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 six-month period ended March 31, 1997.
INVESTMENT RESULTS*
The U.S. Government Portfolio paid shareholders dividends
totaling $0.024 per share during the six-month period, the Money
Market Portfolio paid dividends totaling $0.025 per share and The
Rodney Square Tax-Exempt Fund paid dividends totaling $0.015 per
share. Based on the Portfolios' net asset values of $1.00 per
share, these dividends represented annualized total returns of
4.99%, 5.08% and 2.95%, respectively.
ECONOMIC OVERVIEW
Economic activity during the first half of the Funds' fiscal
year was fairly robust. U.S. Gross Domestic Product (GDP) rose at
an annualized rate of 3.8% during the final quarter of 1996. Data
released thus far in 1997 suggests the economy is on track to
post another increase well in excess of 3.0%. Surprisingly,
despite above trend growth and tightness in the labor markets
(the unemployment rate decreasing to 5.2% in March), inflation
readings have remained benign. Consumer prices rose a smaller
than expected 0.1% in March, down from a 0.3% increase in
February. The more closely watched core rate, which excludes the
volatile food and energy components, also rose a smaller than
expected 0.2% in March matching February's 0.2% rise. For the
first three months of 1997, consumer prices rose at an annualized
1.8% versus 4.0% for the first quarter of 1996. On a year over
year basis, consumer prices are rising at a mild 2.8% with a core
rate of 2.5%.
Nonetheless, concerned that tight labor markets and continued
above trend growth would endanger future price stability, the
Federal Reserve (the "Fed") concluded its 15 month policy-change
hiatus. As telegraphed by Federal Reserve Chairman Alan Greenspan
in his testimony before Congress in February, the Federal Open
Market Committee (FOMC) raised the fed funds rate 25 basis
points, to 5.50% at its March 25 meeting. The FOMC's action was
".taken in light of persisting strength in demand, which is
progressively increasing the risk of inflationary imbalances in
the economy that would eventually undermine the long expansion."
The Fed's decision to slightly tighten monetary policy was a
preemptive effort to slow demand growth before price pressures
mount. It remains to be seen, however, whether the 25 basis point
move will be enough to slow an economy that seems to be gathering
momentum. Data released since the March FOMC meeting continues to
provide evidence of strong economic activity and suggests that
there may be more tightening on the horizon. Many economists
believe that at least one more 25 basis point increase in the fed
funds rate will be necessary, possibly as soon as the May FOMC
meeting.
Since Fed Chairman Greenspan's Senate testimony in February,
the market has traded poorly with interest rates climbing to
levels not seen since last summer. Rates moved about 40 basis
points higher across the yield curve with one year treasury bills
yields moving over 6.0% and bond yields climbing above 7.15%.
Unless we begin to see a marked deceleration in growth over the
near term, continued upward pressure on yields seems likely.
- -----------------------
*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 INSTITUITION,
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.
<PAGE>
INVESTMENT STRATEGY
Year end notwithstanding, interest rate volatility remained
low for much of the first half of the fiscal year, as would be
expected with the fed funds rate seemingly anchored at 5.25%. As
such, the dollar weighted average maturity (WAM) for each of the
portfolios of The Rodney Square Fund was generally in the upper
end of the range we feel is appropriate for our shareholder base.
Extended average maturities allowed the portfolios to lock in
higher yields for a longer period of time. During the reporting
period, the Money Market Portfolio and the U.S. Government
Portfolio were generally in the 50-60 day and 40-50 day weighted
average maturity range, respectively. The WAM of each of the
portfolios was in line with those of their respective peer groups
as identified by IBC's Money Fund Report (IBC).
The Rodney Square Tax-Exempt Fund, conversely, maintained a
WAM that was shorter than its IBC average over the reporting
period. The WAM of the Rodney Square Tax-Exempt Fund was
generally in the 30-40 day range, versus 40-50 days for its IBC
peer group. Strong demand for tax exempt securities, along with
relatively little new supply, continued to result in a widening
of the nominal spread between tax exempt and taxable security
yields. With the erosion in relative value, we did not believe
that we were being adequately compensated to extend the WAM of
the portfolio. Sacrificing little yield by remaining short, we
believed it was more prudent to stay liquid and extend the
average maturity if spreads reverted to more historical norms.
We are pleased to report that these strategies enabled each
of the portfolios to provide shareholders with competitive
returns over the first half of the fiscal year. It gives us
greater pleasure to report that each of the portfolios was
recognized as a top ten performer within its respective peer
group by IBC Financial Data for the ten year period ended
December 31, 1996.** This recognition provides evidence that we
are accomplishing our goal of providing shareholders with
consistent, competitive returns. Going forward, our goal remains
the same. Rest assured that we will continue strive to provide
shareholders with competitive returns, and capital stability with
ready access to your money.
We invite your comments and questions and we thank you for
your investment in the Funds. We look forward to reviewing our
investment outlooks and strategies with you in our next report to
shareholders.
Sincerely,
/S/ Martin L. Klopping
Martin L. Klopping
President
April 21, 1997
- ----------------------
** The Rodney Square Fund U.S. Government Portfolio ranked
7th out of 57 funds in the Government-only Funds Category. The
Rodney Square Money Market Portfolio ranked 7th out of 93
General Purpose funds in the General Purpose Funds Category.
The Rodney Square Tax-Exempt Fund ranked 10th out of 48 funds
in the Tax-free General Purpose Funds Category. 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.
<PAGE>
THE RODNEY SQUARE FUND/U.S GOVERNMENT PORTFOLIO
- -----------------------------------------------
INVESTMENTS/MARCH 31, 1997 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS - 53.9%
FEDERAL FARM CREDIT BANKS DISCOUNT NOTES - 14.7%
Federal Farm Credit Banks Notes, 5.22%, 04/01/97............ $ 6,000,000 $ 6,000,000
Federal Farm Credit Banks Notes, 5.22%, 04/03/97............ 8,075,000 8,072,658
Federal Farm Credit Banks Notes, 5.24%, 04/16/97............ 6,000,000 5,986,900
Federal Farm Credit Banks Notes, 5.55%, 05/08/97............ 5,000,000 4,971,479
Federal Farm Credit Banks Notes, 5.22%, 05/09/97............ 5,000,000 4,972,450
Federal Farm Credit Banks Notes, 5.47%, 06/05/97............ 6,000,000 5,940,742
Federal Farm Credit Banks Notes, 5.26%, 07/29/97............ 7,000,000 6,878,289
Federal Farm Credit Banks Notes, 5.20%, 09/11/97............ 6,000,000 5,858,734
-------------
48,681,252
-------------
FEDERAL FARM CREDIT BANKS NOTES - 6.1%
Federal Farm Credit Banks Notes, 5.60%, 06/03/97............ 10,000,000 9,997,584
Federal Farm Credit Banks Notes, 5.93%, 07/01/97............ 5,310,000 5,317,232
Federal Farm Credit Banks Notes, 5.85%, 10/01/97............ 5,000,000 5,006,807
-------------
20,321,623
-------------
FEDERAL HOME LOAN BANKS DISCOUNT NOTES - 23.2%
Federal Home Loan Banks Notes, 5.23%, 04/10/97.............. 17,000,000 16,977,767
Federal Home Loan Banks Notes, 5.29%, 04/17/97.............. 5,675,000 5,661,657
Federal Home Loan Banks Notes, 5.23%, 04/24/97.............. 6,000,000 5,979,952
Federal Home Loan Banks Notes, 5.28%, 07/03/97.............. 5,000,000 4,931,800
Federal Home Loan Banks Notes, 5.22%, 07/07/97.............. 5,000,000 4,929,675
Federal Home Loan Banks Notes, 5.26%, 07/23/97.............. 6,690,000 6,579,544
Federal Home Loan Banks Notes, 5.23%, 07/28/97.............. 5,500,000 5,405,715
Federal Home Loan Banks Notes, 5.21%, 08/12/97.............. 5,000,000 4,903,760
Federal Home Loan Banks Notes, 5.29%, 09/04/97.............. 5,000,000 4,885,383
Federal Home Loan Banks Notes, 5.39%, 09/18/97.............. 10,000,000 9,745,472
Federal Home Loan Banks Notes, 5.30%, 10/10/97.............. 7,000,000 6,802,134
-------------
76,802,859
-------------
FEDERAL HOME LOAN BANKS NOTES - 4.5%
Federal Home Loan Banks Notes, 5.73%, 06/17/97*............. 10,000,000 9,998,376
Federal Home Loan Banks Notes, 5.71%, 01/21/98.............. 5,000,000 5,004,653
-------------
15,003,029
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES - 1.5%
Federal National Mtge. Assoc. Notes, 9.20%, 06/10/97........ 5,000,000 5,036,367
-------------
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES - 3.9%
Tennessee Valley Auth. Notes, 5.18%, 05/21/97............... 13,000,000 12,906,472
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $178,751,602)................ 178,751,602
-------------
U.S. TREASURY OBLIGATIONS - 3.3%
U.S. Treasury Notes, 8.50%, 04/15/97........................ $ 6,000,000 $ 6,006,153
U.S. Treasury Notes, 6.50%, 05/15/97........................ 5,000,000 5,003,583
-------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $11,009,736)......................... 11,009,736
-------------
REPURCHASE AGREEMENTS - 43.0%
With CS First Boston: at 6.70%,
dated 03/31/97, to be repurchased
at $67,651,488 on 04/01/97,
collateralized by $70,875,000
Federal National Mortgage
Association Securities with
various coupons and maturities to
9/26/97.................................................... 67,638,900 67,638,900
With UBS Securities, Inc.: at
6.75%, dated 03/31/97, to be
repurchased at $75,014,063 on
04/01/97, collateralized by
$135,324,032 Federal Home Loan
Mortgage Corporation Securities
with various coupons and maturities
to 12/01/22................................................ 75,000,000 75,000,000
TOTAL REPURCHASE AGREEMENTS (COST $142,638,900)............................ 142,638,900
-----------
TOTAL INVESTMENTS (COST $332,400,238)+ - 100.2%................................. 332,400,238
OTHER ASSETS AND LIABILITIES, NET - (0.2)% ..................................... (530,113)
-----------
NET ASSETS - 100.0%............................................................. $331,870,125
============
<FN>
* Denotes a Variable Floating Rate Note. Variable and Floating Rate Notes
are instruments whose rates change periodically. The rates shown are the
interest rates as of March 31, 1997.
+ Cost for federal income tax purposes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE FUND/MONEY MARKET PORTFOLIO
- ---------------------------------------------
INVESTMENTS/MARCH 31, 1997 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- -------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- -----------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 23.2%
U.S. BANKS, U.S. BRANCHES - 2.5%
Regions Bank, 5.44%, 04/21/97.................................... P-1/A-1+ $ 25,000,000 $ 25,000,000
-------------
FOREIGN BANKS, U.S. BRANCHES - 20.7%
ABN-Amro Bank, 5.60%, 12/16/97................................... P-1/A-1+ 10,000,000 9,996,452
Barclays Bank, plc, 5.31%, 04/11/97.............................. P-1/A-1+ 25,000,000 25,000,000
Bayerische Hypotheken & Wechselban, 5.40%, 05/07/97.............. P-1/A-1 25,000,000 25,000,247
Canadian Imperial Bank of Commerce, 5.88%, 01/14/98.............. P-1/A-1+ 26,000,000 26,000,000
Commerzbank, 5.45%, 08/13/97..................................... P-1/A-1+ 20,000,000 20,000,725
Credit Agricole, 5.47%, 07/08/97................................. P-1/A-1+ 25,000,000 25,000,000
National Westminster, 5.46%, 04/14/97............................ P-1/A-1+ 10,000,000 10,000,071
Rabobank Nederland, 5.53%, 07/23/97.............................. P-1/A-1+ 10,000,000 10,000,305
Royal Bank of Canada, 5.95%, 03/24/98............................ P-1/A-1+ 10,000,000 9,989,723
Societe Generale, 5.50%, 04/21/97................................ P-1/A-1+ 10,000,000 10,000,000
Societe Generale, 5.52%, 08/06/97................................ P-1/A-1+ 25,000,000 25,000,858
Societe Generale, 5.49%, 08/11/97................................ P-1/A-1+ 10,000,000 10,000,714
-------------
205,989,095
-------------
TOTAL CERTIFICATES OF DEPOSIT (COST $230,989,095)............................... 230,989,095
-------------
COMMERCIAL PAPER - 47.4%
AGRICULTURE - 2.3%
Louis Dreyfus Corp., 5.28%, 04/18/97............................. P-1/A-1+ 23,000,000 22,942,653
-------------
AUTOMOBILES - 4.9%
Daimler-Benz North America Corp., 5.32%, 04/16/97................ P-1/A-1 15,000,000 14,966,750
Daimler-Benz North America Corp., 5.32%, 04/17/97................ P-1/A-1 14,218,000 14,184,382
Daimler-Benz North America Corp., 5.38%, 07/07/97................ P-1/A-1 20,000,000 19,709,809
-------------
48,860,941
-------------
BANKS - 2.0%
Commerzbank U.S. Fin. Inc., 5.37%, 04/15/97...................... P-1/A-1+ 10,250,000 10,228,595
Commerzbank U.S. Fin. Inc., 5.26%, 04/22/97...................... P-1/A-1+ 10,000,000 9,969,316
-------------
20,197,911
-------------
BUILDING & BUILDING SUPPLIES - 3.0%
CSR America Inc., 5.30%, 05/02/97................................ P-1/A-1 30,000,000 29,863,083
-------------
CHEMICALS - 4.4%
Akzo Nobel America, Inc., 5.34%, 04/17/97........................ P-1/A-1 10,000,000 9,976,267
Akzo Nobel America, Inc., 5.28%, 05/27/97........................ P-1/A-1 10,000,000 9,917,867
Akzo Nobel America, Inc., 5.36%, 05/30/97........................ P-1/A-1 5,000,000 4,956,078
Formosa Plastics Corp. USA, 5.32%, 04/10/97...................... P-1/A-1+ 8,500,000 8,488,695
Formosa Plastics Corp. USA, 5.32%, 05/09/97...................... P-1/A-1+ 10,000,000 9,943,844
-------------
43,282,751
-------------
ENTERTAINMENT - 4.5%
Walt Disney Co., 5.31%, 04/15/97................................. P-1/A-1 $ 25,000,000 $ 24,948,375
Walt Disney Co., 5.31%, 06/30/97................................. P-1/A-1 10,000,000 9,867,250
Walt Disney Co., 5.35%, 07/15/97................................. P-1/A-1 10,000,000 9,843,958
-------------
44,659,583
-------------
FINANCE - 2.9%
PGA Tour Investment Fin. Inc., 5.32%, 05/13/97................... P-1/A-1 28,500,000 28,323,110
-------------
FINANCIAL SERVICES - 5.8%
Dean Witter Discover & Co., 5.28%, 04/03/97...................... P-1/A-1 10,000,000 9,997,067
Dean Witter Discover & Co., 5.33%, 04/14/97...................... P-1/A-1 12,500,000 12,475,940
Dean Witter Discover & Co., 5.30%, 05/07/97...................... P-1/A-1 15,000,000 14,920,500
General Electric Cap. Corp., 5.32%, 05/20/97..................... P-1/A-1+ 20,000,000 19,855,178
-------------
57,248,685
-------------
LEASING - 5.8%
International Lease Fin. Corp., 5.29%, 04/04/97.................. P-1/A-1 10,000,000 9,995,592
Vehicle Services Corp. of America Ltd., 5.38%, 05/06/97.......... P-1/A-1 33,300,000 33,125,823
Vehicle Services Corp. of America Ltd., 5.35%, 05/12/97.......... P-1/A-1 10,100,000 10,038,460
Vehicle Services Corp. of America Ltd., 5.30%, 05/28/97.......... P-1/A-1 5,000,000 4,958,041
-------------
58,117,916
-------------
MEDICAL & MEDICAL SERVICES - 0.8%
Medical Bldg. Funding VII, L.L.C., 5.813%, 06/09/97.............. NR/A-1 8,300,000 8,207,533
-------------
PHARMACEUTICALS PREPARATIONS - 2.5%
Zeneca Wilmington Inc., 5.32%, 04/22/97.......................... P-1/A-1+ 25,000,000 24,922,418
-------------
SECURITIES DEALERS - 8.5%
Credit Suisse First Boston Inc., 5.32%, 04/16/97................. P-1/A-1+ 20,000,000 19,955,667
Credit Suisse First Boston Inc., 5.48%, 07/11/97................. P-1/A-1+ 10,000,000 9,846,256
Goldman Sachs Group LP, 5.30%, 04/04/97.......................... P-1/A-1+ 10,000,000 9,995,583
Merrill Lynch & Co., Inc., 5.45%, 04/01/97....................... P-1/A-1+ 30,000,000 30,000,000
Merrill Lynch & Co., Inc., 5.34%, 05/27/97....................... P-1/A-1+ 10,000,000 9,916,933
Merrill Lynch & Co., Inc., 5.37%, 07/01/97....................... P-1/A-1+ 5,000,000 4,932,129
-------------
84,646,568
-------------
TOTAL COMMERCIAL PAPER (COST $471,273,151).............................................. 471,273,152
-------------
CORPORATE NOTES - 7.3%
BANKS - 6.5%
Bank of America, 5.52%, 11/21/97................................. P-1/A-1+ 20,000,000 19,992,511
Fifth Third Bank, 5.47%, 07/10/97................................ P-1/A-1+ 10,000,000 9,999,977
Morgan Guaranty Trust Co., 5.76%, 04/22/97....................... P-1/A-1+ 25,000,000 24,999,442
Morgan Guaranty Trust Co., 6.02%, 03/25/98....................... P-1/A-1+ $ 10,000,000 $ 9,992,697
-------------
64,984,627
-------------
FINANCIAL - 0.3%
General Electric Cap. Corp., 5.05%, 02/09/98..................... Aaa/AAA 3,000,000 2,981,187
-------------
SECURITIES DEALERS - 0.5%
Credit Suisse First Boston Inc., 5.93%, 03/17/98................. P-1/A-1+ 5,000,000 5,000,000
-------------
TOTAL CORPORATE NOTES (COST $72,965,814)................................................ 72,965,814
-------------
BANKERS' ACCEPTANCES - 0.5%
Mellon Bank, 5.33%, 04/10/97 (COST $4,993,337)................... P-1/A-1 5,000,000 4,993,337
-------------
REPURCHASE AGREEMENTS - 17.1%
With CS First Boston Corp.: at
6.70%, dated 03/31/97, to be
repurchased at $134,779,379 on
04/01/97,collateralized by
$142,735,000 Federal National
Mortgage Association Securities
with various coupons and maturities
to 10/02/97..................................................................... $134,754,300 134,754,300
With UBS Securities, Inc.: at 6.75%,
dated 03/31/97, to be
repurchased at $35,006,563 on
04/01/97, collateralized by
$70,161,659 Federal Home Loan
Mortgage Corporation Securities
with various coupons and maturities
to 06/01/25 .................................................................... 35,000,000 35,000,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $169,754,300)............................................ 169,754,300
-----------
TAXABLE MUNICIPAL SECURITIES - 4.6%
CALIFORNIA - 1.4%
Oakland-Alameda County Coliseum Auth., 5.55%, 04/09/97........... VMIG1/A-1+ 7,500,000 7,500,000
Oakland-Alameda County Coliseum Auth., 5.46%, 06/10/97........... VMIG1/A-1+ 6,500,000 6,500,000
-----------
14,000,000
-----------
ILLINOIS - 0.4%
Waukesha Health Systems Inc. Tax. Rev. Bonds, Ser. 1996,
5.80%, 08/15/26*.............................................. VMIG1/A-1+ 3,800,000 3,800,000
-------------
NEW YORK - 2.8%
New York City, NY, Ser. 1994 Subser. H, 5.60%, 06/05/97.......... P-1/A-1+ 6,500,000 6,500,000
New York City, NY, Ser. H Subser. H-7, 5.60%, 06/05/97........... P-1/A-1+ 8,850,000 8,850,000
New York City, NY, Ser. H Subser. H-7, 5.60%, 06/05/97........... P-1/A-1+ 6,100,000 6,100,000
New York City, NY, Ser. 1994 Subser. H-7, 5.60%, 06/05/97........ P-1/A-1+ 6,000,000 6,000,000
-------------
27,450,000
-------------
TOTAL TAXABLE MUNICIPAL SECURITIES (COST $45,250,000)....................................... 45,250,000
-------------
TOTAL INVESTMENTS (COST $995,225,698)+ - 100.1% .................................................... $995,225,698
OTHER ASSETS AND LIABILITIES, NET - (0.1)%.......................................................... (1,542,879)
-------------
NET ASSETS - 100.0%................................................................................. $993,682,819
==============
<FN>
* 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 March 31, 1997.
+ Cost for federal income tax purposes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS/MARCH 31, 1997 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- ---------- -----------
<S> <C> <C> <C>
MUNICIPAL BONDS - 99.9%
ALABAMA - 0.3%
Birmingham, AL Gen. Oblig. Ref. Bonds, Ser. 1992A, 3.45%,
05/01/19*..................................................... VMIG1/A-1+ $ 1,000,000 $ 1,000,000
-------------
ARIZONA - 0.8%
Salt River Agric. Imp. & Power Dist. TECP, 3.45%, 06/13/97....... P-1/A-1+ 2,400,000 2,400,000
-------------
CALIFORNIA - 1.6%
State of California 1996-1997 Rev. Ant. Notes, 4.50%, 06/30/97... MIG1/SP-1+ 4,800,000 4,806,032
-------------
DISTRICT OF COLUMBIA - 5.3%
Dist. of Columbia Gen. Oblig. Bonds, Ser. B-3, 3.90%, 06/01/03*.. VMIG1/A-1+ 4,500,000 4,500,000
Dist. of Columbia (American Univ.), Ser. 1985, 3.45%, 10/01/15*.. VMIG1/NR 10,000,000 10,000,000
Dist. of Columbia (American Univ.), Ser. 1986A, 3.45%, 12/01/15*. VMIG1/NR 1,000,000 1,000,000
-------------
15,500,000
-------------
FLORIDA - 3.5%
City of Jacksonville, FL Poll. Cntrl. Rev. Bonds (Florida
Power & Light Co. Proj.), Ser. 1994, 3.45%, 05/13/97.......... P-1/A-1+ 7,310,000 7,310,000
St. Lucie County, FL Poll. Cntrl. Rev. Bonds, (Florida Power &
Light Co. Proj.) Ser. 1994A, 3.45%, 06/13/97.................. VMIG1/A-1+ 3,000,000 3,000,000
-------------
10,310,000
-------------
GEORGIA - 7.6%
Atlanta, GA Downtown Dev. Auth. (Care Proj.), Ser. 1993,
3.50%, 06/01/13*.............................................. VMIG1/NR 2,600,000 2,600,000
Burke County, GA Dev. Auth. Poll. Cntrl. Rev.
Bonds (Ogelthorthe Power Corp. Vogtle Proj.), Ser. 1997A,
3.60%, 12/01/97............................................... Aaa/AAA 2,600,000 2,600,000
Burke County, GA Dev. Auth. Poll. Cntrl. Rev. Bonds (Georgia
Power Co. Vogtle Proj.), Ser. 1994-1995, 3.80%, 07/01/24*..... P-1/A-1 7,000,000 7,000,000
Burke County, GA Dev. Auth. Poll. Cntrl Rev. Bonds (Georgia
Power Co. Vogtle Proj.), Ser. 1995, 3.85%, 09/01/25*.......... P-1/A-1 1,000,000 1,000,000
Floyd County, GA Dev. Auth. Environ. Imp. Rev. Bonds (Georgia
Kraft Co. Proj.), 4.10%, 12/01/15*............................ P-1/NR 1,975,000 1,975,000
Fulton County, GA Dev. Auth. Rev. Bonds (Alfred & Adele
Davis Inc.), 3.50%, 12/01/10*................................. Aa3/NR 2,000,000 2,000,000
Fulton County, GA Dev. Auth. Rev. Bonds (The Arthritis
Foundation Inc. Proj.), 3.50%, 12/01/16*...................... Aa3/NR 1,000,000 1,000,000
Gwinnett County, GA Dev. Auth. Rev. Bonds (Wesleyan School,
Inc. Proj.) Ser 1997, 3.50%, 03/01/17*........................ Aa3/NR 1,000,000 1,000,000
Municipal Gas Auth. of Georgia Gas Rev. Bonds (Southern
Portfolio 1 Proj.) Ser D, 3.45%, 05/12/97..................... NR/A-1+ 3,200,000 3,200,000
-------------
22,375,000
-------------
IDAHO - 1.0%
Idaho Health Fac. Auth. Rev. Bonds (St. Luke's Regional
Medical Center Proj.), Ser. 1995, 3.85%, 05/01/22*............ VMIG1/NR $ 2,900,000 $ 2,900,000
-------------
ILLINOIS - 22.3%
City of Chicago, IL O'Hare International Airport (American
Airlines), Ser. 1983D, 3.85%, 12/01/17*....................... P-1/NR 2,000,000 2,000,000
Illinois Dev. Fin. Auth. Poll. Cntrl. Rev. Bonds (The
Uno-Ven Co. Proj.), Ser. 1994, 3.50%, 09/01/08*............... NR/A-1+ 7,000,000 7,000,000
Illinois Dev. Fin. Auth. Poll. Cntrl. Rev. Bonds (Commonwealth
Edison Co. Proj.), Ser. C, 3.45%, 03/01/09*................... P-1/A-1+ 10,000,000 10,000,000
Illinois Dev. Fin. Auth. Rev. Bonds (WBEZ Alliance Proj.),
Ser. 1994, 3.50%, 03/01/29*................................... VMIG1/A-1+ 6,600,000 6,600,000
Illinois Educ. Fac. Auth. Rev. Bonds (Museum of Science
& Industry Proj.), Ser. 1985, 3.50%, 11/15/25*................ VMIG1/NR 2,500,000 2,500,000
Illinois Educ. Fac. Auth. Rev. Bonds (Field Museum of
Natural History), Ser. 1985, 3.50%, 11/01/25*................. VMIG1/NR 2,700,000 2,700,000
Illinois Educ. Fac. Auth. Rev. Bonds (DePaul Univ. Proj.),
Ser. 1992, 3.50%, 04/01/26*................................... VMIG1/A-1+ 11,000,000 11,000,000
Illinois Health Fac. Auth. Rev. TECP (University of Chicago),
3.55%, 07/02/97............................................... VMIG1/A-1+ 13,500,000 13,500,000
Illinois Health Fac. Auth. Rev. Bonds (Northwestern Memorial
Hosp.), Ser. 1995, 3.45%, 08/15/25*........................... VMIG1/A-1+ 1,200,000 1,200,000
Illinois Health Fac. Auth. Rev. Bonds (Gottlieb Health
Resources, Inc.), Ser. 1990, 3.50%, 11/15/25*................. VMIG1/NR 9,000,000 9,000,000
-------------
65,500,000
-------------
INDIANA - 0.7%
Indiana Educ. Auth. Rev. Bonds (St. Mary of The Woods
College), 3.50%, 02/15/26*.................................... NR/A-1+ 2,000,000 2,000,000
-------------
KANSAS - 1.0%
City of Burlington, KS Poll. Cntrl. Rev. Bonds (Kansas
City Power & Light Co. Proj.), Ser. 1985B, 3.20%, 04/01/97.... P-1/NR 3,000,000 3,000,000
-------------
LOUISIANA - 9.2%
Louisiana Public Fac. Auth. Hosp. Rev. Bonds (Willis-Knighton
Medical Center Proj.), Ser. 1993, 3.50%, 09/01/23*............ VMIG1/A-1 7,000,000 7,000,000
Louisiana Public Fac. Auth. Hosp. Rev. Bonds (Willis-Knighton
Medical Center Proj.), Ser. 1995, 3.50%, 09/01/25*............ VMIG1/A-1 3,500,000 3,500,000
Parish of East Baton Rouge, LA Poll. Cntrl. Rev. Bonds
(Exxon Corp. Proj.), 3.85%, 03/01/22*......................... P-1/A-1+ 1,400,000 1,400,000
Plaquemines Port Harbor and Terminal Marine Terminal Dist.
Fac. Rev. Bonds (Electro-Coal Transfer), Ser. 1985A, 3.50%,
06/11/97...................................................... P-1/A-1+ 10,500,000 10,500,000
West Baton Rouge LA Ind. Dist. #3 (Dow Chemical Co. Proj.),
Ser. 1994B, 3.85%, 12/01/16*.................................. P-1/A-1 $ 4,600,000 $ 4,600,000
-------------
27,000,000
-------------
MICHIGAN - 0.9%
Michigan State Hosp. Fin. Auth. (St. Mary's Hosp. of Livonia),
Ser. 1996A, 3.45%, 07/01/17*.................................. VMIG1/A-1 2,500,000 2,500,000
-------------
MINNESOTA - 5.0%
Becker, MN Poll. Ctrl. Rev. Bonds Nothern States Power
Co. (Sherburne County Generating Station Unit 3), Ser.
1992, 3.15%, 04/04/97......................................... VMIG1/A-1 9,300,000 9,300,000
Regents of The Univ. of Minnesota Rev. Bonds, Ser. 1985F,
3.70%, 04/01/97............................................... VMIG1/A-1+ 5,500,000 5,500,000
-------------
14,800,000
-------------
MISSISSIPPI - 3.8%
Jackson County, MS Port Fac. (Chevron USA Inc. Proj.),
Ser. 1993, 3.80%, 06/01/23*................................... P-1/NR 6,000,000 6,000,000
Mississippi Business Fin. Corp. Ind. Dev. Rev.
Bonds (Mississippi College Proj.), Ser. 1996, 3.50%, 09/01/06* NR/A-1 5,000,000 5,000,000
-------------
11,000,000
-------------
MISSOURI - 0.3%
Missouri State Environ. Imp. & Energy Resource Auth. Poll.
Cntrl. Rev. Bonds (Noranda Aluminum Inc. Proj.), 3.65%,
10/01/02*..................................................... VMIG1/NR 800,000 800,000
-------------
NEW YORK - 3.4%
New York City Municipal Water Fin. Auth. TECP, Ser. 1,
3.60%, 04/07/97............................................... P-1/A-1+ 10,000,000 10,000,000
-------------
NORTH CAROLINA - 1.7%
Carteret County, NC Ind. Fac. & Poll. Cntrl. Fin. Auth.
(Texas Gulf), Ser. 1985, 3.53%, 10/01/05*..................... Aa1/NR 5,000,000 5,000,000
-------------
PENNSYLVANIA - 1.8%
Hospital and Higher Education Fac. Auth. of Philadelphia
Hosp. Rev. Bonds (The Children's Hosp. of Philadelphia
Proj.), Ser. A, 3.85%, 03/01/27*.............................. VMIG1/A-1+ 2,900,000 2,900,000
Quakertown, PA General Auth. Rev. Bonds. (Pooled Fin.
Proj.), Ser. 1996A, 3.50%, 07/01/26*.......................... VMIG1/NR 2,200,000 2,200,000
-------------
5,100,000
-------------
SOUTH CAROLINA - 3.4%
South Carolina State Public Service Auth. TECP, 3.45%, 05/21/97.. P-1/A-1 $ 10,000,000 $ 10,000,000
-------------
TENNESSEE - 1.6%
Public Auth. of Clarksville, TN Pooled Rev. Bonds, Ser.
1994, 3.50%, 06/01/24*........................................ NR/A-1 4,600,000 4,600,000
-------------
TEXAS - 12.6%
Bexar County, TX Health Fac. Dev. Corp. Rev. Bonds (Air
Force Village II Proj.), Ser. 1985B, 3.40%, 03/01/12*......... NR/A-1+ 9,800,000 9,800,000
Board of Regents of Texas A&M Univ. Sys. TECP, Ser. 1993B,
3.50%, 05/09/97............................................... P-1/A-1+ 3,500,000 3,500,000
Harris County, TX Health Fac. Auth. Dev. Corp. Hosp. Rev.
Bonds (Memorial Hosp. System Proj.), Ser. 1986, 3.45%,
06/02/97...................................................... VMIG1/NR 7,300,000 7,300,000
Harris County, TX Health Fac. Auth. Dev. Corp. (St. Luke's
Episcopal Hosp. Proj.), Ser. C, 3.85%, 02/15/16*.............. NR/A-1+ 2,000,000 2,000,000
Harris County, TX Health Fac. Auth. Dev. Corp. Hosp. Rev.
Bonds (Methodist Hosp.), Ser. 1987, 3.85%, 12/01/26*.......... NR/A-1+ 4,400,000 4,400,000
Port of Corpus Christi Auth. of Nueces County, TX (Koch
Refinancing Co. Proj.) Ser 1995, 3.50%, 05/14/97.............. P-1/A-1+ 4,090,000 4,090,000
State of Texas, Tax & Revenue Ant. Notes, Ser. A,
4.75%, 08/29/97............................................... MIG1/SP-1+ 5,825,000 5,843,738
-------------
36,933,738
-------------
UTAH - 4.2%
Intermountain Power Agency Utah Power Supply Rev. Bonds,
Ser. 1985F, 3.45%, 05/09/97................................... VMIG1/A-1+ 7,500,000 7,500,000
Salt Lake City, UT Rev. Bonds Pooled Hospital Fin. Proj.,
Ser. 1990, 3.45%, 01/01/20*................................... VMIG1/A-1+ 4,700,000 4,700,000
-------------
12,200,000
-------------
WASHINGTON - 1.3%
Washington Health Care Fac. Auth. Rev. Bonds (Fred Hutchinson
Cancer Research Center), Ser. 1991A, 3.85%, 01/01/18*......... VMIG1/NR 2,300,000 2,300,000
Washington Health Care Fac. Auth. Rev. Bonds (Fred Hutchinson
Cancer Research Center), Ser. 1996, 3.85%, 01/01/23*.......... VMIG1/NR 1,500,000 1,500,000
-------------
3,800,000
-------------
WYOMING - 6.6%
Converse County, WY Poll. Cntrl. Rev. Bonds (Pacificorp),
Ser. 1992, 3.25%, 04/09/97.................................... VMIG1/A-1+ $ 5,485,000 $ 5,485,000
Green River, WY Poll. Cntrl. Rev. Bonds (Texas Gulf Inc.),
Ser. 1984, 3.65%, 12/01/04*................................... Aa2/NR 2,000,000 2,000,000
Lincoln County, WY Poll. Cntrl. Rev. Bonds (Exxon Proj.),
3.80%, 08/01/15*.............................................. P-1/A-1+ 7,800,000 7,800,000
Unita Cnty., WY Poll. Cntrl. Rev. Bonds (Chevron USA Inc.
Proj.), 3.80%, 12/01/22*...................................... P-1/NR 4,000,000 4,000,000
-------------
19,285,000
-------------
TOTAL MUNICIPAL BONDS (COST $292,809,770)............................................... 292,809,770
-------------
TOTAL INVESTMENTS (COST $292,809,770)+ - 99.9% .................................................... 292,809,770
OTHER ASSETS AND LIABILITIES, NET - 0.1%........................................................... 436,406
-------------
NET ASSETS - 100.0%................................................................................ $293,246,176
-------------
<FN>
* Denotes a Variable or Floating Rate Note. Variable and Floating
Rate Notes are instruments whose rates change periodicaly.
The rates shown are the interest rates as of March 31, 1997.
+ Cost for federal tax purposes.
TECP - Tax-Exempt Commercial Paper.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVEERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
---------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities (including repurchase agreements
of $142,638,900, $169,754,300 and $0, respectively),
at value (amortized cost $332,400,238, $995,225,698,
and $292,809,770, respectively) (Note 2).......................... $ 332,400,238 $ 995,225,698 $ 292,809,770
Interest receivable................................................ 1,010,196 3,253,417 1,226,003
Other assets....................................................... 66 48 40,049
------------- ------------- -------------
Total assets..................................................... 333,410,500 998,479,163 294,075,822
------------- ------------- -------------
LIABILITIES:
Dividends payable.................................................. 1,372,793 4,341,863 694,972
Accrued management fee (Note 3) ................................... 132,231 412,362 118,737
Other accrued expenses (Note 3) ................................... 35,351 42,119 15,937
------------- ------------- -------------
Total liabilities................................................. 1,540,375 4,796,344 829,646
------------- ------------- -------------
NET ASSETS......................................................... $ 331,870,125 $ 993,682,819 $ 293,246,176
============= ============= =============
NET ASSETS CONSIST OF:
Capital paid in.................................................... $ 331,867,987 $993,710,350 $ 293,247,836
Accumulated realized gain (loss) on investments - net ............. 2,138 (27,531) (1,660)
------------- ------------ --------------
NET ASSETS, for 331,867,987, 993,710,350, and 293,254,519,
shares outstanding, respectively ................................. $ 331,870,125 $ 993,682,819 $ 293,246,176
============= ============= =============
NET ASSET VALUE, offering and redemption price per share:.......... $1.00 1 $1.00 2 $1.00 3
============= ============= =============
<FN>
1 $331,870,125 / 331,867,987 outstanding shares of beneficial interest, no
par value.
2 $993,682,819 / 993,710,350 outstanding shares of beneficial interest, no
par value.
3 $293,246,176 / 293,254,519 outstanding shares of beneficial interest, no
par value.
</FN>
</TABLE>
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- -------------- --------------
<S> <C> <C> <C>
INTEREST INCOME .................................................... $9,309,170 $ 27,980,354 $ 4,724,785
---------- ------------- -------------
EXPENSES:
Management fee (Note 3) ............................................ 804,455 2,388,002 639,584
Accounting fee (Note 3)............................................. 49,192 116,577 42,176
Distribution expenses (Note 3)...................................... 29,207 89,026 10,030
Trustees' fees and expenses (Note 3) ............................... 3,205 4,679 3,347
Registration fees................................................... 15,475 28,365 25,560
Reports to shareholders............................................. 3,242 5,861 1,949
Legal .............................................................. 10,541 28,489 24,274
Audit............................................................... 7,009 18,378 14,522
Other............................................................... 22,038 60,081 13,841
---------- ------------ -------------
Total expenses..................................................... 944,364 2,739,458 775,283
---------- ------------ -------------
Net investment income.............................................. 8,364,806 25,240,896 3,949,502
---------- ------------ -------------
REALIZED GAIN (LOSS) ON INVESTMENTS - NET (NOTE 2) ................. 576 (13,252) 0
---------- ------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $8,365,382 $ 25,227,644 $ 3,949,502
========== ============= =============
</TABLE
STATEMENTS OF CHANGES IN NET ASSETS
</TABLE>
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND - FUND - RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- --------------
<S> <C> <C> <C>
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1997(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ............................................. $ 8,364,806 $ 25,240,896 $ 3,949,502
Net realized gain (loss) on investments ........................... 576 (13,252) 0
------------ ------------ ---------------
Net increase in net assets resulting from operations .............. 8,365,382 25,227,644 3,949,502
------------ ------------ --------------
Dividends to shareholders from net investment income
($0.024, $0.025, and $0.015 per share, respectively) .............. (8,364,806) (25,240,896) (3,949,502)
------------ ------------ --------------
Share transactions at net asset value of $1.00 per share
Proceeds from sale of shares ...................................... 1,969,389,667 3,924,033,905 1,186,489,022
Shares issued to shareholders in reinvestment of dividends
from net investment income ....................................... 197,337 2,011,672 117,559
Cost of shares redeemed ........................................... (1,979,143,564) (3,913,205,632) (1,130,545,109)
--------------- -------------- ---------------
Net increase (decrease) in net assets and shares resulting from
share transactions ............................................... (9,556,560) 12,839,945 56,061,472
--------------- -------------- ---------------
Total increase (decrease) in net assets .......................... (9,555,984) 12,826,693 56,061,472
Net Assets:
Beginning of period................................................ 341,426,109 980,856,126 237,184,704
--------------- -------------- ---------------
End of period...................................................... $ 331,870,125 $ 993,682,819 $ 293,246,176
=============== ============== ===============
For the Fiscal Year Ended September 30, 1996
Increase (Decrease) in Net Assets
Operations:
Net investment income ............................................. $ 18,163,286 $ 43,763,846 $ 8,832,901
Net realized gain (loss) on investments ........................... (58) 127 0
-------------- -------------- ---------------
Net increase in net assets resulting from operations .............. 18,163,228 43,763,973 8,832,901
-------------- -------------- ---------------
Dividends to shareholders from net investment income
($0.050, $0.050, and $0.031 per share, respectively) .............. (18,163,286) (43,763,846) (8,832,901)
-------------- -------------- ---------------
Share transactions at net asset value of $1.00 per share
Proceeds from sale of shares ...................................... 4,435,793,585 6,848,793,367 2,137,883,514
Shares issued to shareholders in reinvestment of dividend
from net investment income ....................................... 388,936 3,203,419 289,502
Cost of shares redeemed............................................ (4,400,852,267) (6,622,265,795) (2,219,200,892)
--------------- -------------- -------------
Net increase (decrease) in net assets and shares resulting
from share transactions .......................................... 35,330,254 229,730,991 (81,027,876)
--------------- -------------- -------------
Total increase (decrease) in net assets ........................... 35,330,196 229,731,118 (81,027,876)
NET ASSETS:
Beginning of year.................................................. 306,095,913 751,125,008 318,212,580
--------------- -------------- --------------
End of year........................................................ $341,426,109 $ 980,856,126 $ 237,184,704
=============== ============== ===============
</TABLE>
<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 period and other performance information derived from the financial
statements. They should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED
MARCH 31,+ For the Fiscal Years Ended September 30,
--------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE FUND - U.S. GOVERNMENT PORTFOLIO
For a Share Outstanding Throughout Each Period:
NET ASSET VALUE - BEGINNING OF PERIOD.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income......................... 0.024 0.050 0.052 0.033 0.028 0.038
------ ------ ------ ------ ------ ------
Distributions:
From net investment income.................... (0.024) (0.050) (0.052) (0.033) (0.028) (0.038)
------ ------ ------ ------ ------ ------
NET ASSET VALUE - END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
Total Return................................... 4.99%* 5.08% 5.37% 3.32% 2.83% 3.88%
Ratios (to average net assets)/Supplemental Data:
Expenses..................................... 0.55%* 0.55% 0.55% 0.53% 0.53% 0.54%
Net investment income........................ 4.89%* 4.97% 5.25% 3.27% 2.79% 3.84%
Net assets at end of period (000 omitted)...... $331,870 $341,426 $306,096 $336,766 $386,067 $409,534
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED
MARCH 31, For the Fiscal Years Ended September 30,
---------------------------------------------
1997+ 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE FUND - MONEY MARKET PORTFOLIO
For a Share Outstanding Throughout Each Period:
NET ASSET VALUE - BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Investment Operations:
Net investment income............................ 0.025 0.050 0.054 0.033 0.029 0.041
------ ------ ------ ------ ------ ------
Distributions:
From net investment income ...................... (0.025) (0.050) (0.054) (0.033) (0.029) (0.041)
------ ------ ------ ------ ------ ------
NET ASSET VALUE END OF PERIOD..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ======
Total Return...................................... 5.08%* 5.17% 5.50% 3.37% 2.92% 4.15%
Ratios (to average net assets)/Supplemental Data:
Expenses........................................ 0.54%* 0.53% 0.54% 0.53% 0.52% 0.52%
Net investment income........................... 4.97%* 5.03% 5.37% 3.33% 2.88% 4.06%
Net assets at end of period (000 omitted)......... $993,683 $980,856 $751,125 $606,835 $649,424 $717,544
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX-MONTH
PERIOD ENDED
MARCH 31, FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1997+ 1996 1995 1994 1993 1992
------ ------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE TAX-EXEMPT FUND
For a Share Outstanding Throughout Each Period:
NET ASSET VALUE - BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ----- ------ ------ ------
Investment Operations:
Net investment income......................... 0.015 0.031 0.033 0.021 0.020 0.030
----- ------ ------ ------ ------ ------
Distributions:
From net investment income.................... (0.015) (0.031) (0.033) (0.021) (0.020) (0.030)
----- ------ ------ ------ ------ ------
NET ASSET VALUE - END OF PERIOD............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return 2.95%* 3.11% 3.36% 2.17% 2.07% 3.06%
Ratios (to average net assets)/Supplemental Data:
Expenses..................................... 0.57%* 0.56% 0.54% 0.54% 0.54% 0.54%
Net investment income........................ 2.90%* 3.08% 3.29% 2.13% 2.05% 3.06%
Net assets at end of period (000 omitted) ..... $293,246 $237,185 $318,213 $388,565 $405,517 $327,098
<FN>
+ Unaudited.
* Annualized.
</FN>
</TABLE>
<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
Declarations of Trust 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, 1996, 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
CARRY FORWARD 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
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.
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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
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 instrumentality.
The Money Market Portfolio invests in short-term unsecured
debt instruments of corporate issuers. The ability of a
corporate issuer to meet its obligations may be affected by
economic developments in a specific industry or region. The
Money Market Portfolio's investments in corporate notes,
commercial paper, certificates of deposit, and bankers'
acceptances of domestic and foreign banks represented in the
aggregate approximately 32.2% of its total investments on
March 31, 1997.
Approximately 88.0% of the investments by the Rodney Square
Tax-Exempt Fund on March 31, 1997 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 six-month period ended
March 31, 1997, amounted to $804,455 for the U.S. Government
Portfolio, $2,388,002 for the Money Market Portfolio and
$639,584 for the Rodney Square Tax-Exempt Fund.
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 six-month period
ended March 31, 1997, RSMC's fees for accounting services
amounted to $49,192 for the U.S. Government Portfolio,
$116,577 for the Money Market Portfolio and $42,176 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 six-month period
ended March 31, 1997, such expenses amounted to $29,207 for
the U.S. Government Portfolio, $89,026 for the Money Market
Portfolio and $10,030 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 $3,205 for the U.S.
Government Portfolio, $4,679 for the Money Market Portfolio
and $3,347 for the Rodney Square Tax-Exempt Fund for the six-
month period ended March 31, 1997.
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<PAGE>
[Outside cover -- divided into two sections]
[Left section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
Martin L. Klopping
John J. Quindlen
------------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Carl M. Rizzo, Esq., ASSISTANT SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
------------------------------------------------
FUND MANAGER, ADMINISTRATOR AND
TRANSFER AGENT
Rodney Square Management Corporation
----------------------------------------
CUSTODIAN
Wilmington Trust Company
----------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
-----------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP
----------------------
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.
RS17 5/97
[Right section]
the RODNEY SQUARE
FUND
&
the RODNEY SQUARE
TAX-EXEMPT
FUND
[GRAPHIC Rodney Square Funds Logo]
SEMIANNUAL REPORT
MARCH 31, 1997
