the RODNEY SQUARE
FUND
&
the RODNEY SQUARE
TAX-EXEMPT
FUND
ANNUAL REPORT
JUNE 30, 1999
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of the Rodney Square Fund and the Rodney Square Tax-Exempt
Fund is pleased to report to you on the Funds' activities for the fiscal year
ended June 30, 1999. This past spring the trustees of the fund recommended that
we take advantage of some cost saving opportunities by combining the Fund with
two other mutual fund families to form one larger fund. By doing this we can
enjoy overall lower costs and an expanded number of investment products
available through one fund family. But, more importantly we can benefit from the
investment expertise offered by two affiliates of Wilmington Trust Company --
Cramer, Rosenthal, McGlynn and Roxbury Capital Management. The reorganization is
expected to occur, late this year, subject to such approvals of shareholders of
the funds and the two other mutual fund families as may be required. Due to the
change in the fiscal year end of the fund to June 30, this report covers the
period from the last fiscal year end, September 30, 1998, to June 30, 1999.
INVESTMENT RESULTS*
During the nine-month period, the U.S. Government Portfolio paid dividends
totaling $0.034 per share, the Money Market Portfolio paid dividends totaling
$0.035 per share and the Rodney Square Tax-Exempt Fund paid dividends totaling
$0.019 per share. Based on the Portfolios' net asset value of $1.00 per share,
these dividends represented total returns of 3.42%, 3.51% and 1.96%,
respectively.
ECONOMIC OVERVIEW
With the change in the Funds' fiscal year end to June 30, it has only been
three months since our last writing. In this time, the U.S. capital markets have
clearly forgotten the international financial crisis of the fall of 1998 and
have focused on the stellar performance of the domestic economy. The large-cap
U.S. equity markets have fully recovered from the panic selling in the fourth
quarter last year. In fact, the major indexes continued to set new highs during
the past three months. Though investors were rattled last year, consumers never
lost the faith. Consumer confidence is now higher than it was in the summer of
1998. The improved confidence kept consumers in a spending mood, especially for
big-ticket items such as autos and homes. This spending helped keep first
quarter GDP above 4 percent, below the 6.0% recorded in the fourth quarter of
1998, but above the 3.0% to 3.5% the Federal reserve has indicated as the long
run, non-inflationary growth potential for the U.S. economy. Expectations for
second quarter GDP are for above potential growth to continue.
With U.S. demand so strong and imports rising to meet that demand, the U.S.
consumer helped stabilize the economies' of the emerging markets. As the world's
economies stabilized, U.S. manufacturers also began to turnaround. The National
Association of Purchasing Managers' Survey (NAPM) has increased sharply during
the quarter to 57.0 in June from 54.3 in March. A reading above 50 indicates
that a majority of purchasing managers see growth in their business. As one
might expect given this background, market interest rates increased
substantially during the quarter. Yields on the U.S. Treasury's benchmark
30-year bond yield approached 6.20% during the quarter, up from 5.63% at the
close of the prior quarter. At the end of June, the rate settled down a bit to
5.96%.
- -------------------------------
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN
EITHER FUND IS NEITHER INSURED NOR GUARANTEED BY WILMINGTON TRUST COMPANY
OR ANY OTHER BANKING INSTITUTION, THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THERE CAN BE NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00.
1
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE -- CONTINUED
- --------------------------------------------------------------------------------
More importantly to money market investors, Federal Reserve Bank Chairman
Alan Greenspan, always hawkish in his public comments regarding inflation, was
even more so during the second quarter. Fears that the Federal Open Market
Committee (FOMC) would raise the Federal Funds Rate (fed funds rate), the rate
banks charge each other for over night loans, sooner rather than later began to
take hold after the May release of April's consumer price index. Primarily
because of higher oil prices, the 0.7% increase in the April CPI report was
almost double the consensus estimate of 0.4%. Even though the May CPI report
(released in June) was flat, the April number provided the FOMC with the
ammunition it needed to increase the fed funds rate by 25 basis points on June
30th.
The increase was well telegraphed, however, the FOMC surprised the market
by changing its future bias to neutral. This was widely interpreted by the
market as an indication that the FOMC would now take a wait-and-see attitude
towards further tightening. As a result, interest rates in general declined
along all maturity classes.
Going forward, there remains much uncertainty to how the FOMC will react if
the current economic landscape of fast growth and low inflation continues. The
Fed has indicated its concerns regarding the inflationary potential brought by
tight labor markets, low personal savings rates and recent increases in oil
prices. However, the Fed has also acknowledged the fact that growing
productivity levels and improvements in technology are working to keep inflation
at bay. Given the current environment, if the economy shows any signs that
inflation is about to accelerate, the Fed will waste little time in raising the
fed funds rate in an effort to contain inflation.
INVESTMENT STRATEGY
As noted in the economic overview, interest rates increased significantly
during the quarter as the economy continued to grow strongly. With the market's
and the FOMC's focus clearly on the U.S. economy, any hint that either inflation
is set to go higher or that the economy is slowing from the higher interest
rates will cause interest rates to move quickly. Rodney Square Management
Corporation, the Funds' adviser, attempts to anticipate these changes in the
economy and resulting changes in market psychology and interest rates. Within
the context of regulatory and liquidity constraints, the Funds' adviser then
adjusts each Portfolio's weighted average maturity in an effort to maximize the
return to shareholders. Judging by the favorable returns of each Portfolio
versus its peer group, the Fund's adviser believes it had success since the last
reporting date.
We are pleased that we were able to continue to provide shareholders with
highly competitive returns this past fiscal year. More importantly, we have
provided shareholders with consistently competitive returns through the years.
We invite your comments and questions and we thank you for your investment
in the Funds.
Sincerely,
/S/ROBERT J. CHRISTIAN
Robert J. Christian
President
August 16, 1999
2
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS / JUNE 30, 1999
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
----------- -----------
<S> <C> <C>
U.S. AGENCY OBLIGATIONS -- 61.1%
FEDERAL FARM CREDIT BANKS DISCOUNT NOTES -- 5.1%
Federal Farm Credit Banks Discount Notes, 4.72%, 07/23/99 ................. $ 6,100,000 $ 6,082,405
Federal Farm Credit Banks Discount Notes, 4.77%, 08/05/99 ................. 5,000,000 4,977,590
Federal Farm Credit Banks Discount Notes, 4.61%, 10/05/99 ................. 6,000,000 5,926,240
Federal Farm Credit Banks Discount Notes, 5.15%, 12/15/99 ................. 6,660,000 6,500,891
Federal Farm Credit Banks Discount Notes, 4.88%, 12/23/99 ................. 5,000,000 4,886,979
------------
28,374,105
------------
FEDERAL FARM CREDIT BANKS NOTES -- 19.3%
Federal Farm Credit Banks Notes, 4.72%, 07/01/99* ......................... 10,000,000 9,999,339
Federal Farm Credit Banks Notes, 4.78%, 07/01/99* ......................... 10,000,000 10,000,000
Federal Farm Credit Banks Notes, 4.82%, 07/23/99* ......................... 20,000,000 19,999,049
Federal Farm Credit Banks Notes, 4.96%, 07/26/99* ......................... 50,000,000 49,982,152
Federal Farm Credit Banks Notes, 5.50%, 08/03/99 .......................... 10,000,000 9,999,236
Federal Farm Credit Banks Notes, 5.20%, 01/14/00 .......................... 5,600,000 5,609,240
------------
105,589,016
------------
FEDERAL HOME LOAN BANKS DISCOUNT NOTES -- 19.4%
Federal Home Loan Banks Discount Notes, 4.73%, 08/02/99 ................... 10,475,000 10,430,958
Federal Home Loan Banks Discount Notes, 4.73%, 08/06/99 ................... 5,000,000 4,976,375
Federal Home Loan Banks Discount Notes, 4.71%, 08/13/99 ................... 5,000,000 4,971,901
Federal Home Loan Banks Discount Notes, 4.93%, 08/18/99 ................... 12,000,000 11,921,120
Federal Home Loan Banks Discount Notes, 4.70%, 09/08/99 ................... 10,000,000 9,909,917
Federal Home Loan Banks Discount Notes, 5.06%, 09/24/99 ................... 5,000,000 4,940,264
Federal Home Loan Banks Discount Notes, 4.73%, 09/24/99 ................... 8,000,000 7,910,656
Federal Home Loan Banks Discount Notes, 4.70%, 10/06/99 ................... 5,000,000 4,936,680
Federal Home Loan Banks Discount Notes, 4.71%, 10/08/99 ................... 5,000,000 4,935,237
Federal Home Loan Banks Discount Notes, 4.75%, 11/05/99 ................... 22,000,000 21,631,294
Federal Home Loan Banks Discount Notes, 4.80%, 11/10/99 ................... 5,000,000 4,912,000
Federal Home Loan Banks Discount Notes, 4.82%, 11/17/99 ................... 5,000,000 4,906,947
Federal Home Loan Banks Discount Notes, 5.03%, 12/08/99 ................... 5,000,000 4,888,222
Federal Home Loan Banks Discount Notes, 4.97%, 12/08/99 ................... 5,000,000 4,889,556
------------
106,161,127
------------
FEDERAL HOME LOAN BANKS NOTES -- 9.9%
Federal Home Loan Banks Notes, 5.51%, 07/06/99 ............................ 10,000,000 10,000,821
Federal Home Loan Banks Notes, 5.54%, 07/13/99 ............................ 5,000,000 4,999,977
Federal Home Loan Banks Notes, 5.00%, 10/27/99 ............................ 5,000,000 4,995,658
Federal Home Loan Banks Notes, 4.93%, 01/19/00 ............................ 5,000,000 5,000,397
Federal Home Loan Banks Notes, 4.85%, 01/27/00 ............................ 6,000,000 5,999,442
Federal Home Loan Banks Notes, 4.98%, 02/16/00 ............................ 5,000,000 4,998,895
Federal Home Loan Banks Notes, 5.00%, 02/24/00 ............................ 8,000,000 7,992,909
Federal Home Loan Banks Notes, 5.04%, 02/25/00 ............................ 5,000,000 4,999,212
Federal Home Loan Banks Notes, 5.08%, 04/28/00 ............................ 5,000,000 4,998,956
------------
53,986,267
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
----------- -----------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE CORP. DISCOUNT NOTES -- 4.7%
Federal Home Loan Mortgage Corp. Discount Notes, 4.69%, 07/06/99 .......... $ 10,000,000 $ 9,993,483
Federal Home Loan Mortgage Corp. Discount Notes, 4.71%, 07/28/99 .......... 8,000,000 7,971,740
Federal Home Loan Mortgage Corp. Discount Notes, 4.98%, 09/15/99 .......... 8,000,000 7,915,893
------------
25,881,116
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES -- 0.9%
Federal National Mortgage Association Discount Notes, 5.05%, 12/13/99 ..... 5,000,000 4,884,271
------------
STUDENT LOAN MARKETING ASSOCIATION NOTES -- 1.8%
Student Loan Marketing Association Notes, 5.53%, 07/16/99 ................. 5,000,000 5,000,184
Student Loan Marketing Association Notes, 5.57%, 03/17/00 ................. 4,630,000 4,644,795
------------
9,644,979
------------
TOTAL U.S. AGENCY OBLIGATIONS
(COST $334,520,881) ................................................................ 334,520,881
------------
REPURCHASE AGREEMENTS -- 39.0%
With Morgan Stanley: at 4.90%, dated 06/30/99, to be repurchased
at $130,017,694 on 07/01/99, collateralized by $133,870,346 of
Government National Mortgage Association Securities with various
coupons and maturities to 12/01/34 ..................................... 130,000,000 130,000,000
With J.P. Morgan, Inc.: at 5.10%, dated 06/30/99, to be
repurchased at $83,785,503 on 07/01/99, collateralized by
$86,287,324 of Federal Home Loan Mortgage Corporation
Discount Notes with various rates and maturities to 08/20/99 ........... 83,774,100 83,774,100
------------
TOTAL REPURCHASE AGREEMENTS (COST $213,774,100) ....................................... 213,774,100
------------
TOTAL INVESTMENTS (COST $548,294,981)(DAGGER)-- 100.1% ......................................... 548,294,981
OTHER ASSETS AND LIABILITIES, NET-- (0.1)% ..................................................... (461,616)
------------
NET ASSETS-- 100.0% ............................................................................ $547,833,365
============
<FN>
* Denotes a Variable or Floating Rate Note. Variable or Floating Rate Notes
are instruments whose rates change periodically. The rates shown are the
interest rates as of June 30, 1999. The dates shown are the next dates the
interest rates on the instruments are scheduled to be reset.
(DAGGER) Cost for federal income tax purposes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS / JUNE 30, 1999
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 30.1%
FOREIGN BANKS, FOREIGN CENTERS -- 6.7%
Bayerische Hypotheken-Und Vereinsbank, London, 4.88%, 08/03/99 P-1, A-1+ $25,000,000 $ 25,000,224
Landesbank Hessen-Thuringen, 4.98%, 12/16/99 .................. P-1, A-1+ 50,000,000 50,001,133
Toronto Dominion, 4.98%, 09/02/99 ............................. P-1, A-1+ 35,000,000 34,998,580
--------------
109,999,937
--------------
FOREIGN BANKS, U.S. BRANCHES -- 17.5%
Bayclay's Bank PLC, 5.01%, 09/08/99 ........................... P-1, A-1 40,000,000 40,000,757
Credit Commercial de France, 4.87%, 08/12/99 .................. P-1, A-1+ 65,000,000 65,000,000
Deutsche Bank, 4.90%, 08/18/99 ................................ P-1, A-1+ 30,000,000 29,999,605
Deutsche Bank, 5.60%, 08/23/99 ................................ P-1, A-1+ 10,000,000 9,999,165
Royal Bank of Canada, 5.12%, 02/18/00 ......................... P-1, A-1+ 15,000,000 14,997,244
Societe Generale, 5.69%, 07/16/99 ............................. P-1, A-1+ 10,000,000 9,999,764
Societe Generale, 4.93%, 09/01/99 ............................. P-1, A-1+ 25,000,000 24,787,736
Societe Generale, 4.87%, 08/20/99 ............................. P-1, A-1+ 25,000,000 24,830,903
Toronto Dominion-New York, 5.06%, 02/10/00 .................... P-1, A-1+ 15,000,000 14,996,451
Westdeutsche Landesbank, 4.90%, 08/04/99 ...................... P-1, A-1+ 25,000,000 25,000,230
Westdeutsche Landesbank, 4.92%, 08/09/99 ...................... P-1, A-1+ 10,000,000 9,999,461
Westdeutsche Landesbank, 4.98%, 12/15/99 ...................... P-1, A-1+ 20,000,000 20,000,451
--------------
289,611,767
--------------
U.S. BANKS, U.S. BRANCHES -- 5.9%
First Tennessee National Bank, 5.11%, 09/21/99 ................ P-1, A-1 40,000,000 40,000,899
First Union National Bank, 4.90%, 09/20/99 .................... P-1, A-1+ 42,000,000 42,000,000
NationsBank, 4.87%, 10/06/99 .................................. P-1, A-1+ 15,000,000 15,000,000
--------------
97,000,899
--------------
TOTAL CERTIFICATES OF DEPOSIT (COST $496,612,603) ..................................... 496,612,603
--------------
COMMERCIAL PAPER -- 58.7%
AUTOMOBILES -- 4.3%
BMW U.S. Capital Corp., 4.80%, 07/22/99 ....................... P-1, A-1 8,500,000 8,476,200
BMW U.S. Capital Corp., 4.80%, 08/12/99 ....................... P-1, A-1 16,894,000 16,799,394
Daimler-Chrysler North America, 5.06%, 08/18/99 ............... P-1, A-1 13,000,000 12,912,293
Volkswagen of America, Inc., 4.82%, 08/10/99 .................. P-1, A-1 20,000,000 19,892,889
Volkswagen of America, Inc., 4.90%, 09/02/99 .................. P-1, A-1 14,250,000 14,127,806
--------------
72,208,582
--------------
BANKS -- 9.1%
Abbey National North America, 4.97%, 09/08/99 ................. P-1, A-1+ 40,000,000 39,618,967
ABN-AMRO Schedule B, Toronto Branch, 4.81%, 10/12/99 .......... P-1, A-1+ 25,000,000 24,655,951
Bank of Nova Scotia, 4.98%, 09/03/99 .......................... P-1, A-1+ 37,250,000 36,920,213
Commerzbank A.G., New York, 5.14%, 09/15/99 ................... P-1, A-1+ 50,000,000 50,016,565
--------------
151,211,696
--------------
CHEMICALS -- 2.3%
AKZO Nobel America, Inc., 4.80%, 08/05/99 ..................... P-1, A-1 37,500,000 37,325,000
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
ENTERTAINMENT -- 2.2%
E.W. Scripps Co., 5.08%, 09/14/99 ............................. P-1, A-1 $36,000,000 $ 35,619,000
--------------
FINANCIAL SERVICES -- 20.5%
First Data Corp., 5.03%, 09/14/99 ............................. P-1, A-1 15,000,000 14,842,812
Ford Motor Credit, 4.90%, 07/19/99 ............................ P-1, A-1 35,000,000 34,914,250
General Electric Capital Corp., 4.83%, 07/07/99 ............... P-1, A-1+ 40,000,000 39,967,800
General Electric Capital Corp., 4.81%, 07/29/99 ............... P-1, A-1+ 25,000,000 24,906,472
General Electric Capital Corp., 4.87%, 08/26/99 ............... P-1, A-1+ 10,000,000 9,924,244
HD Real Estate Funding, Inc., 4.83%, 07/06/99 ................. P-1, A-1+ 20,000,000 19,986,583
National Rural Utilities Co-op., 4.80%, 08/27/99 .............. P-1, A-1+ 50,000,000 49,620,000
Transamerica Finance Corp., 4.91%, 08/09/99 ................... P-1, A-1 20,000,000 19,893,617
Transamerica Finance Corp., 4.81%, 08/10/99 ................... P-1, A-1 30,000,000 29,839,667
Transamerica Finance Corp., 4.83%, 08/16/99 ................... P-1, A-1 19,800,000 19,677,801
UBS Finance (DE) Inc., 4.80%, 07/08/99 ........................ P-1, A-1+ 50,000,000 49,953,333
UBS Finance (DE) Inc., 4.82%, 12/13/99 ........................ P-1, A-1+ 25,000,000 24,447,708
--------------
337,974,287
--------------
INSURANCE -- 4.6%
Allianz of America Finance, 4.81%, 08/12/99 ................... P-1, A-1+ 28,000,000 27,842,873
Allianz of America Finance, 4.87%, 08/16/99 ................... P-1, A-1+ 8,735,000 8,680,644
Allianz of America Finance, 4.89%, 08/30/99 ................... P-1, A-1+ 40,000,000 39,674,000
--------------
76,197,517
--------------
LEASING -- 4.4%
Vehicle Services Corporation of America, 5.03%, 08/16/99 ...... P-1, A-1+ 72,300,000 71,835,312
--------------
MEDICAL SERVICES -- 1.1%
Medical Building VIII, 5.22%, 07/26/99 ........................ NR, A-1 18,200,000 18,133,974
--------------
PHARMACEUTICALS PREPARATIONS -- 2.1%
Zeneca Wilmington, Inc., 4.80%, 07/21/99 ...................... P1, A1+ 34,000,000 33,909,333
--------------
SECURITIES DEALERS -- 8.1%
CS First Boston International (Guernsey), Ltd., 4.76%, 07/09/99 P-1, A-1+ 40,000,000 39,957,689
CS First Boston International Inc., 4.79%, 08/10/99 ........... P-1, A-1+ 10,000,000 9,946,778
CS First Boston International Inc., 4.90%, 08/25/99 ........... P-1, A-1+ 20,000,000 19,850,278
Goldman Sachs Group LP, 4.83%, 10/04/99 ....................... P-1, A-1+ 15,000,000 14,808,812
Merrill Lynch & Co., Inc., 4.90%, 08/24/99 .................... P-1, A-1+ 50,000,000 49,632,500
--------------
134,196,057
--------------
TOTAL COMMERCIAL PAPER (COST $968,610,758) ............................................ 968,610,758
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
CORPORATE NOTES -- 6.7%
BANKS -- 6.7%
Abbey National Treasury Services, 5.58%, 08/19/99 ............. Aa2, AA $10,000,000 $ 9,999,228
Abbey National Treasury Services, 5.26%, 03/01/00 ............. Aa2, AA 10,000,000 9,997,106
First National Bank of Chicago, 4.85%, 08/03/99 ............... P-1, A-1+ 70,000,000 69,998,607
First Union National Bank, 5.31%, 09/14/99 .................... P-1, A-1 20,000,000 20,001,467
--------------
TOTAL CORPORATE NOTES (COST $109,996,408) ............................................. 109,996,408
--------------
TAXABLE MUNICIPAL SECURITIES -- 2.1%
Oakland-Alameda City Coliseum, 5.00%, 08/04/99 ................ VMIG-1, A-1+ 10,000,000 10,000,000
Oakland-Alameda City Coliseum, 5.06%, 08/17/99 ................ VMIG-1, A-1+ 20,400,000 20,400,000
Waukesha Wisconsin Health Systems, 5.15%, 07/01/99 ............ Aa2, AA- 4,350,000 4,350,000
--------------
TOTAL TAXABLE MUNICIPAL SECURITIES (COST $34,750,000) ................................. 34,750,000
--------------
REPURCHASE AGREEMENTS -- 2.3%
With First Boston, Inc.: at 5.10%, dated 06/30/99, to be
repurchased at $38,921,813 on 07/01/99, collateralized by
$40,068,715 of Government National Mortgage Association
Securities with various coupons and maturities to
12/02/99
(Cost $38,916,300) ...........................................................38,916,300 38,916,300
--------------
TOTAL INVESTMENTS (COST $1,648,886,069)(DAGGER)-- 99.9% ........................................ 1,648,886,069
OTHER ASSETS AND LIABILITIES, NET-- 0.1% ....................................................... 2,288,261
--------------
NET ASSETS-- 100.0% ............................................................................ $1,651,174,330
==============
<FN>
* Not audited
(DAGGER) Cost for federal income tax purposes.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS / JUNE 30, 1999
(Showing Percentage of Total Value of Net Assets)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
MUNICIPAL BONDS -- 101.6%
ALABAMA -- 0.9%
Alabama Housing Fin. Auth. Multi Family Housing (Rime Village
Hoover Proj.), FNMA Gtd., Ser. 1996-A, 3.35%, 07/07/99* .... N/R, A-1+ $ 4,200,000 $ 4,200,000
--------------
ALASKA -- 0.6%
Anchorage, AK Higher Educ. Rev. Bonds (Alaska Pacific Univ. Proj.),
LOC Bank of America, Ser. 1997, 3.55%, 07/07/99* ........... N/R, A-1+ 2,800,000 2,800,000
--------------
ARIZONA -- 2.6%
Maricopa County, AZ Transportation Board Excise Tax Subordinated
Lien Rev. Bonds, AMBAC Insured, 5.50%, 07/01/99* ........... Aaa, N/R 2,000,000 2,000,000
Salt River Project, AZ Agric. Imp. and Power Dist. Promissary
Notes, 3.25%, 09/07/99 ..................................... P-1, A-1+ 9,500,000 9,500,000
--------------
11,500,000
--------------
COLORADO -- 0.5%
Pitkin County, CO Ind. Dev. Rev. Bonds (Aspen Skiing Co. Proj.),
LOC First National Bank Chicago, 3.45%, 07/01/99* .......... N/R, A-1+ 2,400,000 2,400,000
--------------
DISTRICT OF COLUMBIA -- 2.8%
Dist. of Columbia (American Univ. Proj.), AMBAC Insured/SBPA
West Deutsche Landesbank, Ser. 1985-A, 3.50%, 07/07/99* .... VMIG-1, N/R 10,000,000 10,000,000
Dist. of Columbia (American Univ. Proj.), AMBAC Insured/SBPA
West Deutsche Landesbank, Ser. 1986-A, 3.50%, 07/07/99* .... VMIG-1, N/R 2,440,000 2,440,000
--------------
12,440,000
--------------
FLORIDA -- 4.4%
Jacksonville, FL Poll. Cntrl. Rev. Bonds TECP (Florida Power &
Light Co. Proj.), Ser. 1992, 3.20%, 08/09/99 ............... P-1, A-1+ 3,000,000 3,000,000
Jacksonville, FL Poll. Cntrl. Rev. Bonds TECP (Florida Power &
Light Co. Proj.), Ser. 1994, 3.20%, 08/09/99 ............... P-1, A-1+ 2,500,000 2,500,000
Jacksonville, FL Poll. Cntrl. Rev. Bonds TECP (Florida Power &
Light Co. Proj.), Ser. 1992, 3.25%, 10/08/99 ............... P-1, A-1+ 5,600,000 5,600,000
Jacksonville, FL Poll. Cntrl. Rev. Bonds TECP (Florida Power &
Light Co. Proj.), Ser. 1994, 3.25%, 10/12/99 ............... P-1, A-1+ 7,000,000 7,000,000
Orange County, FL Housing Fin. Auth. Rev. Bonds (Post Fountains
at Lee Vista Proj.), FNMA Gtd., 3.35%, 07/07/99* ........... N/R, A-1+ 1,900,000 1,900,000
--------------
20,000,000
--------------
GEORGIA -- 10.0%
Atlanta, GA Downtown Dev. Auth. Rev. Bonds (CARE Proj.), LOC
SunTrust Bank, Ser. 1993, 3.75%, 07/07/99* ................. VMIG-1, N/R 2,200,000 2,200,000
Clayton County, GA Hosp. Auth. Rev. Bonds (Southern Regional
Medical Center Proj.), LOC SunTrust Bank, Ser. 1995, 3.75%,
07/07/99* .................................................. Aa1, N/R 3,875,000 3,875,000
Columbus, GA Housing Auth. Rev. Bonds (Columbus State Univ.
Foundation Inc. Proj.), LOC SunTrust Bank, Ser. 1997, 3.75%,
07/07/99* .................................................. Aa3, N/R 1,300,000 1,300,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS -- CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
Columbus, GA Housing Auth. Rev. Bonds (St. Francis Hospital, Inc.
Proj.), LOC SunTrust Bank, Ser. 1997, 3.75%, 07/07/99* ..... Aa3, N/R $ 1,700,000 $ 1,700,000
Dekalb County, GA Hosp. Auth. Rev. Ant. Cert. (Dekalb Medical
Center Proj.), LOC SunTrust Bank, Ser. 1993-B, 3.75%,
07/07/99* .................................................. VMIG-1, N/R 3,700,000 3,700,000
Floyd County, GA Dev. Auth. Envir. Imp. Rev. Bonds (Georgia Kraft
Co. Proj.), LOC Banque Nationale de Paris, 3.55%, 07/01/99* P-1, N/R 4,675,000 4,675,000
Floyd County, GA Dev. Auth. Rev. Bonds (Berry College, Inc. Proj.),
LOC SunTrust Bank, Ser. 99, 3.75%, 07/07/99* ............... Aa3, N/R 3,500,000 3,500,000
Fulton County, GA Dev. Auth. Rev. Bonds (Arthritis Foundation, Inc.
Proj.), LOC SunTrust Bank, Ser. 1996, 3.75%, 07/07/99* ..... Aa3, N/R 1,000,000 1,000,000
Fulton County, GA Dev. Auth. Rev. Bonds (The Alfred and Adele
Davis Academy Income Proj.), LOC SunTrust Bank, Ser. 1996,
3.75%, 07/07/99* ........................................... Aa3, N/R 2,000,000 2,000,000
Gwinnett County, GA Housing Auth. Multi-family Housing (Post
Corners Proj.), FNMA Gtd., Ser. 1996, 3.35%, 07/07/99* ..... N/R, A-1+ 5,560,000 5,560,000
Gwinnett County, GA School Dist. Construction Sales Tax Notes,
3.50%, 12/31/99 ............................................ N/R, A-1+ 5,000,000 5,007,859
Rockdale County, GA Health Fac. Auth. Rev. Bonds (Georgia Hosp.
Proj.), LOC SunTrust Bank, Ser. 1994, 3.75%, 07/07/99* ..... VMIG-1, N/R 6,165,000 6,165,000
Smyrna, GA Housing Auth. Multi-Family Housing (F and M Villages
Proj.), FNMA Gtd., Ser. 1997, 3.35%, 07/07/99* ............. N/R, A-1+ 4,300,000 4,300,000
--------------
44,982,859
--------------
IDAHO -- 0.6%
Nez Perce Cnty., ID Poll. Cntrl. Rev. Bonds (Potlatch Corp. Proj.),
LOC Credit Suisse First Boston 3.65%, 07/01/99* ............ N/R, A-1+ 1,500,000 1,500,000
Nez Perce Cnty., ID Poll. Cntrl. Rev. Bonds (Potlatch Corp. Proj.),
LOC Credit Suisse First Boston 3.75%, 07/07/99* ............ N/R, A-1+ 1,000,000 1,000,000
--------------
2,500,000
--------------
ILLINOIS -- 16.6%
Illinois Dev. Fin. Auth. Poll. Cntrl. Rev. Bonds (Illinois Power
Co. Proj.), LOC Canadian Imperial Bank of Commerce,
3.00%, 08/26/99* ........................................... P-1, A-1+ 5,000,000 5,000,000
Illinois Dev. Fin. Auth. Rev. Bonds (Chicago Symphony Proj.),
LOC Bank of America, Ser. 1996, 3.60%, 07/07/99* ........... VMIG-1, A-1+ 5,200,000 5,200,000
Illinois Dev. Fin. Auth. Rev. Bonds (Goodman Theatre Proj.),
Ser. 99, 3.65%, 07/07/99* .................................. N/R, A-1+ 5,500,000 5,500,000
Illinois Dev. Fin. Auth. Rev. Bonds (Museum of Contemporary
Arts Proj.) Ser. 1994, 3.65%, 07/07/99* .................... VMIG-1, A-1+ 4,000,000 4,000,000
Illinois Educ. Fac. Auth. Rev. Bonds (Depaul Univ. Proj.),
LOC Northern Trust Co., Ser. 1992, 3.65%, 07/07/99 ......... VMIG-1, A-1+ 13,200,000 13,200,000
Illinois Educ. Fac. Auth. Rev. Bonds (Northwestern University
Proj.), Ser. 1988, 3.70%, 07/07/99* ........................ VMIG-1, A-1+ 1,800,000 1,800,000
Illinois Educ. Fac. Authority Rev. Bonds (ACI Cultural Pooled
Financing Proj.), LOC NBD Bank Corp., Ser. 1998, 3.65%,
07/07/99* .................................................. N/R, A-1+ 8,200,000 8,200,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
Illinois Health Fac. Auth. Rev. Bonds (Childrens Memorial
Hospital Proj.), LOCFNBof Chicago, Ser. B, 3.65%, 07/07/99* VMIG-1, A-1+ $ 3,800,000 $ 3,800,000
Illinois Health Fac. Auth. Rev. Bonds (Gottlieb Health Resources
Inc. Proj.), LOC Harris Trust & Savings Bank, 3.65%,
07/07/99* .................................................. VMIG-1, N/R 8,800,000 8,800,000
Illinois Health Fac. Auth. Rev. Bonds (Northwestern Memorial
Hospital Proj.) Ser. 1995, 3.45%, 07/01/99* ................ VMIG-1, A-1+ 2,300,000 2,300,000
Illinois Health Fac. Auth. Rev. Bonds TECP (The Univ. of
Chicago Proj.), 3.20%, 10/05/99 ............................ VMIG-1, A-1+ 12,000,000 12,000,000
Oak Forest, IL Dev. Rev. Bonds (Homewood Pool-South Suburban
Mayors & Managers Assoc. Proj.), LOC First National Bank
Chicago, 3.65%, 07/07/99* .................................. VMIG-1, N/R 5,000,000 5,000,000
--------------
74,800,000
--------------
INDIANA -- 6.5%
Indiana Educ. Auth. Rev. Bonds (St. Mary of the Woods College
Proj.) LOC NBD Bank, 3.65%, 07/07/99* ........................ N/R, A-1+ 1,500,000 1,500,000
Indiana Health Fac. Fin. Auth. Rev. Bonds (Cap. Access Designated
Pool Proj.), LOC Comerica Bank, Ser. 1991, 3.55%, 07/07/99* VMIG-1, N/R 1,000,000 1,000,000
Indiana Health Fac. Fin. Auth. Rev. Bonds (Cap. Access Designated
Pool Proj.), LOC Comerica Bank, Ser. 1998, 3.55%, 07/07/99* N/R, A-1 7,800,000 7,800,000
Indiana State Office Bldg. Commission Fac. Rev. Bonds (Miami
Correctional Facility - Phase 1 Proj.), Ser. 99A, 4.50%,
07/01/00 ................................................... Aaa/AA- 2,765,000 2,785,157
South Bend, IN Redev. Auth. Rev. Bonds (College Football Hall
of Fame Proj.), LOC Landesbank Hessen-Thuringen Girozentrale,
Ser. 1994, 3.65%, 07/07/99* ................................ VMIG-1, A-1+ 11,250,000 11,250,000
Sullivan, IN Poll. Cntrl. Rev. Bonds (Hoosier Energy Rural
Electric Proj.), Natural Rural Utilities CFC Gtd., 3.05%,
08/13/99 ................................................... P-1, A-1+ 5,000,000 5,000,000
--------------
29,335,157
--------------
KANSAS -- 1.3%
Burlington, KS Poll. Cntrl. Rev. Bonds (Kansas Electric Power
Cooperative, Inc. Proj.) Natural Rural Utilities CFC Gtd.,
Ser. 1985 C-1, 3.35%, 09/09/99 ............................. P-1, A-1+ 5,965,000 5,965,000
--------------
KENTUCKY -- 2.9%
Jefferson County, KY Poll. Cntrl. Rev. Bonds (Louisville Gas &
Electric Co. Proj.), Ser. 1993A, 3.20%, 08/09/99 ........... VMIG-1, A-1 3,100,000 3,100,000
Kentucky Asset/Liability General Fund Commission Gen. Fund
Rev. Bonds, Ser. A, 2.90%, 08/12/99 ........................ VMIG-1, N/R 10,000,000 10,000,000
--------------
13,100,000
--------------
LOUISIANA -- 3.7%
Plaquemines Port Harbor and Terminal Dist. Fac. Rev. Bonds TECP
(Electro-Coal Transfer Proj.), Ser. A, 3.15%, 09/08/99 ..... P-1, A-1+ 16,700,000 16,700,000
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS -- CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
MARYLAND -- 3.5%
Baltimore County, MD Consolidated Public Imp. TECP, 3.45%,
09/07/99 ................................................... P-1, A-1+ $13,900,000 $ 13,900,000
Baltimore County, MD Metropolitan District TECP, Ser. 1995,
3.35%, 10/15/99 ............................................ P-1, A-1+ 2,000,000 2,000,000
--------------
15,900,000
--------------
MICHIGAN -- 1.7%
Farmington Hills Hosp. Fin. Auth. Rev. Bonds (Botsford Gen.
Hospital Proj.), LOC Comerica Bank, Ser. B, 3.45%, 07/01/99 VMIG-1, A-1 1,400,000 1,400,000
Michigan Strategic Fund Rev. Bonds (Consumer Power Co. Proj.),
LOC Canadian Imperial Bank, Ser. 1993-A, 3.45%, 07/01/99 ... N/R, A-1+ 4,400,000 4,400,000
Michigan Strategic Fund Poll. Cntrl. Rev. Bonds (Detroit Edison
Co. Proj.), LOC Barclay's Bank, Ser. 1995-CC, 3.45%,
07/01/99* .................................................. P-1, A-1+ 1,800,000 1,800,000
--------------
7,600,000
--------------
MINNESOTA -- 8.6%
Becker, MN Poll. Cntrl. Rev. Bonds TECP (Northern States Power
Proj.) Ser. 1992A, 3.20%, 09/14/99 ......................... VMIG-1, A-1+ 10,400,000 10,400,000
Becker, MN Poll. Cntrl. Rev. Bonds TECP (Northern States Power
Proj.) Ser. 1993B, 3.40%, 10/13/99 ......................... VMIG-1, A-1+ 8,400,000 8,400,000
Minneapolis, MN Gen. Oblig. Unlimited Tax Bonds, 4.00%,
12/01/99 ................................................... N/R, A-1+ 5,635,000 5,648,298
Rochester, MN Health Care Fac. Rev. Bonds TECP (Mayo
Foundation Proj.), Ser. 1988F, 3.25%, 08/05/99 ............. N/R, A-1+ 5,000,000 5,000,000
Rochester, MN Health Care Fac. Rev. Bonds TECP (Mayo
Foundation Proj.), Ser. 1988E, 3.15%, 08/16/99 ............. N/R, A-1+ 9,410,000 9,410,000
--------------
38,858,298
--------------
NEW YORK -- 0.9%
Nassau Cnty, NY Ind. Dev. Rev. Bonds (Manhasset Assoc. Proj.),
3.70%, 07/01/99* ........................................... VMIG-1, N/R 4,000,000 4,000,000
--------------
NORTH CAROLINA -- 1.1%
Carteret County, NC Ind. Fac. & Poll. Cntrl. Fin. Auth. (Texas
Gulf Proj.), LOC Banque Nationale de Paris, Ser. 1985, 3.83%,
07/01/99* ..................................................... N/R, A-1+ 5,000,000 5,000,000
--------------
PENNSYLVANIA -- 3.7%
Pennsylvania Higher Educ. Fac. Auth. Rev. Bonds (Univ. of
Pennsylvania Health Services Proj.), Ser. 1994-B, 3.70%,
07/07/99* .................................................. VMIG-1, A-1+ 16,500,000 16,500,000
--------------
SOUTH CAROLINA -- 0.3%
Piedmont Muni. Power Agency South Carolina Rev. Bonds, MBIA
Insured/SBPA Credit Suisse First Boston, Ser. 1997-B, 3.55%,
07/07/99* .................................................. VMIG-1, A-1+ 1,500,000 1,500,000
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS -- CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
TENNESSEE -- 1.8%
Clarksville, TN Public Bldg. Auth. Rev. Bonds (Tennessee
Municipal Bond Fund Proj.), LOC Nationsbank, Ser. 1984,
3.80%, 07/01/99* ........................................... N/R, A-1+ $ 4,100,000 $ 4,100,000
Clarksville, TN Public Bldg. Auth. Rev. Bonds (Tennessee
Municipal Bond Fund Proj.), LOC Nationsbank, Ser. 1995,
3.80%, 07/01/99* ........................................... N/R, A-1+ 1,850,000 1,850,000
Metropolitan Government Nashville and Davidson County
Health and Educ. Fac. Board Rev. Bonds (Vanderbilt University
Proj,) Ser. 1985-A, 3.10%, 01/15/00 ........................ VMIG-1, A-1+ 2,150,000 2,150,000
--------------
8,100,000
--------------
TEXAS -- 19.5%
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc., Temple-Inland Proj.), LOC Credit Suisse First
Boston, Ser. 1984-B, 3.55%, 07/01/99 ....................... P-1, N/R 5,800,000 5,800,000
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc., Temple-Inland Proj.), LOC Credit Suisse First
Boston, Ser. 1984-C, 3.55%, 07/01/99 ....................... P-1, N/R 3,600,000 3,600,000
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc., Temple-Inland Proj.), LOC Credit Suisse First
Boston, Ser. D, 3.55%, 07/01/99 ............................ P-1, N/R 3,900,000 3,900,000
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc., Temple-Inland Proj.), LOC Credit Suisse First
Boston, Ser. E, 3.55%, 07/01/99 ............................ P-1, N/R 2,000,000 2,000,000
Bexar County, TX Health Fac. Dev. Corp. Rev. Bonds (Air Force
Village II Proj.), LOC Rabobank Nederland, Ser. 1985-B,
3.70%, 07/01/99 ............................................ N/R, A-1+ 9,200,000 9,200,000
City of Austin, TX (Travis and Williamson Counties) Combined
Utility Systems TECP, Ser. A, 3.30%, 07/21/99 .............. P-1, A-1+ 13,562,000 13,562,000
City of Houston Gen. Oblig. TECP Ser. C, 3.05%, 08/18/99 ...... P-1, A-1+ 9,300,000 9,300,000
City of Houston Gen. Oblig. TECP Ser. B, 3.20%, 08/26/99 ...... P-1, A-1+ 5,700,000 5,700,000
Harris County, TX Health Fac. Dev. Corp. Hosp. Rev. Bond
(Methodist Hosp. Proj.), Ser. 1994, 3.50%, 07/01/99 ........ N/R, A-1+ 4,900,000 4,900,000
San Antonio, TX Electric and Gas System TECP, 3.05%,
08/11/99 ................................................... P-1, A-1+ 10,000,000 10,000,000
Texas State Tax Revenue Anticipation Notes, 4.50%, 08/31/99 ... MIG-1, SP-1+ 19,900,000 19,942,818
--------------
87,904,818
--------------
UTAH -- 4.6%
Salt Lake City, UT Rev. Bonds (Pooled Hospital Finance Proj.),
Ser. 1990, Class B, 3.50%, 07/07/99 ........................ VMIG-1, N/R 15,000,000 15,000,000
State of Utah, Gen. Oblig. Highway Dev. TECP, Ser. 1998A, 3.15%,
08/16/99 ................................................... P-1, A-1+ 4,000,000 4,000,000
State of Utah, Gen. Oblig. Highway Dev. TECP, Ser. 1998A, 3.20%,
08/16/99 ................................................... P-1, A-1+ 2,000,000 2,000,000
--------------
21,000,000
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS -- CONTINUED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ----------- --------------
<S> <C> <C> <C>
WASHINGTON -- 0.0%
Washington Public Power Supply Rev. Bonds, LOC Bank of America,
Ser. 1993, 3.40%, 07/07/99 ................................. VMIG-1, A-1+ $ 180,000 $ 180,000
------------
WISCONSIN -- 2.5%
State of Wisconsin Gen. Oblig. TECP, Ser. 1997, 3.15%, 07/22/99 P-1, A-1+ 10,232,000 10,232,000
Town of Carlton, WI Environ. Improvement Rev. Bonds (Wisconsin
Power and Light Co. Proj.), Ser. 1991B, 3.45%, 07/01/99 .... VMIG-1, A-1+ 1,100,000 1,100,000
------------
11,332,000
------------
TOTAL MUNICIPAL BONDS (COST $458,598,132) ............................................. 458,598,132
------------
TOTAL INVESTMENTS (COST $458,598,132)(DAGGER)-- 101.6% ......................................... 458,598,132
OTHER ASSETS AND LIABILITIES, NET-- (1.6)% ..................................................... (7,088,738)
------------
NET ASSETS-- 100.0% ............................................................................ $451,509,394
============
<FN>
* Denotes a Variable or Floating Rate Note. Variable or Floating Rate Notes
are instruments whose rates change periodically. The rates shown are the
interest rates as of June 30, 1999. The dates shown are the next dates the
interest rates on the instruments are scheduled to be reset.
** Not audited
(DAGGER) Cost for federal income tax purposes.
LOC -- Letter of Credit.
SBPA -- Stand-by Bond Purchase Agreement.
TECP -- Tax-Exempt Commercial Paper and multi-modal bonds in commercial paper
mode.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1999
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
------------ -------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities (including repurchase agreements of
$213,774,100, $38,916,300 and $0, respectively), at value
(amortized cost $548,294,981, $1,648,886,069 and
$458,598,132, respectively) ........................................... $548,294,981 $1,648,886,069 $458,598,132
Interest receivable ...................................................... 1,894,090 9,560,792 2,563,244
Other assets ............................................................. 16 875 67,698
---------------------------------------------------
Total assets .......................................................... 550,189,087 1,658,447,736 461,229,074
---------------------------------------------------
LIABILITIES:
Dividends payable . ...................................................... 2,075,341 6,467,886 1,018,472
Payable for investment securities purchased .............................. -- -- 8,457,083
Accrued management fee ................................................... 223,497 149,356 178,456
Other accrued expenses ................................................... 56,884 656,164 65,669
---------------------------------------------------
Total liabilities ..................................................... 2,355,722 7,273,406 9,719,680
---------------------------------------------------
NET ASSETS ............................................................... $547,833,365 $1,651,174,330 $451,509,394
===================================================
NET ASSETS CONSIST OF:
Paid-in capital .......................................................... $547,830,760 $1,651,200,553 $451,511,054
Accumulated net realized gain (loss) on investments ...................... 2,605 (26,223) (1,660)
---------------------------------------------------
NET ASSETS ............................................................... $547,833,365 $1,651,174,330 $451,509,394
===================================================
Shares of beneficial interest outstanding ................................ 547,830,760 1,651,200,553 451,517,737
---------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ................. $1.00 $1.00 $1.00
===================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Period October 1, 1998 through June 30, 1999
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
<S> <C> <C> <C>
INTEREST INCOME .......................................................... $24,744,853 $66,486,667 $10,591,642
-------------------------------------------
EXPENSES:
Management fee ........................................................... 2,300,721 5,864,713 1,588,880
Accounting fee ........................................................... 120,342 281,301 90,051
Distribution expenses .................................................... 45,638 289,532 29,733
Trustees' fees and expenses .............................................. 9,770 8,492 9,790
Registration fees ........................................................ 71,565 111,515 32,361
Report to shareholders ................................................... 15,262 34,080 8,700
Professional fees ........................................................ 45,170 100,662 65,955
Other .................................................................... 35,741 71,166 29,744
-------------------------------------------
Total expenses ........................................................ 2,644,209 6,761,461 1,855,214
-------------------------------------------
Net investment income ................................................. 22,100,644 59,725,206 8,736,428
-------------------------------------------
NET REALIZED GAIN ON INVESTMENTS ......................................... 96 3,764 --
-------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... $22,100,740 $59,728,970 $ 8,736,428
===========================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Fiscal Year Ended September 30, 1998
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
<S> <C> <C> <C>
INTEREST INCOME .......................................................... $32,081,863 $77,760,447 $12,171,636
---------------------------------------------
EXPENSES:
Management fee ........................................................... 2,692,214 6,392,832 1,588,556
Accounting fee ........................................................... 144,347 304,502 97,600
Distribution expenses .................................................... 54,227 253,692 17,711
Trustees' fees and expenses .............................................. 10,378 13,162 10,363
Registration fees ........................................................ 95,425 159,913 48,111
Report to shareholders ................................................... 5,609 16,576 6,204
Professional fees ........................................................ 33,833 85,309 55,186
Other .................................................................... 40,117 112,586 28,826
---------------------------------------------
Total expenses ........................................................ 3,076,150 7,338,572 1,852,557
---------------------------------------------
Net investment income ................................................. 29,005,713 70,421,875 10,319,079
---------------------------------------------
NET REALIZED GAIN (LOSS) ON INVESTMENTS .................................. 296 (1,150) --
---------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... $29,006,009 $70,420,725 $10,319,079
=============================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
<S> <C> <C> <C>
For the Period October 1, 1998 through June 30, 1999
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................................. $ 22,100,644 $ 59,725,206 $ 8,736,428
Net realized gain on investments ...................................... 96 3,764 --
-----------------------------------------------------
Net increase in net assets resulting from operations .................. 22,100,740 59,728,970 8,736,428
-----------------------------------------------------
Dividends to shareholders from net investment income ..................... (22,100,644) (59,725,206) (8,736,428)
-----------------------------------------------------
Share transactions at net asset value of $1.00 per share:
Proceeds from sale of shares .......................................... 1,343,764,140 2,757,629,501 563,511,685
Shares issued to shareholders in reinvestment of dividends
from net investment income ......................................... 328,356 5,092,645 205,820
Cost of shares redeemed ............................................... (1,598,412,063) (2,814,285,554) (504,817,749)
-----------------------------------------------------
Net increase (decrease) in net assets and shares resulting from
share transactions ................................................. (254,319,567) (51,563,408) 58,899,756
-----------------------------------------------------
Total increase (decrease) in net assets ............................... (254,319,471) (51,559,644) 58,899,756
NET ASSETS:
Beginning of period ................................................... 802,152,836 1,702,733,974 392,609,638
-----------------------------------------------------
End of period ......................................................... $ 547,833,365 $ 1,651,174,330 $ 451,509,394
=====================================================
For the Fiscal Year Ended September 30, 1998
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................................. $ 29,005,713 $ 70,421,875 $ 10,319,079
Net realized gain (loss) on investments ............................... 296 (1,150) --
-----------------------------------------------------
Net increase in net assets resulting from operations .................. 29,006,009 70,420,725 10,319,079
-----------------------------------------------------
Dividends to shareholders from net investment income ..................... (29,005,713) (70,421,875) (10,319,079)
-----------------------------------------------------
Share transactions at net asset value of $1.00 per share:
Proceeds from sale of shares .......................................... 4,463,845,267 7,518,930,203 1,662,576,975
Shares issued to shareholders in reinvestment of dividends
from net investment income ......................................... 526,772 6,501,608 297,532
Cost of shares redeemed ............................................... (4,040,694,000) (7,013,967,395) (1,551,128,833)
-----------------------------------------------------
Net increase in net assets and shares resulting from
share transactions ................................................. 423,678,039 511,464,416 111,745,674
-----------------------------------------------------
Total increase in net assets .......................................... 423,678,335 511,463,266 111,745,674
NET ASSETS:
Beginning of year ..................................................... 378,474,501 1,191,270,708 280,863,964
-----------------------------------------------------
End of year ........................................................... $ 802,152,836 $ 1,702,733,974 $ 392,609,638
=====================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
<S> <C> <C> <C>
For the Fiscal Year Ended September 30, 1997
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................................. $ 17,524,954 $ 54,521,949 $ 8,592,334
Net realized gain (loss) on investments ............................... 651 (14,558) --
-----------------------------------------------------
Net increase in net assets resulting from operations .................. 17,525,605 54,507,391 8,592,334
-----------------------------------------------------
Dividends to shareholders from net investment income ..................... (17,524,954) (54,521,949) (8,592,334)
-----------------------------------------------------
Share transactions at net asset value of $1.00 per share:
Proceeds from sale of shares .......................................... 4,042,452,758 8,656,915,051 2,251,065,320
Shares issued to shareholders in reinvestment of dividends
from net investment income ......................................... 406,577 4,778,057 257,389
Cost of shares redeemed ............................................... (4,005,811,594) (8,451,263,968) (2,207,643,449)
-----------------------------------------------------
Net increase in net assets and shares resulting from
share transactions ................................................. 37,047,741 210,429,140 43,679,260
-----------------------------------------------------
Total increase in net assets .......................................... 37,048,392 210,414,582 43,679,260
NET ASSETS:
Beginning of year ..................................................... 341,426,109 980,856,126 237,184,704
-----------------------------------------------------
End of year ........................................................... $ 378,474,501 $1,191,270,708 $ 280,863,964
=====================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following tables include selected data for a share outstanding
throughout each period and other performance information derived from the
financial statements. They should be read in conjunction with the financial
statements and notes thereto.
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
OCTOBER 1, 1998 -------------------------------------------------------------
THROUGH
JUNE 30, 1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
RODNEY SQUARE FUND -- U.S. GOVERNMENT PORTFOLIO
For a Share Outstanding Through Each Period:
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-- BEGINNING OF PERIOD ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
Investment Operations:
Net investment income ........................ 0.034 0.051 0.050 0.050 0.052 0.033
-------------------------------------------------------------------------------
Distributions:
From net investment income ................... (0.034) (0.051) (0.050) (0.050) (0.052) (0.033)
-------------------------------------------------------------------------------
NET ASSET VALUE-- END OF PERIOD ................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN .................................... 3.42%** 5.19% 5.07% 5.08% 5.37% 3.32%
RATIOS (TO AVERAGE NET ASSETS)/ SUPPLEMENTAL DATA:
Expenses ..................................... 0.54%* 0.54% 0.55% 0.55% 0.55% 0.53%
Net investment income ........................ 4.51%* 5.06% 4.96% 4.97% 5.25% 3.27%
Net assets, end of period (000 omitted) ......... $547,833 $802,153 $378,475 $341,426 $306,096 $336,766
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
OCTOBER 1, 1998 -------------------------------------------------------------
THROUGH
JUNE 30, 1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
RODNEY SQUARE FUND -- MONEY MARKET PORTFOLIO
For a Share Outstanding Through Each Period:
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-- BEGINNING OF PERIOD ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
Investment Operations:
Net investment income ........................ 0.035 0.051 0.051 0.050 0.054 0.033
-------------------------------------------------------------------------------
Distributions:
From net investment income ................... (0.035) (0.051) (0.051) (0.050) (0.054) (0.033)
-------------------------------------------------------------------------------
NET ASSET VALUE-- END OF PERIOD ................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN .................................... 3.51%** 5.26% 5.17% 5.17% 5.50% 3.37%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..................................... 0.52%* 0.53% 0.54% 0.53% 0.54% 0.53%
Net investment income ........................ 4.61%* 5.13% 5.06% 5.03% 5.37% 3.33%
Net assets, end of period (000 omitted) ......... $1,651,174 $1,702,734 $1,191,271 $980,856 $751,125 $606,835
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
OCTOBER 1, 1998 -------------------------------------------------------------
THROUGH
JUNE 30, 1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
RODNEY SQUARE TAX-EXEMPT FUND
For a Share Outstanding Through Each Period:
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE-- BEGINNING OF PERIOD ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
Investment Operations:
Net investment income ........................ 0.019 0.031 0.030 0.031 0.033 0.021
-------------------------------------------------------------------------------
Distributions:
From net investment income ................... (0.019) (0.031) (0.030) (0.031) (0.033) (0.021)
-------------------------------------------------------------------------------
NET ASSET VALUE-- END OF PERIOD ................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===============================================================================
TOTAL RETURN .................................... 1.96%** 3.11% 3.09% 3.11% 3.36% 2.17%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ..................................... 0.55%* 0.55% 0.57% 0.56% 0.54% 0.54%
Net investment income ........................ 2.58%* 3.05% 3.05% 3.08% 3.29% 2.13%
Net assets, end of period (000 omitted) ......... $451,509 $392,610 $280,864 $237,185 $318,213 $388,565
<FN>
* Annualized.
** Not annualized.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION AND SHARES OF 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 as
Massachusetts business trusts and registered with the U.S. Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trustees of each Fund may create additional
series or portfolios, each of which may issue additional classes of shares.
Currently, the Rodney Square Fund consists of two series or portfolios, the
U.S. Government Portfolio and the Money Market Portfolio (each a
"Portfolio"). The Rodney Square Tax-Exempt Fund consists of one series or
portfolio (also a "Portfolio" and, together with the U.S. Government
Portfolio and the Money Market Portfolio of the Rodney Square Fund, the
"Portfolios"). Each Portfolio consists of a single class of shares.
Effective June 30, 1999, the Funds changed their fiscal year end from
September 30 to June 30 for financial reporting and federal income tax
purposes.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of each Fund:
SECURITY VALUATION. Each Fund values securities utilizing the amortized cost
valuation method which is permitted by Rule 2a-7 under the 1940 Act provided
that each Fund complies with certain conditions. This method involves valuing
a portfolio security initially at its cost and thereafter adjusting for
amortization of premium or accretion of discount to maturity.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate entity for
federal income tax purposes and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended, and distribute all of its taxable and tax-exempt income to its
shareholders. Therefore, no federal income tax provision has been made. At
June 30, 1999, the U.S. Government Portfolio, Money Market Portfolio and the
Tax-Exempt Fund had net tax basis capital loss carryforwards available to
offset future capital gains of approximately $6,000, $37,000 and $2,000,
respectively, which will expire as follows:
CAPITAL LOSS EXPIRATION
CARRYFORWARD DATE
------------- --------------
U.S. Government Portfolio $ 6,000 06/30/03
Money Market Portfolio $21,000 06/30/02
Money Market Portfolio $15,000 06/30/05
Money Market Portfolio $ 1,000 06/30/06
Tax-Exempt Fund $ 2,000 06/30/02
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest income is accrued as
earned. Dividends to shareholders of each Portfolio are declared daily from
net investment income, which consist of accrued interest and discount earned
(including original issue discount), less amortization of premium and the
accrued expenses applicable to the dividend period. For the Tax-Exempt Fund
only, the tax-exempt portion of each dividend is determined uniformly, based
on the ratio of the Fund's tax-exempt and taxable income, if any, for the
entire fiscal year.
21
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Rodney Square Fund, through its custodian,
receives delivery of the underlying securities, the market value of which at
the time of purchase is required to be in an amount at least equal to 101% of
the resale price. Rodney Square Management Corporation ("RSMC"), the Fund
Manager, is responsible for determining that the amount of these underlying
securities is maintained at a level such that their market value is at all
times equal to at least 101% of the resale price. In the event of default of
the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation; however,
realization and/or retention of the collateral may be subject to legal
proceedings.
OTHER. Investment security transactions are accounted for on a trade date
basis. The Portfolio's use the specific identification method for determining
realized gain and loss on investments for both financial and federal income
tax reporting purposes.
Obligations of agencies and instrumentalities of the U.S. Government are not
direct obligations of the U.S. Treasury and, thus, may or may not be backed
by the "full faith and credit" of the United States. Payment of interest and
principal on these obligations, although generally backed directly or
indirectly by the U.S. Government, may be backed solely by the issuing
instrumentality.
The Money Market Portfolio of the Rodney Square Fund invests in short-term,
unsecured debt instruments of corporate issuers. The ability of a corporate
issuer to meet its obligations may be affected by economic developments in a
specific industry or region. The Money Market Portfolio's investments in
certificates of deposit, commercial paper, corporate notes and time deposits
of domestic and foreign banks represented in the aggregate approximately
45.9% of its total investments on June 30, 1999.
Approximately 81.5% of the investments by the Rodney Square Tax-Exempt Fund
on June 30, 1999 were insured by private issuers that guarantee payments of
principal and interest in the event of default or were backed by letters of
credit issued by domestic and foreign banks or financial institutions.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Funds employ RSMC,
a wholly owned subsidiary of Wilmington Trust Company ("WTC"), to serve as
Fund Manager to each of the Funds pursuant to separate management agreements
each dated August 9, 1991, as amended (the "Management Agreements"). Under
the Management Agreements, RSMC, subject to the supervision of the Funds'
Boards of Trustees, directs the investments of the Portfolios in accordance
with each Portfolio's investment objective, policies and limitations. Also
under the Management Agreements, RSMC is responsible for administrative
services such as compliance monitoring and corporate management. For its
services, the Funds pay RSMC a monthly fee 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.
22
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- --------------------------------------------------------------------------------
PFPC Inc. ("PFPC") determines the net asset value per share and provides all
Fund accounting services pursuant to a separate Accounting Services Agreement
with each Fund. For accounting services, each Fund pays PFPC an annual amount
of $50,000 per Portfolio, plus an annual amount equal to 0.02% of each
Portfolio's average daily net assets in excess of $100 million.
WTC serves as custodian of the assets of the Funds and is paid for its
provision of this service by RSMC out of its management fee. The Funds
reimburse WTC for its related out-of-pocket expenses, if any, incurred in
connection with the performance of these services. Effective February 2,
1998, WTC entered into a Sub-Custodian Services Agreement with PFPC Trust
Company ("PFPC Trust"), whereby PFPC Trust serves as Sub-Custodian of the
Funds' assets. The Funds do not pay PFPC Trust any fees for custodial
services, as RSMC pays for the provision of these services out of its
management fee.
PFPC serves as transfer agent and dividend disbursing agent for each Fund.
RSMC pays PFPC for the provision of these services out of its management fee.
Any related out-of-pocket expenses reasonably incurred by PFPC or its agents
for the provision of such services are reimbursed by the Fund.
Prior to February 2, 1998, Rodney Square Management Corporation ("RSMC"), a
wholly owned subsidiary of WTC, served as accounting agent, administrator,
transfer agent and dividend disbursing agent to the Fund. For accounting
services provided, RSMC received an annual fee of $50,000 per Portfolio, plus
an amount equal to 0.02% of that portion of each Portfolio's average daily
net assets in excess of $100 million. For administration services provided,
RSMC received a monthly administration fee from the Fund at an annual rate of
0.08% of each Portfolio's average daily net assets. The Fund did not pay RSMC
any seperate fees for its services as transfer agent and dividend disbursing
agent for the Portfolios, as WTC assumed the cost of providing these services
to the Portfolios.
Pursuant to a Distribution Agreement with each Fund dated January 1, 1999,
Provident Distributors, Inc. ("PDI") manages the Funds' distribution efforts
and provides assistance and expertise in developing marketing plans and
materials. The Funds' Boards of Trustees have adopted, and shareholders have
approved, distribution plans pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plans"), to allow each Fund to reimburse PDI for certain expenses
incurred in connection with distribution activities. The Trustees have
authorized a payment of up to 0.20% of each Portfolio's average daily net
assets annually to reimburse PDI for such expenses.
23
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Trustees of the Rodney Square Fund and the Rodney Square
Tax-Exempt Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Rodney Square Fund (comprised of the U.S.
Government Portfolio and the Money Market Portfolio) and the Rodney Square
Tax-Exempt Fund (the "Funds") as of June 30, 1999, and the related statements of
operations, the statements of changes in net assets and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of June 30, 1999, by correspondence with the Funds'
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting the Rodney Square Fund and the Rodney
Square Tax-Exempt Fund at June 30, 1999, and the results of their operations,
the changes in their net assets, and their financial highlights for each of the
periods indicated therein, in conformity with generally accepted accounting
principles.
/S/ERNST & YOUNG L.L.P.
Philadelphia, Pennsylvania
August 3, 1999
24
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to Section 852 of the Internal Revenue Code of 1986, as amended, the
Rodney Square Tax-Exempt Fund designates dividends in the amount of $8,736,428
as tax-exempt dividends.
In January, 2000 shareholders of the Funds will recieve Federal income tax
information on all distributions paid to their accounts in calendar year 1999,
including any distributions paid between June 30, 1999 and December 31, 1999.
25
<PAGE>
[This Page Intentionally Left Blank.]
<PAGE>
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
John J. Quindlen
--------------------------------
OFFICERS
Robert J. Christian, PRESIDENT
Joseph M. Fahey,Jr., VICE PRESIDENT
Pat Colletti, VICE PRESIDENT & TREASURER
Gary M. Gardner, SECRETARY
Mary Jane Maloney, ASSISTANT SECRETARY
--------------------------------
FUND MANAGER
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
--------------------------------
SUB-ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
--------------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
--------------------------------
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Ctr.
6th Floor
West Conshohocken, PA 19428-2961
--------------------------------
LEGAL COUNSEL
Pepper Hamilton LLP
--------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP
--------------------------------
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF
THE FUNDS. THE REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
RS02 6/99
