As filed with the Securities and Exchange Commission on March 27, 1998
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. |_|
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Post-Effective Amendment No. 15 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 |X|
The Rodney Square Strategic Equity Fund
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(Exact Name of Registrant as Specified in Charter)
Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-0001
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 651-8280
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Carl M. Rizzo, Esq.
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, DE 19890-0001
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
___ immediately upon filing pursuant to Rule 485(b)
_X_ on April 1, 1998 pursuant to Rule 485(b)
___ 60 days after filing pursuant to Rule 485(a)(1)
___ on ___________ pursuant to Rule 485(a)(1)
___ 75 days after filing pursuant to Rule 485(a)(2)
___ on ___________ pursuant to Rule 485(a)(2)
If appropriate, check the following box:
--- This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE STRATEGIC 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
5A. Management's Discussion [Contained in the Fund's Annual Report,
of Fund Performance President's Letter]
6. Capital Stock and Questions and Answers about the
Other Securities Portfolio
Dividends, Capital Gain Distributions
and Taxes
Description of the Fund
7. Purchase of Securities Questions and Answers about the
Being Offered Portfolio
How Net Asset Value is Determined
Purchase of Shares
Management of the Fund
8. Redemption or Questions and Answers about the
Repurchase Portfolio
Shareholder Accounts
Redemption of Shares
Exchange of Shares
9. Pending Legal Not Applicable
Proceedings
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE STRATEGIC 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 and Accounting
Services
Other Information
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of the Fund
Other Securities
19. Purchase, Redemption and Redemptions
Pricing of Securities Net Asset Value
Being Offered
20. Tax Status Taxes
21. Underwriters Administration and Accounting
Services
22. Calculations of Performance Information
Performance Data
23. Financial Statements Financial Statements
ii
<PAGE>
THE RODNEY SQUARE
STRATEGIC
EQUITY
FUND
[LOGO]
PROSPECTUS
APRIL 1, 1998
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
The Large Cap Growth Equity Portfolio (the "Portfolio") is a diversified
series of The Rodney Square Strategic 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. equity securities. The
Portfolio's adviser, Wilmington Trust Company ("WTC" or "Adviser"), will seek to
achieve the Portfolio's objective by causing the Portfolio to be as fully
invested as is practical, in light of cash flows, in large cap U.S. equity
securities that are judged by WTC to possess strong growth characteristics. The
Portfolio currently offers one class of shares, and charges no sales load or
Rule 12b-1 distribution fees to investors.
PROSPECTUS
APRIL 1, 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 April 1, 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. ("RSD"), by calling the
number below, by writing to RSD at the address noted on the back cover of this
Prospectus, or by accessing the web site maintained by the SEC
(http://www.sec.gov). RSD is a wholly owned subsidiary of WTC, a bank chartered
in the state of Delaware.
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FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
O NATIONWIDE......................(800) 336-9970
- ------------------------------------------------------------------------------
SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
WILMINGTON TRUST COMPANY OR ANY OTHER BANK, NOR ARE THE SHARES INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLE
SHAREHOLDER TRANSACTION COSTS* None
ANNUAL PORTFOLIO OPERATING EXPENSES**
(as a percentage of average net assets)
Advisory Fee (after waivers).................. 0.40%
12b-1 Fee .................................... 0.00%
Other Expenses ............................... 0.35%
-----
Total Portfolio Operating Expenses .......... 0.75%
=====
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
-------- ----------- ---------- ---------
$8 $24 $42 $93
* WTC 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, administration,
accounting services and transfer agency fees, termination of the Portfolio's
Rule 12b-1 Plan, and WTC's undertaking to waive its fees or reimburse the
Portfolio monthly to the extent that the expenses of the Portfolio (excluding
taxes, extraordinary expenses, brokerage commissions and interest) exceed an
annual rate of 0.75% of the Portfolio's average daily net assets through
April, 1999. Without waivers, the Advisory Fee and Total Portfolio Operating
Expenses would be 0.55% and 0.90%, respectively, of the Portfolio's average
daily net assets. See "Management of the Fund."
***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.
2
<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
financial statements of the Fund. It should be read in conjunction with the
Fund's financial statements and notes thereto, appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information. Effective
February 23, 1998, WTC became the Adviser of the Portfolio. Prior to February
23, 1998, the Portfolio was managed by two different portfolio advisers who
followed different investment styles and sought to achieve its objective by
investing at least 65% of its total assets in equity securities without regard
to the market capitalization of the issuers of such securities.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <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
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
INVESTMENT OPERATIONS:
Net investment income (loss)*.(0.19) (0.15) (0.10) (0.03) (0.03) 0.00 0.07 0.11 0.14 0.07
Net realized and unrealized
gain (loss) on investments.... 5.44 4.37 4.38 (0.02) 2.29 0.92 4.71 (1.01) 2.58 1.68
---- ---- ---- ----- ---- ----- ----- ----- ---- -----
Total from investment
operations ......... 5.25 4.22 4.28 (0.05) 2.26 0.92 4.78 (0.90) 2.72 1.75
---- ---- ---- ----- ---- ----- ---- ------ ---- ----
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)
From net realized gain on
investments .................. (3.10) (2.41) (2.01) (1.20) (1.43) (1.04) (0.62) (0.01) 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)
---- ------ ------ ----- ----- ------ ------ ------ ------ -----
NET ASSET VALUE - END OF PERIOD .$21.37 $19.22 $17.41 $15.14 $16.39 $15.56 $15.68 $11.59 $12.62 $10.05
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN ..................27.50% 24.25% 28.43% (0.23)% 14.57% 5.95% 41.54% (7.15)% 27.15% 20.94%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses + ................... 1.38% 1.43% 1.43% 1.38% 1.42% 1.46% 1.50% 1.74% 1.75% 1.75%
Net investment income (loss) . (0.86)% (0.78)% (0.53)% (0.17)% (0.18)% (0.03)% 0.52% 0.94% 1.21% 0.77%
Portfolio turnover rate .......... 28.05% 34.84% 49.12% 37.05% 44.38% 37.79% 32.63% 38.18% 83.12% 57.55%
Average commission rate paid ++... $0.0580 $0.0630 -- -- -- -- -- -- -- --
Net assets at end of period
(000 omitted) .................... $91,445 $76,174 $66,311 $65,267 $66,091 $60,852 $56,648 $40,709 $39,571 $28,845
</TABLE>
* The net investment income per share for the years ended December 31, 1997 and
1996 was calculated using average shares outstanding.
+ Effective December 22, 1990, Rodney Square Management Corporation ("RSMC"),
the former manager and administrator of the Portfolio, agreed to waive its fee
as such 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%
and 2.21% for the years ended December 31, 1991, 1989 and 1988, respectively.
For the years ended December 31, 1997, 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.
3
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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. equity (or related) securities. 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 that 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 that 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 approximately $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?
WTC, a wholly owned subsidiary of Wilmington Trust Corporation, is the
Portfolio's investment adviser. (See "Management of the Fund.")
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING AGENT?
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
provides administrative, accounting and transfer agency services for the Fund.
RSMC, a wholly owned subsidiary of WTC, provides corporate secretarial services
for the Fund. (See "Management of the Fund.")
4
<PAGE>
WHO IS THE DISTRIBUTOR?
RSD, another wholly owned subsidiary of WTC, serves as the Fund's
Distributor. (See "Management of the Fund.")
HOW DO YOU PURCHASE SHARES OF THE PORTFOLIO?
The Portfolio is designed as an investment vehicle for individual investors,
corporations and other institutional investors. Shares may be purchased at their
net asset value next determined after a purchase order is received by PFPC and
accepted by RSD as described below. There is no sales load. The minimum initial
investment is $1,000, but additional investments may be made in any amount.
Shares of the Portfolio are offered on a continuous basis by RSD. Shares may
be purchased directly from RSD, by clients of WTC through their trust accounts,
or by clients of Service Organizations through their Service Organization
accounts. Shares may also be purchased directly by wire or by mail. (See
"Purchase of Shares.")
The Fund and RSD reserve the right to reject new account applications and to
close, by redemption, an account without a certified Social Security or other
taxpayer identification number.
Please contact RSD or your Service Organization or call the number listed
below, for further information about the Portfolio or for assistance in opening
an account.
- --------------------------------------------------------------------------------
NATIONWIDE ......................... (800) 336-9970
- --------------------------------------------------------------------------------
HOW DO YOU REDEEM SHARES OF THE PORTFOLIO?
If you purchased shares of the Portfolio through an account at WTC or a
Service Organization, you may redeem all or any of your shares in accordance
with the instructions pertaining to that account. Other shareholders may redeem
any or all of their shares by telephone or mail. There is no fee charged upon
redemption. (See "Redemption of Shares.")
HOW ARE DIVIDENDS AND OTHER DISTRIBUTIONS PAID?
Distributions of net investment income and net capital gain, if any, are made
annually, shortly before or after the end of the Fund's fiscal year (December
31). Shareholders may elect to receive dividends and other distributions in cash
by checking the appropriate boxes on the Application & New Account Registration
form at the end of this Prospectus ("Application"). (See "Dividends, Capital
Gain Distributions and Taxes.")
ARE EXCHANGE PRIVILEGES AVAILABLE?
You may exchange all or a portion of your Portfolio shares for shares any of
the other funds in the Rodney Square complex, subject to certain conditions.
(See "Exchange of Shares.")
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 Portfolio's total assets will be invested in the
following equity (or related) securities:
o common stock of U.S. corporations with a market capitalization at time
of purchase equal to or greater than that of the smallest issue in the
Russell 1000 Index and that are judged by the Adviser to possess strong
growth characteristics;
5
<PAGE>
o options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of such issuers;
o options on indexes of the common stocks of such issuers; and
o 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.
5A
<PAGE>
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% of such assets 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 are 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. 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. Such securities may include U.S.
Government obligations (including obligations issued by U.S. Government agencies
and instrumentalities), mortgage pass-through certificates and repurchase
agreements with respect to any security in which it is authorized to invest.
PORTFOLIO TURNOVER. The frequency of portfolio 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 securities held by the Portfolio that 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 a larger
amount of capital gain distributions than has 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. All investment policies stated
within this Prospectus are, unless otherwise indicated, non-fundamental and may
be changed by the Fund's Board of Trustees without shareholder approval. Further
fundamental and non-fundamental investment policies of the Portfolio are
described 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
6
<PAGE>
return in the form of capital appreciation. This makes growth company securities
more volatile than the market as a whole. In addition, unlike many other mutual
funds, the Portfolio does not reserve authority to depart from its primary
investment policy, even during declining markets, to temporarily pursue
defensive investment policies in an effort to preserve its capital. The
Portfolio will instead adhere to its policy of investing not less than 85% of
its total assets in large cap U.S. equity (or related) securities, 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. or Standard & Poor's, a division of The McGraw-Hill Companies, Inc., or, if
unrated, determined by the 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's 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.
PURCHASE OF SHARES
HOW TO PURCHASE SHARES. Portfolio shares are offered on a continuous basis by
RSD at their net asset value next determined after a purchase order is received
by PFPC and accepted by RSD. Shares may be purchased directly from RSD, by
clients of WTC through their trust accounts, or by clients of Service
Organizations through their Service Organization accounts. WTC and Service
Organizations may charge their clients a fee for providing administrative or
other services in connection with investments in Portfolio shares. A trust
account at WTC includes any account for which the account records are maintained
on the trust system at WTC. Persons wishing to purchase Portfolio shares through
their accounts at WTC or a Service Organization should contact that entity
directly for appropriate instructions. Other investors may purchase Portfolio
shares by mail or by wire as specified below.
BY MAIL. You may purchase shares by sending a check drawn on a U.S. bank
payable to the Large Cap Growth Equity Portfolio, along with a completed
Application (included at the end of this Prospectus) to The Rodney Square
Strategic Equity Fund, c/o PFPC, P.O. Box 8987, Wilmington, DE 19899-9752. A
purchase order sent by overnight mail should be sent to The Rodney Square
Strategic Equity Fund, c/o PFPC, 400 Bellevue Parkway, Wilmington, DE 19809. 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 PFPC at (800) 336-9970. Once you have an account number, instruct
your bank to wire federal funds to PFPC, c/o PNC Bank, Philadelphia, PA, ABA
#0310-0005-3, attention: The Rodney Square Strategic Equity Fund, Large Cap
Growth Equity Portfolio, DDA #86-0172-6591, further credit-your account number,
7
<PAGE>
and your name. If you make an initial purchase by wire, you must promptly
forward a completed Application to PFPC at the address stated 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
PFPC at (800) 336-9970. PNC Bank, N.A. ("PNC") makes available its services as
IRA custodian for each shareholder account that is established as an IRA. For
these services, PNC receives an annual fee of $10.00 per account, which fee is
paid directly to PNC 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, PFPC, 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 PFPC at (800) 336-9970. This service is generally not
available for WTC trust account clients, since similar services are provided
through WTC. This service may also not be available for Service Organization
clients who are provided similar services by those organizations.
ADDITIONAL PURCHASE INFORMATION. The minimum initial investment is $1,000,
but subsequent investments may be made in any amount. WTC and Service
Organizations may impose additional minimum customer account and other
requirements in addition to the minimum initial investment requirement. The Fund
and RSD each reserves the right to reject any purchase order and may suspend the
offering of shares of the Portfolio for a period of time.
Purchase orders received by PFPC 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 PFPC 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
following Business Day of the Fund. A "Business Day of the Fund" is any day on
which the Exchange, PFPC 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 PFPC and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
SHAREHOLDER ACCOUNTS
PFPC, 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 before the account is closed. Reductions in value that result
solely from market activity will not trigger an involuntary redemption.
8
<PAGE>
REDEMPTION OF SHARES
Shareholders may redeem their shares by mail or by telephone as described
below. If you purchased your shares through an account at WTC or a Service
Organization, you may redeem all or part of your shares in accordance with the
instructions pertaining to that account. Corporations, other organizations,
trusts, fiduciaries and other institutional investors may be required to furnish
certain additional documentation to authorize redemptions. Redemption requests
should be accompanied by the Fund's name and your account number.
BY MAIL. Shareholders redeeming their shares by mail should submit written
instructions with a guarantee of their signature by an institution acceptable to
PFPC, such as a domestic bank or trust company, broker, dealer, clearing agency
or savings association who are participants in a medallion program recognized by
the Securities Transfer Association. The three recognized medallion programs are
Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion
Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature Program
(MSP). Signature guarantees that are not part of these programs will not be
accepted. The written instructions should be mailed to: The Rodney Square
Strategic Equity Fund, c/o PFPC, P.O. Box 8987, Wilmington, DE 19899-9752. A
redemption order sent by overnight mail should be sent to The Rodney Square
Strategic Equity Fund, c/o PFPC, 400 Bellevue Parkway, Wilmington, DE 19809. The
redemption order should indicate the Fund's name, the Portfolio's name, the
Portfolio account number, the number of shares or dollar amount you wish to
redeem and the name of the person in whose name the account is registered. A
signature and a signature guarantee are required for each person in whose name
the account is registered.
BY TELEPHONE. Shareholders who prefer to redeem their shares by telephone
must elect to apply in writing for telephone redemption privileges by completing
an Application for Telephone Redemptions (included at the end of this
Prospectus) which describes the telephone redemption procedures in more detail
and requires certain information that will be used to identify the shareholder.
When redeeming by telephone, you must indicate your name, the Fund's name, the
Portfolio's name, the Portfolio account number, the number of shares or dollar
amount you wish to redeem and certain other information necessary to identify
you as the shareholder. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and, if such procedures are
followed, will not be liable for any losses due to unauthorized or fraudulent
telephone transactions. During times of drastic economic or market changes, the
telephone redemption privilege may be difficult to implement. In the event that
you are unable to reach PFPC by telephone, you may make a redemption request by
mail.
ADDITIONAL REDEMPTION INFORMATION. You may redeem all or any part of the
value of your account on any Business Day of the Fund. Redemptions are effected
at the net asset value next calculated after PFPC has received your redemption
request. (See "How Net Asset Value Is Determined.") The Fund imposes no fee when
shares are redeemed. WTC or the Service Organization is responsible 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
PFPC 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 that
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
9
<PAGE>
account when shares are held by a corporation, other organization, trust,
fiduciary or other institutional investor.
For more information on redemptions, contact PFPC 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 PFPC 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 regular trading on the
Exchange on or about the 25th day of the month. If you expect to purchase
additional Portfolio shares, it may not be to your advantage to participate in
the Systematic Withdrawal Plan because contemporaneous purchases and redemptions
may result in adverse tax consequences. 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 similar services by those organizations.
EXCHANGE OF SHARES
EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may exchange all or a portion of
your Portfolio shares for shares of the other funds in the Rodney Square complex
that currently offer their shares to investors. The other Rodney Square funds
are:
THE RODNEY SQUARE FUND, each portfolio of which seeks a high level of current
income consistent with the preservation of capital and liquidity by investing in
money market instruments pursuant to its investment practices. Its portfolios
are:
U.S. GOVERNMENT PORTFOLIO, which invests in U.S. Government obligations
and repurchase agreements involving such obligations.
MONEY MARKET PORTFOLIO, which invests in obligations of major banks, prime
commercial paper and corporate obligations, U.S. Government obligations,
high quality municipal securities and repurchase agreements involving U.S.
Government obligations.
THE RODNEY SQUARE TAX-EXEMPT FUND, which seeks as high a level of interest
income, exempt from federal income tax, as is consistent with a portfolio of
high quality, short-term municipal obligations, selected on the basis of
liquidity and stability of principal.
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND, consisting of the following
portfolios:
THE RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO, which seeks high total
return, consistent with high current income, by investing principally in
various types of investment grade fixed-income securities.
THE RODNEY SQUARE MUNICIPAL INCOME PORTFOLIO, which seeks a high level of
income exempt from federal income tax consistent with the preservation of
capital.
A redemption of shares through an exchange will be effected at the net asset
value per share next determined after receipt by PFPC 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. 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 of the
Fund. 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.
10
<PAGE>
Exchange transactions will be subject to the minimum initial investment and
other requirements of the fund into which the exchange is made. An exchange may
not be made if the exchange would leave a balance in a shareholder's Portfolio
account of less than $500.
To obtain prospectuses of the other Rodney Square funds, contact RSD. To
obtain more information about exchanges or to place exchange orders, contact
PFPC 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 when
required by SEC rules. This exchange offer is valid only in those jurisdictions
where the sale of the Rodney Square fund shares to be acquired through such
exchange may be legally made.
HOW NET ASSET VALUE IS DETERMINED
PFPC determines the net asset value per share of the Portfolio as of the
close of regular trading on the Exchange (currently 4:00 p.m., Eastern time), on
each Business Day of the Fund. The net asset value per share of the Portfolio is
calculated by dividing the total current market value of all of the Portfolio's
assets, less all its liabilities, by the total number of the Portfolio's shares
outstanding. If any securities do not have a readily available current market
value, they will be valued in good faith by or under the direction of the Fund's
Board of Trustees.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Dividends from the 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 its 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 and other distribution is payable to shareholders who redeem, but not
to shareholders who purchase, Portfolio shares on the ex-distribution 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-distribution date. Shareholders may elect to receive dividends
and other distributions in cash by checking the appropriate boxes on the
Application & New Account Registration form accompanying this Prospectus.
TAXES. The Portfolio intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so that it will be relieved of federal income tax on 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 it distributes to
its shareholders.
Dividends from the Portfolio's investment company taxable income (whether
paid in cash or reinvested in additional shares) are taxable to its shareholders
as ordinary income to the extent of the Portfolio's earnings and profits.
Distributions derived from the Portfolio's net capital gain (whether paid in
cash or reinvested in additional shares), when designated as such, are taxable
to its shareholders as long-term capital gain, regardless of the length of time
they have held their shares. Under the Taxpayer Relief Act of 1997, different
maximum tax rates apply to a non-corporate taxpayer's net capital gain depending
on the taxpayer's holding period and marginal rate of federal income tax -
generally, 28% for gain recognized on capital assets held for more than 18
months and 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than one year but not more than 18
months. The Portfolio may divide each net capital gain distribution into a 28%
rate gain distribution and a 20% rate gain distribution (in accordance with its
holding periods for the securities it sold that generated the distributed gain),
in which event its shareholders must treat those portions accordingly.
Shortly after the end of each calendar year, the Portfolio notifies its
shareholders of the amounts of dividends and capital gain distributions paid (or
deemed paid) during that year. The information regarding capital gain
distributions designates the portions thereof subject to the different maximum
rates of tax applicable to non-corporate taxpayers' net capital gain indicated
above.
11
<PAGE>
Each shareholder must furnish to the Portfolio a certified taxpayer
identification number ("TIN"). The Portfolio is required to withhold 31% of
dividends, capital gain distributions and redemption proceeds payable to any
individuals and certain other non-corporate shareholders who fail to furnish a
certified TIN. The Portfolio is also required to withhold 31% of all dividends
and capital gain distributions payable to those shareholders who otherwise are
subject to backup withholding. 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 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 PORTFOLIO. 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
12
<PAGE>
the extent that expenses of the Portfolio (excluding taxes, extraordinary
expenses, brokerage commissions and interest) exceed an annual rate of 0.75% of
the Portfolio's average daily net assets through April 1, 1999.
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.
ADMINISTRATIVE AND ACCOUNTING SERVICES. Under an Administrative and
Accounting Services Agreement with the Fund, PFPC, 400 Bellevue Parkway,
Wilmington, DE 19809, performs certain administrative services for the Portfolio
including preparing shareholder reports, assisting WTC in compliance monitoring
activities and preparing and filing federal and state tax returns on behalf of
the Portfolio. PFPC also performs accounting services for the Portfolio
including determining the net asset value per share of the Portfolio.
For the services provided under the Administration and Accounting Services
Agreement, the Fund pays PFPC an annual fee equal to the amount derived from the
following schedule: 0.10% of the Portfolio's first $1 billion of average daily
net assets; 0.075% of the Portfolio's next $500 million of average daily net
assets; 0.05% of the Portfolio's next $500 million of average daily net assets;
and 0.035% of the Portfolio's average daily net assets in excess of $2 billion.
In addition, any related out-of-pocket expenses incurred by PFPC in the
provision of services to the Portfolio are borne by the Portfolio.
Under a Fund Secretarial Services Agreement with the Fund, RSMC performs
certain corporate secretarial services on behalf of the Portfolio including
supplying office facilities, non-investment related statistical and research
data and executive and administrative services; preparing and distributing all
materials necessary for meetings of the Trustees and shareholders of the Fund;
and preparing and arranging for filing, printing and distribution of proxy
materials and post-effective amendments to the Fund's registration statement.
WTC pays RSMC for the provision of these services out of its advisory fee.
TRANSFER AGENT AND DIVIDEND PAYING AGENT. PFPC also serves as Transfer Agent
and Dividend Paying Agent to the Portfolio.
CUSTODIAN AND SUB-CUSTODIAN. WTC serves as Custodian of the Portfolio's
assets and PNC serves as Sub-Custodian of the Portfolio's assets. For its
custody services, the Fund pays WTC an annual fee equal to the amount derived
from the following schedule: 0.0150% of the Portfolio's first $2 billion of
average daily net assets; 0.0125% of the Portfolio's next $1 billion of average
daily net assets; and 0.0100% of the Portfolio's average daily net assets in
excess of $3 billion, plus $7.50 per purchase, sale or maturity of a portfolio
security. WTC (not the Fund) pays PNC for sub-custodial services. Any related
out-of-pocket expenses incurred in the provision of custodial services to the
Portfolio are borne by the Portfolio.
DISTRIBUTION AGREEMENT. Pursuant to a Distribution Agreement with the Fund,
RSD manages the Fund's distribution efforts and provides assistance and
expertise in developing marketing plans and materials for the Portfolio, enters
into agreements with broker-dealers 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.
13
<PAGE>
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. Prior
to February 23, 1998, the name of the Fund was The Rodney Square Multi-Manager
Fund and the name of the Portfolio was the Growth Portfolio.
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 January 31, 1998, WTC owned by virtue of
shared or sole voting or investment power on behalf of its underlying customer
accounts 62.5% 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.
14
<PAGE>
[LOGO]
the RODNEY SQUARE
STRATEGIC EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
APPLICATION & NEW ACCOUNT REGISTRATION
- -------------------------------------------------------------------------------
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS THE RODNEY SQUARE STRATEGIC EQUITY FUND
OR FOR ASSISTANCE IN C/O PFPC
COMPLETING THIS FORM P.O. BOX 8987
CALL (800) 336-9970 WILMINGTON, DE 19899-9752
- -------------------------------------------------------------------------------
PORTFOLIO SELECTION ($1,000 MINIMUM)
TOTAL AMOUNT TO BE INVESTED $
-------------------
_______ By check. (Make payable to the "Large Cap Growth Equity Portfolio")
_______ By wire. Call 1-800-336-9970 for instructions.
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1. Individual
--------------- ---- ---------------- -----------------------
First Name MI Last Name Customer Tax ID No.*
2. Joint Tenancy**
--------------- ---- ---------------- -----------------------
First Name MI Last Name Customer Tax ID No.*
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Uniform
Gifts/Transfers
to Minors Act
3. Gifts to Minors+ under the
----------------------------- -------------------------- ---------
Minor's Name Customer Tax ID No.* State
</TABLE>
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
15
<PAGE>
DISTRIBUTION OPTIONS-IF THESE BOXES ARE NOT CHECKED ALL DISTRIBUTIONS WILL BE
INVESTED IN ADDITIONAL SHARES.
Pay Cash for:
Short-Term Long-term
Income Dividends Capital Gain Capital Gain
LARGE CAP GROWTH EQUITY PORTFOLIO |_| |_| |_|
- --------------------------------------------------------------------------------
CHECK ANY OF THE FOLLOWING IF YOU WOULD LIKE ADDITIONAL INFORMATION ABOUT A
PARTICULAR PLAN OR SERVICES SENT TO YOU.
|_|AUTOMATIC INVESTMENT PLAN |_| SYSTEMATIC WITHDRAWAL PLAN
(Check redemptions services are generally not available for clients of WTC
through their Trust or corporate cash management accounts; this service may also
not be available for clients of Service Organizations.)
- --------------------------------------------------------------------------------
CERTIFICATIONS AND SIGNATURE(S) - PLEASE SIGN EXACTLY AS REGISTERED UNDER
"ACCOUNT REGISTRATION."
I have received and read the Prospectus for The Rodney Square Strategic
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 or any other bank, nor are the shares insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. I further understand that investment in these shares involves investment
risks, including possible loss of principal. If a corporate customer, I certify
that appropriate corporate resolutions authorizing investment in The Rodney
Square Strategic 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
------------------------------------------------------ ---------
Check one: |_| Owner |_| Trustee |_| Custodian |_| Other
- --------------------------------------------------------------------------------
IDENTIFICATION OF SERVICE ORGANIZATION
We authorize PFPC 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 |_||_||_||_|
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Authorized Signature of Service Organization Telephone ( )
----------------- --------------
- --------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
[LOGO]
the RODNEY SQUARE
STRATEGIC EQUITY FUND
LARGE CAP GROWTH EQUITY PORTFOLIO
APPLICATION FOR TELEPHONE REDEMPTION OPTION
- --------------------------------------------------------------------------------
Telephone redemption permits redemption of fund shares by telephone, with
proceeds directed only to the fund account address of record or to the bank
account designated below. For investments by check, telephone redemption is
available only after these shares have been on the Fund's books for 10 days.
This form is to be used to add or change the telephone redemption option on your
Rodney Square Strategic Equity Fund account(s).
- --------------------------------------------------------------------------------
ACCOUNT INFORMATION
Portfolio Name(s):
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Fund Account Number(s):
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(Please provide if you are a current account holder:)
REGISTERED IN THE NAME(S) OF:
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REGISTERED ADDRESS:
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NOTE: If this form is not submitted together with the application, a corporate
resolution must be included for accounts registered to other than an individual,
a fiduciary or partnership.
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REDEMPTION INSTRUCTIONS
|_| Add |_| Change
CHECK ONE OR MORE.
|_| Mail proceeds to my fund account address of record (must be $10,000
or less and address must be established for a minimum of 60 days)
|_| Mail proceeds to my bank
|_| Wire proceeds to my bank (minimum $1,000)
|_| All of the above
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In either
case, it may take a day or two, upon receipt for your financial institution to
credit your bank account with the proceeds, depending on its internal crediting
procedures
17
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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
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Bank Routing Transit #
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Bank Address
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City/State/Zip
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Bank Account Number
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Name(s) on Bank Account
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AUTHORIZATIONS
By electing the telephone redemption option, I appoint PFPC 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 PFPC may be contacted, on my apparent behalf, by
impostors. In view of this risk, I further understand and agree that PFPC
plans to follow reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures shall include sending
proceeds of 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 PFPC, any of its affiliates, or
any Rodney Square Fund responsible for acting under the powers I have given
PFPC, 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 PFPC otherwise in writing, accompanied by a
signature guarantee. If I want to terminate this agreement, I will give PFPC
at least ten days notice in writing. If PFPC or the 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).
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Signature of Individual Owner Signature of Joint Owner (if any)
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Signature of Corporate Officer, Trustee or other --
please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable to
PFPC, such as a bank, broker/dealer, clearing agency or savings association,
that is a participant in a medallion program recognized by the Securities
Transfer Association. A Notary Public is not an acceptable guarantor. For more
information on signature guarantees, see "Redemption of Shares" in the
Prospectus.
SIGNATURE GUARANTEE(S) (stamp)
18
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TABLE OF CONTENTS
EXPENSE TABLE................................................................2
FINANCIAL HIGHLIGHTS.........................................................3
QUESTIONS AND ANSWERS ABOUT THE PORTFOLIO....................................4
INVESTMENT OBJECTIVE AND POLICIES............................................5
INVESTMENT PRACTICES.........................................................6
RISK FACTORS.................................................................6
PURCHASE OF SHARES...........................................................7
SHAREHOLDER ACCOUNTS.........................................................8
REDEMPTION OF SHARES.........................................................9
EXCHANGE OF SHARES..........................................................10
HOW NET ASSET VALUE IS DETERMINED...........................................11
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES.............................11
PERFORMANCE INFORMATION.....................................................12
MANAGEMENT OF THE FUND......................................................12
DESCRIPTION OF THE FUND.....................................................14
<PAGE>
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
John J. Quindlen
Nina M. Webb
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OFFICERS
Robert J. Christian, President
Nina M. Webb, Vice President
John J. Kelley, Vice President & Treasurer
Carl M. Rizzo, Esq., Secretary
Diane J. Drake, Esq., Assistant Secretary
Mary Jane Maloney, Assistant Secretary
John C. McDonnell, Assistant Treasurer
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ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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INVESTMENT ADVISER AND
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
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DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
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19
<PAGE>
THE RODNEY SQUARE STRATEGIC 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 Strategic Equity Fund (the "Fund"), an open-end management
investment company. The Portfolio seeks superior long-term growth of capital.
The Portfolio's Adviser, Wilmington Trust Company ("WTC" or 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 (or related) securities of
large cap U. S. issuers that are judged by the Adviser to possess strong growth
characteristics.
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STATEMENT OF ADDITIONAL INFORMATION
April 1, 1998
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This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's current Prospectus, dated April 1, 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 ("Service
Organizations") 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 ADVISORY SERVICES............................................6
ADMINISTRATION AND ACCOUNTING SERVICES..................................7
DISTRIBUTION AGREEMENT..................................................8
REDEMPTIONS.............................................................8
PORTFOLIO TRANSACTIONS..................................................9
NET ASSET VALUE........................................................10
PERFORMANCE INFORMATION................................................10
TAXES..................................................................15
DESCRIPTION OF THE FUND................................................17
OTHER INFORMATION......................................................17
FINANCIAL STATEMENTS...................................................18
APPENDIX..............................................................A-1
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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 mortgage-backed
certificate will have maturities of up to 30 years, the actual average life of a
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 certificate. Conversely, when interest rates are rising, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
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, mortgage-backed
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. Mortgage-backed certificates may include
securities backed by adjustable-rate mortgages which bear interest at a rate
which will be adjusted periodically.
WHEN-ISSUED SECURITIES. New issues of U.S. Government obligations may be
offered on a when-issued basis. This means that delivery and payment for the
securities normally will take place approximately 15 to 90 days after the date
of the transaction. The payment obligation and the interest rate that will be
received are each fixed at the time the buyer enters into the commitment. The
Portfolio will make commitments to purchase such securities only with the
intention of actually acquiring the securities, but it may dispose of the
<PAGE>
commitment before the settlement date if it is deemed advisable as a matter of
investment strategy. A separate account of the Portfolio 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, a division of The McGraw-Hill Companies, Inc.,
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 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.
2
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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; or
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.
3
<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, that 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, with the exception of Nina M. Webb, 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 WTC
are indicated by an asterisk (*).
4
<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. He is also a
member of the Detroit Economic Club, Financial Executive Institute and
Leadership Detroit.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807, Trustee, age 66, 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, President and Trustee, age 49, has been Chief Investment Officer of
WTC since February 1996 and Director of Rodney Square Management Corporation
("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
to November 30, 1993. He also served as Chief Financial Officer of E.I. du Pont
de Nemours and Company, Inc. from 1984 through June 30, 1993. He also serves as
a director of St. Joe Paper Co. and a Trustee of Kalmar Pooled Investment Trust.
JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Vice President, age 41, has been with RSMC since 1984, as a
Secretary of RSMC since 1986, a Director of RSMC since 1989 and a Vice President
of RSMC since 1992. He was an Assistant Vice President of RSMC from 1988 to
January 1992.
*NINA M. WEBB, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Vice President and Trustee, age 44, has been an Equity Portfolio
Manager at WTC since March 1987. A Chartered Financial Analyst, she previously
was employed by the University of Delaware as Senior Investment Analyst
(1985-86), Investment Analyst (1982-85), and Accountant
(1976-82).
JOHN J. KELLEY, 400 Bellevue Parkway, Wilmington, DE 19809, Vice President and
Treasurer, age 38, has been Vice President of PFPC, Inc. ("PFPC") since January
1998. He was a Vice President of RSMC from 1995 to January 1998 and an Assistant
Vice President of RSMC from 1989 to 1995.
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.
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 1997 to the Independent Trustees for their service to the Fund and to
5
<PAGE>
the Rodney Square Family of Funds. On January 31, 1998, 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.
1997 TRUSTEES FEES
TOTAL FEES FROM TOTAL FEES FROM THE RODNEY
INDEPENDENT TRUSTEE THE FUND SQUARE FAMILY OF FUNDS
- ------------------- -------- ----------------------
Eric Brucker $1,950 $12,700
Fred L. Buckner $1,950 $12,700
John J. Quindlen $1,950 $12,700
WILMINGTON TRUST COMPANY
The Investment Adviser to the Fund, WTC, is a state-chartered bank
organized as a Delaware corporation in 1903. WTC is a wholly owned subsidiary of
Wilmington Trust Corporation, a publicly held bank holding company. The Fund
benefits from the experience, conservative values and special heritage of WTC.
WTC is a financially strong bank and enjoys a reputation for providing
exceptional consistency, stability and discipline in managing both short-term
and long-term investments. WTC is Delaware's largest full-service bank and, with
more than $96 billion in trust, custody and investment management assets, WTC
ranks among the nation's leading money management firms. As of December 31,
1996, the trust department of WTC was the seventeenth largest in the United
States as measured by discretionary assets under management. WTC is engaged in a
variety of investment advisory activities, including the management of
collective investment pools, and has nearly a century of experience managing the
personal investments of high net-worth individuals. Its current roster of
institutional clients includes several Fortune 500 companies. In addition to
serving as Investment Adviser to the Fund, WTC also manages over $3 billion in
fixed-income assets for various other institutional clients. Certain departments
in WTC engage in investment management activities that utilize a variety of
investment instruments such as interest rate futures contracts, options on U. S.
Treasury securities and municipal forward contracts. Of course, there can be no
guarantee that the Portfolio will achieve its investment objective or that WTC
will perform its services in a manner which would cause it to satisfy its
objective. WTC is also Custodian of the Fund's assets.
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.
INVESTMENT ADVISORY SERVICES
ADVISORY AGREEMENT. WTC serves as Investment Adviser to the Portfolio
pursuant to an Advisory Agreement between the Fund and WTC dated February 23,
1998. Under the Advisory Agreement, WTC directs the investments of the Portfolio
in accordance with the Portfolio's investment objective, policies and
limitations.
For WTC's services under the Advisory Agreement, the Portfolio pays WTC a
monthly fee at an annual rate of 0.55% of the Portfolio's average daily net
assets. The average is computed on the basis of the Portfolio's daily net
assets, as determined at the close of business on each day throughout the month.
6
<PAGE>
WTC has agreed voluntarily to waive all or a portion of its fee or
reimburse the Portfolio monthly to the extent that expenses (excluding brokerage
commissions, interest, taxes and extraordinary expenses) incurred by the
Portfolio exceed an annual rate of 0.75% of the average daily net assets of the
Portfolio. This undertaking, which is not contained in the Advisory Agreement,
may be amended or rescinded in the future.
Under the Advisory Agreement, the Fund, on behalf of the Portfolio,
assumes responsibility for paying all Fund expenses other than those expressly
stated to be payable by WTC. Such expenses include without limitation: (a) fees
payable for administrative services; (b) fees payable for accounting services;
(c) the cost of obtaining quotations for calculating the value of the assets of
the Portfolio; (d) interest and taxes; (e) brokerage commissions, dealer spreads
and other costs in connection with the purchase and sale of securities; (f)
compensation and expenses of its Trustees other than those who are "interested
persons" of the Fund (as defined in the 1940 Act); (g) legal and audit expenses;
(h) fees and expenses related to the registration and qualification of the Fund
and its shares for distribution under state and federal securities laws; (i)
expenses of typesetting, printing and mailing reports, notices and proxy
material to shareholders of the Fund, (j) all other expenses incidental to
holding meetings of the Fund's shareholders, including proxy solicitations
therefor; (k) premiums for fidelity bond and other insurance coverage; (l) the
Fund's association membership dues; (m) expenses of typesetting for printing
Prospectuses; (n) expenses of printing and distributing Prospectuses to existing
shareholders; (o) out-of-pocket expenses incurred in connection with the
provision of custodial and transfer agency services; (p) service fees payable by
each Portfolio to the Distributor for providing personal services to the
shareholders of each Portfolio and for maintaining shareholder accounts for
those shareholders; (q) distribution fees; and (r) such non-recurring expenses
as may arise, including costs arising from threatened actions, actions, suits
and proceedings to which the fund is a party and the legal obligation which the
Fund may have to indemnify its Trustees and officers with respect thereto.
The Advisory Agreement provides that WTC shall not be liable to the Fund
or to any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services under the Agreement 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 Portfolio, in the absence of WTC's
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties under the Agreement.
The Advisory Agreement became effective on February 23, 1998, 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 Advisory Agreement terminates automatically in the event of its
assignment. The Agreement is also terminable (i) by the Fund (by vote of the
Board of Trustees or by vote of a majority of the outstanding voting securities
of the Portfolio), without payment of any penalty, on 60 days' written notice to
WTC; or (ii) by WTC on 60 days' written notice to the Fund.
Prior to February 23, 1998, the Portfolio was managed by two different
portfolio advisers. For the fiscal years ended December 31, 1997, December 31,
1996 and December 31, 1995, the Portfolio paid advisory fees in the amounts of
$840,071, $353,161 and $320,260 respectively.
ADMINISTRATION AND ACCOUNTING SERVICES
Under an Administration and Accounting Services Agreement with the Fund,
PFPC, 400 Bellevue Parkway, Wilmington, Delaware 19809, performs certain
administrative and accounting services for the Fund. These services include
preparing shareholder reports, providing statistical and research data,
assisting WTC in compliance monitoring activities, and preparing and filing
federal and state tax returns on behalf of the Portfolio. In addition, PFPC
prepares and files various reports with the appropriate regulatory agencies and
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prepares materials required by the SEC or any state securities commission having
jurisdiction over the Fund. The accounting services performed by PFPC for the
Portfolio include determining the net asset value per share of the Portfolio and
maintaining records relating to the Portfolio's securities transactions.
The Administration and Accounting Services Agreement provides that PFPC
and its affiliates shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund or its Portfolio in connection with the
matters to which the Administration and Accounting Services 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 and Accounting Services Agreement.
Under a Secretarial Services Agreement with the Fund, RSMC performs
certain corporate secretarial services on behalf of the Portfolio. These
services include supplying office facilities, non-investment related statistical
and research data, and executive and administrative services; preparing and
distributing all materials necessary for meetings of the Trustees and
shareholders of the Fund; and preparing and arranging for filing, printing, and
distribution of proxy materials and post-effective amendments to the Fund's
registration statement. WTC pays RSMC for the provision of these services out of
its advisory fee.
Prior to February 23, 1998, RSMC provided administrative and accounting
services for the Portfolio. For the fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995, RSMC was paid administration fees
amounting to $75,606, $63,569 and $57,647, respectively. For each of the fiscal
years ended December 31, 1997, December 31, 1996 and December 31, 1995, RSMC was
paid an accounting services fee of $45,000.
DISTRIBUTION AGREEMENT
RSD serves as the Distributor of the Portfolio's shares pursuant to a
Distribution Agreement with the Fund. For the fiscal years ended December 31,
1997, 1996, and 1995, RSD received from the Fund underwriting commissions of
$7,700, $4,544 and $5,691, respectively.
Pursuant to the terms of the Distribution Agreement, RSD is granted the
right to sell shares of the Portfolio as agent for the Fund.
The Distribution Agreement provides that RSD, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the Agreement, will not
be liable to the Fund or its shareholders for losses arising in connection with
the sale of Portfolio shares.
The Distribution Agreement continues in effect from year to year as long
as its continuance is approved at least annually by a majority of the Trustees,
including a majority of the Independent Trustees. The Distribution Agreement
terminates automatically in the event of its assignment. The Agreement is also
terminable without payment of any penalty (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.
REDEMPTIONS
To ensure proper authorization before redeeming shares of the Portfolio,
PFPC may require additional documents such as, but not restricted to, stock
powers, trust instruments, death certificates, appointments as fiduciary,
certificates of corporate authority and tax waivers required in some states when
settling estates.
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Clients of WTC who have purchased shares through their trust accounts at
WTC and clients of Service Organizations who have purchased shares through their
accounts with those Service Organizations should contact WTC or the Service
Organization prior to submitting a redemption request to ensure that all
necessary documents accompany the request. When shares are held in the name of a
corporation, other organization, trust, fiduciary or other institutional
investor, PFPC 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. (See "Dividends,
Capital Gain Distributions and Taxes" in the Prospectus.)
A shareholder's right to redeem shares and to receive payment therefor may
be suspended when (a) the New York Stock Exchange (the "Exchange") is closed
other than for customary weekend and holiday closings, (b) trading on the
Exchange is restricted, (c) an emergency exists as a result of which it is not
reasonably practicable to dispose of the Portfolio's securities or to determine
the value of the net assets of the Portfolio, or (d) ordered by a governmental
body having jurisdiction over the Fund for the protection of the shareholders,
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether a condition described in (b),
(c) or (d) exists. In 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 that make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part with readily marketable securities chosen by the Fund and valued in the
same way as they would be valued for purposes of computing the net asset value
of the Portfolio. If payment is made in securities, a shareholder may incur
transaction expenses in converting those securities into cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares solely in cash if the redemption
requests are made by one shareholder account up to the lesser of $250,000 or 1%
of the net assets of the Portfolio during any 90-day period. This election is
irrevocable unless the SEC permits its withdrawal.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities on a securities exchange are
effected by brokers, and the Portfolio pays brokerage commissions for this
service. In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. During the fiscal years
ended December 31, 1997, 1996 and 1995, the Portfolio paid total brokerage
commissions of $57,925, $59,691, and $116,972, respectively.
The primary objective of WTC 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. In selecting a broker or dealer to execute
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a portfolio transaction, WTC considers, among other things, (i) the price of the
securities to be purchased or sold; (ii) the rate of the commission or the
amount of the mark-up to be charged; (iii) the size and difficulty of the order;
(iv) the reliability, integrity, financial condition, general execution and
operational capability of any competing broker or dealer; and (v) the quality of
the execution and research services provided by the broker or dealer to the Fund
and to other discretionary accounts advised by WTC and its affiliates.
WTC 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, WTC receives services it otherwise might have had to perform
itself. The research services provided by brokers or dealers can be useful to
WTC in serving its other clients, as well as in serving the Fund. Conversely,
information provided to WTC by brokers or dealers who have executed transaction
orders on behalf of other WTC clients may be useful to WTC in providing services
to the Fund. During the fiscal year ended December 31, 1997, the Portfolio paid
$22,228 in brokerage commissions, involving transactions in the amount of
$13,246,387 to brokers because of research services provided. These commissions
paid amounted to 38.37% of the Portfolio's aggregate brokerage commissions for
the fiscal 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.
Some of WTC's other clients have investment objectives and programs
similar to that of the Portfolio. Occasionally, WTC 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 WTC
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 WTC simultaneously purchase
or sell the same security, WTC 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 years ended December 31,
1997 and 1996 was 28.05% and 34.84%, 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 that are
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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 that are not quoted on the
Nasdaq Stock Market System and for which over-the-counter market quotations are
readily available will be valued at the mean between the current bid and asked
prices for such security in the over-the-counter market. Other unlisted
securities (and listed securities subject to restriction on sale) will be valued
at fair value as determined in good faith under the direction of the Board of
Trustees although the actual calculation may be done by others. Short-term
investments with remaining maturities of less than 61 days are valued at
amortized cost.
PERFORMANCE INFORMATION
The performance of the Portfolio may be quoted in terms of its total
return in advertising and other promotional materials ("performance
advertisements"). Performance data quoted represents past performance and is not
intended to indicate future performance. The investment return and principal
value of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Performance of the
Portfolio will vary based on changes in market conditions and the level of the
Portfolio's expenses. Effective February 23, 1998, WTC became the Investment
Adviser of the Portfolio. Prior to February 23, 1998, the Portfolio was managed
by two different portfolio advisers who followed different investment styles and
sought to achieve its objective by investing at least 65% of its total assets in
equity securities without regard to the market capitalization of the issuers of
such securities.
TOTAL RETURN CALCULATIONS. From time to time, the Portfolio may advertise
its average annual total return. The Portfolio's average annual total return is
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.
The time periods used are based on rolling calendar quarters, updated to
the last day of the most recent calendar quarter prior to submission of the
advertisement for publication. Average annual total return, or "T" in the
formula above, is computed by finding the average annual compounded rate of
return over the period that would equate the initial amount invested to the
ending redeemable value ("ERV"). In calculating average annual total return, 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 average annual
total returns for the periods stated below:
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AVERAGE ANNUAL TOTAL RETURN
1 YEAR 5 YEARS 10 YEARS
ENDED ENDED ENDED
DEC. 31, 1997 DEC. 31, 1997 DEC. 31, 1997
------------- ------------- -------------
27.50% 18.39% 17.43%
While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that the Portfolio's
performance is not constant over time, but changes from year to year, and that
average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Portfolio.
The Portfolio may also include in its performance advertisements total
return quotations that are not calculated according to the formula set forth
above ("non-standardized total return"). For example, the Portfolio may quote
unaveraged or cumulative total returns in performance advertisements which
reflect the change in the value of an investment in the Portfolio over a stated
period. PFPC calculates cumulative total return for the Portfolio for a specific
period of time by assuming an initial investment of $1,000 in shares of the
Portfolio and the reinvestment of dividends and other distributions. PFPC then
determines the percentage rate of return on the hypothetical $1,000 investment
by: (i) subtracting the value of the investment at the beginning of the period
from the value of the investment at the end of the period; and (ii) dividing the
remainder by the beginning value. The Portfolio's cumulative total return was,
for the fiscal year ended December 31, 1997: 27.50%; for the five-years ended
December 31, 1997: 132.55%; and for the ten years ended December 31, 1997:
398.52%.
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 ten years ended December 31, 1997, a hypothetical $10,000
investment in the Portfolio would have been worth $49,793.
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CHANGES IN $10,000 HYPOTHETICAL INVESTMENT
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)
----------- ---------- --------- ------------- ----------- ------------
1997 $25,532 $908 $23,353 $49,793 40.1%
1996 $22,963 $817 $15,275 $39,055 37.5%
1995 $20,800 $740 $ 9,891 $31,431 33.1%
1994 $18,088 $643 $ 5,743 $24,474 29.8%
1993 $19,582 $696 $ 4,252 $24,530 26.4%
1992 $18,590 $661 $ 2,160 $21,411 23.0%
1991 $18,734 $666 $ 810 $20,210 19.5%
1990 $13,847 $417 $ 15 $14,279 15.9%
1989 $15,078 $300 - $15,378 9.3%
1988 $12,007 $ 87 - $12,094 4.4%
Explanatory Note: A hypothetical initial investment of $10,000 on December
31, 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 $30,280. 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 $493 for income dividends and $14,119 for capital
gain distributions. Without fee waivers from the Portfolio's service providers,
and expense reimbursements by WTC, the Portfolio's returns would have been
lower.
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, 1997, a copy of which is attached hereto and incorporated by
reference.
COMPARISON OF PORTFOLIO PERFORMANCE. A comparison of the quoted
performance offered for various investments is valid only if performance is
calculated in the same manner. Since there are many methods of calculating
performance, investors should consider the effects of the methods used to
calculate performance when comparing performance of shares of the Portfolio with
performance quoted with respect to other investment companies or types of
investments.
In connection with communicating its performance to current or prospective
shareholders, the Portfolio also may compare performance figures to the
performance of other mutual funds tracked by mutual fund rating services, to
other unmanaged indexes or unit investment trusts with similar holdings or to
individual securities.
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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. (an organization which provides performance
ranking information for broad classes of mutual funds), Lipper Analytical
Services, Inc. ("Lipper") (a mutual fund research firm which analyzes over 1,800
mutual funds), CDA Investment Technologies, Inc. (an organization which provides
mutual fund performance and ranking information), Morningstar, Inc. (an
organization which analyzes over 2,400 mutual funds) and other independent
organizations. When Lipper's tracking results are used, 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.
Because the assets in all funds are always changing, the Portfolio may be
ranked within one asset-size class at one time and in another asset-size class
at some other time. In addition, the independent organization chosen to rank the
Portfolio in marketing and promotional literature may change from time to time
depending upon the basis of the independent organization's categorizations of
mutual funds, changes in the Portfolio's investment policies and investments,
the Portfolio's asset size and other factors deemed relevant. Advertisements and
other marketing literature will indicate the time period and Lipper asset-size
class or other performance ranking company criteria, as applicable, for the
ranking in question.
Evaluations of Portfolio performance made by independent sources may also
be used in advertisements concerning the Portfolio, including reprints of, or
selections from, editorials or articles about the Portfolio. Sources for
performance information and articles about the Portfolio may include the
following:
ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
BUSINESS WEEK, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization that provides performance and
ranking information through examining the dollar results of hypothetical mutual
fund investments and comparing these results against appropriate market indexes.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
FINANCIAL TIMES, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
FINANCIAL WORLD, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
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<PAGE>
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, a national daily newspaper.
U.S. NEWS AND WORLD REPORT, a national business weekly that periodically reports
mutual fund performance data.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records, and price ranges.
15
<PAGE>
TAXES
GENERAL. To continue to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"), 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: (1) 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 and futures) derived with respect to its business of investing in
securities ("Income Requirement"); (2) at the close of each quarter of the
Portfolio's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs 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 (3) at the close of each quarter of
the Portfolio's taxable year, not more than 25% of the value of its total assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) 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 (the "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 December of any year and payable
to shareholders of record on a date in that month will be deemed to have been
paid by the Portfolio and received by its shareholders on December 31 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
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<PAGE>
that time includes the amount of the forthcoming distribution. Thus, investors
purchasing shares just prior to a distribution will receive a partial return of
their investment upon the distribution that nevertheless will be taxable to
them.
If the Portfolio makes a distribution to shareholders in excess of its
current and accumulated "earnings and profits" in any taxable year, the excess
distribution will be treated by each shareholder as a return of capital to the
extent of the shareholder's tax basis and thereafter as capital gain.
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 amount, character and timing of
recognition of the gains and losses the Portfolio realizes in connection
therewith. Gains from options and futures derived by the Portfolio with respect
to its business of investing in securities qualify as permissible income under
the Income Requirement.
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 the
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 "marked-to-market" (that is, deemed to have been sold for
their market value) for federal income tax purposes. Sixty percent of any net
gain or loss recognized on these deemed sales, and 60% of any net realized gain
or loss from any actual sales of Section 1256 Contracts, will be treated as
long-term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. As of the date of this Statement of Additional
Information, it is not entirely clear whether that 60% portion will qualify for
the reduced maximum tax rates on non-corporate taxpayers' net capital gain
enacted by the Taxpayer Relief Act of 1997 -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain recognized on capital assets held for more than one year but
not more than 18 months. However, technical corrections legislation passed by
the House of Representatives late in 1997 would clarify that the lower rates
apply. Section 1256 contracts also may be marked-to-market for purposes of the
Excise Tax.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which the Portfolio may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Under
section 1092, any loss from the disposition of a position in a straddle
generally may be deducted only to the extent the loss exceeds the unrealized
gain on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If the Portfolio makes certain
elections, the amount, character and timing of the recognition of gains and
losses from the affected straddle positions would be determined under rules that
vary according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Portfolio of straddle transactions are not entirely clear.
If the Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option or futures contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Portfolio will be treated as having made an actual sale thereof,
with the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
futures contract entered into by the Portfolio or a related person with respect
to the same or substantially similar property. In addition, if the appreciated
financial position is itself a short sale or such a contract, acquisition of the
underlying property or substantially similar property will be deemed a
constructive sale.
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The foregoing tax discussion 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 Portfolio, 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.
OTHER INFORMATION
INDEPENDENT AUDITORS. Ernst & Young LLP, Suite 4000, 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
appearing or incorporated by reference in the Fund's Prospectus, this Statement
of Additional Information and Registration Statement have been audited by Ernst
& Young LLP, independent auditors, to the extent indicated in their reports
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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 and has
passed upon the legality of the shares offered by the Prospectus and this
Statement of Additional Information.
CUSTODIAN AND SUB-CUSTODIAN. WTC, Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, serves as the Fund's Custodian. PNC Bank,
National Association, 1600 Market Street, Philadelphia, PA 19103, serves as the
Fund's Sub-Custodian.
TRANSFER AGENT. PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809,
serves as the Fund's Transfer Agent and Dividend Paying Agent.
SUBSTANTIAL SHAREHOLDERS. As of January 31, 1998, WTC owned of record
77.73% of the shares of the Portfolio, including 62.5% owned beneficially, all
on behalf of its customer accounts.
FINANCIAL STATEMENTS
The Schedule of Investments as of December 31, 1997; the Statement of
Assets and Liabilities as of December 31, 1997; the Statement of Operations for
the fiscal year ended December 31, 1997; the Statement of Changes in Net Assets
for the fiscal years ended December 31, 1997 and for the fiscal year ended
December 31, 1996; the Financial Highlights for the fiscal years ended December
31, 1997, 1996, 1995, 1994, and 1993; and the Notes to the Financial Statements
and the Report of Independent Auditors, each of which is included in the Annual
Report to the Shareholders of the Fund as of and for the fiscal year ended
December 31, 1997 are attached hereto and incorporated herein.
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APPENDIX
OPTIONS AND FUTURES STRATEGIES
REGULATION OF THE USE OF OPTIONS AND FUTURES STRATEGIES. As discussed in the
Prospectus, in managing the Portfolio, WTC 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 Portfolio will not use leverage in its options and
futures strategies. Accordingly, the Portfolio 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 Portfolio's assets could impede portfolio
management, or the Portfolio's ability to meet redemption requests or other
current obligations.
OPTIONS STRATEGIES. The Portfolio 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 Portfolio may purchase call options on securities in which it is
authorized to invest in order to fix the cost of a future purchase. Call options
also may be used as a means of enhancing returns by, for example, participating
in an anticipated price increase of a security. In the event of a decline in the
price of the underlying security, use of this strategy would serve to limit the
potential loss to the Portfolio to the option premium paid; conversely, if the
market price of the underlying security increases above the exercise price and
the Portfolio either sells or exercises the option, any profit eventually
realized would be reduced by the premium paid.
The Portfolio may purchase put options on securities 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 Portfolio to sell the underlying
security at the predetermined exercise price; thus, the potential for loss to
the Portfolio below the exercise price is limited to the option premium paid. If
the market price of the underlying security is higher than the exercise price of
the put option, any profit the Portfolio realizes on the sale of the security is
reduced by the premium paid for the put option less any amount for which the put
option may be sold.
The Portfolio may on certain occasions wish to hedge against a decline in
the market value of securities that it holds at a time when put options on those
particular securities are not available for purchase. At those times, the
Portfolio may purchase a put option on other carefully selected securities in
which it is authorized to invest, the values of which historically have a high
degree of positive correlation to the value of the securities actually held. If
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 Portfolio purchases a put option on
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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.
The Portfolio may write covered call options on securities in which it is
authorized to invest for hedging purposes or to increase return in the form of
premiums received from the purchasers of the options. A call option gives the
purchaser of the option the right to buy, and the writer (seller) the obligation
to sell, the underlying security at the exercise price during the option period.
The strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Portfolio declines, the amount of the
decline will be offset wholly or in part by the amount of the premium received
by the Portfolio. If, however, there is an increase in the market price of the
underlying security and the option is exercised, the Portfolio will be obligated
to sell the security at less than its market value.
The Portfolio may also write covered put options on securities in which it
is authorized to invest. A put option gives the purchaser of the option the
right to sell, and the writer (seller) the obligation to buy, the underlying
security at the exercise price during the option period. So long as the
obligation of the writer continues, the writer may be assigned an exercise
notice by the broker-dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the underlying security.
The operation of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options. If the put
option is not exercised, the Portfolio will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying securities would decline below the exercise price
less the premiums received, in which case the Portfolio would expect to suffer a
loss.
The Portfolio may purchase put and call options and write covered put and
call options on indexes in much the same manner as the more traditional options
discussed above, except that index options may serve as a hedge against overall
fluctuations in the securities markets (or a market sector) rather than
anticipated increases or decreases in the value of a particular security. An
index assigns values to the securities included in the index and fluctuates with
changes in such values. Settlements of index options are effected with cash
payments and do not involve delivery of securities. Thus, upon settlement of a
index option, the purchaser will realize, and the writer will pay, an amount
based on the difference between the exercise price and the closing price of the
index. The effectiveness of hedging techniques using index options will depend
on the extent to which price movements in the index selected correlate with
price movements of the securities in which a Portfolio invests. Perfect
correlation is not possible because the securities held or to be acquired by the
Portfolio will not exactly match the composition of indexes on which options are
purchased or written.
The Portfolio may purchase and write covered straddles on securities or
indexes. A long straddle is a combination of a call and a put purchased on the
same security where the exercise price of the put is less than or equal to the
exercise price on the call. The Portfolio 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 Portfolio 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 Portfolio
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.
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The Portfolio may purchase put and call warrants with values that vary
depending on the change in the value of one or more specified indexes ("index
warrants"). An index warrant is usually issued by a bank or other financial
institution and gives the Portfolio the right, at any time during the term of
the warrant, to receive upon exercise of the warrant a cash payment from the
issuer of the warrant based on the value of the underlying index at the time of
exercise. In general, if the Portfolio holds a call warrant and the value of the
underlying index rises above the exercise price of the warrant, the Portfolio
will be entitled to receive a cash payment from the issuer upon exercise based
on the difference between the value of the index and the exercise price of the
warrant; if the Portfolio holds a put warrant and the value of the underlying
index falls, the Portfolio will be entitled to receive a cash payment from the
issuer upon exercise based on the difference between the exercise price of the
warrant and the value of the index. The Portfolio holding a call warrant would
not be entitled to any payments from the issuer at any time when the exercise
price is greater than the value of the underlying index; the Portfolio holding a
put warrant would not be entitled to any payments when the exercise price is
less than the value of the underlying index. If the Portfolio does not exercise
an index warrant prior to its expiration, then the Portfolio loses the amount of
the purchase price that it paid for the warrant.
The Portfolio will normally use index warrants as it may use index
options. The risks of the Portfolio'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 Portfolio'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 Portfolio has adopted the following investment
guidelines to govern its use of such strategies. These guidelines may be
modified by the Board of Trustees without shareholder approval:
(1) The Portfolio will write only covered options, and each such
option will remain covered so long as the Portfolio is
obligated thereby.
(2) The Portfolio 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 Portfolio may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If the Portfolio wishes to terminate its obligation to
purchase or sell securities under a put or a call option it has written, the
Portfolio may purchase a put or a call option of the same series (that is, an
option identical in its terms to the option previously written). This is known
as a closing purchase transaction. Conversely, in order to terminate its right
to purchase or sell specified securities under a call or put option it has
purchased, the Portfolio may sell an option of the same series as the option
held. This is known as a closing sale transaction. Closing transactions
essentially permit the Portfolio to realize profits or limit losses on its
options positions prior to the exercise or expiration of the option. If the
Portfolio is unable to effect a closing purchase transaction with respect to
options it has acquired, the Portfolio will have to allow the options to expire
without recovering all or a portion of the option premiums paid. If the
Portfolio is unable to effect a closing purchase transaction with respect to
covered options it has written, the Portfolio will not be able to sell the
underlying securities or dispose of assets used as cover until the options
expire or are exercised, and the Portfolio may experience material losses due to
losses on the option transaction itself and in the covering securities.
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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 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 Portfolio is exercised or unless a
closing transaction is effected with respect to that position, the
Portfolio will realize a loss in the amount of the premium paid and
any transaction costs.
(3) A position in an exchange-listed option may be closed out only on an
exchange that provides a secondary market for identical options.
Although the Portfolio intends to purchase or write only those
exchange-traded options for which there appears to be a liquid
secondary market, there is no assurance that a liquid secondary
market will exist for any particular option at any particular time.
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 Portfolio writes a call
option on an index, the Portfolio will not know in advance the
difference, if any, between the closing value of the index on the
exercise date and the exercise price of the call option itself and
thus will not know the amount of cash payable upon settlement. If
the Portfolio holds an index option and exercises it before the
closing index value for that day is available, the Portfolio runs
the risk that the level of the underlying index may subsequently
change.
(5) The Portfolio's activities in the options markets may result in a
higher portfolio turnover rate and additional brokerage costs;
however, the Portfolio 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 Portfolio may engage in futures
strategies for certain non-trading bona fide hedging, risk management and
portfolio management purposes.
The Portfolio 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 Portfolio's securities holdings. To the extent that a
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portion of the Portfolio's holdings correlate with a given index, the sale of
futures contracts on that index could reduce the risks associated with a market
decline and thus provide an alternative to the liquidation of securities
positions. For example, if the Portfolio correctly anticipates a general market
decline and sells index futures to hedge against this risk, the gain in the
futures position should offset some or all of the decline in the value of the
Portfolio's holdings. The Portfolio may purchase index futures contracts if a
significant market or market sector advance is anticipated. Such a purchase of a
futures contract would serve as a temporary substitute for the purchase of the
underlying securities which may then be purchased in an orderly fashion. This
strategy may minimize the effect of all or part of an increase in the market
price of securities that the Portfolio intends to purchase. A rise in the price
of the securities should be in part or wholly offset by gains in the futures
position.
As in the case of a purchase of an index futures contract, the Portfolio
may purchase a call option on an index futures contract to hedge against a
market advance in securities that the Portfolio plans to acquire at a future
date. The Portfolio may write covered put options on index futures as a partial
anticipatory hedge, and may write covered call options on index futures as a
partial hedge against a decline in the prices of securities held by the
Portfolio. This is analogous to writing covered call options on securities. The
Portfolio also may purchase put options on index futures contracts. The purchase
of put options on index futures contracts is analogous to the purchase of
protective put options on individual securities where a level of protection is
sought below which no additional economic loss would be incurred by the
Portfolio.
FUTURES AND RELATED OPTIONS GUIDELINES. In view of the risks involved in using
the futures strategies that are described above, the Portfolio has adopted the
following investment guidelines to govern its use of such strategies. These
guidelines may be modified by the Board of Trustees without shareholder vote.
(1) The Portfolio will engage only in covered futures
transactions, and each such transaction will remain covered so
long as the Portfolio is obligated thereby.
(2) The Portfolio 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 Portfolio is required to deposit with the Portfolio's
custodian, in a segregated account in the name of the futures broker through
whom the transaction is effected, an amount of cash, U.S. Government securities
or other liquid instruments generally equal to 10% or less of the contract
value. This amount is known as "initial margin." When writing a call or a put
option on a futures contract, margin also must be deposited in accordance with
applicable exchange rules. Unlike margin in securities transactions, initial
margin on futures contracts does not involve borrowing to finance the futures
transactions. Rather, initial margin on a futures contract is in the nature of a
performance bond or good-faith deposit on the contract that is returned to the
Portfolio upon termination of the transaction, assuming all obligations have
been satisfied. Under certain circumstances, such as periods of high volatility,
the Portfolio may be required by a futures exchange to increase the level of its
initial margin payment. Additionally, initial margin requirements may be
increased generally in the future by regulatory action. Subsequent payments,
called "variation margin," to and from the broker, are made on a daily basis as
the value of the futures or options position varies, a process known as "marking
to the market." For example, when the Portfolio purchases a contract and the
value of the contract rises, the Portfolio receives from the broker a variation
margin payment equal to that increase in value. Conversely, if the value of the
futures position declines, the Portfolio is required to make a variation margin
payment to the broker equal to the decline in value. Variation margin does not
involve borrowing to finance the futures transaction, but rather represents a
daily settlement of the Portfolio's obligations to or from a clearing
organization.
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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 Portfolio to close a
position and, in the event of adverse price movements, the Portfolio would have
to make daily cash payments of variation margin (except in the case of purchased
options). However, if futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, there is no guarantee that the price of the securities will, in fact,
correlate with the price movements in the contracts and thus provide an offset
to losses on the contracts.
In considering the Portfolio's use of futures contracts and related
options, particular note should be taken of the following:
(1) Successful use by the Portfolio 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 Portfolio has insufficient cash, it may have to sell assets
to meet daily variation margin requirements. Any such sale of assets
may or may not be made at prices that reflect a rising market.
Consequently, the Portfolio may need to sell assets at a time when
such sales are disadvantageous to the Portfolio. If the price of the
futures contract moves more than the price of the underlying
securities, the Portfolio will experience either a loss or a gain on
the futures contract that may or may not be completely offset by
movements in the price of the securities that are the subject of the
hedge.
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in
the futures position and the securities 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
A-6
<PAGE>
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 Portfolio 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 to close a futures position, and in the event of
adverse price movements, the Portfolio 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 Portfolio
purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to the
Portfolio when the use of a futures contract would not, such as when
there is no movement in the level of the underlying index value or
the securities or currencies being hedged.
(6) As is the case with options, the Portfolio'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 Portfolio 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.
A-7
<PAGE>
The Financial Statements of the Registrant are incorporated herein
by reference to the Annual Report to Shareholders filed with the
Securities and Exchange Commission on March 4, 1998, Edgar
Accession 0000893220-98-000493.
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY 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 each of the ten years in the period ended
December 31, 1997 for the Large Cap Growth Equity Portfolio
Included in Part B of this Registration Statement through incorporation by
reference to the Annual Report to Shareholders previously filed with the
Securities and Exchange Commission on March 4, 1998, Edgar Accession No.
0000893220-98-000493:
Investments, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the fiscal year ended December 31, 1997
Statements of Changes in Net Assets for the fiscal years ended
December 31, 1997 and December 31, 1996
Financial Highlights for each of the five years in the period ended
December 31, 1997
Notes to Financial Statements
Report of Independent Auditors
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).
(d) Amendment to Declaration of Trust of the Registrant dated
February 23, 1998 (filed herewith).
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:
<PAGE>
(a) Amended and Restated Declaration of Trust dated November 10, 1986
as Amended December 29, 1986 and February 15, 1993 and February
23, 1998. (Incorporated by reference to Exhibit 4 (a) to
Post-Effective Amendment No. 9 to this registration statement
filed on February 28, 1994 and to Exhibit 1(d) filed herewith.)
(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 February 23, 1998 (filed herewith).
6. (a) Distribution Agreement between the Registrant and Rodney Square
Distributors, Inc., dated February 23, 1998. (filed herewith).
(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).
(a) Sub-Custodian Services Agreement between Wilmington Trust Company
and PNC Bank, National Association (to be filed)
9. (a) Transfer Agency Services Agreement between the Registrant and
PFPC Inc. (to be filed).
(b) Administration and Accounting Services Agreement between the
Registrant and PFPC Inc. (to be filed).
(c) Fund Secretarial Services Agreement between the Registrant and
Rodney Square Management Corporation (filed herewith).
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).
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 pursuant to Rule 12b-1 - None
16. Schedule for Computation of Performance Quotations. (filed herewith).
17. Financial Data Schedule (filed herewith).
2
<PAGE>
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
By WTC or
Corporate Entity State Of Org. Wt Corp.
---------------- ------------- ---------
Wilmington Trust Company Delaware 100%
Wilmington Trust FSB Federally Chartered 100%
Wilmington Trust of Pennsylvania Pennsylvania 100%
Brandywine Insurance Agency, Inc. Delaware 100%
Brandywine Finance 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%
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.
3
<PAGE>
Item 26. Number Of Holders Of Securities (As Of December 31, 1997):
- --------------------------------------------------------------------
(1) (2)
Title Of Class Number Of Record Shareholders
-------------- -----------------------------
Shares of beneficial interest
$.01 par value 411
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 8A of the Advisory Agreement between Wilmington Trust Company
("WTC") and the Registrant provides that WTC shall not be liable to the
Registrant or to any shareholder of the Registrant for any act or omission in
the course of rendering services under the contract, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties or for any losses that may be sustained in the purchase, holding or sale
of any security or the making of any investment for or on behalf of the
Registrant. Paragraph 8B of the Advisory Agreement provides that no provision of
the 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 of 1940, as amended ("1940 Act"). Paragraph
16 provides that obligations assumed by the Registrant pursuant to the Advisory
Agreement shall be limited in all cases to the Registrant and its assets or a
particular Portfolio and its assets, if liability relates to a particular
Portfolio.
Paragraph 11 of the Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc. ("RSD") provides that the Registrant agrees to
indemnify and hold harmless RSD and each of its directors and officers and each
person, if any, who controls RSD within the meaning of Section 15 of the
Securities Act of 1933 (the "1933 Act") against any loss, liability, claim,
damages or expense arising by reason of any person acquiring any shares, based
upon the 1933 Act or any other statute or common law, alleging any wrongful act
4
<PAGE>
of the Registrant or any of its employees or representatives, or based upon the
grounds that the registration statements or other information filed or made
public by the Registrant included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in 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 11 of
the Distribution Agreement is similar to Paragraph 8 of the Advisory Agreement.
Paragraph 12 of the Transfer Agency Services Agreement between the
Registrant and PFPC Inc. ("PFPC") provides that PFPC and its affiliates 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, as amended, the 1940 Act, the
Commodities Exchange Act, as amended and any state and foreign securities and
blue sky laws, and amendments thereto), and expenses including (without
limitation) attorneys' fees and disbursements arising directly or indirectly
from any action or omission to act which PFPC takes at the request or on the
direction of or in reliance on the advice of the Registrant or upon oral or
written instructions or the acceptance, processing and/or negotiation of checks
or other methods utilized for the purchase of shares of the Registrant in the
absence of PFPC's or any of its affiliates, own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations under such
Agreement. Paragraph 12 of the Transfer Agency Agreement is similar to Paragraph
8 of the Advisory Agreement.
Paragraph 12 of the Administration and Accounting Services Agreement
between the Registrant and PFPC is similar to Paragraph 12 of the Transfer
Agency Services 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.
Item 28. Business And Other Connections Of Investment Adviser.
- --------------------------------------------------------------
Wilmington Trust Company ("WTC"), a Delaware corporation, serves as
investment adviser to the Registrant. It currently manages large
institutional accounts and collective investment funds.
The directors and principal executive officer of the Adviser have held the
following positions of a substantial nature in the past two years:
5
<PAGE>
<TABLE>
<CAPTION>
Business or Other Connections of Principal Executive
Name Officers And Directors Of Registrants Adviser
- ---- ----------------------------------------------------
<S> <C>
Robert H. Bolling, Jr. Owner, R.H. Bolling, Jr. P.E. (consulting engineering
firm)
Carolyn S. Burger President and Chief Executive Officer of Bell
Atlantic-Delaware, Incorporated
Ted T. Cecala Chairman and Chief Executive Officer, Wilmington
Trust Corporation and Wilmington Trust Company
Richard R. Collins Chairman, Collins, Incorporated (consulting firm
for various insurance industry associations and
financial and non-financial companies); Retired
President, American Life Insurance Company
Charles S. Crompton, Esq. Attorney, Partner, Potter Anderson & Corroon (law
firm)
H. Stewart Dunn, Jr., Esq. Attorney, Partner, Ivins, Phillips & Barker (law
firm)
Edward B. du Pont Private investor; Director, E. I. du Pont de
Nemours and Company, Incorporated; Retired
Chairman, Atlantic Aviation Corporation
Robert C. Forney Retired Executive Vice President and Director,
E.I. du Pont de Nemours and Company, Incorporated
Thomas L. Gossage Chairman and Chief Executive Officer, Hercules
Incorporated
Robert V.A. Harra, Jr. President and Treasurer, Wilmington Trust
Corporation and Wilmington Trust Company
Andrew B. Kirkpatrick, Jr., Esq. Of Counsel to, Morris, Nichols, Arsht & Tunnell
(law firm)
Rex L. Mears President of Ray L. Mears & Sons, Inc. (farming
corporation)
Hugh E. Miller Retired Executive, Formerly Vice Chairman, ICI
Americas, Inc.; was with parent Imperial Chemicals
Industries PLC for 20 years until 1990 including
management positions in the United States and
Europe
Stacey J. Mobley Senior Vice President of Communications, E. I. du
Pont de Nemours and Company, Incorporated
Leonard W. Quill Formerly Chairman and Chief Executive Officer,
Wilmington Trust Corporation and Wilmington Trust
Company
David P. Roselle President, University of Delaware
Thomas P. Sweeney, Esq. Attorney, Partner, Richards, Layton & Finger (law
firm)
Bernard J. Taylor, II Retired Chairman and Chief Executive Officer,
Wilmington Trust Corporation and Wilmington Trust
Company
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER(CONTINUED).
Mary Jornlin Theisen Former New Castle County Executive
Robert W. Tunnell, Jr. Managing Partner of Tunnell Companies, L.P., owner
and developer of real estate
</TABLE>
Item 29. Principal Underwriters.
- --------------------------------
(a) The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
Heitman Real Estate Fund - Heitman/PRA Institutional Class
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and Offices
Business Address Rodney Square Distributors, Inc. With Registrant
- ------------------ -------------------------------- ---------------------
<S> <C> <C>
Jeffrey O. Stroble President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
Robert J. Christian Director President and
Rodney Square North Trustee
1100 North Market Street
Wilmington, DE 19890
Nina M. Webb Director Vice President
Rodney Square North and Trustee
1100 North Market Street
Wilmington, DE 19890
</TABLE>
(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 1940 Act and the rules promulgated thereunder and the
records relating to the duties of the Registrant's transfer agent are maintained
by PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware 19809. Records
relating to the duties of the Registrant's custodian are maintained by
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001. PNC Bank, National Association 1600 Market
Street, Philadelphia, Pennsylvania 19103, serves as the Registrant's
sub-custodian.
7
<PAGE>
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.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment No. 15 to its Registration Statement meets all of the
requirements for effectiveness pursuant to Rule 485(b) under the Securities Act
of 1933 and the Registrant further certifies that it has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, and State of
Delaware, on the 26th day of March, 1998.
THE RODNEY SQUARE STRATEGIC EQUITY FUND
By: /s/ Carl M. Rizzo
---------------------------------
Carl M. Rizzo, 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
- --------- ----- ----
/s/ Robert J. Christian President & March 26, 1998
- ---------------------------- Trustee
Robert J. Christian*
/s/ Eric Brucker Trustee March 26, 1998
- ----------------------------
Eric Brucker*
/s/ Fred L. Buckner Trustee March 26, 1998
- ----------------------------
Fred L. Buckner*
/s/ Nina M. Webb Trustee March 26, 1998
- ----------------------------
Nina M. Webb
/s/ John J. Quindlen Trustee March 26, 1998
- ----------------------------
John J. Quindlen*
/s/ John J. Kelley Vice President and March 26, 1998
- ---------------------------- Treasurer (Principal
John J. Kelley Financial and
Accounting Officer)
*By: /s/ Carl M. Rizzo
--------------------------
Carl M. Rizzo**
** Attorney-in-fact pursuant to a power of attorney dated August 19, 1996
and incorporated by reference from Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A, SEC File No. 811-04808,
filed February 28, 1997.
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
Exhibit Index
-------------
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).
(d) Amendment to Declaration of Trust of the Registrant dated
February 23, 1998 (filed herewith).
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 and
February 23, 1998. (Incorporated by reference to Exhibit 4 (a)
to Post-Effective Amendment No. 9 to this registration
statement filed on February 28, 1994 and to Exhibit 1(d) filed
herewith.)
(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 February 23, 1998 (filed herewith).
6. (a) Distribution Agreement between the Registrant and Rodney Square
Distributors, Inc., dated February 23, 1998. (filed herewith).
(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).
(a) Sub-Custodian Services Agreement between Wilmington Trust
Company and PNC Bank, National Association (to be filed)
9
<PAGE>
9. (a) Transfer Agency Services Agreement between the Registrant and
PFPC Inc. (to be filed).
(b) Administration and Accounting Services Agreement between the
Registrant and PFPC Inc. (to be filed).
(c) Fund Secretarial Services Agreement between the Registrant and
Rodney Square Management Corporation (filed herewith).
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).
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 pursuant to Rule 12b-1 - None
16. Schedule for Computation of Performance Quotations. (filed herewith).
17. Financial Data Schedule (filed herewith).
18. Plan adopted pursuant to Rule 18f-3 - None.
10
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000799199
<NAME> RODNEY SQUARE MULTI-MANAGER FUND GROWTH PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 54289
<INVESTMENTS-AT-VALUE> 91573
<RECEIVABLES> 48
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91621
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 175
<TOTAL-LIABILITIES> 175
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 54163
<SHARES-COMMON-STOCK> 4280
<SHARES-COMMON-PRIOR> 3964
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2)
<ACCUM-APPREC-OR-DEPREC> 37284
<NET-ASSETS> 91445
<DIVIDEND-INCOME> 294
<INTEREST-INCOME> 147
<OTHER-INCOME> 0
<EXPENSES-NET> 1162
<NET-INVESTMENT-INCOME> (721)
<REALIZED-GAINS-CURRENT> 12135
<APPREC-INCREASE-CURRENT> 8816
<NET-CHANGE-FROM-OPS> 20230
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 11759
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 179
<NUMBER-OF-SHARES-REDEEMED> 354
<SHARES-REINVESTED> 491
<NET-CHANGE-IN-ASSETS> 15271
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (1)
<GROSS-ADVISORY-FEES> 840
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1162
<AVERAGE-NET-ASSETS> 84007
<PER-SHARE-NAV-BEGIN> 19.22
<PER-SHARE-NII> (0.19)
<PER-SHARE-GAIN-APPREC> 5.44
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 3.10
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.37
<EXPENSE-RATIO> 1.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EXHIBIT 1(d)
SUPPLEMENT TO DECLARATION
OF TRUST OF THE RODNEY SQUARE MULTI-MANAGER FUND
WHEREAS, Article XI, Section 7 of the Declaration of Trust of The Rodney
Square Multi-Manager Fund ("Trust") provides that the Declaration of Trust may
be amended if authorized by votes of the Trustees of the Trust and the
Shareholders of the Trust; and
WHEREAS, at a meeting held on November 17, 1997, the Trustees approved the
amendments to the Declaration of Trust set forth below and authorized their
submission to Shareholders for approval; and
WHEREAS, at a meeting held on February 23, 1998, the Shareholders of the
Trust approved the amendments to the Declaration of Trust set forth below;
NOW THEREFORE, the Trust's Declaration of Trust is amended to add the
following provisions in place of the existing corresponding provisions of the
Declaration of Trust as follows:
ARTICLE I
NAME AND DEFINITIONS
NAME
- ----
SECTION 1. This Trust shall be known as "The Rodney Square Strategic
Equity Fund."
DEFINITIONS
- -----------
SECTION 2.
(f) "Shares" means the equal proportionate transferable units of interest
into which the beneficial interest of each Series or Class thereof shall be
divided from time to time, and includes fractions of shares as well as whole
shares consistent with the requirements of Federal and/or other securities laws
(all of the transferable units of a Series or of a single Class may be referred
to as "Shares" as the context may require);
(i) "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the provisions of Article III.
* * * * *
<PAGE>
ARTICLE III
BENEFICIAL INTEREST
SHARES OF BENEFICIAL INTEREST
- -----------------------------
SECTION 1. The beneficial interest in the Trust shall be divided into such
transferable Shares of one or more separate and distinct Series or Classes
thereof as the Trustees shall from time to time create and establish. The number
of Shares is unlimited and each Share shall have a par value of $0.001 per Share
and upon issuance in accordance with the terms thereof shall be fully paid and
nonassessable. The Trustees shall have full power and authority, in their sole
discretion and without obtaining any prior authorization or vote of the
Shareholders of the Trust, to create and establish (and to change in any manner)
Shares with such preferences, terms of conversion, voting powers, rights and
privileges as the Trustees may from time to time determine, to divide or combine
the Shares into a greater or lesser number, to classify or reclassify any
unissued Shares into one or more Series or Classes of Shares, to abolish any one
or more Series or Classes of Shares, and to take such other action with respect
to the Shares as the Trustees may deem desirable. The Trustees, in their
discretion without a vote of the Shareholders, may divide the Shares of
beneficial interest of any Series into Classes. In such event, each Class of a
Series shall represent interests in the assets of a Series and have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that expenses allocated to that Class of a Series may be
borne solely by such Class as shall be determined by the Trustees and a Class of
a Series may have exclusive voting rights with respect to matters affecting only
that Class. Without limiting the authority of the Trustees set forth in this
Section 1 to establish and designate any further Series, the Trustees have
established and designated a Series of Shares to be known as the "Large Cap
Growth Equity Portfolio."
ESTABLISHMENT OF SERIES OR CLASS
- --------------------------------
SECTION 2. The establishment of any Series or Class in addition to those
set forth in Section 1 shall be effective upon the adoption of a resolution by a
majority of the then Trustees setting forth such establishment and designation
and the relative rights and preferences of the Shares of such Series or Class
thereof. At any time that there are no Shares outstanding of any particular
Series or Class previously established and designated, the Trustees may by a
majority vote abolish that Series or Class and the establishment and designation
thereof.
INVESTMENT IN THE TRUST
- -----------------------
SECTION 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the appropriate
Series is authorized to invest, valued as provided in Article IX, Section 3.
After the date of the initial contribution of capital, the number of Shares to
represent the initial contribution may in the Trustees' discretion be considered
as outstanding and the amount received by the Trustees on account of the
contribution shall be treated as an asset of the Trust or a Series thereof, as
appropriate. Subsequent investments in the Trust or Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received; provided, however, that
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<PAGE>
the Trustees may, in their sole discretion, (a) impose a sales charge upon
investments in the Trust or Series and (b) issue fractional Shares. The Trustees
shall have the right to refuse to accept investments in the Trust or any Series
at any time without any cause or reason therefor whatsoever.
ASSETS AND LIABILITIES OF SERIES
- --------------------------------
SECTION 5. All consideration received by the Trust for the issue or sale
of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition, any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as they, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and shall be referred to as assets belonging to that Series.
The assets belonging to a particular Series shall be so recorded upon the books
of the Trust, and shall be held by the Trustees in Trust for the benefit of the
holders of Shares of that Series. The assets belonging to each particular Series
shall be charged with the liabilities of that Series and all expenses, costs,
charges and reserves attributable to that Series, except that expenses allocated
solely to a particular Class shall be borne by that Class. Any general
liabilities, expenses, costs, charges or reserves of the Trust or Series which
are not readily identifiable as belonging to any particular Series or Class
shall be allocated and charged by the Trustees between or among any one or more
of the Series or Classes in such manner as the Trustees in their sole discretion
deem fair and equitable. Each such allocation shall be conclusive and binding
upon the Shareholders of all Series or Classes for all purposes. Any creditor of
any Series may look only to the assets of that Series to satisfy such creditor's
debt.
* * * * *
ARTICLE V
POWERS OF THE TRUSTEES
POWERS
- ------
SECTION 1.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III and to establish separate Classes
thereof.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series and liabilities and expenses to a particular Class thereof, or
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to apportion the same between or among two or more Series or Classes, as
applicable, provided that any liabilities or expenses incurred by a particular
Series or Class shall be payable solely by that Series or Class as provided for
in Article III.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
- -------------
SECTION 1. The Shareholders shall have power to vote (i) for the election
of Trustees as provided in Article IV, Section 2, (ii) for the removal of
Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory or management contract as provided in Article VII, Section
1, (iv) with respect to any termination or reorganization of the Trust as
provided in Article XI, Section 4, (v) with respect to the amendment of this
Declaration of Trust to the extent and as provided in Article XI, Section 7,
(vi) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, provided, however, that a Shareholder of a particular
Series or Class shall not be entitled to bring any derivative or class action on
behalf of any other Series or Class of the Trust, and (vii) with respect to such
additional matters relating to the Trust as may be required or authorized by
law, by this Declaration of Trust, or the By-Laws of the Trust, if any, or any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any State, or as the Trustees may consider desirable. On any
matter submitted to a vote of the Shareholders, all Shares shall be voted by
individual Series, except (i) when required by the 1940 Act, Shares shall be
voted in the aggregate and not by individual Series and (ii) when the Trustees
have determined that the matter affects only the interests of one or more Series
or one or more Classes, then only the Shareholders of such Series or Class shall
be entitled to vote thereon. Each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote, and each fractional Share shall
be entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Declaration of Trust
or any By-Laws of the Trust to be taken by Shareholders.
MEETINGS
- --------
SECTION 2. The first Shareholders' meeting shall be held as specified in
Section 2 of Article IV at the principal office of the Trust or such other place
as the Trustees may designate. Special meetings of the Shareholders of any
Series or Class thereof may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth of
the outstanding Shares entitled to vote. Whenever ten or more Shareholders
meeting the qualifications set forth in Section 16(c) of the 1940 Act, as the
same may be amended from time to time, seek the opportunity of furnishing
materials to the other Shareholders with a view to obtaining signatures on such
a request for a meeting, the Trustees shall comply with the provisions of said
4
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Section 16(c) with respect to providing such Shareholders access to the list of
the Shareholders of record of the Trust or the mailing of such materials to such
Shareholders of record. Shareholders shall be entitled to at least fifteen days'
notice of any meeting.
QUORUM AND REQUIRED VOTE
- ------------------------
SECTION 3. A majority of Shares entitled to vote in person or by proxy
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of this Declaration of Trust permits
or requires that holders of any Series or Class thereof shall vote as a Series
or Class thereof, then a majority of the aggregate number of Shares of that
Series or Class thereof entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that Series or Class thereof. Any
lesser number shall be sufficient for adjournments. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting, without the necessity of further notice. Except when a larger
vote is required by any provision of this Declaration of Trust or the By-Laws, a
majority of the Shares voted in person or by proxy shall decide any questions
and a plurality shall elect a Trustee, provided that where any provision of law
or of this Declaration of Trust permits or requires that the holders of any
Series shall vote as a Series, or a Class shall vote as a Class, then a majority
of the Shares of that Series or Class voted on the matter shall decide that
matter insofar as the Series or Class is concerned.
* * * * *
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
DISTRIBUTIONS
- -------------
SECTION 1.
(b) The Trustees shall have power, to the fullest extent permitted by the
laws of the Commonwealth of Massachusetts, at any time to declare and cause to
be paid dividends on Shares of a particular Series, from the assets belonging to
that Series, which dividends, at the election of the Trustees, may be paid daily
or otherwise pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Trustees may determine, and may be payable in
Shares of that Series or Class thereof, as appropriate, at the election of each
Shareholder of that Series or Class. All dividends and distributions on Shares
of a particular Series shall be distributed pro rata to the holders of that
Series in proportion to the number of Shares of that Series held by such holders
at the date and time of record established for the payment of such dividends or
distributions, except that such dividends and distributions shall appropriately
reflect expenses allocated to a particular Class of such Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a "stock dividend" pro rata
among the Shareholders of a particular Series as of the record date of that
Series (fixed as provided in Section 3 of Article XI hereof).
5
<PAGE>
REDEMPTIONS
- -----------
SECTION 2. In case any holder of record of Shares of a particular Series
or Class desires to dispose of his Shares, he may deposit at the office of the
transfer agent or other authorized agent of that Series a written request or
such other form of request as the Trustees may from time to time authorize,
requesting that the Series purchase the Shares in accordance with this Section
2; and the Shareholder so requesting shall be entitled to require the Series to
purchase, and the Series or the principal underwriter of the Series shall
purchase his said Shares, but only at the Net Asset Value of the Series or Class
of Shares held by the shareholder (as described in Section 3 hereof) minus any
applicable sales charge or redemption or repurchase fee. The Series shall make
payment for any such Shares to be redeemed, as aforesaid, in cash or property
from the assets of that Series and payment for such Shares shall be made by the
Series or the principal underwriter of the Series to the Shareholder of record
within seven (7) days after the date upon which the request is effective;
provided, however, that if Shares being redeemed have been purchased by check,
the Trust may postpone payment until the Trust has assurance that good payment
has been collected for the purchase of the Shares. The Trust may require
Shareholders to pay a sales charge to the Trust, the underwriter or any other
person designated by the Trustees upon redemption or repurchase of Shares of any
Series or Class thereof, in such amount as shall be determined from time to time
by the Trustees. The amount of such sales charge may but need not vary depending
on various factors, including without limitation the holding period of the
redeemed or repurchased Shares. The Trustees may also charge a redemption or
repurchase fee in such amount as may be determined from time to time by the
Trustees.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
- ------------------------------------------------------------------
SECTION 3. The term "Net Asset Value" of any Series shall mean that amount
by which the assets of that Series exceed its liabilities, all as determined by
or under the direction of the Trustees. Such value per Share shall be determined
separately for each Series of Shares and shall be determined on such days and at
such times as the Trustees may determine. Such determination may be made on a
Series by Series or Class by Class basis, as appropriate, and shall include any
expense allocated to a specific Series or Class. The determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees, provided,
however, that the Trustees, without Shareholder approval, may alter the method
of appraising portfolio securities insofar as permitted under the 1940 Act and
the rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 3 with respect to appraisal of assets and liabilities. At any time the
Trustees may cause the value per Share last determined to be determined again in
a similar manner and may fix the time when such predetermined values shall
become effective.
* * * * *
6
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ARTICLE XI
MISCELLANEOUS
TERMINATION OF TRUST
- --------------------
SECTION 4.
(b) Subject to a Majority Shareholder Vote of each Series affected by the
matter or, if applicable, to a Majority Shareholder Vote of the Trust, the
Trustees may
(i) sell, convey, merge and transfer all or substantially all of the
assets of the Trust or any affected Series to another trust, partnership,
association or corporation organized under the laws of any state which is
an open-end management investment company as defined in the 1940 Act, for
adequate consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of beneficial
interest or stock of such trust, partnership, association or corporation;
or
(ii) at any time sell and convert into money all or substantially all
of the assets of the Trust or any affected Series.
Upon making provision for the payment of all liabilities of the Trust or
any affected Series in either (i) or (ii), by such assumption or otherwise, the
Trustees shall distribute the remaining proceeds or assets (as the case may be)
ratably among the holders of the Shares of the Trust or any affected Series then
outstanding; however, the payment to any particular Class within such Series may
be reduced by any fees, expenses or charges allocated to that Class.
* * * * *
Said Declaration of Trust dated August 19, 1986, as previously amended and
restated on November 10, 1986, and as amended on December 29, 1986 and February
15, 1993, is hereby ratified and confirmed in all other respects.
7
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IN WITNESS WHEREOF, the undersigned, being at least a majority of the
Trustees of the Trust, have executed this Supplement to the Declaration of Trust
this 23rd day of February, 1998.
/s/ Eric Bruckner
--------------------------
Eric Brucker
/s/ Fred L. Buckner
--------------------------
Fred L. Buckner
/s/ Robert J. Christian
--------------------------
Robert J. Christian
/s/ John J. Quindlen
--------------------------
John J. Quindlen
/s/ Nina M. Webb
--------------------------
Nina M. Webb
8
Exhibit 5
ADVISORY AGREEMENT
between
THE RODNEY SQUARE STRATEGIC EQUITY FUND
and
WILMINGTON TRUST COMPANY
AGREEMENT made this 23rd day of February, 1998, by and between The
Rodney Square Strategic Equity Fund, a Massachusetts business trust (hereinafter
called the "Fund"), and Wilmington Trust Company, a corporation organized under
the laws of the State of Delaware (hereinafter called the "Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended ("1940 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:
<PAGE>
A. INVESTMENT ADVISORY SERVICES.
(i) 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.
(ii) 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.
(i) 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.
(ii) 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 1940 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 1940 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.
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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.
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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 1940 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
1940 Act;
G. Legal and audit expenses;
H. fees and expenses related to the registration and qualification
of the Fund and its shares for distribution under state and
federal securities laws;
I. expenses of typesetting. printing and mailing reports, notices
and proxy material to shareholders of the Fund;
J. all other expenses incidental to holding meetings of the Fund's
shareholders, including proxy solicitations therefor;
K. premiums for fidelity bond and other insurance coverage;
L. the Fund's association membership dues;
M. expenses of typesetting for printing Prospectuses;
4
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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 By-Laws and the 1940 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).
5
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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
By-Laws of the Fund as currently in effect and the 1940 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, By-Laws and the 1940 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.
6
<PAGE>
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 1940 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 1940 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 1940 Act,
the shareholders of any affected Portfolio in the manner required by the 1940
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 1940
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.
7
<PAGE>
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 STRATEGIC EQUITY FUND
(SEAL) By: /s/ Robert J. Christian
-----------------------------------------
Name: Robert J. Christian
Title: President
WILMINGTON TRUST COMPANY
(SEAL) By: /s/ Robert J. Christian
-----------------------------------------
Name: Robert J. Christian
Title: Senior Vice President
8
<PAGE>
SCHEDULE A
THE RODNEY SQUARE STRATEGIC EQUITY FUND
PORTFOLIO LISTING
Large Cap Growth Equity Portfolio
9
<PAGE>
SCHEDULE B
THE RODNEY SQUARE STRATEGIC EQUITY FUND
FEE SCHEDULE
% of average
Portfolio daily net assets
--------- ----------------
Large Cap Growth Equity Portfolio 0.55%
10
EXHIBIT 6(a)
THE RODNEY SQUARE STRATEGIC EQUITY FUND
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of the 23rd day of February, 1998,
between The Rodney Square Strategic Equity Fund, a Massachusetts business trust
(the "Fund"), having its principal place of business in Wilmington, Delaware,
and Rodney Square Distributors, Inc., a corporation organized under the laws of
the State of Delaware (the " Distributor"), having its principal place of
business in Wilmington, Delaware.
WHEREAS, the Fund wishes to employ the services of the Distributor, with
such assistance from its affiliates as the latter may provide; and
WHEREAS, the Distributor is a wholly owned subsidiary of Wilmington Trust
Company, which serves as investment adviser to the Fund; and
WHEREAS, the Distributor wishes to provide distribution services to the
Fund as set forth below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties agree as follows:
1. SALE OF SHARES. The Fund grants to the Distributor the right to sell
shares of beneficial interest (the "shares") of all series, and of all
classes now or hereafter created, on its behalf during the term of this
Agreement and subject to the registration requirements of the Securities
Act of 1933, as amended (the "1933 Act"), and of the laws governing the
sale of securities in various states (the "Blue Sky Laws") under the
following terms and conditions: the Distributor (a) shall have the right
to sell, as agent on behalf of the Fund, shares authorized for issue and
registered under the 1933 Act; (b) may sell shares under offers of
exchange, if available, between and among the funds distributed by
Distributor and advised by Rodney Square Management Corporation or
Wilmington Trust Company; and (c) shall sell such shares only in
compliance with the terms set forth in the Fund's currently effective
registration statement. The Distributor may enter into selling agreements
with selected dealers and others for the sale of Fund shares and will act
only on its own behalf as principal in entering into such selling
agreements.
2. SALE OF SHARES BY THE FUND. The rights granted to the Distributor shall be
non-exclusive in that the Fund reserves the right to sell its shares to
investors on applications received and accepted by the Fund. Further, the
Fund reserves the right to issue shares in connection with (a) the merger
or consolidation, or acquisition by the Fund through purchase or
otherwise, with any other investment company, trust or personal holding
company; and (b) a PRO RATA distribution directly to the holders of shares
in the nature of a stock dividend or split-up.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
shares of all series of the Fund, shares of all series of the Fund held in
its treasury in the event that, in the discretion of the Fund, treasury
shares shall be sold, and shares of all series of the Fund repurchased for
resale.
<PAGE>
4. PUBLIC OFFERING PRICE. All shares sold to investors by the Distributor or
the Fund will be sold at the public offering price. The public offering
price for all accepted subscriptions will be the net asset value per
share, determined in the manner described in the Fund's current Prospectus
or SAI with respect to the applicable series. The Fund shall in all cases
receive the net asset value per share on all sales.
5. SUSPENSION OF SALES. If and whenever the determination of net asset value
is suspended and until such suspension is terminated, no further orders
for shares shall be processed by the Distributor except such unconditional
orders placed with the Distributor before it had knowledge of the
suspension. In addition, the Fund reserves the right to suspend sales and
the Distributor's authority to process orders for shares on behalf of the
Fund if, in the judgment of the Fund, it is in the best interests of the
Fund to do so. Suspension will continue for such period as may be
determined by the Fund. In addition, the Distributor reserves the right to
reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of the
Fund. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of underwriting
commissions) with other issuers. The Distributor agrees to use all
reasonable efforts to ensure that taxpayer identification numbers provided
for shareholders of the Fund are correct.
7. AUTHORIZED REPRESENTATIVE. The Distributor is not authorized by the Fund
to give any information or to make any representations other than those
contained in the appropriate registration statements, Prospectuses or SAIs
filed with the Securities and Exchange Commission under the 1933 Act (as
those registration statements, Prospectuses and SAIs may be amended from
time to time), or contained in shareholder reports or other material that
may be prepared by or on behalf of the Fund for the Distributor's use.
This shall not be construed to prevent the Distributor from preparing and
distributing, in compliance with applicable laws and regulations, sales
literature or other material as it may deem appropriate. The Distributor
will furnish or cause to be furnished copies of such sales literature or
other material to the President of the Fund or his designee and will
provide him with a reasonable opportunity to comment on it. The
Distributor agrees to take appropriate action to cease using such sales
literature or other material to which the Fund reasonably objects as
promptly as practicable after receipt of the objection.
8. REGISTRATION OF SHARES. The Fund agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval, if any, of its shareholders) so that there will be available for
sale the number of shares the Distributor may reasonably be expected to
2
<PAGE>
sell. The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of shares of each
series of the Fund.
9. EXPENSES, COMPENSATION AND REIMBURSEMENT
----------------------------------------
(i) The Fund shall pay all fees and expenses:
(ii) in connection with the preparation, setting in type and filing
of any registration statement, Prospectus and SAI under the
1933 Act, and any amendments thereto, for the issue of its
shares;
(iii)in connection with the registration and qualification of
shares for sale in the various states in which the Board of
Trustees (the "Trustees") of the Fund shall determine it
advisable to qualify such shares for sale (including
registering the Fund or any series as a broker or dealer, or
any officer of the Fund as an agent or salesperson in any
state);
(iv) of preparing, setting in type, printing and mailing any report
or other communication to shareholders of the Fund in their
capacity as such; and
(v) of printing and mailing Prospectuses, SAIs, and any
supplements thereto, sent to existing shareholders.
(b) The Distributor may, in its sole discretion, pay such expenses as
it deems reasonable for:
(i) printing and distributing Prospectuses, SAIs and reports
prepared for its use in connection with the offering of the
shares for sale to the public;
(ii) any other literature used in connection with such offering;
and
(c) advertising in connection with such offering.
(i) In addition to the services described above, the Distributor
will provide services including assistance in the production
of marketing and advertising materials for the sale of shares
of the Fund and their review for compliance with applicable
regulatory requirements, entering into dealer agreements with
broker-dealers to sell shares of the Fund and monitoring their
financial strength and contractual compliance, providing,
directly or through its affiliates, certain investor support
services, personal service, and the maintenance of shareholder
accounts.
10. INDEMNIFICATION.
---------------
(a) The Fund agrees to indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
3
<PAGE>
1933 Act against any loss, liability, claim, damages or expense
(including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damages, or expense and reasonable
counsel fees incurred in connection therewith) 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 Fund
or any of its employees or representatives, or based upon the
grounds that the registration statements, Prospectuses, SAIs,
shareholder reports or other information filed or made public by the
Fund (as from time to time amended) included an untrue statement of
a material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading.
However, the Fund does not agree to indemnify the Distributor or
hold it harmless to the extent that the statement or omission was
made in reliance upon, and in conformity with, information furnished
to the Fund in writing by or on behalf of the Distributor. In no
case (i) is the indemnity of the Fund in favor of the Distributor or
any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Fund or its security holders
to which the Distributor 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, or (ii) is the
Fund to be liable under its indemnity agreement contained in this
Section 10(a) with respect to any claim made against the Distributor
or any person indemnified unless the Distributor or person, as the
case may be, shall have notified the Fund in writing of the claim
within a reasonable time after the summons or other first written
notification giving information of the nature of the claim shall
have been served upon the Distributor or any such person or after
the Distributor or such person shall have received notice of service
on any designated agent. However, failure to notify the Fund of any
claim shall not relieve the Fund from any liability which it may
have to the Distributor or any person against whom such action is
brought other than on account of its indemnity agreement contained
in this Section 10(a). The Fund shall be entitled to participate at
its own expense in the defense, or, if it so elects, to assume the
defense of any suit brought to enforce any claims, but if the Fund
elects to assume the defense, the defense shall be conducted by
counsel chosen by it and satisfactory to the Distributor, or person
or persons, defendant or defendants in the suit. In the event the
Fund elects to assume the defense of any suit and retain counsel,
the Distributor, officers or directors or controlling person(s) or
defendant(s) in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Fund does not elect to
assume the defense of any suit, it will reimburse the Distributor,
officers or directors or controlling person(s) or defendant(s) in
the suit, for the reasonable fees and expenses of any counsel
retained by them. The Fund agrees to notify the Distributor promptly
of the commencement of any litigation or proceedings against it or
any of its officers or Trustees in connection with the issuance or
sale of any of the shares.
4
<PAGE>
(b) The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of the members of its Trustees and
officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act, against any loss, liability,
damages, claim or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, damages,
claim or expense and reasonable counsel fees incurred in connection
therewith) 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 Distributor or any of its employees or
representatives, or alleging that the registration statements,
Prospectuses, SAIs, shareholder reports or other information filed
or made public by the Fund (as from time to time amended) included
an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make
the statements not misleading, insofar as the statement or omission
was made in reliance upon, and in conformity with, information
furnished in writing to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Fund or any person indemnified to be deemed to protect the Fund or
any person against any liability to which the Fund 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, or (ii) is the Distributor to be liable under its
indemnity agreement contained in this Section 10(b) with respect to
any claim made against the Fund or any person indemnified unless the
Fund or person, as the case may be, shall have notified the
Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information
of the nature of the claim shall have been served upon the Fund or
any such person or after the Fund or such person shall have received
notice of service on any designated agent. However, failure to
notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Fund or any
person against whom the action is brought other than on account of
its indemnity agreement contained in this Section 10(b). In the case
of any notice to the Distributor, it shall be entitled to
participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any
claims, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by it and satisfactory
to the Fund, to its officers and Trustees and to any controlling
person(s) or any defendants(s) in the suit. In the event the
Distributor elects to assume the defense of any suit and retain
counsel, the Fund or controlling person(s) or defendant(s) in the
suit, shall bear the fees and expenses of any additional counsel
retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Fund, its officers or
Trustees, controlling person(s) or defendant(s) in the suit, for the
reasonable fees and expenses of any counsel retained by them. The
Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the
issue and sale of any of the shares.
5
<PAGE>
11. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become effective on
the date first written above, and unless terminated as provided, shall
continue in force for one (1) year from the date of its execution and
thereafter from year to year, provided continuance after the one (1) year
period is approved at least annually by either (a) the vote of a majority
of the Trustees of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, and (b) the vote of a majority
of those Trustees of the Fund who are not interested persons of the Fund,
cast in person at a meeting called for the purpose of voting on the
approval. This Agreement shall automatically terminate in the event of
its assignment. As used in this Section 11, the terms "vote of a majority
of the outstanding voting securities," "assignment" and "interested
person" shall have the respective meanings specified in the 1940 Act and
the rules enacted thereunder as now in effect or as hereafter amended. In
addition to termination by failure to approve continuance or by
assignment, this Agreement may at any time be terminated without the
payment of any penalty by vote of the Board of Trustees of the Fund or by
vote of a majority of the outstanding voting securities of the Fund, on
not more than sixty (60) days' written notice to the Fund. This Agreement
may be terminated by the Distributor upon not less than sixty (60) days'
prior written notice to the Fund.
12. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail,
postage prepaid, to the other party to this Agreement at its principal
place of business.
13. 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.
14. 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.
15. SHAREHOLDER LIABILITY. The Distributor 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. The Distributor agrees that it shall not seek
satisfaction of any such obligation from the shareholders or any
individual shareholder of the Fund, nor from the Trustees or any
individual Trustee of the Fund.
16. MISCELLANEOUS. Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect. This Agreement
may be executed in two counterparts, each of which, taken together, shall
constitute one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
THE RODNEY SQUARE STRATEGIC EQUITY FUND
By: /s/ Robert J. Christian
Name: Robert J. Christian
Title: President
RODNEY SQUARE DISTRIBUTORS, INC.
By: /s/ Jeffrey O. Stroble
Name: Jeffrey O. Stroble
Title: President
7
EXHIBIT 9.(c)
THE RODNEY SQUARE MULTI-MANAGER FUND
FUND SECRETARIAL SERVICES AGREEMENT
THIS FUND SECRETARIAL SERVICES AGREEMENT is made the 26th day of
January, 1998, between The Rodney Square Multi-Manager Fund, a Massachusetts
business trust (the "Fund"), having its principal place of business in
Wilmington, Delaware, and Rodney Square Management Corporation, a corporation
organized under the laws of Delaware ("RSMC"), having its principal place of
business in Wilmington, Delaware.
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
and offers for public sale distinct series of shares of beneficial interest, par
value $0.01 per share, each corresponding to a distinct portfolio ("Portfolio");
WHEREAS, each share of a Portfolio represents an undivided interest in
the assets, subject to the liabilities, allocated to that Portfolio and each
Portfolio has a separate investment objective and policies;
WHEREAS, RSMC presently serves as manager of the Fund pursuant to a
Fund Management Agreement dated December 2, 1989;
WHEREAS, the Fund wishes to divide, on a mutually exclusive basis, the
services which RSMC has heretofore provided, for and on behalf of the Fund,
pursuant to an Administration Agreement dated December 31, 1992 between the Fund
and RSMC so that, as of and after the date of this Agreement, RSMC will be
solely responsible for providing the services set forth in this Agreement for
and on behalf of the Fund, and PFPC Inc. ("PFPC") will be solely responsible for
providing, pursuant to a separate Administration and Accounting Services
Agreement of even date herewith, for and on behalf of the Fund, the
administrative services contemplated by the Administration and Accounting
Services Agreement; and
WHEREAS, RSMC wishes to provide the services set forth within this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and RSMC agree as follows:
1. APPOINTMENT. The Fund hereby appoints and employs RSMC as agent to
perform the services described in this Agreement for the Fund, such
appointment to take effect on January 26, 1998. RSMC shall act under
<PAGE>
such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth and in accordance with the principles
of principal and agent as enunciated by applicable common law.
2. DOCUMENTS. The Fund has furnished RSMC copies of the Fund's Declaration
of Trust, Bylaws, Advisory Contracts, Distribution Agreement,
Administration and Accounting Services Agreement, Custodian Contract,
Sub-Custodian Contract, Transfer Agency Agreement, current Prospectuses
and Statements of Additional Information and all forms relating to any
plan, program or service offered by the Fund. The Fund shall furnish
promptly to RSMC a copy of any amendment or supplement to the
above-mentioned documents. The Fund shall furnish promptly to RSMC any
additional documents necessary for it to perform its functions
thereunder or such other documents as RSMC shall request.
3. FUND SECRETARIAL SERVICES . Subject to the direction and control of the
Board of Trustees (the "Trustees") of the Fund, and to the extent not
otherwise the responsibility of, or provided by, the Fund or other
service providers to the Fund, RSMC shall provide the following
services for and on behalf of the Fund:
(a) Supply:
(i) office facilities and equipment (which may be in RSMC's or
its affiliates' or agents' own offices) as necessary to
service the non-investment related activities of the Fund;
(ii) non-investment related statistical and research data;
(iii) executive and administrative services; and
(iv) personnel to serve as officers of the Fund, if requested and
elected by the Trustees.
(b) Furnish support for the Fund's Secretary in the performance of
any or all of his or her duties as the same may be assigned or
modified, from time to time, by the Trustees or President of the
Fund. As of the date of this Agreement, such duties include the
following:
(i) preparation and distribution (or cause the preparation
and/or distribution) of all annual calendars, periodic
notices, agendas, minutes, reports and other materials
necessary for the timely and efficient conduct of meetings
of the Trustees and shareholders of the Fund;
(ii) preparation (or cause the preparation), and arranging for
the filing, printing and distribution, as necessary, of
2
<PAGE>
preliminary and definitive proxy solicitation materials, and
post-effective amendments to the Fund's registration
statement;
(iii) arranging for the securing, timely and compliant renewal
and maintenance of all required fidelity bonds and, as
instructed, other insurance policies for the protection of
the Fund, its officers and/or Trustees;
(iv) preparation and administration (or oversight of the
administration) of any and all personal investing code(s) of
ethics adopted by the Fund;
(v) aid the Fund's President in furnishing letters or other
correspondence to be included in reports or other
communications with Fund shareholders;
(vi) serve as principal point of contact, on behalf of the Fund,
with the Fund's distributor as to consultation regarding the
retention of specific dealers, and the advance review and
approval of the use of specific advertising and sales
literature, by the distributor for the purpose of selling
Fund shares; and
(vii) serve as principal point of contact, on behalf of the Fund,
with the Fund's administration and accounting services
agent, auditor(s) and legal counsel.
4. EXPENSES OF THE FUND. The Fund agrees that it will pay all its expenses
other than those expressly stated to be payable by RSMC hereunder,
which expenses payable by the Fund shall include, without limitation,
all costs and fees payable to, for or otherwise incident to:
(a) Investment advisory services; fund administration and
accounting services; and all legal, auditing and related
consulting services procured for and on behalf of the Fund;
(b) Holding meetings of the Trustees and Fund shareholders;
(c) Members of the Trustees who are not "interested persons" of
the Fund;
(d) Maintenance of the Fund's corporate existence, and maintenance
of the registration of its shares (and/or sales thereof) with
all pertinent state and federal securities authorities;
(e) Filing (including EDGAR conversion, assembly and
transmission), typesetting and printing, and mailing or other
dissemination, as necessary, of prospectuses, statements of
3
<PAGE>
additional information, reports, and preliminary and
definitive proxy solicitation materials to existing
shareholders of the Fund.
(f) Printing certificates representing shares of the Fund;
(g) Taxes levied against the Fund or any Portfolio;
(h) Premiums payable upon any and all fidelity bonds and insurance
policies secured for the protection of the Fund, its officers
and/or Trustees;
(i) The Fund's membership in investment company organizations; and
(j) Such non-recurring expenses as may arise, including actions,
suits or 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.
Except as otherwise agreed by RSMC, RSMC will not reimburse the Fund
for any Fund expenses in excess of expense limitations imposed by state
securities commissions having jurisdiction over the Fund.
5. RECORDKEEPING AND OTHER INFORMATION. RSMC shall create, maintain and
preserve all necessary records in accordance with all applicable laws,
rules and regulations, including, but not limited to, records required
by Sections 17(g), 17(j) and 31(a) of the 1940 Act and the rules
thereunder, as the same may be amended from time to time, pertaining to
the various functions (described above) to be provided by it and not
otherwise created and maintained by another party pursuant to contract
with the Fund. All such records shall be the property of the Fund at
all times and shall be available for inspection and use by the Fund.
Copies of such records shall be furnished to the Fund or its authorized
representatives at and upon the Fund's request and expense. Where
applicable, such records shall be maintained and preserved by RSMC for
the periods and in the places required by Rules 17j-1 and 31a-2 under
the 1940 Act.
6. AUDIT, INSPECTION AND VISITATION. RSMC shall make available during
regular business hours all records and other data created and
maintained pursuant to the foregoing provisions of this Agreement for
reasonable audit and inspection by the Fund, any person retained by the
Fund, or any regulatory agency having authority over the Fund.
7. COMPENSATION. For the performance of its obligations under this
Agreement, RSMC shall receive compensation from Wilmington Trust
Company, and not from the Fund.
4
<PAGE>
8. APPOINTMENT OF AGENTS. 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 such of the provisions of this Agreement as RSMC may
from time to time direct; provided, however, that the appointment of
any such agent shall not relieve RSMC of any of its responsibilities or
liabilities hereunder.
9. USE OF RSMC'S NAME. The Fund shall not use the name of RSMC or any of
its affiliates in any Prospectus, SAI, sales literature or other
material relating to the Fund in a manner not approved prior thereto in
writing by RSMC; provided, however, that RSMC shall approve all uses of
its, and its affiliates' and agents', names that merely refer in
accurate terms to their appointments hereunder or that are required by
the SEC or a state securities commission; and further provided, that in
no event shall such approval be unreasonably withheld.
10. USE OF FUND'S NAME. Neither RSMC nor any of its affiliates shall use
the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than
internal use in a manner not approved prior thereto by the Fund;
provided, however, that the Fund shall approve all uses of its name
that merely refer in accurate terms to the appointment of RSMC
hereunder or that are required by the SEC or a state securities
commission; and further provided, that in no event shall such approval
be unreasonably withheld.
11. LIABILITY OF RSMC OR AFFILIATES. RSMC and its affiliates and agents
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
this Agreement relates, except to the extent of a loss resulting from
willful misfeasance, bad faith or negligence on their part in the
performance of their obligations and duties under this Agreement. Any
person, even though also an officer, partner, employee or agent of RSMC
or any of its affiliates or agents who may be or become an officer of
the Fund, shall be deemed, when rendering services to the Fund as such
officer or acting on any business of the Fund as such officer (other
than services or business in connection with RSMC's duties under this
Agreement), to be rendering such services to or acting solely for the
Fund and not as an officer, partner, employee or agent or one under the
control or direction of RSMC or any of its affiliates or agents, even
though paid by one of those entities. RSMC shall not be liable or
responsible for any acts or omissions of any other predecessor
administrator or any other persons having responsibility for matters to
which this Agreement does not relates, nor shall RSMC be responsible
for reviewing any such act or omissions. RSMC shall, however, be liable
for its own acts and omissions subsequent to assuming responsibility
under this Agreement as herein provided.
12. AMENDMENTS. RSMC and the Fund shall regularly consult with each other
regarding RSMC's performance of its obligations under the foregoing
provisions. In connection therewith, the Fund shall submit to RSMC at a
reasonable time in advance of filing with the SEC copies of any amended
5
<PAGE>
or supplemented registration statement of the Fund (including exhibits)
under the Securities Act of 1933, as amended, and the 1940 Act, and, a
reasonable time in advance of their proposed use, copies of any amended
or supplemented forms relating to any plan, program or service offered
by the Fund. Any change in such materials that would require any change
in RSMC's obligations under the foregoing provisions shall be subject
to the burdened party's approval, which shall not be unreasonably
withheld. In the event that a change in such documents or in the
procedures contained therein increases the cost to RSMC of performing
its obligations hereunder by more than an insubstantial amount, RSMC
shall be entitled to receive reasonable compensation therefor.
13. DURATION, TERMINATION, ETC. The provisions of this Agreement may not be
changed, waived, discharged or terminated orally, but only by written
instrument that shall make specific reference to this Agreement and
that shall be signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
The provisions of this Agreement shall become effective on January 26,
1998, and shall continue in effect for one year from the effective
date; and shall continue thereafter unless terminated 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; provided, however, that the
foregoing provisions of this Agreement may be terminated immediately
(a) upon the effective date of an agreement between the Fund and RSMC
pursuant to which RSMC agrees to provide to the Fund advisory services
and the further services described in this Agreement or (b) at any time
for cause either by the Fund or by RSMC in the event that such cause
shall have remained unremedied for sixty (60) days or more after
receipt of written specification of such cause. Any such termination
shall not affect the rights and obligations of the parties under
Section 11 hereof.
In the event that the Fund designates a successor to any of RSMC's
obligations hereunder, RSMC shall, at the expense and direction of the
Fund, transfer to such successor all relevant books, records and other
data established or maintained by RSMC under the foregoing provisions.
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.
6
<PAGE>
16. 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 local
laws of the State of Delaware.
17. SHAREHOLDER LIABILITY. RSMC 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 any 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 assets of such
Portfolios, and RSMC shall not seek satisfaction of any such obligation
from the shareholders or any individual shareholder of the Fund. Nor
shall RSMC seek satisfaction of any such obligations from the Board of
Trustees or any individual Trustee of the Fund.
18. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed in two counterparts, each of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
THE RODNEY SQUARE MULTI-
MANAGER FUND
By: /s/ Robert J. Christian
---------------------------------
Robert J. Christian, President
RODNEY SQUARE MANAGEMENT
CORPORATION
By: /s/ Robert J. Christian
----------------------------------
Robert J. Christian, President
7
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 15 to Registration
Statement Number 33-8120 (Form N-1A) of Rodney Square Strategic Equity Fund of
our report dated January 15, 1998, included in the 1997 Annual Report to
Shareholders.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
March 20, 1998
<TABLE>
<CAPTION>
Exhibit 16
FUND NAME: RODNEY SQUARE STRATEGIC EQUITY FUND - LARGE CAP GROWTH EQUITY PORTFOLIO
(STANDARDIZED RETURNS)
1 YR 5 YR 10 YR
<S> <C> <C> <C>
# YEAR IN PERIOD 1 5 10
AVERAGE ANNUAL TOTAL RETURN 27.50% 18.39% 17.43%
CUMULATIVE TOTAL RETURN 27.50% 132.55% 398.52%
ANNUAL
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(1,274.96/1,000)[SUPERSCRIPT]1 -1 = T (1,274.96/1,000) -1 = T
0.2750 = T 0.2750 = T
27.50% = T 27.50% = T
5 YEARS ENDING 12/31/97
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(2,325.50/1,000)1/5 -1 = T (2,325.50/1,000) -1 = T
0.1839 = T 1.3255 = T
18.39% = T 132.55% = T
10 YEARS ENDING 12/31/97
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(4,985.17/1,000)1/10 -1 = T (4,985.17/1,000) -1 = T
0.1743 = T 3.9852 = T
17.43% = T 398.52% = T
<PAGE>
FUND NAME: RODNEY SQUARE STRATEGIC EQUITY FUND - LARGE CAP GROWTH EQUITY PORTFOLIO
(NON-STANDARDIZED RETURNS)
1 YR 5 YR 10 YR
# YEAR IN PERIOD 1 5 10
AVERAGE ANNUAL TOTAL RETURN 27.50% 18.39% 17.43%
CUMULATIVE TOTAL RETURN 27.50% 132.55% 398.52%
ANNUAL
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(1,274.96/1,000)[SUPERSCRIPT]1 -1 = T (1,274.96/1,000) -1 = T
0.2750 = T 0.2750 = T
27.50% = T 27.50% = T
5 YEARS ENDING 12/31/97
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(2,325.50/1,000)1/5 -1 = T (2,325.50/1,000) -1 = T
0.1839 = T 1.3255 = T
18.39% = T 132.55% = T
10 YEARS ENDING 12/31/97
Average Annual Total Return Cumulative Total Return
- --------------------------- -----------------------
(ERV/P)[SUPERSCRIPT]1/N -1 = T (ERV/P) -1=T
(4,985.17/1,000)1/10 -1 = T (4,985.17/1,000) -1 = T
0.1743 = T 3.9852 = T
17.43% = T 398.52% = T
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 16
FUND NAME: RODNEY SQUARE STRATEGIC EQUITY FUND - LARGE CAP GROWTH EQUITY PORTFOLIO
HYPOTHETICAL $10,000 INVESTMENT
For the Ten-years ended December 31, 1997
<S> <C>
Value of Initial $10,000 Investment
= ($10,000 / Beginning NAV) * Ending NAV
= ($10,000 / $8.37) * $21.37
= $25,531.66
Value of Reinvested Income Dividends
= Shares Reinvested from Income Dividends * Ending NAV
= 42.49 * $21.37
= $908.00
Value of Reinvested Capital Gain
Distributions = Shares Reinvested from Capital Gains Dist. * Ending NAV
= 1,092.79 * $21.37
= $23,352.99
TOTAL VALUE = $25,531.66 + $908.00 + $23,352.99 = $49,792.65
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 Gains Dist. * Ending NAV
= 669.34 * $19.22
= $12,864.71
TOTAL VALUE = $19,220.00 + $807.62 + $12,864.71 = $32,892.33
</TABLE>
