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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 19, 1998
THE RODNEY SQUARE
STRATEGIC EQUITY
FUND
PROSPECTUS
JUNE __, 1998
<PAGE>
TABLE OF CONTENTS
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
i
<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 __, 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 __, 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.
1
<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) ......................................... 0.53% 0.45% 0.46% 0.49%
12b-1 Fee ............................................................ 0.00% 0.00% 0.00% 0.00%
Other Expenses ....................................................... 0.22% 0.30% 0.34% 0.51%
---- ---- ---- ----
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 0.85%, 0.94% and 1.16%, 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. Without waivers, the Advisory Fee for the Large
Cap Growth Portfolio would be 0.55% of the Portfolio's average daily net
assets, and Total Operating Expenses would be 0.77% of its average daily net
assets. See "Management of the Fund" for additional information.
2
<PAGE>
***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.
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
5
<PAGE>
liquidity. The Portfolios also offer a way for investors to diversify their
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.
- --------------------------------------------------------------------------------
. 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:
. 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;
. options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of such issuers;
. options on indexes of the common stocks of such issuers; and
. 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:
. 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;
. options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of such issuers;
. options on indexes of the common stocks of such issuers; and
. 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:
. 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;
. options on, or securities convertible (such as convertible preferred
stock and convertible bonds) into, the common stock of such issuers;
. options on indexes of the common stocks of such issuers; and
. 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.
8
<PAGE>
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 no more than 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. Each sub-adviser will pursue its approach independently of the other
sub-advisers. Because it is unlikely that the Portfolio's sub-advisers will use
the same investment approach at any given point in time, the performance of one
or more other sub-advisers is expected to dampen 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
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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
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
those securities. The costs attributable to foreign investing are frequently
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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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HEDGING STRATEGIES. 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 ore 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.
BY MAIL. Shareholders redeeming their shares by mail should submit written
instructions with a guarantee of their signature by an institution acceptable to
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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
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
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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 Fund portfolios and the Rodney
Square Tax-Exempt Fund are determined at 12:00 noon, Eastern time, on each
Business Day of the Fund. The net asset values per share of the 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
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
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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.
Shortly after the end of each calendar year, each Portfolio notifies its
shareholders of the amounts of dividends and capital gain distributions paid (or
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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
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.
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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 annual deduction annual 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 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 10 YEARS
------ ------------ ------------ ------------
24.63% 26.96% 17.99% 15.33%
- ---------------
* Figures were calculated pursuant to a methodology established by the SEC. The
total return figures are as of December 31, 1997. Performance prior to December
1991 reflects management of the fund by WTC and two other unaffiliated
sub-advisers. 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). 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
__, 1998 were the same as those of the Small Cap Stock Fund immediately prior to
the transfer.
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 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.
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PERFORMANCE INFORMATION REGARDING THE
SMALL CAP STOCK FUND, A COLLECTIVE INVESTMENT FUND
Average Annual Total Return*
1 YEAR 3 YEARS 5 YEARS INCEPTION(10/91)
------ ------- ------- ----------------
25.23% 23.63% 17.90% 18.07%
* Figures were calculated pursuant to a methodology established by the SEC. The
total figures are as of December 31, 1997. The Small Cap Stock Fund's inception
date was October 1991. Performance prior to April 1997 reflects management of
the fund 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 __, 1998 transfer of assets.
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio
commenced operations on June __, 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 __, 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).
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
------ ------------ ------------ --------
3.39% 6.45% 11.15% 9.15%
- ----------------------
* Figures were calculated pursuant to a methodology established by the SEC. The
total return figures are as of December 31, 1997.
The above-quoted performance data is the performance of the International
Stock Fund for the period before the International Equity Portfolio commenced
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<PAGE>
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
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
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<PAGE>
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 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. Essentially, Clemente's investment approach contains the benefit of
group dynamics plus a strong element of individual responsibility. The process
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.
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
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<PAGE>
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.
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
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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.
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.
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 January 31, 1998, WTC owned by virtue of shared or sole voting or
investment power on behalf of its underlying customer accounts 62.5% of the
shares of the Large Cap Growth Equity Portfolio and 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
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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
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
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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.
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TRUSTEES
Eric Brucker
Fred L. Buckner
Robert J. Christian
John J. Quindlen
Nina M. Webb
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OFFICERS
Robert J. Christian, President
Nina M. Webb, Vice President
John J. Kelley, Vice President & Treasurer
Carl M. Rizzo, Esq., Secretary
Diane J. Drake, Esq., Assistant Secretary
Mary Jane Maloney, Assistant Secretary
John C. McDonnell, Assistant Treasurer
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INVESTMENT ADVISER
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
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ADMINISTRATOR,
TRANSFER AGENT AND
ACCOUNTING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
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DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
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