the RODNEY SQUARE
FUND
&
the RODNEY SQUARE
TAX-EXEMPT
FUND
LOGO [GRAPHIC OMITTED]
SEMI-ANNUAL REPORT
MARCH 31, 1998
<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 six-month
period ended March 31, 1998.
INVESTMENT RESULTS*
The U.S. Government Portfolio paid shareholders dividends of $0.025 per
share during the six-month period, the Money Market Portfolio paid dividends
totaling $0.026 per share and The Rodney Square Tax-Exempt Fund paid dividends
totaling $0.015 per share. Based on the Portfolios' net asset value of $1.00 per
share, these dividends represented annualized total returns of 5.22%, 5.29% and
3.11%, respectively.
ECONOMIC OVERVIEW
The Funds' fiscal year began amid concerns that the U.S. economy was
expanding at an "unsustainable" pace. Historically low unemployment, strong wage
growth, higher hours worked, and robust worldwide demand had the financial
markets pricing in imminent monetary tightening by the Federal Reserve despite
the fact that inflationary pressures were nonexistent. These expectations were
significantly altered by the rapid meltdown of the "Asian economic miracle" in
the fourth quarter of 1997.
The "Asian crisis," as it is now called, initially had some market pundits
predicting a global economic disaster. Under this scenario, the drag from a
strong U.S. dollar coupled with a dramatic worsening of our trade balances with
Asia would compromise the U.S. economic expansion. With all the uncertainty
surrounding the outcome of the Asian crisis and the magnitude of the drag it
would exert on the U.S. economy, the threat of any near-term tightening by the
Federal Reserve, without strong signals of inflationary pressures, was
effectively neutralized. Once freed from this threat, U.S. fixed-income
participants focused on any economic report that showed weakness and ignored any
that showed strength. By January, Treasury bond yields had declined seventy-five
basis points from the highs of October.
As the economy entered 1998, continued momentum in domestic demand was
clearly evident, while the drag from Asia was less obvious. Federal Reserve
Chairman Greenspan's overriding message conveyed in his February semi-annual
Humphrey-Hawkins testimony was that the Fed is not close to changing policy in
either direction, given the uncertainties in the economic outlook.
As of late, the Fed has begun hinting that they believe that the drag from
the Asian crisis will not prove powerful enough to overcome the strong
underlying fundamentals of the current U.S. economy: very low unemployment, near
price stability, a budget surplus, healthy consumer confidence and demand, and
low interest rates. The key question is whether the Asian crisis and the
resulting strengthened dollar will slow U.S. exports and the economy enough to
prevent consumer prices from rising under continued strong domestic demand.
No consensus has materialized on the Fed's next action. At this point, a
tightening seems at least as likely as an easing of monetary policy. In any
event, the Fed appears on hold at least until the third quarter of 1998.
- ---------------------
* 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
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
PRESIDENT'S MESSAGE -- CONTINUED
================================================================================
INVESTMENT STRATEGY
During the course of the past six-month period, Rodney Square Management
Corporation attempted to anticipate the directional changes in interest rates
and swings in market psychology, identify relative values in the money markets
and adjust the weighted average portfolio maturity to structure the portfolios
to maximize returns for shareholders.
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
May 20, 1998
2
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS / MARCH 31, 1998 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 51.3%
FEDERAL FARM CREDIT BANKS DISCOUNT NOTES -- 11.3%
Federal Farm Credit Banks Notes, 5.56%, 04/27/98 .......................... $ 7,000,000 $ 6,971,891
Federal Farm Credit Banks Notes, 5.40%, 05/05/98 .......................... 7,000,000 6,964,300
Federal Farm Credit Banks Notes, 5.37%, 05/18/98 .......................... 12,000,000 11,915,870
Federal Farm Credit Banks Notes, 5.42%, 07/06/98 .......................... 6,514,000 6,419,851
Federal Farm Credit Banks Notes, 5.24%, 07/15/98 .......................... 10,000,000 9,847,167
Federal Farm Credit Banks Notes, 5.35%, 07/17/98 .......................... 8,950,000 8,807,683
Federal Farm Credit Banks Notes, 5.33%, 08/14/98 .......................... 10,000,000 9,800,125
Federal Farm Credit Banks Notes, 5.32%, 08/21/98 .......................... 10,000,000 9,790,156
------------
70,517,043
------------
FEDERAL FARM CREDIT BANKS NOTES -- 4.4%
Federal Farm Credit Banks Notes, 5.42%, 07/28/98* ......................... 10,000,000 9,997,416
Federal Farm Credit Banks Notes, 5.70%, 09/02/98 .......................... 7,800,000 7,802,014
Federal Farm Credit Banks Notes, 5.50%, 04/01/99 .......................... 10,000,000 9,987,529
------------
27,786,959
------------
FEDERAL HOME LOAN BANKS DISCOUNT NOTES -- 18.8%
Federal Home Loan Banks Notes, 5.65%, 04/01/98 ............................ 38,000,000 38,000,000
Federal Home Loan Banks Notes, 5.43%, 04/13/98 ............................ 5,000,000 4,990,950
Federal Home Loan Banks Notes, 5.35%, 04/22/98 ............................ 5,000,000 4,984,410
Federal Home Loan Banks Notes, 5.43%, 05/01/98 ............................ 5,000,000 4,977,375
Federal Home Loan Banks Notes, 5.43%, 05/06/98 ............................ 15,000,000 14,920,885
Federal Home Loan Banks Notes, 5.42%, 05/13/98 ............................ 10,000,000 9,936,767
Federal Home Loan Banks Notes, 5.45%, 05/13/98 ............................ 10,000,000 9,936,475
Federal Home Loan Banks Notes, 5.40%, 06/12/98 ............................ 10,000,000 9,892,000
Federal Home Loan Banks Notes, 5.48%, 07/03/98 ............................ 5,533,000 5,454,671
Federal Home Loan Banks Notes, 5.22%, 07/10/98 ............................ 5,000,000 4,927,500
Federal Home Loan Banks Notes, 5.23%, 07/15/98 ............................ 5,000,000 4,923,729
Federal Home Loan Banks Notes, 5.27%, 07/22/98 ............................ 5,000,000 4,918,022
------------
117,862,784
------------
FEDERAL HOME LOAN BANKS NOTES -- 12.8%
Federal Home Loan Banks Notes, 6.12%, 04/17/98 ............................ 5,000,000 4,999,966
Federal Home Loan Banks Notes, 5.72%, 07/07/98 ............................ 15,000,000 15,009,700
Federal Home Loan Banks Notes, 5.45%, 08/04/98* ........................... 20,000,000 19,993,148
Federal Home Loan Banks Notes, 5.47%, 08/18/98* ........................... 10,000,000 9,997,357
Federal Home Loan Banks Notes, 5.77%, 09/25/98 ............................ 5,000,000 5,000,121
Federal Home Loan Banks Notes, 5.69%, 10/02/98 ............................ 5,000,000 4,998,210
Federal Home Loan Banks Notes, 5.79%, 10/23/98 ............................ 5,000,000 4,998,684
Federal Home Loan Banks Notes, 5.80%, 12/18/98 ............................ 5,000,000 5,002,217
Federal Home Loan Banks Notes, 5.62%, 03/12/99 ............................ 10,000,000 10,000,000
------------
79,999,403
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
THE RODNEY SQUARE FUND / U.S. GOVERNMENT PORTFOLIO
- --------------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
STUDENT LOAN MARKETING ASSOCIATION NOTES -- 1.6%
Student Loan Marketing Association Notes, 5.40%, 02/10/99 ................. $ 10,000,000 $ 9,995,605
------------
TENNESSEE VALLEY AUTHORITY DISCOUNT NOTES -- 2.4%
Tennessee Valley Authority Notes, 5.37%, 05/18/98 ......................... 10,000,000 9,929,892
Tennessee Valley Authority Notes, 5.38%, 06/19/98 ......................... 5,000,000 4,940,969
------------
14,870,861
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $321,032,655) 321,032,655
------------
REPURCHASE AGREEMENTS -- 49.8%
With Dean Witter Reynolds, Inc.: at 6.03%, dated 03/31/98, to be
repurchased at $25,004,188 on 04/01/98, collateralized by
$25,500,056 of various U.S. Government Agency Obligation
Securities with various coupons and maturities to 10/15/99 ............ 25,000,000 25,000,000
With CS First Boston, Inc.: at 6.08%, dated 03/31/98, to be
repurchased at $135,022,800 on 04/01/98, collateralized by
$138,725,136 of various U.S. Government Agency Obligation
Securities with various coupons and maturities to 10/26/98 ............... 135,000,000 135,000,000
With UBS Securities, Inc.: at 6.10%, dated 03/31/98, to be
repurchased at $151,354,842 on 04/01/98, collateralized by
$154,360,002 of Government National Mortgage Association
Securities with various coupons and maturities to 03/20/28 ............... 151,329,200 151,329,200
------------
TOTAL REPURCHASE AGREEMENTS (COST $311,329,200) ...................................... 311,329,200
------------
TOTAL INVESTMENTS (COST $632,361,855)(DAGGER) -- 101.1% ....................................... 632,361,855
OTHER ASETS AND LIABILITIES, NET -- (1.1)% .................................................... (7,048,201)
------------
NET ASSETS -- 100.0% .......................................................................... $625,313,654
============
<FN>
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate Notes are instruments whose rates change
periodically. The rates shown are the interest rates as of March 31, 1998.
(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 / MARCH 31, 1998 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
CERTIFICATES OF DEPOSIT -- 19.1%
U.S. BANKS, U.S. BRANCHES -- 2.1%
Morgan Guaranty, 5.81%, 04/30/98 .............................. P-1/A-1+ $ 12,000,000 $ 12,002,822
Morgan Guaranty, 5.87%, 08/06/98 .............................. P-1/A-1+ 5,000,000 4,999,501
LaSalle National Bank, 5.55%, 02/05/99 ........................ P-1/A-1+ 10,000,000 9,996,740
-------------
26,999,063
-------------
FOREIGN BANKS, FOREIGN CENTERS -- 0.8%
National Westminister, Toronto Branch, 5.36%, 07/15/98 ........ P-1/A-1+ 10,000,000 9,843,667
-------------
FOREIGN BANKS, U.S. BRANCHES -- 16.2%
ABN-AMRO Bank, 5.45%, 01/13/99 ................................ P-1/A-1+ 40,000,000 40,012,092
Bank of Nova Scotia, 5.80%, 10/06/98 .......................... P-1/A-1+ 5,000,000 4,998,768
Banque Nationale de Paris, 5.52%, 04/16/98 .................... P-1/A-1 20,000,000 20,000,116
Bayerische Landesbank, 5.88%, 11/30/98 ........................ P-1/A-1+ 10,000,000 10,028,898
Credit Agicole Indosuez, 5.50%, 04/22/98 ...................... P-1/A-1+ 25,000,000 25,000,000
Deutsche Bank, 5.91%, 09/14/98 ................................ P-1/A-1+ 15,000,000 14,995,437
Deutsche Bank, 5.51%, 04/20/98 ................................ P-1/A-1+ 35,000,000 35,000,182
Dresdner, 5.95%, 10/20/98 ..................................... P-1/A-1+ 10,000,000 9,998,942
National Westminister, 5.53%, 08/05/98 ........................ P-1/A-1+ 25,000,000 25,000,000
Societe Generale, 5.64%, 04/01/98* ............................ P-1/A-1+ 6,000,000 5,996,894
Societe Generale, 6.20%, 05/12/98 ............................. P-1/A-1+ 10,000,000 9,999,679
Societe Generale, 5.60%, 01/13/99 ............................. P-1/A-1+ 10,000,000 10,012,089
-------------
211,043,097
-------------
TOTAL CERTIFICATES OF DEPOSIT (COST $247,885,827) ...................................... 247,885,827
-------------
COMMERCIAL PAPER -- 62.5%
AGRICULTURE -- 1.3%
Louis Dreyfus Corp., 5.55%, 04/21/98 .......................... P-1/A-1+ 17,000,000 16,947,583
-------------
AUTOMOBILES -- 7.8%
Daimler-Benz North America Corp., 5.51%, 05/04/98 ............. P-1/A-1 13,000,000 12,934,339
Daimler-Benz North America Corp., 5.46%, 05/08/98 ............. P-1/A-1 10,000,000 9,943,883
Daimler-Benz North America Corp., 5.45%, 05/12/98 ............. P-1/A-1 17,000,000 16,894,482
Daimler-Benz North America Corp., 5.50%, 07/10/98 ............. P-1/A-1 10,000,000 9,847,222
Volkswagen of America, Inc., 5.54%, 04/14/98 .................. P-1/A-1 26,600,000 26,546,785
Volkswagen of America, Inc., 5.54%, 04/21/98 .................. P-1/A-1 25,000,000 24,923,056
-------------
101,089,767
-------------
BANKS -- 8.0%
Bank of Nova Scotia, 5.45%, 05/26/98 .......................... P-1/A-1+ 40,000,000 39,666,944
Commerzbank US Finance, Inc., 5.44%, 05/18/98 ................. P-1/A-1+ 25,000,000 24,822,444
Dresdner US Finance, Inc., 5.54%, 04/17/98 .................... P-1/A-1+ 40,000,000 39,901,511
-------------
104,390,899
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
BUILDINGS MATERIALS -- 4.0%
CSR Finance Ltd, 5.66%, 05/26/98 .............................. P-1/A-1 $ 20,000,000 $ 19,827,056
CSR Finance Ltd, 5.68%, 06/01/98 .............................. P-1/A-1 20,000,000 19,807,511
CSR Finance Ltd, 5.39%, 08/17/98 .............................. P-1/A-1 12,000,000 11,752,060
-------------
51,386,627
-------------
CHEMICALS -- 6.1%
AKZO Nobel America, Inc., 5.40%, 05/22/98 ..................... P-1/A-1 10,000,000 9,923,500
AKZO Nobel America, Inc., 5.50%, 06/01/98 ..................... P-1/A-1 15,000,000 14,860,208
AKZO Nobel America, Inc., 5.47%, 07/20/98 ..................... P-1/A-1 15,000,000 14,749,292
Dupont (E.I.) de Nemours, 5.48%, 07/28/98 ..................... P-1/A-1+ 15,000,000 14,730,567
Dupont (E.I.) de Nemours, 5.35%, 08/14/98 ..................... P-1/A-1+ 25,000,000 24,498,906
-------------
78,762,473
-------------
COMMUNICATION & BROADCASTING -- 3.8%
E.W. Scripps Co., 5.50%, 06/11/98 ............................. P-1/A-1 25,000,000 24,728,819
E.W. Scripps Co., 5.49%, 07/14/98 ............................. P-1/A-1 25,000,000 24,603,500
-------------
49,332,319
-------------
FINANCIAL SERVICES -- 10.1%
Allianz of America Finance Corp., 5.52%, 04/28/98 ............. P-1/A-1 15,250,000 15,186,865
Allianz of America Finance Corp., 5.47%, 05/13/98 ............. P-1/A-1 10,000,000 9,936,183
Allianz of America Finance Corp., 5.51%, 06/12/98 ............. P-1/A-1 10,000,000 9,889,800
Allianz of America Finance Corp., 5.50%, 06/17/98 ............. P-1/A-1 17,160,000 16,958,132
General Electric Capital Corp., 5.36%, 07/07/98 ............... P-1/A-1+ 25,000,000 24,638,944
Morgan Stanley Dean Witter Discover Co., 5.55%, 04/08/98 ...... P-1/A-1 20,000,000 19,978,417
Morgan Stanley Dean Witter Discover Co., 5.43%, 04/23/98 ...... P-1/A-1 35,000,000 34,883,858
-------------
131,472,199
-------------
LEASING -- 3.7%
Vehicle Services Corp. of America, 5.50%, 04/13/98 ............ NR/A-1+ 48,000,000 47,912,000
-------------
LEISURE -- 2.6%
Bass Finance (CI) Ltd, 5.48%, 04/09/98 ........................ P-1/A-1 33,754,000 33,712,895
-------------
MEDICAL SERVICES -- 0.6%
Medical Building Funding VII, L.L.C., 5.98%, 06/03/98 ......... NR/A-1 8,000,000 7,917,540
-------------
SECURITIES DEALERS -- 11.1%
Credit Suisse First Boston, Inc., 5.40%, 04/24/98 ............. P-1/A-1+ 30,000,000 29,895,925
Credit Suisse First Boston, Inc., 5.47%, 05/21/98 ............. P-1/A-1+ 10,000,000 9,924,028
Goldman Sachs Group LP, 5.65%, 05/07/98 ....................... P-1/A-1+ 50,000,000 49,717,500
Merrill Lynch & Co., Inc., 5.48%, 04/17/98 .................... P-1/A-1+ 20,000,000 19,951,289
Merrill Lynch & Co., Inc., 5.55%, 04/27/98 .................... P-1/A-1+ 15,000,000 14,939,875
Merrill Lynch & Co., Inc., 5.46%, 05/20/98 .................... P-1/A-1+ 10,000,000 9,925,683
Merrill Lynch & Co., Inc., 5.42%, 07/24/98 .................... P-1/A-1+ 10,000,000 9,828,367
-------------
144,182,667
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODNEY SQUARE FUND / MONEY MARKET PORTFOLIO
- -----------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
UTILITIES -- 3.4%
National Rural Utilities Co-op., 5.60%, 04/16/98 .............. P-1/A-1+ $45,000,000 $ 44,895,000
--------------
TOTAL COMMERCIAL PAPER (COST $812,001,969) ........................................... 812,001,969
--------------
CORPORATE NOTES -- 10.7%
BANKS -- 9.9%
Bank One, Columbus, 5.50%, 04/07/98* .......................... P-1/A-1+ 25,000,000 24,996,929
Bayerische Landesbank Girozentrale, 5.50%, 04/25/98 ........... P-1/A-1+ 25,000,000 24,985,634
Morgan Guaranty Trust Co. of New York, 5.97%, 06/22/98 ........ P-1/A-1+ 16,000,000 16,007,338
Royal Bank of Canada, 5.52%, 04/01/98* ........................ P-1/A-1+ 25,000,000 24,996,577
Societe Generale, 5.56%, 04/01/98* ............................ P-1/A-1+ 14,000,000 13,996,514
Societe Generale, 5.56%, 04/01/98* ............................ P-1/A-1+ 15,000,000 14,997,525
Wachovia Bank N.C. Bank Note, 6.15%, 05/06/98 ................. P-1/A-1+ 8,500,000 8,502,924
--------------
128,483,441
--------------
SECURITIES DEALERS -- 0.8%
Credit Suisse First Boston, Inc., 6.15%, 06/02/98 ............. P-1/A-1+ 10,000,000 10,004,806
--------------
TOTAL CORPORATE NOTES ($138,488,247) 138,488,247
--------------
TAXABLE MUNICIPAL SECURITIES -- 3.0%
CALIFORNIA -- 1.6%
Oakland-Alameda County Coliseum Auth., 5.59%, 06/24/98 ........ VMIG1/A-1+ 20,400,000 20,400,000
TEXAS -- 1.1%
Texas Veterans Housing Assistance, 5.61%, 04/01/98* ........... VMIG1/A-1+ 14,500,000 14,500,000
WISCONSIN -- 0.3%
Waukesha Wisconsin Health Systems, 5.70%, 04/02/98* ........... VMIG1/A-1+ 4,295,000 4,295,000
--------------
TOTAL TAXABLE MUNICIPAL SECURITIES (COST $39,195,000) ................................ 39,195,000
--------------
REPURCHASE AGREEMENTS -- 4.8%
With UBS Securities, Inc.: at 6.10%, dated 03/31/98 to be
repurchased at $62,442,279 on 04/01/98, collateralized by
$63,681,794 of Government National Mortgage Association
securities with various coupons and maturities to 02/20/27
(COST $62,431,700) ....................................................... 62,431,700 62,431,700
--------------
TOTAL INVESTMENTS (COST $1,300,002,743)(DAGGER) -- 100.1% ..................................... 1,300,002,743
OTHER ASSETS AND LIABILITIES, NET -- (0.1)% ................................................... (822,269)
--------------
NET ASSETS -- 100.0% .......................................................................... $1,299,180,474
==============
<FN>
* Denotes a Variable or Floating Rate Note. Variable and Floating Rate Notes are instruments whose rates change
periodically. The rates shown are the interest rates as of March 31, 1998.
(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 / MARCH 31, 1998 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
MUNICIPAL BONDS -- 99.8%
ALABAMA -- 1.2%
Alabama Housing Fin. Auth. Multifamily Housing (Rime Village
Hoover Project), Ser. 1996-A, 3.70%, 04/07/98* .................. NR/A-1+ $ 4,200,000 $ 4,200,000
-----------
ALASKA -- 0.4%
Anchorge, AK Higher Educ. Rev. Bonds (Alaska Pacific Univ. Proj.),
Ser. 1997, 3.70%, 04/01/98* ..................................... NR/A-1+ 1,300,000 1,300,000
-----------
ARIZONA -- 1.0%
Arizona Agric. Imp. & Power Dist. Electric Sys. Rev. Bonds TECP
(Salt River Proj.), 3.50%, 06/10/98 ............................. P-1/A-1+ 3,500,000 3,500,000
-----------
CALIFORNIA -- 2.8%
Los Angeles County Tax & Rev. Ant. Notes,
Ser. 1997-A, 4.50%, 06/30/98 .................................... MIG1/SP-1+ 7,000,000 7,010,776
State of California 1997-1998 Rev. Ant. Notes, 4.50%, 06/30/98 ..... MIG1/SP-1+ 3,000,000 3,004,656
-----------
10,015,432
-----------
DISTRICT OF COLUMBIA -- 3.0%
Dist. of Columbia (American Univ.), Ser. 1985-A,
3.75%, 04/01/98* ................................................ VMIG1/NR 10,000,000 10,000,000
Dist. of Columbia (American Univ.), Ser. 1986-A,
3.75%, 04/01/98* ................................................ VMIG1/NR 1,000,000 1,000,000
-----------
11,000,000
-----------
FLORIDA -- 2.7%
City of Jacksonville, FL Poll. Cntrl. Rev. Bonds TECP
(Florida Pwr. & Light Co. Proj.), Ser. 1994, 3.55%, 07/14/98 .... VMIG1/A-1+ 2,600,000 2,600,000
Jacksonville Electric Auth. TECP, Ser. 1997-C, 3.55%, 08/27/98 ..... P-1/A-1+ 2,200,000 2,200,000
St. Lucie, FL Poll. Cntrl. Rev. Bonds (Flordia Power & Light Co.
Proj.), Ser. 1994-A, 3.50%, 06/11/98 ............................ VMIG1/A-1+ 5,000,000 5,000,000
-----------
9,800,000
-----------
GEORGIA -- 6.9%
Atlanta, GA Downtown Dev. Auth. Rev. Bonds (CARE Proj.),
Ser. 1993, 3.70%, 04/01/98* ..................................... VMIG1/NR 2,400,000 2,400,000
Burke County, GA Dev. Auth. Poll. Cntrl. Rev. Bond (Ogelthorpe
Power Corp. Vogtle Proj.), Ser. 1997-A, 3.90%, 04/01/98* ........ VMIG1/NR 5,200,000 5,200,000
Columbus Housing Auth. Rev. Bonds (Columbus State Univ.
Foundation Inc. Proj.), Ser.1997, 3.70%, 04/01/98* .............. Aa3/NR 1,300,000 1,300,000
Fulton County Dev. Auth. Rev. Bonds (The Alfred and Adele
Davis Academy Income Proj.), Ser. 1996, 3.70%, 04/01/98* ........ Aa3/NR 2,000,000 2,000,000
Fulton County, GA Dev. Auth. Rev. Bonds (Arthritis Foundation,
Inc. Proj.), Ser. 1996, 3.70%, 04/01/98* ........................ Aa3/NR 1,000,000 1,000,000
Georgia Municipal Gas Auth. Gas Rev. Bond (Southern Portfolio-I),
Ser. 1994-D, 3.55%, 08/14/98 .................................... NR/A-1+ 3,200,000 3,200,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
Gwinnett County Housing Auth. Multifamily Housing
(Post Corners Proj.), Ser. 1996, 3.70%, 04/01/98* ............... NR/A-1+ $ 5,560,000 $ 5,560,000
Monroe County, GA Poll. Cntrl. Rev. Bonds (Georgia Power Co.
Proj.), Ser. 1997, 3.90%, 04/01/98* ............................. VMIG1/A-1 1,100,000 1,100,000
Rockdale County, GA Health Fac. Auth. Rev. Bonds
(Georgia Hosp. Proj.), Ser. 1994, 3.70%, 04/01/98* .............. VMIG1/NR 3,025,000 3,025,000
-----------
24,785,000
-----------
IDAHO -- 1.0%
Idaho Health Facility Auth. Rev. Bonds (St. Luke's Regional
Medical Center Proj.), Ser. 1995, 3.80%, 04/01/98* .............. VMIG1/NR 3,535,000 3,535,000
-----------
ILLINOIS -- 12.2%
Illinois Educ. Fac. Auth. Rev. Bonds (Cultural Pooled Fin. Proj.),
Ser. 1985, 3.65%, 04/01/98* ..................................... VMIG1/NR 9,630,000 9,630,000
Illinois Educ. Fac. Auth. Rev. Bonds (Depaul Univ. Proj.),
Ser. 1992, 3.70%, 04/01/98* ..................................... VMIG1/A-1+ 12,100,000 12,100,000
Illinois Health Fac. Auth. (Gottlieb Health Resources
Inc. Proj.), 3.70%, 04/01/98* ................................... VMIG1/NR 8,900,000 8,900,000
Illinois Health Fac. Auth. Rev. Bonds (Central DuPage Hosp.
Assoc. Proj.), Ser. 1990, 3.80%, 04/01/98* ...................... VMIG1/NR 1,400,000 1,400,000
Illinois Health Fac. Auth. Rev. Bonds (The Univ. of Chicago
Proj.), TECP, 3.75%, 05/27/98 ................................... VMIG1/A-1+ 7,000,000 7,000,000
Oak Forest, Il Dev. Rev. Bonds (Homewood Pool-South
Suburban Mayors & Managers Assoc. Proj.),
3.70%, 04/01/98* ................................................ VMIG1/NR 5,000,000 5,000,000
-----------
44,030,000
-----------
INDIANA -- 11.9%
City of Mt. Vernon, IN Poll. Cntrl. Rev. Bonds TECP (General
Electric Co. Proj.), Ser. 1989-A, 3.65%, 05/12/98 ............... P-1/A-1+ 8,800,000 8,800,000
City of Mt. Vernon, IN Poll. Cntrl. Rev. Bonds TECP
(General Electric Co. Proj.), Ser. 1989-A, 3.60%, 05/21/98 ...... P-1/A-1+ 5,800,000 5,800,000
Indiana Health Fac. Fin. Auth. Rev. Bonds (Cap. Access
Designated Pool Proj.), Ser. 1991, 3.70%, 04/01/98* ............. VMIG1/NR 2,400,000 2,400,000
Indiana Health Fac. Fin. Auth. Rev. Bonds (Cap. Access
Designated Pool Proj.), Ser. 1992, 3.70%, 04/01/98* ............. VMIG1/NR 2,800,000 2,800,000
Indiana Hosp. Equip. Fin. Auth. Rev. Bonds,
Ser. 1985-A, 3.70%, 04/01/98* ................................... VMIG1/A1 8,500,000 8,500,000
Indianapolis, IN Econ. Dev. Bonds (Jewish Federation
Campus Proj.), Ser. 1995, 3.70%, 04/01/98* ...................... VMIG1/NR 3,120,000 3,120,000
South Bend, IN Redev. Auth. Rev. Bonds (College Football Hall
of Fame Proj.), Ser. 1994, 3.70%, 04/01/98* ..................... VMIG1/A-1+ 11,550,000 11,550,000
-----------
42,970,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
KENTUCKY -- 2.2%
Jefferson County, KY Poll. Cntrl. Rev. Bonds TECP (Louisville Gas
& Electric Co. Proj.), Ser. 1992-C, 3.30%, 04/01/98 ............. P-1/A-1+ $ 4,000,000 $ 4,000,000
Trimble County, KY Poll. Cntrl. Rev. Bonds TECP (Louisville Gas
& Electric Co. Proj.), Ser. 1992-A, 3.55%, 06/10/98 ............. P-1/A-1+ 4,000,000 4,000,000
-----------
8,000,000
-----------
LOUISIANA -- 3.2%
Plaquemines Port Harbor and Terminal Dist. Fac. Rev. Bonds
TECP (Electro-Coal Transfer Proj.), Ser. A, 3.50%, 06/05/98 ..... P-1/A-1+ 10,500,000 10,500,000
Plaquemines Port Harbor and Terminal Dist. Fac. Rev. Bonds
(Marine Terminal Proj.), Ser. 1984-B, 3.60%, 03/15/99 ........... Aa1/NR 1,000,000 1,000,000
-----------
11,500,000
-----------
MARYLAND -- 5.4%
Anne Arundel County, MD TECP (Consolidated Water & Sewer
Proj.), Ser. B, 3.45%, 04/09/98 ................................. P-1/A-1+ 11,000,000 11,000,000
Baltimore County, MD Metro. Dist. TECP,
Ser. 1995, 3.30%, 04/01/98 ...................................... P-1/A-1+ 6,500,000 6,500,000
Montgomery County, MD TECP, Ser. 1995, 3.45%, 05/06/98 ............. P-1/A-1+ 2,000,000 2,000,000
-----------
19,500,000
-----------
MICHIGAN -- 4.2%
Farmington Hills Hosp. Fin. Auth. Rev. Bonds (Botsford Gen.
Hospital Proj.), Ser. B, 3.80%, 04/01/98* ....................... VMIG1/A-1 2,000,000 2,000,000
Michigan State Hosp. Fin. Auth. Rev. Bonds (St. Mary's
Hospital of Livonia Proj.), Ser. 1996, 3.70%, 04/01/98* ......... VMIG1/A-1 5,000,000 5,000,000
Michigan State Strategic Fund Rev. Bonds
(Consumer Power Co. Proj.), Ser.1993-A, 3.80%, 04/01/98* ........ P-1/A-1+ 3,500,000 3,500,000
Michigan Strategic Fund Poll. Cntrl. Rev. Bonds (Detroit
Edison Co. Proj.), Ser. 1995-CC, 3.80%, 04/01/98* ............... P-1/A-1+ 1,500,000 1,500,000
Monroe County, MI Econ. Poll. Cntrl. Rev. Bonds
(Detroit Edison Co. Proj.), Ser. 1992-CC, 3.80%, 04/01/98* ...... P-1/NR 3,100,000 3,100,000
-----------
15,100,000
-----------
MINNESOTA -- 0.7%
Rochester Health Care Fac. Rev. Bonds TECP (Mayo Foundation/
Mayo Medical Center Proj.), Ser. A, 3.50%, 06/09/98 ............. NR/A-1+ 2,600,000 2,600,000
-----------
MISSISSIPPI -- 1.4%
Mississippi Business Fin. Corp. Ind. Dev. Rev. Bonds (Mississippi
College Proj.), Ser. 1996, 3.70%, 04/02/98* ..................... NR/A-1+ 5,000,000 5,000,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
MISSOURI -- 1.6%
Missouri Health & Educ. Fac. Auth. Rev. Bonds (Washington
Univ. Proj.), Ser. 1996-A, 3.80%, 04/01/98* ..................... VMIG1/A-1+ $ 2,700,000 $ 2,700,000
Missouri Health & Educ. Fac. Auth. Rev. Bonds (Washington
Univ. Proj.), Ser. 1996-B, 3.80%, 04/01/98* ..................... VMIG1/A-1+ 1,000,000 1,000,000
Missouri Health & Educ. Fac. Auth. Rev. Bonds TECP
(SSM Healthcare Proj.), Ser. 1988-CC, 3.30%, 04/01/98 ........... VMIG1/NR 2,000,000 2,000,000
-----------
5,700,000
-----------
NEVADA -- 1.2%
Las Vegas Valley Water Dist. TECP (SNWA Rev. Supported),
Ser. A, 3.50%, 06/11/98 ......................................... P-1/A-1+ 4,400,000 4,400,000
-----------
NEW YORK -- 2.8%
New York City, NY Municipal Water Rev. Bond TECP,
Ser. 1, 3.45%, 05/08/98 ......................................... P-1/A-1+ 10,000,000 10,000,000
-----------
NORTH CAROLINA -- 1.4%
Carteret County, NC Ind. Fac. & Poll. Cntrl. Fin. Auth.
(Texas Gulf Proj.), Ser. 1985, 3.78%, 04/02/98* ................. Aa3/NR 5,000,000 5,000,000
-----------
NORTH DAKOTA -- 3.2%
Grand Forks, ND Health Care Fac. (United Hospital Proj.),
Ser. 1996, 3.80%, 04/01/98* ..................................... VMIG1/NR 2,400,000 2,400,000
Grand Forks, ND Health Care Fac. (United Hospital Proj.),
Ser. 1992-B, 3.80%, 04/01/98* ................................... VMIG1/NR 9,075,000 9,075,000
-----------
11,475,000
-----------
PENNSYLVANIA -- 0.5%
City of Philadelphia, PA Tax & Rev. Ant. Notes,
Ser. 1997-98, 4.50%, 06/30/98 ................................... MIG1/SP-1+ 2,000,000 2,002,370
-----------
SOUTH CAROLINA -- 3.2%
South Carolina Public Ser. Auth. TECP,
Ser. 1997-98, 3.65%, 06/19/98 ................................... P-1/A-1+ 11,700,000 11,700,000
-----------
TENNESSEE -- 1.7%
Clarksville, TN Public Bldg. Auth. Rev. Bonds (Tenn. Municipal
Bond Fund Proj.), Ser. 1984, 3.70%, 04/02/98* ................... NR/A-1+ 4,300,000 4,300,000
Clarksville, TN Public Bldg. Auth. Rev. Bonds (Tenn. Municipal
Bond Fund Proj.), Ser. 1995, 3.70%, 04/02/98* ................... NR/A-1+ 2,000,000 2,000,000
-----------
6,300,000
-----------
TEXAS -- 19.0%
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc. Temple-Inland Proj.), Ser. 1984-B,
3.80%, 04/01/98* ................................................ VMIG1/NR 2,300,000 2,300,000
Angelina & Neches River Auth. Ind. Dev. Solid Waste Disposal
(TEEC, Inc. Temple-Inland Proj.), Ser. 1984-C,
3.80%, 04/01/98* ................................................ VMIG1/NR 7,400,000 7,400,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE TAX-EXEMPT FUND
- ---------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
Bexar County, TX Health Fac. Dev. Corp. Rev. Bonds
(Air Force Village II Proj.), Ser. 1985-B, 3.65%, 04/02/98* ..... NR/AAA $ 9,500,000 $ 9,500,000
Board of Regents of The Univ. of Texas TECP, 3.60%, 06/12/98 ....... P-1/A-1+ 10,000,000 10,000,000
Board of Regents of The Univ. of Texas TECP, 3.50%, 06/12/98 ....... P-1/A-1+ 5,000,000 5,000,000
City of Austin, TX TECP, 3.50%, 06/10/98 ........................... P-1/A-1+ 2,000,000 2,000,000
City of Austin, TX TECP, 3.55%, 06/10/98 ........................... P-1/A-1+ 2,725,000 2,725,000
Harris County, TX Health Fac. Dev. Corp. Hosp. Rev. Bond
(Methodist Hosp. Proj.), Ser. 1994, 3.80%, 04/01/98* ............ NR/A-1+ 5,300,000 5,300,000
Harris County, TX Health Fac. Dev. Rev. Bond (St. Luke's
Episcopal Hosp. Proj.), Ser. 1997-A, 3.75%, 04/01/98* ........... NR/A-1+ 7,100,000 7,100,000
Harris County, TX Health Fac. Dev. Rev. Bond (St. Luke's
Episcopal Hosp. Proj.), Ser. 1997-B, 3.75%, 04/01/98* ........... NR/A-1+ 4,000,000 4,000,000
State of Texas Tax & Rev. Ant. Notes, Ser. 1997-A,
4.75%, 08/31/98 ................................................. MIG1/SP-1+ 13,200,000 13,251,243
------------
68,576,243
------------
VIRGINIA -- 3.0%
Commonwealth of Virginia Gen. Oblig. Bond Ant. Note,
Ser. 1997, 3.60%, 05/22/98 ...................................... P-1/A-1+ 5,900,000 5,900,000
Roanoke, VA Dev. Auth. Rev. Bonds (Carilion Health System Proj.),
Ser. 1997, 3.80%, 04/01/98* ..................................... NR/A-1+ 4,800,000 4,800,000
------------
10,700,000
------------
WYOMING -- 2.0%
Green River, WY Poll. Cntrl. Rev. Bonds (Texas Gulf Inc. Proj.),
Ser. 1984, 3.90%, 04/02/98* ..................................... Aa2/NR 2,000,000 2,000,000
Lincoln County, WY Poll. Cntrl. Rev. Bonds TECP
(Pacificorp Proj.), Ser. 1997, 3.55%, 07/23/98 .................. VMIG1/A-1+ 3,350,000 3,350,000
Sweetwater County Poll. Cntrl. Rev. Bonds (Pacificorp Proj.),
Ser. 1984, 3.80%, 04/01/98* ..................................... P-1/A-1+ 2,000,000 2,000,000
------------
7,350,000
------------
TOTAL MUNICIPAL BONDS (COST $360,039,045) .................................................. 360,039,045
------------
TOTAL INVESTMENTS (COST $360,039,045)(DAGGER) -- 99.8% .............................................. 360,039,045
OTHER ASSETS AND LIABILITIES, NET -- 0.2% ........................................................... 792,801
------------
NET ASSETS -- 100.0% ................................................................................ $360,831,846
============
<FN>
* Denotes a Variable or Floating Rate Demand Note. Variable and Floating Rate
Demand Notes are instruments whose rates change periodically. The rates shown
are the interest rates as of March 31, 1998. The date shown is the next date
the rate on the instrument is scheduled to be reset.
(DAGGER) Cost for federal income tax purposes.
TECP--Tax-Exempt Commercial Paper and multimodal bonds in commercial paper mode.
</FN>
</TABLE>
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, 1998 (Unaudited)
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities (including repurchase agreements of
$311,329,200, $62,431,700 and $0, respectively), at value
(amortized cost $632,361,855, $1,300,002,743, and
$360,039,045, respectively) (Note 2) .......................... $632,361,855 $1,300,002,743 $360,039,045
Interest receivable .............................................. 1,001,294 5,681,276 1,780,122
Investment securities sold receivable ............................ 4,884,083 0 0
Other assets ..................................................... 257 44 516
----------------------------------------------
Total assets .................................................. 638,247,489 1,305,684,063 361,819,683
----------------------------------------------
LIABILITIES:
Dividends payable ................................................ 2,650,571 5,914,091 810,612
Investment securities purchased payable .......................... 9,987,529 0 0
Accrued management fee (Note 3) .................................. 245,713 544,272 133,540
Other accrued expenses (Note 3) .................................. 50,022 45,226 43,685
----------------------------------------------
Total liabilities ............................................. 12,933,835 6,503,589 987,837
----------------------------------------------
NET ASSETS ....................................................... $625,313,654 $1,299,180,474 $360,831,846
==============================================
NET ASSETS CONSIST OF:
Capital paid in .................................................. $625,311,145 $1,299,210,461 $360,833,506
Accumulated realized gain (loss) on investments -- net ........... 2,509 (29,987) (1,660)
----------------------------------------------
NET ASSETS, for 625,311,145, 1,299,210,461, and 360,840,189,
shares outstanding, respectively .............................. $625,313,654 $1,299,180,474 $360,831,846
==============================================
NET ASSET VALUE, offering and redemption price per share: ........ $1.00 1 $1.00 2 $1.00 3
==============================================
<FN>
1 $625,313,654 (DIVIDE) 625,311,145 outstanding shares of beneficial interest, no par value
2 $1,299,180,474 (DIVIDE) 1,299,210,461 outstanding shares of beneficial interest, no par value
3 $360,831,846 (DIVIDE) 360,840,189 outstanding shares of beneficial interest, no par value
</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 -- CONTINUED
================================================================================
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
RODNEY SQUARE RODNEY SQUARE
FUND -- FUND -- RODNEY SQUARE
U.S. GOVERNMENT MONEY MARKET TAX-EXEMPT
PORTFOLIO PORTFOLIO FUND
--------------- ------------- -------------
<S> <C> <C> <C>
INTEREST INCOME .................................................. $14,201,800 $36,348,923 $5,497,490
---------------------------------------------
EXPENSES:
Management fee (Note 3) .......................................... 1,187,167 2,993,995 715,139
Accounting fee (Note 3) .......................................... 65,477 142,364 45,391
Distribution expenses (Note 3) ................................... 26,905 123,284 9,966
Trustees' fees and expenses (Note 3) ............................. 3,175 4,861 3,279
Registration fees ................................................ 13,494 52,124 24,707
Reports to shareholders .......................................... 4,061 10,125 3,826
Legal ............................................................ 11,099 28,786 17,072
Audit ............................................................ 6,397 16,761 14,510
Other ............................................................ 19,784 56,008 18,241
---------------------------------------------
Total expenses ................................................ 1,337,559 3,428,308 852,131
---------------------------------------------
Net investment income ......................................... 12,864,241 32,920,615 4,645,359
---------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS -- NET (NOTE 2) .............. 296 (1,150) 0
---------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $12,864,537 $32,919,465 $4,645,359
=============================================
</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 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 Six-Month Period Ended March 31, 1998 (Unaudited)
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ....................................... $ 12,864,241 $ 32,920,615 $ 4,645,359
Net realized gain (loss) on investments 296 (1,150) 0
-------------------------------------------------
Net increase in net assets resulting from operations ........ 12,864,537 32,919,465 4,645,359
-------------------------------------------------
Dividends to shareholders from net investment income ........... (12,864,241) (32,920,615) (4,645,359)
-------------------------------------------------
Share transactions at net asset value of $1.00 per share:
Proceeds from sale of shares ................................ 2,926,894,486 5,688,420,387 1,234,181,219
Shares issued to shareholders in reinvestment of dividends
from net investment income ............................... 255,372 2,911,288 140,853
Cost of shares redeemed ..................................... (2,680,311,001) (5,583,420,759) (1,154,354,190)
-------------------------------------------------
Net increase in net assets and shares resulting from
share transactions ....................................... 246,838,857 107,910,916 79,967,882
-------------------------------------------------
Total increase in net assets ................................ 246,839,153 107,909,766 79,967,882
NET ASSETS:
Beginning of period ......................................... 378,474,501 1,191,270,708 280,863,964
-------------------------------------------------
End of period ............................................... $ 625,313,654 $1,299,180,474 $ 360,831,846
=================================================
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) 0
-------------------------------------------------
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.
15
<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 FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
SIX-MONTH -------------------------------------------------
PERIOD ENDED
MARCH 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE FUND -- U.S. GOVERNMENT PORTFOLIO
For a Share Outstanding Through Each Period:
NET ASSET VALUE - BEGINNING OF PERIOD ............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------------------------
Investment Operations:
Net investment income ......................... 0.025 0.050 0.050 0.052 0.033 0.028
----------------------------------------------------------------
Distributions:
From net investment income .................... (0.025) (0.050) (0.050) (0.052) (0.033) (0.028)
----------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD .................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
================================================================
Total Return 5.22%* 5.07% 5.08% 5.37% 3.32% 2.83%
Ratios (to average net assets)/Supplemental Data:
Expenses ...................................... 0.53%* 0.55% 0.55% 0.55% 0.53% 0.53%
Net investment income ......................... 5.09%* 4.96% 4.97% 5.25% 3.27% 2.79%
Net assets at end of period (000 omitted) ........ $625,314 $378,475 $341,426 $306,096 $336,766 $386,067
</TABLE>
<TABLE>
<CAPTION>
FOR THE FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
SIX-MONTH -------------------------------------------------
PERIOD ENDED
MARCH 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE FUND -- MONEY MARKET PORTFOLIO
For a Share Outstanding Through 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 0.051 0.050 0.054 0.033 0.029
----------------------------------------------------------------
Distributions:
From net investment income .................... (0.026) (0.051) (0.050) (0.054) (0.033) (0.029)
----------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD .................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
================================================================
Total Return ..................................... 5.29%* 5.17% 5.17% 5.50% 3.37% 2.92%
Ratios (to average net assets)/Supplemental Data:
Expenses ...................................... 0.54%* 0.54% 0.53% 0.54% 0.53% 0.52%
Net investment income ......................... 5.17%* 5.06% 5.03% 5.37% 3.33% 2.88%
Net assets at end of period (000 omitted) ........ $1,299,180 $1,191,271 $980,856 $751,125 $606,835 $649,424
</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 HIGHLIGHTS -- CONTINUED
================================================================================
<TABLE>
<CAPTION>
FOR THE FOR THE FISCAL YEARS ENDED SEPTEMBER 30,
SIX-MONTH -------------------------------------------------
PERIOD ENDED
MARCH 31, 1998
(UNAUDITED) 1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RODNEY SQUARE TAX-EXEMPT FUND
For a Share Outstanding Through Each Period:
NET ASSET VALUE - BEGINNING OF PERIOD ............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------------------------------------------------------------
Investment Operations:
Net investment income ......................... 0.015 0.030 0.031 0.033 0.021 0.020
----------------------------------------------------------------
Distributions:
From net investment income .................... (0.015) (0.030) (0.031) (0.033) (0.021) (0.020)
----------------------------------------------------------------
NET ASSET VALUE - END OF PERIOD .................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
================================================================
Total Return ..................................... 3.11%* 3.09% 3.11% 3.36% 2.17% 2.07%
Ratios (to average net assets)/Supplemental Data:
Expenses ...................................... 0.56%* 0.57% 0.56% 0.54% 0.54% 0.54%
Net investment income ......................... 3.05%* 3.05% 3.08% 3.29% 2.13% 2.05%
Net assets at end of period (000 omitted) ........ $360,832 $280,864 $237,185 $318,213 $388,565 $405,517
<FN>
* Annualized
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (UNAUDITED)
================================================================================
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 by Declarations of Trust on February 16, 1982
and August 1, 1985, respectively, and registered with the U.S. Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940, as
amended (the "1940 Act"). Each Declaration of Trust permits the Trustees of
each Fund to 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, the "Portfolios"). Each
Portfolio consists of 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 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 each Portfolio intends to continue to qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and to distribute all of its taxable and tax-exempt
income to its shareholders. Therefore, no federal income tax provision is
required. At September 30, 1997, 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 $6,000, $40,000 and $2,000, respectively, which will expire as
follows:
CAPITAL LOSS EXPIRATION
CARRYFORWARD DATE
------------ ----------
U.S. Government Portfolio ............. $ 6,000 09/30/03
Money Market Portfolio ................ $25,000 09/30/02
Money Market Portfolio ................ $15,000 09/30/05
Rodney Square Tax-Exempt Portfolio .... $ 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 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 Rodney Square
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.
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.
18
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
================================================================================
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
OTHER. Investment security transactions are accounted for on a trade date
basis. The Funds use the specific identification method for determining
realized gain and loss on investments for both financial and federal income
tax reporting purposes. Obligations of agencies and instrumentalities of the
U.S. Government are not direct obligations of the U.S. Treasury and, thus,
may or may not be backed by the "full faith and credit" of the United States.
Payment of interest and principal on these obligations, although generally
backed directly or indirectly by the U.S. Government, may be backed solely by
the issuing instrumentality.
The Money Market Portfolio invests in short-term unsecured debt instruments
of corporate issuers. The ability of a corporate issuer to meet its
obligations may be affected by economic developments in a specific industry
or region. The Money Market Portfolio's investments in corporate notes,
commercial paper, and certificates of deposit of domestic and foreign banks
represented in the aggregate approximately 37.0% of its total investments on
March 31, 1998.
Approximately 89.5% of the investments by the Rodney Square Tax-Exempt Fund
on March 31, 1998 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
Fund Manager to each of the Funds pursuant to separate management agreements
each dated August 9, 1991 (the "Management Agreements"). Under the Management
Agreements, RSMC, subject to the supervision of the Funds' Boards of
Trustees, directs the investment 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 the average daily
net assets of each Portfolio of the Funds. The management fee earned by RSMC
for the six-month period ended March 31, 1998, amounted to $1,187,167 for the
U.S. Government Portfolio, $2,993,995 for the Money Market Portfolio and
$715,139 for the Rodney Square Tax-Exempt Fund.
Prior to February 2, 1998, RSMC determined the net asset value per share and
provided all fund accounting services pursuant to separate Accounting
Services Agreements with each Fund. Effective February 2, 1998, each Fund
entered into a Sub-Administration and Accounting Services Agreement with PFPC
Inc. ("PFPC") whereby PFPC serves as Sub-Administrator and Accounting Agent
of each Fund. The Funds will not pay PFPC any fees for sub-administration
services, as RSMC pays for the provision of these services out of its
management fee. 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 $100,000,000. For the
six-month period ended March 31, 1998, PFPC's fees for accounting services
amounted to $24,006 for the U.S. Government Portfolio, $48,964 for the Money
Market Portfolio and $15,544 for the Rodney Square Tax-Exempt Fund. Fees
19
<PAGE>
THE RODNEY SQUARE FUND & THE RODNEY SQUARE TAX-EXEMPT FUND
- ----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
================================================================================
received by RSMC during the six-month period ended March 31, 1998 amounted to
$41,471 for the U.S. Government Portfolio, $93,400 for the Money Market
Portfolio and $29,847 for the Rodney Square Tax-Exempt Fund.
WTC serves as custodian of the assets of the Funds and is paid for their
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 PNC Bank, N.A.
("PNC") whereby PNC serves as Sub-Custodian of the Fund's assets. The Fund
will not pay PNC any fees for custodial services, as RSMC pays for the
provision of these services out of its management fee. The Funds reimburse
PNC for its related out-of-pocket expenses, if any, incurred in connection
with the performance of these services.
Prior to February 2, 1998, RSMC served as transfer agent and dividend
disbursing agent for the Funds. Effective February 2, 1998, each Fund entered
into a Transfer Agency Services Agreement with PFPC whereby 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.
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
pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plans"), 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, 1998, such
expenses amounted to $26,905 for the U.S. Government Portfolio, $123,284 for
the Money Market Portfolio and $9,966 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 each Fund, 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 $3,175 for the U.S. Government Portfolio, $4,861 for the Money
Market Portfolio and $3,279 for the Rodney Square Tax-Exempt Fund for the
six-month period ended March 31, 1998.
20
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
John J. Quindlen
----------------------
OFFICERS
Robert J. Christian, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Nina M. Webb, VICE PRESIDENT
John J. Kelley, VICE PRESIDENT & TREASURER
Carl M. Rizzo, Esq., SECRETARY
Diane J. Drake, Esq., ASSISTANT SECRETARY
Mary Jane Maloney, ASSISTANT SECRETARY
John C. McDonnell, ASSISTANT TREASURER
---------------------------------------------
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
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
----------------------
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.
RS02 3/98
