THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
PRESIDENT'S MESSAGE
- ------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of The Rodney Square Strategic Fixed-Income Fund (the
"Fund") is pleased to report to you on the Fund's activity for the six-
month period ended April 30, 1996.
PERFORMANCE REVIEW*
The Rodney Square Diversified Income Portfolio provided shareholders
with a 0.63% return for the six-month period. This return consisted of
a decrease in the net asset value per share, to $12.77 from $13.08, plus
distributions. During the six-month period, shareholders received
dividends of $0.40 per share. The Portfolio's performance was slightly
lower than the 1.17% return reported for the Lehman Intermediate
Government Corporate Index. The Lehman Intermediate Government
Corporate Index is a total return performance benchmark consisting of
U.S. Government and publicly issued corporate debt issues rated at least
investment grade with maturities from one year to ten years. Wilmington
Trust Company, the Portfolio's advisor, has continued to assist the
Portfolio's return by limiting total expenses of the Portfolio to 0.65%
of average daily net assets.
The Rodney Square Municipal Income Portfolio provided shareholders
with a 1.20% return for the six-month period. This return consisted of
a decrease in the net asset value per share, to $12.37 from $12.49, plus
distributions. During the six-month period, shareholders received
dividends of $0.27 per share. The Portfolio's performance was lower
than the 2.18% return reported for the Merrill Lynch Intermediate
Municipal Index. The Merrill Lynch Intermediate Municipal Index is a
composite return of nearly 400 municipal bond issues with a maturity
range of zero to twenty two years. The Merrill Lynch Intermediate
Municipal Index is designed to model the typical holdings and return
characteristics of intermediate-term mutual funds as defined by Lipper
Analytical Services. Wilmington Trust Company, the Portfolio's advisor,
has continued to assist the Portfolio's return by limiting total
expenses of the Portfolio to 0.75% of average daily net assets.
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO
The Portfolio is designed to give shareholders broad exposure to the
dynamics of the intermediate term bond market with a stable flow of
income and minimization of risk. Wilmington Trust Company seeks to
accomplish this goal by applying a disciplined and systematic investment
process to actively manage a core portfolio of investment grade notes
and bonds from a wide range of taxable market sectors.
The past six months have witnessed two very different market
environments as interest rates declined over the first half of the
period before dramatically reversing course and rising over the second
half of the period. From November to January, interest rates declined
as investors anticipated a balanced budget deal, slow economic growth
- -----------------------
* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. AN
INVESTMENT IN THE 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. CERTAIN VALUES SHOWN ABOVE DO NOT REFLECT
THE EFFECT OF THE MAXIMUM SALES LOAD OF 3.50%. RETURNS ARE HIGHER DUE
TO THE ADVISER'S MAINTENANCE OF THE FUND'S EXPENSES. SEE FINANCIAL
HIGHLIGHTS ON PAGES 13 AND 14.
1
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
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PRESIDENT'S MESSAGE -- CONTINUED
- ------------------------------------------------------------------------
and a continuation of the well behaved inflation environment. With
these fundamentals in place, the Federal Reserve Board (the "Fed") was
expected to continue lowering short-term rates well into 1996. The
market anticipated this outcome by driving two-year U. S. Treasury
yields below the overnight federal funds rate. By the end of January,
the two-year Treasury Note was yielding 4.92% which was 33 basis points
below the overnight federal funds rate of 5.25%. The market began to
reverse course when Fed Chairman Alan Greenspan pointed out in his semi-
annual Humphrey Hawkins testimony that the economy was behaving well,
thus indicating that significant further rate cuts were unlikely. The
outsized increase in payroll employment of over 600,000 for February
dashed any lingering hopes for further rate cuts. Since the end of
January, the two-year Treasury Note has added 113 basis points to finish
the six-month period with a yield of 6.05%. The Portfolio
underperformed the market as we started the year with a favorable
outlook for the market and were too aggressively positioned when the
severe shift in rates took place. However, when it became clear that a
fundamental shift in Fed policy expectations was taking place, we moved
to a more defensive position by shortening maturities.
THE RODNEY SQUARE MUNICIPAL INCOME PORTFOLIO
The Rodney Square Municipal Income Portfolio is an intermediate term
fund designed to produce a high level of income which is exempt from
federal income taxes while seeking preservation of capital. The basic
strategy of the Portfolio is to identify and purchase the undervalued
sectors of the municipal market. The Portfolio will normally be fully
invested with an average maturity in the 5 to 10 year range.
The past six months, as noted above, have witnessed two very different
market environments. From November to January came the end of a bond
market rally that had lasted over a year. This final leg of the rally
saw intermediate municipal yields decline moderately, about 15 basis
points from 4.45% for 7-year high grade issues on October 31, 1995 to
4.30% on January 31, 1996. A weak economy combined with Fed actions to
lower short-term interest rates fueled the markets during this period.
In February, the markets reversed their bullish psychology and
investors looked to sell bonds to lock in their profits. Several
factors weighed in to change the markets course, including the Fed shift
to holding rates steady (instead of continuing their pattern of
reductions) and rapidly rising commodity prices, particularly oil, wheat
and corn. As we moved into March and April, it became clear the economy
had resumed its 2.5% to 3% real growth rate. Surprisingly strong growth
in payroll jobs shocked market participants and concerns of wage
inflation added to the factors pushing market yields higher, and bond
prices lower. By the end of the six-month period, the yield on the
intermediate municipal sector rose to 4.70%, up 40 basis points from
February to April.
Most of our investments in this six-month period were defensive in
nature, being high coupon, premium priced and trading to a call or pre-
refunded date. In April, we purchased a relatively long (15 year
maturity) discount bond to take advantage of the higher yields available
as a result of the downswing in municipal bond prices. The investments
offset a net inflow of over $600,000 and call proceeds of over $400,000,
reducing the cash position from 6.4% to 3.2% of total assets. The
average maturity was reduced to 6.6 years on April 30, 1996 from 6.8
years at the beginning of the period.
2
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
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PRESIDENT'S MESSAGE -- CONTINUED
- ------------------------------------------------------------------------
The bond markets appear to be in a trading range, albeit with yields
higher than the close of calendar 1995. Until we see a reason for the
bond markets to break out of this range, our strategy will be to buy
longer discounts when the market is on the weaker side and focus on
defensive, income oriented securities when the market is strong.
We invite your comments and questions and we thank you for your
investment in The Rodney Square Strategic Fixed-Income Fund. We look
forward to reviewing our investment outlook and strategy with you in our
next report to shareholders.
Sincerely,
/s/ Martin L. Klopping
Martin L. Klopping
President
June 14, 1996
3
THE RODNEY SQUARE STRATEGIC FIXED-INCOME/DIVERSIFIED INCOME PORTFOLIO
- ---------------------------------------------------------------------
INVESTMENTS/APRIL 30, 1996 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
ASSET-BACKED SECURITIES - 9.2%
American Express Master Trust,
Ser. 1994-1 Class A, 7.15%,
08/15/99......................... Aaa/AAA $1,000,000 $1,016,868
Green Tree Financial Corp., Ser.
1995-2 Class A3, 7.45%,
06/15/25......................... Aaa/AAA 400,000 406,466
MBNA Master Credit Card Trust,
Ser. 1995-F Class A, 6.60%,
01/15/03......................... Aaa/AAA 300,000 299,778
Residential Asset Securities
Corp., Ser. 1995-KS3, 8.00%,
10/25/24......................... Aaa/AAA 400,000 402,004
Resolution Trust Corp., Ser.
1994-C2 Class B, 8.00%,
04/25/25......................... NR/AA 250,000 253,418
Standard Credit Card Master
Trust, Ser. 1995-8 Class A,
6.70%, 09/09/02.................. Aaa/AAA 700,000 694,267
---------
TOTAL ASSET-BACKED SECURITIES (COST $3,038,178)............ 3,072,801
---------
CORPORATE NOTES - 22.0%
FINANCIAL - 18.3%
BankAmerica Corp., 6.75%,
09/15/05......................... A3/A- 250,000 240,312
Bankers Trust NY Corp., 9.50%,
06/14/00......................... A2/A 700,000 758,625
Bear Stearns Company, 5.75%,
02/15/01......................... A2/A 500,000 475,625
Citicorp, 7.125%, 06/01/03......... A2/A 300,000 300,000
Commercial Credit Co., 5.875%,
01/15/03......................... A1/A+ 500,000 470,000
Ford Capital B.V., 9.375%,
01/01/98......................... A2/A 300,000 314,250
Heller Financial Corp., 7.875%,
11/01/99......................... A2/BBB+ 800,000 826,000
International Lease Finance,
6.125%, 11/01/99................. A2/A+ 400,000 393,000
ITT Hartford, 6.375%, 11/01/02..... A1/A+ 400,000 384,000
Lehman Brothers, Inc., 7.625%,
08/01/98......................... A3/A 600,000 611,250
Merrill Lynch & Co., Inc., 7.05%,
04/15/03......................... A1/A+ 200,000 196,500
Merrill Lynch & Co., Inc., 7.00%,
03/15/06......................... A1/A+ 600,000 586,500
Santander Financial Issuances Ltd.,
7.875%, 04/15/05................. A1/A+ 300,000 308,625
USL Capital Corp., 5.79%, 01/23/01. A1/A+ 300,000 286,500
---------
6,151,187
---------
MANUFACTURING - 2.1%
Eaton Corp., 8.00%, 08/15/06....... A2/A 650,000 687,375
---------
OIL, GAS & PETROLEUM - 1.6%
British Petroleum of North
America, Inc., 8.875%, 12/01/97.. A1/AA- 200,000 207,500
Societe Nationale Elf Aquitaine,
8.00%, 10/15/01.................. Aa3/AA 300,000 316,500
---------
524,000
---------
TOTAL CORPORATE NOTES (COST $7,379,357).................... 7,362,562
---------
The accompanying notes are an integral part of the financial statements.
4
THE RODNEY SQUARE STRATEGIC FIXED-INCOME/DIVERSIFIED INCOME PORTFOLIO
- ---------------------------------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
MORTGAGE BACKED SECURITIES - 10.8%
Advanta Mortgage Loan Trust, Ser.
1996-1 Class A6, 6.73%, 08/25/23. Aaa/AAA $ 300,000 $ 283,377
EQCC Home Equity Loan Trust, Ser.
1994-4A Class A3, 8.68%,
10/15/08......................... Aaa/AAA 700,000 727,269
Equicon Home Equity Loan Trust,
Ser. 1993-1 Class A, 5.85%,
11/18/12......................... Aaa/AAA 434,935 424,742
Federal National Mortgage. Assoc.,
Ser. 1996-4 Class VC, 6.50%,
07/25/02......................... NR/NR 293,651 288,395
Merrill Lynch Mortgage Investors,
Inc., Ser. 1991-G Class A,
8.15%, 10/15/11.................. Aaa/NR 419,926 429,104
The Money Store Home Equity
Trust, Ser. 1994-D1 Class A3,
8.35%, 10/15/13.................. Aaa/AAA 1,000,000 1,023,950
The Money Store Home Equity
Trust, Ser. 1992-D2 Class A3,
7.55%, 01/15/18.................. Aaa/AAA 444,408 442,371
---------
TOTAL MORTGAGE BACKED SECURITIES (COST $3,605,600)......... 3,619,208
---------
TIME DEPOSITS - 8.1%
Bank of Tokyo-Mitsubishi, Grand
Cayman Branch, 5.375%,
05/01/96 (COST $2,710,648)....... - 2,710,648 2,710,648
---------
U.S. GOVERNMENT AGENCY OBLIGATIONS* - 12.3%
FEDERAL HOME LOAN MORTGAGE CORP. INTEREST BEARING NOTES - 2.7%
Federal Home Loan Mortgage Corp.,
8.60%, 01/26/00.................. - 400,000 405,184
Federal Home Loan Mortgage Corp.,
7.05%, 05/15/02.................. - 500,000 503,545
---------
908,729
---------
FEDERAL NATIONAL MORTGAGE ASSOC. INTEREST BEARING NOTES - 9.6%
Federal National Mortgage Assoc.,
5.39%, 08/05/98.................. - 2,950,000 2,890,292
Federal National Mortgage Assoc.,
7.50%, 08/25/05.................. - 300,000 301,968
---------
3,192,260
---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $3,987,375).. 4,100,989
---------
U.S. TREASURY OBLIGATIONS* - 36.6%
U.S. TREASURY BONDS - 2.5%
U.S. Treasury Bonds, 11.75%,
02/15/10......................... - 650,000 859,709
---------
U.S. TREASURY NOTES - 34.1%
U.S. Treasury Notes, 7.50%,
01/31/97......................... - 1,500,000 1,520,896
U.S. Treasury Notes, 5.375%,
11/30/97......................... - 1,150,000 1,139,581
U.S. Treasury Notes, 6.125%,
03/31/98......................... - 750,000 750,952
U.S. Treasury Notes, 5.125%,
04/30/98......................... - 250,000 245,707
U.S. Treasury Notes, 6.125%,
05/15/98......................... - 400,000 400,400
U.S. Treasury Notes, 6.375%,
01/15/99......................... - 250,000 251,045
The accompanying notes are an integral part of the financial statements.
5
THE RODNEY SQUARE STRATEGIC FIXED-INCOME/DIVERSIFIED INCOME PORTFOLIO
- ---------------------------------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
U.S. Treasury Notes, 6.00%,
10/15/99......................... - $ 250,000 $ 247,997
U.S. Treasury Notes, 6.375%,
01/15/00......................... - 1,400,000 1,401,414
U.S. Treasury Notes, 6.75%,
04/30/00......................... - 1,250,000 1,265,650
U.S. Treasury Notes, 6.25%,
05/31/00......................... - 300,000 298,512
U.S. Treasury Notes, 8.75%,
08/15/00......................... - 150,000 163,097
U.S. Treasury Notes, 6.25%,
08/31/00......................... - 300,000 298,098
U.S. Treasury Notes, 7.88%,
08/15/01......................... - 275,000 291,987
U.S. Treasury Notes, 6.25%,
02/15/03......................... - 350,000 344,057
U.S. Treasury Notes, 5.75%,
08/15/03......................... - 700,000 665,105
U.S. Treasury Notes, 5.875%,
02/15/04......................... - 250,000 238,180
U.S. Treasury Notes, 7.25%,
05/15/04......................... - 600,000 620,976
U.S. Treasury Notes, 6.50%,
08/15/05......................... - 900,000 887,022
U.S. Treasury Notes, 5.875%,
11/15/05......................... - 200,000 188,508
U.S. Treasury Notes, 5.625%,
02/15/06......................... - 200,000 185,272
----------
11,404,456
----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $12,446,225)......... 12,264,165
----------
TOTAL INVESTMENTS (COST $33,167,383)** - 99.0%.................. 33,130,373
OTHER ASSETS AND LIABILITIES, NET - 1.0%........................ 333,824
----------
NET ASSETS - 100.0%............................................. $ 33,464,197
============
* While not rated by Moody's or S&P, U.S. Government
securities are considered to be of the highest quality,
comparable to AAA.
** Cost for federal income tax purposes was $33,173,164. At
April 30, 1996, net unrealized depreciation was $42,791.
This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market
value over tax cost of $383,337 and aggregate gross
unrealized depreciation for all securities in which there
was an excess of tax cost over market value of $426,128.
The accompanying notes are an integral part of the financial statements.
6
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------
INVESTMENTS/APRIL 30, 1996 (UNAUDITED)
(SHOWING PERCENTAGE OF TOTAL VALUE OF NET ASSETS)
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
MUNICIPAL BONDS - 95.5%
ALASKA - 2.3%
Alaska Municipal Bond Bank Auth. Ref.
Rev., Ser. 1993C, 4.90%, 10/01/03....... A/A $400,000 $392,500
----------
CALIFORNIA - 11.3%
California State Veterans Bonds, Ser.
AY, 6.90%, 04/01/01..................... Aa/AA 250,000 254,878
California State Veterans Bonds, Ser.
1989, 7.00%, 04/01/03................... Aa/AA 500,000 509,235
Los Angeles County, CA Public Works
Fin. Auth. Rev. (LA County Park &
Open Space District) Ser. 1994A,
5.63%, 10/01/03......................... Aa/AA 500,000 517,500
Los Angeles, CA Dept. of Water and
Power Electric Plant Rev., 5.75%,
11/15/02................................ Aa/AA 300,000 313,875
Redevelopment Agency of San Francisco,
CA Multi-Family Housing Ref. Rev.
(GNMA South Beach Proj.) Ser. 1994,
4.75%, 09/01/02......................... Aaa/NR 345,000 335,944
----------
1,931,432
COLORADO - 3.0% ----------
Aurora, CO Certificate of Participation
Lease Ref. Rev., 5.85%, 12/01/02........ A/A 500,000 516,875
----------
DELAWARE - 19.5%
Bethany Beach, DE, 9.75%, 11/01/07........ Aaa/AAA 160,000 217,600
Bethany Beach, DE, 9.75%, 11/01/08........ Aaa/AAA 180,000 248,850
Delaware State Economic Dev. Auth.
Rev. (Delmarva Power & Light)
7.30%, 09/01/15......................... Aaa/AAA 100,000 108,375
Delaware State Housing Auth. Multi-
Family Mortgage Ref. Rev., 6.30%,
07/01/98................................ A1/A+ 100,000 100,375
Delaware State Housing Auth. Multi-
Family Mortgage Rev., Ser. 1992D,
6.35%, 07/01/03......................... A1/NR 100,000 102,125
Delaware State Housing Auth. Multi-
Family Mortgage Ref. Rev., Ser. C,
7.25%, 01/01/07......................... A1/A 235,000 245,281
Delaware State Housing Auth. Single
Family Mortgage Rev., Ser. 1993 Sub.
Ser. A-1, AMBAC, 5.05%, 07/01/05........ Aaa/AAA 315,000 303,581
Delaware State Housing Auth. Single
Family Mortgage Rev., Ser. 1993 Sub.
Ser. A-1, AMBAC, 5.15%, 01/01/06........ Aaa/AAA 180,000 174,375
Delaware State Housing Auth. Sr. Home
Mortgage Rev., Sub. Ser. 1991-B,
6.40%, 12/01/02......................... A1/NR 50,000 51,000
Delaware State Solid Waste Auth. System
Rev., 5.80%, 07/01/01................... A/A 500,000 518,125
Delaware Transportation Auth.
Transportation System Jr. Lien Rev.,
5.00%, 07/01/06......................... Aaa/AAA 500,000 488,750
Delaware Transportation Auth.
Transportation System Jr. Lien Rev.,
Prerefunded, 7.75%, 07/01/98............ Aaa/AAA 250,000 271,875
The accompanying notes are an integral part of the financial statements.
7
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
Delaware Transportation Auth.
Transportation System Sr. Lien Rev.,
6.75%, 07/01/98......................... A1/AA- $115,000 $120,606
Delaware Transportation Auth.
Transportation System Sr. Lien Rev.,
5.88%, 07/01/00......................... A1/AA- 350,000 365,750
----------
3,316,668
HAWAII - 4.4% ----------
Hawaii State General Obligation Rev.,
Ser. BW, 6.20%, 03/01/05................ Aa/AA 700,000 752,500
----------
MISSISSIPPI - 2.3%
Medical Center Educ. Bldg. Corp.,
(Univ. of Mississippi Medical Center
Proj.) Ser. 1993, 5.40%, 12/01/05....... NR/A- 400,000 393,000
----------
NEVADA - 2.3%
Nevada State General Obligation Rev.,
Ser. B, 4.38%, 08/01/03................. Aa/AA 400,000 383,000
----------
NEW JERSEY - 6.7%
New Jersey Econ. Dev. Auth. School Rev.
(Blair Academy 1995 Proj.) Ser. B,
6.00%, 09/01/07......................... A/NR 500,000 513,125
New Jersey State Transportation Auth.,
Ser. A, 6.00%, 06/15/01................. Aaa/AAA 600,000 633,750
----------
1,146,875
PENNSYLVANIA - 14.4% ----------
Pennsylvania State Higher Educ. Fac.
Auth. College & Univ. Rev. (Philadelphia
College of Osteopathic Medicine) Ser.
1993, 5.25%, 12/01/07................... NR/AAA 150,000 145,313
Pennsylvania State Higher Educ. Fac.
Auth. College & Univ. Rev. (Trustees
Univ. of Pennsylvania) Ser. A, 6.625%,
01/01/17................................ Aa/AA 550,000 555,296
Pennsylvania State Ref. Rev. First Ser.,
5.30%, 05/01/06......................... A1/AA- 500,000 497,500
Philadelphia, PA Municipal Auth. Rev.
(Philadelphia Airport)7.875%, 07/15/17.. Aaa/AAA 275,000 293,219
Philadelphia, PA Redevelopment Auth.
Home Improvement Loan Rev., 7.38%,
06/01/03................................ A/A 40,000 40,350
York County, PA Ind. Auth. Personal
Care Fac., 9.50%, 10/01/19.............. NR/NR 300,000 375,000
York County, PA Solid Waste Refuse
Auth. Industrial Dev. Rev. (Resource
Recovery Proj.) Ser. 1985, 8.20%,
12/01/14................................ A/AA- 500,000 538,125
----------
2,444,803
TEXAS - 3.7% ----------
Austin, TX General Obligation Rev.,
4.75%, 09/01/09......................... Aa/AA 315,000 292,556
Tarrant County, TX Water Control
District No. 1, Rev. FGIC,
4.75%, 03/01/06......................... Aaa/AAA 350,000 334,688
----------
627,244
----------
The accompanying notes are an integral part of the financial statements.
8
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------
INVESTMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING AMOUNT (NOTE 2)
----------- --------- --------
UTAH - 3.0%
Salt Lake City, UT Municipal Bldg.
Auth. Lease Rev., Ser. 1994A,
5.65%, 10/01/03......................... Aaa/AAA $500,000 $515,625
----------
VERMONT - 7.3%
Vermont Municipal Bond Bank Rev.,
Ser. 2, 6.00%, 12/01/05................. Aaa/AAA 790,000 842,337
Vermont Municipal Bond Bank Rev.,
Ser. 1, 5.50%, 12/01/10................. Aaa/AAA 400,000 395,000
----------
1,237,337
VIRGINIA - 5.9% ----------
Virginia Educ. Loan Auth. Rev.
(Student Loan Prog.) Sr. Ser.
1994B, 5.15%, 03/01/04.................. Aaa/NR 485,000 486,213
Virginia State Housing Development
Auth. Commonwealth Mtg. Rev., Ser.
1992C Sub. Ser. C8, 5.80%, 07/01/04..... Aa/AA+ 500,000 510,000
----------
996,213
WASHINGTON - 4.9% ----------
Clark County, WA Public Utility Dist.
No. 1 Generating System Rev., 6.00%,
01/01/06................................ Aaa/AAA 350,000 368,812
Washington State Public Power Supply
System Ref. Rev. (Nuclear Proj.
No. 3) Ser. 1993C, 5.10%, 07/01/07...... Aa/AA 500,000 473,125
----------
841,937
WEST VIRGINIA - 1.8% ----------
Oak Hill, WV Industrial Development
Ref. Rev. (Fayette Plaza Proj.)
Ser. 1991A, 4.95%, 10/01/09............. NR/AA- 300,000 302,625
----------
WISCONSIN - 2.7%
Appleton, WI Area School Dist.,
5.00%, 04/01/11........................... NR/NR 505,000 465,862
----------
TOTAL MUNICIPAL BONDS (COST $16,289,689)................... 16,264,496
----------
TAX-EXEMPT MUTUAL FUND - 3.1%
PNC Municipal Cash Tax-Exempt Money
Market Fund (COST $530,448)............. - 530,448 530,448
----------
TOTAL INVESTMENTS (COST $16,820,137)* - 98.6%................... 16,794,944
OTHER ASSETS AND LIABILITIES, NET - 1.4%........................ 238,867
------------
NET ASSETS - 100.0%............................................. $ 17,033,811
============
* Cost for federal income tax purposes. At April 30, 1996, net unrealized
depreciation was $25,193. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $117,892 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market
value of $143,085.
The accompanying notes are an integral part of the financial statements.
9
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1996 (Unaudited)
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- -----------
ASSETS:
Investments in securities, at market
(identified cost $33,167,383 and
$16,820,137, respectively) (Note 2)......... $33,130,373 $16,794,944
Receivable for investment securities sold.... 279,945 -
Receivable for Fund shares sold.............. 24,443 -
Interest receivable.......................... 466,854 275,762
Deferred organization costs (Note 2)......... - 43,156
Other assets................................. 1,244 602
----------- -----------
Total assets................................ 33,902,859 17,114,464
----------- -----------
LIABILITIES:
Dividends payable............................ 166,818 62,313
Payable for investment securities purchased.. 187,125 -
Payable for Fund shares redeemed............. 50,317 -
Due to Adviser (Note 4)...................... 3,816 -
Other accrued expenses (Note 4).............. 30,586 18,340
----------- -----------
Total liabilities........................... 438,662 80,653
----------- -----------
NET ASSETS, at market value.................. $33,464,197 $17,033,811
=========== ===========
NET ASSETS CONSIST OF:
Shares of beneficial interest................ $26,196 $13,775
Additional paid-in capital................... 33,658,014 17,098,911
Net unrealized depreciation of investments... (37,010) (25,193)
Accumulated net realized loss................ (183,003) (53,682)
----------- -----------
NET ASSETS, for 2,619,598 and 1,377,529
shares outstanding, respectively............ $33,464,197 $17,033,811
=========== ===========
NET ASSET VALUE and redemption price per
share ($33,464,197 / 2,619,598 and
$17,033,811 / 1,377,529 outstanding shares
of beneficial interest, $0.01 par value,
respectively)............................... $12.77 $12.37
====== ======
Maximum offering price per share (100/96.5
of $12.77 and 100/96.5 of $12.37,
respectively)............................... $13.23 $12.82
====== ======
The accompanying notes are an integral part of the financial statements.
10
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended April 30, 1996 (Unaudited)
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- -----------
INTEREST INCOME.............................. $1,122,676 $427,591
----------- -----------
EXPENSES:
Advisory fee (Note 4)....................... 83,311 41,944
Administration fee (Note 4)................. 13,330 6,711
Accounting fee (Note 4)..................... 24,863 24,863
Distribution expenses (Note 4).............. 13,674 8,918
Trustees' fees and expenses (Note 4)........ 2,686 2,686
Amortization of organizational expenses
(Note 2).................................. 7,928 9,004
Registration fees........................... 8,792 6,293
Reports to shareholders..................... 5,014 2,640
Legal....................................... 4,602 2,505
Audit....................................... 13,271 6,621
Other....................................... 3,893 3,156
----------- -----------
Total expenses before fee waiver.......... 181,364 115,341
Advisory fee waived (Note 4).............. (73,060) (41,944)
Administration fee waived (Note 4)........ - (6,711)
Accounting fee waived (Note 4)............ - (3,769)
----------- -----------
Total expenses, net..................... 108,304 62,917
----------- -----------
Net investment income....................... 1,014,372 364,674
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investment
transactions.............................. 255,226 (2,280)
Net unrealized depreciation of investments
during the period......................... (1,095,334) (166,268)
---------- -----------
Net loss on investments..................... (840,108) (168,548)
---------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... $174,264 $196,126
========== ===========
The accompanying notes are an integral part of the financial statements.
11
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- -----------
FOR THE SIX-MONTH PERIOD ENDED
APRIL 30, 1996 (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income....................... $1,014,372 $364,674
Net realized gain (loss) on investment
transactions.............................. 255,226 (2,280)
Net unrealized depreciation of investments
during the period......................... (1,095,334) (166,268)
Net increase in net assets resulting from ----------- -----------
operations................................ 174,264 196,126
----------- -----------
Distributions to shareholders from:
Net investment income ($0.40 and $0.27
per share, respectively).................. (1,014,372) (364,674)
----------- -----------
Increase in net assets from Fund share
transactions (Note 5)..................... 2,090,375 632,079
----------- -----------
Total increase in net assets............... 1,250,267 463,531
NET ASSETS:
Beginning of period........................ 32,213,930 16,570,280
----------- -----------
End of period.............................. $33,464,197 $17,033,811
=========== ===========
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income...................... $2,075,063 $691,530
Net realized loss on investment
transactions.............................. (352,512) (45,859)
Net unrealized appreciation of investments
during the year........................... 1,976,228 1,100,202
----------- -----------
Net increase in net assets resulting
from operations........................... 3,698,779 1,745,873
----------- -----------
Distributions to shareholders from:
Net investment income ($0.83 and $0.54
per share, respectively).................. (2,075,063) (691,530)
----------- -----------
Increase (decrease) in net assets from
Fund share transactions (Note 5).......... (1,131,026) 1,232,525
----------- -----------
Total increase in net assets............... 492,690 2,286,868
NET ASSETS:
Beginning of year.......................... 31,721,240 14,283,412
----------- -----------
End of year................................ $32,213,930 $16,570,280
=========== ===========
The accompanying notes are an integral part of the financial statements.
12
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following tables include selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements. They should be read in conjunction with the financial statements
and notes thereto.
<TABLE>
<CAPTION>
FOR THE SIX-MONTH FOR THE PERIOD
PERIOD ENDED FOR THE FISCAL APRIL 2, 1991++
APRIL 30, YEARS ENDED OCTOBER 31, TO OCTOBER 31,
-------------------------------------
1996+ 1995 1994 1993 1992 1991
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
DIVERSIFIED INCOME PORTFOLIO
NET ASSET VALUE - BEGINNING OF PERIOD.... $13.08 $12.42 $13.48 $13.20 $12.86 $12.50
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment income................... 0.40 0.83 0.71 0.76 0.83 0.48
Net realized and unrealized gain
(loss) on investments.................. (0.31) 0.66 (1.02) 0.39 0.37 0.36
------ ------ ------ ------ ------ ------
Total from investment operations.... 0.09 1.49 (0.31) 1.15 1.20 0.84
------ ------ ------ ------ ------ ------
Distributions:
From net investment income.............. (0.40) (0.83) (0.71) (0.76) (0.83) (0.48)
From net realized gain on investments... - - (0.04) (0.11) (0.03) -
------ ------ ------ ------ ------ ------
Total distributions................. (0.40) (0.83) (0.75) (0.87) (0.86) (0.48)
------ ------ ------ ------ ------ ------
NET ASSET VALUE - END OF PERIOD.......... $12.77 $13.08 $12.42 $13.48 $13.20 $12.86
====== ====== ====== ====== ====== ======
TOTAL RETURN**........................... 0.63% 12.41% (2.33)% 9.00% 9.58% 6.89%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses***............................. 0.65%* 0.65% 0.65% 0.65% 0.65% 0.89%*
Net investment income................... 6.09%* 6.56% 5.53% 5.65% 6.33% 6.64%*
Portfolio turnover rate.................. 63.87%* 116.40% 43.77% 24.22% 27.37% 78.45%*
Net assets at end of period
($000 omitted).......................... 33,464 32,214 31,721 40,971 30,152 24,171
Senior Securities:
Amount of reverse repurchase agreements
outstanding at end of period
(000 omitted)........................... $0 $0 $0 $0 $0 $0
Average daily amount of reverse
repurchase agreements outstanding
during the period (000 omitted)......... $0 $0 $0 $0 $0 $162
Average daily number of shares
outstanding during the period
(000 omitted)........................... 2,563 2,492 2,960 2,660 2,109 1,279
Average daily amount of reverse
repurchase agreements per share
during the period....................... $0.00 $0.00 $0.00 $0.00 $0.00 $0.13
</TABLE>
13
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS -- CONTINUED
- ------------------------------------------------------------------------------
For the Six-Month For the
Period Ended Fiscal Years
April 30, Ended October 31,
-----------------
1996+ 1995 1994
----- ---- ----
MUNICIPAL INCOME PORTFOLIO
NET ASSET VALUE - BEGINNING OF PERIOD.... $12.49 $11.64 $12.50
------ ------ ------
INVESTMENT OPERATIONS:
Net investment income................... 0.27 0.54 0.49
Net realized and unrealized gain
(loss) on investments................. (0.12) 0.85 (0.86)
------ ------ ------
Total from investment operations.... 0.15 1.39 (0.37)
------ ------ ------
DISTRIBUTIONS:
From net investment income.............. (0.27) (0.54) (0.49)
------ ------ ------
NET ASSET VALUE - END OF PERIOD.......... $12.37 $12.49 $11.64
====== ====== ======
TOTAL RETURN**........................... 1.20% 12.23% (3.05)%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses****............................ 0.75%* 0.75% 0.75%
Net investment income................... 4.35%* 4.50% 4.13%
Portfolio turnover rate.................. 6.41%* 42.08% 21.95%
Net assets at end of period
($000 omitted).......................... 17,034 16,570 14,283
+ Unaudited.
++ Commencement of Operations.
* Annualized.
** These results do not include the sales load. If the
sales load had been included, the returns would have been
lower. The total return figure for both Portfolios for
the six-month period ended April 30, 1996 and the
Diversified Income Portfolio for the fiscal period ended
October 31, 1991 have not been annualized.
*** Wilmington Trust Company ("WTC") reimbursed a portion of
the Portfolio's expenses, exclusive of advisory fees,
amounting to $0.032 per share for the fiscal period ended
October 31, 1991. WTC waived a portion of its fees
amounting to $0.029, $0.063, $0.051 and $0.056 per share
for the six-month period ended April 30, 1996 and for the
fiscal years ended October 31, 1995, 1994 and 1993,
respectively. WTC and Rodney Square Management Corporation
("RSMC") waived a portion of their fees amounting to $0.078
and $0.036 per share for the fiscal year ended October 31,
1992 and for the fiscal period ended October 31, 1991,
respectively. If these expenses, including the advisory
and accounting fees waived, had been incurred by the
Portfolio, the annualized ratio of expenses to average
daily net assets for the six-month period ended April 30,
1996, for the fiscal years ended October 31, 1995, 1994,
1993 and 1992, and for the fiscal period ended October 31,
1991, would have been 1.09%, 1.14%, 1.05%, 1.06%, 1.24% and
1.91%, respectively.
**** WTC waived its entire advisory fee for the six-month
period ended April 30, 1996 and for the fiscal years ended
October 31, 1995 and 1994, amounting to $0.031, $0.057 and
$0.059 per share, respectively. In addition, RSMC waived a
portion of its fees for administration and accounting
services amounting to $0.005 and $0.003 per share for the
six-month period ended April 30, 1996, $0.010 and $0.018
per share for the fiscal year ended October 31, 1995 and
$0.010 and $0.037 per share for the fiscal year ended
October 31, 1994. If these expenses had been incurred by
the Portfolio, the annualized ratio of expenses to average
daily net assets for the six-month period ended April 30,
1996 and for the fiscal years ended October 31, 1995 and
1994, would have been 1.38%, 1.45% and 1.62%, respectively.
14
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND. The Rodney Square Strategic Fixed-Income
Fund (the "Fund") is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company established as a Massachusetts
business trust. The Declaration of Trust, dated May 7, 1986, as
last amended and restated on February 15, 1993, permits the
Trustees to establish separate series (or "Portfolios"), each of
which may issue separate classes of shares. The authorized shares
of beneficial interest of the Fund are currently divided into two
Portfolios, the Diversified Income Portfolio and the Municipal
Income Portfolio (each, a "Portfolio" and collectively, the
"Portfolios"). Each Portfolio currently consists of a single class
of shares. The investment objective of the Diversified Income
Portfolio is to seek high total return, consistent with high
current income, by investing principally in various types of
investment grade fixed-income securities. The investment objective
of the Municipal Income Portfolio is to seek a high level of income
exempt from federal income tax consistent with the preservation of
capital.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. Each Portfolio's securities, except short-term
investments with remaining maturities of 60 days or less, are
valued at their market value as determined by their most recent bid
prices in the principal market in which these securities are
normally traded, or when stock exchange valuations are used, at the
last quoted sale price on the date of valuation. Short-term
investments with remaining maturities of 60 days or less are valued
at amortized cost, which approximates market value, unless the
Fund's Board of Trustees determines that this does not represent
fair value. The value of all other securities is determined in good
faith under the direction of the Board of Trustees.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate
entity and intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986 and to
distribute all of its taxable and tax-exempt income to its
shareholders. Therefore, no federal income tax provision is
required. At October 31, 1995, the Diversified Income Portfolio
and the Municipal Income Portfolio had net tax basis capital loss
carryforwards to offset future capital gains of approximately
$438,000 and $51,000, respectively, which will expire as follows:
CAPITAL LOSS EXPIRATION
CARRY FORWARD DATE
------------- ----------
Diversified Income Portfolio..... $ 86,000 10/31/02
352,000 10/31/03
Municipal Income Portfolio....... 6,000 10/31/02
45,000 10/31/03
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest income is
accrued as earned. Dividends from net investment income consist of
accrued interest and earned discount (including both original issue
and market discount) less amortization of premium and accrued
expenses. Dividends to shareholders of each Portfolio are declared
daily from net investment income and paid to shareholders monthly.
Distributions of net capital gains realized by each Portfolio will
be made annually in December.
15
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------
DEFERRED ORGANIZATION COSTS. Costs incurred by the Portfolios in
connection with the initial registration and public offering of
shares have been deferred and are being amortized on a straight-
line basis over a five-year period beginning on the date that each
Portfolio commenced operations.
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. Each Portfolio uses the specific identification
method for determining realized gain and loss on investments for
both financial and federal income tax reporting purposes.
3. INVESTMENT SECURITIES. During the six-month period ended April 30,
1996, purchases and sales of investment securities (excluding short-
term investments) aggregated as follows:
DIVERSIFIED MUNICIPAL
INCOME INCOME
----------- ---------
Purchases..................... $ 11,914,883 $ 1,656,396
Sales......................... 9,926,242 478,950
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund, on
behalf of each Portfolio, employs Wilmington Trust Company ("WTC"),
a wholly owned subsidiary of Wilmington Trust Corporation, a
publicly held bank holding company, to furnish investment advisory
and other services to the Fund. Under WTC's Advisory Contract with
the Fund, WTC acts as Investment Adviser and, subject to the
supervision of the Board of Trustees, directs the investments of
the Fund's Portfolios in accordance with each Portfolio's
investment objective, policies and limitations. For its services
under the Advisory Contract, the Fund pays WTC a monthly fee at the
annual rate of 0.50% of the average daily net assets of each
Portfolio of the Fund, excluding those assets invested in any money
market mutual fund. WTC has agreed to waive its advisory fee or
reimburse each Portfolio monthly to the extent that operating
expenses of the Portfolio (excluding taxes, extraordinary expenses,
brokerage commissions and interest) exceed an annual rate of 0.75%
of the Portfolio's average daily net assets through February 1997.
For the six-month period ended April 30, 1996, with respect to the
Diversified Income Portfolio, WTC further voluntarily agreed to
waive its fee or reimburse the Portfolio monthly to the extent that
operating expenses of the Portfolio (excluding taxes, extraordinary
expenses, brokerage commissions, and interest) exceed an annual
rate of 0.65% of average daily net assets. These undertakings may
be amended or rescinded at any time in the future.
16
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------
The following table summarizes the advisory fees for the six-month
period ended April 30, 1996:
GROSS ADVISORY ADVISORY
FEE FEE WAIVER
-------------- ----------
Diversified Income Portfolio..... $ 83,311 $ 73,060
Municipal Income Portfolio....... 41,944 41,944
WTC also serves as Custodian of the assets of the Fund and does not
receive any separate fees from the Fund for the performance of this
service. Each Portfolio of the Fund reimburses WTC for its related
out-of-pocket expenses, if any, incurred in connection with the
performance of this service.
Rodney Square Management Corporation ("RSMC"), a wholly owned
subsidiary of WTC, serves as Administrator, Transfer Agent and
Dividend Paying Agent to the Fund under separate Administration and
Transfer Agent Agreements with the Fund, each dated December 31,
1992. As Administrator, RSMC is responsible for services such as
financial reporting, compliance monitoring and corporate
management. For the services provided, RSMC receives a monthly
administration fee from the Fund at an annual rate of 0.08% of each
Portfolio's average daily net assets. The administration fee paid
to RSMC by the Diversified Income Portfolio for the six-month
period ended April 30, 1996 amounted to $13,330. RSMC waived its
administration fee for the Municipal Income Portfolio for the six-
month period ended April 30, 1996 amounting to $6,711.
The Fund does not pay RSMC any separate fees for its services as
Transfer Agent and Dividend Paying Agent for the Portfolios, as WTC
assumes the cost of providing these services to the Portfolios.
Each Portfolio reimburses RSMC for its related out-of-pocket
expenses, if any, incurred in connection with the performance of
these services.
Pursuant to a Distribution Agreement with the Fund dated December
31, 1992, Rodney Square Distributors, Inc. ("RSD"), a wholly owned
subsidiary of WTC, manages the Fund's distribution efforts and
provides assistance and expertise in developing marketing plans and
materials. The Fund's Board of Trustees has adopted distribution
plans (the "12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act
to allow the Fund to reimburse RSD for certain distribution
activities and to allow WTC to incur certain expenses, the payment
of which may be considered to constitute indirect payment by the
Fund of distribution expenses. The Trustees have authorized a
payment of up to 0.25% of each Portfolio's average daily net assets
annually to reimburse RSD for such expenses. For the six-month
period ended April 30, 1996, such expenses amounted to $13,674
for the Diversified Income Portfolio and $8,918 for the Municipal
Income Portfolio.
RSMC determines the net asset value per share of each Portfolio and
provides accounting services to the Fund pursuant to an Accounting
Services Agreement with the Fund on behalf of each Portfolio. For
its services, RSMC receives an annual fee of $50,000 per
Portfolio, plus an amount equal to 0.02% of that portion of each
Portfolio's average daily net assets in excess of $100 million. For
the six-month period ended April 30, 1996, RSMC's fees for
accounting services amounted to $24,863 per Portfolio. RSMC waived
$3,769 of the accounting services fee with respect to the Municipal
Income Portfolio.
17
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
- ------------------------------------------------------------------------
The salaries and fees of all officers of the Fund, the Trustees who
are "interested persons" of the Fund, WTC, RSMC, RSD, or their
affiliates, and all personnel of the 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 for the six-month
period ended April 30, 1996 amounted to $2,686 per Portfolio.
5. FUND SHARES. At April 30, 1996, there were an unlimited number of
shares of beneficial interest of $0.01 par value authorized. The
following table summarizes the activity in shares of each
Portfolio:
DIVERSIFIED INCOME PORTFOLIO
FOR THE SIX-MONTH FOR THE FISCAL
PERIOD ENDED YEAR ENDED
APRIL 30, 1996+ OCTOBER 31, 1995
------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
Shares sold.............. 288,839 $3,800,247 353,623 $4,500,647
Shares issued to
shareholders in
reinvestment of
distributions.......... 34,203 448,479 64,094 813,935
Shares redeemed.......... (166,723) (2,158,351) (508,424) (6,445,608)
--------- ---------- -------- -----------
Net increase (decrease).. 156,319 $2,090,375 (90,707) $(1,131,026)
========== ===========
Shares outstanding:
Beginning of period.... 2,463,279 2,553,986
--------- ---------
End of period.......... 2,619,598 2,463,279
========= =========
MUNICIPAL INCOME PORTFOLIO
FOR THE SIX-MONTH FOR THE FISCAL
PERIOD ENDED YEAR ENDED
APRIL 30, 1996+ OCTOBER 31, 1995
------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
Shares sold.............. 84,446 $1,056,464 226,538 $2,755,791
Shares issued to
shareholders in
reinvestment of
distributions.......... 21,941 275,776 45,994 552,423
Shares redeemed.......... (55,699) (700,161) (172,561) (2,075,689)
--------- ---------- -------- -----------
Net increase............. 50,688 $632,079 99,971 $1,232,525
========== ===========
Shares outstanding:
Beginning of period.... 1,326,841 1,226,870
---------- ----------
End of period.......... 1,377,529 1,326,841
========== ==========
+ Unaudited
18
[Outside cover -- divided into two sections]
[Left Section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
Martin L. Klopping
John J. Quindlen
--------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
Louis C. Schwartz, Esq., ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
------------------------------------------------
ADMINISTRATOR
AND TRANSFER AGENT
Rodney Square Management Corporation
--------------------------------------
INVESTMENT ADVISER
AND 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 FUND. THE REPORT IS NOT
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN
THE FUND UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE
PROSPECTUS.
RS18 6/96
[Right Section]
the RODNEY SQUARE
STRATEGIC
FIXED-INCOME
FUND
[GRAPHIC] RSMC Logo
SEMIANNUAL REPORT
APRIL 30, 1996
