Filed with the Securities and Exchange Commission on January 29, 1996
File No. 2-76333
File No. 811-3406
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ _
Post-Effective Amendment No. 21 x
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 x
THE RODNEY SQUARE FUND
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
RODNEY SQUARE NORTH, 1100 NORTH MARKET STREET, WILMINGTON, DE 19890-0001
------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 651-8280
Marilyn Talman, Esquire
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, DE 19890-0001
---------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
__ immediately upon filing pursuant to paragraph (b)
X on February 1, 1996 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Registrant filed the notice required by Rule 24f-2 for its fiscal year
ended September 30, 1995 on or about November 29, 1995.
TOTAL NUMBER OF PAGES: ____ EXHIBIT INDEX ON PAGE: ____
<PAGE>
THE RODNEY SQUARE FUND
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount
Being Being Offering Price Aggregate of Registration
Registered Registered Per Share Offering Price Fee
- ---------- ------------ -------------- -------------- ---------------
Shares of
Beneficial
Interest $216,796,876 $1.00 $290,000* $100.00*
The fee for the above shares to be registered by this filing has been computed
on the basis of the price in effect on January 22, 1996.
* Calculation of the proposed maximum aggregate offering price has been made
pursuant to Rule 24e-2 under the Investment Company Act of 1940. During its
fiscal year ended September 30, 1995, Registrant redeemed or repurchased
shares of beneficial interest in the aggregate amount of $8,283,512,173.
During its current fiscal year, Registrant used $8,067,005,297 of this
amount for a reduction pursuant to paragraph (c) of Rule 24f-2 under the
Investment Company Act of 1940. Registrant is filing this post-effective
amendment to use the remaining $216,506,876 of the total redemptions and
repurchases during its fiscal year ended September 30, 1995 to reduce the
fee that would otherwise be required for the shares registered hereby.
During its current fiscal year Registrant has filed no other post-effective
amendments for the purpose of the reduction pursuant to paragraph (a) of
Rule 24e-2.
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE FUND
Items Required By Form N-1A
PART A - PROSPECTUS*
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Expense Table
3. Condensed Financial Financial Highlights
Information Performance Information
4. General Description Questions and Answers about the Fund
of Registrant Investment Objective and Policies
Description of the Fund
Appendix
5. Management of the Fund Questions and Answers about the Fund
Management of the Fund
6. Capital Stock and Questions and Answers about the Fund
Other Securities Dividends and Taxes
Description of the Fund
7. Purchase of Securities Questions and Answers about the Fund
Being Offered Purchase of Shares
Management of the Fund
How Net Asset Value is Determined
8. Redemption or Questions and Answers about the Fund
Repurchase Shareholder Accounts
Redemption of Shares
Exchange of Shares
9. Pending Legal Not Applicable
Proceedings
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION*
CAPTION IN STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION
- -------- ------------ -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives Investment Policies
and Policies Investment Limitations
Portfolio Transactions
14. Management of the Trustees and Officers
Registrant
15. Control Persons and Other Information
Principal Holders
of Securities
16. Investment Advisory Rodney Square Management Corporation
and Other Services Wilmington Trust Company
Investment Management Services
Distribution Agreement and Rule 12b-1
Plan
Other Information
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Net Asset Value and Dividends
Other Securities Description of the Fund
19. Purchase, Redemption Net Asset Value and Dividends
and Pricing of Redemptions
Securities Being
Offered
20. Tax Status Taxes
21. Underwriters Portfolio Transactions
Distribution Agreement and Rule 12b-1
Plan
22. Calculations of Net Asset Value and Dividends
Performance Data Performance Information
23. Financial Statements Financial Statements
<PAGE>
[Graphic] Caesar
Rodney upon his
galloping horse
facing right,
reverse image on
dark background
THE RODNEY THE RODNEY SQUARE
SQUARE FUND & TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
The Rodney Square Fund, consisting of two separate series, the U.S.
Government Portfolio and the Money Market Portfolio (each, a "Series"), and The
Rodney Square Tax-Exempt Fund (the "Tax-Exempt Fund") are diversified open-end,
management investment companies. Each Series of The Rodney Square Fund seeks a
high level of current income consistent with the preservation of capital and
liquidity by investing in money market instruments pursuant to its investment
practices. The Tax-Exempt Fund seeks as high a level of interest income, exempt
from federal income tax, as is consistent with a portfolio of high quality,
short-term municipal obligations selected on the basis of liquidity and
stability of principal. The Series and the Tax-Exempt Fund (each, a
"Portfolio") each seek to maintain a constant net asset value of $1.00 per
share.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00.
PROSPECTUS
FEBRUARY 1, 1996
This Prospectus sets forth concise information about the Portfolios that you
should know before investing. Please read and retain this document for future
reference. Statements of Additional Information (dated February 1, 1996)
containing additional information about the Portfolios have been filed with the
Securities and Exchange Commission and, as amended or supplemented from time to
time, are incorporated by reference herein. A copy of the Statements of
Additional Information may be obtained, without charge, from certain
institutions such as banks or broker-dealers that have entered into servicing
agreements ("Service Organizations") with Rodney Square Distributors, Inc. or by
calling the number below, or by writing to Rodney Square Distributors, Inc. at
the address noted on the back cover of this Prospectus. Rodney Square
Distributors, Inc. is a wholly owned subsidiary of Wilmington Trust Company, a
bank chartered in the State of Delaware.
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
* NATIONWIDE ......................................... (800) 336-9970
- --------------------------------------------------------------------------------
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
WILMINGTON TRUST COMPANY, NOR ARE THE SHARES INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE TABLE
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
------------- ------------ ----------
SHAREHOLDER TRANSACTION COSTS:* None None None
- ------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES:
- ------------------------------------
(as a percentage of average net assets)
Management Fee 0.47% 0.47% 0.47%
12b-1 Fee 0.02% 0.01% 0.01%
Other Operating Expenses 0.06% 0.06% 0.06%
----- ----- -----
Total Portfolio Operating Expenses 0.55% 0.54% 0.54%
===== ===== =====
Example**
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period:
One year $ 6 $ 6 $ 6
Three years 18 17 17
Five years 31 30 30
Ten years 69 68 68
- ------------------
* Wilmington Trust Company and Service Organizations may charge their clients
a fee for providing administrative or other services in connection with
investments in Portfolio shares.
** The assumption in the Example of a 5% annual return is required by
regulations of the Securities and Exchange Commission applicable to all
mutual funds; the assumed 5% annual return is not a prediction of, and does
not represent, a Portfolio's projected or actual performance.
The purpose of the preceding table is solely to aid shareholders and prospective
investors in understanding the various expenses that investors in the Portfolios
will bear directly or indirectly. The expenses and fees set forth in the table
are for the fiscal year ended September 30, 1995.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES INCURRED AND RETURNS MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables include selected per share data and other performance
information for each Portfolio throughout the following years, derived from the
audited financial statements of the Rodney Square Fund and the Tax-Exempt Fund
(each, a "Fund," and together the "Funds"). They should be read in conjunction
with the Funds' financial statements and notes thereto appearing in each Fund's
Annual Report to Shareholders for the fiscal year ended September 30, 1995,
which is included together with the auditor's unqualified report thereon as part
of each Fund's Statement of Additional Information.
<TABLE>
<CAPTION>
U. S. GOVERNMENT PORTFOLIO
--------------------------
For the Fiscal Years Ended September 30,
-----------------------------------------------------------------------------------------
1995 1994* 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-
BEGINNING OF YEAR. $1.00 $1.00 $1.00 $1.00 $1.00 $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 0.078 0.086 0.066 0.057 0.066
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions:
From net
investment
income........... (0.052) (0.033) (0.028) (0.038) (0.062) (0.078) (0.086) (0.066) (0.057) (0.066)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE-
END OF YEAR....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return........ 5.37% 3.32% 2.83% 3.88% 6.41% 8.05% 8.91% 6.81% 5.86% 6.86%
Ratios (to average
net assets)
/Supplemental
Data:
Expenses........ 0.55% 0.53% 0.53% 0.54% 0.53% 0.54% 0.52% 0.57% 0.56% 0.58%
Net investment
income........ 5.25% 3.27% 2.79% 3.84% 6.22% 7.76% 8.55% 6.63% 5.76% 6.46%
Net assets at end
of year ($000
omitted).......... 306,096 336,766 386,067 409,534 479,586 364,423 230,804 287,862 288,016 174,401
- ---------------------------
* During the fiscal year ended September 30, 1994, the Fund Manager
contributed capital of $0.0045 per share to the U.S. Government Portfolio.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------
For the Fiscal Years Ended September 30,
-----------------------------------------------------------------------------------------
1995 1994* 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-
BEGINNING OF YEAR. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment Operations:
Net investment
income............ 0.052 0.033 0.029 0.041 0.065 0.079 0.087 0.069 0.059 0.067
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions:
From net
investment
income........... (0.052) (0.033) (0.029) (0.041) (0.065) (0.079) (0.087) (0.069) (0.059) (0.067)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE-
END OF YEAR....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return........ 5.50% 3.37% 2.92% 4.15% 6.73% 8.23% 9.09% 7.07% 6.10% 7.07%
Ratios (to average
net assets)
/Supplemental
Data:
Expenses........ 0.54% 0.53% 0.52% 0.52% 0.52% 0.53% 0.52% 0.55% 0.55% 0.57%
Net investment
income........ 5.37% 3.33% 2.88% 4.06% 6.52% 7.92% 8.74% 6.87% 5.99% 6.61%
Net assets at end
of year ($000
omitted).......... 751,125 606,835 649,424 717,544 790,837 766,798 643,363 488,313 406,217 249,991
- ---------------------------
* During the fiscal year ended September 30, 1994, the Fund Manager
contributed capital of $0.0028 per share to the Money Market Portfolio.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TAX-EXEMPT FUND
---------------
For the Fiscal Years Ended September 30,
-----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-
BEGINNING
OF PERIOD......... $1.00 $1.00 $1.00 $1.00 $1.00 $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 0.054 0.059 0.047 0.037 0.028
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions:
From net
investment
income........... (0.033) (0.021) (0.020) (0.030) (0.045) (0.054) (0.059) (0.047) (0.037) (0.028)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE-
END OF PERIOD..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return........ 3.36% 2.17% 2.07% 3.06% 4.59% 5.58% 6.04% 4.79% 3.79% 2.79%
Ratios (to average
net assets)
/Supplemental
Data:
Expenses........ 0.54% 0.54% 0.54% 0.54% 0.56% 0.57% 0.57% 0.50% 0.56% 0.63%
Net investment
income........ 3.29% 2.13% 2.05% 3.06% 4.49% 5.45% 5.88% 4.67% 3.79% 4.14%
Net assets at end
of period ($000
omitted).......... 318,213 388,565 405,517 327,098 353,271 243,146 258,713 302,471 352,987 181,177
- ---------------------------
* Covers the period from February 7, 1986 (Commencement of Operations) to
September 30, 1986.
** Annualized.
*** The total return figure for the fiscal period ended September 30, 1986 is
not annualized.
</TABLE>
5
<PAGE>
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QUESTIONS AND ANSWERS ABOUT THE FUNDS
- --------------------------------------------------------------------------------
The information provided in this section is qualified in its entirety by
reference to more detailed information elsewhere in this Prospectus.
WHAT ARE THE PORTFOLIOS' INVESTMENT OBJECTIVES AND POLICIES?
THE RODNEY SQUARE FUND -- Each Portfolio of the Rodney Square Fund seeks a
high level of current income consistent with the preservation of capital and
liquidity by investing in money market instruments pursuant to its investment
practices. There can be no assurance, of course, that either Portfolio will
achieve its investment objective. (See "Investment Objectives and Policies.")
The Portfolios are primarily differentiated in terms of their permitted
investments which are as follows:
U.S. GOVERNMENT PORTFOLIO -- Obligations issued or guaranteed as to principal
and interest by the government of the United States, its agencies or
instrumentalities ("U.S. Government obligations") and repurchase agreements
involving such obligations.
MONEY MARKET PORTFOLIO -- U.S. dollar-denominated obligations of major banks
(including certificates of deposit, time deposits or bankers' acceptances of
U.S. banks and their branches located outside of the United States, of U.S.
branches of foreign banks, of foreign branches of foreign banks, of U.S.
agencies of foreign banks and of wholly owned banking subsidiaries of foreign
banks located in the United States), prime commercial paper and other corporate
obligations, U.S. Government obligations, high quality municipal securities and
repurchase agreements involving U.S. Government obligations.
THE RODNEY SQUARE TAX-EXEMPT FUND -- The Rodney Square Tax-Exempt Fund seeks
as high a level of interest income, exempt from federal income tax, as is
consistent with a portfolio of high quality, short-term municipal obligations
selected on the basis of liquidity and stability of principal. There can be no
assurance, of course, that the Tax-Exempt Fund will achieve its investment
objective. (See "Investment Objectives and Policies.")
The Tax-Exempt Fund invests in high quality municipal obligations, including
municipal bonds with less than 397 days remaining until maturity, floating and
variable rate obligations, participation interests, tax-exempt commercial paper
and short-term municipal notes. The Portfolio has adopted a fundamental policy
which requires that, under normal conditions, at least 80% of its annual income
will be exempt from federal income tax. (See "Investment Objectives and
Policies" and "Dividends and Taxes.") The Portfolio also follows a policy
requiring that, under normal conditions, at least 80% of its annual income will
not be a tax preference item for purposes of the federal alternative minimum
tax.
ALL PORTFOLIOS -- All assets of the Portfolios are invested in fixed-income
obligations maturing in 397 days or less, and the dollar-weighted average
maturity of each Portfolio will not exceed 90 days.
HOW CAN YOU BENEFIT BY INVESTING IN THE PORTFOLIOS RATHER THAN BY INVESTING
DIRECTLY IN MONEY MARKET INSTRUMENTS?
6
<PAGE>
Investing in the Portfolios offers several key benefits:
FIRST: By pooling the monies of its many investors, the Portfolios enable
each investor to benefit from the greater liquidity and higher yields offered by
large denomination ($1,000,000 or more) money market instruments.
SECOND: The Portfolios offer a way to keep money invested in professionally
managed portfolios of high quality money market instruments (tax-exempt money
market instruments for the Tax-Exempt Fund) and at the same time to maintain
full liquidity on a day-to-day basis. There is no minimum period for investment,
and no fees will be charged upon redemption.
THIRD: Investors in the Portfolios need not become involved with the
detailed bookkeeping and operating procedures normally associated with direct
investment in money market instruments.
HOW ARE THE PORTFOLIOS' SECURITIES VALUED?
In valuing their portfolio securities, the Portfolios use the amortized cost
method of valuation. It is a fundamental policy of each Portfolio to use its
best efforts to maintain a constant net asset value of $1.00 per share, although
under certain circumstances this may not be possible. (See "Investment
Objectives and Policies" and "How Net Asset Value Is Determined.")
WHO IS THE FUND MANAGER?
Rodney Square Management Corporation ("RSMC"), a wholly owned subsidiary of
Wilmington Trust Company ("WTC"), serves as the Funds' Manager. (See "Management
of the Funds.")
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING AGENT?
RSMC serves as the Administrator of the Funds and provides transfer agency
and accounting services for the Funds. (See "Management of the Funds.")
WHO IS THE DISTRIBUTOR?
Rodney Square Distributors, Inc. ("RSD"), another wholly owned subsidiary of
WTC, serves as the Distributor. (See "Management of the Funds.")
HOW DO YOU PURCHASE PORTFOLIO SHARES?
The Portfolios are designed as investment vehicles for individual investors,
corporations and other institutional investors. Shares may be purchased only as
described below. There is no sales load. The minimum initial investment in any
Portfolio is $1,000, but additional investments may be made in any amount.
Shares of each Portfolio are offered on a continuous basis by RSD. Shares
may be purchased directly from RSD, by clients of WTC through their trust and
corporate cash management accounts or by clients of certain institutions such as
banks or broker-dealers that have entered into servicing agreements ("Service
Organizations") with RSD through their accounts with those Service
Organizations. Service Organizations may receive payments from RSD which are
reimbursed by the Portfolios under a Plan of Distribution adopted with respect
to each Portfolio pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"). Shares may also be purchased directly by wire or by mail.
(See "Purchase of Shares.")
7
<PAGE>
Receipt of federal funds or monies immediately convertible to federal funds
is necessary before investments may be credited to your account in the
Portfolios. The Portfolios and RSD reserve the right to reject new account
applications and to close, by redemption, an account without a certified Social
Security or other taxpayer identification number.
Please call WTC, your Service Organization or the number listed below for
further information about the Portfolios or for assistance in opening an
account.
- --------------------------------------------------------------------------------
* NATIONWIDE ......................................... (800) 336-9970
- --------------------------------------------------------------------------------
HOW DO YOU REDEEM PORTFOLIO SHARES?
If you purchased shares of a Portfolio through an account at WTC or a
Service Organization, you may redeem all or any part of your shares in
accordance with the instructions pertaining to that account. Other shareholders
may redeem their shares by check, by telephone or by mail. There is no fee
charged upon redemption. (See "Redemption of Shares.")
HOW ARE DIVIDENDS PAID?
Substantially all of the net investment income for each Portfolio is
declared as a dividend each day that the net asset value is determined, and
dividends are paid no later than seven (7) days after the end of the month in
which they are accrued. Shareholders may elect to receive dividends and other
distributions in cash by checking the appropriate boxes on the Application & New
Account Registration form at the end of this Prospectus ("Application"). (See
"Dividends and Taxes.")
ARE EXCHANGE PRIVILEGES AVAILABLE?
You may exchange all or a portion of your Portfolio shares for shares of
either of the other Portfolios or for shares of any of the other funds in the
Rodney Square complex, subject to certain conditions. (See "Exchange of
Shares.")
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
THE RODNEY SQUARE FUND
The investment objective of each Portfolio of The Rodney Square Fund is to
seek a high level of current income consistent with the preservation of capital
and liquidity by investing in money market instruments pursuant to its
investment practices.
The Portfolios are primarily differentiated in terms of their permitted
investments, which are as follows:
U.S. GOVERNMENT PORTFOLIO -- U.S. Government obligations and repurchase
agreements involving such obligations.
8
<PAGE>
MONEY MARKET PORTFOLIO -- (i) U.S. dollar-denominated obligations of major
banks and their branches located outside of the United States, of U.S. branches
of foreign banks, of foreign branches of foreign banks, of U.S. agencies of
foreign banks and of wholly owned banking subsidiaries of foreign banks located
in the United States, provided that the bank has capital, surplus and undivided
profits (as of the date of its most recently published annual financial
statements) in excess of $100,000,000 at the date of investment (moreover, it is
the policy of RSMC to require that the bank have assets in excess of $5 billion
at the date of investment); (ii) commercial paper and corporate obligations
rated at least A-1 or AA by Standard & Poor's Ratings Services ("S&P") or P-1 or
Aa by Moody's Investors Service, Inc. ("Moody's") at the time of investment, or
not rated, but determined to be of comparable quality by RSMC under the
direction of, and subject to the review of, The Rodney Square Fund's Board of
Trustees; (iii) U.S. Government obligations; (iv) high quality municipal
securities; and (v) repurchase agreements involving U.S. Government obligations.
Ratings of instruments represent S&P and Moody's opinions regarding their
quality, are not a guarantee of quality, and may change after a Portfolio has
purchased an instrument.
U.S. Government obligations include obligations of agencies and
instrumentalities of the U.S. Government that are not direct obligations of the
U.S. Treasury. Such obligations may be backed by the "full faith and credit" of
the United States or supported primarily or solely by the creditworthiness of
the issuer.
Each Portfolio may enter into repurchase agreements involving U.S.
Government obligations, even though the underlying security matures in more than
397 days. While it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delay and costs to the applicable
Portfolio in the event of a default of the seller), it is the policy of each
Portfolio to limit repurchase transactions to those banks and primary dealers in
U.S. Government obligations whose creditworthiness has been reviewed and found
satisfactory by RSMC.
The Money Market Portfolio's investments in the obligations of foreign banks
and other foreign issuers and their branches, agencies or subsidiaries may be
obligations of the parent, of the issuing branch, agency or subsidiary, or both.
Obligations of such issuers are subject to the same risks that pertain to
domestic issues, notably credit risk, market risk and liquidity risk.
Additionally, obligations of foreign entities may be subject to certain
additional risks, including adverse political and economic developments in a
foreign country, the extent and quality of government regulation of financial
markets and institutions, interest limitations, currency controls, foreign
withholding taxes, and expropriation or nationalization of foreign issuers and
their assets. There may be less publicly available information about foreign
issuers than about domestic issuers, and foreign issuers may not be subject to
the same accounting, auditing and financial recordkeeping standards and
requirements as are domestic issuers. RSMC carefully considers these factors
when making investments, and foreign issuers will be required to meet the same
tests of financial strength as the domestic issuers approved for the Money
Market Portfolio.
9
<PAGE>
The Money Market Portfolio may invest in municipal bonds, including "general
obligation" and "revenue" bonds, with less than 397 days remaining until
maturity, floating and variable rate obligations, participation interests and
short-term municipal notes. Frequently, the municipal obligations acquired by
the Money Market Portfolio are secured by letters of credit or other credit
support arrangements provided by domestic or foreign banks or insurance
companies. The Money Market Portfolio may also purchase Standby Commitments and
new issues of municipal obligations on a "when-issued" basis. For a fuller
description of municipal bonds, see "The Rodney Square Tax-Exempt Fund," below.
Although the interest on municipal securities may be exempt from federal income
tax, dividends paid by the Money Market Portfolio to its shareholders will not
be tax-exempt.
THE RODNEY SQUARE TAX-EXEMPT FUND
The investment objective of the Tax-Exempt Fund is to provide investors with
as high a level of interest income, exempt from federal income tax, as is
consistent with a portfolio of high quality, short-term municipal obligations
selected on the basis of liquidity and stability of principal.
This Portfolio invests in a diversified portfolio of high quality municipal
obligations whose interest payments are exempt from federal income tax. The
Portfolio has adopted a fundamental policy which requires that, under normal
circumstances, at least 80% of its annual income will be exempt from federal
income tax. The Portfolio also follows a policy which requires that, under
normal circumstances, at least 80% of its annual income will not be a tax
preference item for purposes of the federal alternative minimum tax.
The Portfolio invests only in municipal securities that are rated at least
Aa, MIG-1/VMIG-1 or P-1 by Moody's or at least AA, A-1 or SP-1 by S&P at the
time of investment, or not rated but determined to be of comparable quality by
RSMC under the direction of, and subject to the review of, The Rodney Square
Tax-Exempt Fund's Board of Trustees. See the Appendix to this Prospectus for
further information regarding Moody's and S&P's ratings of municipal
obligations. Ratings of municipal obligations represent Moody's and S&P's
opinions regarding their quality, are not a guaranty of quality, and may change
after the Portfolio has acquired a security. In addition, federal, state or
local laws may be passed that adversely affect the tax-exempt status of interest
on the municipal securities held by the Portfolio or of the exempt-interest
dividends paid by the Portfolio, extend the time for payment of principal or
interest, or both, or impose other constraints upon enforcement of such
obligations. (See "Dividends and Taxes.")
The Tax-Exempt Fund invests in municipal bonds, including "general
obligation" and "revenue" bonds, with less than 397 days remaining until
maturity, floating and variable rate obligations, participation interests, tax-
exempt commercial paper and short-term municipal notes. Municipal bonds include
put bonds, which give the Portfolio the unconditional right to sell the bond
back to the issuer at a specified price and exercise date that typically is well
in advance of the bond's maturity date, industrial development bonds, and
private activity bonds, the interest on which usually is exempt from federal
income tax but which generally is an item of tax preference for purposes of the
federal alternative minimum tax. The Portfolio may also hold floating or
variable rate obligations. A variable rate obligation provides for adjustment
in the interest rate (which is set as a percentage of a designated base rate
such as the 90-day U.S. Treasury Bill rate) on specific dates, while a floating
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rate obligation has an interest rate which changes whenever there is a change in
a designated base rate such as the prime rate of a bank. The rate adjustments
make these obligations less subject to fluctuations in value than other
instruments with maturities in excess of 397 days. The obligations have a
"demand feature," which means that the Portfolio can demand payment from the
issuer or another party on not more than 30 days' notice, either at any time or
at specified intervals not to exceed 397 days, at par plus accrued interest.
Frequently, the municipal obligations acquired by the Portfolio are secured by
letters of credit or other credit support arrangements provided by domestic or
foreign banks or insurance companies.
The Portfolio may also invest in participation interests in municipal bonds
and in floating and variable rate obligations that are owned by banks. These
instruments carry a demand feature permitting the Portfolio to tender them back
to the issuing bank at a specified price and exercise date, which is typically
well in advance of the bond's maturity date. The demand feature usually is
backed by an irrevocable letter of credit or guarantee by a bank. The short-
term municipal notes in which the Portfolio invests are issued by state and
local governments and public authorities as interim financing in anticipation of
tax collections, revenue receipts or bond sales, such as tax anticipation notes,
revenue anticipation notes, bond anticipation notes and construction loan notes.
All of these obligations are described in the Appendix to this Prospectus.
The Portfolio may purchase without limitation stand-by commitments which
give the Portfolio the right to sell a security that it holds back to the issuer
or another party at an agreed upon price on a certain date or at any time during
a stated period. The Portfolio may also purchase without limitation new issues
of municipal obligations on a "when-issued" basis. Securities purchased on a
when-issued basis may decline or appreciate in market value prior to their
actual delivery to the Portfolio. The Portfolio may purchase other types of
tax-exempt instruments which may become available in the future as long as RSMC,
under the direction of, and subject to the review of, the Board of Trustees, has
determined that they are of a quality equivalent to the ratings stated above.
The ability of the Portfolio to achieve its investment objective is
dependent on a number of factors, including the skills of RSMC in purchasing
municipal obligations whose issuers have the continuing ability to meet their
obligations for the payment of interest and principal when due. In the case of
obligations which are secured by letters of credit, either the quality of the
credit of the issuer of the underlying security or of the bank issuing the
letter of credit may be looked to for purposes of satisfying the Portfolio's
quality standards. Letters of credit issued by foreign banks may involve
certain risks such as future unfavorable political and economic developments,
currency controls or other governmental restrictions which might affect payment
by the bank. Additionally, there may be less public information available about
foreign banks.
Yields on municipal obligations are the product of a variety of factors,
including the general conditions of the money market and of the municipal bond
and municipal note markets, the size of a particular offering, the maturity of
the obligation and the rating of the issue. Municipal obligations with longer
maturities tend to produce higher yields and are generally subject to
potentially greater price fluctuations than obligations with shorter maturities.
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The Portfolio anticipates being as fully invested as practicable in
municipal bonds and notes; however, consistent with that portion of its
investment objective concerned with stability of principal, from time to time
the Portfolio may invest a portion of its assets on a temporary basis in fixed-
income obligations the interest on which is subject to federal income tax. For
example, the Portfolio may invest in taxable obligations pending the investment
or reinvestment in municipal bonds of proceeds from sales of Portfolio shares or
sales of portfolio securities. In addition, the Portfolio may invest in highly
liquid, taxable obligations in order to avoid the necessity of liquidating
portfolio investments to meet redemption requests by Portfolio shareholders.
Income from taxable obligations will be limited to 20% of the Portfolio's annual
income under normal conditions, although the Portfolio may invest without limit
in taxable obligations for temporary defensive purposes.
If the Portfolio invests in taxable obligations, it will purchase
obligations which, in RSMC's judgment, are of high quality. These include U.S.
Government obligations, obligations of domestic banks (including certificates of
deposit and bankers' acceptances), commercial paper and other short-term
corporate obligations, private activity bonds not exempt from federal income
tax, and repurchase agreements. The Portfolio's investments in commercial paper
and other short-term corporate obligations are limited to those obligations
rated P-1 or Aa or better by Moody's or A-1 or AA or better by S&P,
respectively, or, not rated, but determined to be comparable quality by RSMC
under the direction of, and subject to the review of, the Board of Trustees.
ALL PORTFOLIOS - OTHER INVESTMENT POLICIES
Each Portfolio may borrow money from a bank for temporary or emergency
purposes (not for leveraging or investment) but not in excess of one-third of
the current value of its net assets. No Portfolio will purchase securities for
investment while any bank borrowing equaling 5% of the respective Portfolio's
total assets is outstanding. Each Portfolio may also invest up to 10% of its
net assets in repurchase agreements not entitling the holder to payment of
principal within seven (7) days and other securities that are illiquid by virtue
of legal or contractual restrictions on resale or the absence of a readily
available market. There is no limit on any Portfolio's investment in restricted
securities which are liquid.
There may be occasions when, as a result of maturities of portfolio
securities or sales of Portfolio shares, or in order to meet anticipated
redemption requests, a Portfolio may hold cash which is not earning income. In
addition, there may be occasions when, in order to raise cash to meet
redemptions, a Portfolio might be required to sell securities at a loss.
The investment objectives, policies and limitations set forth above are
supplemented by the information contained in the Portfolios' Statements of
Additional Information. Except as noted, each Portfolio's policies and
limitations are non-fundamental and may be changed by its Board of Trustees
without shareholder approval.
Each Portfolio has a fundamental policy requiring it to use its best efforts
to maintain a constant net asset value of $1.00 per share, although under
certain circumstances this may not be possible. There can be no assurance that
each Portfolio will achieve its investment objective.
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PURCHASE OF SHARES
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How To Purchase Shares. Portfolio shares are offered on a continuous basis
by RSD. Shares may be purchased directly from RSD, by clients of WTC through
their trust and corporate cash management accounts, or by clients of Service
Organizations through their Service Organization accounts. WTC and Service
Organizations may charge their clients a fee for providing administrative or
other services in connection with investments in Portfolio shares. A trust
account at WTC includes any account for which the account records are maintained
on the trust system at WTC. Persons wishing to purchase Portfolio shares through
their accounts at WTC or a Service Organization should contact that entity
directly for appropriate instructions. Other investors may purchase Portfolio
shares by mail or by wire as specified below.
BY MAIL: You may purchase shares by sending a check drawn on a U.S. bank
payable to The Rodney Square Fund or The Rodney Square Tax-Exempt Fund,
indicating the Portfolio you have selected, along with a completed Application
(included at the end of this Prospectus), to The Rodney Square Fund or The
Rodney Square Tax-Exempt Fund, c/o Rodney Square Management Corporation, P.O.
Box 8987, Wilmington, DE 19899-9752. A purchase order sent by overnight mail
should be sent to The Rodney Square Fund or The Rodney Square Tax-Exempt Fund,
c/o Rodney Square Management Corporation, Rodney Square North, 1105 N. Market
Street, Wilmington, DE 19801. If a subsequent investment is being made, the
check should also indicate your Portfolio account number. When you purchase by
check, each Portfolio may withhold payment on redemptions until it is reasonably
satisfied that the funds are collected (which can take up to 10 days). If you
purchase shares with a check that does not clear, your purchase will be
cancelled and you will be responsible for any losses or fees incurred in that
transaction.
BY WIRE: You may purchase shares by wiring federal funds. To advise a
Portfolio of the wire, and if making an initial purchase, to obtain an account
number, you must telephone RSMC at (800) 336-9970. Once you have an account
number, instruct your bank to wire federal funds to RSMC, c/o Wilmington Trust
Company, Wilmington, DE-ABA #0311-0009-2, attention: The Rodney Square Fund or
the Rodney Square Tax-Exempt Fund, DDA# 2610-605-2, further credit-your account
number, the desired Portfolio and your name. If you make an initial purchase by
wire, you must promptly forward a completed Application to RSMC at the address
stated above under "By Mail." If you are making a subsequent purchase, the wire
should also indicate your Portfolio account number.
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the Portfolios of The Rodney
Square Fund may be purchased for a tax-deferred retirement plan such as an
individual retirement account ("IRA"). For an Application for an IRA and a
brochure describing a Portfolio IRA, call RSMC at (800) 336-9970. WTC makes
available its services as IRA custodian for each shareholder account that is
established as an IRA. For these services, WTC receives an annual fee of $10.00
per account, which fee is paid directly to WTC by the IRA shareholder. If the
fee is not paid by the date due, Portfolio shares owned by the IRA will be
redeemed automatically for purposes of making the payment.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Portfolio shares
through an Automatic Investment Plan. Under the Plan, RSMC, at regular
intervals, will automatically debit a shareholder's bank checking account in an
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amount of $50 or more (subsequent to the $1,000 minimum initial investment), as
specified by the shareholder. A shareholder may elect to invest the specified
amount monthly, bimonthly, quarterly, semiannually or annually. The purchase of
Portfolio shares will be effected at their offering price at 12 noon, Eastern
time, on or about the 20th day of the month. For an Application for the
Automatic Investment Plan, check the appropriate box of the Application at the
end of this Prospectus, or call RSMC at (800) 336-9970. This service is
generally not available for WTC trust account clients, since similar services
are provided through WTC. This service may also not be available for Service
Organization clients who are provided similar services by those organizations.
ADDITIONAL PURCHASE INFORMATION. The minimum initial investment is $1,000,
but subsequent investments may be made in any amount. WTC and Service
Organizations may impose additional minimum customer account and other
requirements in addition to this minimum initial investment requirement. Each
Portfolio and RSD reserve the right to reject any purchase order and may suspend
the offering of shares of any Portfolio for a period of time.
Portfolio shares of each Fund are offered at their net asset value next
determined after a purchase order is received by RSMC and accepted by RSD.
Purchase orders received by RSMC and accepted by RSD before 12 noon, Eastern
time, on any Business Day of a Fund will be priced at the net asset value per
share that is determined at 12 noon. (See "How Net Asset Value Is Determined.")
Purchase orders received by RSMC and accepted by RSD after 12 noon, Eastern
time, will be priced as of 12 noon on the following Business Day of a Fund. A
"Business Day of a Fund" is any day on which the New York Stock Exchange (the
"Exchange"), RSMC and the Philadelphia branch office of the Federal Reserve are
open for business. The following are not Business Days of a Fund: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and
Christmas Day.
Investments in a Portfolio are accepted on the Business Day of a Fund that
(i) federal funds are deposited for your account on or before 12 noon, Eastern
time, (ii) monies immediately convertible to federal funds are deposited for
your account on or before 12 noon, Eastern time, or (iii) checks deposited for
your account have been converted to federal funds (usually within two
Business Days of a Fund after receipt). All investments in a Portfolio are
credited to your account in the form of shares of the Portfolio immediately upon
acceptance and become entitled to dividends declared as of the day of
investment.
It is the responsibility of WTC or the Service Organization involved to
transmit orders for the purchase of shares by its customers to RSMC and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
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SHAREHOLDER ACCOUNTS
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RSMC, as Transfer Agent, maintains for each shareholder an account expressed
in terms of full and fractional shares of each Portfolio rounded to the nearest
1/1000th of a share.
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In the interest of economy and convenience, the Portfolios do not issue
share certificates. Each shareholder is sent a statement at least quarterly
showing all purchases in or redemptions from the shareholder's account. The
statement also sets forth the balance of shares held in the account by
Portfolio.
Due to the relatively high cost of maintaining small shareholder accounts,
each Portfolio reserves the right to close any account with a current value of
less than $500 by redeeming all shares in the account and transferring the
proceeds to the shareholder. Shareholders will be notified if their account
value is less than $500 and will be allowed 60 days in which to increase their
account balance to $500 or more to prevent the account from being closed.
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REDEMPTION OF SHARES
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Shareholders may redeem their shares by mail, telephone or check, as
described below. If you purchased your shares through an account at WTC or a
Service Organization, you may redeem all or part of your shares in accordance
with the instructions pertaining to that account. Corporations, other
organizations, trusts, fiduciaries and other institutional investors may be
required to furnish certain additional documentation to authorize redemptions.
Redemption requests should be accompanied by the Portfolio's name and your
account number.
BY MAIL: Shareholders redeeming their shares by mail should submit written
instructions with a guarantee of their signature by an eligible institution
acceptable to the Portfolios' Transfer Agent, such as a bank, broker, dealer,
municipal securities dealer, government securities dealer, credit union,
national securities exchange, registered securities association, clearing
agency, or savings association ("eligible institution"), to: The Rodney Square
Fund or The Rodney Square Tax-Exempt Fund, c/o Rodney Square Management
Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. A redemption order sent
by overnight mail should be sent to The Rodney Square Fund or The Rodney Square
Tax-Exempt Fund, c/o Rodney Square Management Corporation, Rodney Square North,
1105 N. Market Street, Wilmington, DE 19801. The redemption order should
indicate the Portfolio from which shares are to be redeemed, the Portfolio
account number and the name of the person in whose name the account is
registered. A signature and a signature guarantee are required for each person
in whose name the account is registered.
BY TELEPHONE: Shareholders who prefer to redeem their shares by telephone
must elect to do so by applying in writing for telephone redemption privileges
by completing the Application for Telephone Redemptions (included at the end of
this Prospectus) which describes the telephone redemption procedures in more
detail and requires certain information that will be used to identify the
shareholder when a telephone redemption request is made. When redeeming by
telephone, you must indicate your name, the Fund's name, the Portfolio's
name, the account number, the number of shares you wish to redeem and certain
other information necessary to identify you as the shareholder. The Portfolios
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine and will not be liable for any losses due to unauthorized
or fraudulent telephone transactions. During times of drastic economic or market
changes, the telephone redemption privilege may be difficult to implement. In
the event that you are unable to reach RSMC by telephone, you may make a
redemption request by mail.
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BY CHECK: A shareholder may utilize the checkwriting option to redeem
Portfolio shares by drawing a check for $500 or more against a Portfolio
account. When the check is presented for payment, a sufficient number of shares
will be redeemed from the shareholder's Portfolio account to cover the amount of
the check. This procedure enables the shareholder to continue receiving
dividends on those shares until the check is presented for payment. Cancelled
checks are not returned; however, shareholders may obtain photocopies of their
cancelled checks upon request. If a shareholder does not own sufficient shares
to cover a check, the check will be returned to the payee marked "nonsufficient
funds." Checks written in amounts less than $500 will also be returned. Because
the aggregate amount of Portfolio shares owned by a shareholder is likely to
change each day, a shareholder should not attempt to redeem all shares held in
an account by using the checkwriting procedure. Charges will be imposed for
specially imprinted checks, business checks, copies of cancelled checks, stop
payment orders, checks returned due to "nonsufficient funds" and returned
checks; these charges will be paid by redeeming automatically an appropriate
number of Portfolio shares. Each Fund and RSMC reserve the right to terminate or
alter the checkwriting service at any time. RSMC also reserves the right to
impose a service charge in connection with the checkwriting service.
Shareholders who are interested in the checkwriting service should obtain the
necessary forms from RSMC. This service is generally not available for clients
of WTC through their trust or corporate cash management accounts, since it is
already provided for these customers through WTC. The service may also not be
available for Service Organization clients who are provided a similar service by
those organizations.
ADDITIONAL REDEMPTION INFORMATION. You may redeem all or any part of the
value of your account on any Business Day of a Fund. Redemptions are effected at
the net asset value next calculated after RSMC has received your redemption
request. (See "How Net Asset Value Is Determined.") The Funds impose no fee when
shares are redeemed. It is the responsibility of WTC or the Service Organization
to transmit redemption orders and credit their customers' accounts with
redemption proceeds on a timely basis.
Redemption checks are mailed on the next Business Day of a Fund following
acceptance of redemption instructions but in no event later than 7 days
following such receipt and acceptance. Amounts redeemed by wire are normally
wired on the date of receipt and acceptance of redemption instructions (if
received by RSMC before 12 noon, Eastern time) or the next Business Day of a
Fund (if received after 12 noon, Eastern time, or on a non Business Day of a
Fund), but in no event later than 7 days following such receipt and acceptance.
If the shares to be redeemed represent an investment made by check, each Fund
reserves the right not to make the redemption proceeds available until it has
reasonable grounds to believe that the check has been collected (which could
take up to 10 days).
Redemption proceeds may be wired to your predesignated bank account in any
commercial bank in the United States if the amount is $1,000 or more. The
receiving bank may charge a fee for this service. Alternatively, proceeds may be
mailed to your bank or, for amounts of $10,000 or less, mailed to your Portfolio
account address of record if the address has been established for a minimum of
60 days. In order to authorize the Fund to mail redemption proceeds to your
Portfolio account address of record, complete the appropriate section of the
Application for Telephone Redemptions or include your Portfolio account address
of record when you submit written instructions. You may change the account
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which you have designated to receive amounts redeemed at any time. Any request
to change the account designated to receive redemption proceeds should be
accompanied by a guarantee of the shareholder's signature by an eligible
institution. A signature and a signature guarantee are required for each person
in whose name the account is registered. Further documentation will be required
to change the designated account when shares are held by a corporation, other
organization, trust, fiduciary or other institutional investor.
For more information on redemption services, contact RSMC or, if your shares
are held in an account with WTC or a Service Organization, contact WTC or the
Service Organization.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares of a Portfolio with
a value of $10,000 or more may participate in the Systematic Withdrawal Plan.
For an application for the Systematic Withdrawal Plan, check the appropriate box
of the Application at the end of this Prospectus or call RSMC at (800) 336-9970.
Under the Plan, shareholders may automatically redeem a portion of their
Portfolio shares monthly, bimonthly, quarterly, semiannually or annually. The
minimum withdrawal available is $100. The redemption of Portfolio shares will be
effected at their net asset value at 12 noon, Eastern time, on or about the 25th
day of the month. This service is generally not available for WTC trust account
clients, since a similar service is provided through WTC. This service may also
not be available for Service Organization clients who are provided a similar
service by those organizations.
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EXCHANGE OF SHARES
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EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may exchange all or a portion
of your shares in a Portfolio for shares of another Portfolio or any of the
other funds in the Rodney Square complex that currently offer their shares to
investors. In addition to the Funds discussed in this Prospectus, the other
Rodney Square funds are:
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND, consisting of the following
portfolios:
THE RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO, which seeks high total
return, consistent with high current income, by investing principally in various
types of investment grade fixed-income securities.
THE RODNEY SQUARE MUNICIPAL INCOME PORTFOLIO, which seeks a high level of
income exempt from federal income tax consistent with the preservation of
capital.
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND, which uses multiple portfolio
advisers to manage the fund's assets, and which seeks long-term capital
appreciation primarily through investments in equity securities (including
convertible securities) of issuers located outside the United States.
THE RODNEY SQUARE MULTI-MANAGER FUND, which also uses multiple portfolio
advisers to manage the assets of each of its portfolios. Its portfolios are:
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GROWTH PORTFOLIO, which seeks superior long-term capital appreciation by
investing in securities of companies which are judged to possess strong growth
characteristics.
GROWTH AND INCOME PORTFOLIO, which seeks superior long-term total return
through a combination of capital appreciation and income by investing in
securities with attractive growth or valuation characteristics or relatively
high income yields.
A redemption of shares through an exchange will be effected at the net asset
value per share next determined after receipt by RSMC of the request, and a
purchase of shares through an exchange will be effected at the net asset value
per share determined at that time or as next determined thereafter, plus the
applicable sales load, if any. The net asset values per share of the U. S.
Government Portfolio, the Money Market Portfolio and the Tax-Exempt Fund are
determined at 12 noon, Eastern time, on each Business Day of a Fund. The net
asset values per share of the International Equity Fund, the Multi-Manager Fund
portfolios and the Strategic Fixed-Income Fund portfolios are determined at the
close of regular trading on the Exchange (currently, 4:00 p.m., Eastern time),
on each Business Day. A sales load will apply to exchanges from the U.S.
Government Portfolio, the Money Market Portfolio or the Tax-Exempt Fund into the
International Equity Fund, the Multi-Manager Fund portfolios or the Strategic
Fixed-Income Fund portfolios, except that no sales load will be charged if you
are eligible for a sales load waiver as described in a fund's prospectus or the
exchanged shares were acquired by a previous exchange and are shares on which
you paid a sales load or which represent reinvested dividends and other
distributions of such sales. A sales load will not apply to exchanges among the
U.S. Government Portfolio, the Money Market Portfolio and the Tax-Exempt Fund.
Exchange transactions will be subject to the minimum initial investment and
other requirements of the fund or portfolio into which the exchange is made. An
exchange may not be made if the exchange would leave a balance in a
shareholder's Portfolio account of less than $500.
To obtain prospectuses of the other Rodney Square funds, contact RSD. To
obtain more information about exchanges, or to place exchange orders, contact
RSMC, or, if your shares are held in a trust account with WTC or in an account
with a Service Organization, contact WTC or the Service Organization. The
Portfolios reserve the right to terminate or modify the exchange offer described
here and will give shareholders 60 days' notice of such termination or
modification when required by Securities and Exchange Commission ("SEC") rules.
This exchange offer is valid only in those jurisdictions where the sale of the
Rodney Square fund shares to be acquired through such exchange may be legally
made.
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HOW NET ASSET VALUE IS DETERMINED
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RSMC determines the net asset value per share of each Portfolio as of 12
noon, Eastern time, on each Business Day of a Fund. The net asset value per
share of each Portfolio is calculated by adding the value of all securities and
other assets in its portfolio, deducting its actual and accrued liabilities and
dividing by the number of that Portfolio's shares outstanding. It is a
fundamental policy of each Portfolio to use its best efforts to maintain a per
share net asset value of $1.00. Each Portfolio values its portfolio securities
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by the amortized cost method of valuation, that is, the market value of an
instrument is approximated by amortizing the difference between the acquisition
cost and value at maturity of the instrument on a straight-line basis over its
remaining life. All cash, receivables and current payables are carried at their
face value. Other assets, if any, are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees of the Rodney Square
Fund or Tax-Exempt Fund.
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DIVIDENDS AND TAXES
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DIVIDENDS. Substantially all of each Portfolio's net investment income
(consisting of (1) accrued interest and earned discount, less amortization of
premium and accrued expenses in the case of each Series and (2) accrued
interest, earned original issue discount and, if it elects, market discount on
tax-exempt securities) is declared as a dividend daily. Each Portfolio expects
to distribute any net realized gains once each year, although it may distribute
them more frequently if necessary in order to maintain its net asset value at
$1.00 per share.
Each Portfolio's net investment income is determined by RSMC on each day
that the net asset value is calculated. Each dividend is payable to shareholders
of record at the time of its declaration (including, for this purpose, holders
of shares purchased, but excluding holders of shares redeemed, on that day).
Dividends declared by a Portfolio are accrued throughout the month and are paid
to its shareholders no later than seven (7) days after the end of the month in
which the dividends are accrued. The dividend payment program is administered by
RSMC, as the Funds' dividend disbursing agent.
Dividends paid by a Portfolio are automatically reinvested in additional
shares of that Portfolio unless a shareholder has elected to receive dividends
or other distributions in cash by selecting the cash distribution option on the
Application. For shareholders who are clients of WTC through trust or corporate
cash management accounts, dividends may be reinvested by WTC on the next
Business Day of a Fund after the dividend payment, unless the shareholder has
elected to receive dividends in cash, and may result in the shareholder losing a
day's interest on the day the dividend is paid. This dividend reinvestment
policy differs from the dividend reinvestment programs of some other money
market funds and may result in WTC having the use of the proceeds of
shareholders' dividends until they are reinvested.
TAXES. Each Portfolio intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so that it will be relieved of federal income tax on that part of its
investment company taxable income (generally, taxable net investment income plus
any realized net short-term capital gain) that is distributed to its
shareholders. Distributions by the Tax-Exempt Fund of the excess of interest
income on tax-exempt securities over certain amounts disallowed as deductions,
as designated by that Portfolio ("exempt-interest dividends"), may be treated by
its shareholders as interest excludable from gross income. Interest on
indebtedness incurred or continued by a shareholder to purchase or carry shares
of that Portfolio is not deductible. Dividends paid by a Portfolio generally
are taxable to its shareholders as ordinary income, notwithstanding that such
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dividends are paid in additional shares. Each Fund notifies its shareholders
following the end of each calendar year of the amount of dividends paid that
year.
Each Portfolio is required to withhold 31% of all taxable dividends paid to
any individuals and certain other noncorporate shareholders who do not provide
the Portfolio with a correct taxpayer identification number or who otherwise are
subject to backup withholding. In connection with this withholding requirement,
each investor must certify on the Application at the end of this Prospectus that
the Social Security or other taxpayer identification number provided thereon is
correct and that the investor is not otherwise subject to backup withholding.
The exemption of certain interest income for federal income tax purposes
does not necessarily mean that such income is exempt under the laws of any state
or local taxing authority. Shareholders of the Tax-Exempt Fund may be exempt
from state and local taxes on distributions of interest income derived from
obligations of the state and/or municipalities of the state in which they are
resident, but generally are taxed on income derived from obligations of other
jurisdictions. That Portfolio calculates annually the portion of its tax-exempt
income attributable to each state. A portion of the dividends paid by the U.S.
Government Portfolio may be exempt from state taxes. Shareholders should
consult their tax advisers about the tax treatment of distributions from that
Portfolio in their own state and locality.
The foregoing is only a summary of some of the important income tax
considerations generally affecting the Portfolios and their shareholders; a
further discussion appears in the Statements of Additional Information. In
addition to these considerations, which are applicable to any investment in a
Portfolio, there may be other federal, state or local tax considerations
applicable to a particular investor. Prospective investors are therefore urged
to consult their tax advisers with respect to the effects of an investment on
their own tax situations.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, quotations of the "yield," "effective yield," "tax-
equivalent yield" (with respect to the Tax-Exempt Fund), "average annual total
return," "cumulative total return" and "total return" of the Portfolios may be
included in advertisements, sales literature or shareholder reports. These
figures are based on the historical performance of the Portfolios, show the
performance of a hypothetical investment and are not intended to indicate future
performance. The yield of each Portfolio refers to the net investment income
generated by that Portfolio over a specified seven-day period. This income is
then annualized. That is, the amount of income generated by the Portfolio during
that week is assumed to be generated during each week over a 52-week period and
is shown as a percentage of the investment. The effective yield is expressed
similarly, but, when annualized, the income earned by an investment in each
Portfolio is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The Tax-Exempt Fund's tax-equivalent yield is calculated by
determining the rate of return that would have to be achieved on a fully taxable
investment to produce the after-tax equivalent of the Portfolio's yield,
assuming certain tax brackets for a Portfolio shareholder. The average annual
total return is the average annual compound rate of return for the periods of
20
<PAGE>
one year, five years and ten years of a Portfolio, all ended on the last day of
a recent calendar quarter. Cumulative total return is the cumulative rate of
return on a hypothetical initial investment of $1,000 for a specified period.
Both the average annual total return and the cumulative total return quotations
assume that all dividends during the period were reinvested in Portfolio shares.
Total return is the rate of return on an investment for a specified period of
time calculated in the manner of cumulative total return. Performance figures
for each Portfolio will vary based upon, among other things, changes in market
conditions, the level of interest rates and the level of the Portfolio's
expenses. Past performance is no guarantee of future performance.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
The Boards of Trustees supervise the management, activities and affairs of
the Portfolios and have approved contracts with various financial organizations
to provide, among other services, day-to-day management required by the
Portfolios and their shareholders.
FUND MANAGER, ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND PAYING AGENT. RSMC,
the Funds' Manager, Administrator, Transfer Agent and Dividend Paying Agent, is
a wholly owned subsidiary of WTC, which in turn is wholly owned by Wilmington
Trust Corporation. RSMC currently acts in the same capacities for the Multi-
Manager Fund portfolios and as Administrator, Transfer Agent and Dividend Paying
Agent to the Strategic Fixed-Income Fund portfolios and the International Equity
Fund. RSMC also provides asset management services to collective investment
funds maintained by WTC. In the past, RSMC has provided asset management
services to individuals, personal trusts, municipalities, corporations and other
organizations. At December 31, 1995, the aggregate assets of the investment
companies managed by RSMC totaled approximately $1.4 billion. RSMC also serves
as Sub-Investment Adviser to three portfolios of the Emerald Funds, which
portfolio assets totaled approximately $400 million at December 31, 1995.
Under separate Management Agreements, RSMC, subject to the supervision of
the Board of Trustees, directs the investments of each Portfolio in accordance
with each Portfolio's investment objective, policies and limitations. Also under
the Management Agreement, as Administrator, RSMC is responsible for
administrative services such as budgeting, financial reporting, compliance
monitoring and corporate management.
Under the Management Agreements, each Portfolio pays a monthly fee to RSMC
at the annual rate of 0.47% of the Portfolio's average daily net assets. Out of
the fee, RSMC makes payments to WTC for provision of custodial services as
described below.
CUSTODIAN. WTC serves as Custodian of the Portfolios' assets. The Portfolios
do not pay WTC any separate fees for its services as Custodian as RSMC pays WTC
for the provision of these services out of its management fee. Any related out-
of-pocket expenses reasonably incurred in the provision of custodial services to
a Portfolio are borne by that Portfolio.
21
<PAGE>
ACCOUNTING SERVICES. RSMC determines the net asset value per share of each
Portfolio and provides accounting services to the Portfolios pursuant to an
Accounting Services Agreement with respect to each Portfolio. For providing
these services RSMC receives an annual fee of $50,000 per Portfolio plus an
amount equal to 0.02% of the average daily net assets of each Portfolio in
excess of $100 million.
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN. Pursuant to separate
Distribution Agreements, RSD manages the Portfolios' distribution efforts and
provides assistance and expertise in developing marketing plans and materials,
enters into dealer agreements with broker-dealers to sell shares of the
Portfolios and, directly or through its affiliates, provides shareholder support
services.
Under a Plan of Distribution adopted with respect to each Portfolio pursuant
to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), the Portfolios may
reimburse RSD for distribution expenses incurred in connection with the
distribution efforts described above. The 12b-1 Plans provide that RSD may be
reimbursed for amounts paid and expenses incurred for distribution activities
encompassed by Rule 12b-1, such as public relations services, telephone
services, sales presentations, media charges, preparation, printing and mailing
advertising and sales literature, data processing necessary to support a
distribution effort, printing and mailing prospectuses, and distribution and
shareholder servicing activities of broker/dealers and other financial
institutions. The Boards of Trustees have authorized annual payments of up to
0.20% of each Portfolio's average net assets to reimburse RSD for making
payments to certain Service Organizations who have sold Portfolio shares and for
other distribution expenses.
BANKING LAWS. Applicable banking laws prohibit deposit-taking institutions
and certain of their affiliates from underwriting or distributing securities.
WTC believes, and counsel to WTC has advised the Funds, that WTC and its
affiliates may perform the services contemplated by their respective agreements
with the Funds without violation of applicable banking laws or regulations. If
WTC or its affiliates were prohibited from performing these services, it is
expected that the Boards of Trustees would consider entering into agreements
with other entities. If a bank were prohibited from acting as a Service
Organization, its shareholder clients would be expected to be permitted to
remain Portfolio shareholders and alternative means for servicing such
shareholders would be sought. It is not expected that shareholders would suffer
any adverse financial consequences as a result of any of these occurrences.
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
The Rodney Square Fund and the Rodney Square Tax-Exempt Fund (the "Funds")
are diversified, open-end, management investment companies established under
Massachusetts law by Declarations of Trust. Each Fund's capital consists of an
unlimited number of shares of beneficial interest. The authorized shares of
beneficial interest in The Rodney Square Fund are currently divided into two
series or portfolios, the U.S. Government Portfolio and the Money Market
Portfolio; and the authorized shares of beneficial interest in the Rodney Square
Tax-Exempt Fund consist of a single series or portfolio. The Boards of Trustees
22
<PAGE>
are empowered by the Declaration of Trusts and the Bylaws to establish
additional classes and series of shares, although neither Board has a present
intention of doing so. Shares entitle holders to one vote per share and
fractional votes for fractional shares held. Shares have non-cumulative voting
rights, do not have preemptive or subscription rights and are transferable.
Separate votes are taken by each Portfolio for the Funds on matters
affecting that Portfolio. For example, a change in the fundamental investment
policies for a Portfolio would be voted upon only by shareholders of that
Portfolio. Additionally, approval of an advisory contract and Rule 12b-1 Plan is
a matter to be determined separately by each Portfolio. Therefore, if
shareholders of one Portfolio approve an advisory contract or Rule 12b-1 Plan,
it is effective as to that Portfolio, whether or not the shareholders of any
other Portfolio also approve the contract or Plan.
As of December 31, 1995, WTC beneficially owned by virtue of shared or sole
voting or investment power on behalf of its underlying customer accounts 25.58%
of the shares of the U.S. Government Portfolio and 39.74% of the shares of the
Tax-Exempt Fund and may be deemed to be a controlling person of these Portfolios
under the 1940 Act. The Funds do not hold annual meetings of shareholders.
There will normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by the shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the 1940 Act, shareholders of record owning no less than two-thirds of the
outstanding shares of a fund may remove a Trustee by vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Trustee when requested in writing to do so by the shareholders of record
owning not less than 10% of the Rodney Square Fund's or Tax-Exempt Fund's
outstanding shares.
Because the Portfolios use a combined Prospectus, it is possible that a
Portfolio might become liable for a misstatement about another Portfolio
contained in the Prospectus. The Boards of Trustees have considered this factor
in approving the use of a single, combined prospectus.
- --------------------------------------------------------------------------------
APPENDIX
- --------------------------------------------------------------------------------
The following paragraphs provide a brief description of the securities in
which the Portfolios may invest. The Portfolios are not limited by this
discussion, however, and may purchase other types of securities if they meet
each Portfolio's quality standards.
MONEY MARKET INSTRUMENTS are liquid, short-term, high-grade debt securities.
These instruments include U.S. Government obligations, commercial paper,
certificates of deposit, bankers' acceptances, time deposits, municipal
securities and corporate obligations.
23
<PAGE>
BANKERS' ACCEPTANCES are credit instruments evidencing the obligation of a
bank to pay a draft which has been drawn on it by a customer. These instruments
reflect the obligation of both the bank and the drawer to pay the face amount of
the instrument upon maturity.
CERTIFICATES OF DEPOSIT are certificates evidencing the indebtedness of a
commercial bank to repay funds deposited with it for a definite period of time
(usually from 14 days to one year) at a stated or variable interest rate.
Variable rate certificates of deposit provide that the interest rate will
fluctuate on designated dates based on changes in a designated base rate (such
as the composite rate for certificates of deposit established by the Federal
Reserve Bank of New York).
CERTIFICATES OF PARTICIPATION give the investor an undivided interest in the
municipal obligation in the proportion that the investor's interest bears to the
total principal amount of the municipal obligation and provides a demand
repurchase feature.
COMMERCIAL PAPER consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations.
CORPORATE OBLIGATIONS are bonds or notes issued by corporations and other
business organizations in order to finance their long-term credit needs. The
Money Market Portfolio's investments in these obligations will be limited to
those obligations that may be considered to have remaining maturities of 397
days or less pursuant to Rule 2a-7 under the 1940 Act.
MUNICIPAL SECURITIES (including bonds and short-term notes) are debt
obligations of varying maturities issued by states, municipalities and public
authorities to obtain funds for various public purposes such as constructing
public facilities and making loans to public institutions. Certain types of
municipal bonds are issued to obtain funding for privately operated facilities.
The level of support for these obligations can range from obligations supported
by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest, to obligations payable only from the revenues
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise tax or other specific source. A brief
description of some typical types of municipal securities follows:
BOND ANTICIPATION NOTES normally are issued to provide interim financing
until long-term financing can be arranged. The long-term bonds then provide
money for the repayment of the Notes.
CONSTRUCTION LOAN NOTES are sold to provide construction financing. After
successful completion and acceptance, many projects receive permanent financing
through the Federal Housing Administration under "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association).
GENERAL OBLIGATION BONDS are backed by the taxing power of the issuing
municipality and are considered the safest type of municipal bond.
24
<PAGE>
INDUSTRIAL DEVELOPMENT BONDS ("IDB'S") AND PRIVATE ACTIVITY BONDS ("PAB'S")
are specific types of revenue bonds issued by or on behalf of public authorities
to finance various privately operated facilities, such as solid waste facilities
and sewage plants. PAB's generally are such bonds issued after August 15, 1986.
These obligations are included within the term "municipal bonds" if the
interest paid thereon is exempt from federal income tax in the opinion of the
bond issuer's counsel. IDB's and PAB's are in most cases revenue bonds and thus
are not payable from the unrestricted revenues of the issuer. The credit
quality of IDB's and PAB's is usually directly related to the credit standing of
the user of the facilities being financed, or some form of credit enhancement
such as a letter of credit.
REVENUE ANTICIPATION NOTES are issued in expectation of receipt of other
kinds of revenue, such as federal revenues available under the Federal Revenue
Sharing Program.
REVENUE BONDS are backed by the revenues of a project or facility -- tolls
from a toll-bridge, for example.
TAX ANTICIPATION NOTES finance working capital needs of municipalities and
are issued in anticipation of various seasonal tax revenues, to be payable for
these specific future taxes.
TAX-EXEMPT COMMERCIAL PAPER AND SHORT-TERM MUNICIPAL NOTES provide for short-
term capital needs and usually have maturities of one year or less. They
include tax anticipation notes, revenue anticipation notes, bond anticipation
notes and construction loan notes.
PUT BONDS are municipal bonds which give the holder the unconditional right
to sell the bond back to the issuer at a specified price and exercise date,
which is typically well in advance of the bond's maturity date.
REPURCHASE AGREEMENTS are transactions by which a Portfolio purchases a
security and simultaneously commits to resell that security to the seller at an
agreed upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased security. While it is not possible to
eliminate all risks from these transactions (particularly the possibility of a
decline in the market value of the underlying securities, as well as delays and
costs to the Portfolio if the other party to the repurchase agreement becomes
bankrupt), it is the policy of the Portfolio to limit repurchase transactions to
primary dealers and banks whose creditworthiness has been reviewed and found
satisfactory by RSMC.
TIME DEPOSITS are bank deposits for fixed periods of time.
U.S. GOVERNMENT OBLIGATIONS are debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Agencies and
instrumentalities include executive departments of the U.S. Government or
independent federal organizations supervised by Congress, such as the Federal
National Mortgage Association, the Student Loan Marketing Association, the
Federal Home Loan Mortgage Corporation and the Tennessee Valley Authority.
Although all obligations of agencies and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on these
obligations is generally backed directly or indirectly by the U.S. Government.
25
<PAGE>
This support can range from securities supported by the full faith and credit of
the United States (for example, U.S. Treasury securities), to securities that
are supported solely or primarily by the creditworthiness of the issuer, such as
securities of the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation and the Tennessee Valley Authority. In the case of
obligations not backed by the full faith and credit of the United States, a
Portfolio must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
a claim against the United States itself in the event the agency or
instrumentality does not meet its commitments.
VARIABLE AND FLOATING RATE SECURITIES are securities the yield on which is
adjusted in relation to changes in specific market rates, such as the prime
rate. Certain of these obligations also may carry a demand feature that gives
the holder the right to demand prepayment of the principal amount of the
security prior to maturity. The demand feature usually is backed by an
irrevocable letter of credit or guarantee by a bank. Portfolio investments in
these securities must comply with conditions established by the SEC under which
they may be considered to have remaining maturities of 397 days or less.
When-Issued Purchases are securities, as described above, offered on a when-
issued basis. This means that delivery and payment for the securities normally
will take place 17 to 90 days after the date of the transaction. The payment
obligation and the interest rate that will be received on securities purchased
on a when-issued basis are each fixed at the time the buyer enters into the
commitment.
SUMMARY TABLE OF INVESTMENT INSTRUMENTS:
U.S. GOVERNMENT PORTFOLIO
U.S. Government Obligations
Repurchase Agreements
MONEY MARKET PORTFOLIO TAX-EXEMPT PORTFOLIO
Bankers' Acceptances Bankers' Acceptances
Certificates of Deposit Certificates of Deposit
Certificates of Participation Certificates of Participation
Commercial Paper Commercial Paper
Corporate Obligations Municipal Securities
Municipal Securities Put Bonds
Put Bonds Repurchase Agreements
Repurchase Agreements Tax-Exempt Commercial Paper
Time Deposits U.S. Government Obligations
U.S. Government Obligations Variable and Floating Rate Instruments
Variable and Floating Rate Instruments When-Issued Purchases
When-Issued Purchases
26
<PAGE>
DESCRIPTION OF S&P'S HIGHEST COMMERCIAL PAPER RATING:
A-1 -- This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
DESCRIPTION OF MOODY'S HIGHEST COMMERCIAL PAPER RATING:
PRIME-1 -- This designation indicates a superior ability for repayment of
senior short-term debt obligations. Prime-1 repayment ability will often be
evidenced by many of the following characteristics:
- Leading market position in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt and
ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Description of S&P's two highest corporate and municipal bond ratings:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
Description of Moody's two highest corporate bond ratings:
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They (the Aa group) are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk appear somewhat larger than
the Aaa securities.
DESCRIPTION OF S&P'S HIGHEST STATE AND MUNICIPAL NOTES RATING:
S&P's tax-exempt note ratings are generally given to notes due in three
years or less. The highest rating category is as follows:
27
<PAGE>
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus sign (+) designation.
DESCRIPTION OF MOODY'S HIGHEST STATE AND MUNICIPAL NOTES RATING:
Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade ("MIG"). Short-term ratings on issues with
demand features are differentiated by the use of the "VMIG" symbol to reflect
such characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on extreme liquidity. Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk, long-
term secular trends for example, may be less important over the short run. The
symbol used is as follows:
MIG-1/VMIG-1 -- Notes bearing this designation are of the best quality.
There is present strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for refinancing.
28
<PAGE>
THE RODNEY SQUARE THE RODNEY SQUARE
FUND & TAX-EXEMPT FUND
APPLICATION & NEW ACCOUNT REGISTRATION
______________________________________________________________________________
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR THE RODNEY SQUARE FUND and/or
ASSISTANCE IN COMPLETING THIS THE RODNEY SQUARE TAX-EXEMPT FUND
FORM CALL (800) 336-9970 C/O RODNEY SQUARE MANAGEMENT CORP.
P.O. Box 8987
WILMINGTON, DE 19899-9752
______________________________________________________________________________
PORTFOLIO SELECTION ($1,000 MINIMUM)
_MONEY MARKET PORTFOLIO $___________
_U.S. GOVERNMENT PORTFOLIO $___________
_TAX-EXEMPT FUND $___________
TOTAL AMOUNT TO BE INVESTED $___________
____By check. (Make payable to "The Rodney Square Fund" and/or "The Rodney
Square Tax-Exempt Fund")
____By wire. Call 1-800-336-9970 for Instructions.
____Bank from which funds will be wired wire date
______________________________________________________________________________
ACCOUNT REGISTRATION
1.Individual__________________________________________________________________
First Name MI Last Name Customer Tax ID No.*
2.Joint Tenancy_______________________________________________________________
First Name MI Last Name Customer Tax ID No.*
("Joint Tenants with Rights of Survivorship" unless otherwise Specified)
Uniform
3.Gifts to Minors_______________ __________ under the__________Gifts/Transfers
Minor's Name Customer Tax ID No.* State to Minors Act
4.Other Registration__________________________________________________________
Customer Tax ID No.*
5.If Trust, Date of Trust Instrument:_________________________________________
As joint tenants use Lines 1 and 2; as custodian for a minor, use Lines 1 and
3. In the name of a corporation, trust or other organization or any
fiduciary capacity, use Line 4.
*Customer Tax Identification No.: (a) for an individual, joint tenants, or
a custodial account under the Uniform Gifts/Transfers to Minors Act, supply
the Social Security number of the registered account owner who is to be taxed;
(b) for a trust, a corporation, a partnership, an organization, a fiduciary,
etc., supply the Employer Identification number of the legal entity or or-
ganization that will report income and/or gains.
______________________________________________________________________________
ADDRESS OF RECORD
______________________________________________________________________________
Street
______________________________________________________________________________
City State Zip Code
<PAGE>
______________________________________________________________________________
DISTRIBUTION OPTIONS _ If these boxes are not checked, all distributions will
be invested in additional shares.
Pay Cash for:
Income Dividends Other
MONEY MARKET PORTFOLIO ___ ___
U.S. GOVERNMENT PORTFOLIO ___ ___
TAX-EXEMPT FUND ___ ___
Check any of the following if you would like additional information about
a particular plan or service sent to you.
___AUTOMATIC INVESTMENT PLAN ___SYSTEMATIC WITHDRAWAL PLAN ___CHECK REDEMPTIONS
(Check redemptions services are generally not available for clients of
WTC through their trust or corporate cash management accounts; this service
may also not be available for clients of Service Organizations.)
CERTIFICATIONS AND SIGNATURE(S) _ Please sign exactly as registered under
"Account Registration."
I have received and read the Prospectus for The Rodney Square Fund and
The Rodney Square Tax-Exempt Fund and agree to its terms; I am of legal age.
I understand that the shares offered by this Prospectus are not deposits of,
or guaranteed by, Wilmington Trust Company, nor are the shares insured by
the Federal Deposit Insurance Corporation, the Federal Reserve Board or any
other agency. I further understand that investment in these shares
involves investment risks, including possible loss of principal. If a
corporate customer, I certify that appropriate corporate resolutions
authorizing investment in The Rodney Square Fund and/or The Rodney Square
Tax-Exempt Fund have been duly adopted.
I certify under penalties of perjury that the Social Security number
or taxpayer identification number shown above is correct. Unless the box below
is checked, I certify under penalties of perjury that I am not subject to
backup withholding because the Internal Revenue Service (a) has not notified me
that I am as a result of failure to report all interest or dividends, or
(b) has notified me that I am no longer subject to backup withhold-
ing. The certifications in this paragraph are required from all nonexempt
persons to prevent backup withholding of 31% of all taxable distribu-
tions and gross redemption proceeds under the federal income tax law.
____Check here if you are subject to backup withholding.
Signature___________________________________________ Date____________
Signature___________________________________________ Date____________
Joint Owner/Trustee
Check one: ____Owner ____Trustee ____Custodian ____Other
______________________________________________________________________________
IDENTIFICATION OF SERVICE ORGANIZATION
We authorize Rodney Square Management Corporation ("RSMC"), and Rodney
Square Distributors, Inc. ("RSD") in the case of transactions by telephone, to
act as our agents in connection with transactions authorized by this order
form.
Service Organization Name and Code____________________________________________
Branch Address and Code_______________________________________________________
Representative or Other Employee Code_________________________________________
Authorized Signature of Service Organization___________Telephone (___)________
<PAGE>
THE RODNEY SQUARE THE RODNEY SQUARE
FUND & TAX-EXEMPT FUND
APPLICATION for TELEPHONE REDEMPTION OPTION
______________________________________________________________________________
Telephone redemption permits redemption of fund shares by telephone, with
proceeds directed only to the fund account address of record or to the bank
account designated below. For investments by check, telephone redemption is
available only after these shares have been on the Fund's books for 10 days.
This form is to be used to add or change the telephone redemption option on
your Rodney Square Fund and/or Rodney Square Tax-Exempt Fund account(s).
______________________________________________________________________________
ACCOUNT INFORMATION
Portfolio Name(s):_______________________________________________________
Fund Account Number(s):__________________________________________________
(Please provide if you are a current account holder:)
Registered in the Name(s) of:_______________________________________________
Registered Address:_________________________________________________________
Note: If this form is not submitted together with the application, a coporate
resolution must be included for accounts registered to other than an individ-
ual, a fiduciary or partnership.
______________________________________________________________________________
REDEMPTION INSTRUCTIONS
___Add ___Change
Check one or more.
___Mail proceeds to my fund account address of record (must be $10,000 or
less and address must be established for a minimum of 60 days)
___Mail proceeds to my bank
___Wire proceeds to my bank (minimum $1,000)
___All of the above
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
______________________________________________________________________________
<PAGE>
BANK INFORMATION
Please complete the following information only if proceeds mailed/wired to your
bank was selected. A VOIDED BANK CHECK MUST BE ATTACHED TO THIS APPLICATION.
Name of Bank________________________________________________________________
Bank Routing Transit #______________________________________________________
Bank Address________________________________________________________________
City/State/Zip______________________________________________________________
Bank________________________________________________________________________
Account Number______________________________________________________________
Name(s) on Bank Account_____________________________________________________
______________________________________________________________________________
AUTHORIZATIONS
By electing the telephone redemption option, I appoint Rodney Square
Management Corporation ("RSMC"), my agent to redeem shares of any designated
Rodney Square fund when so instructed by telephone. This power will continue
if I am disabled or incapacitated. I understand that a request for telephone
redemption may be made by anyone, but the proceeds will be sent only to the
account address of record or to the bank listed above. Proceeds in excess of
$10,000 will only be sent to your predesignated bank. By signing below, I
agree on behalf of myself, my assigns, and successors, not to hold RSMC and
any of its affiliates, or any Rodney Square fund responsible for acting under
the powers I have given RSMC. I also agree that all account and registration
information I have given will remain the same unless I instruct RSMC otherwise
in a written form, including a signature guarantee. If I want to terminate
this agreement, I will give RSMC at least ten days notice in writing. If RSMC
or the Rodney Square funds want to terminate this agreement, they will give me
at least ten days notice in writing.
All owners on the account must sign below and obtain signature guarantee(s).
_____________________________________ ___________________________________
Signature of Individual Owner Signature of Joint Owner (if any)
______________________________________________________________________________
Signature of Corporate Officer, Trustee or other _ please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government securi-
ties dealer, credit union, national securities exchange, registered securities
association, clearing agency or savings association. A Notary Public is not an
acceptable guarantor.
SIGNATURE GUARANTEE(S) (stamp)
<PAGE>
[Outside cover -- Divided into three sections]
[Leftmost Section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Martin L. Klopping
John J. Quindlen
- ------------------
OFFICERS
Martin L. Klopping, President
Joseph M. Fahey, Jr., Vice President
Robert C. Hancock, Vice President & Treasurer
Marilyn Talman, Esq., Secretary
Leah M. Anderson, Assistant Secretary
Diane D. Marky, Assistant Secretary
Louis C. Schwartz, Esq., Assistant Secretary
John J. Kelley, Assistant Treasurer
- -------------------------------------
FUND MANAGER, ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
<PAGE>
[Middle Section]
THE RODNEY SQUARE
TAX-EXEMPT
FUND
THE RODNEY SQUARE
FUND
[Graphic] Caesar
Rodney upon his
galloping horse
facing right,
reverse image on
dark background
PROSPECTUS
February 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
Expense Table 2
Financial Highlights 3
Questions and Answers About the Funds 6
Investment Objectives and Policies 8
Purchase of Shares 13
Shareholder Accounts 14
Redemption of Shares 15
Exchange of Shares 17
How Net Asset Value is Determined 18
Dividends and Taxes 19
Performance Information 20
Management of the Funds 21
Description of the Funds 22
Appendix 23
Application and New Account Registration 29
<PAGE>
THE RODNEY SQUARE FUND
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
The Rodney Square Fund (the "Fund") consists of two separate portfolios, the
U.S. Government Portfolio and the Money Market Portfolio (each, a
"Portfolio" and collectively, the "Portfolios"). Each Portfolio
seeks a high level of current income consistent with the
preservation of capital and liquidity by investing in
money market instruments pursuant to its
investment practices.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's current Prospectus, dated February 1, 1996,
as amended from time to time. A copy of the current Prospectus may be obtained
without charge, by writing to Rodney Square Distributors, Inc. ("RSD"), Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, and
from certain institutions such as banks or broker-dealers that have entered into
servicing agreements with RSD or by calling (800) 336-9970.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
INVESTMENT POLICIES 1
INVESTMENT LIMITATIONS 5
TRUSTEES AND OFFICERS 7
RODNEY SQUARE MANAGEMENT CORPORATION 9
WILMINGTON TRUST COMPANY 10
INVESTMENT MANAGEMENT SERVICES 10
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN 13
PORTFOLIO TRANSACTIONS 15
REDEMPTIONS 16
NET ASSET VALUE AND DIVIDENDS 17
PERFORMANCE INFORMATION 17
TAXES 22
DESCRIPTION OF THE FUND 23
OTHER INFORMATION 24
FINANCIAL STATEMENTS 25
<PAGE>
THE RODNEY SQUARE FUND
INVESTMENT POLICIES
The Rodney Square Fund consists of two separate portfolios, the Money
Market Portfolio and the U.S. Government Portfolio (the "Portfolios"). The
following information supplements the information concerning each Portfolio's
investment objective, policies and limitations found in the Prospectus.
Each Portfolio has a fundamental policy requiring it to use its best
efforts to maintain a constant net asset value of $1.00 per share, although this
may not be possible under certain circumstances. Each Portfolio values its
portfolio securities on the basis of amortized cost (see "Net Asset Value and
Dividends") pursuant to Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act"). As conditions of that Rule, the Fund's Board of Trustees has
established procedures reasonably designed to stabilize each Portfolio's price
per share at $1.00 per share. Each Portfolio maintains a dollar-weighted
average portfolio maturity of 90 days or less; purchases only instruments having
remaining maturities of 397 days or less; and invests only in securities which
are of high quality as determined by a major rating service or, in the case of
instruments which are not rated, of comparable quality as determined by the
Fund's manager, Rodney Square Management Corporation ("RSMC"), under the
direction of and subject to the review of the Fund's Board of Trustees.
BANK OBLIGATIONS. The Money Market Portfolio's investments in obligations
of U.S. branches and agencies of foreign banks and of wholly owned banking
subsidiaries of foreign banks located in the United States may be affected by
adverse developments in the country in which the parent bank is located, and
obligations of foreign branches of U.S. and foreign banks may be affected by
adverse developments in the country of domicile of the branch. Various
provisions of federal law governing the establishment and operation of domestic
branches of U.S. banks do not apply to their foreign branches. U.S. agencies of
foreign banks may not accept deposits and thus are not eligible for FDIC
insurance (although such insurance may not be of material benefit to the Money
Market Portfolio, depending upon the principal amount of the obligations of a
particular bank held by the Portfolio).
In the event of a default of an obligation of a foreign branch of a foreign
bank, whether a general obligation of the parent bank or limited to the assets
of the branch, the Money Market Portfolio would be required to pursue its claim
in the court where the branch or the principal office of the parent bank was
located. The merits of the claim and the enforcement of any judgment would be
determined by foreign law. A claim against a U.S. branch, agency or subsidiary
of a foreign bank generally will be subject to the jurisdiction of the U.S.
courts. Enforcement of judgments against U.S. branches, agencies or
subsidiaries of foreign banks with respect to assets located in the United
States will be governed by the law of the state where the assets are located.
However, enforcement of a judgment of a U.S. court with respect to assets
located outside the United States may be subject to the law of the country where
such assets are located. Therefore, recovery in the event of default on the
obligations of a foreign branch of a foreign or U.S. bank or a U.S. branch,
agency or subsidiary of a foreign bank may potentially be a more difficult and
expensive process than in the case of a U.S. branch of a U.S. bank.
1
<PAGE>
FOREIGN SECURITIES. At the present time, portfolio securities of the Money
Market Portfolio which are purchased outside the United States are maintained in
the custody of foreign branches of U.S. banks. To the extent that the Portfolio
may maintain portfolio securities in the custody of foreign subsidiaries of U.S.
banks, and foreign banks or clearing agencies in the future, those sub-custodian
arrangements are subject to regulations under the 1940 Act that govern custodial
arrangements with entities incorporated or organized in countries outside of the
United States.
MUNICIPAL SECURITIES. The Money Market Portfolio may invest in debt
obligations issued by states, municipalities and public authorities ("Municipal
Securities") to obtain funds for various public purposes. The Municipal
Securities must be rated at least AA, A-1 or SP-1 by Standard & Poor's Ratings
Services ("S&P ") or Aa, MIG-1/VMIG-1 or P-1 by Moody's Investors Service, Inc.
("Moody's") at the time of investment or, if not rated, must be determined to be
of comparable quality by RSMC under the direction of, and subject to the review
of the Board of Trustees. Yields on Municipal Securities are the product of a
variety of factors, including the general conditions of the money market and of
the municipal bond and municipal note markets, the size of a particular
offering, the maturity of the obligation and the rating of the issue. Although
the interest on Municipal Securities may be exempt from federal income tax,
dividends paid by the Money Market Portfolio to its shareholders will not be
tax-exempt.
WHEN-ISSUED SECURITIES. New issues of Municipal Securities may be offered
on a when-issued basis. This means that delivery and payment for the securities
normally will take place approximately 15 to 90 days after the date of the
transaction. The payment obligation and the interest rate that will be received
on securities purchased on a when-issued basis are each fixed at the time the
buyer enters into the commitment. The Money Market Portfolio will make
commitments to purchase such securities only with the intention of actually
acquiring the securities, but the Portfolio may dispose of the commitment before
the settlement date if it is deemed advisable as a matter of investment
strategy. A separate account of the Money Market Portfolio will be established
at the Fund's custodian bank, into which cash and/or marketable high quality
debt securities equal to the amount of the above commitments will be deposited.
If the market value of the deposited securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of such commitments by the Money
Market Portfolio.
A security purchased on a when-issued basis is recorded as an asset on the
commitment date and is subject to changes in market value generally based upon
changes in the level of interest rates. Thus, upon delivery, its market value
may be higher or lower than its cost. When payment for a when-issued security
is due, the Portfolio will meet its obligations from then-available cash flow,
the sale of the securities held in the separate account or the sale of other
securities. The sale of securities to meet such obligations carries with it a
greater potential for the realization of capital gains, which are subject to
federal income tax.
CERTIFICATES OF PARTICIPATION. The floating and variable rate demand
instruments that the Money Market Portfolio may purchase include certificates of
participation in municipal obligations (primarily private activity or industrial
development bonds) purchased from and owned by financial institutions, primarily
banks. Each certificate of participation is backed by an irrevocable letter of
credit or guarantee of a bank (which may be the bank issuing the certificate of
2
<PAGE>
participation, a bank issuing a confirming letter of credit to that of the
issuing bank or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation) that RSMC has
determined meets the prescribed quality standards for the Money Market
Portfolio. The Money Market Portfolio has the right to sell the instrument back
to the issuing bank or draw on the letter of credit on demand, generally after
seven days' notice. The sale may be for all or in some cases part of the
full principal amount of the Portfolio's participation, plus accrued interest.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest paid on
the municipal obligations over the negotiated yield at which the participations
are purchased by the Money Market Portfolio. To the extent that payment of an
obligation is backed by a bank's letter of credit or guarantee, such payment may
be subject to the bank's ability to satisfy that commitment. RSMC will monitor
the pricing, quality, and liquidity of the participation interests held by the
Money Market Portfolio, and the credit standing of banks issuing letters of
credit or guarantees supporting such participation interests on the basis of
published financial information, reports of rating services and bank analytical
services.
SHORT-TERM MUNICIPAL NOTES. This type of note in which the Money Market
Portfolio invests are issued by state and local governments and public
authorities as interim financing in anticipation of tax collections, revenue
receipts or bond sales, such as tax anticipation notes, revenue anticipation
notes, bond anticipation notes and construction loan notes.
YIELDS AND RATINGS OF MONEY MARKET INSTRUMENTS. The yields on the money
market instruments in which the Portfolios invest (such as commercial paper,
bank obligations and Municipal Securities) are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings of Moody's and S&P represent their opinions as to quality of the
obligations they undertake to rate. Ratings, however, are general and are not
absolute standards of quality. Consequently, obligations with the same rating,
maturity and interest rate may have different market prices. Subsequent to its
purchase by the Money Market Portfolio, an issue may cease to be rated or its
rating may be reduced. RSMC, and in certain cases, as required by Rule 2a-7
under the 1940 Act, the Fund's Board of Trustees, will consider whether the
Money Market Portfolio should continue to hold the obligation.
ILLIQUID SECURITIES. The Portfolios may not purchase securities or invest
in repurchase agreements with respect to any securities, if, as a result, more
than 10% of a Portfolio's net assets (taken at current value) would be invested
in repurchase agreements which do not entitle the holder to payment of principal
within seven days and in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market.
In recent years a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933 (the "1933
Act"), including private placements, repurchase agreements, commercial paper,
foreign securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are sold in transactions not
requiring registration. Institutional investors generally will not seek to sell
3
<PAGE>
these instruments to the general public, but instead will often depend either
on an efficient institutional market in which such unregistered securities
can be readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
For example, commercial paper issues in which the Money Market Portfolio
may invest include securities issued by major corporations without registration
under the 1933 Act in reliance on the exemption from such registration afforded
by Section 3(a)(3) thereof and commercial paper issued in reliance on the so-
called "private placement" exemption from registration afforded by Section 4(2)
of the 1933 Act ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws in that any resale must similarly
be made in an exempt transaction. However, Section 4(2) paper is normally
resold to other institutional investors through or with the assistance of
investment dealers who make a market in Section 4(2) paper, thus providing
liquidity.
To facilitate the increased size and liquidity of the institutional markets
for unregistered securities, the Securities and Exchange Commission ("SEC")
adopted Rule 144A under the 1933 Act. Rule 144A established a "safe harbor"
from the registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers. Section 4(2) paper that is issued
by a company that files reports under the Securities Exchange Act of 1934, as
well as other types of securities, are generally eligible to be resold in
reliance on the safe harbor of Rule 144A. Institutional markets for restricted
securities have developed as a result of Rule 144A, providing both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. Such markets include
automated systems for the trading, clearance and settlement of unregistered
securities, such as the PORTAL system sponsored by the National Association of
Securities Dealers An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by the Money Market
Portfolio, however, could affect adversely the marketability of such securities
and the Money Market Portfolio might be unable to dispose of such securities
promptly or at reasonable prices.
The Fund's Board of Trustees has the ultimate responsibility for
determining whether specific securities are liquid or illiquid. The Board has
delegated the function of making day-to-day determinations of liquidity to RSMC,
pursuant to guidelines approved by the Board. RSMC will monitor the liquidity
of securities held by the Money Market Portfolio and report periodically on such
decisions to the Board of Trustees. RSMC takes into account a number of factors
in reaching liquidity decisions, including (1) the frequency of trades for the
security, (2) the number of dealers that make quotes for the security, (3) the
number of dealers that have undertaken to make a market in the security, (4) the
number of other potential purchasers and (5) the nature of the security and how
trading is effected (e.g., the time needed to sell the security, how offers are
solicited and the mechanics of transfer).
LOANS OF PORTFOLIO SECURITIES. Although each Portfolio has no present
intention of doing so in excess of 5% of the Portfolio's net assets, each
Portfolio may from time to time lend its portfolio securities to brokers,
dealers and financial institutions. Such loans by either Portfolio will in no
event exceed one-third of that Portfolio's total assets and will be secured by
4
<PAGE>
collateral in the form of cash or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities"),
which at all times while the loan is outstanding will be maintained in an amount
at least equal to the current market value of the loaned securities.
The primary risk involved in lending securities is that of a financial
failure by the borrower. In such a situation, the borrower might be unable to
return the loaned securities at a time when the value of the collateral has
fallen below the amount necessary to replace the loaned securities. The
borrower would be liable for the shortage, but the Portfolio would be an
unsecured creditor with respect to such shortage and might not be able to
recover all or any of it. In order to minimize this risk, each Portfolio will
make loans of securities only to firms deemed creditworthy by RSMC and only
when, in the judgment of RSMC, the consideration that the Portfolio will receive
from the borrower justifies the risk.
INVESTMENT LIMITATIONS
The investment limitations described below are fundamental and may not be
changed with respect to either Portfolio without the affirmative vote of the
lesser of (i) 67% or more of the shares of the Portfolio present at a
shareholders' meeting if holders of more than 50% of the outstanding shares of
the Portfolio are present in person or by proxy or (ii) more than 50% of the
outstanding shares of the Portfolio.
Each Portfolio will not as a matter of fundamental policy:
1. purchase the securities of any one issuer if, as a result, more than 5% of
the Portfolio's total assets would be invested in the securities of such
issuer, or the Portfolio would own or hold 10% or more of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to these limitations and
provided that these limitations do not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities;
2. purchase the securities of any issuer if, as a result, more than 25% of a
Portfolio's total assets would be invested in the securities of one or more
issuers having their principal business activities in the same industry,
provided, however, that a Portfolio may invest more than 25% of its total
assets in the obligations of banks. (Neither finance companies as a group
nor utility companies as a group are considered a single industry for
purposes of this policy; the Fund has been advised by the staff of the SEC
that it is the staff's current position that the exclusion discussed in
this item (2) may be applied only to U.S. banks; the Portfolios, however,
will consider both foreign and U.S. bank obligations within this
exclusion.);
3. borrow money, except (i) from a bank for temporary or emergency purposes
(not for leveraging or investment), or (ii) by engaging in reverse
repurchase agreements, provided that borrowings do not exceed an amount
equal to one-third of the current value of the borrowing Portfolio's assets
taken at market value, less liabilities other than borrowings;
5
<PAGE>
4. make loans, except (i) the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies and
limitations, (ii) engaging in repurchase agreements, or (iii) engaging in
securities loan transactions limited to one-third of the Portfolio's total
assets;
5. underwrite any issue of securities, except to the extent that the Portfolio
may be considered to be acting as underwriter in connection with the
disposition of any portfolio security;
6. purchase or sell real estate, but this limitation shall not prevent a
Portfolio from investing in obligations secured by real estate or interests
therein or obligations issued by companies that invest in real estate or
interests therein; or
7. purchase or sell physical commodities or contracts relating to physical
commodities, provided that currencies and currency-related contracts will
not be deemed physical commodities.
In addition, each Portfolio has adopted several non fundamental policies,
which can be changed by the Board of Trustees without shareholder approval.
As a matter of non fundamental policy, each Portfolio will not:
1. purchase the securities of any one issuer if as a result more than 5% of
the Portfolio's total assets would be invested in the securities of such
issuer, provided that this limitation does not apply to securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities;
2. purchase or retain the securities of any issuer other than the Fund, if, to
the Fund's knowledge, those Trustees and officers of the Fund or those
Directors and officers of the Fund's manager who individually own
beneficially more than 1/2 of 1% of the outstanding securities of such
issuer, together own beneficially more than 5% of such outstanding
securities;
3. purchase the securities of any issuer (including its predecessor) which
has been in operation for less than three years if, as a result, more than
5% of the value of a Portfolio's total assets would be invested in the
securities of such issuer;
4. invest in oil, gas or other mineral exploration or development programs, or
leases; provided that a Portfolio may invest in securities issued by
companies engaged in such activities;
5. purchase or otherwise acquire any security or invest in a repurchase
agreement with respect to any securities if, as a result, more than 10% of
a Portfolio's net assets (taken at current value) would be invested in
repurchase agreements not entitling the holder to payment of principal
within seven days and in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available
market;
6
<PAGE>
6. purchase securities for investment while any bank borrowing equaling 5% or
more of a Portfolio's total assets is outstanding and if at any time a
Portfolio's borrowings exceed the Portfolio's investment limitations due to
a decline in net assets, such borrowings will be promptly (within 3 days)
reduced to the extent necessary to comply with the limitations;
7. make short sales of securities or purchase securities on margin (but a
Portfolio may obtain such credits as may be necessary for the clearance of
purchases and sales of securities);
8. purchase the securities of any open-end investment company, or securities
of any closed-end investment company except by purchase in the open market
where no commission or profit to a sponsor or dealer results from such
purchase, provided that in any event the Portfolio may not invest more than
10% of its total assets in securities issued by investment companies, more
than 5% of its total assets in securities issued by any one investment
company or in more than 3% of the voting securities of any one such
investment company, and except when such purchase is part of a plan of
merger, consolidation, reorganization or acquisition of assets;
9. make loans of portfolio securities unless such loans are fully
collateralized by cash, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or any combination of cash
and such securities, marked to market value daily; or
10. invest in real estate limited partnerships.
Whenever an investment policy or limitation states a maximum percentage of
a Portfolio's assets that may be invested in any security or other asset or sets
forth a policy regarding quality standards, such percentage or standard
limitation shall be determined immediately after the Portfolio's acquisition of
such security or other asset. Accordingly, any later increase or decrease
resulting from a change in values, net assets or other circumstances will not be
considered when determining whether the investment complies with a Portfolio's
investment policies and limitations (except where explicitly noted above and
except that, as a condition of Rule 2a-7 under the 1940 Act, quality standards
must be maintained for certain obligations).
TRUSTEES AND OFFICERS
The Fund has a Board, currently composed of four Trustees, which supervises
the Portfolios' activities and reviews contractual arrangements with companies
that provide the Portfolios with services. The Fund's Trustees and officers are
listed below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. All persons named as
Trustees also serve in similar capacities for The Rodney Square Tax-Exempt Fund,
The Rodney Square Multi-Manager Fund, The Rodney Square Strategic Fixed-Income
Fund and The Rodney Square International Securities Fund, Inc. (together with
the Fund, the Rodney Square Family of Funds"). Those Trustees who are
"interested persons" of the Fund (as defined in the 1940 Act ) by virtue of
their positions with either RSMC or Wilmington Trust Company ("WTC "), the
parent of RSMC, are indicated by an asterisk (*).
7
<PAGE>
*MARTIN L. KLOPPING, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, President, elected in 1995, and Trustee, age 42, has been President
and Director of RSMC since 1984. He is also a Director of Rodney Square
Distributors, Inc. ("RSD"), elected in 1992. He is also a Chartered Financial
Analyst and member of the SEC Rules and Investment Advisers Committees of the
Investment Company Institute.
ERIC BRUCKER, School of Management, University of Michigan, Dearborn, MI 48128,
Trustee, age 54, has been Dean of the School of Management at the University of
Michigan since June 1992. He was Professor of Economics, Trenton State College
from September 1989 through June 1992. He was Vice President for Academic
Affairs, Trenton State College, from September 1989 through June 1991. From
1976 until September 1989, he was Dean of the College of Business and Economics
and Chairman of various committees at the University of Delaware.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807, Trustee, age 63, has
retired as President and Chief Operating Officer of Hercules Incorporated
(diversified chemicals), positions he held from March 1987 through March 1992.
He also served as a member of the Hercules Incorporated Board of Directors from
1986 through March 1992.
JOHN J. QUINDLEN, 313 Southwinds, 1250 West Southwinds Blvd., Vero Beach, FL
32963, Trustee, age 63, has retired as Senior Vice President-Finance of E.I. du
Pont de Nemours and Company, Inc. (diversified chemicals), a position he held
from 1984 to November 30, 1993. He served as Chief Financial Officer of E. I.
du Pont de Nemours and Company, Inc. from 1984 through June 1993. He also
serves as Trustee of the Kiewit Funds and Director of St. Joe Paper Co.
JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Vice President, age 39, has been with RSMC since 1984, as a
Secretary of RSMC since 1986 and a Vice President of RSMC since 1992. He was an
Assistant Vice President of RSMC from 1988 to 1992.
ROBERT C. HANCOCK, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Vice President and Treasurer, age 44, has been a Vice President of
RSMC since 1988 and Treasurer of RSMC since 1990. He is also a member of the
Accounting/Treasurer Committee of the Investment Company Institute.
MARILYN TALMAN, Rodney Square North, 1100 N. Market St., Wilmington, DE 19890-
0001, Secretary, age 48, has been a Vice President of RSMC since 1995. She was
an Assistant Vice President of RSMC from 1993 to 1995 and a Senior Fund
Administration Officer of RSMC from 1992 to 1993. She was an Associate at
Ballard Spahr Andrews & Ingersoll (law firm) from 1989 to 1992.
DIANE D. MARKY, Rodney Square North, 1100 N. Market St., Wilmington, DE 19890-
0001, Assistant Secretary, age 31, has been a Senior Fund Administrator of RSMC
since 1994 and a Fund Administration Officer of RSMC since July 1994. She was
a Mutual Fund Accountant for RSMC from 1989 to 1991.
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<PAGE>
CONNIE L. MEYERS, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Assistant Secretary, age 35, has been a Fund Administrator of RSMC
since August, 1994. She was a Corporate Custody Administrator for Wilmington
Trust Company from 1989 to 1994.
LOUIS C. SCHWARTZ, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Assistant Secretary, age 28, has been a Senior Fund Administrator
of RSMC since 1995. He was an Associate at the law offices of Mason, Briody,
Gallagher & Taylor from 1993 to 1995.
JOHN J. KELLEY, Rodney Square North, 1100 N. Market St., Wilmington, DE 19890-
0001, Assistant Treasurer, age 36, has been a Vice President of RSMC since 1995.
He was an Assistant Vice President of RSMC from 1989 to 1995.
The fees and expenses of the Trustees who are not "interested persons" of
the Fund ("Independent Trustees"), as defined in the 1940 Act are paid by each
Portfolio of the Fund. For the fiscal year ended September 30, 1995, such fees
and expenses amounted to $6,845 for the U.S. Government Portfolio and $11,191
for the Money Market Portfolio. The following table shows the fees paid during
calendar 1995 to the Independent Trustees for their service to the Fund and to
the Rodney Square Family of Funds. On September 30, 1995, the Trustees and
officers of the Fund, as a group, owned beneficially, or may be deemed to have
owned beneficially, less than 1% of the outstanding shares of each Portfolio.
1995 TRUSTEES FEES
Total Fees from Total Fees from the Rodney
Independent Trustee the Fund Square Family of Funds
------------------- --------------- --------------------------
Eric Brucker $5,850 $16,900
Fred L. Buckner $5,850 $16,900
John J. Quindlen $5,850 $16,900
RODNEY SQUARE MANAGEMENT CORPORATION
RSMC has served as the Fund Manager of the Fund since October 1, 1985, as
Administrator of the Fund since July 1, 1991, and as the Transfer Agent and
Dividend Paying Agent since January 1, 1993. RSMC is a Delaware corporation
organized on September 17, 1981, which enjoys a reputation for managing high
quality portfolios using a conservative investment approach. In a time when
safety of principal and liquidity are critical, RSMC's experienced management
team will continue to operate with strict internal controls and high credit
quality standards. RSMC's investment management services and specialized
investment techniques are normally available only to institutional clients.
RSMC also acts as Investment Adviser and Administrator to The Rodney Square
Multi-Manager Fund and The Rodney Square Tax-Exempt Fund, as Administrator to
The Rodney Square Strategic Fixed-Income Fund and The Rodney Square
International Equity Fund, and as Transfer Agent and Dividend Paying Agent to
all of the Rodney Square funds.
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<PAGE>
RSMC is a wholly owned subsidiary of WTC, a state-chartered bank organized
as a Delaware corporation in 1903. WTC is the wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding company. RSMC may
occasionally consult, on an informal basis, with personnel of WTC's investment
departments. WTC takes no part, however, in determining which securities are to
be purchased or sold by the Portfolios. Prior to RSMC's formation as a separate
company, most of its investment management staff and some of its officers were
employed by WTC in various money market and other fixed-income investment
management and trading departments.
Wilmington Trust Company of Florida, N.A., a wholly owned subsidiary of WTC
and an affilaite of RSMC, has investment discretion over certain institutional
accounts.
RSD, a wholly owned subsidiary of WTC and the Fund's Distributor is a
registered broker-dealer. Wilmington Brokerage Services Company, another wholly
owned subsidiary of WTC, is a registered investment adviser and a registered
broker-dealer.
WILMINGTON TRUST COMPANY
WTC, the parent of RSMC, serves as Custodian of the assets of the Fund and
is paid for those services by RSMC out of its management fee from the Fund. The
Fund reimburses WTC for its related out-of-pocket expenses for such items as
postage, forms, mail insurance and similar items reasonably incurred in the
performance of custodial services for the Fund.
The Fund benefits from the experience, conservative values and special
heritage of WTC and its affiliates. WTC is a financially strong bank and enjoys
a reputation for providing exceptional consistency, stability and discipline in
managing both short-term and long-term investments. WTC is Delaware's largest
full-service bank and, with more than $75 billion in trust, custody and
investment management assets, WTC ranks among the nation's leading money
management firms. As of December 31, 1995, the trust department of WTC was the
seventeenth largest in the United States as measured by discretionary assets
under management. WTC is engaged in a variety of investment advisory activities,
including the management of collective investment pools, and has nearly a
century of experience managing the personal investments of high net-worth
individuals. Its current roster of institutional clients includes several
Fortune 500 companies as well. WTC is also the Investment Adviser of The Rodney
Square Strategic Fixed-Income Fund and The Rodney Square International Equity
Fund.
INVESTMENT MANAGEMENT SERVICES
MANAGEMENT AND ADMINISTRATION AGREEMENTS. RSMC serves as Fund Manager and
Administrator to the Fund pursuant to a contract with the Fund dated August 9,
1991 ( "Management Agreement "). For the services performed by RSMC under the
Management Agreement, the Fund pays a monthly fee to RSMC at the annual rate of
0.47% of the average daily net assets of each Portfolio. For the fiscal years
ended September 30, 1995, 1994 and 1993, RSMC was paid advisory fees and
administration fees by the Fund amounting to $1,672,293, $1,942,059 and
$1,843,949, respectively, for the U.S. Government Portfolio and $3,240,976,
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<PAGE>
$3,330,944 and $3,484,966, respectively, for the Money Market Portfolio. For
the fiscal year ended September 30, 1993, RSMC paid to Scudder Investor
Services, Inc. administration fees amounting to $168,786.94.
RSMC has agreed to waive all or a part of its advisory fee or to reimburse
each Portfolio on a monthly basis, to the extent that the annual operating
expenses of a Portfolio (excluding brokerage commissions, distribution fees,
interest, taxes and extraordinary expenses) exceed the limitations prescribed by
certain states in which shares of the Portfolios may be registered. RSMC
understands that the lowest applicable limitation is currently 2.5% per year on
the first $30 million of average net assets of a Portfolio, 2% of the next $70
million and 1.5% per year on any additional net assets. During the fiscal years
ended September 30, 1995, 1994 and 1993, RSMC did not waive any part of its fee
or reimburse either Portfolio pursuant to any such state securities expense
limitations.
Under the terms of the Management Agreement, RSMC agrees to: (a) supply
office facilities, non-investment related statistical and research data,
executive and administrative services, stationery and office supplies, and
corporate secretarial services for the Fund; (b) prepare and file, if necessary,
reports to shareholders of the Fund and reports with the SEC and state
securities commissions; (c) monitor each Portfolio's compliance with the
investment restrictions and limitations imposed by the 1940 Act, and state Blue
Sky laws and applicable regulations thereunder, the fundamental and non
fundamental investment policies and limitations set forth in the Prospectus and
this Statement of Additional Information, and the investment restrictions and
limitations necessary for each Portfolio to continue to qualify as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"); (d) monitor sales of the Fund's shares and ensure that such shares
are properly registered with the SEC and applicable state authorities; (e)
prepare and monitor an expense budget for each Portfolio, including setting and
revising accruals for each category of expenses; (f) determine the amount of
dividends and other distributions payable to shareholders as necessary to, among
other things, maintain each Portfolio's qualification as a RIC under the Code;
(g) prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders; (h) prepare
financial statements and footnotes and other financial information with such
frequency and in such format as required to be included in reports to
shareholders and the SEC; (i) supervise the preparation of federal and state tax
returns; (j) review sales literature and file such with regulatory authorities,
as necessary; (k) maintain Fund/Serv membership; and (l) provide personnel to
serve as officers of the Fund if so elected by the Board of Trustees.
Additionally, RSMC agrees to create and maintain all necessary records in
accordance with all applicable laws, rules and regulations pertaining to the
various functions performed by it and not otherwise created and maintained by
another party pursuant to contract with the Fund. RSMC may at any time or times
upon approval by the Trustees, enter into one or more sub-administration
agreements with a sub-administrator pursuant to which RSMC delegates any or all
of its duties as listed above to other parties as its agent to carry out any of
the provisions of the Administration Agreement.
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The Management Agreement provides that RSMC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the Management Agreement relates, except to
the extent of a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its obligations and duties under
the Management Agreement.
The Management Agreement became effective on August 9, 1991, and continues
in effect from year to year thereafter so long as its continuance is approved at
least annually by a majority of the Trustees, including a majority of the
Independent Trustees. The Agreement is terminable by the Fund with respect to a
Portfolio (by vote of the Fund's Board of Trustees or by vote of a majority of
the Portfolio's outstanding voting securities) on sixty (60) days' written
notice given to RSMC or by RSMC on sixty (60) days' written notice given to the
Fund and terminates automatically upon its assignment.
The salaries of any officers and the interested Trustees of the Fund who
are affiliated with RSMC and the salaries of all personnel of RSMC performing
services for the Fund relating to research, statistical and investment
activities are paid by RSMC.
RSMC also serves as Transfer Agent and Dividend Paying Agent pursuant to an
agreement dated as of December 31, 1992. Compensation for the services and
duties performed is paid by RSMC in accordance with the Fund's Management
Agreement. Certain other fees and expenses incurred in connection with the
provision of these services are payable by the Fund or the shareholder on whose
behalf the service is performed.
ACCOUNTING SERVICES AGREEMENT. RSMC also provides portfolio accounting
services to the Fund pursuant to an Accounting Services Agreement with the Fund.
For its services, RSMC receives an annual fee of $50,000 per Portfolio plus an
amount equal to 0.02% of that portion of each Portfolio's average daily net
assets for the year which are in excess of $100 million. For the fiscal years
ended September 30, 1995, 1994 and 1993, RSMC was paid accounting services fees
of $101,163, $112,642 and $108,467, respectively, for the U.S. Government
Portfolio and $167,915, $171,744 and $178,298, respectively, for the Money
Market Portfolio.
Under the terms of the Accounting Services Agreement, RSMC agrees to: (a)
perform the following accounting functions on a daily basis: (1) journalize
each Portfolio's investment, capital share and income and expense activities,
(2) verify investment buy/sell trade tickets when received from RSMC and
transmit trades to the Fund's Custodian on behalf of each Portfolio for proper
settlement, (3) maintain individual ledgers for investment securities, (4)
maintain historical tax lots for each security, (5) reconcile cash and
investment balances of each Portfolio with the Custodian, and provide RSMC with
the beginning cash balance available for investment purposes, (6) update each
Portfolio's cash availability throughout the day as required by RSMC, (7) post
to and prepare each Portfolio's Statement of Assets and Liabilities and the
Statement of Operations, (8) calculate various contractual expenses (e.g.,
advisory fees) for each Portfolio, (9) control all disbursements from each
Portfolio and authorize such disbursements upon written instructions, (10)
calculate capital gains and losses, (11) determine each Portfolio's net income,
(12) obtain security market quotes from services approved by RSMC, or if such
12
<PAGE>
quotes are unavailable, then obtain such prices from RSMC, and in either case
calculate the market value of each Portfolio's investments, (13) transmit or
mail a copy of each Portfolio's portfolio valuation to RSMC, (14) compute the
net asset value of each Portfolio, (15) compute each Portfolio's yields, total
return, expense ratios and portfolio turnover rate, and (16) monitor the expense
accruals and notify Fund management of any proposed adjustments; (b) prepare
monthly financial statements for each Portfolio which include the Schedule of
Investments, the Statement of Assets and Liabilities, the Statement of
Operations, the Statement of Changes in Net Assets, the Cash Statement and the
Schedule of Capital Gains and Losses; (c) prepare monthly security
transactions listings; (d) prepare quarterly broker security transactions
summaries; (e) supply various Fund statistical data as requested on an ongoing
basis; (f) assist in the preparation of support schedules necessary for
completion of Federal and state tax returns; (g) assist in the preparation and
filing of the Fund's semiannual reports with the SEC on Form N-SAR; (h) assist
in the preparation and filing of the Fund's annual and semiannual shareholder
reports and proxy statements; (i) assist with the preparation of registration
statements on Form N-1A and other filings relating to the registration of shares
of the Fund; (j) monitor each Portfolio's status as a RIC under Subchapter M of
the Code; and (k) act as liaison with the Fund's independent public accountants
and provide account analyses, fiscal year summaries and other audit related
schedules. Additionally, RSMC agrees to keep, in accordance with all applicable
laws, rules and regulations, all books and records with respect to the Fund's
books of account and records of each Portfolio's securities transactions.
The Accounting Services Agreement provides that RSMC shall not be liable
for any act or omission which does not constitute willful misfeasance, bad faith
or gross negligence on the part of RSMC in the performance of its obligations
and duties under the Accounting Services Agreement or reckless disregard by RSMC
of such duties and obligation.
The Accounting Services Agreement became effective on October 1, 1989, and
continues in effect from year to year thereafter so long as its continuance is
approved at least annually by a majority of the Trustees, including a majority
of the Independent Trustees. The Agreement is terminable by the Fund or RSMC on
three (3) months' written notice.
DISTRIBUTION AGREEMENT AND RULE 12b-1 PLAN
RSD serves as Distributor of the Portfolios' shares pursuant to a
Distribution Agreement with the Fund. Pursuant to the terms of the Distribution
Agreement, RSD is granted the right to sell the shares of the Portfolios as
agent for the Fund. Shares of the Portfolios are offered continuously.
Under the terms of the Distribution Agreement, RSD agrees to use all
reasonable efforts to secure purchasers for shares of the Portfolios and to pay
expenses of printing and distributing prospectuses, statements of additional
information and reports prepared for use in connection with the sale of
Portfolio shares and any other literature and advertising used in connection
with the offering, subject to reimbursement pursuant to each Portfolio's Plan of
Distribution adopted pursuant to Rule 12b-1 under the 1940 Act (the "12b-1
Plans").
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<PAGE>
The Distribution Agreement provides that RSD, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Agreement, will not be liable to the Fund or its shareholders for losses arising
in connection with the sale of Portfolio shares.
The Distribution Agreement became effective as of December 31, 1992 and
continues in effect from year to year as long as its continuance is approved at
least annually by a majority of the Trustees, including a majority of the
Independent Trustees. The Distribution Agreement terminates automatically in
the event of its assignment. The Agreement is also terminable without payment
of any penalty with respect to either Portfolio (i) by the Fund (by vote of a
majority of the Trustees of the Fund who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of any
Rule 12b-1 Plan of the Fund or any agreements related to the 12b-1 Plan or by
vote of a majority of the outstanding voting securities of the applicable
Portfolio) on sixty (60) days' written notice to RSD; or (ii) by RSD on sixty
(60) days' written notice to the Fund.
RSD may be reimbursed for distribution expenses according to each 12b-1
Plan which became effective January 1, 1993. Each 12b-1 Plan provides that RSD
may be reimbursed for distribution activities encompassed by Rule 12b-1, such as
public relations services, telephone services, sales presentations, media
charges, preparation, printing and mailing advertising and sales literature,
data processing necessary to support a distribution effort, printing and mailing
of prospectuses, and distribution and shareholder servicing activities of
certain financial institutions such as banks or broker-dealers who have entered
into servicing agreements with RSD ("Service Organizations") and other financial
institutions, including fairly allocable internal expenses of RSD and payments
to third parties.
The 12b-1 Plans further provide that reimbursement shall be made for any
month only to the extent that such payment does not exceed (i) 0.20% on an
annualized basis of each Portfolio's average net assets; and (ii) limitations
set from time to time by the Board of Trustees. The Board of Trustees has only
authorized implementation of each 12b-1 Plan for annual payments of up to 0.20%
of each Portfolio's average net assets to reimburse RSD for making payments to
certain Service Organizations who have sold Portfolio shares and for other
distribution expenses. For the fiscal year ended September 30, 1995, payments
made pursuant to the 12b-1 Plans amounted to $60,831, consisting of $10,721 for
trail commissions and $50,110 for the preparation and distribution of marketing
materials, for the U.S. Government Portfolio and $63,098, consisting of $53,447
for trail commissions and $9,651 for the preparation and distribution of
marketing materials for the Money Market Portfolio.
Under the 12b-1 Plans, if any payments made by RSMC out of its management
fee, not to exceed the amount of that fee, to any third parties (including
banks), including payments for shareholder servicing and transfer agent
functions, were deemed to be indirect financing by the Fund of the distribution
of its shares, such payments are authorized. The Fund may execute portfolio
transactions with and purchase securities issued by depository institutions that
receive payments under the 12b-1 Plans. No preference for instruments issued by
such depository institutions is shown in the selection of investments.
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<PAGE>
PORTFOLIO TRANSACTIONS
All portfolio transactions are placed on behalf of each Portfolio by RSMC
pursuant to authority contained in the Management Agreement. Debt securities
purchased and sold by each Portfolio are generally traded on the dealer market
on a net basis (i.e., without commission) through dealers acting for their own
account and not as brokers, or otherwise involve transactions directly with the
issuer of the instrument. This means that a dealer (the securities firm or bank
dealing with the Fund) makes a market for securities by offering to buy at one
price and sell at a slightly higher price. The difference between the prices is
known as a spread. When securities are purchased in underwritten offerings,
they include a fixed amount of compensation to the underwriter.
The primary objective of RSMC in placing orders on behalf of each Portfolio
for the purchase and sale of securities is to obtain best execution at the most
favorable prices through responsible brokers or dealers and, where the spread or
commission rates are negotiable, at competitive rates. Although the Fund has no
current arrangement to pay higher commissions or spreads in return for research,
analysis, advice and similar services, the Fund may do so if it is determined
that the commission or spread is reasonable in relation to the value of the
research services that have been provided. In selecting a broker or dealer,
RSMC considers, among other things: (i) the price of the securities to be
purchased or sold; (ii) the rate of the spread or commission; (iii) the size and
difficulty of the order; (iv) the nature and character of the spread or
commission for the securities to be purchased or sold; (v) the reliability,
integrity, financial condition, general execution and operational capability of
the broker or dealer; and (vi) the quality of any services provided by the
broker or dealer to the Portfolios or to RSMC.
RSMC cannot readily determine the extent to which spreads or commission
rates or net prices charged by brokers or dealers reflect the value of their
research, analysis, advice and similar services. In such cases, RSMC receives
services it otherwise might have had to perform itself. The research, analysis,
advice and similar services provided by brokers or dealers can be useful to RSMC
in serving its other clients, as well as in serving the Fund. Conversely,
information provided to RSMC by brokers or dealers who have executed transaction
orders on behalf of other clients of RSMC may be useful to RSMC in providing
services to the Fund. During the fiscal years ended September 30, 1995, 1994
and 1993, neither Portfolio paid brokerage commissions.
Some of RSMC's other clients have investment objectives and programs
similar to that of the Portfolios. Occasionally, RSMC may make recommendations
to other clients which result in their purchasing or selling securities
simultaneously with the Portfolios. Consequently, the demand for securities
being purchased or the supply of securities being sold may increase, and this
could have an adverse effect on the price of those securities. It is RSMC's
policy not to favor one client over another in making recommendations or in
placing orders. In the event of a simultaneous transaction, purchases or sales
are averaged as to price and allocated between the Portfolio and RSMC's other
clients as to amount according to a formula deemed equitable to the Portfolio
and such other clients.
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REDEMPTIONS
To ensure proper authorization before redeeming shares of the Portfolios,
the Transfer Agent, RSMC, may require additional documents such as, but not
restricted to, stock powers, trust instruments, death certificates, appointments
as fiduciary, certificates of corporate authority and waivers of tax required in
some states when settling estates.
Clients of WTC who have purchased shares through their trust accounts at
WTC and clients of Service Organizations who have purchased shares through their
accounts with those Service Organizations should contact WTC or the Service
Organization prior to submitting a redemption request to ensure that all
necessary documents accompany the request. When shares are held in the name of
a corporation, other organization, trust, fiduciary or other institutional
investor, RSMC requires, in addition to the stock power, certified evidence of
authority to sign the necessary instruments of transfer. THESE PROCEDURES ARE
FOR THE PROTECTION OF SHAREHOLDERS AND SHOULD BE FOLLOWED TO ENSURE PROMPT
PAYMENT. Redemption requests must not be conditional as to date or price of the
redemption. Proceeds of a redemption will be sent within 7 days of acceptance
of shares tendered for redemption. Delay may result if the purchase check has
not yet cleared, but the delay will be no longer than required to verify that
the purchase check has cleared, and the Fund will act as quickly as possible to
minimize delay.
A shareholder's right to redeem shares and to receive payment therefor may
be suspended when (a) the New York Stock Exchange (the "Exchange") is closed,
other than customary weekend and holiday closings, (b) trading on the Exchange
is restricted, (c) an emergency exists as a result of which it is not reasonably
practicable to dispose of a Portfolio's securities or to determine the value of
a Portfolio's net assets, or (d) ordered by a governmental body having
jurisdiction over the Fund for the protection of the Fund's shareholders,
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether a condition described in
(b), (c) or (d) exists. In case of such suspension, shareholders of the
affected Portfolio may withdraw their requests for redemption or may receive
payment based on the net asset value of the Portfolio next determined after the
suspension is lifted.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part with readily marketable securities chosen by the Fund and valued in the
same way as they would be valued for purposes of computing the net asset value
of the applicable Portfolio. If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash. The
Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a
result of which the Fund is obligated to redeem shares solely in cash if the
redemption requests are made by one shareholder account up to the lesser of
$250,000 or 1% of the net assets of the applicable Portfolio during any 90-day
period. This election is irrevocable unless the SEC permits its withdrawal.
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NET ASSET VALUE AND DIVIDENDS
NET ASSET VALUE. Each Portfolio's securities are valued on the basis of
the amortized cost valuation technique. This involves valuing an instrument at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. The valuation of each Portfolio's
instruments based upon their amortized cost and the accompanying maintenance of
each Portfolio's per share net asset value of $1.00 is permitted in accordance
with Rule 2a-7 under the 1940 Act. Certain conditions imposed by that Rule are
set forth under "Investment Policies." In connection with the use of the
amortized cost valuation technique, the Fund's Board of Trustees has established
procedures delegating to RSMC the responsibility for maintaining a constant net
asset value per share. Such procedures include a daily review of each
Portfolio's holdings to determine whether a Portfolio's net asset value,
calculated based upon available market quotations, deviates from $1.00 per
share. Should any deviation exceed 1/2 of 1% of $1.00, the Trustees will
promptly consider whether any corrective action should be initiated to eliminate
or reduce material dilution or other unfair results to shareholders. Such
corrective action may include selling of portfolio instruments prior to maturity
to realize capital gains or losses, shortening average portfolio maturity,
withholding dividends, redeeming shares in kind and establishing a net asset
value per share based upon available market quotations.
Should a Portfolio incur or anticipate any unusual expense or loss or
depreciation that would adversely affect its net asset value per share or income
for a particular period, the Trustees would at that time consider whether to
adhere to the current dividend policy or to revise it in light of the then
prevailing circumstances. For example, if a Portfolio's net asset value per
share were reduced, or were anticipated to be reduced, below $1.00, the Trustees
could suspend or reduce further dividend payments until net asset value returned
to $1.00 per share. Thus, such expenses or losses or depreciation could result
in investors receiving no dividends or educed dividends for the period during
which they held their shares or in their receiving upon redemption a price per
share lower than that which they paid.
DIVIDENDS. Dividends are declared on each Business Day of the Fund (as
defined in the Prospectus). The dividend for such a Business Day immediately
preceding a weekend or holiday normally includes an amount equal to the net
income for the subsequent non-Business Days of the Fund on which dividends are
not declared. However, no such dividend includes any amount of net income
earned in a subsequent semiannual accounting period. A portion of the dividends
paid by the U.S. Government Portfolio may be exempt from state taxes.
PERFORMANCE INFORMATION
The performance of a Portfolio may be quoted in terms of its yield and its
total return in advertising and other promotional materials ("performance
advertisements"). Performance data quoted represents past performance and is
not intended to indicate future performance. Performance of the Portfolios will
vary based on changes in market conditions and the level of each Portfolio's
expenses. These performance figures are calculated in the following manner:
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A. YIELD is the net annualized yield for a specified 7 calendar days
calculated at simple interest rates. Yield is calculated by
determining the net change, exclusive of capital changes, in the value
of a hypothetical pre-existing account having a balance of one share
at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base
period to obtain the base period return. The yield is annualized by
multiplying the base period return by 365/7. The yield figure is
stated to the nearest hundredth of one percent.
The yield for the 7-day period ended September 30, 1995 was 5.37%
for the U.S. Government Portfolio and 5.39% for the Money Market
Portfolio.
B. EFFECTIVE YIELD is the net annualized yield for a specified 7
calendar days assuming reinvestment of income or compounding.
Effective yield is calculated by the same method as yield except the
yield figure is compounded by adding 1, raising the sum to a power
equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective yield = [(Base Period Return + 1) 365/7] - 1.
The effective yield for the 7-day period ended September 30, 1995
was 5.51% for the U.S. Government Portfolio and 5.53% for the Money
Market Portfolio.
C. AVERAGE ANNUAL TOTAL RETURN is the average annual compound rate
of return for the periods of one year, five years, ten years and the
life of a Portfolio, where applicable, all ended on the last day of a
recent calendar quarter. Average annual total return quotations
reflect changes in the price of a Portfolio's shares, if any, and
assume that all dividends and capital gains distributions, if any,
during the respective periods were reinvested in Portfolio shares.
Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment over such
periods, according to the following formula (average annual total
return is then expressed as a percentage):
T = (ERV/P)1/n - 1
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
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AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED SEPTEMBER 30, 1995
One Five Ten
Year Years Years
----- ----- -----
U.S. Government Portfolio 5.37% 4.35% 5.81%
Money Market Portfolio 5.50% 4.53% 6.01%
D. CUMULATIVE TOTAL RETURN is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period.
Cumulative total return quotations reflect the change in the price of
a Portfolio's shares, if any, and assume that all dividends and
capital gains distributions, if any, during the period were reinvested
in Portfolio shares. Cumulative total return is calculated by finding
the cumulative rates of return of a hypothetical investment over such
periods, according to the following formula (cumulative total return
is then expressed as a percentage):
C = (ERV/P)-1
Where: C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
CUMULATIVE TOTAL RETURN FOR PERIODS ENDED SEPTEMBER 30, 1995
One Five Ten
Year Years Years
----- ----- -----
U.S. Government Portfolio 5.37% 23.75% 75.95%
Money Market Portfolio 5.50% 24.77% 79.17%
E. TOTAL RETURN is the rate of return on an investment for a
specified period of time calculated in the manner of Cumulative Total
Return.
COMPARISON OF PORTFOLIO PERFORMANCE. A comparison of the quoted
performance offered for various investments is valid only if performance is
calculated in the same manner. Since there are many methods of calculating
performance, investors should consider the effects of the methods used to
calculate performance when comparing performance of a Portfolio with performance
quoted with respect to other investment companies or types of investments. For
example, it is useful to note that yields reported on debt instruments are
generally prospective, contrasted with the historical yields reported by the
Fund.
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In connection with communicating its performance to current or prospective
shareholders, a Portfolio also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to unmanaged
indices which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
From time to time, in marketing and other literature, a Portfolio's
performance may be compared to the performance of broad groups of comparable
mutual funds or unmanaged indexes of comparable securities such as the
Donoghue Tier One Money Market Index for the Money Market Portfolio and the
Donoghue U.S. Government and Agency Index for the U.S. Government Portfolio.
The Fund's yield and performance over time may also be compared to the
performance of bank money market deposit accounts and fixed-rate insured
certificates of deposit (CD's), or unmanaged indices of securities that are
comparable to money market funds in their terms and intent, such as Treasury
bills, bankers' acceptances, negotiable order of withdrawal accounts, and money
market certificates. Most bank CD's differ from money market funds in several
ways: the interest rate is fixed for the term of the CD, there are interest
penalties for early withdrawal of the deposit from a CD, and the deposit
principal in a CD is insured by the FDIC.
Since the assets in all funds are always changing, a Portfolio may be
ranked within one asset-size class at one time and in another asset-size class
at some other time. In addition, the independent organization chosen to rank
the Portfolio in marketing and promotional literature may change from time to
time depending upon the basis of the independent organization's categorizations
of mutual funds, changes in a Portfolio's investment policies and investments, a
Portfolio's asset size and other factors deemed relevant. Advertisements and
other marketing literature will indicate the time period and Lipper asset-size
class or other performance ranking company criteria, as applicable, for the
ranking in question.
Evaluations of Portfolio performance made by independent sources may also
be used in advertisements concerning a Portfolio, including reprints of, or
selections from, editorials or articles about the Portfolio. Sources for
performance information and articles about a Portfolio may include the
following:
BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
- --------
periodically reviews mutual fund performance data.
CDA INVESTMENT TECHNOLOGIES, INC., an organization which provides performance
- ----------------------------------
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
- -------------------------------------------
publication that periodically features the performance of a variety of
securities.
20
<PAGE>
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
- ---------------
Watch" section featuring financial news.
FINANCIAL WORLD, a general business/financial magazine that includes a "Market
- ---------------
Watch" department reporting on activities in the mutual fund industry.
FORBES, a national business publication that from time to time reports the
- ------
performance of specific investment companies in the mutual fund industry.
FORTUNE, a national business publication that periodically rates the performance
- -------
of a variety of mutual funds.
IBC'S MONEY FUND REPORT, a weekly publication of IBC/Donoghue, Inc., of Ashland,
- -----------------------
Massachusetts, reporting on the performance of the nation's money market funds,
summarizing money market fund activity, and including certain averages as
performance benchmarks, specifically "IBC's Money Fund Average," and "IBC's
Government Money Fund Average."
IBC'S MONEY FUND DIRECTORY, an annual directory ranking money market mutual
- ---------------------------
funds.
INVESTMENT COMPANY DATA, INC., an independent organization which provides
- -------------------------------
performance ranking information for broad classes of mutual funds.
INVESTOR'S DAILY, a daily newspaper that features financial, economic, and
- ----------------
business news.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a weekly
- ---------------------------------------------------------------------
publication of industry-wide mutual fund averages by type of fund.
MONEY, a monthly magazine that from time to time features both specific funds
- -----
and the mutual fund industry as a whole.
MUTUAL FUND VALUES, a biweekly Morningstar, Inc. publication that provides
- -------------------
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
THE NEW YORK TIMES, a nationally distributed newspaper which regularly covers
- -------------------
financial news.
PERSONAL INVESTING NEWS, a monthly news publication that often reports on
- ------------------------
investment opportunities and market conditions.
21
<PAGE>
PERSONAL INVESTOR, a monthly investment advisory publication that includes a
- -----------------
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world of entrepreneurs and growing
- -------
business, often featuring mutual fund performance data.
USA TODAY, the nation's number one daily newspaper.
- ---------
U.S. NEWS AND WORLD REPORT, a national business weekly that periodically reports
- --------------------------
mutual fund performance data.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
- --------------------
covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
- ------------------------------------------
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.
TAXES
GENERAL. In order to continue to qualify for treatment as a RIC under the
Code, each Portfolio each being treated as a separate entity for these
purposes must distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, taxable net investment income plus
net short-term capital gain, if any) and must meet several additional
requirements. With respect to each Portfolio, these requirements include the
following: (a) at least 90% of the Portfolio's gross income each taxable year
must be derived from dividends, interest and gains from the sale or other
disposition of securities, or other income derived with respect to its business
of investing in securities; (b) the Portfolio must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities
held for less than three months; (c) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government Securities and other
securities, with those other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Portfolio's
total assets; and (d) at the close of each quarter of a Portfolio's taxable
year, not more than 25% of the value of its total assets may be invested
in securities (other than U.S. Government Securities) of any one issuer.
DISTRIBUTIONS. Each Portfolio will be subject to a nondeductible 4% excise
tax to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
22
<PAGE>
Distributions from a Portfolio's investment company taxable income, if any,
are taxable to its shareholders as ordinary income to the extent of the
Portfolio's earnings and profits. Because each Portfolio's net investment
income is derived from interest rather than dividends, no portion of the
distributions thereof is eligible for the dividends-received deduction allowed
to corporations.
Shortly after the end of each year, RSMC calculates the federal income tax
status of all distributions made during the year. In addition to federal income
tax, shareholders may be subject to state and local taxes on distributions from
a Portfolio. Shareholders should consult their tax advisers regarding specific
questions relating to federal, state and local taxes.
DESCRIPTION OF THE FUND
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable for the obligations of
the trust. The Declaration of Trust, however, contains an express disclaimer of
shareholder liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each note, bond, contract or other
undertaking relating to the Fund that is issued by or on behalf of the Fund or
the Trustees. The Declaration of Trust provides for indemnification out of the
assets of the applicable Portfolio of any shareholder held personally liable
solely by virtue of ownership of shares of a Portfolio. The Declaration of
Trust also provides that the applicable Portfolio shall, upon request, assume
the defense of any claim made against any shareholder for any act or obligation
of the Portfolio and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Portfolio itself would be unable to meet its
obligations. RSMC believes that, in view of the above, the risk of personal
liability to shareholders is remote.
The Fund's Declaration of Trust further provides that the Trustees will not
be liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
The shares of each Portfolio that are issued by the Fund are fully paid and
nonassessable. The assets of the Fund received for the issuance or sale of
Portfolio shares and all income, earnings, profits and proceeds therefrom,
subject only to the right of creditors, are allocated to the respective
Portfolio and constitute the underlying assets of that Portfolio. The
underlying assets of each Portfolio are segregated on the books of account and
are charged with the liabilities in respect to such Portfolio and with a share
of the general liabilities of the Fund. Expenses with respect to the two
Portfolios are allocated in proportion to the net asset values of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made. The officers of the Fund, subject to the general supervision of the Board
of Trustees, have the power to determine which liabilities are allocable to a
given Portfolio or which are general or allocable to the two Portfolios.
23
<PAGE>
The Declaration of Trust provides that the Fund will continue indefinitely
unless a majority of the shareholders of the Fund or a majority of the
shareholders of the affected Portfolio approve: (a) the sale of the Fund's
assets or the Portfolio's assets to another diversified open-end management
investment company; or (b) the liquidation of the Fund or the Portfolio. In the
event of the liquidation of the Fund or a Portfolio, affected shareholders are
entitled to receive the assets of the Fund or Portfolio that are available for
distribution.
OTHER INFORMATION
INDEPENDENT AUDITORS. Ernst & Young LLP, 1 North Charles Street,
Baltimore, MD 21201, serves as the Fund's independent auditors, providing
services which include (1) audit of the annual financial statements for the
Portfolios, (2) assistance and consultation in connection with SEC filings and
(3) preparation of the annual federal income tax returns filed on behalf of each
Portfolio.
The financial statements and financial highlights of the Portfolios
appearing or incorporated by reference in the Fund's Prospectus, this Statement
of Additional Information and Registration Statement have been audited by Ernst
& Young LLP, independent auditors, to the extent indicated in their reports
thereon also appearing elsewhere herein and in the Registration Statement or
incorporated by reference. Such financial statements have been included herein
or incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
SUBSTANTIAL SHAREHOLDERS. As of December 31, 1995, WTC owned of record, on
behalf of its customer accounts 87.16% of the shares of the U.S. Government
Portfolio in addition to those shares owned beneficially on behalf of its
customer accounts, and WTC owned of record, on behalf of its customer accounts
70.41% of the shares of the Money Market Portfolio, including 24.25% owned
beneficially, all on behalf of its customer accounts. As of that date, Delta
Air Lines Holdings Inc., 1105 North Market Street, Suite 1300, Wilmington, DE,
owned beneficially 5.37% of the outstanding shares of the Money Market
Portfolio.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachussets Avenue,
N.W., Washington, D.C. 20036, serves as counsel to the Fund and has passed upon
the legality of the shares offered by the Prospectus and this Statement of
Additional Information.
CUSTODIAN. Wilmington Trust Company, Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, serves as the Fund's Custodian.
TRANSFER AGENT. Rodney Square Management Corporation, Rodney Square North,
1100 N. Market Street, Wilmington, DE 19890-0001, serves as the Fund's Transfer
Agent and Dividend Paying Agent.
24
<PAGE>
FINANCIAL STATEMENTS
The Schedule of Investments as of September 30, 1995 for each of the
Portfolios; the Statement of Assets and Liabilities as of September 30, 1995 for
each of the Portfolios; the Statement of Operations for the fiscal year ended
September 30, 1995 for each of the Portfolios; the Statements of Changes in Net
Assets for the fiscal years ended September 30, 1995 and 1994 for each of the
Portfolios; the Financial Highlights for the fiscal years ended September 30,
1991 through September 30, 1995 for each of the Portfolios; and the Notes to
Financial Statements and the Report of Independent Auditors, each of which is
included in the Annual Report to the shareholders of the Fund as of and for the
fiscal year ended September 30, 1995 are attached hereto, and are hereby
incorporated by reference.
25
<PAGE>
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
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
a.Financial Statements:
Included in Part A of this Registration Statement:
Financial Information (i.e., Financial Highlights for each of the ten
years in the period ended September 30, 1995 for the U.S. Government
Portfolio and the Money Market Portfolio)
Included in Part B of this Registration Statement:
For the U.S. Government Portfolio:
Investments, September 30, 1995
Statement of Assets and Liabilities, September 30, 1995
Statement of Operations, for the fiscal year ended September 30, 1995
Statements of Changes in Net Assets, for the fiscal years ended
September 30, 1994 and 1995
Financial Highlights for each of the five years in the period ended
September 30, 1995
Notes to Financial Statements
Report of Independent Auditors
For the Money Market Portfolio:
Investments, September 30, 1995
Statement of Assets and Liabilities, September 30, 1995
Statement of Operations, for the fiscal year ended September 30, 1995
Statements of Changes in Net Assets, for the fiscal years ended
September 30, 1994 and 1995
Financial Highlights for each of the five years in the period ended
September 30, 1995
Notes to Financial Statements
Report of Independent Auditors
Statements, schedules and historical information other than those listed
above have been omitted since they are either not applicable or are not
required.
b.Exhibits:
1. (a) Amended and Restated Declaration of Trust of the Registrant
dated October 1, 1985. (Incorporated by reference to Exhibit 1(d)
to Post-Effective Amendment No. 5 to this Registration Statement
filed on October 4, 1985.)
(b) Amendment to Amended and Restated Declaration of Trust of the
Registrant dated August 9, 1991. (Incorporated by reference to
Exhibit 1(b) to Post-Effective Amendment No. 16 to this
Registration Statement filed on November 27, 1991.)
(c) Amendment to Declaration of Trust of the Registrant dated
February 15, 1993. (Incorporated by reference to Exhibit 1(c) to
Post Effective amendment No. 18 to this Registration Statement
filed on December 2, 1993.)
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
----------------------------------------------
2. (a) By-Laws of the Registrant. (Incorporated by reference to
Exhibit 2 to original Registration Statement filed on February 17,
1982.)
(b) Amendment to By-Laws of the Registrant dated August 9, 1991.
(Incorporated by reference to Exhibit 2(b) to Post-Effective
Amendment No. 16 to this Registration Statement filed on November
27, 1991.)
3. Voting Trust Agreement - None.
4. Instruments Defining the Rights of Shareholders.
(a) Amended and Restated Declaration of Trust dated October 1,
1985 as Amended August 9, 1991 and February 15, 1993 (relevant
portions). (Incorporated by reference to Exhibit 4(a) to Post
Effective Amendment No.18 to this Registration Statement filed on
December 2, 1993.)
(b) By-Laws of the Registrant as Amended August 9, 1991 (relevant
portions). (Incorporated by reference to Exhibit 4(b) to Post
Effective Amendment No.18 to this Registration Statement filed on
December 2, 1993.)
5. Management Agreement between the Registrant and Rodney Square
Management Corporation dated August 9, 1991. (Incorporated by
reference to Exhibit 5 to Post-Effective Amendment No. 16 to this
Registration Statement filed on November 27, 1991.)
6. (a) Distribution Agreement between the Registrant and Rodney
Square Distributors, Inc. effective December 31, 1992
(b) Form of Selected Dealer Agreement between Rodney Square
Distributors, Inc. and the broker-dealer as listed in Schedule B to
the Agreement effective December 31, 1992. (Incorporated by
reference to Exhibit 6(b) to Post-Effective Amendment No.18 to this
Registration Statement filed on December 2, 1993.)
7. Bonus, Profit Sharing or Pension Plans - None.
8. (a) Custodian Contract between the Registrant and Wilmington Trust
Company dated October 1, 1986. (Incorporated by reference to
Exhibit 8(a) to Post-Effective Amendment No. 11 to this
Registration Statement filed on February 1, 1988.)
(b) Subcustodian contract between Wilmington Trust Company and
Irving Trust Company of New York. (Incorporated by reference to
Exhibit 8(c) to Post-Effective Amendment No. 11 to this
Registration Statement filed on
February 1, 1988.)
9. (a) Transfer Agency Agreement between the Registrant and Rodney
Square Management Corporation effective December 31, 1992.
(b) Accounting Services Agreement between Registrant and Rodney
Square Management Corporation dated October 1, 1989. (Incorporated
by reference to Exhibit 9(c) to Post-Effective Amendment No. 13 to
this Registration Statement filed on November 28, 1989.)
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
----------------------------------------------
10. (a) Opinion of Kirkpatrick & Lockhart. (Incorporated by reference
to Exhibit 10 to Pre-Effective Amendment No. 1 to this Registration
Statement filed on July 19, 1982.)
(b) Opinion of Kirkpatrick & Lockhart relating to Rule 24e-2
Registration.
11. Consent of Ernst & Young LLP, Independent Auditors for Registrant.
12. Financial Statements omitted from Part B - None.
13. Letter of Investment Intent. (Incorporated by reference to Exhibit
13 to Pre-Effective Amendment No. 1 to this Registration Statement
filed on July 19, 1982 and filed as amended as Exhibit 13 to Pre-
Effective Amendment No. 2 to this Registration Statement filed on
August 2, 1982.)
14. Prototype Retirement Plan - None.
15. (a) Amended and Restated Plan of Distribution Pursuant to Rule
12b-1 under the Investment Company Act of 1940 of the Registrant
with respect to the U.S. Government Portfolio effective May 21,
1990, amended effective as of January 1, 1993.
(b) Amended and Restated Plan of Distribution pursuant to Rule 12b-
1 under the Investment Company Act of 1940 of the Registrant with
respect to the Money Market Portfolio effective May 21, 1990,
amended effective as of January 1, 1993.
16. Schedule for Computation of Performance Quotations.
17. Financial Data Schedule
18. NONE
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
--------------------------------------------------------------
a. Persons Controlled by Registrant: None
b. Persons under Common Control with Registrant in the event
Wilmington Trust Company ("WTC") is deemed to be a controlling
person of the Registrant:
Mutual Funds
The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund
The Rodney Square International Securities Fund, Inc.
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
(CONTINUED).
------------
% Held
Corporate Entity State of Org. by WTC
---------------- ------------- --------
Brandywine Insurance Agency, Inc. Delaware 100%
Brandywine Finance Corp. Delaware 100%
Brandywine Life Insurance Company,
Inc. Delaware 100%
Compton Realty Corporation Delaware 100%
Delaware Corp. Management Delaware 100%
Drew-I Ltd. Delaware 100%
Drew-VIII Ltd. Delaware 100%
Holiday Travel Agency, Inc. Delaware 100%
Rockland Corporation Delaware 100%
Rodney Square Distributors, Inc. Delaware 100%
Rodney Square Management Corporation Delaware 100%
Siobain-XII Ltd. Delaware 100%
Spar Hill Realty Company Delaware 100%
Wilmington Brokerage Services
Company Delaware 100%
Wilmington Capital Management, Inc. Delaware 100%
Wilmington Trust of Florida, N.A. Florida 100%
WTC Corporate Services, Inc. Delaware 100%
100 West 10th St. Corporation Delaware 100%
PARTNERSHIPS
Rodney Square Investors, L.P.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF DECEMBER 31, 1995).
----------------------------------------------------------
(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
-------------- -----------------------------
Shares of beneficial interest
U.S. Government Portfolio 4084
Money Market Portfolio 6869
ITEM 27. INDEMNIFICATION.
----------------
Article XI, Section 2 of the Registrant's Declaration of Trust provides,
subject to certain exceptions and limitations, that the appropriate Series of
the Registrant will indemnify a Trustee or officer ("covered person") of the
Registrant against liability and against all expenses incurred in connection
with any claim, action, suit, proceeding, or settlement in which he becomes
involved as a party or otherwise by virtue of being or having been a Trustee or
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 27. INDEMNIFICATION CONTINUED.
--------------------------
officer, to the fullest extent permitted by law. No covered person, however,
will be indemnified if there is an adjudication that (a) such person is liable
to the Registrant or its shareholders because of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office, or (b) such person did not act in good faith, with the reasonable
belief that his action was in the best interests of the Registrant. In
addition, a covered person will not be indemnified in the event of settlement
unless a court, a majority of disinterested Trustees, or independent legal
counsel determines that the covered person did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. The Registrant may maintain insurance
policies covering such rights of indemnification.
According to Article XII, Section 1 of the Declaration of Trust, the
Registrant is a trust, not a partnership. Trustees are not liable personally to
any person extending credit to, contracting with or having any claim against the
Registrant. A Trustee, however, is not protected from liability due to willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Article XII, Section 2 provides that, subject to the provisions of Article XI
and Article XII, Section 1, the Trustees are not liable for errors of judgment
or mistakes of fact or law, or for any act or omission in accordance with advice
of counsel or other experts or for failing to follow such advice.
Paragraph 7A of the Management Agreement between Rodney Square Management
Corporation ("RSMC") and the Registrant provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties on the part of RSMC, RSMC shall not be subject to liability to the
Registrant or to any shareholder of the Registrant or its Series for any act or
omission in the course of performing its duties under the contract or for any
losses that may be sustained in the purchase, holding or sale of any security or
the making of any investment for or on behalf of the Registrant. Paragraph 15
provides that obligations assumed by the Registrant pursuant to the Management
Agreement are limited in all cases to the Registrant and its assets or a
particular Series and its assets, if liability relates to a Series.
Paragraph 10 of the Distribution Agreement between the Registrant and Rodney
Square Distributors, Inc. ("RSD") provides that the Registrant agrees to
indemnify and hold harmless RSD and each of its directors and officers and each
person, if any, who controls RSD within the meaning of Section 15 of the
Securities Act of 1933 (the "1933 Act") against any loss, liability, claim,
damages or expense arising by reason of any person acquiring any shares, based
upon the 1933 Act or any other statute or common law, alleging any wrongful act
of the Registrant or any of its employees or representatives, or based upon the
grounds that the registration statements, or other information filed or made
public by the Registrant included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements not misleading. RSD, however, will not be indemnified to
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 27. INDEMNIFICATION (CONTINUED).
----------------------------
the extent that the statement or omission is based on information provided in
writing by RSD. In no case is the indemnity of the Registrant in favor of RSD
or any person indemnified to be deemed to protect RSD or any person against any
liability to the Registrant or its security holders to which RSD or such person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. In addition,
Paragraph 15 of the Distribution Agreement is similar to Paragraph 15 of the
Management Agreement.
Paragraph 18 of the Transfer Agency Agreement between the Registrant and RSMC
provides that RSMC and its nominees shall be held harmless from all taxes,
charges, expenses, assessments, claims and liabilities including, without
limitation, liabilities arising under the 1933 Act, the Securities Exchange Act
of 1934 and any state or foreign securities and blue sky laws, and amendments
thereto, and expenses including without limitation reasonable attorneys' fees
and disbursements arising directly or indirectly from any action or omission to
act which RSMC takes at the request of or on the direction of or in reliance on
the advice of the Registrant or upon oral or written instructions in the absence
of RSMC or its nominees' own willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under such Agreement.
Paragraph 27 of the Transfer Agency Agreement is similar to Paragraph 15 of the
Management Agreement.
Paragraph 13 of the Accounting Services Agreement between the Registrant and
RSMC is similar to Paragraph 18 of the Transfer Agency Agreement. Paragraph 20
of the Accounting Services Agreement is similar to Paragraph 15 of the
Management Agreement.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
-----------------------------------------------------
Rodney Square Management Corporation ("RSMC"), a Delaware corporation, serves
as fund manager, administrator, transfer agent and accounting agent to the
Registrant. RSMC is a wholly owned subsidiary of Wilmington Trust Company, also
a Delaware corporation, which in turn is wholly owned by Wilmington Trust
Corporation. Information as to the officers and directors of RSMC is included
in its Form ADV filed on March 11, 1987, and most recently supplemented on
April 14, 1994, with the Securities and Exchange Commission File No. 801-22071
and is incorporated by reference herein.
ITEM 29. PRINCIPAL UNDERWRITERS.
-----------------------
(a)The Rodney Square Strategic Fixed-Income Fund
The Rodney Square International Securities Fund, Inc.
The Rodney Square Multi-Manager Fund
The Rodney Square Tax-Exempt Fund
Heitman Real Estate Fund
The HomeState Group
Kiewit Mutual Fund
Dracena Funds, Inc.
1838 Investment Advisors Funds
The Olstein Funds
(b)
(1) (2) (3)
Name and Principal Position and Offices with Position and Offices
Business Address Rodney Square Distributors, Inc. with Registrant
- ------------------ -------------------------------- --------------------
Jeffrey O. Stroble President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
Martin L. Klopping Director President &
Rodney Square North Trustee
1100 North Market Street
Wilmington, DE 19890
Neil Curran
1105 North Market Street Vice President None
Wilmington, DE 19890
(c)None.
<PAGE>
THE RODNEY SQUARE FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (CONTINUED)
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
---------------------------------
Certain accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder and the records relating to the duties of the Registrant's transfer
agent are maintained by Rodney Square Management Corporation, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-0001. Records
relating to the duties of the Registrant's custodian are maintained by
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001.
ITEM 31. MANAGEMENT SERVICES.
--------------------
Inapplicable.
ITEM 32. UNDERTAKINGS.
-------------
Inapplicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, and State of
Delaware, on the 26th day of January, 1996.
THE RODNEY SQUARE FUND
By: /s/ Marilyn Talman
----------------------------
Marilyn Talman, Secretary
Pursuant to the requirements of the Securities Act of 1933, this amend-
ment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Eric Brucker
- ------------------------
Eric Brucker* Trustee January 26, 1996
/s/ Fred L. Buckner
- ------------------------
Fred L. Buckner* Trustee January 26, 1996
/s/ Martin L. Klopping
- ------------------------
Martin L. Klopping* President & January 26, 1996
Trustee
/s/ John J. Quindlen
- ------------------------
John J. Quindlen* Trustee January 26, 1996
/s/ Robert C. Hancock Vice President and
- ------------------------ Treasurer (Principal
Robert C. Hancock* Financial and January 26, 1996
Accounting Officer)
*By: /s/ Marilyn Talman
--------------------------
Marilyn Talman **
** Attorney-in-fact pursuant to a power of attorney filed herewith.
- -----------------------
<PAGE>
POWER OF ATTORNEY
-----------------
Each of the undersigned in his capacity as a Trustee or officer, or both,
as the case may be, of the Registrant, does hereby appoint Arthur J. Brown and
Marilyn Talman, and each of them, or jointly, his true and lawful attorney and
agent to execute in his name, place and stead (in such capacity) any and all
post-effective amendments to the Registration Statement and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents have power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the act of said
attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal
/s/ Peter J. Succoso Executive Officer) August 21, 1995
- -----------------------
Peter J. Succoso and Trustee
/s/ Eric Brucker
- -----------------------
Eric Brucker Trustee August 21, 1995
/s/ Fred L. Buckner
- -----------------------
Fred L. Buckner Trustee August 21, 1995
/s/ Martin L. Klopping
- -----------------------
Martin L. Klopping Trustee August 21, 1995
/s/ John J. Quindlen
- -----------------------
John J. Quindlen Trustee August 21, 1995
Vice President and
/s/ Robert C. Hancock Treasurer (Principal
- -----------------------
Robert C. Hancock Financial and August 21, 1995
Accounting Officer)
<PAGE>
POWER OF ATTORNEY
-----------------
Each of the undersigned in his capacity as a Trustee or officer, or both,
as the case may be, of the Registrant, does hereby appoint Arthur J. Brown and
Marilyn Talman, and each of them, or jointly, his true and lawful attorney and
agent to execute in his name, place and stead (in such capacity) any and all
post-effective amendments to the Registration Statement and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents have power and authority to do
and perform in the name and on behalf of each of the undersigned, in any and all
capacities, every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as each of the undersigned
might or could do in person, hereby ratifying and approving the act of said
attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal
/s/ Martin L. Klopping Executive Officer) January 26, 1996
- -----------------------
Martin L. Klopping and Trustee
<PAGE>
File No. 2-76333
File No. 811-3406
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 21
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 23
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE RODNEY SQUARE FUND
<PAGE>
THE RODNEY SQUARE FUND
EXHIBIT INDEX
Exhibit 6(a) Distribution Agreement between the EX-6
Registrant and Rodney Square
Distributors, Inc. effective
December 31, 1992
Exhibit 9(a) Transfer Agency Agreement between EX-9
the Registrant and Rodney Square
Management Corporation effective
December 31, 1992
Exhibit 10(b) Opinion of Kirkpatrick & Lockhart EX-10
relating to Rule 24e-2 Registration
Exhibit 11 Consent of Ernst & Young LLP, EX-11
Independent Auditors for Registrant
Exhibit 15(a) Amended and Restated Plan of Distribution EX-15
pursuant to Rule 12b-1 under the Investment
Company Act of 1940 of the Registrant with
respect to the U.S. Government Portfolio
effective May 21, 1990, amended effective
as of January 1, 1993
Exhibit 15(b) Amended and Restated Plan of Distribution EX-15
pursuant to Rule 12b-1 under the Investment
Company Act of 1940 of the Registrant with
respect to the Money Market Portfolio
effective May 21, 1990, amended effective
as of January 1, 1993
Exhibit 16 Schedule for Computation EX-16
of Performance Quotations
Exhibit 17 Financial Data Schedule EX-17
<PAGE>
Exhibit 6(a)
THE RODNEY SQUARE FUND
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of the 31st day of December,
1992, between The Rodney Square Fund, a Massachusetts business trust (the
"Fund"), having its principal place of business in Wilmington, Delaware, and
Rodney Square Distributors, Inc., a corporation organized under the laws of the
State of Delaware (the " Distributor"), having its principal place of business
in Wilmington, Delaware.
WHEREAS, the Fund wishes to employ the services of Distributor, with such
assistance from its affiliates as the latter may provide, such employment to
take effect at the close of business on December 31, 1992; and
WHEREAS, Distributor wishes to provide distribution services to the Fund as
set forth below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties agree as follows:
1. SALE OF SHARES. The Fund grants to the Distributor the right to sell
shares of beneficial interest of all series of the Fund, now or hereafter
created, (the "shares") on its behalf during the term of this Agreement and
subject to the registration requirements of the Securities Act of 1933, as
amended (the "1933 Act"), and of the laws governing the sale of securities
in various states (the "Blue Sky Laws") under the following terms and
conditions: the Distributor (i) shall have the right to sell, as agent on
behalf of the Fund, shares authorized for issue and registered under the
1933 Act; (ii) may sell shares under offers of exchange, if available,
between and among the funds distributed by Distributor and advised by
Rodney Square Management Corporation or Wilmington Trust Company; and (iii)
shall sell such shares only in compliance with the terms set forth in the
Fund's currently effective registration statement. Distributor may enter
into selling agreements with selected dealers and others for the sale of
Fund shares and will act only on its own behalf as principal in entering
into such selling agreements.
2. SALE OF SHARES BY THE FUND. The rights granted to the Distributor shall be
non-exclusive in that the Fund reserves the right to sell its shares to
investors on applications received and accepted by the Fund. Further, the
Fund reserves the right to issue shares in connection with (a) the merger
or consolidation, or acquisition by the Fund through purchase or otherwise,
with any other investment company, trust or personal holding company; and
(b) a pro rata distribution directly to the holders of shares in the nature
of a stock dividend or split-up.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
shares of all series of the Fund, shares of all series of the Fund held in
its treasury in the event that in the discretion of the Fund treasury
shares shall be sold, and shares of all series of the Fund repurchased for
resale.
<PAGE>
4. SUSPENSION OF SALES. If and whenever the determination of net asset value
is suspended and until such suspension is terminated, no further orders for
shares shall be processed by the Distributor except such unconditional
orders placed with the Distributor before it had knowledge of the
suspension. In addition, the Fund reserves the right to suspend sales and
the Distributor's authority to process orders for shares on behalf of the
Fund if, in the judgment of the Fund, it is in the best interests of the
Fund to do so. Suspension will continue for such period as may be
determined by the Fund. In addition, the Distributor reserves the right to
reject any purchase order.
5. SOLICITATION OF SALES. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Fund. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. Distributor agrees to use all reasonable
efforts to ensure that taxpayer identification numbers provided for
shareholders of the Fund are correct.
6. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the Fund
to give any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or SAI's
filed with the Securities and Exchange Commission under the 1933 Act (as
those registration statements, Prospectuses and SAI's may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Fund for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing, in compliance with applicable laws and regulations, sales
literature or other material as it may deem appropriate. Distributor will
furnish or cause to be furnished copies of such sales literature or other
material to the President of the Fund or his designee and will provide him
with a reasonable opportunity to comment on it. Distributor agrees to take
appropriate action to cease using such sales literature or other material
to which the Fund reasonably objects as promptly as practicable after
receipt of the objection.
7. PORTFOLIO SECURITIES. Portfolio securities of every series of the Fund may
be bought or sold by or through the Distributor, and the Distributor may
participate directly or indirectly in brokerage commissions or "spreads"
for transactions in portfolio securities of any series of the Fund.
However, all sums of money received by the Distributor as a result of such
purchases and sales or as a result of such participation must, after
reimbursement of actual expenses of the Distributor in connection with such
activity, be paid over by the Distributor to or for the benefit of the
applicable series.
8. REGISTRATION OF SHARES. The Fund agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval, if any, of its shareholders) so that there will be available for
sale the number of shares the Distributor may reasonably be expected to
sell. The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of each
series of the Fund.
2
<PAGE>
9. EXPENSES, COMPENSATION AND REIMBURSEMENT.
(a) The Fund shall pay all fees and expenses:
(i) in connection with the preparation, setting in type and filing
of any registration statement, Prospectus and SAI under the
1933 Act, and any amendments thereto, for the issue of its
shares;
(ii) in connection with the registration and qualification of shares
for sale in the various states in which the Board of Trustees
(the "Trustees") of the Fund shall determine it advisable to
qualify such shares for sale (including registering the Fund or
Series as a broker or dealer or any officer of the Fund as
agent or salesperson in any state);
(iii) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Fund in their
capacity as such; and
(iv) of preparing, setting in type, printing and mailing
Prospectuses, SAI's, and any supplements thereto, sent to
existing shareholders.
(b) The Distributor shall pay expenses of:
(i) printing and distributing Prospectuses, SAI's and reports
prepared for its use in connection with the offering of the
shares for sale to the public;
(ii) any other literature used in connection with such offering; and
(iii) advertising in connection with such offering.
(c) In addition to the services described above, Distributor will provide
services including assistance in the production of marketing and
advertising materials for the sale of shares of the Fund and their
review for compliance with applicable regulatory requirements,
entering into dealer agreements with broker-dealers to sell shares of
the Fund and monitoring their financial strength and contractual
compliance, providing, directly or through its affiliates certain
investor support services, personal service, and the maintenance of
shareholder accounts.
(d) In connection with the services to be provided by the Distributor
under this Agreement, the Distributor shall receive:
(i) a service fee and reimbursement from the Fund (which may
include reimbursement for the expenses incurred pursuant to
Section 10(b) hereof), to the extent and under the terms and
conditions set forth in any Plan of Distribution of the Fund or
its series ("Plan"), as such Plan may be in effect from time to
time, and subject to any further limitations on such fee or
reimbursement as the Trustees of the Fund may impose, and
(ii) any sales charge, as set forth in the Fund's registration
statement, paid by any purchaser of Fund shares.
3
<PAGE>
10. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933
Act against any loss, liability, claim, damages or expense (including
the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees
incurred in connection therewith) arising by reason of any person
acquiring any shares, based upon the 1933 Act or any other statute or
common law, alleging any wrongful act of the Fund or any of its
employees or representatives, or based upon the grounds that the
registration statements, Prospectuses, SAI's, shareholder reports or
other information filed or made public by the Fund (as from time to
time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in
order to make the statements not misleading. However, the Fund does
not agree to indemnify the Distributor or hold it harmless to the
extent that the statement or omission was made in reliance upon, and
in conformity with, information furnished to the Fund in writing by or
on behalf of the Distributor. In no case (i) is the indemnity of the
Fund in favor of the Distributor or any person indemnified to be
deemed to protect the Distributor or any person against any liability
to the Fund or its security holders to which the Distributor or such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Fund to be liable under its indemnity
agreement contained in this Section 11(a) with respect to any claim
made against the Distributor or any person indemnified unless the
Distributor or person, as the case may be, shall have notified the
Fund in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or any
such person or after the Distributor or such person shall have
received notice of service on any designated agent. However, failure
to notify the Fund of any claim shall not relieve the Fund from any
liability which it may have to the Distributor or any person against
whom such action is brought other than on account of its indemnity
agreement contained in this Section 11(a). The Fund shall be entitled
to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the Distributor,
or person or persons, defendant or defendants in the suit. In the
event the Fund elects to assume the defense of any suit and retain
counsel, the Distributor, officers or directors or controlling
person(s) or defendant(s) in the suit, shall bear the fees and
expenses of any additional counsel retained by them. If the Fund does
not elect to assume the defense of any suit, it will reimburse the
Distributor, officers or directors or controlling person(s) or
defendant(s) in the suit, for the reasonable fees and expenses of any
counsel retained by them. The Fund agrees to notify the Distributor
promptly of the commencement of any litigation or proceedings against
it or any of its officers or Trustees in connection with the issuance
or sale of any of the shares.
4
<PAGE>
(b) The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of the members of its Trustees and
officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act, against any loss, liability,
damages, claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages, claim
or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any shares, based
upon the 1933 Act or any other statute or common law, alleging any
wrongful act of the Distributor or any of its employees or
representatives, or alleging that the registration statements,
Prospectuses, SAI's, shareholder reports or other information filed or
made public by the Fund (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the
statements not misleading, insofar as the statement or omission was
made in reliance upon, and in conformity with, information furnished
in writing to the Fund by or on behalf of the Distributor. In no case
(i) is the indemnity of the Distributor in favor of the Fund or any
person indemnified to be deemed to protect the Fund or any person
against any liability to which the Fund or such person would otherwise
be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement,
or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Section 11(b) with respect to any claim made against
the Fund or any person indemnified unless the Fund or person, as the
case may be, shall have notified the Distributor in writing of the
claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim
shall have been served upon the Fund or any such person or after the
Fund or such person shall have received notice of service on any
designated agent. However, failure to notify the Distributor of any
claim shall not relieve the Distributor from any liability which it
may have to the Fund or any person against whom the action is brought
other than on account of its indemnity agreement contained in this
Section 11(b). In the case of any notice to the Distributor, it shall
be entitled to participate, at its own expense, in the defense, or, if
it so elects, to assume the defense of any suit brought to enforce any
claims, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by it and satisfactory to
the Fund, to its officers and Trustees and to any controlling
person(s) or any defendants(s) in the suit. In the event the
Distributor elects to assume the defense of any suit and retain
counsel, the Fund or controlling person(s) or defendant(s) in the
suit, shall bear the fees and expenses of any additional counsel
retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Fund, its officers or
Trustees, controlling person(s) or defendant(s) in the suit, for the
reasonable fees and expenses of any counsel retained by them. The
Distributor agrees to notify the Fund promptly of the commencement of
any litigation or proceedings against it in connection with the issue
and sale of any of the shares.
11. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become effective at
the close of business on December 31, 1992, and unless terminated as
provided, shall continue in force for one (1) year from the date of its
5
<PAGE>
execution and thereafter from year to year, provided continuance after the
one (1) year period is approved at least annually by either (i) the vote of
a majority of the Trustees of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) the vote of a majority
of those Trustees of the Fund who are not interested persons of the Fund,
who have no direct or indirect financial interest in the operation of any
Plan of the Fund or any agreements related to the Plan and who are not
parties to this Agreement or interested persons of any party, cast in
person at a meeting called for the purpose of voting on the approval. This
Agreement shall automatically terminate in the event of its assignment. As
used in this Section 12, the terms "vote of a majority of the outstanding
voting securities," "assignment" and "interested person" shall have the
respective meanings specified in the 1940 Act and the rules enacted
thereunder as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated without the payment of any penalty
by vote of a majority of the Trustees of the Fund who are not interested
persons of the Fund and who have no direct or indirect financial interest
in the operation of any Plan of the Fund or any agreements related to the
Plan, or by vote of a majority of the outstanding voting securities of the
Fund, on not more than sixty (60) days' written notice to the Fund. This
Agreement may be terminated by the Distributor upon not less than sixty
(60) days' prior written notice to the Fund..
12. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail,
postage prepaid, to the other party to this Agreement at its principal
place of business.
13. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
14. GOVERNING LAW. To the extent that state law has not been preempted by the
provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Delaware.
15. SHAREHOLDER LIABILITY. The Distributor is hereby expressly put on notice
of the limitation of shareholder liability as set forth in the Declaration
of Trust of the Fund and agrees that obligations assumed by the Fund
pursuant to this Agreement shall be limited in all cases to the Fund and
its assets. The Distributor agrees that it shall not seek satisfaction of
any such obligation from the shareholders or any individual shareholder of
the Fund, nor from the Trustees or any individual Trustee of the Fund.
16. MISCELLANEOUS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be
executed in two counterparts, each of which taken together shall constitute
one and the same instrument.
6
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE RODNEY SQUARE FUND
By: /s/ Peter J. Succoso
-----------------------------
Peter J. Succoso, President
RODNEY SQUARE DISTRIBUTORS, INC.
By: /s/ Jeffrey O. Stroble
-----------------------------
Jeffrey O. Stroble, President
7
Exhibit 9(a)
THE RODNEY SQUARE FUND
TRANSFER AGENCY AGREEMENT
THIS TRANSFER AGENCY AGREEMENT is made as of the 31st day of December,
1992, between The Rodney Square Fund, a Massachusetts business trust (the
"Fund"), having its principal place of business in Wilmington, Delaware, and
Rodney Square Management Corporation, a corporation organized under the laws of
the State of Delaware ("RSMC"), having its principal place of business in
Wilmington, Delaware.
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company and
offers for public sale distinct series of shares of beneficial interest, each
corresponding to a distinct portfolio ("Portfolio");
WHEREAS, each share of a Portfolio represents an undivided interest in the
assets, subject to the liabilities, allocated to that Portfolio and each
Portfolio has a separate investment objective and policies;
WHEREAS, the Fund desires to avail itself of the services of RSMC to serve
as the Fund's transfer agent; and
WHEREAS, RSMC is willing to furnish such services to the Fund with respect
to each of the Portfolios listed in Schedule A to this Agreement on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the Fund and RSMC agree as follows:
1. APPOINTMENTS. The Fund hereby appoints RSMC as transfer agent, registrar
and dividend disbursing agent for the shares of common stock (the "Shares")
of the Fund and as servicing agent in connection with the disbursements of
dividends and distributions and as shareholders' servicing agent for the
Fund, each such appointment to take effect at the close of business on
December 31, 1992, and RSMC shall act as such and perform its obligations
thereof upon the terms and conditions hereafter set forth and in accordance
with the principles of principal and agent enunciated by the common law.
2. DOCUMENTS. The Fund has furnished RSMC with copies of the Fund's
Declaration of Trust, By-Laws, Management Agreement, Custodian Agreement,
Distribution Agreement, Accounting Services Agreement, most recent
Registration Statement on Form N-1A, current Prospectus and Statement of
Additional Information (the "SAI"), all forms relating to any plan, program
or service offered by the Fund and a certified copy of the resolution of its
Board of Trustees (the"Trustees") approving RSMC's appointment hereunder and
identifying and containing the signatures of the Fund's officers authorized
to issue Oral Instructions and to sign Written Instructions, as hereinafter
defined, on behalf of the Portfolio and to execute stock certificates
representing Shares. Subject to the provisions of Section 21 hereof, the
Fund shall furnish promptly to RSMC a copy of any amendment or supplement to
the above-listed documents. The Fund shall furnish to RSMC any additional
documents necessary for it to perform its functions hereunder.
<PAGE>
3. DEFINITIONS.
(a) Authorized Person. As used in this Agreement, the term "Authorized
Person" means any officer of the Fund and any other person, whether or not
any such person is an officer or employee of the Fund, duly authorized by
the Trustees of the Fund to give Oral and Written Instructions on behalf of
the Portfolio and certified by the Secretary or Assistant Secretary of the
Fund or any amendment thereto as may be received by RSMC from time to time.
(b) Oral Instructions. As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by RSMC from an
Authorized Person or from a person reasonably believed by RSMC to be an
Authorized Person. The Fund agrees to deliver to RSMC, at the time and in
the manner specified in Section 4(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(c) Written Instructions. As used in this Agreement, the term "Written
Instructions" means written instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device, and received by RSMC and
signed by an Authorized Person.
4. INSTRUCTIONS CONSISTENT WITH DECLARATION OF TRUST, ETC..
(a) Unless otherwise provided in this Agreement, RSMC shall act only upon
Oral or Written Instructions. Although RSMC may know of the provisions of
the Declaration of Trust and By-Laws of the Fund, RSMC may assume that any
Oral or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Declaration of Trust or By-Laws or
any vote, resolution or proceeding of the shareholders, or of the Trustees,
or of any committee thereof.
(b) RSMC shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by RSMC pursuant to this Agreement.
The Fund agrees to forward to RSMC Written Instructions confirming Oral
Instructions in such manner that the Written Instructions are received by
RSMC by the close of business of the same day that such Oral Instructions
are given to RSMC. The Fund agrees that the fact that such confirming
Written Instructions are not received by RSMC shall in no way affect the
validity of the transactions or enforceability of the transactions
authorized by such Oral Instructions. The Fund agrees that RSMC shall incur
no liability to the Fund in acting upon Oral Instructions given to RSMC
hereunder concerning such transactions, provided such instructions
reasonably appear to have been received from an Authorized Person.
5. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary Written
Instructions, RSMC is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from the
Distributor, as defined in the Distribution Agreement between the Fund and
Rodney Square Distributors, Inc. or a prospective shareholder for the
purchase of Shares and sufficient information to enable RSMC to establish a
shareholder account or to issue Shares to an existing shareholder account,
and after confirmation of receipt or crediting of Federal funds for such
order from RSMC's designated bank, RSMC shall issue and credit the account
of the investor or other record holder with Shares in the manner described
in the Prospectus. RSMC shall deposit all checks received from prospective
shareholders into an account on behalf of the Fund, and shall promptly
2
<PAGE>
transfer all Federal funds received from such checks to the Custodian, as
defined in the Custodian Agreement between the Fund and Wilmington Trust
Company. (References herein to "Custodian" shall also be construed to refer
to a "Sub-Custodian" if such appointment has been made.) If so directed by
the Distributor, the confirmation supplied to the shareholder to mark such
issuance will be accompanied by a Prospectus.
(b) Transfer of Shares; Uncertificated Securities. Where a shareholder does
not hold a certificate representing the number of Shares in its account and
does provide RSMC with instructions for the transfer of such Shares which
include a signature guaranteed by a commercial bank, trust company or member
firm of a national securities exchange and such other appropriate
documentation to permit a transfer, then RSMC shall register such Shares and
shall deliver them pursuant to instructions received from the transferor,
pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"), and the laws of the Commonwealth of Massachusetts
relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Portfolio issues stock
certificates, the following provisions will apply:
(i) The Fund will supply RSMC with a sufficient supply of stock
certificates representing Shares, in the form approved from time to time by
the Trustees of the Fund, and, from time to time, shall replenish such
supply upon request of RSMC. Such stock certificates shall be properly
signed, manually or by facsimile signature, by the duly authorized officers
of the Fund, and shall bear the corporate seal or facsimile thereof of the
Fund, and notwithstanding the death, resignation or removal of any officer
of the Fund, such executed certificates bearing the manual or facsimile
signature of such officer shall remain valid and may be issued to
shareholders until RSMC is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate
representing Shares, no new certificate shall be issued in lieu thereof,
unless there shall first have been furnished an appropriate bond of
indemnity issued by the surety company approved by RSMC.
(iii) Upon receipt of signed stock certificates, which shall be in
proper form for transfer, and upon cancellation or destruction thereof, RSMC
shall countersign, register and issue new certificates for the same number
of Shares and shall deliver them pursuant to instructions received from the
transferor, the rules and regulations of the SEC, and the laws of the
Commonwealth of Massachusetts relating to the transfer of shares of common
stock.
(iv) Upon receipt of the stock certificates, which shall be in proper
form for transfer, together with the shareholder's instructions to hold such
stock certificates for safekeeping, RSMC shall reduce such Shares to
uncertificated status, while retaining the appropriate registration in the
name of the shareholder upon the transfer books.
(v) Upon receipt of written instructions from a shareholder of
uncertificated securities for a certificate in the number of shares in its
account, RSMC will issue such stock certificates and deliver them to the
shareholder.
3
<PAGE>
(d) Redemption of Shares. Upon receipt of a redemption order from the
Distributor or a shareholder, RSMC shall redeem the number of Shares
indicated thereon from the redeeming shareholder's account and receive from
the Fund's Custodian and disburse pursuant to the redeeming shareholder's
instructions the redemption proceeds therefor, or arrange for direct payment
of redemption proceeds by the Custodian to the redeeming shareholder or as
instructed by the shareholder, in accordance with such procedures and
controls as are mutually agreed upon from time to time by and among the
Fund, RSMC and the Fund's Custodian.
6. AUTHORIZED ISSUED AND OUTSTANDING SHARES. The Fund agrees to notify RSMC
promptly of any change in the number of authorized Shares and of any change
in the number of Shares registered under the Securities Act of 1933, as
amended or termination of the Fund's declaration under Rule 24f-2 of the
1940 Act. The Fund has advised RSMC, as of the date hereof, of the number
of Shares (i) held in any redemption or repurchase account, and (ii)
registered under the Securities Act of 1933, as amended, which are unsold.
In the event that the Fund shall declare a stock dividend or a stock split,
the Fund shall deliver to RSMC a certificate, upon which RSMC shall be
entitled to rely for all purposes, certifying (i) the number of Shares
involved, (ii) that all appropriate corporate action has been taken, and
(iii) that any amendment to the Declaration of Trust of the Fund which may
be required has been filed and is effective. Such certificate shall be
accompanied by an opinion of counsel to the Fund relating to the legal
adequacy and effect of the transaction.
7. DIVIDENDS AND DISTRIBUTIONS. The Fund shall furnish RSMC with appropriate
evidence of action by the Fund's Trustees authorizing the declaration and
payment of dividends and distributions as described in the Prospectus.
After deducting any amount required to be withheld by any applicable tax
laws, rules and regulations or other applicable laws, rules and regulations,
RSMC shall in accordance with the instructions in proper form from a
shareholder and the provisions of the Fund's Declaration of Trust and
Prospectus, issue and credit the account of the shareholder with Shares, or,
if the shareholder so elects, pay such dividends or distributions in cash to
the shareholders in the manner described in the Prospectus. In lieu of
receiving from the Fund's Custodian and paying to shareholders cash
dividends or distributions, RSMC may arrange for the direct payment of cash
dividends and distributions to shareholders by the Custodian, in accordance
with such procedures and controls as are mutually agreed upon from time to
time by and among the Fund, RSMC and the Fund's Custodian.
RSMC shall prepare, file with the Internal Revenue Service and other
appropriate taxing authorities, and address and mail to shareholders such
returns and information relating to dividends and distributions paid by the
Fund as are required to be so prepared, filed and mailed by applicable laws,
rules and regulations, or such substitute form of notice as may from time to
time be permitted or required by the Internal Revenue Service. On behalf of
the Portfolio, RSMC shall mail certain requests for shareholders'
certifications under penalties of perjury and pay on a timely basis to the
appropriate Federal authorities any taxes to be withheld on dividends and
distributions paid by the Portfolio, all as required by applicable Federal
tax laws and regulation.
In accordance with the Prospectus, resolutions of the Fund's Trustees that
are not inconsistent with this Agreement and are provided to RSMC from time
to time, and such procedures and controls as are mutually agreed upon from
4
<PAGE>
time to time by and among the Fund, RSMC and the Fund's Custodian, RSMC
shall (a) arrange for issuance of Shares obtained through transfers of funds
from shareholders' accounts at financial institutions; (b) arrange for the
exchange of Shares for Shares of other Portfolios of the Fund, or of shares
of other eligible Funds in the Rodney Square Complex, when permitted by the
Prospectus.
8. COMMUNICATIONS WITH SHAREHOLDERS.
(a) Communications to Shareholders. RSMC will address and mail all
communications by the Portfolio to its shareholders, including reports to
shareholders, confirmations of purchases and sales of Shares, monthly
statements, dividend and distribution notices and proxy material for its
meetings of shareholders. RSMC will receive and tabulate the proxy cards
for the meetings of the shareholders of the Portfolio.
(b) Correspondence. RSMC will answer such correspondence from shareholders,
securities brokers and others relating to its duties hereunder and such
other correspondence as may from time to time be mutually agreed upon
between RSMC and the Fund.
9. SERVICES TO BE PERFORMED. RSMC shall be responsible for administering
and/or performing transfer agent functions, for acting as service agent in
connection with dividend and distribution functions and for performing
shareholder account administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with
the Fund's custodian bank in connection with shareholder redemption by
check) of the Fund's Shares as set forth in Schedule B. The details of the
operating standards and procedures to be followed shall be determined from
time to time by agreement between RSMC and the Fund and may be expressed in
written schedules which shall constitute attachments to this Agreement.
10.RECORD KEEPING AND OTHER INFORMATION.
(a) RSMC shall maintain records of the accounts for each Shareholder showing
the items listed in Schedule C.
(b) RSMC shall create and maintain all necessary records in accordance with
all applicable laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act and the rules thereunder,
as the same may be amended from time to time, and those records pertaining
to the various functions performed by it hereunder. All records shall be
the property of the Fund at all times and shall be available for inspection
and use by the Fund. Where applicable, such records shall be maintained by
RSMC for the periods and in the places required by Rule 31a-2 under the 1940
Act.
11.AUDIT, INSPECTION AND VISITATION. RSMC shall make available during regular
business hours all records and other data created and maintained pursuant to
this Agreement for reasonable audit and inspection by the Fund or any person
retained by the Fund. Upon reasonable notice by the Fund, RSMC shall make
available during regular business hours its facilities and premises employed
in connection with its performance of this Agreement for reasonable
visitation by the Fund, or any person retained by the Fund.
5
<PAGE>
12.COMPENSATION. Compensation for the transfer agent services and duties
performed pursuant to this Agreement will be paid by the Fund's manager
pursuant to a separate Management Agreement. Certain other fees due and
expenses incurred pursuant to this Agreement are payable by the Fund or the
shareholder on whose behalf the service is performed and are provided in
Schedule D hereto.
The Fund shall reimburse RSMC for all reasonable out-of-pocket expenses
incurred by RSMC or its agents in the performance of its obligations
hereunder. Such reimbursement for expenses incurred in any calendar month
shall be made on or before the tenth day of the next succeeding month.
The term "out-of-pocket expenses" shall mean the following expenses incurred
by RSMC in the performance of its obligations hereunder: the cost of
stationery and forms (including but not limited to checks, proxy cards, and
envelopes), the cost of postage, the cost of insertion of non-standard size
materials in mailing envelopes and other special mailing preparation by
outside firms, the cost of first-class mailing insurance, the cost of
external electronic communications as approved by the Trustees (to include
telephone and telegraph equipment and an allocable portion of the cost of
personnel responsible for the maintenance of such equipment), toll charges,
data communications equipment and line charges and the cost of microfilming
of shareholder records (including both the cost of storage as well as
charges for access to such records). If RSMC shall undertake the
responsibility for microfilming shareholder records, it may be separately
compensated therefor in an amount agreed upon by the principal financial
officer of the Fund and RSMC, such amount not to exceed the amount which
would be paid to an outside firm for providing such microfilming services.
13.USE OF RSMC'S NAME. The Fund shall not use the name of RSMC in any
Prospectus, SAI, sales literature or other material relating to the Fund in
a manner not approved prior thereto, provided, however, that RSMC shall
approve all uses of its name which merely refer in accurate terms to its
appointments hereunder or which are required by the SEC or a state
securities commission and, provided further, that in no event shall such
approval be unreasonably withheld.
14.USE OF FUND'S NAME. RSMC shall not use the name of the Fund or the
Portfolio of the Fund or material relating to the Fund or the Portfolio on
any checks, bank drafts, bank statements or forms for other than internal
use in a manner not approved prior thereto, provided, however, that the Fund
shall approve all uses of its name which merely refer in accurate terms to
the appointment of RSMC hereunder or which are required by the SEC or a
state securities commission, and, provided, further, that in no event shall
such approval be unreasonably withheld.
15.SECURITY. RSMC represents and warrants that, to the best of its knowledge,
the various procedures and systems which RSMC has implemented with regard to
safeguarding from loss or damage attributable to fire, theft or any other
cause (including provision for twenty-four hours a day restricted access)
the Fund's blank checks, records and other data and RSMC's records, data,
equipment, facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes
therein from time to time as in its judgment are required for the secure
performance of its obligations hereunder. The parties shall review such
systems and procedures on a periodic basis.
6
<PAGE>
16.INSURANCE. RSMC shall notify the Fund should any of its insurance coverage
be materially changed. Such notification shall include the date of change
and the reason or reasons therefor. RSMC shall notify the Fund of any
material claims against it, whether or not they may be covered by insurance
and shall notify the Fund from time to time as may be appropriate of the
total outstanding claims made by RSMC under its insurance coverage.
17.ASSIGNMENT OF DUTIES TO OTHERS. Neither this Agreement nor any rights or
obligations hereunder may be assigned by RSMC without the written consent of
the Fund. RSMC may, however, at any time or times in its discretion appoint
(and may at any time remove) any other bank or trust company, which is
itself qualified under the Securities Exchange Act of 1934 to act as a
transfer agent, as its agent to carry out such of the services to be
performed under this agreement as RSMC may from time to time direct;
provided, however, that the appointment of any agent shall not relieve RSMC
of any of its responsibilities or liabilities hereunder.
18.INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless RSMC and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
including, without limitation, liabilities arising under the Securities Act
of 1933, the Securities Exchange Act of 1934 and any state and foreign
securities and blue sky laws, and amendments thereto (the "Securities
Laws"), and expenses, including without limitation reasonable attorneys'
fees and disbursements arising directly or indirectly from any action or
omission to act which RSMC takes (i) at the request of or on the direction
of or in reliance on the advice of the Fund or (ii) upon Oral or Written
Instructions. Neither RSMC nor any of its nominees shall be indemnified
against any liability (or any expenses incident to such liability) arising
out of RSMC's or its nominees' own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations under this
Agreement.
(b) RSMC agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, claims and liabilities arising from RSMC's
obligations pursuant to this Agreement (including, without limitation,
liabilities arising under the Securities Laws, and any state and foreign
securities and blue sky laws, and amendments thereto) and expenses,
including (without limitation) reasonable attorneys' fees and disbursements
arising directly or indirectly out of RSMC's or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
(c) In order that the indemnification provisions contained in this Section
18 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify
it except with the other party's prior written consent.
7
<PAGE>
19.RESPONSIBILITY OF RSMC. RSMC shall be under no duty to take any action on
behalf of the Fund except as specifically set forth herein or as may be
specifically agreed to by RSMC in writing. RSMC shall be obligated to
exercise due care and diligence in the performance of its duties hereunder,
to act in good faith and to use its best efforts in performing services
provided for under this Agreement. RSMC shall be liable for any damages
arising out of or in connection with RSMC's performance of or omission or
failure to perform its duties under this Agreement to the extent such
damages arise out of RSMC's negligence, reckless disregard of its duties,
bad faith or willful misfeasance.
Without limiting the generality of the foregoing or of any other provision
of this Agreement, RSMC, in connection with its duties under this Agreement,
shall not be under any duty or obligation to inquire into and shall not be
liable for (a) the validity or invalidity or authority or lack thereof of
any Oral or Written Instruction, notice or other instrument which conforms
to the applicable requirements of this Agreement, and which RSMC reasonably
believes to be genuine; or (b) subject to the provisions of Section 20,
delays or errors or loss of data occurring by reason of circumstances beyond
RSMC's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
20.ACTS OF GOD, ETC. RSMC shall not be liable for delays or errors occurring
by reason of circumstances beyond its control, including but not limited to
acts of civil or military authority, national emergencies, labor
difficulties, fire, flood or catastrophe, acts of God, insurrection, war,
riots, or failure of the mails, transportation, communication or power
supply. In the event of equipment breakdowns beyond its control, RSMC
shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but shall have no liability with respect
thereto. RSMC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provision for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
21.AMENDMENTS. RSMC and the Fund shall regularly consult with each other
regarding RSMC's performance of its obligations and its compensation
hereunder. In connection therewith, the Fund shall submit to RSMC at a
reasonable time in advance of filing with the SEC copies of any amended or
supplemented registration statements (including exhibits) under the
Securities Act of 1933, as amended, and the 1940 Act, and a reasonable time
in advance of their proposed use, copies of any amended or supplemented
forms relating to any plan, program or service offered by the Fund. Any
change in such material which would require any change in RSMC's obligations
hereunder shall be subject to RSMC's approval, which shall not be
unreasonably withheld. In the event that such change materially increases
the cost to RSMC of performing its obligations hereunder, RSMC shall be
entitled to receive reasonable compensation therefor.
22.DURATION, TERMINATION, ETC. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by
written instrument which shall make specific reference to this Agreement and
which shall be signed by the party against which enforcement of such change,
waiver, discharge or termination is sought.
8
<PAGE>
This Agreement shall become effective at the close of business on December
31,1992, and shall continue in effect for one year from the effective date,
and thereafter as the parties may mutually agree; provided, however, that
this Agreement may be terminated at any time by six months' written notice
given by RSMC to the Fund or six months' written notice given by the Fund to
RSMC; and provided further that this Agreement may be terminated immediately
at any time for cause either by the Fund or by RSMC in the event that such
cause remains unremedied for a period of time not to exceed ninety days
after receipt of written specification of such cause. Any such termination
shall not affect the rights and obligations of the parties under Section 18
hereof.
Upon the termination hereof, the Fund shall reimburse RSMC for any out-of-
pocket expenses reasonably incurred by RSMC during the period prior to the
date of such termination. In the event that the Fund designates a successor
to any of RSMC's obligations hereunder, RSMC shall, at the expense and
direction of the Fund, transfer to such successor a certified list of the
shareholders of the Fund (with name, address, and, if provided, tax
identification or Social Security number), a complete record of the account
of each shareholder, and all other relevant books, records and other data
established or maintained by RSMC hereunder. RSMC shall be liable for any
losses sustained by the Fund as a result of RSMC's failure to accurately and
promptly provide these materials.
23.REGISTRATION AS A TRANSFER AGENT. RSMC represents that it is currently
registered with the appropriate Federal agency for the registration of
transfer agents, and that it will remain so registered for the duration of
this Agreement. RSMC agrees that it will promptly notify the Fund in the
event of any material change in its status as a registered transfer agent.
Should RSMC fail to be registered with the Federal Deposit Insurance
Corporation or any successor regulatory authority as a transfer agent at any
time during this Agreement, the Fund may, on written notice to RSMC,
immediately terminate this Agreement.
24.NOTICE. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed, postage prepaid, to the other party to this
Agreement at its principal place of business.
25.SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
26.GOVERNING LAW. To the extent that state law has not been preempted by the
provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of
Delaware.
27.SHAREHOLDER LIABILITY. RSMC is hereby expressly put on notice of the
limitation of shareholder liability as set forth in the Declaration of Trust
of the Fund and agrees that obligations assumed by the Fund pursuant to this
Agreement shall be limited in all cases to the Fund and its assets. RSMC
agrees that it shall not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Fund, nor from the
Trustees or any individual Trustee of the Fund.
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<PAGE>
28.MISCELLANEOUS. Both parties agree to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be
executed simultaneously in two counterparts, each of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of the
day and year first above written.
THE RODNEY SQUARE FUND
By: /s/ Peter J. Succoso
----------------------------
Peter J. Succoso, President
RODNEY SQUARE MANAGEMENT CORPORATION
By: /s/ Martin L. Klopping
-----------------------------
Martin L. Klopping, President
Acknowledgement as to the compensation
of Rodney Square Management Corporation,
as Transfer Agent:
RODNEY SQUARE MANAGEMENT
CORPORATION, as Manager
By: /s/ Martin L. Klopping
--------------------------
Martin L. Klopping, President
Date: December 31, 1992
------------------------
10
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SCHEDULE A
THE RODNEY SQUARE FUND
PORTFOLIO LISTING
Money Market Portfolio
U.S. Government Portfolio
A-1
<PAGE>
SCHEDULE B
THE RODNEY SQUARE FUND
SERVICES TO BE PERFORMED
Rodney Square Management Corporation ("RSMC") will perform the following
functions as transfer agent on an ongoing basis with respect to the Portfolio:
(a) furnish state-by-state registration reports;
(b) calculate sales load or compensation payment and provide such information;
(c) calculate dealer commissions;
(d) provide toll-free lines for direct shareholder use, plus customer liaison
staff with on-line inquiry capacity;
(e) mail duplicate confirmations to dealers of their clients' activity, whether
executed through the dealer or directly with RSMC;
(f) provide detail for underwriter or broker confirmations and other
participating dealer shareholder accounting, in accordance with such
procedures as may be agreed upon between the Fund and RSMC;
(g) provide shareholder lists and statistical information concerning accounts
of the Portfolio to the Fund; and,
(h) provide timely notification of Portfolio activity and such other
information as may be agreed upon from time to time between RSMC and the
Portfolio or the Custodian, to the Fund or the Custodian.
B-1
<PAGE>
SCHEDULE C
THE RODNEY SQUARE FUND
SHAREHOLDER RECORDS
Rodney Square Management Corporation ("RSMC") shall maintain records of the
accounts for each shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security
number;
(b) number of Shares held and number of Shares for which certificates, if any,
have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each shareholder, including
dividends and distributions paid and the date and price for all
transactions on a shareholder's account;
(d) any stop or restraining order placed against a shareholder's account;
(e) any correspondence relating to the current maintenance of a shareholder's
account;
(f) information with respect to withholdings; and,
(g) any information required in order for RSMC to perform any calculations
contemplated or required by this Agreement.
C-1
<PAGE>
SCHEDULE D
THE RODNEY SQUARE FUND
FEE SCHEDULE
FEES
Monthly return of checks $ 0.44 per check
Non-return of check 0.10 per check
Out of pocket expenses shall be reimbursed by the Fund to Rodney Square
Management Corporation ("RSMC") or paid directly by the Fund. Such
expenses include but are not limited to the following:
a. Toll-free lines (if required)
b. Forms, envelopes, checks, checkbooks
c. Postage (bulk, pre-sort, first-class at current prevailing rates)
d. Hardware/phone lines for remote terminal(s) (if required)
e. Microfiche/Microfilm
f. Wire fee for receipt or disbursement - $7.50 per wire
g. Mailing fee - approximately $30.00 per 1,000 items
h. Cost of proxy solicitation, mailing and tabulation (if required)
i. Certificate issuance - $2.00 per certificate
j. Development/programming costs/special projects - time and material
NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") FUND/SERV CHARGES (NON-MONEY
MARKET SERIES)
Participation Fee: $50.00 per month
CPU Access Fee: $40.00 per month
Transaction Fee: $ 0.50 each
NSCC will deduct its monthly fee on the 15th of each month from RSMC's cash
settlement that day. These charges will be included on the next bill as
out-of-pocket expenses.
ADDITIONAL EXPENSES (PAID BY SHAREHOLDER):
Direct IRA/Keogh processing $10.00 per account per annum
$ 5.00 new account set-up fee
$ 2.50 per distribution
$10.00 per transfer out
Account transcripts most recent
seven years $35.00
Account transcripts beyond
seven years $50.00
Checkwriting charges
Stop payments $ 7.50 per stop
Non-sufficient funds $12.50 per return
Check copy $ 2.00 per copy
D-1
<PAGE>
PAYMENT
The above will be billed within the first five (5) business days of each
month and will be paid by wire within five (5) business days of receipt.
D-2
Exhibit 10(b)
--------------------------
KIRKPATRICK & LOCKHART LLP
--------------------------
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
ARTHUR J. BROWN
(202) 778-9046
[email protected]
January 24, 1996
The Rodney Square Fund
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Dear Sir or Madam:
The Rodney Square Fund (the "Fund") is a business trust established under
Massachusetts law by Declaration of Trust, dated February 16, 1982, as amended
and restated as of October 1, 1985. We understand that the Fund is about to
file Post-Effective Amendment No. 21 to its Registration Statement on Form N-lA
for the purpose of registering additional shares of beneficial interest in the
Fund under the Securities Act of 1933, as amended ("1933 Act"), pursuant to
Section 24(e)(1) of the Investment Company Act of 1940, as amended (" 1940
Act").
We have, as counsel, participated in various business and other proceedings
relating to the Fund. We have examined copies, either certified or otherwise
proved to be genuine, of its Declaration of Trust, as amended, and By-Laws, as
now in effect, the minutes of meetings of its board of trustees and other
documents relating to its organization and operation, and we are generally
familiar with its affairs. Based upon the foregoing, it is our opinion that the
shares of beneficial interest in the Fund currently being registered pursuant to
Section 24(e)(1) as reflected in Post-Effective Amendment No. 21, when sold in
accordance with the Fund's Declaration of Trust, as amended, and By-Laws, will
be legally issued, fully paid and non-assessable, subject to compliance with the
1933 Act, the 1940 Act and applicable state laws regulating the offer and sale
of securities.
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund. The
Declaration of Trust states that creditors of, contractors with and claimants
against the Fund shall look only to the assets of the Fund for payment. It also
states that every note, bond, contract, or other undertaking issued by or on
behalf of the Fund or the trustees relating to the Fund shall include a
recitation limiting the obligation represented thereby to the Fund and
its DC-243582.1
BOSTON - HARRISBURG - MIAMI - NEW YORK - PITTSBURGH - WASHINGTON
<PAGE>
- --------------------------
KIRKPATRICK & LOCKHART LLP
- --------------------------
The Rodney Square Fund
January 24, 1996
Page Two
assets. The Declaration of Trust further provides: (i) for indemnification from
Fund assets, as appropriate, for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund by virtue of ownership of
shares of the Fund; and (ii) for the Fund to assume the defense of any claim
against the shareholder for any act or obligation of the Fund. Thus, the risk
of a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to meet
its obligations.
We hereby consent to this opinion accompanying Post-Effective Amendment No.
21 which you are about to file with the Securities and Exchange Commission. We
also consent to the reference to our firm under the caption "Other Information -
Legal Counsel" in the statement of additional information incorporated by
reference into the prospectus of the Fund, filed as part of the Fund's
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur Brown
------------------------
Arthur J. Brown
Exhibit 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment Number 21 to Registration
Statement Number 2-76333 (Form N-1A) of our report dated October 26, 1995, on
the financial statements and financial highlights of The Rodney Square Fund for
the year ended September 30, 1995, included in the 1995 Annual Report to
Shareholders.
Baltimore, Maryland
January 23, 1996
Exhibit 15(a)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
OF THE RODNEY SQUARE FUND
WITH RESPECT TO THE U.S. GOVERNMENT PORTFOLIO
WHEREAS, The Rodney Square Fund (the "Fund") operates as an open-end
investment company registered under the Investment Company Act of 1940 (the
"Act");
WHEREAS, the Fund's shares of beneficial interest, are divided into
separate series ("portfolios");
WHEREAS, at the present time, the Fund has two portfolios, the Money Market
Portfolio and the U.S. Government Portfolio;
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act with respect to the U.S. Government Portfolio ("Portfolio");
WHEREAS, the Fund has entered into a Distribution Agreement pursuant to
which the Fund has employed a distributor of the securities of the Fund (the
"Distributor") during the continuous offering of shares of its portfolios;
NOW THEREFORE, the Fund hereby adopts this Plan of Distribution (the
"Plan") on behalf of the Portfolio in accordance with Rule 12b-1 under the Act.
1. The Fund shall pay the Distributor, as reimbursement for the expenses
incurred with respect to the Portfolio by the Distributor pursuant to the
Distribution Agreement ("Distribution Expenses"), promptly after the last day of
each month a fee not greater than the Distribution Expenses incurred by the
Distributor during that month and any prior month of the same fiscal year to the
extent that Distribution Expenses in such prior month had not previously been
paid to the Distributor because of the "provided" clause of this paragraph;
provided that payment shall be made for any month only to the extent that such
payment shall not exceed: (i) on an annualized basis, 0.20% of the Fund's
average annual net assets; and (ii) limitations set from time to time by the
Board of Trustees.
2. For purposes hereof, "Distribution Expenses" shall mean all expenses
which the Distributor bears with respect to the Portfolio under the Distribution
Agreement and consists of the amounts paid and expenses incurred by the
Distributor for distribution activities encompassed by Rule 12b-1, such as
public relations services, telephone services, sales presentations, media
charges, preparation, printing and mailing of advertising and sales literature,
data processing necessary to support a distribution effort, printing and mailing
prospectuses, and distribution and shareholder servicing activities of
broker/dealers and other financial institutions. Such expenses may include
fairly allocable internal expenses of the Distributor and payments to third
parties.
3. Nothing in this Plan shall operate or be construed to limit the extent
to which the Fund's manager (the "Manager") or any other person, other than the
Fund, may incur costs and bear expenses associated with the distribution of
securities of which the Portfolio is the issuer.
<PAGE>
4. It is contemplated by the Plan that the Manager may from time to time
make payments to third parties out of its management fee, not to exceed the
amount of that fee, including payments of fees for shareholder servicing and
transfer agency functions. If such payments are deemed to be indirect financing
of an activity primarily intended to result in the sale of shares issued by the
Portfolio within the context of Rule 12b-1 under the Act, such payments shall be
authorized by this Plan.
5. (a) This Plan shall not take effect until it has been approved by votes
of the majority of both (i) the Board of Trustees of the Fund and (ii) the
Trustees who are not interested persons of the Fund within the meaning of
Section 2(a)(19) of the Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
(b) Any limitations set by the Board of Trustees on the amount of
Distribution Expenses that are reimbursable shall be approved by vote of the
majority of both the Board of Trustees of the Fund and the Independent Trustees.
6. This Plan shall remain in effect for one year from the date of its
effectiveness and may continue in effect thereafter if it is approved at least
annually by a vote of the Board of Trustees of the Fund, and of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on the
Plan.
7. This Plan may be terminated at any time by a majority vote of the
Independent Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio. Upon such termination or upon termination of the
Distribution Agreement, any Distribution Expenses incurred by the Distributor to
the date of termination shall be presented to the Fund for payment subject to
the expense limitation in paragraph (1) hereof. Any Distribution Expenses
incurred by the Distributor prior to the effective date of termination shall be
paid by the Fund in accordance with the Plan except that any expenses not
properly payable by the Fund by fiscal year-end shall expire at fiscal year-end.
The Fund shall have no obligation to make any other payment to the Distributor
under this Plan or the Distribution Agreement.
8. The Distributor shall provide, on at least a quarterly basis, a written
report to the Fund's Board of Trustees of the Distribution Expenses incurred by
the Distributor, the amounts paid on behalf of the Portfolio by the Fund during
the most recently completed quarter pursuant to this Plan or any related
agreements and the purposes for which such expenditures were made.
9. While this Plan is in effect, the selection and nomination of those
Trustees who are not interested persons of the Fund within the meaning of
Section 2(a)(19) of the Act shall be committed to the discretion of the Trustees
then in office who are not interested persons of the Fund.
10. All material amendments to this Plan must be approved by a majority
vote of the Board of Trustees of the Fund and of the Independent Trustees, cast
in person at a meeting called for the purpose of voting thereon. In addition,
this Plan may not be amended to increase materially the amounts authorized to be
spent in paragraphs (1) and (7) hereof without approval of a majority of the
outstanding shares of the Portfolio.
Dated: January 1, 1993
2
<PAGE>
Exhibit 15(b)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
OF THE RODNEY SQUARE FUND
WITH RESPECT TO THE MONEY MARKET PORTFOLIO
WHEREAS, The Rodney Square Fund (the "Fund") operates as an open-end
investment company registered under the Investment Company Act of 1940 (the
"Act");
WHEREAS, the Fund's shares of beneficial interest, are divided into
separate series ("portfolios");
WHEREAS, at the present time, the Fund has two portfolios, the Money Market
Portfolio and the U.S. Government Portfolio;
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to Rule
12b-1 under the Act with respect to the Money Market Portfolio ("Portfolio");
WHEREAS, the Fund has entered into a Distribution Agreement pursuant to
which the Fund has employed a distributor of the securities of the Fund (the
"Distributor") during the continuous offering of shares of its portfolios;
NOW THEREFORE, the Fund hereby adopts this Plan of Distribution (the
"Plan") on behalf of the Portfolio in accordance with Rule 12b-1 under the Act.
1. The Fund shall pay the Distributor, as reimbursement for the expenses
incurred with respect to the Portfolio by the Distributor pursuant to the
Distribution Agreement ("Distribution Expenses"), promptly after the last day of
each month a fee not greater than the Distribution Expenses incurred by the
Distributor during that month and any prior month of the same fiscal year to the
extent that Distribution Expenses in such prior month had not previously been
paid to the Distributor because of the "provided" clause of this paragraph;
provided that payment shall be made for any month only to the extent that such
payment shall not exceed: (i) on an annualized basis, 0.20% of the Fund's
average annual net assets; and (ii) limitations set from time to time by the
Board of Trustees.
2. For purposes hereof, "Distribution Expenses" shall mean all expenses
which the Distributor bears with respect to the Portfolio under the Distribution
Agreement and consists of the amounts paid and expenses incurred by the
Distributor for distribution activities encompassed by Rule 12b-1, such as
public relations services, telephone services, sales presentations, media
charges, preparation, printing and mailing of advertising and sales literature,
data processing necessary to support a distribution effort, printing and mailing
prospectuses, and distribution and shareholder servicing activities of
broker/dealers and other financial institutions. Such expenses may include
fairly allocable internal expenses of the Distributor and payments to third
parties.
3. Nothing in this Plan shall operate or be construed to limit the extent
to which the Fund's manager (the "Manager") or any other person, other than the
Fund, may incur costs and bear expenses associated with the distribution of
securities of which the Portfolio is the issuer.
<PAGE>
4. It is contemplated by the Plan that the Manager may from time to time
make payments to third parties out of its management fee, not to exceed the
amount of that fee, including payments of fees for shareholder servicing and
transfer agency functions. If such payments are deemed to be indirect financing
of an activity primarily intended to result in the sale of shares issued by the
Portfolio within the context of Rule 12b-1 under the Act, such payments shall be
authorized by this Plan.
5. (a) This Plan shall not take effect until it has been approved by votes
of the majority of both (i) the Board of Trustees of the Fund and (ii) the
Trustees who are not interested persons of the Fund within the meaning of
Section 2(a)(19) of the Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan.
(b) Any limitations set by the Board of Trustees on the amount of
Distribution Expenses that are reimbursable shall be approved by vote of the
majority of both the Board of Trustees of the Fund and the Independent Trustees.
6. This Plan shall remain in effect for one year from the date of its
effectiveness and may continue in effect thereafter if it is approved at least
annually by a vote of the Board of Trustees of the Fund, and of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on the
Plan.
7. This Plan may be terminated at any time by a majority vote of the
Independent Trustees or by vote of a majority of the outstanding voting
securities of the Portfolio. Upon such termination or upon termination of the
Distribution Agreement, any Distribution Expenses incurred by the Distributor to
the date of termination shall be presented to the Fund for payment subject to
the expense limitation in paragraph (1) hereof. Any Distribution Expenses
incurred by the Distributor prior to the effective date of termination shall be
paid by the Fund in accordance with the Plan except that any expenses not
properly payable by the Fund by fiscal year-end shall expire at fiscal year-end.
The Fund shall have no obligation to make any other payment to the Distributor
under this Plan or the Distribution Agreement.
8. The Distributor shall provide, on at least a quarterly basis, a written
report to the Fund's Board of Trustees of the Distribution Expenses incurred by
the Distributor, the amounts paid on behalf of the Portfolio by the Fund during
the most recently completed quarter pursuant to this Plan or any related
agreements and the purposes for which such expenditures were made.
9. While this Plan is in effect, the selection and nomination of those
Trustees who are not interested persons of the Fund within the meaning of
Section 2(a)(19) of the Act shall be committed to the discretion of the Trustees
then in office who are not interested persons of the Fund.
10. All material amendments to this Plan must be approved by a majority
vote of the Board of Trustees of the Fund and of the Independent Trustees, cast
in person at a meeting called for the purpose of voting thereon. In addition,
this Plan may not be amended to increase materially the amounts authorized to be
spent in paragraphs (1) and (7) hereof without approval of a majority of the
outstanding shares of the Portfolio.
Dated: January 1, 1993
2
<PAGE>
[ARTICLE] 6
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RODNEY SQUARE FUND'S ANNUAL REPORT DATED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT DATED
SEPTEMBER 30, 1995.
[/LEGEND]
[RESTATED]
[CIK] 0000700844
[NAME] THE RODNEY SQUARE FUND
[SERIES]
[NUMBER] 1
[NAME] U.S. GOVERNMENT PORTFOLIO
[MULTIPLIER] 1000
[CURRENCY] U.S. DOLLARS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-START] OCT-01-1994
[PERIOD-END] SEP-30-1995
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 307,344
[INVESTMENTS-AT-VALUE] 307,344
[RECEIVABLES] 247
[ASSETS-OTHER] 6
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 307,597
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,501
[TOTAL-LIABILITIES] 1,501
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 306,094
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 2
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 306,096
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 20,633
[OTHER-INCOME] 0
[EXPENSES-NET] 1,967
[NET-INVESTMENT-INCOME] 18,666
[REALIZED-GAINS-CURRENT] (6)
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 18,660
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 18,666
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3,161,917
[NUMBER-OF-SHARES-REDEEMED] 3,192,886
[SHARES-REINVESTED] 305
[NET-CHANGE-IN-ASSETS] (30,670)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,672
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1,967
[AVERAGE-NET-ASSETS] 355,807
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .052
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (.052)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .55
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
[ARTICLE] 6
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
RODNEY SQUARE FUND'S ANNUAL REPORT DATED SEPTEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT DATED
SEPTEMBER 30, 1995.
[/LEGEND]
[CIK] 0000700844
[NAME] THE RODNEY SQUARE FUND
[SERIES]
[NUMBER] 2
[NAME] MONEY MARKET PORTFOLIO
[MULTIPLIER] 1000
[CURRENCY] U.S. DOLLARS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1995
[PERIOD-START] OCT-01-1994
[PERIOD-END] SEP-30-1995
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 753,077
[INVESTMENTS-AT-VALUE] 753,077
[RECEIVABLES] 1,938
[ASSETS-OTHER] 10
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 755,025
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,900
[TOTAL-LIABILITIES] 3,900
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 751,139
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (14)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 751,125
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 40,741
[OTHER-INCOME] 0
[EXPENSES-NET] 3,710
[NET-INVESTMENT-INCOME] 37,031
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 37,031
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 37,031
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 5,233,295
[NUMBER-OF-SHARES-REDEEMED] 5,090,626
[SHARES-REINVESTED] 1,621
[NET-CHANGE-IN-ASSETS] 144,290
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,241
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,710
[AVERAGE-NET-ASSETS] 689,569
[PER-SHARE-NAV-BEGIN] 1.00
[PER-SHARE-NII] .054
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (.054)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 1.00
[EXPENSE-RATIO] .54
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
