<PAGE>
THE RODNEY SQUARE
MULTI-MANAGER FUND
THE 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, 1997
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, 1997 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.
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FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT,
PLEASE CALL:
* NATIONWIDE..................... (800) 336-9970
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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 GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
SHAREHOLDER TRANSACTION COSTS 1
------------------------------
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 2 ..................................... 0.02%
Other Expenses.................................. 0.41%
Total Portfolio Operating Expenses.............. 1.43%
EXAMPLE 3
----------
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
1 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.
2 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.
3 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 assist 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, 1996.
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.
<PAGE>
FINANCIAL HIGHLIGHTS
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, 1996, 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,
-------------------------------- ------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -
BEGINNING OF PERIOD............. $17.41 $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05 $8.37 $10.00
INVESTMENT OPERATIONS:
Net investment income (loss)1... (0.15) (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..... 4.37 4.38 (0.02) 2.29 0.92 4.71 (1.01) 2.58 1.68 (1.65)
Total from investment
operations.................. 4.22 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 0.00 (0.07) (0.12) (0.15) (0.07) (0.06)
From net realized gain on
investments.................... (2.41) (2.01) (1.20) (1.43) (1.04) (0.62) (0.01) 0.00 0.00 0.00
Total distributions.......... (2.41) (2.01) (1.20) (1.43) (1.04) (0.69) (0.13) (0.15) (0.07) (0.06)
NET ASSET VALUE - END OF PERIOD.. $19.22 $17.41 $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05 $8.37
TOTAL RETURN 2 ................. 24.25% 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 3...................... 1.43% 1.43% 1.38% 1.42% 1.46% 1.50% 1.74% 1.75% 1.75% 1.75% 4
Net investment income (loss).... (0.78)% (0.53)% (0.17)% (0.18)% (0.03)% 0.52% 0.94% 1.21% 0.77% 0.92% 4
Portfolio turnover rate.......... 34.84% 49.12% 37.05% 44.38% 37.79% 32.63% 38.18% 83.12% 57.55% 62.00% 4
Average commission rate paid 5... $0.063 - - - - - - - - -
Net assets at end of period
(000 omitted)................... $76,174 $66,311 $65,267 $66,091 $60,852 $56,648 $40,709 $39,571 $28,845 $24,169
</TABLE>
1 The net investment income per share for the year ended December 31,
1996 was calculated using average shares outstanding.
2 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.
3 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, 1996, 1995, 1994, 1993, 1992 and 1990, no reimbursement or fee
waiver was necessary.
4 Annualized.
5 Required disclosure for fiscal years beginning after September 1, 1995
pursuant to SEC regulations.
<PAGE>
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 risk 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 at least two
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 "Fund Management and Other Service Agreements").
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
may 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 "Fund Management
and Other Service 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 "Fund Management
and Other Service Agreements").
WHO IS THE DISTRIBUTOR?
Rodney Square Distributors, Inc. ("RSD"), another wholly owned
subsidiary of WTC, serves as Distributor of the Fund. (See
"Fund Management and Other Service 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:
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* NATIONWIDE..................... (800) 336-9970
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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
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, profits,
or other key factors. 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 may also
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, securities
issued by the Government National Mortgage Association) 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 Portfolio 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. The Portfolio may not invest more than 15% of
its net assets in securities that are considered illiquid. Such securities
include 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. Restricted securities 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. As
a matter of of fundamental policy, 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.
Except where otherwise noted, 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 that are described in the Statement of Additional Information.
RISK FACTORS
GROWTH ORIENTED INVESTING. 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.
SMALL CAP COMPANIES. 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, may be dependent on relatively small or
inexperienced management groups, and may operate in industries
characterized by rapid technological obsolescence. 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.
DEBT SECURITIES. The Portfolio's investment 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 fall and, conversely, when interest rates
fall, the prices of such securities tend to rise.
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.
OPTIONS. 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).
AMERICAN DEPOSITORY RECEIPTS. 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, located at the end of this Prospectus 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 canceled, and you will be responsible for any
losses or fees incurred in that transaction.
BY WIRE. You may purchase shares by wiring federal funds. To advise
the Fund of the wire and, if making an initial purchase, to obtain an
account number, you must telephone RSMC at (800) 336-9970. Once you
have an account number, instruct your bank to wire federal funds to
RSMC, c/o Wilmington Trust Company, Wilmington, DE-ABA# 0311-0009-2,
attention: The Rodney Square 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
DISCOUNT TO SERVICE
SALES LOAD AS A PERCENTAGE OF ORGANIZATIONS AS A
OFFERING NET AMOUNT INVESTED PERCENTAGE OF
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) 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, if such
procedures are followed, will not be liable for any losses due to
unauthorized or fraudulent telephone transactions. During times of
drastic economic or market changes, the telephone redemption privilege
may be difficult to implement. In the event that you are unable to
reach RSMC by telephone, you may make a redemption request by mail.
ADDITIONAL REDEMPTION INFORMATION. You may redeem all or any part of
the value of your account on any Business Day of the Fund. Redemptions
are effected at the net asset value 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 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 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, located at the end of
this Prospectus, 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, located at the end of this
Prospectus, that the Social Security or other taxpayer identification
number provided thereon is correct and that the investor is not
otherwise subject to backup withholding.
Special rules apply when a Shareholder (1) disposes of shares of the
Portfolio through a redemption or exchange within 90 days after purchase
therof 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 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. 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.
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.
As of December 31, 1996, the aggregate assets of the three investment
companies managed by RSMC totaled approximately $1.6 billion. RSMC also
serves as Sub-Investment Adviser to one portfolio of the Emerald Funds,
which portfolio assets totaled approximately $99.4 million as of
December 31, 1996.
Martin L. Klopping, President of RSMC, has been responsible for
monitoring the day-to-day activity of the portfolio advisers since
February 26, 1987, the commencement of operations of the Portfolio. Mr.
Klopping has served as President of RSMC for the past twelve 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. Frontier began operations in
1981. The professional staff own 90% 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 $2.6 billion of assets under management as of December 31,
1996. 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 26, 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 34 principals, all of whom are active in the business.
Blair's investment management group acts as adviser to over 444
institutional clients and had over $7.8 billion under discretionary
management as of December 31, 1996. 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.
FUND MANAGEMENT AND OTHER SERVICE 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 Plan"), the Fund may reimburse RSD for distribution
expenses incurred in connection with the distribution efforts described
above. The 12b-1 Plan provides 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 restrict 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.
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 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 January
31, 1997, WTC owned by virtue of shared or sole voting or investment
power on behalf of its underlying customer accounts 75.0% 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
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)
__ GROWTH PORTFOLIO $ _______________
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 _____ _____
GROWTH AND INCOME PORTFOLIO _____ _____
- -------------------------------------------------------------------------------
CHECK ANY OF THE FOLLOWING IF YOU WOULD LIKE ADDITIONAL INFORMATION ABOUT A
PARTICULAR PLAN OR SERVICE SENT TO YOU.
_____ AUTOMATIC INVESTMENT PLAN _____ SYSTEMATIC 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
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. By granting this power, I
understand that RSMC may be contacted, on my apparent behalf, by imposters.
In view of this risk, I futher understand and agree that RSMC plans to
follow reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures shall include sending proceeds to
telephone redemption requests only to my account address of record, or to
the bank listed above. Proceeds in excess of $10,000 will be sent only to
my predesignated bank. By signing below, I agree on behalf of myself,
my successors and assigns, not to hold RSMC, any of its affiliates, or any
Rodney Square fund responsible for acting under the powers I have given
RSMC, provided the aforementioned precautionary procedures are duly followed.
I also agree that all account and registration information I have given will
remain the same unless I instruct RSMC otherwise in writing, accompanied by
a signature guarantee. If I want to terminate this agreement, I will give
RSMC at least ten days notice in writing. If RSMC or other Rodney Square
funds want to terminate this agreement, they will give me at least ten days
notice in writing.
ALL OWNERS ON THE ACCOUNT MUST SIGN BELOW AND OBTAIN SIGNATURE GUARANTEE(S).
___________________________________ _____________________________________
Signature of Individual Owner Signature of Joint Owner (if any)
____________________________________________________________________________
Signature of Corporate Officer, Trustee or other - please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government
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
Carl M. Rizzo, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
- -------------------------------------
ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
INVESTMENT ADVISER AND CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
<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, 1997
<PAGE>
TABLE OF CONTENTS
Expense Table................................
Financial Highlights Growth Portfolio........
Questions and Answers About
the Portfolios............................
Investment Objectives and Policies...........
Other Investment Practices...................
Risk Factors.................................
Purchase of Shares...........................
Shareholder Accounts.........................
Redemption of Shares.........................
Exchange of Shares...........................
How Net Asset Value is Determined............
Dividends, Capital Gains Distribution
and Taxes.................................
Performance Information......................
Management of the Fund.......................
Fund Management And Other Service Agreements.
Description of the Fund......................
Application and New Account Registration.....
Application For Telephone Redemption.........
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
THE 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, 1997
- -------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Fund's current Prospectus, dated
May 1, 1997. 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......................... 8
INVESTMENT MANAGEMENT SERVICES................... 9
Fund Management Agreement..................... 9
Advisory Agreements........................... 10
ADMINISTRATION, ACCOUNTING AND
DISTRIBUTION AGREEMENTS
AND RULE 12b-1 PLAN.......................... 11
REDEMPTIONS...................................... 15
PORTFOLIO TRANSACTIONS........................... 16
NET ASSET VALUE.................................. 18
PERFORMANCE INFORMATION.......................... 18
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.
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.
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 or other liquid assets 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 or losses.
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.
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 initially 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
adversely affect 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.
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
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. purchase securities on margin except to obtain such credits as
may be necessary for the clearance of the purchases and sales of
securities, 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
4. engage in futures contract transactions.
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, and The Rodney Square Strategic Fixed-Income Fund.
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
44, 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 55, 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.
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 held from March 1987
through March 1992. He also served as a member of the Hercules
Incorporated Board of Directors from 1986 through March 1992.
*ROBERT J. CHRISTIAN, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Trustee, age 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 64, 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 has also served as a Trustee of the
Kiewit Mutual Fund since July 1994.
JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market Street,
Wilmington, DE 19890-0001, Vice President, age 40, has been with RSMC
since 1984, as a Secretary of RSMC since 1986, a Director of RSMC since
1989 and a Vice President of RSMC since 1992. He was an Assistant Vice
President of RSMC from 1988 to 1992.
ROBERT C. HANCOCK, Rodney Square North, 1100 N. Market Street,
Wilmington, DE 19890-0001, Vice President and Treasurer, age 45, 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.
CARL M. RIZZO, ESQ., Rodney Square North, 1100 N. Market Street,
Wilmington, DE 19890-0001, Secretary, age 45, was appointed Vice
President of RSMC in July, 1996. From 1995 to 1996 he was Assistant
General Counsel of Aid Association for Lutherans (a fraternal benefit
association); from 1994 to 1995 Senior Associate Counsel of United
Services Automobile Association (an insurance and financial services
firm); and from 1987 to 1994 Special Counsel or Attorney-Adviser with a
federal government agency.
DIANE D. MARKY, Rodney Square North, 1100 N. Market Street, Wilmington,
DE 19890-0001, Assistant Secretary, age 32, has been a Senior Fund
Administrator of RSMC since 1994 and a Fund Administration Officer since
1991.
CONNIE L. MEYERS, Rodney Square North, 1100 N. Market Street, Wilmington,
DE 19890-001, Assistant Secretary, age 36, has been a Fund Administrator
of RSMC since August 1994. She was a Corporate Custody Administrator for
WTC from 1989 to 1994.
JOHN J. KELLEY, Rodney Square North, 1100 N. Market Street, Wilmington,
DE 19890-0001, Assistant Treasurer, age 37, has been a Vice President
of RSMC since 1995 and was an Assistant Vice President of RSMC from 1989
to 1994.
The fees of the Trustees who are not "interested persons" of the
Fund, as defined in the 1940 Act ("Independent Trustees"), are paid by the
Portfolio. The Portfolio may also reimburse Independent Trustees for
expenses incurred in attending meetings of the Board. The following
table shows the fees paid during calendar 1996 to the Independent
Trustees for their service to the Fund and to the Rodney Square Family
of Funds. On December 31, 1996, 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.
1996 TRUSTEES FEES
TOTAL FEES FROM TOTAL FEES FROM THE RODNEY
INDEPENDENT TRUSTEE THE FUND SQUARE FAMILY OF FUNDS
- ------------------- -------- ----------------------
Eric Brucker $1,725 $17,450
Fred L. Buckner $1,725 $17,450
John J. Quindlen $1,725 $17,450
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.
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 twentieth 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. Certain departments in WTC engage in
investment management activities that utilize a variety of investment
instruments such as interest rate futures contracts, options on U. S.
Treasury securities and municipal forward contracts. Of course, there
can be no guarantee that the Portfolio will achieve its investment
objective or that WTC will perform its services for the Portfolio in a
manner which would cause it to satisfy its objective.
WTC also serves as the Investment Adviser of The Rodney Square
Strategic Fixed-Income Fund, and Custodian of The Rodney Square Fund, The
Rodney Square Tax-Exempt Fund, and The RodneySquare Strategic Fixed-
Income Fund.
INVESTMENT MANAGEMENT SERVICES
FUND MANAGEMENT AGREEMENT. RSMC has served as Fund Manager to the
Fund since its inception, currently pursuant to a Fund Management
Agreement dated December 2, 1989. 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 Fund 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.
The Agreement also provides that RSMC may delegate its investment
decision-making authority to the portfolio advisers. RSMC's Fund
Management fees for the Portfolio for the fiscal years ended December 31,
1996, 1995, and 1994 were $706,321, $640,522, and $667,782, respectively.
RSMC 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.
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 (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.
ADVISORY AGREEMENTS. The Fund has entered into Advisory Agreements
with RSMC and the portfolio advisers listed below. Pursuant to these
agreements, RSMC pays out of the Fund Management fee it receives 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, 1996, 1995, and
1994 RSMC paid the following advisory fees:
YEAR ENDED YEAR ENDED YEAR ENDED
PORTFOLIO ADVISER 12/31/96 12/31/95 12/31/94
----------------- -------- -------- --------
Frontier Capital Management
Co., Inc. $176,500 $152,932 $119,560
William Blair &
Company L.L.C. $176,661 $146,471 $109,048
Spears Benzak Salomon &
Farrell (terminated $0 $20,857 $105,283
as of 3/31/95)
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, 1996, 1995, and 1994, RSMC was paid administration
fees amounting to $63,569, $57,647, and $60,100, respectively.
Under the terms of the Administration Agreement, RSMC agrees to:
(a) supply office facilities, non-investment related statistical and
research data, executive and administrative services, stationery and
office supplies and corporate management services for the 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, 1996, 1995, and 1994, RSMC was paid an accounting service
fee of $45,000.
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.
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, 1996, 1995, and 1994, RSD received from the Fund
underwriting commissions of $4,544, $5,691, and $10,910, respectively.
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 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.
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, 1996, payments under the 12b-1 Plan amounted to
$16,899: $13,372 was paid in trail commissions, $1,347 was paid for
prospectus printing and $2,180 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.
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, 1996, 1995 and 1994, the Portfolio paid total brokerage
commissions of $59,691, $116,972, and $61,503, 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").
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, 1996, the Portfolio paid $20,783 in brokerage commissions, involving
transactions in the amount of $10,917,379 to brokers because of research
services provided. These commissions paid amounted to 34.82% of the
Portfolio's aggregate brokerage commissions for the year. The Portfolio
may purchase and sell portfolio securities to and from dealers who
provide the Portfolio with research services. Portfolio transactions,
however, 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, 1996 and 1995, 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.
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, 1996 and
1995 was 34.84% and 49.12%, 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.
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
118 MONTHS SINCE
INCEPTION
1 YEAR 5 YEARS FEB. 26, 1987
ENDED ENDED THROUGH
SALES LOAD1 DEC. 31, 1996 DEC. 31, 1996 DEC. 31, 1996
----------- ------------- ------------- --------------
4.00% 19.28% 13.16% 12.38%
None 24.25% 14.08% 12.84%
- ------------
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.
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, 1996: 24.25%; for
the five-years ended December 31, 1996: 93.24%; and for the period since
the Portfolio's inception on February 26, 1987 through December 31, 1996:
228.92%.
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.
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, 1996, a hypothetical $10,000 investment
in the Portfolio would have grown to $32,892 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 Total (Consumer
DECEMBER 31 INVESTMENT DIVIDENDS DISTRIBUTIONS VALUE PRICE INDEX)
- ----------- ---------- --------- ------------- ----- ------------
1996 $19,220 $808 $12,865 $32,892 42.1%
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%
19872 $ 8,370 $ 52 - $ 8,422 3.4%
- ------------------
2 From commencement of operations, February 26, 1987.
Explanatory Note: A hypothetical initial investment of $10,000 on
February 26, 1987, together with the aggregate cost of reinvested
dividends and capital gain distributions for the entire period covered
(their cash value at the time they were reinvested), would have amounted to
$21,831. If dividends and capital gain distributions had not been
reinvested, the total value of the investment in the Portfolio over time
would have been smaller, and cash payments for the period would have
amounted to $470 for income dividends and $8,716 for capital gain
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.
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, 1996, 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 that 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 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 class, as
applicable, for the ranking in question.
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.
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 businesses, 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. 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, securities of other RIC's
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 or the securities of other RIC's) any one
issuer.
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 for RIC treatment.
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 and capital gain
net income for that year, plus certain other amounts. 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 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 on 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 its
shares. If a distribution reduces 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.
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.
Special rules apply when a shareholder (1) disposes of Portfolio
shares 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 Portfolio shares are redeemed
within 30 days after other Portfolio shares 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 its shareholders. Gains from
options derived by the Portfolio with respect to its business of investing
in securities qualify as permissible income under the Income Requirement.
Income from the sale or other disposition of options held for less than
three months, however, is 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 to mitigate these consequences and prevent its
disqualification as a RIC.
WASH SALES. The "wash sale" rules of the Code generally postpone
deduction of a loss incurred on 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 may not be fully aware,
on a current basis, of purchases and sales effected by the Portfolo's
other portfolio adviser, 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 these wash sale rules
by making each portfolio adviser aware of losses sustained by the 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 authorizes
the creation of multiple series - the Portfolio is the only existing
series - and 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 Portfolio's 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 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 the 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 December 31, 1996, WTC owned of
record 91.0% of the shares of the Portfolio, including 75.0% owned
beneficially, all on behalf of its customer accounts.
FINANCIAL STATEMENTS
The Schedule of Investments as of December 31, 1996: the Statement
of Assets and Liabilities as of December 31, 1996; the Statement of
Operations for the fiscal year ended December 31, 1996; the Statement of
Changes in Net Assets for the fiscal years ended December 31, 1996 and
December 31, 1995; the Financial Highlights for the fiscal years ended
December 31, 1996, 1995, 1994, 1993, and 1992; 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, 1996, are attached hereto.
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.
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 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 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;
(3) 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; and
(4) 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.
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 or other liquid assets 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.
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 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.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
PRESIDENT'S MESSAGE
- ---------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of the Rodney Square Multi-Manager Fund is pleased to
report to you the activity of the Fund for the year ended December 31,
1996.
PORTFOLIO REVIEW*
The stock market was very rewarding to most equity investors during
1996, including shareholders of the Growth Portfolio. The total returns
presented below represent changes in the market value plus capital gains
distributed during the year, assumes distributions are reinvested and
sales loads are not reflected.
NET ASSET VALUE CAPITAL GAINS NET ASSET VALUE TOTAL RETURN
PORTFOLIO AS OF 12/31/95 DISTRIBUTED AS OF 12/31/96 1/1/96 TO 12/31/96
- --------- -------------- ----------- -------------- ------------------
Growth $17.41 $2.41 $19.22 24.25%
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Strong mutual fund cash inflows and moderate economic growth fueled
U.S. equity markets to record levels during 1996, achieving a second
straight year of double digit returns. The Standard & Poor's 500 Index
("S&P 500"), an unmanaged, capitalization weighted index of five hundred
publicly traded stocks, achieved a 22.96% gain for the year. The Russell
2000, comprised of the smallest 2,000 of the largest 3,000 U.S. companies,
based on market capitalization, was up 16.50%. Among mutual funds with
similar objectives, the Growth Portfolio had a 24.25% return compared to
the 19.24% return for the Lipper growth fund category.
During 1996, investors focused on the direction of economic growth and
the possibility of a return of higher inflation as their principal measure
of the strength of financial markets. U.S. equity markets corrected
significantly in July as reports of robust economic growth began to filter
out. However, as the summer continued, concerns about the strength of the
economy and increased inflation subsided. This led investors to continue
to place money into stocks, with mutual funds the preferred vehicle. An
economy that was "not too hot, not too cold, but just right" continued to
provide investors reasons to invest in stocks.
Leadership within the equity markets changed quickly during 1996, but
generally gravitated toward finance, technology and energy. Banks
especially had a positive year and, based on the strength of their balance
sheets and earnings growth, are in the best shape in three decades.
Semiconductor stocks recovered quickly from a downturn in the summer to
post impressive gains. The ongoing push to increase productivity continues
to fuel demand for computer equipment and related products. Energy stocks
were propelled higher by oil and gas prices that continued to surprise
investors on the upside.
- ----------------
* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
INVESTMENT RETURNS AND PRINCIPAL VALUES MAY FLUCTUATE, SO THAT, WHEN
REDEEMED, SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. AN
INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
WILMINGTON TRUST COMPANY OR ANY OTHER BANKING INSTITUTION, THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. THE TOTAL RETURN DOES NOT
REFLECT THE EFFECT OF THE MAXIMUM SALES LOAD OF 4.00%. SEE FINANCIAL
HIGHLIGHTS ON PAGE 11.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Growth Portfolio's continued focus on quality technology stocks
helped it achieve excellent results for 1996. This was accomplished during
a year when volatility in these stocks was, at times, significant.
Frontier Capital Management Corporation ("Frontier") maintained a
significant position in technology stocks throughout 1996, with 44% of its
holdings in that sector at the end of the year. Frontier benefited from
the ongoing boom in capital spending with positions such as Sungard Data
Systems, Inc. and Tech Data Corp. William Blair & Company ("Blair") also
held a significant position in technology stocks such as Microsoft Corp.
and Oracle Systems Corp. Blair, with holdings in MBNA Corp. and State
Street Boston Corp., also took advantage of the positive climate for banks
and other financial institutions.
SUMMARY
At the close of 1996, investors were faced with markets that were at or
near their full values. The ability to add value to investors going
forward will depend on the careful choosing of individual stocks rather
than the choosing of broad market sectors. The multi-manager format of the
Portfolio allows investors to participate in a broad array of large and
small stocks using different management styles. In its role as fund
manager, Rodney Square Management Corporation will continue to review and
evaluate the individual sub-advisers in an effort to deliver consistent,
above average performance to shareholders.
[GRAPH]
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF A HYPOTHETICAL $10,000 INVESTMENT*
FEB-87 DEC-87 DEC-88 DEC-89 DEC-90 DEC-91 DEC-92 DEC-93 DEC-94 DEC-95 DEC-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RS GROWTH PORT (LOAD) 9600 8085.31 9778.39 12433 11544.7 16340.4 17312 19833.8 19788.2 25413.1 31576.6
S&P 500 10000 9380 10880.8 14326.8 13879.8 18108.9 19492.4 21457.3 21738.4 29907.6 36777.4
* PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE VALUES SHOWN FOR
THE PORTFOLIOS REFLECT THE EFFECT OF THE MAXIMUM SALES LOAD OF 4.00% ON A
HYPOTHETICAL INITIAL INVESTMENT OF $10,000 AND WITH DIVIDENDS REINVESTED.
RETURNS ARE HIGHER DUE TO MAINTENANCE OF THE PORTFOLIO'S EXPENSES BY
RODNEY SQUARE MANAGEMENT CORPORATION. SEE FINANCIAL HIGHLIGHTS ON PAGE 11.
** NAV DOES NOT REFLECT THE LOAD.
</TABLE>
The Portfolio's ten largest holdings as of December 31, 1996 are listed
below:
Household International, Inc.
Automatic Data Processing, Inc.
MBNA Corp.
First Data Corp.
State Street Boston Corp.
Molex, Inc. Class A Shares
Cognizant Corp.
Shared Medical Systems Corp.
Microsoft Corp.
Home Depot Inc.
These positions change over time and may not be in the Portfolio at any
time other than December 31, 1996.
We invite your questions and comments and 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 17, 1997
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
INVESTMENTS/DECEMBER 31, 1996
(Showing Percentage of Total Value of Net Assets)
- -------------------------------------------------------------------------
PAR VALUE
(000) (NOTE 2)
----- --------
REPURCHASE AGREEMENT - 0.1%
With C.S. First Boston Group, Inc.
at 7.10% dated 12/31/96, to be
repurchased at $106,042 on 01/02/97
collateralized by $110,000, Federal
Home Loan Mortgage Corporation
Discount Notes due 02/06/97 (market
value $109,351)(COST $106,000)............. 106 $ 106,000
-----------
SHARES
------
COMMON STOCK - 100.0%
COMMUNICATIONS & BROADCASTING - 1.8%
Airtouch Communications, Inc.*.......... 18,000 454,500
Lamar Advertising Co.*.................. 8,700 210,975
Primus Telecommunications Group, Inc.*.. 6,500 82,875
SFX Broadcasting, Inc. (A Shares)*...... 3,700 110,075
Transaction Network Services, Inc.*..... 12,850 147,775
True North Communications, Inc.......... 18,000 393,750
-----------
TOTAL COMMUNICATIONS & BROADCASTING............... 1,399,950
-----------
DURABLE GOODS - 0.3%
Intergraph Corp.*....................... 23,800 243,950
-----------
FINANCE, INSURANCE & REAL ESTATE - 9.7%
INSURANCE - 0.1%
Symons International Group, Inc.*....... 5,800 97,150
-----------
SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS - 2.4%
Household International, Inc............ 20,000 1,845,000
-----------
SECURITY & COMMODITY BROKERS, DEALERS & SERVICES - 2.9%
Alex Brown, Inc......................... 12,700 920,750
Raymond James Financial, Inc............ 42,193 1,271,064
-----------
2,191,814
-----------
STATE & NATIONAL BANKS - 4.3%
MBNA Corp............................... 40,000 1,660,000
State Street Boston Corp................ 25,000 1,612,500
-----------
3,272,500
-----------
TOTAL FINANCE, INSURANCE & REAL ESTATE............ 7,406,464
-----------
MANUFACTURING - 39.0%
CHEMICALS & ALLIED PRODUCTS - 2.3%
Airgas, Inc.*........................... 20,000 440,000
Cambrex Corp............................ 10,500 343,875
Hanna (M.A.) Co......................... 44,000 962,500
-----------
1,746,375
-----------
COMPUTER & OFFICE EQUIPMENT - 7.3%
Accent Color Sciences, Inc.*............ 9,300 79,050
Black Box Corp.*........................ 24,300 1,002,375
Data General Corp.*..................... 27,900 404,550
Digital Link Corp.*..................... 5,500 133,375
HPR Inc.*............................... 8,000 110,000
Hyperion Software Corp.*................ 18,100 384,625
Intel Corp.............................. 10,000 1,309,375
Linear Technology Corp.................. 10,000 438,750
Microsoft Corp.*........................ 17,000 1,404,625
Microcom, Inc.*......................... 10,400 128,700
3D Systems Corp.*....................... 6,600 84,150
Xcellenet, Inc.*........................ 4,700 75,787
-----------
5,555,362
-----------
ELECTRICAL MEASUREMENT & TEST INSTRUMENTS - 0.7%
Genrad, Inc.*........................... 23,000 534,750
-----------
FOOD & BEVERAGE - 0.4%
Smithfield Foods, Inc.*................. 8,100 307,800
-----------
MISC. ELECTRICAL MACHINERY, EQUIP. & SUPPLIES - 8.2%
Anadigics, Inc.*........................ 5,800 227,650
Berg Electronics Corp.*................. 13,600 399,500
Windmere-Durable Holdings, Inc.
Warrants, Expire 01/19/98, Exercise
Price $7.50............................ 131 704
Genlyte Group, Inc.*.................... 14,600 182,500
Lattice Semiconductor Corp.*............ 16,250 747,500
Maxim Integrated Products, Inc.*........ 24,000 1,038,000
Microchip Technology, Inc.*............. 13,900 707,162
Molex, Inc. (A Shares).................. 45,000 1,603,125
Symbol Technologies, Inc.*.............. 12,800 566,400
Xilinx, Inc.*........................... 21,000 773,063
-----------
6,245,604
-----------
MISC. INDUSTRIAL MACHINERY & EQUIP. - 4.1%
Applied Power, Inc. (A Shares).......... 12,000 475,500
Camco International, Inc................ 8,800 405,900
Harman International Industries, Inc.... 18,900 1,051,312
Illinois Tool Works, Inc................ 6,000 479,250
Tower Automotive, Inc.*................. 7,900 246,875
Varco International, Inc.*.............. 18,700 432,437
-----------
3,091,274
-----------
MISCELLANEOUS MANUFACTURING INDUSTRIES - 1.2%
Brown & Sharpe Manufacturing Co.
(A Shares)............................. 13,200 184,800
Cavalier Homes, Inc..................... 10,546 121,279
Continental Homes Holding Corp.......... 7,600 161,500
Pittway Corp. (A Shares)................ 8,400 449,400
-----------
916,979
-----------
NONFERROUS METALS - 0.4%
Oregon Metallurgical Corp............... 9,900 319,275
-----------
PHARMACEUTICAL PREPARATIONS - 4.1%
Anika Research, Inc.*................... 4,140 15,525
Elan Corp. plc, ADR*.................... 36,000 1,197,000
Physio-Control International Corp.*..... 8,600 193,500
R.P. Scherer Corp.*..................... 21,100 1,060,275
Smithkline Beecham plc, ADR............. 10,000 680,000
-----------
3,146,300
-----------
PRECISION INSTRUMENTS & MEDICAL SUPPLIES - 4.4%
Advanced Technology Laboratories,
Inc.*.................................. 17,800 551,800
Cognex Corp.*........................... 15,000 277,500
Fisher Scientific International......... 8,200 386,425
Haemonetics Corp.*...................... 38,400 724,800
Medtronic, Inc.......................... 10,000 680,000
Nellcor Puritan Bennet, Inc.*........... 30,000 656,250
Respironics, Inc.*...................... 5,400 93,825
-----------
3,370,600
-----------
PRINTING & PUBLISHING - 1.6%
Applied Graphics Technology, Inc.*...... 5,500 160,187
Gibson Greeting, Inc.................... 10,000 196,250
International Imaging Materials, Inc.*.. 8,200 186,550
Wallace Computer Services, Inc.......... 20,000 690,000
-----------
1,232,987
-----------
TELECOMMUNICATIONS EQUIPMENT - 3.5%
Analog Devices, Inc.*................... 34,725 1,176,309
Coherent Communications Systems Corp.*.. 7,900 154,050
Digital Microwave Corp.*................ 12,300 342,863
Microwave Power Devices, Inc.*.......... 12,300 33,825
Network Equip. Technologies, Inc.*...... 19,500 321,750
Oak Industries, Inc.*................... 7,300 167,900
Ortel Corp.*............................ 5,000 120,000
Summa Four, Inc.*....................... 5,100 42,713
Westell Technologies, Inc.*............. 11,200 256,200
-----------
2,615,610
-----------
TEXTILES & APPAREL - 0.6%
Cintas Corp............................. 7,500 440,625
-----------
TRANSPORTATION EQUIPMENT - 0.2%
Dura Automotive Systems, Inc.*.......... 6,600 148,500
-----------
TOTAL MANUFACTURING............................... 29,672,041
-----------
MINING - 3.3%
CRUDE PETROLEUM & NATURAL GAS - 2.2%
American Exploration Co.*............... 7,800 124,800
BJ Services Co.*........................ 6,200 316,200
Belco Oil & Gas Corp.*.................. 7,000 191,625
Devon Energy Corp....................... 8,400 291,900
Pogo Producing Co....................... 8,700 411,075
Snyder Oil Corp......................... 8,900 154,637
Wiser Oil Co............................ 8,800 173,800
-----------
1,664,037
-----------
MISCELLANEOUS METAL ORES - 1.1%
Minerals Technologies, Inc.............. 20,000 820,000
-----------
TOTAL MINING...................................... 2,484,037
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.1%
Fairfield Communities, Inc.*............ 1,600 39,600
-----------
SERVICES - 29.3%
AMUSEMENT & RECREATION SERVICES - 1.0%
Walt Disney Co.......................... 8,000 557,000
Scientific Games Holdings Corp.*........ 7,000 187,250
-----------
744,250
-----------
BUSINESS SERVICES - 7.8%
Automatic Data Processing, Inc.......... 40,000 1,715,000
CDI Corp.*.............................. 8,900 252,538
CUC International, Inc.*................ 20,000 475,000
Donnelley Enterprise Solutions, Inc.*... 4,300 105,350
F.Y.I. Inc.*............................ 7,700 160,737
First Data Corp......................... 45,000 1,642,500
Norrell Corp............................ 17,000 463,250
PMT Services, Inc.*..................... 20,100 351,750
Reuters Holding plc, ADR................ 5,000 382,500
Service Experts, Inc.*.................. 4,900 127,400
Snyder Communications, Inc.*............ 4,400 118,800
TMP Worldwide, Inc.*.................... 8,100 103,275
Tetra Technologies, Inc.*............... 1,700 42,925
-----------
5,941,025
-----------
COMPUTER SERVICES - 15.3%
Axiom Corp.*............................ 42,800 1,027,200
American Management Systems, Inc.*...... 20,000 490,000
BA Merchant Services, Inc. (A Shares)*.. 25,000 446,875
BDM International, Inc.................. 3,700 200,725
Boole & Babbage, Inc.*.................. 14,850 371,250
Broadway & Seymour, Inc.*............... 9,000 94,500
Ceridian Corp.*......................... 14,700 595,350
Cognizant Corp.......................... 45,000 1,485,000
Computer Task Group, Inc................ 8,900 383,812
DecisionOne Holdings Corp.*............. 6,600 108,900
Factset Research Systems, Inc.*......... 5,400 113,400
Fiserv, Inc.*........................... 22,412 823,641
Gensym Corp.*........................... 7,200 85,950
IA Corp. I*............................. 9,500 55,813
Information Resources, Inc.*............ 31 434
Intuit, Inc.*........................... 10,000 315,000
MDL Information Systems, Inc.*.......... 11,000 204,875
Manugistics Group, Inc.*................ 5,400 214,650
Marcam Corp. (Rights 1/1000 Share
of Junior Preferred @ $60)*............ 16,000 208,000
Mastech Corp.*.......................... 7,100 134,900
May & Speh, Inc.*....................... 20,000 245,000
Oracle Systems Corp.*................... 10,000 417,500
The Peak Technologies Group *........... 6,400 76,800
Projest Software, Inc.*................. 4,600 194,925
RTW, Inc.*.............................. 6,250 114,844
SCI Systems, Inc.*...................... 11,600 517,650
Shared Medical Systems Corp............. 30,000 1,477,500
State of The Art, Inc.*................. 10,700 132,412
Sungard Data Systems, Inc.*............. 23,800 940,100
Telxon Corp............................. 11,100 135,975
-----------
11,612,981
-----------
MEDICAL & HEALTH SERVICES - 3.6%
American Medical Response, Inc.*........ 6,100 198,250
Conmed Corp.*........................... 4,500 92,250
Healthsouth Corp.*...................... 30,000 1,158,750
Interim Services, Inc.*................. 22,000 781,000
Pharmaceutical Product Dev., Inc.*...... 9,200 232,300
Total Renal Care Holdings, Inc.*........ 7,000 253,750
Veterinary Centers of America, Inc.*.... 5,800 63,800
-----------
2,780,100
-----------
PERSONAL SERVICES - 0.6%
Stewart Enterprises, Inc. (A Shares).... 14,550 494,700
-----------
SANITARY SERVICES - 1.0%
Allied Waste Industries, Inc.*.......... 28,400 262,700
United Waste Systems, Inc.*............. 14,600 501,875
-----------
764,575
-----------
TOTAL SERVICES.................................... 22,337,631
-----------
TRANSPORTATION - 2.2%
Air Express International Corp.......... 29,925 965,081
Sea Containers, Ltd. ................... 11,300 176,563
U.S. Freightways Corp................... 20,000 548,750
-----------
TOTAL TRANSPORTATION.............................. 1,690,394
-----------
WHOLESALE & RETAIL TRADE - 14.3%
MISCELLANEOUS RETAIL STORES - 3.9%
Autozone, Inc.*......................... 20,000 550,000
Barnes & Noble, Inc.*................... 12,000 324,000
Best Buy Co., Inc.*..................... 14,000 148,750
Just For Feet, Inc.*.................... 6,262 164,377
Office Depot, Inc. (Rights 1/1000
Share of Junior Preferred @ $95)*...... 15,000 266,250
Sports & Recreation, Inc.*.............. 27,750 215,063
Wal-Mart Stores, Inc.................... 35,000 800,625
Walgreen Co. ........................... 13,000 520,000
-----------
2,989,065
-----------
RETAIL APPAREL & ACCESSORY STORES - 0.4%
Gymboree Corp.*......................... 3,700 84,638
Linens `n Things, Inc.*................. 9,700 190,363
-----------
275,001
-----------
RETAIL BUILDING MATERIALS - 1.8%
Home Depot, Inc......................... 28,000 1,403,500
-----------
RETAIL EATING & DRINKING PLACES - 0.6%
Applebee's International, Inc. (Rights
1/1000 Share of Preferred @ $75) 17,000 467,500
-----------
RETAIL FURNITURE & APPLIANCE STORES - 0.9%
Williams-Sonoma, Inc.*.................. 17,900 651,113
-----------
WHOLESALE CHEMICALS & DRUGS - 1.7%
Amerisource Health Corp. (A Shares)*.... 6,900 332,925
Cardinal Health, Inc.................... 16,624 968,348
-----------
1,301,273
-----------
WHOLESALE ELECTRONIC EQUIP. & COMPUTERS - 3.2%
Allen Group, Inc........................ 17,600 391,600
Daisytek International Corp.*........... 8,200 336,200
Hughes Supply, Inc...................... 5,800 250,125
Tech Data Corp.*........................ 43,800 1,199,025
Wyle Electronics........................ 7,500 296,250
-----------
2,473,200
-----------
WHOLESALE MISCELLANEOUS - 1.8%
Alco Standard Corp...................... 17,000 877,625
Bearings, Inc........................... 9,000 250,875
Staples, Inc.*.......................... 11,500 207,719
-----------
1,336,219
-----------
TOTAL WHOLESALE & RETAIL TRADE.................... 10,896,871
-----------
Total Common Stock
(Cost $47,702,993)............................... 76,170,938
-----------
TOTAL INVESTMENTS (COST $47,808,993)+ - 100.1%......... 76,276,938
OTHER ASSETS AND LIABILITIES,NET - (0.1)%.............. (103,197)
-----------
NET ASSETS - 100.0%................................... $76,173,741
===========
* Non-income producing security.
+ Cost for federal income tax purposes (Note 3).
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
ASSETS:
Investments in securities (including
repurchase agreement of $106,000), at
market (identified cost $47,808,993)
(Note 2)............................... $ 76,276,938
Dividends and interest receivable....... 49,214
Receivable for Fund shares sold......... 51,977
Other assets............................ 267
-------------
Total assets........................... 76,378,396
-------------
LIABILITIES:
Due to Manager (Note 4)................. $ 63,955
Payable for investments purchased....... 61,030
Payable for Fund shares redeemed........ 22,138
Other accrued expenses (Note 4)......... 57,532
-------------
Total liabilities...................... 204,655
-------------
NET ASSETS.............................. $ 76,173,741
-------------
NET ASSETS CONSIST OF:
Shares of beneficial interest........... $ 39,640
Additional paid-in capital.............. 47,667,243
Distributions in excess of net
realized gains......................... (1,087)
Net unrealized appreciation of
investments (Note 3)................... 28,467,945
-------------
NET ASSETS, for 3,963,965 shares
outstanding........................... $76,173,741
-------------
NET ASSET VALUE and redemption price
per share ($76,173,741 / 3,963,965
outstanding shares of beneficial
interest, $0.01 par value)............. $19.22
-------------
Maximum offering price per share
(100/96.00 of $19.22).................. $20.02
-------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
INVESTMENT INCOME:
Dividends.............................. $ 371,228
Interest............................... 84,999
-------------
456,227
-------------
EXPENSES:
Management fee (Note 4)................ $ 706,321
Distribution expenses (Note 4)......... 16,899
Custodian fee (Note 4)................. 33,657
Transfer Agent fee (Note 4)............ 15,218
Administration fee (Note 4)............ 63,569
Accounting fee (Note 4)................ 45,000
Trustees' fees and expenses (Note 4)... 5,175
Legal.................................. 39,044
Audit.................................. 36,316
Registration fees...................... 12,085
Shareholder reports.................... 20,305
Miscellaneous.......................... 13,835
-------------
Total expenses....................... 1,007,424
-------------
Net investment loss..................... (551,197)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment
transactions....................... 9,091,297
Net unrealized appreciation of
investments during the year........ 6,815,611
-------------
Net gain on investments................ 15,906,908
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 15,355,711
-------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
FINANCIAL STATEMENTS - CONTINUED
- ----------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss.................... $ (551,197)
Net realized gain on investment
transactions......................... 9,091,297
Net unrealized appreciation of
investments during the year.......... 6,815,611
-------------
Net increase in net assets resulting
from operations...................... 15,355,711
-------------
Distributions to shareholders from:
Net capital gain ($2.41 per share)..... (8,583,660)
-------------
Increase in net assets from Fund
share transactions (Note 5).......... 3,090,954
-------------
Increase in net assets.................. 9,863,005
NET ASSETS:
Beginning of year...................... 66,310,736
-------------
End of year............................ $ 76,173,741
-------------
FOR THE YEAR ENDED DECEMBER 31, 1995
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss.................... $ (338,052)
Net realized gain on investment
transactions......................... 7,295,858
Net unrealized appreciation of
investments during the year.......... 8,615,648
-------------
Net increase in net assets resulting
from operations...................... 15,573,454
-------------
Distributions to shareholders from:
Net capital gain ($2.01 per share)..... (6,955,073)
-------------
Decrease in net assets from Fund share
transactions (Note 5).................. (7,574,816)
-------------
Increase in net assets.................. 1,043,565
NET ASSETS:
Beginning of year...................... 65,267,171
-------------
End of year............................ $ 66,310,736
-------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements
and notes thereto.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF YEAR .............. $17.41 $15.14 $16.39 $15.56 $15.68
------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Net investment loss* ............................. (0.15) (0.10) (0.03) (0.03) 0.00
Net realized and unrealized gain (loss)
on investments ................................. 4.37 4.38 (0.02) 2.29 0.92
------ ------ ------ ------ ------
Total from investment operations .............. 4.22 4.28 (0.05) 2.26 0.92
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net realized gain on investments ............ (2.41) (2.01) (1.20) (1.43) (1.04)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR ..................... $19.22 $17.41 $15.14 $16.39 $15.56
====== ====== ====== ====== ======
TOTAL RETURN** .................................... 24.25% 28.43% (0.23)% 14.57% 5.95%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses.......................................... 1.43% 1.43% 1.38% 1.42% 1.46%
Net investment loss ............................. (0.78)% (0.53)% (0.17)% (0.18)% (0.03)%
Portfolio turnover rate ........................... 34.84% 49.12% 37.05% 44.38% 37.79%
Average commission rate paid+...................... $0.063 - - - -
Net assets at end of year (000's omitted).......... $76,174 $66,311 $65,267 $66,091 $60,852
</TABLE>
* The net investment income per share for the year ended December 31, 1996
was calculated using average shares outstanding.
** These results do not include the sales load. If the sales load had been
included, the returns would have been lower.
+ Required disclosure for fiscal years beginning after September 1, 1995
pursuant to SEC regulations.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
NOTES TO 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 Growth Portfolio
(the "Portfolio") is the only series currently offered by the Fund. 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.
2.SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. The 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 Portfolio, through it's custodian,
receives 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. The 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 Portfolio
reclassified $(551,197) and $511,457 from accumulated net investment
loss and accumulated net realized gain, respectively, 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.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions of net investment
income earned and net capital gains realized by the Portfolio, if any,
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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
OTHER. Investment security transactions are accounted for on a
trade date basis. The 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, 1996, purchases and sales of investment securities
(excluding short-term investments) were $24,123,641 and $27,640,441,
respectively.
The following balances for the Portfolio are as of December 31,
1996:
COST FOR NET TAX BASIS TAX BASIS GROSS TAX BASIS GROSS
FEDERAL INCOME UNREALIZED UNREALIZED UNREALIZED
TAX PURPOSES APPRECIATION APPRECIATION DEPRECIATION
------------ ------------ ------------ ------------
$47,808,993 $28,467,945 $30,446,978 ($1,979,033)
4.MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund 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. The Portfolio's
assets are managed by portfolio advisers who have entered into advisory
agreements with RSMC and the Fund.
For management services to the Fund, RSMC receives an annual fee
equal to 1.00% of the average daily net assets of the 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
the 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. The
management fee paid to RSMC for the year ended December 31, 1996
amounted to $706,321.
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
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 the Portfolio's average daily net assets. The administration
fee paid to RSMC for the year ended December 31, 1996 amounted to
$63,569.
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 the Portfolio as follows: 0.025% of average daily net assets
of the Portfolio up to $50 million; 0.020% of average daily net assets
of the Portfolio in excess of $50 million up to $100 million and 0.015%
of average daily net assets of the 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 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 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 the Portfolio's average daily net assets to
reimburse RSD for such expenses. For the year ended December 31, 1996,
such expenses amounted to $16,899.
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 on behalf of the Portfolio. For its
services, RSMC receives an annual fee of $45,000 plus an amount equal to
0.02% of that portion of the Portfolio's average daily net assets in
excess of $100 million. For the year ended December 31, 1996, RSMC's
fees for accounting services amounted to $45,000.
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, 1996, the fees and
expenses of the "non-interested" Trustees amounted to $5,175.
5.FUND SHARES. At December 31, 1996, there was an unlimited number of
shares of beneficial interest, $0.01 par value, authorized. The
following table summarizes the activity in shares of the Portfolio:
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold.............. 167,501 $3,187,296 388,740 $7,028,995
Shares issued to
shareholders in
reinvestment of
distributions.......... 392,595 7,522,118 349,493 6,021,765
Shares redeemed.......... (404,017) (7,618,460) (1,240,767) (20,625,576)
---------- ---------- ---------- -----------
Net increase (decrease).. 156,079 $3,090,954 (502,534) $(7,574,816)
========== ===========
Shares outstanding:
Beginning of year........ 3,807,886 4,310,420
---------- ----------
End of year.............. 3,963,965 3,807,886
========== ==========
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
- -----------------------------------------------------------
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 statement of assets and liabilities,
including the schedule of investments, of the Rodney Square Multi-Manager
Fund - The Growth Portfolio as of December 31, 1996, and the related
statement of operations for the year then ended, the statement of changes
in net assets for each of the two years in the period then ended, and the
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 and financial highlights. Our procedures
included confirmation of securities owned as of December 31, 1996 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the Rodney Square Multi-Manager Fund - The Growth Portfolio at December
31, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the 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, 1997
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THE RODNEY SQUARE MULTI-MANAGER FUND - THE GROWTH PORTFOLIO
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TAX INFORMATION
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By now shareholders to whom year-end tax reporting is required by the
IRS should have received their Form 1099-DIV from the Portfolio.
The Growth Portfolio paid distributions of $2.405 per share from net
long-term capital gains during the year ended December 31, 1996. Pursuant
to Section 852 of the Internal Revenue Code, the Growth Portfolio
designated $8,583,660 as capital gain distributions for the fiscal year
ended December 31, 1996.
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Outside cover - divided into two sections.
[Left Section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
Martin L. Klopping
John J. Quindlen
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OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Carl M. Rizzo, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
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FUND MANAGER, ADMINISTRATOR AND
TRANSFER AGENT
Rodney Square Management Corporation
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CUSTODIAN
Wilmington Trust Company
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DISTRIBUTOR
Rodney Square Distributors, Inc.
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LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
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INDEPENDENT AUDITORS
Ernst & Young LLP
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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.
RS04-2/97
[Right section]
the RODNEY SQUARE
MULTI-MANAGER FUND
THE GROWTH PORTFOLIO
[graphic] RSMC logo
ANNUAL REPORT
DECEMBER 31, 1996
