THE RODNEY SQUARE STRATEGIC FIX-INCOME FUND
- -------------------------------------------
PRESIDENT'S MESSAGE
- ------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of The Rodney Square Strategic Fixed-Income Fund (the
"Fund") is pleased to report to you on the Fund's activity for the six-month
period ended April 30, 1997.
PERFORMANCE REVIEW*
The Diversified Income Portfolio had a total return of 1.48% for the six
months ended April 30, 1997. This return consisted of a modest decrease in
net asset value per share from $12.95 on October 31, 1996 to $12.76 at the end
of April, plus dividends per share of $0.38. The Portfolio's performance
trailed the reported return of 1.75% for the Lehman Intermediate Government
Corporate Index over this six month period. Wilmington Trust Company, the
Portfolio's adviser (the "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 Municipal Income Portfolio had a total return of 1.88% for the six
months ended April 30, 1997. This return consisted of a decrease in net asset
value per share from $12.46 on October 31, 1996 to $12.42 at the end of April
plus dividends per share of $0.27. The Portfolio's performance exceeded the
reported return of 1.49% for the Merrill Lynch Intermediate Municipal Index.
The Portfolio's expenses continue to be limited to 0.75% of average daily net
assets.
ECONOMIC ENVIRONMENT
The past six months have seen interest rates trend higher, resulting in
the modest diminution of principal value for both portfolios. During most of
October 1996, the interest rate picture was positive as yield levels on 5 Year
Treasuries moved down from 6.07% to a low of 5.84%. However, shortly after
reaching these low levels, the market was confronted with Federal Reserve
Board (the "Fed") Chairman Alan Greenspan's well documented characterization
of the financial markets as "irrationally exuberant". This caused an initial
sell off in the bond market as concerns began to develop that the Fed would be
looking to raise rates. At Mr. Greenspan's semiannual Humphrey Hawkins
testimony, he again reiterated his concerns regarding the strength of the
economy and warned of the possible need for a "preemptive strike" against
inflationary pressures. These warnings of an imminent rate hike became
reality when the Federal Open Market Committee ("FOMC") raised rates at their
March 25th meeting. The 5 Year U. S. Treasury reached a high yield of 6.86%
in the aftermath of the FOMC decision. The market did perform better during
the last month of the reporting period as the Employment Cost Index for the
first quarter of 1997 was released in late April and showed employment costs
to be well under control. Given the recent tight labor markets, this news was
especially welcomed by the market and yields fell 30 basis points from their
highs by the end of April.
- -------------------
*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 FINNANCIAL HIGHLIGHTS
PAGES 13 AND 14.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND
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PRESIDENT'S MESSAGE - CONTINUED
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MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE DIVERSIFIED INCOME PORTFOLIO
The Diversified Income Portfolio is designed to give shareholders broad
exposure to the dynamics of the intermediate term bond market 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.
During most of the period when rates were moving higher, the portfolio's
interest rate sensitivity was reduced in order to preserve principal value.
The duration exposure of the portfolio was kept below that of the Lehman
Intermediate Government Corporate Index and thus aided performance relative to
this index.
Steps were also taken to enhance the yield levels on the portfolio as the
weighting in corporate notes was raised to 40%. This had little impact on
recent performance as the higher yields were offset by a general widening in
spread levels versus the Treasury market. The widening in spreads was
triggered by concerns regarding the impact that higher rates may have on
corporate earnings and financial strength. However, we view this concern as
transitory and believe that the strong corporate weighting should prove
helpful over the longer term.
THE MUNICIPAL INCOME PORTFOLIO
The Municipal Income Portfolio is an intermediate, high quality fund
designed to produce a high level of income which is exempt from federal income
taxes while seeking preservation of capital. The basic strategy of the
Portfolio is to identify and purchase undervalued sectors of the municipal
market. The Portfolio will normally be fully invested with an average
maturity in the 5 to 10 year range.
The municipal market generally outperformed the taxable fixed income
markets as strong demand for tax-exempt securities kept rate spreads very
tight. Unusually light new issuance of municipal debt, particularly at the
end of calendar 1996, added to the performance of tax-exempts. Ten year
general obligation municipals yielded 75.4% of comparable U. S. Treasuries at
the end of April, more expensive relative to the 77.3% ratio at the outset of
the semi-annual reporting period.
Our defensive posture helped the Portfolio with its performance during
this period of rising rates (albeit rising slower than Treasury rates). Also
aiding the performance was the relatively high average coupon in the
Portfolio. High coupons generate higher payment flows and help to insulate a
bond's price movement.
We invite your comments and questions and we thank you for your
investment in The Rodney Square Strategic Fixed-Income Fund. We look forward
to reviewing our investment outlook and strategy with you in our next report
to shareholders.
Sincerely,
/s/ Martin L. Klopping
Martin L. Klopping
President
June 16, 1997
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS / APRIL 30, 1997(UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- -----------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
CORPORATE NOTES - 40.5%
BANKS - 1.0%
Bank of Montreal,7.80%,04/01/07........... A1/A+ $ 300,000 $ 309,000
-----------
ELECTRIC UTILITIES - 6.5%
Alabama Power Co., 7.00%,
01/01/03, Callable 01/01/98 @ 101.64.... A1/A+ 1,000,000 993,750
Duke Power Co., 8.00%, 11/01/99........... Aa2/AA- 1,000,000 1,028,750
-----------
2,022,500
-----------
FINANCIAL - 27.2%
American Express Credit Corp., 8.50%,
06/15/99................................ Aa3/A+ 350,000 363,125
Associates Corp. N.A., 6.75%, 08/01/01.... Aa3/AA- 500,000 496,644
Associates Corp. N.A., 8.55%, 07/15/09.... Aa3/AA- 300,000 329,887
BankAmerica Corp., 6.75%, 09/15/05........ A3/A- 250,000 241,250
Bear Stearns Co., 5.75%, 02/15/01 ........ A2/A 500,000 481,875
Beneficial Corp., 8.17%, 11/09/99 ........ A2/A 700,000 723,883
Dean Witter Discover, 6.75%, 08/15/00..... A2/A 400,000 399,888
Ford Capital B.V., 9.375%, 01/01/98....... A2/A 300,000 306,620
General Motors Acceptance Corp., 6.70%,
07/02/99................................ A3/A- 650,000 650,830
Heller Financial Corp., 7.875%, 11/01/99 A2/BBB+ 800,000 821,000
International Lease Finance, 6.125%,
11/01/99................................ A2/A+ 400,000 395,000
Lehman Brothers, Inc., 7.625%, 08/01/98... A3/A 600,000 608,460
Mellon Bank N.A., 7.625%, 09/15/07........ A2/A 500,000 508,750
Merrill Lynch & Co., Inc., 7.05%, 04/15/03 A1/A+ 100,000 99,250
Morgan Stanley Group, 6.375%, 01/18/00.... A1/A+ 600,000 594,750
Norwest Financial Inc., 6.37%, 11/15/01... Aa3/AA- 500,000 490,000
Santander Financial Issuances Ltd., 7.875%,
04/15/05................................ A1/A+ 300,000 309,000
Union Bank of Switzerland, NY, 7.25%,
07/15/06................................ Aa1/AA+ 350,000 349,125
USL Capital Corp., 5.79%, 01/23/01........ A1/A+ 300,000 288,000
-----------
8,457,337
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MANUFACTURING - 2.2%
Eaton Corp., 8.00%, 08/15/06.............. A2/A 650,000 683,313
-----------
OIL, GAS & PETROLEUM - 1.7%
British Petroleum of North America, Inc.,
8.875%, 12/01/97........................ A1/AA- 200,000 203,284
Societe Nationale Elf Aquitaine, 8.00%,
10/15/01................................ Aa3/AA 300,000 312,375
-----------
515,659
-----------
TELEPHONE & COMMUNICATIONS - 1.9%
GTE Southwest, 6.54%, 12/01/05............ A2/A+ 600,000 576,618
-----------
TOTAL CORPORATE NOTES (COST $12,588,788).................. 12,564,427
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
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INVESTMENTS (UNAUDITED) - CONTINUED
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MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
U.S. TREASURY OBLIGATIONS **- 26.1%
U.S. TREASURY BONDS - 2.7%
U.S. Treasury Bonds, 11.75%, 02/15/10..... NR/NR $ 650,000 $ 841,991
-----------
U.S. TREASURY NOTES - 23.4%
U.S. Treasury Notes, 6.125%, 05/15/98..... NR/NR 400,000 400,560
U.S. Treasury Notes, 6.375%, 01/15/99..... NR/NR 1,200,000 1,204,164
U.S. Treasury Notes, 6.25%, 03/31/99...... NR/NR 900,000 899,437
U.S. Treasury Notes, 6.00%, 08/15/99...... NR/NR 1,000,000 993,160
U.S. Treasury Notes, 6.00%, 10/15/99...... NR/NR 250,000 248,252
U.S. Treasury Notes, 6.375%,01/15/00...... NR/NR 1,400,000 1,401,022
U.S. Treasury Notes, 6.75%, 04/30/00...... NR/NR 400,000 403,220
U.S. Treasury Notes, 6.25%, 05/31/00...... NR/NR 300,000 298,407
U.S. Treasury Notes, 8.75%, 08/15/00...... NR/NR 150,000 160,006
U.S. Treasury Notes, 6.625%, 03/31/02..... NR/NR 150,000 150,235
U.S. Treasury Notes, 7.25%, 05/15/04...... NR/NR 800,000 826,105
U.S. Treasury Notes, 7.25%, 08/15/04...... NR/NR 300,000 309,678
-----------
7,294,246
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST $8,167,070)......... 8,136,237
-----------
MORTGAGE-BACKED SECURITIES - 11.4%
Advanta Mtge. Loan Trust, Ser. 1996-1
Class A6, 6.73%, 08/25/23............... Aaa/AAA 300,000 286,444
Contimortgage Home Equity Loan Trust,
Ser. 1996-1 Class A6, 6.69%, 01/15/16... Aaa/AAA 299,998 287,521
Federal National Mtge. Assoc., Ser.
1996-4 Class VC, 6.50%, 07/25/02........ Aaa/NR 254,083 251,779
Federal National Mtge. Assoc., Ser.
G37 Class G, 7.50%, 12/25/19............ Aaa/NR 300,000 302,655
Federal National Mtge. Assoc., Ser.
1995W1 Class A6, 8.10%, 04/25/25 ....... Aaa/NR 500,000 510,393
GE Cap. Mtge. Services, Inc., Ser.
1996HE2 Class A5, 7.94%, 06/25/14....... Aaa/NR 600,000 607,480
Green Tree Financial Corp., Ser.
1995-2 Class A6, 8.30%, 05/15/26........ Aaa/AAA 325,000 343,856
The Money Store Home Equity Trust,
Ser. 1992-D2 Class A3, 7.55%, 01/15/18.. Aaa/AAA 366,502 369,157
The Money Store Home Equity Trust, Ser.
1996D Class A5, 6.67%, 03/15/18......... Aaa/AAA 400,000 393,311
The Money Store Home Equity Trust, Ser.
1996B Class A8, 7.91%, 05/15/24......... Aaa/AAA 200,000 203,235
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TOTAL MORTGAGE-BACKED SECURITIES (COST $3,581,875)........ 3,555,831
-----------
ASSET-BACKED SECURITIES - 8.1%
AFC Home Equity Loan Trust, Ser. 1996-2
Class 1A4, 7.74%, 09/25/27.............. Aaa/AAA 799,831 810,602
Green Tree Financial Corp., Ser. 1996-5
Class A4, 7.15%, 07/15/27............... Aaa/AAA 750,000 751,775
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/DIVERSIFIED INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
MBNA Master Credit Card Trust, Ser. 1995-F
Class A, 6.60%, 01/15/03................ Aaa/AAA $300,000 $ 300,108
Residential Asset Securities Corp., Ser.
1995-KS3, 8.00%, 10/25/24............... Aaa/AAA 400,000 402,660
Resolution Trust Corp., Ser. 1994-C2
Class B, 8.00%, 04/25/25................ NR/AA 250,000 252,247
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TOTAL ASSET-BACKED SECURITIES (COST $2,525,347)........... 2,517,392
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 7.9%
FEDERAL HOME LOAN BANKS NOTES - 1.5%
Federal Home Loan Banks Notes, 7.50%,
09/30/03,Callable 09/30/98 @ 100........ Aaa/NR 475,000 475,182
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION NOTES - 1.6%
Federal Home Loan Mtge. Corp. Notes, 7.05%,
05/15/02................................ Aaa/NR 500,000 498,095
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES - 4.8%
Federal National Mtge. Assoc. Notes,
7.50%, 08/25/05......................... Aaa/NR 300,000 299,025
Federal National Mtge. Assoc. Notes,
6.71%, 02/13/06......................... Aaa/NR 300,000 290,133
Federal National Mtge. Assoc. Notes,
7.58%, 06/02/06......................... Aaa/NR 400,000 402,095
Federal National Mtge. Assoc. Notes,
7.94%, 09/13/06......................... Aaa/NR 500,000 508,509
-----------
1,499,762
-----------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $2,462,679)....................................... 2,473,039
-----------
TIME DEPOSITS - 6.4%
Deutsche Bank, Grand Cayman Branch, 5.65%,
05/01/97 (COST $1,995,210)....................... 1,995,210 1,995,210
-----------
TOTAL INVESTMENTS (COST $31,320,969)+ - 100.4% ................ $31,242,136
OTHER ASSETS AND LIABILITIES, NET - (0.4)%..................... (116,019)
-----------
NET ASSETS - 100.0%............................................ $31,126,117
===========
* 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.
+ THE COST FOR FEDERAL INCOME TAX PURPOSES WAS $31,325,146. AT APRIL 30, 1997,
NET UNREALIZED DEPRECIATION WAS $83,010. THIS CONSISTED OF AGGREGATE GROSS
UNREALIZED APPRECIATION FOR ALL SECURITIES IN WHICH THERE WAS AN EXCESS OF
MARKET VALUE OVER TAX COST $186,414 AND AGGREGATE GROSS UNREALIZED
DEPRECIATION FOR ALL SECURITIES IN WHICH THERE WAS AN EXCESS OF TAX COST
OVER MARKET VALUE OF $269,424.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS / APRIL 30, 1997 (UNAUDITED)
(Showing Percentage of Total Value of Net Assets)
- -----------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
MUNICIPAL BONDS - 97.0%
ALASKA - 5.7%
Alaska Municipal Bond Bank Auth. Ref.
Rev. Bonds, Ser. 1993C, 4.90%, 10/01/03. A/A $400,000 $ 394,500
Seward, AK Rev. Bonds (Alaska Sealife
Center Ser. Proj.), 1996, 6.50%,
10/01/01................................ NR/NR 560,000 562,100
-----------
956,600
-----------
CALIFORNIA - 11.5%
California State Veterans Bonds, Ser. AY,
6.90%, 04/01/01......................... Aa/AA 250,000 252,320
California State Veterans Bonds, Ser. 1989,
7.00%, 04/01/03......................... Aa/AA 500,000 504,635
Los Angeles County, CA Public Works Fin.
Auth.Rev. Bonds (LA County Park & Open
Space Dist.),Ser. 1994A, 5.63%,
10/01/03................................ Aa/AA 500,000 519,375
Los Angeles, CA Dept. of Water and Power
Electric Plant Rev. Bonds, 5.75%,
11/15/02 ............................... Aa/AA 300,000 312,375
Redevelopment Agency of San Francisco, CA
Multi-Family Housing Ref. Rev. Bonds
(GNMA South Beach Proj.), Ser. 1994,
4.75%, 09/01/02......................... Aaa/NR 345,000 339,394
-----------
1,928,099
-----------
COLORADO - 3.1%
Aurora, CO Cert. of Participation Lease Ref.
Rev.Bonds, 5.85%, 12/01/02.............. A/A 500,000 514,375
-----------
DELAWARE - 23.2%
Bethany Beach, DE, 9.75%, 11/01/07........ Aaa/AAA 160,000 215,800
Bethany Beach, DE, 9.75%, 11/01/08........ Aaa/AAA 180,000 248,175
Delaware State Economic Dev. Auth.
Osteopathic Hosp. Assoc., 6.00%,
01/01/03................................ Aaa/NR 500,000 516,250
Delaware State Economic Dev. Auth. Rev.
Bonds(Delmarva Power & Light), 7.30%,
09/01/15................................ Aaa/AAA 100,000 107,500
Delaware State Housing Auth. Multi-Family
Mtge. Ref. Rev. Bonds, 6.30%, 07/01/98.. A1/A+ 100,000 100,375
Delaware State Housing Auth. Sr. Home Mtge.
Rev. Bonds, Ser. 1991, Subser. B-1, 6.10%,
06/01/99................................ Aa3/NR 45,000 45,012
Delaware State Housing Auth. Sr. Home Mtge.
Rev. Bonds, Ser. A, 7.00%, 06/01/00..... Aa/NR 30,000 30,225
Delaware State Housing Auth. Sr. Home Mtge.
Rev. Bonds, Subser. 1991, 6.40%,
12/01/02................................ A1/NR 40,000 40,950
Delaware State Housing Auth. Multi-Family
Mtge. Rev. Bonds, Ser. 1992D, 6.35%,
07/01/03................................ A1/NR 100,000 102,625
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
Delaware State Housing Auth. Single Family
Mtge. Rev. Bonds, Ser. 1993, Subser. A,
5.05%, 07/01/05......................... Aaa/AAA $315,000 $ 307,519
Delaware State Housing Auth. Single Family
Mtge. Rev. Bonds, Ser. 1993, Subser. A1,
5.15%, 01/01/06 ........................ Aaa/AAA 180,000 176,625
Delaware State Housing Auth. Multi-Family
Mtge. Ref. Rev. Bonds, Ser. C, 7.25%,
01/01/07................................ A1/A 225,000 235,969
Delaware State Solid Waste Auth. Sys. Rev.
Bonds, 5.80%, 07/01/01 ................. A/A 500,000 515,000
Delaware Trans. Auth. Trans. Sys. Sr. Lien
Rev. Bonds, 6.75%, 07/01/98............. A1/AA- 115,000 118,163
Delaware Trans. Auth. Trans. Sys. Sr. Lien
Rev. Bonds, 5.88%, 07/01/00............. A1/AA- 350,000 362,250
Delaware Trans. Auth. Trans. Sys. Jr.
Lien Rev. Bonds, 5.00%, 07/01/06........ Aaa/AAA 500,000 493,125
Delaware Trans. Auth. Trans. Sys. Jr. Lien
Rev. Bonds, 7.75%, 07/01/08, Prerefunded
07/01/98 @ 101.50....................... Aaa/AAA 250,000 263,750
-----------
3,879,313
-----------
HAWAII - 4.5%
Hawaii State Gen. Oblig. Rev. Bonds, Ser.
BW, 6.20%, 03/01/05..................... Aa/AA 700,000 750,750
-----------
MISSISSIPPI - 2.4%
Medical Center Educ. Bldg. Corp., (Univ.
of Mississippi Medical Center Proj.),
Ser. 1993, 5.40%, 12/01/05.............. NR/A- 400,000 394,500
-----------
NEW JERSEY - 3.1%
New Jersey Econ. Dev. Auth. School Rev.
Bonds (Blair Academy 1995 Proj.), Ser.
B, 6.00%, 09/01/07...................... A/NR 500,000 513,125
-----------
NORTH CAROLINA - 2.3%
North Carolina Educ. Fac. Fin. Agency Rev.
Bonds, 4.70%, 10/01/08.................. Aa1/AA+ 400,000 381,500
-----------
PENNSYLVANIA - 16.9%
Lancaster County, PA Solid Waste Auth. Rev.
Bonds, Ser. A, 6.15%, 12/15/98........... A/BBB 100,000 100,750
Lancaster County, PA Solid Waste Auth. Rev.
Bonds, 7.75%, 12/15/04................... A/BBB 225,000 235,406
Pennsylvania Infrastructure Investment Auth
Rev. Bonds, 6.00%, 09/01/06.............. Aaa/AAA 330,000 352,687
Pennsylvania State Higher Educ. Fac. Auth.
College & Univ. Rev. Bonds (Philadelphia
College of Osteopathic Medicine), Ser.
1993, 5.25%, 12/01/07.................... NR/AAA 150,000 149,250
Pennsylvania State Ref. Rev. First, Ser.,
5.30%, 05/01/06 ......................... A1/AA- 500,000 505,625
Philadelphia Parking Auth. Rev. Bonds, Ser.
1997, 5.50%, 09/01/03.................... Aaa/AAA 500,000 515,000
Philadelphia, PA Redev. Auth. Home Imp. Loan
Rev. Bonds, 7.38%, 06/01/03.............. A/A 40,000 40,450
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
MOODY'S/S&P PRINCIPAL VALUE
RATING* AMOUNT (NOTE 2)
----------- --------- ---------
York County, PA Ind. Auth. Personal Care
Fac., 9.50%, 10/01/19................... NR/NR $335,000 $ 405,769
York County, PA Solid Waste Refuse Auth.
Ind. Dev. Rev. Bonds (Resource Recovery
Proj.), Ser. 1985, 8.20%, 12/01/14...... A/AA- 500,000 524,315
-----------
2,829,252
-----------
TEXAS - 1.8%
Austin, TX Gen. Oblig. Rev. Bonds, 4.75%,
09/01/09................................ Aa/AA 315,000 295,706
-----------
UTAH - 3.1%
Salt Lake City, UT Municipal Bldg. Auth.
Lease Rev. Bonds, Ser. 1994A, 5.65%,
10/01/03................................ Aaa/AAA 500,000 516,250
-----------
VERMONT - 5.0%
Vermont Municipal Bond Bank Rev. Bonds,
Ser. 2, 6.00%, 12/01/05................. Aaa/AAA 790,000 843,325
-----------
VIRGINIA - 4.6%
Virginia Educ. Loan Auth. Rev. Bonds
(Student Loan Prog.), Sr. Ser. 1994B,
5.15%, 03/01/04......................... Aaa/NR 260,000 260,000
Virginia State Housing Dev. Auth.
Commonwealth Mtge. Rev. Bonds, Ser.
1992C Subser. C8, 5.80%, 07/01/04....... Aa/AA+ 500,000 513,125
-----------
773,125
-----------
WASHINGTON - 5.1%
Clark County, WA Public Utility Dist.
No. 1 Generating Sys. Rev. Bonds, 6.00%,
01/01/06............................... Aaa/AAA 350,000 368,812
Washington State Public Power Supply Sys.
Ref. Rev. Bonds (Nuclear Proj. No. 3),
Ser. 1993C, 5.10%, 07/01/07............ Aa/AA 500,000 486,250
-----------
855,062
-----------
WEST VIRGINIA - 1.8%
Oak Hill, WV Ind. Dev. Ref. Rev. Bonds
(Fayette Plaza Proj.), Ser. 1991A, 4.95%,
10/01/09............................... NR/AA- 300,000 301,500
-----------
WISCONSIN - 2.9%
Appleton, WI Area School Dist., 5.00%,
04/01/11............................... Aa/NR 505,000 481,013
-----------
TOTAL MUNICIPAL BONDS (COST $16,144,215)................. 16,213,495
-----------
TAX-EXEMPT MUTUAL FUND - 2.1%
PNC Municipal Cash Tax-Exempt Money Market
Fund (COST $360,365).............................. 360,365 360,365
-----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND/MUNICIPAL INCOME PORTFOLIO
- -----------------------------------------------------------------------------
INVESTMENTS / APRIL 30, 1997 (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
VALUE
(NOTE 2)
---------
TOTAL INVESTMENTS (COST $16,504,580)+ - 99.1%.................. $16,573,860
OTHER ASSETS AND LIABILITIES, NET - 0.9%....................... 143,045
-----------
NET ASSETS - 100.0%............................................ $16,716,905
===========
* 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.
+ THE COST FOR FEDERAL INCOME TAX PURPOSES WAS $69,280. THIS CONSISTED OF
AGGREGATE GROSS UNREALIZED APPRECIATION FOR ALL SECURITIES IN WHICH THERE
WAS AN EXCESS OF MARKET VALUE OVER TAX COST $135,575 AND AGGREGATE GROSS
UNREALIZED DEPRECIATION FOR ALL SECURITIES IN WHICH THERE WAS AN EXCESS
OF TAX COST OVER MARKET VALUE OF $66,295.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1997 (Unaudited)
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ------------
ASSETS:
Investments in securities, at market
(identified cost $31,320,969 and
$16,504,580, respectively) (Note 2)....... $31,242,136 $16,573,860
Receivable for Fund shares sold.............. 3,981 25,000
Interest receivable.......................... 493,576 252,732
Deferred organization costs (Note 2)......... - 25,100
Other assets................................. 679 348
----------- -----------
Total assets.............................. 31,740,372 16,877,040
LIABILITIES:
Dividends payable............................ 155,519 62,658
Payable for investment securities purchased.. 403,375 -
Payable for Fund shares redeemed............. 28,461 93,591
Due to Adviser (Note 4)...................... 471 -
Other accrued expenses (Note 4).............. 26,429 3,886
----------- -----------
Total liabilities......................... 614,255 160,135
----------- -----------
NET ASSETS, at market value ................ $31,126,117 $16,716,905
NET ASSETS CONSIST OF:
Shares of beneficial interest............... $ 24,387 $ 13,459
Additional paid-in capital.................. 31,352,552 16,709,400
Net unrealized appreciation (depreciation)
of investments........................... (78,833) 69,280
Accumulated net realized loss............... (171,989) (75,234)
----------- -----------
NET ASSETS, for 2,438,679 and 1,345,862
shares outstanding, respectively......... $31,126,117 $16,716,905
=========== ===========
NET ASSET VALUE and redemption price per
share ($31,126,117 / 2,438,679 and
$16,716,905 / 1,345,862 outstanding shares
of beneficial interest, $0.01 par value,
respectively) ........................... $ 12.76 $ 12.42
======== ========
Maximum offering price per share (100/96.50 of
$12.76 and 100/96.50 of $12.42,
respectively)............................ $ 13.22 $ 12.87
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Six-Month Period Ended April 30, 1997 (Unaudited)
DIVERSIFIED MUNICIPAL
INCOME INCOME
PORTFOLIO PORTFOLIO
----------- ----------
INTEREST INCOME.............................. $1,036,681 $ 433,374
---------- ----------
EXPENSES:
Advisory fee (Note 4)..................... 78,606 42,005
Administration fee (Note 4)............... 12,577 6,721
Accounting fee (Note 4)................... 24,795 24,795
Distribution expenses (Note 4)............ 14,481 10,318
Trustees' fees and expenses (Note 4)...... 2,789 2,789
Amortization of organizational expenses
(Note 2)................................ - 8,954
Registration fees......................... 8,506 8,303
Reports to shareholders................... 7,523 4,385
Legal..................................... 7,548 4,614
Audit..................................... 13,155 6,681
Other..................................... 5,168 3,312
----------- ----------
Total expenses before fee waiver..... 175,148 122,877
Advisory fee waived (Note 4)......... (72,961) (42,005)
Administration fee waived (Note 4)... - (6,721)
Accounting fee waived (Note 4)....... - (11,143)
----------- -----------
Total expenses, net................ 102,187 63,008
----------- -----------
Net investment income..................... 934,494 370,366
----------- -----------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investment
transactions ............................ (72,534) (3,420)
Net unrealized depreciation of investments
during the period....................... (390,935) (47,570)
---------- ----------
Net loss on investments................... (463,469) (50,990)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................ $ 471,025 $ 319,376
=========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<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 SIX-MONTH PERIOD ENDED APRIL 30, 1997
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income...................... $ 934,494 $ 370,366
Net realized loss on investment
transactions............................. (72,534) (3,420)
Net unrealized depreciation of investments
during the period........................ (390,935) (47,570)
----------- -----------
Net increase in net assets resulting from
operations............................... 471,025 319,376
----------- -----------
Distributions to shareholders from:
Net investment income ($0.38 and $0.27 per
share, respectively).................... (934,494) (370,366)
----------- -----------
Increase (decrease) in net assets from Fund share
transactions (Note 5)..................... (187,485) 149,303
----------- -----------
Total increase (decrease) in net assets... (650,954) 98,313
NET ASSETS:
Beginning of period....................... 31,777,071 16,618,592
----------- -----------
End of period............................. $31,126,117 $16,716,905
=========== ===========
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income...................... $ 1,993,892 $ 739,446
Net realized gain (loss) on investment
transactions............................. 338,775 (20,412)
Net unrealized depreciation of investments
during the year.......................... (746,222) (24,225)
----------- -----------
Net increase in net assets resulting from
operations............................... 1,586,445 694,809
----------- -----------
Distributions to shareholders from:
Net investment income ($0.78 and $0.55 per
share, respectively)..................... (1,993,892) (739,446)
----------- -----------
Increase (decrease) in net assets from Fund share
transactions (Note 5)...................... (29,412) 92,949
----------- -----------
Total increase (decrease) in net assets (436,859) 48,312
NET ASSETS:
Beginning of year........................... 32,213,930 16,570,280
----------- -----------
End of year................................. $31,777,071 $16,618,592
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<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.
<TABLE>
FOR THE SIX-MONTH
PERIOD ENDED FOR THE FISCAL
APRIL 30, YEARS ENDED OCTOBER 31,
1997+ 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- -------
<S> <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
------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income.............. 0.38 0.78 0.83 0.71 0.76 0.83
Net realized and unrealized gain
(loss) on investments............ (0.19) (0.13) 0.66 (1.02) 0.39 0.37
------- ------ ------- ------- ------- --------
Total from investment operations..... 0.19 0.65 1.49 (0.31) 1.15 1.20
------- ------ ------- ------- ------- --------
DISTRIBUTIONS:
From net investment income......... (0.38) (0.78) (0.83) (0.71) (0.76) (0.83)
From net realized gain on
investments........................ - - - (0.04) (0.11) (0.03)
------- ------ ------- ------- ------- --------
Total distributions........... (0.38) (0.78) (0.83) (0.75) (0.87) (0.86)
------- ------ ------- ------- ------- --------
NET ASSET VALUE - END OF PERIOD...... $ 12.76 $ 12.95 $ 13.08 $ 12.42 $ 13.48 $ 13.20
======= ======= ======= ======= ======= ========
TOTAL RETURN**....................... 1.48% 5.18% 12.41% ( 2.33)% 9.00% 9.58%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses ***....................... 0.65%* 0.65% 0.65% 0.65% 0.65% 0.65%
Net investment income.............. 5.94%* 6.07% 6.56% 5.53% 5.65% 6.33%
Portfolio turnover rate.............. 107.30%* 85.77% 116.40% 43.77% 24.22% 27.37%
Net assets at end of period (000
omitted)........................... $31,126 $31,777 $32,214 $31,721 $40,971 $30,152
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
FINANCIAL HIGHLIGHTS - CONTINUED
- -----------------------------------------------------------------------------
FOR THE SIX-MONTH
PERIOD ENDED FOR THE FISCAL
APRIL 30, YEARS ENDED OCTOBER 31,
1997+ 1996 1995 1994
------- ------- ------- -------
MUNICIPAL INCOME PORTFOLIO
NET ASSET VALUE - BEGINNING OF
PERIOD.......................... $ 12.46 $ 12.49 $ 11.64 $ 12.50
------- ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income........... 0.27 0.55 0.54 0.49
Net realized and unrealized gain
(loss) on investments......... (0.04) (0.03) 0.85 (0.86)
------- ------- ------- -------
Total from investment
operations................. 0.23 0.52 1.39 (0.37)
------- ------- ------- -------
DISTRIBUTIONS:
From net investment income...... (0.27) (0.55) (0.54) (0.49)
------- ------- ------- -------
NET ASSET VALUE - END OF PERIOD... $ 12.42 $ 12.46 $ 12.49 $ 11.64
======= ======= ======= =======
TOTAL RETURN**.................... 1.88% 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........... 4.41%* 4.41% 4.50% 4.13%
Portfolio turnover rate........... 15.34%* 15.91% 42.08% 21.95%
Net assets at end of period
(000 omitted)................... $16,717 $16,619 $16,570 $14,283
* Annualized.
+ Unaudited.
** These results do not include a sales load. If the sales load had been
included, the returns would have been lower. The total return figure
for each Portfolio for the six-month period ended April 30,1997 has
not been annualized.
*** Wilmington Trust Company ("WTC") waived a portion of its advisory fee
for the six-month period ended April 30, 1997 and the fiscal years
ended October 31, 1996, 1995, 1994, 1993 and 1992, and Rodney Square
Management Corporation ("RSMC") waived a portion of its accounting
services fee for the fiscal year ended October 31, 1992. If these
expenses had been incurred by the Portfolio, the annualized ratio of
the expenses to average daily net assets for the six-month period
ended April 30, 1997 and the fiscal years ended October 31, 1996,
1995, 1994, 1993 and 1992, would have been 1.11%, 1.09%, 1.14%, 1.05%,
1.06% and 1.24%, respectively.
**** WTC waived its entire advisory fee and RSMC waived a portion of its
administration and accounting services fees for the six-month period
ended April 30, 1997 and 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
six-month period ended April 30, 1997 and fiscal years ended October
31, 1996, 1995, and 1994, would have been 1.46%, 1.37%, 1.45% and
1.62%, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- -----------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND. The Rodney Square Strategic Fixed-Income Fund
(the "Fund") is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified, open-end management
investment company established as a Massachusetts business trust. The
Declaration of Trust, dated May 7, 1986, as last amended and restated on
February 15, 1993, permits the Trustees to establish separate series or
"Portfolios", each of which may issue separate classes of shares. The
authorized shares of beneficial interest of the Fund are currently
divided into two Portfolios, the Diversified Income Portfolio and the
Municipal Income Portfolio (each, a "Portfolio" and collectively, the
"Portfolios"). Each Portfolio currently consists of a single class of
shares. The investment objective of the Diversified Income Portfolio is
to seek high total return, consistent with high current income, by
investing principally in various types of investment grade fixed-income
securities. The investment objective of the Municipal Income Portfolio
is to seek a high level of income exempt from federal income tax
consistent with the preservation of capital.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. Each Portfolio's securities, except short-term
investments with remaining maturities of 60 days or less, are valued at
their market value as determined by using the last reported sales price
in the principal market where the securities are traded or if no sales
are reported, the last reported bid price. Short-term investments with
remaining maturities of 60 days or less are valued at amortized cost,
which approximates market value, unless the Fund's Board of Trustees
determines that this does not represent fair value. The value of all
other securities is determined in good faith under the direction of the
Board of Trustees.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate entity and
intends to continue to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986 and to distribute all
of its taxable and tax-exempt income to its shareholders. Therefore, no
provision for federal income tax has been made. At October 31, 1996, the
Diversified Income Portfolio and the Municipal Income Portfolio had net
tax basis capital loss carryforwards to offset future capital gains of
approximately $82,000 and $72,000, respectively, which will expire as
follows:
CAPITAL LOSS EXPIRATION
CARRY FORWARD DATE
------------- ----------
Diversified Income Portfolio..... $82,000 10/31/03
Municipal Income Portfolio....... 6,000 10/31/02
45,000 10/31/03
21,000 10/31/04
INTEREST INCOME AND DIVIDENDS TO SHAREHOLDERS. Interest income is accrued
as earned. Dividends from net investment income consist of accrued
interest and earned discount (including both original issue and market
discount) less amortization of premium and accrued expenses. Dividends to
shareholders of each Portfolio are declared daily from net investment
income and paid to shareholders monthly. Distributions of net realized
gains on investments, if any, by each Portfolio will be made annually in
December.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - 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 six-month period ended April 30, 1997,
purchases and sales of investment securities (excluding short-term
investments) aggregated as follows:
DIVERSIFIED MUNICIPAL
INCOME INCOME
------------ ----------
Purchases..................... $15,491,691 $1,282,881
Sales......................... 16,680,005 1,241,549
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund, on behalf
of each Portfolio, employs Wilmington Trust Company ("WTC"), a wholly
owned subsidiary of Wilmington Trust Corporation, a publicly held bank
holding company, to furnish investment advisory and other services to the
Fund. Under WTC's Advisory Contract with the Fund, WTC acts as Investment
Adviser and, subject to the supervision of the Board of Trustees, directs
the investments of the Fund's Portfolios in accordance with each
Portfolio's investment objective, policies and limitations. For its
services under the Advisory Contract, the Fund pays WTC a monthly fee at
the annual rate of 0.50% of the average daily net assets of each
Portfolio of the Fund, excluding those assets invested in any money
market mutual fund. WTC has agreed to waive its advisory fee or reimburse
each Portfolio monthly to the extent that operating expenses of the
Portfolio (excluding taxes, extraordinary expenses, brokerage commissions
and interest) exceed an annual rate of 0.75% of the Portfolio's average
daily net assets through February 1998. For the six-month period April
30, 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.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
The following table summarizes the advisory fees for the six-month period
ended April 30, 1997:
GROSS ADVISORY ADVISORY
FEE FEE WAIVER
-------------- ----------
Diversified Income Portfolio..... $78,606 $72,961
Municipal Income Portfolio....... 42,005 42,005
WTC also serves as Custodian of the assets of the Fund and does not
receive any separate fees from the Fund for the performance of this
service. Each Portfolio of the Fund reimburses WTC for its related out-of-
pocket expenses, if any, incurred in connection with the performance of
this service.
Rodney Square Management Corporation ("RSMC"), a wholly owned subsidiary
of WTC, serves as Administrator, Transfer Agent and Dividend Paying Agent
to the Fund under separate Administration and Transfer Agent Agreements
with the Fund, each dated December 31, 1992. As Administrator, RSMC is
responsible for services such as financial reporting, compliance
monitoring and corporate management. For the services provided, RSMC
receives a monthly administration fee from the Fund at an annual rate of
0.08% of each Portfolio's average daily net assets. The administration
fee paid to RSMC by the Diversified Income Portfolio for the six-month
period ended April 30, 1997 amounted to $12,577. RSMC waived its
administration fee for the Municipal Income Portfolio for the six-month
period ended April 30, 1997 amounting to $6,721. 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 six-month
period ended April 30, 1997, such expenses amounted to $14,481 for the
Diversified Income Portfolio and $10,318 for the Municipal Income
Portfolio.
RSMC determines the net asset value per share of each Portfolio and
provides accounting services to the Fund pursuant to an Accounting
Services Agreement with the Fund on behalf of each Portfolio. For its
services, RSMC receives an annual fee of $50,000 per Portfolio, plus an
amount equal to 0.02% of that portion of each Portfolio's average daily
net assets in excess of $100 million. For the six-month period ended
April 30, 1997, RSMC's fees for accounting services amounted to $24,795
per Portfolio. RSMC waived $11,143 of the accounting services fee with
respect to the Municipal Income Portfolio. The salaries and fees of all
officers of the Fund, the Trustees who are "interested persons" of the
Fund, WTC, RSMC, RSD, or their affiliates, and all personnel of the Fund,
WTC, RSMC or RSD performing services related to research, statistical and
investment activities are paid by WTC, RSMC, RSD or their affiliates. The
fees and expenses of the "non-interested" Trustees for the six-month
period ended April 30, 1997 amounted to $2,789 per Portfolio.
<PAGE>
THE RODNEY SQUARE STRATEGIC FIXED - INCOME FUND
- -----------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
- -----------------------------------------------------------------------------
5. FUND SHARES. At April 30, 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
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX-MONTH PERIOD FISCAL YEAR ENDED
ENDED APRIL 30, 1997+ OCTOBER 31, 1996
------------------------ --------------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold .................. 58,529 $ 759,869 332,967 $4,362,435
Shares issued to shareholders
in reinvestment of
distributions.............. 29,474 379,642 66,445 859,172
Shares redeemed.............. (103,104) (1,326,996) (408,911) (5,251,019)
--------- ---------- -------- ----------
Net decrease................. (15,101) $ (187,485) (9,499) $ (29,412)
========== ==========
Shares outstanding:
Beginning of period........ 2,453,780 2,463,279
--------- ---------
End of period.............. 2,438,679 2,453,780
========= =========
MUNICIPAL INCOME PORTFOLIO
FOR THE
FOR THE SIX-MONTH PERIOD FISCAL YEAR ENDED
ENDED APRIL 30, 1997+ OCTOBER 31, 1996
------------------------ --------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold................... 55,078 $688,449 141,627 $1,762,290
Shares issued to shareholders
in reinvestment of
distributions.............. 22,939 286,784 45,629 568,432
Shares redeemed............... (66,164) (825,930) (180,088) (2,237,773)
------- ------- ------- ----------
Net increase.................. 11,853 $149,303 7,168 $ 92,949
======== ===========
Shares outstanding:
Beginning of period........ 1,334,009 1,326,841
--------- ---------
End of period.............. 1,345,862 1,334,009
--------- ---------
<FOOTNOTE>
+ Unaudited.
</FOOTNOTE>
</TABLE>
<PAGE>
<PAGE>
[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 SEMI ANNUAL REPORT
TRANSFER AGENT APRIL 30, 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.
RS18 6/97
<PAGE>
