RODNEY SQUARE STRATEGIC FIXED INCOME FUND, 485BPOS, 1997-12-24

RODNEY SQUARE STRATEGIC FIXED INCOME FUND
485BPOS, 1997-12-24

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Filed with the Securities and Exchange Commission on December 24, 1997

File No. 33-5501
File No. 811-4663

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. __

Post-Effective Amendment No. 17 X

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 19 X

THE RODNEY SQUARE STRATEGIC FIXED-INCOME
(Fomerly The Rodney Square Benchmark U.S. Treasury Fund)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
RODNEY SQUARE NORTH, 1100 NORTH MARKET STREET, WILMINGTON, DE 19890-0001
(Address of Principal Executive Offices (Zip Code)

Registrant's Telephone Number, including Area Code: (302) 651-8280

Carl M. Rizzo, Esquire
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, DE 19890-0001
(Name and Address of Agent for Service)

It is proposed that this filing will become effective

__ immediately upon filing pursuant to paragraph (b)

x on January 2, 1998 pursuant to paragraph (b)
-- ---------------
__ 60 days after filing pursuant to paragraph (a)(1)

__ on _________ pursuant to paragraph (a)(1)

__ 75 days after filing pursuant to paragraph (a)(2)

on ________________ pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>

CROSS-REFERENCE SHEET

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A

PART A - PROSPECTUS
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Expense Table
Questions and Answers about the
Portfolios
3. Condensed Financial Financial Highlights
Information Performance Information
4. General Description Questions and Answers about the
of Registrant Portfolios
Investment Objectives and Policies
Description of the Fund
Appendix
5. Management of the Questions and Answers about the
Fund Portfolios
Management of the Fund
5A. Management's Discussion Contained in the Fund's Annual Report,
of Fund Performance President's Letter
6. Capital Stock and Questions and Answers about the
Other Securities Portfolios
Dividends, Other Distributions
and Taxes
Description of the Fund
7. Purchase of Securities Questions and Answers about the
Being Offered Portfolios
How Net Asset Value is Determined
Purchase of Shares
Management of the Fund
8. Redemption or Questions and Answers about the
Repurchase Portfolios
Shareholder Accounts
Redemption of Shares
Exchange of Shares
9. Pending Legal Not Applicable
Proceedings
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART B - STATEMENT OF ADDITIONAL INFORMATION

CAPTION IN STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Description of Fund
History
13. Investment Objectives Investment Policies
and Policies Special Considerations
Investment Limitations
Portfolio Turnover
Appendix A
14. Management of the Trustees and Officers
Registrant
15. Control Persons and Trustees and Officers
Principal Holders Other Information
16. Investment Advisory and Wilmington Trust Company
Other Services Investment Advisory Services
Administration, Accounting and
Distribution Agreements
Other Information

17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Redemptions
Securities Description of the Fund
19. Purchase, Redemption and Redemptions
Pricing of Securities Net Asset Value and Dividends
Being Offered
20. Tax Status Taxes
21. Underwriters Administration, Accounting and
Distribution Agreements
22. Calculation of Performance Information
Performance
23. Financial Statements Financial Statements

<PAGE>

THE RODNEY SQUARE
STRATEGIC FIXED-INCOME
FUND
The Rodney Square Strategic Fixed-Income Fund (the
"Fund") consists of two separate portfolios ("Portfolios"),
The Rodney Square Diversified Income Portfolio (the
"Diversified Income Portfolio") and The Rodney Square
Municipal Income Portfolio (the "Municipal Income
Portfolio"). The Diversified Income Portfolio seeks high
total return, consistent with high current income, by
investing principally in various types of investment grade
fixed-income securities. The Municipal Income Portfolio
seeks a high level of income exempt from federal income tax
consistent with the preservation of capital.
PROSPECTUS
JANUARY 2, 1998

This Prospectus sets forth information about the Fund
that you should know before investing. Please read and
retain this document for future reference. A Statement of
Additional Information (dated January 2, 1998) containing
additional information about the Fund has been filed with
the Securities and Exchange Commission and, as amended or
supplemented from time to time, is incorporated by reference
herein. A copy of the Statement of Additional Information
including the Fund's most recent Annual Report to
Shareholders may be obtained, without charge, from certain
institutions such as banks or broker-dealers that have
entered into servicing agreements ("Service Organizations")
with Rodney Square Distributors, Inc., by calling the number
below, or by writing to Rodney Square Distributors, Inc. at
the address noted on the back cover of this Prospectus.
Rodney Square Distributors, Inc. is a wholly owned
subsidiary of Wilmington Trust Company, a bank chartered in
the State of Delaware.

- ------------------------------------------------------------
FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING
AN ACCOUNT, PLEASE CALL:
NATIONWIDE (800) 336-9970
- -------------------------------------------------------------
Shares of the Portfolios are not deposits or obligations
of, or guaranteed by, Wilmington Trust Company, nor are the
shares insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

- ------------------------------------------------------------
EXPENSE TABLE
- ------------------------------------------------------------

DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
--------- ----------
SHAREHOLDER TRANSACTION COSTS*
Maximum sales load on purchases of shares
(as a percentage of public offering price) 3.50% 3.50%
----- -----
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fee (after waiver)** 0.13% 0.00%
12b-1 Fee*** 0.08% 0.11%
Other Expenses**:
Administration and Accounting Services
Expenses (after waiver) 0.23% 0.09%
Other Operating Expenses 0.31% 0.55%
----- -----
Total Other Expenses 0.54% 0.64%
----- -----
Total Operating Expenses (after waiver) 0.75% 0.75%
===== =====

EXAMPLE****
You would pay the following expenses on a $1,000 investment
in each Portfolio assuming (1) 5% annual return and (2)
redemption at the end of each time period:
One year $42 $42
Three years 58 58
Five years 75 75
Ten years 125 125

* Wilmington Trust Company ("WTC"), the Fund's Investment
Adviser, and Service Organizations may charge their
clients a fee for providing administrative or other
services in connection with investments in Fund shares.
(See "Purchase of Shares" for additional information
concerning volume reductions, sales load waivers and
reduced sales load purchase plans.)
**WTC waived a portion of its advisory fee with respect to
the Diversified Income Portfolio during the fiscal year
ended October 31, 1997. Without such waiver, the
Advisory Fee and Total Operating Expenses would have been
0.50% and 1.12%, respectively, of the Portfolio's average
daily net assets. WTC has undertaken to waive all or a
portion of its advisory fee or reimburse the Diversified
Income Portfolio monthly to the extent that the
Portfolio's operating expenses (excluding taxes,
extraordinary expenses, brokerage commissions and
interest) exceed an annual rate of 0.75% through
February, 1999. (See "Management of the Fund " for
additional information.)
WTC waived all of its advisory fee and Rodney Square
Management Corporation ("RSMC") waived a portion of its
administration and accounting services fee with respect
to the Municipal Income Portfolio during the fiscal year
ended October 31, 1997. Without such waivers, the
Advisory Fee, Administration and Accounting Services
Expenses, Total Other Expenses, and Total Operating
Expenses would have been 0.50%, 0.37%, 0.92%, and 1.52%,
respectively, of the Portfolio's average daily net
assets. WTC has undertaken to waive all or a portion of
its advisory fee and RSMC has agreed to waive a portion
of its administration and accounting services fees with
respect to the Municipal Income Portfolio, to the extent
the Portfolio's operating expenses (excluding taxes,
extraordinary expenses, brokerage commissions and
interest) exceed an annual rate of 0.75% through
February, 1999. (See "Management of the Fund" for
additional information.)
*** Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities
Dealers, Inc. rules regarding investment companies.
**** The assumption in the Example of a 5% annual return
is required by regulations of the Securities and Exchange
Commission applicable to all mutual funds; the assumed 5%
annual return is not a prediction of, and does not
represent, either Portfolio's projected or actual
performance. In the Example, it is assumed that the
investor was subject to the maximum sales load (3.50%) on
his or her $1,000 investment.

The purpose of the preceding table is solely to aid
shareholders and prospective investors in understanding the
various expenses that investors in the Portfolios will bear
directly or indirectly.
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES
INCURRED AND RETURNS MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
- -------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------

The following tables include selected per share data and
other performance information for each Portfolio throughout
each period derived from the audited financial statements of
the Rodney Square Strategic Fixed-Income Fund. They should
be read in conjunction with the Fund's financial statements
and notes thereto appearing in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1997,
which is included, together with the auditor's unqualified
report, as part of the Fund's Statement of Additional
Information.
<TABLE>
<CAPTION>
APRIL 2, 1991
(COMMENCEMENT OF
OPERATIONS) TO
FOR THE FISCAL YEARS ENDED OCTOBER 31, OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
DIVERSIFIED INCOME PORTFOLIO
NET ASSET VALUE -- BEGINNING OF PERIOD $12.95 $13.08 $12.42 $13.48 $13.20 $12.86 $12.50
------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment income...................... 0.77 0.78 0.83 0.71 0.76 0.83 0.48
Net realized and unrealized gain (loss) on
investments................................ 0.12 (0.13) 0.66 (1.02) 0.39 0.37 0.36
------ ------ ------ ------ ------ ------ -----
Total from investment operations.......... 0.89 0.65 1.49 (0.31) 1.15 1.20 0.84
------ ------ ------ ------ ------ ------ -----
Distributions:
From net investment income................. (0.77) (0.78) (0.83) (0.71) (0.76) (0.83) (0.48)
From net realized gain on investments...... -- -- -- (0.04) (0.11) (0.03) --
------ ------ ------ ------ ------ ------ -----
Total distributions....................... (0.77) (0.78) (0.83) (0.75) (0.87) (0.86) (0.48)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE -- END OF PERIOD........... $13.07 $12.95 $13.08 $12.42 $13.48 $13.20 $12.86
====== ====== ====== ====== ====== ====== ======
Total Return**............................. 7.13% 5.18% 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% 0.65% 0.89%*
Net investment income...................... 5.98% 6.07% 6.56% 5.53% 5.65% 6.33% 6.64%*
Portfolio turnover rate.................... 83.54% 85.77% 116.40% 43.77% 24.22% 27.37% 78.45%*
Net assets at end of period (000 omitted).. $31,456 $31,777 $32,214 $31,721 $40,971 $30,152 $24,171
Senior Securities:
Amount of reverse repurchase agreements out-
standing at end of period (in thousands).. $0 $0 $0 $0 $0 $0 $0
Average daily amount of reverse repurchase
agreements outstanding during the period
(in thousands)............................ $0 $0 $0 $0 $0 $0 $162
Average daily number of shares outstanding
during the period (in thousands).......... 2,441 2,545 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 $0.00 $0.13
</TABLE>

FOR THE FISCAL YEARS ENDED
OCTOBER 31,
1997 1996 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
MUNICIPAL INCOME PORTFOLIO

NET ASSET VALUE -- BEGINNING OF YEAR $12.46 $12.49 $11.64 $12.50
------ ------ ------ ------
Investment Operations:
Net investment income 0.55 0.55 0.54 0.49
Net realized and unrealized gain (loss)
on investments 0.28 (0.03) 0.85 (0.86)
------ ------- ------ ------
Total from investment operations 0.83 0.52 1.39 (0.37)
------ ------- ------ ------
Distributions:
From net investment income (0.55) (0.55) (0.54) (0.49)
------ ------- ------ ------
NET ASSET VALUE -- END OF YEAR $12.74 $12.46 $12.49 $11.64
====== ======= ====== ======
TOTAL RETURN** 6.85% 4.24% 12.23% (3.05)%
Ratios (to average net assets)/Supplemental Data:
Expenses++ 0.75% 0.75% 0.75% 0.75%
Net investment income 4.42% 4.41% 4.50% 4.13%
Portfolio turnover rate 28.56% 15.91% 42.08% 21.95%
Net assets at end of year (000 omitted) $17,446 $16,619 $16,570 $14,283

* 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 the Diversified
Income Portfolio for the fiscal period ended October 31,
1991 has not been annualized.
+ Wilmington Trust Company ("WTC") reimbursed a portion of
the Portfolio's expenses, exclusive of advisory fees, for
the fiscal period ended October 31, 1991. WTC waived a
portion of its advisory fees for the fiscal years ended
October 31, 1997, 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 and for the fiscal period ended October
31, 1991. 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, 1997,
1996, 1995, 1994, 1993, 1992, and for the fiscal period
ended October 31,1991, would have been 1.12%, 1.09%, 1.14%,
1.05%, 1.06%, 1.24% and 1.91%, respectively.
++WTC waived its entire advisory fee and RSMC waived a
portion of its administration and accounting services fee
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, 1997,
1996, 1995 and 1994, would have been 1.52%, 1.37%, 1.45% and
1.62%, respectively.

</FOOTNOTES>
</TABLES>
- ------------------------------------------------------------
QUESTIONS AND ANSWERS ABOUT THE PORTFOLIOS
- ------------------------------------------------------------
The information provided in this section is qualified in
its entirety by reference to the more detailed information
elsewhere in this Prospectus.
WHAT ARE THE PORTFOLIOS' INVESTMENT OBJECTIVES?
The Fund is an open-end, management investment
company consisting of two separate diversified
portfolios, the Diversified Income Portfolio and the
Municipal Income Portfolio (each a "Portfolio" and
collectively the "Portfolios"). The investment
objectives of the Portfolios are as follows:
DIVERSIFIED INCOME PORTFOLIO. This Portfolio seeks
high total return, consistent with high current income,
by investing principally in various types of investment
grade fixed-income securities. (See "Investment
Objectives and Policies - Diversified Income
Portfolio.")
MUNICIPAL INCOME PORTFOLIO. This Portfolio seeks a
high level of income exempt from federal income tax
consistent with the preservation of capital.
(See "Investment Objectives and Policies - Municipal
Income Portfolio.")
ARE THERE SPECIAL CONSIDERATIONS OR RISKS INVOLVED IN
INVESTING IN THE PORTFOLIOS?
The value of each Portfolio's holdings of fixed-
income securities generally varies inversely with the
movement of market interest rates. Generally, if
interest rates rise, prices of fixed-income securities
fall; if interest rates fall, prices of fixed-income
securities rise. In addition, the value of each
Portfolio's holdings varies depending on the average
duration and the credit quality of the holdings as well
as general market factors. Generally, the longer the
average duration of the holdings, the more fluctuations
in value the Portfolio experiences when interest rates
rise or fall.
The Investment Adviser to the Portfolios may use
options, futures contracts and (with respect to the
Diversified Income Portfolio only) forward currency
contracts to hedge against various market risks or to
enhance potential gain. The use of options, futures
contracts and forward currency contracts may entail
special risks. (See "Appendix.")
Depending on your tax bracket, your return from the
Municipal Income Portfolio may be substantially higher
than the after-tax return you would earn from comparable
taxable investments. Shareholders pay no federal income
tax on exempt interest dividends paid by the Municipal
Income Portfolio. However, those dividends may be subject
to state and local income taxes. In addition, a portion of
that Portfolio's dividends may be a tax preference item
for purposes of the federal alternative minimum tax ("AMT").
Capital gain distributions from the Municipal Income
Portfolio are subject to federal income tax, as well as
state and local taxes. (See "Dividends, Other
Distributions and Taxes.")
HOW CAN YOU BENEFIT BY INVESTING IN THE PORTFOLIOS RATHER
THAN BY INVESTING DIRECTLY IN THE FIXED-INCOME SECURITIES
HELD BY THOSE PORTFOLIOS?
Investing in the Portfolios offers two key benefits.
First: Each Portfolio offers a way to keep money
invested in a professionally managed portfolio of
securities and at the same time to maintain daily
liquidity. Of course, the proceeds to you upon
redemption may be more or less than the cost of your
shares. There are no minimum periods for investment and
no fees will be charged upon redemption.
Second: Investors in each Portfolio need not become
involved with the detailed bookkeeping and operating
procedures normally associated with direct investment in
the fixed-income securities held by the Portfolios.
WHO IS THE INVESTMENT ADVISER?
Wilmington Trust Company ("WTC") is the Investment
Adviser to the Portfolios. (See "Management of the
Fund.")
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING
AGENT?
Rodney Square Management Corporation ("RSMC"), a
wholly owned subsidiary of WTC, serves as Administrator
and Transfer Agent of the Portfolios and provides
accounting services for the Fund. (See "Management of
the Fund.")
WHO IS THE DISTRIBUTOR?
Rodney Square Distributors, Inc. ("RSD"), another
wholly owned subsidiary of WTC, serves as the Fund's
Distributor. (See "Management of the Fund.")
HOW DO YOU PURCHASE SHARES OF THE PORTFOLIOS?
Each Portfolio is designed as an investment vehicle
for individual investors, corporations and other
institutional investors. The Municipal Income Portfolio
is not, however, appropriate for purchase by tax-exempt
institutions and individual retirement accounts and
pension or profit-sharing plans (which already provide
tax-deferred income to their participants). Shares of
each Portfolio may be purchased at their net asset value
next determined after a purchase order is received by
RSMC and accepted by RSD, plus a sales load equal to a
maximum of 3.50% of the offering price, subject to
certain waivers and reductions. The minimum initial
investment is $1,000, but additional investments may be
made in any amount.
Shares of each Portfolio are offered on a continuous
basis by RSD. Shares may be purchased directly from
RSD, by clients of WTC through their trust accounts or
by clients of certain institutions such as banks or
broker-dealers that have entered into servicing
agreements with RSD through their accounts with those
Service Organizations. Some Service Organizations may
receive payments from RSD which are reimbursed by the
Fund under a Plan of Distribution adopted with respect
to each Portfolio pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). Shares
may also be purchased directly by wire or by mail. (See
"Purchase of Shares.")
The Fund and RSD reserve the right to reject new
account applications and to close, by redemption, an
account without a certified Social Security or other
taxpayer identification number.
Please call WTC, or your Service Organization or the
number listed below for further information about the
Portfolios or for assistance in opening an account.
- ------------------------------------------------------------
nationwide (800) 336-9970
- ------------------------------------------------------------
HOW DO YOU REDEEM SHARES OF THE PORTFOLIOS
If you purchased shares of a Portfolio through an
account at WTC or a Service Organization, you may redeem
all or any of your shares in accordance with the
instructions pertaining to that account. Other
shareholders may redeem any or all of their shares by
telephone or mail. There is no fee charged upon
redemption. (See "Redemption of Shares.")
HOW ARE DIVIDENDS PAID?
Income dividends for each Portfolio are declared
daily and distributed monthly and net realized capital
gains, if any, are distributed annually, after the close
of the Fund's fiscal year (October 31st). Shareholders
may elect to receive dividends and/or other
distributions in cash by checking the distribution
option on the Application & New Account Registration
form at the end of this Prospectus ("Application").
(See "Dividends, Other Distributions and Taxes.")
ARE EXCHANGE PRIVILEGES AVAILABLE?
You may exchange all or a portion of your Portfolio
shares for shares of the other Portfolio or for any of
the other funds in the Rodney Square complex, subject to
certain conditions. (See "Exchange of Shares.")
- -------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- -------------------------------------------------------------
DIVERSIFIED INCOME PORTFOLIO
The Diversified Income Portfolio seeks high total return,
consistent with high current income, by investing
principally in various types of investment grade fixed-
income securities.
WTC expects to maintain a short to intermediate average
duration for the Diversified Income Portfolio. Duration
measures the impact of a change in interest rates on the
value of the fixed-income securities held by the Portfolio,
taking into account any possible calls or early redemptions.
Under normal market conditions, the average dollar weighted
duration of securities held by the Portfolio will fall
within a range of 2 1.2 to 4 years.
Under normal market conditions, the Diversified Income
Portfolio invests at least 65% of its total assets in fixed-
income securities. The composition of the Portfolio's
holdings varies depending upon WTC's analysis of the fixed-
income markets including, but not limited to, analysis of
the most attractive segments of the yield curve, the
relative value of different sectors of the fixed-income
markets and expected trends in those markets. By
maintaining a short to intermediate average duration, WTC
seeks to protect the Portfolio's principal value by reducing
fluctuations in value relative to those that may be
experienced by income funds with longer average durations,
although that strategy may reduce the level of income
attained by the Portfolio. Of course, there is no guarantee
that principal value can be protected during periods of
extreme interest rate volatility. (See "Both Portfolios -
Special Considerations or Risks.")
Securities purchased by the Diversified Income Portfolio
may be purchased on the basis of their yield or potential
capital appreciation or both. Because WTC seeks to maintain
a short to intermediate average duration, yield usually is
the more significant component of the Portfolio's total
return.
The Diversified Income Portfolio invests only in
investment grade securities that are rated, at the time of
purchase, in the top four categories by a nationally
recognized statistical rating organization such as Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P ") or, if
not rated, are determined by WTC to be of comparable
quality. (See "Both Portfolios - Special Considerations or
Risks" and the Statement of Additional Information for
further information regarding ratings and the
characteristics of securities rated in the top four rating
categories.)
The Portfolio may invest in: bank obligations; corporate
bonds, notes and commercial paper; convertible securities;
foreign government and private debt obligations; guaranteed
investment contracts; mortgage-backed securities; municipal
securities; participation interests; asset-backed
securities; preferred stock; supranational agency debt
obligations; and obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities ("U.S.
Government obligations"). Short-term debt obligations in
which the Portfolio may invest include certificates of
deposit, time deposits, bankers' acceptances, commercial
paper rated, at the time of purchase, in the highest
category by a nationally recognized statistical rating
organization, such as Moody's or S&P or, if not rated,
determined by WTC to be of comparable quality and U.S.
Government obligations. The Portfolio may also engage in
the following investment strategies: entering into
repurchase agreements fully collateralized by U.S.
Government obligations and reverse repurchase agreements;
purchasing and writing or selling options, futures
contracts, options on futures contracts or forward currency
contracts; short selling; and lending portfolio securities.
(See "Appendix.")
When in WTC's judgment, economic or market conditions
make pursuing the Diversified Income Portfolio's basic
investment strategy inconsistent with the best interests of
its shareholders, WTC may temporarily use alternative
strategies. In implementing these strategies, the Portfolio
may invest in longer term fixed-income securities or short-
term debt obligations such that the Portfolio's overall
average duration falls within a range of 0 to 6 years.
MUNICIPAL INCOME PORTFOLIO
The Municipal Income Portfolio seeks a high level of
income exempt from federal income tax consistent with the
preservation of capital. As a fundamental policy, under
normal market conditions, the Municipal Income Portfolio
seeks to achieve this objective by investing at least 80% of
its net assets in a diversified portfolio of municipal
securities providing interest income that is exempt, in the
opinion of counsel for the issuer, from federal income tax.
WTC expects to maintain an intermediate average duration
for the Municipal Income Portfolio. Duration measures the
impact of a change in interest rates on the value of the
fixed-income securities held by the Portfolio, taking into
account any possible calls or early redemptions. Under
normal market conditions, the average dollar weighted
duration of securities held by the Portfolio will fall
within a range of 4 to 8 years.
Under normal market conditions, the Municipal Income
Portfolio invests at least 65% of its total assets in fixed-
income securities. The composition of the Portfolio's
holdings varies depending upon WTC's analysis of the
municipal securities market including, but not limited to,
analysis of the most attractive segments of the yield curve,
the relative value of different market sectors and supply
versus demand pressures. By maintaining an intermediate
average duration and maturity, WTC seeks to protect the
Portfolio's principal value by reducing the fluctuations in
value relative to those that may be experienced by municipal
funds with longer average durations and maturities, although
that strategy may limit the level of income attained by the
Portfolio as compared to income that may be attained from
securities with longer durations and maturities. (See "Both
Portfolios - Special Considerations or Risks.")
The Municipal Income Portfolio invests only in investment
grade securities which are rated, at the time of purchase,
in the top four categories by a nationally recognized
statistical rating organization such as Moody's or S&P or,
if not rated, are determined by WTC to be of comparable
quality. (See "Both Portfolios - Special Considerations or
Risks" and the Statement of Additional Information for
further information regarding ratings and the
characteristics of securities rated in the top four rating
categories.)
Additionally, the Portfolio may invest without limit in
municipal securities issued to finance private activities,
the interest on which is a tax preference item for purposes
of the federal alternative minimum tax ("private activity
securities"). The Portfolio expects to invest 100% of its
net assets in municipal securities that provide interest
income that is exempt from regular federal income tax;
however, up to 20% of its net assets may be invested in
other types of fixed-income securities that provide
federally taxable income, such as U.S. Government
obligations, bank obligations or corporate bonds, under
certain market conditions. The Portfolio may also enter
into repurchase agreements and invest in investment
companies that seek to maintain a stable net asset value
(money market funds).
When in WTC's judgment, economic or market conditions
make pursuing the Municipal Income Portfolio's basic
investment strategy inconsistent with the best interests of
its shareholders, WTC may temporarily use alternative
defensive strategies, primarily designed to reduce
fluctuations in the value of the Portfolio's assets. In
implementing these defensive strategies, the Portfolio may
invest in short-term municipal obligations (obligations that
have maturities no longer than one year from the time of
purchase), including tax anticipation notes, bond
anticipation notes, revenue anticipation notes and
construction loan notes that are issued to meet the short-
term funding requirements of local, regional and state
governments. If short-term municipal obligations are not
available, or appear overpriced relative to other types of
fixed-income securities, the Portfolio may invest in taxable
short-term debt obligations, including certificates of
deposit, time deposits, bankers' acceptances, commercial
paper rated in the highest category by a nationally
recognized statistical rating organization such as Moody's
or S&P or, if not rated, determined by WTC to be of
comparable quality, U.S. Government obligations and
repurchase agreements fully collateralized by U.S.
Government obligations.
The Municipal Income Portfolio will not invest more than
25% of its total assets in any one industry. Governmental
issuers of municipal securities are not considered part of
any industry. However, the 25% limitation does apply to
municipal securities backed by the assets and revenues of
non-governmental users, such as the private operators of
educational, hospital or housing facilities. WTC may
determine that the yields available from concentrating in
obligations in a particular market sector or political
subdivision justify the risk that the performance of the
Portfolio may be adversely affected by economic, business,
political and other developments related to that market
sector or political subdivision. Under such market
conditions, the Portfolio may invest more than 25% of its
assets in sectors of the municipal securities market such as
health care or housing, or in securities relating to any one
political subdivision, such as a given state or U.S.
territory, and will then be subject to any special risks
attendant on that sector or jurisdiction. At any given
point in time, the Portfolio may have more than 25% of its
assets invested in one of the three general categories of
municipal obligations - general obligation bonds, revenue or
special obligation bonds and private activity bonds. (See
"Appendix.")
SPECIAL CONSIDERATIONS. Proposed tax legislation in
recent years has included several provisions that may affect
the supply of, and the demand for, tax-exempt municipal
securities, as well as the tax-exempt nature of interest
paid on those securities. If the availability of tax-exempt
securities for investment or the value of the Municipal
Income Portfolio's holdings could be materially affected by
such changes in the law, the Trustees would reevaluate the
Portfolio's investment objective and policies or consider
the Portfolio's dissolution.
BOTH PORTFOLIOS
Both Portfolios may invest in securities with fixed,
variable or floating interest rates or in zero coupon
securities. These securities may have various buy-back
features that permit the Portfolios to recover principal by
tendering the securities to the issuer or a third party.
The Portfolios may also purchase participation interests in
fixed-income securities or in pools of fixed-income
securities. Certain of the securities purchased by the
Portfolios may be considered illiquid; certain securities
may be purchased on a when-issued or delayed delivery basis.
For further information about the Portfolios' investments
and investment strategies, see the Appendix to this
Prospectus and the Statement of Additional Information.
SPECIAL CONSIDERATIONS OR RISKS. Each Portfolio's net
asset value per share will fluctuate, and an investor's
redemption proceeds may be higher or lower than the cost of
the shares when initially purchased. The value of the
Portfolios' investments may change in response to changes in
interest rates and the relative financial strength and
creditworthiness of each issuer. During periods of falling
interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising
interest rates, the values of those securities generally
decline.
Each Portfolio invests only in securities that are rated,
at the time of purchase, in the four highest rating
categories by a nationally recognized statistical rating
organization such as Moody's or S&P or, if not rated, are
determined by WTC to be of comparable quality. Ratings
represent the rating agency's opinion regarding the quality
of the security and are not a guarantee of quality. Not
even the highest rating constitutes assurance that the
security will not fluctuate in value or that a Portfolio
will receive the anticipated yield on the security.
Moreover, ratings may change after a security is purchased.
Moody's considers securities in the fourth highest rating
category (Baa) to have speculative characteristics. Such
securities tend to have higher yields, but changes in
economic conditions or other circumstances are more likely
to lead to a weakened capacity of the issuer to make
principal and interest payments than is the case for more
highly rated securities of similar maturities. The
Portfolio may acquire securities insured by private
insurance companies or supported by letters of credit
furnished by domestic or foreign banks. In those instances,
WTC monitors the financial condition of the parties whose
creditworthiness is relied upon in determining the credit
quality of the securities. A change in the rating of a
security, in the issuer's ability to make payments of
interest and principal, in a credit provider's ability to
provide credit support or in the market's perception of
those factors will affect the value of the security, and WTC
will reevaluate the security to determine whether the
Portfolio should continue to hold it under the changed
conditions.
The ability of the Portfolios to buy and sell securities
may be limited at any particular time and with respect to
any particular security. The amount of information about
the financial condition of an issuer of municipal securities
may not be as extensive as information about corporations
whose securities are publicly traded. Generally, the
secondary market for municipal securities is less liquid
than that for taxable fixed-income securities. WTC closely
monitors the liquidity of securities that the Portfolios
hold and, in the case of certain securities such as
restricted securities that may be sold only to institutional
investors or unrated municipal lease obligations, makes
liquidity determinations in accordance with guidelines
adopted by the Board of Trustees.
Certain securities held by each Portfolio may permit the
issuer at its option to call or redeem the securities. If
an issuer redeems securities held by a Portfolio during a
period of declining interest rates, the Portfolio may not be
able to invest the proceeds in securities providing the same
investment return as the securities redeemed. During a
period of declining interest rates, securities held by the
Portfolios may have market values that are higher than the
principal amounts payable at maturity. Although
this "premium " value is amortized over the period remaining
until maturity, an investor who purchases shares of a
Portfolio during a period of declining interest rates may
face an increased risk of capital loss if the securities are
called or redeemed before maturity.
WTC may make frequent changes in the Portfolios'
investments, particularly during periods of rapidly
fluctuating interest rates. These frequent changes involve
transaction costs to the Portfolio and may result in taxable
capital gains.
DERIVATIVES. Some of the Portfolios' investments may be
referred to as "derivatives," because their value depends on
(or "derives" from) the value of an underlying asset,
reference rate or index. These investments include options,
futures contracts and similar instruments that may be used
in hedging and related income strategies. There is only
limited consensus as to what constitutes a "derivative"
security. However, in the view of WTC, derivatives include
"stripped" securities, specially structured types of
mortgage-backed, asset-backed and municipal securities, such
as interest only, principal only and inverse floaters, and
U.S. dollar-denominated securities whose value is linked to
foreign securities. The market value of derivative
instruments and securities sometimes is more volatile than
that of other investments, and each type of derivative may
pose its own special risks. WTC takes these risks into
account in its management of the Portfolios.
OTHER INVESTMENTS. From time to time additional types of
fixed-income securities, financial products and risk
management techniques are developed. WTC may consider use
of these securities, products and techniques by either
Portfolio, consistent with its investment objectives and
policies, as well as regulatory and tax considerations.

OTHER INFORMATION. There can be no assurance that the
Portfolios will achieve their respective investment
objectives. The investment objective of each Portfolio is
fundamental and may not be changed without the affirmative
vote of the holders of a majority of the Portfolio's
outstanding voting securities (as defined in the 1940 Act).
Unless otherwise noted, the investment policies discussed
above are non-fundamental and may be changed by the Board of
Trustees without shareholder approval. Additional
fundamental and non-fundamental investment policies and
limitations are described in the Appendix to this Prospectus
and in the Statement of Additional Information.
- -------------------------------------------------------------
PURCHASE OF SHARES
- -------------------------------------------------------------
HOW TO PURCHASE SHARES. Portfolio shares are offered on
a continuous basis by RSD. Shares may be purchased directly
from RSD, by clients of WTC through their trust accounts, or
by clients of Service Organizations through their Service
Organization accounts. WTC and Service Organizations may
charge their clients a fee for providing administrative or
other services in connection with investments in Portfolio
shares. A trust account at WTC includes any account for
which the account records are maintained on the trust system
at WTC. Persons wishing to purchase Portfolio shares
through their accounts at WTC or a Service Organization
should contact that entity directly for appropriate
instructions. Other investors may purchase Portfolio shares
by mail or by wire as specified below.
BY MAIL: You may purchase shares by sending a check drawn
on a U.S. bank payable to The Rodney Square Strategic Fixed-
Income Fund, indicating the Portfolio you have selected,
along with a completed Application (included at the end of
this Prospectus), to The Rodney Square Strategic Fixed-
Income Fund, c/o Rodney Square Management Corporation, P.O.
Box 8987, Wilmington, DE 19899-9752. A purchase order sent
by overnight mail should be sent to The Rodney Square
Strategic Fixed-Income Fund, c/o Rodney Square Management
Corporation, Rodney Square North, 1105 North Market Street,
Wilmington, DE 19801. If a subsequent investment is being
made, the check should also indicate your Portfolio account
number. When you purchase by check, the Fund may withhold
payment on redemptions until it is reasonably satisfied that
the funds are collected (which can take up to 10 days). If
you purchase shares with a check that does not clear, your
purchase will be canceled and you will be responsible for
any losses or fees incurred in that transaction.
BY WIRE: You may purchase shares by wiring federal funds.
To advise the Fund of the wire, and if making an initial
purchase, to obtain an account number, you must telephone
RSMC at (800) 336-9970. Once you have an account number,
instruct your bank to wire federal funds to RSMC, c/o
Wilmington Trust Company, Wilmington DE-ABA #0311-0009-2,
attention: The Rodney Square Strategic Fixed-Income Fund,
DDA#2610-605-2, further credit-your account number, the
desired Portfolio and your name. If you make an initial
purchase by wire, you must promptly forward a completed
Application to RSMC at the address stated above under "By
Mail."
INDIVIDUAL RETIREMENT ACCOUNTS. Shares of the
Diversified Income Portfolio may be purchased for a tax-
deferred retirement plan such as an individual retirement
account ("IRA"). For an Application for an IRA and a
brochure describing the Diversified Income Portfolio IRA,
call RSMC at (800) 336-9970. WTC makes available its
services as IRA custodian for each shareholder account that
is established as an IRA. For these services, WTC receives
an annual fee of $10.00 per account, which fee is paid
directly to WTC by the IRA shareholder. If the fee is not
paid by the date due, Diversified Income Portfolio shares
owned by the IRA will be redeemed automatically for purposes
of making the payment.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase
Portfolio shares through an Automatic Investment Plan.
Under the Plan, RSMC, at regular intervals, will
automatically debit a shareholder's bank checking account in
an amount of $50 or more (subsequent to the $1,000 minimum
initial investment), as specified by the shareholder. A
shareholder may elect to invest the specified amount
monthly, bimonthly, quarterly, semiannually or annually.
The purchase of Portfolio shares will be effected at their
offering price at the close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m.,
Eastern time) on or about the 20th day of the month. To
apply for the Automatic Investment Plan, check the
appropriate box of the Application at the end of this
Prospectus, or call RSMC at (800) 336-9970. This service is
generally not available for WTC trust account clients, since
similar services are provided through WTC. This service may
also not be available for Service Organization clients who
are provided similar services by those organizations.
ADDITIONAL PURCHASE INFORMATION. The minimum initial
investment is $1,000, but subsequent investments may be made
in any amount. WTC and Service Organizations may impose
additional minimum customer account and other requirements
in addition to this minimum initial investment requirement.
The Fund and RSD each reserves the right to reject any
purchase order and may suspend the offering of shares of
either Portfolio for a period of time.
Purchase orders received by RSMC and accepted by RSD
before the close of regular trading on the Exchange on any
Business Day of the Fund will be priced at the net asset
value per share that is determined as of the close of
regular trading on the Exchange. (See "How Net Asset Value
is Determined.") Purchase orders received by RSMC and
accepted by RSD after the close of regular trading on the
Exchange will be priced as of the close of regular trading
on the Exchange on the following Business Day of the Fund.
A "Business Day" of the Fund is any day on which the
Exchange, RSMC and the Philadelphia branch office of the
Federal Reserve are open for business. The following are
not Business Days of the Fund: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day.
It is the responsibility of WTC or the Service
Organization involved to transmit orders for the purchase of
shares by its customers to RSMC and to deliver required
funds on a timely basis, in accordance with the procedures
previously stated.
OFFERING PRICE. Shares of each Portfolio are offered at
its net asset value next determined after a purchase order
is received by RSMC and accepted by RSD, plus a sales load
which, unless shares were purchased under one of the reduced
sales load plans described below, will vary with the size of
the purchase shown as follows:
SALES LOAD SCHEDULE
SALES LOAD AS A PERCENTAGE OF DISCOUNT TO SERVICE
AMOUNT OF OFFERING NET AMOUNT INVESTED ORGANIZATIONS AS A PERCENTAGE
PURCHASE PRICE (NET ASSET VALUE) OF OFFERING PRICE

Up to-$24,999 3.50% 3.63% 3.05%
$25,000-$49,999 3.00 3.09 2.60
$50,000-$99,999 2.50 2.56 2.15
$100,000-$249,999 2.00 2.04 1.70
$250,000-$499,999 1.50 1.52 1.25
$500,000-$999,999 0.50 0.50 0.40
$1,000,000 and over 0.00 0.00 0.00

REDUCED SALES LOAD PLANS. Shares may be purchased at
reduced charges through two reduced sales load plans: (1) a
right of accumulation that permits a purchase of shares of a
Portfolio to be aggregated with shares of the other
Portfolio, as well as shares of other funds in the Rodney
Square complex on which the shareholder has already paid a
sales load, that are held in the purchaser's account or in
related accounts; and (2) a Letter of Intent ("LOI") that
permits a purchase of shares of a Portfolio to be aggregated
with future purchases of shares of that Portfolio, as well
as with shares of the other Portfolio and the other Rodney
Square funds that are subject to a sales load, within a
thirteen-month period.
The right of accumulation results in a reduced sales load
because the sales load imposed is based on the total dollar
amount of Portfolio shares being purchased, plus the current
net asset value of shares of the Portfolio and shares of
other Rodney Square funds on which a sales load has already
been paid that are held in the purchaser's and related
accounts at the time of purchase. Related accounts include
other individual accounts, joint accounts, spouse's accounts
and accounts for children who are under the age of 21 (but
only if the purchaser serves as a guardian, trustee or
custodian for the account under the Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act) and/or living at the
same residence.
The LOI program also results in a reduced sales load
because purchases of shares of the Portfolios and other
Rodney Square funds that are subject to a sales load made
within a thirteen-month period, starting with the first
purchase made pursuant to the LOI, are aggregated for
purposes of calculating the sales load applicable to each
purchase. In order to qualify under an LOI, purchases must
be made in the same account; purchases made for related
accounts may not be aggregated. The minimum investment
under an LOI is $25,000. The LOI is not a binding
obligation to purchase any amount of shares, but its
execution, if fulfilled, will result in the shareholder's
paying a reduced sales load on the total anticipated amount
of the purchase.
The LOI is included as part of the Application at the end
of this Prospectus. Investors should submit a completed LOI
to The Rodney Square Strategic Fixed-Income Fund, c/o Rodney
Square Management Corporation, P.O. Box 8987, Wilmington, DE
19899-9752. A purchase not originally made pursuant to an
LOI may be included under an LOI executed within 90 days of
that purchase, if the purchaser informs RSMC in writing of
this intent within the 90-day period. This prior purchase
will count toward fulfillment of the LOI; however, the sales
load on any previous purchase will not be adjusted downward.
If the total amount of shares purchased does not equal
the amount stated in the LOI by the end of the eleventh
month, the investor will be notified in writing by RSMC of
the amount purchased to date, the amount required to
complete the LOI and the expiration date. Also, at this
time the investor will be notified of the actions to be
taken by RSMC if the LOI expires unfulfilled. Shares having
a value equal to 5% of the total amount to be purchased over
the thirteen-month period will be held in escrow during that
period. If the total amount of shares purchased by the
expiration date does not equal the amount stated in the LOI,
RSMC will reduce the shares held in escrow by the difference
between the sales load on the shares purchased at the
reduced rate and the sales load applicable to the shares
actually purchased, and the balance of the shares then will
be released from the escrow.
SALES LOAD WAIVERS. Shares of each Portfolio may be
purchased at net asset value by "those entitled to a Sales
Load Waiver" which is defined as those employees, retirees
and their immediate family (spouses and children under 21
years of age), officers and trustees/directors of the Fund
or of WTC and its affiliates, any account at WTC for which
account records are maintained on WTC's trust system,
employees of Service Organizations, and clients of Service
Organizations which have entered into a special Service
Organization agreement with RSD, the terms of which provide
that no sales load will be charged. Portfolio shares may
also be purchased at net asset value by reinvesting
dividends and other distributions.
- ------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- ------------------------------------------------------------
RSMC, as Transfer Agent, maintains for each shareholder
an account expressed in terms of full and fractional shares
of each Portfolio rounded to the nearest 1/1000th of a
share.
In the interest of economy and convenience, the Fund does
not issue share certificates. Each shareholder is sent a
statement at least quarterly showing all purchases in or
redemptions from the shareholder's account. The statement
also sets forth the balance of shares held in the account by
Portfolio.
Due to the relatively high cost of maintaining small
shareholder accounts, the Fund reserves the right to close
any account with a current value of less than $500 by
redeeming all shares in the account and transferring the
proceeds to the shareholder. Shareholders will be notified
if their account value is less than $500 and will be allowed
60 days in which to increase their account balance to $500
or more before the account is closed. Reductions in value
that result solely from market activity will not trigger an
involuntary redemption.
- -------------------------------------------------------------
REDEMPTION OF SHARES
- -------------------------------------------------------------
Shareholders may redeem their shares by mail or by
telephone as described below. If you purchased your shares
through an account at WTC or a Service Organization, you may
redeem all or part of your shares in accordance with the
instructions pertaining to that account. Corporations,
other organizations, trusts, fiduciaries and other
institutional investors may be required to furnish certain
additional documentation to authorize redemptions.
Redemption requests should be accompanied by the Fund's
name, the Portfolio's name and your Portfolio account
number.
BY MAIL: Shareholders redeeming their shares by mail
should submit written instructions with a guarantee of their
signature by an institution acceptable to the Fund's
Transfer Agent, such as a bank, broker, dealer, municipal
securities dealer, government securities dealer, credit
union, national securities exchange, registered securities
association, clearing agency, or savings association
("eligible institution"), to: The Rodney Square Strategic
Fixed-Income Fund, c/o Rodney Square Management Corporation,
P.O. Box 8987, Wilmington, DE 19899-9752. A redemption
order sent by overnight mail should be sent to The Rodney
Square Strategic Fixed-Income Fund, c/o Rodney Square
Management Corporation, Rodney Square North, 1105 North
Market Street, Wilmington, DE 19801. The redemption order
should indicate the Fund's name, the Portfolio's name, the
Portfolio account number, the number of shares or dollar
amount you wish to redeem and the name of the person in
whose name the account is registered. A signature and a
signature guarantee are required for each person in whose
name the account is registered.
BY TELEPHONE: Shareholders who prefer to redeem their
shares by telephone may elect to apply in writing for
telephone redemption privileges by completing an Application
for Telephone Redemptions (included at the end of this
Prospectus) which describes the telephone redemption
procedures in more detail and requires certain information
that will be used to identify the shareholder. When
redeeming by telephone, you must indicate your name, the
Fund's name, the Portfolio's name, the Portfolio account
number, the number of shares or dollar amount you wish to
redeem and certain other information necessary to identify
you as the shareholder. The Fund employs reasonable
procedures to confirm that instructions communicated by
telephone are genuine, and if such procedures are followed,
will not be liable for any losses due to unauthorized or
fraudulent telephone transactions. During times of drastic
economic or market changes, the telephone redemption
privilege may be difficult to implement. In the event that
you are unable to reach RSMC by telephone, you may make a
redemption request by mail.
ADDITIONAL REDEMPTION INFORMATION. You may redeem all or
any part of the value of your account on any Business Day of
the Fund. Redemptions are effected at the net asset value
next calculated after RSMC has received your redemption
request. (See "How Net Asset Value Is Determined.") The
Fund imposes no fee when shares are redeemed. It is the
responsibility of WTC or the Service Organization to
transmit redemption orders and credit their customers'
accounts with redemption proceeds on a timely basis.
Redemption checks are mailed on the next Business Day of
the Fund following acceptance of redemption instructions but
in no event later than 7 days following such receipt and
acceptance. Amounts redeemed by wire are normally wired on
the next Business Day of the Fund after receipt and
acceptance of redemption instructions (if received by RSMC
before the close of regular trading on the Exchange), but in
no event later than 7 days following such receipt and
acceptance. If the shares to be redeemed represent an
investment made by check, the Fund reserves the right not to
make the redemption proceeds available until it has
reasonable grounds to believe that the check has been
collected (which could take up to 10 days).
Redemption proceeds may be wired to your predesignated
bank account in any commercial bank in the United States if
the amount is $1,000 or more. The receiving bank may charge
a fee for this service. Alternatively, proceeds may be
mailed to your bank or, for amounts of $10,000 or less,
mailed to your Portfolio account address of record if the
address has been established for a minimum of 60 days. In
order to authorize the Fund to mail redemption proceeds to
your Portfolio account address of record, complete the
appropriate section of the Application for Telephone
Redemptions or include your Portfolio account address of
record when you submit written instructions. You may change
the account which you have designated to receive amounts
redeemed at any time. Any request to change the account
designated to receive redemption proceeds should be
accompanied by a guarantee of the shareholder's signature by
an eligible institution. A signature and a signature
guarantee are required for each person in whose name the
account is registered. Further documentation will be
required to change the designated account when shares are
held by a corporation, other organization, trust, fiduciary
or other institutional investor.
For more information on redemptions, contact RSMC or, if
your shares are held in an account with WTC or a Service
Organization, contact WTC or the Service Organization.
REINSTATEMENT PRIVILEGE. Shareholders who have redeemed
shares of a Portfolio have a one-time privilege to reinstate
their account without a sales load up to the dollar amount
redeemed by purchasing shares of that Portfolio within 30
days of the redemption. Shareholders must indicate in
writing that they are exercising this privilege and provide
evidence of the redemption date and the amount of redemption
proceeds. The reinstatement will be made at the net asset
value per share next computed after the notice of
reinstatement and check are received. The amount of a
purchase under this reinstatement privilege cannot exceed
the amount of the redemption proceeds.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares
of a Portfolio with a value of $10,000 or more may
participate in the Systematic Withdrawal Plan. For an
Application for the Systematic Withdrawal Plan, check the
appropriate box of the Application at the end of this
Prospectus or call RSMC at (800) 336-9970. Under the Plan,
shareholders may automatically redeem a portion of their
Portfolio shares monthly, bimonthly, quarterly, semiannually
or annually. The minimum withdrawal available is $100. The
redemption of Portfolio shares will be effected at their net
asset value at the close of the Exchange on or about the
25th day of the month. If you expect to purchase additional
Portfolio shares, it may not be to your advantage to
participate in the Systematic Withdrawal Plan because
contemporaneous purchases and redemptions may result in
adverse tax consequences and may cause you to pay a sales
load on amounts withdrawn shortly thereafter. This service
is generally not available for WTC trust account clients,
since similar services are provided through WTC. This
service may also not be available for Service Organization
clients who are provided similar services by those
organizations.
- ------------------------------------------------------------
EXCHANGE OF SHARES
- ------------------------------------------------------------
EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may
exchange all or a portion of your shares in a Portfolio for
shares of the other Portfolio or any of the other funds in
the Rodney Square complex that currently offer their shares
to investors. These other Rodney Square funds are:
THE RODNEY SQUARE FUND, each portfolio of which seeks a
high level of current income consistent with the
preservation of capital and liquidity by investing in money
market instruments pursuant to its investment practices.
Its portfolios are:
U.S. GOVERNMENT PORTFOLIO, which invests in U.S.
Government obligations and repurchase agreements
involving such obligations.
MONEY MARKET PORTFOLIO, which invests in U.S. dollar-
denominated obligations of major banks, prime commercial
paper and corporate obligations, U.S. Government
obligations, high quality municipal securities and
repurchase agreements involving U.S. Government
obligations.
THE RODNEY SQUARE TAX-EXEMPT FUND, which seeks as high a
level of interest income, exempt from federal income tax, as
is consistent with a portfolio of high quality, short-term
municipal obligations, selected on the basis of liquidity
and stability of principal.
THE RODNEY SQUARE MULTI-MANAGER FUND, which
seeks superior long-term capital appreciation by investing in
securities of companies which are judged to possess strong
growth characteristics.
A redemption of shares through an exchange will be
effected at the net asset value per share next determined
after receipt by RSMC of the request, and a purchase of
shares through an exchange will be effected at the net asset
value per share determined at that time or as next
determined thereafter, plus the applicable sales load, if
any. The net asset values per share of the Rodney Square
Fund portfolios and the Tax-Exempt Fund are determined at 12
noon, Eastern time, on each Business Day. The net asset
values per share of the Portfolios and the Growth Portfolio
are determined at the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time), on each
Business Day.
A sales load will apply to exchanges into a Portfolio
from either of the Rodney Square Fund portfolios or the Tax-
Exempt Fund, except that no sales load will be charged if
the exchanged shares were acquired by a previous exchange
and are shares on which you paid a sales load or which
represent reinvested dividends and other distributions of
such shares. In addition, shares of the Rodney Square Fund
portfolios or the Tax-Exempt Fund may be exchanged for
shares of the Portfolios without a sales load by those
entitled to a Sales Load Waiver. A sales load will not
apply to other exchanges into the Portfolios or from the
Portfolios. Shares of either Portfolio must be held at
least 90 days before they can be exchanged for shares of the
Growth Portfolio without an additional sales load, unless
the shares to be exchanged represent reinvested dividends
and other distributions or you are eligible for a Sales Load
Waiver.
Exchange transactions will be subject to the minimum
initial investment and other requirements of the fund into
which the exchange is made. An exchange may not be made if
the exchange would leave a balance in a shareholder's
Portfolio account of less than $500.
To obtain prospectuses of the other Rodney Square funds
contact RSD. To obtain more information about exchanges, or
to place exchange orders, contact RSMC, or, if your shares
are held in a trust account with WTC or in an account with a
Service Organization, contact WTC or the Service
Organization. The Fund, on behalf of the Portfolios,
reserves the right to terminate or modify the exchange offer
described here and will give shareholders 60 days' notice of
such termination or modification when required by SEC rules.
This exchange offer is valid only in those jurisdictions
where the sale of the Rodney Square fund shares to be
acquired through such exchange may be legally made.
- ------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- ------------------------------------------------------------
RSMC determines the net asset value per share of each
Portfolio as of the close of regular trading on the Exchange
(currently 4:00 p.m., Eastern time) on each Business Day of
the Fund. The net asset value per share of each Portfolio
is calculated by dividing the total current market value of
all of a Portfolio's assets, less all its liabilities, by
the total number of the Portfolio's shares outstanding.
The Portfolios value their assets based on their current
market prices when market quotations are readily available.
Current market prices are generally not readily available
for municipal securities; current market prices may also be
unavailable for other types of fixed-income securities held
by the Portfolios. To determine the value of those
securities, RSMC may use a pricing service that takes into
account not only developments related to the specific
securities, but also transactions in comparable securities.
The value of fixed-income securities maturing within 60 days
of the valuation date may be determined by valuing those
securities at amortized cost. Securities that do not have a
readily available current market value are valued in good
faith under the direction of the Board of Trustees of the
Fund.
The assets held by the Diversified Income Portfolio which
are denominated in foreign currencies are valued daily in
U.S. dollars at the foreign currency exchange rates that are
prevailing at the time that RSMC determines the daily net
asset value per share. That Portfolio does not, however,
convert its foreign currency-denominated assets into U.S.
dollars on a daily basis.
- -------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The net investment
income earned by each Portfolio is declared as a dividend
daily and paid to its shareholders ordinarily on the first
Business Day of the following month, but in no event later
than seven days after the end of the month in which the
dividends are declared. Net investment income of a
Portfolio is determined immediately prior to the
determination of its net asset value per share on each
Business Day (see "How Net Asset Value Is Determined ") and
consists of interest accrued and original issue discount
(and, in the case of the Municipal Income Portfolio, if it
so elects, market discount on tax-exempt securities) earned
on its investments less amortization of any premium and
accrued expenses. A dividend is payable to shareholders of
a Portfolio who redeem, but not to shareholders who
purchase, shares of the Portfolio on the day the dividend is
declared. Dividends paid by a Portfolio are automatically
reinvested in additional shares of the Portfolio on the
payment date at their current net asset value per share,
unless the shareholder elects on the Application to receive
dividends in cash, in the form of a check.
Each Portfolio makes annual distributions of realized net
short-term capital gain and net capital gain (the excess of
net long-term capital gain over net short-term capital
loss), if any, and the Diversified Income Portfolio annually
distributes net realized gains from foreign currency
transactions, if any, after the end of the fiscal year in
which the gain was realized by the Portfolio. Distributions
by a Portfolio of these gains are automatically reinvested
in additional shares of the Portfolio on the payment date at
their current net asset value per share, unless the
shareholder elects on the Application to receive distributions,
in cash, in the form of a check.
FEDERAL INCOME TAX. Each Portfolio intends to continue to
qualify for treatment as a regulated investment company
under the Internal Revenue Code of 1986, as amended, so that
it will be relieved of federal income tax on that part of
its investment company taxable income (generally consisting
of taxable net investment income, net short-term capital
gain and, in the case of the Diversified Income Portfolio,
net realized gains from certain foreign currency
transactions, if any) and net capital gain that is
distributed to its shareholders. While both Portfolios may
invest in securities the interest on which is subject to
federal income tax and securities the interest on which is
exempt from that tax, under normal conditions the
Diversified Income Portfolio invests primarily in
taxable securities and the Municipal Income Portfolio
invests primarily in tax-exempt securities.
Distributions by the Municipal Income Portfolio of the
excess of interest income on tax-exempt securities over
certain amounts disallowed as deductions, as designated by
the Portfolio ("exempt-interest dividends"), may be treated
by its shareholders as interest excludable from gross
income. However, exempt-interest dividends are included in
a shareholder's "modified adjusted gross income" for
purposes of determining whether any portion of the
shareholder's Social Security or railroad retirement
benefits are subject to federal income tax. A portion of
the exempt-interest dividends paid by that Portfolio may be
a tax preference item for purposes of the federal
alternative minimum tax.
Dividends from each Portfolio's
investment company taxable income (whether paid in cash or
reinvested in additional shares) generally are taxable to
its shareholders as ordinary income. Distributions of a
Portfolio's net capital gain (whether paid in cash or
reinvested in additional shares), when designated as such by
the Portfolio, are taxable to its shareholders as long-term
capital gains, regardless of the length of time they have
held their shares.
Under the Taxpayer Relief Act of 1997,
different maximum tax rates apply to a noncorporate taxpayer's
net capital gain depending on the taxpayer's
holding period and marginal rate of federal income tax-- generally,
28% for gain recognized on securities held for more than one year
but not more than 18 months and 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on securities held for more
than 18 months. Pursuant to an Internal Revenue Service notice, each
Portfolio may divide each net capital gain distribution into a 28%
rate gain distribution and a 20% rate gain distribution (in
accordance with the Portfolio's holding periods for the securities
it sold that generated the distributed gain) and its shareholders must
treat those portions accordingly.
Early in each calendar year, each
Portfolio notifies its shareholders of the amount and
federal tax status of dividends and capital gain
distributions paid (or deemed paid) by the Portfolio during
the preceding year. The information regarding capital gain
distributions designates the portions therof subject to the
different maximum rates of tax applicable to noncorporate taxpayers'
net capital gain indicated above.
Interest on indebtedness incurred or continued by a
shareholder to purchase or carry Municipal Income Portfolio
shares will not be deductible to the extent that Portfolio's
distributions consist of exempt-interest dividends.
Each Portfolio is required to withhold 31% of all taxable
dividends, capital gain distributions and redemption
proceeds payable to any individuals and certain other
noncorporate shareholders who do not provide the Portfolio
with a certified taxpayer identification number. Each
Portfolio also is required to withhold 31% of all taxable
dividends and capital gain distributions payable to those
shareholders who otherwise are subject to backup
withholding. In connection with this withholding
requirement, unless an investor has indicated that he or she
is subject to backup withholding, the investor must certify
on the Application that the Social Security or other
taxpayer identification number provided thereon is correct
and that the investor is not otherwise subject to backup
withholding.
A redemption of Portfolio shares may result in taxable
gain or loss to the redeeming shareholder, depending on
whether the redemption proceeds are more or less than the
shareholder's adjusted basis for the redeemed shares (which
normally includes any sales load paid). Similar tax
consequences generally will result from an exchange of
shares of one Portfolio for shares of the other Portfolio or
for shares of another fund in the Rodney Square complex.
(See "Exchange of Shares.") Special rules apply, however,
when a shareholder (1) disposes of shares of a Portfolio
through a redemption or exchange within 90 days after
purchase thereof and (2) subsequently acquires shares of the
same Portfolio, the other Portfolio or any Rodney Square
fund on which a sales load normally is imposed ("load fund")
without paying any sales load because of the reinstatement
privilege (see "Redemption of Shares") or the exchange
privilege. In these cases, any gain on the disposition of
the original Portfolio shares will be increased, or loss
thereon decreased, by the amount of the sales load paid when
the shares were acquired; and that amount will increase the
adjusted basis of the load fund shares subsequently
acquired. Moreover, if Portfolio shares are purchased
within 30 days of redeeming other shares of that Portfolio
at a loss (whether pursuant to the reinstatement privilege
or otherwise), that loss will not be deductible to the
extent of the amount reinvested, and an adjustment in that
amount will be made to the shareholder's basis for the newly
purchased shares. If a shareholder holds shares in a
Portfolio for six months or less, and sells any of those
shares at a loss, the deductible loss is reduced by the amount of
exempt-interest dividends received by the shareholder with
respect to those shares, and the remaining loss is treated
as a long-term, rather than a short-term, capital loss to
the extent of capital gain distributions received on those
shares.
STATE AND LOCAL INCOME TAXES. The exemption of certain interest
income for federal income tax purposes does not necessarily
mean that such income is exempt under the income or other
tax laws of any state or local taxing authorities.
Shareholders may be exempt from state and local taxes on
distributions of interest income derived from obligations of
the state and/or municipalities of the state in which they
are resident, but generally are taxed on income derived from
obligations of other jurisdictions. Early each calendar
year, the Municipal Income Portfolio notifies its
shareholders of the portion of their tax-exempt income
attributable to each state for the preceding year.
The foregoing is only a summary of some of the important
income tax considerations generally affecting the Portfolios
and their shareholders; a further discussion appears in the
Statement of Additional Information. In addition to these
considerations, which are applicable to any investment in
the Portfolios, there may be other federal, state or local
tax considerations applicable to a particular investor.
Prospective investors are therefore urged to consult their
tax advisers with respect to the effects of an investment on
their own tax situations.
- ------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------
All performance information advertised by each Portfolio
is based on historical performance of the Portfolio, shows
the performance of a hypothetical investment and is not
intended to indicate future performance. Unlike some bank
deposits or other investments which pay a fixed yield for a
stated period of time, a Portfolio's yield and net asset
value will vary depending upon, among other things, changes
in market conditions and the level of the Portfolio's
operating expenses. The Fund's annual report to
shareholders contains information with respect to the
performance of each Portfolio. The annual report is
available upon request and free of charge.
YIELD. From time to time, quotations of each Portfolio's
"yield" may be included in advertisements, sales literature
or shareholder reports. Quotations of the Municipal Income
Portfolio's "tax-equivalent yield" may also be included in
advertisements, sales literature or shareholder reports.
These quotations, as calculated in accordance with
regulations of the SEC, reflect deduction of the maximum
3.50% sales load and may differ from a Portfolio's net
investment income, as calculated for financial reporting
purposes. The yields quoted are historical and not a
prediction of future yields.
The yield of a Portfolio refers to the net investment
income generated by the Portfolio over a specified thirty-
day (one month) period. This income is then annualized. That
is, the amount of income generated by the Portfolio during
that thirty-day period is assumed to be generated during
each month over a 12-month period and is shown as a
percentage. The effective yield is expressed similarly,
but, when annualized, the income earned by an investment in
the Portfolio is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The Municipal Income Portfolio's tax-equivalent yield is
calculated by determining the yield that would have to be
achieved on a fully taxable investment to produce the after-
tax equivalent of that Portfolio's yield, assuming certain
tax brackets for a Portfolio shareholder. That formula is:

The Portfolio's Yield
__________________________ = The Shareholder's Tax-Equivalent Yield
100% - The Shareholder's Tax Bracket

For example, if the shareholder is in the 39.6% tax
bracket and can earn a tax-exempt yield of 5.0%, the tax-
equivalent yield would be 8.28%:

5.0%

__________________________ = 8.28%
100% - 39.6%

TOTAL RETURN. From time to time, quotations of each
Portfolio's average annual total return ("Standardized
Return") may be included in advertisements, sales literature
or shareholder reports. Standardized Return will show
percentage rates reflecting the average annual change in the
value of an assumed initial investment of $1,000, net of the
Portfolio's maximum 3.50% sales load, assuming the
investment has been held for periods of one year, five years
and ten years, as of a stated ending date. If the Portfolio
has not been in operation for those time periods, the life
of the Portfolio will be used where applicable.
Standardized Return assumes that all dividends and other
distributions were reinvested in additional shares of the
Portfolio.
In addition, each Portfolio may advertise other total
return performance data ("Non-Standardized Return"). Non-
Standardized Return shows a percentage rate of return
encompassing all elements of return (i.e., income and
capital appreciation or depreciation); it assumes
reinvestment of all dividends and other distributions. Non-
Standardized Return may be quoted for the same or different
periods as those for which Standardized Return is quoted and
may or may not reflect the maximum 3.50% sales load; where
not included, the inclusion of the sales load would reduce
the Non-Standardized Return.
Non-Standardized Return may consist of a cumulative
percentage rate of return, an average annual percentage rate
of return, actual year-by-year rates or any combination
thereof. Cumulative total return represents the cumulative
change in value of an investment in a Portfolio for various
periods. To illustrate the components of overall
performance, the cumulative and average annual returns of a
Portfolio may be separated into income results and capital
gain or loss. The total return of a Portfolio is increased
to the extent that either WTC or RSMC has waived all or a
portion of its fees or reimbursed all or a portion of the
Portfolio's expenses.
Past performance is no guarantee of future performance.
- -------------------------------------------------------------
MANAGEMENT OF THE FUND
- -------------------------------------------------------------
The Fund's Board of Trustees supervises the management,
activities and affairs of the Fund and has approved
contracts with various financial organizations to provide,
among other services, day-to-day management required by the
Portfolios and their shareholders.
INVESTMENT ADVISER. WTC, a wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding
company, is the Investment Adviser of the Portfolios. Under
an Advisory Agreement with the Fund, dated April 1, 1991,
WTC, subject to the supervision of the Board of Trustees,
directs the investments of the Diversified Income Portfolio
in accordance with its investment objective, policies and
limitations. Under an Advisory Agreement with the Fund,
dated November 1, 1993, WTC, subject to the supervision of
the Board of Trustees, directs the investments of the
Municipal Income Portfolio in accordance with its investment
objective, policies and limitations. (These Agreements are
collectively referred to as the "Advisory Agreements.")
Under the Advisory Agreements, each Portfolio pays a
monthly advisory fee to WTC at the annual rate of 0.50% of
the average daily net assets of the Portfolio. WTC has
agreed to waive its fee or reimburse each Portfolio monthly
to the extent that 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, 1999.
In addition to serving as Investment Adviser for the
Portfolios, WTC is engaged in a variety of investment
advisory activities, including the management of collective
investment pools. Eric K. Cheung, Vice President and
Manager of the Fixed Income Management Division and Clayton
M. Albright, III, Vice President of the Fixed Income
Management Division of the Investment Management Department
of WTC, are primarily responsible for the day-to-day
management of the Diversified Income Portfolio. From 1978
until 1986, Mr. Cheung was the Portfolio Manager for fixed-
income assets of the Meritor Financial Group. In 1986, Mr.
Cheung joined WTC. In 1991, he became the Division Manager
for all fixed-income products. Mr. Albright has been with
WTC since 1976. In 1987, he joined the fixed-income
division and since that time has specialized in the
management of intermediate term/long term fixed-income
portfolios. Robert F. Collins, CFA, Vice President of
Credit Research and Municipal Trading within the Fixed
Income Management Division of the Investment Management
Department of WTC, is primarily responsible for the day-to-
day management of the Municipal Income Portfolio. Mr.
Collins has been a municipal bond portfolio manager and
credit analyst for WTC for more than 10 years.
ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND PAYING AGENT.
RSMC serves as Administrator, Transfer Agent and Dividend
Paying Agent for the Portfolios. As Administrator, RSMC
supplies office facilities, non-investment related
statistical and research data, stationery and office
supplies, executive and administrative services, internal
auditing and regulatory compliance services. RSMC assists
in the preparation of reports to shareholders, prepares
proxy statements, updates prospectuses and makes filings
with the SEC and state securities authorities. RSMC also
performs certain budgeting, financial reporting and
compliance monitoring activities. For the services provided
as administrator, RSMC receives a monthly administration fee
from each Portfolio at an annual rate of 0.08% of the
Portfolio's average daily net assets. 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 and
their shareholders. Any related out-of-pocket expenses
reasonably incurred in the provision of transfer agent
services to a Portfolio are borne by that Portfolio.
CUSTODIAN. WTC serves as Custodian of the Fund. The
Fund does not pay WTC any separate fees for its services as
Custodian, as WTC assumes the cost of providing these
services to the Portfolios. Any related out-of-pocket
expenses reasonably incurred in the provision of custodial
services to a Portfolio are borne by that Portfolio.
ACCOUNTING SERVICES. RSMC determines the net asset value
per share of each Portfolio and provides accounting services
to the Portfolios pursuant to an Accounting Services
Agreement with the Fund. For providing these services, RSMC
receives an annual fee of $50,000 per Portfolio from the
Fund plus an amount equal to 0.02% of the average daily net
assets of each Portfolio in excess of $100 million.
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN. Pursuant to
a Distribution Agreement with the Fund, RSD manages the
Fund's distribution efforts and provides assistance and
expertise in developing marketing plans and materials for
the Portfolios, enters into agreements with broker-dealers
to sell shares of the Portfolios and, directly or through
its affiliates, provides shareholder support services.
Under a Plan of Distribution adopted with respect to each
Portfolio pursuant to Rule 12b-1 under the 1940 Act (the
"12b-1 Plans"), the Portfolios may reimburse RSD for
distribution expenses incurred in connection with the
distribution efforts described above. The 12b-1 Plans
provide that RSD may be reimbursed for amounts paid and
expenses incurred for distribution activities encompassed by
Rule 12b-1, such as public relations services, telephone
services, sales presentations, media charges, preparation,
printing and mailing advertising and sales literature, data
processing necessary to support a distribution effort,
printing and mailing prospectuses, and distribution and
shareholder servicing activities of broker-dealers and other
financial institutions. The Board of Trustees has limited
the amount that RSD can receive under the 12b-1 Plans to
0.25% of each Portfolio's average daily net assets on an
annualized basis. If an increase in this limitation is
requested by RSD and authorized by the Board at some future
date, shareholders of the affected Portfolio will be
notified of that increase. It is not anticipated, however,
that such an increase will be requested.
The 12b-1 Plan for the Municipal Income Portfolio also
provides that in the event that RSD is not fully reimbursed
for its distribution expenses during any month due to
limitations set by the Trustees, the unpaid portion may be
carried forward for possible reimbursement into successive
months and fiscal years to give RSD the ability to recoup at
some point in time any major capital outlay on behalf of
that Portfolio. Under the 12b-1 Plan, RSD may charge the
Municipal Income Portfolio interest or finance charges on
unreimbursed distribution expenses that have been carried
forward from prior fiscal years, but only with express
authorization by the Board of Trustees. RSD does not
currently intend to request such authorization. If interest
charges are requested by RSD and authorized by the Board at
some future time, the shareholders of the Municipal Income
Portfolio will be advised of those charges.
BANKING LAWS. Banking laws prohibit deposit-taking
institutions and certain of their affiliates from
underwriting or distributing securities. WTC believes, and
counsel to WTC has advised the Fund, that WTC and its
affiliates may perform the services contemplated by their
respective agreements with the Fund without violation of
applicable banking laws or regulations. If WTC or its
affiliates were prohibited from performing these services,
it is expected that the Board of Trustees would consider
entering into agreements with other entities. If a bank
were prohibited from acting as a Service Organization, its
shareholder clients would be expected to be permitted to
remain Portfolio shareholders and alternative means for
servicing such shareholders would be sought. It is not
expected that shareholders would suffer any adverse
financial consequences as a result of any of these
occurrences.
State securities laws may require banks and financial
institutions involved in distribution to register as
dealers, even if this is not required by federal law.
- ------------------------------------------------------------
DESCRIPTION OF THE FUND
- ------------------------------------------------------------
The Fund is a diversified open-end investment company
established on May 7, 1986 as a Massachusetts business trust
under Massachusetts law by a Declaration of Trust.
The authorized shares of beneficial interest in the Fund
are currently divided into two series or portfolios, the
Diversified Income Portfolio and the Municipal Income
Portfolio. The Trustees are empowered by the Declaration of
Trust and the Bylaws to establish additional series and
classes of shares, although they have no present intention
of doing so.
The Fund's capital consists of an unlimited number of
shares of beneficial interest. Shares of the Portfolios
entitle their holders to one vote per share and fractional
votes for fractional shares held. Separate votes are taken
by each Portfolio on matters affecting that Portfolio.
Shares have noncumulative voting rights, do not have
preemptive or subscription rights and are transferable.
As of November 30, 1997, WTC owned by virtue of shared or
sole voting or investment power on behalf of its underlying
customer accounts 72% of the shares of the Diversified
Income Portfolio and 18% of the shares of the Municipal
Income Portfolio, and may be deemed to be a controlling
person of the Fund under the 1940 Act.
The Fund does not hold annual meetings of shareholders.
There will normally be no meetings of shareholders for the
purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the
election of Trustees. Under the 1940 Act, shareholders of
record owning no less than two-thirds of the outstanding
shares of the Fund may remove a Trustee by vote cast in
person or by proxy at a meeting called for that purpose.
The Trustees are required to call a meeting of shareholders
for the purpose of voting upon the question of removal of
any Trustee when requested in writing to do so by the
shareholders of record owning not less than 10% of the
Fund's outstanding shares.

- ------------------------------------------------------------
APPENDIX
- ------------------------------------------------------------
The following paragraphs contain a brief description of the
securities in which the Portfolios may invest and the
strategies in which they may engage consistent with their
investment objectives and policies.
Securities that may be purchased by the Diversified Income
Portfolio and the Municipal Income Portfolio
Asset-Backed Securities. The Portfolios may purchase
interests in pools of obligations, such as credit card or
automobile loan receivables, purchase contracts and
financing leases. Such securities are also known as "asset-
backed securities," and the holders thereof may be entitled
to receive a fixed rate of interest, a variable rate that is
periodically reset to reflect the current market rate or an
auction rate that is periodically reset at auction.
Asset-backed securities typically are supported by some
form of credit enhancement, such as cash collateral,
subordinated tranches, a letter of credit, surety bond or
limited guaranty. Credit enhancements do not provide
protection against changes in the market value of the
security. If the credit enhancement is exhausted or
withdrawn, security holders may experience losses or delays
in payment if required payments of principal and interest
are not made with respect to the underlying obligations.
Except in very limited circumstances, there is no recourse
against the vendors or lessors that originated the
underlying obligations.
Asset-backed securities are likely to involve unscheduled
prepayments of principal that may affect yield to maturity,
result in losses and may be reinvested at higher or lower
interest rates than the original investment. The yield to
maturity of asset-backed securities that represent residual
interests in payments of principal or interest on fixed-
income obligations is particularly sensitive to prepayments.
The value of asset-backed securities may change because
of changes in the market's perception of the
creditworthiness of the servicing agent for the pool of
underlying obligations, the originator of those obligations
or the financial institution providing credit enhancement.
BANK OBLIGATIONS. The Portfolios may invest in U.S.
dollar-denominated obligations of major banks, including
certificates of deposit, time deposits and bankers'
acceptances of U.S. banks and their branches located outside
of the United States, of U.S. branches of foreign banks and
of wholly-owned banking subsidiaries of such foreign banks
located in the United States, provided that the bank has
assets of at least $5 billion at the date of investment.
Obligations of foreign branches of U.S. banks and U.S.
branches or wholly-owned subsidiaries of foreign banks may
be general obligations of the parent bank, of the issuing
branch or subsidiary, or both, or may be limited by the
terms of a specific obligation or by governmental
regulation. Because such obligations are issued by foreign
entities, they are subject to the risks of foreign investing
discussed below in connection with the Diversified Income
Portfolio's investments in foreign debt obligations.
CORPORATE BONDS, NOTES AND COMMERCIAL PAPER. Each
Portfolio may invest in corporate bonds, notes and
commercial paper. These obligations generally represent
indebtedness of the issuer and may be subordinated to other
outstanding indebtedness of the issuer. Commercial paper
consists of short-term unsecured promissory notes issued by
corporations in order to finance their current operations.
FIXED-INCOME SECURITIES WITH BUY-BACK FEATURES. Fixed-
income securities purchased by the Portfolios may have
various buy-back features that permit the Portfolios to
recover principal upon tendering the securities to the
issuer or a third party. For example, a Portfolio may enter
into a stand-by commitment permitting the Portfolio to
resell fixed-income securities back to the original seller
at a specified price. The Portfolios may also purchase long-
term fixed-rate bonds that may be tendered at specified
intervals to a bank or other financial institution for their
face value. Demand instruments permit the Portfolios to
demand from the issuer payment of principal plus accrued
interest upon a specified number of days' notice. These buy-
back features are often supported by letters of credit or
other guarantees obtained by the issuers or financial
intermediaries. However, without credit enhancements, if
there is a default or significant downgrading of a bond or,
in the case of a municipal bond, a loss of its tax-exempt
status, the buy-back feature may terminate automatically and
the risk to the Portfolio holding the bond will be that of
holding a long-term security.
ILLIQUID SECURITIES. Certain of the Portfolios' assets
may be considered illiquid, including restricted securities
that can only be resold in a registered public offering,
over-the-counter options and repurchase agreements or time
deposits maturing in more than 7 days. No more than 15% of a
Portfolio's net assets may be invested in these and other
illiquid securities.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
are securities representing interests in a pool of mortgages
secured by real property. There are three basic types of
mortgage-backed securities: (1) those issued or guaranteed
by the U.S. Government, its agencies or instrumentalities,
such as Government National Mortgage Association ("GNMA"),
Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corporation ("FHLMC"); (2) those issued
by private issuers and collateralized by securities issued
or guaranteed by the U.S. Government; and (3) those issued
by private issuers and collateralized by mortgage loans or
other mortgage-backed securities without a government
guarantee but usually with some form of private credit
enhancement. The value of all mortgage-backed securities
will vary with the creditworthiness of the issuer, the level
and type of collateralization and interest rates. In
addition, the mortgage-backed securities market in general
may be adversely affected by changes in governmental
regulation or tax policies.
The yield characteristics of mortgage-backed securities
differ from those of traditional debt securities. Among the
major differences are that interest and principal payments
are made more frequently, usually monthly, and that
principal may be prepaid at any time. The rates of such
prepayments can be expected to accelerate as interest rates
decline. To the extent the Portfolios purchase these
securities at a premium or discount, prepayment rates will
affect yield to maturity. Prepayments also can result in
losses on securities purchased at a premium to the extent of
the premium. In addition, prepayments usually can be
expected to be reinvested at lower interest rates than the
original investment. Derivative mortgage-backed securities,
such as stripped mortgage-backed securities or residual
interests, generally are more sensitive to changes in
interest rates, and the market for such securities is less
liquid than the market for traditional debt securities and
mortgage-backed securities. Interest only and principal
only mortgage-backed securities backed by fixed-rate
mortgages and issued by an agency or instrumentality of the
U.S. Government may be determined to be liquid by WTC
pursuant to guidelines approved by the Fund's Board of
Trustees.
MUNICIPAL SECURITIES. The municipal securities in which
the Portfolios may invest include general obligation,
revenue or special obligation, industrial development and
private activity municipal bonds. General obligation bonds
are secured by an issuer's pledge of its full faith, credit
and unlimited taxing power for the payment of principal and
interest. Revenue or special obligation bonds are payable
only from the revenues derived from a particular facility or
class of facility or project or, in some cases, from the
proceeds of a special excise or other tax. Similarly,
resource recovery bonds are issued to build facilities such
as solid waste incinerators or waste-to-energy; the revenue
stream from those bonds is secured by fees or rents paid by
municipalities for use of the facilities and depend upon
whether the municipalities appropriate funds for these usage
fees. The term "municipal securities" also includes
municipal lease obligations, such as leases, installment
purchase contracts and conditional sales contracts, and
certificates of participation therein. Municipal lease
obligations are issued by state and local governments and
authorities to purchase land or various types of equipment
or facilities and may be subject to annual budget
appropriations.
Industrial development bonds ("IDB's") and private
activity bonds ("PAB's") finance various privately operated
facilities, such as airport or pollution control facilities.
These obligations are included within the term "municipal
securities" if the interest paid thereon is exempt from
federal income tax in the opinion of the bond issuer's
counsel. IDB's and PAB's are in most cases revenue bonds
and thus are not payable from the unrestricted revenues of
the issuer. The credit quality of IDB's and PAB's is
usually directly related to the credit standing of the user
of the facilities being financed. The interest on these
bonds issued after August 15, 1986, generally is an item of
tax preference for purposes of the federal alternative
minimum tax.
PARTICIPATION INTERESTS. The Portfolios may purchase
participation interests in fixed-income securities that have
been issued by banks or other financial institutions.
Participation interests give the holders differing interests
in the underlying securities, depending upon the type or
class of certificate purchased. For example, coupon strip
certificates give the holder the right to receive a specific
portion of interest payments on the underlying securities;
principal strip certificates give the holder the right to
receive principal payments and the portion of interest not
payable to coupon strip certificate holders. Holders of
certificates of participation in interest payments may be
entitled to receive a fixed rate of interest, a variable
rate that is periodically reset to reflect the current
market rate or an auction rate that is periodically reset at
auction.
More complex participation interests involve special risk
considerations. Since these instruments have only recently
been developed, there can be no assurance that any market
will develop or be maintained for the instruments.
Generally, the fixed-income securities that are deposited in
trust for the holders of these interests are the sole source
of payments on the interests; holders cannot look to the
sponsor or trustee of the trust or to the issuers of the
securities held in trust or to any of their affiliates for
payment. Nevertheless, participation interests may be
backed by credit enhancements such as letters of credit,
insurance policies, surety bonds or liquidity facilities to
provide full or partial coverage for certain defaults and
losses relating to the underlying securities or to provide
liquidity support for participation interests that give
holders the right to demand payment of principal upon a
specified number of days' notice.
REPURCHASE AGREEMENTS. The Portfolios may invest in
repurchase agreements fully collateralized by U.S.
Government obligations. A repurchase agreement is a
transaction in which a Portfolio purchases a security and
simultaneously commits to resell that security to the seller
at an agreed upon market rate of interest that is unrelated
to the coupon rate or maturity of the purchased security.
While it does not currently appear possible to eliminate all
risks from these transactions (particularly the possibility
of a decline in the market value of the underlying
securities, as well as delay and costs to the Portfolio in
connection with bankruptcy proceedings), it is the policy of
the Portfolios to limit repurchase transactions to those
banks and primary dealers in U.S. Government obligations
whose creditworthiness has been reviewed and found
satisfactory by WTC.
U.S. GOVERNMENT OBLIGATIONS. Each Portfolio may purchase
obligations issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities ("U.S. Government
obligations"), including direct obligations of the U.S.
Government (such as Treasury bills, notes and bonds) and
obligations issued by U.S. Government agencies and
instrumentalities. Agencies and instrumentalities include
executive departments of the U.S. Government or independent
federal organizations supervised by Congress. Although not
all obligations of agencies and instrumentalities are direct
obligations of the U.S. Treasury, payment of the interest
and principal on these obligations is generally backed
directly or indirectly by the U.S. Government. This support
can range from obligations supported by the full faith and
credit of the United States (for example, U.S. Treasury
securities or GNMA securities) to obligations that are
supported solely or primarily by the creditworthiness of the
issuer (for example, securities issued by FNMA, FHLMC and
the Tennessee Valley Authority). In the case of obligations
not backed by the full faith and credit of the United
States, the Portfolios must look principally to the agency
or instrumentality issuing or guaranteeing the obligation
for ultimate repayment and may not be able to assert a claim
against the United States itself in the event the agency or
instrumentality does not meet its commitments.
VARIABLE AND FLOATING RATE SECURITIES. The Portfolios'
investments may include fixed, variable or floating rate
securities. Variable or floating rate securities bear
interest at rates subject to periodic adjustment or provide
for periodic recovery of principal on demand. Under certain
conditions, these securities may be considered to have
remaining maturities equal to the time remaining until the
next interest rate adjustment date or the date on which
principal can be recovered on demand.
The variable rate securities in which the Portfolios
invest may pay interest at rates that vary inversely to
changes in market interest rates. These securities,
referred to as "inverse floating obligations" or "residual
interest bonds" provide opportunities for higher yields but
are subject to greater fluctuations in market value.
WHEN-ISSUED SECURITIES. Each Portfolio may purchase
securities on a "when-issued" basis for delivery to the
Portfolio later than the normal settlement date for such
securities, at a stated price and yield. The Portfolio
generally does not pay for such securities or start earning
interest on them until they are received. However, when a
Portfolio purchases securities on a when-issued basis, it
immediately assumes the risks of ownership, including the
risk of price fluctuation. Failure by the issuer to deliver
a security purchased on a when-issued basis may result in a
loss or a missed opportunity to make an alternative
investment.
ZERO COUPON SECURITIES. The Portfolios may invest in
zero coupon securities of governmental or private issuers.
Such securities generally pay no interest to their holders
prior to maturity. Accordingly, such securities are usually
issued and traded at a deep discount from their face or par
value and are subject to greater fluctuations in market
value in response to changing interest rates than are debt
obligations of comparable maturities and credit quality that
make current distributions of interest in cash.
SECURITIES THAT MAY BE PURCHASED BY THE DIVERSIFIED INCOME
PORTFOLIO
CONVERTIBLE SECURITIES. The Diversified Income Portfolio
may invest in convertible bonds or notes or preferred stock
that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer
within a particular period of time at a specified price or
formula. The issuer may have the right to call the
securities before the conversion feature is exercised.
FOREIGN DEBT OBLIGATIONS. The Diversified Income
Portfolio may invest in obligations of foreign issuers,
including foreign governments, payable in U.S. dollars and
issued in the United States (Yankee bonds). The Portfolio
may invest up to 10% of its total assets, at the time of
purchase, in obligations of foreign and U.S. issuers payable
in U.S. dollars and issued outside the United States
(Eurobonds) and other non-U.S. dollar-denominated fixed-
income securities of foreign issuers, including those issued
by foreign governments. The Portfolio's investments in
foreign fixed-income securities may involve risks in
addition to those normally associated with investments in
domestic securities, including the possible imposition of
exchange control regulations or currency restrictions, which
would prevent cash being brought back to the United States;
less publicly available information with respect to issuers
of securities; less extensive regulation of foreign brokers,
the securities markets and issuers of securities; lack of
uniform accounting standards; a generally lower degree of
liquidity than that available in the U.S. markets; and the
possible imposition of foreign taxes, including taxes that
may be confiscatory. Other risks of foreign investment
include non-negotiable brokerage commissions, lower trading
volume and greater volatility, possible delays in
settlement, the difficulty of enforcing obligations in
foreign countries, and possible political or social
instability in foreign countries. Further, to the extent
that the Diversified Income Portfolio invests in securities
denominated in foreign currencies, the Portfolio will be
subject to fluctuations in foreign currency exchange rates
and costs incurred in conversions between currencies.
OBLIGATIONS ISSUED BY SUPRANATIONAL AGENCIES. The
Diversified Income Portfolio may invest in the obligations
of supranational agencies, such as the International Bank
for Reconstruction and Development (the World Bank). Such
obligations may be denominated in U.S. dollars or other
currencies. Supranational agencies rely on funds from
participating countries, often including the United States,
from which they must request funds. Such requests may not
always be honored. Moreover, the securities of
supranational agencies, depending on where and how they are
issued, may be subject to some of the risks discussed above
with respect to foreign debt obligations.
PREFERRED STOCKS. The Diversified Income Portfolio may
invest in dividend-paying preferred stocks of U.S. and
foreign issuers that, in the judgment of WTC, have
substantial potential for income production. Such equity
securities involve greater risk of loss of income than debt
securities because the issuers are not obligated to pay
dividends. In addition, equity securities are subordinate
to debt securities and are more subject to changes in
economic and industry conditions and to changes in the
financial condition of the issuers.
REVERSE REPURCHASE AGREEMENTS. The Diversified Income
Portfolio may enter into reverse repurchase agreements to
sell portfolio securities to securities dealers or banks
subject to the Portfolio's agreement to repurchase the
securities at an agreed-upon date and price reflecting a
market rate of interest. The value of the securities
subject to a reverse repurchase agreement may decline below
the repurchase price. The Portfolio may also encounter
delays in recovering the securities and even loss of rights
in the securities should the opposite party fail
financially. Reverse repurchase agreements, together with
other borrowing by the Portfolio, are limited to one-third
of the Portfolio's assets. The Portfolio will maintain with
the Fund's custodian in a segregated account cash or liquid
securities, marked to market daily, in an amount at least
equal to the Portfolio's obligations under reverse
repurchase agreements that are outstanding.
INVESTMENT STRATEGIES THAT MAY BE USED BY THE DIVERSIFIED
INCOME PORTFOLIO
LENDING OF PORTFOLIO SECURITIES. The Diversified Income
Portfolio may lend securities to increase investment income
through interest on the loan. All loan agreements will
require that the loans be fully collateralized by cash, U.S.
Government obligations or any combination of cash and such
securities, marked to market value daily. The Portfolio
continues to receive interest on the securities lent or an
equivalent fee from the borrower, while simultaneously
earning income on the investment of the collateral. The
Portfolio retains authority to terminate a loan at any time
and retains voting, subscription, dividend and other rights
when it is in the Portfolio's best interests to do so. If
the borrower of the securities fails financially, there may
be a delay in receiving additional collateral, a delay in
recovering the securities or even loss of the collateral.
However, loans are only made to borrowers that are deemed by
WTC to be of good standing and when, in the judgment of WTC,
the income that can be earned justifies the attendant risks.
The aggregate value of outstanding securities loans in the
Portfolio's holdings may not exceed one-third of its total
assets.
HEDGING STRATEGIES. The Diversified Income Portfolio may
engage in options and futures strategies to hedge various
market risks (such as interest rates and broad or specific
market movements) or to enhance potential gain. The
Diversified Income Portfolio may also purchase or sell
forward currency contracts in an attempt to manage the
Portfolio's foreign currency exposure. The Portfolio may
enter into forward currency contracts to set the rate at
which currency exchanges will be made for specific
contemplated transactions. The Portfolio may also enter
into forward currency contracts in amounts approximating the
value of one or more portfolio positions to fix the U.S.
dollar value of those positions. Use of options, futures
and forward currency contracts by the Diversified Income
Portfolio is limited by market conditions, regulatory
limitations and other tax considerations.
The use of forward currency contracts, options and
futures involves certain investment risks and transaction
costs. These risks include: dependence on WTC's and the sub-
advisers' ability to predict movements in the prices of
individual securities, fluctuations in the general
securities markets and movements in interest rates and
currency markets; imperfect correlation between movements in
the price of currency, options, futures contracts or related
options and movements in the price of the currency or
security hedged or used for cover; the fact that skills and
techniques needed to trade options, futures contracts and
related options or to use forward currency contracts are
different from those needed to select the securities in
which the Fund invests; and lack of assurance that a liquid
secondary market will exist for any particular option,
futures contract or related option at any particular time.

SHORT SALES AGAINST THE BOX. The Diversified Income
Portfolio may engage in a short sale against the box as a
hedge when WTC believes that the price of a security held by
the Portfolio may decline. In an ordinary or uncovered short
sale, the seller does not own the securities sold,
and must subsequently purchase an equivalent
amount of securities in the market to complete or
cover the transaction. In a "short sale against the box,"
however, the seller already owns securities equivalent to
the securities sold short, and it is these securities which
are held by the broker ("against the box") to cover the
transaction. The broker borrows the securities that are
actually sold from a third party. Because the seller already
owns the securities sold and does not need to purchase
equivalent securities in the market, the sale entails no
possibility of market gain or risk of market loss other than
the gain or loss that would be realized by an ordinary sale
of the securities.

<PAGE>

THE RODNEY SQUARE
STRATEGIC FIXED-INCOME FUND
APPLICATION & NEW ACCOUNT REGISTRATION
____________________________________________________________________________
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR THE RODNEY SQUARE STRATEGIC
ASSISTANCE IN COMPLETING THIS FIXED-INCOME FUND
FORM CALL (800) 336-9970 C/O RODNEY SQUARE MANAGEMENT CORP.
P.O. Box 8987
WILMINGTON, DE 19899-9752
____________________________________________________________________________
PORTFOLIO SELECTION ($1,000 MINIMUM)
__ DIVERSIFIED INCOME PORTFOLIO $___________
__ MUNICIPAL INCOME PORTFOLIO $___________
TOTAL AMOUNT TO BE INVESTED $___________

____By check. (Make payable to "The Rodney Square Stategic Fixed-Income Fund")
____By wire. Call 1-800-336-9970 for Instructions.
____Bank from which funds will be wired _____________________
wire date _____________________
______________________________________________________________________________
ACCOUNT REGISTRATION - JOINT TENANTS USE LINES 1 AND 2; CUSTODIAN FOR A MINOR,
USE LINES 1 AND 3; CORPORATION, TRUST OR OTHER ORGANIZATION OR ANY FIDUCIARY
CAPACITY, USE LINE 4.

1.Individual__________________________________________________________________
First Name MI Last Name Customer Tax ID No.*
2.Joint Tenancy**
__________________________________________________________________
First Name MI Last Name Customer Tax ID No.*
3.Gifts to Minors***
_______________________ _______________ under the __________
Minor's Name Customer Tax ID No.* State
4.Other Registration
_____________________________________ _____________________
Customer Tax ID No.*
5.If Trust, Date of Trust Instrument:_________________________________________

6._______________________________________
Your Occupation
7.___________________________________ _______________________________________
Employer's Name Employer's Address

*Customer Tax Identification No.: (a) for an individual, joint tenants, or
a custodial account under the Uniform Gifts/Transfers to Minors Act, supply
the Social Security number of the registered account owner who is to be taxed;
(b) for a trust, a corporation, a partnership, an organization, a fiduciary,
etc., supply the Employer Identification number of the legal entity or or-
ganization that will report income and/or gains.
** "Joint Tennants with Rights of Survivorship" unless otherwise specified.
*** Regulated by the state's Uniform Gift/Transfers to Minors Act.
______________________________________________________________________________
ADDRESS OF RECORD
______________________________________________________________________________
Street
______________________________________________________________________________
3/96 City State Zip Code
<PAGE>
______________________________________________________________________________
DISTRIBUTION OPTIONS - IF THESE BOXES ARE NOT CHECKED, ALL DISTRIBUTIONS WILL
BE INVESTED IN ADDITIONAL SHARES.
Pay Cash for:
Income Dividends Other

DIVERSIFIED INCOME PORTFOLIO ___ ___

MUNICIPAL INCOME PORTFOLIO ___ ___

______________________________________________________________________________
CHECK ANY OF THE FOLLOWING IF YOU WOULD LIKE ADDITIONAL INFORMATION ABOUT
A PARTICULAR PLAN OR SERVICE SENT TO YOU.
___AUTOMATIC INVESTMENT PLAN ___SYSTEMATIC WITHDRAWAL PLAN ___CHECK REDEMPTIONS
(Check redemptions services are generally not available for clients of
WTC through their trust or corporate cash management accounts; this service
may also not be available for clients of Service Organizations.)
______________________________________________________________________________
RIGHTS OF ACCUMULATION (SEE PROSPECTUS) -- INDICATE ANY RELATED ACCOUNT(S) IN
FUNDS OR PORTFOLIOS IN THE RODNEY SQUARE COMPLEX WHICH WOULD QUALIFY FOR A
REDUCED SALES LOAD AS OUTLINED UNDER "PURCHASE OF SHARES-REDUCED SALES LOAD
PLANS" IN THE PROSPECTUS.

_____________________ ____________ ____________________ ___________________
Fund/Portfolio Name Account No. Registered Owner Relationship

_____________________ ____________ ____________________ ___________________
Fund/Portfolio Name Account No. Registered Owner Relationship
______________________________________________________________________________
LETTER OF INTENT
I agree to the Letter of Intent provisions set forth below. I am not obligated
but intend to invest an aggregate amount of at least:

__ $25,000 __ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000

Under the terms described under "PURCHASE OF SHARES-Reduced Sales Load Plans"
in the Prospectus, over a thirteen-month period beginning __________________.

I hereby irrevocably constitute and appoint RSMC as my agent and attorney to
surrender for redemption any or all escrowed shares with full power of
substitution in the premises.

I understand that this letter is not effective until it is accepted by RSMC.

____________________________________ ____________________________________
Authorized Signature Authorized Signature
______________________________________________________________________________
SALES LOAD WAIVERS -- PLEASE INDICATE IN THE SPACE PROVIDED THE NATURE OF YOUR
ELIGIBILITY FOR A WAIVER OF SALES LOADS. (SEE "PURCHASE OF SHARES-SALES LOAD
WAIVERS" IN THE PROSPECTUS.)

Nature of Affiliation ______________________________________________________
____________________________________________________________________________
<PAGE>
CERTIFICATIONS AND SIGNATURE(S) - PLEASE SIGN EXACTLY AS REGISTERED UNDER
"ACCOUNT REGISTRATION."
I have received and read the Prospectus for The Rodney Strategic Fixed-
Income Fund and agree to its terms; I am of legal age. I understand that the
shares offered by this Prospectus are not deposits of, or guaranteed by,
Wilmington Trust Company, nor are the shares insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency. I
further understand that investment in these shares involves investment risks,
including possible loss of principal. If a corporate customer, I certify that
appropriate corporate resolutions authorizing investment in The Rodney Square
Strategic Fixed-Income Fund been duly adopted.

I certify under penalties of perjury that the Social Security number or
taxpayer identification number shown above is correct. Unless the box below is
checked, I certify under penalties of perjury that I am not subject to backup
withholding because the Internal Revenue Service (a) has not notified me that
I am as a result of failure to report all interest or dividends, or (b) has
notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required from all nonexempt persons to
prevent backup withholding of 31% of all taxable distributions and gross
redemption proceeds under the federal income tax law.

____Check here if you are subject to backup withholding.

Signature___________________________________________ Date____________

Signature___________________________________________ Date____________
Joint Owner/Trustee
Check one: __ Owner __ Trustee __ Custodian __ Other _____________________
______________________________________________________________________________
IDENTIFICATION OF SERVICE ORGANIZATION
We authorize Rodney Square Management Corporation ("RSMC"), and Rodney
Square Distributors, Inc. ("RSD") in the case of transactions by telephone, to
act as our agents in connection with transactions authorized by this order
form.
Service Organization Name and Code____________________________________________
Branch Address and Code_______________________________________________________
Representative or Other Employee Code_________________________________________
Authorized Signature of Service Organization___________Telephone (___)________

<PAGE>
THE RODNEY SQUARE
STRATEGIC FIXED-INCOME FUND
APPLICATION for TELEPHONE REDEMPTION OPTION
______________________________________________________________________________
Telephone redemption permits redemption of fund shares by telephone, with
proceeds directed only to the fund account address of record or to the bank
account designated below. For investments by check, telephone redemption is
available only after these shares have been on the Fund's books for 10 days.

This form is to be used to add or change the telephone redemption option on
your Rodney Square Strategic Fixed-Income Fund account(s).
______________________________________________________________________________
ACCOUNT INFORMATION
Portfolio Name(s):_______________________________________________________
Fund Account Number(s):__________________________________________________
(Please provide if you are a current account holder:)

Registered in the Name(s) of:_______________________________________________

_______________________________________________

Registered Address:_________________________________________________________

_________________________________________________________

NOTE: If this form is not submitted together with the application, a coporate
resolution must be included for accounts registered to other than an individ-
ual, a fiduciary or partnership.
______________________________________________________________________________
REDEMPTION INSTRUCTIONS

___Add ___Change

Check one or more.
___Mail proceeds to my fund account address of record (must be $10,000 or
less and address must be established for a minimum of 60 days)
___Mail proceeds to my bank
___Wire proceeds to my bank (minimum $1,000)
___All of the above

Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
______________________________________________________________________________
3/96
<PAGE>
BANK INFORMATION
PLEASE COMPLETE THE FOLLOWING INFORMATION ONLY IF PROCEEDS MAILED/WIRED TO YOUR
BANK WAS SELECTED. A VOIDED BANK CHECK MUST BE ATTACHED TO THIS APPLICATION.
Name of Bank________________________________________________________________
Bank Routing Transit #______________________________________________________
Bank Address________________________________________________________________
City/State/Zip______________________________________________________________
Bank________________________________________________________________________
Account Number______________________________________________________________
Name(s) on Bank Account_____________________________________________________
______________________________________________________________________________
AUTHORIZATIONS
By electing the telephone redemption option, I appoint Rodney Square
Management Corporation ("RSMC") my agent to redeem shares of any designated
Rodney Square fund when so instructed by telephone. This power will
continue if I am disabled or incapacitated. By granting this power, I
understand that RSMC may be contacted, on my apparent behalf, by imposters.
In view of this risk, I futher understand and agree that RSMC plans to
follow reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures shall include sending proceeds to
telephone redemption requests only to my account address of record, or to
the bank listed above. Proceeds in excess of $10,000 will be sent only to
my predesignated bank. By signing below, I agree on behalf of myself,
my successors and assigns, not to hold RSMC, any of its affiliates, or any
Rodney Square fund responsible for acting under the powers I have given
RSMC, provided the aforementioned precautionary procedures are duly followed.
I also agree that all account and registration information I have given will
remain the same unless I instruct RSMC otherwise in writing, accompanied by
a signature guarantee. If I want to terminate this agreement, I will give
RSMC at least ten days notice in writing. If RSMC or other Rodney Square
funds want to terminate this agreement, they will give me at least ten days
notice in writing.

All owners on the account must sign below and obtain signature guarantee(s).

_____________________________________ ___________________________________
Signature of Individual Owner Signature of Joint Owner (if any)

______________________________________________________________________________
Signature of Corporate Officer, Trustee or other _ please include your title

You must have a signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government securi-
ties dealer, credit union, national securities exchange, registered securities
association, clearing agency or savings association. A Notary Public is not an
acceptable guarantor.
SIGNATURE GUARANTEE(S) (stamp)

<PAGE>

[Outside cover - divided into three 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
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- -------------------------------------

INVESTMENT ADVISER AND
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- -------------------------

DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- --------------------------------

RS10

[Middle Section]

the RODNEY SQUARE
STRATEGIC
FIXED-INCOME
FUND

[GRAPHIC] RSMC Logo

PROSPECTUS
JANUARY 2, 1998

[Right Section]

TABLE OF CONTENTS

PAGE
Expense Table.................................... 2
Financial Highlights............................. 4
Questions and Answers About the Portfolio........ 6
Investment Objectives and Policies............... 8
Purchase of Shares............................... 12
Shareholder Accounts............................. 15
Redemption of Shares............................. 15
Exchange of Shares............................... 17
How Net Asset Value is Determined................ 18
Dividends, Other Distributions and Taxes......... 19
Performance Information.......................... 21
Management of the Fund........................... 22
Description of the Fund.......................... 24
Appendix......................................... 25
Application & New Account Registration........... 31
<PAGE>

ii
SAI.DOC ii 12/20/96

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001

The Rodney Square Strategic Fixed-Income Fund
(the "Fund") is an open-end investment company
consisting of two portfolios, The Rodney Square
Diversified Income Portfolio (the "Diversified
Income Portfolio") and The Rodney Square Municipal
Income Portfolio (the "Municipal Income Portfolio"
and, together with the Diversified Income
Portfolio, the "Portfolios"). The Diversified
Income Portfolio seeks high total return,
consistent with high current income, by investing
principally in various types of investment grade
fixed-income securities. The Municipal Income
Portfolio seeks a high level of income exempt from
federal income tax consistent with the
preservation of capital.

STATEMENT OF ADDITIONAL INFORMATION

January 2, 1998

This Statement of Additional Information is not a
prospectus and should be read in conjunction with the Fund's
current Prospectus, dated January 2, 1998, as amended from
time to time. A copy of the current Prospectus may be
obtained, without charge, by writing to Rodney Square
Distributors, Inc. ("RSD"), Rodney Square North, 1100 North
Market Street, Wilmington, DE 19890-0001, and from certain
institutions such as banks or broker-dealers that have
entered into servicing agreements with RSD or by calling
(800) 336-9970.
TABLE OF CONTENTS
INVESTMENT POLICIES 1
SPECIAL CONSIDERATIONS 10
INVESTMENT LIMITATIONS 11
TRUSTEES AND OFFICERS 14
WILMINGTON TRUST COMPANY 15
INVESTMENT ADVISORY SERVICES 16
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS
AND RULE 12B-1 PLANS 17
PORTFOLIO TRANSACTIONS 21
PORTFOLIO TURNOVER 22
REDEMPTIONS 22
NET ASSET VALUE AND DIVIDENDS 23
PERFORMANCE INFORMATION 24
TAXES 31
DESCRIPTION OF THE FUND 34
OTHER INFORMATION 35
FINANCIAL STATEMENTS 36
APPENDIX A A-1
APPENDIX B B-1

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

INVESTMENT POLICIES

The following information supplements the information
concerning each Portfolio's investment objective, policies
and limitations found in the Prospectus.

THE DIVERSIFIED INCOME PORTFOLIO AND THE MUNICIPAL INCOME
PORTFOLIO

Wilmington Trust Company ("WTC"), the Portfolios'
Investment Adviser, employs an investment process that is
disciplined, systematic and oriented toward a quantitative
assessment and control of volatility. The Portfolios'
exposure to credit risk is moderated by limiting the
Portfolios' investments to securities that, at the time of
purchase, are rated investment grade by a nationally
recognized statistical rating organization such as Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"), or, if
unrated, are determined by WTC to be of comparable quality.
Ratings, however, are not guarantees of quality or of stable
credit quality. WTC continuously monitors the quality of
the Portfolios' holdings, and should the rating of a
security be downgraded or its quality be adversely affected,
WTC will determine whether it is in the best interest of the
affected Portfolio to retain or dispose of the security.
The effect of interest rate fluctuations in the market
on the principal value of the Portfolios is moderated by
limiting the average dollar weighted duration of their
investments - in the case of the Diversified Income
Portfolio to a range of 2 1/2 to 4 years and in the case of the
Municipal Income Portfolio to a range of 4 to 8 years.
Investors may be more familiar with the term average
effective maturity (when, on average, the fixed-income
securities held by the Portfolio will mature) which is
sometimes used to express the anticipated term of the
Portfolios' investments. Generally, the stated maturity of
a fixed-income security is longer than its projected
duration. Under normal market conditions, the average
effective maturity, in the case of the Diversified Income
Portfolio, is expected to fall within a range of
approximately 3 to 5 years, and in the case of the Municipal
Income Portfolio, within a range of approximately 5 to 10
years.

THE DIVERSIFIED INCOME PORTFOLIO
WTC's goal in managing the Diversified Income Portfolio
is to gain additional return by analyzing the market
complexities and individual security attributes which affect
the returns of fixed-income securities. The Portfolio is
intended to appeal to investors who want a thoughtful
exposure to the broad fixed-income securities market and the
high current returns that characterize the short-term to
intermediate-term sector of that market.
Given the short to intermediate average duration of the
Diversified Income Portfolio's holdings and the current
interest rate environment, the Portfolio should experience
smaller price fluctuations than those experienced by longer
term bond funds and a higher yield than fixed-price money
market funds. Of course, the Portfolio will likely
experience larger price fluctuations than money market funds
and a lower yield than longer term bond funds. Given the
quality of its holdings, which must be investment grade
(rated within the top four categories) or comparable to
investment grade securities at the time of purchase, the
Portfolio will accept lower yields in order to avoid the
credit concerns experienced by funds that invest in lower
quality fixed-income securities.

THE MUNICIPAL INCOME PORTFOLIO
WTC's goal in managing the Municipal Income Portfolio
is to achieve high interest income that is exempt from
federal income tax and to preserve capital by analyzing the
market complexities and individual security attributes which
affect the returns of municipal securities and other types
of fixed-income securities. The Portfolio is intended to
appeal to investors who want high current tax-free income
with moderate price fluctuations.
Given the intermediate average duration of the
Municipal Income Portfolio's holdings and the current
interest rate environment, the Portfolio should experience
smaller price fluctuations than those experienced by longer
term municipal funds and a higher yield than fixed-price tax-
exempt money market funds. Of course, the Portfolio will
likely experience larger price fluctuations than money
market funds and a lower yield than longer term municipal
funds. Given the quality of its holdings, which must be
investment grade (rated within the top four categories) or
comparable to investment grade securities at the time of
purchase, the Portfolio should also experience lesser price
fluctuations (as well as lower yields) than those
experienced by funds that invest in lower quality tax-exempt
securities.
The Municipal Income Portfolio may invest in the
securities of other investment companies within the limits
prescribed by the 1940 Act. Under normal circumstances, the
Portfolio intends to invest less than 5% of the value of its
assets in the securities of other investment companies. In
addition to the Portfolio's expenses (including the various
fees), as a shareholder in another investment company, the
Portfolio would bear its pro rata portion of the other
investment company's expenses (including fees). However,
the Portfolio's Investment Adviser will waive its investment
advisory fee with respect to the assets of the Portfolio
invested in other investment companies, to the extent of the
advisory fee charged by any investment adviser to such
investment company.

PORTFOLIO INVESTMENTS
The Portfolios may purchase the following types of
fixed-income securities:

FIXED-INCOME SECURITIES WITH BUY-BACK FEATURES. Fixed-
income securities with buy-back features enable the
Portfolios to recover principal upon tendering the
securities to the issuer or a third party. These buy-back
features are often supported by letters of credit issued by
domestic or foreign banks. In evaluating a foreign bank's
credit, WTC considers whether adequate public information
about the bank is available and whether the bank may be
subject to unfavorable political or economic developments,
currency controls or other governmental restrictions that
could adversely affect the bank's ability to honor its
commitment under the letter of credit. The Municipal Income
Portfolio will not acquire municipal securities with buy-
back features if, in the opinion of counsel, the existence
of a buy-back feature would alter the tax-exempt nature of
interest payments on the underlying securities and cause
those payments to be taxable to that Portfolio and its
shareholders.
Buy-back features include standby commitments, put
bonds and demand features.
STANDBY COMMITMENTS. The Portfolios may
acquire standby commitments from broker-dealers,
banks or other financial intermediaries to enhance
the liquidity of portfolio securities. A standby
commitment entitles a Portfolio to same day
settlement at amortized cost plus accrued
interest, if any, at the time of exercise. The
amount payable by the issuer of the standby
commitment during the time that the commitment is
exercisable generally approximates the market
value of the securities underlying the commitment.
Standby commitments are subject to the risk that
the issuer of a commitment may not be in a
position to pay for the securities at the time
that the commitment is exercised.
Ordinarily, a Portfolio will not transfer a
standby commitment to a third party, although the
Portfolio may sell securities subject to a standby
commitment at any time. A Portfolio may purchase
standby commitments separate from or in
conjunction with the purchase of the securities
subject to the commitments. In the latter case,
the Portfolio may pay a higher price for the
securities acquired in consideration for the
commitment.
PUT BONDS. A put bond (also referred to as a
tender option or third party bond) is a bond
created by coupling an intermediate or long-term
fixed rate bond with an agreement giving the
holder the option of tendering the bond to receive
its par value. As consideration for providing
this tender option, the sponsor of the bond
(usually a bank, broker-dealer or other financial
intermediary) receives periodic fees that equal
the difference between the bond's fixed coupon
rate and the rate (determined by a remarketing or
similar agent) that would cause the bond, coupled
with the tender option, to trade at par. By
paying the tender offer fees, a Portfolio in
effect holds a demand obligation that bears
interest at the prevailing short-term rate.
In selecting put bonds for the Portfolios,
WTC takes into consideration the creditworthiness
of the issuers of the underlying bonds and the
creditworthiness of the providers of the tender
option features. A sponsor may withdraw the
tender option feature if the issuer of the
underlying bond defaults on interest or principal
payments, the bond's rating is downgraded or, in
the case of a municipal bond, the bond loses its
tax-exempt status.

DEMAND FEATURES. Many variable rate
securities carry demand features that permit the
holder to demand repayment of the principal amount
of the underlying securities plus accrued
interest, if any, upon a specified number of days'
notice to the issuer or its agent. A demand
feature may be exercisable at any time or at
specified intervals. Variable rate securities
with demand features are treated as having a
maturity equal to the time remaining before the
holder can next demand payment of principal. The
issuer of a demand feature instrument may have a
corresponding right to prepay the outstanding
principal of the instrument plus accrued interest,
if any, upon notice comparable to that required
for the holder to demand payment.

GUARANTEED INVESTMENT CONTRACTS. A guaranteed
investment contract ("GIC") is a general obligation of an
insurance company. A GIC is generally structured as a
deferred annuity under which the purchaser agrees to pay a
given amount of money to an insurer (either in a lump sum or
in installments) and the insurer promises to pay interest at
a guaranteed rate (either fixed or variable) for the life of
the contract. Some GIC's provide that the insurer may
periodically pay discretionary excess interest over and
above the guaranteed rate. At the GIC's maturity, the
purchaser generally is given the option of receiving payment
or an annuity. Certain GIC's may have features which permit
redemption by the issuer at a discount from par value.
Generally, GIC's are not assignable or transferable
without the permission of the issuer. As a result, the
acquisition of GIC's is subject to the limitations
applicable to each Portfolio's acquisition of illiquid and
restricted securities. The holder of GIC's is dependent on
the creditworthiness of the issuer as to whether the issuer
is able to meet its obligations. Neither Portfolio intends
to invest more than 5% of its net assets in GIC's.

ILLIQUID SECURITIES. A Portfolio may not purchase or
otherwise acquire any security or invest in a repurchase
agreement if, as a result, more than 15% of the Portfolio's
net assets (taken at current value) would be invested in
illiquid securities. For purposes of this limitation,
repurchase agreements not entitling the holder to payment of
principal within seven days and securities that are illiquid
by virtue of legal or contractual restrictions on resale
("restricted securities") or the absence of a readily
available market are considered illiquid.
Restricted securities may be sold only in privately
negotiated transactions, pursuant to an exemption from
registration under the 1933 Act or in a registered public
offering. Where registration is required, a Portfolio may
be obligated to pay all or part of the registration expense
and a considerable period may elapse before the Portfolio
may sell the security under an effective registration
statement. If, during such a period, adverse market
conditions were to develop, the Portfolio might obtain a
less favorable price than prevailed when it initially
decided to sell the security.
In recent years a large institutional market has
developed for certain securities that are not registered
under the 1933 Act, including private placements, repurchase
agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. These instruments
are often restricted securities because the securities are
either themselves exempt from registration or sold in
transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments
to the general public, but instead will often depend either
on an efficient institutional market in which such
unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such
investments.
To facilitate the increased size and liquidity of the
institutional markets for unregistered securities, the SEC
adopted Rule 144A under the 1933 Act. Rule 144A establishes
a "safe harbor" from the registration requirements of the
1933 Act for resale of certain securities to qualified
institutional buyers. Institutional markets for restricted
securities have developed as a result of Rule 144A,
providing both readily ascertainable values for restricted
securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets include
automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers,
such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. An insufficient
number of qualified institutional buyers interested in
purchasing Rule 144A-eligible restricted securities held by
a Portfolio, however, could affect adversely the
marketability of such portfolio securities, and a Portfolio
might be unable to dispose of such securities promptly or at
reasonable prices.
The Board of Trustees has the ultimate responsibility
for determining whether 144A securities are liquid or
illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to WTC pursuant to
guidelines approved by the Board. WTC monitors the
liquidity of 144A securities in each Portfolio's portfolio
and reports periodically on such decisions to the Trustees.
WTC takes into account a number of factors in reaching
liquidity decisions, including (1) the frequency of trades
for the security, (2) the number of dealers that made quotes
for the security, (3) the number of dealers that have
undertaken to make a market in the security, (4) the number
of other potential purchasers for the security and (5) the
nature of the security and how trading is effected (E.G.,
the time needed to sell the security, how offers are
solicited and the mechanics of the transfer).
OVER-THE-COUNTER OPTIONS. All or a portion
of the value of the instrument underlying an over-
the-counter option may be illiquid depending on
the assets held to cover the option and the nature
and terms of any agreement a Portfolio may have to
close out the option before expiration.

MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
are securities representing interests in a pool of mortgages
secured by real property.
Government National Mortgage Association ("GNMA")
mortgage-backed securities are securities representing
interests in pools of mortgage loans to residential home
buyers made by lenders such as mortgage bankers, commercial
banks and savings associations and are either guaranteed by
the Federal Housing Administration or insured by the
Veterans Administration. Timely payment of interest and
principal on each mortgage loan is backed by the full faith
and credit of the U.S. Government.
The Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC") both issue
mortgage-backed securities that are similar to GNMA
securities in that they represent interests in pools of
mortgage loans. FNMA guarantees timely payment of interest
and principal on its certificates and FHLMC guarantees
timely payment of interest and ultimate payment of
principal. FHLMC also has a program under which it
guarantees timely payment of scheduled principal as well as
interest. FNMA and FHLMC guarantees are backed only by
those agencies and not by the full faith and credit of the
U.S. Government.
In the case of mortgage-backed securities that are not
backed by the U.S. Government or one of its agencies, a loss
could be incurred if the collateral backing these securities
is insufficient. This may occur even though the collateral
is U.S. Government-backed.
Most mortgage-backed securities pass monthly payment of
principal and interest through to the holder after deduction
of a servicing fee. However, other payment arrangements are
possible. Payments may be made to the holder on a different
schedule than that on which payments are received from the
borrower, including, but not limited to, weekly, bi-weekly
and semiannually. The monthly principal and interest
payments also are not always passed through to the holder on
a pro-rata basis. In the case of collateralized mortgage
obligations ("CMO's"), the pool is divided into two or more
tranches and special rules for the disbursement of principal
and interest payments are established.
CMO residuals are derivative securities that generally
represent interests in any excess cash flow remaining after
making required payments of principal and interest to the
holders of the CMO's described above. Yield to maturity on
CMO residuals is extremely sensitive to prepayments. In
addition, if a series of a CMO includes a class that bears
interest at an adjustable rate, the yield to maturity on the
related CMO residual also will be extremely sensitive to the
level of the index upon which interest rate adjustments are
based.
Stripped mortgage-backed securities ("SMBS") are
derivative multi-class mortgage securities and may be issued
by agencies or instrumentalities of the U.S. Government or
by private mortgage lenders. SMBS usually are structured
with two classes that receive different proportions of the
interest and/or principal distributions on a pool of
mortgage assets. A common type of SMBS will have one class
of holders receiving all interest payments - "Interest Only"
or "IO" - and another class of holders receiving the
principal repayments - "Principal Only" or "PO." The yield
to maturity of IO and PO classes are extremely sensitive to
prepayments on the underlying mortgage assets.
Although the Portfolios do not intend to invest in
securities of investment companies generally, a Portfolio
may invest in mortgage-backed securities that are issued by
entities that would be considered investment companies under
the Investment Company Act of 1940 ("1940 Act") but for an
exemption from that Act granted by the Securities and
Exchange Commission ("SEC"); and the Municipal Income
Portfolio, as noted in the Prospectus, may invest, under
certain circumstances, in money market funds.

MUNICIPAL SECURITIES. Municipal securities are debt
obligations issued by or on behalf of states, territories
and possessions of the United States, the District of
Columbia and their sub-divisions, agencies and
instrumentalities, the interest on which is, in the opinion
of bond counsel, exempt from federal income tax. These debt
obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of
outstanding debts. They may also be issued to finance
various privately owned or operated activities. The three
general categories of municipal securities are general
obligation, revenue or special obligation and private
activity municipal securities.
GENERAL OBLIGATION SECURITIES. The proceeds
from general obligation securities are used to
fund a wide range of public projects, including
the construction or improvement of schools,
highways and roads, and water and sewer systems.
These obligations are secured by the
municipality's pledge of principal and interest
and are payable from the municipality's general
unrestricted revenues.
REVENUE OR SPECIAL OBLIGATION SECURITIES.
The proceeds from revenue or special obligation
securities are used to fund a wide variety of
capital projects, including electric, gas, water
and sewer systems; highways, bridges and tunnels;
port and airport facilities; colleges and
universities; and hospitals. These obligations
are secured by revenues from a specific facility
or group of facilities or, in some cases, from a
specific revenue source such as an excise tax.
Many municipal issuers also establish a debt
service reserve fund from which principal and
interest payments are made. Further security may
be available in the form of the state's ability,
without obligation, to make up deficits in the
reserve fund.
MUNICIPAL LEASE OBLIGATIONS. These
revenue or special obligation securities
may take the form of a lease, an
installment purchase or a conditional sale
contract issued by state and local
governments and authorities to acquire
land, equipment and facilities. Usually,
the Portfolios will purchase a
participation interest in a municipal lease
obligation from a bank or other financial
intermediary. The participation interest
gives the holder a pro rata, undivided
interest in the total amount of the
obligation.
Municipal leases frequently have risks
distinct from those associated with general
obligation or revenue bonds. The interest
income from the lease obligation may become
taxable if the lease is assigned. Also, to
free the municipal issuer from
constitutional or statutory debt issuance
limitations, many leases and contracts
include non-appropriation clauses providing
that the municipality has no obligation to
make future payments under the lease or
contract unless money is appropriated for
that purpose by the municipality on a
yearly or other periodic basis. Finally,
the lease may be illiquid.
RESOURCE RECOVERY BONDS. A number of
factors may affect the value and credit
quality of these revenue or special
obligations. These factors include the
viability of the project being financed,
environmental protection regulations and
project operator tax incentives.

PRIVATE ACTIVITY SECURITIES. Private
activity securities may be issued by
municipalities to finance privately owned or
operated educational, hospital or housing
facilities, local facilities for water supply,
gas, electricity, sewage or solid waste disposal,
and industrial or commercial facilities. The
payment of principal and interest on these
obligations generally depends upon the credit of
the private owner/user of the facilities financed
and, in certain instances, the pledge of real and
personal property by the private owner/user. The
interest income from certain types of private
activity securities may be considered a tax
preference item for purposes of the federal
alternative minimum tax ("AMT").
Short-term municipal securities include the following:
TAX ANTICIPATION NOTES ("TAN'S") AND REVENUE
ANTICIPATION NOTES ("RAN'S"). These notes are
issued by states, municipalities and other tax-
exempt issuers to finance short-term cash needs
or, occasionally, to finance construction. Most
TAN's and RAN's are general obligations of the
issuing entity payable from taxes or revenues,
respectively, expected to be received within one
year.
BOND ANTICIPATION NOTES ("BAN'S"). These
notes are issued with the expectation that
principal and interest of the maturing notes will
be paid out of proceeds from bonds to be issued
concurrently or at a later date. BAN's are issued
most frequently by revenue bond issuers to finance
such items as construction and mortgage purchases.
CONSTRUCTION LOAN NOTES ("CLN'S"). These
notes are issued primarily by housing agencies to
finance construction of projects for an interim
period prior to a bond issue. CLN's are secured
by a lien on the property under construction.

PARTICIPATION INTERESTS AND ASSET-BACKED SECURITIES.
The Portfolios may invest in participation interests in
fixed-income securities. A participation interest provides
the certificate holder with a specified interest in an issue
of fixed-income securities. The Portfolios may also
purchase participation interests in pools of securities
backed by various types of fixed-income obligations, known
as "asset-backed securities." For example, the Diversified
Income Portfolio may purchase interests in fixed-income
obligations generated by motor vehicle installment sales,
installment loan contracts, leases of various types of real
and personal property and receivables from revolving credit
card agreements. The Municipal Income Portfolio may
purchase interests in leases of various types of municipal
property.
Some participation interests give the holders differing
interests in the underlying securities, depending upon the
type or class of certificate purchased. For example, coupon
strip certificates give the holder the right to receive a
specific portion of interest payments on the underlying
securities; principal strip certificates give the holder the
right to receive principal payments and the portion of
interest not payable to coupon strip certificate holders.
Holders of certificates of participation in interest
payments may be entitled to receive a fixed rate of
interest, a variable rate that is periodically reset to
reflect the current market rate or an auction rate that is
periodically reset at auction. Asset-backed residuals
represent interests in any excess cash flow remaining after
required payments of principal and interest have been made.
More complex participation interests involve special
risk considerations. Since these instruments have only
recently been developed, there can be no assurance that any
market will develop or be maintained for the instruments.
Generally, the fixed-income securities that are deposited in
trust for the holders of these interests are the sole source
of payments on the interests; holders cannot look to the
sponsor or trustee of the trust or to the issuers of the
securities held in trust or to any of their affiliates for
payment.
Participation interests purchased at a discount may
experience price volatility. Certain types of interests are
sensitive to fluctuations in market interest rates and to
prepayments on the underlying securities. A rapid rate of
prepayment can result in the failure to recover the holder's
initial investment.
The extent to which the yield to maturity of a
participation interest is sensitive to prepayments depends,
in part, upon whether the interest was purchased at a
discount or premium, and if so, the size of that discount or
premium. Generally, if a participation interest is
purchased at a premium and principal distributions occur at
a rate faster than that anticipated at the time of purchase,
the holder's actual yield to maturity will be lower than
that assumed at the time of purchase. Conversely, if a
participation interest is purchased at a discount and
principal distributions occur at a rate faster than that
assumed at the time of purchase, the investor's actual yield
to maturity will be higher than that assumed at the time of
purchase.
Participation interests in pools of fixed-income
securities backed by certain types of debt obligations
involve special risk considerations. The issuers of
securities backed by automobile and truck receivables
typically file financing statements evidencing security
interests in the receivables, and the servicers of those
obligations take and retain custody of the obligations. If
the servicers, in contravention of their duty to the holders
of the securities backed by the receivables, were to sell
the obligations, the third party purchasers could acquire an
interest superior to the interest of the security holders.
Also, most states require that a security interest in a
vehicle be noted on the certificate of title and the
certificate of title may not be amended to reflect the
assignment of the lender's security interest. Therefore,
the recovery of the collateral in some cases may not be
available to support payments on the securities. Securities
backed by credit card receivables are generally unsecured,
and both federal and state consumer protection laws may
allow set-offs against certain amounts owed.
The Municipal Income Portfolio will only invest in
participation interests in municipal securities, municipal
leases or in pools of securities backed by municipal assets
if, in the opinion of counsel, any interest income on the
participation interest will be exempt from federal income
tax to the same extent as the interest on the underlying
securities.

VARIABLE AND FLOATING RATE SECURITIES. Each Portfolio
may invest in variable and floating rate securities. The
terms of variable and floating rate instruments provide for
the interest rate to be adjusted according to a formula on
certain predetermined dates. Floating rate securities have
interest rates that change whenever there is a change in a
designated base rate while variable rate securities provide
for a specified periodic adjustment in the interest rate.
In both cases, these adjustments are intended to result in
the securities having a market value that approximates their
par value.
The variable rate nature of these securities decreases
changes in their value due to interest rate fluctuations.
As interest rates decrease or increase, the potential for
capital gain and the risk of capital loss is less than would
be the case for fixed-income securities. Variable and
floating rate instruments with minimum or maximum rates set
by state law are subject to somewhat greater fluctuations in
value. Because the adjustment of interest rates on floating
and variable rate securities is made in relation to a
designated base rate or rate adjustment index, interest
rates on these securities may be higher or lower than
current market rates for fixed rate obligations of
comparable quality with similar stated maturities. Variable
and floating rate instruments that are repayable on demand
at a future date are deemed to have a maturity equal to the
time remaining until the principal will be received on the
assumption that the demand feature is exercised on the
earliest possible date. For the purposes of evaluating the
credit risks of variable and floating rate instruments,
these instruments are deemed to have a maturity equal to the
time remaining until the earliest date the holder is
entitled to demand repayment of principal.
Each Portfolio may also purchase inverse floaters which
are floating rate instruments whose interest rates bear an
inverse relationship to the interest rate on another
security or the value of an index. Changes in the interest
rate on the other security or index inversely affect the
interest rate paid on the inverse floater, with the result
that the inverse floater's price is considerably more
volatile than that of a fixed rate security. For example,
an issuer may decide to issue two variable rate instruments
instead of a single long-term, fixed rate bond. The
interest rate on one instrument reflects short-term interest
rates, while the interest rate on the other instrument (the
inverse floater) reflects the approximate rate the issuer
would have paid on a fixed rate bond multiplied by two minus
the interest rate paid on the short-term instrument.
Depending on market availability, the two variable rate
instruments may be combined to form a fixed rate bond. The
market for inverse floaters is relatively new.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY
TRANSACTIONS. Each Portfolio may buy when-issued securities
or sell securities on a delayed-delivery basis. This means
that delivery and payment for the securities normally will
take place approximately 15 to 90 days after the date of the
transaction. The payment obligation and the interest rate
that will be received are each fixed at the time the buyer
enters into the commitment. During the period between
purchase and settlement, no payment is made by the purchaser
and no interest accrues to the purchaser. However, when a
security is sold on a delayed-delivery basis, the seller
does not participate in further gains or losses with respect
to the security. If the other party to a when-issued or
delayed-delivery transaction fails to transfer or pay for
the securities, the Portfolio could miss a favorable price
or yield opportunity or could suffer a loss.
A Portfolio will make a commitment to purchase when-
issued securities only with the intention of actually
acquiring the securities, but the Portfolio may dispose of
the commitment before the settlement date if it is deemed
advisable as a matter of investment strategy. A Portfolio
may also sell the underlying securities before they are
delivered which may result in gains or losses. A separate
account for each Portfolio is established at the Fund's
custodian bank, into which cash and/or liquid securities
equal to the amount of when-issued purchase commitments is
deposited. If the market value of the deposited securities
declines, additional cash or securities will be placed in
the account on a daily basis to cover the Portfolio's
outstanding commitments.
When a Portfolio purchases a security on a when-issued
basis, the security is recorded as an asset on the
commitment date and is subject to changes in market value
generally, based upon changes in the level of interest
rates. Thus, upon delivery, the market value of the
security may be higher or lower than its cost, and this may
increase or decrease the Portfolio's net asset value. When
payment for a when-issued security is due, a Portfolio will
meet its obligations from then-available cash flow, the sale
of the securities held in the separate account, the sale of
other securities or from the sale of the when-issued
securities themselves. The sale of securities to meet a
when-issued purchase obligation carries with it the
potential for the realization of capital gains or losses.
The Municipal Income Portfolio may purchase securities
on a when-issued basis in connection with the refinancing of
an issuer's outstanding indebtedness ("refunding
contracts"). These contracts require the issuer to sell and
the Portfolio to buy municipal obligations at a stated price
and yield on a settlement date that may be several months or
several years in the future. The offering proceeds are then
used to refinance existing municipal obligations. Although
the Municipal Income Portfolio may sell its rights under a
refunding contract, the secondary market for these contracts
may be less liquid than the secondary market for other types
of municipal securities. The Portfolio generally will not
be obligated to pay the full purchase price if it fails to
perform under a refunding contract. Instead, refunding
contracts usually provide for payment of liquidated damages
to the issuer (currently 15-20% of the purchase price). The
Portfolio may secure its obligation under a refunding
contract by depositing collateral or a letter of credit
equal to the liquidated damages provision of the refunding
contract. When required by SEC guidelines, the Portfolio
will place liquid assets in a segregated custodial account
equal in amount to its obligations under outstanding
refunding contracts.

ZERO COUPON BONDS. The Portfolios may invest in zero
coupon bonds of governmental or private issuers that
generally pay no interest to their holders prior to
maturity. Since zero coupon bonds do not make regular
interest payments, they allow an issuer to avoid the need to
generate cash to meet current interest payments and may
involve greater credit risks than bonds paying interest
currently. Tax laws requiring the distribution of accrued
discount on the bonds, even though no cash equivalent
thereto has been paid, may cause a Portfolio to liquidate
investments in order to make the required distributions.
LENDING OF PORTFOLIO SECURITIES. Each Portfolio may
make fully collateralized loans of its portfolio securities.
The Municipal Income Portfolio has no current intention of
so doing, and would lend its portfolio securities only under
unusual market conditions, since the interest income that a
Portfolio receives from lending its securities is considered
taxable income.
When a Portfolio lends its portfolio securities, it
will retain all or a portion of the interest received on
investment of the cash collateral or will receive a fee from
the borrower. Although voting rights, or rights to consent,
with respect to the loaned securities will pass to the
borrower, the Portfolio will retain the right to call a loan
at any time on reasonable notice, and will do so to exercise
voting rights, or rights to consent, on any matter
materially affecting the investment. A Portfolio may also
call these loans in order to sell the securities.

OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT
STRATEGIES. Although the Municipal Income Portfolio has no
current intention of so doing, each Portfolio may use
options, futures contracts and (with respect to the
Diversified Income Portfolio only) forward currency
contracts as described in the Appendix to the Prospectus.
For additional information regarding such investment
strategies, see the discussion in Appendix A to this
Statement of Additional Information.
CONCENTRATION POLICY - THE MUNICIPAL INCOME PORTFOLIO
The Municipal Income Portfolio may invest more than 25%
of its assets in sectors of the municipal securities market,
such as the health care, housing or electric utilities
sectors.

HEALTH CARE SECTOR. The health care industry is
subject to regulatory action by a number of private and
governmental agencies, including federal, state and local
governmental agencies. A major source of revenues for the
industry is payments from the Medicare and Medicaid
programs. As a result, the industry is sensitive to
legislative changes and reductions in governmental spending
for those programs. Numerous other factors may affect the
industry, such as general and local economic conditions;
demand for services; expenses (including malpractice
insurance premiums); and competition among health care
providers. In the future, the following may adversely
affect the industry: adoption of legislation proposing a
national health insurance program; medical and technological
advances which alter the demand for health services or the
way in which such services are provided; and efforts by
employers, insurers and governmental agencies to reduce the
costs of health insurance and health care services.
Health care facilities include life care facilities,
nursing homes and hospitals. Bonds to finance these
facilities are typically secured by the revenues from the
facilities and not by state or local government tax
payments. Moreover, in the case of life care facilities,
since a portion of housing, medical care and other services
may be financed by an initial deposit, there may be a risk
of default in the payment of principal or interest on a bond
issue if the facility does not maintain adequate financial
reserves for debt service.

HOUSING SECTOR. Housing revenue bonds typically are
issued by state, county and local housing authorities and
are secured only by the revenues of mortgages originated by
those authorities using the proceeds of the bond issues.
Factors that may affect the financing of multi-family
housing projects include acceptable completion of
construction, proper management, occupancy and rent levels,
economic conditions and changes in regulatory requirements.
Since the demand for mortgages from the proceeds of a
bond issue cannot be precisely predicted, the proceeds may
be in excess of demand, which would result in early
retirement of the bonds by the issuer. Since the cash flow
from mortgages cannot be precisely predicted, differences in
the actual cash flow from the assumed cash flow could have
an adverse impact upon the issuer's ability to make
scheduled payments of principal and interest or could result
in early retirement of the bonds.
Scheduled principal and interest payments are often
made from reserve or sinking funds. These reserves are
funded from the bond proceeds, assuming certain rates of
return on investment of the reserve funds. If the assumed
rates of return are not realized because of changes in
interest rate levels or for other reasons, the actual cash
flow for scheduled payments of principal and interest on the
bonds may be inadequate.

ELECTRIC UTILITIES SECTOR. The electric utilities
industry has experienced, and may experience in the future:
problems in financing large construction programs in an
inflationary period; cost increases and delays caused by
environmental considerations (particularly with respect to
nuclear facilities); difficulties in obtaining fuel at
reasonable prices; the effects of conservation on the demand
for energy; increased competition from alternative energy
sources; and the effects of rapidly changing licensing and
safety requirements.

SPECIAL CONSIDERATIONS
YIELD FACTORS. The yields on fixed-income securities
depend on a variety of factors, including general debt
market conditions, effective marginal tax rates, general
conditions in the municipal securities market, the financial
condition of the issuer, the size of a particular offering,
the maturity of the obligation and the rating of the issue.
In an attempt to capitalize on the differences in the yield
and price of fixed-income securities of differing
maturities, maturities may be varied according to the
structure and level of interest rates and WTC's expectations
of changes in those rates. The interest rate and price
relationships between different categories of fixed-income
securities of the same or generally similar maturity tend to
reflect broad swings in interest rates and relative supply
and demand. Disparities in yield relationships may afford
opportunities to invest in more attractive market sectors or
specific issues. Changing preferences and circumstances of
lenders and borrowers in different market sectors may also
present market trading opportunities. WTC may sell
securities held for brief periods of time if it believes
that a transaction, net of costs (including taxes with
respect to the Municipal Income Portfolio), will improve the
overall return of a Portfolio.

RATINGS. Moody's and S&P are private services that
provide ratings of the credit quality of debt obligations.
A description of the ratings assigned by Moody's and S&P to
the securities in which the Portfolios may invest is
included in Appendix B to this Statement of Additional
Information. These ratings represent the opinions of these
rating services as to the quality of the securities which
they undertake to rate. It should be emphasized, however,
that ratings are general and are not absolute standards of
quality. WTC attempts to discern variations in credit
rankings of the rating services and to anticipate changes in
credit ranking. However, subsequent to purchase by a
Portfolio, an issue of securities may cease to be rated or
its rating may be reduced below the minimum rating required
for purchase by the Portfolio. In that event, WTC will
consider whether it is in the best interest of the Portfolio
to continue to hold the securities.

CREDIT RISK. Although each Portfolio's quality
standards are designed to minimize the credit risk of
investments by the Portfolio, that risk cannot be entirely
eliminated. The securities in which a Portfolio may invest
are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors,
such as the Federal Bankruptcy Code, and laws, if any, which
may be enacted by Congress or the state legislatures
extending the time for payment of principal or interest, or
both, or imposing other constraints upon enforcement of such
obligations. There is also the possibility that litigation
or other conditions may adversely affect the power or
ability of issuers to meet interest and principal payments
on their debt obligations.

THE MUNICIPAL INCOME PORTFOLIO
PROPOSED LEGISLATION. From time to time, proposals
have been introduced before Congress for the purpose of
restricting or eliminating the federal income tax exemption
for interest on debt obligations issued by states and their
political subdivisions. For example, federal tax law
now limits the types and amounts of tax-exempt
bonds issuable for industrial development and other types of
private activities. These limitations may affect the future
supply and yields of private activity securities. Further
proposals affecting the value of tax-exempt securities may be
introduced in the future. In addition, proposals have been
made, such as that involving the "flat tax," that could
reduce or eliminate the value of that exemption. If the
availability of municipal securities for investment or the
value of the Municipal Income Portfolio's holdings could be
materially affected by such changes in the law, the Trustees
would reevaluate the Portfolio's investment objective and
policies or consider the Portfolio's dissolution.

INVESTMENT LIMITATIONS
The investment limitations described below are
fundamental, and may not be changed with respect to either
Portfolio without the affirmative vote of the lesser of (i)
67% of the shares of the Portfolio present at a
shareholders' meeting if the holders of more than 50% of the
outstanding shares of the Portfolio are present in person or
by proxy or (ii) more than 50% of the outstanding shares of
the Portfolio.
Each Portfolio will not as a matter of fundamental
policy:
(1) purchase securities of any one issuer if
as a result more than 5% of the Portfolio's total
assets would be invested in such issuer or the
Portfolio would own or hold 10% or more of the
outstanding voting securities of that issuer,
except that up to 25% of the Portfolio's total
assets may be invested without regard to these
limitations and provided that these limitations do
not apply to securities issued or guaranteed by
the U.S. Government, its agencies or
instrumentalities;
(2) purchase securities of any issuer if, as
a result, more than 25% of its total assets would
be invested in securities of a particular
industry, provided that this limitation does not
apply to securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities
or to municipal securities;
(3) borrow money, except (i) from a bank for
temporary or emergency purposes (not for
leveraging or investment) or (ii) by engaging in
reverse repurchase agreements, provided that
borrowings do not exceed an amount equal to one-
third of the current value of the Portfolio's
assets taken at market value, less liabilities
other than borrowings;
(4) underwrite any issue of securities,
except to the extent that the Portfolio may be
considered to be acting as underwriter in
connection with (i) the disposition of any
portfolio security, or (ii) the disposition of
restricted securities;
(5) purchase or sell real estate or real
estate limited partnership interests, but this
limitation shall not prevent the Portfolio from
investing in obligations secured by real estate or
interests therein or obligations issued by
companies that invest in real estate or interests
therein, including real estate investment trusts;
(6) invest in commodities or commodity
contracts, except financial and foreign currency
futures contracts and options thereon, options on
foreign currencies and forward currency contracts;
(7) make loans, except by (i) the purchase
of a portion of an issue of debt securities in
accordance with the Portfolio's investment
objective, policies and limitations, (ii) engaging
in repurchase agreements, or (iii) engaging in
securities loan transactions limited to one-third
of the Portfolio's total assets; or
(8) issue senior securities, except as
appropriate to evidence indebtedness that the
Portfolio is permitted to incur, and provided that
the Portfolio may issue shares of additional
series or classes that the Trustees may establish,
and provided further that futures, options and
forward currency transactions will not be deemed
to be senior securities for this purpose.

For purposes of investment limitation (2), repurchase
agreements fully collateralized by U.S. Government
obligations are treated as U.S. Government obligations.
The following non-fundamental policies have
been adopted by the Fund's Board of Trustees with
respect to each Portfolio and may be changed by
the Board without shareholder approval. As a
matter of non-fundamental policy, each Portfolio
will not:
(1) (i) purchase or retain the securities of
any open-end investment company except the
Municipal Income Portfolio may invest in money
market funds, or (ii) purchase the securities of
any closed-end investment company except in the
open market where no commission except the
ordinary broker's commission is paid, provided
that in any event the Portfolio may not invest
more than 10% of its total assets in securities
issued by investment companies, invest more than
5% of its total assets in securities issued by any
one investment company or purchase more than 3% of
the voting securities of any one such investment
company. This limitation does not apply to
securities received as dividends, through offers
of exchange, or as a result of merger,
consolidation, reorganization or acquisition of
assets;
(2) purchase or otherwise acquire any
security or invest in a repurchase agreement with
respect to any securities if, as a result, more
than 15% of the Portfolio's net assets (taken at
current value) would be invested in repurchase
agreements not entitling the holder to payment of
principal within seven days and in securities that
are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily
available market. Securities used to cover over-
the-counter ("OTC") call options written by the
Portfolio are considered illiquid unless the OTC
options are sold to qualified dealers who agree
that the Portfolio may repurchase any OTC options
it writes for a maximum price to be calculated by
a formula set forth in the option agreement. The
cover for an OTC call option written subject to
this procedure is considered illiquid only to the
extent that the maximum repurchase price under the
formula exceeds the intrinsic value of the option;
(3) purchase securities for investment while
any bank borrowing equaling 5% or more of the
Portfolio's total assets is outstanding;
(4) pledge, mortgage or hypothecate the
Portfolio's assets except the Portfolio may pledge
securities having a market value at the time of
the pledge not exceeding one-third of the value of
the Portfolio's total assets to secure borrowing,
and the Portfolio may deposit initial and
variation margin in connection with transactions
in futures contracts and options on futures
contracts;
(5) make short sales of securities except
that the Portfolio may make short sales against
the box;
(6) purchase securities on margin, except
that (i) the Portfolio may obtain short-term
credit for the clearance of transactions; and (ii)
the Portfolio may make initial margin deposits and
variation margin payments in connection with
transactions in futures contracts and options
thereon;
(7) when engaging in options, futures and
forward currency contract strategies, a Portfolio
will either: (i) set aside cash or liquid
securities in a segregated account with the Fund's
custodian in the prescribed amount; or (ii) hold
securities or other options or futures contracts
whose values are expected to offset ("cover") its
obligations thereunder. Securities, currencies or
other options or futures contracts used for cover
cannot be sold or closed out while the strategy is
outstanding, unless they are replaced with similar
assets;
(8) purchase or sell non-hedging futures
contracts or related options if aggregate initial
margin and premiums required to establish such
positions would exceed 5% of the Portfolio's total
assets. For purposes of this limitation,
unrealized profits and unrealized losses on any
open contracts are taken into account and the in-
the-money amount of an option that is in-the-money
at the time of purchase is excluded; or
(9) write put or call options having
aggregate exercise prices greater than 25% of the
Portfolio's net assets, except with respect to
options attached to or acquired with or traded
together with their underlying securities and
securities that incorporate features similar to
options.

Whenever an investment policy or limitation states a
maximum percentage of a Portfolio's assets that may be
invested in any security or other asset or sets forth a
policy regarding quality standards, that percentage shall be
determined, or that standard shall be applied, immediately
after the Portfolio's acquisition of the security or other
asset. Accordingly, any later increase or decrease
resulting from a change in the market value of a security or
in the Portfolio's net or total assets will not cause the
Portfolio to violate a percentage limitation. Similarly,
any later change in quality, such as a rating downgrade or
the delisting of a warrant, will not cause the Portfolio to
violate a quality standard.
"Value" for the purposes of all investment limitations
shall mean the value used in determining the net asset value
of each Portfolio.

TRUSTEES AND OFFICERS
The Fund has a Board, presently composed of five
Trustees, which supervises Portfolio activities and reviews
contractual arrangements with companies that provide the
Portfolios with services. The Fund's Trustees and officers
are listed below. Except as indicated, each individual has
held the office shown or other offices in the same company
for the last five years. All persons named as Trustees also
serve in similar capacities for The Rodney Square Fund, The
Rodney Square Tax-Exempt Fund and The Rodney Square Multi-
Manager Fund. Those Trustees who are "interested persons"
of the Fund (as defined in the 1940 Act) by virtue of their
positions with Rodney Square Management Corporation ("RSMC")
or WTC are indicated by an asterisk (*).
*MARTIN L. KLOPPING, Rodney Square North, 1100 N. Market
St., Wilmington, DE 19890-0001, President , elected in 1995,
and Trustee, age 44, has been President and Director of RSMC
since 1984. He is a Director of RSD, elected in 1992. He
is also a Chartered Financial Analyst and member of the SEC
Rules and Investment Advisers Committees of the Investment
Company Institute.
ERIC BRUCKER, School of Management, University of Michigan,
Dearborn, MI 48128, Trustee, age 56, has been Dean of the
School of Management at the University of Michigan since
June 1992. He was Professor of Economics, Trenton State
College from September 1989 through June 1992. He was Vice
President for Academic Affairs, Trenton State College from
September 1989 through June 1991. From 1976 until September
1989, he was Dean of the College of Business and Economics
and Chairman of various committees at the University of
Delaware. He is also a member of the Detroit Economic Club,
Financial Executive Institute and Leadership Detroit.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807,
Trustee, age 65, has retired as President and Chief
Operating Officer of Hercules Incorporated (diversified
chemicals), positions he held from March 1987 through March
1992. He also served as a member of the Hercules
Incorporated Board of Directors from 1986 through March
1992.
*ROBERT J. CHRISTIAN, Rodney Square North, 1100 N. Market
St., Wilmington, DE 19890-0001, Trustee, age 48, has been
Chief Investment Officer of WTC since February 1996 and
Director of RSMC since February 1996. He was Chairman and
Director of PNC Equity Advisors Company, and President and
Chief Investment Officer of PNC Asset Management Group, Inc.
from 1994 to 1996. He was Chief Investment Officer of PNC
Bank, N.A. from 1992 to 1996, Director of Provident Capital
Management from 1993 to 1996, and Director of Investment
Strategy PNC Bank, N.A. from 1989 to 1992. He is also a
director of University and a member of the Board of
Governors for the Pennsylvania Economy League.
JOHN J. QUINDLEN, 313 Southwinds, 1250 West Southwinds
Blvd., Vero Beach, FL 32963, Trustee, age 65, has retired as
Senior Vice President-Finance of E.I. du Pont de Nemours and
Company, Inc. (diversified chemicals) a position he held
from 1984 to November 30, 1993. He served as Chief
Financial Officer of E.I. du Pont de Nemours and Company,
Inc. from 1984 through June 30, 1993. He also serves as a
director of St. Joe Paper Co. and a Trustee of Kalmar
Pooled Investment Trust.

JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market
St., Wilmington, DE 19890-0001, Vice President, age 40, has
been with RSMC since 1984, as a Secretary of RSMC since
1986, a Director of RSMC since 1989 and a Vice President of
RSMC since 1992. He was an Assistant Vice President of RSMC
from 1988 to January 1992.
ROBERT C. HANCOCK, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Vice President and Treasurer, age
45, has been a Vice President of RSMC since 1988, and
Treasurer of RSMC since 1990. He is also a member of the
Accounting/Treasurer Committee of the Investment Company
Institute.
CARL M. RIZZO, ESQ., Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, Secretary, age 45, was
appointed Vice President of RSMC in July, 1996. From 1995
to 1996 he was Assistant General Counsel of Aid Association
for Lutherans (a fraternal benefit association); from 1994
to 1995 Senior Associate Counsel of United Services
Automobile Association (an insurance and financial services
firm); and from 1987 to 1994 Special Counsel or Attorney-
Adviser with a federal government agency.
DIANE D. MARKY, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Assistant Secretary, age 33, has
been a Senior Fund Administrator since 1994. She was a Fund
Administration Officer of RSMC from 1991 to July 1994. She
was a Mutual Fund Accountant for RSMC from 1989 to 1991.
CONNIE L. MEYERS, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Assistant Secretary, age 37, has
been a Fund Administrator of RSMC since August, 1994. She
was a Corporate Custody Administrator for Wilmington Trust
Company from 1989 to 1994.
JOHN J. KELLEY, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Assistant Treasurer, age 38, has
been a Vice President of RSMC since 1995 and was an
Assistant Vice President of RSMC since 1989.
The fees and expenses of the Trustees who are not
"interested persons" of the Fund ("Independent Trustees"),
as defined in the 1940 Act, are paid by each Portfolio. For
the fiscal year ended October 31, 1997, such fees and
expenses amounted to $5,400 per Portfolio. The following
table shows the fees paid during calendar 1997 to the
Independent Trustees for their services to the Fund and to
the Rodney Square Family of Funds. On November 30, 1997 the
Trustees and officers of the Fund, as a group, owned
beneficially, or may be deemed to have owned beneficially,
less than 1% of the outstanding shares of the Diversified
Income Portfolio and the Municipal Income Portfolio.

1997 TRUSTEES FEES
TOTAL FEES
INDEPENDENT TRUSTEE TOTAL FEES FROM FROM THE RODNEY
THE FUND SQUARE FAMILY OF FUNDS
-------------------- ---------------- -----------------------
Eric Brucker $3,600 $12,000
Fred L Buckner $3,600 $12,000
John J. Quindlen $3,600 $12,000

WILMINGTON TRUST COMPANY
The Investment Adviser to the Portfolios, WTC, is a
state-chartered bank organized as a Delaware corporation in
1903. WTC is a wholly owned subsidiary of Wilmington Trust
Corporation, a publicly held bank holding company. The
Portfolios benefit from the experience, conservative values
and special heritage of WTC. WTC is a financially strong
bank and enjoys a reputation for providing exceptional
consistency, stability and discipline in managing both short-
term and long-term investments. WTC is Delaware's largest
full-service bank and, with more than $96 billion in trust,
custody and investment management assets, WTC ranks among
the nation's leading money management firms. As of December
31, 1996, the trust department of WTC was the seventeenth
largest in the United States as measured by discretionary
assets under management. WTC is engaged in a variety of
investment advisory activities, including the management of
collective investment pools, and has nearly a century of
experience managing the personal investments of high net-
worth individuals. Its current roster of institutional
clients includes several Fortune 500 companies. In addition
to serving as Investment Adviser to the Portfolios, WTC also
manages over $3 billion in fixed-income assets for various
other institutional clients. Certain departments in WTC
engage in investment management activities that utilize a
variety of investment instruments, such as interest rate
futures contracts, options on U.S. Treasury securities and
municipal forward contracts. Of course, there can be no
guarantee that either Portfolio will achieve its investment
objective or that WTC will perform its services for each in
a manner which would cause it to satisfy its objective.
WTC is also the Fund's Custodian and is paid for those
services through the Portfolios' advisory fees. In
addition, the Fund reimburses WTC for its related out-of-
pocket expenses for such items as postage, forms, mail
insurance and similar items reasonably incurred in the
performance of custodial services for the Fund.
WTC's subsidiary, RSMC, serves as Administrator and
Transfer Agent and Dividend Paying Agent for the Fund. RSMC
also provides portfolio accounting services to the Fund
pursuant to an Accounting Services Agreement dated November
1, 1993.
Several affiliates of WTC are also engaged in the
investment advisory business. Wilmington Trust FSB, a
wholly owned subsidiary of Wilmington Trust Corporation,
exercises investment discretion over certain institutional
accounts.
RSMC serves as investment adviser and as administrator
for The Rodney Square Fund, The Rodney Square Tax-Exempt
Fund and The Rodney Square Multi-Manager Fund, each a
registered investment company. Rodney Square Distributors,
Inc., a wholly owned subsidiary of WTC and the Fund's
Distributor, is a registered broker-dealer. Wilmington
Brokerage Services Company, a wholly owned subsidiary of
WTC, is a registered investment adviser and a registered
broker-dealer.

INVESTMENT ADVISORY SERVICES
ADVISORY AGREEMENTS. WTC serves as Investment Adviser
to the Diversified Income Portfolio pursuant to an Advisory
Agreement with the Fund dated April 1, 1991; WTC serves as
Investment Adviser to the Municipal Income Portfolio
pursuant to an Advisory Agreement with the Fund dated
November 1, 1993 (the "Advisory Agreements"). Under the
Advisory Agreements, WTC directs the investments of each
Portfolio in accordance with that Portfolio's investment
objectives, policies and limitations.
For WTC's services under the Advisory Agreements, each
Portfolio pays WTC a monthly fee at the annual rate of 0.50%
of the average daily net assets of the Portfolio. The
average is computed on the basis of each Portfolio's daily
net assets, as determined at the close of business on each
day throughout the month. For the fiscal years ended
October 31, 1997, 1996, and 1995, of the $157,518, $164,315,
and $158,066, respectively, paid in advisory fees by the
Diversified Income Portfolio, WTC waived $148,754, $144,473
and $156,223, respectively, for providing advisory services
to that Portfolio. For the fiscal years ended October 31,
1997, 1996, and 1995, WTC waived all of its advisory fee for
providing advisory services to the Municipal Income
Portfolio amounting to $82,587, $81,460 and $73,172,
respectively.
WTC has agreed to waive its advisory fee or reimburse
each Portfolio monthly to the extent that expenses incurred by the
Portfolio (excluding brokerage commissions, interest, taxes
and extraordinary expenses) exceed an annual rate of 0.75%
of the average daily net assets of the Portfolio. This
undertaking, which is not contained in the Advisory
Agreements, is fixed through February, 1999, but may be
amended or rescinded thereafter.
Under the Advisory Agreements, the Fund on behalf of
each Portfolio assumes responsibility for paying all Fund
expenses other than those expressly stated to be payable by
WTC. Such expenses include without limitation: (a) fees
payable for administrative services; (b) fees payable for
accounting services; (c) the cost of obtaining quotations
for calculating the value of the assets of each Portfolio;
(d) interest and taxes; (e) brokerage commissions, dealer
spreads and other costs in connection with the purchase or
sale of securities; (f) compensation and expenses of its
Trustees other than those who are "interested persons" of
the Fund (as defined in the 1940 Act); (g) legal and audit
expenses; (h) fees and expenses related to the registration
and qualification of the Fund and its shares for
distribution under state and federal securities laws;
(i) expenses of typesetting, printing and mailing reports,
notices and proxy material to shareholders of the Fund;
(j) all other expenses incidental to holding meetings of the
Fund's shareholders, including proxy solicitations therefor;
(k) premiums for fidelity bond and other insurance coverage;
(l) the Fund's association membership dues; (m) expenses of
typesetting for printing Prospectuses; (n) expenses of
printing and distributing Prospectuses to existing
shareholders; (o) out-of-pocket expenses incurred in
connection with the provision of custodial and transfer
agency services; (p) service fees payable by each Portfolio
to the Distributor for providing personal services to the
shareholders of each Portfolio and for maintaining
shareholder accounts for those shareholders;
(q) distribution fees; and (r) such non-recurring expenses
as may arise, including costs arising from threatened
actions, actions, suits and proceedings to which the Fund is
a party and the legal obligation which the Fund may have to
indemnify its Trustees and officers with respect thereto.
The Advisory Agreements provide that WTC shall not be
liable to the Fund or to any shareholder of the Fund for any
act or omission in the course of, or connected with,
rendering services under the Agreements or for any losses
that may be sustained in the purchase, holding or sale of
any security or the making of any investment for or on
behalf of the Portfolios, in the absence of WTC's willful
misfeasance, bad faith, gross negligence or reckless
disregard of its obligations or duties under the Agreements.
The Advisory Agreement with respect to the Diversified
Income Portfolio became effective on April 1, 1991 and
continues in effect from year to year with respect to that
Portfolio as long as its continuance is approved at least
annually by a majority of the Trustees, including a majority
of the Independent Trustees. The Advisory Agreement with
respect to the Municipal Income Portfolio became effective
on November 1, 1993 and continues in effect from year to
year with respect to that Portfolio as long as its
continuance is approved at least annually by a majority of
the Trustees, including a majority of the Independent
Trustees.
The Advisory Agreements terminate automatically in the
event of their assignment. The Agreements are also
terminable (i) by the Fund (by vote of the Board of
Trustees or by vote of a majority of the outstanding voting
securities of the affected Portfolio), without payment of
any penalty, on 60 days' written notice to WTC; or (ii) by
WTC on 60 days' written notice to the Fund.

ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS
AND RULE 12B-1 PLANS
RSMC, a Delaware corporation organized on September 17,
1981, serves as Administrator of the Fund pursuant to an
Administration Agreement effective December 31, 1992 with
respect to the Diversified Income Portfolio and effective
August 16, 1993 with respect to the Municipal Income
Portfolio.
For its services under the current Administration
Agreement, RSMC receives a monthly fee from each Portfolio
at an annual rate of 0.08% of the Portfolio's average daily
net assets. For the fiscal year ended October 31, 1997, the
Fund paid RSMC $25,203 and $13,578, respectively, for
providing administrative services to the Diversified Income
Portfolio and the Municipal Income Portfolio, of which $0
and $13,578 were waived, respectively. For the fiscal year
ended October 31, 1996, the Fund paid RSMC $26,291 and
$13,428, respectively, for providing administrative services
to the Diversified Income Portfolio and the Municipal Income
Portfolio, of which $0 and $13,428 were waived,
respectively. For the fiscal year ended October 31, 1995,
the Fund paid RSMC $25,290 and $12,290, respectively, for
providing administrative services to the Diversified Income
Portfolio and the Municipal Income Portfolio, of which $0
and $12,290 were waived, respectively.
Under the terms of the Administration Agreement, RSMC
agrees to: (a) supply office facilities, non-investment
related statistical and research data, executive and
administrative services, stationery and office supplies, and
corporate management services for the Portfolios; (b)
prepare and file, if necessary, reports to shareholders of
the Portfolios and reports with the SEC and state securities
commissions; (c) monitor the Portfolios' compliance with
the investment restrictions and limitations imposed by the
1940 Act and applicable regulations thereunder, each
Portfolio's fundamental and non-fundamental investment
limitations set forth in the Prospectus and this Statement
of Additional Information and the investment restrictions
and limitations necessary for the Fund to continue to
qualify as a regulated investment company ("RIC") under the
Internal Revenue Code of 1986, as amended (the "Code"); (d)
monitor sales of Portfolio shares and ensure that such
shares are properly registered with the SEC and applicable
state authorities; (e) prepare and monitor an expense
budget for each Portfolio, including setting and revising
accruals for each category of expenses; (f) determine the
amounts of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain
each Portfolio's continued qualification for treatment as a
regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended (the "Code") and avoid
imposition of a 4% excise tax imposed on RICs in certain
situations; (g) prepare and distribute to appropriate
parties notices announcing the declaration of dividends and
other distributions to shareholders; (h) prepare financial
statements and footnotes and other financial information
with such frequency and in such format as required to be
included in reports to shareholders and the SEC; (i)
supervise the preparation of federal and state tax returns;
(j) review advertising and sales literature and file such
with regulatory authorities, as necessary; (k) maintain
Fund/Serv membership; (l) provide information regarding
material developments in state securities regulation; and
(m) provide personnel to serve as officers of the Fund if so
elected by the Board of Trustees. Additionally, RSMC agrees
to create and maintain all necessary records in accordance
with all applicable laws, rules and regulations pertaining
to the various functions performed by it and not otherwise
created and maintained by another party pursuant to a
contract with the Fund. RSMC may at any time or times in
its discretion appoint and may at any time remove other
parties as its agent to carry out any of its obligations
under the Administration Agreement.
The Administration Agreement provides that RSMC and its
affiliates shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund or its
Portfolios in connection with the matters to which the
Administration Agreement relates, except to the extent of a
loss resulting from willful misfeasance, bad faith or gross
negligence on their part in the performance of their
obligations and duties under the Administration Agreement.
The Administration Agreement continues in effect from
year to year so long as its continuance is approved at least
annually by a majority of the Trustees, including a majority
of the Independent Trustees. The Agreement is terminable by
the Fund with respect to each Portfolio by 60 days' written
notice given to RSMC or by RSMC by six months' written
notice given to the Fund.
RSMC also provides accounting services for the
Portfolios pursuant to an Accounting Services Agreement with
the Fund effective November 1, 1993. For RSMC's services
provided under the Accounting Services Agreement, RSMC
receives from the Fund with respect to each Portfolio an
annual fee of $50,000 plus an amount equal to 0.02% of the
respective Portfolio's average daily net assets over $100
million. For the fiscal years ended October 31, 1997, 1996,
and 1995, the Fund paid RSMC $50,000, $50,000, and $50,000,
respectively, for providing accounting services for the
Diversified Income Portfolio. For fiscal years ended
October 31, 1997, 1996 and 1995 the Fund paid $50,000,
$50,000 and $50,000, respectively, for providing accounting
services for the Municipal Income Portfolio, of which
$34,363, $9,981 and $22,728 were waived, respectively.
Under the terms of the Accounting Services Agreement,
RSMC agrees to: (a) perform the following accounting
functions on a daily basis: (1) journalize each Portfolio's
investment, capital share and income and expense activities;
(2) verify investment buy/sell trade tickets when received
from the Investment Adviser and transmit trade orders to the
Fund's Custodian for proper settlement; (3) maintain
individual ledgers for investment securities; (4) maintain
historical tax lots for each security; (5) reconcile cash
and investment balances of each Portfolio with the
Custodian, and provide the Investment Adviser with the
beginning cash balance available for investment purposes for
each Portfolio; (6) update the cash availability throughout
the day as required by the Investment Adviser; (7) post to
and prepare each Portfolio's Statement of Assets and
Liabilities and Statement of Operations; (8) calculate
expenses payable pursuant to the Fund's various contractual
obligations (E.G., advisory and administrative fees); (9)
control all disbursements from the Fund on behalf of each
Portfolio and authorize such disbursements upon written
instructions; (10) calculate capital gains and losses;
(11) determine each Portfolio's net income; (12) obtain
current market prices for securities held by the Portfolios
and if such prices are unavailable, then obtain prices from
pricing services approved by the Investment Adviser and by
the Board of Trustees, and in either case calculate the
value of each Portfolio's investments; (13) calculate the
amortized cost value of debt instruments with remaining
maturities of 60 days or less that are held by the
Portfolios; (14) transmit or mail a copy of the valuation
of each Portfolio's investments to the Investment Adviser;
(15) compute the net asset value of each Portfolio; (16)
compute the yields, total returns, expense ratios and
portfolio turnover rate of each Portfolio; and (17) prepare
and monitor expense accruals and notify Fund management of
any proposed adjustments; (b) prepare monthly financial
statements which include a Schedule of Investments, a
Statement of Assets and Liabilities, a Statement of
Operations, a Statement of Changes in Net Assets, the Cash
Statement and a Schedule of Capital Gains and Losses for
each Portfolio; (c) prepare monthly security transaction
listings; (d) prepare quarterly security transactions
summaries; (e) supply statistical data with respect to the
Fund and each Portfolio, as requested on an ongoing basis;
(f) assist in the preparation of support schedules necessary
for completion of federal and state tax returns; (g) assist
in the preparation and filing of the Fund's annual and
semiannual reports with the SEC on Form N-SAR; (h) assist
in the preparation and filing of the Fund's annual and
semiannual shareholder reports and proxy statements; (i)
assist in the preparation of amendments to the Fund's
registration statement on Form N-1A and other filings
relating to the registration of shares of the Fund; (j)
monitor each Portfolio's status as a RIC under the Code;
(k) act as liaison with the Fund's independent auditors and
provide account analyses, fiscal year summaries and other
audit related schedules. Additionally, RSMC agrees to keep,
in accordance with all applicable laws, rules and
regulations, all books and records with respect to the
Fund's books of account and records of each Portfolio's
securities transactions.
The Accounting Services Agreement provides that RSMC
shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross
negligence on the part of RSMC in the performance of its
obligations and duties under the agreement or reckless
disregard by RSMC of such duties and obligations.
The Accounting Services Agreement continues in effect
from year to year so long as its continuance is approved at
least annually by a majority of the Trustees, including a
majority of the Independent Trustees. The Accounting
Services Agreement is terminable by the Fund or RSMC by
written notice.
RSD serves as Distributor of Portfolio shares pursuant
to a Distribution Agreement with the Fund, effective
December 31, 1992 with respect to the Diversified Income
Portfolio and effective November 1, 1993 with respect to the
Municipal Income Portfolio. For the fiscal year ended
October 31, 1997, RSD received underwriting commissions of
$582 and $936, respectively, in connection with the sales of
shares of the Diversified Income Portfolio and Municipal
Income Portfolio. For the fiscal year ended October 31,
1996, RSD received underwriting commissions of $1,824 and
$3,222, respectively, in connection with the sale of shares
of the Diversified Income Portfolio and Municipal Income
Portfolio. For the fiscal year ended October 31, 1995, RSD
received underwriting commissions of $4,942 and $1,800,
respectively, in connection with the sale of shares of the
Diversified Income Portfolio and Municipal Income Portfolio.
Pursuant to the terms of the Distribution Agreement,
RSD is granted the right to sell shares of the Portfolios as
agent for the Fund, to retain a portion of sales load
proceeds as an underwriting commission and to reallocate a
portion of sales load proceeds to dealers who have sold
Portfolio shares. Shares of the Portfolios are offered
continuously.
Under the terms of the Distribution Agreement, RSD
agrees to use all reasonable efforts to secure purchasers
for shares of the Portfolios and to pay expenses of printing
and distributing the prospectus, statement of additional
information, shareholder reports, advertising and sales
literature used in connection with the sale of Portfolio
shares, subject to reimbursement pursuant to the Plan of
Distribution adopted with respect to each Portfolio pursuant
to Rule 12b-1 under the 1940 Act (the "12b-1 Plans").
The Distribution Agreement provides that RSD, in the
absence of willful misfeasance, bad faith or gross
negligence in the performance of its duties or reckless
disregard of its obligations and duties under the Agreement,
will not be liable to the Fund or its shareholders for
losses arising in connection with the sale of Portfolio
shares.
The Distribution Agreement continues in effect from
year to year as long as its continuance is approved at least
annually by a majority of the Trustees, including a majority
of the Independent Trustees. The Distribution Agreement
terminates automatically in the event of its assignment.
The Agreement is also terminable without payment of any
penalty with respect to either Portfolio (i) by the Fund (by
vote of a majority of the Trustees of the Fund who are not
interested persons of the Fund and who have no direct or
indirect financial interest in the operation of any Rule 12b-
1 Plan of the Fund or any agreements related to the Plan or
by vote of a majority of the outstanding voting securities
of the Fund) on 60 days' written notice to RSD; or (ii) by
RSD on 60 days' written notice to the Fund.
Each 12b-1 Plan provides that RSD may be reimbursed for
distribution activities encompassed by Rule 12b-1 under the
1940 Act, including public relations services, telephone
services, sales presentations, media charges, preparation,
printing and mailing of advertising and sales literature,
data processing necessary to support a distribution effort,
printing and mailing of prospectuses, and distribution and
shareholder servicing activities of certain financial
institutions such as banks or broker-dealers who have
entered into servicing agreements with RSD ("Service
Organizations") and other financial institutions, including
fairly allocable internal expenses of RSD and payments to
third parties.
The Diversified Income Portfolio's 12b-1 Plan provides
that reimbursement shall be made for any month only to the
extent that such payment does not exceed: (i) 0.25% on an
annualized basis of the Portfolio's average daily net
assets; and (ii) limitations set from time to time by the
Board of Trustees. The Board of Trustees has only
authorized reimbursement of expenses that RSD has incurred
in (i) paying "trail commissions" to Service Organizations
that have sold Portfolio shares and (ii) preparing and
distributing marketing materials. The Municipal Income
Portfolio's 12b-1 Plan provides that reimbursement shall be
made for any month only to the extent that such payment does
not exceed: (i) 0.75% on an annualized basis of the
Portfolio's average daily net assets; (ii) the limitations
applicable pursuant to the rules of the National Association
of Securities Dealers, Inc. as they may be in effect from
time to time; and (iii) limitations set from time to time by
the Board of Trustees. The Board of Trustees has only
authorized the Fund to pay up to 0.25% of the Portfolio's
average daily net assets annually to reimburse RSD for
expenses that it has incurred in (i) paying "trail
commissions" to Service Organizations that have sold
Portfolio shares; and (ii) for marketing efforts focusing on
the preparation and distribution of marketing materials.
For the fiscal year ended October 31, 1997, RSD
received payments amounting to $19,672 under the Diversified
Income Portfolio's 12b-1 Plan; of that amount, $18,499
represented reimbursement of expenses that RSD had incurred
in paying trail commissions to service organizations and
$1,173 on the preparation and distribution of marketing
materials. For the fiscal year ended October 31, 1997, RSD
received payments amounting to $14,348 under the Municipal
Income Portfolio's 12b-1 Plan; of that amount, $13,715
represented reimbursement of expenses that RSD had incurred
in paying trail commissions to Service Organizations and
$632 on the preparation and distribution of marketing
materials.
Under the 12b-1 Plans, if any payments made by WTC out
of its advisory fee, not to exceed the amount of that fee,
to any third parties (including banks), including payments
for shareholder servicing and transfer agent functions, were
deemed to be indirect financing by the Fund of the
distribution of its shares, such payments are authorized.
The Fund may execute portfolio transactions with and
purchase securities issued by depository institutions that
receive payments under the Plans. No preference for
instruments issued by such depository institutions is shown
in the selection of investments.

PORTFOLIO TRANSACTIONS
All portfolio transactions are placed on behalf of the
Portfolios by WTC pursuant to authority contained in the
Advisory Agreements. Most purchases and sales of securities
by the Portfolios are with the issuers or underwriters of,
or dealers in, those securities, acting as principal. There
is generally no stated commission in the case of fixed-
income securities, but the price paid by a Portfolio usually
includes a dealer spread or mark-up. In underwritten
offerings, the price paid includes a fixed underwriting
commission or discount retained by the underwriter or
dealer.
Transactions on U.S. stock exchanges, futures markets
and other agency transactions involve the payment by the
Portfolios of negotiated brokerage commissions. Brokers may
charge different commissions based on such factors as the
difficulty and size of the transaction. Transactions in
foreign securities by the Diversified Income Portfolio may
involve the payment of fixed brokerage commissions, which
may be higher than those in the United States. During the
fiscal years ended October 31, 1997, 1996 and 1995, the
Portfolios paid no brokerage commissions.

The primary objective of WTC in placing orders on
behalf of the Portfolios for the purchase and sale of
securities is to obtain best execution at the most favorable
prices through responsible brokers or dealers and, where
commission rates are negotiable, at competitive rates. In
selecting a broker or dealer to execute a portfolio
transaction, WTC considers among other things: (i) the price
of the securities to be purchased or sold; (ii) the rate of
the commission or the amount of the mark-up to be charged;
(iii) the size and difficulty of the order; (iv) the
reliability, integrity, financial condition and general
execution and operational capability of the broker or
dealer; and (v) the quality of the execution and research
services provided by the broker or dealer to the Portfolios
and to other discretionary accounts advised by WTC and its
affiliates.
The Portfolios may pay higher commissions in return for
execution and research services, but only if WTC has
determined that those commissions are reasonable in relation
to the value of the execution and research services that
have been or will be provided to the Portfolios and to any
other discretionary accounts advised by WTC or its
affiliates. In reaching this determination, WTC will not
attempt to place a specific dollar value on the execution
and research services provided or to determine what portion
of the compensation should be related to those services.
Execution and research services may include: pricing
services; quotation services; purchase and sale
recommendations; the availability of securities or the
purchasers or sellers of securities; analyses and reports
concerning issuers, industries, securities and economic
factors and trends; and functions incidental to the
portfolio transactions, such as clearance and settlement.
Some of the other discretionary accounts advised by WTC
and its affiliates, including the other investment companies
that they advise, have investment objectives and policies
similar to those of the Portfolios. WTC or a WTC affiliate
may purchase or sell a given security for those accounts on
the same day that it purchases or sells that security for a
Portfolio. In those instances, the demand for the security
being purchased or the supply of the security being sold may
increase, and this could have an adverse effect on the price
of the security. In other instances, however, the ability
of a Portfolio to participate in a volume transaction will
produce better price and execution. If two or more of the
discretionary accounts advised by WTC and its affiliates
simultaneously purchase or sell the same security, WTC and
its affiliates average purchases and sales as to price and
allocate such purchases and sales according to a formula
considered by the officers of each affected investment
company and by the officers of WTC and its affiliates to be
equitable to each account.
On occasion, some of the other discretionary accounts
advised by WTC and its affiliates may have investment
objectives and policies that are dissimilar to those of the
Portfolios, causing WTC and its affiliates to buy a security
for one discretionary account while simultaneously selling
the security for another account. In accordance with
applicable SEC regulations, one discretionary account may
sell a security to another account. It is the policy of WTC
and its affiliates not to favor one discretionary account
over another in placing purchase and sale orders. However,
there may be circumstances when purchases or sales for one
or more discretionary accounts will have an adverse effect
on other accounts.

PORTFOLIO TURNOVER
The portfolio turnover rate for a given fiscal period
is the ratio of the lesser of purchases or sales of
portfolio securities during the period to the monthly
average of the value of portfolio securities held during the
period, excluding securities with maturities or expiration
dates at acquisition of one year or less. A Portfolio's
turnover rate is not a limiting factor when WTC considers
making a change in the Portfolio's holdings.

The frequency of portfolio
transactions and a Portfolio's turnover rate will vary from
year to year depending on market conditions. The portfolio
turnover rate for the Diversified Income Portfolio for the
years ended October 31, 1997 and 1996 was 83.54% and 85.77%,
respectively. The portfolio turnover rate for the Municipal
Income Portfolio for the years ended October 31, 1997 and
1996 was 28.56% and 15.91%, respectively.

REDEMPTIONS
To ensure proper authorization before redeeming shares
of the Portfolios, RSMC may require additional documents
such as, but not restricted to, stock powers, trust
instruments, death certificates, appointments as fiduciary,
certificates of corporate authority and tax waivers required
in some states when settling estates.
Clients of WTC who have purchased shares through their
trust accounts at WTC and clients of Service Organizations
who have purchased shares through their accounts with those
Service Organizations should contact WTC or the Service
Organization prior to submitting a redemption request to
ensure that all necessary documents accompany the request.
When shares are held in the name of a corporation, other
organization, trust, fiduciary or other institutional
investor, RSMC requires, in addition to the stock power,
certified evidence of authority to sign the necessary
instruments of transfer. These procedures are for the
protection of shareholders and should be followed to ensure
prompt payment. Redemption requests must not be conditional
as to date or price of the redemption. Proceeds of a
redemption will be sent within 7 days of acceptance of
shares tendered for redemption. Delay may result if the
purchase check has not yet cleared, but the delay will be no
longer than required to verify that the purchase check has
cleared, and the Fund will act as quickly as possible to
minimize delay.
The value of shares redeemed may be more or less than
the shareholder's cost, depending on the net asset value at
the time of redemption. Redemption of shares may result in
tax consequences (gain or loss) to the shareholder, and the
proceeds of a redemption may be subject to backup
withholding. (See "Dividends, Other Distributions and
Taxes" in the Prospectus.)
A shareholder's right to redeem shares and to receive
payment therefor may be suspended when (a) the New York
Stock Exchange (the "Exchange") is closed other than for
customary weekend and holiday closings, (b) trading on the
Exchange is restricted, (c) an emergency exists as a result
of which it is not reasonably practicable to dispose of a
Portfolio's securities or to determine the value of a
Portfolio's assets, or (d) ordered by a governmental body
having jurisdiction over the Fund for the protection of the
Fund's shareholders, provided that applicable rules and
regulations of the SEC (or any succeeding governmental
authority) shall govern as to whether a condition described
in (b), (c) or (d) exists. In case of such suspension,
shareholders of the affected Portfolio may withdraw their
requests for redemption or may receive payment based on the
net asset value per share of the Portfolio next determined
after the suspension is lifted.
The Fund reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for
redemption by making payment in whole or in part with
readily marketable securities chosen by the Fund and valued
in the same way as they would be valued for purposes of
computing the net asset value per share of the applicable
Portfolio. If payment is made in securities, a shareholder
may incur transaction expenses in converting these
securities into cash. The Fund has elected, however, to be
governed by Rule 18f-1 under the 1940 Act, as a result of
which the Fund is obligated to redeem shares solely in cash
if the redemption requests are made by one shareholder
account up to the lesser of $250,000 or 1% of the net assets
of the applicable Portfolio during any 90-day period. This
election is irrevocable unless the SEC permits its
withdrawal.

NET ASSET VALUE AND DIVIDENDS
NET ASSET VALUE. The net asset value per share of each
Portfolio is determined by dividing the value of the
Portfolio's net assets by the total number of Portfolio
shares outstanding. This determination is made by RSMC as
of the close of regular trading on the Exchange (currently
4:00 p.m., Eastern time) each day the Fund is open for
business. The Fund is open for business on days when the
Exchange, RSMC and the Philadelphia branch office of the
Federal Reserve are open for business ("Business Day").
Securities and other assets for which market quotations
are readily available are valued based upon market
quotations, provided such quotations adequately reflect, in
the opinion of RSMC, the fair value of those securities.
Currently, such prices are determined using the last
reported sale price in the principal market where the
securities are traded or, if no sales are reported (as in
the case of some securities traded over-the-counter), the
last reported bid price, except that in the case of
preferred stock and any other equity securities held by the
Diversified Income Portfolio, if no sales are reported in
the principal market where the securities are traded, at the
mean between the last reported bid and asked prices in that
market. Debt instruments with remaining maturities of 60
days or less are valued on the basis of their amortized
cost. All other securities and other assets are valued at
their fair value as determined in good faith by RSMC under
the general supervision of the Board of Trustees.
Reliable market quotations are not considered to be
readily available for long-term corporate bonds and notes,
certain preferred stocks, municipal securities and certain
foreign securities. These investments may be valued on the
basis of prices provided by pricing services when those
prices are believed to reflect the fair market value of the
securities. Valuations furnished by a pricing service are
based upon a computerized matrix system or appraisals by the
pricing service, in each case in reliance upon information
concerning market transactions and quotations from
recognized securities dealers. The methods used by the
pricing services and the quality of valuations are reviewed
by RSMC under the general supervision of the Trustees.
The calculation of each Portfolio's net asset value per
share may not take place contemporaneously with the
determination of the prices of many of the fixed-income
securities used in the calculation. If events materially
affecting the value of those securities occur between the
time when their prices are determined and the time when net
asset value is determined, the securities will be valued at
fair value, as determined in good faith by RSMC under the
general supervision of the Trustees.

DIVIDENDS. Dividends are declared on each Business Day
for each Portfolio of the Fund. The dividend for a Business
Day immediately preceding a weekend or holiday normally
includes an amount equal to the net income expected for the
subsequent non-Business Days on which dividends are not
declared. However, no such dividend includes any amount of
net income earned in a subsequent semiannual accounting
period.

PERFORMANCE INFORMATION
The performance of a Portfolio may be quoted in terms
of its yield and its total return in advertising and other
promotional materials ("performance advertisements").
Yields and total returns may be quoted numerically or in a
table, graph or similar illustration. Performance data
quoted represents past performance and is not intended to
indicate future performance. The investment return and
principal value of an investment in a Portfolio will
fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. The
performance of each Portfolio will vary based on changes in
market conditions and the level of the Portfolio's expenses.

YIELD CALCULATIONS. From time to time, each Portfolio
may advertise its yield. Yield is calculated by dividing
the Portfolio's investment income for a 30-day period, net
of expenses, by the average number of shares entitled to
receive dividends during that period according to the
following formula:

YIELD = 2[((A-B)/CD + 1)6-1]

where:
a = dividends and interest earned
during the period;
b = expenses accrued for the period
(net of reimbursements);
c = the average daily number of
shares outstanding during the
period that were entitled to receive
dividends; and
d = the maximum offering price per
share on the last day of the period.

The result is expressed as an annualized percentage
(assuming semiannual compounding) of the maximum offering
price per share at the end of the period.
Except as noted below, in determining interest earned
during the period (variable "a" in the above formula), RSMC
calculates the interest earned on each debt instrument held
by a Portfolio during the period by: (i) computing the
instrument's yield to maturity, based on the value of the
instrument (including actual accrued interest) as of the
last business day of the period or, if the instrument was
purchased during the period, the purchase price plus accrued
interest; (ii) dividing the yield to maturity by 360; and
(iii) multiplying the resulting quotient by the value of the
instrument (including actual accrued interest). Once
interest earned is calculated in this fashion for each debt
instrument held by the Portfolio, interest earned during the
period is then determined by totaling the interest earned on
all debt instruments held by the Portfolio.
For purposes of these calculations, the maturity of a
debt instrument with one or more call provisions is assumed
to be the next date on which the instrument reasonably can
be expected to be called or, if none, the maturity date. In
general, interest income is reduced with respect to debt
instruments trading at a premium over their par value by
subtracting a portion of the premium from income on a daily
basis, and increased with respect to debt instruments
trading at a discount by adding a portion of the discount to
daily income.
In determining dividends earned by any preferred stock
or other equity securities held by the Diversified Income
Portfolio during the period (variable "a" in the above
formula), RSMC accrues the dividends daily at their stated
dividend rates. Capital gains and losses generally are
excluded from yield calculations. In calculating the
maximum offering price per share at the end of the period
(variable "d" in the above formula), each Portfolio's
maximum 3.50% sales charge is included. The Diversified
Income Portfolio's yield for the 30-day period ended October
31, 1997 was 5.71%. Without fee waivers by WTC during the
period, the yield for that Portfolio would have been 5.30%.
The Municipal Income Portfolio's yield for the 30-day period
ended October 31, 1997 was 3.18%. Without fee waivers by
WTC and RSMC during the period, the yield for that Portfolio
would have been 2.98%.
Since yield accounting methods differ from the
accounting methods used to calculate net investment income
for other purposes, a Portfolio's yield may not equal the
dividend income actually paid to investors or the net
investment income reported with respect to the Portfolio in
the Fund's financial statements.
Yield information may be useful in reviewing a
Portfolio's performance and in providing a basis for
comparison with other investment alternatives. However, the
Portfolios' yields fluctuate, unlike investments that pay a
fixed interest rate over a stated period of time. Investors
should recognize that in periods of declining interest
rates, the Portfolios' yields will tend to be somewhat
higher than prevailing market rates, and in periods of
rising interest rates, the Portfolios' yields will tend to
be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to the Portfolios from the
continuous sale of their shares will likely be invested in
instruments producing lower yields than the balance of the
Portfolios' holdings, thereby reducing the current yields of
the Portfolios. In periods of rising interest rates, the
opposite can be expected to occur.

TAX-EQUIVALENT YIELD CALCULATIONS. From time to time,
the Municipal Income Portfolio may advertise its tax-
equivalent yield. That Portfolio's tax-equivalent yield is
the rate an investor would have to earn from a fully taxable
investment after taxes to equal the Portfolio's tax-exempt
yield. Tax-equivalent yield is computed by (i) dividing
that portion of the Portfolio's yield that is tax-exempt by
one minus a stated income tax rate and (ii) adding the
product to that portion, if any, of the Portfolio's yield
that is not tax-exempt. For purposes of this formula, tax-
exempt yield is yield that is exempt from federal income
tax.
The following table, which is based upon individual
federal income tax rates in effect during 1997, illustrates
the yields that would have to be achieved on taxable
investments to produce a range of hypothetical tax-
equivalent yields:

TAX-EQUIVALENT YIELD TABLE

Federal
Marginal
Income Tax-Equivalent Yields
Tax Bracket Based on Tax-Exempt Yields of:
- ------------ ------------------------------------------
4% 5% 6% 7% 8% 9% 10%
-- --- --- --- --- --- ---
28% 5.6 6.9 8.3 9.7 11.1 12.5 13.9
31% 5.8 7.2 8.7 10.1 11.6 13.0 14.5
36% 6.3 7.8 9.4 10.9 12.5 14.1 15.6
39.6% 6.6 8.3 9.9 11.6 13.2 14.9 16.6

TOTAL RETURN CALCULATIONS. From time to time, each
Portfolio may advertise its average annual total return. A
Portfolio's average annual total return is calculated
according to the following formula:

P (1 + T)N = ERV

where:
P = a hypothetical initial payment of
$1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at end of
the period of a hypothetical $1,000
payment made at the beginning of that
period.

The time periods used are based on rolling calendar
quarters, updated to the last day of the most recent
calendar quarter prior to submission of the advertisement
for publication. Average annual total return, or "T" in the
formula above, is computed by finding the average annual
compounded rate of return over the period that would equate
the initial amount invested to the ending redeemable value
("ERV"). In calculating average annual total return, each
Portfolio's maximum 3.50% sales load is deducted from the
initial $1,000 payment, and all dividends and other
distributions by the Portfolio are assumed to have been
reinvested at net asset value on the reinvestment date
during the period.
Each Portfolio may also include in its performance
advertisements total return quotations that are not
calculated according to the formula set forth above ("non-
standardized total return"). For example, because Portfolio
shares may be purchased at a reduced sales load or without a
sales load under certain circumstances, non-standardized
average annual total return may be computed without
deducting the sales load from the hypothetical $1,000
investment. The following table reflects the Diversified
Income Portfolio's standardized and non-standardized average
annual total return for the periods stated below:

AVERAGE ANNUAL TOTAL RETURN FOR DIVERSIFIED INCOME PORTFOLIO

April 2, 1991
(Commencement
One-Year ended Five-Years of Operations)
Sales Load1 October 31, ended through
1997 October 31,1997 October 31, 1997
- ----------- -------------- --------------- ----------------

3.50% 3.38% 5.41% 6.61%

None 7.13% 6.16% 7.19%

AVERAGE ANNUAL TOTAL RETURN FOR MUNICIPAL INCOME PORTFOLIO

November 1, 1993
One-Year ended (Commencement
Sales Load October 31, of Operations)
1997 through October 31, 1997
---------- -------------- ------------------------
3.50% 3.11% 3.99%
None 6.85% 4.92%

While average annual returns are a convenient means of
comparing investment alternatives, investors should realize
that the Portfolios' performance is not constant over time,
but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual
year-to-year performance of the Portfolios.
Another example of non-standardized total return that
may be quoted in the Portfolios' performance advertisements
is unaveraged or cumulative total returns which reflect the
change in the value of an investment in a Portfolio over a
stated period. RSMC calculates cumulative total return for
each Portfolio for a specific time period by assuming an
initial investment of $1,000 in shares of the Portfolio and
the reinvestment of dividends and other distributions. RSMC
then determines the percentage rate of return on the
hypothetical $1,000 investment by: (i) subtracting the value
of the investment at the beginning of the period from the
value of the investment at the end of the period; and (ii)
dividing the remainder by the beginning value. RSMC does
not take each Portfolio's maximum sales load into account in
calculating cumulative total return; if the maximum sales
load charged by a Portfolio were reflected in the
calculation, the cumulative total return of the Portfolio
would be reduced. The Diversified Income Portfolio's
cumulative total return for the one-year period ended
October 31, 1997, the five-year period ended October 31,
1997 and for the period from April 2, 1991 (commencement of
operations) through October 31, 1997 was 7.13%, 34.84% and
57.94%, respectively. The Municipal Income Portfolio's
cumulative total return for the one-year period ended
October 31, 1997 and for the period from November 1, 1993
(commencement of operations) through October 31, 1997 was
6.85% and 21.19%, respectively.

- ------------------
1 The Diversified Income Portfolio's maximum sales load is
reduced on November 25, 1991 from 4.50% to 3.50%. The
lower maximum sales load is reflected in the standardized
average annual return set forth in this table.

Average annual and cumulative total returns for the
Portfolios may be quoted as a dollar amount, as well as a
percentage, and may be calculated for a series of
investments or a series of redemptions, as well as for a
single investment or a single redemption, over any time
period. Total returns may be broken down into their
components of income and capital gain (including capital
gains and changes in share price) to illustrate the
relationship of those factors and their contributions to
total return.
The following table shows the income and capital
elements of the Diversified Income Portfolio's total return
and compares them to the cost of living (as measured by the
Consumer Price Index) over the same periods. During the
periods quoted, interest rates and bond prices fluctuated
widely; the table should not be considered representative of
the dividend income or capital gain or loss that could be
realized from an investment in the Diversified Income
Portfolio today.
During the period from April 2, 1991 (Commencement of
Operations) through October 31, 1997, a hypothetical $10,000
investment in the Diversified Income Portfolio would have
been worth $15,794 assuming all distributions were
reinvested and no sales load was paid. During the period
November 1, 1993 (Commencement of Operations) through
October 31, 1997, a hypothetical $10,000 investment in
Municipal Income Portfolio would have been worth $12,119
CHANGE IN $10,000 HYPOTHETICAL INVESTMENT
DIVERSIFIED INCOME PORTFOLIO

</TABLE>
<TABLE>
<CAPTION>

Value of Value of Value of Increase In
Initial Reinvested Reinvested Cost of Living
Period Ended $10,000 Income Capital Gain (Consumer Price
October 31 Investment Dividends Distributions Total Value Price Index)
------------ ---------- ------------ -------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
1997 $10,456 $5,178 $159 $15,793 19.9%

1996 $10,360 $4,225 $157 $14,742 17.3%

1995 $10,464 $3,393 $159 $14,016 13.7%

1994 $ 9,936 $2,382 $151 $12,469 10.6%

1993 $10,784 $1,856 $126 $12,766 7.9%

1992 $10,560 $1,129 $ 23 $11,712 5.0%

1991 $10,288 $ 401 $ 0 $10,689 1.8%

</TABLE>

Explanatory Note: A hypothetical initial investment of
$10,000 on April 2, 1991, together with the aggregate cost
of reinvested dividends and capital gain distributions for
the entire period covered (their cash value at the time they
were reinvested), would have amounted to $15,281. If
dividends and capital gain distributions had not been
reinvested, the total value of the investment in the
Portfolio over time would have been smaller, and cash
payments for the period would have amounted to $4,136 for
income dividends and $142 for capital gain distributions.
Without fee waivers from the Portfolio's service providers
and expense reimbursements by WTC, the Portfolio's returns
would have been lower. This table does not reflect tax
consequences or the Portfolio's 3.50% maximum sales load,
which would reduce the year-end values of the $10,000
investment from those shown here.
MUNICIPAL INCOME PORTFOLIO

Value of Value of Value of Increase in
Period Initial Reinvested Reinvested Cost of Living
Ended $10,000 Income Capital Gain (Consumer Price
October 31 Investment Dividends Distributions Total Value Index)
- ---------- ---------- ---------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
1997 $10,192 $1,927 $0 $12,119 11.2%

1996 $ 9,968 $1,374 $0 $11,342 8.9%

1995 $ 9,992 $ 889 $0 $10,881 5.4%

1994 $ 9,312 $ 383 $0 $ 9,695 2.5%

Explanatory Note: A hypothetical initial investment of
$10,000 on November 1, 1993, together with the aggregate
cost of reinvested dividends and capital gain distributions
for the entire period covered (their cash value at the time
they were reinvested), would have amounted to $11,862. If
dividends and capital gain distributions had not been
reinvested, the total value of the investment in the
Portfolio over time would have been smaller, and cash
payments for the period would have amounted to $1,707.
Without fee waivers from the Portfolio's service providers,
the Portfolio's returns would have been lower. This table
does not reflect tax consequences or the Portfolio's 3.50%
maximum sales load, which would reduce the year-end values
of the $10,000 investment from those shown here.

The Portfolios may also, from time to time along with
performance advertisements, illustrate asset allocation by
sector weightings. These illustrations, an example for
Diversified Income Portfolio of which follows, are not
intended to reflect current or future portfolio holdings of
the Portfolios.

RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO

ASSET BREAKDOWN BY SECTOR
As of October 31, 1997

Percent of
Sector Investments
------ -----------

US Government Bonds 27.0%

Corporate Bonds 47.5%

Asset Backed Securities 8.0%

Mortgage Backed Securities 11.6%

Cash Equivalents 5.9%
---------
Total Investments 100.0%
=========

[Pie Chart Graph]

Corporate Bonds 47%
Mortgage Backed Securities 12%
Asset Backed Securities 8%
Cash Equivalents 6%
US Government Bonds 27%

The Rodney Square Diversified Income Portfolio may also
from time to time along with performance advertisements,
present its investment in the form of the "Schedule of
Investments" included in the Annual Report to the
Shareholders of the Fund as of and for the fiscal year ended
October 31, 1997, a copy of which is attached hereto and
incorporated by reference.
COMPARISON OF PORTFOLIO PERFORMANCE. A comparison of
the quoted performance offered for various investments is
valid only if performance is calculated in the same manner.
Since there are many methods of calculating performance,
investors should consider the effects of the methods used to
calculate performance when comparing performance of shares
of a Portfolio with performance quoted with respect to other
investment companies or types of investments. For example,
it is useful to note that yields reported on debt
instruments are generally prospective, contrasted with the
historical yields reported by the Portfolios.
In connection with communicating its performance to
current or prospective shareholders, a Portfolio also may
compare performance figures to the performance of other
mutual funds tracked by mutual fund rating services, to
unmanaged indexes or unit investment trusts with similar
holdings or to individual securities.
From time to time, in marketing and other literature, a
Portfolio's performance may be compared to the performance
of broad groups of mutual funds with similar investment
goals, as traced by independent organizations such as
Investment Company Data, Inc. (an organization which
provides performance ranking information for broad classes
of mutual funds), Lipper Analytical Services, Inc.
("Lipper") (a mutual fund research firm which analyzes over
1,800 mutual funds), CDA Investment Technologies, Inc. (an
organization which provides mutual fund performance and
ranking information), Morningstar, Inc. (an organization
which analyzes over 2,400 mutual funds) and other
independent organizations. When Lipper's tracking results
are used, a Portfolio will be compared to Lipper's
appropriate fund category, that is, by fund objective and
portfolio holdings. Rankings may be listed among one or
more of the asset-size classes as determined by Lipper.
When other organizations' tracking results are used, a
Portfolio will be compared to the appropriate fund category,
that is, by fund objective and portfolio holdings, or to the
appropriate volatility grouping, where volatility is a
measure of a fund's risk.
Since the assets in all funds are always changing, a
Portfolio may be ranked within one asset-size class at one
time and in another asset-size class at some other time. In
addition, the independent organization chosen to rank the
Portfolio in marketing and promotional literature may change
from time to time depending upon the basis of the
independent organization's categorizations of mutual funds,
changes in the Portfolio's investment policies and
investments, the Portfolio's asset size and other factors
deemed relevant. Advertisements and other marketing
literature will indicate the time period and Lipper asset-
size class or other performance ranking company criteria, as
applicable, for the ranking in question.
Evaluations of Portfolio performance made by
independent sources may also be used in advertisements
concerning the Portfolios, including reprints of, or
selections from, editorials or articles about the
Portfolios. Sources for performance information and
articles about the Portfolios may include the following:
BARRON'S, a Dow Jones and Company, Inc. business
and financial weekly that periodically reviews
mutual fund performance data.
BUSINESS WEEK, a national business weekly that
periodically reports the performance rankings and
ratings of a variety of mutual funds.
CDA INVESTMENT TECHNOLOGIES, INC., an organization
which provides performance and ranking information
through examining the dollar results of
hypothetical mutual fund investments and comparing
these results against appropriate market indexes.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly
investment advisory publication that periodically
features the performance of a variety of
securities.
CONSUMER DIGEST, a monthly business/financial
magazine that includes a "Money Watch" section
featuring financial news.
FINANCIAL WORLD, a general business/financial
magazine that includes a "Market Watch" department
reporting on activities in the mutual fund
industry.
FORBES, a national business publication that from
time to time reports the performance of specific
investment companies in the mutual fund industry.
FORTUNE, a national business publication that
periodically rates the performance of a variety of
mutual funds.
INVESTMENT COMPANY DATA, INC., an independent
organization which provides performance ranking
information for broad classes of mutual funds.
INVESTOR'S DAILY, a daily newspaper that features
financial, economic, and business news.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND
PERFORMANCE ANALYSIS, a weekly publication of
industry-wide mutual fund averages by type of
fund.
MONEY, a monthly magazine that from time to time
features both specific funds and the mutual fund
industry as a whole.
MUTUAL FUND VALUES, a biweekly Morningstar, Inc.
publication that provides ratings of mutual funds
based on fund performance, risk and portfolio
characteristics.
THE NEW YORK TIMES, a nationally distributed
newspaper which regularly covers financial news.
PERSONAL INVESTING NEWS, a monthly news
publication that often reports on investment
opportunities and market conditions.
PERSONAL INVESTOR, a monthly investment advisory
publication that includes a "Mutual Funds Outlook"
section reporting on mutual fund performance
measures, yields, indexes and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world
of entrepreneurs and growing businesses, often
featuring mutual fund performance data.
USA TODAY, a national daily newspaper.
U.S. NEWS AND WORLD REPORT, a national business
weekly that periodically reports mutual fund
performance data.
WALL STREET JOURNAL, a Dow Jones and Company, Inc.
newspaper which regularly covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an
annual compendium of information about mutual
funds and other investment companies, including
comparative data on funds' backgrounds, management
policies, salient features, management results,
income and dividend records, and price ranges.

In advertising the performance of the Portfolios, the
performance of a Portfolio may also be compared to the
performance of unmanaged indexes of securities in which the
Portfolio invests or to unit investment trusts ("UITs") that
hold the same type of securities in which the Portfolio
invests. The performance of the Diversified Income
Portfolio may be compared to the performance of the Lehman
Intermediate Government/Corporate Index; the performance of
the Municipal Income Portfolio may be compared to the
performance of Merrill Lynch Intermediate Municipal Index.
Quotations of index and UIT performance generally assume
reinvestment of dividends and other distributions; however,
index and UIT quotations do not reflect expenses related to
asset management.
Performance advertisements for the Municipal Income
Portfolio may compare investing in that Portfolio to
investing in an individual municipal bond. Unlike municipal
funds such as the Municipal Income Portfolio, individual
municipal bonds offer a stated rate of interest and, if held
to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they
do not offer the reduced risk of a mutual fund which invests
in many different securities. The initial investment
requirements and sales charges of many municipal funds are
lower than the purchase cost of individual municipal bonds,
which are generally issued in $5,000 denominations and are
subject to direct brokerage costs.

TAXES
GENERAL. To continue to qualify for treatment
as a RIC under the Code, each Portfolio - each being treated
as a separate corporation for these purposes - must
distribute to its shareholders for each taxable year at
least 90% of its investment company taxable income
(generally consisting of taxable net investment income plus
net short-term capital gain and, in the case of the Diversified
Income Portfolio, net gains from certain foreign currency
transactions) plus, in the case of the
Municipal Income Portfolio, 90% of its net interest income
excludable from gross income under Section 103(a) of the
Code ("Distribution Requirement") and must meet several
additional requirements. With respect to each Portfolio,
these requirements include the following: (1) at least 90%
of the Portfolio's gross income each taxable year must be
derived from dividends, interest, payments with respect to
securities loans and gains from the sale or other
disposition of securities or foreign currencies, or other
income (including gains from options, futures or forward
currency contracts) derived with respect to its business of
investing in securities or those currencies ("Income
Requirement"); (2) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items,
U.S. Government obligations , securities of other RICs
and other securities, with those
other securities limited, in respect of any one issuer, to
an amount that does not exceed 5% of the value of the
Portfolio's total assets and that does not represent more
than 10% of the issuer's outstanding voting securities; and
(3) at the close of each quarter of the Portfolio's taxable
year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. Government
obligations and securities of other RICs) of any one issuer.
If a Portfolio failed to qualify for treatment as a RIC
in any taxable year, it would be subject to tax on its
taxable income at corporate rates and all distributions from
earnings and profits, including any distributions from net
tax-exempt income and net capital gains, would be
taxable to its shareholders as ordinary income. In
addition, the Portfolio could be required to recognize
unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying as a RIC.
Each Portfolio will be subject to a nondeductible 4%
excise tax ("Excise Tax") to the extent it fails to
distribute by the end of any calendar year substantially all
of its ordinary (taxable) income for that year and capital
gain net income for the one-year period ending on October 31
of that year, plus certain other amounts. For this and
other purposes, dividends and other distributions declared
by a Portfolio in October, November or December of any year
and payable to shareholders of record on a date in one of
those months will be deemed to have been paid by the
Portfolio and received by the shareholders on December 31 of
that year if they are paid by the Portfolio during the
following January.
Investors should be aware that if Portfolio shares are
purchased shortly before the record date for any dividend or
capital gain distribution (other than an exempt-interest
dividend - (as defined in the Prospectus), the shareholder
will pay full price for the shares and will receive some
portion of the price back as a taxable distribution.
If a Portfolio makes a distribution to shareholders in
excess of its current and accumulated "earnings and profits"
in any taxable year, the excess distribution will be treated
by each shareholder as a return of capital to the extent of
the shareholder's tax basis and thereafter as capital gain.
Thus, a return of capital is not taxable, though it does
reduce a shareholder's tax basis.
Each Portfolio may acquire zero coupon securities
issued with original issue discount. As a holder of those
securities, a Portfolio must take into account the original
issue discount that accrues on the securities during the
taxable year, even if it receives no corresponding payment
on them during the year. Because each Portfolio annually
must distribute substantially all of its investment company
taxable income and tax-exempt income, including any original
issue discount, to satisfy the Distribution
Requirement and (except with respect to tax-exempt income)
avoid imposition of the Excise Tax, a Portfolio may be
required in a particular year to distribute as a dividend an
amount that is greater than the total amount of cash it
actually receives. Those distributions will be made from a
Portfolio's cash assets or from the proceeds of sales of
portfolio securities, if necessary. A Portfolio may realize
capital gains or losses from those sales, which would
increase or decrease its investment company taxable income
and/or net capital gain (the excess of net long-term capital
gain over net short-term capital loss).
THE MUNICIPAL INCOME PORTFOLIO. The Municipal Income
Portfolio will be able to pay exempt-interest dividends to
its shareholders only if, at the close of each quarter of
its taxable year, at least 50% of the value of its total
assets consists of obligations the interest on which is
excludable from gross income under Section 103(a) of the
Code; the Portfolio intends to continue to satisfy this
requirement. Distributions that the Portfolio properly
designates as exempt-interest dividends are treated by its
shareholders as interest excludable from their gross income
for federal income tax purposes but may be items of tax
preference for AMT purposes.
The aggregate dividends excludable from the shareholders'
gross income may not exceed the Portfolio's net tax-exempt
income. The shareholders' treatment of dividends from the
Portfolio under state and local income tax laws may differ
from the treatment thereof under the Code. In order to
qualify to pay exempt-interest dividends, the Portfolio may
be limited in its ability to engage in taxable transactions
such as repurchase agreements, options and futures
strategies and portfolio securities lending.
Tax-exempt interest attributable to certain "private
activity bonds" ("PAB's") (including, in the case of a RIC
receiving interest on those bonds, a proportionate part of
the exempt-interest dividends paid by the RIC) is a tax
preference item for purposes of the AMT. Furthermore, even
interest on tax-exempt securities held by the Portfolio
that are not PAB's, which interest otherwise would be a
tax preference item, nevertheless may be indirectly
subject to the AMT in the hands of corporate shareholders
when distributed to them by the Portfolio. PAB's are issued by
or on behalf of public authorities to finance various
privately operated facilities and are described in the
Appendix to the Prospectus. Entities or persons who are
"substantial users" (or persons related to "substantial
users") of facilities financed by industrial development
bonds or PAB's should consult their tax advisers before
purchasing Portfolio shares. For these purposes, the term
"substantial user" is defined generally to include a "non-
exempt person" who regularly uses in trade or business a
part of a facility financed from the proceeds of such bonds.
Up to 85% of Social Security and railroad retirement
benefits may be included in taxable income for recipients
whose adjusted gross income (including income from tax-
exempt sources such as the Portfolio) plus 50% of their
benefits exceeds certain base amounts. Exempt-interest
dividends from the Portfolio still are tax-exempt to the
extent described in the Prospectus; they are only included
in the calculation of whether a recipient's income exceeds
the established amounts.
If shares of the Portfolio are sold at a loss after
being held for six months or less, the loss will be
disallowed to the extent of any exempt-interest dividends
received on those shares.
If the Portfolio invests in any instruments that
generate taxable income, under the circumstances described
in the Prospectus, distributions of the interest earned
thereon will be taxable to its shareholders as ordinary
income to the extent of its earnings and profits. Moreover,
if the Portfolio realizes capital gain as a result of market
transactions, any distribution of that gain will be taxable
to its shareholders.
The Portfolio may invest in municipal bonds that are
purchased with "market discount." For these purposes,
market discount is the amount by which a bond's purchase
price is exceeded by its stated redemption price at maturity
or, in the case of a bond that was issued with original
issue discount ("OID"), the sum of its issue price plus
accrued OID, except that market discount less than the
product of (1) 0.25% of the redemption price at maturity
times and (2) the number of complete years to maturity after
the taxpayer acquired the bond is disregarded. Market
discount generally is accrued ratably, on a daily basis,
over the period from the acquisition date to the date of
maturity. Gain on the disposition of such a bond purchased
by the Portfolio after April 30, 1993 (other than a bond
with a fixed maturity date within one year from its
issuance), generally is treated as ordinary (taxable)
income, rather than capital gain, to the extent of the
bond's accrued market discount at the time of disposition.
In lieu of treating the disposition gain as above, the
Portfolio may elect to include market discount in its gross
income currently, for each taxable year to which it is
attributable.
The Portfolio informs shareholders within 60 days after
the Fund's fiscal year-end (October 31) of the percentage of
its income distributions designated as exempt-interest
dividends. The percentage is applied uniformly to all
distributions made during the year, so the percentage
designated as tax-exempt for any particular distribution may
be substantially different from the percentage of the
Portfolio's income that was tax-exempt during the period
covered by the distribution.

THE DIVERSIFIED INCOME PORTFOLIO. Interest and
dividends received by the Diversified Income Portfolio, and
gains realized thereby, may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield and / or total return on its
securities. Tax conventions between certain countries
and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do
not impose taxes on capital gains in respect of investments
by foreign investors.

HEDGING TRANSACTIONS. The use of hedging strategies,
such as writing (selling) and purchasing options and futures
contracts and entering into forward currency contracts,
involves complex rules that will determine for federal
income tax purposes the amount, character and timing of recognition
of the gains and losses a Portfolio realizes in connection
therewith. Gains from the disposition of foreign currencies
(except certain gains that may be excluded by future regulations),
and gains from options, futures and forward currency contracts derived
by a Portfolio with respect to its business of investing in
securities or foreign currencies, will qualify as
permissible income under the Income Requirement.

Futures and forward currency contracts that are subject
to Section 1256 of the Code (other than such contracts that
are part of a "mixed straddle" with respect to which a
Portfolio has made an election not to have the following
rules apply) ("Section 1256 Contracts") and that are held by
a Portfolio at the end of its taxable year generally will be
deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss
recognized on these deemed sales, and 60% of any net
realized gain or loss from any actual sales of Section 1256
Contracts, will be treated as long-term capital gain or
loss, and the balance will be treated as short-term capital
gain or loss.

As of the date of this Statement of Additional Information,
it is not entirely clear whether that 60% portion will qualify
for the reduced maximum tax rates on net capital gain enacted
by the Taxpayer Relief Act of 1997 -- 20% (10% for taxpayers in
the 15% marginal tax bracket) for gain recognized on capital
assets held for more than 18 months -- instead of the 28% rate
in effect before that legislation, which now applies to gain
recognized on capital assets held for more than one year but not
more than 18 months, although technical corrections legislation
passed by the House of Representatives late in 1997 would treat it
as qualifying therefor.
Section 988 of the Code also may apply to
forward currency contracts and options on foreign
currencies. Under Section 988, each foreign currency gain
or loss generally is computed separately and treated as
ordinary income or loss. In the case of overlap between
Sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss. The
Diversified Income Portfolio attempts to monitor its Section
988 transactions to minimize any adverse tax impact.

DESCRIPTION OF THE FUND
The Portfolios are the only series of the Fund, which
was established as a Massachusetts business trust on May 7,
1986. The name of the Fund formerly was The Rodney Square
Benchmark U.S. Treasury Fund. The name was changed to The
Rodney Square Strategic Fixed-Income Fund effective on March
14, 1991.
Under Massachusetts law, shareholders of a
Massachusetts business trust may, under certain
circumstances, be held personally liable for the obligations
of the trust. The Declaration of Trust, as amended and
restated on July 1, 1992, contains an express disclaimer of
shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each
note, bond, contract or other undertaking relating to the
Fund that is issued by or on behalf of the Fund or the
Trustees. The amended and restated Declaration of Trust
provides for indemnification out of assets belonging to the
applicable Portfolio of any shareholder held personally
liable solely by reason of his or her being or having been a
shareholder of the Portfolio. Thus, the risk of a
shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which
the Portfolio itself would be unable to indemnify the
shareholder. WTC believes that, in view of the above, the
risk of personal liability to shareholders is remote.
The amended and restated Declaration of Trust further
provides that the Trustees will not be liable for neglect or
wrongdoing provided they have exercised reasonable care and
have acted under the reasonable belief that their actions
are in the best interest of the Fund; but nothing in the
Declaration of Trust protects a Trustee against any
liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of
his or her office.
The Fund's capital consists of an unlimited number of
shares of beneficial interest, $0.01 par value. Shares of
the Portfolios that are issued by the Fund are fully paid
and nonassessable. The assets of the Fund received for the
issuance or sale of Portfolio shares and all income,
earnings, profits and proceeds therefrom, subject only to
the right of creditors, are allocated to the respective
Portfolio and constitute the underlying assets of that
Portfolio.
The amended and restated Declaration of Trust provides
that the Fund will continue indefinitely unless a majority
of the shareholders of the Fund or a majority of the
shareholders of the affected Portfolio approve: (a) the sale
of the Fund's assets or the Portfolio's assets to another
diversified open-end management investment company; or (b)
the liquidation of the Fund or the Portfolio. In the event
of the liquidation of the Fund or a Portfolio, affected
shareholders are entitled to receive the assets of the Fund
or Portfolio that are available for distribution.

OTHER INFORMATION
INDEPENDENT AUDITORS. Ernst & Young LLP, Suite 4000,
2001 Market St., Phila., PA 19103, serves as the Fund's
independent auditors, providing services which include (1)
audit of the annual financial statements for the Portfolios,
(2) assistance and consultation in connection with SEC
filings, and (3) preparation of the annual federal and state
income tax returns filed on behalf of the Portfolios.
The financial statements and financial highlights of
the Portfolios appearing or incorporated by reference in the
Fund's Prospectus, this Statement of Additional Information
and Registration Statement have been audited by Ernst &
Young LLP, independent auditors, to the extent indicated in
their reports thereon also appearing elsewhere herein and in
the Registration Statement or incorporated by reference.
Such financial statements have been included herein or
incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in
accounting and auditing.

LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800
Massachusetts Avenue, 2nd Floor, N.W., Washington, D.C.
20036, serves as counsel to the Fund and has passed upon the
legality of the shares offered by the Prospectus and this
Statement of Additional Information.

CUSTODIAN. WTC, Rodney Square North, 1100 N. Market
St., Wilmington, DE 19890-0001, serves as the Fund's
Custodian.

TRANSFER AGENT. RSMC, Rodney Square North, 1100 N.
Market St., Wilmington, DE 19890-0001, serves as the Fund's
Transfer Agent and Dividend Paying Agent. Compensation for
the services and duties performed is paid by WTC in
accordance with the Advisory Agreements. Certain other fees
and expenses incurred in connection with the provision of
these services are payable by the Fund or the shareholder on
whose behalf the service is performed.
SUBSTANTIAL SHAREHOLDERS. As of October 31, 1997, no
shareholder other than WTC owned of record or beneficially
more than 5% of the outstanding shares of either Portfolio.
WTC owned of record 78.0% of the shares of the Diversified
Income Portfolio, in addition to those shares owned
beneficially on behalf of its customer accounts; and WTC
owned of record 55% of the shares of the Municipal Income
Portfolio in addition to those shares owned beneficially on
behalf of its customer accounts.

FINANCIAL STATEMENTS
The Schedules of Investments of the Diversified Income
Portfolio and Municipal Income Portfolio as of October 31,
1997, the Statements of Assets and Liabilities of the
Diversified Income Portfolio and Municipal Income Portfolio
as of October 31, 1997, the Statement of Operations of the
Diversified Income Portfolio and Municipal Income Portfolio
for the fiscal year ended October 31, 1997, the Statements
of Changes in Net Assets of the Diversified Income Portfolio
and Municipal Income Portfolio for the fiscal years ended
October 31, 1997 and 1996, the Financial Highlights of the
Diversified Income Portfolio for the fiscal years ended
October 31, 1997, 1996, 1995, 1994 and 1993, the Financial
Highlights of the Municipal Income Portfolio for the fiscal
years ended October 31, 1997, 1996, 1995 and 1994, the Notes
to Financial Statements and the Report of Independent
Auditors, each of which is included in the Annual Report to
the shareholders of the Fund as of and for the fiscal year
ended October 31, 1997, are attached hereto.

APPENDIX A

OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
REGULATION OF THE USE OF OPTIONS, FUTURES AND FORWARD
CURRENCY CONTRACT STRATEGIES. As discussed in the
Prospectus, in managing both Portfolios, WTC may engage in
certain options and futures strategies to hedge various
market risks or to enhance potential gain. In managing the
Short/Intermediate Bond and the Intermediate Bond
Portfolios, WTC may also use forward currency contracts to
hedge against the risk of foreign currency fluctuations that
could adversely affect that Portfolio's holdings or
contemplated investments. Certain special characteristics
of and risks associated with using these instruments are
discussed below. Use of options, futures and forward
currency contracts is subject to applicable regulations of
the SEC, the several options and futures exchanges upon
which these instruments may be traded, the Commodity Futures
Trading Commission (CFTC) and the various state regulatory
authorities. The Board of Trustees has adopted investment
guidelines (described below) reflecting those regulations.
In addition to the products, strategies and risks
described below and in the Prospectus, WTC expects to
discover additional opportunities in connection with
options, futures and forward currency contracts. These new
opportunities may become available as WTC develops new
techniques, as regulatory authorities broaden the range of
permitted transactions and as new options, futures and
forward currency contracts are developed. WTC may utilize
these opportunities to the extent they are consistent with
each Portfolio's investment objective and limitations and
permitted by applicable regulatory authorities. The
registration statement for the Portfolios will be
supplemented to the extent that new products and strategies
involve materially different risks than those described
below and in the Prospectus.

COVER FOR OPTIONS, FUTURES AND FORWARD CURRENCY
CONTRACT STRATEGIES. The Portfolios will not use leverage
in their options, futures and forward currency contract
strategies. Accordingly, the Portfolios will comply with
guidelines established by the SEC with respect to coverage
of these strategies and will either (1) set aside cash, or
liquid securities in a segregated account with the Fund's
custodian in the prescribed amount, or (2) hold securities
or other options or futures contracts whose values are
expected to offset ("cover") their obligations thereunder.
Securities, currencies or other options or futures contracts
used for cover cannot be sold or closed out while the
strategy is outstanding, unless they are replaced with
similar assets. As a result, there is a possibility that
the use of cover involving a large percentage of a
Portfolio's assets could impede portfolio management or that
Portfolio's ability to meet redemption requests or other
current obligations.

OPTIONS STRATEGIES. Each Portfolio may purchase and
write (sell) options on securities and securities indexes
that are traded on U.S. and foreign securities exchanges and
in the over-the-counter ("OTC") market. Currently, options
on debt securities are primarily traded on the OTC market.
Exchange-traded options in the U.S. are issued by a clearing
organization affiliated with the exchange on which the
option is listed, which, in effect, guarantees completion of
every exchange-traded option transaction. In contrast, OTC
options are contracts between a Portfolio and its contra-
party with no clearing organization guarantee unless the
parties provide for it. Thus, when a Portfolio purchases an
OTC option, it relies on the dealer from which it has
purchased the OTC option to make or take delivery of the
securities underlying the option. Failure by the dealer to
do so would result in the loss of any premium paid by the
Portfolio as well as the loss of the expected benefit of the
transaction. Accordingly, before a Portfolio purchases or
sells an OTC option, WTC assesses the creditworthiness of
each counterparty and any guarantor or credit enhancement of
the counterparty's credit to determine whether the terms of
the option are likely to be satisfied.
Special risks are presented by internationally traded
options. Because of time differences between the United
States and various foreign countries, and because different
holidays are observed in different countries, foreign
options markets may be open for trading during hours or on
days when U.S. markets are closed. As a result, option
premiums may not reflect the current prices of the
underlying securities in the United States.
Each Portfolio may purchase call options on securities
in which it is authorized to invest in order to fix the cost
of a future purchase. Call options also may be used as a
means of enhancing returns by, for example, participating in
an anticipated price increase of a security. In the event
of a decline in the price of the underlying security, use of
this strategy would serve to limit the potential loss to a
Portfolio to the option premium paid; conversely, if the
market price of the underlying security increases above the
exercise price and a Portfolio either sells or exercises the
option, any profit eventually realized would be reduced by
the premium paid.
Each Portfolio may purchase put options on securities
that it holds in order to hedge against a decline in the
market value of the securities held or to enhance return.
The put option enables a Portfolio to sell the underlying
security at the predetermined exercise price; thus, the
potential for loss to the Portfolio below the exercise price
is limited to the option premium paid. If the market price
of the underlying security is higher than the exercise price
of the put option, any profit the Portfolio realizes on the
sale of the security is reduced by the premium paid for the
put option less any amount for which the put option may be
sold.
Each Portfolio may on certain occasions wish to hedge
against a decline in the market value of securities that it
holds at a time when put options on those particular
securities are not available for purchase. At those times,
a Portfolio may purchase a put option on other carefully
selected securities in which it is authorized to invest, the
values of which historically have a high degree of positive
correlation to the value of the securities actually held.
If WTC's judgment is correct, changes in the value of the
put options should generally offset changes in the value of
the securities being hedged. However, the correlation
between the two values may not be as close in these
transactions as in transactions in which a Portfolio
purchases a put option on a security that it holds. If the
value of the securities underlying the put option falls
below the value of the portfolio securities, the put option
may not provide complete protection against a decline in the
value of the portfolio securities.
Each Portfolio may write covered call options on
securities in which it is authorized to invest for hedging
purposes or to increase return in the form of premiums
received from the purchasers of the options. A call option
gives the purchaser of the option the right to buy, and the
writer (seller) the obligation to sell, the underlying
security at the exercise price during the option period.
The strategy may be used to provide limited protection
against a decrease in the market price of the security, in
an amount equal to the premium received for writing the call
option less any transaction costs. Thus, if the market
price of the underlying security held by a Portfolio
declines, the amount of the decline will be offset wholly or
in part by the amount of the premium received by the
Portfolio. If, however, there is an increase in the market
price of the underlying security and the option is
exercised, the Portfolio will be obligated to sell the
security at less than its market value.
Securities used to cover OTC call options written by a
Portfolio are considered illiquid and therefore subject to
the Portfolio's limitations on investing in illiquid
securities, unless the OTC options are sold to qualified
dealers who agree that the Portfolio may repurchase any OTC
options it writes for a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an
OTC call option written subject to this procedure is
considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic
value of the option. A Portfolio could lose the ability to
participate in an increase in the value of the underlying
securities above the exercise price because the increase
would likely be offset by an increase in the cost of closing
out the call option (or could be negated if the buyer chose
to exercise the call option at an exercise price below the
current market value).
Each Portfolio may also write covered put options on
securities in which it is authorized to invest. A put
option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the
underlying security at the exercise price during the option
period. So long as the obligation of the writer continues,
the writer may be assigned an exercise notice by the broker-
dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the
underlying security. The operation of put options in other
respects, including their related risks and rewards, is
substantially identical to that of call options. If the put
option is not exercised, the Portfolio will realize income
in the amount of the premium received. This technique could
be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that
the market price of the underlying securities would decline
below the exercise price less the premiums received, in
which case the Portfolio would expect to suffer a loss.
Each Portfolio may purchase put and call options and
write covered put and call options on indexes in much the
same manner as the more traditional options discussed above,
except that index options may serve as a hedge against
overall fluctuations in the securities markets (or a market
sector) rather than anticipated increases or decreases in
the value of a particular security. An index assigns values
to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are
effected with cash payments and do not involve delivery of
securities. Thus, upon settlement of a index option, the
purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the
closing price of the index. The effectiveness of hedging
techniques using index options will depend on the extent to
which price movements in the index selected correlate with
price movements of the securities in which a Portfolio
invests. Perfect correlation is not possible because the
securities held or to be acquired by a Portfolio will not
exactly match the composition of indexes on which options
are purchased or written.
Each Portfolio may purchase and write covered straddles
on securities or indexes. A long straddle is a combination
of a call and a put purchased on the same security where the
exercise price of the put is less than or equal to the
exercise price on the call. A Portfolio would enter into a
long straddle when WTC believes that it is likely that
prices will be more volatile during the term of the options
than is implied by the option pricing. A short straddle is
a combination of a call and a put written on the same
security where the exercise price on the put is less than or
equal to the exercise price of the call where the same issue
of the security is considered "cover" for both the put and
the call. A Portfolio would enter into a short straddle
when WTC believes that it is unlikely that prices will be as
volatile during the term of the options as is implied by the
option pricing. In such case, the Portfolio will set aside
cash and/or liquid securities in a segregated account with
its custodian equivalent in value to the amount, if any, by
which the put is "in-the-money," that is, that amount by
which the exercise price of the put exceeds the current
market value of the underlying security. Because straddles
involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
Each Portfolio may purchase put and call warrants with
values that vary depending on the change in the value of one
or more specified indexes ("index warrants"). An index
warrant is usually issued by a bank or other financial
institution and gives a Portfolio the right, at any time
during the term of the warrant, to receive upon exercise of
the warrant a cash payment from the issuer of the warrant
based on the value of the underlying index at the time of
exercise. In general, if a Portfolio holds a call warrant
and the value of the underlying index rises above the
exercise price of the warrant, the Portfolio will be
entitled to receive a cash payment from the issuer upon
exercise based on the difference between the value of the
index and the exercise price of the warrant; if a Portfolio
holds a put warrant and the value of the underlying index
falls, the Portfolio will be entitled to receive a cash
payment from the issuer upon exercise based on the
difference between the exercise price of the warrant and the
value of the index. A Portfolio holding a call warrant
would not be entitled to any payments from the issuer at any
time when the exercise price is greater than the value of
the underlying index; a Portfolio holding a put warrant
would not be entitled to any payments when the exercise
price is less than the value of the underlying index. If a
Portfolio does not exercise an index warrant prior to its
expiration, then the Portfolio loses the amount of the
purchase price that it paid for the warrant.
The Portfolios will normally use index warrants as they
use index options. The risks of the Portfolios' use of
index warrants are generally similar to those relating to
their use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and
are not obligations of a regulated clearing agency, but are
backed only by the credit of the bank or other institution
which issues the warrant. Also, index warrants generally
have longer terms than index options. Index warrants are
not likely to be as liquid as index options backed by a
recognized clearing agency. In addition, the terms of index
warrants may limit the Portfolios' ability to exercise the
warrants at any time or in any quantity.

FOREIGN CURRENCY OPTIONS AND RELATED RISKS.
The Diversified Income Portfolio may take
positions in options on foreign currencies to hedge
against the risk of foreign exchange rate fluctuations on
foreign securities that a Portfolio holds or that it intends
to purchase. For example, if a Portfolio enters into a
contract to purchase securities denominated in a foreign
currency, it could effectively fix the maximum U.S. dollar
cost of the securities by purchasing call options on that
foreign currency. Similarly, if a Portfolio held securities
denominated in a foreign currency and anticipated a decline
in the value of that currency against the U.S. dollar, the
Portfolio could hedge against such a decline by purchasing a
put option on the currency involved. The Portfolio's
ability to establish and close out positions in such options
is subject to the maintenance of a liquid secondary market.
Although many options on foreign currencies are exchange-
traded, the majority are traded on the OTC market. The
Portfolios will not purchase or write such options unless,
in WTC's opinion, the market for them is sufficiently liquid
to ensure that the risks in connection with such options are
not greater than the risks in connection with the underlying
currency. In addition, options on foreign currencies are
affected by all of those factors that influence foreign
exchange rates and investments generally.
The value of a foreign currency option depends upon the
value of the underlying currency relative to the U.S.
dollar. As a result, the price of the option position may
vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a
foreign security. Available quotation information is
generally representative of very large transactions in the
interbank market which is a global, around-the-clock market.
There is no systematic reporting of last sale information
for foreign currencies or any regulatory requirement that
quotations available through dealers and other market
resources be firm or revised on a timely basis.
Since foreign currency transactions occurring in the
interbank market involve substantially larger amounts than
those underlying foreign currency options, interbank
quotation information may not reflect rates for foreign
currencies underlying options that would be traded in an odd
lot market (generally consisting of transactions of less
than $1 million) at prices that are less favorable. In
addition, to the extent that the U.S. options markets are
closed while the markets for the underlying currencies
remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in
the options markets until they reopen.

OPTIONS GUIDELINES. In view of the risks involved in
using the options strategies described above, each Portfolio
has adopted the following investment guidelines to govern
its use of such strategies; these guidelines may be modified
by the Board of Trustees without shareholder approval:
(1) each Portfolio will write only covered
options, and each such option will remain covered
so long as the Portfolio is obligated under the
option; and
(2) the Diversified Income Portfolio will not write
put or call options having aggregate exercise prices
greater than 25% of their respective net assets.
These guidelines do not apply to options attached to or
acquired with or traded together with their underlying
securities and do not apply to securities that incorporate
features similar to options.

SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING.
A Portfolio may effectively terminate its right or
obligation under an option by entering into a closing
transaction. If a Portfolio wishes to terminate its
obligation to purchase or sell securities or currencies
under a put or a call option it has written, the Portfolio
may purchase a put or a call option of the same series (that
is, an option identical in its terms to the option
previously written); this is known as a closing purchase
transaction. Conversely, in order to terminate its right to
purchase or sell specified securities or currencies under a
call or put option it has purchased, a Portfolio may sell an
option of the same series as the option held; this is known
as a closing sale transaction. Closing transactions
essentially permit a Portfolio to realize profits or limit
losses on its options positions prior to the exercise or
expiration of the option. If a Portfolio is unable to
effect a closing purchase transaction with respect to
options it has acquired, the Portfolio will have to allow
the options to expire without recovering all or a portion of
the option premiums paid. If a Portfolio is unable to
effect a closing purchase transaction with respect to
covered options it has written, the Portfolio will not be
able to sell the underlying securities or currencies or
dispose of assets used as cover until the options expire or
are exercised, and the Portfolio may experience material
losses due to losses on the option transaction itself and in
the covering securities or currencies.
In considering the use of options to enhance returns or
for hedging purposes, particular note should be taken of the
following:
(1) The value of an option position will
reflect, among other things, the current market
price of the underlying security, index or
currency, the time remaining until expiration, the
relationship of the exercise price to the market
price, the historical price volatility of the
underlying security, index or currency and general
market conditions. For this reason, the
successful use of options depends upon WTC's
ability to forecast the direction of price
fluctuations in the underlying securities or
currency markets or, in the case of index options,
fluctuations in the market sector represented by
the selected index.
(2) Options normally have expiration dates
of up to three years. An American style put or
call option may be exercised at any time during
the option period while a European style put or
call option may be exercised only upon expiration
or during a fixed period prior to expiration. The
exercise price of the options may be below, equal
to or above the current market value of the
underlying security, index or currency. Purchased
options that expire unexercised have no value.
Unless an option purchased by a Portfolio is
exercised or unless a closing transaction is
effected with respect to that position, the
Portfolio will realize a loss in the amount of the
premium paid and any transaction costs.
(3) A position in an exchange-listed option
may be closed out only on an exchange that
provides a secondary market for identical options.
Although each Portfolio intends to purchase or
write only those exchange-traded options for which
there appears to be a liquid secondary market,
there is no assurance that a liquid secondary
market will exist for any particular option at any
particular time. A liquid market may be absent
if: (i) there is insufficient trading interest in
the option; (ii) the exchange has imposed
restrictions on trading, such as trading halts,
trading suspensions or daily price limits; (iii)
normal exchange operations have been disrupted; or
(iv) the exchange has inadequate facilities to
handle current trading volume.
Closing transactions may be effected with
respect to options traded in the OTC markets only
by negotiating directly with the other party to
the option contract or in a secondary market for
the option if such market exists. Although each
Portfolio will enter into OTC options with dealers
that agree to enter into, and that are expected to
be capable of entering into, closing transactions
with the Portfolio, there can be no assurance that
the Portfolio will be able to liquidate an OTC
option at a favorable price at any time prior to
expiration. In the event of insolvency of the
contra-party, a Portfolio may be unable to
liquidate an OTC option. Accordingly, it may not
be possible to effect closing transactions with
respect to certain options, which would result in
the Portfolio having to exercise those options
that it has purchased in order to realize any
profit. With respect to options written by a
Portfolio, the inability to enter into a closing
transaction may result in material losses to the
Portfolio.
(4) With certain exceptions, exchange listed
options generally settle by physical delivery of
the underlying security or currency. Index
options are settled exclusively in cash for the
net amount, if any, by which the option is "in-the-
money" (where the value of the underlying
instrument exceeds, in the case of a call option,
or is less than, in the case of a put option, the
exercise price of the option) at the time the
option is exercised. If a Portfolio writes a call
option on an index, the Portfolio will not know in
advance the difference, if any, between the
closing value of the index on the exercise date
and the exercise price of the call option itself
and thus will not know the amount of cash payable
upon settlement. If a Portfolio holds an index
option and exercises it before the closing index
value for that day is available, the Portfolio
runs the risk that the level of the underlying
index may subsequently change.
(5) A Portfolio's activities in the options
markets may result in a higher portfolio turnover
rate and additional brokerage costs; however, a
Portfolio also may save on commissions by using
options as a hedge rather than buying or selling
individual securities or currencies in
anticipation of, or as a result of, market
movements.

FUTURES AND RELATED OPTIONS STRATEGIES. Each Portfolio
may engage in futures strategies for hedging purposes to
attempt to reduce the overall investment risk that would
normally be expected to be associated with ownership of the
securities in which it invests. The Portfolios may also
engage in futures strategies to enhance potential gain
subject to percentage limitations. (See discussion of
investment guidelines below).
Each Portfolio may use interest rate futures contracts
and options thereon to hedge its securities holdings against
changes in the general level of interest rates. A Portfolio
may purchase an interest rate futures contract when it
intends to purchase debt securities but has not yet done so.
This strategy may minimize the effect of all or part of an
increase in the market price of the debt security that the
Portfolio intends to purchase in the future. A rise in the
price of the debt security prior to its purchase may either
be offset by an increase in the value of the futures
contract purchased by the Portfolio or avoided by taking
delivery of the debt securities under the futures contract.
Conversely, a fall in the market price of the underlying
debt security may result in a corresponding decrease in the
value of the futures position. A Portfolio may sell an
interest rate futures contract in order to continue to
receive the income from a debt security, while endeavoring
to avoid part or all of the decline in market value of that
security that would accompany an increase in interest rates.
A Portfolio may purchase a call option on an interest
rate futures contract to hedge against a market advance in
debt securities that the Portfolio plans to acquire at a
future date. The purchase of a call option on an interest
rate futures contract is analogous to the purchase of a call
option on an individual debt security, which can be used as
a temporary substitute for a position in the security
itself. A Portfolio also may write covered put options on
interest rate futures contracts as a partial anticipatory
hedge and may write covered call options on interest rate
futures contracts as a partial hedge against a decline in
the price of debt securities held in the Portfolio's
portfolio. A Portfolio may also purchase put options on
interest rate futures contracts in order to hedge against a
decline in the value of debt securities held by the
Portfolio.
A Portfolio may sell index futures contracts in
anticipation of a general market or market sector decline
that could adversely affect the market value of the
Portfolio's securities holdings. To the extent that a
portion of the Portfolio's holdings correlate with a given
index, the sale of futures contracts on that index could
reduce the risks associated with a market decline and thus
provide an alternative to the liquidation of securities
positions. For example, if a Portfolio correctly
anticipates a general market decline and sells index futures
to hedge against this risk, the gain in the futures position
should offset some or all of the decline in the value of the
Portfolio's holdings. A Portfolio may purchase index
futures contracts if a significant market or market sector
advance is anticipated. Such a purchase of a futures
contract would serve as a temporary substitute for the
purchase of the underlying securities which may then be
purchased in an orderly fashion. This strategy may minimize
the effect of all or part of an increase in the market price
of securities that the Portfolio intends to purchase. A
rise in the price of the securities should be in part or
wholly offset by gains in the futures position.
As in the case of a purchase of an index futures
contract, a Portfolio may purchase a call option on an index
futures contract to hedge against a market advance in
securities that the Portfolio plans to acquire at a future
date. A Portfolio may write covered put options on index
futures as a partial anticipatory hedge and may write
covered call options on index futures as a partial hedge
against a decline in the prices of bonds held by the
Portfolio. This is analogous to writing covered call
options on securities. A Portfolio also may purchase put
options on index futures contracts. The purchase of put
options on index futures contracts is analogous to the
purchase of protective put options on individual securities
where a level of protection is sought below which no
additional economic loss would be incurred by the Portfolio.
The Diversified Income Portfolio
may sell foreign currency futures contracts to
hedge against possible variations in the exchange rates of
foreign currencies in relation to the U.S. dollar. In
addition, those Portfolios may sell foreign currency futures
contracts when WTC anticipates a general weakening of
foreign currency exchange rates that could adversely affect
the market value of the Portfolios' foreign securities
holdings or interest payments to be received in those
foreign currencies. In this case, the sale of a futures
contract on the underlying currency may reduce the risk to
the Portfolios of a reduction in market value caused by a
decline in the exchange rate and, by so doing, provide an
alternative to the liquidation of the securities position
and resulting transaction costs. The Portfolios may also
write a covered put option on a foreign currency futures
contract as a partial anticipatory hedge and may write a
covered call option on a foreign currency futures contract
as a partial hedge against the effects of a declining
foreign currency exchange rate on the value of securities
denominated in that currency.
When WTC anticipates a significant foreign exchange
rate increase while intending to invest in a security
denominated in that currency, Diversified Income Portfolio
may purchase a foreign currency futures
contract to hedge against the increased
rate pending completion of the anticipated transaction.
Such a purchase would serve as a temporary measure to
protect the Portfolios against any rise in the foreign
currency exchange rate that may add additional costs to
acquiring the foreign security position. The Portfolios may
also purchase a put or call option on a foreign currency
futures contract to obtain a fixed foreign currency exchange
rate at limited risk. The Portfolios may purchase a call
option on a foreign currency futures contract to hedge
against a rise in the foreign currency exchange rate while
intending to invest in a security denominated in that
currency. The Portfolios may purchase a put option on a
foreign currency futures contract as a hedge against the
effects of a decline in the foreign currency exchange rate
on the value of securities denominated in that currency.
Each Portfolio may invest in Eurodollar instruments
which are U.S. dollar-denominated futures contracts or
options thereon which are linked to the London Interbank
Offered Rate ("LIBOR"). The Portfolios may use Eurodollar
futures contracts and options on those futures contracts to
hedge against changes in LIBOR to which a number of variable
and floating rate instruments are linked.
The Portfolios may also write put options on interest
rate, index or, in the case of the Diversified Income
Portfolio, foreign currency futures contracts while, at
the same time, purchasing call options on the same interest
rate, index or foreign currency futures contract in order
to synthetically create an interest rate, index or foreign
currency futures contract. The options will have the same
strike prices and expiration dates. A Portfolio will only
engage in this strategy when it is more advantageous to
the Portfolio to do so as compared to purchasing the
futures contract.
The Portfolios may also purchase and write covered
straddles on interest rate or index futures contracts. A
long straddle is a combination of a call and a put purchased
on the same security where the exercise price of the put is
less than or equal to the exercise price on the call. A
Portfolio would enter into a long straddle when it believes
that it is likely that prices will be more volatile during
the term of the options than is implied by the option
pricing. A short straddle is a combination of a call and a
put written on the same security where the exercise price on
the put is less than or equal to the exercise price of the
call where the same issue of the security is
considered "cover" for both the put and the call. A
Portfolio would enter into a short straddle when it believes
that it is unlikely that prices will be as volatile during
the term of the options as is implied by the option pricing.
In such case, the Portfolio will set aside cash and/or
liquid securities in a segregated account with its custodian
in the amount, if any, by which the put is "in-the-money,"
that is the amount by which the exercise price of the put
exceeds the current market value of the underlying security.

FUTURES AND RELATED OPTIONS GUIDELINES. In view of the
risks involved in using the futures strategies that are
described above, each Portfolio has adopted the following
investment guidelines to govern its use of such strategies;
these guidelines may be modified by the Board of Trustees
without shareholder vote. For purposes of these guidelines,
foreign currency options traded on a commodities exchange
are considered "related options."
(1) A Portfolio will not purchase or sell non-
hedging futures contracts or related options if
aggregate initial margin and premiums required to
establish such positions would exceed 5% of the
Portfolio's total assets; and
(2) For purposes of this limitation,
unrealized profits and unrealized losses on any
open contracts are taken into account and in-the-
money amount of an option that is in-the-money at
the time of purchase is excluded.

SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND
RELATED OPTIONS TRADING. No price is paid upon entering
into a futures contract. Instead, upon entering into a
futures contract, a Portfolio is required to deposit with
the Fund's custodian in a segregated account in the name of
the futures broker through whom the transaction is effected
an amount of cash, U.S. Government securities or other
liquid instruments generally equal to 10% or less of the
contract value. This amount is known as "initial margin."
When writing a call or a put option on a futures contract,
margin also must be deposited in accordance with applicable
exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not involve
borrowing to finance the futures transactions. Rather,
initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that
is returned to the Portfolio upon termination of the
transaction, assuming all obligations have been satisfied.
Under certain circumstances, such as periods of high
volatility, a Portfolio may be required by a futures
exchange to increase the level of its initial margin
payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action.
Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the
futures or options position varies, a process known as
"marking to the market." For example, when a Portfolio
purchases a contract and the value of the contract rises,
the Portfolio receives from the broker a variation margin
payment equal to that increase in value. Conversely, if the
value of the futures position declines, the Portfolio is
required to make a variation margin payment to the broker
equal to the decline in value. Variation margin does not
involve borrowing to finance the futures transaction but
rather represents a daily settlement of the Portfolio's
obligations to or from a clearing organization.
Buyers and sellers of futures positions and options
thereon can enter into offsetting closing transactions,
similar to closing transactions on options on securities, by
selling or purchasing an offsetting contract or option.
Futures contracts or options thereon may be closed only on
an exchange or board of trade providing a secondary market
for such futures contracts or options.
Under certain circumstances, futures exchanges may
establish daily limits on the amount that the price of a
futures contract or related option may vary either up or
down from the previous day's settlement price. Once the
daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit.
The daily limit governs only price movements during a
particular trading day and therefore does not limit
potential losses, because prices could move to the daily
limit for several consecutive trading days with little or no
trading and thereby prevent prompt liquidation of
unfavorable positions. In such event, it may not be
possible for a Portfolio to close a position and, in the
event of adverse price movements, the Portfolio would have
to make daily cash payments of variation margin (except in
the case of purchased options). However, if futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price
of the securities, if any, may partially or completely
offset losses on the futures contract. However, there is no
guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus
provide an offset to losses on the contracts.
In considering the Portfolios' use of futures contracts
and related options, particular note should be taken of the
following:
(1) Successful use by the Portfolios of
futures contracts and related options will depend
upon WTC's ability to predict movements in the
direction of the overall securities, currencies
and interest rate markets, which requires
different skills and techniques than predicting
changes in the prices of individual securities.
Moreover, futures contracts relate not only to the
current price level of the underlying instrument
or currency but also to the anticipated price
levels at some point in the future. There is, in
addition, the risk that the movements in the price
of the futures contract will not correlate with
the movements in the prices of the securities or
currencies being hedged. For example, if the
price of an index futures contract moves less than
the price of the securities that are the subject
of the hedge, the hedge will not be fully
effective, but if the price of the securities
being hedged has moved in an unfavorable
direction, the Portfolio would be in a better
position than if it had not hedged at all. If the
price of the securities being hedged has moved in
a favorable direction, the advantage may be
partially offset by losses in the futures
position. In addition, if the Portfolio has
insufficient cash, it may have to sell assets to
meet daily variation margin requirements. Any
such sale of assets may or may not be made at
prices that reflect a rising market.
Consequently, the Portfolio may need to sell
assets at a time when such sales are
disadvantageous to the Portfolio. If the price of
the futures contract moves more than the price of
the underlying securities, the Portfolio will
experience either a loss or a gain on the futures
contract that may or may not be completely offset
by movements in the price of the securities that
are the subject of the hedge.
(2) In addition to the possibility that there
may be an imperfect correlation, or no correlation
at all, between price movements in the futures
position and the securities or currencies being
hedged, movements in the prices of futures
contracts may not correlate perfectly with
movements in the prices of the hedged securities
or currencies due to price distortions in the
futures market. There may be several reasons
unrelated to the value of the underlying
securities or currencies that cause this situation
to occur. First, as noted above, all participants
in the futures market are subject to initial and
variation margin requirements. If, to avoid
meeting additional margin deposit requirements or
for other reasons, investors choose to close a
significant number of futures contracts through
offsetting transactions, distortions in the normal
price relationship between the securities or
currencies and the futures markets may occur.
Second, because the margin deposit requirements in
the futures market are less onerous than margin
requirements in the securities market, there may
be increased participation by speculators in the
futures market; such speculative activity in the
futures market also may cause temporary price
distortions. As a result, a correct forecast of
general market trends may not result in successful
hedging through the use of futures contracts over
the short term. In addition, activities of large
traders in both the futures and securities markets
involving arbitrage and other investment
strategies may result in temporary price
distortions.
(3) Positions in futures contracts may be
closed out only on an exchange or board of trade
that provides a secondary market for such futures
contracts. Although the Portfolios intend to
purchase and sell futures only on exchanges or
boards of trade where there appears to be an
active secondary market, there is no assurance
that a liquid secondary market on an exchange or
board of trade will exist for any particular
contract at any particular time. In such event,
it may not be possible to close a futures
position, and in the event of adverse price
movements, a Portfolio would continue to be
required to make variation margin payments.
(4) Like options on securities and
currencies, options on futures contracts have
limited life. The ability to establish and close
out options on futures will be subject to the
development and maintenance of liquid secondary
markets on the relevant exchanges or boards of
trade. There can be no certainty that such
markets for all options on futures contracts will
develop.
(5) Purchasers of options on futures
contracts pay a premium in cash at the time of
purchase. This amount and the transaction costs
are all that is at risk. Sellers of options on
futures contracts, however, must post initial
margin and are subject to additional margin calls
that could be substantial in the event of adverse
price movements. In addition, although the
maximum amount at risk when a Portfolio purchases
an option is the premium paid for the option and
the transaction costs, there may be circumstances
when the purchase of an option on a futures
contract would result in a loss to the Portfolio
when the use of a futures contract would not, such
as when there is no movement in the level of the
underlying index value or the securities or
currencies being hedged.
(6) As is the case with options, the
Portfolios' activities in the futures markets may
result in a higher portfolio turnover rate and
additional transaction costs in the form of added
brokerage commissions; however, a Portfolio also
may save on commissions by using futures contracts
or options thereon as a hedge rather than buying
or selling individual securities or currencies in
anticipation of, or as a result of, market
movements.

SPECIAL RISKS RELATED TO FOREIGN CURRENCY FUTURES
CONTRACTS AND RELATED OPTIONS. Buyers and sellers of
foreign currency futures contracts are subject to the same
risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency
futures contracts and their use as a hedging device similar
to those associated with options on foreign currencies
described above.
Options on foreign currency futures contracts may
involve certain additional risks. The ability to establish
and close out positions on such options is subject to the
maintenance of a liquid secondary market. Compared to the
purchase or sale of foreign currency futures contracts, the
purchase of call or put options thereon involves less
potential risk to the Diversified Income Portfolio because
the maximum amount at risk is the premium paid for the
option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option
on a foreign currency futures contract would result in a
loss, such as when there is no movement in the price of the
underlying currency or futures contract, when the
purchase of the underlying futures contract would not.

FORWARD CURRENCY CONTRACTS. The Diversified Income
Portfolio may use forward currency contracts to protect
against uncertainty in the level of future foreign currency
exchange rates.
The Portfolio may enter into forward currency
contracts with respect to specific transactions. For
example, when a Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign
currency, or the Portfolio anticipates the receipt in a
foreign currency of dividend or interest payments on a
security that it holds or anticipates purchasing, the
Portfolio may desire to "lock in" the U.S. dollar price of
the security or the U.S. dollar equivalent of such payment,
as the case may be, by entering into a forward contract for
the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved
in the underlying transaction. The Portfolio will thereby
be able to protect itself against a possible loss resulting
from an adverse change in the relationship between the
currency exchange rates during the period between the date
on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are
made or received.
The Diversified Income Portfolio also may hedge by using
forward currency contracts in connection with portfolio
positions to lock in the U.S. dollar value of those positions,
to increase the Portfolios' exposure to foreign currencies
that WTC believes may rise in value relative to the U.S. dollar
or to shift the Portfolio's exposure to foreign currency fluctuations
from one country to another. For example, when WTC believes
that the currency of a particular foreign country may suffer
a substantial decline relative to the U.S. dollar or another
currency, it may enter into a forward contract to sell the
amount of the former foreign currency approximating the
value of some or all of the Portfolio's securities holdings
denominated in such foreign currency. This investment
practice generally is referred to as "cross-hedging" when
another foreign currency is used.
The precise matching of the forward contract amounts
and the value of the securities involved will not generally
be possible because the future value of such securities in
foreign currencies will change as a consequence of market
movements in the value of those securities between the date
the forward contract is entered into and the date it
matures. Accordingly, it may be necessary for the Portfolio
to purchase additional foreign currency on the spot (that
is, cash) market (and bear the expense of such purchase) if
the market value of the security is less than the amount of
foreign currency the Portfolio is obligated to deliver and
if a decision is made to sell the security and make delivery
of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency
received upon the sale of the security holding if the market
value of the security exceeds the amount of foreign currency
the Portfolio is obligated to deliver. The projection of
short-term currency market movements is extremely difficult
and the successful execution of a short-term hedging
strategy is highly uncertain. Forward contracts involve the
risk that anticipated currency movements will not be
accurately predicted, causing the Portfolio to sustain
losses on these contracts and transaction costs. Under
normal circumstances, consideration of the prospect for
currency parities will be incorporated into the longer term
investment decisions made with regard to overall
diversification strategies. However, WTC believes that it
is important to have the flexibility to enter into such
forward contracts when it determines that the best interests
of the Portfolio will be served.
At or before the maturity date of a forward contract
requiring the Short/Intermediate Bond or the Intermediate
Bond Portfolio to sell a currency, the Portfolio may either
sell a security holding and use the sale proceeds to make
delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Portfolio
will obtain, on the same maturity date, the same amount of
the currency that it is obligated to deliver. Similarly,
the Portfolio may close out a forward contract requiring it
to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The
Portfolio would realize a gain or loss as a result of
entering into such an offsetting forward currency contract
under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the
execution dates of the first contract and the offsetting
contract.
The cost to the Diversified Income Portfolio
of engaging in forward currency contracts varies with
factors such as the currencies involved, the length
of the contract period and the market conditions then
prevailing. Because forward currency contracts are usually
entered into on a principal basis, no fees or commissions
are involved. The use of forward currency contracts
does not eliminate fluctuations in the prices of the
underlying securities the Portfolio owns or intends to
acquire, but it does fix a rate of exchange in
advance. In addition, although forward currency contracts
limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies
increase.
Although Diversified Income Portfolio values their assets
daily in terms of U.S. dollars, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily
basis. The Portfolios may convert foreign currency from
time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are
buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to the Portfolios at one
rate, while offering a lesser rate of exchange should the
Portfolios desire to resell that currency to the dealer.

APPENDIX B

DESCRIPTION OF RATINGS
Moody's Ratings
Corporate and Municipal Bonds
Aaa: Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment
some time in the future.
Baa: Bonds which are rated Baa are considered as medium-
grade obligations (i.e., they are neither highly protected
nor poorly secured). Interest payments and principal
security appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and
in fact have speculative characteristics as well.
Corporate and Municipal Commercial Paper. The highest
rating for corporate and municipal commercial paper is "P-1"
(Prime-1). Issuers rated P-1 (or supporting institutions)
have a superior ability for repayment of senior short-term
debt obligations. P-1 repayment ability will often be
evidenced by many of the following characteristics:
-- Leading market positions in well-established
industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with
moderate reliance on debt and ample asset
protection.
-- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
-- Well-established access to a range of
financial markets and assured sources of
alternate liquidity.

Municipal Notes. The highest ratings for state and
municipal short-term obligations are "MIG 1," "MIG 2" and
"MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3" in the case of
an issue having a variable-rate demand feature). Notes
rated "MIG 1" or "VMIG 1" are judged to be of the best
quality. There is present strong protection by established
cash flows, superior liquidity support or demonstrated
broadbased access to the market for refinancing. Notes
rated "MIG 2" or "VMIG 2" are of high quality, with margins
of protection that are ample although not so large as in the
preceding group. Notes rated "MIG 3" or "VMIG 3" are
of favorable quality, with all security elements accounted
for but lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow
and market access for refinancing is likely to be less well
established.

S&P Ratings

Corporate and Municipal Bonds
AAA: Bonds rated AAA are highest grade debt
obligations. This rating indicates an extremely strong
capacity to pay interest and repay principal.
AA: Bonds rated AA have a very strong capacity to pay
interest and repay principal and differ from AAA issues only
in small degree.
A: Bonds rated A have a strong capacity to pay
interest and repay principal, although they are somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher
rated categories.
BBB: Bonds rated BBB are regarded as having an adequate
capacity to pay interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
Corporate and Municipal Commercial Paper The "A-1"
rating for corporate and municipal commercial paper
indicates that the degree of safety regarding timely payment
is strong. Those issues determined to possess extremely
strong safety characteristics will be rated "A-1+."
Municipal Notes. The "SP-1" rating reflects a very
strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety
characteristics will be rated "SP-1+." The "SP-2" rating
reflects a satisfactory capacity to pay principal and
interest.

<PAGE>
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, 1997.

PERFORMANCE REVIEW*
The Rodney Square Diversified Income Portfolio had a total return of
7.13% for the twelve months ended October 31, 1997. This return consisted of a
modest increase in net asset value per share from $12.95 on October 31, 1996
to $13.07 at the end of October 1997 plus dividends of $0.77 per share. The
Portfolio's performance slightly trailed the reported return of 7.49% for the
Lehman Intermediate Government Corporate Index over this 12 month period.
Wilmington Trust Company, the Portfolio's adviser, 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
6.85% return for the fiscal year ended October 31, 1997. This return
consisted of an increase in the net asset value per share, to $12.74 from
$12.46, plus dividends of $0.55 per share. The Portfolio's performance
was lower than the 7.06% return reported for the Merrill Lynch Intermediate
Municipal Index (the "Merrill Lynch Index"). This Merrill Lynch Index is a
composite return of nearly 400 municipal bond issues with a maturity range
of 0 to 22 years. The index is designed to model the typical holdings and
return characteristics of intermediate-term mutual funds as defined by
Lipper Analytical Services. WTC, the Portfolio's adviser, has continued
to assist in the Portfolio's return by limiting total expenses of the
Portfolio to 0.75% of average daily net assets.

ECONOMIC ENVIRONMENT
The fiscal year started with the bond markets peaking as uneven economic
performance seemed to make the probability of a Federal Reserve Board (the
"Fed") rate hike unlikely. All was rosy until Fed Chairman Greenspan delivered
his now famous "irrational exuberance" speech in December. The bond markets
started a mild retreat that was accelerated when the Fed actually hiked the
Federal Funds rate by 25 basis points in March. The bond markets went into a
tail spin. The 5-Year Treasury bond, which had started the fiscal year
yielding 6.10% rose to 6.75% by the end of March.

As we moved into the second quarter, weak economic data, highlighted by
three consecutive months of declines in retail sales, and benign inflation,
kept the Fed at bay as it did not act again during the year. This "steady as
she goes" rate policy helped the bond markets to reverse their early decline
and sustained a rally that lasted through the end of the fiscal year. By
October 31, 1997, the yield on the 5-Year Treasury issue had declined to
5.70%. In the month of October the rally was given a strong boost as the
economic crisis in the Asian markets sent investors fleeing to the U.S. bond
market for safety.
- ---------------------------
* 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. TOTAL RETURNS SHOWN FOR THE PORTFOLIOS DO NOT REFLECT
THE EFFECT OF THE MAXIMUM SALES LOAD OF 3.50%. RETURNS ARE HIGHER DUE TO
THE ADVISER'S MAINTENANCE OF THE PORTFOLIOS' EXPENSES. SEE FINANCIAL
HIGHLIGHTS ON PAGES 16 AND 17.
1
<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
PRESIDENT'S MESSAGE - CONTINUED
- ------------------------------------------------------------------------------
Against this backdrop, the municipal market was driven primarily by
supply of new issues. For the first 6 months of calendar year 1997, there was
a relatively light schedule of new issues and the municipal market
outperformed its taxable counterparts. This occurred while the retail buyer,
both direct and via mutual funds, largely stayed out of the market. Then,
during the summer and fall, the supply pipeline overflowed, resulting in a
muted rally, compared to the strong rally in the taxable markets. At the end
of the fiscal year, the relative valuations for municipal bonds were as
attractive as they had been since April 1996.

MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE DIVERSIFIED INCOME PORTFOLIO

The Portfolio is designed to give shareholders broad exposure to the
dynamics of the short-intermediate term bond market with a stable flow of
income and minimization of risk. This goal is accomplished 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 taxable fixed income markets responded to a variety of forces over
the past year which affected the Portfolio's performance. The first of these
was Fed policy, which caused a number of interest rate swings during the past
year. The markets began the fiscal year in good shape but this proved to be
short lived as Mr. Greenspan's now famous "irrational exuberance"
characterization of the stock market promptly put the bond market on the
defensive regarding a possible tightening of credit. Mr. Greenspan's February
Humphrey-Hawkins testimony before Congress contained a similar warning and
market yields moved higher. The fears of the market were well founded as the
Fed moved overnight interest rates up a quarter of a percentage point in late
March. During this time, we kept the interest sensitive position of the
portfolio below that of our market index, which helped our performance during
this difficult market period. The Portfolio was also assisted by a strong
reliance on yield enhancement through overweighting the non-U. S. Treasury
sectors of the market such as corporate bonds and asset-backed securities.
With corporate financial positions holding up very well in the robust economy,
credit risks were minimized and these sectors performed very well.

After the Fed's initial rate increase, the markets remained on the
defensive but this outlook began to change as it appeared that the economy was
not overheating and that despite tightening labor markets, inflation was not
becoming a problem. Yield levels began drifting lower and kept moving in this
general direction throughout most of the fiscal period remaining. For the most
part we kept the Portfolio's interest rate sensitivity at or above market
levels during this time. In addition our emphasis on yield enhancement
performed well as corporate credit markets experienced further spread
compression against the U. S. Treasury market.

2
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
PRESIDENT'S MESSAGE - CONTINUED
- ------------------------------------------------------------------------------
During the last few months of the fiscal year, the market witnessed a
dramatic flattening of the yield curve as the two ends of the curve responded
to very different influences. While the Fed has not raised interest rates
since March, the market was respectful of the fed's bias toward tightening.
Therefore, short term rates did not dip too far below the overnight rate. Long
term rates however, responded well to the low inflation environment and more
recently to concerns over the international situation in Asia. Thus 30 Year
Treasury rates fell by 63 basis points since June 30, while 1-Year Treasury
rates fell by only 30 basis points over the same period. The Portfolio took
advantage of this movement by emphasizing maturities in the 8 to 12-year
maturity range while underweighting holdings in the middle of the curve.

The following graph compares 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.

[GRAPHICAL REPRESENTATION (POINTS AND LINES) REQUIRED BY ITEM 5A OF FORM N-1A]
[FOLLOWING ARE GRAPH POINTS AND TOTAL RETURNS]

COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL INVESTMENT*

APR-91 OCT-91 OCT-92 OCT-93 OCT-94 OCT-95 OCT-96 OCT-97
- ------ ------- ------- ------- ------- ------- ------- -------
$9,000 $10,000 $11,000 $12,000 $13,000 $14,000 $15,000 $16,000 $17,000

AVERAGE ANNUAL TOTAL RETURN
---------------------------
1YEAR 5 YEAR INCEPTION
----- ------ ---------
FUND 3.4% 5.4% 6.6%
INDEX 7.5% 6.7% 7.8%
CPI 2.2% 2.7% 2.8%

Diversified Income LGIC Index CPI

* 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 Portfolio's expenses. See
Financial Highlights on pages 16 and 17.

THE MUNICIPAL INCOME PORTFOLIO

The Rodney Square Municipal Income Portfolio is an intermediate, high
quality 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.

3
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
PRESIDENT'S MESSAGE - CONTINUED
- ------------------------------------------------------------------------------

The yield curve shift that occurred in the last few months of the fiscal
year presented an opportunity in the municipal market. The shift in the yield
curve for municipals involved a widening in the 1 to 5-year and the 10 to 15-
year ranges, and a narrowing in the 5 to 10-year range. This structural change
allowed us to reposition the Portfolio by replacing bonds in the 10-year range
with 5 and 15 year maturity ranges. This strategy, referred to as a barbell,
was implemented without giving up any potential yield. Our expectation is that
when the yield curve returns to normal, we should be able to reverse the
position again thereby actually increasing the yield potential. The positions
swapped represented about 12% of the total portfolio.

Our performance for the fiscal year was aided by this barbelling strategy
as well as our focus on high coupon issues. The Portfolio had an average
coupon of 5.90% as of September 30, 1997, compared to a 5.47% average for the
Merrill Index. This extra cushion helped the Portfolio to outperform the
average return of the funds included in the Lipper Intermediate
Municipal category by nearly 30 basis points for the 12 months ending October
31, 1997.

At fiscal year-end, municipals represented good value versus taxable
bonds. In fact, the municipal market was attracting cross-over buyers who had
been out of the municipal market for nearly 6 months. Cross-over buyers are
tax-exempt organizations, for whom the tax free nature of municipals provides
no benefit. They participate in the municipal market only when municipals
become undervalued and their portfolios can benefit from the outperformance
potential as the municipal bonds move back to fair value.

Looking ahead in the municipal arena, market participants will be
watching at least one indicator for direction, the old "January Effect." For
the last several years, there has been an imbalance between supply (very low
as municipalities are slow to start the new year) and demand (very high as
investors look to reinvest large coupon and called bond proceeds.) This has
resulted in a relatively strong municipal market, at least relative to taxable
bonds. This year the effect should be muted. First, the amount of called bonds
peaked in January 1996 and continues to decline. Second, issuers seem to
be quicker to respond to opportunities. There will be a drop off in the amount
of new issues, but probably not as great as experienced historically.

Below is a diagram that illustrates the performance of The Rodney Square
Municipal Income Portfolio, the Merrill Lynch Index - and the Consumer Price
Index ("CPI"), since the Portfolio's commencement of
operations on November 1, 1993.

4
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
PRESIDENT'S MESSAGE - CONTINUED
- ------------------------------------------------------------------------------
[GRAPHICAL REPRESENTATION (POINTS AND LINES) REQUIRED BY ITEM 5A OF FORM N-1A]
[FOLLOWING ARE GRAPH POINTS AND TOTAL RETURNS]

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

AVERAGE ANNUAL TOTAL RETURN
---------------------------
1 YEAR INCEPTION
------ ---------
FUND 3.1% 4.0%
INDEX 7.1% 6.5%
CPI 2.2% 2.7%

OCT-93 OCT-94 OCT-95 OCT-96 OCT-97
$9,000 $9,500 $10,000 $10,500 $11,000 $11,500 $12,000 $12,500 $13,000

Municipal Income Merrill Index CPI

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 Klopping
-------------------
Martin Klopping
President

December 12, 1997
5
<PAGE>

THE RODENY SQUARE STRATEGIC FIXED-INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS/OCTOBER 31, 1997
(SHOWING PERCENTAGE OF TOTAL VALUE OF NET ASSETS
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
ASSET-BACKED SECURITIES - 7.9%
AFC Home Equity Loan Trust, Ser.
1996-2 Class 1A4, 7.74%, 09/25/27. Aaa/AAA $ 799,831 $ 835,121
Green Tree Financial Corp., Ser.
1996-5 Class A4, 7.15%, 07/15/27.. Aaa/AAA 750,000 777,618
MBNA Master Credit Card Trust, Ser.
1995-F Class A, 6.60%, 01/15/03... Aaa/AAA 300,000 305,223
Residential Asset Securities Corp.,
Ser. 1995-KS3, 8.00%, 10/25/24.... Aaa/AAA 314,712 317,026
Resolution Trust Corp., Ser. 1994-C2
Class B, 8.00%, 04/25/25.......... NR/AA 250,000 259,887
-----------
TOTAL ASSET-BACKED SECURITIES
(COST $2,439,816) .............................. 2,494,875
-----------
MORTGAGE-BACKED SECURITIES - 11.5%
Advanta Mtge. Loan Trust, Ser.
1996-1 Class A6, 6.73%, 08/25/23.. Aaa/AAA 300,000 303,448
Contimortgage Home Equity Loan Trust,
Ser. 1996-1 Class A6, 6.69%,
01/15/16.......................... Aaa/AAA 299,998 301,789
Federal National Mtge. Assoc. Notes,
Ser. 1995W1 Class A6, 8.10%,
04/25/25.......................... Aaa/NR 500,000 525,976
Federal National Mtge. Assoc. Notes,
Ser. 1996-4 Class VC, 6.50%,
07/25/02.......................... Aaa/NR 233,315 234,534
Federal National Mtge. Assoc. Notes,
Ser. G37 Class G, 7.50%, 12/25/19. Aaa/NR 300,000 305,812
GE CAP. Mtge. Services, Inc., Ser.
1996HE2 Class A5, 7.94%, 06/25/14. Aaa/NR 600,000 639,546
Green Tree Financial Corp., Ser.
1995-2 Class A6, 8.30%, 05/15/26.. Aaa/AAA 325,000 355,537
The Money Store Home Equity Trust,
Ser. 1992D2 Class A3, 7.55%,
01/15/18.......................... Aaa/AAA 331,354 342,293
The Money Store Home Equity Trust,
Ser. 1996B Class A8, 7.91%,
05/15/24.......................... Aaa/AAA 200,000 215,973
The Money Store Home Equity Trust,
Ser. 1996D Class A5, 6.67%, 03/15/18 Aaa/AAA 400,000 403,754
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(COST $3,524,660) .............................. 3,628,662
-----------
CORPORATE BONDS - 47.3%
BANKS - 1.1%
Bank of Montreal, 7.80%, 04/01/07... A1/A+ 300,000 327,000
-----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODENY SQUARE STRATEGIC FIXED-INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
ELECTRIC UTILITIES - 7.5%
Alabama Power Co., 7.00%, 01/01/03,
Callable 01/01/98 @ 101.64........ A1/A+ $1,000,000 $ 1,017,500
Central Illinois Public Service,
6.73%, 06/01/01................... Aa1/AA+ 300,000 306,750
Duke Energy Corp., 8.00%, 11/01/99.. Aa3/AA- 1,000,000 1,035,000
-----------
2,359,250
-----------
FINANCIAL - 30.7%
American Express Credit Corp.,
8.50%, 06/15/99................... Aa3/A+ 350,000 364,000
Associates Corp. N.A., 6.75%,
08/01/01.......................... Aa3/AA- 500,000 508,337
Associates Corp. N.A., 8.55%,
07/15/09........................... Aa3/AA- 300,000 346,310
BankAmerica Corp., 6.75%,
09/15/05.......................... A1/A- 250,000 253,438
Bear Stearns Co., 6.625%,
10/01/04.......................... A2/A 400,000 398,763
Beneficial Corp., 8.17%, 11/09/99... A2/A 700,000 728,751
Dean Witter Discover, 6.75%,
08/15/00.......................... A1/A+ 400,000 407,637
General Motors Acceptance Corp.,
6.70%, 07/02/99................... A3/A- 650,000 657,686
Heller Financial Corp., 7.875%,
11/01/99.......................... A2/BBB 800,000 827,000
International Lease Finance, 6.125%,
11/01/99.......................... A1/A+ 400,000 400,500
Lehman Brothers, Inc., 6.50%,
10/01/02........................... Baa1/A 600,000 600,387
Lehman Brothers, Inc., 7.375%,
05/15/04........................... Baa1/A 300,000 312,375
Merrill Lynch & Co., Inc., 7.05%,
04/15/03.......................... AA3/AA- 100,000 100,250
Morgan Stanley Group, 6.375%,
01/18/00.......................... A1/A+ 600,000 604,500
Norwest Financial, Inc., Sr. Notes,
6.85%, 07/15/09................... Aa3/AA- 650,000 663,115
Norwest Financial, Inc., 6.37%,
11/15/01.......................... Aa3/AA- 500,000 504,375
Salomon Brothers, Inc., 6.50%,
03/01/00........................... A2/BBB 425,000 427,959
Santander Financial Issuances, Ltd.,
7.875%, 04/15/05.................. A1/A+ 300,000 323,250
Smith Barney Holdings, 7.00%,
03/15/04.......................... A2/A 550,000 565,369

The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE RODENY SQUARE STRATEGIC FIXED-INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
Union Bank of Switzerland, NY, 7.25%,
07/15/06.......................... Aa1/A $ 350,000 $ 368,375
USL Capital Corp., 5.79%, 01/23/01.. A1/A 300,000 296,626
-----------
9,659,003
-----------
MANUFACTURING - 2.3%
Eaton Corp., 8.00%, 08/15/06........ A2/A 650,000 719,875
-----------
MERCHANDISING & RETAIL - 1.0%
Gap, Inc., 6.90%, 09/15/07.......... A2/A 300,000 308,773
-----------
OIL, GAS & PETROLEUM - 1.0%
Societe Nationale Elf Aquitaine,
8.00%, 10/15/01................... Aa3/AA- 300,000 320,625
-----------
TELEPHONE & COMMUNICATIONS - 3.7%
GTE Southwest, 6.54%, 12/01/05...... A2/AA- 600,000 603,568
United Telecommunications, Inc.,
9.50%, 04/01/03................... A3/A- 500,000 570,000
-----------
1,173,568
-----------
TOTAL CORPORATE BONDS
(COST $14,543,167) ............ 14,868,094
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.2%
FEDERAL HOME LOAN BANKS NOTES - 2.8%
Federal Home Loan Banks Notes, 6.095%,
10/23/00........................... Aaa/NR 400,000 399,447
Federal Home Loan Banks Notes, 7.50%,
09/30/03, Callable
09/30/98 @ 100..................... Aaa/NR 475,000 479,828
-----------
879,275
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION NOTES - 1.6%
Federal Home Loan Mtge. Corp. Notes,
7.05%, 05/15/02.................... Aaa/NR 500,000 502,465
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES - 5.8%
Federal National Mtge. Assoc. Notes,
7.50%, 08/25/05.................... Aaa/NR 300,000 301,749
Federal National Mtge. Assoc. Notes,
6.71%, 02/13/06.................... Aaa/NR 300,000 299,205
Federal National Mtge. Assoc. Notes,
7.58%, 06/02/06.................... Aaa/NR 400,000 409,946
Federal National Mtge. Assoc. Notes,
7.94%, 09/13/06.................... Aaa/NR 500,000 514,488
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODENY SQUARE STRATEGIC FIXED-INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
Federal National Mtge. Assoc. Notes,
7.00%, 06/25/07..................... Aaa/NR $ 300,000 $ 305,907
----------
1,831,295
----------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST $3,161,141).................... 3,213,035
----------
U.S. TREASURY OBLIGATIONS** - 16.7%
U.S. TREASURY BONDS - 2.8%
U.S. Treasury Bonds, 11.75%, 02/15/10. NR/NR 650,000 868,757
----------
U.S. TREASURY NOTES - 13.9%
U.S. Treasury Notes, 6.375%, 04/30/99. NR/NR 400,000 404,204
U.S. Treasury Notes, 6.375%, 07/15/99. NR/NR 400,000 404,750
U.S. Treasury Notes, 6.375%, 01/15/00. NR/NR 1,400,000 1,420,860
U.S. Treasury Notes, 6.75%, 04/30/00.. NR/NR 400,000 409,436
U.S. Treasury Notes, 6.25%, 05/31/00.. NR/NR 300,000 303,741
U.S. Treasury Notes, 8.75%, 08/15/00.. NR/NR 150,000 161,440
U.S. Treasury Notes, 6.50%, 08/31/01.. NR/NR 250,000 256,075
U.S. Treasury Notes, 6.125%, 12/31/01. NR/NR 400,000 405,250
U.S. Treasury Notes, 7.25%, 05/15/04.. NR/NR 550,000 590,953
----------
4,356,709
----------
TOTAL U.S. TREASURY OBLIGATIONS
(COST $5,142,214) .............................. 5,225,466
----------
TIME DEPOSITS - 5.9%
Sanwa Bank, Grand Cayman Branch,
5.656%, 11/03/97 (COST $1,853,793).. NR/NR 1,853,793 1,853,793
----------
TOTAL INVESTMENTS (COST $30,664,791)+
- 99.5%.............................................. 31,283,925
OTHER ASSETS AND LIABILITIES,
NET - 0.5%........................................... 171,835
-----------
NET ASSETS - 100.0%.................................... $31,455,760
===========
* 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 Adviser.
** 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 $30,668,968. At October 31,
1997, net unrealized appreciation was $614,957. This consisted of
aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $641,304 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $26,347.

The accompanying notes are an integral part of the financial statements.
9
<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS/OCTOBER 31, 1997
(SHOWING PERCENTAGE OF TOTAL VALUE OF NET ASSETS)
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
MUNICIPAL BONDS - 94.7%
ALASKA - 5.6%
Alaska Municipal Bond Bank Auth. Ref.
Rev. Bonds, Ser. 1994C, 4.90%,
10/01/03............................ A2/A $ 400,000 $ 406,000
Seward, AK Rev. Bonds (Alaska Sealife
Center Proj.), Ser. 1996, 6.50%,
10/01/01*........................... NR/NR 560,000 570,500
----------
976,500
----------
CALIFORNIA - 9.7%
California State Veterans Bonds,
Ser. 1989, 7.00%, 04/01/03.......... A1/A+ 500,000 505,730
California State Veterans Bonds,
Ser. AY, 6.90%, 04/01/01............ A1/A+ 250,000 252,815
Los Angeles County, CA Public Works
Fin. Auth. Rev. Bonds
(LA County Park & Open Space Dist.),
Ser. 1994A, 5.63%, 10/01/03......... Aa3/AA 250,000 267,187
Los Angeles, CA Dept. of Water and
Power Electric Plant Rev. Bonds,
5.75%, 11/15/02..................... Aa3/AA 300,000 320,250
Redevelopement Agency of San Francisco,
CA Multi-Family Housing Ref. Rev.
Bonds (GNMA South Beach Proj.), Ser.
1994, 4.75%, 09/01/02............... Aaa/NR 345,000 347,588
----------
1,693,570
----------
COLORADO - 3.0%
Aurora, CO Cert. of Participation Lease
Ref. Rev. Bonds, 5.85%, 12/01/02.... A/A 500,000 526,250
----------
DELAWARE - 19.6%
Bethany Beach, DE Gen. Oblig. Rev.
Bonds, 9.75%, 11/01/07.............. Aaa/AAA 160,000 224,000
Bethany Beach, DE Gen. Oblig. Rev.
Bonds, 9.75%, 11/01/08.............. Aaa/AAA 180,000 256,500
Delaware State Economic Dev. Auth.
Rev. Bonds (Osteopathic Hosp. Assoc.),
6.00%, 01/01/03..................... Aaa/NR 500,000 526,250
Delaware State Economic Dev. Auth.
Rev. Bonds (Delmarva Power & Light),
7.30%, 09/01/15..................... Aaa/AAA 100,000 107,500

The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
Delaware State Gen. Oblig. Rev.
Bonds, Ser. A, 5.00%, 01/01/04..... Aa1/AA+ $ 255,000 $ 264,244
Delaware State Housing Auth.
Multi-Family Mtge. Ref. Rev. Bonds,
6.30%, 07/01/98.................... A1/A+ 100,000 100,550
Delaware State Housing Auth.
Multi-Family Mtge. Ref. Rev.
Bonds, Ser. 1992D, 6.35%, 07/01/03. A1/NR 100,000 105,000
Delaware State Housing Auth.
Multi-Family Mtge. Ref. Rev.
Bonds, Ser. C, 7.25%, 01/01/07....... A1/A 225,000 241,594
Delaware State Housing Auth. Single
Family Mtge. Rev. Bonds,
Ser. 1993, Subser. A, 5.05%,
07/01/05........................... Aaa/AAA 305,000 308,430
Delaware State Housing Auth. Single
Family Mtge. Rev. Bonds,
Ser. 1993, Subser. A1, 5.15%,
01/01/06........................... Aaa/AAA 175,000 178,062
Delaware State Housing Auth. Sr.
Home Mtge. Rev. Bonds, Ser. 1991,
Subser. B-1, 6.40%, 12/01/02....... Aa3/NR 40,000 41,800
Delaware State Housing Auth. Sr.
Home Mtge. Rev. Bonds, Ser. 1991,
Subser. B-1, 6.10%, 06/01/99....... Aa3/NR 40,000 40,650
Delaware State Housing Auth. Sr.
Home Mtge. Rev. Bonds, Ser. 91A,
7.00%, 06/01/00.................... Aa3/NR 25,000 25,469
Delaware State Solid Waste Auth. Sys.
Rev. Bonds, 5.80%, 07/01/01........ A/A 500,000 522,500
Delaware Trans. Auth. Trans. Sys.
Sr. Lien Rev. Bonds, 6.75%,
07/01/98........................... A1/AA 115,000 117,130
Delaware Trans. Auth. Trans. Sys.
Sr. Lien Rev. Bonds, 5.88%,
07/01/00........................... A1/AA 350,000 364,875
----------
3,424,554
----------
GEORGIA - 2.6%
Georgia State Gen. Oblig. Rev.
Bonds, Ser. 97A, 6.25%, 04/01/07... Aa+/AAA 400,000 450,500
----------
HAWAII - 4.4%
Hawaii State Gen. Oblig. Rev. Bonds,
Ser. 92BW, 6.20%, 03/01/05......... Aa3/A+ 700,000 770,000
----------

The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
MASSACHUSETTS - 2.9%
Massachusetts State Gen. Oblig. Rev.
Bonds, Ser. 93B MBIA, 4.875%, 10/01/13Aaa/AAA 520,000 503,100
----------
MISSISSIPPI - 2.3%
Medical Center Educ. Bldg. Corp.
(Univ. of Mississippi Medical Center
Proj.), Ser. 1993, 5.40%, 12/01/05... NR/A- 400,000 409,500
----------
NEW JERSEY - 3.0%
New Jersey Econ. Dev. Auth. School Rev.
Bonds (Blair Academy 1995 Proj.),
Ser. 95B, 6.00%, 09/01/07........... A3/NR 500,000 518,125
----------
NEW YORK - 3.1%
Municipal Assistance Corp. of New York
City, NY Sales Tax Rev., 5.75%,
07/01/03............................ AA2/AA- 500,000 534,375
----------
PENNSYLVANIA - 14.2%
Dauphin County, PA Gen. Auth. School
Dist. Pooled Fin. Rev. AMBAC, 4.45%,
09/01/32............................ Aaa/NR 500,000 500,000
Lancaster County, PA Solid Waste Auth.
Rev. Bonds, 7.75%, 12/15/04......... Baa2/BBB 225,000 233,150
Lancaster County, PA Solid Waste Auth.
Rev. Bonds, Ser. 91A, 6.15%,
12/15/98............................ Baa2/BBB 100,000 101,125
Pennsylvania State Higher Educ. Fac.
Auth. College & Univ. Rev. Bonds
(Philadelphia College of Osteopathic
Medicine), Ser. 1993, 5.25%, 12/01/07 NR/AAA 150,000 154,500
Philadelphia Parking Auth. Rev. Bonds,
Ser. 1997, 5.50%, 09/01/03.......... Aaa/AAA 500,000 528,750
Philadelphia, PA Redev. Auth. Home Imp.
Loan Rev. Bonds, 7.38%, 06/01/03.... A1/A+ 35,000 35,541
York County, PA Ind. Auth. Personal
Care Fac. 9.50%, 10/01/19, Prerefunded
10/01/02 @ 100...................... NR/NR 335,000 410,375
York County, PA Solid Waste Refuse
Auth. Ind. Dev. Rev. Bonds (Resource
Recovery Proj.), Ser. 85A, 8.20%,
12/01/14............................ A/AA- 500,000 516,340
----------
2,479,781
----------

The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
TEXAS - 5.8%
Austin, TX Gen. Oblig. Rev. Bonds,
4.75%, 09/01/09................... Aa2/AA $ 315,000 $ 313,031
Kingsbridge, TX Municipal Utilities
Dist. AMBAC, 4.875%, 03/01/02..... Aaa/N/R 680,000 695,300
----------
1,008,331
----------
UTAH - 3.1%
Salt Lake City, UT Municipal Bldg.
Auth. Lease Rev. Bonds, Ser. 1994A,
5.65%, 10/01/03................... Aaa/AAA 500,000 532,500
----------
VIRGINIA - 7.4%
Virginia Educ. Loan Auth. Rev. Bonds
(Student Loan Prog.), Ser. 1994B,
5.15%, 03/01/04................... Aaa/NR 260,000 268,450
Virginia State Housing Dev. Auth.
Commonwealth Mtge. Rev. Bonds, Ser.
1992C, Subser. C8, 5.80%, 07/01/04. Aa1/AA+ 500,000 526,250
Virginia State Public Bldg. Auth. Rev.
Bonds, Ser. 96A, 5.00%, 08/01/12.. Aa/AA 500,000 500,625
----------
1,295,325
----------
WASHINGTON - 5.1%
Clark County, WA Public Utility Dist.
No. 1 Generating Sys. Rev. Bonds,
6.00%, 01/01/06.................... Aaa/AAA 350,000 381,938
Washington State Public Power Supply
Sys. Ref. Rev. Bonds (Nuclear Proj.
No. 3), Ser. 1993C, 5.10%, 07/01/07. AA1/AA- 500,000 513,750
----------
895,688
----------
WISCONSIN - 2.9%
Appleton, WI Area School Dist., 5.00%,
04/01/11............................ Aa/NR 505,000 505,631
----------
TOTAL MUNICIPAL BONDS (COST
$16,066,778) 16,523,730
----------
TAX-EXEMPT MUTUAL FUNDS - 4.4%
PNC Municipal Cash Tax-Exempt Money
Market Fund, (COST $767,697)........ NR/NR 767,697 767,697
----------

The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- ------------------------------------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- ---------- -----------
TOTAL INVESTMENTS (COST $16,834,475)+
- 99.1%.................................. $17,291,427
OTHER ASSETS AND LIABILITIES, NET
- 0.9%................................... 154,829
-----------
NET ASSETS - 100.0%........................ $17,446,256
===========

* 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 Adviser.
+ Cost for federal income tax purposes. At October 31, 1997, net unrealized
appreciation was $456,952. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $457,028 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $76.

The accompanying notes are an integral part of the financial statements.
14
<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
---------- ----------
ASSETS:
Investments in securities, at market
(identified cost $30,664,791 and
$16,834,475, respectively) (Note 2). $31,283,925 $17,291,427
Receivable for investment securities
Sold.............................. 301,434 -
Receivable for Fund shares sold...... 788 965
Interest receivable ................. 478,937 234,480
Deferred organization costs (Note 2). - 15,998
Other assets ........................ 230 121
----------- -----------
Total assets .................... 32,065,314 17,542,991
----------- -----------
LIABILITIES:
Dividends payable .................. 159,171 64,467
Payable for Fund shares redeemed ... 394,514 -
Due to Adviser (Note 4) ............ 2,066 -
Other accrued expenses (Note 4) .... 53,803 32,268
----------- -----------
Total liabilities ............... 609,554 96,735
----------- -----------

NET ASSETS, at market value ........ $31,455,760 $17,446,256
=========== ===========
NET ASSETS CONSIST OF:
Shares of beneficial interest ...... $ 24,059 $ 13,693
Additional paid-in capital ......... 30,928,533 17,007,307
Net unrealized appreciation of
investments ..................... 619,134 456,952
Accumulated net realized loss ...... (115,966) (31,696)
----------- ----------
NET ASSETS, for 2,405,944 and 1,369,252
shares outstanding, respectively . $31,455,760 $17,446,256
=========== ===========
NET ASSET VALUE and redemption price
per share ($31,455,760 / 2,405,944
and $17,446,256 / 1,369,252
outstanding shares of beneficial
interest, $0.01 par value,
respectively) .................... $13.07 $12.74
====== ======
Maximum offering price per share
(100/96.50 of $13.07 and 100/96.50
of $12.74, respectively) ......... $13.54 $13.20
====== ======

The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS-CONTINUED
- ----------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Fiscal Year Ended October 31, 1997

DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ---------

Interest income....................... $2,090,092 $ 877,182
---------- ----------
EXPENSES:
Advisory fee (Note 4) ............... 157,518 82,587
Administration fee (Note 4) ......... 25,203 13,578
Accounting fee (Note 4) ............. 50,000 50,000
Distribution expenses (Note 4) ...... 25,102 19,101
Trustees' fees and expenses (Note 4). 5,400 5,400
Amortization of organizational
expenses (Note 2) ................. - 18,057
Registration fees ................... 12,252 14,983
Reports to shareholders ............. 17,366 10,669
Legal ............................... 15,735 13,442
Audit ............................... 26,590 13,446
Other ............................... 18,362 16,559
---------- ----------

Total expenses before fee waivers.... 353,528 257,822
Advisory fee waived (Note 4) ........ (148,754) (82,587)
Administration fee waived (Note 4)... - (13,578)
Accounting fee waived (Note 4)....... - (34,363)
---------- ----------

Total expenses, net ............ 204,774 127,294
---------- ----------

Net investment income .......... 1,885,318 749,888
---------- ----------

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain (loss) on investment
transactions ...................... (16,511) 40,118
Net unrealized appreciation
of investments during the year .... 307,032 340,102
---------- ----------

Net gain on investments ............. 290,521 380,220
---------- ----------

NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................... $2,175,839 $1,130,108
========== ==========

The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL STATEMENTS-CONTINUED
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ---------
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................... $ 1,885,318 $ 749,888
Net realized gain (loss) on investment
transactions .......................... (16,511) 40,118
Net unrealized appreciation of
investments during the year ........... 307,032 340,102
----------- -----------
Net increase in net assets resulting
from operations ...................... 2,175,839 1,130,108
----------- -----------
Distributions to shareholders from:
Net investment income.................... (1,885,318) (749,888)
----------- -----------
Increase (decrease) in net assets from
Fund share transactions (Note 5) ...... (611,832) 447,444
----------- -----------
Total increase (decrease) in net assets . (321,311) 827,664
NET ASSETS:
Beginning of year ....................... 31,777,071 16,618,592
----------- -----------
End of year.............................. $31,455,760 $17,446,256
=========== ===========
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..................... (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
=========== ===========
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
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.

FOR THE FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
DIVERSIFIED INCOME PORTFOLIO

NET ASSET VALUE - BEGINNING OF
YEAR...................... $12.95 $13.08 $12.42 $13.48 $13.20
------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment income..... 0.77 0.78 0.83 0.71 0.76
Net realized and unrealized
gain (loss) on
investments............. 0.12 (0.13) 0.66 (1.02) 0.39
------ ------ ------ ------ ------
Total from investment
Operations.......... 0.89 0.65 1.49 (0.31) 1.15
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income. (0.77) (0.78) (0.83) (0.71) (0.76)
From net realized gain on
Investments............. - - - (0.04) (0.11)
------ ------ ------ ------ ------
Total distributions .. (0.77) (0.78) (0.83) (0.75) (0.87)
------ ------ ------ ------ ------

NET ASSET VALUE - END OF YEAR $13.07 $12.95 $13.08 $12.42 $13.48
====== ====== ====== ====== ======

TOTAL RETURN* .............. 7.13% 5.18% 12.41% (2.33)% 9.00%

RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses + ............... 0.65% 0.65% 0.65% 0.65% 0.65%
Net investment income..... 5.98% 6.07% 6.56% 5.53% 5.65%
Portfolio turnover rate ..... 83.54% 85.77% 116.40% 43.77% 24.22%
Net assets at end of year
(000 omitted) ............. $31,456 $31,777 $32,214 $31,721 $40,971

The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
FINANCIAL HIGHLIGHTS-CONTINUED
- ----------------------------------------------------------------------
FOR THE FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------
1997 1996 1995 1994
------- ------- ------- -------
MUNICIPAL INCOME PORTFOLIO

NET ASSET VALUE - BEGINNING OF
YEAR......................... $ 12.46 $ 12.49 $ 11.64 $ 12.50
------- ------- ------- -------

INVESTMENT OPERATIONS:
Net investment income........ 0.55 0.55 0.54 0.49
Net realized and unrealized
gain (loss) on investments. 0.28 (0.03) 0.85 (0.86)
------- ------- ------- -------
Total from investment
operations ............. 0.83 0.52 1.39 (0.37)
------- ------- ------- -------
DISTRIBUTIONS:
From net investment income.... (0.55) (0.55) (0.54) (0.49)
------- ------- ------- -------

NET ASSET VALUE - END OF YEAR.... $ 12.74 $ 12.46 $ 12.49 $ 11.64
======= ======= ======= =======

TOTAL RETURN* ................... 6.85% 4.24% 12.23% (3.05)%

RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ++ ................... 0.75% 0.75% 0.75% 0.75%
Net investment income.......... 4.42% 4.41% 4.50% 4.13%
Portfolio turnover rate .......... 28.56% 15.91% 42.08% 21.95%
Net assets at end of year
(000 omitted)................... $17,446 $16,619 $16,570 $14,283

* These results do not include a 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, 1997, 1996, 1995, 1994, and 1993. 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, 1997, 1996, 1995, 1994, and 1993, would have been 1.12%,
1.09%, 1.14%, 1.05%, and 1.06%, 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, 1997, 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, 1997, 1996, 1995
and 1994, would have been 1.52%, 1.37%, 1.45%, and 1.62%, respectively.

The accompanying notes are an integral part of the financial statements.
17
<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, 1997, the
Diversified Income Portfolio and the Municipal Income Portfolio had net tax
basis capital loss carryforwards to offset future capital gains of
approximately $112,000 and $32,000, respectively, which will expire as
follows:
CAPITAL LOSS EXPIRATION
CARRY FORWARD DATE
------------- ----------
Diversified Income Portfolio.. $82,000 10/31/03
30,000 10/31/05
Municipal Income Portfolio.... 11,000 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.
18
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED
- ----------------------------------------------------------------
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, 1997,
purchases and sales of investment securities (excluding short-term
investments) aggregated as follows:

DIVERSIFIED MUNICIPAL
INCOME INCOME
----------- ----------
Purchases.................. $24,494,126 $4,693,418
Sales...................... 26,208,894 4,691,687

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 an 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 ended October 31, 1997, 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.

19
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS-CONTINUED
- ----------------------------------------------------------------
The following table summarizes the advisory fees for the fiscal year ended
October 31, 1997:

GROSS ADVISORY ADVISORY
FEE FEE WAIVER
-------------- ----------
Diversified Income Portfolio. $157,518 $148,754
Municipal Income Portfolio... 82,587 82,587

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 earned by RSMC
from the Diversified Income Portfolio for the fiscal year ended October 31,
1997 amounted to $25,203. RSMC waived its administration fee, which
amounted to $13,578, for the Municipal Income Portfolio for the fiscal year
ended October 31, 1997. 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 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, 1997,
such expenses amounted to $25,102 for the Diversified Income Portfolio and
$19,101 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, 1997, RSMC's fees for
accounting services amounted to $50,000 per Portfolio. RSMC waived $34,363
of the accounting services fee for the Municipal Income Portfolio.

20
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
NOTES TO FINANCIAL STATEMENTS-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 fiscal year ended October 31, 1997 amounted to $5,400 per Portfolio.

5.FUND SHARES. At October 31, 1997, 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, 1997 ENDED OCTOBER 31, 1996
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------
Shares sold............... 141,848 $1,841,272 332,967 $4,362,435
Shares issued to shareholders
in reinvestment of
distributions............. 58,648 755,881 66,445 859,172
Shares redeemed............ (248,332) (3,208,985) (408,911) (5,251,019)
--------- ---------- --------- ----------
Net decrease............... (47,836) $ (611,832) (9,499) $ (29,412)
---------- ----------

Shares outstanding:
Beginning of year......... 2,453,780 2,463,279
--------- ---------
End of year............... 2,405,944 2,453,780
========= =========

MUNICIPAL INCOME PORTFOLIO
FOR THE FISCAL YEAR FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1997 ENDED OCTOBER 31, 1996
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ---------- --------- ----------
Shares sold............... 98,185 $1,235,603 141,627 $1,762,290
Shares issued to shareholders
in reinvestment of
distributions............ 45,831 575,223 45,629 568,432
Shares redeemed........... (108,773) (1,363,382) (180,088) (2,237,773)
--------- ---------- --------- ----------
Net increase.............. 35,243 $ 447,444 7,168 $ 92,949
========== ==========
Shares outstanding:
Beginning of year........ 1,334,009 1,326,841
--------- ---------
End of year.............. 1,369,252 1,334,009
========= =========

21
<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
- ---------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
REPORT OF 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 (comprised of respectively, The Diversified Income and The
Municipal Income Portfolios) as of October 31, 1997, 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 periods indicated therein. 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 and financial highlights. Our procedures included
confirmation of securities owned as of October 31, 1997, 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, 1997, 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 their financial highlights for each of the periods
indicated therein in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
November 26, 1997
22
<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 $738,423 as tax-exempt dividends.

In January 1998 shareholders of the Fund will receive Federal income tax
information on all distributions paid to their accounts in the calendar year
1997, including any distributions paid between October 31, 1997 and December
31, 1997.
23
[Outside cover -- divided into two sections]
[Left Section] [Right Section]

TRUSTEES THE RODNEY SQUARE
Eric Brucker STRATEGIC
Fred L.Buckner FIXED-INCOME
Robert J. Christian FUND
Martin L. Klopping
John J. Quindlen
- -------------------

OFFICERS [GRAPHIC - RSMC Logo]
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 ANNUAL REPORT
TRANSFER AGENT October 31, 1997
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 12/97

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A

PART C OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

a.Financial Statements:

Included in Part A of this Registration Statement:

For The Diversified Income Portfolio:

Financial Highlights for each of the seven fiscal years in
the period ended October 31, 1997.

For The Municipal Income Portfolio:

Financial Highlights for each of the four years in the
period ended October 31, 1997.

Included in Part B of this Registration Statement:

FOR THE DIVERSIFIED INCOME PORTFOLIO:

Investments, October 31, 1997
Statement of Assets and Liabilities, October 31, 1997
Statement of Operations, for the fiscal year
ended October 31, 1997
Statement of Changes in Net Assets, for the
fiscal years ended
October 31, 1996 and October 31, 1997
Financial Highlights, for each of the five years
in the period ended October 31, 1997
Notes to Financial Statements

FOR THE MUNICIPAL INCOME PORTFOLIO:

Investments, October 31, 1997
Statement of Assets and Liabilities, October 31,
1997
Statement of Operations, for the fiscal year
ended October 31, 1997
Statement of Changes in Net Assets, for the
fiscal years ended
October 31, 1996 and October 31, 1997
Financial Highlights, for each of the four years
in the period ended October 31, 1997
Notes to Financial Statements

Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.

1
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).

b.Exhibits:

1. (a) Amended and Restated Declaration of Trust
dated July 1, 1992. (Incorporated by reference to Exhibit 1
to Post-Effective Amendment No. 10 to this Registration
Statement filed on December 24, 1992.)

1. (b) Amendment to Declaration of Trust dated
February 15, 1993. (Incorporated by reference to Exhibit
1(b) to Post-Effective Amendment No. 11 to this Registration
Statement filed on August 27, 1993.)

2. (a) Bylaws of the Registrant. (Incorporated by
reference to Exhibit 2 to original Registration Statement
filed on May 7, 1986.)

2. (b) Bylaws of the Registrant as Amended on
September 10, 1986. (Incorporated by reference to Exhibit 2
to Pre-Effective Amendment No. 1 to this Registration
Statement filed on October 30, 1986.)

3. Voting Trust Agreement - None.

4. Instruments Defining the Rights of Shareholders.
4. (a) Amended and Restated Declaration of Trust
dated July 1, 1992, amended February 15, 1993 (relevant
portions). (Incorporated by reference to Exhibit 4(a) to
Post-Effective Amendment No. 11 to this Registration
Statement filed on August 27, 1993.)

4. (b) Bylaws of the Registrant as Amended on
September 10, 1986 (relevant portions).(Incorporated by
reference to Exhibit 4(b) Post-Effective Amendment No. 11 to
this Registration Statement filed on August 27, 1993.)

5. (a) Advisory Contract between the Registrant on
behalf of The Rodney Square Diversified Income Portfolio and
Wilmington Trust Company dated April 1, 1991. (Incorporated
by reference to Exhibit 5 to Post-Effective Amendment No. 7
to this Registration Statement filed on March 29, 1991.)

5. (b) Advisory Agreement between the Registrant on
behalf of The Rodney Square Municipal Income Portfolio and
Wilmington Trust Company dated November 1, 1993.
(Incorporated by reference to Exhibit 5(b) to Post-Effective
Amendment No. 11 to this Registration Statement filed on
August 27, 1993.)

2
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

6. Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc. dated December 31, 1992.
(Incorporated by reference to Exhibit 6 to Post-Effective
Amendment No. 15 to this Registration Statement filed on March 1,
1996.)

7. Bonus, Profit Sharing or Pension Plans - None.

8. (a) Custodian Contract between the Registrant and
Wilmington Trust Company dated November 12, 1986.
(Incorporated by reference to Exhibit 8 to Post-Effective
Amendment No. 1 to this Registration Statement filed on or
about May 28, 1987.)

8. (b) Custodial Undertaking with Manufacturers
Hanover Trust Company in connection with Master Repurchase
Agreement of the Registrant and the First Boston Corporation
dated June 6, 1989. (Incorporated by reference to Exhibit
8(b) to Post-Effective Amendment No. 11 to this Registration
Statement filed on August 27, 1993.)

9. (a) Transfer Agency Agreement between the
Registrant and Rodney Square Management Corporation dated
December 31, 1992, as amended on August 16, 1993.
(Incorporated by Reference to Exhibit 9(a) to Post-Effective
Amendment No. 15 to this Registration Statement filed on
March 1, 1996.)

9. (b) Accounting Services Agreement between the
Registrant and Rodney Square Management Corporation dated
November 1, 1993. (Incorporated by reference to

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).

Exhibit 9(b) to Post-Effective Amendment No. 15
to this Registration Statement filed on March 1, 1996.)

9. (c) Administration Agreement between the
Registrant and Rodney Square Management Corporation dated
December 31, 1992, as amended August 16, 1993.
(Incorporated by reference to Exhibit 9(c) to Post-Effective
Amendment No. 11 to this Registration Statement filed on
August 27, 1993.)

10. (a) Opinion and Consent of Kirkpatrick &
Lockhart LLP with respect to shares of The Rodney Square
Diversified Income Portfolio. (Incorporated by reference
to Exhibit 10 to Post-Effective Amendment No. 7 to this
Registration Statement filed on March 29, 1991.)

3
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

10. (b) Opinion and Consent of Kirkpatrick &
Lockhart LLP with respect to shares of The Rodney Square
Municipal Income Portfolio. (Incorporated by reference to
Exhibit 10(b) to Post-Effective Amendment No. 11 to this
Registration Statement filed on August 27, 1993.)

11. Consent of Ernst & Young LLP, independent auditors
for Registrant.

12. Financial Statements omitted from Part B - None.

13. Letter of Investment Intent (on behalf of The Rodney
Square The Diversified Income Portfolio). (Incorporated by
reference to Exhibit 13 to Post-Effective Amendment No. 7 to
this Registration Statement filed on March 29, 1991.)

14. Prototype Retirement Plan - None.

15. None

(a) Amended Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940 The Rodney
Square Diversified Income Portfolio effective as of
January 1, 1993. (Incorporated by reference to Exhibit 15(a)
to Post-Effective Amendment No. 15 to this Registration
Statement filed on March 1, 1996.)

15. (b) Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 of The Rodney
Square Municipal Income Portfolio effective November 1,
1993. (Incorporated by reference to Exhibit 15 (b) to
Post-Effective Amendment No. 15 to this Registration
Statement filed on March 1, 1996.)

16. (a) Schedule for Computation of Performance
Quotations for The Rodney Square Diversified Income
Portfolio.

16. (b) Schedule for Computation of Performance
Quotations for The Rodney Square Municipal Income
Portfolio.

17. (a) Financial Data Schedule for The Rodney
Square Diversified Income Portfolio.

17. (b) Financial Data Schedule for The Rodney
Square Municipal Income Portfolio.

Power of Attorney included as part of the signature page of this
Post-Effective Amendment No. 17.

4
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

a. Persons Controlled by Registrant: None

b. Persons who may be deemed to be under Common Control with
Registrant in the event Wilmington Trust Corporation ("WT Corp.")
and Wilmington Trust Company ("WTC") may be deemed to be a
controlling person(s) of the Registrant:

MUTUAL FUNDS

The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund

% HELD
CORPORATE ENTITY STATE OF ORG. BY WT CORP.
---------------- ------------- -----------
Wilmington Trust Company Delaware 100%
Wilmington Trust FSB Federally Chartered 100%
Wilmington Trust of Pennsylvania Pennsylvania 100%
Brandywine Insurance Agency, Inc. Delaware 100%
Brandywine Finance Corporation Delaware 100%
Brandywine Life Insurance Company, Inc. Delaware 100%
Compton Realty Corporation Delaware 100%
Delaware Corp. Management Delaware 100%
Drew-I Ltd. Delaware 100%
Drew-VIII Ltd. Delaware 100%
Holiday Travel Agency, Inc. Delaware 100%
Rodney Square Distributors, Inc. Delaware 100%
Rodney Square Management Corporation Delaware 100%
Siobain-VI Ltd. Delaware 100%
Wilmington Brokerage Services Company Delaware 100%
Wilimgton Capital Management, Inc. Delaware 100%
Wilmington Trust Commercial Services
Company Maryland 100%
WTC Corporate Services, Inc. Delaware 100%
100 West Tenth St. Corporation Delaware 100%
WT Investments Inc. Delaware 100%

PARTNERSHIPS

Rodney Square Investors, L.P.

5
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF OCTOBER 31, 1997).

(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
-------------- -----------------------------
Shares of beneficial
interest $.01 par value

The Rodney Square
Diveresified Income
Portfolio 76

The Rodney Square
Municipal Income
Portfolio 79

ITEM 27. INDEMNIFICATION.

Article X, Section 2 of the Registrant's Declaration of Trust provides,
subject to certain exceptions and limitations, that the appropriate Series of
the Registrant will indemnify the Registrant's Trustees or officers ("covered
person") to the fullest extent permitted by law against liability and all
expenses reasonably incurred or paid by such persons in connection with any
claim, action, suit or proceeding in which a covered person becomes involved
as a party or otherwise by virtue of being or having been a Trustee or officer
and against amounts paid or incurred by him or her in the settlement thereof;
provided no covered persons shall be indemnified where there has been an
adjudication, as described in Article X, Section 2(b), that such person is
liable to the Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office or did not act in good faith in the
reasonable belief that his or her action was in the best interest of the
Registrant or where there has been a settlement, unless there has been a
determination, as described in Article X, Section 2(b) that such person did
not engage in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office. Article
X, Section 2(c) provides that the Registrant may maintain insurance policies
covering such rights of indemnification.

According to Article XI, Section 1 of the Declaration of Trust, any
person extending credit to, contracting with or having any claim against the
Registrant or the Trustees shall look only to the assets of the appropriate
Series for payment and neither the shareholders nor the Trustees nor any of
their agents, whether past, present or future, shall be personally liable

6
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 27. INDEMNIFICATION (CONTINUED).

therefor; except that nothing in the Declaration of Trust shall protect a
Trustee against liability by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.

Article XI, Section 2 of the Declaration of Trust provides that subject
to the provisions of Article X and Article XI, Section 1, the Trustees shall
not be liable for errors of judgment or mistakes of fact or law, or for any
act or omission in accordance with advice of counsel or other experts or for
failing to follow such advice.

Paragraph 7A of the Advisory Agreements between Wilmington Trust Company
("WTC") and the Registrant provides that WTC shall not be liable to the
Registrant or to any shareholder of the Registrant or its Series for any act
or omission in the course of performance of its duties under the contract in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties or for any losses that may be sustained in
the purchase, holding or sale of any security or the making of any investment
for or on behalf of the Registrant. Paragraph 7B of each of the Advisory
Agreements provides that no provision of either the Advisory Contract or the
Form of Advisory Agreement shall be construed to protect any Trustee or
officer of the Registrant, or WTC, from liability in violation of Sections
17(h), 17(i) or 36(b) of the Investment Company Act of 1940. Paragraph 15
provides that obligations assumed by the Registrant pursuant to the Advisory
Agreements are limited in all cases to the Registrant and its assets or a
particular Series and its assets, if liability relates to a Series.

Paragraph 11 of the Administration Agreement between the Registrant and
Rodney Square Management Corporation ("RSMC") provides that RSMC and its
affiliates shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Registrant in connection with the matters to
which the Agreement relates, except to the extent of a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of RSMC or its
affiliates in the performance of their obligations and duties under the
Agreement. In addition, Paragraph 17 of the Administration Agreement is
similar to Paragraph 15 of the Advisory Agreements.

Paragraph 11 of the Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc. ("RSD") provides that the Registrant agrees
to indemnify and hold harmless RSD and each of its directors and officers and
each person, if any, who controls RSD within the meaning of Section 15 of the
Securities Act of 1933 (the "1933 Act") against any loss, liability, claim,
damages or expense arising by reason of any person acquiring any shares, based
upon the 1933 Act or any other statute or common law, alleging any wrongful
act of the Registrant or any of its employees or representatives, or based
upon the grounds that the registration statements, or other information filed
or made public by the Registrant included an untrue statement of a material
fact or omitted to state a material fact required to be stated or necessary in
7
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 27. INDEMNIFICATION (CONTINUED).

order to make the statements not misleading. RSD, however, will not be
indemnified to the extent that the statement or omission is based on
information provided in writing by RSD. In no case is the indemnity of the
Registrant in favor of RSD or any person indemnified to be deemed to protect
RSD or any person against any liability to the Registrant or its security
holders to which RSD or such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
under this Agreement. Paragraph 16 of the Distribution Agreement is similar
to Paragraph 15 of the Advisory Agreements.

Paragraph 18 of the Transfer Agency Agreement between the Registrant and
RSMC provides that RSMC and its nominees shall be held harmless from all
taxes, charges, expenses, assessments, claims and liabilities including,
without limitation, liabilities arising under the 1933 Act, the Securities
Exchange Act of 1934 and any state or foreign securities and blue sky laws,
and amendments thereto, and expenses including without limitation reasonable
attorneys' fees and disbursements arising directly or indirectly from any
action or omission to act which RSMC takes at the request of or on the
direction of or in reliance on the advice of the Registrant or upon oral or
written instructions in the absence of RSMC or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under such Agreement. Paragraph 27 of the Transfer Agency
Agreement is similar to Paragraph 15 of the Advisory Agreements.

Paragraph 12 of the Accounting Services Agreement between the
Registrant and RSMC is similar to Paragraph 18 of the Transfer Agency
Agreement. Paragraph 19 of the Accounting Services Agreement is
similar to Paragraph 15 of the Advisory Agreements.

Insofar as indemnification for liability arising under the 1933 Act may
be permitted to Trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

8
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Wilmington Trust Company ("WTC"), a Delaware corporation, serves as
investment adviser to the Registrant. It currently manages large
institutional accounts and collective investment funds.
The directors and principal executive officer of the Adviser have held
the following positions of a substantial nature in the past two years:

BUSINESS OR OTHER CONNECTIONS OF PRINCIPAL EXECUTIVE
NAME OFFICERS AND DIRECTORS OF REGISTRANTS ADVISER
---- ----------------------------------------------------

Robert H. Bolling, Jr. Owner, R.H. Bolling, Jr. P.E. (consulting
Engineering firm)
Carolyn S. Burger President and Chief Executive Officer of Bell
Atlantic-Delaware, Incorporated
Ted T. Cecala Chairman and Chief Executive Officer, Wilmington
Trust Corporation and Wilmington Trust Company
Richard R. Collins Chairman, Collins, Incorporated (consulting firm
for various insurance industry associations and
financial and nonfinancial companies); Retired
President, American Life Insurance Company
Charles S. Crompton, Esq. Attorney, Partner, Potter Anderson & Corroon (law
firm)
H. Stewart Dunn, Jr.,
Esq. Attorney, Partner, Ivins, Phillips & Barker (law
firm)
Edward B. du Pont Private investor; Director, E. I. du Pont de
Nemours and Company, Incorporated; Retired
Chairman, Atlantic Aviation Corporation
Robert C. Forney Retired Executive Vice President and Director,
E. I. du Pont de Nemours and Company, Incorporated
Thomas L. Gossage Chairman and Chief Executive Officer, Hercules
Incorporated
Robert V.A. Harra, Jr. President and Treasurer, Wilmington Trust
Corporation and Wilmington Trust Company
Andrew B. Kirkpatrick,
Jr., Esq. Of Counsel to, Morris, Nichols, Arsht &
Tunnell (law firm)

Rex L. Mears President of Ray L. Mears & Sons, Inc. (farming
corporation)
Hugh E. Miller Retired Executive, Formerly Vice Chairman, ICI
Americas, Inc.; was with parent Imperial Chemicals
Industries PLC for 20 years until 1990 including
management positions in the United States and
Europe

9
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER (CONTINUED).

Stacey J. Mobley Senior Vice President of Communications, E. I. Du
Pont de Nemours and Company, Incorporated
Leonard W. Quill Formerly Chairman and Chief Executive Officer,
Wilmington Trust Corporation and Wilmington Trust
Company
David P. Roselle President, University of Delaware
Thomas P. Sweeney, Esq. Attorney, Partner, Richards, Layton & Finger (law
firm)
Bernard J. Taylor, II Retired Chairman and Chief Executive Officer,
Wilmington Trust Corporation and Wilmington Trust
Company
Mary Jornlin Theisen Former New Castle County Executive
Robert W. Tunnell, Jr. Managing Partner of Tunnell Companies, L.P., owner
and developer of real estate

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) The Rodney Square Fund
The Rodney Square Equity Fund
The Rodney Square Tax-Exempt Fund
1838 Investment Advisors Funds
Heitman Real Estate Fund -
Heitman/PRA Institutional Class
The HomeState Group
Kiewit Mutual Fund
The Mallard Fund
The Olstein Funds

(b)
(1) (2) (3)
POSITIONS AND
NAME AND PRINCIPAL POSITIONS AND OFFICES With Offices WITH
BUSINESS ADDRESS RODNEY SQUARE DISTRIBUTORS, INC. REGISTRANT
- ------------------ -------------------------------- --------------

Jeffrey O. Stroble President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19801
Martin L. Klopping Director President & Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890

Cornelius G. Curran Vice President None
1105 North Market Street
Wilmington, DE 19801

10
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

Items Required By Form N-1A (continued)

PART C OTHER INFORMATION (continued)

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

Certain accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder and the records relating to the duties of the Registrant's transfer
agent are maintained by Rodney Square Management Corporation, Rodney Square
North, 1100 North Market Street, Wilmington, DE 19890-0001. Records
relating to the duties of the Registrant's custodian are maintained by
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, DE 19890-0001.

ITEM 31. MANAGEMENT SERVICES.

Inapplicable.

ITEM 32. UNDERTAKINGS.

The Registrant hereby undertakes to furnish a copy of the Registrant's
latest Annual Report to Shareholders to each person to whom a copy of the
Registrant's Prospectus is delivered, upon request and without charge.

11
<PAGE>

File No. 33-5501
File No. 811-4663

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

FORM N-1A

POST-EFFECTIVE AMENDMENT NO. 17

TO REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

AMENDMENT NO. 19

TO REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

<PAGE>

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

EXHIBIT INDEX

Exhibit 11 Consent of Ernst & Young LLP, independent auditors for
Registrant

Exhibit 16(a) Schedule for Computation of Performance Calculations for
The Rodney Square Diversified Income Portfolio

Exhibit 16(b) Schedule for Computation of Performance Calculations for
The Rodney Square Municipal Income Portfolio

Exhibit 17(a) Financial Data Schedule for Rodney Square
Diversified Income Portfolio

Exhibit 17(b) Financial Data Schedule for The Rodney Square Municipal
Income Portfolio

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that this Post Effective Amendment no. 17 to its registration statement
meets all of the requirements for effectiveness pursuant to
Rule 485(b) under the Securities Act of 1933 and the Registrant
further certifies that it has duly caused this amendment to its
registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of
Wilmington, and State of Delaware, on the 24th day of
December, 1997.

THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND

By: /s/ Carl M. Rizzo
-------------------------------
Carl M. Rizzo, Esq., Secretary

Pursuant to the requirements of the Securities Act of 1933,
this amendment to its Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.

SIGNATURE TITLE DATE
- --------- ----- ----
President (Principal
/s/ Martin L. Klopping Executive Officer) December 24, 1997
- ----------------------
Martin L. Klopping and Trustee

/s/ Eric Brucker
- ----------------------
Eric Brucker* Trustee December 24, 1997

/s/ Fred L. Buckner
- ----------------------
Fred L. Buckner* Trustee December 24, 1997

/s/ Robert J. Christian
- -----------------------
Robert J. Christian* Trustee December 24, 1997

/s/ John J. Quindlen
- -----------------------
John J. Quindlen* Trustee December 24, 1997

Vice President and
/s/ Robert C. Hancock Treasurer (Principal
- ----------------------- Financial and
Robert C. Hancock Accounting Officer) December 24, 1997

*By: /s/ Carl M. Rizzo
-------------------
Carl M. Rizzo**

** Attorney-in-fact pursuant to a power of attorney filed
herewith.
<PAGE>

POWER OF ATTORNEY

Each of the undersigned in his capacity as a Trustee or
officer, or both, as the case may be, of the Registrant, does
hereby appoint Arthur J. Brown, Carl M. Rizzo, and Diane D.
Marky, and each of them, or jointly, his true and lawful attorney
and agent to execute in his name, place and stead (in such
capacity) any and all post-effective amendments to the
Registration Statement and all instruments necessary or desirable
in connection therewith, to attest the seal of the Registrant
thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents have power and
authority to do and perform in the name and on behalf of each of
the undersigned, in any and all capacities, every act whatsoever
necessary or advisable to be done in the premises as fully and to
all intents and purposes as each of the undersigned might or
could do in person, hereby ratifying and approving the act of
said attorneys and agents and each of them.

SIGNATURE TITLE DATE
- --------- ------ -----

President (Principal
/s/Martin L Klopping Executive Officer) November 17, 1997
- ---------------------
Martin L. Klopping and Trustee

/s/ Eric Brucker
- --------------------
Eric Brucker Trustee November 17, 1997

/s/ Fred L. Bucker
- ----------------------
Fred L. Buckner Trustee November 17, 1997

/s/ Robert J. Christian
- ------------------------
Robert J. Christian Trustee November 17, 1997

/s/ John J. Quindlen
- -----------------------
John J. Quindlen Trustee November 17, 1997

Vice President and
/s/ Robert C. Hancock Treasurer (Principal
- -----------------------
Robert C. Hancock Financial and November 17, 1997
Accounting Officer)

<PAGE>

</TABLE>

Exhibit 11

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Independent
Auditors" and "Financial Statements" in the Statement of
Additional Information and to the inclusion
in this Post-Effective Amendment Number 17 to Registration
Statement Number 33-5501 (Form N-1A) of our report dated
November 26, 1997, on the financial statements and financial
highlights of The Rodney Square Strategic Fixed-Income Fund
for the fiscal year ended October 31, 1997, included in the 1997
Annual Report to Shareholders.

Philadelphia, Pennsylvania
December 19, 1997

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
DIVERSIFIED INCOME PORTFOLIO
"HYPOTHETICAL $10,000 INVESTMENT"

For the Period April 2, 1991 (Commencement of Operations) through
October 31, 1997

Value of Initial $10,000 Investment = ($10,000 / Beginning NAV) * Ending NAV
= ($10,000 / $12.50) * $13.07
= $10,456.00

Value of Reinvested Income Dividends = Shares Reinvested from Income
Dividends * Ending NAV
= 396.20 * $13.07
= $5,178.33

Value of Reinvested Capital Gain Distributions = Shares Reinvested from
Capital Gain Distributions * Ending NAV
= 12.13 * $13.07
= $158.54

Exhibit 16 (a)

TOTAL VALUE= $10,456.00 + $5,178.33 + $158.54 = $15,792.87

For the Period April 2, 1991 (Commencement of Operations) through
October 31, 1996

Value of Initial $10,000 Investment = ($10,000/Beginning NAV) * Ending NAV
= ($10,000 / $12.50) * $12.95
= $10,360.00

Value of Reinvested Income Dividends = Shares Reinvested from Income
Dividends * Ending NAV
= 326.24 * $12.95
= $4,224.81

Value of Reinvested Capital Gain Distributions = Shares Reinvested from
Capital Gain Distributions * Ending NAV
= 12.13 * $12.95
= $157.08

"TOTAL VALUE= $10,360.00 + $4,224.81 + $157.08 = $14,741.89

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
DIVERSIFIED INCOME PORTFOLIO
(STANDARDIZED RETURNS)

1 YR 5 YR INCEPTION
---- ----- ---------
# YEARS IN PERIOD 1 5.000 6.589
AVERAGE ANNUAL TOTAL RETURN 3.38% 5.41% 6.60%
MAXIMUM SALES LOAD 3.50% 3.50% 3.50%

FOR THE ONE YEAR PERIOD ENDED OCTOBER 31, 1997

Average Annual Total Return
- ----------------------------
(ERV/P)1/N -1 = T
($1,033.77/1,000)1 -1 = T
.0338 = T
3.38% = T

FOR THE FIVE YEAR PERIOD ENDED OCTOBER 31, 1997

Average Annual Total Return
- ---------------------------
(ERV/P)1/N -1 = T
($1,301.22/1,000) 1/5 -1 = T
.0541 = T
5.41% = T

INCEPTION THROUGH OCTOBER 31, 1997
- ----------------------------------
Average Annual Total Return

(ERV/P)1/N -1 = T
($1,524.01/1,000) 1/6.589 -1 = T
.0660 = T
6.60% = T

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
DIVERSIFIED INCOME PORTFOLIO
(NON-STANDARDIZED RETURNS)

1 YR 5 YR INCEPTION
---- ---- ---------
# YEARS IN PERIOD 1.00 5.000 6.589
CUMULATIVE TOTAL RETURN
(Excluding Maximum Sales Load) 7.13% 34.84% 57.93%
CUMULATIVE TOTAL RETURN
(After Deducting Maximum Sales Load)3.38% 30.12% 52.40%
AVERAGE ANNUAL TOTAL RETURN 7.13% 6.16% 7.18%
MAXIMUM SALES LOAD 3.50% 3.50% 3.50%

FOR THE ONE YEAR PERIOD ENDED OCTOBER 31, 1997
- ----------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- ----------------------- ----------------------------
(ERV/P) - 1 = T (ERV/P)1/N -1 =T
($1,071.30/1,000)-1 = T ($1,071.30/1,000) -1 =T
.0713 = T .0713 = T
7.13% = T 7.13% = T

FOR THE FIVE YEAR PERIOD ENDED OCTOBER 31, 1997
- ----------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(ERV/P) - 1 = T (ERV/P)1/N -1 = T
($1,348.39/1,000)-1 = T ($1,348.39/1,000) 1/5 -1 = T
.3484 = T .0616 = T
34.84% = T 6.16% = T

INCEPTION THROUGH OCTOBER 31, 1997

Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(Excluding Maximum Sales Load)
- ------------------------------
(ERV/P) -1 = T (ERV/P)1/N -1 = T
($1,579.29/1,000)-1 = T ($1,579.29/1,000)1/6.5890-1 = T
.5793 = T .0718 = T
57.93% = T 7.18% = T

Cumulative Total Return (After Deducting Maximum Sales Load)
- -------------------------------------------------------------
(ERV/P) -1 = T
($1,524.01/1,000) -1 = T
.5240 = T
52.40% = T

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
DIVERSIFIED INCOME PORTFOLIO

Yield for the Thirty-day Period Ended October 31, 1997

Actual yield for the 30-day period:
- ----------------------------------

Yield = 2[((a-b)/cd + 1)6 -1]

Yield = 2[((171,148.67 - 16,855.39)/2,424,367.2788 * $13.54 + 1)6 -1]

Yield = .05707116

Yield = 5.71%

YIELD FOR THE PERIOD WITHOUT THE EFFECT OF FEE WAIVERS:
- ------------------------------------------------------

Yield = 2[((a-b)/cd + 1) 6 -1]

Yield = 2[((171,148.67 - 27,820.47)/2,424,367.2788 * $13.54 + 1) 6 -1]

Yield = .05297100

Yield = 5.30%

Exhibit 16(b)

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
MUNICIPAL INCOME PORTFOLIO
"HYPOTHETICAL $10,000 INVESTMENT"

For the Period November 1, 1993 (Commencement of Operations) through
October 31, 1997

Value of Initial $10,000 Investment = ($10,000 / Beginning NAV) * Ending NAV
= ($10,000 / $12.50) * $12.74
= $10,192.00

Value of Reinvested Income Dividends = Shares Reinvested from Income Dividends
* Ending NAV
= 151.28 * $12.74
= $1,927.31

Value of Reinvested Capital Gain Distributions = Shares Reinvested from
Capital Gain Distributions * Ending NAV
= 0.00 * $12.74
= $0.00

TOTAL VALUE= $10,192.00 + $1,927.31 + $0.00 = $12,119.31

For the Period November 1, 1993 (Commencement of Operations) through
October 31, 1996

Value of Initial $10,000 Investment = ($10,000 / Beginning NAV)* Ending NAV
= ($10,000 / $12.50) * $12.46
= $9,968/00

Value of Reinvested Income Dividends = Shares Reinvested from Income Dividends
* Ending NAV
= 110.30 * $12.46
= $1,374.34

Value of Reinvested Capital Gain Distributions = Shares Reinvested from Capital
Gain Distributions * Ending NAV
= 0.00 * $12.49
= $0.00

TOTAL VALUE= $9,968.00 + $1,374.34 + $0.00 = $11,342.34
Exhibit 16(b)

FUND NAME: RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
MUNICIPAL INCOME PORTFOLIO
(STANDARDIZED RETURNS)

1 YR INCEPTION
---- -----------
# YEARS IN PERIOD 1 4.00274
AVERAGE ANNUAL TOTAL RETURN 3.11% 3.99%
MAXIMUM SALES LOAD 3.50% 3.50%

FOR THE ONE YEAR PERIOD ENDED OCTOBER 31, 1997

Average Annual Total Return
- ---------------------------

(ERV/P)1/N -1 =T

($1,031.11/1,000)1 -1 = T
.0311 = T
3.11% = T

INCEPTION THROUGH OCTOBER 31, 1997

Average Annual Total Return
- ---------------------------

(ERV/P)1/N -1 =T

($1,169.51/1,000) 1/4.00274 -1 = T
.0399 = T
3.99% = T

FUND NAME: RODNEY SQUARE STRATEGIC-FIXED INCOME FUND
MUNICIPAL INCOME PORTFOLIO
(NON-STANDARDIZED RETURNS)

1 YR INCEPTION
---- ---------
# YEARS IN PERIOD 1 4.00274
CUMULATIVE TOTAL RETURN
(Excluding Maximum Sales Load) 6.85% 21.19%
CUMULATIVE TOTAL RETURN
(After Deducting Maximum
Sales Load) 3.11% 16.95%
AVERAGE ANNUAL TOTAL RETURN 6.85% 4.92%
MAXIMUM SALES LOAD 3.50% 3.50%

FOR THE ONE YEAR PERIOD ENDED OCTOBER 31, 1997

Cumulative Total Return Average Annual Total Return
- ----------------------- ----------------------------
(ERV/P) - 1 = T (ERV/P)1/N -1 = T
($1,068.51/1,000) -1 = T ($1,068.51/1,000) -1 = T
.0685 = T .0685 = T
6.85% = T 6.85% = T

INCEPTION THROUGH OCTOBER 31, 1997

Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(Excluding Maximum Sales Load)
- -----------------------------
(ERV/P) -1 = T (ERV/P)1/N -1 = T
($1,211.88/1,000) -1 = T ($1,211.88/1,000)1/4.00274 -1 = T
.2119 = T .0492 = T
21.19% = T 4.92% = T

Cumulative Total Return (After Deducting Maximum Sales Load)
- -------------------------------------------------------------
(ERV/P) -1 = T
($1,169.51/1,000) -1 = T
.1695 = T
16.95% = T

FUND NAME: RODNEY SQUARE STRATEGIC-FIXED INCOME FUND
MUNICIPAL INCOME PORTFOLIO

Yield for the Thirty-day Period Ended October 31, 1997

ACTUAL YIELD FOR THE 30-DAY PERIOD:
- -----------------------------------

Yield = 2[((a-b)/cd + 1) 6 -1]

Yield = 2[((67,309.54 - 10,675.46)/1,362,456.3065 * $13.20 + 1) 6-1]

Yield = .03808746

Yield = 3.81%

YIELD FOR THE PERIOD WITHOUT THE EFFECT OF FEE WAIVERS:
- -------------------------------------------------------

Yield = 2[((a-b)/cd + 1) 6 -1]

Yield = 2[((67,309.54 - 22,886.68)/1,362,456.3065 * $13.20 + 1)6 -1]

Yield = .02982251

Yield = 2.98%

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

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