THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
PRESIDENT'S MESSAGE
- ------------------------------------------------------------------------------
DEAR SHAREHOLDER:
The management of The Rodney Square International Equity Fund (the
"Fund") would like to report to you on the Fund's activity for the fiscal year
ended October 31, 1995.
OPERATION SUMMARY:
Since early 1993, the Fund has been operated in a multi-manager format
with Wilmington Trust Company ("WTC") as "adviser" to the Fund, and with
Clemente Capital, Inc. ("Clemente") and Scudder Stevens & Clark, Inc.
("Scudder") as sub-advisers. We continue to believe that the size, complexity
and relative inefficiency of the international markets favors the use of
multiple managers.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE*
As a result of the difficult market for international investments, the
Fund's total return was -1.18% for the fiscal year ended October 31, 1995.
This result was somewhat lower than the Europe, Australia and Far East Index
("EAFE Index") which experienced a total return of -0.37% during the same
period. The U.S. market faired much better during the year with the Standard
& Poor's 500 Index ("S&P 500") providing a total return of 26.44%. Both the
EAFE Index and S&P 500 are widely followed, unmanaged, capitalization-weighted
indices of publicly traded stocks. The EAFE contains 1,020 companies
representing the stock markets of Europe, Australia, New Zealand, and the Far
East, while the S&P 500 contains 500 U.S. stocks.
To put this in perspective the following table shows that over the past
three years, the EAFE Index and the S&P 500 have performed as follows:
ANNUAL TOTAL RETURNS AS OF
--------------------------------------
10/31/95 10/31/94 10/31/93
-------- -------- --------
EAFE Index -0.37% 10.10% 37.46%
S&P 500 26.44% 3.87% 14.94%
Both indices returned a cumulative 51% over this three year period, but the
distribution of the international returns was "front-end" loaded, and this
past year was by far the most difficult of the last three for international
investors.
- ------------------------------------------------------------------------------
* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. AN
INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY WILMINGTON
TRUST COMPANY OR ANY OTHER BANKING INSTITUTION, THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY. THE TOTAL RETURNS SHOWN ABOVE DO NOT REFLECT THE
EFFECT OF THE MAXIMUM SALES LOAD OF 4.00%. RETURNS ARE HIGHER DUE TO THE
ADVISER'S MAINTENANCE OF THE FUND'S EXPENSES. SEE FINANCIAL HIGHLIGHTS ON
PAGE 16.
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
PRESIDENT'S MESSAGE -- CONTINUED
- ------------------------------------------------------------------------------
The following chart represents the performance of the Fund and that of
the EAFE Index, since the Fund's commencement of operations on November 2,
1987.
[GRAPHICAL REPRESENTATION (POINTS AND LINES) REQUIRED BY ITEM 5A OF FORM N-1A]
[FOLLOWING ARE GRAPH POINTS AND TOTAL RETURNS]
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS **
Nov-87 Oct-88 Oct-89 Oct-90 Oct-91 Oct-92 Oct-93 Oct-94 Oct-95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rodney Square
International
Equity $9,600 $10,616 $11,860 $11,225 $12,058 $10,681 $13,741 $15,079 $14,901
EAFE Index $10,000 $12,516 $13,535 $11,800 $12,620 $10,951 $15,054 $16,571 $16,510
</TABLE>
AVERAGE ANNUAL TOTAL RETURN *
1 YEAR 3 YEAR 5 YEAR INCEPTION **
---------------------------------------------
Rodney Square
International
Equity (1.18) 11.74 5.83 5.11**
EAFE Index (0.37) 14.66 6.95 6.47
In the first six months of the Fund's fiscal year, bear market conditions
gripped most of the world's stock markets with the notable exception of the
United States. The initial and most precipitous decline was in the Mexican
market, following that government's devaluation of the peso in December, 1994.
The resulting 63% decline in Mexican stocks from December, 1994 to February,
1995 led to a period of extreme underperformance in most emerging markets in
both Latin America and the Pacific Rim. While the stock markets of more
developed nations faired better than those of emerging markets, it was
largely through foreign currency gains against the dollar that the U.S.
investor was protected against widespread local stock price declines. During
the second half of the Fund's fiscal year, the situation began to reverse
itself as the macroeconomic environment took a turn for the positive. The
currency turmoil that had gripped the markets earlier in the year abated,
while global interest rates reversed their upward trend from early 1994. In
particular, rate cuts by U.S. and Japanese central banks in support of the
dollar gave an uplift to the investment backdrop.
- ------------------------------------------------------------------------------
* PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. CERTAIN
VALUES SHOWN ABOVE DO NOT REFLECT THE EFFECT OF THE MAXIMUM SALES LOAD OF
4.00%. RETURNS ARE HIGHER DUE TO THE ADVISER'S MAINTENANCE OF THE FUND'S
EXPENSES. SEE FINANCIAL HIGHLIGHTS ON PAGE 16.
** THE VALUES SHOWN FOR THE FUND REFLECT THE EFFECT OF THE MAXIMUM SALES
LOAD OF 4.00% ON A HYPOTHETICAL INITIAL INVESTMENT OF $10,000.
2
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
PRESIDENT'S MESSAGE -- CONTINUED
- ------------------------------------------------------------------------------
Scudder and Clemente have reacted to these shifts in different ways.
Scudder's most recent move was to raise its weighting in Japan from 18% to 23%
of the portfolio while simultaneously hedging against a declining yen.
Scudder believes that while political and economic underpinnings remain
fragile in Japan, there has been enough positive change to move its stance
from cautious to cautiously optimistic. First, some relief was seen in the
dollar/yen relationship, taking some of the deflationary heat off the economy.
In addition, there have been: (1) signs of governmental action to address the
nation's banking crisis; (2) a lowering of interest rates; (3) continued sharp
declines in the dollar trade surplus; (4) another much needed fiscal stimulus
package; and (5) new regulatory measures to encourage Japanese institutional
investment overseas. While Clemente has permitted its Japanese exposure to
decline modestly during the year, its remaining holdings have a large company
bias with an emphasis on electronics and basic industries. Clemente was also
successful in hedging a portion of its yen denominated position in the August
- - September period.
In general, both sub-advisers see a benign inflationary environment with
gradual economic growth that has led them to shift toward greater
overweightings in Europe. In particular, there has been a focus on European
companies in less cyclically sensitive industries and often ones with global
diversification characteristics that insulate them from currency volatility.
While Scudder favors industry groups such as energy, financials,
pharmaceuticals and consumer stocks, Clemente's thematic approach has led it
to a more selective list of publishing companies, banks, packaged food
producers and capital spending-related light manufacturers.
The Fund's exposure in the emerging markets is below what it might
otherwise be as a result of the turmoil in the Mexican market and the pressure
that a declining dollar brought in the first part of the year on most emerging
markets. For example, Clemente has reduced its combined position in Latin
America and the Pacific Rim (excluding Japan) from 23% at the beginning of the
Fund's fiscal year to 19% at year end. Now that the "Mexico" effect seems to
be over with respect to the Pacific Rim countries, we expect the sub-advisers
to begin adding positions again, particularly in Thailand, Malaysia and the
Philippines. The sub-advisers will continue to evaluate the Fund's exposure
in Latin America.
WTC continues to be optimistic about the future investment prospects for
the Rodney Square International Equity Fund. We invite your comments and
questions, and we thank you for your investment in the Fund.
Sincerely,
/s/ Martin L. Klopping
Martin L. Klopping
President
December 15, 1995
3
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS / OCTOBER 31, 1995
(Showing Percentage of Total Value of Net Assets)
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
COMMON STOCK - 90.4%
AUSTRALIA - 2.1%
Ampolex Ltd. (Oil Exploration)......... 19,266 $ 38,000
Australian Gas Light Co., Ltd.
(Gas & Oil Distributor).............. 22,760 78,560
Broken Hill Propriety Co.
(Metals - Diversified)............... 4,224 56,975
Coca Cola Amatil, Ltd.
(Soft Drink Distributor)............. 14,711 113,385
CRA, Ltd. (Metals Mining).............. 2,450 37,618
-----------
324,538
-----------
AUSTRIA - 1.7%
Austria Mikro Systeme International AG
(Electronic Manufacturer)............ 1,387 256,501
-----------
BRAZIL - 2.6%
Cesp-Cia Ener Sao Paulo ADR
(Electric Utility)*.................. 1,400 14,323
Cia Ener De Minas Gerais ADR
(Electric Utility)................... 700 15,138
Cia Vale Do Rio Doce ADR
(Mining & Rail Transportation)....... 1,300 52,377
Telebras - Sponsored ADR
(Telecommunications)................. 6,900 278,001
Usinas Sideburg Minas Cerais ADR
(Iron & Steel Manufacturer).......... 4,300 40,687
-----------
400,526
-----------
CANADA - 1.7%
Alcan Aluminum (Aluminum
Manufacturer)........................ 6 187
Canadian Pacific (Holding Co.)......... 5,127 81,877
Royal Plastics Group, Ltd.
(Plastics Manufacturer)*............. 12,000 161,375
Teck Corp. (B Shares)
(Mining & Metals).................... 1,000 18,397
-----------
261,836
-----------
CHINA - 0.4%
Huaneng Power International, Inc.
ADR (Electric Utility)*.............. 3,500 58,188
-----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
FINLAND - 3.0%
Kone Corp. (B Shares) (Elevator
Manufacturer)........................ 4,348 $ 395,273
Outokumpu Oy (A Shares) (Steel
& Copper Manufacturer)............... 4,000 63,425
Outokumpu Oy (A Warrants 1996)*........ 6,000 634
-----------
459,332
-----------
FRANCE - 6.2%
Carrefour Supermarche (Retail
Grocery)............................. 200 117,311
Compagnie De Saint Gobain (Building
Materials Producer).................. 471 56,081
LVMH (Moet-Hennessy) (Wines &
Spirits)............................. 400 79,487
Michelin (C.G.D.E.) (B Shares)
(Tire & Rubber)...................... 1,450 58,487
Pinault - Printemps (Retail
Department Stores)................... 230 49,792
Seita (Tobacco Products)............... 1,020 35,414
Sidel SA (Industrial Machinery)........ 765 265,292
Societe Generale (Banking &
Financial Services).................. 450 51,466
Societe Nationale Elf Aquitaine
(Petroleum Co.)...................... 1,100 74,810
Television Francaise (T.F.I.)
(Broadcasting, Radio & TV)........... 310 31,972
Total SA (B Shares) (Oil &
Gas Exploration)..................... 1,359 83,876
Union Assurancesfederale SA
(Insurance).......................... 400 42,480
-----------
946,468
-----------
GERMANY - 8.2%
Bankgesellschaft Berlin AG (Banking)... 693 202,696
Bayer AG (Chemical Production
and Marketing)....................... 120 31,653
Bayerische Vereinsbank AG (Banking).... 2,000 56,371
Deutsche Bank AG (Banking)............. 1,240 55,832
Mannesmann AG (Miscellaneous
Machinery)........................... 412 134,967
RWE AG (Manufacturer and Retailer
of Petroleum Products)............... 150 53,499
SAP AG (Computer Software Services).... 1,200 188,896
Schering AG (Pharmaceuticals).......... 900 62,668
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
Veba AG (Electric Utility)............. 3,780 $ 154,465
Viag AG (Metal Manufacturer)........... 172 69,517
Wella AG (Personal Care Products)...... 416 229,931
-----------
1,240,495
-----------
HONG KONG - 3.9%
First Pacific Co., Ltd. (Diversified
Holding Co.)......................... 50,000 57,555
HSBC Holdings (Financial
Services)............................ 22,181 322,745
Hutchinson Whampoa (Real Estate)....... 18,000 99,176
Sun Hung Kai Properties (Real
Estate).............................. 5,000 39,933
Swire Pacific, Ltd. (A Shares)
(General Trading and Real Estate).... 6,500 48,760
Television Broadcasts, Ltd.
(Broadcast, Radio & TV).............. 6,000 24,057
-----------
592,226
-----------
INDONESIA - 0.2%
PT HM Sampoerna (Tobacco).............. 3,500 32,394
-----------
IRELAND - 1.5%
Bank of Ireland (Banking).............. 34,870 231,434
-----------
ITALY - 3.2%
Instituto Nationale Assicurazioni
(Insurance).......................... 41,800 54,851
Societa Italiana Per L'Eserreizio
Delle Telecomunicazioni, P.A.
(Telecommunications)................. 134,000 203,116
Telecom Italia Mobile Spa
(Telecommunications)................. 134,000 224,519
-----------
482,486
-----------
JAPAN - 20.0%
Cannon Inc. (Photographic Equipment)... 8,000 137,291
Dai-Ni Demden Corp.
(Telecommunications)................. 16 130,074
Fujitsu, Ltd. (Computer
Manufacturer)........................ 12,000 143,568
Hitachi Metals, Ltd. (Iron & Steel
Manufacturer)........................ 24,000 296,549
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
Hitachi, Ltd. (Electronics)............ 9,000 $ 92,672
Ito Yokado Co. (Grocery Retail)........ 1,000 54,818
Itochu Corp. (Miscellaneous Retail).... 14,000 83,199
Kawasaki Steel First Section
(Steel Products)..................... 10,000 33,342
Keyence Corp. (Electronics)............ 800 98,850
Kyocera Corp. (Bioceramics
Manufacturer)........................ 4,000 328,715
Mabuchi Motor Co. (Automobile
Manufacturer)........................ 700 42,492
Matsushita Electric Industrial Co.,
Ltd. (Electronics)................... 6,000 85,317
Mitsui Trust & Banking (Banking)....... 24,000 192,522
Nec Corp. (Electronics)................ 22,000 291,254
NGK Spark Plug (Spark Plug
Manufacturer)........................ 4,000 54,917
Nippon Shokubai (Chemical
Manufacturer)........................ 4,000 34,990
Nisshin Steel Co., Ltd. (Steel
Manufacturer)........................ 9,000 33,450
Secom Co. (Electrical Engineering
and Electronics)..................... 1,000 65,311
Shin-Etsu Chemical Co. (Chemical
Producer)............................ 12,000 245,948
SMC Corp. (Pneumatic Equipment
Manufacturer)........................ 1,600 112,814
Sony Music Entertainment
(Miscellaneous Manufacturer)......... 1,100 47,248
Sumitomo Electric Industries
(Electronics)........................ 3,000 34,715
Sumitomo Metal Industries (Iron
& Steel Manufacturer)................ 22,000 59,761
Tokyo Electron, Ltd. (Industrial
Electronic Machines)................. 7,000 304,787
Tsutsumi Jewelry (Jewelry
Manufacturer)........................ 700 34,666
-----------
3,039,270
-----------
MALAYSIA - 2.1%
Maylayan Banking (Banking)............. 6,000 48,321
Renong Berhad (Diversified Holding
Co.)................................. 27,000 41,155
United Engineers, Ltd. (Engineering
& Construction)...................... 38,000 235,867
-----------
325,343
-----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
MEXICO - 1.3%
Grupo Televisa S.A. (Broadcasting
& Television)........................ 11,400 $ 195,226
-----------
NETHERLANDS - 7.4%
Aegon N.V. (Insurance)................. 3,425 129,773
Akzo N.V. (Chemicals).................. 380 43,194
Elsevier N.V. (Publisher).............. 3,170 40,906
Heineken N.V. (Beverage Manufacturer).. 250 44,279
International Nederlanden Groep
(Financial Services)................. 1,411 83,987
Philips Electronics N.V.
(Electronics)........................ 2,570 99,165
Polygram N.V. (Music Producer and
Publisher)........................... 5,680 353,900
Royal Dutch Petroleum (Petroleum
Exploration)......................... 370 45,849
Wolters Kluwer N.V. (Publishing
and Printing)........................ 3,185 289,307
-----------
1,130,360
-----------
NEW ZEALAND - 1.3%
Fletcher Challenge, Ltd. (Forest
Products & Paper).................... 46,817 116,393
Telecom Corp. of New Zealand, Ltd.
(Telecommunications)................. 21,320 88,400
-----------
204,793
-----------
NORWAY - 0.9%
Fokus Banken AS (Banking)*............. 5,300 28,033
Saga Petroleum AS (A Shares) (Oil
& Gas Exploration)................... 8,200 102,513
-----------
130,546
-----------
PHILIPPINES - 0.6%
Filinvest Land, Inc. (Real Estate
Developer)*.......................... 80,000 21,545
Metropolitan Bank & Trust
(Banking)............................ 3,009 55,568
SM Prime Holdings, Inc. (Developer
and Holding Co. of Shopping Malls)*.. 80,000 21,545
-----------
98,658
-----------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
SINGAPORE - 1.5%
Development Bank of Singapore, Ltd.
(Banking)............................ 20,250 $ 231,690
-----------
SPAIN - 0.5%
Repsol SA (Oil and Gas Exploration).... 2,595 77,334
-----------
SWEDEN - 2.0%
Astra AB (A Shares) (Pharmaceuticals).. 3,225 118,375
Skandia Forsakrings AB (Insurance)..... 2,800 70,975
SKF AB (B Shares) (Miscellaneous
Machinery)........................... 5,800 109,936
-----------
299,286
-----------
SWITZERLAND - 6.2%
BBC Brown Boveri Group Ptg.
Certificate (Energy Holding Co.)..... 125 144,522
Ciba-Geigy AG (Bearer Shares)
(Pharmaceuticals).................... 128 110,122
Nestle SA (Registered Shares)
(Food and Beverage Manufacturer)..... 287 299,824
Sandoz AG (Registered Shares)
(Pharmaceuticals).................... 100 82,258
Schweizerische Bankgesellschaft
(Banking & Financial Services)....... 68 73,426
SGS Societe Gen De Surveill
(Bearer Shares) (Commercial
Services)............................ 56 105,453
Sulzer AG (Miscellaneous Manufacturer). 63 40,097
Zurich Versicherungsgesellschaft
(Insurance).......................... 305 87,020
-----------
942,722
-----------
THAILAND - 1.3%
American Standard Sanitaryware, Ltd.
(Household Products)................. 1,000 17,095
Bangkok Bank Co., Ltd. (Banking)....... 2,800 28,940
Thai Farmers Bank Co. (Banking)........ 3,200 26,460
The Siam Commercial Bank, Ltd.
(Banking)............................ 11,000 128,562
-----------
201,057
-----------
TURKEY - 0.4%
Turkiye Garanti Bankasi A.S. ADR
(Banking)............................ 6,400 60,481
-----------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
------ ------------
UNITED KINGDOM - 10.2%
B.A.T. Industries plc (Tobacco)........ 30,388 $ 248,642
Bank of Ireland (Banking).............. 2,062 13,657
British Gas plc (Gas Utility).......... 14,400 54,712
Enterprise Oil Ord. (Oil & Gas
Exploration)......................... 3,938 20,798
Guinness plc (Brewery)................. 5,000 39,965
Kingfisher plc (Retail Department
Stores).............................. 11,000 82,461
Powergen plc (Electric Utility)........ 11,322 101,386
Reed International plc
(Publishing)......................... 20,000 303,327
Reuters Holdings plc (B Shares)
(Publishing)......................... 26,550 246,120
Smithkline Beecham (A Shares)
(Pharmaceuticals).................... 10,522 109,556
The R.T.Z. Corp. (Metals Mining)....... 8,265 114,013
Thorn EMI plc (Amusement and
Recreation Services)................. 5,467 126,957
Zeneca Group plc (Pharmaceuticals)..... 4,700 87,325
-----------
1,548,919
-----------
TOTAL COMMON STOCK (COST $11,950,995)............. 13,772,109
-----------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS - 1.9%
Amer Group, 6.25%, 06/15/03
(Convertible Bond) (COST $295,986)....... 330,000 293,700
-----------
TOTAL INVESTMENTS (COST $12,246,981)** - 92.3%....... 14,065,809
OTHER ASSETS AND LIABILITIES, NET - 7.7%............. 1,173,619
-----------
NET ASSETS - 100.0%.................................. $15,239,428
===========
* Non-income producing security.
** The cost for federal income tax purposes was $12,249,975. At October 31,
1995, net unrealized appreciation was $1,815,834. This consisted of
aggregate gross unrealized appreciation for all securities in which there
was an excess of market value over tax cost of $2,698,706 and aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $882,872.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
INVESTMENTS -- CONTINUED
- ------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
- ------------------------------------------------------------------------------
VALUE
% OF NET (NOTE 2)
ASSETS (IN THOUSANDS)
-------- -------------
Basic Industry......................... 10.42 $ 1,588
Financial.............................. 17.78 2,710
Producer Durables...................... 22.02 3,356
Consumer Cyclical...................... 4.17 636
Utilities.............................. 9.19 1,401
Media & Services....................... 20.76 3,164
Energy................................. 4.21 641
Health................................. 3.74 570
------ -------
Total Investment Portfolio............. 92.29 14,066
Other Assets and Liabilities, Net...... 7.71 1,173
------ -------
Total Net Assets....................... 100.00 $15,239
====== =======
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
ASSETS:
Investments, at market (identified cost
$12,246,981) (Note 2)...................... $14,065,809
Cash in interest bearing account............. 1,250,042
Forward foreign currency exchange
contracts held at market (identified
cost $249,147)............................. 245,692
Receivables:
Investments sold........................... 352,996
Dividends and interest..................... 36,470
Foreign taxes recoverable.................. 11,721
Forward foreign currency exchange
contracts sold (Note 6)................... 1,435,377
Other assets................................. 258
-----------
Total assets............................ 17,398,365
LIABILITIES:
Payables:
Investments purchased...................... $ 420,162
Fund shares redeemed....................... 2,036
Due to Adviser (Note 4).................... 3,819
Accrued expenses (Note 4).................. 65,558
Forward foreign currency exchange
contracts held........................... 249,147
Foreign currencies to deliver
(Note 6)................................. 1,418,215
----------
Total liabilities....................... 2,158,937
-----------
NET ASSETS, at market value $15,239,428
===========
NET ASSETS CONSIST OF:
Common stock................................. $ 12,557
Additional capital paid in................... 13,091,950
Undistributed net investment income.......... 55,838
Accumulated net realized gain (loss) on:
Investments................................ 250,757
Foreign currency transactions.............. (3,553)
Net unrealized appreciation on:
Investments................................ 1,818,828
Translation of assets and liabilities
in foreign currencies.................... 13,051
-----------
NET ASSETS, for 1,255,650 shares
outstanding................................ $15,239,428
===========
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
NET ASSET VALUE and redemption price
per share ($15,239,428 / 1,255,650
outstanding shares of common stock,
$0.01 par value)........................... $12.14
======
Maximum offering price per share
(100/96.00 of $12.14)...................... $12.65
======
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Fiscal Year Ended October 31, 1995
INVESTMENT INCOME:
Dividends................................... $ 317,578
Interest.................................... 108,840
---------
426,418
Less foreign taxes withheld................. (33,640)
---------
392,778
EXPENSES:
Advisory fee (Note 4)....................... $ 192,537
Administration fee (Note 4)................. 17,328
Accounting fee (Note 4)..................... 75,000
Distribution expenses (Note 4).............. 6,857
Custodian fees.............................. 60,308
Reports to shareholders..................... 11,534
Legal....................................... 24,496
Audit....................................... 36,000
Registration fees........................... 24,229
Directors' fees and expenses (Note 4)....... 5,400
Transfer Agency fees........................ 14,947
Other....................................... 15,178
----------
Total expenses before reimbursement
from Adviser............................ 483,814
Reimbursement of expenses from
Adviser (Note 4)........................ (146,874)
----------
Expenses, net............................. 336,940
---------
Net investment income....................... 55,838
---------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investments............................... 250,757
Foreign currency transactions............. (3,553)
Net unrealized appreciation (depreciation)
during the year on:
Investments............................. (983,343)
Translation of assets and liabilities
in foreign currencies................. 5,627
---------
Net realized and unrealized loss from
investments and foreign currency.......... (730,512)
---------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $(674,674)
=========
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FISCAL YEARS
ENDED OCTOBER 31,
--------------------------
1995 1994
----------- -----------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income (loss)............... $ 55,838 $ (51,649)
Net realized gain (loss) on:
Investments.............................. 250,757 1,993,499
Foreign currency transactions............ (3,553) (61,586)
Net unrealized appreciation (depreciation)
during the year on:
Investments............................ (983,343) 302,721
Translation of assets and liabilities
in foreign currencies................ 5,627 9,127
----------- -----------
Net increase (decrease) in net assets
resulting from operations................ (674,674) 2,192,112
----------- -----------
Distributions to shareholders from:
Net realized gain from investment
transactions ($1.00 and $0.19 per
share, respectively)..................... (1,850,722) (322,092)
----------- -----------
Increase (decrease) in net assets from Fund
share transactions (Note 5)................ (6,692,436) 3,642,020
----------- -----------
Increase (decrease) in net assets.......... (9,217,832) 5,512,040
NET ASSETS:
Beginning of year.......................... 24,457,260 18,945,220
----------- -----------
End of year (including undistributed
net investment income of $55,838
and $633,204, respectively).............. $15,239,428 $24,457,260
=========== ===========
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each year and other performance information derived from the financial
statements. It should be read in conjunction with the financial statements and
notes thereto.
FOR THE FISCAL YEARS ENDED OCTOBER 31,
------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
NET ASSET VALUE - BEGINNING OF
YEAR............................. $13.36 $12.35 $ 9.60 $11.64 $11.08
INVESTMENT OPERATIONS:
Net investment income (loss)..... 0.03 (0.03) 0.04 0.01 0.18
Net realized and unrealized gain
(loss) on investment and
foreign currency transactions.. (0.25) 1.23 2.71 (1.24) 0.62
------ ------ ------ ------ ------
Total from investment
operations................. (0.22) 1.20 2.75 (1.23) 0.80
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net investment income....... -- -- -- (0.05) (0.13)
From net realized gain on
investment transactions........ (1.00) (0.19) -- (0.76) (0.11)
------ ------ ------ ------ ------
Total distributions.......... (1.00) (0.19) -- (0.81) (0.24)
------ ------ ------ ------ ------
NET ASSET VALUE - END OF YEAR..... $12.14 $13.36 $12.35 $ 9.60 $11.64
====== ====== ====== ====== ======
TOTAL RETURN*..................... (1.18)% 9.74% 28.65% (11.42)% 7.42%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses**.................... 1.75% 1.75% 1.75% 1.75% 1.75%
Net investment income (loss).. 0.29% (0.21)% 0.37% 0.09% 1.12%
Portfolio turnover rate........... 67.1% 81.2% 148.4% 103.7% 74.5%
Net assets at end of year
(000 omitted)................... $15,239 $24,457 $18,945 $20,418 $43,413
* These results do not include the sales load. If the sales load had been
included, the returns would have been lower.
** The Adviser reimbursed the Fund for a portion of the Fund's expenses
amounting to $.09, $.05, $.19, $.05, and $.02 per share for each of the
five fiscal years in the period ended October 31, 1995, respectively. If
these expenses had been incurred by the Fund, the ratio of expenses to
average daily net assets would have been 2.51%, 2.15%, 3.51%, 2.20%, and
1.87%, for each of the five fiscal years in the period ended October 31,
1995, respectively.
16
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND. The Rodney Square International Securities Fund,
Inc. (the "Corporation"), a diversified, open-end management investment
company, was incorporated in Maryland on July 24, 1987, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). Its
Articles of Incorporation permit the Board of Directors to establish an
unlimited number of series each of which may issue separate classes of
shares. The Rodney Square International Equity Fund (the "Fund"), the only
series established, commenced investment operations on November 2, 1987.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies of the Fund:
SECURITY VALUATION. The Fund's securities, except investments with
remaining maturities of 60 days or less, are valued at their market value
as determined by their last sales price in the principal market in which
the securities are normally traded. Lacking any sales, a security will be
valued at the mean between the closing bid and ask price. Debt securities
having a maturity of 60 days or less are valued at cost with any premium
amortized or discount accreted over the period remaining until maturity
unless the Fund's Board of Directors determines that this does not
represent fair value. All other securities and assets are valued at fair
value as determined in good faith by or under the direction of the Board of
Directors.
FEDERAL INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. Distributions of net investment
income and net realized gains, if any, will be made annually. Additional
distributions may be made to the extent necessary to avoid the payment of a
4% excise tax.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments.
17
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and
the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the
end of the fiscal period, resulting from changes in exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into forward foreign currency exchange contracts.
Additionally, from time to time the Fund may enter into these contracts to
hedge certain foreign currency assets.
Foreign currency exchange contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts. Realized
gains or losses arising from such transactions are included in net realized
gain (loss) from foreign currency transactions.
OTHER. Investment security transactions are accounted for on a trade date
basis. The Fund uses the specific identification method for determining
realized gain or loss on investments for both financial and federal income
tax reporting purposes. Dividend income and distributions to shareholders
are recorded on the ex-dividend date, except if the ex-dividend date has
passed, certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income is recorded
on an accrual basis.
The Fund reclassified $633,204, $107,068, and $(887,537) from undistributed
net investment income, accumulated net realized gain on investments, and
accumulated net realized (loss) on foreign currency transactions,
respectively, to additional capital paid in. these reclassifications were
made to present undistributed income and accumulated gains (losses) on a
tax basis and have no impact on the net asset value of the Fund.
3. PURCHASES AND SALES OF INVESTMENT SECURITIES. Purchases and sales of
investment securities (excluding short-term investments) for the fiscal
year ended October 31, 1995 were $11,832,579 and $19,091,538, respectively.
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund employs
Wilmington Trust Company ("WTC"), a wholly owned subsidiary of Wilmington
Trust Corporation, a publicly held bank holding company, to furnish
investment advisory services to the Fund. Under WTC's Advisory Contract
with the Corporation, WTC acts as Investment Adviser and, subject to the
supervision of the Board of Directors, directs the investments of the Fund.
The Fund's assets are managed by two sub-advisers, each of which has
18
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
entered into an identical Sub-Advisory Agreement with WTC and the
Corporation. Each sub-adviser makes specific investments for the Fund in
accordance with the Fund's investment objective, policies and limitations,
and is compensated by WTC for the services it provides.
The Fund pays WTC a monthly fee at the annual rate of 1.00% of the average
daily net assets of the Fund. WTC has agreed to waive its advisory fee or
reimburse the Fund monthly to the extent that expenses (excluding taxes,
extraordinary expenses, brokerage commissions and interest) exceed an
annual rate of 1.75% of the Fund's average daily net assets. This
undertaking may be rescinded at any time in the future. The advisory fee
for the fiscal year ended October 31, 1995 amounted to $192,537. During
the fiscal year ended October 31, 1995, WTC reimbursed a portion of the
Fund's expenses in the amount of $146,874.
Rodney Square Management Corporation ("RSMC"), a wholly owned subsidiary of
WTC, serves as Administrator to the Fund pursuant to an Administration
Agreement with the Corporation dated December 31, 1992. As Administrator,
RSMC is responsible for services such as financial reporting, compliance
monitoring and corporate management. For the services provided, RSMC
receives a monthly administration fee from the Fund at an annual rate of
0.09% of the Fund's average daily net assets. The administration fee paid
to RSMC for the fiscal year ended October 31, 1995 amounted to $17,328.
Pursuant to a Distribution Agreement with the Corporation dated as of
December 31, 1992, Rodney Square Distributors, Inc. ("RSD"), a wholly owned
subsidiary of WTC, manages the Fund's distribution efforts and utilizes its
personnel to provide assistance and expertise in developing marketing plans
and materials. The Corporation's Board of Directors has adopted, and the
Fund's shareholders have approved, a distribution plan (the "12b-1 Plan")
pursuant to Rule 12b-1 under the 1940 Act to allow the Fund to reimburse
RSD for certain distribution activities and to allow WTC to incur certain
expenses the payment of which may be considered to constitute indirect
payment by the Corporation of distribution expenses of the Fund. The Board
of Directors has authorized a payment of up to 0.25% of the Fund's average
daily net assets annually to reimburse RSD for such expenses. For the
fiscal year ended October 31, 1995 such expenses amounted to $6,857.
RSMC determines the net asset value per share and provides accounting
services to the Fund pursuant to an Accounting Services Agreement with the
Corporation. For its services, RSMC receives an annual fee of $75,000 plus
an amount equal to 0.03% of that portion of the Fund's average daily net
assets over $100,000,000. For the fiscal year ended October 31, 1995,
RSMC's fees for accounting services amounted to $75,000.
RSMC serves as Transfer Agent and Dividend Paying Agent to the Fund
pursuant to a Transfer Agent Agreement with the Corporation dated December
31, 1992. The Fund pays RSMC $7 per account per year, subject to a minimum
fee of $1,000, per month, plus out-of-pocket expenses.
19
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
- ------------------------------------------------------------------------------
4. ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
The Directors of the Corporation who are "interested persons" of the
Corporation, WTC or its affiliates and all personnel of the Corporation or
WTC performing services related to research, statistical and investment
activities are paid by WTC or its affiliates. The fees and expenses of the
"non-interested" Directors amounted to $5,400 for the fiscal year ended
October 31, 1995.
5. FUND SHARES. At October 31, 1995, there were 100,000,000 shares of $0.01
par value common stock authorized. Transactions in shares of the Fund were
as follows:
FOR THE FISCAL YEAR FOR THE FISCAL YEAR
ENDED OCTOBER 31, 1995 ENDED OCTOBER 31,1994
---------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ----------
Shares sold................. 219,948 $ 2,630,182 576,988 $7,319,590
Shares issued to shareholders
in reinvestment of
distributions from net
investment income and net
realized gains............ 108,347 1,239,487 20,434 264,415
Shares redeemed............. (902,642) (10,562,105) (301,534) (3,941,985)
--------- ----------- --------- ----------
Net increase (decrease)..... (574,347) $(6,692,436) 295,888 $3,642,020
=========== ==========
Shares outstanding:
Beginning of year......... 1,829,997 1,534,109
--------- ---------
End of year............... 1,255,650 1,829,997
========= =========
6. COMMITMENTS. As of October 31, 1995, the Fund had entered into forward
foreign currency exchange contracts which contractually obligate the Fund to
deliver currencies at specified future dates. The open contracts were as
follows:
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE U.S. DOLLARS
- ----------------------------- ---------------------- ---------- --------------
Australian Dollar 12 U.S. Dollar 9 11/01/95 0
Japanese Yen 35,166,667 U.S. Dollar 357,204 03/18/96 5,740
Japanese Yen 35,166,667 U.S. Dollar 358,313 04/16/96 5,387
Japanese Yen 35,166,666 U.S. Dollar 366,319 09/20/96 5,490
Netherlands Guilder 489,067 U.S. Dollar 309,830 11/01/95 470
German Mark 61,527 U.S. Dollar 43,702 11/07/95 75
U.S. Dollar 249,147 Austrian
Schilling 2,437,902 11/06/95 (3,455)
20
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- ------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of The Rodney Square International Securities Fund,
Inc. and the Shareholders of The Rodney Square International Equity Fund:
We have audited the accompanying statement of assets and liabilities of The
Rodney Square International Equity Fund, including the schedule of
investments, as of October 31, 1995, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and financial highlights for each of
the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Rodney Square International Equity Fund at October 31, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Baltimore, Maryland
November 30, 1995
21
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
- -------------------------------------------
TAX INFORMATION
- ------------------------------------------------------------------------------
Pursuant to Section 852 of the Internal Revenue Code of 1986, the Fund
designates $1,283,047 ($0.6941 per share) as long-term capital gain dividend
for purposes of calculating its dividend paid deduction. In addition, during
the year ended October 31, 1995, the Fund recognized $66,639 of foreign source
income.
Due to the nature of its investments, the Fund pays a variety of foreign taxes
throughout the year. For the year ended October 31, 1995, the Fund paid
foreign taxes of $33,640. The Fund intends to make a distribution in December
1995 and, as in prior years, it will make an election under Section 853 of the
Internal Revenue Code. This election allows shareholders to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them.
In January 1996, shareholders will receive federal income tax information on
all distributions paid to their accounts in the calendar year 1995. Please
consult a tax advisor if you have questions about federal or state income tax
laws, or on how to prepare your tax return.
22
<PAGE>
DIRECTORS
Eric Brucker THE RODNEY SQUARE
Fred L. Buckne INTERNATIONAL
Martin L. Klopping EQUITY FUND
John J. Quindlen
------------------
OFFICERS
Martin L. Klopping, PRESIDENT
Joseph M. Fahey, Jr., VICE PRESIDENT [Graphic] Ceasar
Robert C. Hancock, VICE PRESIDENT & TREASURER Rodney upon his
Marilyn Talman, Esq., SECRETARY gallopping horse
Diane D. Marky, ASSISTANT SECRETARY facing right,
Connie L. Meyers, ASSISTANT SECRETARY reverse image on
Louis C. Schwartz, Esq., ASSISTANT SECRETARY dark background
John J. Kelley, ASSISTANT TREASURER
--------------------------------------------
INVESTMENT ADVISER
Wilmington Trust Company
------------------------
ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
------------------------------------
CUSTODIAN
Chase Manhattan Bank, N.A.
--------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
--------------------------------
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
--------------------------
INDEPENDENT AUDITORS ANNUAL REPORT
Ernst & Young LLP OCTOBER 31, 1995
--------------------
THIS REPORT IS SUBMITTED FOR THE GENERAL
INFORMATION OF THE SHAREHOLDERS OF THE
FUND. THE REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO PROSPECTIVE INVESTORS IN
THE FUND UNLESS PRECEDED OR ACCOMPANIED
BY AN EFFECTIVE PROSPECTUS.
RS01
