<PAGE>
EMERALD FUNDS ANNUAL REPORT
EMERALD
INSTITUTIONAL MONEY
MARKET FUNDS
PRIME ADVANTAGE INSTITUTIONAL FUND - TREASURY ADVANTAGE INSTITUTIONAL FUND
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November 30, 1997
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[LOGO]
<PAGE>
EMERALD FUNDS 1997 ANNUAL REPORT
EMERALD
INSTITUTIONAL MONEY
MARKET FUNDS
Prime Advantage Institutional Fund
Treasury Advantage Institutional Fund
This report is not authorized for distribution to prospective investors
unless preceded or accompanied by a current prospectus for one of the
Emerald Funds discussed within.
THE EMERALD FUNDS ARE NOT INSURED OR PROTECTED BY THE FDIC OR ANY OTHER
GOVERNMENT AGENCY, ARE NOT DEPOSITS OR OBLIGATIONS OF BARNETT BANK, ARE
NOT GUARANTEED BY THE BANK AND INVOLVE INVESTMENT RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
Investments in the Prime Advantage Institutional and Treasury Advantage
Institutional Funds are neither insured nor guaranteed by the U.S.
Government, and yields will fluctuate. There can be no assurance that
the Funds will be able to maintain a stable net asset value of $1.00 per
share.
Barnett Capital Advisors, Inc. serves as investment adviser to the
Emerald Funds, is paid a fee for its services and is unaffiliated with
Emerald Asset Management, Inc., the Funds' distributor.
The service contractors for the Emerald Funds may from time to time
voluntarily waive fees or reimburse Fund expenses, which increases the
return to investors. These fee waivers and reimbursements may be
discontinued at any time, which would reduce performance results.
The Emerald Funds prospectuses contain more complete information,
including charges and expenses. Please read the prospectus carefully
before investing.
<PAGE>
BARNETT CAPITAL ADVISORS'
ECONOMIC OUTLOOK AND MARKET REVIEW
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THE ECONOMY: HARDLY MISSING A BEAT
We've had an economy that's been remarkably strong on all fronts, with the
exception, perhaps, of government spending. It's become something of a cliche
this year, but in an economic sense, we've been experiencing "the best of all
worlds" right now. We have an economy running on just about all cylinders:
Consumers are spending; the corporate sector is investing; and the federal
deficit is nearly balanced. And all this is being achieved with inflation
running at just about 2%.
Gross Domestic Product (GDP), the most common measure of the economy's strength,
grew 4% for the 12 months ended November 30, 1997. Most recently, GDP growth for
the third quarter of 1997 was an annualized rate of 3.5%. While this pace was
somewhat lower than the first quarter's blistering 5.8% rate, it still
underscores continued, solid growth.
Looking into 1998, we could be at a crossroads. Certainly, the extreme events
that recently occurred in Southeast Asia -- which reflected a spreading
throughout the region of problems that had been contained in Japan for the last
several years -- have caused interest rates to come down dramatically. But along
with the implications of our strong dollar, the Asian situation has kept the
Federal Reserve Board (Fed) on the sidelines; the Fed has been reluctant to
raise interest rates, for fear of adversely impacting global markets. This
series of events could actually help pump up the U.S. economy going into next
year.
INFLATION: WAGE PRESSURES CHECKED BY PRODUCTIVITY GAINS
Inflation has been more tame than might be expected, given the continued strong
job growth and the extended expansion of the economy. Through November, the rate
of inflation as measured by the Consumer Price Index was just 2.1% -- despite
the fact that unemployment had dropped to 4.6%, its lowest level in nearly 25
years. The hero in this story is rising productivity, spawned by capital
investments made by American industries in recent years and by the rising impact
of technology. Through the third quarter of 1997, the nation's "output
percentage" grew at an annualized rate of 4.4%. This means that the same number
of workers, working the same number of hours, produced 4.4% more in goods and
services.
Higher productivity can offset factors that might otherwise fuel rising
inflation. In theory, companies could afford to pay workers 4.4% more in wages
and benefits without having to raise prices. This is a lesson that the markets
have had to learn: While wages are going up faster than the rate of inflation,
productivity is growing at least as fast as wages. And this eliminates, or at
least delays, the threat of rising inflation coming from rising wages.
The globalization of productivity, and a global economy nourished by free trade
agreements such as NAFTA, also has helped the economy grow. This isn't great
news for American workers -- because so many goods can now be made more cheaply
overseas -- but it helps companies grow profits.
INTEREST RATES AND BONDS: A WILD, BUT ULTIMATELY POSITIVE, RIDE
Over the last 12 months, the yield on the benchmark 30-year U.S. Treasury bond
fell approximately 60 basis points (0.60%) -- a significant drop and one that
helped fuel strong, year-to-year gains in both the bond and stock markets.
However, the road to lower interest rates was not free of potholes. Beginning
December 1, 1996, the long bond rose from 6.35% to 7.20% in mid-April, spurred
at least partially by the Fed's decision to raise short-term rates 25 basis
points (0.25%) in March. With interest rates climbing, bond prices sank, and
stocks followed suit.
But the situation reversed itself in the spring, and long-term rates began a
steady, substantial decline, resting at 6.13% at the end of November. This
positive move drove bond prices higher, and established an underpinning for
renewed strength in the stock market.
<PAGE>
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STOCKS: HIGH, HIGHER, HIGHEST
Stocks provided equity investors with another outstanding year, with most of the
major indices posting gains that were much higher than historical norms. To be
sure, volatility was the rule throughout the 12 months. In early spring, the Dow
Jones Industrial Average lost nearly 10% of its value, while the Nasdaq Average
dropped 14%. Then, regaining its upward momentum, the market drove to a record
high of 8259 on August 6. However, just 11 weeks later, the Dow suffered its
largest single-day point loss in history, plunging 554 points on October 27.
But, as we write this report in early December, the Dow has recaptured almost
all of its recent losses and is standing within 2% of its August high.
Stocks were propelled by lower interest rates and the simple willingness of
investors to keep investing. Equity growth has come partly as the result of a
self-fulfilling prophecy: The fact that the stock market has gone up has created
a new awareness among potential investors -- especially baby boomers who are in
their peak earning years and who feel they must begin saving for retirement --
and they've started to put their money into stocks.
Another factor helping the market is that investors' risk tolerance levels are
substantially higher than they were in years past. With the emergence of 401(k)s
- -- and the way that the market has recovered so quickly from recent downturns --
investors have become a little more sanguine about risk.
THE ROAD AHEAD: ROOM FOR GROWTH
Moving forward, we're going to pay very close attention to the level of the
stock market, and to the shape of the interest-rate yield curve -- to how steep
or flat it is -- which can guide us in our bond selection. At this stage, we
feel there's still a little more room for growth left in the stock market, and
we remain moderately positive about stocks.
2
<PAGE>
INTERVIEW (as of November 30, 1997)
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EMERALD PRIME ADVANTAGE INSTITUTIONAL AND TREASURY ADVANTAGE INSTITUTIONAL
FUNDS*
Jacqueline R. Lunsford,
INVESTMENT MANAGER
20 years of
investment experience
INVESTMENT GOAL
The Emerald Money Market Funds seek to provide a high level of current income
consistent with liquidity, the preservation of capital and a stable net asset
value. Each Fund seeks its objective by investing in:
PRIME ADVANTAGE INSTITUTIONAL FUND
A broad range of U.S. Government, bank and corporate short-term money market
obligations.
TREASURY ADVANTAGE INSTITUTIONAL FUND
Short-term U.S. Treasury securities and other government obligations which are
guaranteed by the full faith and credit of the U.S. Treasury, and repurchase
agreements collateralized by the same.
WHAT FACTORS AFFECTED THE PERFORMANCE OF THE MONEY MARKET FUNDS?
Interest rate movements were not a significant factor this past year. The Fed
raised interest rates just once, at the end of March, and then by only 25 basis
points (0.25%). Although fluctuations in economic indicators and the resulting
perception of impending rate changes did have some impact on market prices from
time to time, for most of the year short-term rates traded in a very narrow
range of plus or minus10 basis points (0.10%). Since the short-term yield curve
has been very flat over the past few months, the greatest challenge has been to
find, and then to take advantage of, any undervalued maturity or issuer sectors
we could find.
Another significant factor has been a continuing supply/demand problem in the
short-term markets, which has kept prices somewhat higher due to the lack of
supply. In addition, past issuers of short-term products are now cash-rich
themselves, which means that they are no longer issuers of securities, but
purchasers, and therefore direct competitors with the investors who used to
purchase their products. This has resulted in too much cash chasing too few
investments.
3
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL AND TREASURY ADVANTAGE INSTITUTIONAL
FUNDS*
(as of November 30, 1997)
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<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS**
EMERALD PRIME EMERALD TREASURY
ADVANTAGE ADVANTAGE
INSTITUTIONAL FUND INSTITUTIONAL FUND
<S> <C> <C>
12-MONTH PERIOD ENDED
11/30/97 5.58% 5.37%
11/30/96 5.29% 5.13%
11/30/95 5.76% 5.65%
11/30/94 3.83% 3.73%
11/30/93 3.31% 2.96%
11/30/92 4.00% 3.73%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
HOW DO YOU TAKE ADVANTAGE OF INTEREST-RATE MOVES TO GENERATE HIGHER YIELDS FOR
SHAREHOLDERS?
Except to modestly position the average maturities of the Funds in advance of an
anticipated Fed movement, we tend not to make market-timing calls with the
Funds. Instead, we find that continually watching the market and taking
advantage of any undervalued maturity or issuer sector is one of the best
methods of capturing higher yields -- and thereby achieving good, steady,
overall performance for our shareholders.
WHAT IS YOUR OUTLOOK FOR THE NEXT SIX TO 12 MONTHS, AND HOW WILL YOU POSITION
THE FUNDS?
We do not expect the Fed to make any changes to interest rates in the near
future due to the problems in the international markets. The economy continues
to perform well, with the greatest pressure currently coming from the labor
sector, which recently posted the lowest unemployment numbers since the early
1970s. However inflation continues to run very low, so we feel that the Fed will
continue their watchful stance. Therefore, we feel that short-term rates will
remain close to current levels throughout much of the first quarter.
<TABLE>
<CAPTION>
SEC 7-DAY YIELDS AS OF NOVEMBER 30, 1997**
<S> <C>
Prime Advantage Institutional Fund 5.53%
Treasury Advantage Institutional Fund 5.27%
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
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* Investments in the Emerald Prime Advantage Institutional and Treasury
Advantage Institutional Funds are neither insured nor guaranteed by the U.S.
Government, and yields will fluctuate. Although these Funds seek to maintain
a stable net asset value (NAV) of $1.00 per share, there is no assurance that
they will be able to do so.
** During the periods indicated, fee waivers and/or reimbursements were in
effect. Without these waivers and/or reimbursements, performance would have
been lower. Had these waivers or reimbursements not been in effect, the SEC
7-day yield would have been 5.47% for the Prime Advantage Institutional Fund
and 5.20% for the Treasury Advantage Institutional Fund.
4
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
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Schedule of Portfolio Investments
November 30, 1997
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<TABLE>
<CAPTION>
MOODY'S/S&P
RATINGS PRINCIPAL AMORTIZED
(UNAUDITED) AMOUNT COST
------------------ ---------- -------------
<S> <C> <C> <C>
BANK NOTES (8.4%)
DOMESTIC (8.4%)
1st USA Bank, Variable Rate Bank Note, 5.74%, 12/17/97*.......... P-1/A-1+ $5,000,000 $ 5,001,908
Compass Bank, Floating Rate Bank Note, 5.64%, 12/1/97*........... P-1/TBW1** 5,000,000 4,998,335
PNC Bank NA., Floating Rate Bank Note, 5.60%, 12/1/97*........... P-1/A-1 5,000,000 4,997,447
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TOTAL BANK NOTES (COST $14,997,690)................................ 14,997,690
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CERTIFICATES OF DEPOSIT -- DOMESTIC (13.6%)
Amex Centurian Bank, 5.54%, 12/1/97.............................. P-1/A-1 5,000,000 5,000,000
CS First Boston variable rate CD, 5.89%, 12/02/97*............... P-1/A-1 5,000,000 5,000,000
Regions Bank CD, 5.60%, 12/17/97................................. P-1/A-1+ 4,000,000 3,999,998
South Trust Bank floating rate CD, 5.65%, 12/1/97*............... P-1/A-1 5,000,000 4,999,625
Union Bank of California, 5.57%, 12/18/97........................ P-1/A-1 5,000,000 5,000,000
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TOTAL CERTIFICATES OF DEPOSIT -- DOMESTIC (COST $23,999,623)....... 23,999,623
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CERTIFICATES OF DEPOSIT -- YANKEE (11.2%)
Abbey National Treasury plc, New York Branch floating rate Yankee
CD 5.65%, 12/1/97*............................................. P-1/A-1+ 5,000,000 4,999,105
Bayerishce Hypo-Bank, New York Branch, 5.60%, 12/18/97........... P-1/A-1+ 5,000,000 5,000,000
Canadian Imperial Bank, New York Branch, 5.58%, 12/31/97......... P-1/A-1+ 5,000,000 5,000,123
Deutsche Bank AG, New York Branch, 5.57%, 12/31/97............... P-1/A-1+ 5,000,000 4,999,999
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TOTAL CERTIFICATES OF DEPOSIT -- YANKEE (COST $19,999,227)......... 19,999,227
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COMMERCIAL PAPER (27.9%)
DOMESTIC (27.9%)
Alpine Securitization Corp. (b), 5.58%, 12/04/97................. P-1/A-1+ 5,000,000 4,997,675
Chrysler Financial Corp., 5.60%, 12/23/97........................ D-1**/A-1 5,000,000 4,982,889
Countrywide Funding Corp., 5.58%, 12/4/97........................ F-1**/A-1 5,000,000 4,997,675
Dakota Finance (b), (c), 5.53%, 12/16/97......................... P-1/A-1+ 5,000,000 4,988,479
Deer Park Refining LP (b), (c), 5.65%, 12/9/97................... P-1/A-1 5,000,000 5,000,000
Dynamic Funding Corp. (b), 5.83%, 12/22/97....................... P-1/D-1** 5,000,000 4,982,996
Hasbro, Inc., 5.52%, 12/10/97.................................... P-1/A-1 5,590,000 5,582,287
Hitachi America, Inc., 5.53%, 12/22/97........................... P-1/A-1+ 4,000,000 3,987,097
Internationale Nederlanden (U.S.) Funding Corp., 5.56%, 12/4/97.. P-1/A-1+ 5,000,000 4,997,683
Sanwa Business Credit, Inc., 5.72%, 12/23/97..................... P-1/D-1** 5,000,000 4,982,522
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TOTAL COMMERCIAL PAPER -- DOMESTIC (COST $49,499,303).............. 49,499,303
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COMMERCIAL PAPER -- FOREIGN (2.8%)
Pearson, Inc., 5.57%, 12/9/97.................................... P-1/A-1 5,000,000 4,993,811
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TOTAL COMMERCIAL PAPER -- FOREIGN (COST $4,993,811)................ 4,993,811
-------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
MOODY'S/S&P
RATINGS PRINCIPAL AMORTIZED
(UNAUDITED) AMOUNT COST
------------------ ---------- -------------
<S> <C> <C> <C>
MEDIUM TERM NOTES (22.6%)
ABSIT, Series 1997-A, Variable Rate Medium Term Note (b), 5.74%,
12/15/97*...................................................... F-1**/A-1 $5,000,000 $ 5,000,363
CTN Trust, Series 1, Variable Rate Medium Term Note (b), 5.99%,
12/2/97*....................................................... P-1/A-1 5,000,000 5,013,083
Dean Witter Discover, Variable Rate Medium Term Note, 5.56%,
12/17/97*...................................................... P-1/A-1 5,000,000 5,001,118
Goldman Sachs, Variable Rate Promissory Note, 5.66%, 12/1/97
(b)*........................................................... P-1/A-1+ 5,000,000 5,000,000
Merrill Lynch & Co., Variable Rate Medium Term Note, 5.88%,
12/02/97*...................................................... P-1/A-1+ 5,000,000 5,000,000
Sigma Finance, Inc., Medium Term Note (b), 5.80%, 3/3/98......... P-1/A-1+ 5,000,000 5,000,000
Toyota Motor Credit Corp., Medium Term Note, 13.64%, 3/9/98...... P-1/A-1+ 5,200,000 5,302,059
U.S.L. Capital Corp., Variable Rate Medium Term Note, 5.86%,
1/6/98*........................................................ P-1/A-1 5,000,000 5,002,146
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TOTAL MEDIUM TERM NOTES (COST $40,318,769)......................... 40,318,769
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MASTER NOTES -- FOREIGN (2.8%)
Lehman Brothers plc, Foreign Master Note (b), 5.70%, 12/3/97..... F-1**/A-1 5,000,000 5,000,000
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TOTAL MASTER NOTES -- FOREIGN (COST $5,000,000).................... 5,000,000
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REPURCHASE AGREEMENTS (10.6%)
Fuji Securities Tri-Party Repurchase Agreement, dated 11/28/97
with a maturity value of $18,915,448 (Collateralized by
$48,929,000 various U.S. Agency Strips, 0.00% -- 6.75%,
6/30/99 -- 8/15/26, market value of $19,285,130) 5.78%,
12/1/97........................................................ 18,906,342 18,906,342
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TOTAL REPURCHASE AGREEMENTS (COST $18,906,342)..................... 18,906,342
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TOTAL (COST $177,714,765) (A) -- 99.9%............................. $ 177,714,765
-------------
-------------
</TABLE>
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Percentages indicated are based on net assets of $177,907,787.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Rule 144A, Section 4(2), or other security which is restricted as to resale
to institutional investors.
(c) This security has been determined to be illiquid.
* Variable rate security. Rate represents rate in effect November 30, 1997.
Maturity date reflects the next rate change date.
** Duff Phelps, Fitch Investors or Thomson BankWatch ratings.
plc - Public Limited Company.
See Notes to Financial Statements.
6
<PAGE>
EMERALD TREASURY ADVANTAGE INSTITUTIONAL FUND
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Schedule of Portfolio Investments
November 30, 1997
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<TABLE>
<CAPTION>
MOODY'S/S&P
RATINGS PRINCIPAL AMORTIZED
(UNAUDITED) AMOUNT COST
----------------- ------------ -------------
<S> <C> <C> <C>
U.S. TREASURY BILLS (6.2%)
U.S. Treasury Bill, 5.20%, 1/22/98............................. Aaa/AAA* $ 10,000,000 $ 9,924,961
-------------
TOTAL U.S. TREASURY BILLS (COST $9,924,961)...................... 9,924,961
-------------
U.S. TREASURY NOTES (31.5%)
U.S. Treasury Notes, 7.88%, 1/15/98............................ Aaa/AAA* 10,000,000 10,029,234
U.S. Treasury Notes, 5.00%, 1/31/98............................ Aaa/AAA* 10,000,000 9,991,420
U.S. Treasury Notes, 7.25%, 2/15/98............................ Aaa/AAA* 10,000,000 10,032,424
U.S. Treasury Notes, 6.13%, 3/31/98............................ Aaa/AAA* 10,000,000 10,024,085
U.S. Treasury Notes, 5.88%, 4/30/98............................ Aaa/AAA* 10,000,000 10,017,511
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TOTAL U.S. TREASURY NOTES (COST $50,094,674)..................... 50,094,674
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U.S. TREASURY STRIPS (9.3%)
U.S. Treasury Strips, 2/15/98.................................. Aaa/AAA* 15,000,000 14,829,414
-------------
TOTAL U.S. TREASURY STRIPS (COST $14,829,414).................... 14,829,414
-------------
REPURCHASE AGREEMENTS (48.4%)
CS First Boston Corp., dated 11/28/97 with a maturity value of
$9,776,846 (Collateralized by $7,270,000 U.S. Government
Bonds, 10.75% -- 13.25%, 5/15/03 -- 5/15/14, market value --
$9,998,240), 5.67%, 12/1/97.................................. 9,772,229 9,772,229
CS First Boston, dated 10/6/97 with a maturity value of
$8,181,774 (Collateralized by $8,000,000 various U.S.
Treasury Notes, 5.375%, 11/30/97, market value --
$8,365,203), 5.38%, 12/1/97.................................. 8,151,320 8,151,320
Goldman Sachs, dated 11/25/97 with a maturity value of
$7,006,417 (Collateralized by $8,115,898 Government National
Mortgage Assoc., 6.25%, 11/16/25, market value --
$7,210,000), 5.50%, 12/1/97................................. 7,000,000 7,000,000
J P Morgan, dated 11/25/97 with a maturity value of $25,023,042
(Collateralized by $24,188,000 U.S. Treasury Notes, 6.625%,
5/15/07, market value -- $25,500,229), 5.53%, 12/1/97........ 25,000,000 25,000,000
Morgan Stanley & Co., dated 11/25/97 with a maturity value of
$7,006,498 (Collateralized by $6,730,000 U.S. Treasury
Notes, 8.750%, 2/15/99, market value -- $7,144,910), 5.57%,
12/1/97...................................................... 7,000,000 7,000,000
Prudential Bache, dated 11/25/97 with a maturity value of
$20,018,333 (Collateralized by, $22,116,020 Government
National Mortgage Assoc., 4.50% -- 8.25%, 11/15/07 --
11/20/27, market value -- $20,400,000), 5.50%, 12/1/97....... 20,000,000 20,000,000
-------------
TOTAL REPURCHASE AGREEMENTS (COST $76,923,549)................... 76,923,549
-------------
TOTAL (COST $151,772,598) (A) -- 95.4%........................... $ 151,772,598
-------------
-------------
</TABLE>
- ---------------
Percentages indicated are based on net assets of $159,160,769.
* Implied Rating.
(a) Cost for federal income tax and financial reporting purposes are the same.
See Notes to Financial Statements.
7
<PAGE>
EMERALD INSTITUTIONAL MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY
ADVANTAGE ADVANTAGE
INSTITUTIONAL INSTITUTIONAL
FUND FUND
-------------- --------------
<S> <C> <C>
ASSETS:
Investment in securities (amortized cost $158,808,423 and $74,849,049,
respectively) ............................................................... $ 158,808,423 $ 74,849,049
Repurchase agreements (amortized cost $18,906,342 and $76,923,549,
respectively) ............................................................... 18,906,342 76,923,549
Interest and dividends receivable ............................................. 1,002,147 743,660
Receivable for investment securities sold ..................................... -- 6,848,680
Receivable from collateral for reverse repurchase agreement ................... -- 8,365,203
Income and other receivables .................................................. -- 401,030
Prepaid expenses and other assets ............................................. 12,661 16,472
-------------- --------------
Total assets .................................................................... 178,729,573 168,147,643
-------------- --------------
LIABILITIES:
Dividends payable ............................................................. 771,253 722,226
Investment advisory fees ...................................................... 13,978 13,619
Administration fees ........................................................... 1,199 1,092
Custodian and transfer agent fees ............................................. 8,572 8,739
Audit and legal fees .......................................................... 8,613 7,408
Reports to shareholders ....................................................... 14,301 15,350
Registration and filing fees .................................................. 3,536 2,709
Payable for reverse repurchase agreement ...................................... -- 8,151,320
Interest payable for reverse repurchase agreement ............................. -- 63,780
Other liabilities ............................................................. 334 631
-------------- --------------
Total liabilities ............................................................... 821,786 8,986,874
-------------- --------------
NET ASSETS ...................................................................... $ 177,907,787 $ 159,160,769
-------------- --------------
-------------- --------------
Shares Outstanding ($0.001 par value, unlimited number of shares authorized): ... 177,917,523 159,244,945
-------------- --------------
-------------- --------------
Net Asset Value, Offering Price and Redemption Price per share: ................. $ 1.00 $ 1.00
-------------- --------------
-------------- --------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par ......................................... $ 177,918 $ 159,245
Additional paid-in capital .................................................... 177,739,605 159,075,435
Accumulated undistributed net investment income................................ 3,853 1,339
Accumulated net realized losses on investment transactions .................... (13,589) (75,250)
-------------- --------------
Net Assets, November 30, 1997 ................................................... $ 177,907,787 $ 159,160,769
-------------- --------------
-------------- --------------
</TABLE>
- ------------
See Notes to Financial Statements.
8
<PAGE>
EMERALD INSTITUTIONAL MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Statements of Operations
For the year ended November 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME TREASURY
ADVANTAGE ADVANTAGE
INSTITUTIONAL INSTITUTIONAL
FUND FUND
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................................................. $ 8,192,300 $ 9,443,214
------------ ------------
EXPENSES:
Investment advisory fees............................................................ 144,896 172,480
Administration fees................................................................. 112,302 133,668
Transfer agent fees and expenses.................................................... 36,821 42,138
Custodian fees and expenses......................................................... 24,806 26,397
Legal fees.......................................................................... 23,431 28,315
Audit fees.......................................................................... 2,635 5,376
Reports to shareholders............................................................. 36,113 41,045
Registration and filing fees........................................................ 1,066 3,920
Trustees' fees...................................................................... 7,262 7,053
Insurance expense................................................................... 3,728 3,737
Interest expense.................................................................... -- 63,780
Other expenses...................................................................... 7,171 11,191
------------ ------------
Gross Expenses........................................................................ 400,231 539,100
Less: Expense waivers and reimbursements.............................................. (109,503) (129,851)
Expenses paid by third parties.................................................... (458) (544)
------------ ------------
Net Expenses.......................................................................... 290,270 408,705
------------ ------------
Net Investment Income................................................................. 7,902,030 9,034,509
------------ ------------
REALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on securities transactions.............................. 36 (29,185)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................. $ 7,902,066 $ 9,005,324
------------ ------------
------------ ------------
</TABLE>
- ------------
See Notes to Financial Statements.
9
<PAGE>
EMERALD INSTITUTIONAL MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIME ADVANTAGE TREASURY ADVANTAGE
INSTITUTIONAL FUND INSTITUTIONAL FUND
-------------------------------- --------------------------------
YEARS ENDED YEARS ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ..................... $ 7,902,030 $ 6,632,019 $ 9,034,509 $ 7,141,837
Net realized gains (losses) on securities
transactions ............................ 36 32 (29,185) (39,042)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets
resulting from operations ............... 7,902,066 6,632,051 9,005,324 7,102,795
--------------- --------------- --------------- ---------------
Dividends to shareholders from net investment
income: ................................... (7,902,030) (6,632,019) (9,034,509) (7,141,837)
--------------- --------------- --------------- ---------------
Fund Share Transactions:
Net proceeds from shares subscribed ....... 386,649,397 393,024,147 211,669,866 288,670,400
Cost of shares redeemed ................... (341,785,250) (391,069,443) (199,338,495) (274,622,989)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from
Fund share transactions ................. 44,864,147 1,954,704 12,331,371 14,047,411
--------------- --------------- --------------- ---------------
Total Increase .............................. 44,864,183 1,954,736 12,302,186 14,008,369
NET ASSETS:
Beginning of period ....................... 133,043,604 131,088,868 146,858,583 132,850,214
--------------- --------------- --------------- ---------------
End of period ............................. $ 177,907,787 $ 133,043,604 $ 159,160,769 $ 146,858,583
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
- ------------
See Notes to Financial Statements.
10
<PAGE>
EMERALD INSTITUTIONAL MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL
Emerald Funds (the "Trust") was organized as a Massachusetts business trust on
March 15, 1988. The Trust is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end, management investment company. The
Trust operates as a series company currently comprising fourteen portfolios. The
accompanying financial statements and notes relate only to the Prime Advantage
Institutional Fund and Treasury Advantage Institutional Fund (the "Funds"). The
investment objective of the Funds is to provide a high level of current income
consistent with the maintenance of liquidity, the preservation of capital and a
stable net asset value. The Prime Advantage Institutional Fund pursues its
objective by investing in a broad range of short-term government, bank and
corporate obligations. The Treasury Advantage Institutional Fund seeks to
achieve its objective by investing in obligations that the U.S. Treasury has
issued or to which the U.S. Treasury has pledged its full faith and credit to
guarantee the payment of principal and interest.
Barnett Capital Advisors, Inc. ("Barnett"), a wholly-owned subsidiary of
Barnett Banks, Inc., serves as the Funds' investment adviser. BISYS Fund
Services Limited Partnership d/b/a BISYS Fund Services ("BISYS") serves as the
Funds' administrator. BISYS Fund Services, Inc. serves as the Funds' fund
accountant and transfer agent. Emerald Asset Management, Inc. (the
"Distributor") serves as the distributor of the Funds' shares. BISYS and BISYS
Fund Services, Inc. are each a wholly-owned subsidiary and the Distributor is an
indirect wholly-owned subsidiary of The BISYS Group, Inc. The Funds are
primarily distributed by representatives and affiliates of Barnett Banks.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
A)Security Valuation:
Portfolio securities are valued at amortized cost, which approximates market
value. The amortized cost method involves valuing a security at cost on the date
of purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and initial cost.
B)Securities Transactions and Investment Income:
Securities transactions are recorded on the trade date. Realized gains and
losses on the sales of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, is accrued daily.
C)Dividends and Distributions to Shareholders:
Dividends from net investment income are declared daily and are paid monthly to
shareholders. Distributions of net realized gains, if any, will be paid at least
annually. However, to the extent that net realized gains of a Fund can be
reduced by any capital loss carryovers of that Fund, such gains will not be
distributed. Dividends and distributions are recorded by the Funds on the
ex-dividend date.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment
11
<PAGE>
- --------------------------------------------------------------------------------
income or distributions in excess of net realized gains. To the extent they
exceed net investment income and net realized gains for tax purposes, they are
reported as distributions of capital.
As of November 30, 1997, the following reclassifications have been made to
increase (decrease) the components of net assets:
<TABLE>
<CAPTION>
ACCUMULATED
ACCUMULATED NET REALIZED
UNDISTRIBUTED GAIN (LOSS)
NET INVESTMENT ON
INCOME INVESTMENTS
--------------- -------------
<S> <C> <C>
Prime Advantage
Institutional Fund..... 3,853 (3,853)
Treasury Advantage
Institutional Fund..... 1,339 (1,339)
</TABLE>
D)Repurchase Agreements:
The Trust's custodian and other banks acting in a sub-custodian capacity take
possession of the collateral pledged for investments in repurchase agreements.
The underlying collateral is valued daily on a mark-to-market basis to determine
that the value, including accrued interest, exceeds the repurchase price. In the
event of the seller's default on the obligation to repurchase, the Funds have
the right to liquidate the collateral and apply the proceeds in satisfaction of
the obligation. Under certain circumstances, in the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral may be subject to legal proceedings.
E)Reverse Repurchase Agreements:
Each of the Funds may enter into reverse repurchase agreements. Under such an
agreement, a Fund sells portfolio securities and then agrees to buy them back
later at an agreed-upon time and price. When a Fund enters into a reverse
repurchase agreement, it will place in a separate custodial account, either
liquid assets or high grade debt securities that have a value equal to or more
than the price the Fund must pay when it buys back the securities, and the
account will be continuously monitored to make sure the appropriate value is
maintained. Reverse repurchase agreements involve the possible risk that the
value of portfolio securities a Fund relinquishes may decline below the price a
Fund must pay when the transaction closes. Interest paid by a Fund in a reverse
repurchase agreement is considered a reduction of the Fund's income. At November
30, 1997, the Treasury Advantage Institutional Fund had a reverse repurchase
agreement in the amount of $8,151,320 which was collateralized by a receivable
from the maturity of a U.S. Treasury Note in the amount of $8,365,203.
F)Lending Securities:
If either of the Funds lends its securities, the Fund receives collateral from
the borrower, in the form of cash or U.S. Treasury securities or, in the case of
the Prime Advantage Institutional 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 Advantage Institutional Fund, in an
amount at least equal at all times to the market value of the securities loaned.
The Funds continue to receive interest on the securities loaned and may
simultaneously earn interest on the collateral held. Each Fund records and
values such collateral at its market value on the date of receipt and
marks-to-market such collateral on a daily basis through the maturity date. If
the borrower defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the borrower of the security,
realization of the collateral by the Funds may be delayed or limited. As of
November 30, 1997, there were no securities on loan.
G)Expenses:
The Trust accounts separately for the assets, liabilities and operations of each
Fund. Direct expenses of a Fund are charged to that Fund while general Trust
expenses are allocated among the Trust's respective portfolio's net assets.
H)Federal Income Taxes:
For federal income tax purposes, each Fund is treated as a separate entity for
the purpose of determining its qualification as a regulated investment company
under the Internal Revenue Code (the "Code"). It is the policy of each Fund to
meet the requirements of
12
<PAGE>
- --------------------------------------------------------------------------------
the Code applicable to regulated investment companies, including the requirement
that it distribute substantially all of its taxable income to shareholders.
Therefore, no federal income tax provision is required.
At November 30, 1997, the Funds had the following capital loss carryovers:
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATE
--------- -----------
<S> <C> <C>
Prime Advantage Institutional
Fund............................. $ 2,278 2001
11,311 2002
---------
$ 13,589
---------
---------
Treasury Advantage Institutional
Fund............................. $ 39,042 2004
36,208 2005
---------
$ 75,250
---------
---------
</TABLE>
These capital loss carryovers may be used to offset any future realized
gains on securities transactions to the extent provided in the regulations under
the Code. To the extent utilized, the Funds will reduce amounts otherwise
payable to shareholders from net realized gains.
I)Other:
The Funds maintain a cash balance with their custodian and receive a reduction
of their custody fees and expenses for the amount of interest earned on such
uninvested cash balances. For financial reporting purposes for the year ended
November 30, 1997, custodian fees and expenses were increased by $458 and $544
for the Prime Advantage Institutional Fund and Treasury Advantage Institutional
Fund, respectively. There was no effect on net investment income. The Funds
could have invested such cash amounts in an income-producing asset if they had
not agreed to a reduction of fees or expenses under the expense offset
arrangement with their custodian.
NOTE 3 -- AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment Advisory Agreement with Barnett, an
Administration Agreement with BISYS, a Transfer Agent Agreement with BISYS Fund
Services, Inc. and a Distribution Agreement with the Distributor. BISYS' fees
for serving as fund accountant to the Funds are included as part of the
administration fee. The Funds pay BISYS' out-of-pocket accounting expenses.
The Trust has agreed to pay Barnett a fee at an annual rate of 0.10% of the
average daily net assets of each of the Funds. Such fees are accrued daily and
paid monthly. Barnett is responsible for all purchases and sales of each Fund's
portfolio securities, subject to the general supervision of the Board of
Trustees. As administrator, BISYS assists in supervising the operations of the
Funds. For its services, BISYS is entitled to receive a fee at an annual rate of
0.0775% of the first $5 billion of the Trust's aggregate net assets, 0.07% of
the next $2.5 billion, 0.065% of the next $2.5 billion and 0.05% of all assets
exceeding $10 billion. In the event the aggregate average daily net assets falls
below $3 billion, the fee will be increased to 0.08% of the aggregate average
daily net assets of the Trust. Such fees are accrued daily and paid monthly. The
Distributor does not receive a fee under the Distribution Agreement.
For its services as transfer agent, BISYS Fund Services, Inc. waived fees in
the amounts of $14,492 and $17,245 for the Prime Advantage Institutional Fund
and the Treasury Advantage Institutional Fund, respectively for the year ended
November 30, 1997.
BISYS may voluntarily reduce fees to assist the Funds in maintaining
competitive expense ratios. For the year ended November 30, 1997, BISYS waived
administration fees of $39,852, and $47,425 for the Prime Advantage
Institutional Fund and the Treasury Advantage Institutional Fund, respectively.
Barnett has voluntarily agreed to reimburse Fund expenses with respect to
each Fund to the extent a Fund's ordinary operating expenses exceed 0.20% of
such Fund's average daily net assets. This voluntary reimbursement may be
terminated at any time by Barnett. As a result of such expense limitations,
Barnett agreed to reimburse $55,159 and $65,181 to the Prime Advantage
Institutional Fund and Treasury Advantage Institutional Fund, respectively, for
the year ended November 30, 1997.
Certain officers of the Trust are "affiliated persons" (as defined in the
1940 Act) of BISYS or the Distributor. Effective March 1, 1997, each Trustee of
the Trust is entitled to receive an annual fee of
13
<PAGE>
- --------------------------------------------------------------------------------
$15,000 plus $2,000 for each regular or special meeting attended, for services
relating to all of the portfolios of the Trust. The Chairman of the Board of
Trustees and the President of the Trust are each entitled to receive an
additional annual fee of $5,000 for their services in these capacities. Prior to
March 1, 1997, each Trustee was entitled to receive an annual fee of $14,000
plus a meeting fee of $1,500 per meeting. For the year ended November 30, 1997,
the Prime Advantage Institutional Fund and Treasury Advantage Institutional Fund
incurred legal fees of $23,431 and $28,315, respectively, earned by a law firm,
a partner of which serves as Secretary to the Trust.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Because each Fund has maintained a $1.00 net asset value per share from
inception, the number of shares sold, shares issued to shareholders in
reinvestment of dividends and distributions, and shares redeemed are equal to
the dollar amounts shown in the Statements of Changes in Net Assets for the
corresponding capital share transactions.
NOTE 5 -- SUBSEQUENT EVENTS
During the first quarter of 1998, Barnett Banks was merged into a subsidiary of
NationsBank. As a result of the merger, Barnett became a wholly-owned subsidiary
of NationsBank.
The Board of Trustees of the Trust is considering the proposed
reorganization of the Trust with Nations Fund Trust, Nations Fund, Inc. and
Nations Institutional Reserves (collectively, "Nations Funds"), three investment
companies that are part of the Nations Family of Funds. If approved by the Board
of Trustees, it is expected that the proposed reorganization will be submitted
to a vote of shareholders of the Trust on or before May 9, 1998. If the
reorganization is approved by shareholders, and certain other conditions are
satisfied, the assets and liabilities of each of the Trust's portfolios,
including the Funds, will be transferred to similar funds in the Nations Funds
family, and the shareholders of the Trust's portfolios, including the
shareholders of the Funds, will become shareholders of Nations Funds.
14
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------------------------
NOVEMBER NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
30, 1997* 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................................... $ 0.9999 $ 0.9999 $ 0.9999 $ 1.0000 $ 1.0017
----------- ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income........................... 0.0545 0.0516 0.0561 0.0377 0.0304
Net realized gains (losses) on securities....... -- -- -- (0.0038) 0.0005***
----------- ------------ ------------ ------------ ------------
Total income from investment operations......... 0.0545 0.0516 0.0561 0.0339 0.0309
----------- ------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment income............ (0.0545) (0.0516) (0.0561) (0.0377) (0.0304)
Distributions from net realized gains on
securities.................................... -- -- -- -- (0.0022)
----------- ------------ ------------ ------------ ------------
Total dividends and distributions............... (0.0545) (0.0516) (0.0561) (0.0377) (0.0326)
----------- ------------ ------------ ------------ ------------
Increase due to voluntary capital contribution
from Sub-Adviser................................ -- -- -- 0.0037 --
----------- ------------ ------------ ------------ ------------
Net change in net asset value..................... -- -- -- (0.0001) (0.0017)
----------- ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.................... $ 0.9999 $ 0.9999 $ 0.9999 $ 0.9999 $ 1.0000
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
Total return...................................... 5.58% 5.29% 5.76% 3.83% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)................ $177,908 $133,044 $131,089 $131,758 $111,769
Ratio of expenses to average
net assets.................................... 0.20% 0.35% 0.40% 0.40% 0.40%
Ratio of net investment income to average net
assets........................................ 5.45% 5.16% 5.60% 3.80% 3.03%
Ratio of expenses to average net assets**....... 0.28% 0.35% 0.46% 0.44% 0.44%
Ratio of net investment income to average net
assets**...................................... 5.37% 5.16% 5.54% 3.76% 3.00%
</TABLE>
- ---------------
* Effective December 1, 1996, Rodney Square Management Corporation no longer
serves as Sub-Adviser to the Fund.
** During the period, certain fees were voluntarily reduced, reimbursed and/or
paid by third parties. If such voluntary fee reductions and/or
reimbursements had not occurred, the ratios would have been as indicated.
During the period, the Fund received credits from its custodian for interest
earned on uninvested cash balances which were used to offset custodian fees
and expenses. The ratios were not affected.
*** Net realized gain per share is the direct result of a decrease in
outstanding shares between 11/30/92 and the date of the gain distribution.
See Notes to Financial Statements.
15
<PAGE>
EMERALD TREASURY ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1997* 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................................... $ 0.9996 $ 1.0000 $ 1.0015 $ 0.9999 $ 0.9999
------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income....................... 0.0524 0.0501 0.0551 0.0367 0.0292
Net realized gains (losses) on securities... (0.0001) (0.0004) (0.0006) 0.0016 --
------------ ------------ ------------ ------------ ------------
Total income from investment operations..... 0.0523 0.0497 0.0545 0.0383 0.0292
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment income........ (0.0524) (0.0501) (0.0551) (0.0367) (0.0292)
Distributions from net realized gains on
securities................................ -- -- (0.0009) -- --
------------ ------------ ------------ ------------ ------------
Total dividends and distributions........... (0.0524) (0.0501) (0.0560) (0.0367) (0.0292)
------------ ------------ ------------ ------------ ------------
Net change in net asset value................. (0.0001) (0.0004) (0.0015) 0.0016 --
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD................ $ 0.9995 $ 0.9996 $ 1.0000 $ 1.0015 $ 0.9999
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total return.................................. 5.37% 5.13% 5.74% 3.73% 2.96%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s)............ $ 159,161 $ 146,859 $ 132,850 $ 126,771 $ 166,410
Ratio of expenses to average net assets..... 0.20% 0.37% 0.40% 0.40% 0.40%
Ratio of interest expense to average net
assets.................................... 0.04% -- -- -- --
------------ ------------ ------------ ------------ ------------
Ratio of total expenses to average net
assets.................................... 0.24% 0.37% 0.40% 0.40% 0.40%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratio of net investment income to average
net assets................................ 5.24% 5.00% 5.54% 3.61% 2.92%
Ratio of expenses to average net assets**... 0.28% 0.37% 0.45% 0.44% 0.42%
Ratio of interest expense to average net
assets.................................... 0.04% -- -- -- --
------------ ------------ ------------ ------------ ------------
Ratio of total expenses to average net
assets**.................................. 0.32% 0.37% 0.45% 0.44% 0.42%
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Ratio of net investment income to average
net assets**.............................. 5.16% 5.00% 5.50% 3.57% 2.90%
</TABLE>
- ---------------
* Effective December 1, 1996, Rodney Square Management Corporation no longer
serves as Sub-Adviser to the Fund.
** During the period, certain fees were voluntarily reduced, reimbursed and/or
paid by third parties. If such voluntary fee reductions and/or reimbursements
had not occurred, the ratios would have been as indicated. During the period,
the Fund received credits from its custodian for interest earned on
uninvested cash balances which were used to offset custodian fees and
expenses. The ratios were not affected.
See Notes to Financial Statements.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Trustees of the
Emerald Funds:
We have audited the accompanying statements of assets and liabilities of Emerald
Funds -- Prime Advantage Institutional Fund and Treasury Advantage Institutional
Fund (the Funds), including the schedules of portfolio investments, as of
November 30, 1997, and the related statements of operations, statements of
changes in net assets and the financial highlights for the year then ended.
These financial statements and the financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The
accompanying statements of changes in net assets for the period ended November
30, 1996 and the financial highlights for the periods ended November 30, 1996,
and prior periods as indicated herein, were audited by other auditors whose
report thereon dated January 22, 1997 expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included verification of securities owned as of November 30, 1997, by
confirmation with the custodian and brokers and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the 1997 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Emerald Funds at November 30, 1997, and the results of their operations, the
changes in their net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 21, 1998
17
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EMD-1197
PA/TA 11/97 ANN
