<PAGE>
EMERALD FUND 1998 ANNUAL REPORT
EMERALD
INSTITUTIONAL MONEY
MARKET FUND
Prime Advantage Institutional Fund
This report is submitted for the general information of Nations Funds
shareholders and must be preceded or accompanied by a current Nations
Funds prospectus.
<PAGE>
July 1998
Dear Shareholder,
We are pleased to present the Annual Report for the Emerald Prime Advantage
Institutional Fund for the fiscal period of December 1, 1997 through May 15,
1998. The report contains information concerning the Fund's performance,
portfolio holdings and financial statements for the fiscal period. We hope you
will take a moment to review it.
As you know, the Emerald Prime Advantage Institutional Fund was reorganized into
Nations Money Market Reserves Fund on May 22, 1998. The reorganization was
approved by the Fund's shareholders at a special shareholder meeting on May 4,
1998.
As a Nations Funds shareholder, you will receive a semi-annual report for the
Nations Money Market Reserves Fund at the beginning of January for the period of
May 16, 1998 through October 31, 1998.
We appreciate your ongoing commitment to Nations Funds and look forward to
continuing to help you pursue your investment goals over the course of your
lifetime. If you have any questions or would like assistance, please contact us
anytime between 8:30 a.m. and 6:00 p.m., Eastern time, at 1-800-321-7854.
Sincerely,
Nations Funds
NOT MAY LOSE VALUE
FDIC-INSURED NO BANK GUARANTEE
Nations Funds Distributor: Stephens Inc. Stephens Inc., which is not affiliated
with NationsBank, N.A., is not a bank and securities offered by it are not
guaranteed by any bank or insured by the FDIC. Stephens Inc., member NYSE, SIPC.
Nations Funds Investment Adviser: NationsBanc Advisors, Inc
1
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
May 15, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
RATINGS AMORTIZED
(UNAUDITED) PRINCIPAL COST
---------- -------------- -------------
<S> <C> <C> <C>
BANK NOTES (10.9%)
DOMESTIC (10.9%)
Compass Bank, Floating Rate Bank Note, 5.64%, 7/16/98* ............. P-1/A-2 $ 5,000,000 $ 4,999,553
Morgan Stanley, Floating Rate Bank Note, 5.57%, 5/18/98* ........... A1/A+ 3,000,000 3,000,000
PNC Bank NA., Floating Rate Bank Note, 5.60%, 9/2/98* .............. A1/A 5,000,000 4,998,988
-------------
TOTAL BANK NOTES
(AMORTIZED COST $12,998,541)......................................... 12,998,541
-------------
CERTIFICATES OF DEPOSIT -- DOMESTIC (8.4%)
CS First Boston, Variable Rate CD, 6.25%, 10/30/98* ................ P-1/A-1 5,000,000 5,000,000
Harris Bank and Trust, CD, 5.51%, 5/28/98 .......................... P-1/A-1 5,000,000 5,000,000
-------------
TOTAL CERTIFICATES OF DEPOSIT -- DOMESTIC
(AMORTIZED COST $10,000,000)......................................... 10,000,000
-------------
CERTIFICATES OF DEPOSIT -- YANKEE (4.2%)
Bank of Scotland, New York Branch CD, 5.53%, 6/1/98 ................ P-1+/A-1+ 5,000,000 5,000,000
-------------
TOTAL CERTIFICATES OF DEPOSIT -- YANKEE
(AMORTIZED COST $5,000,000).......................................... 5,000,000
-------------
COMMERCIAL PAPER (29.3%)
DOMESTIC (25.1%)
Asset Securitization Cooperative Corp. (b), (c), 5.52%, 6/5/98 ..... P-1/A-1+ 5,000,000 4,984,667
Chrysler Financial Corp., 5.53%, 6/22/98 ........................... P-1/A-1 5,000,000 4,971,582
General Motors Acceptance Corporation, 5.48%, 6/8/98 ............... P-1/A-1 5,000,000 4,982,494
Lexington Capital Company LLC (b), 5.50%, 8/14/98 .................. F-1**/A-1 5,000,000 4,931,250
New Center Asset Trust, 5.50%, 6/24/98 ............................. P-1/A-1+ 5,000,000 4,970,208
PHH Corp, 5.56%, 5/20/98 ........................................... P-1/A-1 5,000,000 4,996,911
-------------
29,837,112
-------------
FOREIGN (4.2%)
Svenska Handelsbanken, 5.49%, 5/26/98 .............................. P-1/A-1 5,000,000 4,992,375
-------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST $34,829,487)......................................... 34,829,487
-------------
</TABLE>
- -------------
See Notes to Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
MOODY'S/S&P
RATINGS AMORTIZED
(UNAUDITED) PRINCIPAL COST
---------- -------------- -------------
<S> <C> <C> <C>
MEDIUM TERM NOTES (16.8%)
CTN Trust, Series 1, Variable Rate Medium Term Note (b), 6.01%,
9/2/98* .......................................................... P-1/A-1 $ 5,000,000 $ 5,005,186
Goldman Sachs, Variable Rate Promissory Note (b),
5.66%, 8/7/98* ................................................... P-1/A-1+ 5,000,000 5,000,000
Key Auto Finance Trust, Series 97-2, Class A-1,
5.84%, 1/5/99 .................................................... P-1/A-1+ 2,017,578 2,017,386
Merrill Lynch & Co., Variable Rate Medium Term Note, 6.24%,
10/29/98* ........................................................ Aa3/AA- 5,000,000 5,000,000
TMG Financial/Tiers, Series 1996-A, Variable Rate Medium Term Note
(b), 5.66%, 6/15/98* ............................................. P-1/A-1+ 3,000,000 3,000,000
-------------
TOTAL MEDIUM TERM NOTES
(AMORTIZED COST $20,022,572)......................................... 20,022,572
-------------
REPURCHASE AGREEMENTS (30.4%)
J P Morgan Tri-Party Repurchase Agreement, dated 5/15/98 with a
maturity value of $15,007,003 (Collateralized by $41,607,673
various Government National Mortgage Assoc., 8.50%, 11/15/19 --
4/15/25, market value of $15,401,803), 5.68%, 5/18/98 ............ 15,000,000 15,000,000
Salomon Brothers Tri-Party Repurchase Agreement, dated 5/15/98 with
a maturity value of $21,045,072 (Collateralized by $97,257,980
various Federal National Mortgage Assoc., 5.50% -- 12.00%, 8/1/98
-- 5/1/28, market value of $21,546,824), 5.70%, 5/18/98 .......... 21,035,217 21,035,217
-------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $36,035,217)......................................... 36,035,217
-------------
TOTAL (AMORTIZED COST $118,885,817) (A) -- 100.0%..................... $ 118,885,817
-------------
-------------
</TABLE>
- -------------
Percentages indicated are based on net assets of $118,879,828.
* Variable rate security. Rate represents rate in effect on May 15, 1998.
Maturity date reflects the next rate change date.
** Fitch Investors rating
(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.
See Notes to Financial Statements.
3
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
May 15, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in securities (amortized cost $82,850,600)..................... $ 82,850,600
Repurchase agreements (amortized cost $36,035,217)........................ 36,035,217
Interest and dividends receivable......................................... 296,184
Prepaid expenses and other assets......................................... 3,091
--------------
Total assets................................................................ 119,185,092
--------------
LIABILITIES:
Dividends payable......................................................... 271,516
Investment advisory fees.................................................. 4,927
Administration fees....................................................... 3,197
Other liabilites and accrued expenses..................................... 25,624
--------------
Total liabilities........................................................... 305,264
--------------
NET ASSETS.................................................................. $ 118,879,828
--------------
--------------
Shares Outstanding ($0.001 par value, unlimited number of shares
authorized):.............................................................. 118,889,260
--------------
--------------
Net Asset Value, Offering Price and Redemption Price per share:............. $ 1.00
--------------
--------------
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at par..................................... $ 118,889
Additional paid-in capital................................................ 118,770,371
Accumulated undistributed net investment income........................... 3,853
Accumulated undistributed net realized losses on investment
transactions............................................................ (13,285)
--------------
Net Assets.................................................................. $ 118,879,828
--------------
--------------
</TABLE>
- ------------
See Notes to Financial Statements.
4
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Statement of Operations
For the period ended May 15, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................... $ 3,690,212
------------
EXPENSES:
Investment advisory fees............................... $ 64,318
Administration fees.................................... 49,847
Fund accounting fees................................... 2,260
Transfer agent fees and expenses....................... 15,830
Custody fees........................................... 10,734
Audit and Legal fees................................... 12,815
Registration and filing fees........................... 4,247
Insurance expense...................................... 3,632
Other.................................................. 7,289
------------
Gross Expenses........................................... 170,972
Less: Expense waivers and reimbursements................. (43,747)
------------
Net Expenses............................................. 127,225
------------
Net Investment Income.................................... 3,562,987
------------
REALIZED GAINS ON INVESTMENTS:
Net realized gains on securities transactions.......... 304
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..... $ 3,563,291
------------
------------
</TABLE>
- ------------
* For the period from December 1, 1997 through May 15, 1998.
See Notes to Financial Statements.
5
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD YEAR ENDED
ENDED MAY 15, NOVEMBER 30,
1998* 1997
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income........................... $ 3,562,987 $ 7,902,030
Net realized gains (losses) on securities
transactions.................................. 304 36
-------------- --------------
Net increase (decrease) in net assets resulting
from operations............................... 3,563,291 7,902,066
-------------- --------------
Dividends to Shareholders from net investment
income:......................................... (3,562,987) (7,902,030)
-------------- --------------
Fund Share Transactions:
Net proceeds from shares subscribed............. 188,672,761 386,649,397
Cost of shares redeemed......................... (247,701,024) (341,785,250)
-------------- --------------
Net increase (decrease) in net assets from Fund
share transactions............................ (59,028,263) 44,864,147
-------------- --------------
Total increase (decrease)......................... (59,027,959) 44,864,183
NET ASSETS:
Beginning of period............................. 177,907,787 133,043,604
-------------- --------------
End of period................................... $ 118,879,828 $ 177,907,787
-------------- --------------
-------------- --------------
</TABLE>
- ------------
* For the period from December 1, 1997 through May 15, 1998.
See Notes to Financial Statements.
6
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
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 (the "Fund"). The investment objective of the Fund 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 Fund
pursues its objective by investing in a broad range of short-term government,
bank and corporate obligations.
Barnett Capital Advisors, Inc. ("Barnett"), formally a wholly-owned
subsidiary of Barnett Banks, Inc., serves as the Fund's investment adviser.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
serves as the Fund's administrator. BISYS Fund Services, Inc. serves as the
Fund's transfer agent and fund accountant. Emerald Asset Management, Inc. (the
"Distributor") serves as the distributor of the Fund's 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.
On January 9, 1998, Barnett Banks, Inc. was merged into a subsidiary of
NationsBank Corporation ("NationsBank"). As a result of the merger, Barnett
became a wholly-owned indirect subsidiary of NationsBank.
On February 12, 1998, the Board of Trustees of the Trust approved the
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. The reorganization was
approved by shareholders of the Trust, including shareholders of the Fund at a
special meeting of shareholders held on May 4, 1998 as reconvened on May 8,
1998.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
A) Security Valuation:
Portfolio securities are valued at amortized cost, which approximates market
value. The amortized cost method involves valuing a security at cost on the date
of purchase and thereafter assuming a constant amortization to maturity of the
difference between the principal amount due at maturity and initial cost. In
addition, the Fund may not (a) purchase any instrument with a remaining maturity
greater than thirteen months unless such instrument is subject to a demand
feature, or (b) maintain a dollar-weighted average maturity which exceeds 90
days.
B) Securities Transactions and Investment Income:
Securities transactions are recorded on the trade date. Realized gains and
losses on the sales of investments are calculated on the identified cost basis.
Interest income, including accretion of discount and amortization of premium on
investments, is accrued daily.
C) Dividends and Distributions to Shareholders:
Dividends from net investment income are declared daily 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 the Fund could be
reduced by any capital loss carryovers of the Fund, such gains will not be
distributed. Dividends and distributions are recorded by the Fund 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
7
<PAGE>
- --------------------------------------------------------------------------------
tax regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are considered either 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 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.
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 Fund has the
right to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
E) Lending Securities:
If the Fund lends its securities, the Fund receives collateral from the
borrower, in the form of cash, securities of the U.S. Government or its agencies
or instrumentalities or an irrevocable letter of credit issued by a bank that
meets the credit standards of the Fund, in an amount at least equal at all times
to the market value of the securities loaned. The Fund continues to receive
interest on the securities loaned and may simultaneously earn interest on the
collateral held. The Fund records and values such collateral at its market value
on the date of receipt and marks-to-market such collateral on a daily basis
through 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 Fund may be
delayed or limited. As of May 15, 1998, the Fund had no securities on loan.
F) Expenses:
The Trust accounts separately for the assets, liabilities and operations of the
Fund. Direct expenses of the Fund are charged to the Fund while general Trust
expenses are allocated among the Trust's respective portfolios.
G) Federal Income Taxes:
For federal income tax purposes, the 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 the Fund to
meet the requirements of the Code applicable to regulated investment companies,
including the requirement that it distribute substantially all of its taxable
income to shareholders. Therefore, no federal income tax provision is required.
At November 30, 1997, the Fund 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
-------
-------
</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 Fund will reduce amounts otherwise payable
to shareholders from net realized gains.
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 Agency Agreement with BISYS Fund
Services, Inc. and a Distribution Agreement with the Distributor. BISYS' fees
for serving as
8
<PAGE>
- --------------------------------------------------------------------------------
fund accountant to the Fund are included as part of the administration fee. The
Fund pays 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 the Fund. Such fees are accrued daily and paid
monthly. Barnett is responsible for all purchases and sales of the Fund's
portfolio securities, subject to the general supervision of the Board of
Trustees. As administrator, BISYS assists in supervising the operations of the
Fund. 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 that the aggregate average daily net assets
fall 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 amount of $6,433 for the Fund for the period ended May 15, 1998.
BISYS may voluntarily reduce fees to assist the Fund in maintaining a
competitive expense ratio. For the period ended May 15, 1998, BISYS waived
administration fees of $17,688 for the Fund.
Barnett has voluntarily agreed to reimburse Fund expenses with respect to
the Fund to the extent the Fund's ordinary operating expenses exceed 0.20% of
the 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 $19,626 to the Fund for the period ended May 15,
1998.
Certain officers of the Trust are "affiliated persons" (as defined in the
1940 Act) of BISYS or the Distributor. Two of the Trustees receive an annual fee
of $20,000 while the remaining four Trustees receive an annual fee of $15,000
and a meeting fee of $2,000 per meeting was received by all six Trustees, for
services relating to all of the portfolios constituting the Trust. For the
period ended May 15, 1998, the Fund incurred legal fees of $6,006, earned by a
law firm, a partner of which serves as Secretary to the Trust.
NOTE 4 -- CAPITAL SHARE TRANSACTIONS
Because the 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 -- SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
A Special Meeting of Shareholders of the Trust (the "Meeting") was held on May
4, 1998 as reconvened May 8, 1998. At the Meeting, shareholders of the Fund
approved the following proposals:
1. Proposal to ratify and approve an interim investment advisory agreement
between the Trust and Barnett Capital Advisors Inc. with respect to the
Fund for the period from January 9, 1998 forward.
<TABLE>
<CAPTION>
PRIME ADVANTAGE INSTITUTIONAL FUND
VOTES IN VOTES VOTES
FAVOR AGAINST ABSTAINED
- ---------- --------- -----------
<S> <C> <C>
115,083,399 14,166 0
</TABLE>
2. Proposal to approve an Agreement and Plan of Reorganization between the
Trust and Nations Institutional Reserves ("Nations") which provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations in exchange for Capital Class shares of
such Nations fund, and which contemplates the reorganization of the
Trust.
<TABLE>
<CAPTION>
PRIME ADVANTAGE INSTITUTIONAL FUND
VOTES IN VOTES VOTES
FAVOR AGAINST ABSTAINED
- ---------- --------- -----------
<S> <C> <C>
115,083,399 14,166 0
</TABLE>
NOTE 6 -- SUBSEQUENT EVENT (UNAUDITED)
On May 15, 1998 and May 22, 1998, all of the assets and liabilities of the
Trust's portfolios were transferred to corresponding funds in the Nations Funds
family, including the assets and liabilities of the Fund which were transferred
on May 22, 1998. As a result, the shareholders of the Trust's portfolios,
including shareholders of the Fund, have become shareholders of Nations Funds.
9
<PAGE>
EMERALD PRIME ADVANTAGE INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED YEARS ENDED
------------ ---------------------------
MAY 15, NOVEMBER 30, NOVEMBER 30,
1998* 1997(a) 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 1.0000 $ 0.9999 $ 0.9999
------------ ------------ ------------
Income from investment operations:
Net investment income........................... 0.0252 0.0545 0.0516
Net realized and unrealized gain (loss)......... -- -- --
------------ ------------ ------------
Total income from investment operations......... 0.0252 0.0545 0.0516
------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment income............ (0.0252) (0.0545) (0.0516)
Distributions from net realized gains on
securities.................................... -- -- --
------------ ------------ ------------
Total dividends and distributions............... (0.0252) (0.0545) (0.0516)
------------ ------------ ------------
Increase due to voluntary capital contribution
from Sub-Adviser.............................. -- -- --
------------ ------------ ------------
Net change in net asset value..................... -- -- --
------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.................... $ 1.0000 $ 0.9999 $ 0.9999
------------ ------------ ------------
------------ ------------ ------------
Total Return...................................... 2.55%(b) 5.58% 5.29%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).......... $ 118,880 $ 177,908 $ 133,044
Ratio of expenses to average net assets......... 0.20%(c) 0.20% 0.35%
Ratio of net investment income to average net
assets........................................ 5.54%(c) 5.45% 5.16%
Ratio of expenses to average net assets**....... 0.27%(c) 0.28% 0.35%
Ratio of net investment income to average net
assets**...................................... 5.47%(c) 5.37% 5.16%
<CAPTION>
YEARS ENDED
------------------------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 0.9999 $ 1.0000 $ 1.0017
------------ ------------ ------------
Income from investment operations:
Net investment income........................... 0.0561 0.0377 0.0304
Net realized and unrealized gain (loss)......... -- (0.0038) 0.0005***
------------ ------------ ------------
Total income from investment operations......... 0.0561 0.0339 0.0309
------------ ------------ ------------
Less dividends and distributions:
Dividends from net investment income............ (0.0561) (0.0377) (0.0304)
Distributions from net realized gains on
securities.................................... -- -- (0.0022)
------------ ------------ ------------
Total dividends and distributions............... (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 $ 1.0000
------------ ------------ ------------
------------ ------------ ------------
Total Return...................................... 5.76% 3.83% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in thousands).......... $ 131,089 $ 131,758 $ 111,769
Ratio of expenses to average net assets......... 0.40% 0.40% 0.40%
Ratio of net investment income to average net
assets........................................ 5.60% 3.80% 3.03%
Ratio of expenses to average net assets**....... 0.46% 0.44% 0.44%
Ratio of net investment income to average net
assets**...................................... 5.54% 3.76% 3.00%
</TABLE>
- ---------------
* For the period from December 1, 1997 through May 15, 1998.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been as indicated.
*** Net realized gain per share is the direct result of a decrease in
outstanding shares between 11/30/92 and the date of the gain distribution.
(a) Effective December 1, 1996, Rodney Square Management Corporation no longer
served as Sub-Adviser to the Fund.
(b) Not annualized.
(c) Annualized.
See Notes to Financial Statements.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Trustees of the
Emerald Funds:
We have audited the accompanying statement of assets and liabilities of the
Emerald Prime Advantage Institutional Fund (the Fund), including the schedule of
portfolio investments, as of May 15, 1998, the related statement of operations
for the period December 1, 1997 through May 15, 1998, and the statements of
changes in net assets and the financial highlights for the period from December
1, 1997 through May 15, 1998 and for the year ended November 30, 1997. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
accompanying 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
financial highlights.
We conducted our audits 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 May
15, 1998, 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 audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights for the period
from December 1, 1997 through May 15, 1998 and for the year ended November 30,
1997 present fairly, in all material respects, the financial position of the
Emerald Prime Advantage Institutional Fund at May 15, 1998, and the results of
its operations for the period from December 1, 1997 through May 15, 1998, and
the changes in its net assets and the financial highlights for the period from
December 1, 1997 through May 15, 1998 and for the year ended November 30, 1997,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
July 1, 1998
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