THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of The Rodney Square Fund and The Rodney Square Tax-Exempt Fund
is pleased to report to you on the Funds' activities for the fiscal year ended
September 30, 1995.
INVESTMENT RESULTS*
The U.S. Government Portfolio paid shareholders dividends of $0.052 per share
during the year, the Money Market Portfolio paid dividends of $0.054 per share
and The Rodney Square Tax-Exempt Fund paid dividends of $0.033 per share. Based
on the Portfolios' net asset values of $1.00 per share, these dividends
represented total returns of 5.37%, 5.50% and 3.36%, respectively.
ECONOMIC OVERVIEW
The U.S. economy was accelerating as we began the Fund's fiscal year.
Supported by strong gains in employment, income and confidence, consumer
spending was robust and the manufacturing sector was booming. The Commerce
Department's measure of real Gross Domestic Product (GDP) placed inflation
adjusted output at 5.1%, far exceeding the 2.5% non-inflationary growth target
identified by the Federal Reserve (the "Fed"). With labor and plant utilization
rates well through thresholds that have put upward pressure on inflation in the
past, the Fed responded to the above-trend growth by raising its target for
the federal funds rate (an interbank lending rate) 75 basis points in November
and 50 basis points in February. These tightenings marked the sixth and seventh
moves by the Fed during the past year, lifting the federal funds rate a
cumulative 300 basis points to 6.0%.
As the economy progressed into the second half of the Fund's fiscal year, the
interest rate increases began to further the slowdown that was underway, after
the venting of pent-up demand in 1994. After over producing through January,
manufacturers began to reduce output and jobs and income growth stalled. Real
GDP growth, which had slowed to 2.5% in the first quarter of calendar 1995, was
estimated to have grown at a scant 0.5% (since revised to 1.3%) in the second
quarter. Recession concerns quickly replaced fears of an overheating economy
and the market began to anticipate aggressive Fed easing. Interest rates fell
significantly across the board. From the February 1 tightening through quarter
end, money market yields fell 50-100 basis points while longer dated issues
declined 100-150 basis points. The Fed validated the market perception on July
6, lowering the federal funds target rate 25 basis points to 5.75%.
Lower interest rates boosted housing activity and had a positive influence on
retail sales and consumer confidence. On the production side, the inventory
adjustment process seems to be completed and manufacturing activity has
recovered. Growth prospects appear to be well within the Fed's tolerance limit.
Coupled with a benign inflation environment, there appears to be no compelling
reason for further action by the Fed at this time.
A critical factor in the timing of the Fed's next move is how the budget
debate between the Administration and Congress unfolds. If fiscal policy makers
manage to put together a creditable deficit reduction package, the Fed may be
inclined to act preemptively to counter the effects of the fiscal drag.
<PAGE>
INVESTMENT STRATEGY
During the first half of the fiscal year, each of the portfolios of The Rodney
Square Fund and The Rodney Square Tax-Exempt Fund maintained comparatively short
weighted average maturities (WAM). Short average maturities were targeted to
allow the Portfolios to benefit from rising short-term interest rates. Weighted
average maturities of each of the portfolios were generally kept in a 20-40 day
range during this period.
As the year progressed and it became apparent that economic growth was
decelerating, we took the opportunity to extend the weighted average maturities
of the portfolios when appropriate. Average maturities of the portfolios were
moved into a 30-50 day range to stabilize yields in a declining rate
environment. Comparatively, these WAMs were still short of the industry average
as reported by IBC'S MONEY FUND REPORT. We did not share the market's
perception about the need for the aggressive Fed easing that was priced into the
shape of the money market yield curve. As such, we kept a large percentage of
the portfolio's assets in overnight investments. Nonetheless, each of the
portfolios comfortably outpaced the average of its respective universe as
measured by IBC'S MONEY FUND REPORT. The Money Market Portfolio had a 12 month
total return of 5.50% versus 5.30% for IBC's First Tier Index; the U.S.
Government Portfolio had a 12 month total return of 5.37% versus 5.19% for IBC's
U.S. Government and Agency Index; and The Tax-Exempt Fund had a 12 month total
return of 3.36% versus IBC's Stockbroker & General Purpose Index of 3.26%.
We invite your comments and questions and we thank you for your investment in
the Funds.
Sincerely,
/s/ Martin L. Klopping
Martin L. Klopping
President
November 20, 1995
- ------------------------------
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN
EITHER FUND IS NEITHER INSURED NOR GUARANTEED BY WILMINGTON TRUST
COMPANY OR ANY OTHER BANKING INSTITUTION, THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT EITHER FUND
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00.
2
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS / SEPTEMBER 30, 1995
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 51.2%
FEDERAL FARM CREDIT BANKS DISCOUNT NOTES - 20.4%
Federal Farm Credit Bank Notes, 6.08%, 10/04/95 .. $ 7,000,000 $ 6,996,552
Federal Farm Credit Bank Notes, 5.68%, 10/05/95 .. 10,000,000 9,993,745
Federal Farm Credit Bank Notes, 5.91%, 10/25/95 .. 5,000,000 4,980,767
Federal Farm Credit Bank Notes, 5.70%, 11/10/95 .. 5,920,000 5,883,033
Federal Farm Credit Bank Notes, 5.70%, 11/14/95 .. 5,000,000 4,965,656
Federal Farm Credit Bank Notes, 5.56%, 01/09/96 .. 5,000,000 4,924,861
Federal Farm Credit Bank Notes, 5.55%, 01/11/96 .. 5,000,000 4,923,500
Federal Farm Credit Bank Notes, 5.87%, 01/18/96 .. 15,000,000 14,744,001
Federal Farm Credit Bank Notes, 4.30%, 02/05/96 .. 5,000,000 4,901,751
------------
62,313,866
------------
FEDERAL FARM CREDIT BANK INTEREST BEARING NOTE - 1.5%
Federal Farm Credit Bank Notes, 5.72%, 07/01/96 .. 5,000,000 4,994,377
------------
FEDERAL HOME LOAN BANKS DISCOUNT NOTES - 21.0%
Federal Home Loan Bank Notes, 5.69%, 10/02/95 .... 15,000,000 14,997,465
Federal Home Loan Bank Notes, 5.66%, 10/04/95 .... 10,000,000 9,995,291
Federal Home Loan Bank Notes, 5.65%, 11/13/95 .... 5,000,000 4,966,735
Federal Home Loan Bank Notes, 5.70%, 11/24/95 .... 5,000,000 4,957,850
Federal Home Loan Bank Notes, 5.60%, 12/14/95 .... 5,000,000 4,943,267
Federal Home Loan Bank Notes, 5.60%, 12/15/95 .... 5,000,000 4,942,500
Federal Home Loan Bank Notes, 5.75%, 02/12/96 .... 5,000,000 4,895,964
Federal Home Loan Bank Notes, 6.56%, 03/22/96 .... 5,000,000 4,851,989
Federal Home Loan Bank Notes, 5.69%, 04/10/96 .... 5,000,000 4,853,867
Federal Home Loan Bank Notes, 5.74%, 05/03/96 .... 5,000,000 4,835,764
------------
64,240,692
------------
FEDERAL HOME LOAN BANK INTEREST BEARING NOTE - 3.3%
Federal Home Loan Bank Notes, 6.20%, 01/18/96* ... 10,000,000 9,998,121
------------
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES - 5.0%
Tennessee Valley Authority Notes, 5.70%, 10/13/95 5,000,000 4,990,583
Tennessee Valley Authority Notes, 5.71%, 10/17/95 10,355,000 10,328,974
------------
15,319,557
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $156,866,613) ....................................... 156,866,613
------------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
REPURCHASE AGREEMENTS - 49.2%
With Fuji Securities, Inc.: at 6.47%, dated
09/29/95, to be repurchased at $75,040,438 on
10/02/95, collateralized by U.S. Treasury
Securities with various coupons and maturities
to 05/15/20 (market value $40,688,247), and U.S.
Government Agency Securities with various
coupons and maturities to 04/15/30 (market
value, $35,812,376) ............................ $ 75,000,000 $ 75,000,000
With UBS Securities, Inc.: at 6.45%, dated
09/29/95, to be repurchased at $75,517,869 on
10/02/95, collateralized by Federal Home Loan
Mortgage Corporation Adjustable Rate Mortgage
Pass-Through Securities with various coupons and
maturities to 04/01/31 (market value,
$74,490,328), and Federal National Mortgage
Association Adjustable Rate Mortgage Pass-
Through Securities with various coupons and
maturities to 10/01/23 (market value,
$2,496,591) .................................... 75,477,300 75,477,300
------------
TOTAL REPURCHASE AGREEMENTS (COST $150,477,300) ............ 150,477,300
------------
TOTAL INVESTMENTS (COST $307,343,913)** - 100.4% ................ 307,343,913
OTHER ASSETS AND LIABILITIES, NET - (0.4)% ...................... (1,248,000)
------------
NET ASSETS - 100.0% ............................................. $306,095,913
============
** Cost for federal income tax purposes.
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate
Notes are instruments whose rates change periodically. The rate shown
is the interest rate as of September 30, 1995.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS / SEPTEMBER 30, 1995
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
TAXABLE MUNICIPAL SECURITIES - 11.4%
ALABAMA - 0.6%
The Ind. Dev. Brd. of Geneva
County, AL VRDB (Brooks AG Co.,
Inc.) Ser. 1995, 5.95%, 02/01/10* ...... NR/A-1+ $ 4,800,000 $ 4,800,000
------------
ARKANSAS - 1.4%
Arkansas Dev. Fin. Auth. Ind. Fac.
VRDB (Potlatch Corp.) Ser. 1995B,
5.95%, 08/01/30* ....................... NR/A-1+ 10,750,000 10,750,000
------------
MICHIGAN - 3.7%
Genesys Health System VRDB Ser. 1995A,
5.91%, 04/01/20* ....................... VMIG1/A-1 10,000,000 10,000,000
Oakwood Medical Enterprises, Inc. VRDB
Ser. 1988A, 5.94%, 09/01/12* ........... NR/A-1 17,500,000 17,500,000
------------
27,500,000
------------
MISSISSIPPI - 0.8%
Mississippi Business Fin. Corp. Ind. Dev.
VRDB (Choctaw Foods, Inc. Proj.) Ser.
1995, 5.95%, 08/01/15* ................. Aaa/NR 6,000,000 6,000,000
------------
NEW YORK - 4.9%
New York City, NY Ser. 1993B, 5.95%,
10/11/95 ............................... VMIG1/A-1+ 6,500,000 6,500,000
New York City, NY Ser. 1996A-Z, 5.90%,
11/20/95 ............................... VMIG1/A-1+ 5,000,000 5,000,000
New York City, NY Ser. H, Sub. Ser. H-7,
5.95%, 10/11/95 ........................ VMIG1/A-1+ 25,430,000 25,430,000
------------
36,930,000
------------
TOTAL TAXABLE MUNICIPAL SECURITIES (COST $85,980,000) ...... 85,980,000
------------
CERTIFICATES OF DEPOSIT - 16.6%
U.S. BANKS, U.S. BRANCHES - 2.0%
First Alabama Bank, 5.75%, 12/14/95 ...... P-1/A-1+ 15,000,000 14,999,229
------------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
FOREIGN BANKS, U.S. BRANCHES - 12.6%
Banque Nationale de Paris, SF, 5.98%,
10/05/95 ............................... P-1/A-1 $ 25,000,000 $ 25,000,639
Bayerische Landesbank Girozentral, NY,
6.00%, 07/22/96 ........................ P-1/A-1+ 35,000,000 35,000,000
Canadian Imperial Bank of Commerce, NY,
5.78%, 10/23/95 ........................ P-1/A-1+ 5,000,000 5,000,000
Commerzbank, NY, 5.86%, 11/15/95 ......... P-1/A-1+ 10,000,000 9,999,222
Credit Suisse, NY, 5.64%, 01/17/96 ....... P-1/A-1+ 20,000,000 19,993,637
------------
94,993,498
------------
FOREIGN BANK, FOREIGN BRANCH - 2.0%
National Westminster Bank, Grand Cayman,
5.75%, 01/05/96 ........................ P-1/A-1+ 15,000,000 15,001,787
------------
TOTAL CERTIFICATES OF DEPOSIT (COST $124,994,514) .......... 124,994,514
------------
COMMERCIAL PAPER - 46.9%
AUTOMOBILES - 4.1%
Daimler-Benz North America Corp., 5.73%,
11/06/95 ............................... P-1/A-1 11,000,000 10,936,970
Daimler-Benz North America Corp., 5.55%,
03/15/96 ............................... P-1/A-1 15,000,000 14,615,203
Hyundai Motor Finance Co., 5.94%,
10/02/95 ............................... P-1/A-1 5,000,000 4,999,175
------------
30,551,348
------------
BANKS - 7.3%
Abbey National North America, 5.67%,
12/05/95 ............................... P-1/A-1+ 35,000,000 34,642,004
Credit Agricole USA, Inc., 6.05%,
10/18/95 ............................... P-1/A-1+ 20,000,000 19,942,861
------------
54,584,865
------------
CHEMICALS - 8.3%
Akzo Nobel America, Inc., 5.75%, 11/15/95 P-1/A-1 10,000,000 9,928,125
Akzo Nobel America, Inc., 5.69%, 12/04/95 P-1/A-1 18,053,000 17,870,384
DuPont (E.I.) De Nemours & Co., 5.63%,
12/21/95 ............................... P-1/A-1+ 15,000,000 14,809,987
DuPont (E.I.) De Nemours & Co., 5.60%,
06/05/96 ............................... P-1/A-1+ 20,500,000 19,709,156
------------
62,317,652
------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
FINANCE - 11.1%
Commerzbank U.S. Finance Inc., 5.77%,
10/27/95 ............................... P-1/A-1+ $10,000,000 $ 9,958,328
General Electric Capital Corp., 6.25%,
10/31/95 ............................... P-1/A-1+ 10,000,000 9,947,917
PGA Tour Investment Finance, Inc., 5.80%,
10/12/95 ............................... P-1/A-1 4,500,000 4,492,025
PGA Tour Investment Finance, Inc., 5.67%,
11/17/95 ............................... P-1/A-1 20,500,000 20,348,249
Vehicle Services of America, Ltd., 5.73%,
11/10/95 ............................... P-1/A-1 8,500,000 8,445,883
Vehicle Services of America, Ltd., 5.71%,
11/17/95 ............................... P-1/A-1 25,500,000 25,309,904
Vehicle Services of America, Ltd., 5.73%,
12/06/95 ............................... P-1/A-1 5,000,000 4,947,475
------------
83,449,781
------------
INTERNATIONAL TRADING - 4.6%
Daewoo International (America) Corp.,
5.75%, 10/23/95 ........................ P-1/A-1+ 10,000,000 9,964,861
Daewoo International (America) Corp.,
5.66%, 01/10/96 ........................ P-1/A-1+ 25,000,000 24,603,014
------------
34,567,875
------------
PHARMACEUTICAL - 3.5%
Zeneca Wilmington, Inc., 5.73%, 10/19/95 . P-1/A-1 26,000,000 25,925,510
------------
SECURITIES DEALERS - 8.0%
Goldman Sachs Group, L.P., 5.55%, 02/16/96 P-1/A-1+ 30,000,000 29,361,750
Merrill Lynch & Co., Inc., 5.75%, 10/17/95 P-1/A-1+ 11,335,000 11,306,033
Merrill Lynch & Co., Inc., 5.72%, 11/20/95 P-1/A-1+ 15,000,000 14,880,833
Merrill Lynch & Co., Inc., 5.62%, 02/29/96 P-1/A-1+ 5,000,000 4,882,136
------------
60,430,752
------------
TOTAL COMMERCIAL PAPER (COST $351,827,783) ................. 351,827,783
------------
CORPORATE BONDS - 3.3%
MANUFACTURING - 2.6%
G.E. Engine RPP Trust Guaranteed VRDB
Ser. 1995-1, Sub. Ser. B, 5.88%,
02/12/99* .............................. NR/NR 20,000,000 20,000,000
------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
FINANCIAL - 0.7%
General Electric Capital Corp., 5.83%,
07/30/96 ............................... Aaa/AAA $ 5,000,000 $ 4,998,423
------------
TOTAL CORPORATE BONDS (COST $24,998,423) ................... 24,998,423
------------
BANKERS' ACCEPTANCES - 5.3%
Chemical Bank, 5.67%, 10/30/95 ........... P-1/A-1 5,000,000 4,977,162
CoreStates Bank, 5.84%, 10/20/95 ......... P-1/A-1 8,000,000 7,975,342
CoreStates Bank, 5.65%, 12/12/95 ......... P-1/A-1 5,023,204 4,966,442
CoreStates Bank, 5.66%, 12/26/95 ......... P-1/A-1 7,157,283 7,060,509
CoreStates Bank, 5.60%, 01/30/96 ......... P-1/A-1 5,000,000 4,905,889
CoreStates Bank, 5.70%, 02/26/96 ......... P-1/A-1 10,000,000 9,765,667
------------
TOTAL BANKERS' ACCEPTANCES (COST $39,651,011) .............. 39,651,011
------------
REPURCHASE AGREEMENT - 16.7%
With UBS Securities, Inc.: at 6.45%,
dated 09/29/95, to be repurchased at
$125,692,724 on 10/02/95,
collateralized by Federal Home Loan
Mortgage Corp. Gold Pass-Through
Securities with various coupons and
maturities to 05/01/25 (market value,
$16,554,719), Federal Home Loan
Mortgage Corp. Adjustable Rate Mortgage
Pass-Through Securities with various
coupons and maturities to 02/01/25
(market value, $25,015,423), Federal
National Mortgage Association Pass-
Through Securities with various coupons
and maturities to 05/01/25 (market
value, $66,919,904), Federal National
Mortgage Association Adjustable Rate
Mortgage Pass-Through Securities with
various coupons and maturities to
08/01/25 (market value, $19,650,134)
(Cost $125,625,200) .................... NR/NR 125,625,200 125,625,200
------------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
VALUE
(NOTE 2)
--------
TOTAL INVESTMENTS (COST $753,076,931)** - 100.2% ................ $753,076,931
OTHER ASSETS AND LIABILITIES, NET - (0.2)% ...................... (1,951,923)
------------
NET ASSETS - 100.0% ............................................. $751,125,008
============
** Cost for federal income tax purposes.
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate
Notes are instruments whose rates change periodically. The rates shown
are the interest rates as of September 30, 1995.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS / SEPTEMBER 30, 1995
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
MUNICIPAL SECURITIES - 99.9%
ALABAMA - 4.3%
Chatom, AL Ind. Dev. Brd. Poll. Cntrl.
Rev. Bonds TECP (AL Electric Corp.)
Ser. 1993, 3.85%, 12/08/95 P-1/A-1+ $7,000,000 $ 7,000,000
Montgomery, AL Ind. Dev. Brd. Poll.
Cntrl. & Solid Waste Disposal Rev.
Ref. Bonds TECP (General Electric Co.
Proj.) Ser. 1990, 3.75%, 12/14/95 ...... P-1/A-1+ 6,700,000 6,700,000
------------
13,700,000
------------
ALASKA - 2.5%
Anchorage, AK Higher Educ. VRDB (Alaska
Pacific University) Ser. 1987, 4.50%,
07/01/17* .............................. NR/A-1 7,840,000 7,840,000
------------
ARIZONA - 1.6%
Salt River, AZ TECP (Agric. Imp. & Pwr.
Dist. Proj.), 3.75%, 11/13/95 .......... P-1/A-1+ 5,000,000 5,000,000
------------
DISTRICT OF COLUMBIA - 3.4%
District of Columbia VRDB (American
University) Ser. 1985, 4.35%, 10/01/15* VMIG1/NR 10,000,000 10,000,000
District of Columbia VRDB (American
University) Ser. 1986A, 4.35%, 12/01/15* VMIG1/NR 1,000,000 1,000,000
------------
11,000,000
------------
FLORIDA - 2.7%
City of Jacksonville, FL TECP, 3.80%,
12/13/95 ............................... P-1/A-1 8,500,000 8,500,000
------------
GEORGIA - 4.8%
Atlanta, GA Downtown Dev. Auth. VRDB
(Care Proj.) Ser. 1993, 4.40%,
06/01/13* .............................. VMIG1/NR 2,900,000 2,900,000
City of Roswell, GA Housing Auth.
Multi-Family Housing Rev. Ref. VRDB
(Wood Crossing Proj.) Ser. 1994,
4.45%, 08/01/24* ....................... NR/A-1 5,000,000 5,000,000
County of Dekalb, GA Housing Auth.
Multifamily Housing Rev. Bonds VRDB
(Crow Wood Arbor Associates Ltd. Proj.)
Ser. 1985Q, 4.45%, 12/01/27* ........... NR/A-1 3,630,000 3,630,000
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
Macon Bibb County, GA Hosp. Auth. Rev.
Ant. Cert. VRDB (The Medical Center of
Central Georgia) Ser. 1994, 4.40%,
04/01/07* .............................. Aa3/NR $ 3,750,000 $ 3,750,000
------------
15,280,000
------------
HAWAII - 0.6%
Hawaii Dept. of Budget & Fin. Special
Purpose Rev. VRDB (G.N. Wilcox
Memorial Hosp. Proj.) Ser. 1988,
5.10%, 07/01/18* ....................... VMIG1/NR 1,800,000 1,800,000
------------
ILLINOIS - 14.4%
Illinois Dev. Auth. Poll. Cntrl. Rev.
VRDB (Diamond Star Motors Corp.),
4.95%, 12/01/08* ....................... P-1/NR 1,200,000 1,200,000
Illinois Health Fac. Auth. Variable
Revolving Fund Pooled Fin. Proj. TECP
(Univ. of Chicago), 3.90%, 02/08/96 ... VMIG1/A-1+ 14,100,000 14,100,000
Illinois Health Fac. Auth. VRDB
(Elmhurst Memorial Hosp.), 4.85%,
01/01/20* .............................. VMIG1/NR 9,260,000 9,260,000
Illinois Health Fac. Auth. VRDB
(Evangelical Hosp. Corp.) Ser. 1985B,
4.45%, 01/01/16* ...................... VMIG1/NR 6,900,000 6,900,000
Illinois Health Fac. Auth. VRDB
(Healthcorp Affiliates - Central
Du Page Hospital Proj.) Ser. 1990,
4.85%, 11/01/20* ....................... VMIG1/NR 8,000,000 8,000,000
Illinois Health Fac. Auth. VRDB
(Resurrection Health Care System) Ser.
1993, 4.85%, 05/01/11* ................. VMIG1/NR 6,300,000 6,300,000
------------
45,760,000
------------
INDIANA - 15.1%
City of Mt. Vernon, IN Poll. Cntrl. &
Solid Waste Disposal Rev. Bonds TECP
(General Electric Co. Proj.) Ser.
1989A, 3.60%, 10/20/95 ................. P-1/A-1+ 8,900,000 8,900,000
City of Rockport, IN Poll. Cntrl. Rev.
VRDN (AEP Generating Co. Proj.) Ser.
1995B, 4.40%, 06/01/25* ................ NR/A-1 8,000,000 8,000,000
Indiana Health Fac. Fin. Auth. VRDB
(Capital Access Designated Pool Proj.)
Ser. 1991, 4.50%, 08/01/06* ............ VMIG1/NR 7,775,000 7,775,000
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
Indiana Hosp. Equip. Fin. Auth. Insured
VRDB Ser. 1985A, 4.50%, 12/01/15* VMIG1/A-1 $9,450,000 $ 9,450,000
Jasper County, IN Poll. Cntrl. Rev.
Bonds TECP (Northern Indiana Public
Svc.) Ser. 1988D, 3.70%, 12/15/95 ...... P-1/A-1+ 6,000,000 6,000,000
South Bend Redevelopment Auth. Lease
Rental VRDB (College Football Hall
of Fame Proj.) Ser. 1994, 4.55%,
02/01/19* .............................. VMIG1/A-1 7,950,000 7,950,000
------------
48,075,000
------------
IOWA - 2.9%
Des Moines, IA Methodist Sys. Inc. Hosp.
Fac. VRDB (Methodist Medical Center
Proj.) Ser. 1985, 4.50%, 08/01/15* ..... VMIG1/NR 1,600,000 1,600,000
Polk City, IA Hosp. Equip. Imp. Rev.
VRDB Ser. 1985, 4.30%, 12/01/05* ....... VMIG1/A-1 4,700,000 4,700,000
University of Iowa Fac. Corp. VRDB
(Human Biology Research Proj.) Ser.
1985A, 4.50%, 06/01/05* ................ NR/A-1 3,125,000 3,125,000
------------
9,425,000
------------
LOUISIANA - 4.2%
Ascension Parish, LA Poll. Cntrl. Rev.
VRDB (Shell Oil Co. Proj.) Ser. 1993,
4.85%, 09/01/23* ....................... P-1/A-1+ 3,000,000 3,000,000
Plaquemines Port, Harbor & Terminal Dist.,
LA Marine Terminal Fac. Rev. Ref. Bonds
TECP (Electro-Coal Transfer Corp.)
Ser. 1985A, 3.90%, 02/23/96 ............ P-1/A-1+ 10,500,000 10,500,000
------------
13,500,000
------------
MARYLAND - 3.8%
Anne Arundel County, MD Port Fac. Rev.
Bonds TECP (Baltimore Gas & Elec. Co.),
3.95%, 12/08/95 ........................ VMIG1/A-1 12,000,000 12,000,000
------------
MICHIGAN - 0.4%
Farmington Hills Hosp. Fin. Auth. VRDB
(Botsford General Hosp.) Ser. 1991B,
4.85%, 02/15/16* ....................... VMIG1/A-1 1,260,000 1,260,000
------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
MINNESOTA - 4.1%
Becker, MN Poll. Cntrl. Rev. Bonds TECP
(Northern State Pwr. Co. - Sherburne
County Gen. Stat. Unit 3 Proj.) Ser.
1992A, 3.85%, 11/28/95 ................ VMIG1/A-1+ $8,000,000 $ 8,000,000
Becker, MN Poll. Cntrl. Rev. Bonds TECP
(Northern State Pwr. Co. - Sherburne
County Gen. Stat. Unit 3 Proj.) Ser.
1993A, 3.85%, 11/28/95 ................. VMIG1/A-1 5,200,000 5,200,000
------------
13,200,000
------------
MISSISSIPPI - 1.3%
Mississippi Hosp. Equip. & Fac. Auth.
VRDB (Mississippi Baptist Medical
Center) Ser. 1990B, 4.50%, 07/01/12* ... VMIG1/NR 4,110,000 4,110,000
------------
MISSOURI - 1.1%
Ind. Dev. Auth. of The City of Joplin,
MO Ind. Dev. Rev. VRDB (Northpark Mall
Exp. Proj.), 4.50%, 12/01/05* .......... VMIG1/NR 2,100,000 2,100,000
Missouri Health & Educ. Fac. Auth. VRDB
(Washington University) Ser. 1989B,
4.85%, 03/01/17* ....................... VMIG1/A-1+ 800,000 800,000
Missouri St. Env. Imp. Energy Res. Auth.
Poll. Cntrl. Rev. VRDB (Noranda
Aluminum Co. Proj.), 4.50%, 10/01/02* .. P-1/NR 800,000 800,000
------------
3,700,000
------------
NEW YORK - 4.7%
New York City General Obligation Tax
Ant. Note Ser. 1996A, 4.50%, 02/15/96 . MIG1/SP-1+ 14,850,000 14,885,909
------------
NORTH CAROLINA - 1.6%
Carteret County, NC Ind. Fac. & Poll.
Cntrl. Fin. Auth. VRDB (Texas Gulf)
Ser. 1985, 4.65%, 10/01/05* ............ Aa1/NR 5,000,000 5,000,000
------------
NORTH DAKOTA - 0.9%
Grand Forks, ND Health Care Fac. VRDB
(United Hosp. Oblig. Group) Ser. 1992B,
4.85%, 12/01/16* ....................... VMIG1/NR 3,000,000 3,000,000
------------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
OHIO - 1.2%
Ohio Air Quality Dev. Auth. Poll. Cntrl.
Rev. Bonds TECP (Cleveland Electric
Illuminating Co. Proj.) Ser. 1988B,
3.85%, 12/11/95 ....................... VMIG1/A-1+ $3,820,000 $ 3,820,000
------------
PENNSYLVANIA - 1.6%
Bucks County, PA Ind Dev. Auth. VRDB
(New Edgecomb Metals Co.) Ser. 1984,
4.13%, 10/01/09* ....................... Aa1/NR 5,000,000 5,000,000
------------
TENNESSEE - 1.6%
Public Auth. of Clarksville, TN Pooled
Rev. VRDB Ser. 1994, 4.45%, 06/01/24* .. NR/A-1 5,000,000 5,000,000
------------
TEXAS - 14.8%
Board of Regents of The University of
Texas System TECP, 3.70%, 12/15/95 ..... P-1/A-1+ 5,200,000 5,200,000
City of Houston, TX TECP Ser. A, 3.85%,
10/04/95 .............................. A-1+/P-1 14,200,000 14,200,000
City of Houston, TX General Obligation
Bonds Ser. 1992E, 4.35%, 10/01/95 ...... VMIG1/A-1+ 1,700,000 1,700,000
Harris County, TX Health Fac. Auth. Dev.
Corp. VRDB (St. Luke's Episcopal Hosp.
Proj.) Ser. 1985D, 4.85%, 02/15/16* .... NR/A-1+ 6,600,000 6,600,000
Harris County, TX Health Fac. Auth. Dev.
Corp. VRDB (St. Luke's Episcopal Hosp.
Proj.) Ser. 1992, 4.85%, 02/15/21* ..... NR/A-1+ 2,100,000 2,100,000
Harris County, TX Health Fac. Auth. Dev.
Corp. VRDB (St. Luke's Episcopal Hosp.
Proj.) Ser. C, 4.85%, 02/15/16* ........ NR/A-1+ 500,000 500,000
Harris County, TX Health Fac. Auth. Dev.
Corp. VRDB (Methodist Hosp.), 4.85%,
12/01/25* .............................. NR/A-1+ 6,700,000 6,700,000
North Central, TX Health Fac. Dev. Corp.
VRDB (Methodist Hosp. of Dallas) Ser.
1985B, 4.85%, 10/01/15* ................ NR/A-1 4,900,000 4,900,000
Texas A&M University System TECP Ser. B,
3.85%, 10/05/95 ........................ P-1/A-1+ 5,100,000 5,100,000
------------
47,000,000
------------
VERMONT - 2.2%
State of Vermont General Obligation TECP
Ser. F, 3.85%, 12/31/95 ................ P-1/A-1+ 7,100,000 7,100,000
------------
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS - CONTINUED
- --------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
VIRGINIA - 1.6%
Louisa County, VA Ind. Dev. Auth. Pooled
Fin. VRDB, 4.45%, 01/01/20* ............ NR/A-1 $ 5,000,000 $ 5,000,000
------------
WASHINGTON - 0.6%
Washington Health Care Fac. Auth. VRDB
(Fred Hutchinson Cancer Research Center)
Ser. 1991A, 4.85%, 01/01/18* ........... VMIG1/NR 1,800,000 1,800,000
------------
WISCONSIN - 1.3%
Wisconsin Health Fac. Auth. VRDB
(Franciscan Health Care Inc.) Ser.
1985A-2, 4.40%, 01/01/16* .............. VMIG1/A-1+ 4,100,000 4,100,000
------------
WYOMING - 0.6%
Green River Poll. Cntrl. Rev. VRDB
(Texas Gulf Inc.) Ser. 1984, 4.65%,
12/01/04* .............................. VMIG1/NR 2,000,000 2,000,000
------------
TOTAL MUNICIPAL SECURITIES (COST $317,855,909) ............. 317,855,909
------------
TOTAL INVESTMENTS (COST $317,855,909)** - 99.9% ................. 317,855,909
OTHER ASSETS AND LIABILITIES, NET - 0.1% ........................ 356,671
------------
NET ASSETS - 100.0% ............................................. $318,212,580
============
** Cost for federal income tax purposes.
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate
Notes are instruments whose rates change periodically. The rates shown
are the interest rates as of September 30, 1995.
TECP - Tax-Exempt Commercial Paper.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 1995
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
ASSETS:
Investments in securities
(including repurchase agreements
of $150,477,300, $125,625,200
and $0, respectively), at value
(amortized cost $307,343,913,
$753,076,931, and $317,855,909,
respectively) (NOTE 2) ........ $ 307,343,913 $ 753,076,931 $ 317,855,909
Interest receivable ............. 246,983 1,938,392 1,394,024
Other assets .................... 6,189 9,630 40,220
------------- ------------- -------------
Total assets .................. 307,597,085 755,024,953 319,290,153
------------- ------------- -------------
LIABILITIES:
Dividends payable ............... 1,354,116 3,508,641 897,684
Accrued management fee (Note 3) . 120,701 306,957 126,645
Other accrued expenses (Note 3) . 26,355 84,347 53,244
------------- ------------- -------------
Total liabilities ............. 1,501,172 3,899,945 1,077,573
------------- ------------- -------------
NET ASSETS ...................... $ 306,095,913 $ 751,125,008 $ 318,212,580
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in ................. $ 306,094,293 $ 751,139,414 $ 318,214,240
Accumulated realized gain (loss)
on investments - net .......... 1,620 (14,406) (1,660)
------------- ------------- -------------
NET ASSETS, for 306,094,293,
751,139,414, and 318,220,923,
shares outstanding,
respectively .................. $ 306,095,913 $ 751,125,008 $ 318,212,580
============= ============= =============
NET ASSET VALUE, offering and
redemption price per share: ... $1.00(1) $1.00(2) $1.00(3)
===== ===== =====
(1) $306,095,913 / 306,094,293 outstanding shares of beneficial interest,
no par value
(2) $751,125,008 / 751,139,414 outstanding shares of beneficial interest,
no par value
(3) $318,212,580 / 318,220,923 outstanding shares of beneficial interest,
no par value
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Fiscal Year Ended September 30, 1995
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
INTEREST INCOME ................. $ 20,633,110 $ 40,741,059 $ 13,837,440
------------ ------------ ------------
EXPENSES:
Management fee (Note 3) ......... 1,672,293 3,240,976 1,696,280
Accounting fee (Note 3) ......... 101,163 167,915 102,184
Distribution expenses (Note 3) .. 60,831 63,098 26,729
Trustees' fees and expenses
(Note 3) ...................... 6,845 11,191 6,600
Registration fees ............... 33,082 51,318 35,082
Reports to shareholders ......... 4,689 9,232 5,062
Legal ........................... 30,189 53,268 13,616
Audit ........................... 17,480 30,920 29,100
Other ........................... 40,420 82,237 42,809
------------ ------------ ------------
Total expenses ................ 1,966,992 3,710,155 1,957,462
------------ ------------ ------------
Net investment income ......... 18,666,118 37,030,904 11,879,978
------------ ------------ ------------
REALIZED GAIN (LOSS) ON
INVESTMENTS - NET (NOTE 2) .... (6,526) 243 4,106
------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..... $ 18,659,592 $ 37,031,147 $ 11,884,084
============ ============ ============
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
For the Fiscal Year Ended September 30, 1995
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ........ $ 18,666,118 $ 37,030,904 $ 11,879,978
Net realized gain (loss) on
investments ................ (6,526) 243 4,106
-------------- -------------- --------------
Net increase in net assets
resulting from operations .. 18,659,592 37,031,147 11,884,084
-------------- -------------- --------------
Dividends to shareholders from
net investment income ($0.052,
$0.054, and $0.033 per share,
respectively) ................ (18,666,118) (37,030,904) (11,879,978)
-------------- -------------- --------------
Share transactions at net asset
value of $1.00 per share
Proceeds from sale of shares . 3,161,916,931 5,233,294,691 2,175,933,192
Shares issued to shareholders
in reinvestment of dividends
from net investment income . 305,455 1,620,673 314,985
Cost of shares redeemed ...... (3,192,886,094) (5,090,626,079) (2,246,604,280)
-------------- -------------- --------------
Net increase (decrease) in net
assets and shares resulting
from share transactions .... (30,663,708) 144,289,285 (70,356,103)
-------------- -------------- --------------
Total increase (decrease) in net
assets ....................... (30,670,234) 144,289,528 (70,351,997)
NET ASSETS:
Beginning of year ............ 336,766,147 606,835,480 388,564,577
-------------- -------------- --------------
End of year .................. $ 306,095,913 $ 751,125,008 $ 318,212,580
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -CONTINUED
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
For the Fiscal Year Ended September 30, 1994
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ........ $ 13,508,642 $ 23,569,613 $ 8,356,912
Net realized loss on investments (1,893,713) (1,896,678) (1,661)
-------------- -------------- --------------
Net increase in net assets
resulting from operations .. 11,614,929 21,672,935 8,355,251
-------------- -------------- --------------
Dividends to shareholders from
net investment income ($0.033,
$0.033, and $0.021 per share,
respectively) .............. (13,508,642) (23,569,613) (8,356,912)
-------------- -------------- --------------
Share transactions at net asset
value of $1.00 per share
Proceeds from sale of shares . 3,003,180,234 4,670,277,041 2,380,635,778
Shares issued to shareholders
in reinvestment of dividends
from net investment income . 149,378 375,594 149,383
Cost of shares redeemed ...... (3,052,632,227) (4,713,216,236) (2,397,735,551)
-------------- -------------- --------------
Net decrease in net assets and
shares resulting from share
transactions ............... (49,302,615) (42,563,601) (16,950,390)
-------------- -------------- --------------
Capital contribution from Manager
(Note 3) ..................... 1,895,702 1,871,673 0
-------------- -------------- --------------
Total decrease in net assets ... (49,300,626) (42,588,606) (16,952,051)
NET ASSETS:
Beginning of year ............ 386,066,773 649,424,086 405,516,628
-------------- -------------- --------------
End of year .................. $ 336,766,147 $ 606,835,480 $ 388,564,577
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout
each year and other performance information derived from the financial
statements. They should be read in conjunction with the financial statements
and notes thereto.
For the Fiscal Years Ended September 30,
----------------------------------------
1995 1994* 1993 1992 1991
------ ------ ------ ------ ------
RODNEY SQUARE FUND - U.S. GOVERNMENT PORTFOLIO
For a Share Outstanding Throughout Each Year:
NET ASSET VALUE - BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Investment Operations:
Net investment income ......... 0.052 0.033 0.028 0.038 0.062
----- ----- ----- ----- -----
Distributions:
From net investment income .... (0.052) (0.033) (0.028) (0.038) (0.062)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR ... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return .................... 5.37% 3.32% 2.83% 3.88% 6.41%
Ratios (to average net assets)/Supplemental Data:
Expenses .................... 0.55% 0.53% 0.53% 0.54% 0.53%
Net investment income ....... 5.25% 3.27% 2.79% 3.84% 6.22%
Net assets at end of year
($000 omitted) ................ $306,096 $336,766 $386,067 $409,534 $479,586
20
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS - CONTINUED
- --------------------------------------------------------------------------------
For the Fiscal Years Ended September 30,
----------------------------------------
1995 1994* 1993 1992 1991
------ ------ ------ ------ ------
RODNEY SQUARE FUND - MONEY MARKET PORTFOLIO
For a Share Outstanding Throughout Each Year:
NET ASSET VALUE - BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Investment Operations:
Net investment income ......... 0.054 0.033 0.029 0.041 0.065
----- ----- ----- ----- -----
Distributions:
From net investment income .... (0.054) (0.033) (0.029) (0.041) (0.065)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR ... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return .................... 5.50% 3.37% 2.92% 4.15% 6.73%
Ratios (to average net assets)/Supplemental Data:
Expenses .................... 0.54% 0.53% 0.52% 0.52% 0.52%
Net investment income ....... 5.37% 3.33% 2.88% 4.06% 6.52%
Net assets at end of year
($000 omitted) ................ $751,125 $606,835 $649,424 $717,544 $790,837
For the Fiscal Years Ended September 30,
----------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
RODNEY SQUARE TAX-EXEMPT FUND
For a Share Outstanding Throughout Each Year:
NET ASSET VALUE - BEGINNING OF YEAR $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
Investment Operations:
Net investment income ......... 0.033 0.021 0.020 0.030 0.045
----- ----- ----- ----- -----
Distributions:
From net investment income .... (0.033) (0.021) (0.020) (0.030) (0.045)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR ... $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
Total Return .................... 3.36% 2.17% 2.07% 3.06% 4.59%
Ratios (to average net assets)/Supplemental Data:
Expenses .................... 0.54% 0.54% 0.54% 0.54% 0.56%
Net investment income ....... 3.29% 2.13% 2.05% 3.06% 4.49%
Net assets at end of year
($000 omitted) ................ $318,213 $388,565 $405,517 $327,098 $353,271
* During the fiscal year ended September 30, 1994, the Fund Manager
contributed capital of $0.0045 and $0.0028 per share to the U.S.
Government Portfolio and the Money Market Portfolio, respectively.
21
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION AND SHARES OF THE FUND. The Rodney Square Fund and The Rodney
Square Tax-Exempt Fund (the "Fund(s)") are Massachusetts business trusts
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as diversified, open-end management investment companies. The
Declaration of Trusts for The Rodney Square Fund, dated February 16, 1982,
and The Rodney Square Tax-Exempt Fund, dated July 31, 1985, each as last
amended on February 15, 1993, permit the Trustees of each Fund to create
additional series (or portfolios), each of which may issue additional classes
of shares. There are currently two portfolios, the U.S. Government Portfolio
and the Money Market Portfolio (the "Portfolios"), in The Rodney Square Fund,
each of which currently consists of a single class of shares. The Rodney
Square Tax-Exempt Fund has one portfolio (also a "Portfolio") with a single
class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of each Fund:
SECURITY VALUATION. Each Fund values securities utilizing the amortized cost
valuation method which is permitted under Rule 2a-7 under the 1940 Act
provided that the Fund complies with certain conditions. This method
involves valuing a portfolio security initially at its cost and thereafter
adjusting for amortization of premium or accretion of discount to maturity.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate entity for
federal income tax purposes and each intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code
of 1986 and to distribute all of its taxable income and tax-exempt income to
its shareholders. Therefore, no federal income tax provision is required.
At September 30, 1995, the U.S. Government Portfolio, the Money Market
Portfolio and The Rodney Square Tax-Exempt Fund had a net tax basis capital
loss carryforward available to offset future capital gains of approximately
$7,000, $14,000 and $2,000, respectively, which will expire as follows:
CAPITAL LOSS EXPIRATION
CARRYFORWARD DATE
------------ ----------
U.S. Government Portfolio $ 7,000 09/30/03
Money Market Portfolio $14,000 09/30/02
Rodney Square Tax-Exempt Fund $ 2,000 09/30/02
Expired capital loss carryforward of The Rodney Square Tax-Exempt Fund in the
amount of $6,682 has been reclassified to capital paid in.
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest income is accrued as
earned. Dividends to shareholders of each Portfolio are declared daily from
net investment income, which consists of accrued interest and discount earned
(including original issue discount), less amortization of premium and the
accrued expenses applicable to the dividend period. For The Rodney Square
Tax-Exempt Fund only, the tax-exempt interest portion of each dividend is
determined uniformly, based on the ratio of the Fund's tax-exempt and taxable
income, if any, for the entire fiscal year.
22
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
REPURCHASE AGREEMENTS. The Rodney Square Fund, through its custodian,
receives delivery of the underlying securities, the market value of which at
the time of purchase is required to be in an amount at least equal to 101% of
the resale price. Rodney Square Management Corporation ("RSMC"), the Fund
Manager, is responsible for determining that the amount of these underlying
securities is maintained at a level such that their market value is at all
times equal to 101% of the resale price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral
and apply the proceeds in satisfaction of the obligation.
OTHER. Investment security transactions are accounted for on a trade date
basis. The Funds use the specific identification method for determining
realized gain and loss on investments for both financial and federal income
tax reporting purposes. Obligations of agencies and instrumentalities of the
U.S. Government are not direct obligations of the U.S. Treasury and, thus,
may or may not be backed by the "full faith and credit" of the United States.
Payment of interest and principal on these obligations, although generally
backed directly or indirectly by the U.S. Government, may be backed solely by
the issuing agency or instrumentality.
The Money Market Portfolio invests in short-term unsecured debt instruments
of corporate issuers. Although the Portfolio is diversified, the issuers'
ability to meet their obligations may be affected by economic developments in
a specific industry or region. The Money Market Portfolio had investments in
commercial paper, certificates of deposit and bankers' acceptances of
domestic and foreign banks which in the aggregate approximated 29% of its
total investments on September 30, 1995.
Approximately 66% of the investments in The Rodney Square Tax-Exempt Fund on
September 30, 1995 were insured by private issuers that guarantee payments of
principal and interest in the event of default or were backed by letters of
credit issued by domestic and foreign banks or financial institutions.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Funds employ
RSMC, a wholly owned subsidiary of Wilmington Trust Company ("WTC"), to serve
as Investment Adviser and Administrator to each of the Funds pursuant to
separate Management Agreements each dated August 9, 1991. Under the
Management Agreements, RSMC, subject to the supervision of the Funds' Boards
of Trustees, directs the investments of the Portfolios in accordance with
each Portfolio's investment objective, policies and limitations. Also under
the Management Agreements, RSMC is responsible for administrative services
such as budgeting, financial reporting, compliance monitoring and corporate
management. For its services, the Funds pay RSMC a monthly fee at the annual
rate of 0.47% of the average daily net assets of each Portfolio of the Funds.
The management fee paid to RSMC for the fiscal year ended September 30, 1995,
amounted to $1,672,293 for the U.S. Government Portfolio, $3,240,976 for the
Money Market Portfolio and $1,696,280 for The Rodney Square Tax-Exempt Fund.
23
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
- --------------------------------------------------------------------------------
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED
During the fiscal year ended September 30, 1994, the Fund Manager contributed
$1,895,702 and $1,871,673 to the U.S. Government Portfolio and the Money
Market Portfolio, respectively, to offset each Portfolio's net realized
losses on certain adjustable rate U.S. Government agency securities. These
contributions increased each Portfolio's capital paid in accounts by their
respective dollar amounts. In accordance with Statement of Position 93-2,
the Money Market Portfolio and the U.S. Government Portfolio reclassified
these amounts from capital paid in to accumulated realized gain (loss) on
investments. These reclassifications had no impact on the net asset value of
either Portfolio.
RSMC determines the net asset value per share and provides all Fund
accounting services pursuant to a separate Accounting Services Agreement with
each Fund. For its services, RSMC receives an annual fee of $50,000 per
Portfolio, plus an amount equal to 0.02% of each Portfolio's average daily
net assets in excess of $100,000,000. For the fiscal year ended September
30, 1995, RSMC's fees for accounting services amounted to $101,163 for the
U.S. Government Portfolio, $167,915 for the Money Market Portfolio and
$102,184 for The Rodney Square Tax-Exempt Fund.
WTC serves as Custodian of the assets of the Funds and is paid for the
provision of this service by RSMC out of its management fee. The Funds
reimburse WTC for its related out-of-pocket expenses, if any, incurred in
connection with the performance of these services.
RSMC serves as Transfer and Dividend Paying Agent for the Funds and does not
receive any separate fees from the Funds for the performance of these
services other than the reimbursement of all reasonable out-of-pocket
expenses incurred by RSMC or its agents for the provision of such services.
Pursuant to a Distribution Agreement with each Fund, dated as of December 31,
1992, Rodney Square Distributors, Inc. ("RSD"), a wholly owned subsidiary of
WTC, manages the Funds' distribution efforts and provides assistance and
expertise in developing marketing plans and materials. The Funds' Boards of
Trustees have adopted, and shareholders have approved, distribution plans
(the "12b-1 Plans") pursuant to Rule 12b-1 under the 1940 Act, to allow each
Fund to reimburse RSD for certain expenses incurred in connection with
distribution activities. The Trustees have authorized a payment of up to
0.20% of each Portfolio's average daily net assets annually to reimburse RSD
for such expenses. For the fiscal year ended September 30, 1995, such
expenses amounted to $60,831 for the U.S. Government Portfolio, $63,098 for
the Money Market Portfolio and $26,729 for The Rodney Square Tax-Exempt Fund.
The salaries of all officers of each Fund, the Trustees of each Fund who are
"interested persons" of the Fund, WTC, RSMC, RSD, or their affiliates and all
personnel of the Funds, WTC, RSMC or RSD performing services related to
research, statistical and investment activities, are paid by WTC, RSMC, RSD,
or their affiliates. The fees and expenses of the "non-interested" Trustees
amounted to $6,845 for the U.S. Government Portfolio, $11,191 for the Money
Market Portfolio and $6,600 for The Rodney Square Tax-Exempt Fund for the
fiscal year ended September 30, 1995.
24
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Trustees of The Rodney Square Fund and The Rodney Square
Tax-Exempt Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Rodney Square Fund (comprising,
respectively, the U.S. Government and the Money Market Portfolios) and The
Rodney Square Tax-Exempt Fund (the "Funds"), as of September 30, 1995, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the five years in the period then ended. These
financial statements and 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 audits.
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 confirmation of securities owned as of
September 30, 1995 by correspondence with the custodian and brokers. 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 that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Rodney Square Fund and The Rodney
Square Tax-Exempt Fund at September 30, 1995, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Baltimore, Maryland
October 26, 1995
25
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
Pursuant to Section 852 of the Internal Revenue Code of 1986, The Rodney Square
Tax-Exempt Fund designates $11,879,978 as tax-exempt dividends.
In January, 1996 shareholders of the Funds will receive Federal income tax
information on all distributions paid to their accounts in calendar year 1995,
including any distributions paid between September 30, 1995 and December 31,
1995.
26
<PAGE>
TRUSTEES
Eric Brucker
Fred L. Buckner
Martin L. Klopping
John J. Quindlen THE RODNEY SQUARE
--------------------
FUND
OFFICERS
Martin L. Klopping, PRESIDENT &
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER THE RODNEY SQUARE
Marilyn Talman, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY TAX-EXEMPT
Connie L. Meyers, ASSISTANT SECRETARY
Louis C. Schwartz, Esq., ASSISTANT SECRETARY FUND
John J. Kelley, ASSISTANT TREASURER
----------------------------------------
FUND MANAGER, ADMINISTRATOR
AND TRANSFER AGENT
Rodney Square Management Corporation [Graphic] Ceasar
----------------------------------------- Rodney upon his
galloping horse
CUSTODIAN facing right,
Wilmington Trust Company reverse image on
---------------------------- dark background
DISTRIBUTOR
Rodney Square Distributors, Inc.
------------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP ANNUAL REPORT
---------------------
SEPTEMBER 30, 1995
THIS REPORT IS SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE
FUNDS. THE REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN
THE FUNDS UNLESS PRECEDED OR ACCOMPANIED
BY AN EFFECTIVE PROSPECTUS.
RS02
