RODNEY SQUARE STRATEGIC FIXED INCOME FUND, N-30D, 1996-12-26

RODNEY SQUARE STRATEGIC FIXED INCOME FUND
N-30D, 1996-12-26

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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 fiscal
year ended October 31, 1996.

PERFORMANCE REVIEW*

The Diversified Income Portfolio had a total return of 5.18% during
the fiscal year ended October 31, 1996. This return consisted of a decrease
in net asset value per share, from $13.08 to $12.95, plus distributions
from net investment income during the year of $0.78 per share. The
Portfolio's performance trailed the reported return of 5.81% for the Lehman
Intermediate Government/Corporate Index. Wilmington Trust Company, the
Portfolio's adviser, has continued to assist the Portfolio by limiting
total expenses of the Portfolio to 0.65% of average daily net assets. 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
1 year to 10 years.

The Municipal Income Portfolio provided shareholders with a 4.24%
total return for the fiscal year ended October 31, 1996. This return
consisted of a decrease in the net asset value per share, from $12.49 to
$12.46, plus distributions from net investment income during the year of
$0.55 per share. The Portfolio's performance was lower than the 5.78%
return reported for the Merrill Lynch Intermediate Municipal Index.
Wilmington Trust Company, the Portfolio's adviser, has continued to assist
the Portfolio by limiting total expenses of the Portfolio to 0.75% of
average daily net assets. The Merrill Lynch Intermediate Municipal Index
is a composite return of nearly 400 municipal bond issues with a maturity
range of 0 to 22 years.

ECONOMIC ENVIRONMENT

The domestic fixed income market experienced several interest rate
swings during the past fiscal year in response to changing expectations of
the Federal Reserve Board's (the "Fed") policy. Following the momentum of
declining interest rates during most of 1995, the new year began
anticipating that the Fed would extend the bullish outlook for interest
rates by further reducing short-term interest rates. The fortunes of the
fixed income market took a turn for the worse in February and March of 1996
as economic growth accelerated and all prospects of further rate cuts by
the Fed at that time were eliminated. The fixed income markets continued
to perform poorly into the summer as employment growth triggered additional
concerns regarding inflation and higher wage pressures. However, prospects
for the third quarter began to indicate that the economy was slowing and,
with inflation remaining under control, the markets began to stabilize.
Yields on U.S. Treasury securities with 5-year maturities, which had
bottomed out at 5.13% in mid-February, peaked at 6.82% in early July. The
final months of the fiscal year have seen yields move lower, reaching 6.10%
by October 31, 1996 for the above-mentioned U.S. Treasury securities.

- --------------
* 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 16 AND 17.

Municipal bond prices rose for the first three months of the year,
representing the end of a long rally that started early in 1995. However,
tax-exempts under-performed their taxable counterparts during this period
as the issue of radical tax reform was the primary issue of the Steve
Forbes presidential campaign. The next six months proved to be difficult
for the fixed income markets. An economy showing signs of explosive
growth, combined with rising commodity prices, led to uncertainty regarding
Fed actions and volatility in the markets. Municipals, while participating
in the bear market, were buoyed somewhat by two factors. First, the demise
of the Forbes campaign put to rest, at least temporarily, talk of radical
tax reform. Second, the municipal market experienced a net reduction in
outstanding issuance. The amount of bond redemptions, either from calls or
maturities, peaked in the June/July period with over $60 billion of bonds
retired. Investors' efforts to replace these bonds, when the supply of new
issues was relatively light, minimized the downward price pressures.
Municipal prices declined by less than half of the decline experienced by
Treasury issues.

The final three months of the fiscal year witnessed a recovery in bond
prices so that, over the course of the year, the decline in bond prices was
moderate. The Fed held short-term interest rates steady in the summer in
expectation of a slowing economy. The economy behaved as the Fed expected;
perceived inflation pressures never materialized and the bond markets were
off to the races.

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

THE DIVERSIFIED INCOME PORTFOLIO

The Diversified Income Portfolio is designed to give shareholders
broad exposure to the dynamics of the intermediate term bond market. This
goal is accomplished by applying a disciplined and systematic investment
process to actively manage a core portfolio of investment grade bonds and
notes from a wide range of taxable market sectors.

The Portfolio performed well in the volatile interest rate
environment, with the exception of the first quarter of 1996 when interest
rates reversed direction and began to rise. The Portfolio was positioned
with a higher level of interest rate sensitivity in order to capture
possible gains in anticipation of the Fed pushing rates down. When this
did not take place, the Portfolio lost ground as interest rates rose and
bond prices declined. The Portfolio was repositioned defensively as rates
continued to rise and we were able to recapture most of the initial under-
performance. The Portfolio's performance was enhanced during the past
fiscal year by exposure to the corporate and asset-backed markets. The
asset-backed market in particular performed extremely well as new issues
reached record levels and the buyer base for these securities widened,
allowing for the higher supply to be easily absorbed. The Portfolio's
exposure to the asset-backed market was 20% early in the fiscal year and
remained near that level until the third quarter of 1996 when the exposure
was lowered to below 10%. The allocation to this sector was reduced
primarily to capture the strong performance gained earlier in the year.
The corporate bond market also assisted the Portfolios' performance as
spreads against the Treasury market narrowed, reflecting both investors
satisfaction with the overall economic and credit outlook as well as their
need for yield enhanced returns. Corporate allocations have been increased
from near-market weightings earlier in the year to an approximately 6% over-
weighting by the end of the fiscal year. We believe that the favorable
environment in the corporate market for stable growth and low inflation
will continue.

The following graph compares the performance of The Diversified Income
Portfolio, the Lehman Intermediate Government/Corporate Index and the
Consumer Price Index ("CPI"), since the Portfolio's commencement of
operations on April 2, 1991.

[GRAPH]

COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT*

Fund LGIC Index CPI

Apr-91 9,650 10,000 10,000
Oct-91 10,314 10,791 10,180
Oct-92 11,302 11,870 10,506
Oct-93 12,318 13,050 10,800
Oct-94 12,031 12,798 11,081
Oct-95 13,524 14,403 11,391
Oct-96 14,225 15,240 11,733

Average Annual Total Return
---------------------------
1 YEAR 5 YEAR INCEPTION
------ ------ ---------
Fund 1.5% 5.9% 6.5%
Index 5.8% 7.1% 7.8%
CPI 3.0% 2.9% 2.9%

*Past performance is not necessarily indicative of future results. An
investment in the Portfolio 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. The values shown for the Portfolio
reflect the effect of the maximum sales load of 3.50% on a hypothetical
initial investment of $10,000 and with dividends reinvested. Returns are
higher due to the Adviser's maintenance of the Fund's expenses. See
Financial Highlights on pages 16 and 17.

THE MUNICIPAL INCOME PORTFOLIO

The Municipal Income Portfolio is an intermediate, high quality fund
designed to produce a high level of income which is exempt from federal
income tax 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.

Municipals continued to be relatively expensive to Treasury issues due
to the imbalance between supply and demand. We expect this imbalance to
ease somewhat in fiscal 1997 as the peak of the bond redemptions appears to
be behind us. This should lead to municipals under-performing until they
move back to the fair value range, again on a relative basis. As a result,
we have positioned the Portfolio in a slightly defensive position, using
both shorter maturity bonds and higher coupons. The shorter maturities we
bought decreased our duration exposure to 5.06 years, compared to 5.11 for
the Merrill Lynch Index. Our average maturity declined during the year to
6.3 years from 6.6 years as of October 31, 1995. In addition, the
Portfolio's coupon increased to 6.02% versus 5.53% for the Index. This
coupon differential is also defensive in nature because higher coupon
bonds, all else being equal, will have a smaller price reaction to a given
change in interest rates.

Another strategy we are currently utilizing takes advantage of the
positive slope of the municipal yield curve. We are looking to increase
the Portfolio's position in the 12 to 13 year maturity range. These
maturities offer the best roll down value as we approach another calendar
year end. The roll down value is the natural shortening of a bond over
time. As a bond due in 2008 is priced as a 12 year bond in 1996, it will
be priced as an 11 year bond in 1997. This difference represents a 0.5% to
1.0% improvement in relevant price. Our present goal is to have between 5
to 10% of the Portfolio in the 12 to 13 year maturity range.

The following graph compares the performance of The Municipal Income
Portfolio, the Merrill Lynch Intermediate Municipal Index, and the Consumer
Price Index ("CPI"), since the Portfolio's commencement of operations on
November 1, 1993.

[GRAPH]

COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT*

CPI Merrill Index RSMIP

10/31/93 $10,000 $10,000 $9,650
10/31/94 $10,260 $9,808 $9,356
10/31/95 $10,568 $10,882 $10,500
10/31/96 $10,885 $12,033 $10,945

Average Annual Total Return
---------------------------
1 YEAR INCEPTION
------ ---------
Fund 0.59% 3.05%
Index 5.78% 4.80%
CPI 3.00% 2.87%

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

December 14, 1996

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- --------------------------------------------------------------------------
INVESTMENTS/OCTOBER 31, 1996
(Showing Percentage of Total Value of Net Assets)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- --------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES - 11.8%
Advanta Mtge. Loan Trust, Ser. 1996-1 Class A6, 6.73%,
08/25/23...................................................... Aaa/AAA $ 300,000 $ 289,695
Federal National Mtge. Assoc., Ser. 1996-4 Class VC, 6.50%,
07/25/02...................................................... NR/NR 274,187 273,132
GE Cap. Mtge. Services, Inc., Ser. 1996HE2 Class A5, 7.94%,
06/25/14...................................................... Aaa/NR 600,000 618,168
Green Tree Financial Corp., Ser. 1995-2 Class A3, 7.45%,
06/15/26...................................................... Aaa/AAA 400,000 411,436
Green Tree Financial Corp., Ser. 1996-5 Class A4, 7.15%,
07/15/27...................................................... Aaa/AAA 750,000 770,501
MBNA Master Credit Card Trust, Ser. 1995F Class A, 6.60%,
01/15/03...................................................... Aaa/AAA 300,000 303,661
Residential Asset Securities Corp., Ser. 1995KS3, 8.00%,
10/25/24...................................................... Aaa/AAA 400,000 406,472
Resolution Trust Corp., Ser. 1994C2 Class B, 8.00%, 04/25/25.... NR/AA 250,000 257,392
The Money Store Home Equity Trust, Ser. 1992D2 Class A3,
7.55%, 01/15/18............................................... Aaa/AAA 396,477 406,480
-------------
TOTAL ASSET-BACKED SECURITIES (COST $3,674,517)................................................. 3,736,937
-------------

CORPORATE BONDS - 28.8%
ELECTRIC UTILITIES - 3.2%
Alabama Power Co., 7.00%, 01/01/03, Callable 01/01/98 @ 101.64.. A1/A+ 1,000,000 1,012,500
-------------

FINANCIAL - 21.7%
American Express Credit Corp., 8.50%, 06/15/99................... Aa3/A+ 350,000 369,688
Associates Corp. N.A., 6.75%, 08/01/01........................... Aa3/AA- 500,000 505,133
BankAmerica Corp., 6.75%, 09/15/05............................... A3/A- 250,000 246,250
Bear Stearns Co., 5.75%, 02/15/01................................ A2/A 500,000 484,375
Ford Capital B.V., 9.375%, 01/01/98.............................. A2/A 300,000 311,625
Heller Financial Corp., 7.875%, 11/01/99......................... A2/BBB+ 800,000 833,000
International Lease Fin., 6.125%, 11/01/99....................... A2/A+ 400,000 398,000
ITT Hartford, 6.375%, 11/01/02................................... A1/A+ 400,000 393,000
J.P. Morgan & Co., 7.625%, 09/15/04.............................. Aa2/AA+ 300,000 316,125
Lehman Brothers, Inc., 7.625%, 08/01/98.......................... A3/A 600,000 613,500
Mellon Bank N.A., 7.625%, 09/15/07............................... A2/A 500,000 521,250
Merrill Lynch & Co., Inc., 7.05%, 04/15/03....................... A1/A+ 200,000 200,750
Merrill Lynch & Co., Inc., 7.00%, 03/15/06....................... A1/A+ 600,000 600,750
Norwest Financial Inc., 6.37%, 11/15/01.......................... Aa3/AA- 500,000 499,095
Santander Financial Issuances Ltd., 7.875%, 04/15/05............. A1/A+ 300,000 315,375
USL Capital Corp., 5.79%, 01/23/01............................... A1/A+ 300,000 291,375
-------------
6,899,291
-------------
MANUFACTURING - 2.2%
Eaton Corp., 8.00%, 08/15/06..................................... A2/A 650,000 702,000
-------------

OIL, GAS & PETROLEUM - 1.7%
British Petroleum N.A., Inc., 8.875%, 12/01/97................... A1/AA- $ 200,000 $ 206,184
Societe Nationale Elf Aquitaine, 8.00%, 10/15/01................. Aa3/AA 300,000 319,500
-------------
525,684
-------------
TOTAL CORPORATE BONDS (COST $8,983,251)......................................................... 9,139,475
-------------

TIME DEPOSITS - 1.9%
Sanwa Bank Cayman Time Deposit, 5.68%, 11/01/96
(COST $605,563)................................................ NR/NR 605,563 605,563
-------------

U.S. GOVERNMENT AGENCY OBLIGATIONS** - 12.3%
FEDERAL HOME LOAN BANKS NOTES - 6.3%
Federal Home Loan Banks Notes, 6.73%, 12/30/99, Callable
12/30/96 @ 100................................................ NR/NR 1,000,000 1,004,380
Federal Home Loan Banks Notes, 6.90%, 08/27/03, Callable
11/27/96 @ 100................................................ NR/NR 500,000 501,730
Federal Home Loan Banks Notes, 7.50%, 09/30/03, Callable
09/30/98 @ 100................................................ NR/NR 475,000 481,727
-------------
1,987,837
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.8%
Federal Home Loan Mtge. Corp., 8.60%, 01/26/00................... NR/NR 400,000 402,003
Federal Home Loan Mtge. Corp., 7.05%, 05/15/02................... NR/NR 500,000 502,135
-------------
904,138
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES - 3.2%
Federal National Mtge. Assoc., 7.50%, 08/25/05................... NR/NR 300,000 302,421
Federal National Mtge. Assoc., 6.71%, 02/13/06................... NR/NR 300,000 295,119
Federal National Mtge. Assoc., 7.58%, 06/02/06................... NR/NR 400,000 410,509
-------------
1,008,049
-------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (COST $3,850,277)...................................... 3,900,024
-------------

U.S. TREASURY OBLIGATIONS** - 44.5%
U.S. TREASURY BONDS - 2.7%
U.S. Treasury Bonds, 11.75%, 02/15/10............................ NR/NR 650,000 870,974
-------------

U.S. TREASURY NOTES - 41.8%
U.S. Treasury Notes, 7.50%, 01/31/97............................. NR/NR 500,000 502,715
U.S. Treasury Notes, 5.375%, 11/30/97............................ NR/NR 1,150,000 1,147,734
U.S. Treasury Notes, 6.125%, 05/15/98............................ NR/NR 400,000 402,692
U.S. Treasury Notes, 6.375%, 01/15/99............................ NR/NR 250,000 253,112
U.S. Treasury Notes, 6.00%, 08/15/99............................. NR/NR 3,000,000 3,008,790
U.S. Treasury Notes, 6.00%, 10/15/99............................. NR/NR 250,000 250,860
U.S. Treasury Notes, 6.375%, 01/15/00............................ NR/NR 1,400,000 1,418,186
U.S. Treasury Notes, 6.75%, 04/30/00............................. NR/NR $ 1,250,000 $ 1,279,175
U.S. Treasury Notes, 6.25%, 05/31/00............................. NR/NR 300,000 302,364
U.S. Treasury Notes, 8.75%, 08/15/00............................. NR/NR 150,000 163,666
U.S. Treasury Notes, 6.25%, 08/31/00............................. NR/NR 500,000 503,660
U.S. Treasury Notes, 6.125%, 09/30/00............................ NR/NR 200,000 200,638
U.S. Treasury Notes, 7.88%, 08/15/01............................. NR/NR 275,000 295,152
U.S. Treasury Notes, 6.50%, 08/31/01............................. NR/NR 500,000 508,105
U.S. Treasury Notes, 6.375%, 08/15/02............................ NR/NR 650,000 657,495
U.S. Treasury Notes, 6.25%, 02/15/03............................. NR/NR 350,000 351,358
U.S. Treasury Notes, 5.875%, 02/15/04............................ NR/NR 250,000 244,392
U.S. Treasury Notes, 7.25%, 05/15/04............................. NR/NR 600,000 634,860
U.S. Treasury Notes, 6.50%, 08/15/05............................. NR/NR 900,000 909,522
U.S. Treasury Notes, 6.875%, 05/15/06............................ NR/NR 250,000 258,935
-------------
13,293,411
-------------

TOTAL U.S. TREASURY OBLIGATIONS (COST $14,120,674).............................................. 14,164,385
-------------

TOTAL INVESTMENTS (COST $31,234,282)+ - 99.3%................................................... 31,546,384

OTHER ASSETS AND LIABILITIES, NET - 0.7%........................................................ 230,687
-------------

NET ASSETS - 100.0%............................................................................. $ 31,777,071
=============
</TABLE>

* Although certain securities are not rated (NR) by either Moody's or S&P,
they have been determined to be of comparable quality to investment grade
securities by the Portfolio Advisor.
** While not rated by Moody's or S&P, U.S. Government Securities are
considered to be of the highest quality, comparable to AAA.
+ The cost for federal income tax purposes was $31,251,647. At October 31,
1996, net unrealized appreciation was $294,737. This consisted of
aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $441,112 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $146,375.

The accompanying notes are an integral part of the financial statements.

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------
INVESTMENTS/OCTOBER 31, 1996
(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 - 97.6%
ALASKA - 5.8%
Alaska Municipal Bond Bank Auth. Ref. Rev., Ser. 1993C,
4.90%, 10/01/03............................................... A/A $ 400,000 $ 396,000
Seward, AK Rev. (Alaska Sealife Center Proj.), Ser. 1996,
6.50%, 10/01/01............................................... NR/NR 560,000 562,100
-------------
958,100
-------------
CALIFORNIA - 11.6%
California State Veterans Bonds, Ser. AY, 6.90%, 04/01/01........ Aa/AA 250,000 252,390
California State Veterans Bonds, Ser. 1989, 7.00%, 04/01/03...... Aa/AA 500,000 504,775
Los Angeles County, CA Public Works Fin. Auth. Rev. (LA
County Park & Open Space District), Ser. 1994A, 5.63%,
10/01/03....................................................... Aa/AA 500,000 521,875
Los Angeles, CA Dept. of Water and Power Electric Plant Rev.,
5.75%, 11/15/02................................................ Aa/AA 300,000 316,875
Redev. Agency of San Francisco, CA Multi-Family Housing Ref.
Rev. (GNMA South Beach Proj.), Ser. 1994, 4.75%, 09/01/02...... Aaa/NR 345,000 339,394
-------------
1,935,309
-------------
COLORADO - 3.1%
Aurora, CO Cert. of Participation Lease Ref. Rev., 5.85%,
12/01/02...................................................... A/A 500,000 518,750
-------------

DELAWARE - 23.1%
Bethany Beach, DE, 9.75%, 11/01/07.............................. Aaa/AAA 160,000 218,600
Bethany Beach, DE, 9.75%, 11/01/08.............................. Aaa/AAA 180,000 250,425
Delaware State Economic Dev. Auth. Osteopatic Hosp. Assoc.,
6.00%, 01/01/03............................................... Aaa/NR 500,000 514,375
Delaware State Economic Dev. Auth. Rev. (Delmarva Power
& Light), 7.30%, 09/01/15..................................... Aaa/AAA 100,000 108,500
Delaware State Housing Auth. Multi-Family Mtge. Ref. Rev.,
6.30%, 07/01/98............................................... A1/A+ 100,000 100,625
Delaware State Housing Auth. Multi-Family Mtge. Rev., Ser.
1992D, 6.35%, 07/01/03........................................ A1/NR 100,000 102,875
Delaware State Housing Auth. Multi-Family Mtge. Ref. Rev.,
Ser. C, 7.25%, 01/01/07....................................... A1/A 235,000 247,337
Delaware State Housing Auth. Single Family Mtge. Rev.,
Ser. 1993, Subser. A, 5.05%, 07/01/05......................... Aaa/AAA 315,000 307,519
Delaware State Housing Auth. Single Family Mtge. Rev.,
Ser. 1993, Subser. A1, 5.15%, 01/01/06........................ Aaa/AAA 180,000 176,850
Delaware State Housing Auth. Sr. Home Mtge. Rev. Subser.
1991, 6.40%, 12/01/02......................................... A1/NR 45,000 46,181
Delaware State Solid Waste Auth. Sys. Rev., 5.80%, 07/01/01..... A/A $ 500,000 $ 519,375
Delaware Trans. Auth. Trans. Sys. Jr. Lien Rev., 5.00%,
07/01/06...................................................... Aaa/AAA 500,000 493,125
Delaware Trans. Auth. Trans. Sys. Jr. Lien Rev., 7.75%,
07/01/08, Prerefunded 07/01/98 @ 101.50....................... Aaa/AAA 250,000 268,438
Delaware Trans. Auth. Trans. Sys. Sr. Lien Rev., 6.75%,
07/01/98...................................................... A1/AA- 115,000 119,744
Delaware Trans. Auth. Trans. Sys. Sr. Lien Rev., 5.88%,
07/01/00...................................................... A1/AA- 350,000 365,750
-------------
3,839,719
-------------
HAWAII - 4.6%
Hawaii State Gen. Oblig. Rev., Ser. BW, 6.20%, 03/01/05......... Aa/AA 700,000 758,625
-------------

MISSISSIPPI - 2.4%
Medical Center Educ. Bldg. Corp., (Univ. of Mississippi
Medical Center Proj.), Ser. 1993, 5.40%, 12/01/05............. NR/A- 400,000 396,500
-------------

NEVADA - 2.3%
Nevada State Gen. Oblig. Rev., Ser. B, 4.38%, 08/01/03.......... Aa/AA 400,000 387,500
-------------

NEW JERSEY - 3.1%
New Jersey Econ. Dev. Auth. School Rev. (Blair Academy
1995 Proj.), Ser. B, 6.00%, 09/01/07.......................... A/NR 500,000 515,000
-------------

PENNSYLVANIA - 17.0%
Lancaster County, PA Solid Waste Auth. Rev., Ser. A, 6.15%,
12/15/98...................................................... A/BBB 100,000 101,250
Lancaster County, PA Solid Waste Auth. Rev., 7.75%, 12/15/04.... A/BBB 225,000 238,219
Pennsylvania State Higher Educ. Fac. Auth. College & Univ.
Rev. (Philadelphia College of Osteopathic Medicine), Ser.
1993, 5.25%, 12/01/07......................................... NR/AAA 150,000 148,875
Pennsylvania State Higher Educ. Fac. Auth. College & Univ.
Rev. (Trustees Univ. of Pennsylvania), Ser. A, 6.65%,
01/01/17, Prerefunded 01/01/97 @ 100.......................... Aa/AA 550,000 552,502
Pennsylvania State Ref. Rev. First Ser., 5.30%, 05/01/06........ A1/AA- 500,000 508,125
Philadelphia, PA Municipal Auth. Rev. (Philadelphia Airport),
7.87%, 07/15/17, Prerefunded 07/15/97 @ 102................... Aaa/AAA 275,000 288,431
Philadelphia, PA Redev. Auth. Home Imp. Loan Rev., 7.38%,
06/01/03...................................................... A/A 40,000 40,650
York County, PA Ind. Auth. Personal Care Fac., 9.50%, 10/01/19,
Prerefunded 10/01/02 @ 100.................................... NR/NR 335,000 416,237
York County, PA Solid Waste Refuse Auth. Ind. Dev. Rev.
(Resource Recovery Proj.), Ser. 1985, 8.20%, 12/01/14......... A/AA- 500,000 532,770
-------------
2,827,059
-------------
TEXAS - 1.8%
Austin, TX Gen. Oblig. Rev., 4.75%, 09/01/09.................... Aa/AA $ 315,000 $ 294,131
-------------

UTAH - 3.1%
Salt Lake City, UT Municipal Bldg. Auth. Lease Rev., Ser.
1994A, 5.65%, 10/01/03........................................ Aaa/AAA 500,000 520,000
-------------

VERMONT - 5.1%
Vermont Municipal Bond Bank Rev., Ser. 2, 6.00%, 12/01/05....... Aaa/AAA 790,000 850,238
-------------

VIRGINIA - 4.7%
Virginia Educ. Loan Auth. Rev. (Student Loan Prog.), Ser.
1994B, 5.15%, 03/01/04........................................ Aaa/NR 260,000 263,250
Virginia State Housing Dev. Auth. Commonwealth Mtg. Rev.,
Ser. 1992C Subser. C8, 5.80%, 07/01/04........................ Aa/AA+ 500,000 514,375
-------------
777,625
-------------
WASHINGTON - 5.2%
Clark County, WA Public Utility Dist. No. 1 Generating
Sys. Rev., 6.00%, 01/01/06.................................... Aaa/AAA 350,000 371,438
Washington State Public Power Supply Sys. Ref. Rev. (Nuclear
Proj. No. 3), Ser. 1993C, 5.10%, 07/01/07..................... Aa/AA 500,000 485,625
-------------
857,063
-------------
WEST VIRGINIA - 1.8%
Oak Hill, WV Ind. Dev. Ref. Rev. (Fayette Plaza Proj.),
Ser. 1991A, 4.95%, 10/01/09................................... NR/AA- 300,000 302,625
-------------

WISCONSIN - 2.9%
Appleton, WI Area School Dist., 5.00%, 04/01/11................. Aa/NR 505,000 485,431
-------------

TOTAL MUNICIPAL BONDS (COST $16,106,825) ....................................................... 16,223,675
-------------

TAX-EXEMPT MUTUAL FUNDS - 1.1%
PNC Municipal Cash Tax-Exempt Money Market Fund
(COST $181,043)............................................... NR/NR 181,043 181,043
-------------

TOTAL INVESTMENTS (COST $16,287,868)+ - 98.7%................................................... $ 16,404,718
-------------
OTHER ASSETS AND LIABILITIES, NET - 1.3%........................................................ 213,874
-------------
NET ASSETS - 100.0%............................................................................. $ 16,618,592
=============
</TABLE>

* Although certain securities are not rated (NR) by either Moody's or S&P,
they have been determined to be of comparable quality to investment grade
securities by the Portfolio Advisor.
+ Cost for federal income tax purposes. At October 31, 1996, net unrealized
appreciation was $116,850. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $171,949 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over market
value of $55,099.

The accompanying notes are an integral part of the financial statements.

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------

STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1996

<TABLE>
<CAPTION>
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ----------
<S> <C> <C>
ASSETS:
Investments in securities, at market (identified cost $31,234,282 and
$16,287,868, respectively) (Note 2) ..................................... $ 31,546,384 $ 16,404,718
Receivable for investment securities sold................................. 501,440 -
Receivable for Fund shares sold .......................................... 3,231 -
Interest receivable ...................................................... 469,734 262,757
Deferred organization costs (Note 2) ..................................... - 34,054
Other assets ............................................................. 495 254
------------- --------------

Total assets ............................................................ 32,521,284 16,701,783
------------- --------------

LIABILITIES:
Dividends payable ........................................................ 157,478 61,768
Payable for investment securities purchased............................... 499,915 -
Payable for Fund shares redeemed ......................................... 39,227 -
Due to Adviser (Note 4) .................................................. 684 -
Other accrued expenses (Note 4) .......................................... 46,909 21,423
------------- --------------

Total liabilities ....................................................... 744,213 83,191
------------- --------------

NET ASSETS, at market value .............................................. $ 31,777,071 $ 16,618,592

NET ASSETS CONSIST OF:
Shares of beneficial interest ............................................ $ 24,538 $ 13,340
Additional paid-in capital ............................................... 31,539,886 16,560,216
Net unrealized appreciation of investments ............................... 312,102 116,850
Accumulated net realized loss ............................................ (99,455) (71,814)
------------- --------------

NET ASSETS, for 2,453,780 and 1,334,009 shares outstanding, respectively.. $ 31,777,071 $ 16,618,592
============= ==============

NET ASSET VALUE and redemption price per share ($31,777,071 / 2,453,780
and $16,618,592 / 1,334,009 outstanding shares of beneficial interest,
$0.01 par value, respectively) .......................................... $12.95 $12.46
====== ======

Maximum offering price per share (100/96.5 of $12.95 and 100/96.5
of $12.46, respectively) ................................................ $13.42 $12.91
====== ======
</TABLE>

<PAGE>

STATEMENTS OF OPERATIONS
For the Fiscal Year Ended October 31, 1996
<TABLE>
<CAPTION>
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ----------
<S> <C> <C>
INTEREST INCOME ......................................................... $ 2,207,502 $ 865,331
------------- --------------

EXPENSES:
Advisory fee (Note 4) ................................................... 164,315 81,460
Administration fee (Note 4) ............................................. 26,291 13,428
Accounting fee (Note 4) ................................................. 50,000 50,000
Distribution expenses (Note 4) .......................................... 28,344 19,949
Trustees' fees and expenses (Note 4) .................................... 5,625 5,625
Amortization of organizational expenses (Note 2) ........................ 7,927 18,106
Registration fees ....................................................... 17,167 12,166
Reports to shareholders ................................................. 10,925 5,834
Legal ................................................................... 11,289 5,298
Audit ................................................................... 26,717 13,283
Other ................................................................... 9,483 5,605
------------- --------------

Total expenses before fee waivers ...................................... 358,083 230,754
Advisory fee waived (Note 4).......................................... (144,473) (81,460)
Administration fee waived (Note 4).................................... - (13,428)
Accounting fee waived (Note 4)........................................ - (9,981)
------------- --------------

Total expenses, net ................................................... 213,610 125,885
------------- --------------

Net investment income.................................................... 1,993,892 739,446
------------- --------------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain (loss) on investment transactions..................... 338,775 (20,412)
Net unrealized depreciation of investments during the year.............. (746,222) (24,225)
------------- --------------

Net loss on investments................................................. (407,447) (44,637)
------------- --------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $ 1,586,445 $ 694,809
============= ==============
</TABLE>

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ----------
<S> <C> <C>
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.................................................... $ 1,993,892 $ 739,446
Net realized gain (loss) on investment transactions..................... 338,775 (20,412)
Net unrealized depreciation of investments during the year.............. (746,222) (24,225)
------------- --------------
Net increase in net assets resulting from operations .................... 1,586,445 694,809
------------- --------------
Distributions to shareholders from:
Net investment income ($0.78 and $0.55 per share, respectively)......... (1,993,892) (739,446)
------------- --------------
Increase (decrease) in net assets from Fund share transactions (Note 5)... (29,412) 92,949
------------- --------------
Total increase (decrease) in net assets................................. (436,859) 48,312

NET ASSETS:
Beginning of year ....................................................... 32,213,930 16,570,280
------------- --------------
End of year.............................................................. $ 31,777,071 $ 16,618,592
============= ==============

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
============= ==============
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
FINANCIAL HIGHLIGHTS

The following tables include selected data for a share outstanding throughout
each year 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 FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
DIVERSIFIED INCOME PORTFOLIO

NET ASSET VALUE - BEGINNING OF YEAR ............... $13.08 $12.42 $13.48 $13.20 $12.86
------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment income............................ 0.78 0.83 0.71 0.76 0.83
Net realized and unrealized gain (loss) on
investments .................................. (0.13) 0.66 (1.02) 0.39 0.37
------ ------ ------ ------ ------
Total from investment operations.............. 0.65 1.49 (0.31) 1.15 1.20
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income....................... (0.78) (0.83) (0.71) (0.76) (0.83)
From net realized gain on investments............ - - (0.04) (0.11) (0.03)
------ ------ ------ ------ ------
Total distributions .......................... (0.78) (0.83) (0.75) (0.87) (0.86)
------ ------ ------ ------ ------

NET ASSET VALUE - END OF YEAR .................... $12.95 $13.08 $12.42 $13.48 $13.20
====== ====== ====== ====== ======

TOTAL RETURN* .................................... 5.18% 12.41% (2.33)% 9.00% 9.58%

RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses + ...................................... 0.65% 0.65% 0.65% 0.65% 0.65%
Net investment income............................ 6.07% 6.56% 5.53% 5.65% 6.33%
Portfolio turnover rate .......................... 85.77% 116.40% 43.77% 24.22% 27.37%
Net assets at end of year (000 omitted) .......... $31,777 $32,214 $31,721 $40,971 $30,152

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
MUNICIPAL INCOME PORTFOLIO

NET ASSET VALUE - BEGINNING OF YEAR............... $12.49 $11.64 $12.50
------ ------ ------

INVESTMENT OPERATIONS:
Net investment income............................ 0.55 0.54 0.49
Net realized and unrealized gain (loss) on
investments................................... (0.03) 0.85 (0.86)
------ ------ ------
Total from investment operations.............. 0.52 1.39 (0.37)
------ ------ ------

DISTRIBUTIONS:
From net investment income....................... (0.55) (0.54) (0.49)
------ ------ ------

NET ASSET VALUE - END OF YEAR..................... $12.46 $12.49 $11.64
====== ====== ======

TOTAL RETURN*..................................... 4.24% 12.23% (3.05)%

RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ++...................................... 0.75% 0.75% 0.75%
Net investment income............................ 4.41% 4.50% 4.13%
Portfolio turnover rate........................... 15.91% 42.08% 21.95%
Net assets at end of year (000 omitted)........... $16,619 $16,570 $14,283

</TABLE>

* These results do not include the sales load. If the sales load had been
included, the returns would have been lower.
+ Wilmington Trust Company ("WTC") waived a portion of its advisory fee for
the fiscal years ended October 31, 1996, 1995, 1994, 1993 and 1992, and
Rodney Square Management Corporation ("RSMC") waived a portion of its
accounting services fee for the fiscal year-ended October 31, 1992. If
these expenses had been incurred by the Portfolio, the annualized ratio
of expenses to average daily net assets for the fiscal years ended
October 31, 1996, 1995, 1994, 1993 and 1992, would have been 1.09%, 1.14%,
1.05%, 1.06% and 1.24%, respectively.
++ WTC waived its entire advisory fee and RSMC waived a portion of its
administration and accounting services fees for the fiscal years ended
October 31, 1996, 1995, and 1994. If these expenses had been incurred by
the Portfolio, the annualized ratio of expenses to average daily net
assets for the fiscal years ended October 31, 1996, 1995 and 1994, would
have been 1.37%, 1.45% and 1.62%, respectively.

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------

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 using the last reported sales price
in the principal market where the securities are traded or if no sales
are reported, the last reported bid price. 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 continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 and to distribute all
of its taxable and tax-exempt income to its shareholders. Therefore, no
provision for federal income tax has been made. At October 31, 1996,
the Diversified Income Portfolio and the Municipal Income Portfolio had
net tax basis capital loss carryforwards to offset future capital gains
of approximately $82,000 and $72,000, respectively, which will expire
as follows:

CAPITAL LOSS EXPIRATION
CARRYFORWARD DATE
------------ ----------

Diversified Income Portfolio.... $ 82,000 10/31/03

Municipal Income Portfolio...... 6,000 10/31/02
45,000 10/31/03
21,000 10/31/04

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
realized gains on investments, if any, by each Portfolio will be made
annually in December.

DEFERRED ORGANIZATION COSTS. Costs incurred by the Municipal Income
Portfolio 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 the
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 affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.

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 fiscal year ended October 31, 1996,
purchases and sales of investment securities (excluding short-term
investments) aggregated as follows:

DIVERSIFIED MUNICIPAL
INCOME INCOME
----------- ----------
Purchases.............. $28,311,261 $3,627,182
Sales.................. 26,521,158 2,570,404

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 1998. For the
fiscal year ending October 31, 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.

The following table summarizes the advisory fees for the fiscal year
ended October 31, 1996:

GROSS ADVISORY ADVISORY
FEE FEE WAIVER
-------------- ----------
Diversified Income Portfolio.... $ 164,315 $ 144,473
Municipal Income Portfolio...... 81,460 81,460

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 fiscal year ended October 31, 1996 amounted to
$26,291. RSMC waived its administration fee for the Municipal Income
Portfolio for the fiscal year ended October 31, 1996 amounting to
$13,428. 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
Plans") pursuant to Rule 12b-1 under the 1940 Act to allow each of the
Portfolios 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 Portfolio 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 fiscal year ended October 31, 1996, such
expenses amounted to $28,344 for the Diversified Income Portfolio and
$19,949 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 fiscal year
ended October 31, 1996, RSMC's fees for accounting services amounted to
$50,000 per Portfolio. RSMC waived $9,981 of the accounting services
fee with respect to the Municipal Income Portfolio. 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 fiscal year ended October 31, 1996 amounted to $5,625
per Portfolio.

5.FUND SHARES. At October 31, 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 FISCAL YEAR FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1996 ENDED OCTOBER 31,1995
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold........... 332,967 $4,362,435 353,623 $4,500,647
Shares issued to
shareholders in
reinvestment of
distributions........ 66,445 859,172 64,094 813,935
Shares redeemed....... (408,911) (5,251,019) (508,424) (6,445,608)
--------- ---------- --------- -----------
Net decrease.......... (9,499) $(29,412) (90,707) $(1,131,026)
========== ===========
Shares outstanding:
Beginning of year.... 2,463,279 2,553,986
--------- ---------
End of year.......... 2,453,780 2,463,279
========= =========

MUNICIPAL INCOME PORTFOLIO

FOR THE FISCAL YEAR FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1996 ENDED OCTOBER 31,1995
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold........... 141,627 $1,762,290 226,538 $2,755,791
Shares issued to
shareholders in
reinvestment of
distributions........ 45,629 568,432 45,994 552,423
Shares redeemed....... (180,088) (2,237,773) (172,561) (2,075,689)
--------- ---------- --------- -----------
Net increase.......... 7,168 $92,949 99,971 $1,232,525
========== ===========
Shares outstanding:
Beginning of year.... 1,326,841 1,226,870
--------- ---------
End of year.......... 1,334,009 1,326,841
========= =========

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- ---------------------------------------------------------------------------

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Shareholders and Trustees of The Rodney Square Strategic Fixed-
Income Fund:

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Rodney Square Strategic
Fixed-Income Fund (comprising, respectively, The Diversified Income and The
Municipal Income Portfolios) as of October 31, 1996, and the related
statements of operations for the year then ended, the statements of changes
in net assets for each of the two years in the period then ended, and
financial highlights for each of the five years in the period then ended
for the Diversified Income Portfolio and for each of the three years in the
period then ended for the Municipal Income Portfolio. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1996, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of each of the respective portfolios constituting The Rodney Square
Strategic Fixed- Income Fund at October 31, 1996, the results of their
operations for the year then ended, the changes in their net assets for
each of the two years in the period then ended, and financial highlights
for each of the five years in the period then ended for the Diversified
Income Portfolio and for each of the three years in the period then ended
for the Municipal Income Portfolio, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Baltimore, Maryland
November 27, 1996

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
TAX INFORMATION
- ------------------------------------------------------------------------

Pursuant to Section 852 of the Internal Revenue Code of 1986, the
Municipal Income Portfolio designates $730,747 as tax-exempt dividends.

In January 1997 shareholders of the Fund will receive Federal income tax
information on all distributions paid to their accounts in the calendar
year 1996, including any distributions paid between October 31, 1996 and
December 31, 1996.

<PAGE>

[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
Carl M. Rizzo, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, 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.

RS03 1/97

[Right Section]

the RODNEY SQUARE
STRATEGIC
FIXED-INCOME
FUND

[GRAPHIC - RSMC Logo]

ANNUAL REPORT
OCTOBER 31, 1996