Filed with the Securities and Exchange Commission on November 25, 1998.
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. 24 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26 |X|
THE RODNEY SQUARE FUND
(Exact Name of Registrant as Specified in Charter)
1100 N. MARKET STREET, WILMINGTON, DE 19890
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 651-8998
Carl M. Rizzo, 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)
___ on __________________ pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
_X_ on January 29, 1999 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.
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE FUND
Items Required By Form N-1A
PART A - PROSPECTUS
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
======== ============ ==================
1. Front and Back Cover Page Front and Back Cover Page
2. Risk/Return Summary: Investment Objectives
Investments, Risks Primary Investment Strategies
and Performance Risk Factors Related to the
Portfolios
Performance Information
3. Risk/Return Summary: Fees and Expenses of the Portfolio
Fee Table
4. Investment Objectives, Investment Objective
Principal Investment Primary Investment Strategies
Strategies and Related Risks Risk Factors Related to the
Portfolios
5. Management Discussion of Not Applicable
Fund Performance
6. Management, Organization Management of the Funds
and Capital Structure Investment Manager
Service Providers
7. Shareholder Information Shareholder Information
Pricing of Shares
Purchase of Shares
Redemption of Shares
Exchange of Shares
Dividends
Taxes
8. Distribution Arrangements Distribution Arrangements
Rule 12b-1 Fees
9. Financial Highlights Financial Highlights
Information
ii
<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 and Table of Cover Page and Table of Contents
Contents
11. Fund History The Funds
12. Description of the Fund and Investment Policies
Its Investments and Risks Investment Limitations
13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Control Persons and
Holders of Securities Principal Holders of Securities
15. Investment Advisory and Investment Management Services
Other Services Distribution Agreement and
Rule 12b-1 Plan
Additional Service Providers
16. Brokerage Allocation and Brokerage Allocation and
Other Practices Other Practices
17. Capital Stock and Other The Funds
Securities
18. Purchase, Redemption and Purchase, Redemption and
Pricing of Shares Pricing of Shares
19. Taxation of the Fund Taxation of the Fund
20. Calculation of Performance Data Calculation of Performance Data
21. Financial Statements Financial Statements
ii
<PAGE>
THE RODNEY SQUARE THE RODNEY SQUARE
FUND TAX-EXEMPT FUND
U.S. GOVERNMENT PORTFOLIO
MONEY MARKET PORTFOLIO
================================================================================
PROSPECTUS DATED JANUARY 29, 1999
This prospectus gives vital information about these money market mutual funds,
including information on investment policies, risks and fees. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.
Please note that these Funds:
(BULLET) are not bank deposits
(BULLET) are not obligations of, or guaranteed or endorsed by Wilmington Trust
Company or any of its affiliates
(BULLET) are not federally insured
(BULLET) are not obligations of, or guaranteed or endorsed or otherwise
supported by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental
agency
(BULLET) are not guaranteed to achieve their goal(s)
(BULLET) may not be able to maintain a stable $1 share price
Like all mutual fund shares, the Securities and Exchange Commission has not
approved or disapproved the Funds' shares or determined whether this prospectus
is accurate or complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
A LOOK AT THE GOALS, PORTFOLIO DESCRIPTION
STRATEGIES, RISKS, EXPENSES Investment Objectives...........................3
AND FINANCIAL HISTORY OF Primary Investment Strategies...................3
EACH PORTFOLIO. Risk Factors Related to the Portfolios..........4
Performance Information.........................5
Fees and Expenses...............................8
Financial Highlights............................9
DETAILS ABOUT THE SERVICE MANAGEMENT OF THE FUNDS
PROVIDERS. Investment Manager.............................13
Service Providers..............................14
POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Shares..............................15
CLOSING AN ACCOUNT IN ANY OF Purchase of Shares.............................15
THE PORTFOLIOS. Redemption of Shares...........................17
Exchange of Shares.............................19
Dividends......................................20
Taxes..........................................20
DETAILS ON DISTRIBUTION DISTRIBUTION ARRANGEMENTS
PLANS. Rule 12b-1 Fees................................21
FOR MORE INFORMATION...................BACK COVER
For information about key terms and concepts, look for our "PLAIN TALK"
explanations.
2
<PAGE>
THE RODNEY SQUARE FUND THE RODNEY SQUARE TAX-EXEMPT FUND
(BULLET) U.S. GOVERNMENT PORTFOLIO
(BULLET) MONEY MARKET PORTFOLIO
PORTFOLIO DESCRIPTION
PLAIN TALK
----------------------------------------------------------------------
WHAT ARE MONEY MARKET FUNDS?
Money market funds invest only in high quality, short-term debt
securities, commonly known as money market instruments. Money market
funds follow strict rules about credit risk, maturity and
diversification of their investments. An investment in a money market
fund is not a bank deposit. Although a money market fund seeks to keep
a constant share price of $1.00, you may lose money by investing in a
money market fund.
----------------------------------------------------------------------
INVESTMENT OBJECTIVES
Each of the portfolios 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 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. The U.S. Government Portfolio, the Money Market Portfolio and the
Tax-Exempt Fund are referred to as "Portfolios" in this prospectus. Each
Portfolio is a money market fund and intends to maintain a stable $1 share price
although this may not be possible under certain circumstances.
PRIMARY INVESTMENT STRATEGIES
The U.S. GOVERNMENT PORTFOLIO may invest in:
(BULLET) U.S. Government obligations; and
(BULLET) repurchase agreements relating to such obligations.
U.S. Government obligations are debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
3
<PAGE>
The MONEY MARKET PORTFOLIO may invest in:
(BULLET) U.S. dollar-denominated obligations of major U.S. and foreign 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 wholly-owned banking subsidiaries
of foreign banks;
(BULLET) high quality commercial paper and corporate obligations;
(BULLET) U.S. Government obligations;
(BULLET) high quality municipal securities; and
(BULLET) repurchase agreements relating to U.S. Government obligations.
Each Portfolio described above may invest more than 25% of their respective
total assets in the obligations of banks.
The TAX-EXEMPT FUND may invest in:
(BULLET) high quality municipal obligations and municipal bonds;
(BULLET) floating and variable rate obligations;
(BULLET) participation interests;
(BULLET) high quality tax-exempt commercial paper; and
(BULLET) high quality short-term municipal notes.
The Tax-Exempt Fund has adopted a policy that, under normal circumstances, at
least 80% of its annual income will be exempt from federal income tax.
Additionally, at least 80% of its annual income will not be a tax preference
item for purposes of the federal alternative minimum tax.
High quality securities include those that (1) are rated in one of the two
highest short-term rating categories by two nationally statistical rating
organizations ("NRSRO"), such as S&P, Moody's and Fitch IBCA (or by one NRSRO if
only one NRSRO has issued a rating) or; (2) if unrated, are issued by an issuer
with comparable outstanding debt that is rated or are otherwise unrated and
determined by the investment adviser to be of comparable quality.
Each Portfolio also may invest in other securities, use other strategies and
engage in other investment practices, which are described in detail in our
Statement of Additional Information. Of course, we cannot guarantee that any
Portfolio will achieve its investment goal.
RISK FACTORS RELATED TO THE PORTFOLIOS
The following is a general list of the types of risks that may apply to a
Portfolio. Additional information about a Portfolio's investments is available
in our Statement of Additional Information:
(BULLET) An investment in a Portfolio is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although each Portfolio seeks to preserve the value of your investment
at $1.00 per share, it is possible to lose money by investing in a
Portfolio.
(BULLET) An investment in a Portfolio is not a deposit of Wilmington Trust
Company, any other bank, or any of their affiliates and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
(BULLET) CREDIT RISK: The risk that the issuer of a security, or the
counterparty to a contract, will default or otherwise become unable to
honor a financial obligation.
(BULLET) FOREIGN SECURITY RISK: The risk of losses due to political,
regulatory, economic, social or other uncontrollable forces in a
foreign country.
4
<PAGE>
(BULLET) INTEREST RATE RISK: The risk of market losses attributable to changes
in interest rates. With fixed-rate securities, a rise in interest
rates typically causes a fall in values, while a fall in rates
typically causes a rise in values. The yield paid by a Portfolio will
vary with changes in interest rates.
(BULLET) LIQUIDITY RISK: The risk that certain securities may be difficult or
impossible to sell at the time and the price that the seller would
like.
(BULLET) MANAGEMENT RISK: The risk that a strategy used by the adviser may fail
to produce the intended result.
(BULLET) MARKET RISK: The risk that the market value of a security may move up
and down, sometimes rapidly and unpredictably.
(BULLET) PREPAYMENT RISK: The risk that a debt security may be paid off and
proceeds invested earlier than anticipated. Depending on market
conditions, the new investments may or may not carry the same interest
rate.
(BULLET) YEAR 2000 COMPLIANCE RISK: Like other mutual funds, financial and
business organizations and individuals around the world, the
Portfolios could be adversely affected if the computer systems used by
Wilmington Trust Company ("WTC"), Rodney Square Management Corporation
("RSMC") and the Portfolios' other service providers do not properly
process and calculate date-related information and data on and after
January 1, 2000. Many existing application software products in the
marketplace were designed only to accommodate a two-digit date
position, which represents the year (e.g., "95" is stored on the
system and represents the year 1995). As a result, the year 1999
(i.e., "99") could be the maximum date value these systems will be
able to accurately process. This is commonly known as the "Year 2000
Problem." RSMC is taking steps that it believes are reasonably
designed to address the Year 2000 Problem with respect to the computer
systems that it uses, and to obtain assurances that comparable steps
are being taken by the Portfolios' other major service providers. At
this time, however, there can be no assurances that these steps will
be sufficient to avoid any adverse impact on the Portfolios.
PERFORMANCE INFORMATION
U.S. GOVERNMENT PORTFOLIO
The chart below shows the changes in annual total returns for the U.S.
Government Portfolio for the last 10 calendar years. The information provides
some indication of the risks of investing in the Portfolio by showing changes in
the Portfolio's performance from year to year. Of course, past performance is
not necessarily an indicator of how the Portfolio will perform in the future.
5
<PAGE>
U.S. GOVERNMENT PORTFOLIO
ANNUAL RETURNS FOR EACH OF THE LAST TEN CALENDAR YEARS
(GRAPHIC OMITTED)
PLOT POINTS FOLLOW:
1988 7.18%
1989 8.96%
1990 7.86%
1991 5.73%
1992 3.38%
1993 2.82%
1994 3.82%
1995 5.51%
1996 4.99%
1997 5.12%
<PAGE>
The total return for the U.S. Government Portfolio for the nine months ended
September 30, 1998 was 3.85%. Over the past 10 calendar years, the highest
quarter total return was 2.31% (quarter ended June 30, 1989). Over the past 10
calendar years, the lowest quarter total return was 0.69% (quarter ended March
31, 1993).
The table below shows the U.S. Government Portfolio's average annual total
returns for the past 1, 5 and 10 calendar years.
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
U.S. Government Portfolio 5.12% 4.45% 5.52%
You may call (800) 336-9970 to obtain the Portfolio's current 7-day yield.
PLAIN TALK
----------------------------------------------------------------------
WHAT IS YIELD?
Yield is a measure of the income (interest) earned by the securities
in the fund's portfolio and paid to shareholders over a specified time
period. The annualized yield is expressed as a percentage of the
offering price per share on a specified date.
----------------------------------------------------------------------
MONEY MARKET PORTFOLIO
The chart below shows the changes in annual total returns for the Money Market
Portfolio for the last 10 calendar years. The information provides some
indication of the risks of investing in the Portfolio by showing changes in the
Portfolio's performance from year to year. Of course, past performance is not
necessarily an indicator of how the Portfolio will perform in the future.
6
<PAGE>
MONEY MARKET PORTFOLIO
ANNUAL RETURNS FOR EACH OF THE LAST TEN CALENDAR YEARS
(GRAPHIC OMITTED)
PLOT POINTS FOLLOW:
1988 7.39%
1989 9.14%
1990 8.04%
1991 6.05%
1992 3.61%
1993 2.86%
1994 3.89%
1995 5.63%
1996 5.08%
1997 5.22%
<PAGE>
The total return for the Money Market Portfolio for the nine months ended
September 30, 1998 was 3.90%. Over the past 10 calendar years, the highest
quarter total return was 2.36% (quarter ended June 30, 1989). Over the past 10
calendar years, the lowest quarter total return was 0.70% (quarter ended June
30, 1993).
The table below shows the Money Market Portfolio's average annual total returns
for the past 1, 5 and 10 calendar years.
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Money Market Portfolio 5.22% 4.53% 5.68%
You may call (800) 336-9970 to obtain the Portfolio's current 7-day yield.
TAX-EXEMPT FUND
The chart below shows the changes in annual total returns for the Tax-Exempt
Fund for the last 10 calendar years. The information provides some indications
of the risks of investing in the Tax-Exempt Fund's performance from year to
year. Of course, past performance is not necessarily an indicator of how the
Portfolio will perform in the future.
7
<PAGE>
TAX-EXEMPT FUND
ANNUAL RETURNS FOR EACH OF THE LAST TEN CALENDAR YEARS
(GRAPHIC OMITTED)
PLOT POINTS FOLLOW:
1988 4.96%
1989 6.07%
1990 5.57%
1991 4.15%
1992 2.66%
1993 1.98%
1994 2.42%
1995 3.47%
1996 3.01%
1997 3.15%
<PAGE>
The total return for the Tax-Exempt Fund for the nine months ended September 30,
1998 was 2.27%. Over the past 10 calendar years, the highest quarter total
return was 1.61% (quarter ended June 30, 1989). Over the past 10 calendar years,
the lowest quarter total was 0.47% (quarter ended March 31, 1994).
The table below shows the Tax-Exempt Fund's average annual total returns for the
past 1, 5 and 10 calendar years.
1 YEAR 5 YEAR 10 YEAR
------ ------ -------
Tax-Exempt Fund 3.15% 2.80% 3.73%
You may call (800) 336-9970 to obtain the Portfolio's current 7-day yield.
FEES AND EXPENSES
The table below describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted U.S. GOVERNMENT MONEY MARKET
from Portfolio assets PORTFOLIO PORTFOLIO TAX-EXEMPT FUND
- -------------------------- --------------- ------------ ---------------
Management fees 0.47% 0.47% 0.47%
Distribution (12b-1) fees 0.05% 0.05% 0.05%
Other Expenses 0.06% 0.04% 0.07%
TOTAL ANNUAL OPERATING
EXPENSES 1 0.58% 0.56% 0.59%
PLAIN TALK
----------------------------------------------------------------------
WHAT ARE FUND EXPENSES?
Unlike an index, every mutual fund has operating expenses to pay for
professional advisory, distribution, administration and custody
services. The Portfolio's expenses in the table above are shown as a
percentage of the Portfolio's net assets. These expenses are deducted
from Portfolio assets.
----------------------------------------------------------------------
- ---------------------------
1 While the Distribution (12b-1) Plan provides for reimbursement to the
distributor of up to 0.20% of each Portfolio's average net assets, the Boards of
Trustees have authorized annual payments of up to 0.05% of each Portfolio's
average net assets for the current fiscal year. Actual 12b-1 and total annual
operating expenses were 0.01% and 0.54% for the U.S. Government Portfolio; 0.02%
and 0.53% for the Money Market Portfolio; and 0.01% and 0.55% for the Tax-Exempt
Fund, respectively for the fiscal year ended September 30, 1998. For more
information see "Rule 12b-1 Fees".
8
<PAGE>
EXAMPLE
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The table below
shows what you would pay if you invested $10,000 over the various time frames
indicated. The example assumes that:
(BULLET) you reinvested all dividends
(BULLET) the average annual return was 5%
(BULLET) the Portfolio's maximum total operating expenses are charged and
remain the same over the time periods
(BULLET) you redeemed all of your investment at the end of the time period.
Although your actual cost may be higher or lower, based on these assumptions,
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
U.S. Government Portfolio $59 $186 $324 $726
Money Market Portfolio $57 $179 $313 $701
Tax-Exempt Fund $60 $189 $329 $738
THE ABOVE EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF
A PORTFOLIO'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
Portfolio's financial performance for the past 10 years. Certain information
reflects financial results for a single share of a Portfolio. The total returns
in the table represent the rate that a shareholder would have earned on an
investment in a Portfolio (assuming reinvestment of all dividends). This
information has been audited by Ernst & Young LLP, whose report, along with
each Fund's financial statements, is included in the Annual Report, which is
available without charge upon request.
9
<PAGE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT PORTFOLIO
FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
- ------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<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 0.051 0.050 0.050 0.052 0.033 0.028 0.038 0.062 0.078 0.086
Distributions:
From net investment
income (0.051) (0.050) (0.050) (0.052) (0.033) (0.028) (0.038) (0.062) (0.078) (0.086)
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 5.19% 5.07% 5.08% 5.37% 3.32% 2.83% 3.88% 6.41% 8.05% 8.91%
Ratios (to average net assets)/Supplemental Data:
Expenses 0.54% 0.55% 0.55% 0.55% 0.53% 0.53% 0.54% 0.53% 0.54% 0.52%
Net investment income 5.06% 4.96% 4.97% 5.25% 3.27% 2.79% 3.84% 6.22% 7.76% 8.55%
Net assets at end of year
(000 omitted) $802,153 $378,475 $341,426 $306,096 $336,766 $386,067 $409,534 $479,586 $364,423 $230,804
</TABLE>
- -----------------------------------------
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
For the Fiscal years Ended September 30,
- ------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<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 0.051 0.051 0.050 0.054 0.033 0.029 0.041 0.065 0.079 0.087
Distributions:
From net investment
income (0.051) (0.051) (0.050) (0.054) (0.033) (0.029) (0.041) (0.065) (0.079) (0.087)
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 5.26% 5.17% 5.17% 5.50% 3.37% 2.92% 4.15% 6.73% 8.23% 9.09%
Ratios (to average net assets)/Supplemental Data:
Expenses 0.53% 0.54% 0.53% 0.54% 0.53% 0.52% 0.52% 0.52% 0.53% 0.52%
Net investment income 5.13% 5.06% 5.03% 5.37% 3.33% 2.88% 4.06% 6.52% 7.92% 8.74%
Net assets at end of year
(000 omitted) $1,702,734 $1,191,271 $980,856 $751,125 $606,835 $49,424 $717,544 $790,837 $766,798 $643,363
- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TAX-EXEMPT FUND
For the Fiscal years Ended September 30,
- ------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<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 0.031 0.030 0.031 0.033 0.021 0.020 0.030 0.045 0.054 0.059
Distributions:
From net investment
income (0.031) (0.030) (0.031) (0.033) (0.021) (0.020) (0.030) (0.045) (0.054) (0.059)
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 3.11% 3.09% 3.11% 3.36% 2.17% 2.07% 3.06% 4.59% 5.58% 6.04%
Ratios (to average net assets)/Supplemental Data:
Expenses 0.55% 0.57% 0.56% 0.54% 0.54% 0.54% 0.54% 0.56% 0.57% 0.57%
Net investment income 3.05% 3.05% 3.08% 3.29% 2.13% 2.05% 3.06% 4.49% 5.45% 5.88%
Net assets at end of year
(000 omitted) $392,610 $280,864 $237,185 $318,213 $388,565 $405,517 $327,098 $353,271 $243,146 $258,713
- -----------------------------------------
</TABLE>
<PAGE>
MANAGEMENT OF THE FUNDS
The Boards of Trustees supervise the management, activities and affairs of the
Funds and have approved contracts with various financial organizations to
provide, among other services, the day-to-day management required by the
Portfolios and their shareholders.
PLAIN TALK
----------------------------------------------------------------------
WHAT IS AN INVESTMENT ADVISER?
The investment adviser makes investment decisions for a Portfolio and
continuously reviews, supervises and administers the Portfolio's
investment program. The Board of Trustees supervises the investment
adviser and establishes policies that the adviser must follow in its
management activities.
----------------------------------------------------------------------
INVESTMENT MANAGER
Rodney Square Management Corporation ("RSMC"), the Funds' investment adviser and
administrator, is located at 1100 North Market Street, Wilmington, Delaware
19890. RSMC is a wholly owned subsidiary of Wilmington Trust Company ("WTC"),
which is wholly owned by Wilmington Trust Corporation. RSM 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. As of October 31,
1998, the aggregate assets of the investment companies managed by RSMC totaled
approximately $3.2 billion.
Each Portfolio pays a monthly fee to RSMC at the annual rate of 0.47% of the
Portfolio's first $1 billion of average daily net assets; 0.43% of the
Portfolio's next $500 million of average daily net assets; 0.40% of the
Portfolio's next $500 million of average daily net assets; and 0.37% of the
Portfolio's average daily net assets in excess of $2 billion, as determined at
the close of business on each day throughout the month. Out of its fee, RSMC
makes payments to PFPC Inc. for the provisions of sub-administration, accounting
and transfer agency services and to WTC for provision of custodial services. For
the fiscal year ended September 30, 1998, RSMC received the following fees, as a
percentage of each Portfolio's average net assets:
U.S. Government Portfolio 0.47%
Money Market Portfolio 0.47%
Tax-Exempt Fund 0.47%
SERVICE PROVIDERS
The chart below provides information on the Funds' primary service providers.
13
<PAGE>
Asset Management Shareholder Services
- ------------------------ ------------------------ ------------------------
INVESTMENT MANAGER TRANSFER AGENT
AND ADMINISTRATOR PFPC INC.
RODNEY SQUARE 400 BELLEVUE PARKWAY
MANAGEMENT CORPORATION WILMINGTON, DE
RODNEY SQUARE NORTH 19809
1100 N. MARKET STREET
WILMINGTON, DE Handles shareholder
19890-0001 services, including
recordkeeping and
Manages each Portfolio's statements, distribution
business and investment of dividends and
activities. processing of buy
and sell requests.
- ------------------------ ------------------------ ------------------------
Fund Operations Asset Safe Keeping
- ------------------------ ------------------------ -------------------------
SUB-ADMINISTRATOR AND CUSTODIANS
ACCOUNTING AGENT WILMINGTON TRUST COMPANY
PFPC INC. RODNEY SQUARE NORTH
400 BELLEVUE PARKWAY 1100 N. MARKET STREET
WILMINGTON, DE 19809 WILMINGTON, DE 19890-0001
PNC BANK N.A.
200 STEVENS DRIVE
Provides facilities, FUND LESTER, PA 19113
equipment and personnel
to carry out Hold each Portfolio's
administrative services assets, settle all
related to each portfolio trades and
Portfolio and calculates collect most of the
each Portfolio's NAV the valuation data
and dividends. required for calculating
each Portfolio's NAV.
- ------------------------ ------------------------ -------------------------
Distribution
------------------------
DISTRIBUTOR
PROVIDENT DISTRIBUTORS INC.
FOUR FALL CORPORATE CENTER
WEST CONSHOHOCKEN, PA
19428
Distributes each
Portfolio's Shares.
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<PAGE>
SHAREHOLDER INFORMATION
PRICING OF SHARES
Each Portfolio uses its best effort to maintain its $1 constant share price and
values its securities at cost. This involves valuing a security at its cost and
therafter assuming a constant amortization to maturity of any discount or
premium, regardless of fluctuating interest rates on the market value of the
security. 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 each Fund.
PLAIN TALK
----------------------------------------------------------------------
WHAT IS THE NET ASSET VALUE or "NAV"?
NAV = Assets - Liabilities
--------------------
Outstanding Shares
----------------------------------------------------------------------
PFPC determines the net asset value (the "NAV") per share of each Portfolio as
of , Eastern time, on each Business Day (a day that the New York Stock Exchange,
the Transfer Agent and the Philadelphia branch of the Federal Reserve Bank are
open for business). The NAV is calculated by adding the value of all securities
and other assets in a portfolio, deducting its liabilities and dividing the
balance by the number of outstanding shares in that Portfolio.
Shares will not be priced on those days the Funds are closed. As of the date of
this prospectus, those days are:
New Year's Day Memorial Day Thanksgiving Day
Martin Luther King, Jr. Day Independence Day Christmas Day
President's Day Columbus Day
Good Friday Veterans Day
PURCHASE OF SHARES
PLAIN TALK
----------------------------------------------------------------------
HOW TO PURCHASE SHARES:
(BULLET) Directly by mail or by wire
(BULLET) As a client of WTC through a trust account or a corporate
cash management account
(BULLET) As a client of a Service Organization
----------------------------------------------------------------------
Portfolio shares are offered on a continuous basis and are sold without any
sales charges. The minimum initial investment in any Portfolio is $1,000, but
additional investments may be made in any amount. You may purchase shares
directly from Provident Distributors Inc. ("PDI"), by mail or by wire, as
specified below.
You may also purchase shares if you are a client of WTC through your trust or
corporate cash management accounts. If you are a client of an institution (such
as a bank or broker-dealer) that has entered into a servicing agreement with the
Funds' distributor ("Service Organization") you may also purchase shares through
such Service Organization. You should also be aware that you may be charged a
fee by WTC or the Service Organization in connection with your investment in the
Portfolios. If you wish to purchase Portfolio shares through your account at WTC
or a Service Organization, you should contact that entity directly for
information and instructions on purchasing shares.
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<PAGE>
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 that you have selected, along with a completed application (included
at the end of this prospectus). Send the check and application to The Rodney
Square Fund or The Rodney Square Tax-Exempt Fund, c/o PFPC Inc., P.O. Box 8951,
Wilmington, DE 19899-9752. Any purchase orders sent by overnight mail should be
sent to The Rodney Square Fund or The Rodney Square Tax-Exempt Fund, c/o PFPC,
Inc., 400 Bellevue Parkway, Wilmington, DE 19809. If a subsequent investment is
being made, the check should also indicate your Portfolio account number. When
you make purchases 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 canceled and you will be responsible for any losses or fees
incurred in that transaction.
BY WIRE: You may purchase shares by wiring federal funds readily available. You
must advise PFPC at (800) 336-9970 before making a purchase by wire, and if
making an initial purchase, to also obtain an account number. Once you have an
account number, you should instruct your bank to wire federal funds to PFPC, c/o
PNC Bank, Philadelphia, PA, ABA # 031-0000-53, attention: The Rodney Square Fund
or The Rodney Square Tax-Exempt Fund, DDA # 86-0172-6591. Be sure to also
include 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
the Transfer Agent at the address above. If you are making a subsequent
purchase, the wire should also indicate your Portfolio account number.
INDIVIDUAL RETIREMENT ACCOUNTS: You may purchase shares of the Portfolios of the
Rodney Square Fund for a tax-deferred retirement plan such as an individual
retirement account ("IRA"). To order an application for an IRA and a brochure
describing a Portfolio IRA, call the Transfer Agent at (800) 336-9970. PNC Bank,
as custodian for each IRA account receives an annual fee of $10 per account,
paid directly to PNC by the IRA shareholder. If the fee is not paid by the due
date, the Portfolio shares owned by the IRA will be redeemed automatically as
payment.
AUTOMATIC INVESTMENT PLAN: You may purchase Portfolio shares through an
Automatic Investment Plan ("AIP"). Under the AIP, the Transfer Agent, at regular
intervals, will automatically debit your bank checking account in an amount of
$50 or more (after the $1,000 minimum initial investment). You 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 12:00 p.m. Eastern time for the Tax-Exempt Fund and at 2:00 p.m.
Eastern time for the Rodney Square Fund, on or about the 20th day of the
16
<PAGE>
month. For an application for the Automatic Investment Plan, check the
appropriate box of the application or call the Transfer Agent 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
through those organizations.
ADDITIONAL PURCHASE INFORMATION: Investments in a Portfolio are accepted on the
Business Day that federal funds are deposited for your account on or before
12:00 p.m. Eastern time for the Tax-Exempt Fund and at 2:00 p.m. Eastern time
for the Rodney Square Fund. Monies immediately convertible to federal funds are
deposited for your account on or before 12:00 p.m. Eastern time for the
Tax-Exempt Fund and at 2:00 p.m. Eastern time for the Rodney Square Fund, or
checks deposited for your account have been converted to federal funds (usually
within two Business Days 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 and time of
investment.
Any purchase order may be rejected if a Portfolio determines that accepting the
order would not be in the best interest of the Portfolio or its shareholders.
It is the responsibility of WTC or the Service Organization to transmit orders
for the purchase of shares by its customers to the Transfer Agent and to deliver
required funds on a timely basis, in accordance with the procedures stated
above.
For information on other ways to purchase shares, please refer to the Statement
of Additional Information.
REDEMPTION OF SHARES
PLAIN TALK
----------------------------------------------------------------------
HOW TO REDEEM (SELL) SHARES:
(BULLET) By mail
(BULLET) By telephone
(BULLET) By check
(BULLET) Through a Systematic Withdrawal Plan
----------------------------------------------------------------------
You may sell your shares on any Business Day by mail, telephone or check, as
described below. Redemptions are effected at the NAV next determined after the
Transfer Agent has received your redemption request. There is no fee when
Portfolio 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 following acceptance by the Transfer Agent of redemption
instructions, but never 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 the Transfer Agent 12:00
p.m. Eastern time for the Tax-Exempt Fund and at 2:00 p.m. Eastern time for the
Rodney Square Fund or the next Business Day if received after 12:00 p.m. Eastern
time for the Tax-Exempt Fund and at 2:00 p.m. Eastern time for the Rodney Square
Fund or on a non-Business Day), but never later than 7 days following such
receipt and acceptance. If you purchased your shares through an account at
17
<PAGE>
WTC or a Service Organization, you should contact WTC or the Service
Organization for information relating to redemptions. The Portfolio's name and
your account number should accompany any redemption requests.
BY MAIL: If you redeem your shares by mail, you should submit written
instructions with a guarantee of your signature by an eligible institution
acceptable to the Transfer Agent. Eligible institutions include a domestic bank
or trust company, broker dealer, clearing agency or savings association, who are
participants in a medallion program recognized by the Securities Transfer
Association. The three recognized medallion programs are Securities Transfer
Agents Medallion Program ("STAMP"), Stock Exchanges Medallion Program ("SEMP"),
and New York Stock Exchange, Inc. Medallion Signature Program ("MSP"). Signature
guarantees that are not part of these programs will not be accepted. The written
instructions and guarantees should be mailed to: The Rodney Square Fund or The
Rodney Square Tax-Exempt Fund, c/o PFPC, Inc., P.O. Box 8951, 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 PFPC, Inc., 400
Bellevue Parkway, Wilmington, DE 19809. You must indicate the Portfolio name,
your account number and your name.
BY TELEPHONE: If you prefer to redeem your shares by telephone you may elect to
do so. However there are certain risks. The Funds have certain safeguards and
procedures to confirm the identity of callers and to confirm that the
instructions communicated are genuine. If such procedures are followed, you will
bear the risk of any losses.
BY CHECK: You 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 your
Portfolio account to cover the amount of the check. This procedure enables you
to continue receiving dividends on those shares until the check is presented for
payment. Because the aggregate amount of Portfolio shares owned is likely to
change each day, you should not attempt to redeem all shares held in your
account by using the checkwriting procedure. Charges will be imposed for
specially imprinted checks, business checks, copies of canceled 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 the Transfer Agent reserve the right
to terminate or alter the checkwriting service at any time. The Transfer Agent
also reserves the right to impose a service charge in connection with the
checkwriting service. If you are interested in the check writing service,
contact the Transfer Agency for further information. 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.
If the shares to be redeemed represent an investment made by check, each
Portfolio 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).
18
<PAGE>
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. Proceeds may also 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 at least 60 days. In
order to authorize the Transfer Agent 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 that
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 a corporation, other organization, trust,
fiduciary or other institutional investor holds the Portfolio shares.
SYSTEMATIC WITHDRAWAL PLAN: If you own shares of a Portfolio with a value of
$10,000 or more you may participate in the Systematic Withdrawal Plan ("SWP").
Under the SWP, you may automatically redeem a portion of your account monthly,
bimonthly, quarterly, semiannually or annually. The minimum withdrawal available
is $100. The redemption of Portfolio shares will be effected at NAV at 12:00
p.m. Eastern time for the Tax-Exempt Fund and at 2:00 p.m. Eastern time for the
Rodney Square Fund on or about the 25th day of the month. This service is
generally not available for WTC trust accounts or certain Service Organizations,
because a similar service is provided through those organizations.
EXCHANGE OF SHARES
PLAIN TALK
----------------------------------------------------------------------
WHAT IS AN EXCHANGE OF SHARES?
An exchange of shares allows you to move your money from one Portfolio
to another Portfolio within the Rodney Square family of funds.
----------------------------------------------------------------------
You may exchange all or a portion of your shares in a Portfolio for shares of
another Portfolio within the Rodney Square family of funds that is currently
being offered. The other Rodney Square funds are:
The Rodney Square Strategic Fixed-Income Fund:
The Rodney Square Short/Intermediate Bond Portfolio
The Rodney Square Intermediate Bond Portfolio
The Rodney Square Municipal Bond Portfolio
The Rodney Square Strategic Equity Fund:
The Rodney Square Large Cap Growth Equity Portfolio
The Rodney Square Large Cap Value Equity Portfolio
The Rodney Square Small Cap Equity Portfolio
The Rodney Square International Equity Portfolio.
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<PAGE>
Redemption of shares through an exchange will be effected at the NAV per share
next determined after the Transfer Agent receives your request. A purchase of
shares through an exchange will be effected at the NAV per share determined at
that time or as next determined thereafter. The NAV of the Money Market
Portfolios is determined at 12:00 p.m. Eastern time for the Tax-Exempt Fund and
at 2:00 p.m. Eastern time for the Rodney Square Fund on each Business Day. The
NAV of The Rodney Square Strategic Fixed-Income Fund and The Rodney Square
Strategic Equity Fund is determined at the close of regular trading on the New
York Stock Exchange (currently, 4:00 p.m. Eastern time), on each Business Day.
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 account of less than $500.
To obtain prospectuses of the other Rodney Square funds, you may call (800)
336-9970. To obtain more information about exchanges, or to place exchange
orders, contact the Transfer Agent, 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 may terminate or modify the exchange
offer described here and will give you 60 days' notice of such termination or
modification. 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.
DIVIDENDS
As a shareholder of a Portfolio, you are entitled to dividends arising from the
net investment income and net realized short-term capital gains, if any, earned
on the investments held by the Portfolios. Generally, each Portfolio declares
its net income daily. Each Portfolio expects to distribute any net realized
gains once a year.
Each Portfolio's net investment income is determined by PFPC on each day that
the Portfolio's NAV is calculated. Dividends are payable to the shareholders of
record at the time the dividends are declared (including holders of shares being
purchased, but excluding holders of shares being redeemed). Dividends declared
by a Portfolio are accrued throughout the month and are paid to you no later
than 7 days after the end of each month.
Dividends are automatically reinvested and are paid in the form of additional
Portfolio shares unless you have elected to receive dividends in cash. If you
are a client of WTC through your trust or corporate cash management account,
dividends may be reinvested by WTC on the next Business Day after the dividend
payment, resulting in the loss of a day's interest on the day the dividend is
paid, unless you have elected to receive the dividends in cash. 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
your dividends until they are reinvested.
TAXES
As long as a Portfolio meets the requirements for being a "regulated investment
company", which each Portfolio has done in the past and intends to do in the
future, it pays no Federal
20
<PAGE>
income tax on the earnings it distributes to shareholders. Each Portfolio will
notify you following the end of the calendar year of the amount of dividends
paid that year.
Dividends you receive from a Portfolio of the Rodney Square Fund, whether
reinvested in Portfolio shares or taken as cash, are generally taxable to you as
ordinary income.
You will not recognize any gain or loss on the sale (redemption) or exchange of
shares of a Portfolio so long as that Portfolio maintains a stable price of
$1.00 a share.
Dividend distributions by the Tax-Exempt Fund of the excess of its interest
income on tax-exempt securities over certain amounts disallowed as deductions
("exempt-interest dividends") may be treated by you as interest excludable from
your gross income.
STATE AND LOCAL TAXES: 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. You may be exempt from state
and local taxes on the Tax-Exempt Fund's dividend distributions of interest
income derived from obligations of the state and/or municipalities of the state
in which you reside, but you generally will be taxed on income derived from
obligations of other jurisdictions. YOU SHOULD CONSULT YOUR TAX ADVISERS
CONCERNING STATE AND LOCAL TAX LAWS, WHICH MAY HAVE DIFFERENT CONSEQUENCES FROM
THOSE OF THE FEDERAL INCOME TAX LAW.
DISTRIBUTION ARRANGEMENTS
PDI manages the Portfolios' distribution efforts and provides assistance and
expertise in developing marketing plans and materials, enters into dealer
agreement with broker-dealers to sell shares and provides shareholder support
services, directly or through affiliates.
RULE 12B-1 FEES
PLAIN TALK
----------------------------------------------------------------------
WHAT ARE 12b-1 FEES?
12b-1 fees, charged by some funds, are deducted from fund assets to
pay for marketing and advertising expenses or, more commonly, to
compensate sales professionals.
----------------------------------------------------------------------
Each Portfolio has adopted a plan under Rule 12b-1 that allows the Portfolio
reimburse PDI for distribution expenses incurred in connection with the
distribution efforts described above. Each plan permits reimbursement in an
amount up to 0.20% of a Portfolio's average net assets. For the current fiscal
year, the Boards of Trustees have authorized annual payments of up to 0.05% of
each Portfolio's average net assets to reimburse PDI for making payments to
certain Service Organizations who have sold Portfolio shares and for other
distribution expenses.
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FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ON THE PORTFOLIOS, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: Contain performance data and information on
portfolio holdings and operating results for a Fund's most recently completed
fiscal year or half-year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): Provides a complete technical and
legal description of a Portfolio's policies, investment restrictions, risks, and
business structure. This prospectus incorporates the SAI by reference.
Copies of these documents and answers to questions about the Portfolios may be
obtained without charge by contacting:
The Rodney Square Fund or The Rodney Square Tax-Exempt Fund
c/o PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, Delaware 19809
(800) 336-9970
9:00 a.m. to 5:00 p.m., Eastern time
Information about the Funds (including the SAI) can be reviewed and copied at
the Public Reference Room of the Securities and Exchange Commission in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
DC, 20549-6009. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Funds may be viewed on-screen or downloaded from the SEC's Internet
site at http://www.sec.gov. The investment company registration numbers for The
Rodney Square Fund and The Rodney Square Tax-Exempt Fund are 811-3406 and
811-4372, respectively.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING CHANGES TO EXISTING
ACCOUNTS, PURCHASING, EXCHANGING OR REDEEMING SHARES, OR OTHER INVESTOR
SERVICES, PLEASE CALL 1-(800)-336-9970.
22
<PAGE>
THE RODNEY SQUARE FUND
U.S. GOVERNMENT PORTFOLIO
MONEY MARKET PORTFOLIO
THE RODNEY SQUARE TAX-EXEMPT FUND
400 Bellevue Parkway
Wilmington, Delaware 19809
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 29, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Funds' current Prospectus, dated January
29, 1999, as amended from time to time. A copy of the current Prospectus may be
obtained without charge, by writing to Provident Distributors, Inc. ("PDI"),
Four Fall Corporate Center, West Conshohocken, PA 19428, and from certain
institutions such as banks or broker-dealers that have entered into servicing
agreements with PDI or by calling (800) 336-9970.
<PAGE>
TABLE OF CONTENTS
THE FUNDS......................................................................2
INVESTMENT POLICIES............................................................3
DESCRIPTION OF RATINGS.........................................................7
INVESTMENT LIMITATIONS.........................................................8
TRUSTEES AND OFFICERS.........................................................10
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................12
RODNEY SQUARE MANAGEMENT CORPORATION..........................................12
WILMINGTON TRUST COMPANY......................................................13
INVESTMENT MANAGEMENT SERVICES................................................13
DISTRIBUTION AGREEMENT AND RULE 12b-1 PLAN....................................15
ADDITIONAL SERVICE PROVIDERS..................................................16
BROKERAGE ALLOCATION AND OTHER PRACTICES......................................16
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................17
DIVIDENDS.....................................................................18
TAXATION OF THE PORTFOLIOS....................................................18
CALCULATION OF PERFORMANCE INFORMATION........................................19
FINANCIAL STATEMENTS..........................................................24
i
<PAGE>
THE FUNDS
The Rodney Square Fund and the Rodney Square Tax-Exempt Fund (each, a
"Fund" and collectively, the "Funds") are diversified, open-end, management
investment companies established under Massachusetts law by Declaration of Trust
on February 16, 1982 and August 1, 1985, respectively and registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). 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 (each a "Portfolio"). The authorized shares of beneficial
interest in the Rodney Square Tax-Exempt Fund consist of one series or portfolio
(also a "Portfolio" and together with the U.S. Government Portfolio and the
Money Market Portfolio, the "Portfolios"). Each Fund's Board of Trustees is
empowered by the respective Declarations of Trust and the Bylaws to establish
additional classes and series of shares for each Fund, although the Board does
not have 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 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.
The Funds do not hold annual meetings of shareholders. 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 a Fund's outstanding shares.
SHAREHOLDER LIABILITY. The Funds are entities 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. Each of the Declarations of Trust, however,
contains an express disclaimer of shareholder liability for acts or obligations
of a Fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by or on behalf of
the Trust or the Trustees relating to a Fund that is issued by or on behalf of a
Fund or the Trustees. The Declarations of Trust provide 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 Declarations
of Trust also provide 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.
LIMITATION OF TRUSTEES' LIABILITY. Each Fund's Declaration of Trust
provides that a Trustee 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.
DESCRIPTION OF SHARES. The shares of each Portfolio are fully paid and
nonassessable. The assets 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 a Fund.
Expenses with respect to the Portfolios are allocated in proportion to the net
assets of the respective Portfolio except where allocations of direct expenses
can otherwise be fairly made. The officers of the Funds, subject to the general
supervision of the Boards of Trustees, have the power to determine which
liabilities are allocable to a given Portfolio or which are general or allocable
to the Portfolios.
2
<PAGE>
INVESTMENT POLICIES
The following information supplements the information concerning each
Portfolio's investment objective, policies and limitations found in the
Prospectus.
Each Portfolio has adopted 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 "Purchase,
Redemption and Pricing of Shares") pursuant to Rule 2a-7 under the 1940 Act. As
conditions of that Rule, each 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 with effective
maturities of 397 days or less; and invests only in securities which are of high
quality as determined by major rating services or, in the case of instruments
which are not rated, of comparable quality as determined by the Portfolio's
investment manager, Rodney Square Management Corporation ("RSMC"), under the
direction of and subject to the review of each Fund's Board of Trustees.
Although not required, typically over 90% of each Portfolio's assets are rated
A-1+ by Standard & Poor's ("S&P"), P-1 by Moody's Investors Service, Inc.
("Moody's"), or F-1 by Fitch IBCA. Inc. ("Fitch") or a comparable rating by an
equivalent rating agency.
BANK OBLIGATIONS. The Money Market Portfolio may invest in U.S.
dollar-denominated obligations of major U.S. and foreign 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 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 audited financial statements) in
excess of $100,000,000 (moreover, it is the policy of RSMC to require that the
bank have assets in excess of $5 billion). There may be less publicly available
information about the obligations of foreign banks and other foreign issuers
than domestic issuers, and foreign issuers may not be subject to the same
accounting, auditing and financial record keeping standards as domestic issuers.
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. A brief
description of some typical types of bank obligations follows:
(BULLET) BANKERS' ACCEPTANCES. The Money Market Portfolio and the
Tax-Exempt Portfolio may invest in bankers' acceptances,
which are credit instruments evidencing the obligation of a
bank to pay a draft that 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.
3
<PAGE>
(BULLET) CERTIFICATES OF DEPOSIT. The Money Market Portfolio and the
Tax-Exempt Portfolio may invest in 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).
(BULLET) TIME DEPOSITS. The Money Market Portfolio may invest in time
deposits, which are bank deposits for fixed periods of time.
CERTIFICATES OF PARTICIPATION. The Tax-Exempt Portfolio may invest in
certificates of participation, which 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.
COMMERCIAL PAPER. The Money Market Portfolio and the Tax-Exempt
Portfolio may invest in commercial paper, which 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. The Money Market Portfolio may invest in
corporate obligations, which are bonds or notes issued by corporations and other
business organizations in order to finance their long-term credit needs. The
Portfolio's investments in these obligations will be limited to such obligations
that have remaining maturities of 397 days.
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.
ILLIQUID SECURITIES. Each Portfolio may not invest more than 10% of the
value of its net assets in securities that at the time of purchase have legal or
contractual restrictions on resale or are otherwise illiquid. Securities are
deemed illiquid if they are not readily marketable and include repurchase
agreements having a maturity of longer than 7 days.
Each 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 Portfolio's 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).
INVESTMENT COMPANY SECURITIES. Each Portfolio may invest in the
securities of other open-end investment companies that seek to maintain a stable
net asset value. Each Portfolio may invest in such securities within the limits
prescribed by the 1940 Act. These limitations currently provide, in part, that a
Portfolio may purchase shares of an investment company unless a) such a purchase
would cause the Portfolio to own in the aggregate more than 3% of the total
outstanding voting stock of the investment company or b) such a purchase would
cause the Portfolio to have more than 5% of its total assets invested in the
investment company or more than 10% of its total assets invested in the
aggregate in all such investment companies. In addition to a Portfolio's
expenses, including various fees, as a shareholder in an
4
<PAGE>
investment company, the Portfolio would bear its pro rata portion of the
investment company's expenses, including advisory fees.
MUNICIPAL SECURITIES. The Money Market Portfolio and the Tax-Exempt
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
S&P, Aa, MIG-1/VMIG-1 or P-1 by Moody's, or at least AA or F-1 by Fitch, 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 Portfolios to their respective shareholders may not be
tax-exempt. A brief description of some typical types of municipal securities
follows:
(BULLET) GENERAL OBLIGATION BONDS are backed by the taxing power of
the issuing municipality and are considered the safest type
of municipal bond.
(BULLET) REVENUE BONDS are backed by the revenues of a specific
project or facility - tolls from a toll-bridge, for example.
(BULLET) 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.
(BULLET) 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.
(BULLET) 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.
(BULLET) INDUSTRIAL DEVELOPMENT BONDS ("IDBs) and PRIVATE ACTIVITY
BONDS ("PAB's") are specific types of revenue bonds issued on
or behalf of public authorities to finance various privately
operated facilities, such as solid waste facilities and
sewage plants. PABs generally are such bonds issued after
April 15, 1986. These obligations are included within the
term "municipal bonds" if the interest paid on them is exempt
from federal income tax in the opinion of the bond issuer's
counsel. IDBs and PABs are in most case revenue bonds and
thus are not payable from the unrestricted revenues of the
issuer. The credit quality of the IDBs and PABs 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.
(BULLET) 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 and construction loan
notes.
(BULLET) CONSTRUCTION LOAN NOTES are sold to provide construction
financing. After successful completion and acceptance, many
projects receive permanent financing through the Federal
Housing Administration by way of "Fannie Mae" (the Federal
National Mortgage Association) or "Ginnie Mae" (the
Government National Mortgage Association).
(BULLET) PUT BONDS are municipal bonds which give the holder the right
to sell the bond back to the issuer or a third party at a
specified price and exercise date, which is typically well in
advance of the bond's maturity date.
5
<PAGE>
REPURCHASE AGREEMENTS. Each Portfolio may invest in repurchase
agreements. These 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 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 to be
satisfactory by RSMC.
SECURITIES LENDING. 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 a Portfolio will in no event exceed one-third of
that Portfolio's total assets and will be secured by 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.
STANDBY COMMITMENTS. The Money Market Portfolio may invest in standby
commitments. It is expected that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary and advisable, the Money Market Portfolio may pay for standby
commitments either separately in cash or by paying a higher price for the
obligations acquired subject to such a commitment (thus reducing the yield to
maturity otherwise available for the same securities). Standby commitments
purchased by the Money Market Portfolio will be valued at zero in determining
net asset value and will not affect the valuation of the obligations subject to
the commitments. Any consideration paid for a standby commitment will be
accounted for as unrealized depreciation and will be amortized over the period
the commitment is held by the Money Market Portfolio.
U.S. GOVERNMENT OBLIGATIONS. Each Portfolio may invest in debt
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. 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. This support can range from securities supported by the full
faith and credit of the United States (for example, securities of the Government
National Mortgage Association), 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,
Tennessee Valley Authority, Federal Farm Credit Banks and the Federal Home Loan
Banks. 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. Each Portfolio may invest in
variable and floating rate securities which 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
6
<PAGE>
the holder the right to demand prepayment of the principal amount of the
security prior to maturity. The demand feature is usually 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 SECURITIES. Each Portfolio may purchase securities 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. A 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 Portfolio will be established at the Fund's custodian bank, into which
liquid, unencumbered daily mark-to-market assets equal to the amount of the
above commitments will be deposited. If the market value of the deposited assets
declines, additional assets 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 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.
YIELDS AND RATINGS OF SECURITIES. The yields on the securities in which
the Portfolios may 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 rating of the issue. The ratings of Moody's, S&P and
Fitch 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 a
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, a Fund's
Board of Trustees, will consider whether the Portfolio should continue to hold
the obligation.
DESCRIPTION OF RATINGS
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:
(BULLET) Leading market position in well established industries.
(BULLET) High rates of return on funds employed.
(BULLET) Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
(BULLET) Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
(BULLET) 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
7
<PAGE>
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 AND MUNICIPAL 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:
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.
DESCRIPTION OF FITCH'S HIGHEST STATE AND MUNICIPAL NOTES RATING:
AAA - Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA.
F-1+ - Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1 - Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
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:
8
<PAGE>
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 the U.S. Government Portfolio and the
Money Market Portfolio may invest more than 25% of their respective
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;
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 a Portfolio's
total assets;
5. underwrite any issue of securities, except to the extent that a
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 to the foregoing, as a fundamental policy, the Tax-Exempt
Portfolio may not issue senior securities, except as appropriate to evidence
indebtedness that the Portfolio is permitted to incur, provided that the
Portfolio may issue shares of additional series or classes that the Trustees may
establish, and provided that the Portfolio's use of options, futures contracts
and options thereon or currency-related contracts, will not be deemed to be
senior securities for this purpose.
In addition, each Portfolio has adopted several non-fundamental
policies, which can be changed by the Board of Trustees of a Fund without
shareholder approval.
As a matter of non-fundamental policy, each Portfolio will not:
1. 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;
9
<PAGE>
2. 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;
3. make short sales of securities or purchase securities on margin (but a
Portfolio may effect short sales against the box and obtain such
credits as may be necessary for the clearance of purchases and sales of
securities);
4. 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.
As a matter of non-fundamental policy, the U.S. Government Portfolio
and the Money Market Portfolio will not 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.
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
Each 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 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 Strategic
Equity Fund and The Rodney Square Strategic Fixed-Income Fund (together with the
Funds, the Rodney Square Family of Funds"). Those Trustees who are "interested
persons" of each 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 (*).
10
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<TABLE>
<CAPTION>
- ------------------------------ -------------- ---------------------------------------------------------------
NAME, ADDRESS AND AGE POSITION(S) PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE YEARS
HELD WITH
THE FUND
- ------------------------------ -------------- ---------------------------------------------------------------
<S> <C> <C>
ERIC BRUCKER Trustee Mr. Brucker has been the Dean of the College of Business,
College of Business, Public Policy and Health at the University of Maine since
Public Policy and Health September 1998. Previously he was the Dean of the School of
University of Maine Management at the University of Michigan since June 1992. He
Orono, ME 04473 was Professor of Economics, Trenton State College from
Age 57 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. He is also a
member of the Detroit Economic Club, Financial Executive
Institute and Leadership Detroit.
- ------------------------------ -------------- ---------------------------------------------------------------
FRED L. BUCKNER Trustee Mr. Buckner has retired as President and Chief Operating
5 Hearth Lane, Officer of Hercules Incorporated (diversified chemicals),
Greenville, DE 19807 positions he held from March 1987 through March 1992. He also
Age 66 served as a member of the Hercules Incorporated Board of
Directors from 1986 through March 1992.
- ------------------------------ -------------- ---------------------------------------------------------------
JOHN J. QUINDLEN Trustee Mr. Quindlen has retired as Senior Vice President-Finance of
313 Southwinds, 1250 E.I. du Pont de Nemours and Company, Inc. (diversified
West Southwinds Blvd. chemicals), a position he held from 1984 to November 30,
Vero Beach, FL 32963 1993. He served as Chief Financial Officer of E.I. du Pont
Age 66 de Nemours and Company, Inc. from 1984 through June 1993. He
also serves as a Director of St. Joe Paper Co. and a Trustee
of Kalmar Pooled Investment Trust.
- ------------------------------ -------------- ---------------------------------------------------------------
*ROBERT J. CHRISTIAN Trustee, Mr. Christian has been Chief Investment Officer of WTC since
Rodney Square North, President February 1996 and Director of RSMC since February 1996. He
1100 N. Market St., was Chairman and Director of PNC Equity Advisors Company, and
Wilmington, DE 19890 President and Chief Investment Officer of PNC Asset
Age 49 Management Group, Inc. from 1994 to 1996. He was Chief
Investment Officer of PNC Bank, N.A. from 1992 to 1996,
Director of Provident Capital Management from 1993 to 1996,
and Director of Investment Strategy PNC Bank, N.A. from 1989
to 1992. He is also a Trustee of LaSalle University and
Peninsula United Methodist Homes. He is also President and a
Trustee of WT Investment Trust and a Director of Clemente
Capital Inc.
- ------------------------------ -------------- ---------------------------------------------------------------
JOSEPH M. FAHEY, JR. Vice Mr. Fahey has been with RSMC since 1984, as a Director and
Rodney Square North, President Secretary of RSMC since 1986 and a Vice President of RSMC
1100 N. Market St., since 1992. He was an Assistant Vice President of RSMC from
Wilmington, DE 19890 1988 to 1992.
Age 41
- ------------------------------ -------------- ---------------------------------------------------------------
JOHN J. KELLEY Vice Mr. Kelley has been Vice President of PFPC Inc. since January
103 Bellevue Parkway President 1998. He was a Vice President of RSMC from 1995 to January
Wilmington, DE 19809 and 1998 and an Assistant Vice President of RSMC from 1989 to
Age 39 Treasurer 1995.
- ------------------------------ -------------- ---------------------------------------------------------------
CARL M. RIZZO Secretary Mr. Rizzo has been Vice President of RSMC since July, 1996.
Rodney Square North, From 1995 to 1996 he was Assistant General Counsel of Aid
1100 N. Market St., Association for Lutherans (a fraternal benefit association);
Wilmington, DE 19890 from 1994 to 1995 Senior Associate Counsel of United Services
Age 47 Automobile Association (an insurance and financial services
firm); and from 1987 to 1994 Special Counsel or
Attorney-Adviser with a federal government agency.
- ------------------------------ -------------- ---------------------------------------------------------------
</TABLE>
11
<PAGE>
The fees and expenses of the Trustees who are not "interested persons"
of each Fund ("Independent Trustees"), as defined in the 1940 Act are paid by
each Portfolio. The following table shows the fees paid during the fiscal year
ended September 30, 1998 to the Independent Trustees for their service to the
Fund and to the Rodney Square Family of Funds. On November 20, 1998, 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.
1998 TRUSTEES FEES
<TABLE>
<CAPTION>
AGGREGATE TOTAL
AGGREGATE COMPENSATION COMPENSATION
COMPENSATION FROM RODNEY FROM THE RODNEY
FROM THE RODNEY SQUARE TAX- SQUARE FAMILY OF
INDEPENDENT TRUSTEE SQUARE FUND EXEMPT FUND FUNDS
<S> <C> <C> <C>
Eric Brucker $8,350 $3,800 $21,638
Fred L. Buckner $8,350 $3,800 $21,638
John J. Quindlen $8,350 $3,800 $21,638
</TABLE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of November 20, 1998, WTC beneficially owned, by virtue of shared or
sole voting or investment power on behalf of its underlying customer accounts,
22% of the shares of the U.S. Government Portfolio, 30% of the shares of the
Money Market Portfolio and 40% of the shares of the Tax-Exempt Fund and may be
deemed to be a controlling person of these Portfolios under the 1940 Act.
As of November 20, 1998, the National Financial Services Corp., Church
Street Station, P.O. Box 3752, New York, NY 10008-3908, owned 6.05% of the Money
Market Portfolio.
RODNEY SQUARE MANAGEMENT CORPORATION
RSMC has served as the Manager of the Rodney Square Fund since October
1, 1985 and of the Rodney Square Tax-Exempt Fund since December 20, 1985. 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 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.
Several affiliates of RSMC are also engaged in the investment advisory
business. Wilmington Trust FSB, a wholly owned subsidiary of WTC, exercises
investment discretion over certain institutional accounts. Wilmington Brokerage
Services Company, a wholly owned subsidiary of WTC, is a registered investment
adviser and a registered broker-dealer.
12
<PAGE>
WILMINGTON TRUST COMPANY
Wilmington Trust Company, the parent of RSMC, serves as Custodian of
the assets of each Fund and is paid for those services by RSMC out of its
management fee from the Fund. Each 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.
Each 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 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 Strategic Equity Fund.
INVESTMENT MANAGEMENT SERVICES
MANAGEMENT AGREEMENTS. RSMC, in its capacity as Manager of the Funds,
serves as adviser and administrator pursuant to separate contracts each dated
August 9, 1991 and amended June 29, 1998 (the "Management Agreements"). For the
services performed by RSMC under the Management Agreements, each Fund pays a
monthly fee to RSMC at the annual rate of 0.47% of each Portfolio's first $1
billion of average daily net assets; 0.43% of each Portfolio's next $500 million
of average daily net assets; 0.40% of each Portfolio's next $500 million of
average daily net assets; and 0.37% of each Portfolio's average daily net assets
in excess of $2 billion, as determined at the close of business on each day
throughout the month. For the fiscal years ended September 30, 1998, 1997 and
1996, RSMC was paid advisory fees and administration fees by the Rodney Square
Fund amounting to $2,692,214, $1,660,206 and $1,718,316, respectively, for the
U.S. Government Portfolio and $6,392,832, $5,069,252 and $4,086,710,
respectively, for the Money Market Portfolio. For the fiscal years ended
September 30, 1998, 1997 and 1996, RSMC was paid advisory fees and
administration fees by the Rodney Square Tax-Exempt Fund amounting to
$1,588,556, $1,325,491 and $1,346,805, respectively.
Under the terms of the Management Agreements, 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 each Fund; (b) prepare and file, if
necessary, reports to shareholders of the Funds 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 each 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 Fund, 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 Fund'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 Funds 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.
13
<PAGE>
The Management Agreements provides that RSMC shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a 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 Agreements 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 Agreements are terminable by a Fund with
respect to a Portfolio (by vote of a 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 Funds
who are affiliated with RSMC and the salaries of all personnel of RSMC
performing services for each Fund relating to research, statistical and
investment activities are paid by RSMC.
SUB-ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT.
Under separate Sub-Administration and Accounting Services Agreements,
PFPC, Inc. ("PFPC"), 400 Bellevue Parkway, Wilmington, Delaware 19809, performs
certain administrative and accounting services for each Fund. These services
include preparing shareholder reports, providing statistical and research data,
assisting WTC in compliance monitoring activities, and preparing and filing
federal and state tax returns on behalf of the Fund. In addition, PFPC prepares
and files various reports with the appropriate regulatory agencies and prepares
materials required by the SEC or any state securities commission having
jurisdiction over the Fund. The accounting services performed by PFPC for the
Funds in connection with the matters to which the Sub-Administration and
Accounting Services Agreements relate, except to the extend of a loss resulting
from willful misfeasance, bad faith or gross negligence on their part in the
performance of their obligations and duties under the Sub-Administration and
Accounting Services Agreements.
For the period February 23, 1998 to September 30, 1998, PFPC was paid
accounting services fees amounting to $102,876 for the U.S. Government
Portfolio, $211,102 for the Money Market Portfolio and $67,753 for the
Tax-Exempt Portfolio. PFPC is paid for its sub-administration services out of
RSMC's management fee.
Prior to February 23, 1998, RSMC provided accounting services for each
Fund as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FISCAL YEAR FOR THE FISCAL
OCTOBER 1, 1997 TO ENDED SEPTEMBER 30, YEAR ENDED
FEBRUARY 22, 1998 1997 SEPTEMBER 30, 1996
------------------- ------------------- ------------------
ACCOUNTING SERVICES FEES
PAID TO RSMC
<S> <C> <C> <C>
U.S. Government Portfolio $41,471 $100,648 $103,119
Money Market Portfolio $93,400 $245,714 $203,902
Rodney Square Tax-Exempt Fund $17,877 $ 45,000 $ 45,000
</TABLE>
14
<PAGE>
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN
Provident Distributors, Inc. ("PDI"), Four Fall Corporate Center, West
Conshohocken, PA 19428, serves as the Distributor of the Portfolios' shares
pursuant to separate Distribution Agreements with each Fund. Pursuant to the
terms of the Distribution Agreement, PDI is granted the right to sell the shares
of the Portfolios as agent for the Funds. Shares of the Portfolios are offered
continuously.
Under the terms of the Distribution Agreement, PDI 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").
The Distribution Agreements provide that PDI, 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
Agreements, will not be liable to a Fund or its shareholders for losses arising
in connection with the sale of Portfolio shares.
The Distribution Agreements became effective as of January 1, 1999 and
continue 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 Agreements terminate automatically in the
event of an assignment. Each Agreement is also terminable without payment of any
penalty with respect to any Portfolio (i) by a 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 PDI; or (ii) by PDI on sixty (60) days'
written notice to the Fund.
PDI may be reimbursed for distribution expenses according to each 12b-1
Plan which became effective January 1, 1993. Each 12b-1 Plan provides that PDI
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 PDI ("Service Organizations") and other financial
institutions, including fairly allocable internal expenses of PDI 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 0.05%
of each Portfolio's average net assets to reimburse PDI for making payments to
certain Service Organizations who have sold Portfolio shares and for other
distribution expenses.
Prior to January 1, 1999, Rodney Square Distributors, Inc. ("RSD"),
1100 North Market Street, Wilmington, DE 19890, served as the Distributor of
each Portfolio's shares. For these services, RSD received payments pursuant to
the 12b-1 Plan, described in the table below, for the fiscal year ended
September 30, 1998.
<TABLE>
<CAPTION>
PAYMENTS MADE PURSUANT TO THE 12B-1 PLAN U.S GOVERNMENT MONEY MARKET TAX-EXEMPT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ----------
<S> <C> <C> <C>
Trail Commissions: $16,641 $251,587 $17,081
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
PAYMENTS MADE PURSUANT TO THE 12B-1 PLAN U.S GOVERNMENT MONEY MARKET TAX-EXEMPT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ----------
<S> <C> <C> <C>
Preparation and Distribution of Marketing $37,586 $2,105 $630
Materials:
Total: $54,227 $253,692 17,711
</TABLE>
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 each Fund of the
distribution of its shares, such payments are authorized. Each 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.
ADDITIONAL SERVICE PROVIDERS
INDEPENDENT AUDITORS. Ernst & Young LLP, Suite 4000, 2001 Market
Street, Philadelphia, PA 19103, serves as each Fund's independent auditor,
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.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036, serves as counsel to each 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 19809, serves as each Fund's Custodian.
TRANSFER AGENT. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE
19890-0001, serves as each Fund's Transfer Agent and Dividend Paying Agent.
BROKERAGE ALLOCATION AND OTHER PRACTICES
All portfolio transactions are placed on behalf of each Portfolio by
RSMC pursuant to authority contained in the Management Agreements. 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 a 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. 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
16
<PAGE>
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 Funds.
During the fiscal years ended September 30, 1998, 1997 and 1996, none of the
Portfolios 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, transaction costs are allocated between a Portfolio
and RSMC's other clients participating in the transaction on a pro rata basis
and purchases and sales are normally allocated between the Portfolio and RSMC's
other clients as to amount according to a formula determined prior to the
execution of such transactions.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE OF SHARES. Information regarding the purchase of shares is
discussed in the "Purchase of Shares" section of the Prospectus. Please see the
Prospectus for further information.
REDEMPTION OF SHARES. To ensure proper authorization before redeeming
shares of the Portfolios, the Transfer Agent 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 Funds will act as quickly as possible to
minimize delay.
A shareholder's right to redeem shares and to receive payment therefore
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 a 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.
Each 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. Each Fund has elected, however, to be governed by Rule 18f-1 under the
1940 Act, as a result of which a 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
17
<PAGE>
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.
PRICING OF SHARES. 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, each 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 the net asset value
returned to $1.00 per share. Thus, such expenses or losses or depreciation could
result in investors receiving no dividends or reduced 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 (as defined in the
Prospectus). The dividend for a Business Day immediately preceding a weekend or
holiday normally includes an amount equal to the net income for the subsequent
non-Business Days 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.
TAXATION OF THE PORTFOLIOS
GENERAL. To continue to qualify for treatment as a RIC under the Code,
each Portfolio - each of which is being treated as a separate entity for these
purposes - must distribute annually to its shareholders at least 90% of the sum
of its net interest excludable from gross income (if any), plus 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 a 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) at the close of each quarter of a 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 (c) 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.
If a Portfolio failed to qualify as a RIC for any taxable year, it
would be taxed on the full amount of its taxable income for that year without
being able to deduct the distributions it makes to its shareholders and the
shareholders would treat all those distributions, including with respect to the
Tax-Exempt Fund distributors that otherwise would qualify as "exempt-interest
dividends" described in the following paragraph, as dividends (that is, ordinary
income) to the extent of the Portfolio's earnings and profits.
Dividends paid by the Rodney Square Tax-Exempt Portfolio will qualify
as "exempt-interest dividends" (as defined in the Prospectus), and thus will be
excludable from gross income by its
18
<PAGE>
shareholders, if the Portfolio satisfies the additional requirement that, at the
close of each quarter of its taxable year, at least 50% of the value of its
total assets consists of securities the interest on which is excludable from
gross income under section 103(a) of the Code; the Portfolio intends to continue
to satisfy this requirement. The portion of each dividend excludable from the
shareholders' gross income may not exceed the Portfolio's net tax-exempt income.
The treatment of dividends from the Portfolio under state and local income tax
laws may differ from the treatment thereof under the Code.
Tax-exempt interest attributable to certain "private activity bonds"
(including, in the case of a RIC receiving interest on those bonds, a
proportionate part of the exempt-interest dividends paid by the RIC) is a
preference item for purposes of the federal alternative minimum tax.
Furthermore, interest on municipal securities held by the Portfolio that are not
PABs, which interest otherwise would be a tax preference item, nevertheless may
be indirectly subject to the federal alternative minimum tax in the hands of
corporate shareholders when distributed by the Portfolio. PABs are issued by or
on behalf of public authorities to finance various privately operated
facilities. Entities or persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by IDBs or PABs should consult
their tax advisers before purchasing Portfolio shares. For these purposes, the
term "substantial user" is defined generally to include a "non-exempt person"
who regularly uses in trade or business a part of a facility financed from the
proceeds of such bonds.
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.
DISTRIBUTIONS. With respect to the U.S. Government Portfolio and the
Money Market Portfolio 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 of these
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.
With respect to the Tax-Exempt Fund to 85% of social security and
railroad retirement benefits may be included in taxable income for recipients
whose adjusted gross income (including income from tax-exempt sources such as
the Tax-Exempt Portfolio) plus 50% of their benefits exceeds certain base
amounts. Exempt-interest dividends from the Tax-Exempt Fund still are tax-exempt
to the extent described in the Prospectus; they are only included in the
calculation of whether a recipient's income exceeds the established amounts.
If the Tax-Exempt Fund invests in any instruments that generate taxable
income, distributions of the interest earned thereon will be taxable to the
Tax-Exempt Fund's shareholders as ordinary income to the extent of the
Tax-Exempt Fund's earnings and profits. Moreover, if the Tax-Exempt Fund
realizes capital gain as a result of market transactions, any distributions of
such gain will be taxable to its shareholders.
Shortly after the end of each year, PFPC 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.
CALCULATION OF 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:
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
19
<PAGE>
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, 1998 was 4.94%
for the U.S. Government Portfolio, 5.11% for the Money Market
Portfolio and 3.26 for the Tax-Exempt 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, 1998
was 5.07% for the U.S. Government Portfolio, 5.24% for the Money
Market Portfolio and 3.31% for the Tax-Exempt Portfolio.
C. TAX-EQUIVALENT YIELD is the net annualized taxable yield needed to
produce a specified tax-exempt yield at a given tax rate based on
a specified 7-day period assuming a reinvestment of all dividends
paid during such period. Tax-equivalent yield is calculated by
dividing that portion of the Tax-Exempt Portfolio's yield
(computed as in the yield description above) which is tax-exempt
by 1 minus a stated income tax rate and adding the quotient to
that portion, if any, of the yield of the Tax-Exempt Portfolio
that is not tax-exempt.
The Tax-Exempt Portfolio's tax-equivalent yield for the 7-day
period ended September 30, 1998 was 4.53% for the 28% tax bracket,
4.72% for the 31% tax bracket, 5.09% for the 36% tax bracket and
5.40% for the 39.6% tax bracket.
The following table, which is based upon federal income tax rates in
effect on the date of this Statement of Additional Information, illustrates the
yields that would have to be achieved on taxable investments to produce a range
of hypothetical tax-equivalent yields:
TAX-EQUIVALENT YIELD TABLE
<TABLE>
<CAPTION>
FEDERAL MARGINAL
INCOME TAX BRACKET TAX-EQUIVALENT YIELDS BASED ON TAX-EXEMPT YIELDS OF:
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2% 3% 4% 5% 6% 7% 8%
-- -- -- -- -- -- --
28% 2.8 4.2 5.6 6.9 8.3 9.7 11.1
31% 2.9 4.3 5.8 7.2 8.7 10.1 11.6
36% 3.1 4.7 6.3 7.8 9.4 10.9 12.5
39.6% 3.3 5.0 6.6 8.3 9.9 11.6 13.2
</TABLE>
D. 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
20
<PAGE>
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.
AVERAGE ANNUAL TOTAL RETURN FOR PERIODS ENDED SEPTEMBER 30, 1998
ONE FIVE TEN
YEAR YEARS YEARS
----- ----- -----
U.S. Government Portfolio 5.19% 4.80% 5.40%
Money Market Portfolio 5.26% 4.89% 5.54%
Tax-Exempt Portfolio 3.11% 2.97% 3.61%
E. 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
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, 1998
ONE FIVE TEN
YEAR YEARS YEARS
----- ------ ------
U.S. Government Portfolio 5.19% 26.44% 69.14%
Money Market Portfolio 5.26% 26.96% 71.50%
Tax-Exempt Portfolio 3.11% 15.73% 42.56%
21
<PAGE>
F. 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 a Fund.
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 IBC First
Tier Money Market Index for the Money Market Portfolio, the IBC U.S. Government
and Agency Index for the U.S. Government Portfolio and the IBC Stockbroker and
general purpose funds for the Tax-Exempt Portfolio. 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 (CDs), 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 CDs 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 a
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 Analytical
Services, Inc. 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.
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
22
<PAGE>
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.
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.
23
<PAGE>
FINANCIAL STATEMENTS
Each Fund's financial statements for the fiscal year ended September
30, 1998, including notes thereto and the report of Ernst & Young LLP thereon,
are incorporated herein by reference to the Fund's Annual Report to
Shareholders.
<PAGE>
THE RODNEY SQUARE FUND
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation.
(i) Amended and Restated Declaration of Trust of the Registrant
dated October 1, 1985. (Incorporated by reference to Exhibit
1(a) to Post-Effective Amendment No. 5 to this Registration
Statement filed on October 4, 1985.)
(ii) 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.)
(iii) 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.)
(b) By-Laws.
(i) Amended and Restated By-Laws of the Registrant dated August
17, 1998, filed herewith.
(c) Instruments Defining the Rights of Security Holders.
(i) 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.)
(ii) Amended and Restated By-Laws of the Registrant (relevant
portions). Filed herewith as Exhibit (b)(i).
(d) Investment Advisory Agreements.
(i) Fund 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.)
(ii) Amendment dated as of June 29, 1998 to Fund Management
Agreement dated August 9, 1991 filed herewith.
(e) Underwriting Contracts.
(i) Form of Distribution Agreement between the Registrant and
Provident Distributors, Inc. effective January 1, 1999. (Filed
herewith.)
(ii) Form of Selected Dealer Agreement between Provident
Distributors, Inc. and the broker-dealer as listed in Schedule
B to the Agreement effective January 1, 1999. (To be filed by
subsequent amendment.)
<PAGE>
(f) Bonus or Profit Sharing Contracts. None.
(g) Custodian Agreements.
(i) 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.)
(ii) Sub-Custodian Services Agreement among PNC Bank, N.A.,
Wilmington Trust Company, Rodney Square Management Corporation
and the Registrant dated February 2, 1998 filed herewith.
(h) Other Material Contracts
(i) Transfer Agency Services Agreement among the Registrant,
Rodney Square Management Corporation and PFPC Inc. dated
February 2, 1998 filed herewith.
(ii) Sub-Administration and Accounting Services Agreement among
Registrant, Rodney Square Management Corporation and PFPC Inc.
dated February 2, 1998 filed herewith.
(i) Legal Opinion. Opinion of Kirkpatrick & Lockhart, LLP. (Incorporated
by reference to Exhibit 10 to Pre-Effective Amendment No. 1 to this
Registration Statement filed on July 19, 1982.)
(j) Other Opinions. Consent of Ernst & Young LLP, Independent Auditors for
Registrant filed herewith.
(k) Omitted Financial Statements. Financial Statements omitted from Item
22 - None.
(l) 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.)
(m) Rule 12b-1Plan
(i) 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. (Incorporated by reference to Exhibit 15(a) to
Post-Effective Amendment No. 21 to this Registration Statement
filed on January 29, 1996.)
(ii) 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. (Incorporated by reference to Exhibit No. 15(b) to
Post-Effective Amendment No. 21 to this Registration Statement
filed on January 29, 1996.)
2
<PAGE>
(n) Financial Data Schedules filed herewith.
(o) Rule 18f-3 Plan - None.
ITEM 24. 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 Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Strategic Equity Fund
% Held by
Wilmington
Trust
Corporate Entity State of Org. Corporation
---------------- ------------- -----------
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%
WTC Corporate Services, Inc. Delaware 100%
100 West 10th St. Corporation Delaware 100%
WT Investments Inc. Delaware 100%
3
<PAGE>
PARTNERSHIPS
Rodney Square Investors, L.P.
ITEM 25. 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
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 Registrant's 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 of the Registrant's Declaration of Trust 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
4
<PAGE>
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 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.
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 of 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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Rodney Square Management Corporation ("RSMC"), a Delaware corporation,
serves as manager and administrator 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 March 20, 1998, with the Securities and
Exchange Commission File No. 801-22071 and is incorporated by reference herein.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Rodney Square Distributors, Inc. serves as underwriter for the
following investment companies: The Rodney Square Strategic
Fixed-Income Fund, The Rodney Square Strategic Equity Fund and The
Rodney Square Tax-Exempt Fund.
5
<PAGE>
(b)
(1) (2) (3)
POSITION AND OFFICESc
NAME AND PRINCIPAL WITH RODNEY SQUARE POSITION AND OFFICES
BUSINESS ADDRESS DISTRIBUTORS, INC. WITH REGISTRANT
- ------------------ -------------------- --------------------
James S. Gandolfo President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
(c) None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, Delaware 19890-0001
Wilmington Trust Company
Rodney Square North,
1100 North Market Street
Wilmington, Delaware 19890-0001.
PFPC Inc.
103 Bellevue Parkway
Wilmington, DE 19809
ITEM 29. MANAGEMENT SERVICES.
Inapplicable.
ITEM 30. UNDERTAKINGS.
Inapplicable.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Wilmington and State of Delaware on the 24th day of November, 1998.
THE RODNEY SQUARE FUND
By: /S/ROBERT M. CHRISTIAN
Robert M. Christian, President
Pursuant to the requirements of the Securities Act, this registration statement
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/S/ROBERT M. CHRISTIAN Trustee and President November 24, 1998
Robert M. Christian
/S/ERIC BRUCKER Trustee November 24, 1998
*Eric Brucker
/S/FRED L. BUCKNER Trustee November 24, 1998
*Fred L. Buckner
/S/JOHN J. QUINDLEN Trustee November 24, 1998
*John J. Quindlen
/S/JOHN J. KELLEY Treasurer November 24, 1998
John J. Kelley
*By: /S/CARL M. RIZZO
Carl M. Rizzo
Attorney-in-Fact, pursuant to Power of Attorney
previously filed
7
<PAGE>
EXHIBIT INDEX
The Rodney Square Fund
11 Consent of Independent Auditors
23(b)(i) Amended and Restated Bylaws
23(d)(ii) Amendment to Management Agreement between the Rodney Square
Fund and the Rodney Square Management Corporation
23(e)(i) Form of Distribution Agreement between Registrant and
Provident Distributors, Inc.
23(g)(iii) Sub-Custodian Services Agreement
23(h)(i) Transfer Agency Services Agreement
23(h)(ii) Sub-Administration and Accounting Services Agreement
27 Financial Data Schedule - U.S. Government Portfolio
27 Financial Data Schedule - Money Market Portfolio
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 24 to the Registration Statement (Form N-1A) (No.
2-76333) of the Rodney Square Fund of our report dated November 6, 1998 included
in the 1998 Annual Report to shareholders.
Philadelphia, Pennsylvania
November 23, 1998
Exhibit 23(b)(i)
THE RODNEY SQUARE FUND
A Massachusetts Business Trust
AMENDED AND RESTATED BYLAWS
AUGUST 17, 1998
<PAGE>
AMENDED AND RESTATED BYLAWS
THE RODNEY SQUARE FUND
ARTICLE I
Declaration Trust and Location of Offices
SECTION 1. DECLARATION OF TRUST. These Bylaws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of The Rodney Square Fund, the Massachusetts business trust established
by the Declaration of Trust (the "Trust").
SECTION 2. PRINCIPAL OFFICE OF THE TRUST AND RESIDENT AGENT. The
principal office of the Trust shall be located in Wilmington, Delaware. Its
resident agent in Massachusetts shall be CT Corporation System, 2 Oliver Street,
Boston, Massachusetts, or such other person as the Trustees may from time to
time designate. The Trust may establish and maintain such other offices and
places of business as the Trustees may, from time to time, determine.
ARTICLE II
Powers and Duties of Trustees
SECTION 1. TRUSTEES. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary and desirable
to carry out the responsibility, so far as such powers are not inconsistent with
the laws of the Commonwealth of Massachusetts, the Declaration of Trust, or with
these Bylaws.
SECTION 2. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by vote of a
majority of the Trustees then in office, may elect from their own number an
executive committee or other committees to consist of not less than three nor
more than five members, and may delegate thereto some or all of their powers
except those which by law, by the Declaration of Trust, or by these Bylaws may
not be delegated. Except as the Trustees may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the Trustees or in such rules, its business shall be conducted so
far as possible in the same manner as is provided by these Bylaws for the
Trustees themselves. All members of such committees shall hold such offices at
the pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its actions to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect. Any such committee may act by
meeting in person, by unanimous written consent, or by telephonic meeting
provided a quorum of members participates in any such telephonic meeting.
SECTION 3. OTHER COMMITTEES. The Trustees may appoint other committees,
each consisting of one or more persons, who need not be Trustees. Each such
committee shall have such powers perform such duties and abide by such
procedures as may be determined from time to time
<PAGE>
by the Trustees, but shall not exercise any power which may lawfully be
exercised only by the Trustees or a committee of Trustees.
SECTION 4. COMPENSATION. Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
ARTICLE III
Trustees' Meetings
SECTION 1. REGULAR MEETINGS. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as the Trustees may
from time to time determine, provided that any Trustee who is absent when such
determination is made shall be given notice of the determination.
SECTION 2. SPECIAL MEETINGS. Special meetings of the Trustees shall be
called by the Secretary at the written request of the President, the Treasurer,
or any two Trustees, and if the Secretary when so requested refuses or fails for
more than twenty-four hours to call such meeting, the President, the Treasurer,
or such two Trustees, may in the name of the Secretary call such meeting by
giving due notice in the manner required when notice is given by the Secretary.
SECTION 3. NOTICES. Except as otherwise provided, notice of any special
meeting of the Trustees shall be given by the Secretary to each Trustee, by
mailing to him, postage prepaid, addressed to him at his address as registered
on the books of the Trust or, if not so registered, at his last known address, a
written or printed notification of such meeting at least three days before the
meeting or by delivering such notice to him at least two days before the
meeting, or by sending to him at least 24 hours before the meeting, by prepaid
telegram, addressed to him at his said registered address, if any, or if he has
no such registered address, at his last known address, notice of such meeting.
SECTION 4. PLACE OF MEETING. All special meetings of the Trustees shall
be held in Wilmington, Delaware, or such other place in the United States as the
person or persons requesting said meeting to be called may designate, but any
meeting may adjourn to any other place.
SECTION 5. SPECIAL ACTION. When all the Trustees shall be present in
person or by telephone at any meeting, however called, or wherever held, or
shall assent to the holding of the meeting without notice, or after the meeting
shall sign a written assent thereto on the record of such meeting, the acts of
such meeting shall be valid as if such meeting had been regularly held.
SECTION 6. ACTION BY CONSENT. Any action by the Trustees may be taken
without a meeting, if a written consent thereto is signed by all the Trustees
and filed with the records of the Trustees meetings, or by telephone consent
provided a quorum of Trustees participates in any such telephone meeting. Such
consent shall be treated as a vote of the Trustees for all purposes.
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ARTICLE IV
Officers
SECTION 1. OFFICERS. The officers of the Trust shall be a President, a
Treasurer, a Secretary, and such other officers as the Trustees may from time to
time elect. Two or more offices may be held by a single person. Any officer may
be, but need not be, a Trustee. It shall not be necessary for any Trustee or
other officer to be a holder of shares in the Trust. The Trust may also have
such agents, if any, as the Trustees from time to time may in their discretion
appoint.
SECTION 2. ELECTION OF OFFICERS. The President, the Treasurer and the
Secretary shall be elected annually by the Trustees at their last regular
meeting in each year or at such other meeting in such year as the Trustees shall
determine ("Annual Meeting"). Other officers or agents, if any, may be elected
or appointed by the Trustees at said meeting or at any other time. The
President, Treasurer and Secretary shall hold office until the next Annual
Meeting and until their respective successors are chosen and qualified, or in
each case until he dies, resigns, is removed or become disqualified. Each other
officer shall hold office and each agent shall retain his authority at the
pleasure of the Trustees.
SECTION 3. POWERS. Subject to the other provisions of these Bylaws,
each officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to his office as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may from time to
time designate.
SECTION 4. CHAIRMAN OF THE BOARD OF TRUSTEES. The Trustees may, but
need not appoint from their number a Chairman. He shall perform any such duties
as the Trustees may from time to time designate.
SECTION 5. PRESIDENT. The President shall be the chief executive
officer of the Trust and, subject to the Trustees, shall have general
supervision over the business, affairs and property of the Trust and general
supervision over its officers, employees and agents. When present, he shall
preside at all meetings of the shareholders and the Trustees, and shall exercise
such other powers and perform such other duties as from time to time may be
assigned to him by the Trustees.
SECTION 6. TREASURER. The Treasurer shall be the principal financial
and accounting officer of the Trust and shall have general charge of the
finances and books of account of the Trust. Except as otherwise provided by the
Trustees, he shall have general supervision of the funds and property of the
Trust and of the performance by the custodian of its duties with respect
thereto. He shall render to the Trustees, whenever directed by the Trustees, an
account of the financial condition of the Trust; and as soon as possible after
the close of each financial year he shall make and submit to the Trustees a like
report for such financial year. The Treasurer shall perform such other duties as
appertain to his office or as may be required by the Trustees.
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SECTION 7. SECRETARY. The Secretary shall attend to the giving and
serving of all notices of the Trust and shall record all proceedings of the
meetings of the Shareholders and Trustees in books to be kept for that purpose.
He shall keep in safe custody the seal of the Trust, and shall have charge of
the records of the Trust, all of which shall at all reasonable times be open to
inspection by the Trustees. The Secretary shall perform such other duties as
appertain to his office or as may be required by the Trustees.
SECTION 8. VICE PRESIDENT. Each Vice President of the Trust shall
perform such duties as the Trustees or the President may from time to time
designate. At the request or in the absence or disability of the President, the
Vice President (or, if there are two or more Vice Presidents, then the senior of
the Vice Presidents present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 9. ASSISTANT TREASURER. The Assistant Treasurer of the Trust
shall perform such duties as the Treasurer or the Trustees may from time to time
designate, and, in the absence of the Treasurer, (or, if there are two or more
Assistant Treasurers, then the senior of the Assistant Treasurers present and
able to act) may perform all the duties of the Treasurer, subject to the control
of the Trustees.
SECTION 10. ASSISTANT SECRETARY. Assistant Secretary of the Trust shall
perform such duties as the Secretary or the Trustees may from time to time
designate, and, in the absence of the Secretary, (or, if there are two or more
Assistant Secretaries, then the senior of the Assistant Secretaries present and
able to act) may perform all the duties of the Secretary.
SECTION 11. SUBORDINATE OFFICERS. The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective rights,
terms of office, authorities and duties.
SECTION 12. RESIGNATIONS AND REMOVALS. Any officer of the Trust may
resign by filing a written resignation with the President, the Trustees, or the
Secretary, which shall take effect at such time as may be therein specified. The
Trustees may at any meeting remove any officer by a majority vote. In addition,
any officer or agent appointed in accordance with the provision of Section 11
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
SECTION 13. VACANCIES AND NEWLY CREATED OFFICES. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
of the Trustees or, in the case of any office created pursuant to Section 11
hereof, by any officer upon whom such power shall have been conferred by the
Trustees.
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ARTICLE V
Insurance
The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer or employee of the Trust, or is or was serving
at the request of the Trust as a Trustee, officer or employee of a corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the Trust would have the power to indemnify
him against such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its shareholders 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 office.
ARTICLE VI
Shares of Beneficial Interest
SECTION 1. TRANSFER OF SHARES. The shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
on the books of the Trust, in person or by attorney.
SECTION 2. EQUITABLE INTEREST NOT RECOGNIZED. The Trust shall be
entitled to treat the holder of record of any share or shares of beneficial
interest as the holder of fact thereof, and shall not be bound to recognize any
equitable or other claim of interest in such share or shares on the part of any
other person except as may be otherwise expressly provided by law.
ARTICLE VII
Shareholders' Meetings
SECTION 1. CALLING OF MEETINGS. Meetings of the shareholders shall be
called by the Secretary whenever ordered by the Trustees or requested in writing
by the holder or holders of at least one-tenth of the outstanding shares
entitled to vote. If the Secretary, when so ordered or requested, refuses or
neglects for more than THIRTY days to call such special meeting, the Trustees or
the shareholders so requesting may, in the name of the Secretary, call the
meeting by giving notice thereof in the manner required when notice is given by
the Secretary.
SECTION 2. NOTICES. Except as above provided, notices of any special
meeting of the shareholders shall be given by the Secretary by delivering or
mailing, postage prepaid, to each shareholder entitled to vote at said meeting,
a written or printed notification of such meeting, at least fifteen days before
the meeting, to such address as may be registered with the Trust by the
shareholder, provided, however, that notice of a meeting need not be given to a
shareholder to whom such notice need not be given under the proxy rules of the
Commission under the 1940 Act and the Securities Exchange Act of 1934, each as
amended. Each such notice shall state the place, date, hour and purposes of the
meeting. Notice of any meeting of shareholders need not be given to any
shareholder if a written waiver of notice, executed before or after such
meeting, is
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filed with the records of such meeting, or to any shareholder who shall attend
such meeting in person or by proxy. Notice of adjournment of a shareholders'
meeting to another time or place need not be given, if such time and place are
announced at the meeting.
SECTION 3. PLACE OF MEETING. All meetings of the shareholders shall be
held in Wilmington, Delaware, or at such other place in the United States as the
Trustees may designate.
SECTION 4. BALLOTS. The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.
SECTION 5. VOTING; PROXIES. Shareholders entitled to vote may vote
either in person or by proxy, provided that such proxy to act is authorized to
act by (1) a written instrument, dated not more than eleven months before the
meeting and executed either by the shareholder or by his or her duly authorized
attorney in fact (who may be so authorized by a writing or by any non-written
means permitted by the laws of the Commonwealth of Massachusetts) or (2) such
electronic, telephonic, computerized or other alternative means as may be
approved by a resolution adopted by the Trustees. Proxies shall be delivered to
the secretary of the Trust or other person responsible for recording the
proceedings before being voted. A proxy with respect to shares held in the name
of two or more persons shall be valid if executed by one of them unless at or
prior to exercise of such proxy the Trust receives a specific written notice to
the contrary from any one of them. Unless otherwise specifically limited by
their terms, proxies shall entitle the holder thereof to vote at any adjournment
of a meeting. A proxy purporting to be exercised by or on behalf of a
shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. At all
meetings of the shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualifications of voters, the validity of proxies, and
the acceptance or rejection of votes shall be decided by the chairman of the
meeting.
SECTION 6. ACTION WITHOUT A MEETING. Any action to be taken by
shareholders may be taken without a meeting if all shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting.
ARTICLE VIII
Inspection of Books
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the shareholders; and no shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by law
or otherwise by the Trustees.
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ARTICLE IX
Custodian
The Custodian employed by the Trust pursuant to Article IX to the
Declaration of Trust shall be required to enter into a contract with the Trust
which shall contain in substance the following provisions:
(a) The Trust will cause all securities and funds owned by the Trust to
be delivered or paid to the Custodian.
(b) The Custodian will receive and receipt for any monies due to the
Trust and deposit the same in its own banking department and in such other
banking institutions, if any, as the Custodian and the Trustees may approve. The
Custodian shall have the sole power to draw upon any such account.
(c) The Custodian shall release and deliver securities owned by the
Trust in the following cases only:
(1) Upon the sale of such securities for the account of the Trust
and receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided that in any such
case, the cash is to be delivered to the Custodian;
(3) To the issuer thereof or its agent for transfer into the name
of the Trust, the Custodian or a nominee of either, or for exchange for a
different number of bonds or certificates representing the same aggregate face
amount or number of units; provided that in any such case the new securities are
to be delivered to the Custodian;
(4) To the broker selling the same for examination, in accord with
the "street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
securities of the issuer of such securities or pursuant to provisions to any
deposit agreement; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
(6) In the case of warrants, rights, or similar securities, the
surrender thereof in the exercise of such warrants, rights or similar securities
or the surrender of interim receipts of temporary securities for definitive
securities;
(7) To any pledge by way of pledge or hypothecation to secure any
loan, but only within the limits permitted to the Trust by Article V, Section
l(p) of the Declaration of Trust.
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(8) For deposit in a system for the central handling of securities
in accordance with the provisions of Article IX, Section 2 of the Declaration of
Trust.
(d) The Custodian shall pay out monies of the Trust only upon the
purchase of securities for the account of the Trust and the delivery in due
course of such securities to the Custodian, or in connection with the
conversion, exchange or surrender of securities owned by the Trust as set forth
in (c), or for the repurchase of shares issued by the Trust or for the making of
any disbursements authorized by the Trustees pursuant to the Declaration of
Trust or these Bylaws, or for the payment of any expense or liability incurred
by the Trust; provided that, in every case where payment is made by the
Custodian in advance of receipt of the securities purchases, the Custodian shall
be absolutely liable to the Trust for such securities to the same extent as if
the securities had been received by the Custodian.
(e) The Custodian shall make deliveries of securities and payments of
cash only upon written instructions signed or initialed by such officer or
officers or other agent or agents of the Trust as may be authorized to sign or
initial such instructions by resolution of the Trustees; it being understood
that the Trustees may from time to time authorize a different person or persons
to sign or initial instructions for different purposes.
The contract between the Trust and the Custodian may contain any such
other provisions not inconsistent with the provisions of Article IX of the
Declaration of Trust or with these Bylaws as the Trustees may approve.
Such contract shall be terminable by either party upon written notice
to the other within such time not exceeding sixty (60) days as may be specified
in the contract; provided; however, that upon termination of the contract or
inability of the Custodian to continue to serve, the Custodian shall, upon
written notice of appointment of another bank or trust company as custodian,
deliver and pay over to such successor custodian all securities and monies held
by it for account of the Trust. In such case, Trustees shall promptly appoint a
successor custodian, but in the event that no successor custodian can be found
having the required qualifications and willing to serve, it shall be the duty of
the Trustees to call as promptly as possible a special meeting of the
shareholders to determine whether the Trust shall function without a custodian
or shall be liquidated. If so directed by vote of the holders of a majority of
the outstanding shares, the Custodian shall deliver and pay over all property of
the Trust held by it as specified in such vote.
Such contract shall also provide that, pending appointment of a
successor Custodian or a vote of the shareholders specifying some other
disposition of the funds and property, the Custodian shall not deliver funds and
property of the Trust to the Trust, but may deliver them to a bank or trust
company doing business in Boston, Massachusetts, of its own selection having an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than $2,000,000 as the property of the Trust to be held
under terms similar to those on which they were held by the retiring custodian.
Any Sub-Custodian employed by the Custodian pursuant to authorization
to do so granted by the Trust pursuant to this Article IX of the Declaration of
Trust shall be required to
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enter into a contract with the Custodian containing in substance the same
provisions as those described in paragraphs (a) through (e) above, except that
any contract with a Sub-Custodian performing its duties outside the United
States and its territories and possessions, may omit or limit any of such
conditions, provided that, any such omission or limitation shall be expressly
approved by a majority of the Trustees of the Trust.
ARTICLE X
Seal
The seal of the Trust shall be circular in form bearing the
inscription: "Rodney Square Fund - 1982."
The form of the seal shall be subject to alteration by the Trustees and
the seal may be used by causing it or a facsimile to be impressed or affixed or
printed or otherwise reproduced. Any officer or Trustee of the Trust shall have
authority to affix the seal of the Trust to any document, instrument or other
paper executed and delivered by or on behalf of the Trust; however, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on and its absence shall not impair the validity of any document, instrument, or
other paper executed by or on behalf of the Trust.
ARTICLE XI
Execution of Papers
Except as the Trustees may generally or in particular cases authorize
the execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts, and other obligations made, accepted,
or endorsed by the Trust shall be executed by the president, any vice president,
or the treasurer, or by whomever else shall be designated for that purpose by
the Trustees, and need not bear the seal of the Trust.
ARTICLE XII
Fiscal year
The fiscal year of the Trust shall be the period of twelve months
ending on the 30th day of September in each calendar year.
ARTICLE XIII
Amendments
These Bylaws may be amended at any meeting of the Trustees of the Trust
by a majority vote; provided, however, that any amendment which changes or
affects the provisions of Article IX, Article XIII or Article XIV shall be
approved by vote of a majority of the outstanding shares of the Trust entitled
to vote.
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ARTICLE XIV
Reports to Shareholders
The Trustees shall at least semi-annually submit to the shareholders a
written financial report of the transactions of the Trust including financial
statements which shall at least annually be certified by independent public
accountants.
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Exhibit 23(d)(ii)
AMENDMENT TO MANAGEMENT AGREEMENT
BETWEEN
THE RODNEY SQUARE FUND
AND
RODNEY SQUARE MANAGEMENT CORPORATION
Amendment, dated as of June 29, 1998, amends the Management Agreement
dated August 9, 1991 ("Management Agreement") between The Rodney Square Fund
(the "Trust") and Rodney Square Management Corporation (the "Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end management
investment company and offers for sale distinct series of shares of beneficial
interest ("Series"), each corresponding to a distinct portfolio; and
WHEREAS, the Trust has retained the Adviser to furnish certain services
including investment advisory, portfolio management and administrative services
to the Trust and each Series pursuant to the Management Agreement.
NOW THEREFORE, it is agreed between the parties hereto as follows:
1. Paragraph 5 of the Management Agreement shall be deleted and replaced
in its entity with the following:
5. COMPENSATION OF THE ADVISER. For the services to be rendered and
the payments made pursuant to this Agreement the Adviser shall
receive an annual fee, payable monthly as soon as practicable
after the last day of each month, at the annual rate of 0.47% of
each Series' first $1 billion of average daily net assets; 0.43%
of each Series' next $500 million of average daily net assets;
0.40% of each Series' next $500 million of average daily net
assets; and 0.37% of each Series' average daily net assets in
excess of $2 billion, as determined at the close of the business
on each day throughout the month. The value of net assets shall
be determined pursuant to the applicable provisions of the
Trust's Declaration of Trust, its By-Laws and the Investment
Company Act. If, pursuant to such provisions, the determination
of the net asset value of any Series of the Trust is suspended
for any particular business day, then the value of the net assets
of that Series on that day shall be deemed to be the value of its
net assets as determined on the preceding business day. If the
determination of the net asset value of any Series has been
suspended for more than one month, the Adviser's compensation
payable at the end of that month shall be computed on the basis
of the value of the net assets of the Series as last determined
(whether during or prior to such month). The Adviser agrees to
reimburse the Trust or to waive all or part of its advisory
<PAGE>
fee on a monthly basis, to the extent that the annual operating expenses of any
Series exceed the highest applicable expense limitation established pursuant to
the statutes or regulations of any jurisdiction in which the shares of the
Series are qualified or registered for offer and sale.
2. All other provisions of the Management Agreement shall remain in full
force in effect.
IN WITNESS WHEREOF the parties have caused this instrument to be signed
on their behalf by their respective officers thereunto duly authorized, as of
the date first written above.
THE RODNEY SQUARE FUND
By: /S/ NINA M. WEBB
Name: Nina M. Webb
Title: Vice President
RODNEY SQUARE MANAGEMENT CORPORATION
By: /S/ NINA M. WEBB
Name: Nina M. Webb
Title: Vice President
Exhibit 23(e)(i)
THE RODNEY SQUARE FUND
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of the 1st day of January, 1999,
between The Rodney Square Fund, a Massachusetts business trust (the "Fund"),
having its principal place of business in Wilmington, Delaware, and Provident
Distributors, Inc., a corporation organized under the laws of the State of
Delaware (the " Distributor"), having its principal place of business in West
Conshohocken, Pennsylvania.
WHEREAS, the Fund wishes to employ the services of the Distributor,
with such assistance from its affiliates as the latter may provide; and
WHEREAS, the 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 (the "shares") of all series, and of all
classes now or hereafter created, 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 (a)
shall have the right to sell, as agent on behalf of the Fund, shares
authorized for issue and registered under the 1933 Act; (b) 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 (c) shall sell
such shares only in compliance with the terms set forth in the Fund's
currently effective registration statement. The 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
<PAGE>
the discretion of the Fund, treasury shares shall be sold, and shares
of all series of the Fund repurchased for resale.
4. PUBLIC OFFERING PRICE. All shares sold to investors by the Distributor
or the Fund will be sold at the public offering price. The public
offering price for all accepted subscriptions will be the net asset
value per share, determined in the manner described in the Fund's
current Prospectus or SAI with respect to the applicable series. The
Fund shall in all cases receive the net asset value per share on all
sales.
5. 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.
6. 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. The Distributor agrees to
use all reasonable efforts to ensure that taxpayer identification
numbers provided for shareholders of the Fund are correct.
7. AUTHORIZED REPRESENTATIVE. 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 SAIs filed with the Securities and Exchange Commission
under the 1933 Act (as those registration statements, Prospectuses and
SAIs 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. The Distributor shall be responsible for
filing all sales literature relating to the Fund with the National
Association of Securities Dealers, Inc. ("NASD") and any other
applicable regulatory authority. The 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. The 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.
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)
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<PAGE>
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.
9. REPORTING. The Distributor shall provide the Fund's Board of Trustees
such information as is reasonably requested. The Distributor shall also
attend any meeting of the Fund's Board of Trustees at which the
Distributor's presence is requested.
10. FEES, EXPENSES AND ADDITIONAL SERVICES
(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 any series as a broker or
dealer, or any officer of the Fund as an 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 printing and mailing Prospectuses, SAIs, and any
supplements thereto, sent to existing shareholders.
(b) The Distributor may, in its sole discretion, pay such expenses as
it deems reasonable for:
(i) printing and distributing Prospectuses, SAIs 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, the 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.
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<PAGE>
(d) In connection with the services provided by the Distributor under
this Agreement, the Distributor shall receive reimbursement from
the Fund, to the extent and under the terms and conditions set
forth in any Plan of Distribution of the Fund or its series, as
such Plan may be in effect from time to time, and subject to any
further limitation on such reimbursement as the Trustees of the
Fund may impose.
11. 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, SAIs, 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 10(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
10(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
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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.
(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, SAIs,
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 10(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
10(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
5
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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.
12. STATUS OF THE DISTRIBUTOR. The Distributor is a member in good standing
of the NASD and a properly registered broker-dealer under the
Securities Exchange Act of 1934, as amended. In carrying out this
Agreement, the Distributor agrees to abide by the rules and regulations
of the NASD and all applicable federal and state laws.
13. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become effective
on the date first written above, and unless terminated as provided,
shall continue in force for one (1) year from the date of its execution
and thereafter from year to year, provided continuance after the one
(1) year period is approved at least annually by either (a) 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 (b) the vote of a
majority of those Trustees of the Fund who are not interested persons
of the Fund, 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 11, 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 the Board of
Trustees of the Fund 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.
14. 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.
15. 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.
16. 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.
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17. 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.
18. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THE RODNEY SQUARE FUND
By:_________________________________
Name:_______________________________
Title:______________________________
PROVIDENT DISTRIBUTORS, INC.
By:_________________________________
Name:_______________________________
Title:______________________________
7
Exhibit 23(g)(iii)
SUB-CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 among PNC BANK, NATIONAL
ASSOCIATION, a national banking association ("PNC Bank"), WILMINGTON TRUST
COMPANY, a Delaware banking corporation, as custodian ("Custodian"), RODNEY
SQUARE MANAGEMENT CORPORATION, a Delaware corporation ("RSMC") and THE RODNEY
SQUARE FUND, a Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, Custodian serves as custodian for the Fund pursuant to a
custody agreement with the Fund; and
WHEREAS, Custodian, with the consent of the Fund, wishes to retain PNC
Bank to provide sub-custodian services, and PNC Bank wishes to furnish
sub-custodian services, either directly or through an affiliate or affiliates,
as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund, the
Custodian and any
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other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PNC Bank. An Authorized Person's scope
of authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "BOOK-ENTRY SYSTEM" means Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors, and its nominee or nominees and any book-entry system maintained by
an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "ORAL INSTRUCTIONS" mean oral instructions received by PNC
Bank from an Authorized Person or from a person reasonably believed by PNC Bank
to be an Authorized Person.
(g) "PNC BANK" means PNC Bank, National Association or a
subsidiary or affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(j) "SHARES" mean the shares of beneficial interest of any series
or class of the Fund.
(k) "PROPERTY" means:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or cause
to be deposited, with PNC Bank or which PNC Bank may
from time to time hold for the Fund;
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(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to
time, from or on behalf of the Fund.
(l) "WRITTEN INSTRUCTIONS" mean written instructions signed by
one Authorized Person and received by PNC Bank. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT. Custodian, with the consent of the Fund, hereby
appoints PNC Bank to provide sub-custodian services to the Fund, on behalf of
each of its investment portfolios (each, a "Portfolio"), and PNC Bank accepts
such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions
of the Fund's Board of Trustees, approving the
appointment of PNC Bank or its affiliates to provide
services;
(b) a copy of the Fund's most recent effective
registration statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to
each class of Shares;
(e) a copy of each Portfolio's administration agreement if
PNC Bank is not providing the Portfolio with such
services;
(f) copies of any shareholder servicing agreements made in
respect of the Fund
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or a Portfolio; and
4
<PAGE>
(g) certified or authenticated copies of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall
act only upon Oral Instructions and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral Instructions
and Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral Instructions or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PNC Bank receives Written Instructions to the contrary.
(c) Custodian and the Fund, as applicable, agree to forward to
PNC Bank Written Instructions confirming Oral Instructions (except where such
Oral Instructions are given by PNC Bank or its affiliates) so that PNC Bank
receives the Written Instructions by the close of business on the same day that
such Oral Instructions are received. The fact that such confirming Written
5
<PAGE>
Instructions are not received by PNC Bank shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions reasonably appear
to have been received from an Authorized Person, PNC Bank shall incur no
liability to the Fund in acting upon such Oral Instructions or Written
Instructions provided that PNC Bank's actions comply with the other provisions
of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PNC Bank is in doubt as to any action
it should or should not take, PNC Bank may request directions or advice,
including Oral Instructions or Written Instructions, from Custodian or the Fund,
as applicable.
(b) ADVICE OF COUNSEL. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for Custodian, the Fund, the Fund's investment adviser or PNC
Bank, at the option of PNC Bank).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PNC Bank
receives from the Fund or WTC, and the advice it receives from counsel, PNC Bank
shall be entitled to rely upon and, after notice to Custodian and the Fund, to
follow the advice of counsel. In the event PNC Bank so relies on the advice of
counsel, PNC Bank remains liable for any action or omission on the part of PNC
Bank which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PNC Bank of any duties, obligations or responsibilities set forth
in this Agreement.
6
<PAGE>
(d) PROTECTION OF PNC BANK. PNC Bank shall be protected in any
action it takes or does not take in reliance upon Oral Instructions or Written
Instructions it receives from the Fund or directions or advice from counsel and
which PNC Bank believes, in good faith, to be consistent with those directions,
advice or Oral Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PNC Bank (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PNC Bank's properly taking or not taking such action.
Nothing in this subsection shall excuse PNC Bank when an action or omission on
the part of PNC Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by PNC Bank of any duties, obligations or responsibilities
set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to Custodian, the
Fund and any Portfolio, which are in the possession or under the control of PNC
Bank, shall be the property of Custodian and the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. Custodian, the Fund and
Authorized Persons shall have access to such books and records at all times
during PNC Bank's normal business hours. Upon the reasonable request of the
Custodian or the Fund, copies of any such books and records shall be provided by
PNC Bank to Custodian, the Fund or to an authorized representative of either, at
the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees to keep confidential all records of
Custodian, the Fund and information relating to Custodian, the Fund and its
shareholders, unless the release of such
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<PAGE>
records or information is otherwise consented to, in writing, by Custodian or
the Fund, as the case may be. The Fund and Custodian agree that such consent
shall not be unreasonably withheld and may not be withheld where PNC Bank may be
exposed to civil or criminal contempt proceedings or when required to divulge
such information or records to duly constituted authorities, unless PNC Bank is
indemnified by Custodian or the Fund, as the case may be.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with
Custodian's and the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under this Agreement to
ensure that the necessary information is made available to such accountants for
the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not caused by PNC Bank's own willful misfeasance,
bad faith, negligence or reckless disregard of its duties or obligations under
this Agreement.
11. COMPENSATION. As compensation for sub-custody services rendered by
PNC Bank during the term of this Agreement, RSMC, on behalf of the Fund and each
of the Portfolios, will pay to PNC Bank a fee or fees as may be agreed to in
writing from time to time by RSMC, the Fund and PNC Bank.
8
<PAGE>
12. INDEMNIFICATION. The Fund and Custodian, on behalf of each
Portfolio, agree to indemnify and hold harmless PNC Bank and its affiliates from
all taxes, charges, expenses, assessments, claims and liabilities (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) attorneys' fees and disbursements, arising
directly or indirectly from any action or omission to act which PNC Bank takes
(i) at the request or on the direction of or in reliance on the advice of the
Fund or Custodian or (ii) upon Oral Instructions or Written Instructions. The
Custodian's indemnification of PNC Bank is subject to the Fund's indemnification
of Custodian. Neither PNC Bank, nor any of its affiliates, shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PNC Bank's or its affiliates' own willful misfeasance, bad faith, negligence
or reckless disregard of its duties under this Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf
of Custodian or the Fund or any Portfolio except as specifically set forth
herein or as may be specifically agreed to by PNC Bank in writing. PNC Bank
shall be obligated to exercise care and diligence in the performance of its
duties hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this Agreement. PNC
Bank shall be liable for any damages arising out of PNC Bank's failure to
perform its duties under this Agreement to the extent such damages arise out of
PNC Bank's willful misfeasance, bad faith, negligence or reckless disregard of
its duties under this Agreement.
9
<PAGE>
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PNC Bank 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 Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PNC Bank reasonably believes to be
genuine; or (B) subject to section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PNC Bank nor its affiliates shall be liable to Custodian or
the Fund or to any Portfolio for any consequential, special or indirect losses
or damages which Custodian or the Fund may incur or suffer by or as a
consequence of PNC Bank's or its affiliates' performance of the services
provided hereunder, whether or not the likelihood of such losses or damages was
known by PNC Bank or its affiliates.
(d) Notwithstanding anything to the contrary contained herein,
PNC Bank on behalf of itself and any and all of its affiliates or assignees
hereunder, agrees to indemnify and hold harmless Custodian and its directors,
officers and employees from and against any and all damages, losses, costs,
taxes, charges, expenses, assessments, claims and liabilities, including,
without limitation, attorneys' fees and disbursements (collectively, "Losses"),
arising directly from any action or omission to act by PNC Bank or any of its
affiliates or assignees, as applicable, relating to this Agreement, including
Losses arising out of any threatened, pending or completed claim, action, suit
10
<PAGE>
or proceeding, whether civil, criminal, administrative or investigative, except
to the extent such Losses were caused directly by the willful misfeasance, bad
faith, negligence or reckless disregard by Custodian of its duties under this
Agreement.
14. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. Custodian, for the account of the
Fund, will deliver or arrange for delivery to PNC Bank, all the Property owned
by the Portfolios, including cash received as a result of the distribution of
Shares, during the period that is set forth in this Agreement. PNC Bank will not
be responsible for such property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PNC Bank, acting upon
Written Instructions, shall open and maintain separate accounts in Custodian's
name for the benefit of the Fund using all cash received from or for the account
of the Fund, subject to the terms of this Agreement. In addition, upon Written
Instructions, PNC Bank shall open separate custodial accounts for each separate
series or Portfolio of the Fund (collectively, the "Accounts") and shall hold in
the Accounts all cash received from or for the Accounts of the Fund specifically
designated to each separate series or Portfolio.
PNC Bank shall make cash payments from or for the Accounts of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio or
PNC Bank or PNC Bank's nominee as provided in
sub-section (j) and for which PNC Bank has received a
copy of the broker's or dealer's confirmation or
payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered
to PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution,
advisory, management fees or similar expenses which
are to be borne by a Portfolio;
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(iv) payment to, subject to receipt of Written
Instructions, the Fund's transfer agent, as agent for
the shareholders, an amount equal to the amount of
dividends and distributions stated in the Written
Instructions to be distributed in cash by the transfer
agent to shareholders, or, in lieu of paying the
Fund's transfer agent, PNC Bank may arrange for the
direct payment of cash dividends and distributions to
shareholders in accordance with procedures mutually
agreed upon from time to time by and among the Fund,
PNC Bank and the Fund's transfer agent.
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender
of securities owned or subscribed to by the Fund and
held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for other
proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts
or other orders for the payment of money received as custodian for the Accounts.
(c) RECEIPT OF SECURITIES; SUB-CUSTODIANS.
(i) PNC Bank shall hold all securities received by it for
the Accounts in a separate account that physically
segregates such securities from those of any other
persons, firms or corporations, except for securities
held in a Book-Entry System. All such securities shall
be held or disposed of only upon Written Instructions
of the Fund pursuant to the terms of this Agreement.
PNC Bank shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express
terms of this Agreement and upon Written Instructions,
accompanied by a certified resolution of the Fund's
Board of Trustees, authorizing the transaction. In no
case may any member of the Fund's Board of Trustees,
or any officer, employee or agent of the Fund withdraw
any securities.
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At PNC Bank's own expense and for its own convenience,
PNC Bank may enter into sub-custodian agreements with
other United States banks or trust companies to
perform duties described in this sub-section (c). Such
bank or trust company shall have an aggregate capital,
surplus and undivided profits, according to its last
published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of
PNC Bank, or at least twenty million dollars
($20,000,000) if such bank or trust company is not a
subsidiary or affiliate of PNC Bank. In addition, such
bank or trust company must be qualified to act as
custodian and agree to comply with the relevant
provisions of the 1940 Act and other applicable rules
and regulations. Any such arrangement will not be
entered into without prior written notice to the Fund.
PNC Bank shall remain responsible for the performance
of all of its duties as described in this Agreement
and shall hold the Fund and each Portfolio harmless
from its own acts or omissions, under the standards of
care provided for herein, or the acts and omissions of
any sub-custodian chosen by PNC Bank under the terms
of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PNC Bank, directly or
through the use of the Book-Entry System, shall:
(i) deliver any securities held for a Portfolio against
the receipt of payment for the sale of such
securities;
(ii) execute and deliver to such persons as may be
designated in such Oral Instructions or Written
Instructions, proxies, consents, authorizations, and
any other instruments whereby the authority of a
Portfolio as owner of any securities may be exercised;
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(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to
be delivered to PNC Bank;
(iv) deliver any securities held for a Portfolio against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise
of any conversion privilege;
(v) deliver any securities held for a Portfolio to any
protective committee, reorganization committee or
other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization
or sale of assets of any corporation, and receive and
hold under the terms of this Agreement such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be
stated in said Oral Instructions or Written
Instructions to be for the purpose of effectuating a
duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(vii) release securities belonging to a Portfolio to any
bank or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund
on behalf of that Portfolio; provided, however, that
securities shall be released only upon payment to PNC
Bank of the monies borrowed, except that in cases
where additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released for
that purpose; and repay such loan upon redelivery to
it of the securities pledged or hypothecated therefor
and upon surrender of the note or notes evidencing the
loan;
(viii) release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into
on behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection
with such repurchase agreements, but only upon the
delivery of the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other
securities;
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(x) release and deliver securities owned by the Fund for
the purpose of redeeming in kind shares of the Fund
upon delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes.
PNC Bank must also receive a certified resolution
describing the nature of the corporate purpose and the
name and address of the person(s) to whom delivery
shall be made when such action is pursuant to
sub-paragraph d. (xi).
(e) USE OF BOOK-ENTRY SYSTEM. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Board of Trustees approving, authorizing and
instructing PNC Bank on a continuous basis, to deposit in the Book-Entry System
all securities belonging to the Portfolios eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Portfolios, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. PNC Bank shall continue to
perform such duties until it receives Written Instructions or Oral Instructions
authorizing contrary actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of
PNC Bank shall identify by Book-Entry or otherwise
those securities belonging to each Portfolio. PNC Bank
shall furnish to the Fund a detailed statement of the
Property held for each Portfolio under this Agreement
at least monthly and from time to time and upon
written request.
(ii) Securities and any cash of each Portfolio deposited in
the Book-Entry System will at all times be segregated
from any assets and cash controlled by PNC Bank in
other than a fiduciary or custodian capacity but may
be commingled with other assets held in such
capacities. PNC Bank and its sub-custodian, if any,
will pay out money only upon receipt of securities and
will deliver securities only upon the receipt of
money.
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<PAGE>
(iii) All books and records maintained by PNC Bank which
relate to the Fund's participation in the Book-Entry
System will at all times during PNC Bank's regular
business hours be open to the inspection of Authorized
Persons, and PNC Bank will furnish to Custodian and
the Fund all information in respect of the services
rendered as it may require.
PNC Bank will also provide Custodian and the Fund with such reports on
its own system of internal control as the Fund may reasonably request from time
to time.
(f) REGISTRATION OF SECURITIES. All Securities held for a
Portfolio which are issued or issuable only in bearer form, except such
securities held in the Book-Entry System, shall be held by PNC Bank in bearer
form; all other securities held for a Portfolio may be registered in the name of
the Fund on behalf of that Portfolio, PNC Bank, the Book-Entry System, a
sub-custodian, or any duly appointed nominees of the Fund, PNC Bank, Book-Entry
System or sub-custodian. The Fund reserves the right to instruct PNC Bank as to
the method of registration and safekeeping of the securities of the Fund. The
Fund agrees to furnish to PNC Bank appropriate instruments to enable PNC Bank to
hold or deliver in proper form for transfer, or to register in the name of its
nominee or in the name of the Book-Entry System, any securities which it may
hold for the Accounts and which may from time to time be registered in the name
of the Fund on behalf of a Portfolio.
(g) VOTING AND OTHER ACTION. Neither PNC Bank nor its nominee
shall vote any of the securities held pursuant to this Agreement by or for the
account of a Portfolio, except in accordance with Written Instructions. PNC
Bank, directly or through the use of the Book-Entry System, shall execute in
blank and promptly deliver all notices, proxies and proxy soliciting
16
<PAGE>
materials to the registered holder of such securities. If the registered holder
is not the Fund on behalf of a Portfolio, then PNC Bank shall deliver such
materials timely to the applicable investment adviser for the portfolio or such
other party as may be identified for such purpose in Written Instructions.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of each
Portfolio, all income, dividends, distributions,
coupons, option premiums, other payments and
similar items, included or to be included in the
Property, and, in addition, promptly advise each
Portfolio of such receipt and credit such income,
as collected, to each Portfolio's custodian
account;
(B) endorse and deposit for collection, in the name of
the Fund, checks, drafts, or other orders for the
payment of money;
(C) receive and hold for the account of each Portfolio
all securities received as a distribution on the
Portfolio's securities as a result of a stock
dividend, share split-up or reorganization,
recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any securities
belonging to a Portfolio and held by PNC Bank
hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable
on the date such securities become payable; and
(E) take any action which may be necessary and proper
in connection with the collection and receipt of
such income and other payments and the endorsement
for collection of checks, drafts, and other
negotiable instruments.
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<PAGE>
(ii) MISCELLANEOUS TRANSACTIONS.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer selling
for the account of a Portfolio in accordance
with street delivery custom;
(2) for the exchange of interim receipts or
temporary securities for definitive
securities; and
(3) for transfer of securities into the name of
the Fund on behalf of a Portfolio or PNC Bank
or nominee of either, or for exchange of
securities for a different number of bonds,
certificates, or other evidence, representing
the same aggregate face amount or number of
units bearing the same interest rate,
maturity date and call provisions, if any;
provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral
Instructions or Written Instructions to the
contrary, PNC Bank shall:
(1) pay all income items held by it which call
for payment upon presentation and hold the
cash received by it upon such payment for the
account of each Portfolio;
(2) collect interest and cash dividends received,
with notice to the Fund, to the account of
each Portfolio;
(3) hold for the account of each Portfolio all
stock dividends, rights and similar
securities issued with respect to any
securities held by PNC Bank; and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by
the Internal Revenue Code or the Income Tax
Regulations of the
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United States Treasury Department or under
the laws of any state now or hereafter in
effect, inserting the Fund's name, on behalf
of a Portfolio, on such certificate as the
owner of the securities covered thereby, to
the extent it may lawfully do so.
(i) SEGREGATED ACCOUNTS.
(i) PNC Bank shall upon receipt of Written
Instructions or Oral Instructions establish and
maintain segregated accounts on its records for
and on behalf of each Portfolio. Such accounts may
be used to transfer cash and securities, including
securities in the Book-Entry System:
(A) for the purposes of compliance by the Fund
with the procedures required by a securities
or option exchange, providing such procedures
comply with the 1940 Act and any releases of
the SEC relating to the maintenance of
segregated accounts by registered investment
companies; and
(B) upon receipt of Written Instructions, for
other proper corporate purposes.
(ii) PNC Bank shall arrange for the establishment of
IRA custodian accounts for such shareholders
holding Shares through IRA accounts, in accordance
with the Fund's prospectuses, the Internal Revenue
Code of 1986, as amended (including regulations
promulgated thereunder), and with such other
procedures as are mutually agreed upon from time
to time by and among Custodian, the Fund, PNC Bank
and the Fund's transfer agent.
(j) PURCHASES OF SECURITIES. PNC Bank shall settle purchased
securities upon receipt of Oral Instructions or Written Instructions on behalf
of the Fund or its investment advisers that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
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<PAGE>
(ii) the number of shares or the principal amount
purchased and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker
through whom the purchase was made. PNC Bank
shall upon receipt of securities purchased by or
for a Portfolio pay out of the moneys held for
the account of the Portfolio the total amount
payable to the person from whom or the broker
through whom the purchase was made, provided
that the same conforms to the total amount
payable as set forth in such Oral Instructions
or Written Instructions.
(k) SALES OF SECURITIES. PNC Bank shall settle sold
securities upon receipt of Oral Instructions or Written Instructions on behalf
of the Fund that specify:
(i) the name of the issuer and the title of the
security, including CUSIP number if applicable;
(ii) the number of shares or principal amount sold,
and accrued interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such
sale;
(vi) the name of the broker through whom or the
person to whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any; and
20
<PAGE>
(viii) the Portfolio involved.
PNC Bank shall deliver the securities upon receipt of the total
amount payable to the Portfolio upon such sale, provided that the total amount
payable is the same as was set forth in the Oral Instructions or Written
Instructions. Subject to the foregoing, PNC Bank may accept payment in such form
as shall be reasonably satisfactory to it, and may deliver securities and
arrange for payment in accordance with the customs prevailing among dealers in
securities.
(l) REPORTS; PROXY MATERIALS.
(i) PNC Bank shall furnish to Custodian and the Fund
the following reports:
(A) such periodic and special reports as
Custodian and/or the Fund may reasonably
request;
(B) a monthly statement summarizing all
transactions and entries for the account of
each Portfolio, listing each Portfolio
securities belonging to each Portfolio with
the adjusted average cost of each issue and
the market value at the end of such month and
stating the cash account of each Portfolio
including disbursements;
(C) the reports required to be furnished to the
Fund pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon
from time to time between Custodian and/or
the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any
proxy statement, proxy material, notice of a call
or conversion or similar communication received by
it as sub-custodian of the Property and PNC Bank
shall use its best efforts, within reasonable
limits, to
21
<PAGE>
transmit promptly to the Fund any class action
notices and tender or exchange offers. PNC Bank
shall be under no other obligation to inform the
Fund as to such actions or events.
(m) COLLECTIONS. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and shall await instructions from the Fund. PNC Bank shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. PNC Bank shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in due
course and shall provide the Fund with periodic status reports of such income
collected after a reasonable time.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first written above and shall continue for a period of five (5) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by the Fund, Custodian or PFPC without
penalty during a Renewal Term upon written notice given at least sixty (60) days
prior to termination. During either the Initial Term or the Renewal Terms, this
Agreement may also be terminated on an earlier date by the Fund, Custodian or
PFPC for cause.
With respect to the Fund, cause shall mean PFPC's material breach of
this Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material
22
<PAGE>
breach to constitute "cause" under this Paragraph, PFPC must receive written
notice from the Fund specifying the material breach and PFPC shall not have
corrected such breach within a 30-day period. Custodian may terminate this
Agreement for cause immediately in the event of the appointment of a conservator
or receiver for PNC Bank or any assignee or successor hereunder by the
applicable regulator or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent jurisdiction. With
respect to PFPC, cause includes, but is not limited to, the failure of RSMC, on
behalf of the Fund and each of the Portfolios, to pay the compensation set forth
in writing pursuant to Paragraph 11 of this Agreement after it has received
written notice from PFPC specifying the amount due and RSMC shall not have paid
that amount within a 30-day period. A constructive termination of this Agreement
will result where a substantial percentage of the Fund's assets are transferred,
merged or are otherwise removed from the Fund to another fund(s) that is not
serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, RSMC shall pay to
PFPC such compensation as may be due for the period prior to the date of such
termination. Any termination effected shall not affect the rights and
obligations of the parties under Paragraphs 12 and 13 hereof.
In the event this Agreement is terminated (pending appointment of a
successor to PNC Bank or vote of the shareholders of the Fund to dissolve or to
function without a custodian of its cash, securities or other property), PNC
Bank shall not deliver cash, securities or other property of the Portfolios to
the Fund. If a successor to PNC Bank is not appointed by Custodian or the Fund
within such sixty (60) day period, PNC Bank may deliver them to a bank or trust
company of PNC
23
<PAGE>
Bank's choice, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under the terms of this
Agreement. PNC Bank shall not be required to make any such delivery or payment
until full payment shall have been made to PNC Bank of all of its fees,
compensation, costs and expenses. PNC Bank shall have a security interest in and
shall have a right of setoff against the Property as security for the payment of
such fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor) (b) if to Custodian, 1100 North Market St.,
Wilmington, DE., Attn: Corporate Custody (c) if to the Fund, c/o Wilmington
Trust Company, 1100 North Market St., Wilmington, DE., Attn: Asset Management
Department or (d) if to none of the foregoing, at such other address as shall
have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given five days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver
24
<PAGE>
is sought.
18. DELEGATION; ASSIGNMENT. Subject to the provision of Section 14(c)
hereof, PNC Bank may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of PNC Bank, National Association or
PNC Bank Corp., provided that (i) PNC Bank gives the Fund thirty (30) days'
prior written notice; (ii) the delegate (or assignee) agrees with PNC Bank and
the Fund to comply with all relevant provisions of the 1940 Act; and (iii) PNC
Bank and such delegate (or assignee) promptly provide such information as the
Fund may request, and respond to such questions as the Fund may ask, relative to
the delegation (or assignment), including (without limitation) the capabilities
of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
25
<PAGE>
(c) GOVERNING LAW. This Agreement shall be deemed to be a
contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party
to this Agreement shall constitute the valid and binding execution hereof by
such party.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:__________________________
WILMINGTON TRUST COMPANY
By:_____________________________
Title:__________________________
RODNEY SQUARE MANAGEMENT CORPORATION
By:_____________________________
Title:__________________________
ACKNOWLEDGED AND AGREED TO:
THE RODNEY SQUARE FUND
By:_____________________
Title:__________________
27
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
________________________ ________________________
________________________ ________________________
________________________ ________________________
________________________ ________________________
________________________ ________________________
________________________ ________________________
Exhibit 23(h)(i)
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 among PFPC INC., a
Delaware corporation ("PFPC"), THE RODNEY SQUARE MANAGEMENT CORPORATION, a
Delaware corporation ("RSMC") and THE RODNEY SQUARE FUND, a Massachusetts
business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each, a
"Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
<PAGE>
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC
from an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(h) "SHARES" mean the shares of beneficial interest of any series
or class of the Fund.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent to
the Fund in accordance with the terms set forth in this Agreement. PFPC accepts
such appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or its affiliates to
provide services to the Fund and approving this Agreement;
(b) A copy of the Fund's most recent effective registration
statement;
(c) A copy of the advisory agreement with respect to each
investment Portfolio
2
<PAGE>
of the Fund (each, a Portfolio);
(d) A copy of the distribution agreement with respect to each
class of Shares of the Fund;
(e) A copy of each Portfolio's administration agreements if PFPC
is not providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements made in respect
of the Fund or a Portfolio; and
(g) Copies (certified or authenticated where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its investment portfolios.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act
only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PFPC receives Written Instructions to the contrary.
3
<PAGE>
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
4
<PAGE>
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral Instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund, which
are in the possession or under the control of PFPC, shall be the property of the
Fund. Such books and records shall be prepared and maintained as required by the
1940 Act and other applicable securities laws, rules and regulations. The Fund
and Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PFPC may be exposed to civil
5
<PAGE>
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to the
loss of data or service interruptions caused by equipment failure, provided such
loss or interruption is not caused by PFPC's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, RSMC will pay to PFPC a fee or fees as may be agreed
to from time to time in writing by the Fund, RSMC and PFPC.
12. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (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) attorneys'
fees and
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<PAGE>
disbursements, arising directly or indirectly from (i) any action or omission to
act which PFPC takes (a) at the request or on the direction of or in reliance on
the advice of the Fund or (b) upon Oral Instructions or Written Instructions or
(ii) the acceptance, processing and/or negotiation of checks or other methods
utilized for the purchase of Shares. Neither PFPC, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad
faith, negligence or reckless disregard of its duties and obligations under this
Agreement, provided that in the absence of a finding to the contrary the
acceptance, processing and/or negotiation of a fraudulent payment for the
purchase of Shares shall be presumed not to have been the result of PFPC's or
its affiliates own willful misfeasance, bad faith, negligence or reckless
disregard of such duties and obligations.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC'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 PFPC'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 12 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
7
<PAGE>
indemnification in the defense of such claim. The party seeking indemnification
shall in no case confess any claim to 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.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf or
the Fund except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder, to act in good faith and
to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PFPC shall be liable for any damages arising
out of PFPC's failure to perform its duties under this Agreement to the extent
such damages arise out of PFPC's willful misfeasance, bad faith, negligence or
reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with the standard
of care set forth above; and (ii) PFPC 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 Instruction or Written Instruction, notice
or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything else in this Agreement to the
contrary and except
8
<PAGE>
to the limited extent set forth in paragraph 13(d) below, PFPC shall not be
liable to the Fund for any consequential or special losses or damages ("Special
Damages") which the Fund may incur as a consequence of PFPC's performance of the
services provided hereunder.
(d) PFPC shall be liable for Special Damages incurred by the Fund
only to the extent that Special Damages arise out of PFPC's or its affiliates'
willful misfeasance, bad faith or negligence in performing, or reckless
disregard of, their duties under this Agreement; provided, however, the
liability of PFPC with respect to all such Special Damages arising during the
term of this Agreement and thereafter shall be limited to One Hundred Thousand
Dollars ($100,000) per transaction or series of directly related transactions;
related transactions may be related as to parties, timing or subject matter.
14. DESCRIPTION OF SERVICES.
(a) SERVICES PROVIDED ON AN ONGOING BASIS, IF APPLICABLE.
(i) Furnish state-by-state registration reports;
(ii) Calculate 12b-1 payments;
(iii) Maintain proper shareholder registrations;
(iv) Review new applications and correspond with
shareholders to complete or correct information;
(v) Direct payment processing of checks or wires;
(vi) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(vii) Countersign share certificates;
(viii) Prepare and mail to shareholders confirmation of
activity;
(ix) Provide toll-free lines for direct shareholder use,
plus customer liaison
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<PAGE>
staff for on-line inquiry response;
(x) Mail duplicate confirmations to broker-dealers of
their clients' activity, whether executed through
the broker-dealer or directly with PFPC;
(xi) Provide periodic shareholder lists and statistics to
the clients;
(xii) Provide detailed data for underwriter/broker
confirmations;
(xiii) Prepare periodic mailing of year-end tax and
statement information;
(xiv) Coordinate and support the Fund's shares being
traded on the Fund/Serv system;
(xv) Notify on a timely basis the investment adviser,
accounting agent, and custodian of fund activity;
and
(xvi) Perform other participating broker-dealer
shareholder services as may be agreed upon from time
to time.
(b) SERVICES PROVIDED BY PFPC UNDER ORAL INSTRUCTIONS OR WRITTEN
INSTRUCTIONS.
(i) Accept and post daily Fund purchases and
redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in
writing by the shareholder).
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of
an investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder
account; and
(iii) Confirmation of receipt or crediting of funds for
such order to the
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<PAGE>
Fund's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that
function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Trustees. Shares shall be redeemed and payment
therefor shall be made in accordance with the Fund's prospectus, when the record
holder tenders Shares in proper form and directs the method of redemption. If
Shares are received in proper form, Shares shall be redeemed before the funds
are provided to PFPC from the Fund's custodian (the "Custodian"). If the
recordholder has not directed that redemption proceeds be wired, when the
Custodian provides PFPC with funds, the redemption check shall be sent to and
made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of
an assignee or holder and transfer authorization is
signed by the recordholder; or
(ii) Transfer authorizations are signed by the
recordholder when Shares are held in book-entry
form.
When a broker-dealer notifies PFPC of a redemption desired by a customer, and
the Custodian provides PFPC with funds, PFPC shall prepare and send the
redemption check to the broker-dealer and made payable to the broker-dealer on
behalf of its customer.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of
the Fund's Board of Trustees authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash, if provided for in the Fund's prospectus.
Such issuance or payment, as well as payments upon redemption as described
above, shall be made after deduction and payment of the required amount of funds
to be withheld in accordance with any applicable tax
11
<PAGE>
laws or other laws, rules or regulations. PFPC shall mail to the Fund's
shareholders such tax forms and other information, or permissible substitute
notice, relating to dividends and distributions paid by the Fund as are required
to be filed and mailed by applicable law, rule or regulation. PFPC shall
prepare, maintain and file with the IRS and other appropriate taxing authorities
reports relating to all dividends above a stipulated amount paid by the Fund to
its shareholders as required by tax or other law, rule or regulation.
(f) SHAREHOLDER ACCOUNT SERVICES.
(i) PFPC may arrange, in accordance with the prospectus,
for issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC may arrange, in accordance with the prospectus,
for a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written
Instructions, PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
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<PAGE>
In addition, PFPC will receive and tabulate the proxy cards for
the meetings of the Fund's shareholders.
(h) RECORDS. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification
or Social Security number;
(ii) Number and class of Shares held and number and class
of Shares for which certificates, if any, have been
issued, including certificate numbers and
denominations;
(iii) 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;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current
maintenance of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer
agent to perform any calculations contemplated or
required by this Agreement.
(i) LOST OR STOLEN CERTIFICATES. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond
or such other appropriate indemnity bond issued by a
surety company approved by PFPC; and
(ii) Completion of a release and indemnification
agreement signed by the shareholder to protect PFPC
and its affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from
any Fund
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<PAGE>
shareholder to inspect stock records, PFPC will notify the Fund and the Fund
will issue instructions granting or denying each such request. Unless PFPC has
acted contrary to the Fund's instructions, the Fund agrees and does hereby,
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's stock records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES.
Upon receipt of Written Instructions, PFPC shall cancel
outstanding certificates surrendered by the Fund to reduce the total amount of
outstanding shares by the number of shares surrendered by the Fund.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first written above and shall continue for a period of five (5) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by any party without penalty during a Renewal
Term upon written notice given at least sixty (60) days prior to termination.
During either the Initial Term or the Renewal Terms, this Agreement may also be
terminated on an earlier date by either the Fund or PFPC for cause.
With respect to the Fund, cause shall mean PFPC's material breach of
this Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material breach to constitute "cause" under this
Paragraph, PFPC must receive written notice from the Fund specifying the
material breach and PFPC shall not have corrected such breach within a 30-day
period. With respect to PFPC, cause includes, but is not limited to, the failure
of the Fund and/or RSMC to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement after having received written notice from PFPC
specifying the amount due and the Fund and/or RSMC
14
<PAGE>
shall not have paid that amount within a 30-day period. A constructive
termination of this Agreement will result where a substantial percentage of the
Fund's assets are transferred, merged or are otherwise removed from the Fund to
another fund(s) that is not serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, the Fund and/or
RSMC shall pay to PFPC such compensation as may be due for the period prior to
the date of such termination. Any termination effected shall not affect the
rights and obligations of the parties under Paragraphs 12 and 13 hereof.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809 Attn: President; (b) if to the
Fund, c/o Wilmington Trust Company 1100 North Market St., Wilmington, Delaware,
Attn: Robert Christian; (c) if to RSMC, c/o Wilmington Trust Company, 1100 North
Market St., Wilmington, Delaware, Attn: Robert Christian; or (d) if to none of
the foregoing, at such other address as shall have been given by like notice to
the sender of any such notice or other communication by the other party. If
notice is sent by confirming telegram, cable, telex or facsimile sending device,
it shall be deemed to have been given immediately. If notice is sent by
first-class mail, it shall be deemed to have been given three days after it has
been mailed. If notice is sent by messenger, it shall be deemed to have been
given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. USE OF FUND'S NAME. PFPC shall not use the name of the Fund or the
Portfolios in
15
<PAGE>
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 PFPC 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.
19. SECURITY. PFPC represents and warrants that, to the best of its
knowledge, the various procedures and systems which PFPC has implemented with
regard to safeguarding from loss or damage the Fund's blank checks, records and
other data and PFPC's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate. The parties
may review such systems and procedures on a periodic basis.
20. REGISTRATION AS A TRANSFER AGENT. PFPC 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. PFPC agrees that it will promptly notify the Fund in the event of any
material change in its status as a registered transfer agent.
21. SHAREHOLDER LIABILITY. PFPC 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, and if the
liability relates to one or more Portfolios, the obligations hereunder shall be
limited to the respective assets of such Portfolios. PFPC 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.
22. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or
16
<PAGE>
PNC Bank Corp., provided that (i) PFPC gives the Fund thirty (30) days' prior
written notice; (ii) the delegate (or assignee) is registered and qualified
under the 1934 Act to act as a transfer agent; (iii) the delegate (or assignee)
agrees with PFPC and the Fund to comply with all relevant provisions of the 1940
Act; and (iv) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). In addition, PFPC,
subject to the approval of the Fund, may sub-contract any of its services to be
performed hereunder to one or more qualified sub-transfer agents, shareholder
servicing agents or other financial institutions to facilitate access to
third-party distribution networks.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
25. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
17
<PAGE>
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:
Title:
THE RODNEY SQUARE FUND
By:__________________________
Title:_________________________
THE RODNEY SQUARE MANAGEMENT CORPORATION
By:
Title:
18
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of February 2, 1998, is Exhibit A to that
certain Transfer Agency Services Agreement dated as of February 2, 1998 among
PFPC Inc., The Rodney Square Management Corporation and The Rodney Square Fund.
PORTFOLIOS
Money Market Portfolio
U.S. Government Portfolio
19
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- -------------------- --------------------
- -------------------- --------------------
- -------------------- --------------------
- -------------------- --------------------
- -------------------- --------------------
- -------------------- --------------------
Exhibit 23(h)(ii)
SUB-ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 among RODNEY SQUARE
MANAGEMENT CORPORATION, a Delaware corporation ("RSMC"), PFPC INC., a Delaware
corporation ("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank
Corp. and THE RODNEY SQUARE FUND, a Massachusetts business trust (the "Fund").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund has retained RSMC pursuant to a Management
Agreement dated August 9, 1991 to provide administration services to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio");
and
WHEREAS, RSMC is authorized pursuant to Paragraph 2. B(5) of the
Management Agreement to delegate any or all of its administrative duties to a
sub-administrator; and
WHEREAS, RSMC wishes to retain PFPC to provide certain administrative
services to the Fund, PFPC wishes to furnish such services and the Fund agrees
and consents to the appointment of PFPC; and
WHEREAS, the Fund wishes to retain PFPC to provide accounting
services to its Portfolios listed on Exhibit A, and PFPC wishes to furnish such
services.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein
<PAGE>
contained, and intending to be legally bound hereby the parties hereto agree as
follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any
other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
amendment thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC
from an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(h) "Shares" mean the shares of beneficial interest of any series
or class of the Fund.
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2
<PAGE>
2. APPOINTMENT. RSMC hereby appoints PFPC to provide
sub-administration services to the each of the Portfolios, in accordance with
the terms set forth in this Agreement. PFPC accepts such appointment and agrees
to furnish such services. The Fund hereby appoints PFPC to provide accounting
services, to each of the Portfolios, in accordance with the terms set forth in
this Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or its affiliates to
provide services to each Portfolio and approving this Agreement;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each
class of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with
respect to a Portfolio;
(f) a copy of any shareholder servicing agreement made in respect
of the Fund or a Portfolio; and
(g) copies (certified or authenticated, where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties
3
<PAGE>
to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC
assumes no responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act
only upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by PFPC shall in
no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral Instructions or Written
Instructions reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral Instructions
or Written Instructions provided that PFPC's actions comply with the other
provisions of this Agreement.
4
<PAGE>
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund or RSMC.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
question of law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund or RSMC and the advice PFPC receives from counsel, PFPC may rely
upon and follow the advice of counsel. In the event PFPC so relies on the advice
of counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund, RSMC or from counsel and
which PFPC believes, in good faith, to be consistent with those directions,
advice and Oral Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral
5
<PAGE>
Instructions or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral Instructions or Written Instructions unless, under
the terms of other provisions of this Agreement, the same is a condition of
PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the
Portfolios which are in the possession or under the control of PFPC shall be the
property of the Fund. Such books and records shall be prepared and maintained as
required by the 1940 Act and other applicable securities laws, rules and
regulations. The Fund, RSMC, Authorized Persons and any regulatory agency having
authority over the Fund shall have access to such books and records at all times
during PFPC's normal business hours for reasonable audit and inspection. Upon
the reasonable request of the Fund or RSMC, copies of any such books and records
shall be provided by PFPC to the Fund, RSMC or to an Authorized Person at the
Fund's request and expense.
(b) PFPC shall create, maintain and preserve the following
records:
(i) all books and records with respect to each
Portfolio's books of account;
(ii) records of each Portfolio's securities
transactions; and
(iii) all other books and records as PFPC is required to
maintain pursuant to Rule 2a-7 and/or Rule 31a-1 of
the 1940 Act in connection with the services
provided hereunder.
6
<PAGE>
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of
the Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund or RSMC. The Fund and RSMC agree that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the
Fund's independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules with respect to each
Portfolio. PFPC shall take all reasonable action in the performance of its
duties under this Agreement to assure that the necessary information is made
available to such accountants for the expression of their opinion, as required
by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to the
loss of data or service interruptions caused by equipment failure, provided such
loss or interruption is not caused by PFPC's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, RSMC and the Fund will pay to PFPC a fee or fees as
may be agreed to in writing
7
<PAGE>
by RSMC, the Fund and PFPC.
12. INDEMNIFICATION.
(a) The Fund, on behalf of each Portfolio, agrees to indemnify
and hold harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state or foreign securities and blue
sky laws, and amendments thereto), and expenses, including (without limitation)
attorneys' fees and disbursements arising directly or indirectly from any action
or omission to act which PFPC takes (i) at the request or on the direction of or
in reliance on the advice of the Fund or (ii) upon Oral Instructions or Written
Instructions. Neither PFPC, nor any of its affiliates, shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied only
against the relevant Portfolio's assets and not against the assets of any other
investment portfolio of the Fund.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC'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 attorney's fees and disbursements arising
directly or indirectly out of PFPC's or its nominees' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement.
8
<PAGE>
(c) In order that the indemnification provisions contained in
this Section 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.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of
RSMC or the Fund or any Portfolio except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be liable for
any damages arising out of PFPC's failure to perform its duties under this
Agreement to the extent such damages arise out of PFPC's willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any
other provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with the standard
of care set forth above; and (ii) PFPC shall not be liable for (A) the validity
or invalidity or authority or lack thereof of any Oral Instruction or Written
9
<PAGE>
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything else in this Agreement to the
contrary and except to the limited extent set forth in paragraph 13(d) below,
PFPC shall not be liable to the Fund for any consequential or special losses or
damages ("Special Damages") which the Fund may incur as a consequence of PFPC's
performance of the services provided hereunder.
(d) PFPC shall be liable for Special Damages incurred by the Fund
only to the extent that Special Damages arise out of PFPC's or its affiliates'
willful misfeasance, bad faith or gross negligence in performing, or reckless
disregard of, their duties under this Agreement; provided, however, the
liability of PFPC with respect to all such Special Damages arising during the
term of this Agreement and thereafter shall be limited to One Hundred Thousand
Dollars ($100,000) per transaction or series of directly related transactions;
related transactions may be related as to parties, timing or subject matter.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect
to each Portfolio:
(i) Journalize investment, capital share and income and
expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the investment
10
<PAGE>
adviser for a Portfolio (the "Adviser") and
transmit trades to the Fund's custodian (the
"Custodian") for proper settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund
with the Custodian, and provide the Adviser with
the beginning cash balance available for investment
purposes;
(vi) Update the cash availability throughout the day as
required by the Adviser;
(vii) Post to and prepare the Statement of Assets and
Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g.,
advisory and custody fees);
(ix) Monitor the expense accruals and notify an officer
of the Fund of any proposed adjustments;
(x) Control all disbursements and authorize such
disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the net income of each Portfolio;
(xiii) Obtain security market quotes from independent
pricing services approved by the Adviser, or if
such quotes are unavailable, then obtain such
prices from the Adviser, at the Fund's expense and
in either case calculate the market value of each
Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio
valuation to the Adviser;
(xv) Compute the net asset value of each Portfolio;
(xvi) Subject to PFPC's acceptance, perform all functions
assigned to PFPC under the Fund's Rule 2a-7
procedures;
(xvii) As appropriate, compute yields, total return,
expense ratios, portfolio turnover
11
<PAGE>
rate, and, if required, portfolio average
dollar-weighted maturity; and
(xviii) Prepare a monthly financial statement, which will
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
15. DESCRIPTION OF SUB-ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following sub-administration services with
respect to each Portfolio:
(i) Prepare quarterly broker security transactions
summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and
Fund statistical data as requested on an ongoing
basis;
(iv) Prepare and file the Fund's Federal and state tax
returns;
(v) Prepare and file the Fund's Semi-Annual Reports
with the SEC on Form N-SAR;
(vi) Prepare and file, if necessary, with the SEC the
Fund's annual, semi-annual, and quarterly
shareholder reports;
(vii) Prepare and file, if necessary, reports with Blue
Sky Authorities;
(viii) Assist in the preparation of registration
statements and other filings relating to the
registration of Shares;
(ix) Monitor sales of the Fund's shares and assure that
the Fund has properly registered such shares with
the SEC and applicable state authorities;
12
<PAGE>
(x) Assist the investment adviser to monitor the Fund's
compliance with the investment restrictions and
limitations imposed by the 1940 Act, the state Blue
Sky laws and applicable regulations thereunder, the
fundamental and non-fundamental investment policies
and limitations set forth in the Prospectus and
SAI, and the investment restrictions and
limitations necessary for each Portfolio of the
Fund to qualify as a regulated investment company
under Sub-chapter M of the Internal Revenue Code of
1986, as amended (the "Code"), or any successor
statute;
(xi) Subject to the direction and control of the Fund,
coordinate contractual relationships and
communications between the Fund and its contractual
service providers;
(xii) Prepare and monitor an expense budget for each
Portfolio, including setting and revising accruals
for each category of expenses;
(xiii) Determine the amount of dividends and other
distributions payable to shareholders as necessary
to maintain the qualification as a regulated
investment company of each Portfolio of the Fund
under the Code;
(xiv) Prepare and distribute to appropriate parties
notices announcing the declaration of dividends and
other distributions to shareholders;
(xv) Provide information regarding material developments
in state securities regulation; and
(xvi) Provide personnel to serve as officers of the Fund
if so elected by the Trustees.
16. DURATION AND TERMINATION. This Agreement shall be effective on
the date first written above and shall continue for a period of five (5) years
(the "Initial Term"). Upon the expiration of the Initial Term, this Agreement
shall automatically renew for successive terms of one (1) year ("Renewal Terms")
each provided that it may be terminated by any party without penalty during a
Renewal Term upon written notice given at least sixty (60) days prior to
termination. During either the Initial Term or the Renewal Terms, this Agreement
may also be terminated on an earlier date by either the Fund or PFPC for cause.
13
<PAGE>
With respect to the Fund, cause shall mean PFPC's material breach of
this Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material breach to constitute "cause" under this
Paragraph, PFPC must receive written notice from the Fund specifying the
material breach and PFPC shall not have corrected such breach within a 30-day
period. With respect to PFPC, cause includes, but is not limited to, the failure
of the Fund and/or RSMC to pay the compensation set forth in writing pursuant to
Paragraph 11 of this Agreement after having received written notice from PFPC
specifying the amount due and the Fund and/or RSMC shall not have paid that
amount within a 30-day period. A constructive termination of this Agreement will
result where a substantial percentage of the Fund's assets are transferred,
merged or are otherwise removed from the Fund to another fund(s) that is not
serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, the Fund and/or
RSMC shall pay to PFPC such compensation as may be due for the period prior to
the date of such termination. Any termination effected shall not affect the
rights and obligations of the parties under Paragraphs 12 and 13 hereof.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809 Attn:
President; (b) if to RSMC, c/o of Wilmington Trust Company,
14
<PAGE>
1100 N. Market St., Wilmington, DE 19809 Attn: Robert Christian; or (c) if to
the Fund, c/o of Wilmington Trust Company, 1100 N. Market St., Wilmington, DE
19809 Attn: Robert Christian; or (d) if to none of the foregoing, at such other
address as shall have been provided by like notice to the sender of any such
notice or other communication by the other party.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. SHAREHOLDER LIABILITY. PFPC 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, and if the
liability relates to one or more Portfolios, the obligations hereunder shall be
limited to the respective assets of such Portfolios. PFPC 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.
20. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate
its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., provided that (i) PFPC gives the
Fund thirty (30) days' prior written notice; (ii) the delegate (or assignee)
agrees with PFPC and the Fund to comply with all relevant provisions of the 1940
Act; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee).
15
<PAGE>
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
22. FURTHER ACTIONS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
23. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a
contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement
16
<PAGE>
shall constitute the valid and binding execution hereof by such party.
(g) ENFORCEABILITY. The Fund shall have the right at any time,
including upon termination of this Agreement, to assume the rights of RSMC and
to enforce the obligations of PFPC under this Agreement.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
RODNEY SQUARE MANAGEMENT CORPORATION
By:________________________
Title:_____________________
PFPC INC.
By: _______________________
Title:_____________________
THE RODNEY SQUARE FUND
By:________________________
Title:_____________________
18
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of February 2, 1998, is Exhibit A to that
certain Sub-Administration and Accounting Services Agreement dated as of
February 2, 1998 among Rodney Square Management Corporation, PFPC Inc., and the
Rodney Square Fund.
PORTFOLIOS
Money Market Portfolio
U.S. Government Portfolio
19
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
_________________ _________________
_________________ _________________
_________________ _________________
_________________ _________________
_________________ _________________
_________________ _________________
20
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<ARTICLE> 6
<CIK> 0000700844
<NAME> THE RODNEY SQUARE FUND
<SERIES>
<NUMBER> 01
<NAME> U.S. GOVERNMENT PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 802331139
<INVESTMENTS-AT-VALUE> 802331139
<RECEIVABLES> 3210482
<ASSETS-OTHER> 5759
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 805547380
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3394544
<TOTAL-LIABILITIES> 3394544
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 802150327
<SHARES-COMMON-STOCK> 802150327
<SHARES-COMMON-PRIOR> 378472288
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2509
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 802152836
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32081863
<OTHER-INCOME> 0
<EXPENSES-NET> (3076150)
<NET-INVESTMENT-INCOME> 29005713
<REALIZED-GAINS-CURRENT> 296
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 29006009
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (29005713)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4463845267
<NUMBER-OF-SHARES-REDEEMED> (4040694000)
<SHARES-REINVESTED> 526772
<NET-CHANGE-IN-ASSETS> 423678335
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2213
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2692214
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3076150
<AVERAGE-NET-ASSETS> 572811526
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.051)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000700844
<NAME> THE RODNEY SQUARE FUND
<SERIES>
<NUMBER> 02
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1699247941
<INVESTMENTS-AT-VALUE> 1699247941
<RECEIVABLES> 10961673
<ASSETS-OTHER> 8140
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1710217754
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7483780
<TOTAL-LIABILITIES> 7483780
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1702763961
<SHARES-COMMON-STOCK> 1702763961
<SHARES-COMMON-PRIOR> 1191299545
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (29987)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1702733974
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 77760447
<OTHER-INCOME> 0
<EXPENSES-NET> (7338572)
<NET-INVESTMENT-INCOME> 70421875
<REALIZED-GAINS-CURRENT> (1150)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 70420725
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (70421875)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7518930203
<NUMBER-OF-SHARES-REDEEMED> (7013967395)
<SHARES-REINVESTED> 6501608
<NET-CHANGE-IN-ASSETS> 511463266
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (28837)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6392832
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7338572
<AVERAGE-NET-ASSETS> 1372500828
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .051
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.051)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
