As filed with the Securities and Exchange Commission on June 26, 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. ________ |_|
Post-Effective Amendment No. 17 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 19 |X|
The Rodney Square Strategic Equity Fund
--------------------------------------------------
(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
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 June 29, 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
<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expense Table
Questions and Answers about the
Portfolios
3. Condensed Financial Financial Highlights
Information
4. General Description Questions and Answers about the Portfolios
of Registrant Investment Objectives and Policies
Investment Practices
Risk Factors
Description of the Fund
5. Management of the Questions and Answers about the
Fund Portfolios
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 Portfolios
Dividends, Capital Gain Distributions
and Taxes
Description of the Fund
7. Purchase of Securities Questions and Answers about the
Being Offered Portfolios
How Net Asset Value is Determined
Purchase of Shares
Management of the Fund
8. Redemption or Questions and Answers about the
Repurchase Portfolios
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 Portfolios' 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 The Sub-Advisers
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 Distribution Agreement
22. Calculations of Performance Information
Performance Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
THE RODNEY SQUARE
STRATEGIC EQUITY
FUND
PROSPECTUS
JUNE 29, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
EXPENSE TABLE................................................................2
FINANCIAL HIGHLIGHTS.........................................................4
QUESTIONS AND ANSWERS ABOUT THE PORTFOLIOS...................................5
INVESTMENT OBJECTIVES AND POLICIES...........................................7
RISK FACTORS................................................................10
PURCHASE OF SHARES..........................................................12
SHAREHOLDER ACCOUNTS........................................................13
REDEMPTION OF SHARES........................................................13
EXCHANGE OF SHARES..........................................................15
HOW NET ASSET VALUE IS DETERMINED...........................................16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES....................................16
PERFORMANCE INFORMATION.....................................................17
MANAGEMENT OF THE FUND......................................................20
DESCRIPTION OF THE FUND.....................................................23
APPENDIX....................................................................24
APPLICATION & NEW ACCOUNT REGISTRATION......................................26
<PAGE>
the RODNEY SQUARE
STRATEGIC EQUITY
FUND
The Rodney Square Strategic Equity Fund (the "Fund"), an open-end management
investment company, consists of four separate portfolios (the "Portfolios"): the
Large Cap Growth Equity Portfolio, the Large Cap Value Equity Portfolio, the
Small Cap Equity Portfolio and the International Equity Portfolio. The Large Cap
Growth Equity Portfolio seeks superior long-term growth of capital by investing
principally in large cap U.S. equity securities that are judged by the
Portfolio's adviser, Wilmington Trust Company ("WTC" or "Adviser"), to possess
strong growth characteristics. The Large Cap Value Equity Portfolio seeks
superior long-term growth of capital by investing in large cap U.S. equity
securities that are judged by WTC to be undervalued in the marketplace relative
to underlying profitability. The Small Cap Equity Portfolio seeks superior
long-term growth of capital by investing in small cap U.S. equity securities
that are judged by WTC to either possess strong growth characteristics or to be
undervalued in the marketplace relative to underlying profitability. The
International Equity Portfolio seeks superior long-term capital appreciation by
investing primarily in equity securities of issuers located outside the United
States. Shares of the portfolios are offered at net asset value without the
imposition of any front-end sales charge and are not subject to any Rule 12b-1
fees.
PROSPECTUS
JUNE 29, 1998
This Prospectus sets forth 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 June 29, 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 PORTFOLIOS 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>
<TABLE>
<CAPTION>
EXPENSE TABLE
Large Cap Large Cap Small Cap International
Growth Equity Value Equity Equity Equity
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS* None None None None
ANNUAL PORTFOLIO OPERATING EXPENSES**
(as a percentage of average net assets)
Advisory Fee (after waivers) ........... 0.55% 0.46% 0.48% 0.54%
12b-1 Fee .............................. 0.00% 0.00% 0.00% 0.00%
Other Expenses ......................... 0.20% 0.29% 0.32% 0.46%
---- ---- ---- ----
Total Operating Expenses (after waivers) 0.75% 0.75% 0.80% 1.00%
==== ==== ==== ====
EXAMPLE***
You would pay the following expenses on a $1,000 investment in each Portfolio
assuming a 5% annual return and redemption at the end of each time period:
One year ............................ $ 8 $ 8 $ 8 $ 10
Three years ......................... $ 24 $ 24 $ 26 $ 32
Five years .......................... $ 42 $ 42 $ 44 $ 55
Ten years ........................... $ 93 $ 93 $ 99 $122
</TABLE>
* WTC and/or Service Organizations may charge their clients a fee for
providing administrative or other services in connection with investments
in Fund shares. See "Purchase of Shares" for additional information.
** Because the Large Cap Value Equity Portfolio, the Small Cap Equity
Portfolio and the International Equity Portfolio had no operations prior to
the date of this Prospectus, expenses for those Portfolios are estimated
for their first year of operations, adjusted to reflect WTC's undertaking
to waive its advisory fees or reimburse expenses to the extent that the
Portfolios' expenses (excluding taxes, extraordinary expenses, brokerage
commissions and interest) exceed an annual rate of 0.75%, 0.80%, and 1.00%,
respectively, of each Portfolio's average daily net assets through April
1999. Without waivers, the Advisory Fees for the Large Cap Value Equity
Portfolio, the Small Cap Equity Portfolio and the International Equity
Portfolio would be 0.55%, 0.60% and 0.65%, respectively, of each
Portfolio's average daily net assets. Without waivers, Total Operating
Expenses for the Large Cap Value Equity Portfolio, the Small Cap Equity
Portfolio and the International Equity Portfolio are estimated to be 0.84%,
0.92% and 1.11%, respectively, of each Portfolio's average daily net
assets. With respect to the Large Cap Growth Equity Portfolio, expenses are
based on that Portfolio's expenses for its fiscal year ended December 31,
1997, adjusted to reflect its current advisory, administration, accounting
services and transfer agency fees, the termination of its Rule 12b-1 Plan,
and WTC's undertaking to waive its advisory fees or reimburse expenses to
the extent that the Portfolio's expenses (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.
*** The assumption in the Example of a 5% annual return is required by
regulations of the SEC and is applicable to all mutual funds. The assumed
5% annual return is not a prediction of, and does not represent, any
Portfolio's projected or actual performance.
2
<PAGE>
The purpose of the preceding table is solely to aid shareholders and
prospective investors in understanding the various expenses that investors in
the Portfolios 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.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected per share data and other performance
information for the Large Cap Growth Equity Portfolio throughout the following
periods derived from the audited financial statements of the Fund. It should be
read in conjunction with the Portfolio's audited financial statements and notes
thereto, appearing in the Fund's Annual Report to Shareholders for the fiscal
year ended December 31, 1997, which is included, together with the auditor's
unqualified report, as part of the Fund's Statement of Additional Information.
Effective February 23, 1998, WTC became the Adviser of the Large Cap Growth
Equity Portfolio. Prior to February 23, 1998, the Large Cap Growth Equity
Portfolio was managed by two or three different portfolio advisers selected by
Rodney Square Management Corporation ("RSMC"), the former manager and
administrator of the Portfolio, and the Fund. Also prior to February 23, 1998,
the Large Cap Growth Equity Portfolio sought to achieve its objective by
investing at least 65% of total assets in equity securities without regard to
the market capitalization of the issuers of such securities.
Information is not provided for the Large Cap Value Equity Portfolio, the Small
Cap Equity Portfolio and the International Equity Portfolio, as those Portfolios
had no operations prior to the date of this Prospectus.
<TABLE>
<CAPTION>
LARGE CAP GROWTH EQUITY PORTFOLIO
For the Fiscal 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 . (3.10) (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 December 31, 1996 was calculated using average shares outstanding.
+ Effective December 22, 1990, RSMC 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.
4
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PORTFOLIOS
The information provided in this section is qualified in its entirety by
reference to the more detailed information contained elsewhere in this
Prospectus.
WHAT ARE THE PORTFOLIOS' INVESTMENT OBJECTIVES AND PRIMARY INVESTMENT
POLICIES?
The Fund is an open-end, management investment company consisting of four
separate diversified portfolios: the Large Cap Growth Equity Portfolio, the
Large Cap Value Equity Portfolio, the Small Cap Equity Portfolio and the
International Equity Portfolio. The investment objectives and primary investment
policies of the Portfolios are as follows:
LARGE CAP GROWTH EQUITY PORTFOLIO. This Portfolio's investment objective is
to seek superior long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 85% of its total assets in large cap U.S. equity
securities that are judged by WTC to possess strong growth characteristics. (See
"Investment Objectives and Policies - Large Cap Growth Equity Portfolio.")
LARGE CAP VALUE EQUITY PORTFOLIO. This Portfolio's investment objective is to
seek superior long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 85% of its total assets in large cap U.S. equity
securities that are judged by WTC to be undervalued in the marketplace relative
to underlying profitability. (See "Investment Objectives and Policies - Large
Cap Value Equity Portfolio.")
SMALL CAP EQUITY PORTFOLIO. This Portfolio's investment objective is to seek
superior long-term growth of capital. The Portfolio seeks to achieve its
objective by investing at least 85% of its total assets in small cap U.S. equity
securities that are judged by WTC to either possess strong growth
characteristics or to be undervalued in the marketplace relative to underlying
profitability. (See "Investment Objectives and Policies - Small Cap Equity
Portfolio.")
INTERNATIONAL EQUITY PORTFOLIO. This Portfolio's investment objective is to
seek superior long-term capital appreciation. The Portfolio seeks to achieve its
objective by investing at least 85% of its total assets in equity securities of
issuers located outside the United States. (See "Investment Objectives and
Policies - International Equity Portfolio.")
WHAT ARE THE RISKS TO CONSIDER BEFORE INVESTING?
Investment in the Portfolios 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 Portfolios may engage in certain options, futures and (in the case of the
International Equity Portfolio only) foreign currency transactions. Such
transactions may involve certain risks, increase costs and diminish investment
performance.
In addition, in the case of the International Equity Portfolio, investing in
foreign securities also involves special risks such as greater volatility in
foreign securities markets, less extensive regulation of foreign brokers,
securities, markets and issuers, the possibility of delays in settlement in
foreign securities markets and possible expropriation, nationalization, currency
controls or confiscatory taxation. (See "Investment Objectives and Policies" and
"Risk Factors.")
Prior to the date of this Prospectus, the Large Cap Value Equity Portfolio,
the Small Cap Equity Portfolio and the International Equity Portfolio had no
operations. Prior to February 23, 1998, WTC was not the adviser to the Large Cap
Growth Equity Portfolio.
HOW CAN YOU BENEFIT BY INVESTING IN THE PORTFOLIOS RATHER THAN BY INVESTING
DIRECTLY IN THE SECURITIES HELD BY THOSE PORTFOLIOS?
Investing in the Portfolios offers two key benefits:
FIRST: Each Portfolio offers a way to keep money invested in a professionally
managed portfolio of securities and, at the same time, to maintain daily
liquidity. The Portfolios also offer a way for investors to diversify their
5
<PAGE>
investment portfolios by participating in pooled funds of large cap or small cap
U.S. equity securities or equity securities of issuers located outside the
United States. There are no minimum periods for investment in the Portfolios,
and no fees will be charged at the time of purchase or redemption.
SECOND: Investors in a Portfolio need not become involved with the detailed
bookkeeping and operating procedures normally associated with direct investment
in the securities held by the Portfolios.
WHO IS THE INVESTMENT ADVISER?
Wilmington Trust Company ("WTC"), is the investment adviser to the
Portfolios. As part of its responsibilities, WTC recommends sub-advisers for the
direct management of the International Equity Portfolio, allocates assets among
those sub-advisers, and monitors and evaluates the sub-advisers' performance.
(See "Management of the Fund.")
WHO ARE THE SUB-ADVISERS OF THE INTERNATIONAL EQUITY PORTFOLIO?
The three sub-advisers are:
Clemente Capital, Inc.
Invista Capital Management, Inc.
Scudder Kemper Investments, Inc.
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING AGENT FOR THE FUND?
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.")
WHO IS THE FUND'S DISTRIBUTOR?
Rodney Square Distributors, Inc. ("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 PORTFOLIOS?
Each Portfolio is designed as an investment vehicle for individual investors,
corporations and other institutional investors. Shares of each Portfolio 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 per Portfolio, but additional
investments may be made in any amount.
Shares of each 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 Portfolios or for assistance in opening
an account.
- --------------------------------------------------------------------------------
o NATIONWIDE ......................... (800) 336-9970
- --------------------------------------------------------------------------------
HOW DO YOU REDEEM SHARES OF THE PORTFOLIOS?
If you purchased shares of a 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.")
6
<PAGE>
HOW ARE DIVIDENDS AND OTHER DISTRIBUTIONS PAID?
Distributions of net investment income and net realized capital gains, if
any, and, in the case of the International Equity Portfolio, net realized gains
from foreign currency transactions, if any, are made annually, near the end of
the calendar year. 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, Other Distributions and Taxes.")
ARE EXCHANGE PRIVILEGES AVAILABLE?
You may exchange all or a portion of your Portfolio shares for shares of
another Portfolio or for shares of any of the other funds in the Rodney Square
complex, subject to certain conditions. (See "Exchange of Shares.")
INVESTMENT OBJECTIVES AND POLICIES
LARGE CAP GROWTH EQUITY PORTFOLIO
The Large Cap Growth Equity 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. 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), which is formed by assigning a style composite
score to all of the companies in the Russell 1000 Index, a passive index that
includes the largest 1000 stocks in the U.S. as measured by market
capitalization, to determine their growth or value characteristics.
Approximately 70% of those stocks are placed in either the Growth or Value
Index. The remaining stocks are placed in both indexes with a weight
proportional to their growth or value characteristics. On its annual rebalancing
date of May 31, 1997, the smallest stock in the Russell 1000 Index had a market
cap of approximately $1.1 billion.
At all times, at least 85% of the Portfolio's total assets will be
invested in the following equity (or related) securities:
o common stocks 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;
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. (See "Appendix.")
LARGE CAP VALUE EQUITY PORTFOLIO
The Large Cap Value Equity 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. 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 Value Index (assuming the reinvestment of dividends
and capital gain distributions), which is formed by assigning a style composite
score to all of the companies in the Russell 1000 Index, a passive index that
includes the largest 1000 stocks in the U.S. as measured by market
capitalization, to determine their growth or value characteristics.
Approximately 70% of the stocks are placed in either the Growth or Value Index.
The remaining stocks are placed in both indexes with a weigh proportional to
their growth or value characteristics. On its annual rebalancing date of May 31,
1997, the smallest stock in the Russell 1000 Index had a market cap of
approximately $1.1 billion.
7
<PAGE>
At all times, at least 85% of the Portfolio's total assets will be
invested in the following equity (or related) securities:
o common stocks 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 be undervalued
in the marketplace relative to underlying profitability;
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. (See "Appendix.")
SMALL CAP EQUITY PORTFOLIO
The Small Cap Equity 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 small cap U.S. equity (or related) securities. 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 2000 Index (assuming the reinvestment of dividends and
capital gain distributions), a passive index that includes the smallest 2000
stocks in the Russell 3000 Index of the 3000 largest stocks in the U.S. as
measured by market capitalization. On its annual rebalancing date of May 31,
1997, the largest stock in the Russell 2000 Index had a market cap of
approximately $1.1 billion.
The Adviser delegates investment management responsibilities for the
Portfolio to two different portfolio management teams - one value-oriented and
the other growth-oriented - to achieve the Portfolio's objective.
At all times, at least 85% of the Portfolio's total assets will be
invested in the following equity (or related) securities:
o common stocks of U.S. corporations with a market capitalization at time
of purchase equal to or less than that of the largest stock in the
Russell 2000 Index and that are judged by the Adviser to possess strong
growth characteristics or to be undervalued in the marketplace relative
to underlying profitability;
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. (See "Appendix.")
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks superior long-term capital
appreciation. 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 equity securities (including convertible
securities) of issuers located outside the United States. 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
Morgan Stanley Capital International Europe, Australasia & Far East Index
(assuming the reinvestment of dividends and capital gain distributions), an
unmanaged index representing the market value-weighted price of stocks of
approximately 1100 companies screened for liquidity, cross-ownership, and
industry representation and listed on major stock exchanges in Europe,
Australasia and the Far East.
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Under normal conditions, at least 85% of the Portfolio's total assets will
be invested in common stocks of foreign issuers, preferred stocks and/or debt
securities that are convertible securities of such issuers, and open- or
closed-end investment companies that invest primarily in the equity securities
of issuers in countries where it is impossible or impractical to invest
directly. The Portfolio may also invest up to 15% of its total assets in
non-convertible debt securities issued by foreign governments, international
agencies and private foreign issuers that, at the time of purchase, are rated A
or better by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P"), or, if not rated, are
judged by the Adviser or one or more of the sub-advisers to be of comparable
quality. The Portfolio may use forward currency contracts, options, futures
contracts and options on futures contracts to attempt to hedge actual or
anticipated investment security positions. (See "Appendix.")
MULTIPLE ADVISER TECHNIQUE. The assets of the International Equity
Portfolio are managed by three sub-advisers, each of which has entered into a
separate agreement with WTC for the provision of investment advisory services to
the Portfolio. Subject to the receipt of an exemptive order from the SEC, WTC
may enter into new or modified advisory agreements with existing or new
sub-advisers without the approval of Portfolio shareholders, but subject to
approval of the Board of Trustees of the Fund. The allocation of assets among
the Portfolio's sub-advisers is made by WTC, and each sub-adviser makes specific
investments for the portion of the assets under its management. Each sub-adviser
uses its own investment approach and investment strategies to achieve the
Portfolio's objective. It is anticipated that the allocation among the
sub-advisers will be roughly equal and that no sub-adviser will be asked to
focus its investments on a particular region or sector.
The primary objective of the multiple adviser structure is to reduce
portfolio volatility through multiple investment approaches, a strategy used by
many institutional investors. For example, a particular investment approach may
be successful in a bear (falling) market, while a different approach may be more
successful in a bull (rising) market. The use of multiple investment approaches
consistent with the investment objective and policies of the International
Equity Portfolio is designed to mitigate the impact of a single sub-adviser's
performance in the market cycle during which such sub-adviser's approach is less
successful. Because the sub-advisers' different investment approaches make it
unlikely that there will be significant overlap in the securities selected by
any of the sub-advisers at any given point in time, the performance of one or
more of the sub-advisers is expected to offset the impact of any other
sub-adviser's relatively adverse results. Conversely, the successful results of
a sub-adviser will be dampened by less successful results of the other
sub-advisers. There can be no assurance that the expected advantages of the
multiple adviser technique will be realized.
ALL PORTFOLIOS
CASH MANAGEMENT. With respect to not more than 15% of a Portfolio's total
assets, the Adviser may hold cash and cash equivalents including high-quality
money market instruments and investment companies that seek to maintain a stable
net asset value (money market funds) in order to manage cash flow in the
Portfolio. Such securities may include bank obligations, commercial paper, 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.
OTHER INVESTMENTS AND INVESTMENT STRATEGIES. As a matter of fundamental
policy, each Portfolio may also borrow money for temporary or emergency
purposes, in an aggregate amount not exceeding 10% of its total assets. As a
matter of non-fundamental policy, however, no Portfolio will purchase securities
while borrowings in excess of 5% of the Portfolio's total assets are
outstanding. In addition, certain of the securities purchased by the Portfolios
may be considered illiquid. For further information about the Portfolios'
investments and investment strategies, see the Appendix to this Prospectus and
the Statement of Additional Information.
PORTFOLIO TURNOVER. The frequency of portfolio transactions and a 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 Large Cap Growth
Equity 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
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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. The
portfolio turnover rate for the other Portfolios is expected to be less than
100%. (See "Dividends, Other Distributions and Taxes.")
OTHER INFORMATION. Each 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. Additional fundamental and non-fundamental
investment policies are described in the Appendix to this Prospectus and in the
Statement of Additional Information.
RISK FACTORS
GROWTH-ORIENTED INVESTING. Because the Large Cap Growth Equity Portfolio and
the growth portion of the Small Cap Equity Portfolio will be invested in
growth-oriented companies, the volatility of these Portfolios 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 in the company,
and pay out less to shareholders in the form of current dividends. As a result,
growth investors tend to receive most of their return in the form of capital
appreciation. This tends to make growth company securities more volatile than
the market as a whole. In addition, there can be no assurance that growth within
a particular company will continue to occur.
VALUE-ORIENTED INVESTING. Even though the Large Cap Value Equity Portfolio
and the value portion of the Small Cap Equity Portfolio will be invested in
companies whose securities are believed to be undervalued relative to their
underlying profitability, there can be no assurance that the shares of the
companies selected for these Portfolios will appreciate in value. In addition,
although an investment in the shares of undervalued companies may provide some
protection from market declines, even the shares of comparatively undervalued
companies typically fall in price during broad market declines.
SMALL CAP COMPANIES. The Small Cap Equity Portfolio will invest principally
in securities of small cap companies. Small cap companies may be more vulnerable
than larger companies to adverse business or economic developments. Small cap
companies may also have limited product lines, markets or financial resources,
may be dependent on relatively small or inexperienced management groups, and may
operate in industries characterized by rapid technological obsolescence.
Securities of such companies may be less liquid and more volatile than
securities of larger companies and therefore may involve greater risk than
investing in larger companies. In addition, small cap companies may not be well
known to the investing public, may not have institutional ownership and may have
only cyclical, static or moderate growth prospects.
FOREIGN SECURITIES. The International Equity Portfolio will invest
principally in securities of foreign issuers. Investing in foreign securities
involves risks and considerations not normally associated with investing in U.S.
markets. For example, most of the securities held by the International Equity
Portfolio are not registered with the SEC, nor are most of the issuers of such
securities subject to SEC reporting requirements. Other considerations and risks
include the potential of expropriation, nationalization, currency controls,
confiscatory taxation, withholding taxes on dividends and interest, less
extensive regulation of foreign brokers, securities markets and issuers, less
publicly available information, different accounting standards, non-negotiable
brokerage commissions, costs incurred in conversions between currencies, lower
trading volume and greater volatility, the possibility of delays in settlement
in foreign securities markets, limitations on the use or transfer of assets
(including suspension of the ability to transfer currency from a given country),
the difficulty of enforcing obligations in other countries, and adverse
economic, diplomatic, political or social developments. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. To the
extent the International Equity Portfolio invests substantially in issuers
located in one country, such investments may be subject to greater risk in the
event of political or social instability or adverse economic developments
affecting that country. While the International Equity Portfolio invests
predominantly in securities that are regularly traded on recognized exchanges or
in over-the-counter markets, from time to time foreign securities may be
difficult to liquidate rapidly without significantly depressing the price of
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those securities. The costs attributable to foreign investing are frequently
higher than those attributable to domestic investing. For example, the costs of
maintaining assets outside the United States exceed the costs of maintaining
assets with a U.S. custodian.
The International Equity Portfolio may invest in securities of issuers
located in emerging market countries. The risks of investing in foreign
securities may be with respect to securities of issuers in, or denominated in
the currencies of, emerging market countries. The economies of emerging market
countries generally have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade. In addition to the risks of their generally less stable political,
social and economic conditions, emerging market countries also have been and may
continue to be adversely affected by economic conditions in the countries with
which they trade. Emerging market countries also have been and may continue to
be adversely affected by economic conditions in the countries with which they
trade. The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the United States and other developed countries. Disclosure and
regulatory standards in many respects are less stringent in emerging market
countries than in the United States and other major markets. There also may be a
lower level of monitoring and regulation of emerging markets and the activities
of investors in such markets, and enforcement of existing regulations may be
extremely limited. Investing in local markets, particularly in emerging market
countries, may require the International Equity Portfolio to adopt special
procedures, seek local government approvals or take other actions, each of which
may involve additional costs to the International Equity Portfolio and may delay
the Portfolio's ability to purchase or sell securities. Certain emerging market
countries may also restrict investment opportunities in issuers in industries
deemed important to national interests.
FOREIGN CURRENCY. Because foreign securities ordinarily are denominated in
foreign currencies, changes in foreign currency exchange rates affect the
International Equity Portfolio's net asset value, the value of dividends and
interest earned, gains and losses realized on the sale of portfolio securities,
and net investment income and capital gains, if any, to be distributed to
shareholders. In other words, if the value of a foreign currency declines
against the U.S. dollar, the value of assets quoted in such currency will
decrease, and conversely, if the value of foreign currency rises against the
U.S. dollar, the value of assets quoted in such currency will increase. The rate
of exchange between the U.S. dollar and other currencies is determined by
various factors, including supply and demand in the foreign exchange markets,
international balance of payments, governmental intervention and speculation,
and other political and economic conditions.
NO TEMPORARY DEFENSIVE INVESTMENT POLICY. Unlike many other mutual funds, the
Portfolios do not reserve authority to depart from their primary investment
policies, even during declining markets, to temporarily pursue defensive
investment policies in an effort to preserve their capital. Instead, each
Portfolio will adhere to a policy of investing not less than 85% of its total
assets in 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
Portfolios.
DEBT SECURITIES. The Portfolios' 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 Portfolios 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 or S&P, or, if
unrated, are determined by the Adviser or sub-adviser, as applicable, to be of
comparable quality. In addition, the International Equity Portfolio may invest
in non-convertible debt securities issued by foreign governments, international
agencies, and private foreign issuers that, at the time of purchase, are rated A
or better by Moody's or S&P, or, if not rated, are judged by the Adviser or one
or more of the sub-advisers 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 a Portfolio's purchase of the security, the Adviser or sub-adviser, as
applicable, will determine whether it is in the best interests of the Portfolio
to retain the security.
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OPTIONS AND FUTURES. The use of forward currency contracts, options and
futures involves certain investment risks and transaction costs. These risks
include: dependence on WTC's and the sub-advisers' 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 currency, options, futures
contracts or related options and movements in the price of the currency or
security hedged or used for cover; the fact that skills and techniques needed to
trade options, futures contracts and related options or to use forward currency
contracts are different from those needed to select the securities in which the
Portfolios invest; and lack of assurance that a liquid secondary market will
exist for any particular option, futures contract or related option at any
particular time.
YEAR 2000 ISSUE. Like other mutual funds, financial and business
organizations and individuals around the world, the Portfolios could be
adversely affected if the computer systems used by WTC, the sub-advisers and the
Portfolios' other service providers do not properly process and calculate
date-related information and data after January 1, 2000. This is commonly known
as the "Year 2000 Problem." WTC is taking steps that it believes are reasonably
designed to address the Year 2000 Problem with respect to the computer systems
that it uses, and to obtain assurances that comparable steps are being taken by
the Portfolios' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse impact
on the Portfolios.
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 Portfolio you have selected, 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 8951, 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, Suite 108, 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#
031-0000-53, attention: The Rodney Square Strategic Equity Fund, DDA#
86-0172-6591, further credit-your account number, the name of the selected
Portfolio 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 the 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.
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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 Portfolios 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.
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.
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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, that is a participant 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 8951, 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, Suite 108, 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 for
transmitting redemption orders and crediting their customers' accounts with
redemption proceeds on a timely basis.
Redemption checks are normally mailed or wired on the next Business Day of
the Fund after receipt and acceptance by PFPC 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
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 of a Portfolio 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
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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 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.
EXCHANGE OF SHARES
EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may exchange all or a portion of
your shares in a Portfolio for shares of another Portfolio or 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:
SHORT/INTERMEDIATE BOND PORTFOLIO, which seeks high total return,
consistent with high current income, by investing principally in various
types of investment grade fixed-income securities of a short/intermediate
duration.
INTERMEDIATE BOND PORTFOLIO, which seeks high total return, consistent
with high current income, by investing principally in various types of
investment grade fixed-income securities of an intermediate duration.
MUNICIPAL BOND 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 Tax-Exempt Fund and the two
portfolios of The Rodney Square Fund are determined at 12:00 noon, Eastern time,
on each Business Day of the Fund. The net asset values per share of the
Portfolios and the Rodney Square Strategic Fixed-Income Fund portfolios are
determined at the close of regular trading on the Exchange (currently 4:00 p.m.,
Eastern time), on each Business Day.
Exchange transactions will be subject to the minimum initial investment and
other requirements of the 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
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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 each 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 each Portfolio
is calculated by dividing the total current market value of all of a Portfolio's
assets, less all its liabilities, by the total number of the Portfolio's shares
outstanding.
The Portfolios value their assets based on their current market prices when
market quotations are readily available. Any assets held by a Portfolio that are
denominated in foreign currencies or that are traded on foreign exchanges are
valued daily in U.S. dollars at the foreign currency exchange rates prevailing
at the time PFPC determines the daily net asset value per share. Securities that
do not have a readily available current market value, are valued in good faith
by or under the direction of the Fund's Board of Trustees
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
DIVIDENDS AND OTHER DISTRIBUTIONS. Dividends from each Portfolio's net
investment income and distributions of (1) net short-term capital gain and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), if any, realized by each Portfolio, after deducting any available
capital loss carryovers, and (2) (in the case of the International Equity
Portfolio only) net gains realized from foreign currency transactions are paid
to its shareholders annually, near the end of each calendar year.
Each dividend and other distribution is payable to shareholders of a
Portfolio who redeem, but not to shareholders who purchase, shares of the
Portfolio on the ex-distribution date. Dividends and other distributions paid by
each Portfolio are automatically reinvested in additional shares of the
Portfolio on the payment date at their current net asset value unless the
shareholder elects to receive distributions in cash, in the form of a check, by
checking the appropriate boxes on the Application & New Account Registration
form accompanying this Prospectus.
TAXES. Each Portfolio intends to qualify (or, in the case of the Large Cap
Growth Equity Portfolio, to continue to qualify) for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended ("Code"),
so that it will be relieved of federal income tax on the portion of its
investment company taxable income (generally consisting of net investment income
and net short-term capital gain and, in the case of the International Equity
Portfolio, net realized gains from certain foreign currency transactions, if
any) and net capital gain that it distributes to its shareholders.
Dividends from each 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 of a 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 noncorporate 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 one year but not
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 18 months. Each
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. Investors
should be aware that if Portfolio shares are purchased shortly before the record
date for any dividend or capital gain distribution, they will pay full price for
the shares and will receive some portion of the price back as a taxable
distribution.
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Shortly after the end of each calendar year, each 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.
Each Portfolio is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Portfolio with a
certified taxpayer identification number. Each Portfolio also is required to
withhold 31% of all dividends and capital gain distributions payable to those
shareholders who otherwise are subject to backup withholding. In connection with
this withholding requirement, unless an investor has indicated that he or she is
subject to backup withholding, the investor must certify on the Application that
the Social Security or other taxpayer identification number provided thereon is
correct and that the investor is not otherwise subject to backup withholding.
A redemption of Portfolio shares may result in taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares. Similar tax
consequences generally will result from an exchange of shares of one Portfolio
for shares of another Portfolio or another fund in the Rodney Square complex.
(See "Exchange of Shares.") In addition, if shares of a Portfolio are purchased
within 30 days of redeeming other shares of that Portfolio at a loss, that loss
will not be deductible to the extent of the amount reinvested, and an adjustment
in that amount will be made to the shareholder's basis for the newly purchased
shares.
The foregoing is only a summary of some important federal income tax
considerations generally affecting the Portfolios and their shareholders; a
further discussion appears in the Statement of Additional Information. In
addition to these considerations, which are applicable to any investment in the
Portfolios, there may be other federal, state or local tax considerations
applicable to a particular investor, and any shareholders who are non-resident
alien individuals, or foreign corporations, partnerships, trusts or estates, may
be subject to different federal income tax treatment than that summarized above.
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
All performance information advertised by each Portfolio is based on
historical information, shows the performance of a hypothetical investment and
is not intended to indicate and is no guarantee of future performance. Unlike
some bank deposits or other investments which pay a fixed yield for a stated
period of time, a Portfolio's total return and net asset valued will vary
depending upon, among other things, changes in market conditions and the level
of the Portfolio's operating expenses. The Fund's annual report to shareholders
contains additional performance information. The annual report is available upon
request and free of charge.
TOTAL RETURN. From time to time, quotations of each 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 the
Portfolio has not been in operation for those time periods, the life of the
Portfolio will be used where applicable. Standardized Return assumes that all
dividends and other distributions were reinvested in additional shares of the
Portfolio.
In addition, each 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
other distributions. Non-Standardized Return may be quoted for the same or
different periods as those for which Standardized Return is quoted.
A Portfolio's Return (Standardized and Non-Standardized) is increased to the
extent that WTC or RSMC has waived all or a portion of its fees, or reimbursed
all or a portion of the Portfolio's expenses. Returns (Standardized and
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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.
LARGE CAP VALUE EQUITY PORTFOLIO. The Large Cap Value Equity Portfolio
commenced operations on June __, 1998 following the transfer of assets by the
Value Stock Fund, a collective investment fund, to the Portfolio in exchange for
shares of the Portfolio. The Large Cap Value Equity Portfolio's investments on
June __, 1998 were the same as those of the Value Stock Fund immediately prior
to the transfer.
The Value Stock Fund was not a registered investment company because it was
exempt from registration under the 1940 Act. Because, in a practical sense, the
Value Stock Fund constitutes a "predecessor" of the Large Cap Value Equity
Portfolio, the Portfolio calculates its performance by including the Value Stock
Fund's total return, adjusted to reflect the deduction of annual fees and
expenses applicable to shares of the Portfolio as stated in the Fee Table in
this Prospectus (i.e., adjusted to reflect anticipated expenses, absent
investment advisory fee waivers).
The Large Cap Value Equity Portfolio from time to time may advertise certain
investment performance figures, as discussed below. These figures are based on
historical information and are not intended to indicate, predict or guarantee
future performance of the Large Cap Value Equity Portfolio.
PERFORMANCE INFORMATION REGARDING THE
VALUE STOCK FUND, A COLLECTIVE INVESTMENT FUND
AVERAGE ANNUAL TOTAL RETURN*
1 year 3 years 5 years Since 12/91**
------ --------- ------- -----------
36.14% 27.69% 18.95% 13.18%
- ---------------
* Figures were calculated pursuant to a methodology established by the SEC. The
total return figures are as of March 31, 1998.
** The Value Stock Fund was organized in 1987, but was operated as a
"multi-manager" fund by WTC and two other unaffiliated sub-advisors prior to
December 1991. As of December 1991, WTC became the sole adviser of the fund.
The above-quoted performance data is the performance of the Value Stock
Fund for the period before the Large Cap Value Equity Portfolio commenced
operations, adjusted to reflect the annual deduction of fees and expenses
applicable to shares of the Portfolio (i.e., adjusted to reflect anticipated
expenses, absent investment advisory fee waivers). The Value Stock Fund was not
registered under the 1940 Act and therefore was not subject to certain
investment restrictions, limitations and diversification requirements imposed by
the 1940 Act and the Code. If the Value Stock Fund had been registered under the
1940 Act, its performance may have been different. The investment objective,
restrictions and strategies of the Large Cap Value Equity Portfolio are
substantially similar to those followed by the Value Stock Fund since December
1991, although the Value Stock Fund invested in common stocks of issuers with
medium-to-large market values ($500 million to over $10 billion).
Notwithstanding such differences, WTC believes that the investment objective,
restrictions and strategies of the Large Cap Value Equity Portfolio are
substantially similar to those of the Value Stock Fund. The portfolio managers
of the Large Cap Value Equity Portfolio also managed the Value Stock Fund from
December 1991 to the June __, 1998 transfer of assets.
SMALL CAP EQUITY PORTFOLIO. The Small Cap Equity Portfolio commenced
operations on June 29, 1998 following the transfer of assets by the Small Cap
Stock Fund, a collective investment fund, to the Portfolio in exchange for
shares of the Portfolio. The Small Cap Equity Portfolio's investments on June
29, 1998 were the same as those of the Small Cap Stock Fund immediately prior to
the transfer.
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The Small Cap Stock Fund was not a registered investment company as it was
exempt from registration under the 1940 Act. Because, in a practical sense, the
Small Cap Stock Fund constitutes a "predecessor" of Small Cap Equity Portfolio,
the Portfolio calculates is performance by including Small Cap Stock Fund's
total return, adjusted to reflect the annual deduction of fees and expenses
applicable to shares of the Portfolio as stated in the Fee Table in this
Prospectus (i.e., adjusted to reflect anticipated expenses, absent investment
advisory fee waivers).
The Small Cap Equity Portfolio from time to time may advertise certain
investment performance figures, as discussed below. These figures are based on
historical information and are not intended to indicate, predict or guarantee
future performance of the Small Cap Equity Portfolio.
PERFORMANCE INFORMATION REGARDING THE
SMALL CAP STOCK FUND, A COLLECTIVE INVESTMENT FUND
Average Annual Total Return*
Since 4/97**
50.69%
- --------------
* Figures were calculated pursuant to a methodology established by the SEC. The
total figures are as of March 31, 1998.
** The Small Cap Stock Fund's inception date was October 1991. Prior to April
1997 the fund was managed by an investment adviser unaffiliated with WTC, which
invested primarily in growth-oriented small cap companies with market
capitalizations of $500 million or less at time of purchase. As of April 1997,
WTC assumed management of the Fund and assigned management responsibility to two
different WTC portfolio management teams - one value-oriented and the other
growth-oriented.
The above-quoted performance data is the performance of the Small Cap
Stock Fund for the period before the Small Cap Equity Portfolio commenced
operations, adjusted to reflect the annual deduction of fees and expenses
applicable to shares of the Portfolio (i.e., adjusted to reflect anticipated
expenses, absent investment advisory fee waivers). The Small Cap Stock Fund was
not registered under the 1940 Act and therefore was not subject to certain
investment restrictions, limitations and diversification requirements imposed by
the 1940 Act and the Code. If the Small Cap Stock Fund had been registered under
the 1940 Act, its performance may have been different. The investment objective,
restrictions and strategies of the Small Cap Equity Portfolio are substantially
similar to those followed by the Small Cap Stock Fund since April 1997, and the
portfolio managers of the Small Cap Equity Portfolio also managed the Small Cap
Stock Fund from April 1997 to the June 29, 1998 transfer of assets.
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio
commenced operations on June 29, 1998 following the transfer of assets by the
International Stock Fund, a collective investment fund, to the Portfolio in
exchange for shares of the Portfolio. The International Equity Portfolio's
investments on June 29, 1998 were the same as those of the International Stock
Fund immediately prior to the transfer.
The International Stock Fund was not a registered investment company
because it was exempt from registration under the 1940 Act. Because, in a
practical sense, the International Stock Fund constitutes a "predecessor" of the
International Equity Portfolio, the Portfolio calculates its performance by
including the International Stock Fund's total return, adjusted to reflect the
annual deduction of fees and expenses applicable to shares of the Portfolio as
stated in the Fee Table in this Prospectus (i.e., adjusted to reflect
anticipated expenses, absent investment advisory fee waivers).
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<PAGE>
The International Equity Portfolio from time to time may advertise certain
investment performance figures, as discussed below. These figures are based on
historical information and are not intended to indicate, predict or guarantee
future performance of the International Equity Portfolio.
PERFORMANCE INFORMATION REGARDING THE
INTERNATIONAL STOCK FUND, A COLLECTIVE INVESTMENT FUND
AVERAGE ANNUAL TOTAL RETURN*
1 year 3 years 5 years 10 years
------ ------- ------- --------
18.53% 12.76% 12.66% 10.34%
- ----------------------
* Figures were calculated pursuant to a methodology established by the SEC. The
total return figures are as of March 31, 1998.
The above-quoted performance data is the performance of the International
Stock Fund for the period before the International Equity Portfolio commenced
operations, adjusted to reflect the annual deduction of fees and expenses
applicable to shares of the Portfolio (i.e., adjusted to reflect anticipated
expenses, absent investment advisory fee waivers). The International Stock Fund
was not registered under the 1940 Act and therefore was not subject to certain
investment restrictions, limitations and diversification requirements imposed by
the 1940 Act and the Code. If the International Stock Fund had been registered
under the 1940 Act, its performance may have been different. The investment
objective, restrictions and strategies of the International Equity Portfolio are
substantially similar to those followed by the International Stock Fund since
the latter's inception. Two of the three sub-advisers of the International
Equity Portfolio (Scudder Kemper Investments, Inc. and Clemente Capital, Inc.)
were also sub-advisers of the International Stock Fund since inception. The
third sub-adviser (Invista Capital Management, Inc.) assumed its
responsibilities in February 1998.
MANAGEMENT OF THE FUND
The Fund's 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 Portfolios and their shareholders.
INVESTMENT ADVISER. WTC, a wholly owned subsidiary of Wilmington Trust
Corporation, a publicly held bank-holding company, is the Investment Adviser of
the Portfolios.. Under Advisory Agreements with the Fund, WTC, subject to the
supervision of the Board of Trustees, directs the investments of each Portfolio
in accordance with its investment objective, policies and limitations. In
addition to serving as Investment Adviser for the Portfolios, WTC is engaged in
a variety of investment advisory activities, including the management of other
mutual funds and collective investment pools.
Under the Advisory Agreements, the Large Cap Growth Equity Portfolio and the
Large Cap Value Equity Portfolio each pays a monthly advisory fee to WTC at the
annual rate of 0.55% of the average daily net assets of the Portfolio; the Small
Cap Equity Portfolio pays a monthly advisory fee to WTC at the annual rate of
0.60% of the average daily net assets of the Portfolio; and the International
Equity Portfolio pays a monthly advisory fee to WTC at the annual rate of 0.65%
of the average daily net assets of the Portfolio. WTC has agreed to waive its
fees or reimburse each Portfolio monthly to the extent that expenses of the
Portfolio (excluding taxes, extraordinary expenses, brokerage commissions and
interest) exceed an annual rate of 0.75% of the average daily net assets of the
Large Cap Growth Equity Portfolio and the Large Cap Value Equity Portfolio,
0.80% of the average daily net assets of the Small Cap Equity Portfolio, and
1.00% of the average daily net assets of the International Equity Portfolio
through April 1999.
A "growth" team led by E. Matthew Brown, Vice President, is responsible for
the day-to-day management of the Large Cap Growth Equity Portfolio and the
growth portion of the Small Cap Equity 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
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for Delaware Trust Capital Management from 1990 through 1993. A "value" team led
by Grace Messner is responsible for the day-to-day management of the Large Cap
Value Equity Portfolio and the value portion of the Small Cap Equity Portfolio.
Ms. Messner, a chartered financial analyst, joined WTC's investment group in
1972 and has worked at various times as an equity analyst, fixed income manager,
Director of Equity Research, and head of Equity Management. She currently
manages WTC's Value Equity Division and is a member of the Investment Policy
Committee. With respect to the International Equity Portfolio, Robert J.
Christian, Chief Investment Officer of WTC, or his delegate, is primarily
responsible for monitoring the day-to-day investment activities of the
sub-advisers to the Portfolio. Mr. Christian has been a Director of RSMC since
February 1996, and 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 and Director of Provident Capital Management from 1993 to 1996.
SUB-ADVISERS OF THE INTERNATIONAL EQUITY PORTFOLIO. WTC has hired three
sub-advisers who specialize in international investing strategies to manage the
Portfolio's assets on a day-to-day basis. Each sub-adviser makes specific
portfolio investments for that segment of the assets of the Portfolio under its
management in accordance with the Portfolio's investment objective and policies
and the sub-adviser's investment approach and strategies. A sub-adviser may
direct Portfolio transactions to a broker that is an affiliate of a sub-adviser.
The sub-advisers of the Portfolio are listed and described below.
Selection and retention criteria for sub-advisers include: (1) their
historical performance records; (2) an investment approach that is distinct in
relation to the approaches of each of the Portfolio's other sub-advisers; (3)
consistent performance in the context of the markets and preservation of capital
in declining markets; (4) organizational stability and reputation; (5) the
quality and depth of investment personnel; and (6) the ability of the
sub-adviser to apply its approach consistently. Each sub-adviser will not
necessarily exhibit all of the criteria to the same degree. WTC (not the Fund)
pays each sub-adviser a monthly portfolio management fee at the annual rate of
0.50% of the average daily net assets under the sub-adviser's management during
the month.
The Fund intends to seek an exemptive order from the SEC that would permit
the Fund's Board of Trustees, without the approval of shareholders: (a) to
employ a new sub-adviser pursuant to the terms of a new sub-advisory agreement,
either as a replacement for an existing sub-adviser or as an additional
sub-adviser; (b) to change the terms of a sub-advisory agreement; and (c) to
continue the employment of an existing sub-adviser on the same advisory contract
terms where a contract has been assigned because of a change in control of the
sub-adviser. Shareholders would receive notice of such action, including the
information concerning the sub-adviser that normally is provided in the
Prospectus.
The sub-advisers of the International Equity Portfolio are as follows:
CLEMENTE CAPITAL, INC.
Carnegie Hall Tower
152 West 57th Street, 25th Floor
New York, New York 10019
Clemente Capital, Inc. ("Clemente") was founded in 1976 as a Far East
economic and business consultant, and in 1979, registered as an investment
adviser. Since 1986, Clemente has focused on managing money with a global
emphasis. Lilia C. Clemente is Chairman, Chief Executive Officer and controlling
shareholder of Clemente. WTC is a creditor of Clemente and owns approximately
24% of its common stock.
Clemente performs active global and international investment management
services for individual and institutional clients including two U.S. registered
investment companies: The Clemente Global Growth Fund and The First Philippine
Fund. As of February 28, 1998, Clemente managed in excess of $500 million in
assets. Clemente's investment approach begins with a global outlook and
identifies the major forces affecting the global environment. Clemente then
identifies the themes that are responding to global factors. The third step
involves the decision of which country or sector will benefit from the themes.
Finally, Clemente seeks companies with favorable growth characteristics in such
countries and sectors. Leopoldo M. Clemente, President and Chief Investment
Officer, and Thomas J. Prapas, Director of Portfolio Management serve as
portfolio managers for that portion of the Portfolio's assets under Clemente's
management. Mr. Clemente has been responsible for portfolio management and
security selection for the past eight years, and Mr. Prapas has been a portfolio
manager with Clemente for the past eleven years.
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INVISTA CAPITAL MANAGEMENT, INC.
1800 Hub Tower
699 Walnut Street
Des Moines, Iowa 50309
Invista Capital Management, Inc. ("Invista") is a registered investment
adviser that was organized in 1984 and is an indirect, wholly owned subsidiary
of Principal Mutual Life Insurance Company.
As of February 28, 1998, Invista managed in excess $26 billion in assets. As
of that date, Invista managed approximately $3.8 billion in foreign equities in
separately managed accounts and mutual funds for public funds, corporations,
endowments and foundations, insurance companies, and individuals.
Invista's investment philosophy is based on estimating the true economic
value of a company and purchasing the stock at a discount to this intrinsic
value. Intrinsic value is driven by the company's current and future competitive
prospects as captured in an estimate of long-term free cash flow, which is
compared to the current price. Invista takes a long-term, value-oriented
approach to investing and recognizes the importance of growth to future
investment objectives. Whether investing in developed or emerging markets,
Invista uses a borderless valuation comparison method that evaluates similar
companies within particular industries or sectors rather than within a single
country. Invista's utilization of a bottom-up process is aimed at identifying
the best investment opportunities in the world, regardless of location. Scott D.
Opsal, CFA, Executive Vice President and lead portfolio manager of international
equities for Invista, is the portfolio manager for the portion of the
Portfolio's assets under Invista's management. Mr. Opsal joined Invista at its
inception in 1985, and assumed his current responsibilities in 1993. His
previous responsibilities include security analysis and portfolio management
activities for various U.S. equity portfolios, managing the firm's convertible
securities, and overseeing Invista's index fund and derivatives positions.
Kurtis D. Spieler, CFA, Vice President and manager of the firm's dedicated
emerging market portfolios, is Mr. Opsal's backup. Mr. Spieler has been
Invista's emerging markets portfolio manager since joining Invista in 1995.
SCUDDER KEMPER INVESTMENTS, INC.
345 Park Avenue
New York, New York 10154
Scudder Kemper Investments, Inc. ("Scudder Kemper") was founded in 1919 as
America's first independent investment counselor and has served as investment
adviser, administrator, and distributor of mutual funds since 1928.
As of December 31, 1997, Scudder Kemper managed in excess of $200 billion in
assets. As of December 31, 1997, more than $49.6 billion represented investment
management services for over 2.5 million mutual fund shareholder accounts. As of
that date, Scudder Kemper supervised approximately $30 billion of foreign
investments in separately managed accounts for pension funds, foundations,
educational institutions and government entities, and in open-end and closed-end
investment companies.
Each international investment product offered by Scudder Kemper is managed by
a small, separate team of specialized investment professionals. The investment
process combines a top-down/bottom-up approach with a focus on fundamental
research. Investment ideas are generated by regional analysts, global industry
analysts, and portfolio managers through the integration of three analytical
disciplines; global themes (identification of sectors and industries likely to
gain or lose during specific phases of a theme's cycle); country analysis
(qualitative assessment of each country's fundamental and political
characteristics combined with an objective, quantitative analysis of market and
economic data); and company analysis (identification of company opportunities by
search for unique attributes such as a franchise or monopoly, above average
growth potential, innovation, or scarcity). Irene T. Cheng serves as the lead
portfolio manager for that portion of the Portfolio's assets under Scudder
Kemper's management. Ms. Cheng has been in the asset management business for
over nine years and joined Scudder Kemper as a portfolio manager in 1993.
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ADMINISTRATIVE AND ACCOUNTING SERVICES. Under an Administrative and
Accounting Services Agreement with the Fund, PFPC, 400 Bellevue Parkway,
Wilmington, Delaware 19809, performs certain administrative services for the
Portfolios including preparing shareholder reports, assisting WTC in compliance
monitoring activities and preparing and filing federal and state tax returns on
behalf of the Portfolios. PFPC also performs accounting services for the
Portfolios, including determining the net asset value per share of each
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 each Portfolio's first $1 billion of average daily
net assets; 0.075% of each Portfolio's next $500 million of average daily net
assets; 0.05% of each Portfolio's next $500 million of average daily net assets;
and 0.035% of each 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 a Portfolio are borne by that Portfolio.
Under a Fund Secretarial Services Agreement with the Fund, RSMC performs
certain corporate secretarial services on behalf of the Portfolios 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 Portfolios. For these services, the Fund pays
PFPC a minimum annual base fee of $18,000 for each Portfolio, as well as account
fees, transaction charges, and out of pocket expenses.
CUSTODIAN AND SUB-CUSTODIAN. WTC serves as Custodian, and PNC serves as
Sub-Custodian, of the assets of each Portfolio, except the International Equity
Portfolio. For its custody services, the Fund pays WTC an annual fee equal to
the amount derived from the following schedule: 0.0150% of the first $2 billion
of the Fund's average daily net assets; 0.0125% of the next $1 billion of the
Fund's average daily net assets; and 0.0100% of the Fund's average daily net
assets in excess of $3 billion, plus $7.50 per purchase, sale or maturity of
each 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 a Portfolio are borne by that Portfolio. Bankers Trust Company
serves as Custodian of the International Equity Portfolio's assets, and it
employs foreign sub-custodians to maintain the International Equity Portfolio's
assets outside the United States.
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 Portfolios, enters
into agreements with financial institutions to sell shares of the Portfolio and,
directly or through its affiliates, provides investor support services.
BANKING LAWS. Banking laws restrict deposit-taking institutions and certain
of their affiliates from underwriting or distributing securities. WTC believes,
and counsel to WTC has advised the Fund, that WTC and its affiliates may perform
the services contemplated by their respective Agreements with the Fund without
violation of applicable banking laws or regulations. If WTC or its affiliates
were prohibited from performing these services, it is expected that the Board of
Trustees would consider entering into agreements with other entities. If a bank
were prohibited from acting as a Service Organization, its shareholder clients
would be expected to be permitted to remain Portfolio shareholders and
alternative means for servicing such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
DESCRIPTION OF THE FUND
The Fund is a diversified, open-end, management investment company
established on August 19, 1986, as a Massachusetts business trust under
Massachusetts law 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
Large Cap Growth Equity Portfolio was the Growth Portfolio.
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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 and classes of shares. Shares of the
Portfolios 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 June 22, 1998, WTC owned of record approximately 86.79% of the shares
of the Large Cap Growth Equity Portfolio, of which it owned beneficially with
power to vote, on behalf of its customer accounts, approximately 58.47% of the
shares of the Portfolio. Accordingly, WTC may be deemed to be a controlling
person of the Portfolio under the 1940 Act. It is anticipated that immediately
after the commencement of operations of the Large Cap Value Equity Portfolio,
the Small Cap Equity Portfolio and the International Equity Portfolio, WTC will
own by virtue of shared or sole voting or investing power on behalf of its
underlying customer accounts approximately 100% of the outstanding shares of
each of those Portfolios and may be deemed to be a controlling person of those
Portfolios 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.
APPENDIX
The following paragraphs contain a brief description of certain securities in
which the Portfolio may invest and the strategies in which they may engage
consistent with their investment objectives and policies.
ALL PORTFOLIOS
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which a
Portfolio purchases a security from a bank or recognized securities dealer and
simultaneously commits to resell that security to a bank or dealer at an agreed
date and price reflecting a market rate of interest, unrelated to the coupon
rate or the maturity of the purchased security. While it is not 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 delays and
costs to the Portfolio if the other party to the repurchase agreement becomes
bankrupt), it is the policy of the Portfolio to limit repurchase transactions to
primary dealers and banks whose creditworthiness has been reviewed and found
satisfactory by WTC. Repurchase agreements maturing in more than seven days are
considered illiquid for purposes of the Portfolio's investment limitations. (See
following discussion of illiquid securities.)
ILLIQUID SECURITIES. Under each Portfolio's investment limitations, the
Portfolio may not invest more than 15% of its net assets in securities that are
considered illiquid. For purposes of these limitations repurchase agreements
maturing in more than seven days, and securities that are illiquid by virtue of
legal or contractual restrictions on resale ("restricted securities") or the
absence of a readily available market are considered illiquid securities.
Securities that are freely marketable in the country where they are principally
traded, but which are not freely marketable in the United States, are not
subject to this 15% limit. Similarly, securities that are considered restricted
securities by virtue of legal or contractual restrictions on their resale but
which are actively traded in the institutional market are not subject to the 15%
limit.
LARGE CAP GROWTH EQUITY PORTFOLIO, LARGE CAP VALUE EQUITY PORTFOLIO AND SMALL
CAP EQUITY PORTFOLIO
OPTIONS ON SECURITIES AND SECURITIES INDEXES. The Portfolios may purchase
call options on securities that the Adviser intends to include in the Portfolios
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 Portfolios may purchase put options to hedge against a decline in
24
<PAGE>
the market value of securities held in the Portfolios or in an attempt to
enhance return. The Portfolios may write (sell) put and covered call options on
securities in which they are authorized to invest. The Portfolios 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 a 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 Portfolios 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 a 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.
INTERNATIONAL EQUITY PORTFOLIO
HEDGING STRATEGIES. The International Equity Portfolio's sub-advisers may use
forward currency contracts, options and futures contracts and related options to
attempt to hedge securities held by the Portfolio. There can be no assurance
that such efforts will succeed. Hedging strategies, if successful, can reduce
risk of loss by wholly or partially offsetting the negative effect of
unfavorable price movements in the investments being hedged. However, hedging
strategies can also reduce opportunity for gain by offsetting the positive
effect of favorable price movements in the hedged investment. These hedging
techniques are described below and in further detail in the Statement of
Additional Information, and the risks associated with these techniques are
described below under "Risk Factors."
The International Equity Portfolio may enter into forward currency contracts
either with respect to specific transactions or with respect to the Portfolio's
positions. When WTC or a sub-adviser believes that a particular currency may
decline compared to the U.S. dollar, the Portfolio may enter into a forward
contract to sell the currency that WTC or the sub-adviser expects to decline in
an amount approximating the value of some or all of the Portfolio's securities
denominated in that currency. Such contracts may only involve the sale of a
foreign currency against the U.S. dollar. In addition, when the Portfolio
anticipates purchasing or selling a security, it may enter into a forward
currency contract in order to set the rate (either relative to the U.S. dollar
or another currency) at which a currency exchange transaction related to the
purchase or sale will be made.
The International Equity Portfolio also may sell (write) and purchase put and
call options and futures contracts and related options on foreign currencies to
hedge against movements in exchange rates relative to the U.S. dollar. In
addition, the Portfolio may write and purchase put and call options on
securities and stock indexes to hedge against the risk of fluctuations in the
prices of securities held by the Portfolio or which WTC or a sub-adviser intends
to include in the Portfolio. 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. The Portfolio also may sell and
purchase stock index futures contracts and related options to protect against a
general stock market decline that could adversely affect the Portfolio's
securities or to hedge against a general stock market or market sector advance
to lessen the cost of future securities acquisitions. The Portfolio may use
interest rate futures contracts and related options thereon to hedge the debt
portion of its portfolio against changes in the general level of interest rates.
The International Equity Portfolio will not enter into an options, futures or
forward currency contract transaction that exposes the Portfolio to an
obligation to another party unless the Portfolio either (i) owns an offsetting
("covered") position in securities, currencies, options, futures or forward
currency contracts or (ii) has cash, receivables and liquid securities with a
value sufficient at all times to cover its potential obligations to the extent
not covered as provided in (i) above.
25
<PAGE>
[LOGO]
the RODNEY SQUARE
STRATEGIC EQUITY FUND
APPLICATION & NEW ACCOUNT REGISTRATION
- --------------------------------------------------------------------------------
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTION THE RODNEY SQUARE STRATEGIC EQUITY FUND
OR FOR ASSISTANCE IN C/O PFPC
COMPLETING THIS FORM P.O. BOX 8951
CALL (800) 336-9970 WILMINGTON, DE 19899-9752
- --------------------------------------------------------------------------------
PORTFOLIO SELECTION ($1,000 MINIMUM)
/_/ LARGE CAP GROWTH EQUITY PORTFOLIO $_______________
/_/ LARGE CAP VALUE EQUITY PORTFOLIO $_______________
/_/ SMALL CAP EQUITY PORTFOLIO $_______________
/_/ INTERNATIONAL EQUITY PORTFOLIO $_______________
TOTAL AMOUNT TO BE INVESTED $_______________
_____ By check. (Make payable to the applicable 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> <C>
1. Individual
------------ ------- -------------- ---------------------
First Name MI Last Name Customer Tax ID No.*
2. Joint Tenancy**
------------ ------- -------------- ---------------------
First Name MI Last Name Customer Tax ID No.*
Uniform
3. Gifts to Minors+ Gift/Transfers
------------------ under the -------------------- ----- to Minors Act
Minor's Name Customer Tax ID No.* State
4. Other Registration
------------------------------ -----------------------
Customer Tax Id. No.*
5. If Trust, Date of Trust Instrument:
---------------------------------------
6. ----------------------------------------
Your Occupation
7. ---------------------------------- --------------------------------
Employer's Name Employer's Address
</TABLE>
* 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.
26
<PAGE>
- --------------------------------------------------------------------------------
ADDRESS OF RECORD
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City State Zip Code
Pay Cash for:
Income Other
Dividends Distributions
LARGE CAP GROWTH EQUITY
PORTFOLIO /_/ /_/
LARGE CAP VALUE EQUITY PORTFOLIO /_/ /_/
SMALL CAP EQUITY PORTFOLIO /_/ /_/
INTERNATIONAL 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
- --------------------------------------------------------------------------------
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
27
<PAGE>
- --------------------------------------------------------------------------------
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 /_//_//_//_/
Authorized Signature of
Service Organization Telephone ( )
--------------------------------- ------------
28
<PAGE>
[LOGO]
the RODNEY SQUARE
STRATEGIC EQUITY FUND
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):
-------------------------------------------------------
Fund Account Number(s):
----------------------------------------------------
(Please provide if you are a current account holder:)
REGISTERED IN THE NAME(S) OF:
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
REGISTERED ADDRESS:
------------------------------------------------
NOTE: If this form is not submitted together with the application, a corporate
resolution must be included for accounts registered to other than an individual,
a fiduciary or partnership.
- --------------------------------------------------------------------------------
REDEMPTION INSTRUCTIONS
/_/ Add /_/ Change
CHECK ONE OR MORE.
/_/ Mail proceeds to my fund account address of record (must 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
- --------------------------------------------------------------------------------
29
<PAGE>
BANK INFORMATION -- PLEASE COMPLETE THE FOLLOWING INFORMATION ONLY IF PROCEEDS
MAILED/WIRED TO YOUR BANK WAS SELECTED. A VOIDED BANK CHECK MUST BE ATTACHED TO
THIS APPLICATION.
Name of Bank
------------------------------------------------------
Bank Routing Transit #
------------------------------------------------------
Bank Address
------------------------------------------------------
City/State/Zip
------------------------------------------------------
Bank Account Number
------------------------------------------------------
Name(s) on Bank Account
------------------------------------------------------
- --------------------------------------------------------------------------------
AUTHORIZATIONS
By electing the telephone redemption option, I appoint 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).
---------------------------------- ----------------------------------
Signature of Individual Owner Signature of Joint Owner (if any)
-----------------------------------------------------------------------------
Signature of Corporate Officer, Trustee or other -- please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable to
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)
30
<PAGE>
TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
John J. Quindlen
Nina M. Webb
----------------
OFFICERS
Robert J. Christian, President
Nina M. Webb, Vice President
John J. Kelley, Vice President & Treasurer
Carl M. Rizzo, Esq., Secretary
Mary Jane Maloney, Assistant Secretary
John C. McDonnell, Assistant Treasurer
----------------
INVESTMENT ADVISER
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
----------------
ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
----------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
----------------
31
<PAGE>
THE RODNEY SQUARE STRATEGIC EQUITY FUND
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
The Rodney Square Strategic Equity Fund (the "Fund"), an open-end management
investment company, consists of four separate portfolios (the "Portfolios"): the
Large Cap Growth Equity Portfolio, the Large Cap Value Equity Portfolio, the
Small Cap Equity Portfolio, and the International Equity Portfolio. The Large
Cap Growth Equity Portfolio seeks superior long-term growth of capital by
investing principally in large cap U.S. equity securities that are judged by the
Portfolio's adviser, Wilmington Trust Company ("WTC" or "Adviser"), to possess
strong growth characteristics. The Large Cap Value Equity Portfolio seeks
superior long-term growth of capital by investing in large cap U.S. equity
securities that are judged by WTC to be undervalued in the marketplace relative
to underlying profitability. The Small Cap Equity Portfolio seeks superior
long-term growth of capital by investing in small cap U.S. equity securities
that are judged by WTC to possess strong growth characteristics or to be
undervalued by the marketplace relative to underlying profitability. The
International Equity Portfolio seeks superior long-term capital appreciation by
investing primarily in equity securities of issuers located outside the United
States.
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
June 29, 1998
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's current Prospectus, dated June 29, 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
INVESTMENT POLICIES.......................................................1
INVESTMENT LIMITATIONS....................................................5
TRUSTEES AND OFFICERS.....................................................6
WILMINGTON TRUST COMPANY..................................................8
THE SUB-ADVISERS..........................................................8
INVESTMENT ADVISORY SERVICES..............................................9
ADMINISTRATION AND ACCOUNTING SERVICES...................................10
DISTRIBUTION AGREEMENT...................................................11
REDEMPTIONS..............................................................11
PORTFOLIO TRANSACTIONS...................................................12
NET ASSET VALUE AND DIVIDENDS............................................14
PERFORMANCE INFORMATION..................................................14
TAXES....................................................................20
DESCRIPTION OF THE FUND..................................................23
OTHER INFORMATION........................................................24
FINANCIAL STATEMENTS.....................................................24
APPENDIX.................................................................A-1
<PAGE>
INVESTMENT POLICIES
The following information supplements the information concerning the
Portfolios' investment objectives, policies and limitations found in the
Prospectus.
GENERAL
WTC allocates responsibility for investment management of the Large Cap
Growth Equity Portfolio, the Large Cap Value Equity Portfolio and the Small Cap
Equity Portfolio to its growth and value equity teams. The investment philosophy
of the growth equity team, which is responsible for the management of the Large
Cap Growth Equity Portfolio and a portion of the Small Cap Equity Portfolio, is
to invest in fast growing companies using both fundamental security analysis
along with quantitative valuation techniques. The value equity team, which is
responsible for the management of the Large Cap Value Equity Portfolio and a
portion of the Small Cap Equity Portfolio, uses a disciplined stock valuation
process to develop individual stock price targets from its fundamental
assessments of future company profitability. The International Equity Portfolio
is managed by three sub-advisers selected by WTC, each of which employs a
different investment strategy. See "The Sub-Advisers" below.
The Large Cap Growth Equity Portfolio 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. 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 Large Cap Value Equity Portfolio 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. 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 Value Index (assuming
the reinvestment of dividends and capital gain distributions).
The Small Cap Equity Portfolio 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 small cap U.S. equity (or
related) securities. 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 2000 Index (assuming the reinvestment
of dividends and capital gain distributions).
The International Equity Portfolio 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 equity
securities (including convertible securities) of issuers located outside the
United States. 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 Morgan Stanley Capital International Europe,
Australasia & Far East Index (assuming the reinvestment of dividends and capital
gain distributions).
ALL PORTFOLIOS
CONVERTIBLE SECURITIES. Each Portfolio may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. A convertible security entitles
<PAGE>
the holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed, converted
or exchanged. Before conversion, convertible securities have characteristics
similar to non-convertible debt securities in that they ordinarily provide a
stable stream of income with generally higher yields than those of common stocks
of the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable non-convertible securities. While no securities investment is without
some risk, investments in convertible securities generally entail less risk than
the issuer's common stock, although the extent to which such risk is reduced
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security. Convertible securities have unique
investment characteristics in that they generally (1) have higher yields than
common stocks, but lower yields than comparable non-convertible securities, (2)
are less subject to fluctuation in value than the underlying stock because they
have fixed income characteristics and (3) provide the potential for capital
appreciation if the market price of the underlying common stock increases.
The value of a convertible security is a function of its "investment
value" (determined by its yield comparison with the yields of other securities
of comparable maturity and quality that do not have a conversion privilege) and
its "conversion value" (the security's worth, at market value, if converted into
the underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security generally will sell at a premium over its conversion value
determined by the extent to which investors place value on the right to acquire
the underlying common stock while holding a fixed income security.
HEDGING STRATEGIES. Each Portfolio may engage in certain hedging
strategies involving options, futures and, in the case of the International
Equity Portfolio, forward currency exchange contracts. These hedging strategies
are described in detail in the Appendix.
ILLIQUID SECURITIES. A 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. A Portfolio may not, however, invest more that 10% of its total assets in
restricted equity securities that do not have a readily available market. All or
a portion of the value of the instrument underlying an over-the-counter option
may be illiquid depending on the assets held to cover the option and the nature
and terms of any agreement a Portfolio may have to close out the option before
expiration. With respect to the International Equity Portfolio, illiquid
securities include those that are subject to restrictions contained in the
securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid.
Restricted securities may be sold only in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933 ("1933 Act") or in a registered public offering. Where registration
is required, a Portfolio may be obligated to pay all or part of the registration
expense and a considerable period may elapse before the Portfolio may sell the
2
<PAGE>
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it initially decided to sell the security.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt from
registration or sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
To facilitate the increased size and liquidity of the institutional
markets for unregistered securities, the SEC adopted Rule 144A under the 1933
Act. Rule 144A establishes a "safe harbor" from the registration requirements of
the 1933 Act for resale of certain securities to qualified institutional buyers.
Institutional markets for restricted securities have developed as a result of
Rule 144A, providing both readily ascertainable values for restricted securities
and the ability to liquidate an investment to satisfy share redemption orders.
Such markets include automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc. An
insufficient number of qualified institutional buyers interested in purchasing
Rule 144A-eligible restricted securities held by a Portfolio, however, could
affect adversely the marketability of such portfolio securities, and a Portfolio
might be unable to dispose of such securities promptly or at reasonable prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to WTC pursuant to guidelines approved by the Board.
WTC monitors the liquidity of 144A securities in each Portfolio's portfolio and
reports periodically on such decisions to the Trustees. WTC takes into account a
number of factors in reaching liquidity decisions, including (1) the frequency
of trades for the security, (2) the number of dealers that made quotes for the
security, (3) the number of dealers that have undertaken to make a market in the
security, (4) the number of other potential purchasers for the security and (5)
the nature of the security and how trading is effected (E.G., the time needed to
sell the security, how offers are solicited and the mechanics of the transfer).
LOANS OF PORTFOLIO SECURITIES. Each Portfolio may from time to time lend
its portfolio securities to brokers, dealers and financial institutions. Such
loans will in no event exceed one-third of the Portfolio's total assets and will
be secured by collateral in the form of cash or securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, which at all times
while the loan is outstanding will be maintained in an amount at least equal to
the current market value of the loaned securities. The Portfolio will retain all
or a portion of the interest received on the investment of cash collateral or
will receive a fee from the borrower. Although voting rights, or rights to
consent, with respect to the loaned securities will pass to the borrower, the
Portfolio will retain the right to call a loan at any time on reasonable notice,
and will do so to exercise voting rights, or rights to consent, on any matter
materially affecting the investment. The Portfolio may also call these loans in
order to sell the securities.
The primary risk involved in lending securities is 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 a 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 Portfolios 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 Portfolios will receive from the
borrower justifies the risk.
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<PAGE>
CASH MANAGEMENT. With respect to no more than 15% of a Portfolio's total
assets, the Adviser may hold cash and cash equivalents including high-quality
money market instruments and money market funds in order to manage cash flow in
the Portfolio. Certain of these instruments are described below.
MONEY MARKET FUNDS. Each Portfolio may invest in the securities of other
open-end investment companies that seek to maintain a stable net asset value
("Money Market Funds"). Each Portfolio may invest in such securities within the
limits prescribed by the Investment Company Act of 1940 ("1940 Act"). These
limitations currently provide, in part, that a Portfolio may purchase shares of
an investment company unless (a) such a purchase would cause the Portfolio to
own in the aggregate more than 3% of the total outstanding voting stock of the
investment company or (b) such a purchase would cause the Portfolio to have more
than 5% of its total assets invested in the investment company or more than 10%
of its total assets invested in the aggregate in all such investment companies.
In addition to a Portfolio's expenses (including the various fees), as a
shareholder in a Money Market Fund, the Portfolio would bear its PRO RATA
portion of the Money Market Fund's expenses (including fees).
U.S. GOVERNMENT OBLIGATIONS. Each 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. Such securities may include 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"). In the case of
obligations not backed by the full faith and credit of the United States, the
Portfolios 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.
COMMERCIAL PAPER. Each Portfolio may invest in 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
Portfolios may invest only in commercial paper rated A-1 or higher by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and/or Prime-1 by
Moody's Investors Service, Inc. ("Moody's").
BANK OBLIGATIONS. Each Portfolio may invest in obligations of U.S. banks
including certificates of deposit, time deposits and bankers' acceptances.
INTERNATIONAL EQUITY PORTFOLIO
EUROPEAN AND AMERICAN DEPOSITORY RECEIPTS. The International Equity
Portfolio may invest in foreign securities by purchasing European Depository
Receipts ("EDRs"), American Depository Receipts ("ADRs") and other securities
convertible into equity securities of foreign issuers. It is possible that these
securities will not be denominated in the same currency as the securities into
which they may be converted. In general, EDRs, in bearer form, are designed for
use in European securities markets, while ADRs, in registered form, are designed
for use in U.S. securities markets.
INVESTMENTS IN INVESTMENT COMPANIES. In addition to investing in Money
Market Funds, the International Equity Portfolio may invest in securities of
open-end and closed-end investment companies that invest primarily in the equity
securities of issuers in countries where it is impossible of impractical to
invest directly. Such investments will be subject to the limits described above
that apply to investments in Money Market Funds. In addition to the Portfolio's
expenses (including the various fees), as a shareholder in another open-end or
closed-end investment company, the Portfolio would bear its PRO RATA portion of
the other investment company's expenses (including fees).
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INVESTMENT LIMITATIONS
The investment limitations described below are fundamental and may not be
changed with respect to any Portfolio without the affirmative vote of the lesser
of (i) 67% or more of the shares of the affected 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.
Each 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% of the aggregate 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.
The following non-fundamental policies have been adopted by the Board of
Trustees with respect to each Portfolio and may be changed by the Board of
Trustees without shareholder approval. As a matter of non-fundamental policy,
each 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;
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2. 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
3. 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
a 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 a Portfolio's net asset value.
A 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 for purposes of
implementing a master-feeder structure, notwithstanding any other investment
policy of the Portfolio.
TRUSTEES AND OFFICERS
The Fund has a Board, presently composed of five Trustees, that supervises
the Portfolios' activities and reviews contractual arrangements with companies
that provide the Portfolios 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. With the exception of
Nina M. Webb, all persons named as Trustees also serve in similar capacities for
The Rodney Square Fund, The Rodney Square Tax-Exempt Fund, and The Rodney Square
Strategic Fixed-Income Fund. Those Trustees who are "interested persons" of the
Fund (as defined in the 1940 Act) by virtue of their positions with WTC are
indicated by an asterisk (*).
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.
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*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 66, 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 December 1993. He also served as Chief Financial Officer of E.I. du Pont de
Nemours and Company, Inc. from 1984 through June 1993. He also serves as a
director of St. Joe Paper Co. and a Trustee of Kalmar Pooled Investment Trust.
*NINA M. WEBB, CFA, 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 Portfolios.
The Portfolios 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 services to the Fund and to
the Rodney Square Family of Funds. On March 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 Large Cap Growth
Equity 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
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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 $114.4 billion in trust, custody and investment management assets, WTC
ranks among the nation's leading money management firms. As of December 31,
1997, the trust department of WTC had $38.4 billion in 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 manages over $3.8 billion in fixed income assets and $1.4 billion in equity
assets for various other institutional clients. Certain departments in WTC
engage in investment management activities that utilize a variety of investment
instruments such as futures contracts, options and forward contracts. Of course,
there can be no guarantee that a 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 Wilmington Trust
Corporation, 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.
THE SUB-ADVISERS
The International Equity Portfolio utilizes a multi-manager configuration,
with each sub-adviser following a different investment approach in investing in
non-U.S. companies with attractive return potential. Each of the current
sub-advisers employs a fundamentally driven investment process that includes
varying levels of both top-down economic analysis at the country level and
bottom-up stock selection within markets, as well as varying degrees of
quantitative analysis of issuers, industries, countries and regional markets.
The Portfolio typically maintains representation across a broad range of
countries, but will tend to have weightings that significantly differ from
international stock indexes, such as the Morgan Stanley Capital International
Europe, Australasia & Far East Index (the "EAFE Index"). The Portfolio also may
have significant exposure to emerging markets not represented in the EAFE Index,
such as Mexico, Indonesia and Thailand. Because country allocations may differ
from those of the EAFE Index, the Portfolio's returns may significantly deviate
from those of the EAFE Index.
The sub-advisers to the Portfolio are:
Clemente Capital, Inc. ("Clemente") - A theme-oriented international
manager investing in companies with favorable growth characteristics that
will be positively influenced by global and regional trends.
Scudder Kemper Investments, Inc. ("Scudder Kemper") - Uses a very heavy
emphasis on research to identify companies benefiting from favorable global
themes, a positive economic climate conducive to growth in their area of
operation, or unique situations.
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<PAGE>
Invista Capital Management, Inc. ("Invista") - Takes a long-term,
value-oriented approach that focuses on the intrinsic value of companies within
particular industries or sectors and seeks to purchase stock in target companies
at a discount to their intrinsic value.
INVESTMENT ADVISORY SERVICES
ADVISORY AGREEMENTS. WTC serves as Investment Adviser to each Portfolio
pursuant to an Advisory Agreement with the Fund. Under the Advisory Agreement,
WTC directs the investments of each Portfolio in accordance with that
Portfolio's investment objectives, policies and limitations. In addition, WTC
recommends sub-advisers for the International Equity Portfolio, allocates assets
among the sub-advisers, and monitors and evaluates the sub-advisers'
performance.
For WTC's services under the Advisory Agreement, the Large Cap Growth
Equity Portfolio and the Large Cap Value Equity Portfolio each pays WTC a
monthly fee at an annual rate of 0.55% of the Portfolio's average daily net
assets. The Small Cap Equity Portfolio and the International Equity Portfolio
each pays WTC a monthly fee at an annual rate of 0.60% and 0.65%, respectively,
of the Portfolio's average daily net assets for WTC's services under the
Advisory Agreement.
Under the Advisory Agreement, the Fund, on behalf of the Portfolios,
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 Portfolios; (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 Portfolios, 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 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 each 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.
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<PAGE>
Prior to February 23, 1998, the Large Cap Growth Equity 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 RSMC
advisory fees in the amounts of $840,071, $706,321 and $640,522,
respectively, and RSMC paid the portfolio advisers.
SUB-ADVISORY AGREEMENTS. Scudder Kemper, Clemente and Invista serve as
sub-advisers to the International Equity Portfolio pursuant to sub-advisory
agreements ("Sub-Advisory Agreements"). For services furnished pursuant to each
Sub-Advisory Agreement, WTC (not the Portfolio) pays each sub-adviser a monthly
portfolio management fee at an annual rate of 0.50% of the average daily net
assets under the sub-adviser's management.
Each Sub-Advisory Agreement provides that the sub-adviser has
discretionary investment authority (including the selection of brokers and
dealers for the execution of the Portfolio's portfolio transactions) with
respect to the portion of the Portfolio's assets allocated to it by WTC, subject
to the restrictions of the 1940 Act, the Internal Revenue Code of 1986, as
amended, applicable state securities laws, applicable statutes and regulations
of foreign jurisdictions, the Portfolio's investment objective, policies and
restrictions and the instructions of the Trustees and WTC.
Each Sub-Advisory Agreement provides that the sub-adviser will not be
liable for any action taken, omitted or suffered to be taken except if such acts
or omissions are the result of willful misfeasance, bad faith, gross negligence
or reckless disregard of duty. The Agreements continue in effect from year to
year so long as continuance of each such Agreement is approved at least annually
(i) by the vote of a majority of the Independent Trustees at a meeting called
for the purpose of voting on such approval and (ii) by the vote of a majority of
the Trustees or by the vote of a majority of the outstanding voting securities
of the Portfolio. Each Sub-Advisory Agreement terminates automatically in the
event of its assignment and is terminable on written notice by the Fund (without
penalty, by action of the Board of Trustees or by vote of a majority of the
Portfolio's outstanding voting securities) or by WTC or the sub-adviser. Each
Agreement provides that written notice of termination must be provided sixty
days prior to the termination date, absent mutual agreement for a shorter notice
period.
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 Portfolios. In addition, PFPC
prepares and files various reports with the appropriate regulatory agencies and
prepares materials required by the SEC or any state securities commission having
jurisdiction over the Fund. The accounting services performed by PFPC for the
Portfolios include determining the net asset value per share of each Portfolio
and maintaining records relating to the Portfolios' 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 Portfolios 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 Portfolios. 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
10
<PAGE>
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 Large Cap Growth Equity 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 Portfolios' shares pursuant to a
Distribution Agreement with the Fund effective February 23, 1998. 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. Under the
current Distribution Agreement, RSD receives no underwriting commissions or Rule
12b-1 fees in connection with the sale of shares of the Portfolios.
Pursuant to the terms of the Distribution Agreement, RSD is granted the
right to sell shares of the Portfolios 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 Portfolios,
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.
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 7 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.
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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,
Other 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 a Portfolio's securities or to determine
the value of the net assets of a Portfolio, or (d) ordered by a governmental
body having jurisdiction over the Fund for the protection of the Fund's
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 case of such suspension, shareholders of
the affected 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 applicable 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 Portfolios pay 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 Large Cap Growth Equity Portfolio
paid total brokerage commissions of $57,925, $59,691 and $116,972, respectively.
The primary objective of WTC and, with respect to the International Equity
Portfolio, each sub-adviser in placing orders on behalf of the Portfolios 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
a portfolio transaction, WTC and the sub-advisers consider, 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 or the sub-advisers and their affiliates.
WTC and the sub-advisers cannot readily determine the extent to which
commission rates or net prices charged by broker-dealers reflect the value of
their research services. In such cases, WTC and the sub-advisers receive
services they otherwise might have had to perform themselves. The research
services provided by brokers or dealers can be useful to WTC and the
sub-advisers in serving their other clients, as well as in serving the Fund.
Conversely, information provided to WTC and the sub-advisers by brokers or
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dealers who have executed transaction orders on behalf of other WTC clients or
other clients of the sub-advisers may be useful to WTC and the sub-advisers in
providing services to the Fund. During the fiscal year ended December 31, 1997,
the Large Cap Growth Equity 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 Portfolios
may purchase and sell portfolio securities to and from dealers who provide the
Portfolios with research services. Portfolio transactions, however, will not be
directed by the Portfolios to dealers solely on the basis of research services
provided.
In order to obtain the best net results, WTC and each sub-adviser may
conduct brokerage transactions on behalf of the Portfolios with a broker that is
an affiliate of WTC or a sub-adviser. The Fund's Board of Trustees has adopted
procedures in conformity with Rule 17e-1 under the 1940 Act to ensure that all
brokerage commissions paid to such affiliates are reasonable and fair in the
context of the market in which they are operating. Any such transactions will be
effected and related compensation paid only in accordance with applicable SEC
regulations.
Some of the sub-advisers' and WTC's other clients have investment
objectives and policies similar to those of the Portfolios. Occasionally, WTC
and the sub-advisers may make recommendations to other clients which result in
their purchasing or selling securities simultaneously with the Portfolios.
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. 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 or the
sub-advisers simultaneously purchase or sell the same security, WTC and the
sub-advisers allocate the prices and amounts according to a formula considered
by the officers of each affected investment company and by the officers of WTC
and its affiliates to be equitable to each account. While in some cases this
practice could have a detrimental effect upon the price or the value of the
security as far as the Portfolios are 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
Portfolios.
On occasion, some of the other accounts advised by WTC and the
sub-advisers may have investment objectives and policies that are dissimilar to
those of the Portfolios, causing WTC and the sub-advisers to buy a security for
one account while simultaneously selling the security for another account. In
accordance with applicable SEC regulations, one account may sell a security to
another account. It is the policy of WTC and the sub-advisers not to favor one
account over another in placing purchase and sale orders. However, there may be
circumstances when purchases or sales for one or more accounts will have an
adverse effect on other accounts.
PORTFOLIO TURNOVER. The portfolio turnover rate is calculated by dividing
the lesser of a 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, excluding securities whose
maturity or the expiration date at the time of acquisition was one year or less.
A Portfolio's turnover rate is not a limiting factor when WTC or a sub-adviser
considers making a change in the Portfolio's holdings.
The frequency of portfolio transactions and a Portfolio's turnover rate
will vary from year to year depending on market conditions. The portfolio
turnover rate of the Large Cap Growth Equity Portfolio for the years ended
December 31, 1997 and 1996 was 28.05% and 34.84%, respectively. The portfolio
turnover rate for the other Portfolios is expected to be less than 100%.
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NET ASSET VALUE AND DIVIDENDS
NET ASSET VALUE. The net asset value per share of each Portfolio is
determined by dividing the value of the Portfolio's net assets by the total
number of Portfolio shares outstanding. This determination is made by PFPC as of
the close of regular trading on the Exchange (currently 4:00 p.m., Eastern time)
each day the Fund is open for business. The Fund is open for business on days
when the Exchange, PFPC and the Philadelphia branch office of the Federal
Reserve are open for business ("Business Day").
In valuing a 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
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.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter market is normally completed well before the close of business
on each Business Day. In addition, European or Far Eastern securities trading
generally or in a particular country or countries may not take place on all
Business Days. Furthermore, trading takes place in Japanese markets on certain
Saturdays and in various foreign markets on days which are not Business Days and
on which the International Equity Portfolio's net asset value is not calculated
and investors will be unable to buy or sell shares of the Fund. Calculation of
the Portfolio's net asset value does not take place contemporaneously with the
determination of the prices of the majority of the portfolio securities used in
such calculation. If events materially affecting the value of such securities
occur between the time when their price is determined and the time when the
Portfolio's net asset value is calculated, such securities may be valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees.
DIVIDENDS. Dividends from each Portfolio's net investment income and
distributions of (1) net short-term capital gain and net capital gain (the
excess of net long-term capital gain over the short-term capital loss) realized
by each Portfolio, after deducting any available capital loss carryovers, and
(2) in the case of the International Equity Portfolio, net gains realized from
foreign currency transactions are declared and paid to its shareholders
annually.
PERFORMANCE INFORMATION
The performance of a 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
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worth more or less than the original cost. The performance of each 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
Large Cap Growth Equity Portfolio. Prior to February 23, 1998, the Large Cap
Growth Equity 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. As described in
the Prospectus, the Large Cap Value Equity Portfolio may advertise performance
figures of the Value Stock Fund, a collective investment fund, the International
Equity Portfolio may advertise performance figures of the International Stock
Fund, another collective investment fund, and the Small Cap Equity Portfolio may
advertise performance figures of the Small Cap Stock Fund, another collective
investment fund.
TOTAL RETURN CALCULATIONS. From time to time, a Portfolio may advertise
its average annual total return. A 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 a Portfolio are assumed to have been
reinvested at net asset value on the reinvestment date during the period.
The following table reflects the Large Cap Growth Equity Portfolio's
standardized average annual total returns for the periods stated below:
LARGE CAP GROWTH EQUITY PORTFOLIO
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 a 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.
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Each 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 Portfolios 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 each 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 Large Cap Growth Equity
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 Portfolios 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 Large Cap
Growth Equity 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 stock 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 Large Cap Growth Equity Portfolio would have been worth
$49,793, assuming the reinvestment of all distributions.
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LARGE CAP GROWTH EQUITY PORTFOLIO
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 Portfolios may also from time to time along with performance
advertisements, present their investments in the form of a "Schedule of
Investments" included in the Annual Report to the shareholders of the Fund. A
copy of the Annual Report to the Fund's Shareholders as of and for the fiscal
year ended December 31, 1997, 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 a 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, a Portfolio also may compare performance figures to the
performance of other mutual funds tracked by mutual fund rating services, to
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, a 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, a 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, a 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, a 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 a
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 Portfolios, including reprints of, or
selections from, editorials or articles about the Portfolios. Sources for
performance information and articles about the Portfolios 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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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.
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.
In advertising the performance of the Portfolios, the performance of a
Portfolio may also be compared to the performance of unmanaged indexes of
securities in which the Portfolio invests or to unit investment trusts ("UITs")
that hold the same type of securities in which the Portfolio invests.
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TAXES
GENERAL. Each Portfolio is treated as a separate corporation for federal
income tax purposes. To qualify or continue to qualify for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"), each 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, net short-term capital gain and,
in the case of the International Equity Portfolio, net gains from certain
foreign currency transactions) and must meet several additional requirements.
For each Portfolio, 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 foreign currencies, or other income
(including gains from options, futures and forward contracts) derived with
respect to its business of investing in securities or those currencies ("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 a 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 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. Each 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 net
investment income of each Portfolio other than the International Equity
Portfolio 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 federal 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 a 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
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distribution nevertheless will be taxable to the shareholder even though, from
an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. 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 a 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.
FOREIGN SECURITIES. Dividends and interest received, and gains realized,
by the International Equity Portfolio may be subject to income, withholding or
other taxes imposed by foreign countries or U.S. possessions (collectively,
"foreign taxes") that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate foreign
taxes, however, and many foreign countries do not impose taxes on capital gains
in respect of investments by foreign investors.
If more than 50% of the value of the International Equity Portfolio's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Portfolio will be eligible to, and may, file an election with
the Internal Revenue Service that will enable its shareholders, in effect, to
benefit from any foreign tax credit or deduction that is available with respect
to foreign taxes paid by the Portfolio. If the election is made, the Portfolio
will treat those taxes as dividends paid to its shareholders and each
shareholder (1) will be required to include in gross income, and treat as paid
by the shareholder, a proportionate share of those taxes, (2) will be required
to treat that share of those taxes and of any dividend paid by the Portfolio
that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources and (3) may either deduct the taxes
deemed paid by the shareholder in computing taxable income or, alternatively,
use the foregoing information in calculating the foreign tax credit against the
shareholder's federal income tax. The Portfolio will report to its shareholders
shortly after each taxable year their respective shares of its income from
sources within, and taxes paid to, foreign countries and U.S. possessions if it
makes this election. If the Portfolio makes this election, individuals who have
no more than $300 ($600 for married persons filing jointly) of creditable
foreign taxes included on Forms 1099 and all of whose foreign source income is
"qualified passive income" may elect each year to be exempt from the extremely
complicated foreign tax credit limitation and will be able to claim a foreign
tax credit without having to file the detailed Form 1116 that otherwise is
required.
The International Equity Portfolio may invest in the stock of passive
foreign investment companies ("PFICs"). A PFIC is a foreign corporation -- other
than a "controlled foreign corporation" (I.E., a foreign corporation in which,
on any day during its taxable year, more than 50% of the total voting power of
all voting stock therein or the total value of all stock therein is owned,
directly, indirectly, or constructively, by "U.S. shareholders," defined as U.S.
persons that individually own, directly, indirectly, or constructively, at least
10% of that voting power) as to which the Portfolio is a U.S. shareholder --
that, in general, meets either of the following tests: (a) at least 75% of its
gross income is passive or (b) an average of at least 50% of its assets produce,
or are held for the production of, passive income. If the Portfolio acquires
stock in a PFIC and holds the stock beyond the end of the year of acquisition,
the Portfolio will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the stock
(collectively, "PFIC income"), plus interest thereon, even if the Portfolio
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Portfolio's investment
company taxable income and, accordingly, will not be taxable to it to the extent
that income is distributed to its shareholders.
If the International Equity Portfolio invests in a PFIC and elects to
treat the PFIC as a "qualified electing fund" ("QEF"), then in lieu of the
foregoing tax and interest obligation, the Portfolio will be required to include
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in income each year its pro rata share of the QEF's annual ordinary earnings and
net capital gain, even if they are not distributed to the Portfolio by the QEF;
those amounts most likely would have to be distributed by the Fund to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax. It may be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
The International Equity Portfolio may elect to "mark to market" its stock
in any PFIC. "Marking-to-market," in this context, means including in ordinary
income each taxable year the excess, if any, of the fair market value of the
stock over the Portfolio's adjusted basis therein as of the end of that year.
Pursuant to the election, the Portfolio also will be allowed to deduct (as an
ordinary, not capital, loss) the excess, if any, of its adjusted basis in PFIC
stock over the fair market value thereof as of the taxable year-end, but only to
the extent of any net mark-to-market gains with respect to that stock included
in income by the Portfolio for prior taxable years. The Portfolio's adjusted
basis in each PFIC's stock subject to the election will be adjusted to reflect
the amounts of income included and deductions taken thereunder.
HEDGING TRANSACTIONS. The use of hedging strategies, such as writing
(selling) and purchasing options and futures contracts and entering into forward
currency contracts, involves complex rules that will determine for federal
income tax purposes the amount, character and timing of recognition of the gains
and losses a Portfolio realizes in connection therewith. Gains from the
disposition of foreign currencies (except certain gains that may be excluded by
future regulations) and gains from options, futures and foreign currency
contracts derived by a Portfolio with respect to its business of investing in
securities qualify as permissible income under the Income Requirement.
Futures and foreign currency contracts that are subject to section 1256 of
the Code (other than such contracts that are part of a "mixed straddle" with
respect to which a Portfolio has made an election not to have the following
rules apply) ("Section 1256 Contracts") and that are held by a 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.
Section 988 of the Code also may apply to forward currency contracts and
options on foreign currencies. Under section 988, each foreign currency gain or
loss generally is computed separately and treated as ordinary income or loss. In
the case of overlap between sections 1256 and 988, special provisions determine
the character and timing of any income, gain or loss. The International Equity
Portfolio attempts to monitor its section 988 transactions to minimize any
adverse tax impact.
Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which a 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 a Portfolio makes certain
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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 a
Portfolio of straddle transactions are not entirely clear.
If a Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, futures or forward 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 or forward contract entered into by a 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.
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
a 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 on August 19, 1986. The Fund's capital consists
of an unlimited number of shares of beneficial interest, $0.01 par value. The
shares of each Portfolio that are issued by the Fund are fully paid and
non-assessable. The assets of the Fund received for the issuance or sale of
Portfolio shares and all income, earnings, profits and proceeds therefrom,
subject only to the right of creditors, are allocated to the respective
Portfolio and constitute the underlying assets of that Portfolio. 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 Portfolio of any
shareholder held personally liable solely by virtue of ownership of shares of
the series. The Declaration of Trust also provides that the applicable series
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the series and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss because of
shareholder liability is limited to circumstances in which the Portfolio itself
would be unable to meet its obligations. 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 wrongdoing 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 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 affected 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
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that the continuation of a 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
Portfolios, (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 each Portfolio.
The financial statements and financial highlights of the Large Cap Growth
Equity 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 report 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 report 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.
CUSTODIANS AND SUB-CUSTODIANS. WTC, Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890-0001, serves as the Custodian to the Large Cap
Growth Equity Portfolio, the Large Cap Value Equity Portfolio, and the Small Cap
Equity Portfolio. Bankers Trust Company serves as custodian of the International
Equity Portfolio. PNC Bank, National Association, 1600 Market Street,
Philadelphia, Pennsylvania 19103, serves as the Sub-Custodian of the Large Cap
Growth Equity Portfolio, the Large Cap Value Equity Portfolio and the Small Cap
Equity Portfolio.
TRANSFER AGENT. PFPC Inc., 400 Bellevue Parkway, Wilmington, Delaware
19809, serves as the Fund's Transfer Agent and Dividend Paying Agent.
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 year ended December 31, 1997 and for the fiscal year ended
December 31, 1996; the Financial Highlights of the Large Cap Growth Equity
Portfolio 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 Large Cap Growth Equity Portfolio (formerly the Rodney Square Multi-Manager
Fund - Growth Portfolio) as of and for the fiscal year ended December 31, 1997
are attached hereto and incorporated herein.
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APPENDIX
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
REGULATION OF THE USE OF OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT
STRATEGIES. As discussed in the Prospectus, in managing a Portfolio, WTC or the
sub-advisers may engage in certain options, futures and forward currency
contract 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,
futures and forward currency contracts 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 regulations.
In addition to the products, strategies and risks described below and in
the Prospectus, WTC expects to discover additional opportunities in connection
with options, futures and forward currency contracts. These new opportunities
may become available as WTC develops new techniques, as regulatory authorities
broaden the range of permitted transactions and as new options, futures and
forward currency contracts are developed. WTC may utilize these opportunities to
the extent they are consistent with each Portfolio's investment objective and
limitations and permitted by applicable regulatory authorities. The registration
statement for the Portfolios will be supplemented to the extent that new
products and strategies involve materially different risks than those described
below and in the Prospectus.
COVER REQUIREMENTS. The Portfolios will not use leverage in their options,
futures, and in the case of the International Equity Portfolio, their forward
currency contract strategies. Accordingly, the Portfolios will comply with
guidelines established by the SEC with respect to coverage of these strategies
by either (1) setting aside cash or liquid, unencumbered, daily marked-to-market
securities in one or more segregated accounts with the Fund's custodian in the
prescribed amount; or (2) holding securities or other options or futures
contracts whose values are expected to offset ("cover") their obligations
thereunder. Securities, currencies, 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. With the exception of the International Equity Portfolio, a
Portfolio may purchase and write (sell) only those options on securities and
securities indices that are traded on U.S. exchanges. 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 International Equity Portfolio may
purchase and write (sell) options only on securities and securities indices that
are traded on foreign exchanges.
Each 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.
Each 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
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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.
Each 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 a Portfolio purchases a put option on a
security that it holds. If the value of the securities underlying the put option
falls below the value of the portfolio securities, the put option may not
provide complete protection against a decline in the value of the portfolio
securities.
Each 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.
Each 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.
Each 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.
Each 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
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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.
Each 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 a 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.
Each 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, each 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) each Portfolio will write only covered options, and each such
option will remain covered so long as the Portfolio is
obligated thereby; and
(2) no Portfolio will 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. A Portfolio may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If a 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
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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, a 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 a Portfolio to realize profits or limit losses on its options positions
prior to the exercise or expiration of the option. If a 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 a Portfolio is unable to effect a
closing purchase transaction with respect to covered options it has written, the
Portfolio will not be able to sell the underlying securities or dispose of
assets used as cover until the options expire or are exercised, and the
Portfolio may experience material losses due to losses on the option transaction
itself and in the covering securities.
In considering the use of options to enhance returns or for hedging
purposes, particular note should be taken of the following:
(1) The value of an option position will reflect, among other things,
the current market price of the underlying security or index, the
time remaining until expiration, the relationship of the exercise
price to the market price, the historical price volatility of the
underlying security or index, and general market conditions. For
this reason, the successful use of options depends upon 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.
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(5) A 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. Each Portfolio may engage in futures
strategies for certain non-trading bona fide hedging, risk management and
portfolio management purposes.
Each 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
portion of a 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 a 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. A 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 a 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, a 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.
The International Equity Portfolio may sell foreign currency futures
contracts to hedge against possible variations in the exchange rates of foreign
currencies in relation to the U.S. dollar. In addition, the Portfolio may sell
foreign currency futures contracts when a sub-adviser anticipates a general
weakening of foreign currency exchange rates that could adversely affect the
market values of the Portfolio's foreign securities holdings. In this case, the
sale of futures contracts on the underlying currency may reduce the risk to the
Portfolio of a reduction in market value caused by foreign currency exchange
rate variations and, by so doing, provide an alternative to the liquidation of
securities positions and resulting transaction costs. When a sub-adviser
anticipates a significant foreign currency exchange rate increase while
intending to invest in a security denominated in that currency, the Portfolio
may purchase a foreign currency futures contract to hedge against that increase
pending completion of the anticipated transaction. Such a purchase would serve
as a temporary measure to protect the Portfolio against any rise in the foreign
exchange rate that may add additional costs to acquiring the foreign security
position. The Portfolio may also purchase call or put options on foreign
currency futures contracts to obtain a fixed foreign exchange rate at limited
risk. The Portfolio may purchase a call option on a foreign currency futures
contract to hedge against a rise in the foreign exchange rate while intending to
invest in a security denominated in that currency. The Portfolio may purchase
put options on foreign currency futures contracts as a partial hedge against a
decline in the foreign exchange rates or the value of its foreign portfolio
securities. The Portfolio may write a call option on a foreign currency futures
contract as a partial hedge against the effects of declining foreign exchange
rates on the value of foreign securities.
FUTURES AND RELATED OPTIONS GUIDELINES. In view of the risks involved in using
the futures strategies that are described above, each Portfolio has adopted the
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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, a Portfolio is required to deposit with its 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 a
Portfolio upon termination of the transaction, assuming all obligations have
been satisfied. Under certain circumstances, such as periods of high volatility,
a 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 market." For example, when a 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, a 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 a Portfolio's obligations to or from a clearing organization.
Buyers and sellers of futures positions and options thereon can enter into
offsetting closing transactions, similar to closing transactions on options on
securities, by selling or purchasing an offsetting contract or option. Futures
contracts or options thereon may be closed only on an exchange or board of trade
providing a secondary market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract or related option may vary
either up or down from the previous day's settlement price. Once the daily limit
has been reached in a particular contract, no trades may be made that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses, because
prices could move to the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation of unfavorable
positions. In such event, it may not be possible for the 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 a Portfolio's use of futures contracts and related options,
particular note should be taken of the following:
A-6
<PAGE>
(1) Successful use by a 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, a 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 a 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, a 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, a 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
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 each 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, a 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.
A-7
<PAGE>
(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, a 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, a 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.
SPECIAL RISKS RELATED TO FOREIGN CURRENCY OPTIONS AND FUTURES CONTRACTS
Options and futures contracts on foreign currencies are affected by all of
those factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option or futures contract depends upon the
value of the underlying currency relative to the U.S. dollar. As a result, the
price of the International Equity Portfolio's position in a foreign currency
option or currency contract may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the use of foreign currency options or futures transactions, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(that is, less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options or futures markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options or
futures markets until they reopen.
As with other options and futures positions, the International Equity
Portfolio's ability to establish and close out such positions in foreign
currencies is subject to the maintenance of a liquid secondary market. Trading
of some such positions is relatively new. Although the Portfolio will not
purchase or write such positions unless and until, in WTC's opinion, the market
for them has developed sufficiently to ensure that the risks in connection with
such positions are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will exist
for a particular option or futures contract at any specific time. Moreover, the
Portfolio will not enter into OTC options that are illiquid if, as a result,
more than 15% of its net assets would be invested in illiquid securities.
Settlement of a foreign currency futures contract must occur within the
country issuing the underlying currency. Thus, the Portfolio must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign banking
A-8
<PAGE>
arrangements by U.S. residents, and it may be required to pay any fees, taxes
and charges associated with such delivery that are assessed in the issuing
country.
FORWARD CURRENCY CONTRACTS. The International Equity Portfolio may use forward
currency contracts to protect against uncertainty in the level of future foreign
currency exchange rates.
The Portfolio may enter into forward currency contracts with respect to
specific transactions. For example, when the Portfolio enters into a contract
for the purchase or sale of a security denominated in a foreign currency or
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds or anticipates purchasing, the Portfolio may desire
to "lock in" the U.S. dollar price of the security or the U.S. dollar equivalent
of such payment, as the case may be, by entering into a forward contract for the
sale, for a fixed amount of U.S. dollars, of the amount of foreign currency
involved in the underlying transaction. The Portfolio will thereby be able to
protect itself against a possible loss resulting from an adverse change in the
relationship between the currency exchange rates during the period between the
date on which the security is purchased or sold, or on which the payment is
declared, and the date on which such payments are made or received.
The Portfolio also may hedge by using forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of those
positions or to increase its exposure to foreign currencies that WTC or the
sub-advisers believe may rise in value relative to the U.S. dollar. For example,
when WTC or the sub-advisers believe that the currency of a particular foreign
country may suffer a substantial decline relative to the U.S. dollar, it may
enter into a forward contract to sell the amount of the former foreign currency
approximating the value of some or all of the Portfolio's securities holdings
denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Portfolio to purchase additional foreign currency on the spot (that is,
cash) market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is obligated
to deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the security holding if
the market value of the security exceeds the amount of foreign currency the
Portfolio is obligated to deliver. The projection of short-term currency market
movements is extremely difficult and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that
anticipated currency movements will not be accurately predicted, causing the
Portfolio to sustain losses on these contracts and transaction costs. Under
normal circumstances, consideration of the prospect for currency parities will
be incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, WTC and the sub-advisers believe
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Portfolio will be
served.
At or before the maturity date of a forward contract requiring the
Portfolio to sell a currency, the Portfolio may either sell a security holding
and use the sale proceeds to make delivery of the currency or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Portfolio will obtain, on the
same maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, the Portfolio may close out a forward contract requiring it
to purchase a specified currency by entering into a second contract entitling it
to sell the same amount of the same currency on the maturity date of the first
contract. The Portfolio would realize a gain or loss as a result of entering
into such an offsetting forward currency contract under either circumstance to
the extent the exchange rate or rates between the currencies involved moved
between the execution dates of the first contract and the offsetting contract.
A-9
<PAGE>
The cost to the Portfolio of engaging in forward currency contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. The use of forward currency contracts does not eliminate fluctuations
in the prices of the underlying securities the Portfolio owns or intends to
acquire, but it does fix a rate of exchange in advance. In addition, although
forward currency contracts limit the risk of loss due to a decline in the value
of the hedged currencies, at the same time they limit any potential gain that
might result should the value of the currencies increase.
Although the Portfolio values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Portfolio may convert foreign currency from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to the Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
A-10
<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 (Incorporated by reference to Exhibit 1 (d) to
Post-Effective Amendment No. 15 to this Registration Statement
filed on March 27, 1998).
(e) Amendment to Declaration of Trust of the Registrant dated June 15,
1998 (filed herewith).
<PAGE>
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, February 23,
1998 and June 15, 1998. (Incorporated by reference to Exhibit 4
(a) to Post-Effective Amendment No. 9 to this registration
statement filed on February 28, 1994; to Exhibit No. 1 (d) to
Post-Effective Amendment No. 15 to this Registration Statement
filed on March 27, 1998 and to Exhibit 1(e) 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. (a) Advisory Agreement between the Registrant and Wilmington Trust
Company dated February 23, 1998 (Incorporated by reference to
Exhibit No. 5 to Post-Effective Amendment No. 15 to this
Registration Statement filed March 27, 1998).
(i) Amended Schedule A to Advisory Agreement dated February 23,
1998 between the Registrant and Wilmington Trust Company
(filed herewith).
(ii) Amended Schedule B to Advisory Agreement dated February 23,
1998 between the Registrant and Wilmington Trust Company
(filed herewith).
(b) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Clemente Capital, Inc. (filed herewith).
(c) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Invista Capital Management, Inc. (filed herewith).
(d) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Scudder Kemper Investments, Inc. (filed herewith).
6. (a) Distribution Agreement between the Registrant and Rodney Square
Distributors, Inc., dated February 23, 1998. (Incorporated by
reference to Exhibit No. 6 (a) to Post-Effective Amendment No. 15
to this Registration Statement filed March 27, 1998).
(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. (a) 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).
<PAGE>
(b) Sub-Custodian Services Agreement dated February 2, 1998 between
PNC Bank, National Association and Wilmington Trust Company as
Custodian for the Registrant (filed herewith).
(i) Fee Agreement dated February 2, 1998 between the Registrant,
PNC Bank, National Association and Wilmington Trust Company
(filed herewith).
(c) Custodian Agreement between the Registrant on behalf of the
International Equity Portfolio and Bankers Trust Company (to be
filed).
9. (a) Transfer Agency Services Agreement dated February 2, 1998 between
the Registrant and PFPC Inc. (filed herewith).
(i) Fee Agreement dated February 2, 1998 between Registrant and
PFPC Inc. (filed herewith)
(ii) Amended Exhibit A to Transfer Agency Services Agreement dated
February 2, 1998 between the Registrant and PFPC, Inc. (to be
filed)
(b) Administration and Accounting Services Agreement dated February 2,
1998 between the Registrant and PFPC Inc. (filed herewith).
(i) Fee Agreement dated February 2, 1998 between Registrant and
PFPC Inc. (filed herewith).
(ii) Amended Exhibit A to Administration and Accounting Services
Agreement dated February 2, 1998 between the Registrant and
PFPC, Inc. (to be filed).
(c) Fund Secretarial Services Agreement between the Registrant and
Rodney Square Management Corporation (Incorporated by reference to
Exhibit No. 9 (c) to Post-Effective Amendment No. 15 to this
Registration Statement filed March 27, 1998).
10. (a) 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).
(b) Opinion of Kirkpatrick & Lockhart LLP with respect to Large Cap
Value Equity Portfolio, Small Cap Equity Portfolio and
International Equity Portfolio (filed herewith).
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 for Large Cap
Growth Equity Portfolio. (Incorporated by reference to Exhibit 16 to
Post-Effective Amendment No. 15 to this Registration Statement filed
on March 27, 1998).
17. Financial Data Schedule (filed herewith).
<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%
Rockland Corporation Delaware 100%
Rodney Square Distributors, Inc. Delaware 100%
Rodney Square Management Corporation Delaware 100%
Siobain VI, Ltd. Delaware 100%
Siobain VIII, Ltd. Delaware 100%
Wilmington Brokerage Services Company Delaware 100%
Wilmington Trust Commercial Services Co. Maryland 100%
WTC Corporate Services, Inc. Delaware 100%
100 West Tenth St. Corporation Delaware 100%
WT Investments Inc. Delaware 100%
PARTNERSHIPS
------------
Rodney Square Investors, L.P.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF MAY 31, 1998):
- ---------------------------------------------------------------
(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
-------------- -----------------------------
Shares of beneficial interest
$.01 par value
Large Cap Growth Equity Portfolio 376
<PAGE>
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
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
<PAGE>
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:
Business or Other Connections of Principal Executive
NAME OFFICERS AND DIRECTORS OF REGISTRANTS ADVISER
---- ----------------------------------------------------
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
<PAGE>
Business or Other Connections of Principal Executive
NAME OFFICERS AND DIRECTORS OF REGISTRANTS ADVISER
---- ----------------------------------------------------
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, 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
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
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
- --------------------------------
(a) The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and Offices
BUSINESS ADDRESS RODNEY SQUARE DISTRIBUTORS, INC. WITH REGISTRANT
- ---------------- -------------------------------- ---------------
James S. Gandolfo President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
Robert J. Christian Director President and
Trustee
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Nina M. Webb Director Vice President and
Rodney Square North Trustee
1100 North Market Street
Wilmington, DE 19890
(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 and PNC Bank, National Association 1600 Market Street, Philadelphia,
Pennsylvania.
ITEM 31. MANAGEMENT SERVICES.
- -----------------------------
Inapplicable.
ITEM 32. UNDERTAKINGS.
- ----------------------
Registrant hereby undertakes to furnish a copy of the Registrant's latest
Annual Report to Shareholders to each person to whom a copy of the Registrant's
Prospectus is delivered, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Post
Effective Amendment No. 17 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 is 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 16th day of June, 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 & June 16, 1998
- ---------------------------- Trustee
Robert J. Christian*
/s/ Eric Brucker Trustee June 16, 1998
- ----------------------------
Eric Brucker*
/s/ Fred L. Buckner Trustee June 16, 1998
- ----------------------------
Fred L. Buckner*
/s/ Nina M. Webb Trustee June 16, 1998
- ----------------------------
Nina M. Webb
/s/ John J. Quindlen Trustee June 16, 1998
- ----------------------------
John J. Quindlen*
/s/ John J. Kelley Vice President and June 16, 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 (Incorporated by reference to Exhibit 1 (d) to
Post-Effective Amendment No. 15 to this Registration Statement
filed on March 27, 1998).
(e) Amendment to Declaration of Trust of the Registrant dated June 15,
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; to Exhibit No. 1 (d) to Post-Effective
Amendment No. 15 to this Registration Statement filed on March 27,
1998 and to Exhibit 1(e) 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. (a) Advisory Agreement between the Registrant and Wilmington Trust
Company dated February 23, 1998 (Incorporated by reference to
Exhibit No. 5 to Post-Effective Amendment No. 15 to this
Registration Statement filed March 27, 1998).
(i) Amended Schedule A to Advisory Agreement dated February 23,
1998 between the Registrant and Wilmington Trust Company
(filed herewith).
(ii) Amended Schedule B to Advisory Agreement dated February 23,
1998 between the Registrant and Wilmington Trust Company
(filed herewith).
(b) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Clemente Capital, Inc. (filed herewith).
<PAGE>
(c) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Invista Capital Management, Inc. (filed herewith).
(d) Sub-Advisory Agreement between the Registrant on behalf of the
International Equity Portfolio, Wilmington Trust Company and
Scudder Kemper Investments, Inc. (filed herewith).
6. (a) Distribution Agreement between the Registrant and Rodney Square
Distributors, Inc., dated February 23, 1998. (Incorporated by
reference to Exhibit No. 6 (a) to Post-Effective Amendment No. 15
to this Registration Statement filed March 27, 1998).
(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. (a) 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).
(b) Sub-Custodian Services Agreement dated February 2, 1998 between
PNC Bank, National Association and Wilmington Trust Company as
Custodian for the Registrant (filed herewith).
(i) Fee Agreement dated February 2, 1998 between the Registrant,
PNC Bank, National Association and Wilmington Trust Company
(filed herewith).
(c) Custodian Agreement between the Registrant on behalf of the
International Equity Portfolio and Bankers Trust Company (to be
filed).
9. (a) Transfer Agency Services Agreement dated February 2, 1998 between
the Registrant and PFPC Inc. (filed herewith).
(i) Fee Agreement dated February 2, 1998 between Registrant and
PFPC Inc. (filed herewith)
(ii) Amended Exhibit A to Transfer Agency Services Agreement dated
February 2, 1998 between the Registrant and PFPC, Inc. (to be
filed)
(b) Administration and Accounting Services Agreement dated February 2,
1998 between the Registrant and PFPC Inc. (filed herewith).
(i) Fee Agreement dated February 2, 1998 between Registrant and
PFPC Inc. (filed herewith).
(ii) Amended Exhibit A to Administration and Accounting Services
Agreement dated February 2, 1998 between the Registrant and
PFPC, Inc. (to be filed).
(c) Fund Secretarial Services Agreement between the Registrant and
Rodney Square Management Corporation (Incorporated by reference to
Exhibit No. 9 (c) to Post-Effective Amendment No. 15 to this
Registration Statement filed March 27, 1998).
<PAGE>
10. (a) 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).
(b) Opinion of Kirkpatrick & Lockhart LLP with respect to Large Cap
Value Equity Portfolio, Small Cap Equity Portfolio and
International Equity Portfolio (filed herewith).
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 for Large Cap
Growth Equity Portfolio. (Incorporated by reference to Exhibit 16 to
Post-Effective Amendment No. 15 to this Registration Statement filed
on March 27, 1998).
17. Financial Data Schedule (filed herewith).
18. Plan adopted pursuant to Rule 18f-3 - None.
EXHIBIT 1 (e)
SUPPLEMENT TO DECLARATION
OF TRUST OF THE RODNEY SQUARE STRATEGIC EQUITY FUND
WHEREAS, Article XI, Section 7 of the Declaration of Trust of The Rodney
Square Strategic Equity Fund ("Trust") provides that the Declaration of Trust
may be amended if authorized by votes of the Trustees of the Trust; and
WHEREAS, at a meeting held on May 18, 1998, the Trustees approved the
amendments to the Declaration of Trust set forth below;
NOW THEREFORE, the Trust's Declaration of Trust is amended effective June
24, 1998, to add the following provisions in place of the existing corresponding
provisions of the Declaration of Trust as follows:
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 $0.01 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 four Series of Shares to be known as
the "Large Cap Growth Equity Portfolio," the "Large Cap Value Equity Portfolio,"
the "Small Cap Equity Portfolio" and the "International Equity Portfolio."
<PAGE>
* * * * *
Said Declaration of Trust dated August 19, 1986, as previously amended and
restated on November 10, 1986, and as amended on December 29, 1986, February 15,
1993 and March 12, 1998 is hereby ratified and confirmed in all other respects.
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 15th day of June, 1998.
/s/ Eric Brucker
------------------------
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
Exhibit 5(a)(i)
SCHEDULE A
THE RODNEY SQUARE STRATEGIC EQUITY FUND
PORTFOLIO LISTING
Large Cap Growth Equity Portfolio
Large Cap Value Equity Portfolio
Small Cap Equity Portfolio
International Equity Portfolio
Amended Schedule adopted on June 29, 1998.
Exhibit 5(a)(ii)
SCHEDULE B
THE RODNEY SQUARE STRATEGIC EQUITY FUND
FEE SCHEDULE
% of average
PORTFOLIO DAILY NET ASSETS
--------- ----------------
Large Cap Growth Equity Portfolio 0.55%
Large Cap Value Equity Portfolio 0.55%
Small Cap Equity Portfolio 0.60%
International Equity Portfolio 0.65%
Amended Schedule adopted on June 29, 1998.
Exhibit 5 (b)
THE RODNEY SQUARE STRATEGIC EQUITY FUND
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 16th day of June 1998, among
The Rodney Square Strategic Equity Fund, a Massachusetts business trust (the
"Fund"), Wilmington Trust Company (the "Adviser"), a corporation organized under
the laws of the State of Delaware and Clemente Capital, Inc., a corporation
organized under the laws of the State of New York (the "Sub-Adviser" ) .
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; and
WHEREAS, The International Equity Portfolio (the "Portfolio") is a
series of the Fund; and
WHEREAS, the Adviser acts as the investment adviser for the Portfolio
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities; and
WHEREAS, the Adviser is authorized under the Investment Advisory Agreement
to delegate its investment responsibilities to one or more persons or companies;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the Fund, the Adviser and the Sub-Adviser agree as follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund hereby appoints and employs the
Sub-Adviser as a discretionary portfolio manager, on the terms and
conditions set forth herein, of those assets of the Portfolio which the
Adviser determines to assign to the Sub-Adviser (those assets being
referred to as the "Portfolio Account"). The Adviser may, from time to
time, make additions to and withdrawals, including cash and cash
equivalents, from the Portfolio Account.
2. ACCEPTANCE OF APPOINTMENT. The Sub-Adviser accepts its appointment as a
discretionary portfolio manager and agrees to use its professional
judgment to make investment decisions for the Portfolio with respect to
the investments of the Portfolio Account and to implement such decisions
on a timely basis in accordance with the provisions of this Agreement.
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnish the Sub-Adviser with copies
properly certified or authenticated of each of the following and will
promptly provide the Sub-Adviser with copies properly certified or
authenticated of any amendment or supplement thereto:
(a) The Portfolio's Investment Advisory Agreement;
(b) The Fund's most recent effective registration statement and
financial statements as filed with the Securities and Exchange
Commission;
(c) The Fund's Declaration of Trust and By-Laws; and
(d) Any policies, procedures or instructions adopted or approved by the
Fund's Board of Trustees relating to obligations and services
provided by the Sub-Adviser.
4. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
Sections 6 and 7 hereof and Schedule A hereto (as amended from time to
time). In providing portfolio management services to the Portfolio
Account, the Sub-Adviser shall be subject to and shall conform to such
investment restrictions as are set forth in the 1940 Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Trustees of the Fund, such
specific instructions as the Board of Trustees may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions of
the Fund applicable to the Portfolio furnished pursuant to Section 5 of
this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto (as
amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect to
any decision made by it with respect to the investments of the Portfolio
Account.
5. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide the
Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Portfolio as contained in the Portfolio's
Prospectus and Statement of Additional Information, all amendments or
supplements to the Prospectus and Statement of Additional Information, and
any instructions adopted by the Board of Trustees supplemental thereto.
The Fund agrees, on an ongoing basis, to notify the Sub-Adviser in writing
of each change in the fundamental and non-fundamental investment policies
of the Portfolio and will provide the Sub-Adviser with such further
<PAGE>
information concerning the investment objective, policies, restrictions
and such other information applicable thereto as the Sub-Adviser may from
time to time reasonably request for performance of its obligations under
this Agreement. The Fund retains the right, on written notice to the
Sub-Adviser from the Fund or the Adviser, to modify any such objective,
policies or restrictions in any manner at any time.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment to
or delivery by the custodian designated by the Fund (the "Custodian"), or
such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof.
The Sub-Adviser shall advise the Custodian and confirm in writing to the
Fund and to the administrator designated by the Fund or any other
designated agent of the Fund, all investment orders for the Portfolio
Account placed by it with brokers and dealers at the time and in the
manner set forth in Schedule B hereto (as amended from time to time). The
Fund shall issue to the Custodian such instructions as may be appropriate
in connection with the settlement of any transaction initiated by the
Sub-Adviser. The Fund shall be responsible for all custodial arrangements
and the payment of all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Sub-Adviser shall have no
responsibility or liability with respect to custodial arrangements or the
acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Sub-Adviser to take appropriate action if the
Custodian fails to confirm in writing proper execution of the
instructions.
7. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers (including brokers that may be
affiliates of the Sub-Adviser to the extent permitted by Section 7(c)
hereof) to execute portfolio transactions initiated by the Sub-Adviser,
and for the selection of the markets on or in which the transactions will
be executed, subject to the following and subject to conformance with the
policies and procedures disclosed in the Fund's Prospectus and Statement
of Additional Information and the policies and procedures adopted by the
Fund's Board of Trustees.
(a) In executing portfolio transactions, the Sub-Adviser will give
primary consideration to securing the best price and execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
<PAGE>
brokers, subject to review by the Fund's Board of Trustees from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients. The Sub-Adviser is also authorized to
place orders with certain brokers for services deemed by the Adviser
to be beneficial for the Fund; and the Sub-Adviser shall follow the
directions of the Adviser or the Fund in this regard.
(b) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the best price and execution. In such event,
allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
(c) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser or any Sub-Adviser for any
Portfolio of the Fund; (ii) a principal underwriter of the Fund's
shares; or (iii) an affiliated person of such an affiliated person
or principal underwriter. The Adviser agrees that it will provide
the Sub-Adviser with a list of such brokers and dealers.
(d) The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
8. PROXIES. The Sub-Adviser will vote all proxies solicited by or with
respect to issuers of securities in which assets of the Portfolio Account
may be invested from time to time. At the request of the Sub-Adviser, the
Adviser shall provide the Sub-Adviser with its recommendations as to the
voting of such proxies.
9. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
10. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of the
Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
<PAGE>
11. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges that
the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 7(b) hereof, the Fund agrees that the
Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Portfolio Account, provided
that the Sub-Adviser acts in good faith, and provided further, that it is
the Sub-Adviser's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Account over a period of time on
a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objective and policies of the Portfolio and
any specific investment restrictions applicable thereto. 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 the Portfolio Account may have an
interest from time to time, whether in transactions which involve the
Portfolio Account or otherwise. The Sub-Adviser shall have no obligation
to acquire for the Portfolio Account a position in any investment which
any 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 the Portfolio Account or otherwise.
12. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser shall
furnish to each other from time to time certified copies of the
resolutions of their Boards of Trustees/Directors or executive committees,
as the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of the Fund, a Portfolio Account, the
Adviser and/or the Sub-Adviser.
13. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions
from the Fund or the Adviser, provided, however, that such acts or
omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 13 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
14. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information pertaining
to the Portfolio Account and the actions of the Sub-Adviser, the Adviser
and the Fund in respect thereof.
<PAGE>
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event
of such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the
Sub-Adviser.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Trustees of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Trustees of the
Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
18. REPRESENTATIONS. WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The
Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request. The Sub-Adviser agrees to keep confidential all
records of the Fund and information relating to the Fund, unless the
release of such records or information is
<PAGE>
otherwise consented to in writing by the Fund or the Adviser. The
Fund and the Adviser agree that such consent shall not be
unreasonably withheld and may not be withheld where the Sub-Adviser
may be exposed to civil or criminal contempt proceedings or when
required to divulge such information or records to duly constituted
authorities.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and has provided the Fund 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, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the
Sub-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 Sub-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,
the Sub-Adviser shall permit the Fund, its employees or its agents
to examine the reports required to be made to the Sub-Adviser by
Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise. The Sub-Adviser
will also immediately notify the Fund and the Adviser if it is
served or otherwise receives notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Portfolio.
19. AMENDMENT. This Agreement may be amended at any time, but only by written
agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and, to the extent required by the 1940
Act, the shareholders of the Portfolio in the manner required by the 1940
Act and the rules thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
<PAGE>
20. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time 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 vote of
a majority of the Directors who are not interested persons of the Fund,
the Adviser or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be continued
"annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
21. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a material breach of any provision thereof
by the party so notified or otherwise by the Fund, upon sixty (60)
days' written notice to the other parties hereto, but any such
termination shall not affect the status, obligations or liabilities
of any party hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the
Sub-Adviser, without the payment of any penalty immediately upon
written notice to the other parties hereto, in the event of a
material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a 20-day period after
notice of such breach or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
22. SHAREHOLDER LIABILITY. The Adviser and Sub-Adviser are hereby expressly
put on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust of the Fund and agree 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 and Sub-Adviser
further agree that they 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.
23. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" 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.
<PAGE>
24. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
25. 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.
26. GOVERNING LAW. To the extent that state law is not 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.
27. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto
embodies the entire agreement and understanding between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE RODNEY SQUARE STRATEGIC EQUITY FUND
on behalf of
THE INTERNATIONAL EQUITY PORTFOLIO
By: /s/ Robert J. Christian, President
-------------------------------------
Robert J. Christian, President
CLEMENTE CAPITAL, INC.
By: /s/ Leopoldo M. Clemente, Jr.
-------------------------------------
Leopoldo M. Clemente, Jr.
Title: President
WILMINGTON TRUST COMPANY
By: /s/ Robert J. Christian, Senior Vice President
--------------------------------------------------
Robert J. Christian, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C Fee Schedule
<PAGE>
SCHEDULE A
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate (i)
the monitoring of the Fund's compliance with the restrictions and limitations
applicable to the operations of a registered investment company and (ii) the
preparation of reports to the Board of Trustees, regulatory authorities and
shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or a
supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser, on
behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33 % of the voting securities of such issuer to be held in
the Portfolio Account (1940 Act ss.5(b)(1); IRC*
ss.851(b)(4)(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1 % of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act ss.12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5 % of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(iii)),
- -------------------------
* Internal Revenue Code
A-1
<PAGE>
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the
Adviser, or any other investment adviser to the Fund (1940 Act
ss.12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would cause
more than 3.33% of the outstanding voting securities of any insurance
company to be held in the Portfolio Account (1940 Act ss.12(d)(2)); or
4. purchase securities of or any interest in any person who is a broker, a
dealer, is engaged in the business of underwriting, is an investment
adviser to an investment company or is a registered investment adviser
under the Investment Advisers Act of 1940. unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues from
securities-related activities (1940 Act Rule 12d3-l(a)), or
b. despite the fact that such purchase is of any security of any issuer
that derived more than 15% of its gross revenues from
securities-related activities:
(1) immediately after the purchase of any equity security, the
Portfolio Account would not own more than 5% of outstanding
securities of that class of the issuer's equity securities
(1940 Act Rule 12d3-1(b)(1));
(2) immediately after the purchase of any debt security, the
Portfolio Account would not own more than 10% of the
outstanding principal amount of the issuer's debt securities
(1940 Act Rule 12d3-1(b)(2)); and
(3) immediately after the purchase, not more than 5% of the value
of the Portfolio Account's total assets would be invested in
the issuer's securities (1940 Act Rule 12d3-1(b)(3)).
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in the
number of Sub-Advisers and the proportionate decrease or increase in the
percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
A-2
<PAGE>
D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source other than dividends, interest, payments with respect to
securities loans (as defined in IRCss.512(a)(5)), and gains from the
sale or other disposition of stock or securities (as defined in the
1940 Actss.2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRCss.851(b)(2)).
A-3
<PAGE>
SCHEDULE B
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-l(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf of
the Portfolio Account for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-l(b)(9)). A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases (e.g. execution ability, execution and research) upon which the
allocation of orders for the purchase and sale of portfolio securities to
named brokers or dealers was effected, and the division of brokerage
commissions or other compensation on such purchase and sale orders. Such
record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers
to:
(1) the Fund,
(2) the Adviser,
(3) the Sub-Adviser, and
(4) any person other than the foregoing; and
B-1
<PAGE>
c. any other consideration other than the technical
qualifications of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
C. (Rule 31a-l(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is
made by a committee or group, a record shall be kept of the names of
its members who participate in the authorization. There shall be
retained as part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are required
to be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Sub-Adviser's
transactions with respect to the Portfolio Account.
- ----------------------
* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation, i.e., buy, sell, hold) or any internal reports or
portfolio adviser reviews.
B-2
<PAGE>
SCHEDULE C
FEE SCHEDULE
For the services to be provided to the Portfolio pursuant to the attached
Sub-Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee in
accordance with the following formula:
Monthly Fee = (.50% x net asset value of the Sub-Adviser's Portfolio Account on
the last business day of the month) / 12
Such fee shall be payable in arrears within 15 business days following the end
of each month.
C-1
Exhibit 5 (c)
THE RODNEY SQUARE STRATEGIC EQUITY FUND
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 3rd day of June 1998, among
The Rodney Square Strategic Equity Fund, a Massachusetts business trust (the
"Fund"), Wilmington Trust Company (the "Adviser"), a corporation organized under
the laws of the State of Delaware and Invista Capital Management, Inc. a
corporation organized under the laws of the State of Iowa (the "Sub-Adviser" ) .
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; and
WHEREAS, The International Equity Portfolio (the "Portfolio") is a series
of the Fund; and
WHEREAS, the Adviser acts as the investment adviser for the Portfolio
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities; and
WHEREAS, the Adviser is authorized under the Investment Advisory Agreement
to delegate its investment responsibilities to one or more persons or companies;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the Fund, the Adviser and the Sub-Adviser agree as follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund hereby appoints and employs the
Sub-Adviser as a discretionary portfolio manager, on the terms and
conditions set forth herein, of those assets of the Portfolio which the
Adviser determines to assign to the Sub-Adviser (those assets being
referred to as the "Portfolio Account"). The Adviser may, from time to
time, make additions to and withdrawals, including cash and cash
equivalents, from the Portfolio Account.
2. ACCEPTANCE OF APPOINTMENT. The Sub-Adviser accepts its appointment as a
discretionary portfolio manager and agrees to use its professional
judgment to make investment decisions for the Portfolio with respect to
the investments of the Portfolio Account and to implement such decisions
on a timely basis in accordance with the provisions of this Agreement.
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnish the Sub-Adviser with copies
properly certified or authenticated of each of the following and will
promptly provide the Sub-Adviser with copies properly certified or
authenticated of any amendment or supplement thereto:
(a) The Portfolio's Investment Advisory Agreement;
(b) The Fund's most recent effective registration statement and
financial statements as filed with the Securities and Exchange
Commission;
(c) The Fund's Declaration of Trust and By-Laws; and
(d) Any policies, procedures or instructions adopted or approved by the
Fund's Board of Trustees relating to obligations and services
provided by the Sub-Adviser.
4. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
Sections 6 and 7 hereof and Schedule A hereto (as amended from time to
time). In providing portfolio management services to the Portfolio
Account, the Sub-Adviser shall be subject to and shall conform to such
investment restrictions as are set forth in the 1940 Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Trustees of the Fund, such
specific instructions as the Board of Trustees may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions of
the Fund applicable to the Portfolio furnished pursuant to Section 5 of
this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto (as
amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect to
any decision made by it with respect to the investments of the Portfolio
Account.
5. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide the
Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Portfolio as contained in the Portfolio's
Prospectus and Statement of Additional Information, all amendments or
supplements to the Prospectus and Statement of Additional Information, and
any instructions adopted by the Board of Trustees supplemental thereto.
The Fund agrees, on an ongoing basis, to notify the Sub-Adviser in writing
of each change in the fundamental and non-fundamental investment policies
of the Portfolio and will provide the Sub-Adviser with such further
2
<PAGE>
information concerning the investment objective, policies, restrictions
and such other information applicable thereto as the Sub-Adviser may from
time to time reasonably request for performance of its obligations under
this Agreement. The Fund retains the right, on written notice to the
Sub-Adviser from the Fund or the Adviser, to modify any such objective,
policies or restrictions in any manner at any time.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment to
or delivery by the custodian designated by the Fund (the "Custodian"), or
such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof.
The Sub-Adviser shall advise the Custodian and confirm in writing to the
Fund and to the administrator designated by the Fund or any other
designated agent of the Fund, all investment orders for the Portfolio
Account placed by it with brokers and dealers at the time and in the
manner set forth in Schedule B hereto (as amended from time to time). The
Fund shall issue to the Custodian such instructions as may be appropriate
in connection with the settlement of any transaction initiated by the
Sub-Adviser. The Fund shall be responsible for all custodial arrangements
and the payment of all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Sub-Adviser shall have no
responsibility or liability with respect to custodial arrangements or the
acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Sub-Adviser to take appropriate action if the
Custodian fails to confirm in writing proper execution of the
instructions.
7. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers (including brokers that may be
affiliates of the Sub-Adviser to the extent permitted by Section 7(c)
hereof) to execute portfolio transactions initiated by the Sub-Adviser,
and for the selection of the markets on or in which the transactions will
be executed, subject to the following and subject to conformance with the
policies and procedures disclosed in the Fund's Prospectus and Statement
of Additional Information and the policies and procedures adopted by the
Fund's Board of Trustees.
(a) In executing portfolio transactions, the Sub-Adviser will give
primary consideration to securing the best price and execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
3
<PAGE>
brokers, subject to review by the Fund's Board of Trustees from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients. The Sub-Adviser is also authorized to
place orders with certain brokers for services deemed by the Adviser
to be beneficial for the Fund; and the Sub-Adviser shall follow the
directions of the Adviser or the Fund in this regard.
(b) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the best price and execution. In such event,
allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
(c) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser or any Sub-Adviser for any
Portfolio of the Fund; (ii) a principal underwriter of the Fund's
shares; or (iii) an affiliated person of such an affiliated person
or principal underwriter. The Adviser agrees that it will provide
the Sub-Adviser with a list of such brokers and dealers.
(d) The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
8. PROXIES. The Sub-Adviser will vote all proxies solicited by or with
respect to issuers of securities in which assets of the Portfolio Account
may be invested from time to time. At the request of the Sub-Adviser, the
Adviser shall provide the Sub-Adviser with its recommendations as to the
voting of such proxies.
9. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
10. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of the
Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
4
<PAGE>
11. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges that
the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 7(b) hereof, the Fund agrees that the
Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Portfolio Account, provided
that the Sub-Adviser acts in good faith, and provided further, that it is
the Sub-Adviser's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Account over a period of time on
a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objective and policies of the Portfolio and
any specific investment restrictions applicable thereto. 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 the Portfolio Account may have an
interest from time to time, whether in transactions which involve the
Portfolio Account or otherwise. The Sub-Adviser shall have no obligation
to acquire for the Portfolio Account a position in any investment which
any 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 the Portfolio Account or otherwise.
12. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser shall
furnish to each other from time to time certified copies of the
resolutions of their Boards of Trustees/Directors or executive committees,
as the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of the Fund, a Portfolio Account, the
Adviser and/or the Sub-Adviser.
13. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions
from the Fund or the Adviser, provided, however, that such acts or
omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 13 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
14. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information pertaining
to the Portfolio Account and the actions of the Sub-Adviser, the Adviser
and the Fund in respect thereof.
5
<PAGE>
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event
of such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the
Sub-Adviser.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Trustees of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Trustees of the
Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
18. REPRESENTATIONS. WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The
Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request. The Sub-Adviser agrees to keep confidential all
records of the Fund and information relating to the Fund, unless the
release of such records or information is
6
<PAGE>
otherwise consented to in writing by the Fund or the Adviser. The
Fund and the Adviser agree that such consent shall not be
unreasonably withheld and may not be withheld where the Sub-Adviser
may be exposed to civil or criminal contempt proceedings or when
required to divulge such information or records to duly constituted
authorities.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and has provided the Fund 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, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the
Sub-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 Sub-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,
the Sub-Adviser shall permit the Fund, its employees or its agents
to examine the reports required to be made to the Sub-Adviser by
Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise. The Sub-Adviser
will also immediately notify the Fund and the Adviser if it is
served or otherwise receives notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Portfolio.
19. AMENDMENT. This Agreement may be amended at any time, but only by written
agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and, to the extent required by the 1940
Act, the shareholders of the Portfolio in the manner required by the 1940
Act and the rules thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
7
<PAGE>
20. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time 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 vote of
a majority of the Directors who are not interested persons of the Fund,
the Adviser or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be continued
"annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
21. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a material breach of any provision thereof
by the party so notified or otherwise by the Fund, upon sixty (60)
days' written notice to the other parties hereto, but any such
termination shall not affect the status, obligations or liabilities
of any party hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the
Sub-Adviser, without the payment of any penalty immediately upon
written notice to the other parties hereto, in the event of a
material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a 20-day period after
notice of such breach or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
22. SHAREHOLDER LIABILITY. The Adviser and Sub-Adviser are hereby expressly
put on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust of the Fund and agree 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 and Sub-Adviser
further agree that they 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.
23. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" 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.
8
<PAGE>
24. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
25. 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.
26. GOVERNING LAW. To the extent that state law is not 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.
27. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto
embodies the entire agreement and understanding between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE RODNEY SQUARE STRATEGIC EQUITY FUND
on behalf of
THE INTERNATIONAL EQUITY PORTFOLIO
By: /s/ Robert J. Christian, President
------------------------------------------
Robert J. Christian, President
INVISTA CAPITAL MANAGEMENT, INC.
By: /s/ C. R. Barnes
-----------------------------------------
C. R. Barnes
Title: President
WILMINGTON TRUST COMPANY
By: /s/ Robert J. Christian, Senior Vice President
-----------------------------------------------
Robert J. Christian, Senior Vice
President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C Fee Schedule
9
<PAGE>
SCHEDULE A
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate (i)
the monitoring of the Fund's compliance with the restrictions and limitations
applicable to the operations of a registered investment company and (ii) the
preparation of reports to the Board of Trustees, regulatory authorities and
shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or a
supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser, on
behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33 % of the voting securities of such issuer to be held in
the Portfolio Account (1940 Act ss.5(b)(1); IRC*
ss.851(b)(4)(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1 % of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act ss.12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5 % of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(iii)),
- --------
* Internal Revenue Code
A-1
<PAGE>
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the
Adviser, or any other investment adviser to the Fund (1940 Act
ss.12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would cause
more than 3.33% of the outstanding voting securities of any insurance
company to be held in the Portfolio Account (1940 Act ss.12(d)(2)); or
4. purchase securities of or any interest in any person who is a broker, a
dealer, is engaged in the business of underwriting, is an investment
adviser to an investment company or is a registered investment adviser
under the Investment Advisers Act of 1940. unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues from
securities-related activities (1940 Act Rule 12d3-l(a)), or
b. despite the fact that such purchase is of any security of any issuer
that derived more than 15% of its gross revenues from
securities-related activities:
(1) immediately after the purchase of any equity security, the
Portfolio Account would not own more than 5% of outstanding
securities of that class of the issuer's equity securities
(1940 Act Rule 12d3-1(b)(1));
(2) immediately after the purchase of any debt security, the
Portfolio Account would not own more than 10% of the
outstanding principal amount of the issuer's debt securities
(1940 Act Rule 12d3-1(b)(2)); and
(3) immediately after the purchase, not more than 5% of the value
of the Portfolio Account's total assets would be invested in
the issuer's securities (1940 Act Rule 12d3-1(b)(3)).
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in the
number of Sub-Advisers and the proportionate decrease or increase in the
percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
A-2
<PAGE>
D. The Sub-Adviser will manage the Portfolio Account so that no more than 10%
of the gross income of the Portfolio Account is derived from any source
other than dividends, interest, payments with respect to securities loans
(as defined in IRCss.512(a)(5)), and gains from the sale or other
disposition of stock or securities (as defined in the 1940 Actss.2(a)(36))
or foreign currencies, or other income (including, but not limited to,
gains from options, futures, or forward contracts) derived with respect to
the Portfolio's business of investing in such stock, securities, or
currencies (IRCss.851(b)(2)).
A-3
<PAGE>
SCHEDULE B
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-l(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf of
the Portfolio Account for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-l(b)(9)). A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases (e.g. execution ability, execution and research) upon which the
allocation of orders for the purchase and sale of portfolio securities to
named brokers or dealers was effected, and the division of brokerage
commissions or other compensation on such purchase and sale orders. Such
record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers
to:
(1) the Fund,
(2) the Adviser,
(3) the Sub-Adviser, and
(4) any person other than the foregoing; and
B-1
<PAGE>
c. any other consideration other than the technical
qualifications of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
C. (Rule 31a-l(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained as
part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of portfolio securities and
such other information as is appropriate to support the authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are required
to be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Sub-Adviser's
transactions with respect to the Portfolio Account.
- -------------
* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation, i.e., buy, sell, hold) or any internal reports or
portfolio adviser reviews.
B-2
<PAGE>
SCHEDULE C
FEE SCHEDULE
For the services to be provided to the Portfolio pursuant to the attached
Sub-Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee in
accordance with the following formula:
Monthly Fee = (.50% x net asset value of the Sub-Adviser's Portfolio Account on
the last business day of the month) / 12
Such fee shall be payable in arrears within 15 business days following the end
of each month.
C-1
Exhibit 5 (d)
THE RODNEY SQUARE STRATEGIC EQUITY FUND
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 7th day of June 1998, among
The Rodney Square Strategic Equity Fund, a Massachusetts business trust (the
"Fund"), Wilmington Trust Company (the "Adviser"), a corporation organized under
the laws of the State of Delaware and Scudder Kemper Investments, Inc., a
corporation organized under the laws of the State of Delaware (the
"Sub-Adviser").
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; and
WHEREAS, The International Equity Portfolio (the "Portfolio") is a
series of the Fund; and
WHEREAS, the Adviser acts as the investment adviser for the Portfolio
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities; and
WHEREAS, the Adviser is authorized under the Investment Advisory Agreement
to delegate its investment responsibilities to one or more persons or companies;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, the Fund, the Adviser and the Sub-Adviser agree as follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund hereby appoints and employs the
Sub-Adviser as a discretionary portfolio manager, on the terms and
conditions set forth herein, of those assets of the Portfolio which the
Adviser determines to assign to the Sub-Adviser (those assets being
referred to as the "Portfolio Account"). The Adviser may, from time to
time, make additions to and withdrawals, including cash and cash
equivalents, from the Portfolio Account.
2. ACCEPTANCE OF APPOINTMENT. The Sub-Adviser accepts its appointment as a
discretionary portfolio manager and agrees to use its professional
judgment to make investment decisions for the Portfolio with respect to
the investments of the Portfolio Account and to implement such decisions
on a timely basis in accordance with the provisions of this Agreement.
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnish the Sub-Adviser with copies
properly certified or authenticated of each of the following and will
promptly provide the Sub-Adviser with copies properly certified or
authenticated of any amendment or supplement thereto:
(a) The Portfolio's Investment Advisory Agreement;
(b) The Fund's most recent effective registration statement and
financial statements as filed with the Securities and Exchange
Commission;
(c) The Fund's Declaration of Trust and By-Laws; and
(d) Any policies, procedures or instructions adopted or approved by the
Fund's Board of Trustees relating to obligations and services
provided by the Sub-Adviser.
4. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to place
orders for the execution of such portfolio transactions in accordance with
Sections 6 and 7 hereof and Schedule A hereto (as amended from time to
time). In providing portfolio management services to the Portfolio
Account, the Sub-Adviser shall be subject to and shall conform to such
investment restrictions as are set forth in the 1940 Act and the rules
thereunder, the Internal Revenue Code, applicable state securities laws,
applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Trustees of the Fund, such
specific instructions as the Board of Trustees may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions of
the Fund applicable to the Portfolio furnished pursuant to Section 5 of
this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto (as
amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect to
any decision made by it with respect to the investments of the Portfolio
Account.
5. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide the
Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Portfolio as contained in the Portfolio's
Prospectus and Statement of Additional Information, all amendments or
supplements to the Prospectus and Statement of Additional Information, and
any instructions adopted by the Board of Trustees supplemental thereto.
The Fund agrees, on an ongoing basis, to notify the Sub-Adviser in writing
of each change in the fundamental and non-fundamental investment policies
of the Portfolio and will provide the Sub-Adviser with such further
2
<PAGE>
information concerning the investment objective, policies, restrictions
and such other information applicable thereto as the Sub-Adviser may from
time to time reasonably request for performance of its obligations under
this Agreement. The Fund retains the right, on written notice to the
Sub-Adviser from the Fund or the Adviser, to modify any such objective,
policies or restrictions in any manner at any time.
6. TRANSACTION PROCEDURES. All transactions will be consummated by payment to
or delivery by the custodian designated by the Fund (the "Custodian"), or
such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof.
The Sub-Adviser shall advise the Custodian and confirm in writing to the
Fund and to the administrator designated by the Fund or any other
designated agent of the Fund, all investment orders for the Portfolio
Account placed by it with brokers and dealers at the time and in the
manner set forth in Schedule B hereto (as amended from time to time). The
Fund shall issue to the Custodian such instructions as may be appropriate
in connection with the settlement of any transaction initiated by the
Sub-Adviser. The Fund shall be responsible for all custodial arrangements
and the payment of all custodial charges and fees, and, upon giving proper
instructions to the Custodian, the Sub-Adviser shall have no
responsibility or liability with respect to custodial arrangements or the
acts, omissions or other conduct of the Custodian, except that it shall be
the responsibility of the Sub-Adviser to take appropriate action if the
Custodian fails to confirm in writing proper execution of the
instructions.
7. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers (including brokers that may be
affiliates of the Sub-Adviser to the extent permitted by Section 7(c)
hereof) to execute portfolio transactions initiated by the Sub-Adviser,
and for the selection of the markets on or in which the transactions will
be executed, subject to the following and subject to conformance with the
policies and procedures disclosed in the Fund's Prospectus and Statement
of Additional Information and the policies and procedures adopted by the
Fund's Board of Trustees.
(a) In executing portfolio transactions, the Sub-Adviser will give
primary consideration to securing the best price and execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
brokers, subject to review by the Fund's Board of Trustees from time
to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients. The Sub-Adviser is also authorized to
place orders with certain brokers for services deemed by the Adviser
to be beneficial for the Fund; and the Sub-Adviser shall follow the
directions of the Adviser or the Fund in this regard.
3
<PAGE>
(b) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the best price and execution. In such event,
allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
(c) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser or any Sub-Adviser for any
Portfolio of the Fund; (ii) a principal underwriter of the Fund's
shares; or (iii) an affiliated person of such an affiliated person
or principal underwriter. The Adviser agrees that it will provide
the Sub-Adviser with a list of such brokers and dealers.
(d) The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
8. PROXIES. The Sub-Adviser will vote all proxies solicited by or with
respect to issuers of securities in which assets of the Portfolio Account
may be invested from time to time. At the request of the Sub-Adviser, the
Adviser shall provide the Sub-Adviser with its recommendations as to the
voting of such proxies.
9. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
10. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of the
Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
4
<PAGE>
11. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges that
the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 7(b) hereof, the Fund agrees that the
Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing
or nature of action taken with respect to the Portfolio Account, provided
that the Sub-Adviser acts in good faith, and provided further, that it is
the Sub-Adviser's policy to allocate, within its reasonable discretion,
investment opportunities to the Portfolio Account over a period of time on
a fair and equitable basis relative to the Affiliated Accounts, taking
into account the investment objective and policies of the Portfolio and
any specific investment restrictions applicable thereto. 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 the Portfolio Account may have an
interest from time to time, whether in transactions which involve the
Portfolio Account or otherwise. The Sub-Adviser shall have no obligation
to acquire for the Portfolio Account a position in any investment which
any 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 the Portfolio Account or otherwise.
12. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser shall
furnish to each other from time to time certified copies of the
resolutions of their Boards of Trustees/Directors or executive committees,
as the case may be, evidencing the authority of officers and employees who
are authorized to act on behalf of the Fund, a Portfolio Account, the
Adviser and/or the Sub-Adviser.
13. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or instructions
from the Fund or the Adviser, provided, however, that such acts or
omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 13 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
14. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information pertaining
to the Portfolio Account and the actions of the Sub-Adviser, the Adviser
and the Fund in respect thereof.
5
<PAGE>
15. ASSIGNMENT. No assignment of this Agreement shall be made by the
Sub-Adviser, and this Agreement shall terminate automatically in the event
of such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the
Sub-Adviser.
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Trustees of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Trustees of the
Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
18. REPRESENTATIONS. WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The
Sub-Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act") or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request. The Sub-Adviser agrees to keep confidential all
records of the Fund and information relating to the Fund, unless the
6
<PAGE>
release of such records or information is otherwise consented to in
writing by the Fund or the Adviser. The Fund and the Adviser agree
that such consent shall not be unreasonably withheld and may not be
withheld where the Sub-Adviser may be exposed to civil or criminal
contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and has provided the Fund 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, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the
Sub-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 Sub-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,
the Sub-Adviser shall permit the Fund, its employees or its agents
to examine the reports required to be made to the Sub-Adviser by
Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise. The Sub-Adviser
will also immediately notify the Fund and the Adviser if it is
served or otherwise receives notice of any action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Portfolio.
19. AMENDMENT. This Agreement may be amended at any time, but only by written
agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Trustees and, to the extent required by the 1940
Act, the shareholders of the Portfolio in the manner required by the 1940
Act and the rules thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
7
<PAGE>
20. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time 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 vote of
a majority of the Directors who are not interested persons of the Fund,
the Adviser or the Sub-Adviser, cast in person at a meeting called for the
purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be continued
"annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
21. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a material breach of any provision thereof
by the party so notified or otherwise by the Fund, upon sixty (60)
days' written notice to the other parties hereto, but any such
termination shall not affect the status, obligations or liabilities
of any party hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the
Sub-Adviser, without the payment of any penalty immediately upon
written notice to the other parties hereto, in the event of a
material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a 20-day period after
notice of such breach or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
22. SHAREHOLDER LIABILITY. The Adviser and Sub-Adviser are hereby expressly
put on notice of the limitation of shareholder liability as set forth in
the Declaration of Trust of the Fund and agree 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 and Sub-Adviser
further agree that they 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.
23. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" 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.
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<PAGE>
24. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
25. 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.
26. GOVERNING LAW. To the extent that state law is not 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.
27. ENTIRE AGREEMENT. This Agreement and the Schedules attached hereto
embodies the entire agreement and understanding between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE RODNEY SQUARE STRATEGIC EQUITY FUND
on behalf of
THE INTERNATIONAL EQUITY PORTFOLIO
By: /s/ Robert J. Christian, President
--------------------------------------------
Robert J. Christian, President
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Nicholas Bratt
--------------------------------------------
Nicholas Bratt
Title: Managing Director
WILMINGTON TRUST COMPANY
By: /s/ Robert J. Christian, Senior Vice President
---------------------------------------------
Robert J. Christian, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C Fee Schedule
9
<PAGE>
SCHEDULE A
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate (i)
the monitoring of the Fund's compliance with the restrictions and limitations
applicable to the operations of a registered investment company and (ii) the
preparation of reports to the Board of Trustees, regulatory authorities and
shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or a
supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser, on
behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33 % of the voting securities of such issuer to be held in
the Portfolio Account (1940 Act ss.5(b)(1); IRC*
ss.851(b)(4)(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1 % of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act ss.12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5 % of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act ss.12(d)(1)(A)(iii)),
- --------
* Internal Revenue Code
A-1
<PAGE>
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the
Adviser, or any other investment adviser to the Fund (1940 Act
ss.12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would cause
more than 3.33% of the outstanding voting securities of any insurance
company to be held in the Portfolio Account (1940 Act ss.12(d)(2)); or
4. purchase securities of or any interest in any person who is a broker, a
dealer, is engaged in the business of underwriting, is an investment
adviser to an investment company or is a registered investment adviser
under the Investment Advisers Act of 1940. unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues from
securities-related activities (1940 Act Rule 12d3-l(a)), or
b. despite the fact that such purchase is of any security of any issuer
that derived more than 15% of its gross revenues from
securities-related activities:
(1) immediately after the purchase of any equity security, the
Portfolio Account would not own more than 5% of outstanding
securities of that class of the issuer's equity securities
(1940 Act Rule 12d3-1(b)(1));
(2) immediately after the purchase of any debt security, the
Portfolio Account would not own more than 10% of the
outstanding principal amount of the issuer's debt securities
(1940 Act Rule 12d3-1(b)(2)); and
(3) immediately after the purchase, not more than 5% of the value
of the Portfolio Account's total assets would be invested in
the issuer's securities (1940 Act Rule 12d3-1(b)(3)).
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in the
number of Sub-Advisers and the proportionate decrease or increase in the
percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
A-2
<PAGE>
D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source other than dividends, interest, payments with respect to
securities loans (as defined in IRCss.512(a)(5)), and gains from the
sale or other disposition of stock or securities (as defined in the
1940 Actss.2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRCss.851(b)(2)).
A-3
<PAGE>
SCHEDULE B
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-l(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf of
the Portfolio Account for, or in connection with, the purchase or sale of
securities, whether executed or unexecuted. Such records shall include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-l(b)(9)). A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases (e.g. execution ability, execution and research) upon which the
allocation of orders for the purchase and sale of portfolio securities to
named brokers or dealers was effected, and the division of brokerage
commissions or other compensation on such purchase and sale orders. Such
record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers
to:
(1) the Fund,
(2) the Adviser,
(3) the Sub-Adviser, and
(4) any person other than the foregoing; and
B-1
<PAGE>
c. any other consideration other than the technical
qualifications of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
C. (Rule 31a-l(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is
made by a committee or group, a record shall be kept of the names of
its members who participate in the authorization. There shall be
retained as part of this record: any memorandum, recommendation or
instruction supporting or authorizing the purchase or sale of portfolio
securities and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are required
to be maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Sub-Adviser's
transactions with respect to the Portfolio Account.
- -------------
* Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms (including
their recommendation, i.e., buy, sell, hold) or any internal reports or
portfolio adviser reviews.
B-2
<PAGE>
SCHEDULE C
FEE SCHEDULE
For the services to be provided to the Portfolio pursuant to the attached
Sub-Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee in
accordance with the following formula:
Monthly Fee = (.50% x net asset value of the Sub-Adviser's Portfolio Account on
the last business day of the month) / 12
Such fee shall be payable in arrears within 15 business days following the end
of each month.
C-1
Exhibit 8(b)
SUB-CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as custodian
("Custodian") for THE RODNEY SQUARE MULTI-MANAGER FUND, a Massachusetts business
trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, Custodian serves as custodian for the Fund pursuant to a custody
agreement with the Fund; and
WHEREAS, Custodian, with the consent of the Fund, wishes to retain PNC
Bank to provide sub-custodian services, and PNC Bank wishes to furnish
sub-custodian services, either directly or through an affiliate or affiliates,
as more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund, the Custodian and
any other person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed on the
Authorized Persons Appendix attached hereto and made a part hereof or any
<PAGE>
amendment thereto as may be received by PNC Bank. An Authorized Person's scope
of authority may be limited by the Fund by setting forth such limitation in the
Authorized Persons Appendix.
(d) "BOOK-ENTRY SYSTEM" means Federal Reserve Treasury book-entry system
for United States and federal agency securities, its successor or successors,
and its nominee or nominees and any book-entry system maintained by an exchange
registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "ORAL INSTRUCTIONS" mean oral instructions received by PNC Bank from
an Authorized Person or from a person reasonably believed by PNC Bank to be an
Authorized Person.
(g) "PNC BANK" means PNC Bank, National Association or a subsidiary or
affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(j) "SHARES" mean the shares of beneficial interest of any series or class
of the Fund.
(k) "PROPERTY" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit, or cause to be deposited,
with PNC Bank or which PNC Bank may from time to time hold for
the Fund;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by PNC Bank from time to time, from or on
behalf of the Fund.
2
<PAGE>
(l) "WRITTEN INSTRUCTIONS" mean written instructions signed by one
Authorized Person and received by PNC Bank. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. Custodian, with the consent of the Fund, hereby appoints
PNC Bank to provide sub-custodian services to the Fund, on behalf of each of its
investment portfolios (each, a "Portfolio"), and PNC Bank accepts such
appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PNC Bank or its
affiliates to provide services;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares;
(e) a copy of each Portfolio's administration agreement if PNC Bank is
not providing the Portfolio with such services;
(f) copies of any shareholder servicing agreements made in respect of
the Fund or a Portfolio; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
3
<PAGE>
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act only
upon Oral Instructions and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to this
Agreement. PNC Bank may assume that any Oral Instructions or Written
Instructions received hereunder are not in any way inconsistent with the
provisions of organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PNC Bank receives Written Instructions to the contrary.
(c) Custodian and the Fund, as applicable, agree to forward to PNC Bank
Written Instructions confirming Oral Instructions (except where such Oral
Instructions are given by PNC Bank or its affiliates) so that PNC Bank receives
the Written Instructions by the close of business on the same day that such Oral
Instructions are received. The fact that such confirming Written Instructions
are not received by PNC Bank shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral Instructions. Where
Oral Instructions or Written Instructions reasonably appear to have been
received from an Authorized Person, PNC Bank shall incur no liability to the
Fund in acting upon such Oral Instructions or Written Instructions provided that
PNC Bank's actions comply with the other provisions of this Agreement.
4
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6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PNC Bank is in doubt as to any action it should
or should not take, PNC Bank may request directions or advice, including Oral
Instructions or Written Instructions, from Custodian or the Fund, as applicable.
(b) ADVICE OF COUNSEL. If PNC Bank shall be in doubt as to any question of
law pertaining to any action it should or should not take, PNC Bank may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for Custodian, the Fund, the Fund's investment adviser or PNC Bank, at the
option of PNC Bank).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PNC Bank receives and the
advice it receives from counsel, PNC Bank shall be entitled to rely upon and,
after notice to Custodian and the Fund, to follow the advice of counsel. In the
event PNC Bank so relies on the advice of counsel, PNC Bank remains liable for
any action or omission on the part of PNC Bank which constitutes willful
misfeasance, bad faith, negligence or reckless disregard by PNC Bank of any
duties, obligations or responsibilities set forth in this Agreement.
(d) PROTECTION OF PNC BANK. PNC Bank shall be protected in any action it
takes or does not take in reliance upon Oral Instructions or Written
Instructions it receives from the Fund or directions or advice from counsel and
which PNC Bank believes, in good faith, to be consistent with those directions,
advice or Oral Instructions or Written Instructions. Nothing in this section
shall be construed so as to impose an obligation upon PNC Bank (i) to seek such
directions, advice or Oral Instructions or Written Instructions, or (ii) to act
in accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PNC Bank's properly taking or not taking such action.
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Nothing in this subsection shall excuse PNC Bank when an action or omission on
the part of PNC Bank constitutes willful misfeasance, bad faith, negligence or
reckless disregard by PNC Bank of any duties, obligations or responsibilities
set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to Custodian, the
Fund and any Portfolio, which are in the possession or under the control of PNC
Bank, shall be the property of Custodian and the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. Custodian, the Fund and
Authorized Persons shall have access to such books and records at all times
during PNC Bank's normal business hours. Upon the reasonable request of
Custodian or the Fund, copies of any such books and records shall be provided by
PNC Bank to Custodian, the Fund or to an authorized representative of either, at
the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees to keep confidential all records of
Custodian, the Fund and information relating to Custodian, the Fund and its
shareholders, unless the release of such records or information is otherwise
consented to, in writing, by Custodian or the Fund, as the case may be.
Custodian and the Fund agree that such consent shall not be unreasonably
withheld and may not be withheld where PNC Bank may be exposed to civil or
criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities, unless PNC Bank is indemnified by
Custodian or the Fund, as the case may be.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with Custodian's
and the Fund's independent public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to ensure that
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the necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not caused by PNC Bank's own willful misfeasance,
bad faith, negligence or reckless disregard of its duties or obligations under
this Agreement.
11. COMPENSATION. As compensation for sub-custody services rendered by PNC
Bank during the term of this Agreement, the Custodian, on behalf of each of the
Portfolios, will pay to PNC Bank a fee or fees as may be agreed to in writing
from time to time by the Custodian and PNC Bank.
12. INDEMNIFICATION. The Fund and Custodian, on behalf of each Portfolio,
agree to indemnify and hold harmless PNC Bank and its affiliates from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws 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 PNC Bank takes
(i) at the request or on the direction of or in reliance on the advice of the
Fund or Custodian or (ii) upon Oral Instructions or Written Instructions. The
Custodian's indemnification of PNC Bank is subject to the Fund's indemnification
of Custodian. Neither PNC Bank, nor any of its affiliates, shall be indemnified
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against any liability (or any expenses incident to such liability) arising out
of PNC Bank's or its affiliates' own willful misfeasance, bad faith, negligence
or reckless disregard of its duties under this Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf of
Custodian, the Fund or any Portfolio except as specifically set forth herein or
as may be specifically agreed to by PNC Bank in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within reasonable
limits, in performing services provided for under this Agreement. PNC Bank shall
be liable for any damages arising out of PNC Bank's failure to perform its
duties under this Agreement to the extent such damages arise out of PNC Bank's
willful misfeasance, bad faith, negligence or reckless disregard of its duties
under this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PNC Bank reasonably believes to be
genuine; or (B) subject to section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PNC Bank's control, including acts
of civil or military authority, national emergencies, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PNC Bank nor its affiliates shall be liable to Custodian, the Fund or to any
Portfolio for any consequential, special or indirect losses or damages which
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Custodian or the Fund may incur or suffer by or as a consequence of PNC Bank's
or its affiliates' performance of the services provided hereunder, whether or
not the likelihood of such losses or damages was known by PNC Bank or its
affiliates.
(d) Notwithstanding anything to the contrary contained herein, PNC Bank on
behalf of itself and any and all of its affiliates or assignees hereunder,
agrees to indemnify and hold harmless Custodian and its directors, officers and
employees from and against any and all damages, losses, costs, taxes, charges,
expenses, assessments, claims and liabilities, including, without limitation,
attorneys' fees and disbursements (collectively, "Losses"), arising directly
from any action or omission to act by PNC Bank or any of its affiliates or
assignees, as applicable, relating to this Agreement, including Losses arising
out of any threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative, except to the extent
such Losses were caused directly by the willful misfeasance, bad faith,
negligence or reckless disregard by Custodian of its duties under this
Agreement.
14. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. Custodian, for the account of the Fund, will
deliver or arrange for delivery to PNC Bank, all the Property owned by the
Portfolios, including cash received as a result of the distribution of Shares,
during the period that is set forth in this Agreement. PNC Bank will not be
responsible for such property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PNC Bank, acting upon Written
Instructions, shall open and maintain separate accounts in Custodian's name for
the benefit of the Fund using all cash received from or for the account of the
Fund, subject to the terms of this Agreement. In addition, upon Written
Instructions, PNC Bank shall open separate custodial accounts for each separate
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series or Portfolio of the Fund (collectively, the "Accounts") and shall hold in
the Accounts all cash received from or for the Accounts of the Fund specifically
designated to each separate series or Portfolio.
PNC Bank shall make cash payments from or for the Accounts of a Portfolio
only for:
(i) purchases of securities in the name of a Portfolio or PNC Bank
or PNC Bank's nominee as provided in sub-section (j) and for
which PNC Bank has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered to PNC
Bank;
(iii) payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, advisory, management
fees or similar expenses which are to be borne by a Portfolio,
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent, as agent for the shareholders, an
amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu of paying
the Fund's transfer agent, PNC Bank may arrange for the direct
payment of cash dividends and distributions to shareholders in
accordance with procedures mutually agreed upon from time to
time by and among the Fund, PNC Bank and the Fund's transfer
agent.
(v) payments, upon receipt of Written Instructions, in connection
with the conversion, exchange or surrender of securities owned
or subscribed to by the Fund and held by or delivered to PNC
Bank;
(vi) payments of the amounts of dividends received with respect to
securities sold short;
(vii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(viii)payments, upon Written Instructions, made for other proper
Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the Accounts.
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(c) RECEIPT OF SECURITIES; SUB-CUSTODIANS.
(i) PNC Bank shall hold all securities received by it for the
Accounts in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System. All such securities shall be held or disposed of only
upon Written Instructions of the Fund pursuant to the terms of
this Agreement. PNC Bank shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express terms of
this Agreement and upon Written Instructions, accompanied by a
certified resolution of the Fund's Board of Trustees,
authorizing the transaction. In no case may any member of the
Fund's Board of Trustees, or any officer, employee or agent of
the Fund withdraw any securities.
At PNC Bank's own expense and for its own convenience, PNC
Bank may enter into sub-custodian agreements with other United
States banks or trust companies to perform duties described in
this subsection (c). Such bank or trust company shall have an
aggregate capital, surplus and undivided profits, according to
its last published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of PNC Bank,
or at least twenty million dollars ($20,000,000) if such bank
or trust company is not a subsidiary or affiliate of PNC Bank.
In addition, such bank or trust company must be qualified to
act as custodian and agree to comply with the relevant
provisions of the 1940 Act and other applicable rules and
regulations. Any such arrangement will not be entered into
without prior written notice to the Fund.
PNC Bank shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Fund and each Portfolio harmless from its own acts or
omissions, under the standards of care provided for herein, or
the acts and omissions of any sub-custodian chosen by PNC Bank
under the terms of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PNC Bank, directly or
through the use of the Book-Entry System, shall:
(i) deliver any securities held for a Portfolio against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in
such Oral Instructions or Written Instructions, proxies,
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consents, authorizations, and any other instruments whereby
the authority of a Portfolio as owner of any securities may be
exercised;
(iii) deliver any securities to the issuer thereof, or its agent,
when such securities are called, redeemed, retired or
otherwise become payable; provided that, in any such case, the
cash or other consideration is to be delivered to PNC Bank;
(iv) deliver any securities held for a Portfolio against receipt of
other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege;
(v) deliver any securities held for a Portfolio to any protective
committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be stated in
said Oral Instructions or Written Instructions to be for the
purpose of effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Fund;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation to
secure any loan incurred by the Fund on behalf of that
Portfolio; provided, however, that securities shall be
released only upon payment to PNC Bank of the monies borrowed,
except that in cases where additional collateral is required
to secure a borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender
of the note or notes evidencing the loan;
(viii)release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on receipt of payment therefor;
and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the
securities;
(ix) release and deliver or exchange securities owned by the Fund
in connection with any conversion of such securities, pursuant
to their terms, into other securities;
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(x) release and deliver securities owned by the Fund for the
purpose of redeeming in kind shares of the Fund upon delivery
thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by the Fund
for other corporate purposes.
PNC Bank must also receive a certified resolution describing the
nature of the corporate purpose and the name and address of the
person(s) to whom delivery shall be made when such action is
pursuant to sub-paragraph d (xi).
(e) USE OF BOOK-ENTRY SYSTEM. The Fund shall deliver to PNC Bank certified
resolutions of the Fund's Board of Trustees approving, authorizing and
instructing PNC Bank on a continuous basis, to deposit in the Book-Entry System
all securities belonging to the Portfolios eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Portfolios, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. PNC Bank shall continue to
perform such duties until it receives Written Instructions or Oral Instructions
authorizing contrary actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of PNC Bank
shall identify by Book-Entry or otherwise those securities
belonging to each Portfolio. PNC Bank shall furnish to the
Fund a detailed statement of the Property held for each
Portfolio under this Agreement at least monthly and from time
to time and upon written request.
(ii) Securities and any cash of each Portfolio deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt of
securities and will deliver securities only upon the receipt
of money.
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(iii) All books and records maintained by PNC Bank which relate to
the Fund's participation in the Book-Entry System will at all
times during PNC Bank's regular business hours be open to the
inspection of Authorized Persons, and PNC Bank will furnish to
Custodian and the Fund all information in respect of the
services rendered as it may require.
PNC Bank will also provide Custodian and the Fund with such reports on its
own system of internal control as the Fund may reasonably request from time to
time.
(f) REGISTRATION OF SECURITIES. All Securities held for a Portfolio which
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for a Portfolio may be registered in the name of the Fund on
behalf of that Portfolio, PNC Bank, the Book-Entry System, a sub-custodian, or
any duly appointed nominees of the Fund, PNC Bank, Book-Entry System or
sub-custodian. The Fund reserves the right to instruct PNC Bank as to the method
of registration and safekeeping of the securities of the Fund. The Fund agrees
to furnish to PNC Bank appropriate instruments to enable PNC Bank to hold or
deliver in proper form for transfer, or to register in the name of its nominee
or in the name of the Book-Entry System, any securities which it may hold for
the Accounts and which may from time to time be registered in the name of the
Fund on behalf of a Portfolio.
(g) VOTING AND OTHER ACTION. Neither PNC Bank nor its nominee shall vote
any of the securities held pursuant to this Agreement by or for the account of a
Portfolio, except in accordance with Written Instructions. PNC Bank, directly or
through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notices, proxies and proxy soliciting materials to the registered
holder of such securities. If the registered holder is not the Fund on behalf of
a Portfolio, then PNC shall deliver such materials timely to the applicable
investment adviser for the Portfolio or such other party as may be identified
for such purpose in Written Instructions.
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(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of each Portfolio,
all income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise each Portfolio of such receipt and
credit such income, as collected, to each Portfolio's
custodian account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the Portfolio's
securities as a result of a stock dividend, share
split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to any
securities belonging to a Portfolio and held by PNC Bank
hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed,
or retired, or otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(l) for examination by a broker or dealer selling for
the account of a Portfolio in accordance with
street delivery custom;
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(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the
Fund on behalf of a Portfolio or PNC Bank or
nominee of either, or for exchange of securities
for a different number of bonds, certificates, or
other evidence, representing the same aggregate
face amount or number of units bearing the same
interest rate, maturity date and call provisions,
if any; provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral Instructions or
Written Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of each Portfolio;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of each
Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued
with respect to any securities held by PNC Bank;
and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by the
Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name, on
behalf of a Portfolio, on such certificate as the
owner of the securities covered thereby, to the
extent it may lawfully do so.
(i) SEGREGATED ACCOUNTS.
(i) PNC Bank shall upon receipt of Written Instructions or Oral
Instructions establish and maintain segregated accounts on its
records for and on behalf of each Portfolio. Such accounts may
be used to transfer cash and securities, including securities
in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and
any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
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(B) upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA custodian
accounts for such shareholders holding Shares through IRA
accounts, in accordance with the Fund's prospectuses, the
Internal Revenue Code of 1986, as amended (including
regulations promulgated thereunder), and with such other
procedures as are mutually agreed upon from time to time by
and among Custodian, the Fund, PNC Bank and the Fund's
transfer agent.
(j) PURCHASES OF SECURITIES. PNC Bank shall settle purchased securities
upon receipt of Oral Instructions or Written Instructions on behalf of the Fund
or its investment advisers that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable,
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker through whom
the purchase was made. PNC Bank shall upon receipt of
securities purchased by or for a Portfolio pay out of the
moneys held for the account of the Portfolio the total amount
payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the
total amount payable as set forth in such Oral Instructions or
Written Instructions.
(k) SALES OF SECURITIES. PNC Bank shall settle sold securities upon
receipt of Oral Instructions or Written Instructions on behalf of
the Fund that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
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(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount payable
is the same as was set forth in the Oral Instructions or Written Instructions.
Subject to the foregoing, PNC Bank may accept payment in such form as shall be
reasonably satisfactory to it, and may deliver securities and arrange for
payment in accordance with the customs prevailing among dealers in securities.
(l) REPORTS; PROXY MATERIALS.
(i) PNC Bank shall furnish to Custodian and the Fund the following
reports:
(A) such periodic and special reports as Custodian and/or
the Fund may reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of each Portfolio, listing each
Portfolio securities belonging to each Portfolio with
the adjusted average cost of each issue and the market
value at the end of such month and stating the cash
account of each Portfolio including disbursements;
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon from time
to time between Custodian and/or the Fund and PNC Bank.
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(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as sub-custodian of the
Property and PNC Bank shall use its best efforts, within
reasonable limits, to transmit promptly to the Fund any class
action notices and tender or exchange offers. PNC Bank shall
be under no other obligation to inform the Fund as to such
actions or events.
(m) COLLECTIONS. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping thereof
upon receipt by PNC Bank) shall be at the sole risk of the Fund. If payment is
not received by PNC Bank within a reasonable time after proper demands have been
made, PNC Bank shall notify the Fund in writing, including copies of all demand
letters, any written responses, memoranda of all oral responses and shall await
instructions from the Fund. PNC Bank shall not be obliged to take legal action
for collection unless and until reasonably indemnified to its satisfaction. PNC
Bank shall also notify the Fund as soon as reasonably practicable whenever
income due on securities is not collected in due course and shall provide the
Fund with periodic status reports of such income collected after a reasonable
time.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first written above and shall continue for a period of five (5) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by the Fund, Custodian or PFPC without
penalty during a Renewal Term upon written notice given at least sixty (60) days
prior to termination. During either the Initial Term or the Renewal Terms, this
Agreement may also be terminated on an earlier date by the Fund, Custodian or
PFPC for cause.
With respect to the Fund, cause shall mean PFPC's material breach of this
Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material breach to constitute "cause" under this
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Paragraph, PFPC must receive written notice from the Fund specifying the
material breach and PFPC shall not have corrected such breach within a 30-day
period. Custodian may terminate this Agreement for cause immediately in the
event of the appointment of a conservator or receiver for PNC Bank or any
assignee or successor hereunder by the applicable regulator or upon the
happening of a like event by the applicable regulator or upon the happening of a
like event at the direction of an appropriate regulator agency or court of
competent jurisdiction. With respect to PFPC, cause includes, but is not limited
to, the failure of Custodian to pay the compensation set forth in writing
pursuant to Paragraph 11 of this Agreement after it has received written notice
from PFPC specifying the amount due and Custodian shall not have paid that
amount within a 30-day period. A constructive termination of this Agreement will
result where a substantial percentage of the Fund's assets are transferred,
merged or are otherwise removed from the Fund to another fund(s) that is not
serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, Custodian shall
pay to PFPC such compensation as may be due for the period prior to the date of
such termination. Any termination effected shall not affect the rights and
obligations of the parties under Paragraphs 12 and 13 hereof.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor) (b) if to Custodian at 1100 North Market Street,
Wilmington, DE, Attn: Corporate Custody (c) if to the Fund, c/o Wilmington Trust
Company, 1100 North Market St., Wilmington, DE., Attn: Asset Management Dept.;
or (d) if to none of the foregoing, at such other address as shall have been
20
<PAGE>
given by like notice to the sender of any such notice or other communication by
the other party. If notice is sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately. If
notice is sent by first-class mail, it shall be deemed to have been given five
days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. Subject to the provisions of Section 14(c)
hereof, PNC Bank may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of PNC Bank, National Association or
PNC Bank Corp., provided that (i) PNC Bank gives the Fund thirty (30) days'
prior written notice; (ii) the delegate (or assignee) agrees with PNC Bank and
the Fund to comply with all relevant provisions of the 1940 Act; and (iii) PNC
Bank and such delegate (or assignee) promptly provide such information as the
Fund may request, and respond to such questions as the Fund may ask relative to
the delegation (or assignment), including (without limitation) the capabilities
of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21
<PAGE>
21. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of conflicts
of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/Nicholas M. Marsini
----------------------------------------------
Title: Senior Vice President
WILMINGTON TRUST COMPANY
By: /s/Robert J. Christian
----------------------------------------------
Title: Senior Vice President
ACKNOWLEDGED AND AGREED TO:
THE RODNEY SQUARE MULTI-MANAGER FUND
By: /s/Robert J. Christian
----------------------------------
Title: President
23
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
- ---------------------------- ---------------------------------
24
Exhibit 8(b)(i)
February 2, 1998
THE RODNEY SQUARE MULTI-MANAGER FUND
Re: Sub-Custodian Services Fees
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation to be
paid to PNC Bank, National Association ("PNC") under the terms of a
Sub-Custodian Agreement dated February 2, 1998 between PNC and Rodney Square
Multi-Manager Fund ("you" or the "Fund") and Wilmington Trust Company ("WTC"),
as amended from time to time (the "Agreement"). Pursuant to Paragraph 11 of the
Agreement, and in consideration of the services to be provided to the Fund, WTC
will pay PNC the following:
1. Asset-based fees, payable monthly and calculated daily, based on the
average daily net assets of the Portfolios of the Fund in the aggregate:
.0150% of the first $2 billion of average daily net assets .0125% on the
next $1 billion of average daily net assets .0100% of the average daily
net assets over $3 billion
2. Each Portfolio shall pay PNC transaction charges as follows:
Physical delivery $15.00
Fed Book entry $ 7.50
Depository eligible $ 7.50
GNMA depository $15.00
Repo with PNC $ 7.50 -- Round-trip per piece of
collateral
Repo outside PNC $ 7.50 -- Round-trip per piece of
collateral
Options contract $30.00 -- Round-trip
Futures contract $ 5.00 -- For each margin variation
wire
A transaction includes each buy, sell, maturity, "receive", "deliver",
exercise or expiration of any of the types of items listed above.
3. Wilmington Trust Company shall pay PNC's out-of-pocket expenses
reasonably incurred on behalf of the Fund, including, but not limited to,
incremental costs in providing, federal express, confirmation fees and federal
reserve wire fees.
<PAGE>
4. The minimum monthly fee shall be $1,000 per Portfolio, exclusive of
transaction charges, balance debits, out-of-pocket charges and other
miscellaneous charges. PNC will waive its monthly minimum fee per portfolio when
aggregate asset levels reach $3 billion.
5. PNC will sweep any net excess cash balances daily into an investment
vehicle designated in writing by the Fund and agreed to by PNC and will credit
the Fund with such sweep earnings on a monthly basis. PNC will be paid .25% of
assets swept.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Nicholas M. Marsini
----------------------------------------
Title: Senior Vice President
Agreed and Accepted:
RODNEY SQUARE MULTI-MANAGER FUND
By: /s/ Robert J. Christian
-----------------------------------
Title: President
Agreed and Accepted:
WILMINGTON TRUST COMPANY
By: /s/ Robert J. Christian
-----------------------------------
Title: Senior Vice President
EXHIBIT 9(a)
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 by and between PFPC INC., a
Delaware corporation ("PFPC"), and THE RODNEY SQUARE MULTI-MANAGER FUND, a
Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
--------------------------------------
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
(c) "AUTHORIZED PERSON" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral Instructions
and Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment thereto
as may be received by PFPC. An Authorized Person's scope of authority may be
limited by the Fund by setting forth such limitation in the Authorized Persons
Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940
Act and the CEA.
(h) "SHARES" mean the shares of beneficial interest of any series or
class of the Fund.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to the Fund
2
<PAGE>
in accordance with the terms set forth in this Agreement. PFPC accepts such
appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or
its affiliates to provide services to the Fund and approving
this Agreement;
(b) A copy of the Fund's most recent effective registration
statement;
(c) A copy of the advisory agreement with respect to each
investment Portfolio of the Fund (each, a Portfolio);
(d) A copy of the distribution agreement with respect to each
class of Shares of the Fund;
(e) A copy of each Portfolio's administration agreements if PFPC
is not providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements made in respect
of the Fund or a Portfolio; and
(g) Copies (certified or authenticated where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply
with all applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any of
its Portfolios.
3
<PAGE>
5. INSTRUCTIONS.
------------
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an Authorized
Person, PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions comply with
the other provisions of this Agreement.
4
<PAGE>
6. RIGHT TO RECEIVE ADVICE.
-----------------------
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund, and the advice it receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice or Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral Instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
5
<PAGE>
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund, which
are in the possession or under the control of PFPC, shall be the property of the
Fund. Such books and records shall be prepared and maintained as required by the
1940 Act and other applicable securities laws, rules and regulations. The Fund
and Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
6
<PAGE>
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION.
---------------
(a) The Fund agrees to indemnify and hold harmless PFPC and its
affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws 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 (i) any action or
omission to act which PFPC takes (a) at the request or on the direction of or in
reliance on the advice of the Fund or (b) upon Oral Instructions or Written
Instructions or (ii) the acceptance, processing and/or negotiation of checks or
other methods utilized for the purchase of Shares. Neither PFPC, nor any of its
affiliates, shall be indemnified against any liability (or any expenses incident
to such liability) arising out of PFPC's or its affiliates' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
7
<PAGE>
obligations under this Agreement, provided that in the absence of a finding to
the contrary the acceptance, processing and/or negotiation of a fraudulent
payment for the purchase of Shares shall be presumed not to have been the result
of PFPC's or its affiliates own willful misfeasance, bad faith, negligence or
reckless disregard of such duties and obligations.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising form
PFPC's obligations pursuant to this Agreement (including, without limitation,
liabilities arising under the Securities Laws, and any state and foreign
securities and blue sky laws, and amendments thereto) and expenses, including
(without limitation) reasonable attorneys' fees and disbursements arising
directly or indirectly out of PFPC's or its nominees' own willful misfeasance,
bad faith, negligence or reckless disregard of its duties and obligations under
this Agreement.
(c) In order that the indemnification provisions contained in this
Section 12 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
8
<PAGE>
13. RESPONSIBILITY OF PFPC.
----------------------
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed to
by PFPC in writing. PFPC shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent such damages
arise out of PFPC's willful misfeasance, bad faith, negligence or reckless
disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC, shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be under any duty or obligation to
inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral Instruction or Written Instruction, notice
or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything else in this Agreement to the contrary
and except to the limited extent set forth in paragraph 13(d) below, PFPC shall
not be liable to the Fund for any consequential or special losses or damages
("Special Damages") which the Fund may incur as a consequence of PFPC's
performance of the services provided hereunder.
9
<PAGE>
(d) PFPC shall be liable for Special Damages incurred by the Fund
only to the extent that Special Damages arise out of PFPC's or its affiliates'
willful misfeasance, bad faith or negligence in performing, or reckless
disregard of, their duties under this Agreement; provided, however, the
liability of PFPC with respect to all such Special Damages arising during the
term of this Agreement and thereafter shall be limited to One Hundred Thousand
Dollars ($100,000) per transaction or series of directly related transactions;
related transactions may be related as to parties, timing or subject matter.
14. DESCRIPTION OF SERVICES.
-----------------------
(a) Services Provided on an Ongoing Basis, If Applicable.
----------------------------------------------------
(i) Furnish state-by-state registration reports;
(ii) Calculate 12b- l payments;
(iii) Maintain proper shareholder registrations;
(iv) Review new applications and correspond with
shareholders to complete or correct information;
(v) Direct payment processing of checks or wires;
(vi) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(vii) Countersign share certificates;
(viii) Prepare and mail to shareholders confirmation of
activity;
(ix) Provide toll-free lines for direct shareholder use,
plus customer liaison staff for on-line inquiry
response;
10
<PAGE>
(x) Mail duplicate confirmations to broker-dealers of
their clients' activity, whether executed through the
broker-dealer or directly with PFPC;
(xi) Provide periodic shareholder lists and statistics to
the clients;
(xii) Provide detailed data for underwriter/broker
confirmations;
(xiii) Prepare periodic mailing of year-end tax and statement
information;
(xiv) Coordinate and support the Fund's shares being traded
on the Fund/Serv system;
(xv) Notify on a timely basis the investment adviser,
accounting agent, and custodian of fund activity; and
(xvi) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(B) SERVICES PROVIDED BY PFPC UNDER ORAL INSTRUCTIONS OR
WRITTEN INSTRUCTIONS.
(i) Accept and post daily Fund purchases and redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in
writing by the shareholder).
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of
an investor, in the manner described in the Fund's prospectus, once it receives:
(i) A purchase order;
11
<PAGE>
(ii) Proper information to establish a shareholder account;
and
(iii) Confirmation of receipt or crediting of funds for such
order to the Fund's custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that
function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Trustees. Shares shall be redeemed and payment
therefor shall be made in accordance with the Fund's prospectus, when the
recordholder tenders Shares in proper form and directs the method of redemption.
If Shares are received in proper form, Shares shall be redeemed before the funds
are provided to PFPC from the fund's custodian (the "Custodian"). If the
recordholder has not directed that redemption proceeds be wired, when the
Custodian provide PFPC with funds, the redemption check shall be sent to and
made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of an
assignee or holder and transfer authorization is signed by the
recordholder; or
(ii) Transfer authorizations are signed by the recordholder when
Shares are held in book-entry form.
When a broker-dealer notifies PFPC of a redemption desired by a Customer, and
the Custodian provides PFPC with funds, PFPC shall prepare and send the
redemption check to the broker-dealer and made payable to the broker-dealer on
behalf of its Customer.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of
the Fund's Board of Trustees authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash, if provided for in the Fund's prospectus.
Such issuance or payment, as well as payments upon redemption as described
above, shall be made after deduction and payment of the required amount of funds
12
<PAGE>
to be withheld in accordance with any applicable tax laws or other laws, rules
or regulations. PFPC shall mail to the Fund's shareholders such tax forms and
other information, or permissible substitute notice, relating to dividends and
distributions paid by the Fund as are required to be filed and mailed by
applicable law, rule or regulation. PFPC shall prepare, maintain and file with
the IRS and other appropriate taxing authorities reports relating to all
dividends above a stipulated amount paid by the Fund to its Shareholders as
required by tax or other law, rule or regulation.
(f) SHAREHOLDER ACCOUNT SERVICES.
(i) PFPC may arrange, in accordance with the prospectus, for
issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC may arrange, in accordance with the prospectus, for
a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption
plan; and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written
Instructions, PFPC shall mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
13
<PAGE>
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.
(h) RECORDS. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or
Social Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid
and the date and price for all transactions on a
shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current maintenance
of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent
to perform any calculations contemplated or required by
this Agreement.
(i) LOST OR STOLEN CERTIFICATES. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
14
<PAGE>
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond or
such other appropriate indemnity bond issued by a surety
company approved by PFPC; and
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC and its
affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from
any Fund shareholder to inspect stock records, PFPC will notify the Fund and the
Fund will issue instructions granting or denying each such request. Unless PFPC
has acted contrary to the Fund's instructions, the Fund agrees and does hereby,
release PFPC from any liability for refusal of permission for a particular
shareholder to inspect the Fund's stock records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES. Upon
receipt of Written Instructions, PFPC shall cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
15. DURATION AND TERMINATION. This Agreement shall be effective on the
date first written above and shall continue for a period of five (5) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (l) year ("Renewal Terms") each
provided that it may be terminated by either party without penalty during a
Renewal Term upon written notice given at least sixty (60) days prior to
termination. During either the Initial Term or the Renewal Terms, this Agreement
may also be terminated on an earlier date by either party for cause.
15
<PAGE>
With respect to the Fund, cause shall mean PFPC's material breach of this
Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material breach to constitute "cause" under this
Paragraph, PFPC must receive written notice from the Fund specifying the
material breach and PFPC shall not have corrected such breach within a 30-day
period. With respect to PFPC, cause includes, but is not limited to, the failure
of the Fund to pay the compensation set forth in writing pursuant to Paragraph
11 of this Agreement after it has received written notice from PFPC specifying
the amount due and the Fund shall not have paid that amount within a 30-day
period. A constructive termination of this Agreement will result where a
substantial percentage of the Fund's assets are transferred, merged or are
otherwise removed from the Fund to another fund(s) that is not serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, the Fund shall
pay to PFPC such compensation as may be due for the period prior to the date of
such termination. Any termination effected shall not affect the rights and
obligations of the parties under Paragraphs 12 and 13 hereof.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to PFPC, at 400
Bellevue Parkway, Wilmington, Delaware 19809 Attn: President; (b) if to the
Fund, c/o Wilmington Trust Company 1100 North Market St., Wilmington, De., Attn:
Robert Christian or (c) if to neither of the foregoing, at such other address as
shall have been given by like notice to the sender of any such notice or other
communication by the other party. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
16
<PAGE>
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. USE OF FUND'S NAME. PFPC shall not use the name of the Fund or the
Portfolios in a manner not approved prior thereto, provided, however, that the
Fund shall approve all uses of its name which merely refer in accurate terms to
the appointment of PFPC hereunder or which are required by the SEC or a state
securities commission, and provided, further, that in no event shall such
approval be unreasonably withheld.
19. SECURITY. PFPC represents and warrants that, to the best of its
knowledge, the various procedures and systems which PFPC has implemented with
regard to safeguarding from loss or damage the Fund's blank checks, records and
other data and PFPC's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate. The parties
may review such systems and procedures on a periodic basis.
20. REGISTRATION AS A TRANSFER AGENT. PFPC represents that it is
currently registered with the appropriate Federal agency for the registration of
transfer agents, and that it will remain so registered for the duration of this
Agreement. PFPC agrees that it will promptly notify the Fund in the event of any
material change in its status as a registered transfer agent.
21. SHAREHOLDER LIABILITY. PFPC 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
17
<PAGE>
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 Portfolios. PFPC 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.
22. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) is
registered and qualified under the 1934 Act to act as a transfer agent; (iii)
the delegate (or assignee) agrees with PFPC and the Fund to comply with all
relevant provisions of the 1940 Act; and (iv) PFPC and such delegate (or
assignee) promptly provide such information as the Fund may request, and respond
to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate (or
assignee). In addition, PFPC, subject to the approval of the Fund, may
sub-contract any of its services to be performed hereunder to one or more
qualified sub-transfer agents, shareholder servicing agents or other financial
institutions to facilitate access to third-party distribution networks.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
24. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
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25. MISCELLANEOUS.
-------------
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ J. Richard Carnall
-------------------------------------
Title: Chairman
-------------------------------------
THE RODNEY SQUARE MULTI-MANAGER FUND
By: /s/ Robert J. Christian
---------------------------------------
Title: President
--------------------------------------
20
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
- ---------------------------------- --------------------------------
21
EXHIBIT 9(a)(i)
February 2, 1998
THE RODNEY SQUARE MULTI-MANAGER FUND
RE: TRANSFER AGENCY SERVICES FEES
-----------------------------
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation
to be paid to PFPC Inc. ("PFPC") for services provided under the terms of a
Transfer Agency Services Agreement dated February 2, 1998 between Rodney Square
Multi-Manager Fund ("you" or the "Fund") and PFPC (the "Agreement"). Pursuant to
paragraph 11 of the Agreement, and in consideration of the services to be
provided to the Fund, you will pay PFPC certain fees and reimburse PFPC for its
out-of-pocket expenses incurred on its behalf, as follows:
1) Account Fee:
Annual, Semi-Annual, Quarterly Dividend: $10.00 per account per annum
Monthly Dividend: $15.00 per account per annum
Daily Accrual Dividend: $18.00 per account per annum
Inactive Account: $ .30 per account per month
Fees shall be calculated and paid monthly based on one-twelfth (1/12th) of
the annual fee. An inactive account is defined as having a zero balance with
no dividend payable. Inactive accounts are purged annually after year-end
tax reporting.
2) Transaction Charges:
<TABLE>
<CAPTION>
<S> <C>
Master/Omnibus Account: $ 1.00 per purchase/redemption
Telephone/Wire Orders: $ 4.00 per purchase/redemption
New Account Opening: $ 3.50 per account (paper)
12b-1 Calculation: $ .25 per account, per cycle
IRA/Qualified Plan Processing: $ 10.00 per Social Security Number, per annum
$ 2.50 per distribution
$ 25.00 per transfer in or transfer out
Checkwriting $ 1.85 per account with checkwriting per annum
$ .10 per check transaction (non-return of checks)
$ .50 per check transaction (return of checks)
<PAGE>
</TABLE>
3) Minimum Base Fee:
Retail - $2,500 for each portfolio/class; excluding transaction charges and
out-of-pocket expenses.
Institutional - .03% of average daily net assets for each portfolio with
Account Fees waived.
Any fee or out-of-pocket expenses not paid within 30 days of the date of
the original invoice will be charged a late payment fee of 1% per month until
payment of the fees are received by PFPC.
The fee for the period from the date hereof until the end of the year
shall be prorated according to the proportion which such period bears to the
full annual period.
If the foregoing accurately sets forth our agreement and you intend to
be legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PFPC INC.
By: /s/ J. Richard Carnall
---------------------------
Title: Chairman
---------------------------
Agreed and Accepted:
RODNEY SQUARE MULTI-MANAGER FUND
By: /s/ Robert J. Christian
Title: President
- ---------------------------
Exhibit 9(b)
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of February 2, 1998 by and between THE RODNEY
SQUARE MULTI-MANAGER FUND, a Massachusetts business trust (the "Fund"), and PFPC
INC., a Delaware corporation ("PFPC"), which is an indirect wholly owned
subsidiary of PNC Bank Corp.
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to provide administration and
accounting services to its investment portfolios listed on Exhibit A attached
hereto and made a part hereof, as such Exhibit A may be amended from time to
time (each a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as
amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral Instructions
<PAGE>
and Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment thereto
as may be received by PFPC. An Authorized Person's scope of authority may be
limited by the Fund by setting forth such limitation in the Authorized Persons
Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" means the 1933 Act, the 1934 Act, the
----------------
1940 Act and the CEA.
(h) "SHARES" mean the shares of beneficial interest of any
series or class of the Fund.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to provide administration
and accounting services to the each of the Portfolios, in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment and agrees to
furnish such services.
2
<PAGE>
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or
its affiliates to provide services to each Portfolio and
approving this Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each
class of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect
to a Portfolio;
(f) a copy of any shareholder servicing agreement made in respect
of the Fund or a Portfolio; and
(g) copies (certified or authenticated, where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with
all applicable requirements of the Securities Laws, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any
Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral Instructions and Written Instructions.
3
<PAGE>
(b) PFPC shall be entitled to rely upon any Oral Instructions and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral Instruction or Written Instruction
received hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless
and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received. The
fact that such confirming Written Instructions are not received by PFPC shall in
no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral Instructions or Written
Instructions reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral Instructions
or Written Instructions provided that PFPC's actions comply with the other
provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
4
<PAGE>
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between
directions, advice or Oral Instructions or Written Instructions PFPC receives
from the Fund and the advice PFPC receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful rnisfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and Oral
Instructions or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral Instructions or Written Instructions, or (ii) to act in accordance with
such directions, advice or Oral Instructions or Written Instructions unless,
under the terms of other provisions of this Agreement, the same is a condition
of PFPC's properly taking or not taking such action. Nothing in this subsection
shall excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.
5
<PAGE>
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the Portfolios
which are in the possession or under the control of PFPC shall be the property
of the Fund. Such books and records shall be prepared and maintained as required
by the 1940 Act and other applicable securities laws, rules and regulations. The
Fund, Authorized Persons and any regulatory agency having authority over the
Fund shall have access to such books and records at all times during PFPC's
normal business hours for reasonable audit and inspection. Upon the reasonable
request of the Fund, copies of any such books and records shall be provided by
PFPC to the Fund or to an Authorized Person, at the Fund's request and expense.
(b) PFPC shall create, maintain and preserve the following records:
(i) all books and records with respect to each Portfolio's
books of account;
(ii) records of each Portfolio's securities transactions; and
(iii) all other books and records as PFPC is required to
maintain pursuant to Rule 31a-1 of the 1940 Act in
connection with the services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in writing, by
the Fund. The Fund agrees that such consent shall not be unreasonably withheld
and may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
6
<PAGE>
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund, on behalf of each Portfolio, will pay to PFPC
a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. INDEMNIFICATION.
(a) The Fund, on behalf of each Portfolio, agrees to indemnify and
hold harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state or foreign securities and blue
7
<PAGE>
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 (i) at the request or on the direction of or
in reliance on the advice of the Fund or (ii) upon Oral Instructions or Written
Instructions. Neither PFPC, nor any of its affiliates', shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied only
against the relevant Portfolio's assets and not against the assets of any other
investment portfolio of the Fund.
(b) PFPC agrees to indemnify and hold harmless the Fund from all
taxes, charges, expenses, assessments, claims and liabilities arising from
PFPC's obligations pursuant to this Agreement (including, without limitation,
liabilities arising under the Securities Laws, and any state and foreign
securities and blue sky laws, and amendments thereto) and expenses, including
(without limitation) reasonable attorney's fees and disbursements arising
directly or indirectly out of PFPC's or its nominees' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement.
(c) In order that the indemnification provisions contained in this
Section shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
8
<PAGE>
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund or any Portfolio except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder, to act in good
faith and to use its best efforts, within reasonable limits, in performing
services provided for under this Agreement. PFPC shall be liable for any damages
arising out of PFPC's failure to perform its duties under this Agreement to the
extent such damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral Instruction or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
9
<PAGE>
(c) Notwithstanding anything else in this Agreement to the contrary
and except to the limited extent set forth in paragraph 13(d) below, PFPC shall
not be liable to the Fund for any consequential or special losses or damages
("Special Damages") which the Fund may incur as a consequence of PFPC's
performance of the services provided hereunder.
(d) PFPC shall be liable for Special Damages incurred by the Fund
only to the extent that Special Damages arise out of PFPC's or its affiliates'
willful misfeasance, bad faith or gross negligence in performing, or reckless
disregard of, their duties under this Agreement; provided, however, the
liability of PFPC with respect to all such Special Damages arising during the
term of this Agreement and thereafter shall be limited to One Hundred Thousand
Dollars ($100,000) per transaction or series of directly related transactions;
related transactions may be related as to parties, timing or subject matter.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect to
each Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from
the investment adviser for a Portfolio (the "Adviser") and
transmit trades to the Fund's custodian (the "Custodian") for
proper settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
10
<PAGE>
(v) Reconcile cash and investment balances of the Fund with the
Custodian, and provide the Adviser with the beginning cash
balance available for investment purposes;
(vi) Update the cash availability throughout the day as required by
the Adviser;
(vii) Post to and prepare the Statement of Assets and Liabilities
and the Statement of Operations;
(viii)Calculate various contractual expenses (e.g., advisory and
custody fees);
(ix) Monitor the expense accruals and notify an officer of the Fund
of any proposed adjustments;
(x) Control all disbursements and authorize such disbursements
upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the net income of each Portfolio;
(xiii)Obtain security market quotes from independent pricing
services approved by the Adviser, or if such quotes are
unavailable, then obtain such prices from the Adviser, at the
Fund's expense and in either case calculate the market value
of each Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to
the Adviser;
(xv) Compute the net asset value of each Portfolio;
(xvi) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
dollar-weighted maturity; and
(xvii)Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
11
<PAGE>
Cash Statement
Schedule of Capital Gains and Losses
15. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with respect
to each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Fund
statistical data as requested on an ongoing basis;
(iv) Prepare and file the Fund's Federal and state tax returns;
(v) Prepare and file the Fund's Semi-Annual Reports with the SEC
on Form N-SAR;
(vi) Prepare and file, if necessary, with the SEC the Fund's
annual, semi-annual, and quarterly shareholder reports;
(vii) Prepare and file, if necessary, with the SEC the Fund's
annual, semi-annual, and quarterly shareholder reports;
(viii)Assist in the preparation of registration statements and
other filings relating to the registration of Shares;
(ix) Monitor sales of the Fund's shares and assure that the Fund
has properly registered such shares with the SEC and
applicable state authorities;
(x) Assist the investment adviser to monitor the Fund's compliance
with the investment restrictions and limitations imposed by
the 1940 Act, the state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental
investment policies and limitations set forth in the
Prospectus and SAI, and the investment restrictions and
limitations necessary for each Portfolio of the Fund to
qualify as a regulated investment company under Sub-chapter M
12
<PAGE>
of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor statute;
(xi) Subject to the direction and control of the Fund, coordinate
contractual relationships and communications between the Fund
and its contractual service providers;
(xii) Prepare and monitor an expense budget for each Portfolio,
including setting and revising accruals for each category of
expenses;
(xiii)Determine the amount of dividends and other distributions
payable to shareholders as necessary to maintain the
qualification as a regulated investment company of each
Portfolio of the Fund under the Code;
(xiv) Prepare and distribute to appropriate parties notices
announcing the declaration of dividends and other
distributions to shareholders;
(xv) Provide information regarding material developments in state
securities regulation; and
(xvi) Provide personnel to serve as officers of the Fund if so
elected by the Trustees.
16. DURATION AND TERMINATION. This Agreement shall be effective on the
date first written above and shall continue for a period of five (5) years (the
"Initial Term"). Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of one (1) year ("Renewal Terms") each
provided that it may be terminated by either party without penalty during a
Renewal Term upon written notice given at least sixty (60) days prior to
termination. During either the Initial Term or the Renewal Terms, this Agreement
may also be terminated on an earlier date by either party for cause.
With respect to the Fund, cause shall mean PFPC's material breach of this
Agreement causing it to fail to substantially perform its duties under this
Agreement. In order for such material breach to constitute "cause" under this
Paragraph, PFPC must receive written notice from the Fund specifying the
13
<PAGE>
material breach and PFPC shall not have corrected such breach within a 30-day
period. With respect to PFPC, cause includes, but is not limited to, the failure
of the Fund to pay the compensation set forth in writing pursuant to Paragraph
11 of this Agreement after it has received written notice from PFPC specifying
the amount due and the Fund shall not have paid that amount within a 30-day
period. A constructive termination of this Agreement will result where a
substantial percentage of the Fund's assets are transferred, merged or are
otherwise removed from the Fund to another fund(s) that is not serviced by PFPC.
Any notice of termination for cause shall be effective sixty (60) days
from the date of any such notice. Upon the termination hereof, the Fund shall
pay to PFPC such compensation as may be due for the period prior to the date of
such termination. Any termination effected shall not affect the rights and
obligations of the parties under Paragraphs 12 and 13 hereof.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809 Attn:
President; (b) if to the Fund, c/o of Wilmington Trust Company, 1100 N. Market
St., Wilmington, DE 19809 Attn: Robert Christian; or (c) if to neither of the
foregoing, at such other address as shall have been provided by like notice to
the sender of any such notice or other communication by the other party.
14
<PAGE>
18. AMENDMENTS. This Agreement, or any term thereof, may be changed
or waived only by written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
19. SHAREHOLDER LIABILITY. PFPC 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 Portfolios. PFPC 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.
20. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act;
and (iii) PFPC and such delegate (or assignee) promptly provide such information
as the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15
<PAGE>
22. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
23. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) CAPTIONS. 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.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) PARTIAL INVALIDITY. 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.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ J. Richard Carnall
----------------------------------
Title: Chairman
THE RODNEY SQUARE MULTI-MANAGER FUND
By: /s/ Robert J. Christian
----------------------------------
Title: President
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of February 2, 1998, is Exhibit A to that certain
Administration and Accounting Services Agreement dated as of February 2, 1998
between PFPC Inc. and The Rodney Square Multi-Manager Fund.
PORTFOLIOS
Growth Portfolio
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
- ---------------------------------- ------------------------------
Exhibit 9(b)(i)
February 2, 1998
THE RODNEY SQUARE MULTI-MANAGER FUND
Re: Administration and Accounting Services Fees
-------------------------------------------
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation to be
paid to PFPC Inc. ("PFPC") under the terms of an Administration and Accounting
Services Agreement dated February 2, 1998 between PFPC and Rodney Square
Multi-Manager Fund (the "Fund"), as amended from time to time (the "Agreement").
Pursuant to paragraph 11 of the Agreement, and in consideration of the services
to be provided, the Fund will pay PFPC an annual administration and accounting
fee, to be calculated daily and paid monthly. The Fund will also reimburse PFPC
for its out-of-pocket expenses reasonably incurred on its behalf, including, but
not limited to: postage, telephone, telex, overnight express charges, outside
independent pricing service charges, and travel expenses incurred for board
meeting attendance.
The annual administrative and accounting services fee will be an asset
based fee of .10% of each Portfolio's first $1 billion of average daily net
assets; .075% of each Portfolio's next $500 million of average daily net assets;
.05% of each Portfolio's next $500 million of average daily net assets; and
.035% of each Portfolio's average daily net assets in excess of $2 billion. Such
fees are exclusive of out-of-pocket expenses and shall be calculated daily and
paid monthly.
Any fee or out-of-pocket expenses not paid within 30 days of the date of
the original invoice will be charged a late payment fee of 1% per month until
payment of the fees are received by PFPC.
The fee for the period from the date hereof until the end of the year
shall be prorated according to the proportion which such period bears to the
full annual period.
<PAGE>
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.
Very truly yours,
PFPC INC.
By: /s/ J. Richard Carnall
----------------------------------
Title: Chairman
Agreed and Accepted:
RODNEY SQUARE MULTI-MANAGER FUND
By: /s/ Robert J. Christian
----------------------------
Title: Chairman
Exhibit 10(b)
KIRKPATRICK & LOCKHART LLP
1800 Massachusetts Avenue, N.W.
Washington, D. C. 20036-1800
Telephone 202-778-9000
June 24, 1998
The Rodney Square Strategic Equity Fund
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Ladies and Gentlemen:
You have requested our opinion, as counsel to The Rodney Square
Strategic Equity Fund ("Trust"), as to certain matters regarding the issuance of
Shares of the Trust. As used in this letter, the term "Shares" means the shares
of beneficial interest of the Large Cap Value Equity Portfolio, the Small Cap
Equity Portfolio and the International Equity Portfolio (collectively,
"Portfolios"), each of which is a series of the Trust, during the time that
Post-Effective Amendment No. 17 to the Trust's Registration Statement on Form
N-1A ("PEA") is effective and has not been superseded by another post-effective
amendment.
As such counsel, we have examined certified or other copies, believed
by us to be genuine, of the Trust's Declaration of Trust and by-laws and such
resolutions and minutes of meetings of the Trust's Board of Trustees as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) in the Commonwealth of
Massachusetts that in our experience are normally applicable to the issuance of
shares by unincorporated voluntary associations and to the Securities Act of
1933 ("1933 Act"), the Investment Company Act of 1940 ("1940 Act") and the
regulations of the Securities and Exchange Commission ("SEC") thereunder.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust and that, when sold in accordance
with the terms contemplated by the PEA, including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been validly issued, fully paid and non-assessable.
We note, however, that the Trust is an entity of the type commonly
known as a "Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that creditors of,
contractors with and claimants against the Trust or any series shall look only
to the assets of the Trust for the appropriate series for payment. It also
requires that notice of such disclaimer be given in each note, bond, contract,
certificate undertaking or instrument made or issued by the officers or the
trustees of the Trust on behalf of the Trust. The Declaration of Trust further
<PAGE>
The Rodney Square Strategic Equity Fund
June 24, 1998
Page 2
provides: (1) for indemnification from the assets of the Trust or the
appropriate series for all loss and expense of any shareholder held personally
liable for the obligations of the Trust or any series by virtue of ownership of
shares of the Trust or such series; and (2) for the Trust or appropriate series
to assume the defense of any claim against the shareholder for any act or
obligation of the Trust or series. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust or series would be unable to meet its obligations.
We hereby consent to this opinion accompanying the PEA when it is filed
with the SEC and to the reference to our firm in the statement of additional
information that is being filed as part of the PEA.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur J. Brown
---------------------
Arthur J. Brown
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 17 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.
/s/ Ernst & Young
Philadelphia, Pennsylvania
June 23, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> LARGE CAP GROWTH EQUITY 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>
