Rule 497(e)
File No. 33-8120
File No. 811-4808
THE RODNEY SQUARE
MULTI-MANAGER FUND
GROWTH PORTFOLIO
The Growth Portfolio (the "Portfolio") is a diversified
series of The Rodney Square Multi-Manager Fund (the "Fund"),
an open-end investment company. The Portfolio seeks
superior long-term capital appreciation by investing in
securities of companies which are judged by its portfolio
advisers to possess strong growth characteristics.
The Portfolio is supervised by Rodney Square Management
Corporation ("RSMC" or the "Manager"), and is ordinarily
managed by at least two different portfolio advisers having
separate investment approaches. The goals of this multiple
adviser technique are (1) to reduce the volatility of the
Portfolio's net asset value through multiple investment
approaches and (2) to achieve long-term performance that is
superior to that which is likely to be achieved by any one
portfolio adviser. There can be no assurance that the
Portfolio will achieve its investment objective or that the
expected advantages of the multiple adviser technique will
be realized.
PROSPECTUS
MAY 1, 1996, AS REVISED MAY 20, 1996
This Prospectus sets forth concisely 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 May 1, 1996, as revised May
20, 1996 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 and 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 Portfolio 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 OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
EXPENSE TABLE
SHAREHOLDER TRANSACTION COSTS*
Maximum sales load on purchases of shares
(as a percentage of public offering price)........ 4.00%
=====
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Management Fee...................................... 1.00%
12b-1 Fee**......................................... 0.03%
Other Expenses...................................... 0.40%
-----
Total Portfolio Operating Expenses.................. 1.43%
=====
EXAMPLE***
You would pay the following expenses on a $1,000 investment
in the Portfolio assuming (1) 5% annual return and (2)
redemption at the end of each time period:
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
$54 $83 $115 $204
* Wilmington Trust Company and Service Organizations may
charge their clients a fee for providing administrative
or other services in connection with investments in
Portfolio shares. See "Purchase of Shares" for
additional information concerning volume reductions,
sales load waivers and reduced sales load purchase plans.
**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, the Portfolio's projected or actual
performance. In the Example, it is assumed that the
investor was subject to the maximum sales load (4.00%) 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 Portfolio will bear
directly or indirectly.The expenses and fees set forth in
the table are for the fiscal year ended December 31, 1995.
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
GROWTH PORTFOLIO
The following table includes selected per share data and
other performance information for the Portfolio throughout
the following periods derived from the audited financial
statements of the Fund. It 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 year ended December 31, 1995, which is included together
with the auditor's unqualified report thereon as part of the
Statement of Additional Information.
<TABLE>
<CAPTION> For the Period
February 26, 1987
(Commencement
of Operations)to
For the Years Ended December 31, December 31,
-------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE - ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING OF PERIOD $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05 $8.37 $10.00
------ ------ ------ ------ ------ ------ ------ ----- ------
INVESTMENT OPERATIONS:
Net investment income (loss) (0.10) (0.03) (0.03) 0.00 0.07 0.11 0.14 0.07 0.08
Net realized and unrealized
gain (loss) on investments 4.38 (0.02) 2.29 0.92 4.71 (1.01) 2.58 1.68 (1.65)
Total from investment ---- ------ ---- ---- ---- ------ ---- ---- ------
operations 4.28 (0.05) 2.26 0.92 4.78 (0.90) 2.72 1.75 (1.57)
---- ------ ---- ---- ---- ------ ---- ---- ------
DISTRIBUTIONS:
From net investment income 0.00 0.00 0.00 0.00 (0.07) (0.12) (0.15) (0.07) (0.06)
From net realized gain on
investments (2.01) (1.20) (1.43) (1.04) (0.62) (0.01) 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ---- ---- ----
Total distributions (2.01) (1.20) (1.43) (1.04) (0.69) (0.13) (0.15) (0.07) (0.06)
------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE -
END OF PERIOD $17.41 $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05 $8.37
====== ====== ====== ====== ====== ====== ====== ====== =====
TOTAL RETURN ** 28.43% (0.23)% 14.57% 5.95% 41.54% (7.15)% 27.15% 20.94% (15.78)%
Ratios (to average net assets)/Supplemental Data:
Expenses *** 1.43% 1.38% 1.42% 1.46% 1.50% 1.74% 1.75% 1.75% 1.75%*
Net investment income (loss) (0.53)% (0.17)% (0.18)% (0.03)% 0.52% 0.94% 1.21% 0.77% 0.92%*
Portfolio turnover rate 49.12% 37.05% 44.38% 37.79% 32.63% 38.18% 83.12% 57.55% 62.00%*
Net assets at end of period
(000 omitted) $66,311 $65,267 $66,091 $60,852 $56,648 $40,709 $39,571 $28,845 $24,169
</TABLE>
* Annualized.
** These results do not include the sales charge. If the
sales charge had been included, the returns would have
been lower. The total return figure for the fiscal
period ended December 31, 1987 has not been annualized.
*** Effective December 22, 1990, RSMC agreed to waive its fee
or bear any expenses (excluding taxes, extraordinary
expenses, brokerage commissions and interest) that would
cause the Portfolio's ratio of expenses to average daily
net assets to exceed, on an annual basis, 1.50%. Prior
to December 22, 1990, RSMC agreed to bear any expenses
that would cause the Portfolio's ratio of expenses to
average daily net assets to exceed, on an annual basis,
1.75%. The annualized expense ratio, had there been no
reimbursement of expenses or fee waivers by RSMC, would
have been 1.54%, 1.85%, 2.21% and 1.81% for the years
ended December 31, 1991, 1989, 1988 and for the fiscal
period ended December 31, 1987, respectively. For the
years ended December 31, 1995, 1994, 1993, 1992 and 1990,
no reimbursement or fee waiver was necessary.
QUESTIONS AND ANSWERS ABOUT THE PORTFOLIO
The information provided in this section is qualified in
its entirety by reference to the more detailed information
elsewhere in this Prospectus.
WHAT IS THE PORTFOLIO'S INVESTMENT OBJECTIVE?
The Portfolio seeks superior long-term capital
appreciation by investing in securities of companies
which are judged by its portfolio advisers to possess
strong growth characteristics. (See "Investment
Objective and Policies.")
For these purposes, "superior" long-term capital
appreciation means that which exceeds the long-term
capital appreciation from an investment in the
securities comprising the Standard & Poor's 500
Composite Stock Price Index (assuming the reinvestment
of dividends and capital gain distributions).
WHAT ARE THE RISKS TO CONSIDER BEFORE INVESTING?
Investment in the Portfolio represents an investment
in securities with fluctuating market prices; thus, the
net asset value of an investor's holdings will also
fluctuate and, at the time of redemption, may be more or
less than the purchase price. The Portfolio may invest
in securities having above-average risk. The Portfolio
may engage in certain options transactions. Such
transactions may involve certain risks, increase costs
and diminish investment performance. The Portfolio may
also invest substantially in securities of companies
with small market capitalization ("small cap
companies"). Investing in securities of small cap
companies entails greater market volatility and risks of
adverse financial developments than is the case of
securities of larger companies. (See "Other Investment
Practices" and "Risk Factors.")
HOW CAN YOU BENEFIT BY INVESTING IN THE PORTFOLIO RATHER
THAN BY INVESTING DIRECTLY IN THE SECURITIES IN WHICH IT
INVESTS?
Investing in the Portfolio offers several key
benefits:
FIRST: The Portfolio offers a way to keep money
invested in a portfolio of securities professionally
managed by multiple advisers applying different
investment approaches to achieve the investment
objective of the Portfolio and at the same time to
maintain liquidity on a day-to-day basis. 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 the Portfolio need not become
involved with the detailed bookkeeping and operating
procedures normally associated with direct investment in
these securities.
WHO IS THE FUND MANAGER?
Rodney Square Management Corporation ("RSMC" or the
"Manager"), a wholly owned subsidiary of Wilmington
Trust Company ("WTC"), is the Fund Manager and has
overall responsibility for the Portfolio's assets under
management, provides overall investment strategies and
programs for the Portfolio, recommends portfolio
advisers, allocates assets among the portfolio advisers,
monitors and evaluates portfolio advisers' performance
and manages short-term investments for the Portfolio.
(See "Management of the Fund.")
WHAT IS THE MULTIPLE ADVISER TECHNIQUE?
The Portfolio's assets are managed ordinarily by at
least two portfolio advisers, each of which has entered
into an advisory agreement with the Manager and the Fund
on behalf of the Portfolio. Each portfolio adviser
makes specific investments for the Portfolio in
accordance with the Portfolio's investment objective and
policies and the portfolio adviser's investment approach
and strategies.
The primary objective of the multiple adviser
structure is to reduce portfolio volatility through
multiple investment approaches, a strategy used by many
institutional investors. For example, a particular
investment approach may be successful in a bear
(falling) market, while a different approach may be more
successful in a bull (rising) market. The use of
multiple investment approaches consistent with the
investment objective and policies of the Portfolio is
designed such that different but complementary
investment approaches tend to mitigate the impact of a
single portfolio adviser's performance in the market
cycle during which such adviser's approach is less
successful. Each portfolio adviser will pursue its
approach independently of the other portfolio adviser.
Because it is unlikely that both portfolio advisers will
use the same investment approach at any given point in
time, the impact of a portfolio adviser's relatively
adverse results may be curtailed by the more successful
results of the other portfolio adviser. Conversely, the
successful results of a portfolio adviser will be
diminished by less successful results of the other
portfolio adviser.
RSMC believes the use of multiple advisers enhances
the Portfolio's potential to achieve relatively
consistent and above-average investment performance, and
through relatively consistent results, superior long-
term capital appreciation can be achieved.
Nevertheless, there can be no assurance that the
expected advantages of the multiple adviser technique
will be realized.
WHO ARE THE PORTFOLIO ADVISERS?
The portfolio advisers are:
Frontier Capital Management Co., Inc.
William Blair & Company L.L.C.
WHAT IS THE MANAGEMENT FEE?
The Manager is paid by the Fund a monthly management
fee at an annual rate of 1.00% of the Portfolio's
average daily net assets up to $200 million of Fund
assets and 0.95% of its average daily net assets in
excess of $200 million. Although the management fee is
higher than the advisory fee paid by most investment
companies, it is not necessarily higher than the fees
charged by funds with investment objectives similar to
that of the Portfolio that use multiple advisers. The
Manager compensates the portfolio advisers out of its
management fee. No portfolio adviser receives any
direct compensation from the Fund or the Portfolio.
(See "Management Agreements.")
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING
AGENT?
RSMC serves as the Administrator and Transfer Agent
of the Fund and provides accounting services for the
Fund. (See "Management Agreements.")
WHO IS THE DISTRIBUTOR?
Rodney Square Distributors, Inc. ("RSD"), another
wholly owned subsidiary of WTC, serves as Distributor of
the Fund. (See "Management Agreements.")
HOW DO YOU PURCHASE SHARES IN THE PORTFOLIO?
The Portfolio is designed as an investment vehicle
for individual investors, trusts, corporations and other
institutional investors. Shares 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 4.00% of the amount
invested, subject to certain waivers and reductions.
The minimum initial investment is $1,000, but additional
investments may be made in any amount.
Shares of the Portfolio are sold 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 ("Service Organizations") with RSD through
their accounts with those Service Organizations.
Service Organizations may receive payments from RSD that
are reimbursed by the Portfolio under a Plan of
Distribution adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act"). Shares may
also be purchased 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, your Service Organization or the
number listed below for further information about the
Portfolio or for assistance in opening an account:
- NATIONWIDE................. (800) 336-9970
HOW DO YOU REDEEM SHARES OF THE PORTFOLIO?
If you purchased shares of the 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 by mail. There is no fee charged upon
redemption. (See "Redemption of Shares.")
HOW ARE DIVIDENDS AND OTHER DISTRIBUTIONS PAID?
Distributions of net investment income and net
capital gain, if any, are made annually, shortly before
or after the end of the Fund's fiscal year (December
31). Shareholders may elect to receive dividends and
other distributions in cash by checking the appropriate
boxes on the Application & New Account Registration form
at the end of this Prospectus ("Application"). (See
"Dividends, Capital Gain Distributions and Taxes.")
ARE EXCHANGE PRIVILEGES AVAILABLE?
You may exchange all or a portion of your Portfolio
shares for shares of any of the other funds in the
Rodney Square complex that currently offer their shares
to investors, subject to certain conditions. (See
"Exchange of Shares.")
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio's objective is to produce superior long-
term capital appreciation by investing in securities of
companies which are judged by its portfolio advisers to
possess strong growth characteristics. Under normal
circumstances, at least 65% of the total assets of the
Portfolio is invested in equity securities, including common
stock, preferred stock and investment grade convertible
securities (such as preferred stock and debt securities that
are convertible into equity securities). "Investment grade"
securities are those rated within the top four categories by
a nationally recognized statistical rating organization or,
if unrated, deemed by a portfolio adviser to be of
comparable quality.
In general, the portfolio advisers of the Portfolio
emphasize investments in securities they believe demonstrate
good growth or valuation characteristics, including
prospects for increased earnings due to new products, new
management, technological developments or market changes and
other factors.
With respect to not more than 35% of the Portfolio's
total assets, the portfolio advisers may hold cash and
invest in (i) debt securities that are rated in the top
three categories by a nationally recognized statistical
rating organization or, if unrated, are deemed by a
portfolio adviser to be of comparable quality; and (ii)
repurchase agreements involving such securities. For
temporary defensive purposes or pending investment, the
Portfolio may with respect to all or any portion of its
total assets, hold cash or invest in high grade debt
securities. Should the rating of a security be downgraded
subsequent to the Portfolio's purchase of that security, the
portfolio adviser will determine whether it is in the best
interest of the Portfolio to retain that security.
MULTIPLE ADVISER TECHNIQUE. The allocation of assets
among the portfolio advisers is made by RSMC. (See
"Management of the Fund.") The methodologies of the
portfolio advisers of the Portfolio may vary in the types of
approaches and analytical factors that are utilized,
including, among others, relative valuation techniques,
fundamental company and industry characteristics, technical
security and market characteristics, macroeconomic estimates
and risk analysis. Because selections of securities are
made independently by each portfolio adviser, it is possible
that the securities held by one portfolio segment may also
be held by other portfolio segments of the Portfolio. The
decision to invest defensively is also made independently by
each portfolio adviser and may result in the Portfolio, as a
whole, being defensively invested. There can be no
assurance, of course, that the investment objective of the
Portfolio will be achieved.
OTHER INVESTMENT PRACTICES
As described in more detail in the Statement of
Additional Information, the Portfolio may engage in the
following investment practices:
OPTIONS ON SECURITIES AND SECURITIES INDEXES. The
Portfolio may purchase call options on securities that a
portfolio adviser intends to include in the Portfolio in
order to fix the cost of a future purchase or attempt to
enhance return by, for example, participating in an
anticipated increase in the value of a security. The
Portfolio may purchase put options to hedge against a
decline in the market value of securities held in the
Portfolio or in an attempt to enhance return. The Portfolio
may write (sell) put and covered call options on securities
in which it is authorized to invest. The Portfolio also may
purchase put and call options, and write put and covered
call options, on U.S. securities indexes. Stock index
options serve to hedge against overall fluctuations in the
securities markets rather than anticipated increases or
decreases in the value of a particular security.
U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in
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) to
obligations that are supported solely or primarily by the
creditworthiness of the issuer (for example, securities
issued by the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation and the Tennessee
Valley Authority). In the case of obligations not backed by
the full faith and credit of the United States, the Fund
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.
ILLIQUID SECURITIES. Under the Fund's investment
limitations, the Portfolio may not invest more than 15% of
its net assets in securities that are considered illiquid.
For purposes of these limitations, repurchase agreements
maturing in more than 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 securities.
Securities that are considered restricted securities by
virtue of legal or contractual restrictions on their resale
but that are actively traded in the institutional market are
not subject to the 15% limit. The Portfolio may not,
however, invest more than 10% of its total assets in
restricted equity securities that do not have a readily
available market.
REPURCHASE AGREEMENTS. The Portfolio may enter into
repurchase agreements with respect to any security in which
it is authorized to invest. A repurchase agreement is a
transaction in which the Portfolio purchases a security from
a bank or recognized securities dealer and simultaneously
commits to resell that security to that bank or dealer at an
agreed upon price, date and market rate of interest. While
it does not presently 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 Fund in connection with
bankruptcy proceedings), it is the policy of the Fund to
limit repurchase transactions to primary dealers in U.S.
Government obligations and to banks whose creditworthiness
has been reviewed and found satisfactory by RSMC. Repurchase
agreements maturing in more than seven days are considered
to be illiquid for the purposes of the Fund's investment
limitations
MORTGAGE PASS-THROUGH CERTIFICATES. The debt securities
in which the Portfolio may invest include mortgage pass-
through certificates. Such certificates represent interests
in pools of mortgage loans and provide for the "pass-
through" of monthly payments by the mortgagors net of
service fees. Prepayments of the mortgages included in the
underlying mortgage pool may adversely impact the yield of
the mortgage pass-through certificates and may also result
in more rapid prepayment of principal than the stated
maturity of the certificates would indicate.
PORTFOLIO TURNOVER. The frequency of portfolio
transactions and the Portfolio's turnover rate will vary
from year to year depending on market conditions. Because a
higher portfolio turnover rate increases transaction costs
and may have tax consequences, the portfolio advisers
carefully evaluate market conditions against these
consequences. (See "Dividends, Capital Gain Distributions
and Taxes.")
OTHER INFORMATION. The Portfolio may acquire securities
on a when-issued basis, provided that its outstanding
commitments to buy such securities do not exceed 5% of its
net assets at any time. The Portfolio may also borrow money
for temporary or emergency purposes in an amount not in
excess of 5% of the Portfolio's total assets.
The policies set forth above are non fundamental and may
be changed by the Fund's Board of Trustees without
shareholder approval. In addition to its non fundamental
policies, the Portfolio is subject to certain fundamental
investment restrictions, that, like the Portfolio's
investment objective, 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. The Portfolio is also subject to certain other
non fundamental investment restrictions. A description of
these investment restrictions is included in the Statement
of Additional Information.
RISK FACTORS
The Portfolio may be subject to risks involved in
investing in equity securities of companies that are judged
by the portfolio advisers to possess strong growth
characteristics. Such companies may be relatively small,
new or undercapitalized, have inexperienced management or
operate in industries characterized by rapid technological
obsolescence. Accordingly, investment in the equity
securities of such companies may involve greater risk than
investment in companies that do not exhibit strong growth
characteristics. In addition, the portion of the
Portfolio's assets invested in debt securities will be
subject to credit risk and the inverse relationship between
market prices and interest rates; that is, when interest
rates rise, the prices of such securities tend to go down
and, conversely, when interest rates fall, the prices of
such securities tend to rise.
The Portfolio may invest substantially in securities of
small cap companies. Small cap companies may be more
vulnerable than larger companies to adverse business or
economic developments. Small cap companies may also have
limited product lines, markets or financial resources, and
may be dependent on relatively small management groups.
Securities of such companies may be less liquid and more
volatile than securities of larger companies and therefore
may involve greater risk than investing in larger companies.
In addition, small cap companies may not be well known to
the investing public, may not have institutional ownership
and may have only cyclical, static or moderate growth
prospects.
The portfolio advisers of the Portfolio utilize a growth-
oriented investment philosophy, although each may look to
different indications of growth or to different market
sectors. A growth-oriented investment approach generally
seeks superior results by investing in securities of
companies with above average records or prospects for growth
in revenues, or profits or other key factors.
The Portfolio may invest in convertible 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 Investors Service, Inc.
("Moody's") or Standard & Poor's Ratings Services or, if
unrated, deemed by a portfolio adviser 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. 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.
The use of options involves certain investment risks and
transaction costs. These risks include: dependence on the
portfolio adviser's ability to predict movements in the
prices of individual securities, fluctuations in the
securities markets in general and movements in interest
rates; imperfect correlation between movements in the price
of options and movements in the price of the security or
securities hedged or used for cover; the fact that skills
and techniques needed to trade options are different from
those needed to select the securities in which the Portfolio
invests; lack of assurance that a liquid secondary market
will exist for any particular option at any particular time;
and the possible need to defer closing out certain options
in order to continue to qualify for the beneficial tax
treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended ("Code"). (See
"The Portfolio's Investment Policies" and "Taxes" in the
Statement of Additional Information.)
The Portfolio may invest in foreign securities by
purchasing American Depository Receipts ("ADR's"). ADR's
are denominated in U.S. dollars and are receipts typically
issued by a U.S. bank or trust company evidencing ownership
of the underlying security. Securities of foreign issuers
are subject to the same risks that pertain to securities of
domestic issuers, notably credit risk, market risk and
liquidity risk. Additionally, securities of foreign issuers
may be subject to certain additional risks, including
adverse political and economic developments in a foreign
country, the extent and quality of government regulation of
financial markets and institutions, interest limitations,
currency controls, foreign withholding taxes and
expropriation or nationalization of foreign issuers and
their assets. There may be less publicly available
information about foreign issuers than about domestic
issuers, and foreign issuers may not be subject to the same
accounting, auditing and financial recordkeeping standards
and requirements as are domestic issuers.
PURCHASE OF SHARES
HOW TO PURCHASE SHARES. Portfolio shares are sold 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 Multi-
Manager Fund, along with a completed Application, to The
Rodney Square Multi-Manager 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 Multi-Manager Fund, c/o Rodney
Square Management Corporation, 1105 N. 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 cancelled, 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 Multi-Manager Fund, DDA#
2610-605-2, further credit-your account number, and your
name. If you make an initial purchase by wire, you must
promptly forward a completed Application to RSMC at the
address above under "By Mail."
INDIVIDUAL RETIREMENT ACCOUNTS. Portfolio shares 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 a 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, 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. For an
Application 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 reserve the right to reject any
purchase order and may suspend the offering of shares of the
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
stated above.
OFFERING PRICE. Shares of the 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 as follows, will vary with the
size of the purchase as shown following:
SALES LOAD SCHEDULE
Sales Load as a Percentage of Discount to Service
Net Amount Organizations as
Offering Invested a Percentage
Amount of Purchase Price (Net Asset Value) of Offering Price
------------------ -------- ----------------- -----------------
Up to $24,999 4.00% 4.17% 3.50%
$25,000 - $49,999 3.50 3.63 3.05
$50,000 - $99,999 3.00 3.09 2.60
$100,000 - $ 249,999 2.50 2.56 2.15
$250,000 - $ 499,999 2.00 2.04 1.70
$500,000 - $ 999,999 1.00 1.01 0.80
$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 Portfolio
shares to be aggregated with 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 Portfolio shares to be aggregated
with future purchases of Portfolio shares, as well as with
shares of 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 is applied to the total dollar amount
of Portfolio shares being purchased, plus an amount equal to
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 Portfolio 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 a LOI, purchases must
be made in the same account; purchases made for related
accounts may not be aggregated. The minimum investment
under a 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 paying a reduced
sales load for 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 Multi-Manager Fund, c/o Rodney Square
Management Corporation, P.O. Box 8987, Wilmington, DE 19899-
9752. A purchase not originally made pursuant to a LOI may
be included under a 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 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 as
actually purchased, and the balance of the shares then will
be released from the escrow.
SALES LOAD WAIVERS. Shares of the 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 their 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 computerized
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, without a
sales load, by reinvesting dividends and capital gain
distributions.
SHAREHOLDER ACCOUNTS
RSMC, as Transfer Agent, maintains for each shareholder
an account expressed in terms of full and fractional shares
of the 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.
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 to prevent the account from being 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
and your account number.
BY MAIL. Shareholders redeeming their shares by mail
should submit written instructions with a guarantee of their
signature by an eligible 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
Multi-Manager 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 Multi-Manager Fund, c/o Rodney Square
Management Corporation, 1105 N. Market Street, Wilmington,
DE 19801. The instructions should indicate the Portfolio
account number 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 must elect to do so by applying 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 a telephone redemption request is made. 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 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
per share 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.
Amounts redeemed are normally mailed or 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 at 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. 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
Portfolio shares have a one-time privilege to reinstate
their account without a sales load up to the dollar amount
redeemed by purchasing shares 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
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 contemporary
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
a similar service is provided through WTC. This service may
also not be available for Service Organization clients who
are provided a similar service by those organizations.
EXCHANGE OF SHARES
EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may
exchange all or a portion of your Portfolio shares for
shares of the other funds in the Rodney Square complex that
currently offer their shares to investors. The 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 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 STRATEGIC FIXED-INCOME FUND, consisting
of the following portfolios:
THE RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO, which
seeks high total return, consistent with high current
income, by investing principally in various types of
investment grade fixed-income securities.
THE RODNEY SQUARE MUNICIPAL INCOME PORTFOLIO, which
seeks a high level of income exempt from federal income
tax consistent with the preservation of capital.
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
12:00 noon, Eastern time, on each Business Day. The net
asset values per share of the Portfolio and the Strategic
Fixed-Income Fund portfolios 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 the 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 a sales load was paid or which
represent reinvested dividends and other distributions on
such shares. In addition, shares of the Rodney Square Fund
portfolios or the Tax-Exempt Fund may be exchanged for
shares of the Portfolio without a sales load by those
entitled to a Sales Load Waiver. A sales load will not
apply to any other exchanges into the Portfolio or from the
Portfolio. Shares of the Strategic Fixed-Income Fund
portfolio must be held at least 90 days before they can be
exchanged for shares of the Portfolio without an additional
sales load, unless the shares to be exchanged represent
reinvested dividends and other distributions or the
shareholder of the Strategic Fixed-Income Fund portfolios'
shares is entitled to a Sales Load Waiver.
Exchange transactions will be subject to the minimum
initial investment and other requirements of the Portfolio.
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 reserves the right to terminate or
modify the exchange offer described here and will give
shareholders 60 days' notice of such termination or
modification as required by Securities and Exchange
Commission (the "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 and offering price
per share of the Portfolio as of the close of regular
trading on the Exchange on each Business Day of the Fund.
The net asset value per share of the Portfolio is calculated
by dividing the total current market value of all of the
Portfolio's assets, less its liabilities, by the total
number of the Portfolio's shares outstanding. If any
securities do not have a readily available current market
value, they will be valued in good faith by or under the
direction of the Fund's Board of Trustees.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Dividends from
the net investment income earned by the Portfolio are paid
to its shareholders annually. Distributions of net short-
term capital gain and net capital gain (the excess of net
long-term capital gain over net short-term capital loss)
realized by the Portfolio, after deducting any available
capital loss carryovers, are paid to the Portfolio's
shareholders annually shortly before or after the end of the
Fund's fiscal year (December 31). An additional
distribution may be made each year if necessary to avoid the
payment of an excise tax. Each dividend is payable to
shareholders who redeem, but not to shareholders who
purchase, shares of the Portfolio on the ex-dividend date.
Dividends and capital gain distributions paid by the
Portfolio are automatically reinvested in additional shares
of the Portfolio by WTC and its agents on the payment date
at the net asset value on the ex-dividend date, unless the
shareholder elects on the Application to receive them in
cash, in the form of a check.
TAXES. The Portfolio intends to continue to qualify for
treatment as a regulated investment company under the Code
so that it will be relieved of federal income tax on the
portion of its investment company taxable income (generally
consisting of net investment income plus net short-term
capital gain) and net capital gain that is distributed to
its shareholders.
Dividends from the Portfolio's taxable income (whether
paid in cash or reinvested in additional shares) are taxable
to its shareholders as ordinary income to the extent of the
Portfolio's earnings and profits. Distributions derived
from the Portfolio's net capital gain (whether paid in cash
or reinvested in additional shares), when designated as
such, are taxable to its shareholders as long-term capital
gain, regardless of the length of time they have held their
shares. Shortly after the end of each calendar year, the
Portfolio notifies its shareholders of the amounts of
dividends and capital gain distributions paid (or deemed
paid) during that year.
The Portfolio is required to withhold 31% of 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. The Portfolio
also is required to withhold 31% of all dividends and
capital gain distributions payable to such shareholders who
otherwise are subject to backup withholding. In connection
with this withholding requirement, each 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 the Portfolio for shares of any other fund in the
Rodney Square complex. (See "Exchange of Shares.")
The foregoing is only a summary of some important federal
income tax considerations generally affecting the Portfolio
and its shareholders; a further discussion appears in the
Statement of Additional Information. In addition to these
considerations, which are applicable to any investment in
the Portfolio, 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
From time to time, quotations of the 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 4.00%
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 a ten-year period has not yet elapsed, data
will be provided as of the end of a shorter period
corresponding to the life of the Portfolio. Standardized
Return assumes that all dividends and capital gain
distributions are reinvested in additional shares of the
Portfolio.
In addition, the 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 capital gain
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
effects of the Portfolio's maximum 4.00% sales load; where
not included, the inclusion of the sales load would reduce
the advertised 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.
The Portfolio's Return (Standardized and Non
Standardized) is increased to the extent that RSMC has
waived all or a portion of its advisory fee, or reimbursed
all or a portion of the Portfolio's operating expenses.
Returns (Standardized and Non Standardized) are based on
historical performance of the Portfolio, show the
performance of a hypothetical investment and are not
intended to indicate future performance.
MANAGEMENT OF THE FUND
The 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
Portfolio and its shareholders.
MANAGER AND ADMINISTRATOR OF THE FUND. RSMC, the Fund's
Manager and Administrator and a wholly owned subsidiary of
WTC, which in turn is wholly owned by Wilmington Trust
Corporation, a publicly held bank holding company, was
organized in 1981. RSMC has overall responsibility for
assets under management, provides overall investment
strategies and programs for the Portfolio, recommends
portfolio advisers, allocates assets among the advisers,
monitors and evaluates portfolio advisers' performance and
manages short-term investments for the Portfolio. In
evaluating possible portfolio advisers and monitoring and
evaluating the investment performance of the portfolio
advisers, RSMC may seek advice from one or more consultants.
The Portfolio's assets are managed by portfolio advisers who
enter into advisory agreements with RSMC and the Fund on
behalf of the Portfolio. (See "Management Agreements.")
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
also prepares reports to shareholders of the Portfolio and
proxy statements, updates prospectuses, and makes filings
with the SEC and state securities authorities. RSMC also
determines the amount of dividends and other distributions
payable to shareholders, prepares financial statements and
footnotes and supervises the preparation of federal and
state tax returns.
RSMC also serves as Fund Manager and Administrator to the
Rodney Square Fund portfolios and the Tax-Exempt Fund,
serves as Administrator to the Strategic Fixed-Income Fund
portfolios and provides asset management services to
collective investment funds maintained by WTC. In the past,
RSMC has provided asset management services to individuals,
personal trusts, municipalities, corporations and other
organizations. At December 31, 1995, the aggregate assets
of the three investment companies managed by RSMC totaled
approximately $1.4 billion. RSMC also serves as Sub-
Investment Adviser to three portfolios of the Emerald Funds,
which portfolio assets totaled approximately $379.6 million
at December 31, 1995.
Martin L. Klopping, President of RSMC, has been
responsible for monitoring the day-to-day activity of the
portfolio advisers since the commencement of operations of
the Portfolio: February 26, 1987. Mr. Klopping has served
as President of RSMC for the past eleven years.
PORTFOLIO ADVISERS. Each portfolio adviser makes
specific portfolio investments for that segment of the
assets of the Portfolio under its management in accordance
with the Portfolio's investment objective and policies and
the portfolio adviser's investment approach and strategies.
A portfolio adviser may direct Portfolio transactions to a
brokerage affiliate of another portfolio adviser. The
portfolio advisers of the Portfolio are listed and described
below.
Selection and retention criteria for portfolio advisers
include (1) their historical performance records; (2) an
investment approach that is distinct in relation to the
approaches of each of the Portfolio's other portfolio
advisers; (3) consistent performance in the context of the
markets and preservation of capital in declining markets;
(4) organizational stability and reputation; (5) the quality
and depth of investment personnel; and (6) the ability of
the portfolio adviser to apply its approach consistently.
Each portfolio adviser will not necessarily exhibit all of
the criteria to the same degree. Portfolio advisers are
paid by RSMC (not the Fund).
The portfolio advisers are as follows:
FRONTIER CAPITAL MANAGEMENT CO., INC.
99 Summer Street
Boston, Massachusetts 02110
Frontier Capital Management Co., Inc. ("Frontier") seeks
to identify industry sectors likely to achieve significantly
above average rates of growth over a two- to three-year time
period. All investments are subjected to intensive internal
research and monitoring. Portfolios generally are broadly
diversified. Companies are selected on the basis of
relative earnings growth criteria. The firm will invest in
companies whose market capitalizations at time of initial
purchase are not greater than $500 million. Frontier began
operations in 1981. The professional staff own 86% of the
firm's stock, including controlling interests held by J.
David Wimberly and Thomas W. Duncan, with the remainder
owned by private investors. The firm had approximately $2.2
billion of assets under management as of December 31, 1995.
The firm also advises certain of WTC's collective investment
funds. Thomas W. Duncan, President of Frontier, has the day-
to-day responsibility for the management of that portion of
the Portfolio's assets under Frontier's control. Mr. Duncan
has been a portfolio manager for the Fund since February 25,
1987.
WILLIAM BLAIR & COMPANY L.L.C.
222 West Adams Street
Chicago, Illinois 60606
William Blair & Company ("Blair") invests in companies
that represent highly profitable, enduring business
franchises, capable of achieving consistent, above-average
earnings growth. The investment in growth companies ranges
from emerging companies to large corporations. For over 25
years, the firm has internally researched scores of mid-
sized growth companies and believes it knows the management,
profitability characteristics, business franchise and growth
prospects of these companies. The firm attempts to assess
the long-term fundamentals of such companies and invests in
them when they are judged to be attractively priced. Blair,
founded in 1935, is a financial services firm with over 100
principals, all of whom are active in the business. Blair's
investment management group acts as adviser to over 500
clients and had over $6 billion under discretionary
management as of December 31, 1995. Blair also serves as
investment adviser to William Blair Mutual Funds, Inc., a
registered investment company. John P. Nicholas has served
as the portfolio manager for that portion of the Portfolio's
assets under Blair's management since December 2, 1989. Mr.
Nicholas has acted as a portfolio manager for eleven years
and has been employed by Blair for over 24 years.
MANAGEMENT AGREEMENTS
FUND MANAGEMENT, ADMINISTRATION, ACCOUNTING AND TRANSFER
AGENCY AGREEMENTS. The Fund Management Agreement provides
that RSMC will, subject to supervision by the Board of
Trustees, manage the investment of the assets of the
Portfolio in accordance with the investment objective and
policies of the Portfolio and any directions which the
Fund's Trustees may issue to RSMC from time to time. For
its services to the Fund, RSMC receives an annual fee equal
to 1.00% of the average daily net assets of the Fund up to
$200 million and 0.95% of the Fund's average daily net
assets in excess of $200 million. This fee is higher than
that charged to many funds which invest primarily in equity
securities but not necessarily higher than the fees charged
to funds with investment objectives similar to that of the
Portfolio which use multiple advisers.
RSMC serves as Administrator of the Portfolio, pursuant
to an Administration Agreement with the Fund. For the
provision of administrative and operational services and
facilities, RSMC receives a monthly fee from the Fund at an
annual rate of 0.09% of the Portfolio's average daily net
assets. As Accounting Agent, RSMC determines the net asset
value per share of the Portfolio and provides accounting
services to the Portfolio pursuant to an Accounting Services
Agreement with the Fund on behalf of the Portfolio. For the
provision of the accounting services, RSMC receives from the
Fund an annual fee of $45,000 plus an amount equal to 0.02%
of the average daily net assets of the Portfolio in excess
of $100 million. RSMC also serves as Transfer Agent and
Dividend Paying Agent of the Fund pursuant to a separate
Transfer Agency Agreement with the Fund on behalf of the
Portfolio. Pursuant to such Agreement, the Fund pays RSMC
$7 per account per year with respect to the Portfolio, plus
various other transaction fees, subject to a minimum fee of
$1,000 per month, plus out-of-pocket expenses.
ADVISORY AGREEMENTS. Pursuant to an Advisory Agreement
among each portfolio adviser, RSMC and the Fund, and on
behalf of the Portfolio, the portfolio adviser determines
what securities should be purchased, held or sold for its
segment of the Portfolio. The portfolio adviser also
selects brokers or dealers to execute portfolio
transactions. Each Advisory Agreement provides for the
monthly payment to the portfolio adviser by RSMC (not the
Fund) of a fee at the approximate annual rate of 0.5% of the
average daily net assets under the portfolio adviser's
management.
CUSTODIAN. WTC serves as Custodian of the Fund. For its
custody services, the Fund pays WTC an annual fee based upon
the average net assets of the Portfolio as follows: $0.25
per $1,000 on the first $50 million; $0.20 per $1,000 on the
next $50 million and $0.15 per $1,000 over $100 million,
plus, $15 per purchase, sale or maturity of a portfolio
security. The custodian fee is subject to a minimum charge
of $1,000 per month, exclusive of any transaction charges.
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN. Pursuant to
a Distribution Agreement with the Fund, and on behalf of the
Portfolio, RSD manages the Fund's distribution efforts and
provides assistance and expertise in developing marketing
plans and materials, enters into dealer agreements with
broker-dealers and other financial institutions to sell
shares of the Portfolio and directly, or through its
affiliates, provides investor support services.
Under a Plan of Distribution adopted pursuant to Rule 12b-
1 under the 1940 Act (the "12b-1 Plans"), the Fund 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 authorized annual payments of up to 0.25%
of the Portfolio's average net assets to reimburse RSD for
making payments to certain Service Organizations who have
sold Portfolio shares and for other distribution expenses.
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 an open-end, management investment company
established as a Massachusetts business trust on August 19,
1986 by a Declaration of Trust.
The Fund's capital consists of an unlimited number of
shares of beneficial interest. The authorized shares of
beneficial interest of the Fund are currently divided into
two series or portfolios. The Trustees are empowered by the
Declaration of Trust and the Bylaws to establish additional
portfolios, although they have no present intention of doing
so. Shares of the Portfolio entitle their holders to one
vote per share and fractional votes for fractional shares
held. Shares have non-cumulative voting rights, do not have
preemptive or subscription rights and are transferable. As
of March 31, 1996, WTC owned by virtue of shared or sole
voting or investment power on behalf of its underlying
customer accounts 77.4% of the shares of the Portfolio and
may be deemed to be a controlling person of the Portfolio
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.
<PAGE>
[GRAPHIC]
the Rodney Square
Multi-Manager Fund
the Growth Portfolio
APPLICATION & NEW ACCOUNT REGISTRATION
- -------------------------------------------------------------------------------
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR THE RODNEY SQUARE MULTI-MANAGER FUND
ASSISTANCE IN COMPLETING THIS C/O RODNEY SQUARE MANAGEMENT CORPORATION
FORM CALL (800) 336-9970 P.O. BOX 8987
WILMINGTON, DE 19899-9752
- -------------------------------------------------------------------------------
PORTFOLIO SELECTION ($1,000 MINIMUM)
TOTAL AMOUNT TO BE INVESTED $ _______________
_____ By check. (Make payable to "The Rodney Square Multi-Manager 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
organization that will report income and/or gains.
** "Joint Tenants with Rights of Survivorship" unless otherwise specified.
*** Regulated by the state's Uniform Gift/Transfers to Minors Act.
- -------------------------------------------------------------------------------
ADDRESS OF RECORD
__________________________________________________________________________
Street
__________________________________________________________________________
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
GROWTH 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 WITHDRAWL PLAN
- -------------------------------------------------------------------------------
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 Square Multi-Manager
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 under-
stand 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
Multi-Manager Fund have 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>
[GRAPHIC]
the Rodney Square
Multi-Manager Fund
the Growth Portfolio
APPLICATION FOR TELEPHONE REDEMPTION
- -------------------------------------------------------------------------------
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 Multi-Manager 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 with the application, a corporate
resolution must be included for accounts registered to other than an
individual, a fiduciary or partnership.
- -------------------------------------------------------------------------------
REDEMPTION INSTRUCTIONS
_____ Add _____ Change
CHECK ONE OR MORE.
_____ Mail proceeds to my fund account address of record (must by $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.
- -------------------------------------------------------------------------------
<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. I understand that a request for telephone
redemption may be made by anyone, but the proceeds will be sent only to the
account address of record or to the bank listed above. Proceeds in excess of
$10,000 will only be sent to your predesignated bank. By signing below, I
agree on behalf of myself, my assigns, and successors, not to hold RSMC and
any of its affiliates, or any Rodney Square fund responsible for acting under
the powers I have given RSMC in accordance with the procedures described in
the Prospectus. I also agree that all account and registration information
I have given will remain the same unless I instruct RSMC otherwise in a
written form, including a signature guarantee. If I want to terminate this
agreement, I will give RSMC at least ten days notice in writing. If RSMC or
ther 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
securities 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]
[Leftmost Section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
Martin L. Klopping
John J. Quindlen
- ------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
Louis C. Schwartz, Esq., ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
- -------------------------------------
FUND MANAGER, ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
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
<PAGE>
[Middle Section]
THE RODNEY SQUARE
MULTI-MANAGER FUND
THE GROWTH PORTFOLIO
[Graphic] Caesar
Rodney upon his
galloping horse
facing right,
reverse image on
dark background
PROSPECTUS
MAY 1, 1996,
AS REVISED MAY 20, 1996
<PAGE>
TABLE OF CONTENTS
Expense Table................................ 2
Financial Highlights ........................ 3
Questions and Answers About
the Portfolios............................ 4
Investment Objective and Policies............ 7
Other Investment Practices................... 7
Risk Factors................................. 9
Purchase of Shares........................... 10
Shareholder Accounts......................... 13
Redemption of Shares......................... 14
Exchange of Shares........................... 15
How Net Asset Value is Determined............ 17
Dividends, Capital Gains Distribution
and Taxes................................. 17
Performance Information...................... 18
Management of the Fund....................... 18
Management Agreements........................ 20
Description of the Fund...................... 22
Application and New Account Registration..... 23
Application for Telephone Redemption......... 27
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
GROWTH PORTFOLIO
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
The Growth Portfolio (the "Portfolio") is a diversified series of The Rodney
Square Multi-Manager Fund (the "Fund"), an open-end investment company. The
Portfolio seeks superior long-term capital appreciation by investing in
securities of companies which are judged by its portfolio advisers to possess
strong growth characteristics.
- ------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996, as revised May 20, 1996
- ------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's current Prospectus, dated May 1, 1996,
as revised May 20, 1996. 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.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
THE PORTFOLIO'S INVESTMENT POLICIES ....................... 1
INVESTMENT LIMITATIONS .................................... 4
TRUSTEES AND OFFICERS ..................................... 6
RODNEY SQUARE MANAGEMENT CORPORATION ...................... 8
WILMINGTON TRUST COMPANY .................................. 9
INVESTMENT MANAGEMENT SERVICES ............................ 9
Fund Management Agreement ............................ 9
Advisory Agreements .................................. 11
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS
AND RULE 12b-1 PLAN .................................. 12
REDEMPTIONS ............................................... 15
PORTFOLIO TRANSACTIONS .................................... 16
NET ASSET VALUE ........................................... 18
PERFORMANCE INFORMATION ................................... 19
TAXES ..................................................... 24
DESCRIPTION OF THE FUND ................................... 27
OTHER INFORMATION ......................................... 28
FINANCIAL STATEMENTS ...................................... 29
APPENDIX .................................................. A - 1
<PAGE>
THE PORTFOLIO'S INVESTMENT POLICIES
The following information supplements the information concerning the
Portfolio's investment objective, policies and limitations found in the
Prospectus.
The growth oriented nature of certain of the Portfolio's investments may
lead to long holding periods for many portfolio investments; such investments,
during a declining market cycle, may lead to above average price volatility in
the securities of the Portfolio and consequently in the Portfolio's net asset
value per share. Rodney Square Management Corporation ("RSMC" or the
"Manager") believes that the appointment of multiple portfolio advisers taking
different investment approaches mitigates the extremes of potential
volatility. Additionally, the Portfolio may invest in securities issued by
smaller companies, which may result in the Portfolio having fewer
opportunities to sell such securities at a favorable price.
LOANS OF PORTFOLIO SECURITIES. Although the Portfolio has no present
intention of doing so, it may from time to time lend its portfolio securities
to brokers, dealers and financial institutions. Such loans will in no event
exceed one-third of the Portfolio's total assets and will be secured by
collateral in the form of cash or securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, which at all times while the
loan is outstanding will be maintained in an amount at least equal to the
current market value of the loaned securities.
The primary risk involved in lending securities is that of a financial
failure by the borrower. In such a situation, the borrower might be unable to
return the loaned securities at a time when the value of the collateral has
fallen below the amount necessary to replace the loaned securities. The
borrower would be liable for the shortage, but the Portfolio would be an
unsecured creditor with respect to such shortage and might not be able to
recover all or any of it. In order to minimize this risk, the Portfolio will
make loans of securities only to firms deemed creditworthy by the Manager and
only when, in the judgment of the Manager, the consideration that the
Portfolio will receive from the borrower justifies the risk.
U.S. GOVERNMENT OBLIGATIONS. A portion of the assets of the Portfolio
may consist of Treasury bonds, Government National Mortgage Association
("GNMA") mortgage-backed certificates and other U.S. Government obligations
representing ownership interests in mortgage pools, such as securities issued
by the Federal National Mortgage Association ("FNMA") and by the Federal Home
Loan Mortgage Corporation ("FHLMC"). The payment of interest and principal on
the latter securities are guaranteed by FNMA and FHLMC, respectively. FNMA
and FHLMC are federally chartered corporations supervised by the U.S.
Government acting as government instrumentalities under authority granted by
Congress. Securities issued and backed by FNMA and FHLMC are not backed by
the full faith and credit of the United States; however, their close
relationship with the U.S. Government makes them high quality securities with
minimal credit risks. FNMA and FHLMC are each authorized to borrow to a
limited extent from the U.S. Treasury to meet their obligations.
<PAGE>
Although the mortgage loans in the pool underlying a GNMA certificate
will have maturities of up to 30 years, the actual average life of a GNMA
certificate typically will be substantially less because the mortgages will be
subject to normal principal amortization and may be prepaid prior to maturity.
Prepayment rates vary widely and may be affected by changes in mortgage
interest rates. In periods of falling interest rates, the rate of prepayment
on higher interest rate mortgages tends to increase, thereby shortening the
actual average life of the GNMA certificate. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the GNMA certificate. Reinvestment of prepayments may
occur at rates higher or lower than the original yield on the certificates.
Due to the prepayment possibility and the need to reinvest prepayments of
principal at current rates, GNMA certificates may be less effective than
typical non-callable bonds of similar maturities at "locking in" higher yields
during the period of declining interest rates, although they may have
comparable risks of decline in value during periods of rising interest rates.
GNMA pass-through certificates may include securities backed by adjustable-
rate mortgages which bear interest at a rate which will be adjusted
periodically.
WHEN-ISSUED SECURITIES. New issues of U.S. Government obligations may be
offered on a when-issued 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. The
Portfolio will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but it may dispose of the
commitment before the settlement date if it is deemed advisable as a matter of
investment strategy. A separate account of the Fund will be established at
the Fund's custodian bank, into which cash and/or marketable high quality debt
securities equal to the amount of the above commitments will be deposited. If
the market value of the deposited securities declines, additional cash or
securities will be placed in the account on a daily basis so that the market
value of the account will equal the amount of such commitments by the
Portfolio. The Portfolio expects that its outstanding commitments at any one
time to purchase when-issued securities will not exceed 5% of its net asset
value.
A security purchased on a when-issued basis 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, its market
value may be higher or lower than its cost resulting in an increase or
decrease in the Portfolio's net asset value.
When payment for a when-issued security is due, the Portfolio will meet
its obligations from then-available cash flow, the sale of securities held in
the separate account or the sale of other securities. The sale of securities
to meet such obligations carries with it a greater potential for the
realization of capital gains.
ILLIQUID SECURITIES. The Portfolio may not 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 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.
<PAGE>
Restricted securities may be sold only in privately negotiated
transactions or in public offerings with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Such securities include those that are subject to restrictions contained in
the securities laws of other countries. Securities that are freely marketable
in the country where they are principally traded, but would not be freely
marketable in the United States, will not be subject to this 15% limit. Where
registration is required, the Portfolio may be obligated to pay all or part of
the registration expenses and a considerable period may elapse between the
time of the decision to sell and the time the Portfolio may be permitted to
sell a 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 decided to sell.
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 of the institutional markets for
unregistered securities, the Securities and Exchange Commission (the "SEC")
adopted Rule 144A under the 1933 Act. Rule 144A establishes a "safe harbor"
from the registration requirements of the 1933 Act for resales 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
might 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 buyers interested in purchasing Rule 144A
eligible restricted securities held by the Portfolio, however, could affect
adversely the marketability of such portfolio securities, and the Portfolio
might be unable to dispose of such securities promptly or at reasonable
prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to RSMC and the portfolio advisers pursuant to
guidelines approved by the Board. RSMC and the portfolio advisers take 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 make
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
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
transfer). RSMC and the portfolio advisers monitor the liquidity of
restricted securities in the Portfolio and report periodically on such
decisions to the Board of Trustees.
<PAGE>
COMMERCIAL PAPER. Commercial paper consists of short-term (up to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. The Portfolio may invest only in commercial paper
rated A-1 or higher by Standard & Poor's Ratings Services or Prime-1 by
Moody's Investors Service, Inc.
OPTION INCOME AND HEDGING STRATEGIES. The Portfolio may purchase and
write (sell) both exchange-traded options and options traded on the over-the-
counter market. These strategies are described in detail in the Appendix.
INVESTMENT LIMITATIONS
The investment limitations described below are fundamental, and may not
be changed without the affirmative vote of the lesser of (i) 67% or more of
the shares of the Portfolio present at a shareholders' meeting if 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.
The Portfolio will not as a matter of fundamental policy:
1. with respect to 75% of the Portfolio's total assets, invest more than
5% of the value of its total assets in the securities of any one issuer,
except debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government obligations");
2. with respect to 75% of the Portfolio's total assets, purchase the
securities of any issuer if such purchase would cause more than 10% of the
voting securities of such issuer to be held by the Portfolio;
3. borrow money, except that the Portfolio may borrow an amount not
exceeding 5% of its total assets for temporary or emergency purposes;
4. purchase securities (other than U.S. Government obligations), if such
purchase would cause more than 25% in the aggregate of the market value of the
total assets of the Portfolio at the time of such purchase to be invested in
the securities of one or more issuers having their principal business
activities in the same industry;
5. act as underwriter of the securities issued by others, except to the
extent that the purchase of securities in accordance with the Portfolio's
investment objective and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;
6. issue senior securities, except as appropriate to evidence
indebtedness that the Fund is permitted to incur and except that the Fund may
issue shares of additional series which the Trustees may establish;
7. purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts,
except that the Fund, reserves the freedom of action (i) to hold and to sell
real estate acquired for the Portfolio as a result of the ownership of
marketable securities provided that the Portfolio's ownership of real estate
for which there is no established market will never exceed 10% of its net
assets and (ii) to purchase or sell futures contracts including but not
limited to contracts for the future delivery of securities and futures
contracts based on securities indexes; or
<PAGE>
8. make loans to other persons, except loans of portfolio securities and
except to the extent that the purchase of debt obligations in accordance with
the Portfolio's investment objectives and policies and the entry into
repurchase agreements may be deemed to be loans.
In addition, the Portfolio has adopted several non fundamental policies,
which can be changed by the Board of Trustees without shareholder approval.
As a matter of non fundamental policy, the Portfolio will not:
1. 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;
2. purchase the securities of open-end investment companies or invest
more than 10% of its total net assets, taken at market value, in the
securities of closed-end investment companies, provided that no purchase of
securities of closed-end companies shall be made except by purchase in the
open market when no commission or profit to a sponsor or broker-dealer results
from such purchase other than the customary broker's commission (except when
part of a plan of merger, consolidation, reorganization or acquisition of
assets);
3. invest in securities of any issuer which, together with any
predecessor, has been in operation for less than three years if, as a result,
more than 5% of the Portfolio's total assets would then be invested in such
securities;
4. purchase or retain the securities of an issuer if, to the Fund's
knowledge, one or more of the Trustees/Directors or officers of the Fund, the
Manager, or the portfolio adviser responsible for its investments,
individually own beneficially more than 1/2 of 1% of the securities of such
issuer and together own beneficially more than 5% of such securities;
5. invest more than 10% of the value of its assets in options on
securities indexes;
6. write covered call or put options having aggregate exercise prices
greater than 25% of the value of its net assets;
7. invest more than 5% of its net assets in warrants or more than 2% of
its net assets in warrants that are not listed on a national securities
exchange (for this purpose warrants which are attached to other securities
will be deemed of no value);
8. enter into a transaction for the purpose of making a short-term
profit, provided that the Portfolio may dispose of a security at any time if
the portfolio adviser believes it to be in the Portfolio's best interest to do
so;
9. purchase securities on margin or make short sales, unless by virtue
of its ownership of other securities, it has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions; or
<PAGE>
10. engage in futures contract transactions.
If necessary in order to comply with limitations imposed by certain state
securities commissions, the Portfolio may adopt additional restrictions.
For purposes of fundamental investment limitation (1), repurchase
agreements fully collateralized by U.S. Government obligations will be treated
as U.S. Government obligations. Whenever an investment policy or limitation
states a maximum percentage of the Portfolio's assets that may be invested in
any security or other asset or sets forth a policy regarding quality
standards, such percentage or standard limitation shall be determined
immediately after the Portfolio's acquisition of such security or other asset.
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered when determining
whether the investment complies with the Portfolio's investment policies and
limitations.
"Value" for the purposes of all investment limitations shall mean the
value used in determining the Portfolio's net asset value.
TRUSTEES AND OFFICERS
The Fund has a Board, presently composed of five Trustees, which
supervises the Portfolio's activities and reviews contractual arrangements
with companies that provide the Portfolio 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, The Rodney Square Strategic
Fixed-Income Fund and The Rodney Square International Securities Fund, Inc.
Those Trustees who are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940 (the "1940 Act"), by virtue of their positions
with either RSMC or Wilmington Trust Company ("WTC"), the parent of RSMC, are
indicated by an asterisk (*).
*MARTIN L. KLOPPING, Rodney Square North, 1100 N. Market Street, Wilmington,
DE 19890-0001, President elected in 1995, and Trustee, age 43, has been
President and Director of RSMC since 1984. He is also 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 54, 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 a member of the Detroit Economic Club.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807, Trustee, age 64, has
retired as President and Chief Operating Officer of Hercules Incorporated
(diversified chemicals), positions he has 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.
<PAGE>
*ROBERT J. CHRISTIAN, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Trustee, age 47, has been Chief Investment Officer of WTC 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 Trustee of LaSalle University and a
member of the Board of Governors for the Pennsylvania Economy League.
JOHN J. QUINDLEN, 313 Southwinds, 1250 Southwinds Blvd., Vero Beach, FL.
32963, Trustee, age 63, 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 through November 1993. He also served as Chief Financial
Officer of E.I. du Pont de Nemours and Company, Inc. from 1984 through June
1993. Mr. Quindlen also serves as a Trustee of the Kiewit Mutual Fund since
July 1994. Mr. Quindlen serves as a Director of Atlantic Aviation, Inc. and
St. Joe Paper Co. and a Trustee of Winterthur Museum and Gardens and Medical
Center of Delaware.
JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market Street, Wilmington,
DE 19890-0001, Vice President, age 39, has been with RSMC since 1984, as a
Secretary of RSMC since 1986 and a Vice President of RSMC since 1992. He was
an Assistant Vice President of RSMC from 1988 to 1992 and Senior Investment
Officer of RSMC from 1984 to 1988.
ROBERT C. HANCOCK, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Vice President and Treasurer, age 44, has been 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.
DIANE D. MARKY, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Assistant Secretary, age 31, has been a Senior Fund Administrator
of RSMC since 1994 and a Fund Administration Officer since 1991. She was a
Mutual Fund Accountant for RSMC from 1989 to 1991.
CONNIE L. MEYERS, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-001, Assistant Secretary, age 35, has been a Fund Administrator of RSMC
since August 1994. She was a Corporate Custody Administrator for WTC from
1989 to 1994.
LOUIS C. SCHWARTZ, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Assistant Secretary, age 28, has been a Senior Fund Administrator
of RSMC since 1995 and a Fund Administration Officer since February, 1996. He
was an Associate of the law offices of Mason, Briody, Gallagher & Taylor from
1993 to 1995.
JOHN J. KELLEY, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Assistant Treasurer, age 36, has been a Vice President of RSMC
since 1995. He was an Assistant Vice President of RSMC from 1989 to 1994.
<PAGE>
The fees of the Trustees who are not "interested persons" of the Fund
("Independent Trustees"), as defined in the 1940 Act, are paid by the
Portfolio. For the fiscal year ended December 31, 1995, such fees amounted to
$5,400 for the Portfolio and $10,350 for the Fund. The Portfolio may also
reimburse Independent Trustees for expenses incurred in attending meetings of
the Fund's Board. The following table shows the fees paid during calendar 1995
to the Independent Trustees for their service to the Fund and to the Rodney
Square Family of Funds. On December 31, 1995, 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 Portfolio.
1995 TRUSTEES FEES
TOTAL FEES FROM TOTAL FEES FROM THE RODNEY
INDEPENDENT TRUSTEE THE FUND SQUARE FAMILY OF FUNDS
- ------------------- --------------- --------------------------
Eric Brucker $3,450 $16,900
Fred L. Buckner $3,450 $16,900
John J. Quindlen $3,450 $16,900
RODNEY SQUARE MANAGEMENT CORPORATION
RSMC, a Delaware corporation organized on September 17, 1981, is a wholly
owned subsidiary of WTC, a state-chartered bank organized as a Delaware
corporation in 1903. WTC is the wholly owned subsidiary of Wilmington Trust
Corporation, a publicly held bank holding company. Through RSMC's management
of the Fund and its selection of portfolio advisers, the Fund offers investors
access to a group of advisers not available from most other mutual funds and
specialized investment techniques normally available only to institutional
clients. RSMC provides asset management services to collective investment
funds maintained by WTC and acts as Investment Adviser, Administrator,
Transfer Agent and Dividend Paying Agent to the Fund and to two other
registered investment companies: The Rodney Square Fund and The Rodney Square
Tax-Exempt Fund.
Several affiliates of RSMC are also engaged in the investment advisory
business. Wilmington Trust FSB, a wholly owned subsidiary of WTC, exercises
investment discretion over certain institutional accounts.
RSD, a wholly owned subsidiary of WTC and the Fund's Distributor, is a
registered broker-dealer. Wilmington Brokerage Services Company, another
wholly owned subsidiary of WTC, is a registered investment adviser and a
registered broker-dealer.
<PAGE>
WILMINGTON TRUST COMPANY
WTC, the parent of RSMC, serves as Custodian for the Fund pursuant to a
Custodian Agreement dated January 30, 1987. Pursuant to such Agreement, the
Fund pays WTC an annual fee based upon the average net assets of the
Portfolio as follows: $0.25 per $1,000 on the first $50 million; $0.20 per
$1,000 on the next $50 million and $0.15 per $1,000 over $100 million, plus
$15 per purchase, sale or maturity of a portfolio security. This fee is
subject to a minimum charge of $1,000 per month, exclusive of any transaction
charges.
The Fund benefits from the experience, conservative values and special
heritage of WTC and its affiliates. 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 $75 billion in trust,
custody and investment management assets, WTC ranks among the nation's leading
financial services firms. As of December 31, 1995, 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 as well. Certain departments in WTC engage in
investment management activities that utilize a variety of investment
instruments.
WTC is also the Investment Adviser of The Rodney Square Strategic Fixed-
Income Fund and The Rodney Square International Equity Fund.
INVESTMENT MANAGEMENT SERVICES
FUND MANAGEMENT AGREEMENT. RSMC has served as Manager to the Fund since
its inception, currently pursuant to a Fund Management Agreement dated
December 2, 1989.
Under the Fund Management Agreement, RSMC has agreed to waive all or a
portion of its advisory fee or reimburse the Fund annually to the extent that
the annual operating expenses of the Portfolio exceed the lowest expense
limitation prescribed by certain states in which shares of the Portfolio are
qualified or registered for offer or sale. RSMC understands that the lowest
applicable limitation (excluding brokerage commissions, interest, taxes,
distribution fees and extraordinary expenses) is currently 2.5% on the first
$30 million of the Portfolio's average daily net assets, 2.0% of the next $70
million of its average daily net assets, and 1.5% of its average daily net
assets in excess of $100 million. RSMC also has agreed voluntarily to waive
all or a portion of its fee or reimburse the Fund monthly to the extent that
expenses (excluding brokerage commissions, interest, taxes and extraordinary
expenses) incurred by the Portfolio exceed an annual rate of 1.50% of the
average daily net assets of the Portfolio. This undertaking, which is not
contained in the Fund Management Agreement, may be amended or rescinded in the
future.
RSMC's management fees for the Portfolio for the fiscal years ended
December 31, 1995, 1994 and 1993 were $640,522, $667,782, and $605,215,
respectively.
<PAGE>
The Fund Management Agreement provides that RSMC is responsible for the
provision of investment management and related services to the Fund, subject
to the direction of the Board of Trustees and the officers of the Fund. The
Agreement also provides that RSMC may delegate its investment decision-making
authority to the portfolio advisers.
Under the Agreement, the Fund, on behalf of the Portfolio, assumes
responsibility for paying or entering into arrangements with third parties to
pay all Fund expenses which are not expressly assumed by RSMC. Such expenses
include: (i) fees payable for administrative services provided by the Fund's
administrator; (ii) fees payable for services provided by the Fund's
independent public accountants; (iii) fees payable for transfer agent,
registrar, dividend disbursement and shareholder recordkeeping services; (iv)
fees payable for accounting services; (v) fees payable for custodial services;
(vi) the cost of obtaining quotations for calculating the value of the assets
of the Portfolio; (vii) taxes levied against the Fund or the Portfolio; (viii)
brokerage fees and commissions in connection with the purchase and sale of
portfolio securities; (ix) costs, including the interest expense, of borrowing
money; (x) the Fund's pro-rata share of costs and/or fees incident to holding
meetings of the Trustees and shareholders, preparation, filing and mailing of
prospectuses and reports, maintenance of the Fund's corporate existence, and
registration of shares with federal and state securities authorities; (xi)
legal fees and expenses; (xii) the costs of printing share certificates
representing shares of the Portfolio; (xiii) the Fund's pro-rata share of fees
payable to, and expenses of, members of the Board of Trustees who are
not "interested persons" of the Fund; (xiv) the Portfolio's pro-rata share of
premiums payable on the fidelity bond required by Section 17(g) of the 1940
Act, and any other premiums payable on insurance policies related to the
Fund's business and the investment activities of the Portfolio;
(xv) distribution fees; (xvi) fees, voluntary assessments and other expenses
incurred in connection with the Fund's membership in investment company
organizations; and (xvii) such non-recurring expenses as may arise, including
actions, suits or proceedings to which the Fund is a party and the Fund's pro-
rata share of the legal obligation which the Fund may have to indemnify its
Trustees and officers with respect thereto.
The Agreement provides that RSMC, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
under such Agreement, shall not be liable to the Fund or its shareholders for
any act or omission in the course of, or connected with, providing services
under the Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security. The Agreement is terminable without penalty
on sixty (60) days' written notice by RSMC or by the Fund (by action of its
Board of Trustees or by vote of a majority of the Fund's outstanding voting
securities), and terminates automatically in the event of its assignment. The
Agreement continues in effect from year to year so long as its continuance is
approved at least annually (i) by the vote of a majority of the Independent
Trustees at a meeting called for the purpose of voting on such approval and
(ii) by the vote of a majority of the Trustees or by the vote of a majority of
the outstanding voting securities of the Fund.
<PAGE>
ADVISORY AGREEMENTS. The Fund has entered into Advisory Agreements with
RSMC and the portfolio advisers listed below pursuant to which RSMC pays a
monthly fee to each portfolio adviser at the approximate annual rate of 0.5%
of the average daily net assets under the portfolio adviser's management.
During the fiscal years ended December 31, 1995, 1994 and 1993 RSMC paid the
following advisory fees:
YEAR ENDED YEAR ENDED YEAR ENDED
PORTFOLIO ADVISER 12/31/95 12/31/94 12/31/93
- ----------------- ---------- ---------- ----------
Frontier Capital Management
Co., Inc. $152,932 $119,560 $106,016
Spears Benzak Salomon &
Farrell (terminated
as of 3/31/95) $20,857 $105,283 $97,380
William Blair &
Company L.L.C. $146,471 $109,048 $99,212
Each Advisory Agreement provides that the portfolio adviser has
discretionary investment authority (including the selection of brokers and
dealers for the execution of portfolio transactions) with respect to the
portion of the Portfolio's assets allocated to it by RSMC, subject to the
restrictions of the 1940 Act, the Internal Revenue Code of 1986, as amended
(the "Code"), applicable state securities laws, the supervision and control of
the Trustees, the relevant Portfolio's investment objectives, policies and
restrictions and the instructions of the Trustees and RSMC.
Each Advisory Agreement provides that the portfolio adviser will not be
liable for any action taken, omitted or suffered to be taken except if such
acts or omissions are the result of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. The Agreements continue in effect
from year to year so long as continuance of each such Agreement is approved at
least annually (i) by the vote of a majority of the Independent Trustees at a
meeting called for the purpose of voting on such approval and (ii) by the vote
of a majority of the Trustees or by the vote of a majority of the outstanding
voting securities of the Portfolio. Each Advisory Agreement terminates
automatically in the event of its assignment and is terminable on written
notice by the Fund (without penalty, by action of the Board of Trustees or by
vote of a majority of the Portfolio's outstanding voting securities) or by
RSMC or the portfolio adviser. The Agreement provides that written notice of
termination must be provided by the Fund, RSMC or the portfolio adviser within
thirty (30) days of the termination date.
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS AND RULE 12B-1 PLAN
RSMC, a Delaware corporation organized on September 17, 1981, serves as
Administrator of the Fund pursuant to an Administration Agreement effective as
of December 31, 1992. For the services provided, RSMC receives a monthly
administration fee from the Fund at an annual rate of 0.09% of the Portfolio's
average daily net assets.
For the fiscal years ended December 31, 1995, 1994 and 1993, RSMC was
paid administration fees amounting to $57,647, $60,100 and $54,470,
respectively.
<PAGE>
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 Fund; (b) prepare and file, if
necessary, reports to shareholders of the Fund and reports with the SEC and
state securities commissions; (c) monitor the Fund's compliance with the
investment restrictions and limitations imposed by the 1940 Act, and state
Blue Sky laws and applicable regulations thereunder, the fundamental and non
fundamental investment policies and limitations set forth in the Prospectus
and this Statement of Additional Information, and the investment restrictions
and limitations necessary for the Portfolio to qualify as a regulated
investment company under the Code ("RIC"); (d) monitor sales of the
Portfolio's shares and ensure that such shares are properly registered with
the SEC and applicable state authorities; (e) prepare and monitor an expense
budget for the Portfolio, including setting and revising accruals for each
category of expenses; (f) determine the amount of dividends and other
distributions payable to shareholders as necessary to, among other things,
maintain the qualification of the Portfolio as a RIC; (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 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 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 the provisions of 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 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 became effective at the close of business on
December 31, 1992, and 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 by sixty (60) days' written notice given to RSMC or by RSMC by six
(6) months' written notice given to the Fund.
RSMC determines the net asset value per share of the Portfolio and
provides accounting services to the Fund pursuant to an Accounting Services
Agreement with the Fund. For each of the fiscal years ended December 31,
1995, 1994, and 1993, RSMC was paid an accounting service fee of $45,000.
<PAGE>
Under the terms of the Accounting Services Agreement, RSMC agrees to:
(a) perform the following accounting functions on a daily basis: (1)
journalize the Fund's investment, capital share and income and expense
activities, (2) verify investment buy/sell trade tickets when received from
the portfolio advisers and transmit trades 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 the Fund with the Custodian, and provide the portfolio
advisers with the beginning cash balance available for investment purposes,
(6) update the cash availability throughout the day as required by the
portfolio advisers, (7) post to and prepare the Fund's Statement of Assets and
Liabilities and the Statement of Operations, (8) calculate various contractual
expenses (e.g., advisory and custody fees), (9) control all disbursements from
the Fund and authorize such disbursements upon written instructions, (10)
calculate capital gains and losses, (11) determine the Fund's net income, (12)
obtain security market quotes from services approved by the portfolio adviser,
or if such quotes are unavailable, then obtain such prices from the portfolio
adviser, and in either case calculate the market value of the Fund's
investments, (13) transmit or mail a copy of the portfolio valuation to the
Manager and to the portfolio advisers, (14) compute the net asset value of the
Fund, (15) compute the Fund's yields, total return, expense ratios and
portfolio turnover rate, and (16) monitor the expense accruals and notify Fund
management of any proposed adjustments; (b) prepare monthly financial
statements which include the Schedule of Investments, the Statement of Assets
and Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement and the Schedule of Capital Gains and Losses; (c)
prepare monthly security transactions listings; (d) prepare quarterly broker
security transactions summaries; (e) supply various Fund statistical data 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 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
with the preparation of registration statements on Form N-1A and other filings
relating to the registration of shares of the Fund; (j) monitor the
Portfolio's status as a RIC; and (k) act as liaison with the Fund's
independent public accountants 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 the
Fund'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 Accounting Services Agreement or reckless
disregard by RSMC of such duties and obligation.
The Accounting Services Agreement became effective on October 1, 1989,
and 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 Agreement is terminable by the Fund or RSMC
by three (3) months' written notice.
<PAGE>
RSD serves as the Distributor of the Portfolio's shares pursuant to a
Distribution Agreement with the Fund. Under the terms of the Distribution
Agreement, RSD is granted the right to sell shares of the Portfolio as agent
for the Fund, to retain a portion of sales load proceeds as underwriting
commissions and to reallocate a portion of sales load proceeds to dealers who
have sold Portfolio shares. For the fiscal years ended December 31, 1995, 1994
and 1993, RSD received from the Fund underwriting commissions of $5,691,
$10,910 and $5,266, respectively. For the fiscal year ended December 31, 1995,
RSD received underwriting commissions of $4,798 from the Portfolio.
Under the terms of the Distribution Agreement, RSD agrees to use all
reasonable efforts to secure purchasers for shares of the Portfolio and to pay
expenses of printing and distributing prospectuses, statements of additional
information and reports prepared for use in connection with the sale of
Portfolio shares and any other literature and advertising used in connection
with the offering, subject to reimbursement pursuant to the Portfolio's Plan
of Distribution adopted 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
by reason of 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 became effective as of December 31, 1992 and
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 (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 12b-1 Plan or by vote of a majority of
the outstanding voting securities of the Fund) on sixty (60) days' written
notice to RSD; or (ii) by RSD on sixty (60) days' written notice to the Fund.
RSD may be reimbursed for distribution expenses according to the 12b-1
Plan which the Board of Trustees and the shareholders of the Portfolio have
adopted. The 12b-1 Plan provides that RSD may be reimbursed 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 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.
<PAGE>
The 12b-1 Plan further provides that reimbursement shall be made for any
month only to the extent that such payment does not exceed (i) 0.35% on an
annualized basis of the Portfolio's average net assets; and (ii) limitations
set from time to time by the Board of Trustees. The Board of Trustees has
only authorized implementation of the 12b-1 Plan for annual payments of up to
0.25% of the Portfolio's average net assets to reimburse RSD for paying "trail
commissions" to Service Organizations who have sold Portfolio shares and for
marketing efforts focusing on the preparation and distribution of marketing
materials. For the fiscal year ended December 31, 1995, payments under the
12b-1 Plan amounted to $18,594: $10,564 was paid in trail commissions, $2,645
was paid for prospectus printing and $5,385 was paid for preparation and
distribution of marketing materials.
The 12b-1 Plan provides that it shall not operate or be construed to
limit the extent to which RSMC or any other person, other than the Fund, may
incur costs and bear expenses associated with the distribution of shares of
the Fund. The Fund may execute portfolio transactions with and purchase
securities issued by depository institutions that receive payments under the
12b-1 Plan. No preference for instruments issued by such depository
institutions is shown in the selection of investments.
REDEMPTIONS
To ensure proper authorization before redeeming shares of the Portfolio,
RSMC may require additional documents such as, but not restricted to, stock
powers, trust instruments, certificates of death, appointments as executor,
certificates of corporate authority and waivers of tax required in some states
when settling estates.
Clients of WTC who have purchased shares through their trust accounts 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, trust, fiduciary or partnership, WTC 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.
Redemption proceeds will be sent within seven 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.
<PAGE>
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 or trading on the Exchange is restricted, (b) an emergency exists as a
result of which it is not reasonably practicable to dispose of the Portfolio's
securities or to determine the value of the net assets of the Portfolio, or
(c) ordered by a governmental body having jurisdiction over the Fund for the
protection of the shareholders. In the case of any such suspension,
shareholders of the Portfolio may withdraw their requests for redemption or
may receive payment based on the net asset value 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 of the Portfolio. If payment is made in securities, a shareholder may
incur transaction expenses in converting those 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 Portfolio during any 90-day period.
This election is irrevocable unless the SEC permits its withdrawal.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities on a securities exchange are
effected by brokers, and the Portfolio pays brokerage commissions for this
service. In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a
profit to the dealer. In underwritten offerings, securities are purchased at
a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. During the
fiscal years ended December 31, 1995, 1994 and 1993, the Portfolio paid total
brokerage commissions of $116,972, $61,503, and $71,627, respectively.
The primary objective in placing orders on behalf of the Portfolio for
the purchase and sale of securities is to obtain best execution at the most
favorable prices through responsible broker-dealers and, where commission
rates are negotiable, at competitive rates. Although the Portfolio may pay
higher commissions in return for brokerage and research services, it must be
determined that such commission is reasonable in relation to the value of the
brokerage and/or research services that have been provided. In selecting a
broker or dealer, RSMC and each portfolio adviser consider, among other
things, (i) the price of the securities to be purchased or sold; (ii) the rate
of the commission; (iii) the size and difficulty of the order; (iv) the
reliability, integrity, financial condition, general execution and operational
capability of any competing broker or dealer; (v) the value and quality of the
brokerage and research services provided to RSMC, the portfolio advisers or
to the Fund; and (vi) the level of any brokerage commissions paid to any
broker or dealer who is an affiliate of RSMC or of a portfolio adviser
("Affiliated Broker").
<PAGE>
RSMC and the portfolio advisers cannot readily determine the extent to
which commission rates or net prices charged by broker-dealers reflect the
value of their research services. In such cases, RSMC and the portfolio
advisers receive services they otherwise might have had to perform themselves.
The research services provided by brokers or dealers can be useful to RSMC and
the portfolio advisers in serving their other clients, as well as in serving
the Fund. Conversely, information provided to RSMC and the portfolio advisers
by brokers or dealers who have executed transaction orders on behalf of other
portfolio advisers' or RSMC's clients may be useful to RSMC and the portfolio
advisers in providing services to the Fund. During the fiscal year ended
December 31, 1995, the Portfolio paid $31,364 in brokerage commissions,
amounting to 26.81% of the Portfolio's aggregate brokerage commissions for
the year, involving transactions in the amount of $13,094,255 to brokers
because of research services provided. The Portfolio may purchase and sell
portfolio securities to and from dealers who provide the Portfolio with
research services. Portfolio transactions will not be directed by the
Portfolio to dealers solely on the basis of research services provided.
In order for an Affiliated Broker to effect any portfolio transactions
for the Portfolio, the commissions, fees or other remuneration received by the
Affiliated Broker must be reasonable and fair compared to the commissions,
fees or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard allows an
Affiliated Broker to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate arms-
length transaction. The Fund's Board of Trustees has adopted procedures in
conformity with Rule 17e-1 under the 1940 Act to ensure that all brokerage
commissions paid to Affiliated Brokers are reasonable and fair. During the
fiscal years ended December 31, 1995 and 1994, the Portfolio did not pay any
brokerage commissions to Affiliated Brokers.
Some of the portfolio advisers' and RSMC's other clients have investment
objectives and programs similar to that of the Portfolio. Occasionally, RSMC
and the portfolio advisers may make recommendations to other clients which
result in their purchasing or selling securities simultaneously with the
Portfolio. Consequently, the demand for securities being purchased or the
supply of securities being sold may increase, and this could have an adverse
effect on the price of those securities. It is the policy of RSMC and the
portfolio advisers not to favor one client over another in making
recommendations or in placing orders. When two or more clients are
simultaneously engaged in the purchase or sale of the same security and if the
entire order cannot be made in a single order, the securities are allocated
among clients in a manner believed to be equitable to each. If two or more of
the clients of RSMC and the portfolio advisers simultaneously purchase or sell
the same security, RSMC and the portfolio advisers allocate the prices and
amounts 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. While in some cases this practice could have a
detrimental effect upon the price or the value of the security as far as the
Portfolio is concerned, or upon its ability to complete its entire order, in
other cases it is believed that coordination and the ability to participate in
volume transactions will be beneficial to the Portfolio.
<PAGE>
PORTFOLIO TURNOVER. The portfolio turnover rate is calculated by
dividing the lesser of the Portfolio's annual purchases or sales of portfolio
securities for the particular fiscal year by the monthly average value of the
portfolio securities owned by the Portfolio during the year. All securities,
including options, whose maturity or the expiration date at the time of
acquisition was one year or less are to be excluded from both the numerator
and the denominator. The portfolio turnover rate of the Portfolio for the
years ended December 31, 1995 and 1994 was 49.12% and 37.05%, respectively.
NET ASSET VALUE
In valuing the Portfolio's assets, a security listed on the Exchange (and
not subject to restrictions against sale by the Portfolio on the Exchange)
will be valued at its last sale price on the Exchange on the day the security
is valued. Lacking any sales on such day, the security will be valued at the
mean between the closing asked price and the closing bid price. Securities
listed on other exchanges (and not subject to restriction against sale by the
Portfolio on such exchanges) will be similarly valued, using quotations on the
exchange on which the security is traded most extensively. Unlisted
securities which are quoted on the National Association of Securities Dealers'
National Market System, for which there have been sales of such securities on
such day, shall be valued at the last sale price reported on such system on
the day the security is valued. If there are no such sales on such day, the
value shall be the mean between the closing asked price and the closing bid
price. The value of such securities quoted on the Nasdaq Stock Market System,
but not listed on the National Market System, shall be valued at the mean
between the closing asked price and the closing bid price. Unlisted
securities which are not quoted on the Nasdaq Stock Market System and for
which over-the-counter market quotations are readily available will be valued
at the mean between the current bid and asked prices for such security in the
over-the-counter market. Other unlisted securities (and listed securities
subject to restriction on sale) will be valued at fair value as determined in
good faith under the direction of the Board of Trustees although the actual
calculation may be done by others. Short-term investments with remaining
maturities of less than 61 days are valued at amortized cost.
PERFORMANCE INFORMATION
The performance of the Portfolio may be quoted in terms of its total
return in advertising and other promotional materials ("performance
advertisements"). Performance data quoted represents past performance and is
not intended to indicate future performance. The investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost. Performance
of the Portfolio will vary based on changes in market conditions and the level
of the Portfolio's expenses.
TOTAL RETURN CALCULATIONS. Average annual total return quotes used in
the Portfolio's performance advertisements are calculated according to the
following formula:
P (1 + T) n = ERV
where: P = hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at end of the period
of a hypothetical $1,000 payment made at
the beginning of that period.
<PAGE>
Under the foregoing formula, the time periods used in performance
advertisements will be 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 the ERV for standardized
average annual total return, the Portfolio's maximum 4.00% 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. The following table
reflects the Portfolio's standardized and non standardized average annual
total returns for the periods stated below:
AVERAGE ANNUAL TOTAL RETURN
106 MONTHS SINCE
INCEPTION
1 YEAR 5 YEARS FEB. 26, 1987
ENDED ENDED THROUGH
SALES LOAD 1 DEC. 31, 1995 DEC. 31, 1995 DEC. 31, 1995
----------- ------------- ------------- ----------------
4.00% 23.29% 16.14% 11.11%
None 28.43% 17.09% 11.62%
Because shares of the Portfolio may be purchased at a reduced sales load
or without a sales load under certain circumstances, non standardized average
annual total return is also computed without deducting the sales load from the
initial $1,000 payment for the ERV calculation. The Portfolio may also from
time to time include in such advertising and promotional materials additional
non standardized total return figures that are not calculated according to the
formula set forth above ("cumulative total return"). The Portfolio calculates
cumulative total return for a specific period of time by assuming the
investment of $1,000 in Portfolio shares and assuming the reinvestment of each
dividend and other distribution at net asset value. Percentage rates of
return are then determined by subtracting the value of the investment at the
beginning of the period from the ending value and by dividing the remainder by
the beginning value. The Portfolio does not take sales loads into account in
calculating cumulative total return; the inclusion of such loads would reduce
such return. The Portfolio's cumulative total return was, for the fiscal year
ended December 31, 1995: 28.43%; for the five-years ended December 31, 1995:
120.13%; and for the period since the Portfolio's inception on February 26,
1987 through December 31, 1995: 164.72%.
Average annual and cumulative total returns for the Portfolio 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 gain distributions and changes in share price) to illustrate the
relationship of those factors and their contributions to total return.
- ---------------------------------
1. The Portfolio's maximum sales load was reduced on November 25, 1991 from
5.75% to 4.00%. The lower maximum sales load is reflected in the
standardized average annual total return set forth in this table.
<PAGE>
The following table shows the income and capital elements of the
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 Portfolio today.
During the periods from February 26, 1987 (Commencement of Operations)
through December 31, 1995, a hypothetical $10,000 investment in the Portfolio
would have grown to $26,472 assuming all distributions were reinvested and no
sales load was paid.
VALUE OF VALUE OF VALUE OF INCREASE IN
INITIAL REINVESTED REINVESTED COST OF LIVING
PERIOD ENDED $10,000 INCOME CAPITAL GAIN (CONSUMER
DECEMBER 31 INVESTMENT DIVIDENDS DISTRIBUTIONS TOTAL VALUE PRICE INDEX)
- ------------ ---------- ---------- ------------- ----------- --------------
1995 $17,410 $732 $8,330 $26,472 37.5%
1994 $15,140 $636 $4,836 $20,612 34.1%
1993 $16,390 $689 $3,581 $20,660 30.6%
1992 $15,560 $654 $1,820 $18,034 27.2%
1991 $15,680 $659 $ 682 $17,021 23.6%
1990 $11,590 $423 $ 12 $12,025 19.9%
1989 $12,620 $331 - $12,951 13.0%
1988 $10,050 $136 - $10,186 8.0%
1987 2 $ 8,370 $ 52 - $ 8,422 3.4%
Explanatory Note: A hypothetical initial investment of $10,000 on
February 26, 1987, together with the aggregate cost of reinvested dividends
and other distributions for the entire period covered (their cash value at the
time they were reinvested), would have amounted to $18,175. If dividends and
other 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 $471 for income dividends and $6,311 for other
distributions. This table does not reflect tax consequences or the
Portfolio's 4.00% maximum sales load, which would reduce the year-end values
of the $10,000 investment from those shown here.
The preceding performance figures were affected by fee waivers and
reimbursement of the Portfolio's expenses by the Portfolio's service providers
during the relevant time periods. Without such waivers and reimbursements,
the total return figures quoted above would have been lower.
- ---------------------------------
2 From commencement of operations, February 26, 1987.
<PAGE>
The Fund may also from time to time along with performance
advertisements, present its investments 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 December 31, 1995, 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 returns when comparing returns on shares of
the Portfolio with returns quoted with respect to other investment companies
or types of investments.
In connection with communicating its total return to current or
prospective shareholders, the Portfolio also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
The return of the Portfolio may be compared to relevant domestic indexes.
Examples include but are not limited to the Standard & Poor's 500 Composite
Stock Price Index, a widely followed, capitalization weighted index containing
500 of the largest publicly traded stocks. The total return of these
unmanaged indexes assumes the reinvestment of all dividends and other
distributions, if applicable, paid by the indexed stocks. Comparisons to these
indexes may be used in advertisements, shareholder reports and otherwise.
From time to time, in marketing and other literature, the Portfolio's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such
as, Investment Company Data, Inc., Lipper Analytical Services, Inc. ("Lipper")
(a mutual fund research firm which analyzes over 1,800 mutual funds), CDA
Investment Technologies, Inc., Morningstar, Inc. and other independent
organizations. When Lipper's tracking results are used, the 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, the 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, the 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, as applicable, for the ranking in
question.
<PAGE>
Evaluations of Portfolio performance made by independent sources may also
be used in advertisements concerning the Portfolio, including reprints of, or
selections from, editorials or articles about the Portfolio. Sources for
Portfolio performance information and articles about the Portfolio may include
the following:
ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
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 investing
abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization that 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 TIMES, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
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.
THE FRANK RUSSELL COMPANY, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
GLOBAL INVESTOR, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
INVESTMENT COMPANY DATA, INC., an independent organization that 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.
<PAGE>
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 that 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
business, often featuring mutual fund performance data.
USA TODAY, the nation's number one 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 that 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.
TAXES
GENERAL. In order to continue to qualify for treatment as a RIC, the
Portfolio must distribute to its shareholders for each taxable year at least
90% of its investment company taxable income (consisting generally of net
investment income plus net short-term capital gain) and must meet several
additional requirements. These requirements include the following: (a) the
Portfolio must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities, or other income (including gains
from options) derived with respect to its business of investing in securities
("Income Requirement"); (b) the Portfolio must derive less than 30% of its
gross income each taxable year from the sale or other disposition of
securities or options held for less than three months ("Short-Short
Limitation"); (c) 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 securities and other securities, with
these 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 (d) 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 securities) of any one issuer.
<PAGE>
If the 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 gain (the excess of net long-term
capital gains over net short-term capital loss), 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.
DISTRIBUTIONS. The Portfolio will be subject to a nondeductible 4%
excise tax to the extent it fails to distribute by the end of any calendar
year substantially all of its ordinary income for that year and its capital
gain net income for the one-year period ending on October 31 of that year,
plus certain other amounts. With respect to the capital gain net income
measurement period, the Portfolio has made an election to substitute its tax
year, which ends on December 31, for the one-year period ending on October 31.
For this and other purposes, dividends and other distributions declared 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 its shareholders on December 31 of that year if
they are paid by the Portfolio during the following January. Accordingly,
such distributions will be taxed to the shareholders for the year in which
that December 31 falls.
It is anticipated that all or a portion of the dividends from the
Portfolio's net investment income will qualify for the dividends-received
deduction allowed to corporations. The qualifying portion for the Portfolio
may not exceed the aggregate dividends received by the Portfolio from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax. Moreover, the dividends-received
deduction will be reduced to the extent the shares with respect to which the
dividends are received are treated as debt-financed and will be eliminated if
those shares are deemed to have been held for less than 46 days.
Distributions of net short-term capital gain and net capital gain are not
eligible for the dividends-received deduction.
Any loss realized by a shareholder upon the redemption of shares within
six months from the date of their purchase will be treated as a long-term,
instead of a short-term, capital loss to the extent of any capital gain
distributions to that shareholder with respect to those shares.
Distributions by the Portfolio from net investment income or capital
gains will result in a reduction in the net asset value of the Portfolio's
shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, the distribution nevertheless will be taxable to the
shareholder even though, from an investment standpoint, it may constitute a
partial return of capital. In particular, investors should be careful to
consider the tax implications of buying shares just prior to a distribution.
The price of shares purchased at that time includes the amount of the
forthcoming distribution. Those investors purchasing shares just prior to a
distribution will receive a partial return of their investment upon the
distribution that nevertheless will be taxable to them.
<PAGE>
If the 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.
Although a return of capital is not taxable, it does reduce a shareholder's
tax basis.
Special rules apply when a shareholder (1) disposes of shares of the
Portfolio through a redemption or exchange within 90 days after purchase
thereof and (2) subsequently re-acquires shares of the Portfolio or acquires
shares of any other Rodney Square fund on which a sales load normally is
imposed without paying any sales load because of the reinstatement privilege
or the exchange privilege. (See "Redemption of Shares" and "Exchange of
Shares" in the Prospectus.) In these cases, any gain on the disposition of
the original Portfolio shares will be increased, or the 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 shares subsequently
acquired. Moreover, if the reinstatement privilege is exercised (or shares of
the Portfolio are redeemed within 30 days after other shares of the Portfolio
are purchased), gain on the redemption nevertheless will be taxable, but any
loss arising out of the redeemed shares will not be deductible to the extent
of the amount of shares purchased and an adjustment will be made to the
shareholder's basis for the newly purchased shares.
TAX TREATMENT OF OPTIONS. The use of options involves complex rules that
determine for income tax purposes the character and timing of recognition of
the gains and losses the Portfolio realizes in connection therewith and
thereby affect, among other things, the amount of income that is available for
distribution to shareholders. Income from transactions in options derived by
the Portfolio with respect to its business of investing in securities
qualifies as permissible income under the Income Requirement. Income from the
sale or other disposition of options held for less than three months, however,
will be subject to the Short-Short Limitation.
If the Portfolio satisfies certain requirements, any increase in value of
a position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Portfolio
satisfies the Short-Short Limitation. Thus, only the net gain (if any) from
the designated hedge will be included in gross income for purposes of that
limitation. The Portfolio anticipates engaging in hedging transactions that
are intended to qualify for this treatment, but at the present time it is not
clear whether this treatment will be available for all of the Portfolio's
hedging transactions. To the extent this treatment is not available, the
Portfolio may be forced to defer the closing out of certain options beyond the
time when it otherwise would be advantageous to do so, in order for the
Portfolio to continue to qualify as a RIC.
The Portfolio's use of options strategies may create "straddles" for
federal income tax purposes, which may result in the deferral of losses,
adjustments in the holding periods of securities held by the Portfolio and
conversion of short-term capital losses into long-term capital losses. The
Portfolio monitors its transactions in options and may make certain tax
elections in order to mitigate these consequences and prevent disqualification
of the Portfolio as a RIC.
<PAGE>
WASH SALES. The "wash sale" rules of the Code generally postpone
deduction of a loss incurred upon the disposition of securities if, within 30
days before or after the disposition, the taxpayer acquires, or enters into a
contract or purchases an option to acquire, substantially identical
securities. Because a portfolio adviser of the Portfolio may not be fully
aware, on a current basis, of purchases and sales effected by the other
portfolio adviser of the Portfolio, it is possible that a loss incurred upon
the sale of certain securities by one portfolio adviser may not be deductible
currently for tax purposes, because the other portfolio adviser has purchased
or does purchase, within the applicable period, substantially identical
securities. The Portfolio attempts to reduce the likelihood of adverse tax
consequences from the operation of the wash sale rules by making each of its
portfolio advisers aware of losses sustained by its other portfolio advisers.
DESCRIPTION OF THE FUND
The Fund is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable for the obligations of
the trust. However, the Fund's Declaration of Trust 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 agreement, obligation
or instrument entered into or executed by the Fund or the Trustees. The
Declaration of Trust provides for indemnification out of the assets of the
applicable series of any shareholder held personally liable solely by virtue
of ownership of shares of the series. The Declaration of Trust also provides
that the applicable series shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the series and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss because of shareholder liability is limited to circumstances in
which the Portfolio itself would be unable to meet its obligations. RSMC
believes that, in view of the above, the risk of personal liability to
shareholders is remote.
The Fund's Declaration of Trust further provides that the Trustees will
not be liable for neglect or wrong doing provided they have exercised
reasonable care and have acted in the reasonable belief that their actions are
in the best interest of the Fund, but nothing in the Declaration of Trust
protects or indemnifies a Trustee against any liability to which he or she
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 shares of the Portfolio that are issued by the Fund are fully paid
and non-assessable.
The 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 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. The
Declaration of Trust further provides, however, that the Board of Trustees may
take the actions specified in (a) or (b) if a majority of the Trustees
determine that the continuation of the Portfolio or the Trust is not in the
best interests of the Portfolio or the Trust or their respective shareholders
<PAGE>
as a result of factors or events adversely affecting the ability of the
Portfolio or the Trust to conduct its business and operations in an
economically viable manner. In the event of the liquidation of the Fund or
the 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, 1 North Charles Street,
Baltimore, MD 21201, serves as the Fund's independent auditors, providing
services which include (1) audit of the annual financial statements for the
Portfolio, (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 Portfolio.
The financial statements and financial highlights of the Portfolio
appearing or incorporated by reference in the Fund's Prospectus and this
Statement of Additional Information 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,
N.W., 2nd Floor, Washington, DC 20036, serves as counsel to the Fund.
CUSTODIAN. Wilmington Trust Company, Rodney Square North, 1100 N. Market
Street, 2nd floor, Wilmington, DE 19890-0001, serves as the Fund's Custodian.
TRANSFER AGENT. Rodney Square Management Corporation, Rodney Square
North, 1100 N. Market Street, Wilmington, DE 19890-0001, serves as the Fund's
Transfer Agent and Dividend Paying Agent.
SUBSTANTIAL SHAREHOLDERS. As of March 31, 1996, WTC owned of record
92.3% of the shares of the Portfolio, including 77.4% owned beneficially, all
on behalf of its customer accounts.
FINANCIAL STATEMENTS
The Schedule of Investments as of December 31, 1995: the Statement of
Assets and Liabilities as of December 31, 1995; the Statement of Operations
for the fiscal year ended December 31, 1995; the Statement of Changes in Net
Assets for the fiscal years ended December 31, 1995 and December 31, 1994; the
Financial Highlights for the fiscal years ended December 31, 1995, 1994, 1993,
1992 and 1991; and the Notes to the 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 December 31,
1995, are attached hereto, and are hereby incorporated by reference. In
addition to the financial statements of the Portfolio, the Annual Report also
includes the financial statements of the Growth and Income Portfolio, another
series of the Fund. The Growth and Income Portfolio is no longer offered for
investment.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
PRESIDENT'S MESSAGE-CONTINUED
- ------------------------------------------------------------------------------
THE GROWTH AND INCOME PORTFOLIO
The advisers of the Growth and Income Portfolio took advantage of the
positive moves by larger company stocks during 1995. Sirach Capital
Management, Inc. ("Sirach") found value in the finance and healthcare sectors
with holdings in Citicorp and Johnson & Johnson. Returns from these sectors
reflect the move that occurred in the second half of 1995 toward larger
companies with more predictable growth characteristics. Wedge Capital
Management L.L.P. ("Wedge") also took advantage of the merger and acquisition
activity in financial stocks with holdings in banks such as Chemical Banking
Corp. and First Union Corp. Wedge's holdings in oil companies such as British
Petroleum Co. Ltd. and Royal Dutch Petroleum Co., benefited from the firming
of energy prices in 1995. Because of its value disciplines, Wedge held a
relatively large cash position throughout the year.
All of the advisers generally agree that 1996 will not be a repeat of
1995. They agree the key for success in 1996 will be the ability to find
value in individual stocks as opposed to entire sectors. Each of our advisers
employ various valuation screens designed to isolate those companies with the
best characteristics for future growth. We feel strongly that this, combined
with the multi-manager format, which allows investors to reduce their
investment volatility through multiple investment approaches, will deliver
superior returns. Rodney Square Management Corporation will continue to
review and evaluate the individual advisers in an effort to deliver above
average performance for our shareholders.
[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 $10,000 INVESTMENT*
<TABLE>
<CAPTION>
Feb-87 Dec-87 Dec-88 Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth and
Income Portfolio $10,000 $9,500 $10,100 $14,000 $14,000 $16,000 $18,000 $20,000 $20,500 $30,000
S&P 500 Index $9,900 $9,400 $10,000 $13,000 $12,000 $15,000 $17,000 $19,500 $19,500 $25,000
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEAR INCEPTION
------ ------ ---------
FUND** 20.99% 11.63% 8.32%
FUND*** 26.03% 12.55% 8.82%
INDEX 37.58% 16.60% 12.34%
<PAGE>
- ------------------------------
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. RETURNS ARE HIGHER
DUE TO MAINTENANCE OF THE PORTFOLIO'S EXPENSES BY RODNEY SQUARE
MANAGEMENT CORP. SEE FINANCIAL HIGHLIGHTS ON PAGE 23.
** THESE VALUES REFLECT THE EFFECT OF THE MAXIMUM SALES LOAD OF 4.00%.
*** THESE VALUES DO NOT REFLECT THE EFFECT OF THE SALES LOAD.
3
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
PRESIDENT'S MESSAGE-CONTINUED
- ------------------------------------------------------------------------------
We invite your questions and comments, and we thank you for your
investment in The Rodney Square Multi-Manager 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
February 10, 1996
4
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS/DECEMBER 31, 1995
(Showing Percentage of Total Value of Net Assets)
- -----------------------------------------------------------------------------
PAR VALUE
(000) (NOTE 2)
----- -----------
REPURCHASE AGREEMENTS - 4.1%
WITH CS FIRST BOSTON GROUP, INC.
at 6.00%, dated 12/29/95, to be
repurchased at $2,737,124 on
01/02/96, collateralized by
$2,803,449 Federal Farm Credit
Bank Discount Notes with various
MATURITIES TO 06/05/96
(COST $2,735,300).......................... 2,735 $ 2,735,300
-----------
SHARES
------
COMMON STOCK - 96.2%
FINANCE, INSURANCE & REAL ESTATE - 9.9%
INSURANCE CARRIERS - 1.1%
Compdent Corp.*......................... 4,300 178,450
GCR Holdings, Ltd....................... 8,300 186,750
Meadowbrook Insurance Group, Inc.*...... 6,000 201,000
Renaissancere Holdings Ltd.*............ 6,500 197,438
-----------
763,638
-----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 2.5%
Advanta Corp. (B Shares)................ 10,000 363,750
Household International, Inc............ 22,000 1,300,750
-----------
1,664,500
-----------
SECURITY & COMMODITY BROKERS, DEALERS & SERVICES - 2.9%
Alex Brown, Inc......................... 12,700 533,400
Federal Home Loan Mortgage Corp......... 6,000 501,000
Raymond James Financial, Inc............ 42,193 891,327
-----------
1,925,727
-----------
STATE & NATIONAL BANKS - 3.4%
MBNA Corp............................... 30,000 1,106,250
State Street Boston Corp................ 25,000 1,125,000
-----------
2,231,250
-----------
TOTAL FINANCE, INSURANCE
& REAL ESTATE....................... 6,585,115
-----------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
MANUFACTURING - 36.1%
CHEMICALS & ALLIED PRODUCTS - 4.1%
Air Products and Chemicals, Inc......... 16,000 $ 844,000
Airgas, Inc.*........................... 15,000 498,750
Applied Extrusion Technologies, Inc.*... 6,500 81,250
Cambrex Corp............................ 7,000 289,625
Hanna (M.A.) Co......................... 36,000 1,008,000
-----------
2,721,625
-----------
COMPUTER & OFFICE EQUIPMENT - 5.0%
3D Systems Corp.*....................... 5,000 118,750
Cirrus Logic, Inc.*..................... 11,700 231,075
Data General Corp.*..................... 23,000 316,250
Digi International, Inc.*............... 15,000 285,000
Digital Link Corp....................... 5,500 77,687
HPR Inc.*............................... 4,000 120,500
Hyperion Software Corp.*................ 13,400 284,750
Intel Corp.............................. 12,000 681,000
Microcom, Inc.*......................... 5,600 145,600
Microsoft Corp.*........................ 10,000 877,500
Network Appliance, Inc.*................ 2,100 84,263
Xcellenet, Inc.* 4,700 69,913
-----------
3,292,288
-----------
FOOD & BEVERAGE - 0.4%
Smithfield Foods, Inc.*................. 8,100 257,175
-----------
MISC. ELECTRICAL MACHINERY, EQUIP. & SUPPLIES - 3.8%
Genlyte Group, Inc.*.................... 14,600 98,550
GenRad, Inc.*........................... 23,000 221,375
Microchip Technology, Inc.*............. 13,700 500,050
Molex, Inc. (A Shares).................. 45,000 1,378,125
Watkins-Johnson Co...................... 6,700 293,125
-----------
2,491,225
-----------
MISC. INDUSTRIAL MACHINERY & EQUIP. - 3.5%
Augat, Inc.............................. 24,200 414,425
Camco International, Inc................ 6,800 190,400
Harman International Industries, Inc.... 18,900 758,363
Illinois Tool Works, Inc................ 11,000 649,000
Tower Automotive, Inc.*................. 7,900 138,250
Varco International, Inc.*.............. 14,900 178,800
-----------
2,329,238
-----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 2.2%
Cavalier Homes, Inc..................... 5,625 $ 116,719
Continental Homes Holding Corp.......... 7,600 187,150
Newell Co............................... 20,000 517,500
Pittway Corp. (A Shares)................ 7,400 501,350
Whittaker Corp.*........................ 6,100 132,675
-----------
1,455,394
-----------
PHARMACEUTICAL PREPARATIONS - 4.6%
Abbott Laboratories..................... 19,000 793,250
Alpharma, Inc. (A Shares)............... 12,800 334,400
Anika Research, Inc.*................... 4,140 16,042
Elan Corp. plc, ADR*.................... 18,000 875,250
R.P. Scherer Corp.*..................... 21,100 1,036,537
-----------
3,055,479
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 5.2%
Advanced Technology Laboratories,
Inc.*................................. 17,800 436,100
Cognex Corp.*........................... 15,000 521,250
Fisher Scientific International......... 8,200 273,675
Gelman Sciences, Inc.*.................. 5,500 138,875
Haemonetics Corp.*...................... 33,400 592,850
Kensey Nash Corp.*...................... 5,100 63,750
Nellcor Puritan Bennet, Inc.*........... 13,000 754,000
Research Medical, Inc.*................. 5,800 156,600
Spacelabs Medical, Inc.*................ 17,600 506,000
-----------
3,443,100
-----------
PRINTING & PUBLISHING - 1.0%
Banta Corp.............................. 10,000 440,000
International Imaging Materials, Inc.*.. 8,200 207,050
-----------
647,050
-----------
TELECOMMUNICATIONS EQUIPMENT - 3.3%
Analog Devices, Inc.*................... 33,150 1,172,681
Microwave Power Devices, Inc.*.......... 9,000 100,125
Network Equipment Technologies, Inc.*... 17,600 481,800
Oak Industries, Inc.*................... 7,300 136,875
Summa Four, Inc......................... 5,100 68,212
TSX Corp.*.............................. 4,600 98,900
Westell Technologies, Inc.*............. 5,600 140,700
-----------
2,199,293
-----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
TEXTILES & APPAREL - 2.1%
Authentic Fitness Corp.................. 11,500 $ 238,625
Cintas Corp............................. 20,000 890,000
Donnkenny, Inc.......................... 9,300 168,563
Fieldcrest Cannon, Inc.*................ 6,500 108,062
-----------
1,405,250
-----------
TRANSPORTATION EQUIPMENT - 0.9%
OEA, Inc................................ 20,000 597,500
-----------
TOTAL MANUFACTURING................... 23,894,617
-----------
MINING - 3.5%
CRUDE PETROLEUM & NATURAL GAS - 1.5%
Benton Oil & Gas Co.*................... 7,900 118,500
Devon Energy Corp....................... 12,900 328,950
Pogo Producing Co....................... 12,000 339,000
Weatherford Enterra, Inc.*.............. 7,943 229,354
-----------
1,015,804
-----------
MISCELLANEOUS METAL ORES - 2.0%
AMCOL International Corp................ 14,700 209,475
Minerals Technologies Inc............... 30,000 1,095,000
-----------
1,304,475
-----------
TOTAL MINING.......................... 2,320,279
-----------
SERVICES - 22.6%
BUSINESS SERVICES - 8.4%
Automatic Data Processing, Inc.......... 24,000 1,782,000
CUC International, Inc.*................ 14,000 477,750
First Data Corp......................... 25,000 1,671,875
Norrell Corp............................ 6,700 196,812
The Olsten Corp......................... 10,000 395,000
PMT Services, Inc.*..................... 6,700 202,675
PST Vans, Inc.*......................... 4,000 18,500
Shared Medical Systems Corp............. 15,000 815,625
-----------
5,560,237
-----------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
COMPUTER SERVICES - 7.5%
Acxiom Corp.*........................... 25,100 $ 687,113
American Management Systems, Inc.*...... 13,000 390,000
Banyan Systems, Inc.*................... 9,100 93,275
Boole & Babbage, Inc.*.................. 9,900 242,550
Broadway & Seymour, Inc.*............... 9,000 146,250
Ceridian Corp.*......................... 14,700 606,375
Computer Task Group, Inc................ 8,900 175,775
Fiserv, Inc.*........................... 23,412 702,360
MDL Information Systems, Inc.*.......... 10,200 234,600
Marcam Corp.*........................... 16,000 244,000
Project Software, Inc................... 4,600 160,425
SPS Transaction Services, Inc.*......... 8,900 263,662
State of The Art, Inc.*................. 10,700 105,663
Sungard Data Systems, Inc.*............. 23,800 678,300
Technology Solutions Co.*............... 500 9,750
Telxon Corp............................. 11,100 251,138
-----------
4,991,236
-----------
MEDICAL & HEALTH SERVICES - 5.8%
American Medical Response, Inc.*........ 6,100 198,250
HealthSouth Corp.*...................... 34,000 990,250
HealthWise of America, Inc.*............ 7,050 274,950
Interim Services Inc.*.................. 19,000 660,250
Medaphis Corp.*......................... 14,000 518,000
Ornda Healthcorp*....................... 25,600 595,200
Owen Healthcare, Inc.*.................. 7,700 212,713
Sterling Healthcare Group*.............. 5,400 57,375
Total Renal Care Holdings, Inc.*........ 7,000 206,500
Veterinary Centers of America, Inc.*.... 5,800 97,875
-----------
3,811,363
-----------
PERSONAL SERVICES - 0.5%
Stewart Enterprises, Inc. (A Shares).... 9,700 358,900
-----------
SANITARY SERVICES - 0.4%
United Waste Systems, Inc.*............. 7,100 264,475
-----------
TOTAL SERVICES........................ 14,986,211
-----------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
TRANSPORTATION, COMMUNICATION, ELECTRIC
& SANITATION - 4.2%
COMMUNICATION & BROADCASTING - 2.2%
Airtouch Communications, Inc.*.......... 18,000 $ 508,500
ANADIGICS, Inc.*........................ 5,400 114,750
Reuters Holding plc, ADR................ 10,000 551,250
SFX Broadcasting, Inc. (A Shares)*...... 3,700 111,925
Transaction Network Services, Inc.*..... 6,300 157,500
-----------
1,443,925
-----------
ELECTRIC, GAS & WATER UTILITIES - 0.1%
Southwestern Energy Co.................. 8,000 102,000
-----------
TRANSPORTATION - 1.9%
Air Express International Corp.......... 29,925 688,275
Covenant Transport, Inc. (A Shares)..... 6,000 72,000
TNT Freightways Corp.................... 25,000 503,125
-----------
1,263,400
-----------
TOTAL TRANSPORTATION,
COMMUNICATION, ELECTRIC
& SANITATION........................ 2,809,325
-----------
WHOLESALE & RETAIL TRADE - 19.9%
MISCELLANEOUS RETAIL STORES - 2.8%
Barnes & Noble Inc.*.................... 9,000 261,000
Best Buy Co., Inc.*..................... 19,400 315,250
Just For Feet, Inc.*.................... 7,575 270,806
Sports & Recreation, Inc.*.............. 20,550 146,419
Trend-Lines, Inc. (A Shares)*........... 7,650 76,500
Wal-Mart Stores, Inc.................... 35,000 783,125
-----------
1,853,100
-----------
RETAIL BUILDING MATERIALS - 2.0%
Home Depot, Inc......................... 28,000 1,340,500
-----------
RETAIL EATING & DRINKING PLACES - 0.7%
Applebee's International, Inc. Rights
1/1000 Share of Preferred @ $75....... 17,000 386,750
Hometown Buffet Inc.*................... 7,900 87,394
-----------
474,144
-----------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH PORTFOLIO
- -----------------------------------------------------
INVESTMENTS-CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ -----------
RETAIL FURNITURE & APPLIANCE STORES - 0.5%
Williams-Sonoma, Inc.*.................. 15,700 $ 290,450
-----------
WHOLESALE CHEMICALS & DRUGS - 2.1%
Amerisource Health Corp. (A Shares)*.... 6,900 $227,700
Cardinal Health, Inc.................... 12,616 690,726
Walgreen Co............................. 16,000 478,000
-----------
1,396,426
-----------
WHOLESALE ELECTRONIC EQUIP. & COMPUTERS - 9.1%
Arrow Electronics, Inc.*................ 15,700 677,063
Daisytek International Corp.*........... 6,900 212,175
Inmac Corp.*............................ 17,000 196,562
Lattice Semiconductor Corp.*............ 21,450 699,806
Maxim Integrated Products, Inc.*........ 46,800 1,801,800
SCI Systems, Inc.*...................... 14,300 443,300
Symbol Technologies, Inc.*.............. 16,600 655,700
Tech Data Corp.*........................ 43,800 657,000
Wyle Electronics........................ 7,500 263,437
Xilinx, Inc.*........................... 14,000 427,000
-----------
6,033,843
-----------
WHOLESALE MISCELLANEOUS - 2.7%
Alco Standard Corp...................... 22,000 1,003,750
Bearings, Inc........................... 9,000 263,250
Grainger (W.W.), Inc.................... 8,000 530,000
-----------
1,797,000
-----------
TOTAL WHOLESALE
& RETAIL TRADE...................... 13,185,463
-----------
TOTAL COMMON STOCK
(COST $42,128,676).................. 63,781,010
-----------
TOTAL INVESTMENTS
(COST $44,863,976)** - 100.3%................ 66,516,310
OTHER ASSETS AND LIABILITIES,
NET - (0.3)% ................................ (205,574)
-----------
NET ASSETS - 100.0%............................ $66,310,736
===========
* Non-income producing security.
** Cost for federal income tax purposes (Note 3).
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS/DECEMBER 31, 1995
(Showing Percentage of Total Value of Net Assets)
- -----------------------------------------------------------------------------
PAR VALUE
(000) (NOTE 2)
----- ----------
REPURCHASE AGREEMENTS - 20.6%
With C.S. Boston Group, Inc. at 6.00%,
dated 12/29/95, to be repurchased
at $1,485,890 on 01/02/96, collateralized
by $1,523,720 Federal Farm Credit Bank
Discount Notes with various maturities
to 05/14/96 (COST 1,484,900).......... 1,485 $1,484,900
----------
SHARES
------
COMMON STOCK - 79.4%
COMMUNICATION & BROADCASTING - 0.7%
Viacom Inc., (B Shares)*................ 1,000 47,375
----------
ELECTRIC, GAS & TELECOMMUNICATION UTILITIES - 6.5%
Coastal Corp............................ 2,500 93,125
Peco Energy Co.......................... 800 24,100
Telefonica de Espana S.A., ADR.......... 1,900 79,562
Unicom Corp............................. 1,700 55,675
Williams Cos., Inc...................... 3,800 166,725
WorldCom Inc.*.......................... 1,500 52,875
----------
472,062
----------
FINANCE, INSURANCE & REAL ESTATE - 13.9%
INSURANCE CARRIERS - 4.4%
Aflac, Inc............................ 300 13,013
American General Corp................. 1,300 45,337
American International Group, Inc..... 750 69,375
Exel Ltd.............................. 400 24,400
MGIC Investment Corp.................. 1,000 54,250
Providian Corp........................ 500 20,375
St. Paul Cos., Inc.................... 1,600 89,000
----------
315,750
----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 1.1%
Mercury Finance Co.................... 2,250 29,812
Washington Federal, Inc............... 1,892 48,482
----------
78,294
----------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ----------
STATE & NATIONAL BANKS - 8.4%
Bank of Boston Corp..................... 1,000 $ 46,250
BankAmerica Corp........................ 1,000 64,750
Capital One Financial Corp.............. 1,500 35,812
Chemical Banking Corp................... 1,000 58,750
Citicorp................................ 600 40,350
Comerica, Inc........................... 1,500 60,188
First Bank Systems, Inc................. 300 14,888
First Union Corp........................ 2,000 111,250
Keycorp................................. 2,500 90,625
MBNA Corp............................... 500 18,438
Suntrust Banks, Inc..................... 1,000 68,500
----------
609,801
----------
TOTAL FINANCE, INSURANCE
& REAL ESTATE....................... 1,003,845
----------
MANUFACTURING - 38.6%
TRANSPORTATION - 2.9%
AMR Corp.*.............................. 700 51,975
CSX Corp................................ 1,800 82,125
Illinois Central Corp................... 2,000 76,750
----------
210,850
----------
CHEMICALS & ALLIED PRODUCTS - 6.0%
Amgen, Inc.............................. 1,400 83,125
Eastman Chemical Co..................... 2,100 131,513
FMC Corp................................ 800 54,100
IMC Global Inc.......................... 900 36,788
Mallinckrodt Group, Inc................. 2,700 98,212
Praxair, Inc............................ 1,000 33,625
----------
437,363
----------
COMPUTER & OFFICE EQUIPMENT - 6.1%
Bay Networks, Inc....................... 750 30,844
Hewlett-Packard Co...................... 800 67,000
Intel Corp.............................. 800 45,400
International Business Machines Corp.... 800 73,400
LSI Logic Corp.*........................ 1,000 32,750
Microsoft Corp.*........................ 400 35,100
Paychex, Inc............................ 1,000 49,875
Xerox Corp.............................. 800 109,600
----------
443,969
----------
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ----------
FOOD & BEVERAGE - 3.4%
CPC International....................... 500 $ 34,312
Conagra, Inc............................ 1,500 61,875
IBP, Inc................................ 500 25,250
Pepsico, Inc............................ 1,300 72,637
Sysco Corp.............................. 1,500 48,750
----------
242,824
----------
IRON & STEEL - 1.0%
British Steel plc, ADS.................. 2,700 69,188
----------
MISC. ELECTRICAL MACHINERY, EQUIP. & SUPPLIES - 3.4%
Black & Decker Corp..................... 1,000 35,250
General Electric Co..................... 1,100 79,200
Loral Corp.............................. 1,100 38,913
Raytheon Co............................. 2,000 94,500
----------
247,863
----------
MISC. INDUSTRIAL MACHINERY & EQUIP. - 0.9%
Case Corp............................... 500 22,875
Deere & Co.............................. 1,200 42,300
----------
65,175
----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 1.6%
Gillette Co............................. 1,000 52,125
Premark International, Inc.............. 400 20,250
Procter & Gamble Co..................... 500 41,500
----------
113,875
----------
PAPER & PAPER PRODUCTS - 1.6%
Boise Cascade Corp...................... 1,400 48,475
Mead Corp............................... 800 41,800
Weyerhaeuser Co......................... 600 25,950
----------
116,225
----------
PHARMACEUTICAL PREPARATIONS - 3.8%
Abbott Laboratories..................... 2,000 83,500
Bristol-Myers Squibb Co................. 300 25,762
Johnson & Johnson....................... 500 42,812
Merck & Co., Inc........................ 600 39,450
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ----------
Pfizer, Inc............................. 500 $ 31,500
Schering-Plough, Inc.................... 1,000 54,750
----------
277,774
----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 0.6%
Beckman Instruments, Inc................ 700 24,763
Nellcor Puritan Bennet, Inc.*........... 300 17,400
----------
42,163
----------
PRINTING & PUBLISHING - 0.6%
American Greetings Corp................. 1,700 46,963
----------
RUBBER & PLASTICS - 1.4%
Goodyear Tire & Rubber Co............... 2,200 99,825
----------
TELECOMMUNICATIONS EQUIPMENT - 1.1%
ADC Telecommunications, Inc............. 1,000 36,500
Adaptec, Inc............................ 1,000 41,000
----------
77,500
----------
TEXTILES & APPAREL - 0.8%
Nautica Enterprises, Inc.*.............. 450 19,688
Nine West Group, Inc.*.................. 1,000 37,500
----------
57,188
----------
TRANSPORTATION EQUIPMENT - 3.4%
AlliedSignal, Inc....................... 1,500 71,250
Echlin, Inc............................. 500 18,250
Ford Motor Co........................... 1,700 49,300
General Motors Corp. (E Shares)......... 1,000 52,000
Rockwell International Corp............. 1,000 52,875
----------
243,675
----------
TOTAL MANUFACTURING................... 2,792,420
----------
MINING - 6.9%
COAL - 0.4%
Pittston Services Group................. 900 28,238
----------
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ----------
CRUDE PETROLEUM & NATURAL GAS - 5.5%
Atlantic Richfield Co................... 300 $ 33,225
British Petroleum Co. Ltd., ADR......... 702 71,692
Chevron Corp............................ 1,000 52,500
Halliburton Co.......................... 1,000 50,625
Mobil Corp.............................. 500 56,000
Nova Corp............................... 2,300 18,400
Royal Dutch Petroleum Co................ 600 84,675
Tenneco, Inc............................ 700 34,738
----------
401,855
----------
MISCELLANEOUS METAL ORES - 1.0%
Potash Corp. of Saskatchewan, Inc....... 1,000 70,875
----------
TOTAL MINING.......................... 500,968
----------
SERVICES - 6.8%
BUSINESS SERVICES - 2.2%
CUC International, Inc.*................ 1,250 42,656
Equifax, Inc............................ 2,600 55,575
First Data Corp......................... 300 20,062
Marriott International Inc.............. 1,000 38,250
----------
156,543
----------
MEDICAL & HEALTH SERVICES - 4.1%
Columbia/HCA Healthcare Corp............ 2,784 141,288
Foundation Health Corp.................. 1,200 51,600
Phycor, Inc.*........................... 1,125 56,883
Vencor, Inc.*........................... 1,500 48,750
----------
298,521
----------
SANITARY SERVICES - 0.5%
Sanifill Inc.*.......................... 1,000 33,375
----------
TOTAL SERVICES 488,439
----------
WHOLESALE & RETAIL TRADE - 6.0%
MISCELLANEOUS RETAIL STORES - 3.0%
Eckerd Corp.*........................... 1,500 66,937
General Nutrition Cos................... 900 20,700
Price/Costco, Inc....................... 1,500 22,875
Walgreen Co............................. 2,500 74,688
Wal-Mart Stores, Inc.................... 1,500 33,562
----------
218,762
----------
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND/GROWTH AND INCOME PORTFOLIO
- ----------------------------------------------------------------
INVESTMENTS-CONTINUED
- -----------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ----------
RETAIL EATING & DRINKING PLACES - 1.3%
McDonald's Corp......................... 2,000 $ 90,250
----------
RETAIL FOOD STORES - 1.3%
Safeway Inc.*........................... 1,500 77,250
SuperValu, Inc.......................... 600 18,900
----------
96,150
----------
WHOLESALE ELECTRONIC EQUIP. & COMPUTERS - 0.4%
Arrow Electronics, Inc.*................ 700 30,187
----------
TOTAL WHOLESALE
& RETAIL TRADE...................... 435,349
----------
TOTAL COMMON STOCK
(COST $4,624,593)..................... 5,740,458
----------
TOTAL INVESTMENTS
(COST $6,109,493)** - 100.0%................. 7,225,358
OTHER ASSETS AND LIABILITIES,
NET - (0.0)% ................................ 354
----------
NET ASSETS - 100.0%............................ $7,225,712
==========
* Non-income producing security.
** Cost for federal income tax purposes was $6,116,504 (Note 3).
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
GROWTH GROWTH AND INCOME
PORTFOLIO PORTFOLIO
----------- -----------------
ASSETS:
Investments in securities (including
repurchase agreements of
$2,735,300 and $1,484,900,
respectively), at market
(identified cost $44,863,976
and $6,109,493, respectively) (Note 2)... $66,516,310 $7,225,358
Dividends and interest receivable.......... 48,134 9,037
Receivable for Fund shares sold............ 41,872 19,251
Other assets............................... 300 32
----------- ----------
Total assets..................... 66,606,616 7,253,678
----------- ----------
LIABILITIES:
Due to Manager (Note 4).................... 56,431 147
Payable for investments purchased.......... 179,109 -
Other accrued expenses (Note 4)............ 60,340 27,819
----------- ----------
Total liabilities................ 295,880 27,966
----------- ----------
NET ASSETS................................. $66,310,736 $7,225,712
=========== ==========
NET ASSETS CONSIST OF:
Undistributed net investment income........ $ - $ 273
Net unrealized appreciation of
investments (Note 3)..................... 21,652,334 1,115,865
Accumulated net realized gain.............. 2,733 -
Distributions in excess of net
realized gains........................... - (7,079)
Shares of beneficial interest.............. 38,079 7,633
Additional paid-in capital................. 44,617,590 6,109,020
----------- ----------
NET ASSETS, for 3,807,886 and
763,267 shares outstanding,
respectively............................. $66,310,736 $7,225,712
=========== ==========
NET ASSET VALUE and redemption
price per share ($66,310,736 / 3,807,886
and $7,225,712 / 763,267 outstanding
shares of beneficial interest,
$0.01 par value, respectively)........... $17.41 $9.47
====== =====
Maximum offering price per share
(100/96.00 of $17.41 and
100/96.00 of $9.47, respectively)........ $18.14 $9.86
====== =====
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL STATEMENTS-CONTINUED
- -----------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Fiscal Year Ended December 31, 1995
GROWTH GROWTH AND INCOME
PORTFOLIO PORTFOLIO
----------- -----------------
INVESTMENT INCOME:
Income:
Dividends................................ $ 413,900 $ 106,072
Interest................................. 161,320 93,927
----------- ----------
575,220 199,999
----------- ----------
Expenses:
Management fee (Note 4).................. 640,522 69,211
Distribution expenses (Note 4)........... 18,594 5,995
Custodian fee (Note 4)................... 34,765 27,431
Transfer Agent fee (Note 4).............. 14,108 13,235
Administration fee (Note 4).............. 57,64 76,229
Accounting fee (Note 4).................. 45,000 45,000
Trustees' fees and expenses (Note 4)..... 5,398 4,950
Legal.................................... 21,465 2,407
Audit.................................... 38,574 8,837
Registration fees........................ 13,995 14,372
Miscellaneous............................ 23,204 6,189
----------- ----------
Total expenses before
reimbursement.................. 913,272 203,856
Reimbursement from Manager
(Note 4)....................... - (100,039)
----------- ----------
Total expenses, net........................ 913,272 103,817
----------- ----------
Net investment income (loss)............... (338,052) 96,182
----------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment
transactions........................... 7,295,858 612,530
Net unrealized appreciation of investments
during the year........................ 8,615,648 893,146
----------- ----------
Net gain on investments.................... 15,911,506 1,505,676
----------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.......................... $15,573,454 $1,601,858
=========== ==========
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL STATEMENTS-CONTINUED
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
GROWTH GROWTH AND INCOME
PORTFOLIO PORTFOLIO
----------- -----------------
FOR THE YEAR ENDED DECEMBER 31, 1995
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)............. $ (338,052) $ 96,182
Net realized gain on investment
transactions........................... 7,295,858 612,530
Net unrealized appreciation of
investments during the year............ 8,615,648 893,146
----------- ----------
Net increase in net assets resulting
from operations........................ 15,573,454 1,601,858
----------- ----------
Distributions to shareholders from:
Net investment income ($0.00 and
$0.13 per share, respectively)......... - (96,184)
Net realized capital gains ($2.01
and $0.88 per share, respectively)..... (6,955,073) (612,961)
----------- ----------
Total distributions to shareholders...... (6,955,073) (709,145)
----------- ----------
Decrease in net assets from Fund share
transactions (Note 5).................... (7,574,816) (116,957)
----------- ----------
Increase in net assets..................... 1,043,565 775,756
NET ASSETS:
Beginning of year........................ 65,267,171 6,449,956
----------- ----------
End of year
(including undistributed net
investment income of $0 and $273,
respectively).......................... $66,310,736 $7,225,712
=========== ==========
FOR THE YEAR ENDED DECEMBER 31, 1994
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)............. $ (115,975) $ 71,085
Net realized gain on investment
transactions........................... 4,911,108 236,741
Net unrealized depreciation
of investments during the year......... (4,935,019) (709,145)
----------- ----------
Net decrease in net assets resulting
from operations........................ (139,886) (401,319)
----------- ----------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL STATEMENTS-CONTINUED
- -----------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS-CONTINUED
GROWTH GROWTH AND INCOME
PORTFOLIO PORTFOLIO
----------- -----------------
Distributions to shareholders from:
Net investment income ($0.00 and $0.10
per share, respectively)............... $ - $ (70,810)
Net capital gain ($1.20 and $0.32
per share, respectively)............... (4,796,011) (240,067)
----------- ----------
Total distributions to shareholders...... (4,796,011) (310,877)
----------- ----------
Increase in net assets from Fund share
transactions (Note 5).................... 4,112,033 650,262
----------- ----------
Decrease in net assets..................... (823,864) (61,934)
NET ASSETS:
Beginning of year........................ 66,091,035 6,511,890
----------- ----------
End of year
(including accumulated net
investment income (loss) of
$(239,522) and $275, respectively)..... $65,267,171 $6,449,956
=========== ==========
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following tables include selected data for a share outstanding for each
Portfolio throughout each year and other performance information derived from
the financial statements. They should be read in conjunction with the
financial statements and notes thereto.
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
GROWTH PORTFOLIO
NET ASSET VALUE - BEGINNING OF YEAR. $15.14 $16.39 $15.56 $15.68 $11.59
------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment income (loss)...... (0.10) (0.03) (0.03) 0.00 0.07
Net realized and unrealized
gain (loss)on investments....... 4.38 (0.02) 2.29 0.92 4.71
------ ------ ------ ------ ------
Total from investment
operations.................. 4.28 (0.05) 2.26 0.92 4.78
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income........ 0.00 0.00 0.00 0.00 (0.07)
From net realized gain on
investments..................... (2.01) (1.20) (1.43) (1.04) (0.62)
------ ------ ------ ------ ------
Total distributions........... (2.01) (1.20) (1.43) (1.04) (0.69)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR....... $17.41 $15.14 $16.39 $15.56 $15.68
====== ====== ====== ====== ======
TOTAL RETURN*....................... 28.43% (0.23)% 14.57% 5.95% 41.54%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses**...................... 1.43% 1.38% 1.42% 1.46% 1.50%
Net investment income (loss).... (0.53)% (0.17)% (0.18)% (0.03)% 0.52%
Portfolio turnover rate........... 49.12% 37.05% 44.38% 37.79% 32.63%
Net assets at end of year
(000 omitted)................... $66,311 $65,267 $66,091 $60,852 $56,648
* These results do not include the sales load. If the sales load had
been included, the returns would have been lower.
** RSMC reimbursed a portion of the Portfolio's expenses amounting to
0.04% of average daily net assets for the year ended December 31, 1991.
The annualized expense ratio, had there been no reimbursement of
expenses by RSMC, would have been 1.54%.
22
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
FINANCIAL HIGHLIGHTS-CONTINUED
- -----------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
GROWTH AND INCOME PORTFOLIO
NET ASSET VALUE - BEGINNING OF YEAR.. $8.33 $9.29 $10.51 $12.09 $10.47
INVESTMENT OPERATIONS:
Net investment income.............. 0.13 0.10 0.10 0.18 0.28
Net realized and unrealized
gain (loss) on investments....... 2.02 (0.64) 1.39 0.52 2.37
------ ------------ ------ ------
Total from investment
operations................... 2.15 (0.54) 1.49 0.70 2.65
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income......... (0.13) (0.10) (0.10) (0.18) (0.28)
From net realized gain on
investments...................... (0.88) (0.32) (2.61) (2.10) (0.75)
------ ------ ------ ------ ------
Total distributions............ (1.01) (0.42) (2.71) (2.28) (1.03)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR........ $9.47 $8.33 $9.29 $10.51 $12.09
====== ====== ====== ====== ======
TOTAL RETURN*........................ 26.03% (5.82)% 14.26% 5.90% 25.74%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses**....................... 1.50% 1.50% 1.50% 1.50% 1.50%
Net investment income............ 1.39% 1.12% 0.80% 1.37% 2.12%
Portfolio turnover rate............ 83.49% 106.26% 68.49% 76.63% 133.02%
Net assets at end of year
(000 omitted).................... $7,226 $6,450 $6,512 $10,147 $15,432
* These results do not include the sales load. If the sales load had
been included, the returns would have been lower.
** RSMC reimbursed a portion of the Portfolio's expenses amounting to
1.45%, 1.54%, 1.35%, 0.93% and 0.79% for the five years in the period
ended December 31, 1995, respectively. The annualized expense ratio,
had there been no reimbursement of expenses by RSMC, would have been
2.95%, 3.04%, 2.85%, 2.43%, and 2.29%, respectively.
23
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND. The Rodney Square Multi-Manager 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 August 19, 1986, as last amended on February
15, 1993, permits the Board of Trustees to establish separate series each
of which issues a separate class of shares. The authorized shares of
beneficial interest in the Fund are currently divided into two series,
the Growth Portfolio and the Growth and Income Portfolio (each, a
"Portfolio" and collectively, the "Portfolios"). The investment
objective of the Growth Portfolio is to produce superior long-term
capital appreciation by investing in securities of companies which are
judged by its portfolio advisers to possess strong growth
characteristics. The investment objective of the Growth and Income
Portfolio is to produce superior long-term total return through a
combination of capital appreciation and income by investing in securities
with attractive growth or valuation characteristics or relatively high
income yields.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. Each Portfolio's securities, except short-term
investments with remaining maturities of 60 days or less, are valued at
their market value as determined by their last sale price in the
principal market in which these securities are normally traded. Lacking
any sales, such securities will be valued at the mean between the closing
bid and ask 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.
REPURCHASE AGREEMENTS. The Portfolios, through their custodian, receive
delivery of the underlying securities, the market value of which at the
time of purchase is required to be an amount equal to at least 101% of
the resale price. Rodney Square Management Corporation ("RSMC") is
responsible for determining that the value of these underlying securities
is at all times equal to 101% of the resale price.
FEDERAL INCOME TAXES. Each Portfolio is treated as a separate entity and
intends to continue to qualify for treatment as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986 and to
distribute all of its taxable income to its shareholders. Therefore, no
federal income tax provision is required. The Growth Portfolio
reclassified $(577,574) and $558,143 from accumulated net investment loss
and accumulated net realized gain, repectively, to additional paid-in
capital. These reclassifications were made to present undistributed
income and accumulated gains on a tax basis and have no impact on the net
asset value of the Portfolio. Certain temporary book/tax timing
differences are reflected as "distributions in excess of net realized
gains" in the Statement of Assets and Liabilities.
24
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
- ------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. Distributions of net investment income
earned by the Growth Portfolio will be made annually in December.
Distributions of net investment income earned by the Growth and Income
Portfolio will be made quarterly in March, June, September and December.
Distributions of net capital gains realized by each Portfolio will be
made annually in December. An additional distribution may be made to the
extent necessary to avoid the payment of a 4% excise tax.
OTHER. Investment security transactions are accounted for on a trade
date basis. Each Portfolio uses the specific identification method for
determining realized gain or loss on investments for both financial and
federal income tax reporting purposes.
3. PURCHASES AND SALES OF INVESTMENT SECURITIES. During the year ended
December 31, 1995, purchases and sales of investment securities
(excluding short-term investments) aggregated as follows:
GROWTH AND
GROWTH PORTFOLIO INCOME PORTFOLIO
---------------- ----------------
Purchases....... $30,253,215 $4,473,251
Sales........... 43,533,448 5,007,247
The following balances are as of December 31, 1995:
TAX BASIS TAX BASIS
COST FOR NET TAX BASIS GROSS GROSS
FEDERAL INCOME UNREALIZED UNREALIZED UNREALIZED
PORTFOLIO TAX PURPOSES APPRECIATION APPRECIATION DEPRECIATION
------------ -------------- ------------- ------------ ------------
Growth......... $44,863,976 $21,652,334 $23,148,441 $(1,496,107)
Growth
and Income... 6,116,504 1,108,854 1,150,490 (41,636)
4. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund, on
behalf of each Portfolio, employs RSMC, a wholly owned subsidiary of
Wilmington Trust Company ("WTC"), which in turn is wholly owned by
Wilmington Trust Corporation, a publicly held bank holding company, to
provide asset management, consulting services and other services to the
Fund. Each Portfolio's assets are managed by portfolio advisers who have
entered into advisory agreements with RSMC and the Fund. It is
anticipated that each Portfolio will ordinarily be served by at least two
portfolio advisers. RSMC, as well as each portfolio adviser, is
considered an "investment adviser" to the applicable Portfolio as that
term is defined in the 1940 Act.
For management services to the Fund, RSMC receives an annual fee equal to
1.00% of the average daily net assets of each Portfolio up to $200
million of Fund assets and 0.95% of the average daily net assets in
excess of $200 million. RSMC has agreed to waive its fees or reimburse
each Portfolio monthly to the extent that operating expenses (excluding
taxes, extraordinary expenses, brokerage commissions and interest) exceed
an annual rate of 1.50% of average daily net assets.
25
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
- ------------------------------------------------------------------------------
The following table summarizes the management fees for the year ended
December 31, 1995:
GROSS
MANAGEMENT REIMBURSEMENT
PORTFOLIO FEE FROM MANAGER
-------------------- ---------- -------------
Growth................ $640,522 $ -
Growth and Income..... 69,211 100,039
RSMC serves as Administrator to the Fund under an Administration
Agreement dated December 31, 1992. Pursuant to this agreement, RSMC is
responsible for services such as budgeting, maintaining federal and state
registration for the Fund's shares, 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
0.09% of each Portfolio's average daily net assets. The administration
fee paid to RSMC for the year ended December 31, 1995 amounted to $57,647
and $6,229 for the Growth Portfolio and the Growth and Income Portfolio,
respectively.
WTC serves as Custodian of the assets of the Fund. For its services, WTC
is paid an annual fee based upon the average daily net assets of each
Portfolio as follows: 0.025% of average daily net assets of each
Portfolio up to $50 million; 0.020% of average daily net assets of each
Portfolio in excess of $50 million up to $100 million and 0.015% of
average daily net assets of each Portfolio over $100 million, plus $15
per purchase, sale or maturity of a portfolio security. The custodian
fee is subject to a minimum charge of $1,000 per Portfolio, per month,
exclusive of any transaction charges.
RSMC serves as Transfer and Dividend Paying Agent for the Fund pursuant
to a Transfer Agent Agreement with the Fund dated December 31, 1992. For
its services, the Fund pays RSMC $7 per shareholder account per year,
plus various other transaction fees, subject to a minimum of $1,000 per
month, plus out-of-pocket expenses.
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, and the Fund's shareholders have approved,
a distribution plan with respect to each Portfolio pursuant to Rule 12b-1
under the 1940 Act to allow the Fund to reimburse RSD for certain
distribution activities and to allow WTC to incur certain expenses, the
payment of which may be considered to constitute indirect payment by the
Fund of distribution expenses. The Board of Trustees has authorized
annual payments of up to 0.25% of each Portfolio's average daily net
assets to reimburse RSD for such expenses. For the year ended December
31, 1995, such expenses amounted to $18,594 and $5,995 for the Growth
Portfolio and the Growth and Income Portfolio, respectively.
26
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
- ------------------------------------------------------------------------------
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 $45,000 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 year ended December 31,
1995, RSMC's fees for accounting services amounted to $45,000 per
Portfolio.
The salaries of all officers of the Fund, the Trustees who are
"interested persons" of the Fund, RSMC, RSD, or their affiliates and all
personnel of the Fund, RSMC or RSD performing services related to
research, statistical and investment activities are paid by RSMC, RSD or
their affiliates. For the year ended December 31, 1995 the fees and
expenses of the "non-interested" Trustees amounted to $5,398 and $4,950
for the Growth Portfolio and the Growth and Income Portfolio,
repectively.
5. FUND SHARES. At December 31, 1995, there was an unlimited number of
shares of beneficial interest, $0.01 par value, authorized. The
following table summarizes the activity in shares of each Portfolio:
GROWTH PORTFOLIO
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- --------- ----------
Shares sold............ 388,740 $ 7,028,995 323,662 $5,252,086
Shares issued
to shareholders
in reinvestment
of dividends......... 349,493 6,021,765 303,972 4,553,501
Shares redeemed........(1,240,767) (20,625,576) (350,492) (5,693,554)
---------- ----------- --------- ----------
Net increase
(decrease)........... (502,534) $(7,574,816) 277,142 $4,112,033
=========== ==========
Shares outstanding:
Beginning of year...... 4,310,420 4,033,278
---------- ---------
End of year............ 3,807,886 4,310,420
========== =========
27
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
NOTES TO THE FINANCIAL STATEMENTS-CONTINUED
- -----------------------------------------------------------------------------
GROWTH AND INCOME PORTFOLIO
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- --------- --------- ----------
Shares sold.......... 121,230 $1,137,365 236,338 $2,127,357
Shares issued
to shareholders
in reinvestment
of dividends....... 72,293 681,872 34,067 285,058
Shares redeemed...... (204,858) (1,936,194) (196,585) (1,762,153)
-------- ---------- -------- ----------
Net increase
(decrease).......... (11,335) $ (116,957) 73,820 $ 650,262
========== ==========
Shares outstanding:
Beginning of year.... 774,602 700,782
-------- --------
End of year.......... 763,267 774,602
======== ========
28
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Trustees of The Rodney Square Multi-Manager Fund:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Rodney Square Multi-Manager
Fund (comprising, respectively, the Growth and Growth and Income Portfolios)
as of December 31, 1995, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1995 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 Multi-Manager Fund
at December 31, 1995, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Baltimore, Maryland
January 24, 1996
29
THE RODNEY SQUARE MULTI-MANAGER FUND
- ------------------------------------
TAX INFORMATION
- ------------------------------------------------------------------------------
By now shareholders to whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV from the Fund.
The Growth and the Growth and Income Portfolios paid distributions of $2.0065
and $0.5930, respectively, from net long-term capital gains during the year
ended December 31, 1995. Pursuant to Section 852 of the Internal Revenue
Code, the Growth and the Growth and Income Portfolios designate $6,933,993 and
$411,742, respectively, as capital gain distributions for the fiscal year
ended December 31, 1995.
<PAGE>
30
TRUSTEES THE RODNEY SQUARE
Eric Brucker MULTI-MANAGER FUND
Fred L. Buckner
Martin L. Klopping
John J. Quindlen
------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Marilyn Talman, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
Louis C. Schwartz, Esq., ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
- ---------------------------------------------
[Graphic] Ceasar
Rodney upon his
FUND MANAGER, ADMINISTRATOR AND galloping horse
TRANSFER AGENT facing right,
Rodney Square Management Corporation reverse image on
------------------------------------ dark background
CUSTODIAN
Wilmington Trust Company
------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
--------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
--------------------------
ANNUAL REPORT
DECEMBER 31, 1995
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.
RS04 - 2/96
<PAGE>
APPENDIX
DESCRIPTION OF OPTION INCOME AND HEDGING STRATEGIES
The following describes the Fund's option income and hedging strategies.
OPTION INCOME AND HEDGING STRATEGIES. The Portfolio may purchase and
write (sell) both exchange-traded options and options traded on 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 the
Portfolio and its contra-party with no clearing organization guarantee. Thus,
when the 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.
The Portfolio may purchase call options on securities that a portfolio
adviser intends to include in the Portfolio 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 the Portfolio
to the option premium paid; conversely, if the market price of the underlying
security increases above the exercise price and the Portfolio either sells or
exercises the option, any profit eventually realized would be reduced by the
premium paid.
The Portfolio may purchase put options on securities in order to hedge
against a decline in the market value of securities held in its portfolio or
to attempt to enhance return. The put option enables the 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 would be reduced by the premium paid for the put
option less any amount for which the put option may be sold.
The Portfolio may on certain occasions wish to hedge against a decline in
the market value of securities held in its portfolio at a time when put
options on those particular securities are not available for purchase. The
Portfolio may therefore purchase a put option on other carefully selected
securities, the values of which historically have a high degree of positive
correlation to the value of such portfolio securities. If the portfolio
adviser's judgment is correct, changes in the value of the put options should
generally offset changes in the value of the portfolio securities being
hedged. However, the correlation between the two values may not be as close
in these transactions as in transactions in which the Portfolio purchases a
put option on a security held in its portfolio. If the portfolio adviser's
judgment is not correct, the value of the securities underlying the put option
may decrease less than the value of the Portfolio's securities, and therefore
the put option may not provide complete protection against a decline in the
value of the Portfolio's securities below the level sought to be protected by
the put option.
<PAGE>
The Portfolio may write covered call options on securities in which it is
authorized to invest for hedging or to increase return in the form of premiums
received from the purchases 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 the Portfolio declines, the amount of
such 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
would be obligated to sell the security at less than its market value. The
Portfolio would give up the ability to sell any portfolio securities used to
cover the call option while the call option was outstanding. Portfolio
securities used to cover OTC options written also may be considered illiquid,
and therefore subject to the Portfolio's limitation on investing no more than
15% of its net asset 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 option written subject to this
procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
In addition, the Portfolio could lose the ability to participate in an
increase in the value of such securities above the exercise price of the call
option because such an 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).
The 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
security would decline below the exercise price less the premiums received, in
which case the Portfolio would expect to suffer a loss.
The Portfolio may purchase put and call options and write covered put and
covered call options on U.S. securities 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 an index option, the purchaser will
realize, and the writer will pay, an amount based on the difference between
<PAGE>
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 the Portfolio invests. Perfect correlation is not
possible because the securities held or to be acquired by the Portfolio will
not exactly match the composition of the securities indexes on which options
are purchased or written.
OPTIONS GUIDELINES. In view of the risks involved in using the options
strategies described above, the Portfolio has adopted the following investment
guidelines to govern its use of such strategies; these guidelines may be
modified without shareholder vote:
(1) the Portfolio will write only covered options, and each such option
will remain covered so long as the Portfolio is obligated under the option;
(2) the Portfolio will not write call or put options having aggregate
exercise prices greater than 25% of its net assets;
(3) the Portfolio may purchase a put or call option only if the value of
its premium, when aggregated with the premiums on all other options held by
the Portfolio, does not exceed 5% of the Portfolio's total assets;
(4) the Portfolio may purchase protective put options (under which the
security to be sold is identical or substantially identical to a security
already held by the Portfolio or which the Portfolio has the right to
purchase) with respect to not more than 25% of the value of its net assets;
(5) the Portfolio may purchase put and call options, other than
protective put options, with a value of up to 5% of the value of the
Portfolio's net assets; and
(6) the Portfolio will not invest more than 10% of the value of its
assets in options on securities indexes.
COVER FOR OPTIONS STRATEGIES. The Portfolio will not use leverage in its
options strategies and will write only covered options. Accordingly, the
Portfolio will comply with guidelines established by the SEC with respect to
coverage of options strategies and will either (1) set aside cash, U.S.
Government or other liquid, high-grade debt securities in a segregated account
with its custodian in the prescribed amount, or (2) hold securities or other
options positions whose values are expected to offset its obligations
thereunder. Securities or other options positions used for cover cannot be
sold or closed out while the option 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 the Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.
<PAGE>
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The Portfolio may
effectively terminate its right or obligation under an option by entering into
a closing transaction. If the Portfolio wishes to terminate its obligation to
purchase or sell securities under a put or 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 under a call or put option it
has purchased, the 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 the Portfolio to realize profits or limit
losses on its options positions prior to the exercise or expiration of the
option. If the 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 the 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 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.
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 or index, the time
remaining until expiration, the relationship of the exercise price to the
market price, the historical price volatility of the underlying security or
index and general market conditions. For this reason, the successful use of
options depends upon a portfolio adviser's ability to forecast the direction
of price fluctuations in the underlying securities 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. The
exercise price of the options may be below, equal to or above the current
market value of the underlying security or index. Purchased options that
expire unexercised have no value. Unless an option purchased by the 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. Most
exchange-listed options relate to stocks. Although the 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. Closing
transactions may be effected with respect to options traded in the OTC markets
(currently the primary markets for options on debt securities) only by
negotiating directly with the other party to the option contract or in a
secondary market for the option if such other market exists. Although the
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, the Portfolio may
<PAGE>
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 the
Portfolio, the inability to enter into a closing transaction may result in
material losses to the Portfolio. For example, because the Portfolio must
maintain a covered position with respect to any call option it writes on a
security or index, the Portfolio may not sell the underlying securities (or
invest any cash or securities used to cover the option) during the period it
is obligated under such option. This requirement may impair the Portfolio's
ability to sell a portfolio security or make an investment at a time when such
a sale or investment might be advantageous.
(4) Securities index options are settled exclusively in cash. If the
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. In addition, a holder of
an index option, who exercises it before the closing index value for that day
is available, runs the risk that the level of the underlying index may
subsequently change.
(5) The Portfolio's activities in the options markets may result in a
higher portfolio turnover rate and additional brokerage costs; nevertheless,
the Portfolio also may save on commissions by using options as a hedge rather
than buying or selling individual securities in anticipation or as a result of
market movements.
