THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE
- ------------------------------------------------------------
DEAR SHAREHOLDER:
The management of The Rodney Square Fund and The Rodney
Square Tax-Exempt Fund is pleased to report to you on the
Funds' activities for the six-month period ended March 31,
1996.
INVESTMENT RESULTS*
The U.S. Government Portfolio paid shareholders dividends
of $0.026 per share during the six-month period, the Money
Market Portfolio paid dividends of $0.026 per share and The
Rodney Square Tax-Exempt Fund paid dividends of $0.016 per
share. These dividends represented annualized returns of
5.21%, 5.29% and 3.20%, respectively.
ECONOMIC OVERVIEW
U.S. economic growth ground to a virtual halt during the
fourth quarter of 1995. The Commerce Department placed
fourth quarter gross domestic product (GDP) _ the value of
goods and services produced _ at a scant 0.5%, down from
3.6% in the third quarter. Much of the weakness during the
quarter was attributable to a slowdown in inventory
accumulation resulting from soft final demand. The slowdown
in activity was further exacerbated by the U.S. government's
shutdown during much of the fourth quarter. The first
quarter of 1996 initially appeared to exhibit little
improvement and many analysts were concerned that the
economy was slipping into recession.
With the economy clearly operating below its long run
non-inflationary growth potential of 2.0-2.5%, the Federal
Reserve (the "Fed") adopted a less restrictive monetary
stance. The Fed elected to lower its federal funds rate
target 25 basis points on December 19 and again on January
31, bringing the rate on overnight bank loans to 5.25%.
Interest rates adjusted accordingly across the yield curve
in anticipation of , and in response to, the Fed's actions.
From the beginning of October to the middle of February the
one year Treasury bill yield declined over 80 basis points
to 4.80% while 30 year Treasuries fell 50 basis points to
6.00%. Concerned that a 5.25% federal funds rate was still
too restrictive to allow a return to trend growth, the
market priced itself for additional Fed ease.
The market expectation that the Fed would continue to
ease due to slow growth now appears to be a bit premature.
Recent data indicates that U.S. economic growth has passed
its low point. Trade, inventory, housing, retail sales,
industrial production and labor market indicators point to a
reacceleration of economic activity. February's outsized
non-farm payroll employment number, initially reported as a
gain of 705,000 (since revised to 624,000), jolted financial
markets back to reality. The violent back up in yields
witnessed since the March 8 release of the payroll numbers
(one and thirty year Treasuries approaching 5.75% and 7.00%,
respectively) indicates the market's miscalculation of the
underlying strength of the economy and the Fed's
intentions. Stronger than expected employment data for
March (+140,000) appears to have closed the door on chances
for further Fed ease over the near term. The market, in
fact, now appears to be positioned for the Fed to reverse
course and tighten in the second half of the year.
Going forward, monetary policy will likely remain on hold
for some time as the Fed assesses the durability of the
recent economic strength. However, with the economy
operating at, or near capacity, above trend GDP growth would
likely cause sufficient inflation anxiety to increase the
risks of tightening during the latter half of the year.
- --------------------------
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. AN
INVESTMENT IN EITHER FUND IS NEITHER INSURED NOR GUARANTEED
BY WILMINGTON TRUST COMPANY OR ANY OTHER BANKING
INSTITUTION, THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD, OR
ANY OTHER AGENCY. THERE CAN BE NO ASSURANCE THAT EITHER
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00.
1
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE - CONTINUED
- ------------------------------------------------------------
INVESTMENT STRATEGY
Each of the portfolios of The Rodney Square Fund and The
Rodney Square Tax-Exempt Fund maintained defensive positions
throughout much of the first half of the fiscal year.
Weighted average maturities of the portfolios lagged those
of their respective benchmarks as measured by IBC's Money
Fund Report. The rationale for the defensive posture
stemmed primarily from our view that the market expectations
for continued and significant Fed easing were misplaced.
These expectations resulted in an inverted money market
yield curve with yields on short term securities exceeding
those of longer term securities. Since we did not share the
market's view of continued aggressive Fed easing, we did not
believe we were adequately compensated to extend maturity.
As noted in the economic overview, our position has since
been validated and the market now appears to be priced for
the Fed to tighten by the second half of the year. However,
with the Fed likely on hold for the near term, the return of
the positive slope to the money market yield curve provides
a greater degree of comfort and flexibility to extend
portfolio maturities as opportunities are presented.
We invite your comments and questions and we thank you
for your investment in the Funds.
Sincerely,
/S/ Martin L. Klopping
Martin L. Klopping
President
May 20, 1996
2
<PAGE>
THE RODNEY SQUARE FUND/U.S. GOVERNMENT PORTFOLIO
- ------------------------------------------------
INVESTMENTS/MARCH 31, 1996 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 54.4%
FEDERAL FARM CREDIT BANKS DISCOUNT NOTES - 14.5%
Federal Farm Credit Banks Notes, 5.26%, 04/11/96.... $ 8,700,000 $ 8,687,288
Federal Farm Credit Banks Notes, 5.10%, 04/26/96.... 5,500,000 5,480,521
Federal Farm Credit Banks Notes, 5.34%, 05/17/96.... 5,000,000 4,965,883
Federal Farm Credit Banks Notes, 5.17%, 05/28/96.... 5,530,000 5,484,732
Federal Farm Credit Banks Notes, 5.26%, 05/29/96.... 10,000,000 9,915,256
Federal Farm Credit Banks Notes, 5.21%, 06/07/96.... 5,800,000 5,743,761
Federal Farm Credit Banks Notes, 5.21%, 06/18/96.... 6,000,000 5,932,271
Federal Farm Credit Banks Notes, 4.89%, 08/28/96.... 12,000,000 11,756,509
----------
57,966,221
----------
FEDERAL FARM CREDIT BANKS INTEREST BEARING NOTES - 2.5%
Federal Farm Credit Banks Notes, 5.60%, 07/01/96.... 5,000,000 4,998,133
Federal Farm Credit Banks Notes, 5.53%, 10/01/96.... 5,000,000 5,011,800
----------
10,009,933
FEDERAL HOME LOAN BANKS DISCOUNT NOTES - 18.6%
Federal Home Loan Banks Notes, 5.27%, 04/02/96...... 5,000,000 4,999,236
Federal Home Loan Banks Notes, 5.48%, 04/10/96...... 5,000,000 4,993,150
Federal Home Loan Banks Notes, 5.50%, 05/03/96...... 5,000,000 4,975,556
Federal Home Loan Banks Notes, 5.01%, 05/22/96...... 10,000,000 9,929,025
Federal Home Loan Banks Notes, 5.12%, 06/03/96...... 5,865,000 5,812,450
Federal Home Loan Banks Notes, 5.21%, 06/26/96...... 7,000,000 6,912,877
Federal Home Loan Banks Notes, 5.09%, 06/28/96...... 5,415,000 5,347,625
Federal Home Loan Banks Notes, 5.17%, 07/09/96...... 14,795,000 14,585,821
Federal Home Loan Banks Notes, 4.88%, 07/29/96...... 6,980,000 6,867,405
Federal Home Loan Banks Notes, 4.95%, 08/02/96...... 5,000,000 4,915,437
Federal Home Loan Banks Notes, 4.93%, 08/30/96...... 5,000,000 4,896,606
----------
74,235,188
FEDERAL HOME LOAN BANKS INTEREST BEARING NOTES - 4.6%
Federal Home Loan Banks Notes, 6.13%, 08/05/96...... 8,250,000 8,272,626
Federal Home Loan Banks Notes, 5.31%, 11/13/96*..... 10,000,000 9,995,808
----------
18,268,434
FEDERAL NATIONAL MORTGAGE ASSOCIATION DISCOUNT NOTES - 1.5%
Federal National Mortgage Association Notes,
4.80%, 07/26/96 .................................. 6,000,000 5,907,200
FEDERAL NATIONAL MORTGAGE ASSOCIATION INTEREST BEARING NOTES - 2.5%
Federal National Mortgage Association Notes,
5.27%, 08/08/96* ................................. 10,000,000 9,996,805
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES - 10.2%
Tennessee Valley Authority Notes, 5.26%, 04/03/96... 10,000,000 9,997,078
Tennessee Valley Authority Notes, 5.28%, 04/08/96... 5,000,000 4,994,867
Tennessee Valley Authority Notes, 5.11%, 04/15/96... 5,000,000 4,990,064
The accompanying notes are an integral part of the financial statements.
3
THE RODNEY SQUARE FUND/U.S. GOVERNMENT PORTFOLIO
- ------------------------------------------------
INVESTMENTS (UNAUDITED)- CONTINUED
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- ---------
Tennessee Valley Authority Notes, 5.11%, 04/17/96... $ 5,000,000 $ 4,988,644
Tennessee Valley Authority Notes, 5.16%, 05/03/96... 5,000,000 4,977,067
Tennessee Valley Authority Notes, 5.20%, 05/06/96... 6,000,000 5,969,667
Tennessee Valley Authority Notes, 5.01%, 07/26/96... 5,000,000 4,919,282
----------
40,836,669
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $217,220,450)... 217,220,450
-----------
Repurchase Agreements _ 45.9%
With CS First Boston Group, Inc.: at 5.10%,
dated 03/29/96, to be repurchased at
$31,952,074 on 04/01/96, collateralized
by $17,052,390 Federal Home Loan Bank
Securities with various coupons and
maturities to 09/13/99, and $15,758,084
Federal National Mortgage Association
Securities with various coupons and
maturities to 07/10/03............................ 31,938,500 31,938,500
With CS First Boston Group, Inc.: at 5.65%,
dated 03/29/96, to be repurchased at
$51,548,859 on 04/01/96, collateralized
by $49,336,744 Federal Home Loan Bank
Securities with various coupons and
maturities to 03/27/00, and $3,848,262
Federal National Mortgage Association
Securities with various coupons and
maturities to 08/01/96............................ 51,524,600 51,524,600
With UBS Securities, Inc.: at 5.50%, dated
03/29/96, to be repurchased at $99,545,604
on 04/01/96, collateralized by $79,319,292
Federal Home Loan Mortgage Corporation
Securities with various coupons and
maturities to 06/01/24, and $22,171,259
Federal National Mortgage Association
Securities with various coupons and
maturities to 07/01/25............................ 99,500,000 99,500,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $182,963,100)............. 182,963,100
-----------
TOTAL INVESTMENTS (COST $400,183,550)** - 100.3% ................ 400,183,550
OTHER ASSETS AND LIABILITIES, NET - (0.3)% ...................... (1,052,645)
------------
NET ASSETS - 100.0% ............................................. $399,130,905
============
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate Notes
are instruments whose rates change periodically. The rate shown is the
interest rate as of March 31, 1996.
** Cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE RODNEY SQUARE FUND/MONEY MARKET PORTFOLIO
- ---------------------------------------------
INVESTMENTS/MARCH 31, 1996 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
U.S. GOVERNMENT AGENCY OBLIGATIONS* - 0.5%
Federal Home Loan Banks Notes, 5.38%,
03/14/97(COST $5,000,000)............... - $5,000,000 $5,000,000
----------
TAXABLE MUNICIPAL SECURITIES - 10.0%
ARKANSAS - 1.1%
Arkansas Dev. Fin. Auth. Ind. Fac.
(Potlatch Corp.) Ser. 1995B, 5.55%,
08/01/30**.............................. NR/A-1+ 10,750,000 10,750,000
----------
ILLINOIS - 1.4%
Lexington Fin. Services, LLC Taxable Adj.
Demand Health Care Rev. Bonds, 5.55%,
02/01/26**.............................. P-1/NR 13,000,000 13,000,000
----------
MICHIGAN - 1.8%
Genesys Health System Ser. 1995A, 5.55%,
04/01/20**.............................. VMIG1/A-1 16,600,000 16,600,000
----------
NEW YORK - 5.0%
New York City, NY Ser. 1996 A-2, 5.75%,
05/14/96................................ P-1/A-1+ 9,325,000 9,325,000
New York City, NY Ser. 1992B, 5.20%,
08/13/96................................ P-1/A-1+ 18,600,000 18,600,000
New York City, NY Ser. 1994 H-7, 5.20%,
08/13/96................................ P-1/A-1+ 11,400,000 11,400,000
New York City, NY Ser. 1996 A-2, 5.40%,
08/21/96................................ P-1/A-1+ 7,500,000 7,500,000
----------
46,825,000
----------
TEXAS - 0.7%
Methodist Hospital Taxable Health Care Ser.
1994A, 5.60%, 07/01/96.................. NR/A-1+ 6,000,000 6,000,000
----------
TOTAL TAXABLE MUNICIPAL SECURITIES (COST $93,175,000)...... 93,175,000
----------
CERTIFICATES OF DEPOSIT - 20.5%
U.S. BANKS, U.S. BRANCHES - 5.5%
First Alabama Bank, 5.02%, 08/05/96....... P-1/A-1+ 15,000,000 15,000,000
First Tennessee National, 5.35%, 05/20/96. P-1/A-1 21,000,000 21,000,000
NBD Bank, MI, 5.32%, 04/01/96............. P-1/A-1+ 15,000,000 15,000,000
----------
51,000,000
----------
FOREIGN BANKS, FOREIGN BRANCHES - 5.3%
Abbey National, London, 5.09%, 06/06/96... P-1/A-1+ 5,000,000 4,999,210
ABN-Amro Bank, London, 5.63%, 05/14/96.... P-1/A-1+ 20,000,000 20,000,555
Bayerische Vereinsbank, London, 5.46%,
04/16/96................................ P-1/A-1+ 25,000,000 25,000,103
----------
49,999,868
----------
The accompanying notes are an integral part of the financial statements.
5
THE RODNEY SQUARE FUND/MONEY MARKET PORTFOLIO
- ---------------------------------------------
INVESTMENTS(UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
FOREIGN BANKS, U.S. BRANCHES - 9.7%
Banque Nationale de Paris, NY, 5.22%,
04/04/96................................ P-1/A-1 $25,000,000 $25,000,041
Canadian Imperial Bank of Commerce, NY,
5.32%, 06/10/96......................... P-1/A-1+ 25,000,000 25,000,000
Deutsche Bank, NY, 5.42%, 04/04/96........ P-1/A-1+ 20,000,000 19,999,973
Deutsche Bank, NY, 5.73%, 05/02/96........ P-1/A-1+ 13,000,000 13,001,244
Dresdner Bank, NY, 5.62%, 05/10/96........ P-1/A-1+ 8,000,000 8,000,053
----------
91,001,311
----------
TOTAL CERTIFICATES OF DEPOSIT (COST $192,001,179)......... 192,001,179
-----------
Commercial Paper - 55.1%
Automobiles - 4.2%
Daimler-Benz North America Corp.,
5.30%, 04/12/96......................... P-1/A-1 5,000,000 4,991,903
Daimler-Benz North America Corp.,
5.23%, 04/29/96......................... P-1/A-1 5,000,000 4,979,661
Daimler-Benz North America Corp.,
5.00%, 06/26/96......................... P-1/A-1 5,000,000 4,940,278
Daimler-Benz North America Corp.,
5.26%, 07/10/96......................... P-1/A-1 10,000,000 9,853,889
Daimler-Benz North America Corp.,
5.25%, 07/22/96......................... P-1/A-1 15,000,000 14,755,000
----------
39,520,731
----------
BANKS - 9.7%
Abbey National North America, 5.17%,
06/19/96................................ P-1/A-1+ 30,000,000 29,659,642
Abbey National North America, 4.98%,
06/20/96................................ P-1/A-1+ 10,000,000 9,889,333
ABN-Amro North America Finance, Inc.,
5.35%, 04/09/96......................... P-1/A-1+ 5,000,000 4,994,056
Canadian Imperial Holdings, Inc., 5.27%,
04/25/96................................ P-1/A-1+ 10,000,000 9,964,867
Royal Bank of Canada, 5.03%, 07/01/96..... P-1/A-1+ 20,000,000 19,745,706
UBS Finance (DE) Inc., 5.43%, 04/01/96.... P-1/A-1+ 16,765,000 16,765,000
----------
91,018,604
----------
BUILDING & BUILDING SUPPLIES - 2.1%
CSR America, Inc., 5.67%, 04/01/96........ P-1/A-1 6,000,000 6,000,000
CSR America, Inc., 5.12%, 07/25/96........ P-1/A-1 10,000,000 9,836,444
CSR America, Inc., 5.03%, 08/27/96........ P-1/A-1 4,000,000 3,917,284
---------
19,753,728
----------
CHEMICALS - 8.5%
Akzo Nobel America, Inc., 5.25%, 04/29/96. P-1/A-1 5,000,000 4,979,583
Akzo Nobel America, Inc., 5.08%, 05/09/96. P-1/A-1 14,000,000 13,924,929
Akzo Nobel America, Inc., 5.33%, 05/24/96. P-1/A-1 15,000,000 14,882,296
DuPont (E.I.) de Nemours & Co., 5.36%,
04/10/96................................ P-1/A-1+ 25,000,000 24,966,500
DuPont (E.I.) de Nemours & Co., 5.60%,
06/05/96................................ P-1/A-1+ 20,500,000 20,292,722
----------
79,046,030
----------
ENTERTAINMENT - 2.1%
Walt Disney Co., 5.31%, 05/03/96.......... P-1/A-1 20,000,000 19,905,600
----------
The accompanying notes are an integral part of the financial statements.
6
THE RODNEY SQUARE FUND/MONEY MARKET PORTFOLIO
- ---------------------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
FINANCE - 8.3%
Commerzbank U.S. Finance, Inc., 5.18%,
04/09/96................................ P-1/A-1+ $13,000,000 $12,985,036
PGA Tour Investment Finance, Inc., 5.25%,
04/04/96................................ P-1/A-1 24,000,000 23,989,500
Vehicle Services of America, Ltd., 5.20%,
04/16/96................................ P-1/A-1 28,500,000 28,438,250
Vehicle Services of America, Ltd., 5.11%,
05/10/96................................ P-1/A-1 7,000,000 6,961,249
Vehicle Services of America, Ltd., 5.13%,
06/14/96................................ P-1/A-1 5,000,000 4,947,275
----------
77,321,310
----------
INTERNATIONAL TRADING - 4.0%
Daewoo International (America) Corp.,
5.32%, 05/09/96......................... P-1/A-1+ 15,000,000 14,915,767
Daewoo International (America) Corp.,
5.02%, 06/26/96......................... P-1/A-1+ 10,000,000 9,880,077
Daewoo International (America) Corp.,
5.04%, 06/27/96......................... P-1/A-1+ 12,500,000 12,347,750
----------
37,143,594
----------
METALS & MINING - 2.1%
Queensland Alumina Ltd., 5.27%, 06/12/96.. P-1/A-1+ 20,000,000 19,789,200
PHARMACEUTICALS - 1.8%
Zeneca Wilmington, Inc., 5.35%, 04/11/96.. P-1/A-1 17,000,000 16,974,736
SECURITIES DEALERS - 9.1%
CS First Boston Inc., 5.23%, 04/08/96..... P-1/A-1 25,000,000 24,974,576
Goldman Sachs Group, L.P., 5.60%, 04/04/96 P-1/A-1+ 5,000,000 4,997,667
Merrill Lynch & Co., Inc., 5.33%, 04/19/96 P-1/A-1+ 7,500,000 7,480,013
Merrill Lynch & Co., Inc., 5.15%, 04/26/96 P-1/A-1+ 15,000,000 14,946,354
Merrill Lynch & Co., Inc., 5.25%, 09/16/96 P-1/A-1+ 10,000,000 9,755,000
Morgan Stanley Group, Inc., 5.02%, 08/02/96 P-1/A-1+ 23,000,000 22,605,512
----------
84,759,122
----------
TIRE & RUBBER - 1.6%
Michelin North America, Inc., 5.18%,
04/05/96................................ P-1/A-1+ 15,000,000 14,991,367
----------
UTILITIES - 1.6%
Ontario Hydro, 5.34%, 04/02/96............ P-1/A-1+ 15,000,000 14,997,775
----------
TOTAL COMMERCIAL PAPER (COST $515,221,797)................ 515,221,797
-----------
CORPORATE NOTES - 11.1%
Bayerische Landesbank New York, 5.51%,
11/20/96................................ P-1/A-1+ 25,000,000 25,035,524
General Electric Capital Corp., 6.39%,
05/06/96................................ Aaa/AAA 25,000,000 25,020,618
General Electric Capital Corp., 5.83%,
07/30/96................................ Aaa/AAA 5,000,000 4,999,375
General Electric Capital Corp., 5.52%,
10/25/96**.............................. Aaa/AAA 8,570,000 8,575,605
Mellon Bank, 5.71%, 05/01/96.............. P-1/A-1 20,000,000 20,000,000
The accompanying notes are an integral part of the financial statements.
7
THE RODNEY SQUARE FUND/MONEY MARKET PORTFOLIO
- ---------------------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
Mellon Bank, 5.70%, 05/01/96............... P-1/A-1 $10,000,000 $10,001,953
Society National Bank of Cleveland, 6.70%,
04/15/96................................ P-1/A-1 10,000,000 10,002,980
----------
TOTAL CORPORATE NOTES (COST $103,636,055)................. 103,636,055
-----------
BANKERS' ACCEPTANCES - 2.7%
CoreStates Bank, N.A, 5.51%, 05/07/96..... P-1/A-1 5,000,000 4,972,450
CoreStates Bank, N.A., 5.22%, 09/11/96.... P-1/A-1 5,400,000 5,272,371
First Alabama Bank, 5.28%, 09/18/96....... P-1/A-1+ 4,000,000 3,900,267
Mellon Bank, 5.63%, 04/23/96.............. P-1/A-1 5,000,000 4,982,797
Seattle First National Bank, 5.08%,
05/16/96................................ P-1/A-1+ 6,000,000 5,961,900
---------
TOTAL BANKERS' ACCEPTANCES (COST $25,089,785)............. 25,089,785
----------
REPURCHASE AGREEMENTS - 0.1%
With UBS Securities, Inc.: at 5.50%, dated
03/29/96, to be repurchased at $726,933
on 04/01/96, collateralized by $840,000
Government National Mortgage Association
Securities at 10.00%, due 06/15/21
(COST $726,600)...................................... 726,600 726,600
-------
TOTAL INVESTMENTS (COST $934,850,416)*** - 100.0%.............. 934,850,416
OTHER ASSETS AND LIABILITIES, NET - 0.0%....................... 347,846
-------
NET ASSETS - 100.0%............................................ $935,198,262
============
* While not rated by Moody's or the S&P, U.S. Government
Agency Obligations are considered to be of the highest
quality, comparable to AAA.
** Denotes a Variable or Floating Rate Note. Variable and
Floating Rate Notes are instruments whose rates change
periodically. The rates shown are the interest rates as
of March 31, 1996.
*** Cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS/MARCH 31, 1996 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
MUNICIPAL SECURITIES - 99.9%
ALABAMA - 3.7%
Birmingham, AL General Obligation
Ref. Bonds Ser. 1994A, 3.45%,
06/01/18*......................... VMIG1/A-1+ $ 5,000,000 $ 5,000,000
Birmingham, AL General Obligation
Ref. Bonds Ser. 1995, 3.45%,
06/01/23*......................... VMIG1/A-1+ 4,000,000 4,000,000
----------
9,000,000
ALASKA - 4.2% ----------
Anchorage, AK Higher Educ.
(Alaska Pacific Univ.) Ser.
1987, 3.35%, 07/01/17*............ NR/A-1+ 10,400,000 10,400,000
----------
ARIZONA - 2.0%
Pima CoUnty, AZ Ind. Dev. Auth.
Rev. Bonds (Tucson Retirement
Center), 3.30%, 01/01/09*......... Aa1/NR 5,000,000 5,000,000
----------
CONNECTICUT - 0.7%
Mashantucket Pequot Tribe
Connecticut TECP Ser. 1996,
3.40%, 08/16/96................... P-1/A-1+ 1,800,000 1,800,000
----------
DISTRICT OF COLUMBIA - 4.5%
Dist. of Columbia (American Univ.)
Ser. 1985, 3.40%, 10/01/15*....... VMIG1/NR 10,000,000 10,000,000
Dist. of Columbia (American Univ.)
Ser. 1986A, 3.40%, 12/01/15*...... VMIG1/NR 1,000,000 1,000,000
----------
11,000,000
FLORIDA - 2.0% ----------
Palm Beach County, FL Health Fac.
Auth. Rev. Ref. Bonds TECP
(Pooled Hospital Prog) 3.45%,
06/20/96.......................... VMIG1/A-1+ 5,000,000 5,000,000
----------
GEORGIA - 5.7%
Assoc. County Commission of Georgia
Cherokee County Georgia Public
Purpose Proj. 4.55%, 12/01/96..... Aaa/AAA 3,000,000 3,023,408
Atlanta, GA Downtown Dev. Auth.
(Care Proj.) Ser. 1993, 3.45%,
06/01/13*......................... VMIG1/NR 2,700,000 2,700,000
City of Roswell, GA Housing Auth.
Multi-Family Housing Rev. Ref.
(Wood Crossing Proj.) Ser. 1994,
3.50%, 08/01/24*.................. NR/A-1 5,000,000 5,000,000
Floyd County, GA Dev. Auth. Environ.
Improvement Rev. Bonds (Georgia
Kraft Co. Proj.), 3.80%, 12/01/05* P-1/NR 3,300,000 3,300,000
-----------
14,023,408
IDAHO - 0.9% -----------
Idaho Health Fac. Auth. Rev. Bonds
(St. Luke's Regional Medical Ctr.
Proj.) Ser. 1995, 4.05%, 05/01/22* VMIG1/NR 2,250,000 2,250,000
----------
The accompanying notes are an integral part of the financial statements.
9
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
ILLINOIS - 14.8%
Illinois Health Fac. Auth. TECP
(Univ. of Chicago) 3.25%, 08/06/96 VMIG1/A-1+ $14,000,000 $14,000,000
Illinois Health Fac. Auth.
(Resurrection Health Care System)
Ser. 1993, 3.80%, 05/01/11*....... VMIG1/NR 11,500,000 11,500,000
Illinois Health Fac. Auth.
(Evangelical Hosp. Corp.) Ser.
1985B, 3.35%, 01/01/16*........... VMIG1/NR 1,100,000 1,100,000
Illinois Health Fac. Auth.
(Franciscan Sisters Health
Care Corp.) Ser. 1992, 3.85%,
01/01/18*......................... VMIG1/NR 3,100,000 3,100,000
Illinois Health Fac. Auth.
(Elmhurst Memorial Hosp.),
4.05%, 01/01/20*.................. VMIG1/NR 6,700,000 6,700,000
----------
36,400,000
INDIANA - 5.4% ----------
Indiana Health Fac. Fin. Auth. Rev.
Bonds (Cap. Access Designated Pool)
3.35%, 12/01/02*................. VMIG1/NR 2,700,000 2,700,000
Indiana Health Fac. Fin. Auth.
(Cap. Access Designated Pool Proj.)
Ser. 1991, 3.35%, 08/01/06*....... VMIG1/NR 4,275,000 4,275,000
Indiana Hosp. Equip. Fin. Auth. Ser.
1985A, 3.35%, 12/01/15*........... VMIG1/A-1 6,215,000 6,215,000
----------
13,190,000
IOWA - 2.3% ----------
Des Moines, IA Methodist System Inc.
Hosp. Fac. (MethodistnMedical
Center Proj.) Ser. 1985, 3.35%,
08/01/15*......................... VMIG1/NR 2,435,000 2,435,000
Univ. of Iowa Fac. Corp. (Human
Biology Research Proj.) Ser.
1985A, 3.35%, 06/01/05*........... NR/A-1 3,125,000 3,125,000
----------
5,560,000
KENTUCKY - 3.8% ----------
Trimble County, KY Poll. Cntrl.
Rev. Bonds TECP (Louisville
Gas and Electric) Ser. 1992A,
3.35%, 04/22/96................... VMIG1/A-1+ 9,400,000 9,400,000
----------
LOUISIANA - 8.6%
Louisiana Public Fac. Auth. Hosp.
Rev. Bonds (Willis-Knighton
Medical Center Proj.) Ser. 1995,
3.50%, 09/01/25*.................. VMIG1/A-1 3,500,000 3,500,000
Louisiana Public Fac. Auth. Hosp.
Rev. Bonds (Willis-Knighton
Medical Center Proj.) Ser. 1993,
3.50%, 09/01/23*.................. VMIG1/A-1 7,100,000 7,100,000
Plaquemines Port Harbor and Terminal
TECP Ser. 1985A, 3.35%, 04/22/96.. P-1/A-1+ 10,500,000 10,500,000
----------
21,100,000
MARYLAND - 1.8% ----------
Howard County, MD Cons. Public Imp.
TECP Ser. A, 3.45%, 04/25/96...... P-1/A-1+ 4,400,000 4,400,000
----------
The accompanying notes are an integral part of the financial statements.
10
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
Minnesota - 5.3%
Becker, MN Poll. Cntrl. Rev. Bonds
TECP (Northern States Pwr. Co.)
Ser. 1993A, 3.60%, 05/10/96....... VMIG1/A-1 $ 5,100,000 $ 5,100,000
Becker, MN Poll. Cntrl. Rev. Bonds
TECP (Northern States Pwr. Co.)
Ser. 1992A, 3.60%, 05/10/96....... VMIG1/A-1 8,000,000 8,000,000
----------
13,100,000
MISSISSIPPI - 1.7% ----------
Mississippi Hosp. Equip. & Fac.
Auth. (Mississippi Baptist
Medical Center) Ser. 1990B,
3.55%, 07/01/12*.................. VMIG1/NR 4,110,000 4,110,000
----------
MISSOURI - 2.7%
Missouri Health & Educ. Fac. Auth.
TECP (SSM Healthcare) Ser.
1988C, 3.40%, 05/17/96............ VMIG1/NR 5,700,000 5,700,000
Missouri St. Environ. Imp. & Energy
Resource Auth. Poll. Cntrl. Rev.
Bonds (Noranda Aluminum Inc.
Proj.), 3.35%, 10/01/02*.......... P-1/NR 800,000 800,000
----------
6,500,000
NEVADA - 1.0% ----------
Washoe County, NV Ref. Ser. 1986,
7.125%, Prerefunded 07/15/96...... Aaa/AAA 2,500,000 2,576,072
----------
NEW YORK - 1.0%
New York, NY Subser. A-4, 3.85%,
08/01/22*......................... VMIG1/A-1 2,500,000 2,500,000
----------
NORTH CAROLINA - 4.1%
Carteret County, NC Ind. Fac. &
Poll. Cntrl. Fin. Auth. (Texas
Gulf) Ser. 1985, 3.55%, 10/01/05* Aa1/NR 5,000,000 5,000,000
Mecklenburg, NC Ser. 1996C, Subser.
A, 3.40%, 03/01/14*............... VMIG1/A-1 5,000,000 5,000,000
----------
10,000,000
NORTH DAKOTA - 0.8% ----------
Grand Forks, ND Health Care Fac.
(United Hosp. Obligation Group)
Ser. 1992B, 3.85%, 12/01/16*...... VMIG1/NR 2,000,000 2,000,000
----------
PENNSYLVANIA - 2.0%
Bucks County, PA Ind. Dev. Auth.
(New Edgecomb Metals Co.) Ser.
1984, 3.30%, 10/01/09*............ Aa1/NR 5,000,000 5,000,000
----------
TENNESSEE - 1.9%
Public Auth. of Clarksville, TN
Pooled Rev. Ser. 1994, 3.50%,
06/01/24*......................... NR/A-1 4,700,000 4,700,000
----------
TEXAS - 10.7%
Bexar County, TX Health Fac. Dev.
Corp. Rev. Bonds (Air Force
Village II Proj.) Ser. 1985B,
3.30%, 03/01/12*.................. NR/A-1+ 5,910,000 5,910,000
The accompanying notes are an integral part of the financial statements.
11
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------------
Moody's/S&P Principal Value
Rating Amount (Note 2)
----------- --------- --------
Board of Regents of Texas A&M
University System TECP Ser. B,
3.30%, 04/16/96................... P-1/A-1+ $ 7,300,000 $ 7,300,000
City of Houston, TX General
Obligation Bonds Ser. 1992E,
4.00%, 04/01/96................... VMIG1/A-1+ 1,700,000 1,700,000
City of Houston, TX TECP Ser. A,
3.30%, 05/01/96................... P-1/A-1+ 1,000,000 1,000,000
Texas Public Fin. Auth. TECP Ser.
B, 3.50%, 07/24/96................ P-1/A-1+ 10,300,000 10,300,000
----------
26,210,000
UTAH - 3.2% ----------
Intermountain Power Agency, UT
Power Supply Rev. Ser. A, 7.75%,
Prerefunded 07/01/96.............. Aaa/AA- 3,000,000 3,088,174
Salt Lake City, UT Flexible Rate
Rev. Bonds Ser. 1990, 3.40%,
01/01/20*......................... VMIG1/A-1+ 4,700,000 4,700,000
----------
7,788,174
VERMONT - 3.0% ----------
State of Vermont TECP, 3.50%,
06/14/96.......................... P-1/A-1+ 7,300,000 7,300,000
----------
WASHINGTON - 1.3%
Washington Health Care Fac. Auth.
(Fred Hutchinson Cancer Research
Center) Ser. 1991C, 3.85%,
01/01/18*......................... VMIG1/NR 1,300,000 1,300,000
Washington Health Care Fac. Auth.
(Fred Hutchinson Cancer Research
Center) Ser. 1991B, 3.85%,
01/01/18*......................... VMIG1/NR 1,800,000 1,800,000
----------
3,100,000
WYOMING - 0.8% ----------
Green River Poll. Cntrl. Rev.
(Texas Gulf Inc.) Ser. 1984,
3.55%, 12/01/04*.................. VMIG1/NR 2,000,000 2,000,000
-----------
TOTAL MUNICIPAL SECURITIES (COST $245,407,654)............. 245,407,654
-----------
TOTAL INVESTMENTS (COST $245,407,654)** - 99.9%................. 245,407,654
OTHER ASSETS AND LIABILITIES, NET - 0.1%........................ 287,614
-----------
NET ASSETS - 100.0%............................................. $245,695,268
============
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate Notes
are instruments whose rates change periodically. The rate shown is the
interest rate as of March 31, 1996.
TECP - Tax-Exempt Comercial Paper.
** Cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 1996 (Unaudited)
RODNEY SQUARE RODNEY SQUARE RODNEY
FUND - FUND - SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- ----------
ASSETS:
Investments in securities
(including repurchase agreements
of $182,963,100, $726,600 and $0,
respectively), at value (amortized
cost $400,183,550, $934,850,416,
and $245,407,654, respectively)
(Note 2)........................... $400,183,550 $934,850,416 $245,407,654
Interest receivable................. 521,389 4,928,477 933,815
Other assets........................ 16,733 24,012 106,826
----------- ------------ ------------
Total assets....................... 400,721,672 939,802,905 246,448,295
----------- ------------ ------------
LIABILITIES:
Dividends payable................... 1,423,707 4,120,327 622,956
Accrued management fee (Note 3)..... 138,592 395,679 104,403
Other accrued expenses (Note 3)..... 28,468 88,637 25,668
------------ ------------ ------------
Total liabilities 1,590,767 4,604,643 753,027
------------ ------------ ------------
NET ASSETS.......................... $399,130,905 $935,198,262 $245,695,268
============ ============ ============
NET ASSETS CONSIST OF:
Capital paid in..................... $399,126,353 $935,212,668 $245,696,928
Accumulated realized gain (loss)
on investments - net............... 4,552 (14,406) (1,660)
NET ASSETS, for 399,126,353, ------------ ------------ ------------
935,212,668, and 245,703,611,
shares outstanding, respectively... $399,130,905 $935,198,262 $245,695,268
============ ============ ============
NET ASSET VALUE, offering and
redemption price per share: $1.00(1) $1.00(2) $1.00(3)
======== ======== ========
(1) 399,130,905 / 399,126,353 outstanding shares of beneficial interest,
no par value
(2) $935,198,262 / 935,212,668 outstanding shares of beneficial interest,
no par value
(3) $245,695,268 / 245,703,611 outstanding shares of beneficial interest,
no par value
The accompanying notes are an integral part of the financial statements.
13
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended March 31, 1996 (Unaudited)
RODNEY SQUARE RODNEY SQUARE RODNEY
FUND - FUND - SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- ----------
INTEREST INCOME..................... $10,098,596 $23,485,836 $5,740,996
----------- ----------- ----------
EXPENSES:
Management fee (Note 3)............. 837,765 1,940,683 723,125
Accounting fee (Note 3)............. 50,649 97,582 45,771
Distribution expenses (Note 3)...... 33,964 44,370 12,316
Trustees' fees and expenses (Note 3) 3,215 5,296 3,273
Registration fees................... 18,915 25,369 15,875
Reports to shareholders............. 2,475 5,165 4,719
Legal............................... 9,990 18,653 8,582
Audit............................... 8,022 16,003 14,550
Other............................... 21,269 41,536 21,187
----------- ----------- ----------
Total expenses.................... 986,264 2,194,657 849,398
----------- ----------- ----------
Net investment income............. 9,112,332 21,291,179 4,891,598
----------- ----------- ----------
REALIZED GAIN ON INVESTMENTS - NET
(NOTE 2)........................... 2,932 0 0
----------- ----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $9,115,264 $21,291,179 $4,891,598
=========== =========== ==========
The accompanying notes are an integral part of the financial statements.
14
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
RODNEY SQUARE RODNEY SQUARE RODNEY
FUND - FUND - SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- ----------
For the Six-Month Period Ended March 31, 1996 (Unaudited)
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............ $9,112,332 $21,291,179 $4,891,598
Net realized gain on investments. 2,932 0 0
Net increase in net assets ----------- ----------- ----------
resulting from operations....... 9,115,264 21,291,179 4,891,598
----------- ----------- ----------
Dividends to shareholders from net
investment income ($0.026, $0.026,
and $0.016 per share, respectively) (9,112,332) (21,291,179) (4,891,598)
----------- ------------ -----------
Share transactions at net asset value
of $1.00 per share
Proceeds from sale of shares..... 2,197,871,031 3,571,558,249 1,117,820,025
Shares issued to shareholders in
reinvestment of dividends from
net investment income.......... 199,259 1,534,063 165,113
Cost of shares redeemed..........(2,105,038,230)(3,389,019,058)(1,190,502,450)
------------- ------------- -------------
Net increase (decrease) in net
assets and shares resulting
from share transactions......... 93,032,060 184,073,254 (72,517,312)
Total increase (decrease) in net ------------ ------------ ------------
assets.......................... 93,034,992 184,073,254 (72,517,312)
NET ASSETS:
Beginning of period.............. 306,095,913 751,125,008 318,212,580
------------ ------------ ------------
End of period.................... $399,130,905 $935,198,262 $245,695,268
============ ============ ============
For the Fiscal Year Ended September 30, 1995
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income............ $18,666,118 $37,030,904 $11,879,978
Net realized gain (loss) on
investments (6,526) 243 4,106
Net increase in net assets ----------- ----------- -----------
resulting from operations 18,659,592 37,031,147 11,884,084
Dividends to shareholders from net ----------- ----------- -----------
investment income ($0.052, $0.054,
and $0.033 per share, respectively) (18,666,118) (37,030,904) (11,879,978)
------------ ------------ -----------
Share transactions at net asset
value of $1.00 per share
Proceeds from sale of shares..... 3,161,916,931 5,233,294,691 2,175,933,192
Shares issued to shareholders
in reinvestment of dividends
from net investment income..... 305,455 1,620,673 314,985
Cost of shares redeemed..........(3,192,886,094)(5,090,626,079)(2,246,604,280)
Net increase (decrease) in net ------------- ------------- -------------
assets and shares resulting
from share transactions........ (30,663,708) 144,289,285 (70,356,103)
Total increase (decrease) in ------------ ----------- ------------
net assets..................... (30,670,234) 144,289,528 (70,351,997)
NET ASSETS:
Beginning of year................ 336,766,147 606,835,480 388,564,577
------------ ----------- ------------
End of year...................... $306,095,913 $751,125,008 $318,212,580
============ =========== ===========
The accompanying notes are an integral part of the financial statements.
15
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.
FOR THE
SIX-MONTH
PERIOD ENDED
MARCH 31, FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------------
1996** 1995 1994 1993 1992 1991
------ ---- ---- ---- ---- ----
RODNEY SQUARE FUND - U.S.
GOVERNMENT PORTFOLIO
For a Share Outstanding
Throughout Each Period:
NET ASSET VALUE -
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Investment Operations:
Net investment income... 0.026 0.052 0.033 0.028 0.038 0.062
----- ----- ----- ----- ----- -----
Distributions:
From net investment
income.................. (0.026) (0.052) (0.033) (0.028) (0.038) (0.062)
------- ------- ------- ------- ------- -------
NET ASSET VALUE -
END OF PERIOD........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return............. 5.21%* 5.37% 3.32% 2.83% 3.88% 6.41%
Ratios (to average net
assets)/Supplemental Data:
Expenses.............. 0.55%* 0.55% 0.53% 0.53% 0.54% 0.53%
Net investment income. 5.11%* 5.25% 3.27% 2.79% 3.84% 6.22%
Net assets at end of
period ($000 omitted)... 399,131 306,096 336,766 386,067 409,534 479,586
FOR THE
SIX-MONTH
PERIOD ENDED
MARCH 31, FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------------
1996** 1995 1994 1993 1992 1991
------ ---- ---- ---- ---- ----
RODNEY SQUARE FUND -
MONEY MARKET PORTFOLIO
For a Share Outstanding
Throughout Each Period:
NET ASSET VALUE -
BEGINNING OF PERIOD..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Investment Operations:
Net investment income... 0.026 0.054 0.033 0.029 0.041 0.065
----- ----- ----- ----- ----- -----
Distributions:
From net investment
income.................. (0.026) (0.054) (0.033) (0.029) (0.041) (0.065)
------- ------- ------- ------- ------- -------
NET ASSET VALUE -
END OF PERIOD........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return............. 5.29%* 5.50% 3.37% 2.92% 4.15% 6.73%
Ratios (to average net
assets)/Supplemental Data:
Expenses.............. 0.53%* 0.54% 0.53% 0.52% 0.52% 0.52%
Net investment income. 5.16%* 5.37% 3.33% 2.88% 4.06% 6.52%
Net assets at end of
period ($000 omitted)... 935,198 751,125 606,835 649,424 717,544 790,837
16
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS - CONTINUED
- -------------------------------------------------------------------------------
FOR THE
SIX-MONTH
PERIOD ENDED
MARCH 31, FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
----------------------------------------
1996** 1995 1994 1993 1992 1991
------ ---- ---- ---- ---- ----
RODNEY SQUARE
TAX-EXEMPT FUND
For a Share Outstanding
Throughout Each Period:
NET ASSET VALUE -
BEGINNING OF PERIOD..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Investment Operations:
Net investment income... 0.016 0.033 0.021 0.020 0.030 0.045
----- ----- ----- ----- ----- -----
Distributions:
From net investment
income ................. (0.016) (0.033) (0.021) (0.020) (0.030) (0.045)
------- ------- ------- ------- ------- -------
NET ASSET VALUE -
END OF PERIOD........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return............. 3.20%* 3.36% 2.17% 2.07% 3.06% 4.59%
Ratios (to average net
assets)/Supplemental Data:
Expenses.............. 0.55%* 0.54% 0.54% 0.54% 0.54% 0.56%
Net investment income. 3.18%* 3.29% 2.13% 2.05% 3.06% 4.49%
Net assets at end of
period ($000 omitted)... 245,695 318,213 388,565 405,517 327,098 353,271
** Unaudited.
* Annualized.
17
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
1. DESCRIPTION AND SHARES OF THE FUND. The Rodney Square Fund and the
Rodney Square Tax-Exempt Fund (the "Fund(s)") are Massachusetts
business trusts registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as diversified, open-end management
investment companies. The Declarations of Trust for the Rodney
Square Fund, dated February 16, 1982, and the Rodney Square Tax-
Exempt Fund, dated July 31, 1985, each as last amended on February
15, 1993, permit the Trustees of each Fund to create additional
series (or portfolios), each of which may issue additional classes
of shares. There are currently two portfolios, the U.S. Government
Portfolio and the Money Market Portfolio (the "Portfolios"), in the
Rodney Square Fund, each of which currently consists of a single
class of shares. The Rodney Square Tax-Exempt Fund has one
portfolio (also a "Portfolio") with a single class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of each Fund:
SECURITY VALUATION. Each Fund values securities utilizing the
amortized cost valuation method which is permitted under Rule 2a-7
under the 1940 Act provided that the Fund complies with certain
conditions. This method involves valuing a portfolio security
initially at its cost and thereafter adjusting for amortization of
premium or accretion of discount to maturity.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate
entity for federal income tax purposes and each intends to continue
to qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986 and to distribute all of its
taxable income and tax-exempt income to its shareholders.
Therefore, no federal income tax provision is required. At
September 30, 1995, the U.S. Government Portfolio, the Money Market
Portfolio and the Rodney Square Tax-Exempt Fund had a net tax basis
capital loss carryforward available to offset future capital gains
of approximately $7,000, $14,000 and $2,000, respectively, which
will expire as follows:
CAPITAL LOSS EXPIRATION
CARRYFORWARD DATE
------------ ----------
U.S. Government Portfolio $ 7,000 09/30/03
Money Market Portfolio $ 14,000 09/30/02
Rodney Square Tax-Exempt Fund $ 2,000 09/30/02
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest income is
accrued as earned. Dividends to shareholders of each Portfolio are
declared daily from net investment income, which consists of accrued
interest and discount earned (including original issue discount),
less amortization of premium and the accrued expenses applicable to
the dividend period. For the Rodney Square Tax-Exempt Fund only,
the tax-exempt interest portion of each dividend is determined
uniformly, based on the ratio of the Fund's tax-exempt and taxable
income, if any, for the entire fiscal year.
REPURCHASE AGREEMENTS. The Rodney Square Fund, through its
custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in
an amount at least equal to 101% of the resale price. Rodney Square
Management Corporation ("RSMC"), the Fund Manager, is responsible
for determining that the amount of these underlying securities is
maintained at a level such that their market value is at all times
equal to 101% of the resale price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
OTHER. Investment security transactions are accounted for on a
trade date basis. The Funds use the specific identification method
for determining realized gain and loss on investments for both
financial and federal income tax reporting purposes. Obligations of
agencies and instrumentality's of the U.S. Government are not direct
obligations of the U.S. Treasury and, thus, may or may not be backed
18
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- ------------------------------------------------------------------------
by the "full faith and credit" of the United States. Payment of
interest and principal on these obligations, although generally
backed directly or indirectly by the U.S. Government, may be backed
solely by the issuing instrumentality.
The Money Market Portfolio invests in short-term unsecured debt
instruments of corporate issuers. Although the Fund maintains a
diversified portfolio, the issuers' ability to meet their
obligations may be affected by economic developments in a specific
industry or region. The Money Market Portfolio had investments in
commercial paper, certificates of deposit, time deposits and
bankers' acceptances of domestic and foreign banks which in the
aggregate approximated 33% of its total investments on March 31,
1996.
Approximately 51% of the investments in the Rodney Square Tax-Exempt
Fund on March 31, 1996 were insured by private issuers that
guarantee payments of principal and interest in the event of default
or were backed by letters of credit issued by domestic and foreign
banks or financial institutions.
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Funds
employ RSMC, a wholly owned subsidiary of Wilmington Trust Company
("WTC"), to serve as Investment Adviser and Administrator to each of
the Funds pursuant to separate Management Agreements each dated
August 9, 1991. Under the Management Agreements, RSMC, subject to
the supervision of the Funds' Boards of Trustees, directs the
investments of the Portfolios in accordance with each Portfolio's
investment objective, policies and limitations. Also under the
Management Agreements, RSMC is responsible for administrative
services such as budgeting, financial reporting, compliance
monitoring and corporate management. For its services, the Funds
pay RSMC a monthly fee at the annual rate of 0.47% of the average
daily net assets of each Portfolio of the Funds. The management fee
paid to RSMC for the six-month period ended March 31, 1996, amounted
to $837,765 for the U.S. Government Portfolio, $1,940,683 for the
Money Market Portfolio and $723,125 for the Rodney Square Tax-Exempt
Fund.
RSMC determines the net asset value per share and provides all Fund
accounting services pursuant to a separate Accounting Services
Agreement with each Fund. For its services, RSMC receives an annual
fee of $50,000 per Portfolio, plus an amount equal to 0.02% of each
Portfolio's average daily net assets in excess of $100,000,000. For
the six-month period ended March 31, 1996, RSMC's fees for
accounting services amounted to $50,649 for the U.S. Government
Portfolio, $97,582 for the Money Market Portfolio and $45,771 for
the Rodney Square Tax-Exempt Fund.
WTC serves as Custodian of the assets of the Funds and is paid for
the provision of this service by RSMC out of its management fee.
The Funds reimburse WTC for its related out-of-pocket expenses, if
any, incurred in connection with the performance of these services.
RSMC serves as Transfer and Dividend Paying Agent for the Funds and
does not receive any separate fees from the Funds for the
performance of these services other than the reimbursement of all
reasonable out-of-pocket expenses incurred by RSMC or its agents for
the provision of such services.
Pursuant to a Distribution Agreement with each Fund, dated as of
December 31, 1992, Rodney Square Distributors, Inc. ("RSD"), a
wholly owned subsidiary of WTC, manages the Funds' distribution
efforts and provides assistance and expertise in developing
marketing plans and materials. The Funds' Boards of Trustees have
adopted, and shareholders have approved, distribution plans (the
"12b-1 Plans") pursuant to Rule 12b-1 under the 1940 Act, to allow
each Fund to reimburse RSD for certain expenses incurred in
connection with distribution activities. The Trustees have
authorized a payment of up to 0.20% of each Portfolio's average
daily net assets annually to reimburse RSD for such expenses. For
the six-month period ended March 31, 1996, such expenses amounted to
$33,964 for the U.S. Government Portfolio, $44,370 for the Money
Market Portfolio and $12,316 for the Rodney Square Tax-Exempt Fund.
The salaries of all officers of each Fund, the Trustees of each Fund
who are "interested persons" of the Fund, WTC, RSMC, RSD, or their
affiliates and all personnel of the Funds, WTC, RSMC or RSD
performing services related to research, statistical and investment
activities, are paid by WTC, RSMC, RSD, or their affiliates. The
fees and expenses of the "non-interested" Trustees amounted to
$3,215 for the U.S. Government Portfolio, $5,296 for the Money
Market Portfolio and $3,273 for the Rodney Square Tax-Exempt Fund
for the six-month period ended March 31, 1996.
19
<PAGE>
[Outside cover -- divided into two sections]
[Left section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Martin L. Klopping
John J. Quindlen
------------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
Louis C. Schwartz, Esq., ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
------------------------------------------------
FUND MANAGER, ADMINISTRATOR AND
TRANSFER AGENT
Rodney Square Management Corporation
----------------------------------------
CUSTODIAN
Wilmington Trust Company
----------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
-----------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP
----------------------
THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE
SHAREHOLDERS OF THE FUNDS. THE REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS
PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
[Right section]
the RODNEY SQUARE
FUND
&
the RODNEY SQUARE
TAX-EXEMPT
FUND
[GRAPHIC] Caesar Rodney
upon his galloping horse
facing right, reverse
image on dark background
SEMIANNUAL REPORT
MARCH 31, 1996
