Filed with the Securities and Exchange Commission on November 26,
1997
File No. 33-8120
File No. 811-4808
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 13
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15
The Rodney Square Equity Fund
(Exact Name of Registrant as Specified in Charter)
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 651-8280
Carl M. Rizzo, Esquire
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, DE 19890-0001
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
x 60 days after filing pursuant to paragraph (a)(1)
on pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on pursuant to paragraph
(a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new
effective date for a previously
filed post-effective amendment.
Registrant has filed a declaration registering an indefinite
amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. Registrant filed the notice
required by Rule 24f-2 for its fiscal year ended December 31,
1996 on or about February 28, 1997.
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE EQUITY FUND
Items Required By Form N-1A
PART A - PROSPECTUS
Item No. Item Caption Prospectus Caption
- -------- ------------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Table
Questions and Answers about the
Portfolio
3. Condensed Financial Financial Highlights
Information
4. General Description Questions and Answers about the Portfolio
of Registrant Investment Objective and Policies
Investment Practices
Description of the Fund
5. Management of the Questions and Answers about the
Fund Portfolio
Management of the Fund
Fund Management and Other
Service Agreements
5A. Management's [Contained in the Fund's Annual Report,
Discussion of Fund President's Letter]
Performance
6. Capital Stock and Questions and Answers about the
Other Securities Portfolio
Dividends Capital Gain Distributions
and Taxes
Description of the Fund
7. Purchase of Questions and Answers about the
Securities Being Portfolio
Offered How Net Asset Value is Determined
How to Purchase Shares
Management of the Fund
8. Redemption or Questions and Answers about the
Repurchase Portfolio
Shareholder Accounts
How to Redeem Shares
Exchange of Shares
9. Pending Legal Not Applicable
Proceedings
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE EQUITY FUND
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives The Portfolio's Investment
and Policies Policies
Investment Limitations
Portfolio Transactions
14. Management of the Trustees and Officers
Registrant
15. Control Persons and Trustees and Officers
Principal Holders Other Information
of Securities
16. Investment Advisory Wilmington Trust Company
and Other Services Investment Advisory Services
Administration, Accounting and
Distribution Agreements
Other Information
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of the Fund
Other Securities
19. Purchase, Redemption Redemptions
and Pricing of Net Asset Value
Securities Being
Offered
20. Tax Status Taxes
21. Underwriters Administration, Accounting and
Distribution Agreements
22. Calculations of Performance Information
Performance Data
23. Financial Statements Financial Statements
<PAGE>
THE RODNEY SQUARE EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
The Large Cap Growth Equity Portfolio (the "Portfolio") is a
diversified series of The Rodney Square Equity Fund (the "Fund"),
an open-end management investment company. The Portfolio seeks
superior long-term growth of capital. It is designed to offer
long-term investors, who are willing to assume the associated
risks, the opportunity to participate in a professionally
managed, diversified portfolio of large cap U.S. equities. The
Adviser will seek to achieve this objective by causing the Portfolio
to be as fully invested as is practical, in light
of cash flows in equity securities of or relating to U.S. large cap
issuers which are judged by the Adviser to possess strong growth
characteristics. The Adviser is Wilmington Trust Company ("WTC").
The Portfolio currently offers one class of shares, and charges
no sales load or Rule 12b-1 distribution fees to investors.
PROSPECTUS
JANUARY 26, 1998
This Prospectus concisely describes information about the Fund
that you should know before investing. Please read this
Prospectus carefully and keep it for future reference. A
Statement of Additional Information, dated January 26, 1998
containing additional information about the Fund has been filed
with the Securities and Exchange Commission ("SEC") and, as
amended or supplemented from time to time, is incorporated by
reference herein. A copy of the Statement of Additional
Information and the Fund's most recent Annual Report to
Shareholders may be obtained, without charge, from certain
institutions such as banks or broker-dealers that have entered
into servicing agreements ("Service Organizations") with Rodney
Square Distributors, Inc., by calling the number below, or by
writing to Rodney Square Distributors, Inc. at the address noted
on the back cover of this Prospectus. Rodney Square
Distributors, Inc. is a wholly owned subsidiary of Wilmington
Trust Company, a bank chartered in the state of Delaware.
- -------------------------------------------------------------------------
FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
NATIONWIDE (800) 336-9970
- -------------------------------------------------------------------------
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED BY, WILMINGTON TRUST COMPANY, NOR ARE THE SHARES
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC"),
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........... None*
ANNUAL PORTFOLIO OPERATING EXPENSES**
(as a percentage of average net assets)
Management Fee.......................... 0.55%
12b-1 Fee............................... 0.00%
Other Expenses.......................... 0.35%
-----
Total Portfolio Operating Expenses...... 0.90%
=====
EXAMPLE***
You would pay the following expenses on a $1,000 investment in
the Portfolio assuming (1) 5% annual return and (2) redemption
at the end of each time period:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
-------- ----------- ---------- ---------
$9 $29 $50 $111
* 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.
** Expenses are based on the Portfolio's fiscal year ended
December 31, 1997, adjusted to reflect the Portfolio's
current advisory fee and administration fee and termination
of the Portfolio's Rule 12b-1 Plan.
***The assumption in the Example of a 5% annual return is
required by regulations of the SEC and 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.
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 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 SEMI-ANNUAL REPORT TO
SHAREHOLDERS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997, AND THE
FUND'S ANNUAL REPORT DATED DECEMBER 31, 1996, WHICH ARE INCORPORATED
BY REFERENCE IN THE STATEMENT OF ADDITIONAL INFORMATION. EFFECTIVE
JANUARY 26, 1998, THE PORTFOLIO ADVISER WAS CHANGED TO WTC AND THE
INVESTMENT OBJECTIVE OF THE PORTFOLIO WAS CHANGED (SEE "INVESTMENT
OBJECTIVE AND POLICIES"). PRIOR TO JANUARY 26, 1998, THE
PORTFOLIO WAS MANAGED BY TWO DIFFERENT PORTFOLIO ADVISERS HAVING
DIFFERENT INVESTMENT APPROACHES AND SOUGHT TO ACHIEVE ITS OBJECTIVE
BY INVESTING AT LEAST 65% OF TOTAL ASSETS IN EQUITY SECURITIES WITHOUT
REGARD TO THE MARKET CAPITALIZATION OF THE ISSUERS OF SUCH SECURITIES.
<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 26, 1987
(COMMENCEMENT OF
FOR THE SIX-MONTH OPERATIONS) TO
PERIOD ENDED FOR THE YEARS ENDED DECEMBER 31, DECEMBER 31,
JUNE 30,1997 -------------------------------- ------------
UNAUDITED 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
--------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -
BEGINNING OF PERIOD.......... $19.22 $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)* (0.09) (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.. 3.26 4.37 4.38 (0.02) 2.29 0.92 4.71 (1.01) 2.58 1.68 (1.65)
----- ------ ------- ------ ------ ------- ------ ------- ------ ------ ------
Total from investment
operations............... 3.17 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 0.00 (0.07) (0.12) (0.15) (0.07) (0.06)
From net realized gain on
investments................. 0.00 (2.41) (2.01) (1.20) (1.43) (1.04) (0.62) (0.01) 0.00 0.00 0.00
------ ------ ------ ------ ------ ------- ------ ------- ------ ----- ------
Total distributions....... 0.00 (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 $22.39 $19.22 $17.41 $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05 $8.37
====== ====== ====== ====== ====== ======= ====== ======= ======= ====== ======
TOTAL RETURN ***.............. 16.49% 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 +.................... 1.40%** 1.43% 1.43% 1.38% 1.42% 1.46% 1.50% 1.74% 1.75% 1.75% 1.75%**
Net investment income (loss)..(0.88)%** (0.78)% (0.53)% (0.17)% (0.18)% (0.03)% 0.52% 0.94% 1.21% 0.77% 0.92%**
Portfolio turnover rate........ 33.61%** 34.84% 49.12% 37.05% 44.38% 37.79% 32.63% 38.18% 83.12% 57.55% 62.00%**
Average commission rate paid++. $0.0591 $0.0630 - - - - - - - - -
Net assets at end of period
(000 omitted)................. $85,986 $76,174 $66,311 $65,267 $66,091 $60,852 $56,648 $40,709 $39,571 $28,845 $24,169
<FOOTNOTE>
* The net investment income per share for the year ended December
31, 1996 was calculated using average shares outstanding.
** Annualized.
***The total return figures for the fiscal period ended December 31,
1987 and the six-month period ended June 30, 1997 have not been
annualized.
+ Effective December 22, 1990, RSMC agreed to waive its fee or bear
any expenses (excluding taxes, extraordinary expenses, brokerage
commissions and interest) that would cause the Portfolio's ratio
of expenses to average daily net assets to exceed, on an annual
basis, 1.50%. Prior to December 22, 1990, RSMC agreed to bear
any expenses that would cause the Portfolio's ratio of expenses
to average daily net assets to exceed, on an annual basis, 1.75%.
The annualized expense ratio, had there been no reimbursement of
expenses or fee waivers by RSMC, would have been 1.54%, 1.85%,
2.21% and 1.81% for the years ended December 31, 1991, 1989, 1988
and for the fiscal period ended December 31, 1987, respectively.
For the six-month period ended June 30, 1997 and for the years
ended December 31, 1996, 1995, 1994, 1993, 1992 and 1990, no
reimbursement or fee waiver was necessary.
++ Required disclosure for fiscal years beginning after September 1,
1995 pursuant to SEC regulations.
</FOOTNOTE>
</TABLE>
<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 contained
elsewhere in this Prospectus.
WHAT IS THE PORTFOLIO'S INVESTMENT OBJECTIVE?
The Portfolio seeks superior long-term growth of capital.
It is designed to offer long-term investors, who are willing to
assume the associated risks, the opportunity to participate in a
professionally managed, diversified portfolio of large cap U.S.
equities. The Adviser will seek to achieve the Portfolio's
objective by investing at least 85% of the Portfolio's total
assets in large cap U.S. equity (or related) securities which are judged by
the Adviser to possess strong growth characteristics.
For these purposes, "superior" long-term growth of capital means that
which would exceed the long-term growth of capital from an
investment in the securities comprising the Russell 1000 Growth
Index (assuming the reinvestment of dividends and capital gain
distributions). The Russell 1000 Growth Index is formed by assigning
a style composite score to all of the companies in the Russell 1000
Index to determine their growth or value characteristics. Roughly 70%
of the stocks are placed in either the Growth or the Value Index. The
remaining stocks are placed in both the Growth and Value Indices with
a weight proportional to their growth or value characteristics. The Russell
1000 Index is a passive index which includes the largest 1000 stocks in the
U.S. as measured by market capitalization. On its annual rebalancing date
of May 31, 1997 the smallest stock in the index had a market cap of
approixmately $1.1 billion.
WHAT ARE THE RISKS TO CONSIDER BEFORE INVESTING?
Investment in the Portfolio represents an investment in
securities with fluctuating market prices. As market prices
fluctuate, 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 engage in
certain options and futures transactions. Such transactions may
involve certain risks, increase costs and diminish investment
performance. (See "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 an investment
adviser and, at the same time, to maintain daily liquidity. The
Portfolio also offers a way for investors to diversify their
investment portfolio by investing in a pooled fund of large cap
U.S. equity securities.
SECOND: Investors in the Portfolio need not become involved
with the detailed bookkeeping and operating procedures normally
associated with direct investment in these securities. 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.
Additionally, you may exchange all or a portion of your Portfolio
shares for shares of any of the other funds in the Rodney Square
complex, subject to certain conditions. (See "Exchange of
Shares").
WHO IS THE INVESTMENT ADVISER?
Wilmington Trust Company ("WTC" or "Adviser"), a wholly owned
subsidiary of Wilmington Trust Corporation, is the Investment
Adviser. WTC has responsibility for the Portfolio's assets under
management, and provides overall investment strategies and
programs for the Portfolio. (See "Management of the Fund").
WHAT IS THE ADVISORY FEE?
WTC is paid by the Fund a monthly management fee at an annual
rate of 0.55% of the Portfolio's average daily net assets. (See
"Fund Management and Other Service Agreements").
INVESTMENT OBJECTIVE AND POLICIES
The Portfolio's objective is to seek superior long-term
growth of capital. At all times, at least 85% of the Portfolios total
assets will be invested in the following (or related) securities:
<PAGE>
- - Common Stock of U.S. Corporations with an equity market capitalization
at time of purchase equal to or greater than that of the smallest issue
in the Russell 1000 Index and which are judged by the Adviser to possess
strong growth characteristics;
- - Options on, or securities convertible (such as convertible preferred stock
and convertible bonds) into, the common stock of such issuers;
- - Options on indexes of the common stocks of such issuers;
- - Contracts for either the future delivery, or payment in respect of the future
market value, of certain indexes of the common stocks of such issuers, and
options upon such futures contracts.
With respect to not more than 15% of the Portfolio's total
assets, the Adviser may hold cash and cash equivalents including high-quality
money market instruments and/or money market funds in order to manage cash
flow in the Portfolio.
At no time will the Portfolio invest in any security or type of security
not identified above.
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 the 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. Of the 85% of the total assets of the Portfolio that
are invested in equity (or related) securities, the Portfolio may not
invest more than 10% in covered call options on securities and/or
options on securities indices.
FUTURES AND RELATED OPTIONS. The Portfolio may write (sell)
or purchase certain financial futures contracts and/or options
thereon for non-trading purposes in order to: hedge various
pertinent market risks; establish a position in the futures or
related options markets as a temporary substitute for purchasing
or selling particular securities; and/or maintain liquidity while
simulating full investment in the securities or index underlying
such futures or options. Of the 85% of the total assets of the
Portfolio that is to be invested in equity (or related)
securities, the Portfolio may not invest more than 10% of such
assets in futures contracts or options relating to such
contracts.
ADDITIONAL INVESTMENT PRACTICES. In addition, the Portfolio
may invest in U.S. Government Obligations (including obligations
issued by U.S. Government agencies and instrumentalities),
mortgage pass-through certificates and may enter into repurchase
agreements with respect to any security in which it is authorized
to invest. For further description of these investment
techniques, see the Statement of Additional Information.
<PAGE>
PORTFOLIO TURNOVER. The frequency of trading transactions and
the Portfolio's turnover rate will vary from year to year
depending on market conditions. Due to changes in its investment
adviser and investment policies, the Portfolio expects to
experience a higher than normal portfolio turnover rate for its
fiscal year ending December 31, 1998. The higher rate will be
due to the replacement of investment securities placed within the
Portfolio at the direction of the Portfolio's previous investment
sub-advisers and which do not satisfy the current large
capitalization investment parameters of the Portfolio. Due to
this increased rate of turnover, the Portfolio is likely to incur
the cost of additional brokerage commissions, and investors are
likely to receive an increased amount of capital gains than have
been received in prior years. (See "Dividends, Capital Gain
Distributions and Taxes").
OTHER INFORMATION. As a matter of fundamental policy, the
Portfolio may also borrow money for temporary or emergency
purposes, in an aggregate amount not exceeding 10% of its total
assets. Additionally, as a matter of non-fundamental policy, the
Portfolio will not purchase securities while borrowings in excess
of 5% of the Portfolio's total assets are outstanding.
The Portfolio is subject to certain fundamental investment
policies 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. Certain further non-fundamental
policies of the Portfolio, however, may be changed by the Fund's
Board of Trustees without shareholder approval. All investment
policies stated within this Prospectus are, unless otherwise
indicated, non-fundamental. Further fundamental and non-
fundamental investment policies of the Portfolio are listed and described
in greater detail in the Statement of Additional Information.
RISK FACTORS
GROWTH-ORIENTED INVESTING; NO TEMPORARY DEFENSIVE INVESTMENT
POLICY. Because the Portfolio will be invested in growth-oriented companies,
the volatility of the Portfolio may be higher than that of the U.S.
equity market as a whole. Generally, companies with high relative rates
of growth tend to reinvest more of their profits into the company, and
pay out less to shareholders in the form of current dividends. As a
result, equity investors tend to receive most of their return in the
form of capital appreciation. This makes growth-company issues more
volatile than the market as whole. In addition, unlike many other
mutual funds, the Portfolio does not reserve authority to depart from
its investment objective, even during declining markets, to
temporarily pursue defensive investment policies in an effort to preserve
its capital. The Portfolio will instead adhere to its basic policy
of investing not less than 85% of its total assets in equity securities of
large-cap U.S. issuers, during both good and bad stock market conditions.
Investors should carefully consider the risk of capital losses that may
flow from this policy should adverse market conditions arise and persist
in the future, in determining whether to invest, or remain invested, in the
Portfolio.
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 three 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
the 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. Should the
rating of a security be downgraded subsequent to the Portfolio'
purchase of the security, the Adviser will determine whether it
is in the best interests of the Portfolio to retain the security.
OPTIONS AND FUTURES. The use of options and futures involves
certain investment risks and transaction costs. These risks
include: dependence on the adviser's ability to predict movements
in the prices of individual securities, fluctuations in the
general securities markets and movements in interest rates and
currency markets; imperfect correlation between movements in the
price of options, futures contracts or related options and
movements in the price of the security hedged or used for cover;
the fact that skills and techniques needed to trade options,
futures contracts and related options are different from those
needed to select the securities in which the Portfolio invests;
and lack of assurance that a liquid secondary market will exist
for any particular option, futures contract or related option at
any particular time.
<PAGE>
HOW TO PURCHASE SHARES
Portfolio shares are offered on a continuous basis by Rodney
Square Distributors, Inc. ("RSD"), another wholly owned
subsidiary of WTC, who serves as Distributor of the Fund. Shares
may be purchased directly from RSD, by clients of WTC through
<PAGE>
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 Equity Fund, along with
a completed Application, located at the end of this Prospectus,
to The Rodney Square Equity 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 Equity 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 Rodney Square
Management Corporation ("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 Equity 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.
<PAGE>
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
the 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. 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.
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.
Please call WTC, your Service Organization or the number
listed below for further information about the Portfolio or for
assistance in opening an account:
- ---------------------------------------------------------------------
NATIONWIDE (800) 336-9970
- ---------------------------------------------------------------------
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.
HOW TO REDEEM 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 Equity 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
<PAGE>
Rodney Square Equity 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.
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.
<PAGE>
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.
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 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.
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Dividends from the
Portfolio's net investment income and 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 its shareholders annually shortly before
or after the end of the Portfolio's fiscal year (December 31).
An additional distribution may be made each year if necessary to
avoid the payment of a federal excise tax. Each dividend is
payable to shareholders who redeem, but not to shareholders who
purchase, Portfolio shares on the ex-dividend date. Dividends
and capital gain distributions paid by the Portfolio are
automatically reinvested in additional Portfolio shares on the
payment date at the net asset value on the ex-dividend date.
Shareholders may elect to receive dividends and other
distributions in cash by checking the appropriate boxes on the
Application & New Account Registration form contained with this
Prospectus.
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.
In general, all dividend distributions derived from ordinary
income and short-term capital gain are taxable to investors as
ordinary income (eligible in part for the dividends-received
deduction in the case of corporations, subject to certain
conditions). Pursuant to the Taxpayer Relief Act of 1997 (the
"1997 Act"), two different tax rates apply to net capital gains.
One rate (generally 28%) applies to net gains on capital assets
held for more than one year but not more than 18 months ("mid-
term gains"). A second, preferred rate (generally 20%) applies
to the balance of such net capital gains ("adjusted net capital
gains"). Distributions of net capital gains will be treated in
the hands of shareholders as mid-term gains to the extent
designated by the Fund as deriving from net gains from assets
held for more than one year but not more than 18 months, and the
balance will be treated as adjusted net capital gains.
Distributions of mid-term gains and adjusted net capital gains
will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions will be
taxable as described above whether received in cash or in shares
through the reinvestment of distributions. The dividends-
received deduction for corporations will generally apply to a
Fund's dividends from investment income to the extent derived by
dividends received by the Fund from domestic corporations,
provided the Fund and the shareholder each meet the relevant
holding period requirements.
A statement detailing the Federal income tax status of all
distributions made during a taxable year will be sent to
shareholders of record no later than January 31 of the following
year. Shareholders must furnish to the Fund a certified taxpayer
identification number ("TIN"). The Fund is required to withhold
31% from reportable payments including ordinary income dividends,
capital gains distributions, and redemptions occurring in
accounts where the shareholder has failed to furnish a certified
TIN and has not certified that such withholding does not apply.
Any shareholders who are non-resident alien individuals, or
foreign corporations, partnerships, trusts or estates, may be
subject to different Federal income tax treatment.
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. Similar tax consequences
generally will result from an exchange of Portfolio shares 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
<PAGE>
average annual change in the value of an assumed initial
investment of $1,000 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. 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 WTC 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.
INVESTMENT ADVISER OF THE FUND. WTC, a wholly owned
subsidiary of Wilmington Trust Corporation, a publicly held bank
holding company, is the Investment Adviser of the Portfolio. WTC
has overall responsibilities for assets under management,
provides overall investment strategies and programs for the
Portfolio, monitors and evaluates portfolio performance and
manages short-term investments for the Portfolio. Under an
Advisory Agreement with the Fund, WTC subject to the supervision
of the Board of Trustees, directs the investments of the
Portfolio in accordance with its investment objective, policies
and limitations.
Under the Advisory Agreement, the Portfolio pays a monthly
advisory fee to WTC at the annual rate of 0.55% of the average
daily net assets of the Portfolio. WTC has agreed to waive its
fee or reimburse the Portfolio monthly to the extent that
expenses of the Portfolio (excluding taxes, extraordinary
expenses, brokerage commission and interest) exceed an annual
rate of 1.50% of the Portfolio's average daily net assets through
December 31, 1998.
In addition to serving as Adviser for the Portfolio, WTC is
engaged in a variety of investment advisory activities, including
the management of collective pools. A team led by E. Matthew
Brown, Vice President, is responsible for the day-to-day
management of the Portfolio. Mr. Brown joined WTC in October
of 1996. Prior to joining WTC, he served as Chief Investment
Officer of PNC Bank, Delaware from 1993 through 1996, and as
Investment Division Manager for Delaware Trust Capital Management
from 1990 through 1993.
FUND MANAGEMENT AND OTHER SERVICE AGREEMENTS
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENTS.
RSMC serves as Administrator of the Portfolio, pursuant to an
Administration Agreement with the Fund. For providing
administrative and operational services, RSMC receives a monthly
fee from the Fund at an annual rate of 0.09% of the Portfolio's
average daily net assets. 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.
Pursuant to an Accounting Services Agreement with the Fund on
behalf of the Portfolio, RSMC provides accounting services and
determines the net asset value per share of the Portfolio. For
these accounting services, RSMC receives from the Fund an annual
<PAGE>
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.
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
October 31, 1997, 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
$200.4 million as of October 31, 1997
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. Pursuant to a Distribution Agreement
with the Fund, and on behalf of the Portfolio, RSD manages the
Fund's distribution efforts. RSD 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.
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. 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 October 31,
1997, WTC owned by virtue of shared or sole voting or investment
power on behalf of its underlying customer accounts 69.8% 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 Equity Fund
APPLICATION & NEW ACCOUNT REGISTRATION
- -------------------------------------------------------------------------------
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR THE RODNEY SQUARE EQUITY 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)
__ LARGE CAP GROWTH LARGE CAP GROWTH EQUITY PORTFOLIO $ _______________
TOTAL AMOUNT TO BE INVESTED $ _______________
_____ By check. (Make payable to "The Rodney Square Equity 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
LARGE CAP GROWTH EQUITY 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
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
CERTIFICATIONS AND SIGNATURE(S) - PLEASE SIGN EXACTLY AS REGISTERED UNDER
"ACCOUNT REGISTRATION."
I have received and read the Prospectus for The Rodney Square Equity
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
Equity 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 Equity 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 Equity 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]
[Left Section]
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
Martin L. Klopping
John J. Quindlen
- -------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT
Robert C. Hancock, VICE PRESIDENT & TREASURER
Carl M. Rizzo, Esq., SECRETARY
Diane D. Marky, ASSISTANT SECRETARY
Connie L. Meyers, ASSISTANT SECRETARY
John J. Kelley, ASSISTANT TREASURER
- --------------------------------------
ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ----------------------------
INVESTMENT ADVISER AND CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ----------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- --------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
Expense Table................................
Financial Highlights.........................
Questions and Answers About
the Portfolios............................
Investment Objectives and Policies...........
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 Agreements...................
Description of the Fund......................
Application and New Account Registration.....
[Middle Section]
THE RODNEY SQUARE EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
[Graphic]
PROSPECTUS
January 26, 1998
<PAGE>
THE RODNEY SQUARE EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
The Large Cap Growth Equity Portfolio (the "Portfolio") is a
diversified series of the Rodney Square Equity Fund (the "Fund"),
an open-end investment company. The Portfolio seeks superior
long-term growth of capital. The Adviser will seek to achieve this
objective by causing the Portfolio to be as fully invested as is
practical, in light of cash flows, in equity securities of or relating to
U.S. large cap issuers which are judged by the Adviser to possess strong
growth characteristics.
STATEMENT OF ADDITIONAL INFORMATION
January 26, 1998
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Fund's current
Prospectus, dated January 26, 1998. 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................................... 3
TRUSTEES AND OFFICERS.................................... 4
WILMINGTON TRUST COMPANY................................. 6
INVESTMENT MANAGEMENT SERVICES........................... 7
Advisory Agreement.................................... 7
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS... 8
REDEMPTIONS.............................................. 11
PORTFOLIO TRANSACTIONS................................... 11
NET ASSET VALUE.......................................... 13
PERFORMANCE INFORMATION.................................. 13
TAXES.................................................... 18
DESCRIPTION OF THE FUND.................................. 20
OTHER INFORMATION........................................ 21
FINANCIAL STATEMENTS..................................... 21
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.
OPTION AND FUTURES STRATEGIES. The Portfolio may purchase
and write (sell) exchange-traded options and futures. These
strategies are described in detail in the Appendix.
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 to obligations that are supported solely or
primarily by the creditworthiness of the issuer. 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.
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.
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.
<PAGE>
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. Failure by the
issuer to deliver a security purchased on a when-issued basis
may result in a loss or a missed opportunity to make an
alternative investment.
The Portfolio generally does not pay for such securities
or start earning interest on them until they are received.
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.
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 WTC. Repurchase agreements maturing in more than seven days
are considered to be illiquid for the purposes of the Fund's
investment limitations.
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 that are actively traded in the institutional market
are not subject to the 15% limit. The Portfolio may not,
however, invest more that 10% of its total assets in restricted
equity securities that do not have a readily available market.
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.
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
<PAGE>
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 Adviser and only when,
in the judgment of the Adviser, the consideration that the
Portfolio will receive from the borrower justifies the risk.
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"); for purposes
of this limitation, repurchase agreements fully collateralized
by U.S. Government obligations will be treated as 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 for temporary or emergency
purposes, and then in an aggregate amount not in excess of 10%
of the Portfolio's total assets;
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 to the extent
permitted by the Investment Company Act of 1940 (the "1940
Act");
7. purchase or sell real estate, but this limitation shall
not prevent the Portfolio from investing in obligations secured
by real estate or interests therein or obligations issued by
companies that invest in real estate or interests therein,
including real estate investment trusts;
8. purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments, but the
Portfolio may purchase, sell or enter into financial options
and futures, forward and spot currency contracts, swap
transactions and other derivative financial instruments;
9. 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.
<PAGE>
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; or
5. purchase securities while borrowings in excess of 5% of
the Portfolio's total assets are outstanding.
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, that percentage shall be
determined, or that standard shall be applied, immediately
after the Portfolio's acquisition of the security or other
asset. Accordingly, any later increase or decrease resulting
from a change in the market value of a security or in the
Portfolio's net or total assets will not cause the Portfolio to
violate a percentage limitation. Similarly, any later change
in quality, such as a rating downgrade or the delisting of a
warrant, will not cause the Portfolio to violate a quality
standard.
"Value" for the purposes of all investment limitations
shall mean the value used in determining the Portfolio's net
asset value.
The Portfolio may as a fundamental policy invest all of
its investable assets (cash, securities and receivables
relating to securities) in an open-end management investment
company having substantially the same investment objective,
policies and limitations as the Portfolio, notwithstanding any
other investment policy of the Portfolio.
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 1940 Act, by virtue of their
positions with either RSMC or Wilmington Trust Company ("WTC"),
the parent of Rodney Square Management Corporation ("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.
<PAGE>
ERIC BRUCKER, School of Management, University of Michigan,
Dearborn, MI 48128, Trustee, age 56, has been Dean of the
School of Management at the University of Michigan since June
1992. He was Professor of Economics, Trenton State College
from September 1989 through June 1992. He was Vice President
for Academic Affairs, Trenton State College, from September
1989 through June 1991. From 1976 until September 1989, he was
Dean of the College of Business and Economics and Chairman of
various committees at the University of Delaware.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807, Trustee,
age 65, has retired as President and Chief Operating Officer of
Hercules Incorporated (diversified chemicals), positions he
held from March 1987 through March 1992. He also served as a
member of the Hercules Incorporated Board of Directors from
1986 through March 1992.
*ROBERT J. CHRISTIAN, Rodney Square North, 1100 N. Market St.,
Wilmington, DE 19890-0001, Trustee, age 48, has been Chief
Investment Officer of WTC 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 65, has retired as Senior Vice
President-Finance of E.I. du Pont de Nemours and Company, Inc.
(diversified chemicals), a position he held from 1984 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 46, 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 33, 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 37, 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 38, has
been a Vice President of RSMC since 1995 and was an Assistant
Vice President of RSMC from 1989 to 1994.
<PAGE>
The fees of the Trustees who are not "interested persons"
of the Fund, 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 November 4, 1997, the Trustees and officers of the
Fund, as a group, owned beneficially, or may be deemed to have
owned beneficially, less than 1% of the outstanding shares of
the 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
WILMINGTON TRUST COMPANY
WTC is the wholly owned subsidiary of Wilmington Trust
Corporation, a publicly held bank holding company. WTC is a
state-chartered bank organized as a Delaware corporation in
1903.
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 $96 billion in
trust, custody and investment management assets, WTC ranks
among the nation's leading financial services firms. As of
December 31, 1996, the trust department of WTC was the
seventeenth 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.
WTC 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.
Several affiliates of WTC are also engaged in the
investment advisory business. Wilmington Trust FSB, a wholly
owned subsidiary of WTC, exercises investment discretion over
certain institutional accounts. Wilmington Brokerage Services
Company, another wholly owned subsidiary of WTC, is a
registered investment adviser and a registered broker-dealer.
In addition, 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 Rodney Square Strategic Fixed-Income Fund.
<PAGE>
INVESTMENT ADVISORY SERVICES
ADVISORY AGREEMENT. WTC serves as Investment Adviser to
the Fund pursuant to an Advisory Agreement executed as of
December 19, 1997. Under the Advisory Agreement WTC directs
the investments of the Portfolio in accordance with the
Portfolio's investment objectives, policy and limitations. The
Advisory Agreement provides that WTC 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 Investment Adviser is paid by the
Fund a monthly management fee at an annual rate of 0.50% of the
Portfolio's average daily net assets.
WTC 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
Advisory 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 WTC. 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 WTC, 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 WTC or by the Fund (by action of its Board of Trustees or by
vote of a majority of the Fund's outstanding voting
securities), and terminates automatically in the event of its
assignment. The Agreement continues in effect from year to
year so long as its continuance is approved at least annually
(i) by the vote of a majority of the Independent Trustees at a
meeting called for the purpose of voting on such approval and
(ii) by the vote of a majority of the Trustees or by the vote
of a majority of the outstanding voting securities of the Fund.
<PAGE>
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS
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 0.12% of
the Portfolio's average daily net assets. Prior to January 16,
1998, RSMC received a monthly administration fee of 0.09% of
the Portfolio's average daily net assets. For the six-month
period ended June 30, 1997, RSMC earned administration fees
amounting to $34,183. For the fiscal years ended December 31,
1996, 1995, and 1994, RSMC earned administration fees amounting
to $63,569, $57,647, and $60,100, respectively. RSMC provides
asset management services to collective investment funds
maintained by WTC and acts as 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. In addition, RSMC also serves as
Investment Adviser to The Rodney Square Fund and The Rodney
Square Tax-Exempt Fund.
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 the six-
month period ended June 30, 1997, RSMC earned an accounting
service fee of $22,315. For each of the fiscal years ended
<PAGE>
December 31, 1996, 1995, and 1994, RSMC earned 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, a wholly owned subsidiary of WTC and registered
broker-dealer, 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.
Pursuant to 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
<PAGE>
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.
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 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.
Effective January 16, 1998, the Fund has no 12b-1
distribution plan. Previously, the Fund had a 12b-1 Plan under
which the Board of Trustees authorized 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
sold Portfolio shares and for marketing efforts focusing on the
preparation and distribution of marketing materials. For the
six-month period ended June 30, 1997, payments under the 12b-1
Plan amounted to $8,207: $8,207 was paid in trail commission,
$0 was paid for prospectus printing and $0 was paid for
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.
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
<PAGE>
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 six-month period ended June
30, 1997, the Portfolio paid brokerage commissions totaling
$31,598. 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, the
portfolio adviser considers, 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 the portfolio adviser or to the Fund; and
(vi) the level of any brokerage commissions paid to any broker
or dealer who is an affiliate of WTC ("Affiliated Broker").
The portfolio adviser 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, the portfolio adviser receives services they
otherwise might have had to perform themselves. The research
services provided by brokers or dealers can be useful to the
portfolio adviser in serving their other clients, as well as in
serving the Fund. Conversely, information provided to the
portfolio adviser by brokers or dealers who have executed
transaction orders on behalf of other portfolio adviser clients
may be useful to the portfolio adviser in providing services to
the Fund. During the six-month period ended June 30, 1997, the
Portfolio paid $14,830 in brokerage commissions, involving
transactions in the amount of $8,862,300 to brokers because of
research services provided. These commissions paid amounted to
46.93% of the Portfolio's aggregate brokerage commissions for
the six-month period. 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.
<PAGE>
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 six-month period
ended June 30, 1997, and 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 adviser's other clients have
investment objectives and programs similar to that of the
Portfolio. Occasionally, the portfolio adviser 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 the portfolio adviser 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 the
portfolio adviser simultaneously purchase or sell the same
security, the portfolio adviser allocates 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 six-month
period ended June 30, 1997 was 33.61%. 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
<PAGE>
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:
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
118 MONTHS SINCE
INCEPTION
SIX-MONTHS 1 YEAR 5 YEARS FEB. 26, 1987
ENDED ENDED ENDED THROUGH
SALES LOAD1 JUNE 30, 1997 DEC. 31, 1996 DEC. 31, 1996 DEC. 31,1996
- ----------- ------------- -------------- -------------- --------------
4.00% 11.83% 19.28% 13.16% 12.38%
None 16.49% 24.25% 14.08% 12.84%
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 six-month period ended June 30, 1997: 16.49%;
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.
- -----------------
1 The Portfolio's maximum sales load was reduced on November 25, 1991
from 5.75% to 4.00%. The lower maximum sales load is reflected in the
standardized average annual total return set forth in this table.
<PAGE>
Value of Value of Value of Increase in
Initial Reinvested Reinvested Cost of Living
Period Ended $10,000 Income Capital Gain (Consumer
December 31 Investment Dividends Distributions Total Value Price Index)
- ----------- ---------- ---------- ------------- ----------- --------------
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%
1987 2 $ 8,370 $ 52 - $ 8,422 3.4%
Explanatory Note: A hypothetical initial investment of
$10,000 on February 26, 1987, together with the aggregate cost
of reinvested dividends and 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
- -------------------
2 From commencement of operations, February 26, 1997.
<PAGE>
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 Russell 1000 Growth
Index, which is a passive index that includes the largest 1000
stocks in the U.S. as measured by market capitalization. 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.
<PAGE>
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.
<PAGE>
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) 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 (c) 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) of 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 gain 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.
<PAGE>
If the Portfolio makes a distribution to shareholders in
excess of its current and accumulated "earnings and profits" in
any taxable year, the excess distribution will be treated by
each shareholder as a return of capital to the extent of the
shareholder's tax basis and thereafter as capital gain.
HEDGING TRANSACTIONS. The use of hedging strategies, such
as writing (selling) options and futures contracts, involves
complex rules that will determine for federal income tax
purposes the character and timing of recognition of the gains
and losses the Portfolio realizes in connection therewith.
Gains from the disposition of foreign currencies (except
certain gains that may be excluded by future regulations), and
gains from options and futures derived by the Portfolio with
respect to its business of investing in securities or foreign
securities, will qualify as permissible income under the Income
Requirement.
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.
Futures contracts that are subject to Section 1256 of the
Code (other than such contracts that are part of a "mixed
straddle" with respect to which a Portfolio has made an
election not to have the following rules apply) ("Section 1256
Contracts") and that are held by the Portfolio at the end of
its taxable year generally will be deemed to have been sold at
market value for federal income tax purposes. Sixty percent of
any net gain or loss recognized on these deemed sales, and 60%
of any net realized gain or loss from any actual sales of
Section 1256 Contracts, will be treated as long-term capital
gain or loss, and the balance will be treated as short-term
capital gain or loss. Section 988 of the Code also may apply
to options on foreign securities. Under Section 988, each
foreign currency gain or loss generally is computed separately
and treated as ordinary income or loss. In the case of
overalap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss.
The Portfolio attempts to monitor its Section 988 transactions
in order to minimize any adverse tax impact.
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. The
Portfolio attempts to reduce the likelihood of adverse tax
consequences from the operation of these wash sale rules by
carefully monitoring its trading activities.
The Fund's transactions in options, futures contracts,
hedging transactions and straddles will be subject to special
tax rules (including mark-to-market, constructive sale,
straddle, wash sale and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's
securities and convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount,
timing and character of distributions to shareholders.
Pursuant to the Taxpayer Relief Act of 1997 (the "1997
Act"), new "constructive sale" rules apply to activities by a
Fund which lock in gain on an "appreciated financial position."
Generally, a "position" is defined to include stock, a debt
instrument, or partnership interest, or an interest in any of
the foregoing, including through a short sale, a swap contract,
or a future or forward contract. Under the 1997 Act, the entry
<PAGE>
into a short sale, a swap contract or a future contract
relating to an appreciated direct position in any stock or debt
instrument, or the acquisition of stock or debt instrument at a
time when the Fund occupies an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a
"constructive sale" that gives rise to the immediate
recognition of gain (but not loss). The application of these
new provisions may cause a Fund to recognize taxable income
from these offsetting transactions in excess of the cash
generated by such activities.
The tax discussion set forth above is a summary included
for general informational purposes only. Each shareholder is
advised to consult its own tax adviser with respect to the
specific tax consequences to it of an investment in the Fund,
including the effect and applicability of state, local, foreign
and other tax laws and the possible effects of changes in
federal or other tax laws.
DESCRIPTION OF THE FUND
The Fund is a diversified open-end series investment
company organized 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 and classes of shares, 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. WTC 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.
<PAGE>
OTHER INFORMATION
INDEPENDENT AUDITORS. Ernst & Young LLP, Two Commerce Square,
2001 Market Street, Philadelphia, PA 19103 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 for each of the ten fiscal years in the period ended
December 31, 1996 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 October 31, 1997, WTC
owned of record 86.5% of the shares of the Portfolio, including
69.8% owned beneficially, all on behalf of its customer
accounts.
FINANCIAL STATEMENTS
The Schedule of Investments as of June 30, 1997
(unaudited); the Statement of Assets and Liabilities as of June
30, 1997 (unaudited); the Statement of Operations for the six-
month period ended June 30, 1997 (unaudited) and for the fiscal
year ended December 31, 1996; Statement of Changes in Net Assets
for the six-month period ended June 30, 1997 (unaudited) and
for the fiscal year ended December 31, 1996; the Financial Highlights
for the six-month period ended June 30, 1997 (unaudited) and for
the fiscal years ended December 31, 1996, 1995, 1994, 1993 and
1992; and the Notes to the Financial Statements, each of which
is included in the Semi-Annual Report to the Shareholders of
the Fund as of and for the six-month period ended June 30, 1997
and the Annual report to the Shareholders of the Fund as of and
for the fiscal year ended December 31, 1996 are incorporated by
reference herein.
<PAGE>
APPENDIX
OPTIONS AND FUTURES STRATEGIES
REGULATION OF THE USE OF OPTIONS AND FUTURES STRATEGIES. As
discussed in the Prospectus, in managing the Fund, the adviser
may engage in certain options and futures strategies for certain
bona fide hedging, risk management or other portfolio management
purposes. Certain special characteristics of and risks
associated with using these strategies are discussed below. Use
of options and futures is subject to applicable regulations
and/or interpretations of the SEC and the several options and
futures exchanges upon which these instruments may be traded.
The Board of Trustees has adopted investment guidelines
(described below) reflecting these trading regulations.
COVER REQUIREMENTS. The Fund will not use leverage in its
options and futures strategies. Accordingly, the Fund will
comply with guidelines established by the SEC with respect to
coverage of these strategies by either (1) setting aside liquid,
unencumbered, daily marked-to-market assets in the prescribed
amount(s) in one or more segregated accounts with the Fund's
custodian; or (2) holding securities or other options or futures
contracts whose values are expected to offset ("cover") its
obligations thereunder. Securities or other options or futures
contracts used for cover cannot be sold or closed out while these
strategies are 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 Fund's assets could
impede portfolio management, or the Fund's ability to meet
redemption requests or other current obligations.
OPTIONS STRATEGIES. The Fund may purchase and write (sell) only
those options on securities and securities indices that are
traded on U.S. exchanges. 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.
The Fund may purchase call options on securities in which it
is authorized to invest in order to fix the cost of a future
purchase. Call options also may be used as a means of enhancing
returns by, for example, participating in an anticipated price
increase of a security. In the event of a decline in the price
of the underlying security, use of this strategy would serve to
limit the potential loss to the Fund to the option premium paid;
conversely, if the market price of the underlying security
increases above the exercise price and the Fund either sells or
exercises the option, any profit eventually realized would be
reduced by the premium paid.
The Fund may purchase put options on securities that it
holds in order to hedge against a decline in the market value of
the securities held or to enhance return. The put option enables
the Fund to sell the underlying security at the predetermined
exercise price; thus, the potential for loss to the Fund 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 Fund realizes on
the sale of the security is reduced by the premium paid for the
put option less any amount for which the put option may be sold.
The Fund may on certain occasions wish to hedge against a
decline in the market value of securities that it holds at a time
when put options on those particular securities are not available
for purchase. At those times, the Fund may purchase a put option
on other carefully selected securities in which it is authorized
to invest, the values of which historically have a high degree of
positive correlation to the value of the securities actually
held. If the adviser's judgment is correct, changes in the value
of the put options should generally offset changes in the value
of the securities being hedged. However, the correlation between
the two values may not be as close in these transactions as in
transactions in which the Fund purchases a put option on a
security that it holds. If the value of the securities
underlying the put option falls below the value of the portfolio
securities, the put option may not provide complete protection
against a decline in the value of the portfolio securities.
<PAGE>
The Fund may write covered call options on securities in
which it is authorized to invest for hedging purposes or to
increase return in the form of premiums received from the
purchasers of the options. A call option gives the purchaser of
the option the right to buy, and the writer (seller) the
obligation to sell, the underlying security at the exercise price
during the option period. The strategy may be used to provide
limited protection against a decrease in the market price of the
security, in an amount equal to the premium received for writing
the call option less any transaction costs. Thus, if the market
price of the underlying security held by the Fund declines, the
amount of the decline will be offset wholly or in part by the
amount of the premium received by the Fund. If, however, there
is an increase in the market price of the underlying security and
the option is exercised, the Fund will be obligated to sell the
security at less than its market value.
The Fund 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 Fund will realize income in
the amount of the premium received. This technique could be used
to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of
the underlying securities would decline below the exercise price
less the premiums received, in which case the Fund would expect
to suffer a loss.
The Fund may purchase put and call options and write covered
put and call options on indexes in much the same manner as the
more traditional options discussed above, except that index
options may serve as a hedge against overall fluctuations in the
securities markets (or a market sector) rather than anticipated
increases or decreases in the value of a particular security. An
index assigns values to the securities included in the index and
fluctuates with changes in such values. Settlements of index
options are effected with cash payments and do not involve
delivery of securities. Thus, upon settlement of a index option,
the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the
closing price of the index. The effectiveness of hedging
techniques using index options will depend on the extent to which
price movements in the index selected correlate with price
movements of the securities in which a Fund invests. Perfect
correlation is not possible because the securities held or to be
acquired by the Fund will not exactly match the composition of
indexes on which options are purchased or written.
The Fund may purchase and write covered straddles on
securities or indexes. A long straddle is a combination of a
call and a put purchased on the same security where the exercise
price of the put is less than or equal to the exercise price on
the call. The Fund would enter into a long straddle when the
adviser believes that it is likely that prices will be more
volatile during the term of the options than is implied by the
option pricing. A short straddle is a combination of a call and
a put written on the same security where the exercise price on
the put is less than or equal to the exercise price of the call
where the same issue of the security is considered "cover" for
both the put and the call. The Fund would enter into a short
straddle when the adviser believes that it is unlikely that
prices will be as volatile during the term of the options as is
implied by the option pricing. In such case, the Fund will set
aside cash and/or liquid, unencumbered securities in a segregated
account with its custodian equivalent in value to the amount, if
any, by which the put is "in-the-money," that is, that amount by
which the exercise price of the put exceeds the current market
value of the underlying security. Because straddles involve
multiple trades, they result in higher transaction costs and may
be more difficult to open and close out.
The Fund may purchase put and call warrants with values that
vary depending on the change in the value of one or more
specified indexes ("index warrants"). An index warrant is
usually issued by a bank or other financial institution and gives
the Fund the right, at any time during the term of the warrant,
to receive upon exercise of the warrant a cash payment from the
issuer of the warrant based on the value of the underlying index
at the time of exercise. In general, if the Fund holds a call
warrant and the value of the underlying index rises above the
exercise price of the warrant, the Fund will be entitled to
<PAGE>
receive a cash payment from the issuer upon exercise based on the
difference between the value of the index and the exercise price
of the warrant; if the Fund holds a put warrant and the value of
the underlying index falls, the Fund will be entitled to receive
a cash payment from the issuer upon exercise based on the
difference between the exercise price of the warrant and the
value of the index. The Fund holding a call warrant would not be
entitled to any payments from the issuer at any time when the
exercise price is greater than the value of the underlying index;
the Fund holding a put warrant would not be entitled to any
payments when the exercise price is less than the value of the
underlying index. If the Fund does not exercise an index warrant
prior to its expiration, then the Fund loses the amount of the
purchase price that it paid for the warrant.
The Fund will normally use index warrants as it may use
index options. The risks of the Fund's use of index warrants are
generally similar to those relating to its use of index options.
Unlike most index options, however, index warrants are issued in
limited amounts and are not obligations of a regulated clearing
agency, but are backed only by the credit of the bank or other
institution which issues the warrant. Also, index warrants
generally have longer terms than index options. Index warrants
are not likely to be as liquid as index options backed by a
recognized clearing agency. In addition, the terms of index
warrants may limit the Fund's ability to exercise the warrants at
any time or in any quantity.
OPTIONS GUIDELINES. In view of the risks involved in using the
options strategies described above, the Fund has adopted the
following investment guidelines to govern its use of such
strategies. These guidelines may be modified by the Board of
Trustees without shareholder approval:
(1) The Fund will write only covered options, and each
such option will remain covered so long as the
Fund is obligated thereby.
(2) The Fund will not write options (whether on
securities or securities indexes) if aggregate
exercise prices of previous written outstanding
options, together with the value of assets used to
cover all outstanding positions, would exceed 25%
of its total net assets.
SPECIAL CHARACTERISTICS AND RISKS OF OPTIONS TRADING. The Fund
may effectively terminate its right or obligation under an option
by entering into a closing transaction. If the Fund wishes to
terminate its obligation to purchase or sell securities under a
put or a call option it has written, the Fund 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 Fund 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 Fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option. If
the Fund is unable to effect a closing purchase transaction with
respect to options it has acquired, the Fund will have to allow
the options to expire without recovering all or a portion of the
option premiums paid. If the Fund is unable to effect a closing
purchase transaction with respect to covered options it has
written, the Fund 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 Fund 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 the adviser's ability to forecast
<PAGE>
the direction of price fluctuations in the underlying
securities markets or, in the case of index options,
fluctuations in the market sector represented by the
selected index.
(2) Options normally have expiration dates of up to three
years. An American style put or call option may be
exercised at any time during the option period while a
European style put or call option may be exercised only
upon expiration or during a fixed period prior to
expiration. The exercise price of the options may be
below, equal to or above the current market value of
the underlying security or index. Purchased options
that expire unexercised have no value. Unless an
option purchased by the Fund is exercised or unless a
closing transaction is effected with respect to that
position, the Fund will realize a loss in the amount of
the premium paid and any transaction costs.
(3) A position in an exchange-listed option may be closed
out only on an exchange that provides a secondary
market for identical options. Although the Fund
intends to purchase or write only those exchange-traded
options for which there appears to be a liquid
secondary market, there is no assurance that a liquid
secondary market will exist for any particular option
at any particular time. A liquid market may be absent
if: (i) there is insufficient trading interest in the
option; (ii) the exchange has imposed restrictions on
trading, such as trading halts, trading suspensions or
daily price limits; (iii) normal exchange operations
have been disrupted; or (iv) the exchange has
inadequate facilities to handle current trading volume.
(4) With certain exceptions, exchange listed options
generally settle by physical delivery of the underlying
security. Index options are settled exclusively in
cash for the net amount, if any, by which the option is
"in-the-money" (where the value of the underlying
instrument exceeds, in the case of a call option, or is
less than, in the case of a put option, the exercise
price of the option) at the time the option is
exercised. If the Fund writes a call option on an
index, the Fund will not know in advance the
difference, if any, between the closing value of the
index on the exercise date and the exercise price of
the call option itself and thus will not know the
amount of cash payable upon settlement. If the Fund
holds an index option and exercises it before the
closing index value for that day is available, the Fund
runs the risk that the level of the underlying index
may subsequently change.
(5) The Fund's activities in the options markets may result
in a higher portfolio turnover rate and additional
brokerage costs; however, the Fund also may save on
commissions by using options as a hedge rather than
buying or selling individual securities in anticipation
of, or as a result of, market movements.
FUTURES AND RELATED OPTIONS STRATEGIES. The Fund may engage in
futures strategies for certain non-trading bona fide hedging,
risk management and portfolio management purposes.
The Fund may sell securities index futures contracts in
anticipation of a general market or market sector decline that
could adversely affect the market value of the Fund's securities
holdings. To the extent that a portion of the Fund's holdings
correlate with a given index, the sale of futures contracts on
that index could reduce the risks associated with a market
decline and thus provide an alternative to the liquidation of
securities positions. For example, if the Fund correctly
anticipates a general market decline and sells index futures to
hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the Fund's
holdings. The Fund may purchase index futures contracts if a
significant market or market sector advance is anticipated. Such
a purchase of a futures contract would serve as a temporary
substitute for the purchase of the underlying securities which
may then be purchased in an orderly fashion. This strategy may
minimize the effect of all or part of an increase in the market
price of securities that the Fund intends to purchase. A rise in
the price of the securities should be in part or wholly offset by
gains in the futures position.
<PAGE>
As in the case of a purchase of an index futures contract,
the Fund may purchase a call option on an index futures contract
to hedge against a market advance in securities that the Fund
plans to acquire at a future date. The Fund may write covered
put options on index futures as a partial anticipatory hedge, and
may write covered call options on index futures as a partial
hedge against a decline in the prices of securities held by the
Fund. This is analogous to writing covered call options on
securities. The Fund also may purchase put options on index
futures contracts. The purchase of put options on index futures
contracts is analogous to the purchase of protective put options
on individual securities where a level of protection is sought
below which no additional economic loss would be incurred by the
Portfolio.
FUTURES AND RELATED OPTIONS GUIDELINES. In view of the risks
involved in using the futures strategies that are described
above, the Fund has adopted the following investment guidelines
to govern its use of such strategies. These guidelines may be
modified by the Board of Trustees without shareholder vote.
(1) The Fund will engage only in covered futures
transactions, and each such transaction will
remain covered so long as the Fund is obligated
thereby.
(2) The Fund will not write options on futures
contracts if aggregate exercise prices of
previously written outstanding options (whether on
securities or securities indexes), together with
the value of assets used to cover all outstanding
futures positions, would exceed 25% of its total
net assets.
SPECIAL CHARACTERISTICS AND RISKS OF FUTURES AND RELATED OPTIONS
TRADING. No price is paid upon entering into a futures contract.
Instead, upon entering into a futures contract, the Fund is
required to deposit with the Fund's custodian, in a segregated
account in the name of the futures broker through whom the
transaction is effected, an amount of cash, U.S. Government
securities or other liquid instruments generally equal to 10% or
less of the contract value. This amount is known as "initial
margin." When writing a call or a put option on a futures
contract, margin also must be deposited in accordance with
applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not
involve borrowing to finance the futures transactions. Rather,
initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the transaction,
assuming all obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, the Fund may
be required by a futures exchange to increase the level of its
initial margin payment. Additionally, initial margin
requirements may be increased generally in the future by
regulatory action. Subsequent payments, called "variation
margin," to and from the broker, are made on a daily basis as the
value of the futures or options position varies, a process known
as "marking to the market." For example, when the Fund purchases
a contract and the value of the contract rises, the Fund receives
from the broker a variation margin payment equal to that increase
in value. Conversely, if the value of the futures position
declines, the Fund is required to make a variation margin payment
to the broker equal to the decline in value. Variation margin
does not involve borrowing to finance the futures transaction,
but rather represents a daily settlement of the Fund's
obligations to or from a clearing organization.
Buyers and sellers of futures positions and options thereon
can enter into offsetting closing transactions, similar to
closing transactions on options on securities, by selling or
purchasing an offsetting contract or option. Futures contracts
or options thereon may be closed only on an exchange or board of
trade providing a secondary market for such futures contracts or
options.
Under certain circumstances, futures exchanges may establish
daily limits on the amount that the price of a futures contract
or related option may vary either up or down from the previous
day's settlement price. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price
beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit
potential losses, because prices could move to the daily limit
for several consecutive trading days with little or no trading
and thereby prevent prompt liquidation of unfavorable positions.
In such event, it may not be possible for the Fund to close a
position and, in the event of adverse price movements, the Fund
would have to make daily cash payments of variation margin
<PAGE>
(except in the case of purchased options). However, if futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses
on the futures contract. However, there is no guarantee that the
price of the securities will, in fact, correlate with the price
movements in the contracts and thus provide an offset to losses
on the contracts.
In considering the Fund's use of futures contracts and
related options, particular note should be taken of the
following:
(1) Successful use by the Fund of futures contracts and
related options will depend upon the adviser's ability
to predict movements in the direction of the securities
markets, which requires different skills and techniques
than predicting changes in the prices of individual
securities. Moreover, futures contracts relate not
only to the current price level of the underlying
securities, but also to anticipated price levels at
some point in the future. There is, in addition, the
risk that the movements in the price of the futures
contract will not correlate with the movements in the
prices of the securities being hedged. For example, if
the price of an index futures contract moves less than
the price of the securities that are the subject of the
hedge, the hedge will not be fully effective, but if
the price of the securities being hedged has moved in
an unfavorable direction, the Portfolio would be in a
better position than if it had not hedged at all. If
the price of the securities being hedged has moved in a
favorable direction, the advantage may be partially
offset by losses in the futures position. In addition,
if the Fund has insufficient cash, it may have to sell
assets to meet daily variation margin requirements.
Any such sale of assets may or may not be made at
prices that reflect a rising market. Consequently, the
Fund may need to sell assets at a time when such sales
are disadvantageous to the Fund. If the price of the
futures contract moves more than the price of the
underlying securities, the Fund will experience either
a loss or a gain on the futures contract that may or
may not be completely offset by movements in the price
of the securities that are the subject of the hedge.
(2) In addition to the possibility that there may be an
imperfect correlation, or no correlation at all,
between price movements in the futures position and the
securities being hedged, movements in the prices of
futures contracts may not correlate perfectly with
movements in the prices of the hedged securities due to
price distortions in the futures market. There may be
several reasons unrelated to the value of the
underlying securities that cause this situation to
occur. First, as noted above, all participants in the
futures market are subject to initial and variation
margin requirements. If, to avoid meeting additional
margin deposit requirements or for other reasons,
investors choose to close a significant number of
futures contracts through offsetting transactions,
distortions in the normal price relationship between
the securities and the futures markets may occur.
Second, because the margin deposit requirements in the
futures market are less onerous than margin
requirements in the securities market, there may be
increased participation by speculators in the futures
market. Such speculative activity in the futures
market also may cause temporary price distortions. As
a result, a correct forecast of general market trends
may not result in successful hedging through the use of
futures contracts over the short term. In addition,
activities of large traders in both the futures and
securities markets involving arbitrage and other
investment strategies may result in temporary price
distortions.
(3) Positions in futures contracts may be closed out only
on an exchange or board of trade that provides a
secondary market for such futures contracts. Although
the Fund intends to purchase and sell futures only on
exchanges or boards of trade where there appears to be
an active secondary market, there is no assurance that
a liquid secondary market on an exchange or board of
trade will exist for any particular contract at any
particular time. In such event, it may not be possible
<PAGE>
to close a futures position, and in the event of
adverse price movements, the Fund would continue to be
required to make variation margin payments.
(4) Like options on securities, options on futures
contracts have limited life. The ability to establish
and close out options on futures will be subject to the
development and maintenance of liquid secondary markets
on the relevant exchanges or boards of trade. There
can be no certainty that such markets for all options
on futures contracts will develop.
(5) Purchasers of options on futures contracts pay a
premium in cash at the time of purchase. This amount
and the transaction costs are all that is at risk.
Sellers of options on futures contracts, however, must
post initial margin and are subject to additional
margin calls that could be substantial in the event of
adverse price movements. In addition, although the
maximum amount at risk when the Fund purchases an
option is the premium paid for the option and the
transaction costs, there may be circumstances when the
purchase of an option on a futures contract would
result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement
in the level of the underlying index value or the
securities or currencies being hedged.
(6) As is the case with options, the Fund's activities in
the futures markets may result in a higher portfolio
turnover rate and additional transaction costs in the
form of added brokerage commissions. However, the Fund
also may save on commissions by using futures contracts
or options thereon as a hedge rather than buying or
selling individual securities in anticipation of, or as
a result of, market movements.
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS AND FUTURES
STRATEGIES.
To the extent such investments are permissible for the Fund,
the Fund's activities in options, futures contracts, hedging
transactions, short sales and straddles will be subject to
certain tax rules including mark-to-market, constructive sale,
straddle and wash sale rules. The effect of these rules may
include acceleration of income to the Fund, deferral of losses to
the Fund, adjustments in the holding periods of the Fund's
securities, and they may cause the conversion of short-term
capital losses into long-term capital losses. Therefore, these
tax rules could affect the amount, timing and character of
distributions to the Fund's shareholders.
Pursuant to the Taxpayer Relief Act of 1997 (the "1997
Act"), new "constructive sale" provisions apply to Fund
activities which lock in gain on an "appreciated financial
position." Generally, an "appreciated financial position" is
defined as any "position" with respect to stock, a debt
instrument, or partnership interest, or an interest in any of the
foregoing, including through a short sale, or a future contract.
Under these provisions, the entry into a future contract relating
to an appreciated direct position in any stock or a debt
instrument, or the acquisition of stock or debt instrument at a
time when the Fund holds an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a
"constructive sale" that gives rise to the immediate recognition
of gain (but not loss). The application of these new provisions
of the 1997 Act may cause a Fund to recognize taxable income from
offsetting transactions in excess of the cash generated by such
transactions. In addition, to the extent provided under the 1997
Act, a constructive sale occurs if the Fund enters into one or
more transactions (or acquires one or more positions) that have
"substantially the same effect" as the transactions described.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a.Financial Statements:
Included in Part A of this Registration Statement:
Financial Highlights for the six-month period ended June
30, 1997 and for each of the nine years in the period
ended December 31, 1996 for the Rodney Square Multi-
Manager Fund, the Growth Portfolio, and for the period
from February 26, 1987 (Commencement of Operations)
through December 31, 1987 for the Growth Portfolio.
Included in Part B of this Registration Statement:
Investments, June 30, 1997 (unaudited)* and December
31, 1996**
Statement of Assets and Liabilities, June 30, 1996
(unaudited)* and December 31, 1996**
Statement of Operations for the six-month period ended
June 30, 1997 (unaudited)* and December 31, 1996**
Statements of Changes in Net Assets for the six-month
period ended June 30, 1997 (unaudited)* and for the
fiscal years ended December 31, 1996 and December
31, 1995**
Financial Highlights for the six-month period ended
June 30, 1997 and for each of the five years in the
period ended December 31, 1996*
Notes to Financial Statements* **
* Incorporated by reference to N-30D filing filed on August
27, 1997 (accession #000079199-97-000007)
**Incorporated by Reference to this Registration Statement
filed on February 28, 1997
Statements, schedules and historical information other than
those listed above have been omitted since they are
either not applicable or are not required.
b.Exhibits:
1. (a) Declaration of Trust of the Registrant dated
August 19, 1986 as Amended and Restated on November 10,
1986. (Incorporated by reference to Exhibit 1 to Pre-
Effective Amendment No. 1 to this Registration
Statement filed on November 12, 1986).
(b) Amendment to Declaration of Trust of the
Registrant dated December 29, 1986. (Incorporated by
reference to Exhibit 1(b) to Pre-Effective Amendment
No. 2 to this Registration Statement filed on January
28, 1987).
(c) Amendment to Declaration of Trust of the
Registrant dated February 15, 1993. (Incorporated by
reference to Exhibit 1(c) to Post-Effective Amendment
No. 9 to this Registration Statement filed on February
28, 1994).
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
2.Bylaws of the Registrant as Amended on May 20, 1987.
(Incorporated by reference to Exhibit 2 to Post-Effective
Amendment No. 1 to this Registration Statement filed on
July 31, 1987).
3.Voting Trust Agreement - None.
4. Instruments Defining the Rights of Shareholders.
(a) Amended and Restated Declaration of Trust dated
November 10, 1986 as Amended December 29, 1986 and
February 15, 1993. (Incorporated by reference to
Exhibit 4 (a) to Post-Effective Amendment No. 9 to this
registration statement filed on February 28, 1994).
(b) By-laws of the Registrant as Amended on May 20,
1987. (Incorporated by reference to Exhibit 4(b) to
Post-Effective Amendment No. 9 to this registration
statement filed on February 28, 1994).
5. Advisory Agreement between the Registrant and
Wilmington Trust Company dated December 19, 1997.
(To be filed).
6. (a) Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc., dated December 31,
1992. (Incorporated by reference to Exhibit 6 to
Post-Effective Amendment No. 8 to this Registration
Statement filed on February 26, 1993).
(b) Form of Selected Dealer Agreement between Rodney
Square Distributors, Inc. and the broker-dealer as
listed in Schedule B to the Agreement effective
December 31, 1992. (Incorporated by reference to
Exhibit 6(b) to Post-Effective Amendment No. 9 to this
Registration Statement filed on February 28, 1994).
7. Bonus, Profit Sharing or Pension Plans - None.
8. Custodian Agreement between the Registrant and Wilmington
Trust Company dated January 30, 1987. (Incorporated by
reference to Exhibit 8 to Post-Effective Amendment No. 1
to this Registration Statement filed on July 31, 1987).
9. (a) Transfer Agency Agreement between the Registrant
and Rodney Square Management Corporation dated December
31, 1992. (Incorporated by reference to Exhibit 9(a)
to Post-Effective Amendment No. 8 to this Registration
Statement filed on February 26, 1993).
(b) Accounting Services Agreement between the
Registrant and Rodney Square Management Corporation
dated October 1, 1989. (Incorporated by reference to
Exhibit 9(c) to Post-Effective Amendment No. 6 to this
Registration Statement filed on March 1, 1991).
(c) Administration Agreement between the Registrant
and Rodney Square Management Corporation dated December
31, 1992. (Incorporated by reference to Exhibit 9(c)
to Post-Effective Amendment No. 8 to this Registration
Statement filed on February 26, 1993).
10. Opinion of Kirkpatrick & Lockhart, LLP. (Opinion at the
time of Fund creation filed with the Securities and
Exchange Commission on or about February 23, 1987 under
Rule 24f-2).
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
11. Consent of Ernst & Young L.L.P., independent
auditors for Registrant. (Filed herewith).
12. Financial Statements omitted from Part B - None.
13. Letter of Investment Intent. (Incorporated by
reference to Exhibit 13 to Pre-Effective Amendment No. 2
to this Registration Statement filed on January 28,
1987).
14. Prototype Retirement Plan - None.
15. Plan of Distribution adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 of the
Registrant with respect to the Growth Portfolio effective
March 28, 1988, amended effective as of January 1, 1993.
(Incorporated by reference to Exhibit 15(a) to
Post-Effective Amendment No. 8 to this Registration
Statement filed on February 26, 1993).
16. Schedule for Computation of Performance Quotations.
(Filed herewith).
17. Financial Data Schedule. (Filed herewith).
18. Plan adopted pursuant to Rule 18f-3 - None.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
a.Persons Controlled by Registrant: None
b.Persons who may be deemed to be under Common Control with
Registrant in the event Wilmington Trust Company ("WTC")
and/or Wilmington Trust Corporation ("WT Corp.") may be
deemed to be a controlling person(s) of the Registrant:
MUTUAL FUNDS
------------
The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
% HELD
CORPORATE ENTITY STATE OF ORG. BY WT CORP.
---------------- -------------- ----------
Wilmington Trust Company Delaware 100%
Wilmington Trust FSB Federally Chartered 100%
Wilmington Trust of Pennsylvania Pennsylvania 100%
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT (CONTINUED).
% HELD
CORPORATE ENTITY STATE OF ORG. BY WTC
---------------- ------------- ------
Brandywine Insurance Agency, Inc. Delaware 100%
Brandywine Finance Corp. Delaware 100%
Brandywine Life Insurance Company, Inc. Delaware 100%
Compton Realty Corporation Delaware 100%
Delaware Corp. Management Delaware 100%
Drew-I Ltd. Delaware 100%
Drew-VIII Ltd. Delaware 100%
Holiday Travel Agency, Inc. Delaware 100%
Rodney Square Distributors, Inc. Delaware 100%
Rodney Square Management Corporation Delaware 100%
Siobain-XII Ltd. Delaware 100%
Spar Hill Realty Company Delaware 100%
Wilmington Brokerage Services Company Delaware 100%
WTC Corporate Services, Inc. Delaware 100%
100 West Tenth St. Corporation Delaware 100%
WT Investments Inc. Delaware 100%
PARTNERSHIPS
------------
Rodney Square Investors, L.P.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF OCTOBER 31, 1997):
(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
--------------- -----------------------------
Shares of beneficial
interest $.01 par value 417
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
ITEM 27. INDEMNIFICATION.
Section 2 of Article X of the Registrant's Amended and Restated
Declaration of Trust provides that the appropriate series of the
Registrant will indemnify the Registrant's Trustees or officers
("covered persons") to the fullest extent permitted by law
against liability and all expenses reasonably incurred or paid by
such persons in connection with any claim, action, suit or
proceeding in which a covered person becomes involved as a party
or otherwise by virtue of being or having been a Trustee or
officer and against amounts paid or incurred by him or her in the
settlement thereof; provided no covered persons shall be
indemnified where there has been an adjudication, as described in
Article X, Section 2(b), that such person is liable to the
Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office or did not act in
good faith in the reasonable belief that his or her action was in
the best interest of the Registrant. Article X, Section 2(c)
provides that the Registrant may maintain insurance policies
covering such rights of indemnification.
Additionally, Article XI, Section 1 of the Declaration of Trust
provides that the Trustees shall not be personally liable to any
person extending credit to, contracting with or having any claim
against the Registrant; except that nothing in the Declaration of
Trust shall protect a Trustee against liability by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office.
Section 2 of Article XI of the Declaration of Trust also
provides that subject to the provisions of Article X and Article
XI, Section 1, the Trustees shall not be liable for errors of
judgment or mistakes of fact or law, or for any act or omission
in accordance with advice of counsel or other experts or for
failing to follow such advice.
Paragraph 7 of the Fund Management Agreement between Rodney
Square Management Corporation ("RSMC") and the Registrant provides
that RSMC shall not be liable to the Registrant or to any shareholder
of the Registrant for any act or omission in the course of performance
of its duties under the contract, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations
or duties. Paragraph 15 specifies that RSMC shall be limited in
all cases to the Registrant and its assets for satisfaction of
any claims it may have against the Registrant.
Paragraph 12 of each Advisory Agreement among the Registrant, RSMC
and each portfolio adviser provides that the adviser will not be liable
for any action taken, omitted or suffered to be taken by the adviser
in good faith and believed by it to be authorized or within the scope
of the Agreement provided it shall not have acted with willful misfinance,
bad faith, gross negligence or in violation of the standarfd of care
established under the Agreement. Paragraph 20 of each Advisory
Agreement conains a paragraph similar Paragraph 15 of the Fund
Management Agreement.
Paragraph 11 of the Administration Agreement between the
Registrant and RSMC provides that RSMC and their affiliates shall
not be liable for any error of judgment or mistake of law or for
any loss suffered by the Registrant in connection with the
matters to which the Agreement relates, except to the extent of a
loss resulting from willful misfeasance, bad faith or gross
negligence on the part of RSMC or their affiliates in the
performance of their obligations and duties under the Agreement.
In addition, Paragraph 17 of the Administration Agreement is
similar to Paragraph 15 of the Fund Management Agreement
described above.
Paragraph 11 of the Distribution Agreement between the
Registrant and Rodney Square Distributors, Inc. ("RSD") provides
that the Registrant agrees to indemnify and hold harmless RSD and
<PAGE>
THE RODNEY SQUARE MULT-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
ITEM 27. INDEMNIFICATION (CONTINUED).
each of its directors and officers and each person, if any, who
controls RSD within the meaning of Section 15 of the Securities
Act of 1933 (the "1933 Act") against any loss, liability, claim,
damages or expense arising by reason of any person acquiring any
shares, based upon the 1933 Act or any other statute or common
law, alleging any wrongful act of the Registrant or any of its
employees or representatives, or based upon the grounds that the
registration statements, or other information filed or made
public by the Registrant included an untrue statement of a
material fact or omitted to state a
ITEM 27. INDEMNIFICATION (CONTINUED).
material fact required to be stated or necessary in order to make
the statements not misleading. RSD, however, will not be
indemnified to the extent that the statement or omission is based
on information provided in writing by RSD. In no case is the
indemnity of the Registrant in favor of RSD or any person
indemnified to be deemed to protect RSD or any person against any
liability to the Registrant or its security holders to which RSD
or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of
its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement. Paragraph 16 of the
Distribution Agreement is similar to Paragraph 15 of the Fund
Management Agreement.
Paragraph 18 of the Transfer Agency Agreement between the
Registrant and RSMC provides that RSMC and their nominees shall
be held harmless from all taxes, charges, expenses, assessments,
claims and liabilities including, without limitation, liabilities
arising under the 1933 Act, the Securities Exchange Act of 1934
and any state or foreign securities and blue sky laws, and
amendments thereto, and expenses including without limitation
reasonable attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which RSMC takes at
the request of or on the direction of or in reliance on the
advice of the Registrant or upon oral or written instructions in
the absence of RSMC's or its nominees' own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and
obligations under such Agreement. Paragraph 27 of the Transfer
Agency Agreement is similar to Paragraph 15 of the Fund
Management Agreement.
Paragraph 13 of the Accounting Services Agreement between the
Registrant and RSMC is similar to Paragraph 18 of the Transfer
Agency Agreement. Paragraph 20 of the Accounting Services
Agreement is similar to Paragraph 15 of the Fund Management Agreement.
Insofar as indemnification for liability arising under the 1933
Act may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a Trustee,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Rodney Square Management Corporation ("RSMC"), a Delaware Corporation,
serves as Investment manager, administrator, transfer agent and
accounting agent to the Registrant. It currently manages large
Institutional accounts and collective investment funds for accounts
managed by Wilmington Trust Company's ("WTC") trust department. RSMC
is a wholly owned subsidiary of WTC, also a Delaware Corporation, which
in turn is wholly owned by Wilmington Trust Corporation. Information
as to the officers and directors of RSMC is included in its Form ADV
filed on March 11, 1987 and most recently supplemented on February 27,
1997, with the Securities and Exchange Commission File No. 801-22071 and
is incorporated by reference herein.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The Rodney Square Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Tax-Exempt Fund
Heitman Real Estate Fund - Heitman/PRA Institutional Class
The HomeState Group
Kiewit Mutual Funds
1838 Investment Advisors Funds
The Olstein Funds
Brazos Mutual Funds
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and Offices
Business Address Rodney Square Distributors, Inc. with Registrant
- ------------------ --------------------------------- ---------------------
Jeffrey O. Stroble President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
Martin L. Klopping Director President & Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Cornelius G. Curran Vice President None
1105 North Market Street
Wilmington, DE 19890
<PAGE>
THE RODNEY SQUARE MULTI-MANAGER FUND
Items Required By Form N-1A (continued)
PART C - OTHER INFORMATION (continued)
ITEM 29. PRINCIPAL UNDERWRITERS (CONTINUED).
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940
and the rules promulgated thereunder and the records relating to
the duties of the Registrant's transfer agent are maintained by
Rodney Square Management Corporation, Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001. Records
relating to the duties of the Registrant's custodian are
maintained by Wilmington Trust Company, Rodney Square North,
Wilmington, Delaware 19890-0001.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish a copy of the
Registrant's latest Annual Report to Shareholders to each
person to whom a copy of the Registrant's Prospectus is
delivered, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused
this amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Wilmington, and State of Delaware, on the 26th day of November, 1997.
THE RODNEY SQUARE EQUITY FUND
By:
-------------------------------
Carl M. Rizzo, Esq., Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
President (Principal
/s/ Martin Klopping Executive Officer) November 26, 1997
- -------------------------
Martin L. Klopping and Trustee
/s/ Eric Brucker
- -------------------------
Eric Brucker* Trustee November 26, 1997
/s/ Fred L. Buckner
- ------------------------
Fred L. Buckner* Trustee November 26, 1997
/s/ Robert J. Christian
- ------------------------
Robert J. Christian* Trustee November 26, 1997
/s/ John J. Quindlen
- -------------------------
John J. Quindlen* Trustee November 26, 1997
Vice President and
/s/ Robert C. Hancock
- -------------------------- Treasurer (Principal
Robert C. Hancock Financial and November 26, 1997
Accounting Officer)
*By: /s/ Carl M. Rizzo
----------------------
Carl M. Rizzo**
** Attorney-in-fact pursuant to a power of attorney filed herewith.
<PAGE>
POWER OF ATTORNEY
Each of the undersigned in his capacity as a Trustee or
officer, or both, as the case may be, of the Registrant, does
hereby appoint Arthur J. Brown, Carl M. Rizzo, and Diane D.
Marky, and each of them, or jointly, his true and lawful attorney
and agent to execute in his name, place and stead (in such
capacity) any and all post-effective amendments to the
Registration Statement and all instruments necessary or desirable
in connection therewith, to attest the seal of the Registrant
thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents have power and
authority to do and perform in the name and on behalf of each of
the undersigned, in any and all capacities, every act whatsoever
necessary or advisable to be done in the premises as fully and to
all intents and purposes as each of the undersigned might or
could do in person, hereby ratifying and approving the act of
said attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ------ -----
President (Principal
/s/ Martin L. Klopping
- ---------------------- Executive Officer) November 17, 1997
Martin L. Klopping and Trustee
/s/ Eric Brucker
- ----------------------
Eric Brucker Trustee November 17, 1997
/s/ Fred L. Buckner
- ----------------------
Fred L. Buckner Trustee November 17, 1997
/s/ Robert J. Christian
- ------------------------
Robert J. Christian Trustee November 17, 1997
/s/ John J. Quindlen
- ------------------------
John J. Quindlen Trustee November 17, 1997
Vice President and
/s/ Robert C. Hancock
- ----------------------- Treasurer (Principal
Robert C. Hancock Financial and November 17, 1997
Accounting Officer)
<PAGE>
File No. 33-8120
File No. 811-4808
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 13
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 15
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE RODNEY SQUARE EQUITY FUND
<PAGE>
THE RODNEY SQUARE EQUITY FUND
EXHIBIT INDEX
Exhibit 5 Advisory Agreement between Registrant and
Wilmington Trust Company
Exhibit 11 Consent of Ernst & Young L.L.P., independent
auditors for Registrant
Exhibit 16 Schedule for Computation of Performance
Quotations
Exhibit 17 Financial Data Schedule
<PAGE>
EXHIBIT A
ADVISORY AGREEMENT
between
THE RODNEY SQUARE EQUITY FUND
and
WILMINGTON TRUST COMPANY
AGREEMENT made this _____ day of January, 1998, by and
between The Rodney Square Equity Fund, a Massachusetts
business trust (hereinafter called the "Fund"), and Wilmington
Trust Company, a Delaware corporation (hereinafter called the
"Adviser").
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended ("Investment Company Act"), as an open-
end management investment company, and offers for sale distinct
series of shares of beneficial interest ("Series") each
corresponding to a distinct portfolio; and
WHEREAS, the Fund desires to avail itself of the services,
information, advice, assistance and facilities of an investment
adviser on behalf of one or more Series of the Fund, and to have
that investment adviser provide or perform for the Series various
research, statistical and investment services; and
WHEREAS, the Adviser is willing to furnish such services to
the Fund with respect to each of the Series listed on Schedule A
to this Agreement (the "Portfolio" or "Portfolios") on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and the
mutual covenants herein contained, it is agreed between the
parties as follows:
1. EMPLOYMENT OF THE ADVISER. The Fund hereby employs the
Adviser to invest and reinvest the assets of the Portfolio in the
manner set forth in Section 2 of this Agreement subject to the
direction of the Trustees and the officers of the Fund, for the
period, in the manner, and on the terms set forth hereinafter.
The Adviser hereby accepts such employment and agrees during such
period to render the services and to assume the obligations
herein set forth. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as
expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY, THE
ADVISER. The Adviser undertakes to provide the services
hereinafter set forth and to assume the following obligations:
A. INVESTMENT ADVISORY SERVICES.
(a) The Adviser shall direct the investments of
each Portfolio, subject to and in accordance with the Portfolio's
investment objective, policies and limitations as provided in its
Prospectus and Statement of Additional Information ("the
Prospectus") and other governing instruments, as amended from
time to time, and any other directions and policies which the
Trustees may issue to the Adviser from time to time.
(b) The Adviser is authorized, in its discretion
and without prior consultation with the Fund, to purchase and
sell securities and other investments of each Portfolio.
B. CORPORATE MANAGEMENT SERVICES.
(a) The Adviser shall furnish for the use of the
Fund office space and all necessary office facilities, equipment
and personnel for servicing the investments of the Fund.
(b) The Adviser shall pay the salaries of all
personnel of the Fund or the Adviser performing services relating
to research, statistical and investment activities.
C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION
OF REGISTRATION STATEMENT, AMENDMENTS AND OTHER MATERIALS. The
Adviser will make available and provide such information as the
Fund or its administrator may reasonably request for use in the
preparation of its registration statement, reports and other
documents required by any applicable federal, foreign or state
statutes or regulations.
D. CODE OF ETHICS. The Adviser will adopt a written
code of ethics complying with the requirements of Rule 17j-1
under the Investment Company Act and Section 204A of the
Investment Advisers Act of 1940 and will provide the Fund and its
administrator with a copy of the code of ethics and evidence of
its adoption. Within forty-five (45) days of the end of the last
calendar quarter of each year while this Agreement is in effect,
an executive officer of the Adviser shall certify to the Trustees
that the Adviser has complied with the requirements of Rule 17j-1
and Section 204A during the previous year and that there has been
no violation of the Adviser's code of ethics or, if such a
violation has occurred, that appropriate action was taken in
response to such violation. Upon the written request of the Fund
or its administrator, the Adviser shall permit the Fund or its
administrator to examine the reports required to be made to the
Adviser by Rule 17j-l(c)(l).
E. DISQUALIFICATION. The Adviser shall immediately
notify the Trustees of the occurrence of any event which would
disqualify the Adviser from serving as an investment adviser of
an investment company pursuant to Section 9 of the Investment
Company Act or any other applicable statute or regulation.
F. OTHER OBLIGATIONS AND SERVICES. The Adviser shall
make its officers and employees available to the Trustees and
officers of the Fund for consultation and discussion regarding
the management of each Portfolio and its investment activities.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE.
A. The Adviser, subject to the control and direction
of the Trustees, shall have authority and discretion to select
brokers and dealers to execute portfolio transactions for each
Portfolio, and for the selection of the markets on or in which
the transactions will be executed.
B. In acting pursuant to Section 3A, the Adviser will
place orders through such brokers or dealers in conformity with
the policies with respect to portfolio transactions set forth in
the Fund's registration statement.
C. It is understood that neither the Fund nor the
Adviser will adopt a formula for allocation of a Portfolio's
brokerage.
D. It is understood that the Adviser may, to the
extent permitted by applicable laws and regulations, aggregate
securities to be sold or purchased for any Portfolio and for
other clients in order to obtain the most favorable price and
efficient execution. In that event, allocation of the securities
purchased or sold, as well as expenses incurred in the
transaction, will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its
fiduciary obligations to the Fund and to its other clients.
E. It is understood that the Adviser may, in its
discretion, use brokers who provide a Portfolio with research,
analysis, advice and similar services to execute portfolio
transactions on behalf of the Portfolio, and the Adviser may pay
to those brokers in return for brokerage and research services a
higher commission than may be charged by other brokers, subject
to the Adviser determining in good faith that such commission is
reasonable in terms either of the particular transaction or of
the overall responsibility of the Adviser to the Portfolio and
its other clients and that the total commissions paid by such
Portfolio will be reasonable in relation to the benefits to the
Portfolio over the long term.
F. It is understood that the Adviser may use brokers
who (i) are affiliated with the Adviser provided that no such
broker will be utilized in any transaction in which such broker
acts as principal; and (ii) the commissions, fees or other
remuneration received by such brokers is 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 during a
comparable period of time.
G. The Adviser shall provide such reports as the
Trustees may reasonably request with respect to each Portfolio's
total brokerage and portfolio transaction activities and the
manner in which that business was allocated.
4. DELEGATION OF ADVISER'S OBLIGATIONS AND SERVICES. With
respect to any or all Portfolios, the Adviser may enter into one
or more contracts ("Sub-Advisory Contract") with a sub-adviser in
which the Adviser delegates to such sub-adviser any or all of its
obligations or services specified in Section 2 of this Agreement,
provided that each Sub-Advisory Agreement imposes on the sub-
adviser bound thereby all the duties and conditions the Adviser
is subject to under this Agreement, and further provided that
each Sub-Advisory Agreement meets all requirements of the
Investment Company Act and rules thereunder.
5. EXPENSES OF THE FUND. It is understood that the Fund
will pay all its expenses other than those expressly stated to be
payable by the Adviser hereunder, which expenses payable by the
Fund shall include, without limitation:
A. fees payable for administrative services;
B. fees payable for accounting services;
C. the cost of obtaining quotations for calculating
the value of the assets of each Portfolio;
D. interest and taxes;
E. brokerage commissions, dealer spreads and other
costs in connection with the purchase or sale of
securities;
F. compensation and expenses of its Trustees other
than those who are "interested persons" of the
Fund within the meaning of the Investment Company
Act;
G. Legal and audit expenses;
H. fees and expenses related to the registration and
qualification of the Fund and its shares for
distribution under state and federal securities
laws;
I. expenses of typesetting. printing and mailing
reports, notices and proxy material to
shareholders of the Fund:
J. all other expenses incidental to holding meetings
of the Fund's shareholders, including proxy
solicitations therefor:
K. premiums for fidelity bond and other insurance
coverage;
L. the Fund's association membership dues;
M. expenses of typesetting for printing Prospectuses;
N. expenses of printing and distributing Prospectuses
to existing shareholders;
O. out-of-pocket expenses incurred in connection with
the provision of custodial and transfer agency
services;
P. service fees payable by each Portfolio to the
Distributor for providing personal services to the
shareholders of each Portfolio and for maintaining
shareholder accounts for those shareholders;
Q. distribution fees; and
R. such non-recurring expenses as may arise,
including costs arising from threatened actions,
actions, suits and proceedings to which the Fund
is a party and the legal obligation which the Fund
may have to indemnify its Trustees and officers
with respect thereto.
6. Compensation of the Adviser. For the services and
facilities to be furnished hereunder, the Adviser shall receive
an advisory fee equivalent to the annual rate listed along with
each Portfolio's name in Schedule B attached hereto. This
advisory fee shall be payable monthly as soon as practicable
after the last day of each month based on the average of the
daily values placed on the net assets of the Fund as determined
at the close of business on each day throughout the month, with
each Portfolio to contribute pro-rata to the payment to the
Adviser on the basis of its net assets. The assets of each
Portfolio will be valued separately as of the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m.,
Eastern time) on each business day throughout the month or, if
the Fund lawfully determines the value of the net assets of any
Portfolio as of some other time on each business day, as of such
time with respect to that Portfolio. If the Fund determines the
value of the net assets of any Portfolio more than once on any
business day, the last such determination on that day shall be
deemed to be the sole determination on that day. The value of net
assets shall be determined pursuant to the applicable provisions
of the Fund's Declaration of Trust, its Bylaws and the Investment
Company Act. If, pursuant to such provisions, the determination
of the net asset value of any Portfolio of the Fund is suspended
for any particular business day, then the value of the net assets
of that Portfolio on that day shall be deemed to be the value of
its net assets as determined on the preceding business day. If
the determination of the net asset value of any Portfolio has
been suspended for more than one month, the Adviser's
compensation payable at the end of that month shall be computed
on the basis of the value of the net assets of the Portfolio as
last determined (whether during or prior to such month). This
advisory fee shall also serve as compensation for the additional
services also listed on Schedule B provided by the Adviser under
separate agreements with the Fund, with respect to each
Portfolio, provided that any related reasonable out-of-pocket
expenses incurred in the provision of services under those
agreements shall be borne by the Fund.
7. ACTIVITIES AND AFFILIATES OF THE ADVISER.
A. The services of the Adviser to the Fund are not to
be deemed exclusive, the Adviser being free to render services to
others and engage in other activities, provided, however, that
such other services and activities do not, during the term of
this Agreement, interfere, in a material manner, with the
Adviser's ability to meet all of its obligations with respect to
rendering services to the Fund hereunder.
B. The Fund acknowledges that the Adviser or one or
more of its "affiliated persons" may have investment
responsibilities or render investment advise to or perform other
investment advisory services for other individuals or entities
and that the Adviser, its "affiliated persons" or any of its or
their directors, officers, agents or employees may buy, sell or
trade in securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph
3, the Fund agrees that the Adviser or its "affiliated persons"
may give advice or exercise investment responsibility and take
such other action with respect to Affiliated Accounts which may
differ from the advice given or the timing or nature of action
with respect to the Portfolios of the Fund, provided that the
Adviser acts in good faith. The Fund acknowledges that one or
more of the Affiliated Accounts may at any time hold, acquire,
increase, decrease, dispose of or otherwise deal with positions
in investments in which one or more Portfolios may have an
interest. The Adviser shall have no obligation to recommend for
any Portfolio a position in any investment which an Affiliated
Account may acquire, and the Fund shall have no first refusal, co-
investment or other rights in respect of any such investment,
either for its Portfolios or otherwise.
C. Subject to and in accordance with the Declaration
of Trust and Bylaws of the Fund as currently in effect and the
Investment Company Act and the rules thereunder, it is understood
that Trustees, officers and agents of the Fund and shareholders
of the Fund are or may be interested in the Adviser or its
"affiliated persons" as directors, officers, agents or
shareholders of the Adviser or its "affiliated persons"; that
directors, officers, agents and shareholders of the Adviser or
its "affiliated persons" are or may be interested in the Fund as
trustees, officers, agents, shareholders or otherwise; that the
Adviser or its "affiliated persons" may be interested in the Fund
as shareholders or otherwise; and that the effect of any such
interests shall be governed by said Declaration of Trust, Bylaws
and the Investment Company Act and the rules thereunder.
8. LIABILITIES OF THE ADVISER.
A. Except as provided below, in the absence of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of obligations or duties hereunder on the part of the
Adviser, the Adviser shall not be subject to liability to the
Fund or to any shareholder of the Fund or its Portfolios for any
act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security or the making of any
investment for or on behalf of the Fund.
B. No provision of this Agreement shall be construed
to protect any Trustee or officer of the Fund, or the Adviser,
from liability in violation of Sections 17(h), 17(i), 36(a) or
36(b) of the Investment Company Act.
9. EFFECTIVE DATE; TERM. This Agreement shall become
effective on the date first written above and shall remain in
force for a period of two years from such date, and from year to
year thereafter, but only so long as such continuance is
specifically approved at least annually by the Board of Trustees,
including the vote of a majority of the Trustees who are not
"interested persons" of the Fund, cast in person at a meeting
called for the purpose of voting on such approval, or by vote of
a majority of the outstanding voting securities. The aforesaid
provision shall be construed in a manner consistent with the
Investment Company Act and the rules and regulations thereunder.
10. ASSIGNMENT. No "assignment" of this Agreement shall be
made by the Adviser, and this Agreement shall terminate
automatically in event of such assignment. The Adviser shall
notify the Fund in writing in advance of any proposed change of
"control" to enable the Fund to take the steps necessary to enter
into a new advisory agreement.
11. AMENDMENT. This Agreement may be amended at any time,
but only by written agreement between the Adviser and the Fund,
which amendment is subject to the approval of the Trustees of the
Fund and, where required by the Investment Company Act, the
shareholders of any affected Portfolio in the manner required by
the Investment Company Act and the rules thereunder.
12. TERMINATION. This Agreement:
A. may at any time be terminated without payment of
any penalty by the Fund with respect to any
Portfolio (by vote of the Board of Trustees of the
Fund or by "vote of a majority of the outstanding
voting securities") on sixty (60) days' written
notice to the Adviser;
B. shall immediately terminate in the event of its
"assignment"; and
C. may be terminated with respect to any Portfolio by
the Adviser on sixty (60) days' written notice to
the Fund.
13. DEFINITIONS. As used in this Agreement, the terms
"affiliated person," "assignment," 'control," "interested person"
and "vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the Investment Company Act
and the rules and regulations thereunder, subject to any
applicable orders of exemption issued by the Securities and
Exchange Commission.
14. NOTICE. Any notice under this Agreement shall be given
in writing addressed and delivered or mailed postage prepaid to
the other party to this Agreement at its principal place of
business.
15. SEVERABILITY. If any provision of this Agreement shall
be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected
thereby.
16. SHAREHOLDER LIABILITY. The Adviser is hereby expressly
put on notice of the limitation of shareholder liability as set
forth in the Declaration of Trust of the Fund and agrees that
obligations assumed by the Fund pursuant to this Agreement shall
be limited in all cases to the Fund and its assets, and if the
liability relates to one or more Portfolios, the obligations
hereunder shall be limited to the respective assets of such
Portfolio or Portfolios. The Adviser further agrees that it shall
not seek satisfaction of any such obligation from the
shareholders or any individual shareholder of the Portfolios of
the Fund, nor from the Trustees or any individual Trustee of the
Fund.
17. GOVERNING LAW. To the extent that state law has not
been preempted by the provisions of any law of the United States
heretofore or hereafter enacted, as the same may be amended from
time to time, this Agreement shall be administered, construed and
enforced according to the laws of the State of Delaware.
IN WITNESS WHEREOF the parties have caused this instrument
to be signed on their behalf by their respective officers
thereunto duly authorized, and their respective seals to be
hereunto affixed, all as of the date first written above.
THE RODNEY SQUARE EQUITY FUND
(SEAL) By:
President
WILMINGTON TRUST COMPANY
(SEAL) By:
Senior Vice President
SCHEDULE A
THE RODNEY SQUARE EQUITY FUND
PORTFOLIO LISTING
SCHEDULE B
THE RODNEY SQUARE EQUITY FUND
FEE AND SERVICES SCHEDULE
Exhibit 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Independent
Auditors" and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference
in this Post-Effective Amendment Number 13 to Registration
Statement Number 33-8120 (Form N-1A) of our report dated
January 24, 1997, on the financial statements and financial
highlights of The Rodney Square Multi-Manager Fund for the
year ended December 31, 1996, included in the 1996 Annual
Report to Shareholders.
Philadelphia, Pennsylania
November 20, 1997
Exhibit 16
FUND NAME: RODNEY SQUARE MULTI-MANAGER FUND - GROWTH PORTFOLIO
(NON-STANDARDIZED RETURNS)
Six-Month Period
Ended June 30, 1997
-------------------
# YEARS IN PERIOD N/A
AVERAGE ANNUAL TOTAL RETURN 16.49%
CUMULATIVE TOTAL RETURN 16.49%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,164.93/1,000)**1 -1 = T (1,164.93/1,000) -1 = T
0.1649 = T 0.1649 = T
16.49% = T 16.49% = T
FUND NAME: RODNEY SQUARE MULTI-MANAGER FUND - GROWTH PORTFOLIO
(STANDARDIZED RETURNS)
Six-Month Period
Ended June 30, 1997
-------------------
# YEARS IN PERIOD N/A
AVERAGE ANNUAL TOTAL RETURN 11.83%
CUMULATIVE TOTAL RETURN 11.83%
MAXIMUM SALES LOAD 4.00%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,118.34/1,000)**1 -1 = T (1,118.34/1,000) -1 = T
0.1183 = T 0.1183 = T
11.83% = T 11.83% = T
<PAGE>
Exhibit 16
FUND NAME: RODNEY SQUARE MULTI-MANAGER FUND - GROWTH PORTFOLIO
(NON-STANDARDIZED RETURNS)
1 YR 5 YR INCEPTION
---- ---- ---------
# YEARS IN PERIOD 1 5 9.854795
AVERAGE ANNUAL TOTAL RETURN 24.25% 14.08% 12.84%
CUMULATIVE TOTAL RETURN 24.25% 93.24% 228.92%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,242.53/1,000)**1 -1 = T (1,242.53/1,000) -1 = T
0.2425 = T 0.2425 = T
24.25% = T 24.25% = T
5 YEARS ENDING 12/31/96
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,932.43/1,000)**(1/5) -1 = T (1,932.43/1,000) -1 = T
0.1408 = T 0.9324 = T
14.08% = T 93.24% = T
INCEPTION THROUGH 12/31/96
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(3,289.23/1,000)**(1/9.854795) -1 = T (3,289.23/1,000) -1 = T
0.1284 = T 2.2892 = T
12.84% = T 228.92% = T
<PAGE>
FUND NAME: RODNEY SQUARE MULTI-MANAGER FUND - GROWTH PORTFOLIO
(STANDARDIZED RETURNS)
1 YR 5 YR INCEPTION
---- ---- ---------
# YEARS IN PERIOD 1 5 9.854795
AVERAGE ANNUAL TOTAL RETURN 19.28% 13.16% 12.38%
CUMULATIVE TOTAL RETURN 19.28% 85.51% 215.77%
MAXIMUM SALES LOAD 4.00% 4.00% 4.00%
ANNUAL
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,192.83/1,000)**1 -1 = T (1,192.83/1,000) -1 = T
0.1928 = T 0.1928 = T
19.28% = T 19.28% = T
5 YEARS ENDING 12/31/96
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(1,855.13/1,000)**(1/5) -1 = T (1,855.13/1,000) -1 = T
0.1316 = T 0.8551 = T
13.16% = T 85.51% = T
INCEPTION THROUGH 12/31/96
AVERAGE ANNUAL TOTAL RETURN CUMULATIVE TOTAL RETURN
- --------------------------- -----------------------
(ERV/P)**(1/N) -1 = T (ERV/P) - 1 = T
(3,157.66/1,000)**(1/9.854795) -1 = T (3,157.66/1,000) -1 = T
0.1238 = T 2.1577 = T
12.38% = T 215.77% = T
<PAGE>
FUND NAME: RODNEY SQUARE MULTI-MANAGER FUND - GROWTH PORTFOLIO
HYPOTHETICAL $10,000 INVESTMENT
- -----------------------------------------------------------------------------
For the Period February 26, 1987 (Commencement of Operations) through
December 31, 1996
- -----------------------------------------------------------------------------
Value of Initial $10,000 Investment = ($10,000/beginning NAV) * Ending NAV
= ($10,000/$10.00) * $19.22
= $19,220.00
Value of Reinvested Income Dividends = Shares Reinvested from Income
Dividends * Ending NAV
= 42.02 * $19.22
= $807.62
Value of Reinvested Capital Gain
Distributions = Shares Reinvested from Capital Gain
Distributions * Ending NAV
= 669.34 * $19.22
= $12,864.71
TOTAL VALUE = $19,220.00 + $807.62 + $12,864.71 = $32,892.33
- -----------------------------------------------------------------------------
For the Period February 26, 1987 (Commencement of Operations) through
December 31, 1995
- -----------------------------------------------------------------------------
Value of Initial $10,000 Investment = ($10,000/beginning NAV) * Ending NAV
= ($10,000/$10.00) * $17.41
= $17,410.00
Value of Reinvested Income Dividends = Shares Reinvested from Income
Dividends * Ending NAV
= 42.02 * $17.41
= $731.57
Value of Reinvested Capital Gain
Distributions = Shares Reinvested from Capital Gain
Distributions * Ending NAV
= 478.48 * $17.41
= $8,330.34
TOTAL VALUE = $17,410.00 + $731.57 + $8,330.34 = $26,471.91
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Exhibit 17
this schedule contains summary information extracted from the rodney
square multi-manager fund's annual report dated december 31, 1996 and is
qualified in it's entirety by reference to the annual report dated
december 31, 1996.
</LEGEND>
<CIK> 0000799199
<NAME> THE RODNEY SQUARE MULTI-MANAGER FUND
<SERIES>
<NUMBER> 1
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 47809
<INVESTMENTS-AT-VALUE> 76277
<RECEIVABLES> 101
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 76378
<PAYABLE-FOR-SECURITIES> 61
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 143
<TOTAL-LIABILITIES> 204
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47707
<SHARES-COMMON-STOCK> 3964
<SHARES-COMMON-PRIOR> 3808
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1)
<ACCUM-APPREC-OR-DEPREC> 28468
<NET-ASSETS> 76174
<DIVIDEND-INCOME> 371
<INTEREST-INCOME> 85
<OTHER-INCOME> 0
<EXPENSES-NET> (1007)
<NET-INVESTMENT-INCOME> (551)
<REALIZED-GAINS-CURRENT> 9091
<APPREC-INCREASE-CURRENT> 6816
<NET-CHANGE-FROM-OPS> 15356
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 8584
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3187
<NUMBER-OF-SHARES-REDEEMED> 7618
<SHARES-REINVESTED> 7522
<NET-CHANGE-IN-ASSETS> 9863
<ACCUMULATED-NII-PRIOR> (338)
<ACCUMULATED-GAINS-PRIOR> 3
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 706
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<GROSS-EXPENSE> 1007
<AVERAGE-NET-ASSETS> 70632
<PER-SHARE-NAV-BEGIN> 17.41
<PER-SHARE-NII> (0.15)
<PER-SHARE-GAIN-APPREC> 4.37
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.41)
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<PER-SHARE-NAV-END> 19.22
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799199
<NAME> THE RODNEY SQUARE MUTI-MANAGER FUND-THE GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 52732
<INVESTMENTS-AT-VALUE> 86246
<RECEIVABLES> 50
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 86297
<PAYABLE-FOR-SECURITIES> 160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 151
<TOTAL-LIABILITIES> 311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45332
<SHARES-COMMON-STOCK> 3841
<SHARES-COMMON-PRIOR> 3964
<ACCUMULATED-NII-CURRENT> (333)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7474
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33513
<NET-ASSETS> 85986
<DIVIDEND-INCOME> 149
<INTEREST-INCOME> 49
<OTHER-INCOME> 0
<EXPENSES-NET> 531
<NET-INVESTMENT-INCOME> (333)
<REALIZED-GAINS-CURRENT> 7475
<APPREC-INCREASE-CURRENT> 5045
<NET-CHANGE-FROM-OPS> 12187
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 1874
<NUMBER-OF-SHARES-REDEEMED> 4249
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9812
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<ACCUMULATED-GAINS-PRIOR> (1)
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<GROSS-EXPENSE> 531
<AVERAGE-NET-ASSETS> 76592
<PER-SHARE-NAV-BEGIN> 19.22
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 3.26
<PER-SHARE-DIVIDEND> 0.00
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<PER-SHARE-NAV-END> 22.39
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
