Filed with the Securities and Exchange Commission on February 27, 1996
File No. 33-16056
File No. 811-5255
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ _
Post-Effective Amendment No. 9 x
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 x
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
RODNEY SQUARE NORTH, 1100 NORTH MARKET STREET, WILMINGTON, DE 19890-0001
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 651-8280
Marilyn Talman, Esquire
Rodney Square Management Corporation
Rodney Square North, 1100 North Market Street
Wilmington, DE 19890-0001
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
__ immediately upon filing pursuant to paragraph (b)
X on March 1, 1996 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Registrant filed the notice required by Rule 24f-2 for its fiscal year
ended October 31, 1995 on or about December 22, 1995.
TOTAL NUMBER OF PAGES: ____ EXHIBIT INDEX ON PAGE: ____
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THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
Calculation of Registration Fee under the Securities Act of 1933
================================================================
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
Being Being Offering Price Aggregate Registration
Registered Registered Per Share Offering Price Fee
- ---------- ---------- -------------- -------------- ------------
Shares of
Common
Stock 744,011 $12.92 $290,000* $100.00*
The fee for the above shares to be registered by this filing has been
computed on the basis of the price in effect on February 13, 1996.
* Calculation of the proposed maximum aggregate offering price has
been made pursuant to Rule 24e-2 under the Investment Company Act of
1940. During its fiscal year ended October 31, 1995, Registrant redeemed
or repurchased shares of common stock in the aggregate amount of
$10,562,105. During its current fiscal year, Registrant used $1,239,487
of this amount for a reduction pursuant to paragraph (c) of Rule 24f-2
under the Investment Company Act of 1940. Registrant is filing this post-
effective amendment to use the remaining $9,322,618 of the total
redemptions and repurchases during its fiscal year ended October 31, 1995
to reduce the fee that would otherwise be required for the shares
registered hereby. During its current fiscal year Registrant has filed
no other post-effective amendments for the purpose of the reduction
pursuant to paragraph (a) of Rule 24e-2.
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
Items Required By Form N-1A
PART A - PROSPECTUS*
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1. Cover Page Cover Page
2. Synopsis Expense Table
3. Condensed Financial Financial Highlights
Information Performance Information
4. General Description Questions and Answers about the Fund
of Registrant Investment Objective and Policies
Special Considerations and Risks
Description of the Fund
5. Management of the Fund Questions and Answers about the Fund
Management of the Fund
5A. Management's Discussion [Contained in Fund's Annual Report,
of Fund Performance President's Letter]
6. Capital Stock and Questions and Answers about the Fund
Other Securities Dividends, Other Distributions
and Taxes
Description of the Fund
7. Purchase of Securities Questions and Answers about the Fund
Being Offered Purchase of Shares
Management of the Fund
How Net Asset Value is Determined
8. Redemption or Questions and Answers about the Fund
Repurchase Shareholder Accounts
Redemption of Shares
Exchange of Shares
9. Pending Legal Not Applicable
Proceedings
<PAGE>
CROSS-REFERENCE SHEET
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
Items Required By Form N-1A (continued)
PART B - STATEMENT OF ADDITIONAL INFORMATION*
CAPTION IN STATEMENT OF
ITEM NO. ITEM CAPTION ADDITIONAL INFORMATION
- -------- ------------ -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Not Applicable
and History
13. Investment Objectives Investment Policies
and Policies Investment Limitations
Portfolio Transactions
14. Management of the Directors and Officers
Registrant
15. Control Persons and Directors and Officers
Principal Holders Other Information
of Securities
16. Investment Advisory Investment Management Services
and Other Services Wilmington Trust Company
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of the Fund
Other Securities Net Asset Value
19. Purchase, Redemption Net Asset Value
and Pricing of Redemptions
Securities Being Administration, Accounting and
Offered Distribution Agreements and Rule
12b-1 Plan
20. Tax Status Taxes
21. Underwriters Administration, Accounting and
Distribution Agreements and Rule
12b-1 Plan
22. Calculations of Performance Information
Performance Data
23. Financial Statements Financial Statements
<PAGE>
[Graphic] Ceasar
Rodney upon his gallopping horse
facing right, reverse image on dark background
THE RODNEY SQUARE
INTERNATIONAL
EQUITY FUND
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The Rodney Square International Equity Fund (the "Fund") is a diversified
series of The Rodney Square International Securities Fund, Inc. (the
"Corporation"), an open-end investment company. The Fund seeks long-term
capital appreciation primarily through investments in equity securities
(including convertible securities) of issuers located outside the United
States. It is designed to offer long-term investors, who are willing to assume
the risks associated with investing in foreign securities, the opportunity to
participate in a professionally managed, diversified portfolio of foreign
securities.
Wilmington Trust Company ("WTC"), the Fund's investment adviser, is
responsible for providing investment management and related services to the
Fund and ordinarily delegates investment management responsibilities to at
least two different portfolio advisers utilizing separate investment
approaches to achieve the Fund's objective. The goals of this multiple
adviser technique are to reduce the volatility of the Fund's net asset value
and to achieve long-term performance that is superior to that which is likely
to be achieved by any one sub-adviser through multiple investment approaches.
The sub-advisers of the Fund are Scudder, Stevens & Clark, Inc. and Clemente
Capital, Inc.
PROSPECTUS
MARCH 1, 1996
This Prospectus sets forth concisely information about the Fund that you
should know before investing. Please read and retain this document for future
reference. A Statement of Additional Information (dated March 1, 1996)
containing additional information about the Fund has been filed with the
Securities and Exchange Commission and, as amended or supplemented from time
to time, is incorporated by reference herein. A copy of the Statement of
Additional Information including the Fund's most recent Annual Report to
Shareholders may be obtained, without charge, from certain institutions such
as banks or broker-dealers that have entered into servicing agreements
("Service Organizations") with Rodney Square Distributors, Inc., by calling
the number below, or by writing to Rodney Square Distributors, Inc. at the
address noted on the back cover of this Prospectus. Rodney Square
Distributors, Inc. is a wholly owned subsidiary of WTC, a bank chartered in
the state of Delaware.
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FOR FURTHER INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
* NATIONWIDE..............................................(800) 336-9970
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
WILMINGTON TRUST COMPANY, NOR ARE THE SHARES INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
PROSPEC.DOC
<PAGE>
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EXPENSE TABLE
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SHAREHOLDER TRANSACTION COSTS*
Maximum sales load on purchases of shares
(as a percentage of public offering price)........... 4.00%
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ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fee........................................... 1.00%
12b-1 Fee**............................................ 0.04%
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Other Expenses:
Administration and Accounting Services Expenses......0.48%
Other Operating Expenses (after reimbursement)***....0.23%
Total Other Expenses.............................. 0.71%
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Total Operating Expenses (after reimbursement)***...... 1.75%
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE**** ------ ------- ------- --------
You would pay the following expenses
on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $57 $93 $131 $238
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* WTC and 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 concerning volume reductions, sales load waivers and reduced
sales load purchase plans.
** Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc. rules regarding investment companies.
*** The expenses and fees set forth in the table are for the fiscal year
ended October 31, 1995. WTC has agreed to waive its advisory fee or
reimburse the Fund monthly to the extent that expenses of the Fund
(excluding taxes, extraordinary expenses, brokerage commissions and
interest) exceed an annual rate of 1.75% of its average daily net
assets. See "Management of the Fund." In accordance with that agreement,
WTC reimbursed a portion of the Fund's expenses for the fiscal year
ended October 31, 1995. Without such reimbursement, the Fund's total
operating expenses would have been 2.51% of its average daily net
assets.
2
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**** The assumption in the Example of a 5% annual return is required by
regulations of the Securities and Exchange Commission applicable to all
mutual funds; the assumed 5% annual return is not a prediction of, and
does not represent, the Fund's projected or actual performance. In the
Example, it is assumed that the investor was subject to the maximum
sales load (4.00%) on his or her $1,000 investment.
The purpose of the preceding table is solely to aid shareholders and
prospective investors in understanding the various expenses that investors in
the Fund 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>
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FINANCIAL HIGHLIGHTS
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The following table includes selected per share data and other performance
information for the Fund throughout the following years derived from the
audited financial statements of the Fund. It should be read in conjunction
with the Fund's financial statements and notes thereto appearing in the Fund's
Annual Report to Shareholders for the fiscal year ended October 31, 1995,
which is included, together with the auditor's unqualified report thereon as
part of the Statement of Additional Information.
FOR THE FISCAL YEARS ENDED OCTOBER 31,
----------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(1) 1988(1)
NET ASSET VALUE -
BEGINNING OF
YEAR............$13.36 $12.35 $ 9.60 $11.64 $11.08 $12.08 $11.02 $10.00
INVESTMENT OPERATIONS:
Net investment
income(loss)...... 0.03 (0.03) 0.04 0.01 0.18 0.12 0.07 0.14
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
related
transactions.... (0.25) 1.23 2.71 (1.24) 0.62 (0.71) 1.20 0.92
Total from
investment
operations.... (0.22) 1.20 2.75 (1.23) 0.80 (0.59) 1.27 1.06
DISTRIBUTIONS:
From net
investment
income.......... 0.00 0.00 0.00 (0.05) (0.13) (0.08) (0.05) (0.04)
From net realized
gain on investment
and foreign
currency related
transactions.... (1.00) (0.19) 0.00 (0.76) (0.11) (0.33) (0.16) 0.00
Total
distributions. (1.00) (0.19) 0.00 (0.81) (0.24) (0.41) (0.21) (0.04)
NET ASSET VALUE -
END OF YEAR.......$12.14 $13.36 $12.35 $ 9.60 $11.64 $11.08 $12.08 $11.02
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (2)...(1.18)% 9.74% 28.65% (11.42)% 7.42% (5.35)% 11.72% 10.58%
4
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FOR THE FISCAL YEARS ENDED OCTOBER 31,
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1995 1994 1993 1992 1991 1990 1989(1) 1988(1)
RATIOS (TO AVERAGE
NET ASSETS)
/SUPPLEMENTAL DATA:
Expenses (3)...... 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75% 1.75%
Net investment
income (loss)... 0.29% (0.21)% 0.37% 0.09% 1.12% 0.93% 0.65% 1.46%
Portfolio turnover
rate.............. 67.1% 81.2% 148.4% 103.7% 74.5% 57.4% 48.6% 27.5%
Net assets at end
of period
(000 omitted)...$15,239 $24,457 $18,945 $20,418 $43,413 $58,533 $64,772$52,659
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(1) The per share data for the fiscal years ended October 31, 1989 and 1988
was examined by other auditors.
(2) These results do not include the sales load. If the sales load had been
included, the returns would have been lower.
(3) WTC absorbed a portion of the Fund's expenses amounting to $.09, $.05,
$.19, $.05, $.019, $.002, $.02 and $.02 per share for each of the eight
fiscal years in the period ended October 31, 1995, respectively. WTC did
not impose a portion of its advisory fee amounting to $.004 and $.003 per
share for the fiscal years ended October 31, 1989 and 1988, respectively.
If these expenses, including the advisory fee not imposed, 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%, 1.87%, 1.77%, 1.96% and 1.99%
for each of the eight fiscal years in the period ended October 31, 1995,
respectively.
5
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QUESTIONS AND ANSWERS ABOUT THE FUND
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The information provided in this section is qualified in its entirety by
reference to the more detailed information elsewhere in this Prospectus.
WHAT ARE THE FUND'S INVESTMENT OBJECTIVE AND ITS POLICIES?
The Fund's investment objective is to seek long-term capital
appreciation primarily through investment in equity securities (including
convertible securities) of issuers located outside the United States. The
Fund invests primarily in common stocks of foreign issuers, but may also
invest in convertible bonds and preferred stocks of foreign issuers. The
Fund is intended for investors seeking to complement their U.S.
investments with a professionally managed portfolio of foreign securities
and who can assume the risks involved in investing in foreign securities.
(See "Investment Objective and Policies" and "Special Considerations and
Risks.")
WHAT ARE THE RISKS TO CONSIDER BEFORE INVESTING?
The value of the Fund's portfolio securities fluctuates with changes
in market and economic conditions abroad and with changes in relative
currency values. Thus, the value of an investor's holdings fluctuates
and, upon redemption, may be more or less than the investor's cost.
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. The Fund may engage in certain foreign currency,
options and futures transactions to attempt to hedge against the overall
level of investment and currency risk associated with its present or
planned investments. The Fund's participation in the currency, options
and futures markets involves certain risks and transaction costs. (See
"Special Considerations and Risks.")
HOW CAN YOU BENEFIT BY INVESTING IN THE FUND RATHER THAN BY INVESTING DIRECTLY
IN FOREIGN SECURITIES?
Investing in the Fund offers several key benefits:
FIRST: The Fund enables investors to participate in a diversified
portfolio of foreign securities. An investor ordinarily would have to
make numerous separate purchases in order to build a diversified
portfolio of foreign securities equivalent to the portfolio of the Fund.
SECOND: An investor in the Fund will receive the professional
investment advice and experience of the Fund's investment adviser and
sub-advisers, who receive and study information from around the world
regarding foreign investment opportunities.
6
<PAGE>
THIRD: By investing in the Fund rather than directly in foreign
securities, an investor will avoid complications and difficulties,
including detailed bookkeeping, income collection and custodial
arrangements, that are normally associated with direct investment in
foreign securities.
WHO IS THE INVESTMENT ADVISER?
Wilmington Trust Company ("WTC" or the "Adviser") is the investment
adviser to the Fund and has overall responsibility for assets under
management, provides overall investment strategies and programs for the
Fund, allocates assets among the sub-advisers, recommends and monitors
sub-advisers and evaluates their performance and may manage certain
investments for the Fund directly. (See "Management of the Fund.")
WHAT IS THE MULTIPLE ADVISER TECHNIQUE?
The Fund's assets are managed by two or more sub-advisers, each of
which has entered into an identical sub-advisory agreement with the
Adviser and the Fund. Each sub-adviser invests the Fund's assets
allocated to it in accordance with the Fund's investment objective and
policies and the sub-adviser's investment approach and strategies.
WTC believes that the use of multiple advisers enhances the Fund's
potential to achieve relatively consistent investment performance and,
through relatively consistent results, superior long-term performance.
WHO ARE THE SUB-ADVISERS?
The sub-advisers of the Fund are:
Scudder, Stevens & Clark, Inc.
Clemente Capital, Inc.
WHAT IS THE ADVISORY FEE?
The Adviser is paid by the Fund a monthly advisory fee at an annual
rate of 1.00% of the Fund's average daily net assets. The advisory fee is
higher than the advisory fee paid by most investment companies but not
higher than that paid by many funds with a similar investment objective.
The Adviser compensates the sub-advisers out of its advisory fee; no sub-
adviser receives any direct compensation from the Fund. (See "Management
of the Fund.")
WHO IS THE ADMINISTRATOR, TRANSFER AGENT AND ACCOUNTING SERVICES AGENT?
Rodney Square Management Corporation ("RSMC"), a wholly owned
subsidiary of WTC, serves as the Administrator and Transfer Agent of the
Fund and provides accounting services for the Fund. (See "Management of
the Fund.")
7
<PAGE>
WHO IS THE 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 FUND?
The Fund is designed as an investment vehicle for individual
investors, corporations and other institutional investors. Shares may be
purchased at their net asset value next determined after a purchase order
is received by RSMC and accepted by RSD, plus a sales load equal to a
maximum of 4.00% of the offering price, subject to certain waivers and
reductions. The minimum initial investment is $1,000, but additional
investments may be made in any amount.
Fund shares 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 certain institutions such as banks or broker-
dealers that have entered into servicing agreements ("Service
Organizations") with RSD through their accounts with those Service
Organizations. Some Service Organizations may receive payments from RSD
which are reimbursed by the Fund under a Plan of Distribution adopted
with respect to the Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"). 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 any purchase orders, and to close, by redemption, an
account without a certified Social Security or other taxpayer
identification number.
Please call WTC, your Service Organization or the number listed
below for further information about the Fund or for assistance in opening
an account.
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* NATIONWIDE............................................(800) 336-9970
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HOW DO YOU REDEEM SHARES OF THE FUND?
If you purchased Fund shares 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 by mail. There is no
fee charged upon redemption. (See "Redemption of Shares.").
8
<PAGE>
HOW ARE DIVIDENDS PAID?
Net investment income, net capital gains and net gains from foreign
currency transactions, if any, are distributed annually, after the close
of the Fund's fiscal year (October 31st). Shareholders may elect to
receive dividends and/or 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 Fund shares for shares of
any of the other funds in the Rodney Square complex that currently offer
their shares to investors, subject to certain conditions. (See "Exchange
of Shares.")
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INVESTMENT OBJECTIVE AND POLICIES
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The Fund's investment objective is to seek long-term capital appreciation
primarily through investments in equity securities (including convertible
securities) of issuers located outside the United States. There can be no
assurance, of course, that the Fund will achieve its investment objective.
Under normal conditions, the Fund invests at least 65% of its total
assets in equity securities (including convertible securities) of issuers
whose principal place of business (as determined by the location of the
corporate headquarters) is located outside of the United States. Under normal
conditions, the Fund invests in issuers located in at least four different
countries and not more than 50% of its assets in issuers located in any one
country. In addition, the Fund may invest up to 10% of its total assets in
securities of other investment companies that invest in the securities of
issuers located in certain countries where it is currently impossible or
impractical to invest directly. In those cases, Fund shareholders may be
subject indirectly to advisory and other expenses of those companies. The Fund
also may invest in foreign securities by purchasing European Depository
Receipts ("EDR's"), American Depository Receipts ("ADR's") and other
securities convertible into equity securities of issuers located outside the
United States. ADR's are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDR's are European
receipts evidencing similar arrangements.
The Fund may also invest in debt securities issued by foreign
governments, international agencies and foreign companies which at the time of
purchase are rated A or better by Standard & Poor's Ratings Services ("S&P")
or A or better by Moody's Investors Service, Inc. ("Moody's") or, if not
rated, judged by WTC or one or more of the sub-advisers to be of comparable
quality. The value of debt securities generally varies inversely with interest
rate changes.
9
<PAGE>
MULTIPLE ADVISER TECHNIQUE. The allocation of assets among the Fund's
sub-advisers is made by WTC, and each sub-adviser makes specific investments
for the portion of the assets under its management. (See "Management of the
Fund.") Each sub-adviser uses its own investment approach and investment
strategies to achieve the Fund's investment objective.
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 Fund
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-
adviser(s). Because it is unlikely that the Fund'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-
adviser(s). There can be no assurance that the expected advantages of the
multiple adviser technique will be realized.
TEMPORARY DEFENSIVE STRATEGIES. For temporary defensive purposes or
pending investment, the Fund may hold cash (U.S. dollars, foreign currencies
or multinational currency units) and may invest all or any portion of its
assets in high quality money market instruments of U.S. or foreign issuers,
including without limitation bankers' acceptances, certificates of deposit,
time deposits, commercial paper, short-term government and corporate
obligations, and repurchase agreements that are collateralized by any of the
foregoing instruments. The bank obligations in which the Fund may invest
(certificates of deposit, bankers' acceptances and time deposits) are limited
to those which are issued by banks with at least $5 billion in assets and
which are of high quality in the opinion of WTC or one or more of the sub-
advisers. For temporary or emergency purposes, the Fund may also borrow an
amount not exceeding one-third of the current value of the Fund's assets taken
at market value, less liabilities other than borrowings.
HEDGING STRATEGIES. The Adviser and sub-advisers may use forward currency
contracts, options and futures contracts and related options to attempt to
hedge the Fund's portfolio. There can be no assurance that such efforts will
succeed. Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investment. These hedging techniques are described
below and in further detail in the Statement of Additional Information, and
the risks associated with these techniques are described below under "Special
Considerations and Risks."
10
<PAGE>
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward currency contracts for the
purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Fund may enter into
forward currency contracts either with respect to specific transactions or
with respect to the Fund's portfolio positions. For example, when the Fund
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. Further, when WTC or a sub-adviser believes
that a particular currency may decline compared to the U.S. dollar or another
currency, the Fund 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 Fund's portfolio securities denominated in that
currency.
The Fund 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. In addition, the Fund 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 Fund or which WTC or a
sub-adviser intends to include in the Fund's 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.
Further, the Fund may sell and purchase stock index futures contracts and
related options to protect against a general stock market decline that could
adversely affect the Fund's portfolio or to hedge against a general stock
market or market sector advance to lessen the cost of future securities
acquisitions. The Fund 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 Fund will not enter into an options, futures or forward currency
contract transaction that exposes the Fund to an obligation to another party
unless the Fund either (i) owns an offsetting ("covered") position in
securities, currencies, options, futures or forward currency contracts or (ii)
has cash, receivables and liquid debt securities with a value sufficient at
all times to cover its potential obligations to the extent not covered as
provided in (i) above.
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which
the Fund 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 Fund if the other party to the repurchase
agreement becomes bankrupt), it is the policy of the Fund 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 Fund's investment
limitations. (See following discussion of illiquid securities.)
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<PAGE>
ILLIQUID SECURITIES. Under the Fund's investment limitations, the Fund
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. The Fund may not, however, invest more than 10% of
its total assets in restricted equity securities that do not have a readily
available market.
PORTFOLIO TURNOVER. The frequency of portfolio transactions and the
Fund's portfolio turnover rate will vary from year to year depending on market
conditions. Because a higher portfolio turnover rate increases transaction
costs and may increase taxable capital gains, WTC and the sub-advisers
carefully weigh the anticipated benefits of short-term investing against these
consequences.
OTHER INFORMATION. The policies set forth above are non fundamental and
may be changed by the Corporation's Board of Directors without shareholder
approval. In addition to those non fundamental policies, the Fund has adopted
certain fundamental investment restrictions, which, like the Fund's investment
objective, may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding voting securities as defined in the 1940
Act. The Fund has also adopted certain other non fundamental investment
restrictions. A description of these investment restrictions is included in
the Statement of Additional Information.
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SPECIAL CONSIDERATIONS AND RISKS
- ------------------------------------------------------------------------------
FOREIGN SECURITIES. Investing in foreign securities involves risks and
considerations not normally associated with investing in U.S. markets. For
example, most of the Fund's portfolio securities are not registered with the
Securities and Exchange Commission (the "SEC"), nor are most of the issuers of
the Fund's portfolio 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,
12
<PAGE>
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 of self-sufficiency and balance of payments position. To the extent
the Fund 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
Fund 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 Fund invests in securities of issuers located in emerging market
countries. The risks of investing in foreign securities may be greater 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. 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 Fund
to adopt special procedures, seek local government approvals or take other
actions, each of which may involve additional costs to the Fund. 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
Fund'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 Fund shareholders. In other
words, if the value of a foreign currency declines against the U.S. dollar,
the value of Fund assets quoted in such currency will decrease, and
conversely, if the value of foreign currency rises against the U.S. dollar,
the value of Fund 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.
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<PAGE>
COSTS OF FOREIGN INVESTING. The costs attributable to foreign investing
are frequently higher than those attributable to domestic investing. For
example, the costs of maintaining Fund assets outside the United States exceed
the costs of maintaining assets with a U.S. custodian.
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 Fund invests; lack of assurance that a liquid
secondary market will exist for any particular option, futures contract or
related option at any particular time; and the possible need to defer closing
out certain forward currency contracts, options and/or futures contracts in
order to continue to qualify for the beneficial tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986, as
amended. (See "Taxes" in the Statement of Additional Information.)
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PURCHASE OF SHARES
- ------------------------------------------------------------------------------
HOW TO PURCHASE SHARES. Fund shares 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. WTC and Service Organizations may charge their
clients a fee for providing administrative or other services in connection
with investments in Fund 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 Fund shares through their accounts at WTC or a
Service Organization should contact that entity directly for appropriate
instructions. Other investors may purchase Fund shares by mail or by wire as
specified below.
BY MAIL: You may purchase shares by sending a check drawn on a U.S. bank
payable to The Rodney Square International Equity Fund, along with a completed
Application (included at the end of this Prospectus), to The Rodney Square
International Equity Fund, c/o Rodney Square Management Corporation, P.O. Box
8987, Wilmington, DE 19899-9752. A purchase order sent by overnight mail
should be sent to the Rodney Square International Equity Fund, c/o Rodney
Square Management Corporation, Rodney Square North, 1105 N. Market St.,
Wilmington, DE 19801. If a subsequent investment is being made, the check
should also indicate your Fund 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 cancelled and you will
be responsible for any losses or fees incurred in that transaction.
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<PAGE>
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 RSMC at (800) 336-9970. Once you have an account
number, instruct your bank to wire federal funds to RSMC c/o Wilmington Trust
Company, Wilmington, DE-ABA #0311-0009-2, attention: The Rodney Square
International Equity Fund, DDA #2610-605-2, further credit-your account number
and your name. If you make an initial purchase by wire, you must promptly
forward a completed Application to RSMC at the address stated above under "By
Mail."
INDIVIDUAL RETIREMENT ACCOUNTS. Fund shares may be purchased for a tax-
deferred retirement plan such as an individual retirement account ("IRA").
For an Application for an IRA and a brochure describing a Fund IRA, call RSMC
at (800) 336-9970. WTC makes available its services as IRA custodian for each
shareholder account that is established as an IRA. For these services, WTC
receives an annual fee of $10.00 per account, which fee is paid directly to
WTC by the IRA shareholder. If the fee is not paid by the date due, Fund
shares owned by the IRA will be redeemed automatically for purposes of making
the payment.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Fund shares through
an Automatic Investment Plan. Under the Plan, RSMC, at regular intervals, will
automatically debit a shareholder's bank checking account in an amount of $50
or more (subsequent to the $1,000 minimum initial investment), as specified by
the shareholder. A shareholder may elect to invest the specified amount
monthly, bimonthly, quarterly, semiannually or annually. The purchase of Fund
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. To obtain an Application
for the Automatic Investment Plan, check the appropriate box of the
Application at the end of this Prospectus or call RSMC at (800) 336-9970. This
service is generally not available for WTC trust account clients, since
similar services are already provided for these customers 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 this minimum initial investment requirement. The
Fund and RSD each reserve the right to reject any purchase order and may
suspend the offering of shares for a period of time.
Purchase orders received by RSMC and accepted by RSD before the close of
regular trading on the Exchange on any Business Day of the Fund will be priced
at the net asset value per share that is determined as of the close of the
Exchange. (See "How Net Asset Value is Determined.") Purchase orders received
by RSMC and accepted by RSD after the close of regular trading on the Exchange
will be priced as of the close of regular trading on the Exchange on the
following Business Day of the Fund. A "Business Day of the Fund " is any day
the Exchange, RSMC and the Philadelphia branch office of the Federal Reserve
are open for business. The following are not Business Days of the Fund: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving Day and Christmas Day.
15
<PAGE>
It is the responsibility of WTC or the Service Organization involved to
transmit orders for the purchase of shares by its customers to RSMC and to
deliver required funds on a timely basis, in accordance with the procedures
stated above.
OFFERING PRICE. Shares of the Fund are offered at its net asset value per
share next determined after a purchase order is received by RSMC and accepted
by RSD, plus a sales load which, unless shares are purchased under one of the
reduced sales load plans described below, will vary with the size of the
purchase as shown below:
SALES LOAD SCHEDULE
SALES LOAD AS A PERCENTAGE OF DISCOUNT TO SERVICE
----------------------------- ORGANIZATIONS AS A
OFFERING NET AMOUNT INVESTED PERCENTAGE OF
AMOUNT OF PURCHASE PRICE (NET ASSET VALUE) OFFERING PRICE
- --------------------- -------- ------------------- -------------------
Up to _ $24,999 4.00% 4.17% 3.50%
$25,000 _ $49,999 3.50 3.63 3.05
$50,000 _ $99,999 3.00 3.09 2.60
$100,000 _ $249,999 2.50 2.56 2.15
$250,000 _ $499,999 2.00 2.04 1.70
$500,000 _ $999,999 1.00 1.01 0.80
$1,000,000 and over 0.00 0.00 0.00
REDUCED SALES LOAD PLANS. Shares may be purchased at reduced loads
through two reduced sales load plans: (1) a right of accumulation that permits
a purchase of Fund shares to be aggregated with shares of the Fund, as well as
shares of other funds in the Rodney Square complex, on which the shareholder
has already paid a sales load, that are held in the purchaser's account or in
related accounts; and (2) a Letter of Intent ("LOI") that permits a purchase
of Fund shares to be aggregated with future purchases of shares of the Fund,
as well as with shares of other Rodney Square funds that are subject to a
sales load, within a thirteen-month period.
The right of accumulation results in a reduced sales load because the
sales load imposed is based on the total of the dollar amount of Fund shares
being purchased, plus the current net asset value of shares of the Fund and
shares of other Rodney Square funds on which a sales load has already been
paid that are held in the purchaser's and related accounts at the time of
purchase. Related accounts include other individual accounts, joint accounts,
spouse's accounts and accounts for children who are under the age of 21 (but
only if the purchaser serves as a guardian, trustee or custodian for the
account under the Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act ) and/or children living at the same residence.
The LOI program also results in a reduced sales load because purchases of
shares of the Fund and other Rodney Square funds that are subject to a sales
load made within a thirteen-month period, starting with the first purchase
pursuant to the LOI, are aggregated for purposes of calculating the sales load
applicable to each purchase. In order to qualify under an LOI, purchases must
be made in the same account; purchases made for related accounts may not be
16
<PAGE>
aggregated. The minimum investment under an LOI is $25,000. The LOI is not a
binding obligation to purchase any amount of shares, but its execution, if
fulfilled, will result in the shareholder's paying a reduced sales load for
the total anticipated amount of the purchase.
The LOI is included as part of the Application. Investors should submit a
completed LOI to The Rodney Square International Equity Fund, c/o Rodney
Square Management Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. A
purchase not originally made pursuant to an LOI may be included under an LOI
executed within 90 days of that purchase, if the purchaser informs RSMC in
writing of this intent within the 90-day period. This prior purchase will
count towards fulfillment of the LOI; however, the sales load on any previous
purchase will not be adjusted downward.
If the total amount of shares purchased does not equal the amount stated
in the LOI by the end of the eleventh month, the investor will be notified in
writing by RSMC of the amount purchased to date, the amount required to
complete the LOI and the expiration date. Also, at this time the investor will
be notified of the actions to be taken by RSMC if the LOI expires unfulfilled.
Shares having a value equal to 5% of the total amount to be purchased over the
thirteen-month period will be held in escrow during that period. If the total
amount of shares purchased by the expiration date does not equal the amount
stated in the LOI, RSMC will reduce the shares held in escrow by the
difference between the sales load on the shares purchased at the reduced rate
and the sales load applicable to the shares actually purchased and the balance
of the shares then will be released from the escrow.
SALES LOAD WAIVERS. Shares of the Fund may be purchased at net asset
value per share by "those entitled to a Sales Load Waiver" which is defined as
those employees, retirees and their immediate family (spouses and children
under 21 years of age), officers and directors of the Corporation or of WTC
and its affiliates, any account at WTC for which account records are
maintained on WTC's trust system, employees of Service Organizations and
clients purchasing shares of the Fund through a Service Organization agreement
with RSD the terms of which provide that no sales load will be charged. Fund
shares may also be purchased at net asset value per share, without a sales
load, by reinvesting dividends and other distributions.
- ------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- ------------------------------------------------------------------------------
RSMC, as Transfer Agent, maintains for each shareholder an account
expressed in terms of full and fractional Fund shares 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.
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<PAGE>
Due to the relatively high cost of maintaining small shareholder
accounts, the Corporation on behalf of 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 may
be notified if their account value is less than $500 and will be allowed 60
days in which to increase their account balance to $500 or more to prevent the
account from being closed. Reductions in value that result solely from market
activity will not trigger an involuntary redemption.
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REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
Shareholders may redeem their shares by telephone or by mail as described
below. If you purchased your shares through an account at WTC or a Service
Organization, you may redeem all or part of your shares in accordance with the
instructions pertaining to that account. Corporations, other organizations,
trusts, fiduciaries and other institutional investors may be required to
furnish certain additional documentation to authorize redemptions. Redemption
requests should be accompanied by the Fund's name and your account number.
BY MAIL: Shareholders redeeming their shares by mail should submit
written instructions with a guarantee of their signature by an eligible
institution acceptable to the Fund's Transfer Agent, such as a bank, broker,
dealer, municipal securities dealer, government securities dealer, credit
union, national securities exchange, registered securities association,
clearing agency, or savings association ("eligible institution"), to: The
Rodney Square International Equity Fund, c/o Rodney Square Management
Corporation, P.O. Box 8987, Wilmington, DE 19899-9752. A redemption order
sent by overnight mail should be sent to The Rodney Square International
Equity Fund, c/o Rodney Square Management Corporation, Rodney Square North,
1105 N. Market St., Wilmington, DE 19801. A signature and a signature
guarantee are required for each person in whose name the account is
registered.
BY TELEPHONE: Shareholders who prefer to redeem their shares by telephone
must elect to do so by applying in writing for telephone redemption privileges
by completing an Application for Telephone Redemptions, (included at the end
of this Prospectus), which describes the telephone redemption procedures in
more detail and requires certain information that will be used to identify the
shareholder when a telephone redemption request is made. When redeeming by
telephone, you must indicate your name, the Fund's name, the Fund 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 will not be liable for any losses due to
unauthorized or fraudulent telephone transactions. During times of drastic
economic or market changes, the telephone redemption privilege may be
difficult to implement. In the event that you are unable to reach RSMC by
telephone, you may make a redemption request by mail.
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<PAGE>
ADDITIONAL REDEMPTION INFORMATION. You may redeem all or any part of the
value of your account on any Business Day of the Fund. Redemptions are
effected at the net asset value per share next calculated after RSMC has
received and accepted your redemption request. (See "How Net Asset Value Is
Determined.") The Fund imposes no fee when shares are redeemed. It is the
responsibility of WTC or the Service Organization to transmit redemption
orders and credit their customers' accounts with redemption proceeds on a
timely basis.
Redemption checks are mailed on the next Business Day of the Fund
following acceptance of redemption instructions but in no event later than 7
days following such receipt and acceptance. Amounts redeemed by wire are
normally wired on the next Business Day of the Fund after receipt and
acceptance of redemption instructions (if received 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 Fund
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
Fund account address of record, complete the appropriate section of the
Application for Telephone Redemptions or include your Fund account address of
record when you submit written instructions. You may change the account which
you have designated to receive amounts redeemed at any time. Any request to
change the account designated to receive redemption proceeds should be
accompanied by a guarantee of the shareholder's signature by an eligible
institution. Further documentation will be required to change the designated
account when shares are held by a corporation, other organization, trust,
fiduciary or other institutional investor.
For more information on redemptions, contact RSMC or, if your shares are
held in an account with WTC or a Service Organization, contact WTC or the
Service Organization.
REINSTATEMENT PRIVILEGE. Shareholders who have redeemed Fund shares have
a one-time privilege to reinstate their Fund account without a sales load up
to the dollar amount redeemed by purchasing shares within 30 days of the
redemption. Shareholders must indicate in writing that they are exercising
this privilege and provide evidence of the redemption date and the amount of
redemption proceeds. The reinstatement will be made at the net asset value per
share next computed after the notice of reinstatement and check are received.
The amount of a purchase under this reinstatement privilege cannot exceed the
amount of the redemption proceeds.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares with a value of
$10,000 or more may participate in the Systematic Withdrawal Plan. For an
Application for the Systematic Withdrawal Plan, check the appropriate box on
the Application at the end of this Prospectus or call RSMC at (800) 336-9970.
Under the Plan, shareholders may automatically redeem a portion of their Fund
shares monthly, bimonthly, quarterly, semiannually or annually. The minimum
19
<PAGE>
withdrawal available is $100. The redemption of Fund shares will be effected
at their net asset value at the close of the Exchange on or about the 25th day
of the month. If you expect to purchase additional Fund shares, it may not be
to your advantage to participate in the Systematic Withdrawal Plan because
contemporary purchases and redemptions may result in adverse tax consequences
and may cause you to pay a sales load on amounts withdrawn shortly thereafter.
This service is generally not available for WTC trust account clients, since
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.
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EXCHANGE OF SHARES
- ------------------------------------------------------------------------------
EXCHANGES AMONG THE RODNEY SQUARE FUNDS. You may exchange all or a
portion of your Fund shares for shares of any of the other funds in the
Rodney Square complex that currently offer their shares to investors. The
other Rodney Square funds are:
THE RODNEY SQUARE FUND, each portfolio of which seeks a high level of
current income consistent with the preservation of capital and liquidity by
investing in money market instruments pursuant to its investment practices.
Its portfolios are:
U.S. GOVERNMENT PORTFOLIO, which invests in U.S. Government
obligations and repurchase agreements involving such obligations.
MONEY MARKET PORTFOLIO, which invests in obligations of major banks,
prime commercial paper and corporate obligations, U.S. Government
obligations, high quality municipal securities and repurchase agreements
involving U.S. Government obligations.
THE RODNEY SQUARE TAX-EXEMPT FUND, which seeks as high a level of
interest income, exempt from federal income tax, as is consistent with a
portfolio of high quality, short-term municipal obligations, selected on the
basis of liquidity and stability of principal.
THE RODNEY SQUARE STRATEGIC FIXED-INCOME FUND consisting of the following
portfolios:
THE RODNEY SQUARE DIVERSIFIED INCOME PORTFOLIO, which seeks high
total return, consistent with high current income, by investing
principally in various types of investment grade fixed-income securities.
THE RODNEY SQUARE MUNICIPAL INCOME PORTFOLIO, which seeks a high
level of income exempt from federal income tax consistent with the
preservation of capital.
THE RODNEY SQUARE MULTI-MANAGER FUND uses multiple portfolio advisers to
manage the assets of each of its portfolios, which are:
GROWTH PORTFOLIO, which seeks superior long-term capital
appreciation by investing in securities of companies that are judged to
possess strong growth characteristics.
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<PAGE>
GROWTH AND INCOME PORTFOLIO, which seeks superior long-term total
return through a combination of capital appreciation and income by
investing in securities with attractive growth or valuation
characteristics or relatively high income yields.
A redemption of shares through an exchange will be effected at the net
asset value per share next determined after receipt by RSMC of the request,
and a purchase of shares through an exchange will be effected at the net asset
value per share determined at that time or as next determined thereafter, plus
the applicable sales load, if any. The net asset values per share of the
Rodney Square Fund portfolios and the Tax-Exempt Fund are determined at 12
noon, Eastern time, on each Business Day. The net asset values per share of
the Fund, the Multi-Manager Fund portfolios and the Strategic Fixed-Income
Fund portfolios are determined at the close of regular trading on the Exchange
(currently 4:00 p.m., Eastern time) on each Business Day.
A sales load will apply to exchanges into the Fund from either of the
Rodney Square Fund portfolios or the Tax-Exempt Fund, except that no sales
load will be charged if the exchanged shares were acquired by a previous
exchange and are shares on which you paid a sales load or which represent
reinvested dividends and other distributions on such shares. In addition,
shares of the Rodney Square Fund portfolios or the Tax-Exempt Fund may be
exchanged for shares of the Fund without a sales load by those entitled to a
Sales Load Waiver. A sales load will not apply to any other exchanges into the
Fund or from the Fund. Shares of either Strategic Fixed-Income Fund portfolio
must be held at least 90 days before they can be exchanged for shares of the
Fund without an additional sales load, unless the shares to be exchanged
represent reinvested dividends and other distributions or the shareholder of
the Strategic Fixed-Income Fund portfolios' shares is entitled to a Sales Load
Waiver.
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 account of less than $500.
To obtain prospectuses of the other Rodney Square funds, contact RSD. To
obtain more information about exchanges, or to place exchange orders, contact
RSMC or, if your shares are held in a trust account with WTC or in an account
with a Service Organization, contact WTC or the Service Organization. The Fund
reserves the right to terminate or modify the exchange offer described here
and will give shareholders 60 days' notice of such termination or modification
as required by the SEC. 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.
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HOW NET ASSET VALUE IS DETERMINED
- ------------------------------------------------------------------------------
RSMC determines the net asset value and offering price per share of the
Fund as of the close of regular trading on the Exchange on each Business Day
of the Fund. The net asset value per share is calculated by dividing the
value of all the Fund's assets, less all liabilities, by the total number of
the Fund's shares outstanding. The Fund values its assets based on their
current market value when market quotations are readily available. If such
value cannot be established, assets are valued at fair value as determined in
good faith by or under the direction of the Corporation's Board of Directors.
Those securities that are quoted in foreign currency are valued each Business
Day in U.S. dollars at the foreign currency exchange rates prevailing at the
time RSMC determines the daily net asset value per share. Although the Fund
values its assets in U.S. dollars on each Business Day, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on each Business
Day.
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DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The net investment income (including
net short-term capital gain) earned by the Fund is declared as a dividend and
paid to its shareholders annually. Net capital gain (the excess of net long-
term capital gain over net short-term capital loss) and net gains from foreign
currency transactions realized by the Fund, if any, are distributed to its
shareholders after October 31, the end of its fiscal year. Dividends and other
distributions payable to each shareholder are reinvested in additional Fund
shares on the payment date at the net asset value per share on the ex-dividend
date, unless the shareholder elects on the Application to receive dividends or
other distributions, or both, in cash, in the form of a check.
TAXES. The Fund intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so that it will be relieved of federal income tax on that part of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gain and net gains from certain foreign
currency transactions, if any) and net capital gain that is distributed to its
shareholders. If the Fund invests in stock of certain foreign investment
companies, it may be subject to federal income tax on a portion of any "excess
distribution" with respect to, or gain from the disposition of, that stock.
Dividends from the Fund's investment company taxable income (whether paid
in cash or reinvested in additional Fund shares) generally are taxable to its
shareholders as ordinary income. Distributions of the Fund's net capital gain
(whether paid in cash or reinvested in additional Fund shares), when
designated as such, are taxable to its shareholders as long-term capital
gains, regardless of the length of time they have held their Fund shares.
Shortly after the end of each calendar year, the Fund notifies each
shareholder of the amounts of dividends and capital gain distributions paid
(or deemed paid) during that year.
22
<PAGE>
Under certain circumstances described more fully in the Statement of
Additional Information, each shareholder may be entitled to claim a credit or
deduction for a proportionate share of any foreign taxes paid by the Fund. In
that event, that proportionate share must be included in the shareholder's
gross income.
The Fund 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 Fund with a certified
taxpayer identification number. The Fund also is required to withhold 31% of
all dividends and capital gain distributions payable to such shareholders who
are otherwise subject to backup withholding. In connection with this
withholding requirement, each 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 Fund 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 (which
normally includes any sales load paid). Similar tax consequences generally
will result from an exchange of Fund shares for shares of another fund in the
Rodney Square complex. (See "Exchange of Shares.") Special rules apply,
however, when a shareholder (1) disposes of Fund shares through a redemption
or exchange within 90 days after purchase thereof and (2) subsequently
reacquires Fund shares or acquires shares of any other Rodney Square fund on
which a sales load normally is imposed ("load fund") without paying any sales
load because of the reinstatement privilege (see "Redemption of Shares") or
the exchange privilege. In these cases, any gain on the disposition of the
original Fund shares will be increased, or loss thereon decreased, by the
amount of the sales load paid when the shares were acquired; and that amount
will increase the adjusted basis of the Fund shares or load fund shares
subsequently acquired. Moreover, if Fund shares are purchased within 30 days
before or after redeeming other Fund shares at a loss (whether pursuant to the
reinstatement privilege or otherwise), 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 of the important federal tax
considerations generally affecting the Fund and its shareholders. (See the
Statement of Additional Information for a further discussion.) In addition to
these considerations, which are applicable to any investment in the Fund,
there may be other federal, state or local tax considerations applicable to a
particular investor. Prospective investors are therefore urged to consult
their tax advisors with respect to the effects of an investment on their own
tax situations.
- ------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
From time to time, quotations of the Fund'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
23
<PAGE>
$1,000, net of the Fund's maximum 4.00% sales load, assuming the investment
has been held for periods of one year, five years and ten years as of a stated
ending date. If a ten-year period has not yet elapsed, data will be provided
as of the end of a shorter period corresponding to the life of the Fund.
Standardized Return assumes that all dividends and other distributions are
reinvested in additional shares of the Fund.
In addition, the Fund 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 and may or
may not reflect the effects of the Fund's maximum 4.00% sales load; where not
included, the inclusion of the sales load would reduce the Non Standardized
Return. Non Standardized Return may consist of a cumulative percentage rate of
return, an average annual percentage rate of return, actual year-by-year rates
or any combination thereof.
The Returns (Standardized and Non Standardized) of the Fund are increased
to the extent that WTC has waived all or a portion of its advisory fee or
reimbursed all or a portion of the Fund's operating expenses. Returns
(Standardized and Non Standardized) are based on historical performance of the
Fund, show the performance of a hypothetical investment and are not intended
to indicate future performance. Additional performance information is
contained in the Fund's Annual Report which may be obtained without charge by
contacting WTC, your Service Organization or by calling (800) 336-9970.
- ------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
The Corporation's Board of Directors 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 Fund.
INVESTMENT ADVISER. WTC, a wholly owned subsidiary of Wilmington Trust
Corporation, a publicly held bank holding company, serves as the Fund's
investment adviser. Under its Investment Advisory Agreement with the
Corporation, WTC, subject to the supervision of the Corporation's Board of
Directors is responsible for the management and investment of the assets of
the Fund in accordance with its investment objective, policies and
limitations. WTC provides overall investment strategies and programs for the
Fund, recommends sub-advisers, allocates assets among the sub-advisers,
monitors and evaluates the sub-advisers' performance and may manage certain
investments for the Fund directly. In evaluating possible sub-advisers and
monitoring and evaluating the investment performance of the sub-advisers, WTC
may seek advice from one or more consultants.
24
<PAGE>
For these services, the Fund pays WTC, a monthly advisory fee at the
annual rate of 1.00% of the average daily net assets of the Fund. This fee is
higher than that paid by most investment companies, but not higher than that
paid by many funds whose investment objective is similar to the Fund. WTC has
agreed to waive its advisory fee or reimburse the Fund monthly to the extent
that expenses of the Fund (excluding taxes, extraordinary expenses, brokerage
commissions and interest) exceed an annual rate of 1.75% of average daily net
assets of the Fund.
WTC is engaged in a variety of investment advisory activities, including
the management of collective investment pools. WTC is also the investment
adviser of the Strategic Fixed-Income Fund portfolios. Thomas P. Neale, CFA,
Assistant Vice President of the Investment Management Department of WTC, is
primarily responsible for monitoring the day-to-day investment activity of the
sub-advisers of the Fund. Mr. Neale has been an equity portfolio manager for
WTC for the past eight years.
SUB-ADVISERS. The Fund's assets are managed by sub-advisers which have
entered into identical sub-advisory agreements with WTC and the Fund. Each
sub-adviser makes specific portfolio investments for that segment of the
assets of the Fund under its management in accordance with the Fund's invest-
ment objective, policies and limitations and the sub-adviser's investment
approach and strategies. WTC (not the Fund) pays each sub-adviser a monthly
portfolio management fee at an annual rate of 0.50% of the average net assets
under the sub-adviser's management during the month.
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 the Fund's other sub-adviser(s); (3) consistent
performance in the context of the 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.
It should be noted, however, that there can be no certainty that any sub-
adviser of the Fund will obtain superior results at any given time. With WTC's
prior approval, a sub-adviser may direct portfolio transactions to a brokerage
affiliate.
Prior to February 1, 1993, the Fund utilized a single adviser at which
time it commenced institution of the multiple adviser approach.
The Fund's sub-advisers are as follows:
SCUDDER, STEVENS & CLARK, INC.
345 Park Avenue
New York, New York 10154
Scudder, Stevens & Clark, Inc. ("Scudder") 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. Today, as
an owner managed corporation, Scudder remains one of the few investment
management firms not affiliated with any bank, broker, insurer, or other
financial services institution.
25
<PAGE>
As of September 30, 1995, Scudder managed in excess of $90 billion in
assets. As of December 31, 1995, more than $37 billion represented investment
management services for over 1.9 million mutual fund shareholder accounts. As
of that date, Scudder supervised approximately $18 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 investment product offered by Scudder is managed by a small,
separate team of specialized investment professionals. Portfolio management is
the day-to-day application of Scudder investment management policy and
research, within prospectus and other legal limitations, to balance risk and
opportunity in seeking superior performance. Irene T. Cheng serves as the
lead portfolio manager for that portion of the Fund's assets under Scudder's
management. Ms. Cheng has been in the asset management business for over
seven years and joined Scudder as a portfolio manager in 1993.
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.
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 December 31, 1995, Clemente managed approximately $656
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 Fund'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 nine years.
ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND PAYING AGENT. RSMC, a wholly
owned subsidiary of WTC, serves as Administrator, Transfer Agent and Dividend
Paying Agent of the Fund and provides accounting services to the Fund.
26
<PAGE>
As Administrator, RSMC supplies office facilities, non-investment related
statistical and research data, stationery and office supplies, executive and
administrative services, internal auditing and regulatory compliance services.
RSMC also assists in the preparation of reports to shareholders, prepares
proxy statements, updates prospectuses and makes filings with the SEC and
state securities authorities. RSMC performs certain budgeting and financial
reporting and compliance monitoring activities. For the services provided as
Administrator, RSMC receives a monthly administration fee from the Fund at an
annual rate of 0.09% of the Fund's average daily net assets. For the services
provided as Transfer Agent and Dividend Paying Agent of the Fund, RSMC
receives $7 per account per year plus various other transaction fees, subject
to a minimum fee of $1,000 per month plus out-of-pocket expenses. As
Accounting Agent, RSMC determines the Fund's net asset value per share and
provides accounting services to the Fund pursuant to an Accounting Services
Agreement with the Corporation. For the services provided as Accounting
Agent, RSMC receives from the Fund an annual fee of $75,000 plus an amount
equal to 0.03% of the average daily net assets over $100 million.
CUSTODIAN. The Custodian for the assets of the Fund is The Chase
Manhattan Bank, N.A. ("Chase"), which employs foreign sub-custodians to
maintain the Fund's foreign assets outside the United States subject to the
Corporation's Board of Directors' annual review of those foreign custody
arrangements.
DISTRIBUTION AGREEMENT AND RULE 12B-1 PLAN. 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,
enters into agreements with broker-dealers and other financial institutions to
sell shares of the Fund and directly, or through its affiliates, provides
investor support services.
Under a Plan of Distribution adopted pursuant to Rule 12b-1 under the
1940 Act (the "12b-1 Plan"), the Fund may reimburse RSD for expenses incurred
in connection with distribution activities encompassed by Rule 12b-1. The 12b-
1 Plan provides that RSD may be reimbursed for amounts paid and expenses
incurred for public relations services, telephone services, sales
presentations, media charges, preparation, printing and mailing advertising
and sales literature, data processing necessary to support a distribution
effort, printing and mailing prospectuses, and distribution and shareholder
servicing activities of broker/dealers and other financial institutions. The
Board of Directors has limited the amount that RSD can receive under the 12b-1
Plan to 0.25% of the Fund's average daily net assets on an annualized basis.
If an increase in this limitation is requested by RSD and authorized by the
Board at some future date, Fund shareholders will be advised of that increase.
In the event that RSD is not fully reimbursed for its distribution
expenses during any month due to limitations set by the Directors, the unpaid
portion may be carried forward for possible reimbursement into successive
months and fiscal years to give RSD the ability to recoup at some point in
time any major capital outlay on behalf of the Fund. Under the 12b-1 Plan, RSD
may charge the Fund interest or finance charges on unreimbursed distribution
expenses that have been carried forward from prior fiscal years, but only with
27
<PAGE>
express authorization by the Board of Directors. RSD does not intend to
request such authorization at the present time. If interest charges are
requested by RSD and authorized by the Board at some future time, Fund
shareholders will be advised of those charges.
BANKING LAWS. Banking laws prohibit 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
Corporation 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 Directors 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 Fund 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.
State securities laws may require banks and financial institutions
involved in distribution to register as dealers, even if this is not required
by federal law.
- ------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
- ------------------------------------------------------------------------------
The Fund is the only series of the Corporation, an open-end investment
company established as a Maryland corporation on July 24, 1987. The Directors
are empowered by the Articles of Incorporation and the By-Laws to establish
additional series and classes of shares, although they have no present
intention of doing so.
The Corporation has an authorized capitalization of 100,000,000 shares of
$0.01 par value common stock. Each share has one vote, and fractional shares
entitle their holder to fractional votes with respect to matters upon which a
shareholder vote is required. Shares have noncumulative voting rights, do not
have preemptive or subscription rights and are transferable. As of January 31,
1996, WTC beneficially owned by virtue of shared or sole voting or investment
power on behalf of its underlying customer accounts 82.4% of the shares then
outstanding for the Fund and may be deemed to be a controlling person of the
Fund 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 Directors
unless and until such time as less than a majority of the Directors holding
office has been elected by shareholders, at which time the Directors then in
office will call a shareholders' meeting for the election of Directors. Under
the 1940 Act, shareholders of record owning no less than two-thirds of the
outstanding shares of the Fund may remove a Director by vote cast in person or
by proxy at a meeting called for that purpose. The Directors are required to
call a meeting of shareholders for the purpose of voting upon the question of
removal of any Director when requested in writing to do so by the shareholders
of record of not less than 10% of the Fund's outstanding shares.
28
<PAGE>
THE RODNEY SQUARE
INTERNATIONAL EQUITY FUND
APPLICATION & NEW ACCOUNT REGISTRATION
______________________________________________________________________________
INSTRUCTIONS: RETURN THIS COMPLETED FORM TO:
FOR WIRING INSTRUCTIONS OR FOR THE RODNEY SQUARE INTERNATIONAL
ASSISTANCE IN COMPLETING THIS EQUITY FUND
FORM CALL (800) 336-9970 C/O RODNEY SQUARE MANAGEMENT CORP.
P.O. Box 8987
WILMINGTON, DE 19899-9752
______________________________________________________________________________
PORTFOLIO SELECTION ($1,000 MINIMUM)
AMOUNT TO BE INVESTED $___________
____By check. (Make payable to "The Rodney Square International Equity Fund")
____By wire. Call 1-800-336-9970 for Instructions.
____Bank from which funds will be wired _____________________
wire date _____________________
______________________________________________________________________________
ACCOUNT REGISTRATION - JOINT TENANTS USE LINES 1 AND 2; CUSTODIAN FOR A MINOR,
USE LINES 1 AND 3; CORPORATION, TRUST OR OTHER ORGANIZATION OR ANY FIDUCIARY
CAPACITY, USE LINE 4.
1.Individual__________________________________________________________________
First Name MI Last Name Customer Tax ID No.*
2.Joint Tenancy**
__________________________________________________________________
First Name MI Last Name Customer Tax ID No.*
("Joint Tenants with Rights of Survivorship" unless otherwise Specified)
Uniform
3.Gifts to Minors***
_______________________ _______________ __________
Minor's Name Customer Tax ID No.* State
4.Other Registration
__________________________________________________________
Customer Tax ID No.*
5.If Trust, Date of Trust Instrument:_________________________________________
6._______________________________________
Your Occupation
7.___________________________________ _______________________________________
Employer's Name Employer's Address
*Customer Tax Identification No.: (a) for an individual, joint tenants, or
a custodial account under the Uniform Gifts/Transfers to Minors Act, supply
the Social Security number of the registered account owner who is to be taxed;
(b) for a trust, a corporation, a partnership, an organization, a fiduciary,
etc., supply the Employer Identification number of the legal entity or or-
ganization that will report income and/or gains.
** "Joint Tennants with Rights of Survivorship" unless otherwise specified.
*** Regulated by the state's Uniform Gift/Transfers to Minors Act.
______________________________________________________________________________
ADDRESS OF RECORD
______________________________________________________________________________
Street
______________________________________________________________________________
City State Zip Code
<PAGE>
______________________________________________________________________________
DISTRIBUTION OPTIONS - IF THESE BOXES ARE NOT CHECKED, ALL DISTRIBUTIONS WILL
BE INVESTED IN ADDITIONAL SHARES.
Pay Cash for:
Income Dividends Other
INTERNATIONAL EQUITY FUND ___ ___
______________________________________________________________________________
CHECK ANY OF THE FOLLOWING IF YOU WOULD LIKE ADDITIONAL INFORMATION ABOUT
A PARTICULAR PLAN OR SERVICE SENT TO YOU.
___AUTOMATIC INVESTMENT PLAN ___SYSTEMATIC WITHDRAWAL PLAN ___CHECK REDEMPTIONS
(Check redemptions services are generally not available for clients of
WTC through their trust or corporate cash management accounts; this service
may also not be available for clients of Service Organizations.)
______________________________________________________________________________
RIGHTS OF ACCUMULATION (SEE PROSPECTUS) -- INDICATE ANY RELATED ACCOUNT(S) IN
FUNDS OR PORTFOLIOS IN THE RODNEY SQUARE COMPLEX WHICH WOULD QUALIFY FOR A
REDUCED SALES LOAD AS OUTLINED UNDER "PURCHASE OF SHARES-REDUCED SALES LOAD
PLANS" IN THE PROSPECTUS.
_____________________ ____________ ____________________ ___________________
Fund/Portfolio Name Account No. Registered Owner Relationship
_____________________ ____________ ____________________ ___________________
Fund/Portfolio Name Account No. Registered Owner Relationship
______________________________________________________________________________
LETTER OF INTENT
I agree to the Letter of Intent provisions set forth below. I am not obligated
but intend to invest an aggregate amount of at least:
__ $25,000 __ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Under the terms described under "PURCHASE OF SHARES-Reduced Sales Load Plans"
in the Prospectus, over a thirteen-month period beginning __________________.
I hereby irrevocably constitute and appoint RSMC as my agent and attorney to
surrender for redemption any or all escrowed shares with full power of
substitution in the premises.
I understand that this letter is not effective until it is accepted by RSMC.
____________________________________ ____________________________________
Authorized Signature Authorized Signature
______________________________________________________________________________
SALES LOAD WAIVERS -- PLEASE INDICATE IN THE SPACE PROVIDED THE NATURE OF YOUR
ELIGIBILITY FOR A WAIVER OF SALES LOADS. (SEE "PURCHASE OF SHARES-SALES LOAD
WAIVERS" IN THE PROSPECTUS.)
Nature of Affiliation ______________________________________________________
______________________________________________________________________________
<PAGE>
CERTIFICATIONS AND SIGNATURE(S) - PLEASE SIGN EXACTLY AS REGISTERED UNDER
"ACCOUNT REGISTRATION."
I have received and read the Prospectus for The Rodney Square Fund and The
Rodney Square Tax-Exempt Fund and agree to its terms; I am of legal age. I
understand that the shares offered by this Prospectus are not deposits of, or
guaranteed by, Wilmington Trust Company, nor are the shares insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
agency. I further understand that investment in these shares involves
investment risks, including possible loss of principal. If a corporate
customer, I certify that appropriate corporate resolutions authorizing
investment in The Rodney Square Fund and/or The Rodney Square Tax-Exempt Fund
have been duly adopted.
I certify under penalties of perjury that the Social Security number or
taxpayer identification number shown above is correct. Unless the box below is
checked, I certify under penalties of perjury that I am not subject to backup
withholding because the Internal Revenue Service (a) has not notified me that
I am as a result of failure to report all interest or dividends, or (b) has
notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required from all nonexempt persons to
prevent backup withholding of 31% of all taxable distributions and gross
redemption proceeds under the federal income tax law.
____Check here if you are subject to backup withholding.
Signature___________________________________________ Date____________
Signature___________________________________________ Date____________
Joint Owner/Trustee
Check one: __ Owner __ Trustee __ Custodian __ Other _____________________
______________________________________________________________________________
IDENTIFICATION OF SERVICE ORGANIZATION
We authorize Rodney Square Management Corporation ("RSMC"), and Rodney
Square Distributors, Inc. ("RSD") in the case of transactions by telephone, to
act as our agents in connection with transactions authorized by this order
form.
Service Organization Name and Code____________________________________________
Branch Address and Code_______________________________________________________
Representative or Other Employee Code_________________________________________
Authorized Signature of Service Organization___________Telephone (___)________
<PAGE>
THE RODNEY SQUARE
INTERNATIONAL EQUITY FUND
APPLICATION for TELEPHONE REDEMPTION OPTION
______________________________________________________________________________
Telephone redemption permits redemption of fund shares by telephone, with
proceeds directed only to the fund account address of record or to the bank
account designated below. For investments by check, telephone redemption is
available only after these shares have been on the Fund's books for 10 days.
This form is to be used to add or change the telephone redemption option on
your Rodney Square International Equity Fund account(s).
______________________________________________________________________________
ACCOUNT INFORMATION
Fund Account Number(s):__________________________________________________
(Please provide if you are a current account holder:)
Registered in the Name(s) of:_______________________________________________
_______________________________________________
Registered Address:_________________________________________________________
_________________________________________________________
NOTE: If this form is not submitted together with the application, a coporate
resolution must be included for accounts registered to other than an individ-
ual, a fiduciary or partnership.
______________________________________________________________________________
REDEMPTION INSTRUCTIONS
___Add ___Change
Check one or more.
___Mail proceeds to my fund account address of record (must be $10,000 or
less and address must be established for a minimum of 60 days)
___Mail proceeds to my bank
___Wire proceeds to my bank (minimum $1,000)
___All of the above
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
______________________________________________________________________________
<PAGE>
BANK INFORMATION
PLEASE COMPLETE THE FOLLOWING INFORMATION ONLY IF PROCEEDS MAILED/WIRED TO YOUR
BANK WAS SELECTED. A VOIDED BANK CHECK MUST BE ATTACHED TO THIS APPLICATION.
Name of Bank________________________________________________________________
Bank Routing Transit #______________________________________________________
Bank Address________________________________________________________________
City/State/Zip______________________________________________________________
Bank________________________________________________________________________
Account Number______________________________________________________________
Name(s) on Bank Account_____________________________________________________
______________________________________________________________________________
AUTHORIZATIONS
By electing the telephone redemption option, I appoint Rodney Square
Management Corporation ("RSMC"), my agent to redeem shares of any designated
Rodney Square fund when so instructed by telephone. This power will continue
if I am disabled or incapacitated. I understand that a request for telephone
redemption may be made by anyone, but the proceeds will be sent only to the
account address of record or to the bank listed above. Proceeds in excess of
$10,000 will only be sent to your predesignated bank. By signing below, I
agree on behalf of myself, my assigns, and successors, not to hold RSMC and
any of its affiliates, or any Rodney Square fund responsible for acting under
the powers I have given RSMC. I also agree that all account and registration
information I have given will remain the same unless I instruct RSMC otherwise
in a written form, including a signature guarantee. If I want to terminate
this agreement, I will give RSMC at least ten days notice in writing. If RSMC
or the Rodney Square funds want to terminate this agreement, they will give me
at least ten days notice in writing.
All owners on the account must sign below and obtain signature guarantee(s).
_____________________________________ ___________________________________
Signature of Individual Owner Signature of Joint Owner (if any)
______________________________________________________________________________
Signature of Corporate Officer, Trustee or other _ please include your title
You must have a signature(s) guaranteed by an eligible institution acceptable
to the Fund's transfer agent, such as a bank, broker/dealer, government securi-
ties dealer, credit union, national securities exchange, registered securities
association, clearing agency or savings association. A Notary Public is not an
acceptable guarantor.
SIGNATURE GUARANTEE(S) (stamp)
<PAGE>
[Outside cover -- Divided into three sections]
[Leftmost Section]
DIRECTORS
Eric Brucker
Fred L. Buckner
Martin L. Klopping
John J. Quindlen
- ------------------
OFFICERS
Martin L. Klopping, President
Joseph M. Fahey, Jr., Vice President
Robert C. Hancock, Vice President & Treasurer
Marilyn Talman, Esq., Secretary
Diane D. Marky, Assistant Secretary
Connie L. Meyers, Assistant Secretary
Louis C. Schwartz, Esq., Assistant Secretary
John J. Kelley, Assistant Treasurer
- -------------------------------------
FUND MANAGER, ADMINISTRATOR AND TRANSFER AGENT
Rodney Square Management Corporation
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
- ---------------------------
DISTRIBUTOR
Rodney Square Distributors, Inc.
Rodney Square North
1100 N. Market St.
Wilmington, DE 19890-0001
<PAGE>
[Middle Section]
THE RODNEY SQUARE
INTERNATIONAL
EQUITY FUND
[Graphic] Caesar
Rodney upon his
galloping horse
facing right,
reverse image on
dark background
PROSPECTUS
March 1, 1996
<PAGE>
TABLE OF CONTENTS
Page
Expense Table 2
Financial Highlights 3
Questions and Answers About the Funds 4
Investment Objectives and Policies 6
Purchase of Shares 10
Shareholder Accounts 13
Redemption of Shares 13
Exchange of Shares 15
How Net Asset Value is Determined 16
Dividends, Other distributions and Taxes 17
Performance Information 18
Management of the Funds 19
Description of the Funds 22
Application and New Account Registration 23
<PAGE>
THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
The Rodney Square International Equity Fund (the "Fund") is a
diversified series of The Rodney Square International
Securities Fund, Inc. (the "Corporation"), an open-end
investment company. The Fund seeks long-term capital
appreciation primarily through investments in equity
securities (including convertible securities) of issuers
located outside the United States.
- ------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1996
- ------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Fund's current Prospectus, dated March 1,
1996, as amended from time to time. A copy of the current Prospectus may be
obtained without charge, by writing to Rodney Square Distributors, Inc.
("RSD"), Rodney Square North, 1100 North Market Street, Wilmington, DE 19890-
0001, and from certain institutions such as banks or broker-dealers that have
entered into servicing agreements with RSD or by calling (800) 336-9970.
<PAGE>
TABLE OF CONTENTS
PAGE
SPECIAL INVESTMENT CONSIDERATIONS......................... 1
INVESTMENT POLICIES....................................... 2
INVESTMENT LIMITATIONS.................................... 3
DIRECTORS AND OFFICERS.................................... 5
WILMINGTON TRUST COMPANY.................................. 7
THE SUB-ADVISERS.......................................... 8
INVESTMENT MANAGEMENT SERVICES............................ 8
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS
AND RULE 12b-1 PLAN.................................... 10
PORTFOLIO TRANSACTIONS.................................... 13
PORTFOLIO TURNOVER........................................ 14
REDEMPTIONS............................................... 14
NET ASSET VALUE........................................... 15
PERFORMANCE INFORMATION................................... 15
TAXES..................................................... 22
DESCRIPTION OF THE FUND................................... 24
OTHER INFORMATION......................................... 25
FINANCIAL STATEMENTS...................................... 25
APPENDIX.................................................. A-1
<PAGE>
SPECIAL INVESTMENT CONSIDERATIONS
The Fund seeks investment opportunities outside of the United States and
attempts to respond to investment situations that may arise in equity markets
outside the United States. Wilmington Trust Company ("WTC" or the "Adviser"),
investment adviser to the Fund, believes that diversification of assets on an
international basis decreases an investor's risk exposure. In the period
since World War II, many leading foreign economies and foreign stock markets
have grown more rapidly than the U.S. economy and leading U.S. stock markets.
There may be times, however, when U.S. stock markets grow more rapidly than
some or all foreign stock markets.
In recent years, a great deal of U.S. investor interest has focused on
the international investment market, where many equity markets have
outperformed U.S. markets. According to the Morgan Stanley Capital
International Index, as of December 31, 1995, the U.S. equity market accounts
for less than 34% of the world's total equity market. International equity
investments offer significant potential advantages: investment in a number of
stock markets, participation in growth opportunities outside of the United
States and protection against a falling dollar. The Fund may be particularly
appropriate for the investor who holds a well diversified portfolio of U.S.
stocks and wants the opportunity to enhance returns and reduce overall
investment volatility by diversifying into the international markets.
Portfolios that include foreign equities have historically exhibited greater
returns, with less overall volatility, than portfolios invested solely in U.S.
equities. However, because the Fund invests primarily in equity securities of
issuers located outside the United States, the Fund alone is not intended to
provide a complete investment program for an investor.
Of course, there can be no guarantee that the sub-advisers' investment
approaches or the potential advantages offered by international equity
investments will facilitate the Fund's ability to achieve its investment
objective. Since investment decisions are made independently by each sub-
adviser, it is possible that the securities held by one portfolio segment may
also be held by another portfolio segment of the Fund. However, it is not
expected that such overlapping of investments would be significant.
Overlapping investments in illiquid securities would be infrequent; to the
extent that they do occur, there may be some risk that the purchase or sale of
such securities may affect the value of the Fund's holdings. In addition, a
sub-adviser may purchase a particular security for the Fund at the same time
another sub-adviser is selling the same security for the Fund. The result of
this could be increased brokerage commissions to the Fund without any change
to the Fund's portfolio holdings. The decision to invest defensively is also
made independently by each sub-adviser and may result in the Fund, as a whole,
being defensively invested.
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<PAGE>
Investors should also recognize that investing in foreign issuers
involves certain considerations, including those described in the Prospectus
and below, which are not typically associated with investing in U.S. issuers
and which may favorably or unfavorably affect the Fund's performance. For
example, because foreign companies generally are not subject to uniform
accounting and financial reporting standards, or practices and requirements
comparable to those applicable to domestic companies, there may be less
publicly available information about a foreign company than about a domestic
company. Also, since investments in foreign issuers will normally be
denominated in currencies of foreign countries, and since the Fund may
temporarily hold funds in bank deposits in foreign currencies during
completion of investment programs, the Fund's returns will likely be affected
favorably or unfavorably by changes in foreign currency reporting standards,
practices and requirements, and foreign currency exchange rates and exchange
control regulations.
In addition, although the Fund does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis, it will do so from time
to time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread ") between the prices at
which they are buying and selling various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate should the Fund desire to resell that currency to the dealer. The
Fund conducts its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into forward foreign currency exchange
contracts to purchase or sell foreign currencies.
Foreign stock markets, while growing in volume of trading activity, may
have substantially less volume than the New York Stock Exchange (the
"Exchange"), and securities of some foreign issuers are less liquid and more
volatile than securities of comparable domestic issuers. Similarly, volume
and liquidity in most foreign money markets may be less than in the United
States. Fixed commissions on foreign stock exchanges are generally higher
than negotiated commissions on U.S. exchanges, although the Fund will endeavor
to achieve the most favorable net results on its portfolio transactions. In
situations where there are negotiated commissions, it is WTC's and the sub-
advisers' intention to negotiate the most favorable commission rates given the
specific transaction contemplated under conditions then prevailing.
There is generally less government supervision and regulation of foreign
stock exchanges, brokers and listed companies than in the United States, and
therefore, it may be more difficult for the Fund's sub-advisers to keep
currently informed about corporate actions such as stock dividends or other
matters which may affect the prices of portfolio securities. In addition,
with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect U.S. investment in those countries.
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.
2
<PAGE>
INVESTMENT POLICIES
The following supplements the information contained in the Prospectus
concerning the Fund's investment policies.
HEDGING STRATEGIES. The Fund may purchase and sell (write) put and call
options and futures contracts and options on futures contracts on foreign
currencies, securities and other financial instruments. The Fund may also
enter into forward currency exchange contracts. These hedging strategies are
described in detail in the Appendix.
EUROPEAN AND AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in
foreign securities by purchasing European Depository Receipts ("EDR's"),
American Depository Receipts ("ADR's") and other securities convertible into
equity securities of foreign issuers. It is possible that these securities
will not be denominated in the same currency as the securities into which they
may be converted. In general, EDR's, in bearer form, are designed for use in
European securities markets, while ADR's, in registered form, are designed for
use in U.S. securities markets.
LOANS OF PORTFOLIO SECURITIES. Although the Fund has no present
intention of doing so, it may from time to time lend its portfolio securities
to brokers, dealers and financial institutions. Such loans will in no event
exceed one-third of the Fund's total assets and will be secured by collateral
in the form of cash or securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities ("U.S. Government Securities"), in an amount
at least equal to the current market value of the loaned securities determined
on a daily basis and adjusted accordingly.
The primary risk involved in lending securities is that the borrower
might fail financially and would not return the loaned securities at a time
when the value of the collateral is insufficient to replace the full amount of
the loaned securities. The borrower would be liable for the shortage, but the
Fund would be an unsecured creditor with respect to such shortage and might
not be able to recover all or any of it. In order to minimize this risk, the
Fund will make loans of securities only to firms deemed creditworthy by WTC or
a sub-adviser when, in their judgment, the consideration to be earned
justifies this risk.
ILLIQUID SECURITIES. The Fund may not purchase or otherwise acquire any
security or invest in a repurchase agreement if, as a result, more than 15% of
the Fund's net assets (taken at current value) would be invested in illiquid
securities. For purposes of this limitation, repurchase agreements not
entitling the holder to payment of principal within seven days and securities
that are illiquid by virtue of legal or contractual restrictions on resale
("restricted securities") or the absence of a readily available market are
considered illiquid.
3
<PAGE>
Restricted securities may be sold only in privately negotiated
transactions or in public offerings with respect to which a registration
statement is in effect under the Securities Act of 1933 (the "1933 Act").
Such securities include those that are subject to restrictions contained in
the securities laws of other countries. Securities that are freely marketable
in the country where they are principally traded, but would not be freely
marketable in the United States, will not be subject to the limitations set
forth above. Where registration is required, the Fund may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Fund may be
permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than prevailed when it decided to sell.
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are
often restricted securities because the securities are either themselves
exempt from registration or sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to
the general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily
resold or on an issuer's ability to honor a demand for repayment. Therefore,
the fact that there are contractual or legal restrictions on resale to the
general public or certain institutions is not dispositive of the liquidity of
such investments.
To facilitate the increased size and liquidity of the institutional
markets for unregistered securities, the SEC adopted Rule 144A under the 1933
Act. Rule 144A establishes a "safe harbor" from the registration requirements
of the 1933 Act for resales of certain securities to qualified institutional
buyers. Institutional markets for restricted securities have developed as a
result of Rule 144A, providing both readily ascertainable values for
restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. An insufficient number of qualified
institutional buyers interested in purchasing Rule 144A-eligible restricted
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities, and the Fund might be unable to dispose of such
securities promptly or at reasonable prices.
The Corporation's Board of Directors has the ultimate responsibility for
determining whether 144A securities are liquid or illiquid. The Board has
delegated the function of making day-to-day determinations of liquidity to WTC
and the sub-advisers pursuant to guidelines approved by the Board. WTC and
the sub-advisers monitor the liquidity of 144A securities in the Fund's
4
<PAGE>
portfolio and report periodically on such decisions to the Directors. WTC and
the sub-advisers have taken into account a number of factors in reaching
liquidity decisions, including (1) the frequency of trades for the security,
(2) the number of dealers that made quotes for the security, (3) the number of
dealers that have undertaken to make a market in the security, (4) the number
of other potential purchasers for the security and (5) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of the transfer).
INVESTMENT LIMITATIONS
The following investment limitations of the Fund are fundamental and may
not be changed without the affirmative vote of the lesser of (1) 67% of the
shares of the Fund present at a shareholders' meeting if the holders of more
than 50% of the outstanding shares of the Fund are present in person or by
proxy or (2) more than 50% of the outstanding shares of the Fund.
Investment limitations, except with respect to the borrowing of money,
that appear below or elsewhere in the Prospectus or this Statement of
Additional Information which involve a maximum percentage of securities or
assets shall not be considered to be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets.
The Fund will not:
(1) With respect to 75% of the Fund's total assets, invest more than 5%
of the value of its total assets in the securities of any one issuer, except
debt obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities;
(2) With respect to 75% of the Fund's total assets, purchase the
securities of any issuer if such purchase would cause more than 10% of the
voting securities of such issuer to be held by the Fund;
(3) Borrow money, except (a) from a bank for temporary or emergency
purposes (not for leveraging or investment) or (b) by engaging in reverse
repurchase agreements, provided that borrowings do not exceed an amount equal
to one-third of the current value of the Fund's assets taken at market value,
less liabilities other than borrowings;
(4) Purchase securities (other than U.S. Government Securities), if such
purchase would cause more than 25% in the aggregate of the market value of the
total assets of the Fund at the time of such purchase to be invested in the
securities of one or more issuers having their principal business activities
in the same industry;
(5) Act as underwriter of the securities issued by others, except to the
extent that the purchase of securities in accordance with the Fund's
investment objective and policies directly from the issuer thereof and the
later disposition thereof may be deemed to be underwriting;
5
<PAGE>
(6) Issue senior securities, except (i) as appropriate to evidence
indebtedness that the Fund is permitted to incur; (ii) the Fund may issue
shares of additional classes or series which the Board of Directors may
establish; and (iii) the Fund's futures, options and forward currency
transactions will not be considered senior securities;
(7) Purchase or sell real estate (including limited partnerships) and
physical commodity contracts, except that the Fund may (i) invest in
securities secured by real estate or interests in real estate or in securities
issued by companies, including real estate investment trusts, that invest in
real estate or interests in real estate; and (ii) purchase and sell (write)
put and call options, futures contracts and options on futures contracts on
foreign currencies, securities and other financial instruments and enter into
forward foreign currency exchange contracts; or
(8) Make loans to other persons, except loans of portfolio securities to
the extent that such loans do not exceed one-third of the Fund's total assets
and except to the extent that the purchase of debt obligations in accordance
with the Fund's investment objective and policies and the entry into
repurchase agreements may be deemed to be loans.
In addition to those fundamental investment limitations described above,
the following non fundamental investment limitations have been adopted by the
Corporation's Board of Directors and may be changed by the Board without
shareholder approval.
The Fund will not:
(1) purchase securities issued by any other investment company, except
to the extent necessary to purchase the securities of issuers located in
foreign countries whose securities may be purchased only through investment
companies and to the extent permitted by Section 12 of the Investment Company
Act of 1940 (the "1940 Act") (currently, up to 10% of the total assets of the
Fund and, as to any one investment company, up to 5% of the total assets of
the Fund and no more than 3% of the total outstanding voting securities of
that investment company);
(2) invest in securities of any issuer which, together with any
predecessor, has been in operation for less than three years, if, as a result,
more than 5% of the Fund's total assets would then be invested in such
securities;
(3) purchase or retain the securities of an issuer if, to the Fund's
knowledge, one or more of the Directors or officers of the Corporation or of
WTC or any sub-adviser individually own beneficially more than 1/2 of 1% of
the securities of such issuer and together own beneficially more than 5% of
the securities of that issuer;
6
<PAGE>
(4) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial margin and
premiums does not exceed 5% of the Fund's total assets provided that in the
case of an option that is in-the-money at the time of purchase, the in-the-
money amount may be excluded in computing the 5% limit;
(5) purchase or retain securities of any open-end investment company
except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition of assets;
(6) purchase securities of closed-end investment companies except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets;
(7) purchase securities on margin or make short sales, unless by virtue
of its ownership of other securities, it has the right to obtain securities
equivalent in kind and amount to the securities sold and, if the right is
conditional, the sale is made upon the same conditions;
(8) invest in warrants (other than options on securities) except that
the Fund may invest in warrants valued at the lower of cost or market, not
exceeding 10% of the value of its net assets;
(9) purchase or sell interests in oil, gas or mineral leases;
(10) make loans to other persons, except loans of portfolio securities
to the extent that such loans do not exceed one-third of the Fund's total
assets and are fully collateralized in an amount at least equal to the current
market value of the loaned securities and except to the extent that the
purchase of debt obligations in accordance with the Fund's investment
objective and policies and the entry into repurchase agreements may be deemed
to be loans; or
(11) purchase or otherwise acquire any security or invest in a
repurchase agreement with respect to any securities if, as a result, more than
15% of its net assets (taken at current value) would be invested in illiquid
securities. For purposes of this limitation, repurchase agreements not
entitling the holder to payment of principal within seven days and securities
that are illiquid by virtue of legal or contractual restrictions on resale or
the absence of a readily available market are considered illiquid.
If necessary in order to comply with limitations imposed by certain state
securities commissions, the Fund may adopt additional restrictions.
"Value" for the purposes of all investment limitations shall mean the
value used in determining the Fund's net asset value.
7
<PAGE>
DIRECTORS AND OFFICERS
The Corporation has a Board, presently composed of five Directors, which
supervises Fund activities and reviews contractual arrangements with companies
that provide the Fund with services. The Directors and officers of the
Corporation are listed below. Except as indicated, each individual has held
the office shown or other offices in the same company for the last five years.
All persons named as Directors also serve in similar capacities for The Rodney
Square Fund, The Rodney Square Tax-Exempt Fund, The Rodney Square Strategic
Fixed-Income Fund and The Rodney Square Multi-Manager Fund. Those Directors
who are "interested persons" of the Corporation (as defined in the 1940 Act)
by virtue of their position with either Rodney Square Management Corporation
("RSMC") or WTC are indicated by an asterisk (*).
*MARTIN L. KLOPPING, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, President elected in 1995, and Director, age 42, has been
President and Director of RSMC since 1984. He is also a Director of RSD,
elected in 1992. He is also a Chartered Financial Analyst and member of the
SEC Rules and Investment Advisers Committees of the Investment Company
Institute.
ERIC BRUCKER, School of Management, University of Michigan, Dearborn, MI
48128, Director, age 54, has been Dean of the School of Management at the
University of Michigan since June 1992. He was Professor of Economics, Trenton
State College from September 1989 through June 1992. He was Vice President
for Academic Affairs, Trenton State College from September 1989 through June
1991. From 1976 until September 1989, he was Dean of the College of Business
and Economics and Chairman of various committees at the University of
Delaware. He is a member of the Detroit Economic Club.
FRED L. BUCKNER, 5 Hearth Lane, Greenville, DE 19807, Director, age 64, has
retired as President and Chief Operating Officer of Hercules Incorporated
(diversified chemicals), positions he has held from March 1987 through March
1992. He also served as a member of the Hercules Incorporated Board of
Directors from 1986 through March 1992.
JOHN J. QUINDLEN, 313 Southwinds, 1250 West Southwinds Blvd., Vero Beach, FL
32963, Director, age 63, has retired as Senior Vice President-Finance of E.I.
du Pont de Nemours and Company, Inc. (diversified chemicals) a position he
held from 1984 to November 30, 1993. He also served as Chief Financial
Officer of E.I. du Pont de Nemours and Company, Inc. from 1984 through
June 30, 1993. He also serves as a Trustee of Kiewit Mutual Fund since 1994.
He is a Director of Atlantic Aviation, Inc. and St. Joe Paper Co. and a
Trustee of Winterthur Museum and Gardens and Medical Center of Delaware.
8
<PAGE>
JOSEPH M. FAHEY, JR., Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Vice President, age 39, has been with RSMC since 1984 as a
Secretary of RSMC since 1986 and a Vice President of RSMC since 1992. He was
an Assistant Vice President of RSMC from 1988 to 1992 and Senior Investment
Officer of RSMC from 1984 to 1988.
ROBERT C. HANCOCK, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Vice President and Treasurer, age 44, has been Vice President of
RSMC since 1988 and Treasurer of RSMC since 1990. He is also a member of the
Accounting/Treasurer Committee of the Investment Company Institute.
MARILYN TALMAN, Rodney Square North, 1100 N. Market Street, Wilmington, DE
19890-0001, Secretary, age 49, has been a Vice President of RSMC since 1995.
She served as an Assistant Vice President of RSMC from 1993 to 1995 and a
Senior Fund Administration Officer from 1992 to 1993. She was an Associate at
Ballard Spahr Andrews & Ingersoll (law firm) from 1989 to 1992.
DIANE D. MARKY, Rodney Square North, 1100 N. Market St., Wilmington, DE 19890-
0001, Assistant Secretary, age 31, has been a Senior Fund Administrator of
RSMC since 1994 and a Fund Administration Officer since 1991. She was a
Mutual Fund Accountant for RSMC from 1989 to 1991.
CONNIE L. MEYERS, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Assistant Secretary, age 35, has been a Fund Administrator of RSMC
since August, 1994. She was a Corporate Custody Administrator for Wilmington
Trust Company from 1989 to 1994.
LOUIS C. SCHWARTZ, Rodney Square North, 1100 N. Market St., Wilmington, DE
19890-0001, Assistant Secretary, age 28, has been a Senior Fund Administrator
of RSMC since 1995 and a Fund Administration Officer since February, 1996. He
was an Associate at the law offices of Mason, Briody, Gallagher & Taylor from
1993 to 1995.
JOHN J. KELLEY, Rodney Square North, 1100 N. Market St., Wilmington, DE 19890-
0001, Assistant Treasurer, age 36, has been a Vice President of RSMC since
1995. He was an Assistant Vice President from 1989 to 1994.
The fees and expenses of the Directors who are not "interested persons"
of the Corporation (the "Independent Directors"), as defined in the 1940 Act,
are paid by the Corporation. For the fiscal year ended October 31, 1995, such
fees and expenses amounted to $5,400. The following table shows the fees paid
during calendar 1995 to the Independent Directors for their service to the
Fund and to the Rodney Square Family of Funds. As of January 31, 1996, the
Directors and officers of the Corporation as a group owned beneficially less
than 1% of the shares of the Fund.
9
<PAGE>
1995 DIRECTORS FEES
Total Fees from Total Fees from the Rodney
Independent Trustee the Fund Square Family of Funds
- ------------------- --------------- --------------------------
Eric Brucker $1,800 $16,900
Fred L. Buckner $1,800 $16,900
John J. Quindlen $1,800 $16,900
WILMINGTON TRUST COMPANY
The investment adviser, WTC, is a state-chartered bank organized as a
Delaware corporation in 1903. WTC is a wholly owned subsidiary of Wilmington
Trust Corporation which is a publicly held bank holding company. The Fund
benefits from the experience, conservative values and special heritage of WTC.
WTC is a financially strong bank and enjoys a reputation for providing
exceptional consistency, stability and discipline in managing both short-term
and long-term investments. WTC is Delaware's largest full-service bank and,
with more than $75 billion in trust, custody and investment management assets,
WTC ranks among the nation's leading money management firms. As of December
31, 1995, the trust department of WTC was the seventeenth largest in the
United States as measured by discretionary assets under management. WTC is
engaged in a variety of investment advisory activities, including the
management of collective investment pools, and has nearly a century of
experience managing the personal investments of high net-worth individuals.
Its current roster of institutional clients includes several Fortune 500
companies as well. In addition to serving as Investment Adviser to the Fund,
WTC also serves as Investment Adviser to The Rodney Square Strategic Fixed-
Income Fund and manages over $3.7 billion in fixed-income assets for various
other institutional clients.
Several affiliates of WTC are also engaged in the investment advisory
business. Wilmington Trust FSB, a wholly owned subsidiary of Wilmington
Trust Corporation exercises investment discretion over certain institutional
accounts. RSMC, a wholly owned subsidiary of WTC, and the Fund's
Administrator, Transfer Agent and Dividend Paying Agent, serves as investment
adviser for The Rodney Square Fund, The Rodney Square Tax-Exempt Fund and The
Rodney Square Multi-Manager Fund, each a registered investment company. RSMC
also serves as Administrator, Transfer Agent and Dividend Paying Agent for
those funds and for The Rodney Square Strategic Fixed-Income Fund, another
registered investment company.
RSD, a wholly owned subsidiary of WTC and the Fund's distributor, is a
registered broker-dealer. Wilmington Brokerage Services Company, another
wholly owned subsidiary of WTC, is a registered investment adviser and a
registered broker-dealer.
10
<PAGE>
THE SUB-ADVISERS
The Fund utilizes a multi-manager configuration, with each sub-adviser
following a different investment approach in investing in non-U.S. companies
with attractive return potential. Each of the current sub-advisers employs a
fundamentally driven investment process which includes varying levels of both
top-down economic analysis at the country level and bottom-up stock selection
within markets as well as varying degrees of quantitative analyses of issuers,
industries, countries and regional markets. The Fund typically maintains
representation across a broad range of countries, but will tend to have
weightings which significantly differ from international stock indexes, such
as EAFE (Europe, Asia, Far East), a widely followed unmanaged capitalization
weighted index of publicly traded stocks. The Fund may also have significant
exposure to emerging markets not represented in EAFE, such as Mexico,
Indonesia and Thailand. Because country allocations may differ from those of
the EAFE Index, the Fund's returns may significantly deviate from those of the
EAFE Index.
The sub-advisers to the Fund are:
CLEMENTE CAPITAL, INC. - A theme oriented international manager investing
in companies with favorable growth characteristics that will be positively
influenced by global and regional trends.
SCUDDER, STEVENS & CLARK, INC. - Uses a very heavy emphasis on research
to identify companies benefiting from favorable global themes, a positive
economic climate conducive to growth in their area of operation, or unique
situations.
INVESTMENT MANAGEMENT SERVICES
ADVISORY AGREEMENT. WTC serves as investment adviser to the Fund
pursuant to an Investment Advisory Agreement with the Corporation effective
February 1, 1993. Prior to February 1, 1993, WTC served as investment adviser
to the Fund pursuant to an Investment Advisory Agreement with the Corporation
dated October 21, 1987.
For the services provided by WTC under the Investment Advisory Agreement,
the Fund pays a monthly advisory fee to WTC at the annual rate of 1.00% of the
average daily net assets of the Fund as determined at the close of business on
each day throughout the month. For the fiscal years ended October 31, 1995,
1994 and 1993, WTC's fee amounted to $192,537, $241,650 and $131,713,
respectively.
Under the Investment Advisory Agreement, WTC has agreed to waive all or
part of its advisory fee or reimburse the Fund monthly to the extent that the
annual operating expenses of the Fund exceed the lowest expense limitation
prescribed by certain states in which shares of the Fund are qualified or
registered for offer or sale. Currently, the lowest applicable limitation
(excluding brokerage commissions, interest, taxes, distribution fees, certain
11
<PAGE>
expenses attributable to investing outside the United States and extraordinary
expenses) is 2.5% on the first $30 million of average net assets of the Fund,
2.0% of the next $70 million and 1.5% on any additional net assets. WTC has
also agreed to waive its advisory fee or reimburse the Fund monthly to the
extent that operating expenses (excluding taxes, interest, extraordinary
expenses and brokerage commissions) incurred by the Fund exceed an annual rate
of 1.75% of the average daily net assets of the Fund. This undertaking, which
is not contained in the Investment Advisory Agreement, may be amended or
rescinded in the future. During the fiscal years ended October 31, 1995, 1994
and 1993, WTC reimbursed $146,874, $97,332 and $231,728, respectively, of the
Fund's expenses.
The Investment Advisory Agreement provides that WTC is responsible for
the provision of investment management and related services to the Fund,
subject to the direction of the Board of Directors and the officers of the
Corporation. The Agreement also provides that WTC may delegate its investment
decision-making authority to the sub-advisers.
Under the Agreement, the Corporation on behalf of the Fund assumes
responsibility for paying or entering into arrangements with third parties to
pay all Fund expenses which are not expressly assumed by WTC. Such expenses
include: (i) fees payable for administrative services provided by the Fund's
administrator; (ii) fees payable for services provided by the Fund's
independent public accountants; (iii) fees payable for transfer agent,
registrar, dividend disbursement and shareholder recordkeeping services; (iv)
fees payable for accounting services; (v) fees payable for custodial services;
(vi) the cost of obtaining quotations for calculating the value of the assets
of the Fund; (vii) taxes levied against the Fund and the Fund's pro-rata share
of taxes levied against the Corporation; (viii) brokerage fees and commissions
in connection with the purchase and sale of portfolio securities; (ix) costs,
including the interest expense, of borrowing money; (x) the Fund's pro-rata
share of costs and/or fees incident to holding meetings of the Directors and
shareholders, preparation, filing and mailing of prospectuses and reports,
maintenance of the Corporation's corporate existence, and registration of
shares with federal and state securities authorities; (xi) legal fees and
expenses; (xii) the costs of printing share certificates representing shares
of the Fund; (xiii) the Fund's pro-rata share of fees payable to, and expenses
of, members of the Board of Directors who are not "interested persons" of the
Fund; (xiv) the Fund's pro-rata share of premiums payable on the fidelity bond
required by Section 17(g) of the 1940 Act, and any other premiums payable on
insurance policies related to the Fund's business and the investment
activities of its portfolios; (xv) distribution fees; (xvi) fees, voluntary
assessments and other expenses incurred in connection with the Corporation's
membership in investment company organizations; and (xvii) such non-recurring
expenses as may arise, including actions, suits or proceedings to which the
Corporation is a party and the Fund's pro-rata share of the legal obligation
which the Corporation may have to indemnify its Directors and officers with
respect thereto.
12
<PAGE>
The Agreement provides that WTC, in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
under such Agreement, shall not be liable to the Fund or its shareholders for
any act or omission in the course of, or connected with, providing services
under the Agreement or for any losses that may be sustained in the purchase,
holding or sale of any security. The Agreement is terminable without penalty
on sixty days' written notice by WTC or by the Corporation (by action of its
Board of Directors or by vote of a majority of the Fund's outstanding voting
securities), and terminates automatically in the event of its assignment. The
Agreement continues from year to year so long as its continuance is approved
at least annually (i) by the vote of a majority of the Independent Directors
at a meeting called for the purpose of voting on such approval and (ii) by the
vote of a majority of the Directors or by the vote of a majority of the
outstanding voting securities of the Fund.
SUB-ADVISORY AGREEMENTS. Scudder and Clemente serve as sub-advisers to
the Fund pursuant to identical sub-advisory agreements effective February 1,
1993 ("Sub-Advisory Agreements"). Scudder and Clemente also serve as sub-
advisers to a collective investment fund managed by WTC. For services
furnished pursuant to each Sub-Advisory Agreement, WTC (not the Fund) pays
each sub-adviser a monthly portfolio management fee at an annual rate of 0.50%
of the average net assets under the sub-adviser's management. Prior to
December 31, 1993, Edinburgh Fund Managers, plc. ("EFM") served as a sub-
adviser to the Fund and prior to February 1, 1993, EFM served as sole
portfolio consultant and acted as sub-adviser to the Fund. The rate of
compensation for EFM for these services was the same as that payable to each
sub-adviser under the Sub-Advisory Agreements. For the fiscal years ended
October 31, 1995, 1994 and 1993, WTC paid Clemente, Scudder and EFM the
following sub-advisory fees:
SUB-ADVISORY FEES RECEIVED FROM WTC
----------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
SUB-ADVISER 10/31/95 10/31/94 10/31/93
- ------------------------------ ---------- ---------- ----------
Clemente Capital, Inc. $47,805 $59,536 $15,893
Scudder, Stevens & Clark, Inc. $48,463 $58,435 $16,077
Edinburgh Fund Managers, Plc. - $ 2,855 $33,877
Each Sub-Advisory Agreement provides that the sub-adviser has
discretionary investment authority (including the selection of brokers and
dealers for the execution of the Fund's portfolio transactions) with respect
to the portion of the Fund's assets allocated to it by WTC, subject to the
restrictions of the 1940 Act, the Internal Revenue Code, applicable state
securities laws, applicable statutes and regulations of foreign jurisdictions,
the Fund's investment objective, policies and restrictions and the
instructions of the Directors and WTC.
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<PAGE>
Each Sub-Advisory Agreement provides that the sub-adviser will not be
liable for any action taken, omitted or suffered to be taken except if such
acts or omissions are the result of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty. The Agreements continue in effect
from year to year so long as continuance of each such Agreement is approved at
least annually (i) by the vote of a majority of the Independent Directors at a
meeting called for the purpose of voting on such approval and (ii) by the vote
of a majority of the Directors or by the vote of a majority of the outstanding
voting securities of the Fund. Each Sub-Advisory Agreement terminates
automatically in the event of its assignment and is terminable on written
notice by the Corporation (without penalty, by action of the Board of
Directors or by vote of a majority of the Fund's outstanding voting
securities) or by WTC or the sub-adviser. Each Agreement provides that written
notice of termination must be provided by the Fund within thirty days of the
termination date and by WTC or the sub-adviser within sixty days of the
termination date.
ADMINISTRATION, ACCOUNTING AND DISTRIBUTION AGREEMENTS AND RULE 12B-1 PLAN
RSMC, a Delaware corporation organized on September 17, 1981, serves as
Administrator of the Fund pursuant to an Administration Agreement effective
January 1, 1993.
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. For the fiscal years ended October 31, 1995, 1994 and 1993, RSMC was
paid administration fees amounting to $17,328, $21,748 and 10,492,
respectively. For the fiscal year ended October 31, 1993, Scudder Investor
Services, Inc., the prior co-administrator for the Fund until December 31,
1992, was paid administration fees amounting to $1,362.
Under the terms of the Administration Agreement, RSMC agrees to: (a)
supply office facilities, non-investment related statistical and research
data, executive and administrative service, stationery and office supplies,
and corporate management services for the Fund; (b) prepare and file, if
necessary, reports to shareholders of the Corporation and reports with the
Securities and Exchange Commission (the "SEC") and state securities
commissions; (c) monitor the Fund's compliance with the investment
restrictions and limitations imposed by the 1940 Act and state Blue Sky laws
and applicable regulations thereunder, the fundamental and non fundamental
investment policies and limitations set forth in the Prospectus and this
Statement of Additional Information, and the investment restrictions and
limitations necessary for the Fund to continue to qualify as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"); (d) monitor sales of the Fund's shares and ensure that such
shares are properly registered with the SEC and applicable state authorities;
14
<PAGE>
(e) prepare and monitor an expense budget for the Fund, including setting and
revising accruals for each category of expenses; (f) determine the amounts of
dividends and other distributions payable to shareholders as necessary to,
among other things, maintain the Fund's continued qualification for treatment
as a RIC under the Code and avoid imposition of a 4% excise tax imposed on
RICs in certain situations; (g) prepare and distribute to appropriate parties
notices announcing the declaration of dividends and other distributions to
shareholders; (h) prepare financial statements and footnotes and other
financial information with such frequency and in such format as required to be
included in reports to shareholders and the SEC; (i) supervise the preparation
of federal and state tax returns; (j) review sales literature and file such
with regulatory authorities, as necessary; (k) maintain Fund/Serv membership;
(l) provide information regarding material developments in state securities
regulation; and (m) provide personnel to serve as officers of the Fund if so
elected by the Board of Directors. Additionally, RSMC agrees to create and
maintain all necessary records in accordance with all applicable laws, rules
and regulations pertaining to the various functions performed by it and not
otherwise created and maintained by another party pursuant to contract with
the Fund. RSMC may at any time or times in its discretion appoint (and may at
any time remove) other parties as its agent to carry out any of the provisions
of the Administration Agreement.
The Administration Agreement provides that RSMC and its affiliates shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which the
Administration Agreement relates, except to the extent of a loss resulting
from willful misfeasance, bad faith or gross negligence on their part in the
performance of their obligations and duties under the Administration
Agreement.
The Administration Agreement continues in effect from year to year so
long as its continuance is approved at least annually by a majority of the
Directors, including a majority of the Independent Directors. The Agreement
is terminable by the Fund by sixty (60) days' written notice given to RSMC or
by RSMC on six (6) months' written notice given to the Fund.
RSMC also provides accounting services to the Fund pursuant to an
Accounting Services Agreement that became effective February 1, 1991. For the
services provided, RSMC receives from the Fund an annual fee of $75,000 plus
an amount equal to 0.03% of the average daily net assets over $100 million.
For each of the fiscal years ended October 31, 1995, 1994 and 1993, RSMC was
paid accounting services fees of $75,000, respectively.
Under the terms of the Accounting Services Agreement, RSMC agrees to:
(a) perform the following accounting functions on a daily basis: (1)
journalize the Fund's investment, capital share and income and expense
activities, (2) verify investment buy/sell trade tickets when received from
the Fund's custodian, (3) maintain individual ledgers for investment
securities, (4) maintain historical tax lots for each security, (5) reconcile
cash and investment balances of the Fund with the custodian, and provide the
Adviser with the beginning cash balance available for investment purposes, (6)
update the cash availability throughout the day as required by the Adviser,
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<PAGE>
(7) post to and prepare the Fund's Statement of Assets and Liabilities and the
Statement of Operations, (8) calculate various contractual expenses (e.g.,
advisory and custody fees), (9) control all disbursements from the Fund and
authorize such disbursements upon written instructions, (10) calculate capital
gains and losses, (11) determine the Fund's net income, (12) obtain security
market quotes at the Fund's expense from services approved by the Adviser, or
if such quotes are unavailable, then obtain such prices from the Adviser, and
in either case calculate the market value of the Fund's investments, (13)
transmit or mail a copy of the portfolio valuation to the Adviser and to the
sub-advisers, (14) compute the net asset value of the Fund, (15) compute the
Fund's yields, total return, expense ratios and portfolio turnover rate, and
(16) monitor the expense accruals and notify Fund management of any proposed
adjustments; (b) prepare monthly financial statements which include the
Schedule of Investments, the Statement of Assets and Liabilities, the
Statement of Operations, the Statement of Changes in Net Assets, the Cash
Statement and the Schedule of Capital Gains and Losses; (c) prepare quarterly
broker security transactions summaries; (d) supply various Fund statistical
data as requested on an ongoing basis; (e) assist in the preparation of
support schedules necessary for completion of federal and state tax returns;
(f) assist in the preparation and filing of the Fund's semi annual reports
with the SEC on Form N-SAR; (g) assist in the preparation and filing of the
Fund's annual and semi annual shareholder reports and proxy statements; (h)
assist with the preparation of registration statements on Form N-1A and other
filings relating to the registration of shares of the Corporation; (i) monitor
the Fund's status as a RIC under the Code; and (j) act as liaison with the
Fund's independent public accountants and provide account analyses, fiscal
year summaries and other audit related schedules. Additionally, RSMC agrees
to keep, in accordance with all applicable laws, rules and regulations, all
books and records with respect to the Fund's books of account and records of
the Fund's securities transactions.
The Accounting Services Agreement provides that RSMC shall not be liable
for any act or omission which does not constitute willful misfeasance, bad
faith or gross negligence on the part of RSMC in the performance of its
obligations and duties under the Accounting Services Agreement or reckless
disregard by RSMC of such duties and obligation.
The Accounting Services Agreement continues in effect from year to year
so long as its continuance is approved at least annually by a majority of the
Directors, including a majority of the Independent Directors. The Agreement
is terminable by the Fund or RSMC on three (3) months' written notice.
RSD serves as the Distributor of Fund shares pursuant to a Distribution
Agreement with the Corporation effective December 31, 1992. Under the terms
of the Distribution Agreement, RSD is granted the right to sell the Fund's
shares as agent for the Fund, to retain a portion of sales load proceeds as
underwriting commissions and to reallocate a portion of sales load proceeds to
dealers who have sold Fund shares. Until the close of business on December
31, 1992, Scudder Investor Services, Inc. served as distributor for the Fund
pursuant to a Distribution Agreement dated October 21, 1987. For the fiscal
years ended October 31, 1995 and 1994, RSD received underwriting commissions
of $2,415 and $3,376, respectively. For the fiscal year ended October 31,
1993, RSD and Scudder Investor Services, Inc. received underwriting
commissions of $95 and $122, respectively.
16
<PAGE>
Under the terms of the Distribution Agreement, RSD agrees to use all
reasonable efforts to secure purchasers for shares of the Fund and to pay
expenses of printing and distributing prospectuses, statements of additional
information and reports prepared for use in connection with the sale of Fund
shares and any other literature and advertising used in connection with the
offering, subject to reimbursement pursuant to the Fund's Plan of Distribution
adopted pursuant to Rule 12b-1 under the 1940 Act (the "12b-1 Plan").
The Distribution Agreement provides that RSD, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
Agreement, will not be liable to the Fund or its shareholders for losses
arising in connection with the sale of Fund shares.
The Distribution Agreement continues in effect from year to year so long
as its continuance is approved at least annually (i) by the vote of a majority
of the Independent Directors; and (ii) by the vote of a majority of the
Directors or by the vote of a majority of the outstanding shares of the Fund.
The Agreement is terminable on sixty (60) days' prior written notice by either
RSD or the Fund and terminates automatically in the event of its assignment.
RSD may be reimbursed for distribution expenses according to a 12b-1 Plan
which the Board of Directors has adopted and shareholders approved on February
1, 1993. The 12b-1 Plan provides that RSD may be reimbursed for distribution
activities encompassed by Rule 12b-1, such as public relations services,
telephone services, sales presentations, media charges, preparation, printing
and mailing advertising and sales literature, data processing necessary to
support a distribution effort, printing and mailing of prospectuses, and
distribution and shareholder servicing activities of certain financial
institutions such as banks or broker-dealers who have entered into servicing
agreements with RSD ("Service Organizations") and other financial
institutions, including fairly allocable internal expenses of RSD and payments
to third parties.
The 12b-1 Plan further provides that reimbursement shall be made for any
month only to the extent that such payment does not exceed (i) 0.75% on an
annualized basis of the Fund's average annual net assets; (ii) when combined
with sales load proceeds, 7.25% of the Fund's gross new sales; and (iii)
limitations set from time to time by the Board of Directors. The Board of
Directors has only authorized implementation of the 12b-1 Plan for up to 0.25%
of the Fund's average daily net assets annually to reimburse RSD for
paying "trail commissions" to Service Organizations who have sold Fund shares
and for retail oriented marketing efforts focusing on the preparation and
distribution of marketing materials. For the fiscal year ended October 31,
1995, payments under the 12b-1 Plan amounted to $6,857; of that amount, $2,616
was paid in trail commissions, $3,006 for prospectus printing and $1,235 on
the preparation and distribution of marketing materials.
17
<PAGE>
Under the 12b-1 Plan, if any payments made by WTC out of its advisory
fee, not to exceed the amount of that fee, to any third parties (including
banks), including payments for shareholder servicing and transfer agent
functions, were deemed to be indirect financing by the Fund of the
distribution of its shares, such payments are authorized. The Fund may
execute portfolio transactions with and purchase securities issued by
depository institutions that receive payments under the 12b-1 Plan. No
preference for instruments issued by such depository institutions will be
shown in the selection of investments.
PORTFOLIO TRANSACTIONS
Purchases and sales of securities on stock exchanges involve the payment
of brokerage commissions. In transactions on stock exchanges in the United
States, these commissions are negotiated, whereas on many foreign stock
exchanges they are fixed. There generally is no stated commission in
transactions involving securities traded in the over-the-counter markets, but
the price usually includes an undisclosed commission or markup. In
underwritten offerings, securities are purchased at a fixed price which
includes a disclosed, fixed concession or discount to the underwriter. Each
sub-adviser is responsible for investing a segment of the Fund's portfolio,
including the negotiation of commissions and the allocation of portfolio
brokerage and principal transactions in connection with those investments.
WTC may manage certain investments for the Fund directly. It is expected that
securities ordinarily will be purchased in the secondary markets, whether over-
the-counter or on exchanges. During the fiscal years ended October 31, 1995,
1994 and 1993, the Fund paid total brokerage commissions of $110,961, $147,663
and $192,034, respectively. During those periods, no brokerage commissions
were paid to any affiliate of the Fund, any principal underwriter of the
Fund's shares or any affiliate of such an affiliate or principal underwriter.
The primary objective of WTC and each sub-adviser in placing orders on
behalf of the Fund for the purchase and sale of securities for the Fund's
portfolio is to obtain best execution at the most favorable prices through
responsible broker-dealers and, where commission rates are negotiable, at
competitive rates. Although the Fund may pay higher commissions in return for
brokerage and research services, it must be determined that such commission is
reasonable in relation to the value of the brokerage and/or research services
that have been provided. In selecting a broker or dealer, WTC and the sub-
advisers consider among other things: (i) the price of the securities to be
purchased or sold; (ii) the rate of the commission; (iii) the size and
difficulty of the order; (iv) the reliability, integrity, financial condition,
general execution and operational capability of competing broker or dealer
and; (v) the quality of any service provided by the broker or dealer to WTC,
the sub-advisers or to the Fund.
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<PAGE>
WTC and the sub-advisers cannot readily determine the extent to which
commission rates or net prices charged by brokers or dealers reflect the value
of their research services. In such cases, WTC and the sub-advisers receive
services they otherwise might have had to perform themselves. The research
services provided by broker-dealers can be useful to WTC and the sub-advisers
in serving their other clients, as well as in serving the Fund. Conversely,
information provided to WTC and the sub-advisers by brokers or dealers who
have executed transaction orders on behalf of other sub-advisers or WTC
clients may be useful to WTC and the sub-advisers in providing services to the
Fund.
WTC and each sub-adviser may execute principal transactions on behalf of
the Fund with a broker or dealer who furnishes brokerage and/or research
services, or designate any such broker or dealer to receive selling
concessions, discounts or other allowances, or otherwise deal with any such
broker or dealer in connection with the acquisition of securities in
underwritings.
WTC and the sub-advisers receive a wide range of research services from
brokers or dealers covering investment opportunities throughout the world,
including information on the economies, industries, groups of securities,
individual companies, statistics, political developments, technical market
action, pricing and appraisal services and performance analyses of all the
countries in which the Fund's portfolio is likely to be invested. During the
fiscal year ended October 31, 1995, there were no commissions involving
transactions directed to brokers chosen because of research services provided.
Some of the sub-advisers' and WTC's other clients have investment
objectives and programs similar to that of the Fund. Occasionally, WTC and
the sub-advisers may make recommendations to other clients which result in
their purchasing or selling securities simultaneously with the Fund.
Consequently, the demand for securities being purchased or the supply of
securities being sold may increase, and this could have an adverse effect on
the price of those securities. It is the policy of WTC and the sub-advisers
not to favor one client over another in making recommendations or in placing
orders. In the event of a simultaneous transaction, purchases or sales are
averaged as to price and allocated between the Fund and the other clients as
to amount according to a formula deemed equitable to the Fund and the other
clients.
PORTFOLIO TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of the
Fund's annual purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of portfolio securities owned
by the Fund during the year. All securities, including options, whose
maturity or expiration date at the time of acquisition was one year or less
are to be excluded from both the numerator and denominator. The Fund's
portfolio turnover rates for the fiscal years ended October 31, 1995 and
October 31, 1994 were 67.1% and 81.2%, respectively. A higher portfolio
turnover rate may result in higher transaction costs and also may result in
the realization of gains that will be subject to tax.
19
<PAGE>
REDEMPTIONS
To ensure proper authorization before redeeming shares of the Fund, RSMC
may require additional documents such as, but not restricted to, stock powers,
trust instruments, death certificates, appointments as fiduciary, certificates
of corporate authority and waivers of tax required in some states when
settling estates.
Clients of WTC who have purchased shares through their trust accounts and
clients of Service Organizations who have purchased shares through their
accounts with those Service Organizations should contact WTC or the Service
Organization prior to submitting a redemption request to ensure that all
necessary documents accompany the request. When shares are held in the name
of a corporation, other organization, trust, fiduciary or other institutional
investor, RSMC requires, in addition to the stock power, certified evidence of
authority to sign the necessary instruments of transfer. THESE PROCEDURES ARE
FOR THE PROTECTION OF SHAREHOLDERS AND SHOULD BE FOLLOWED TO ENSURE PROMPT
PAYMENT. Redemption requests must not be conditional as to date or price of
the redemption. Redemption proceeds will be sent within seven days of
acceptance of shares tendered for redemption. Delay may result if the
purchase check has not yet cleared, but the delay will be no longer than
required to verify that the purchase check has cleared, and the Fund will act
as quickly as possible to minimize delay.
The value of shares redeemed may be more or less than the shareholder's
cost, depending on the net asset value at the time of redemption. Redemption
of shares may result in tax consequences (gain or loss) to the shareholder,
and the proceeds of a redemption may be subject to backup withholding.
(See "Dividends, Other Distributions and Taxes" in the Prospectus.)
A shareholder's right to redeem shares and to receive payment therefor
may be suspended when (a) the Exchange is closed or trading on that Exchange
is restricted, (b) an emergency exists as a result of which it is not
reasonably practicable to dispose of portfolio securities or to determine the
value of the Fund's net assets, or (c) ordered by a governmental body having
jurisdiction over the Fund for the protection of the Fund's shareholders. In
case of such suspension, shareholders may withdraw their requests for
redemption or may receive payment based on the net asset value next determined
after the suspension is lifted.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption by making payment in whole or
in part with readily marketable securities chosen by the Fund and valued in
the same way as they would be valued for purposes of computing the Fund's net
asset value. If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares solely in cash for any
shareholder up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period.
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NET ASSET VALUE
The net asset value per share is determined by dividing the value of the
Fund's net assets by the total number of shares outstanding. The
determination is made by RSMC on each day the Fund is open for business. Such
determination is made as of the close of regular trading on the Exchange
(currently 4:00 p.m., Eastern time). The Fund is open for business on days on
which the Exchange, RSMC and the Philadelphia branch office of the Federal
Reserve are open for business ("Business Day ").
In valuing the Fund's assets, all securities for which market quotations
are readily available are valued under normal circumstances at the last sales
price prior to the time of determination, or if no sale is reported at that
time, the mean between the closing asked price and the closing bid price.
With respect to a security which is listed or traded on more than one
exchange, the Fund normally looks to the exchange on which trading is more
extensive. Short-term investments having a maturity of 60 days or less are
valued at cost, with any premium amortized or discount accrued over the period
remaining until maturity. Securities and assets for which market values are
not readily available are valued at fair value as determined in good faith by
or under the direction of the Board of Directors.
Trading in securities on European and Far Eastern securities exchanges
and over-the-counter markets is normally completed well before the close of
business on each Business Day. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all Business Days. Furthermore, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days which are
not Business Days and on which the Fund's net asset value is not calculated.
Calculation of the Fund's net asset value does not take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Fund's net asset value is calculated, such
securities are valued at fair value as determined in good faith by or under
the direction of the Board of Directors.
PERFORMANCE INFORMATION
The Fund's performance may be quoted in terms of its total return in
advertising and other promotional materials ("performance advertisements").
Performance data quoted represent past performance and is not intended to
indicate future performance. The investment return and principal value of an
investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than the original cost. Performance of the Fund will vary
based on changes in market conditions and the level of the Fund's expenses.
21
<PAGE>
TOTAL RETURN CALCULATIONS. Average annual total return quotes used in
the Fund's performance advertisements are calculated according to the
following formula:
P (1 + T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at end of the
period of a hypothetical $1,000 payment
made at the beginning of that period.
Under the foregoing formula, the time periods used in performance
advertisements will be based on rolling calendar quarters, updated to the last
day of the most recent calendar quarter prior to submission of the
advertisement for publication. Average annual total return, or "T " in the
formula above, is computed by finding the average annual compounded rate of
return over the period that would equate the initial amount invested to the
ending redeemable value ("ERV"). In calculating the ERV for standardized
average annual total return, the Fund's maximum 4.00% sales load is deducted
from the initial $1,000 payment and all dividends and other distributions by
the Fund are assumed to have been reinvested at net asset value on the
reinvestment date during the period. The following table reflects the Fund's
standardized and non standardized average annual total return for the periods
stated below:
AVERAGE ANNUAL TOTAL RETURN
Since Inception
1 Year Ending 5 Years Ending Nov. 2, 1987 through
Sales Load * Oct. 31, 1995 Oct. 31, 1995 Oct. 31, 1995
- ---------- ------------- ------------- --------------------
4.00% (5.13)% 4.97% 5.11%
None (1.18)% 5.83% 5.65%
Because shares of the Fund may be purchased at a reduced sales load or
without a sales load under certain circumstances, non standardized average
annual total return is computed without deducting the sales load from the
initial $1,000 payment for the ERV calculation. The Fund may also from time
to time include in such advertising and promotional materials additional non
standardized total return figures that are not calculated according to the
formula set forth above ("cumulative total return"). The Fund calculates
cumulative total return for a specific period of time by assuming the
investment of $1,000 in Fund shares and assuming the reinvestment of each
dividend and other distribution at net asset value. Percentage rates of
return are then determined by subtracting the value of the investment at the
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beginning of the period from the ending value and by dividing the remainder by
the beginning value. The Fund does not take sales loads into account in
calculating cumulative total return; the inclusion of such loads would reduce
such return. The Fund's cumulative total return for the fiscal year ended
October 31, 1995 was (1.18)%, for the five years ended October 31, 1995 was
32.75% and for the period since the Fund's inception on November 2, 1987
through October 31, 1995 was 55.22%.
The above performance figures were affected by fee waivers and
reimbursement of the Fund's expenses by WTC during the relevant time periods.
Without such waivers and reimbursements, the standardized average annual total
return, non standardized average annual total return and the non standardized
cumulative total return figures quoted above would have been lower.
The Fund may also from time to time along with performance
advertisements, illustrate its asset allocation by country weighting. This
illustration, an example of which follows, is not intended to project the
current or future portfolio composition of the Fund.
* The Fund's maximum sales load was reduced on November 25, 1991 from 5.75%
to 4.00%. The lower maximum sales load is reflected in the standardized
average annual total return set forth in this table.
23
<PAGE>
RODNEY SQUARE INTERNATIONAL EQUITY FUND
ASSET ALLOCATION BY COUNTRY
AS OF DECEMBER 31, 1995
Percentage of Percentage of
Investments Investments
Country by Country Country by Country
------------------ ------------- ----------------- -------------
Continental Europe 42.3% Japan 24.5%
Austria 1.9
Finland 2.9 Pacific Rim 15.6%
France 5.6 Australia 2.4
Germany 9.2 China 0.3
Ireland 1.7 Hong Kong 4.2
Italy 3.1 Indonesia 0.3
Netherlands 6.0 Malaysia 2.3
Norway 0.8 New Zealand 0.6
Spain 0.6 Philippines 1.0
Sweden 1.8 Singapore 1.7
Switzerland 8.7 South Korea 1.2
Thailand 1.6
United Kingdom 10.6%
Latin America 4.8%
Canada 2.2% Brazil 3.0
Mexico 1.8
Total Investments 100.00%
======
[GRAPHIC] PIE CHART
Country Percentage of Investments
- ------------------ -------------------------
Continental Europe 42.3%
Latin America 4.8%
Japan 24.5%
United Kingdom 10.6%
Pacific Rim 15.6%
Canada 2.20%
Average annual and cumulative total returns for the Fund may be quoted as
a dollar amount, as well as a percentage, and may be calculated for a series
of investments or a series of redemptions, as well as for a single investment
or a single redemption, over any time period. Total returns may be broken
down into their components of income and capital gain (including capital gains
and changes in share price) to illustrate the relationship of those factors
and their contributions to total return.
24
<PAGE>
The following table shows the income and capital elements of the Fund's
total return and compares them to the cost of living (as measured by the
Consumer Price Index) over the same periods. During the periods quoted,
interest rates and bond prices fluctuated widely; the table should not be
considered representative of the dividend income or capital gain or loss that
could be realized from an investment in the Fund today.
During the period from November 2, 1987 (Commencement of Operations)
through October 31, 1995, a hypothetical $10,000 investment in the Fund would
have grown to $15,522, assuming all distributions were reinvested and no sales
load was paid.
CHANGE IN $10,000 HYPOTHETICAL INVESTMENT
Value of Value of Value of Increase in
Initial Reinvested Reinvested Cost of Living
Period Ended $10,000 Income Capital Gain Total (Consumer
October 31, Investment Dividends Distributions Value Price Index)
- ------------ ---------- ---------- ------------- ------- -------------
1995 $12,140 $383 $2,999 $15,522 33.2%
1994 $13,360 $421 $1,926 $15,707 29.7%
1993 $12,350 $390 $1,574 $14,314 26.3%
1992 $ 9,600 $303 $1,223 $11,126 22.9%
1991 $11,640 $315 $ 606 $12,561 19.1%
1990 $11,080 $157 $ 456 $11,693 15.7%
1989 $12,080 $ 99 $ 175 $12,354 8.8%
1988** $11,020 $ 38 $11,058 4.2%
** From commencement of operations, November 2, 1987.
Explanatory Note: A hypothetical initial investment of $10,000 on
November 2, 1987, together with the aggregate cost of reinvested dividends and
other distributions for the entire period covered (their cash value at the
time they were reinvested), would have amounted to $13,177. If dividends and
other distributions had not been reinvested, the total value of the investment
in the Fund over time would have been smaller, and cash payments for the
period would have amounted to $337 for income dividends and $2,548 for other
distributions. Without reimbursements by WTC, the Fund's returns would have
been lower. This table does not reflect tax consequences or the Fund's 4.00%
maximum sales load, which would reduce the year-end values of the $10,000
investment from those shown here.
From time to time along with performance advertisements, the Fund may
also present, its investments, as of a current date, in the form of the
"Schedule of Investments" included in the Annual Report to the shareholders of
the Fund as of and for the fiscal year ended October 31, 1995, a copy of which
is attached hereto and incorporated by reference.
25
<PAGE>
COMPARISON OF FUND PERFORMANCE. A comparison of the quoted performance
offered for various investments is valid only if performance is calculated in
the same manner. Since there are many methods of calculating performance,
investors should consider the effects of the methods used to calculate returns
when comparing returns on shares of the Fund with returns quoted with respect
to other investment companies or types of investments.
In connection with communicating its total return to current or
prospective shareholders, the Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
The return of the Fund may be compared to relevant global, international and
domestic indexes. Examples include but are not limited to the Morgan Stanley
Capital International World Index (containing 1,468 securities listed on the
exchanges of the USA, Europe, Canada, Australia, New Zealand and the Far
East), the Morgan Stanley Capital International EAFE index (containing over
1,000 companies representing the stock markets of Europe, Australia, and the
Far East), and the Standard & Poor's Composite Index of 500 Stock Prices
(containing 500 of the largest U.S. companies). These indexes are widely
followed, capitalization weighted indexes of publicly traded stocks. All
index returns are translated into U.S. dollars.
From time to time, in marketing and other promotional literature, the
Fund's performance may be compared to the performance of broad groups of
mutual funds with similar investment goals, as tracked by independent
organizations such as, Investment Company Data, Inc. ("ICD") (an organization
which provides performance ranking information for broad classes of mutual
funds), Lipper Analytical Services, Inc. ("Lipper") (a mutual fund research
firm which analyzes over 1,800 mutual funds), CDA Investment Technologies,
Inc. ("CDA") (an organization which provides mutual fund performance and
ranking information), Morningstar, Inc. (an organization which analyzes over
2,400 mutual funds) and other independent organizations. When Lipper's
tracking results are used, the Fund will be compared to Lipper's appropriate
fund category, that is, by fund objective and portfolio holdings. Rankings
may be listed among one or more of the asset-size classes as determined by
Lipper. When other organizations' tracking results are used, the Fund will be
compared to the appropriate fund category, that is, by fund objective and
portfolio holdings, or to the appropriate volatility grouping, where
volatility is a measure of a fund's risk.
Since the assets in all funds are always changing, the Fund may be ranked
within one asset-size class at one time and in another asset-size class at
some other time. In addition, the independent organization chosen to rank the
Fund in marketing and promotional literature may change from time to time
depending upon the basis of the independent organization's categorizations of
mutual funds, changes in the Fund's investment policies and investments, the
Fund's asset size and other factors deemed relevant. Advertisements and other
marketing literature will indicate the time period and Lipper asset-size class
or other performance ranking company criteria, as applicable, for the ranking
in question.
Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning the Fund, including reprints of, or
selections from, editorials or articles about the Fund. Sources for
performance information and articles about the Fund may include the following:
ASIAN WALL STREET JOURNAL, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
26
<PAGE>
BARRON'S, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
BUSINESS WEEK, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing
abroad.
CDA INVESTMENT TECHNOLOGIES, INC., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indexes.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
CONSUMER DIGEST, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
FINANCIAL TIMES, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
FINANCIAL WORLD, a general business/financial magazine that includes a
"Market Watch" department reporting on activities in the mutual fund industry.
FORBES, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
FORTUNE, a national business publication that periodically rates the
performance of a variety of mutual funds.
THE FRANK RUSSELL COMPANY, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
GLOBAL INVESTOR, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
INVESTMENT COMPANY DATA, INC., an independent organization which provides
performance ranking information for broad classes of mutual funds.
INVESTOR'S DAILY, a daily newspaper that features financial, economic, and
business news.
LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL FUND PERFORMANCE ANALYSIS, a weekly
publication of industry-wide mutual fund averages by type of fund.
MONEY, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
MUTUAL FUND VALUES, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
27
<PAGE>
THE NEW YORK TIMES, a nationally distributed newspaper which regularly covers
financial news.
PERSONAL INVESTING NEWS, a monthly news publication that often reports on
investment opportunities and market conditions.
PERSONAL INVESTOR, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indexes and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
USA TODAY, the nation's number one daily newspaper.
U.S. NEWS AND WORLD REPORT, a national business weekly that periodically
reports mutual fund performance data.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
WIESENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
TAXES
GENERAL. In order to continue to qualify for treatment as a RIC under
the Code, the Fund must distribute to its shareholders for each taxable year
at least 90% of its investment company taxable income (generally consisting of
dividends and interest income, net short-term capital gain and net realized
gains from certain foreign currency transactions) ("Distribution Requirement")
and must meet several additional requirements. Among these requirements are
the following: (1) at least 90% of the Fund's gross income each taxable year
must be derived from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures or forward
currency contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months: options or futures (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contracts
thereon) that are not directly related to the Fund's principal business of
investing in securities (or options and futures with respect thereto)
("Short-Short Limitation"); (3) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be
28
<PAGE>
represented by cash and cash items, U.S. Government Securities and other
securities, with those other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets
and that does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable year,
not more than 25% of the value of its total assets may be invested in
securities (other than U.S. Government Securities) of any one issuer.
If the Fund failed to qualify for treatment as a RIC in any taxable year,
it would be subject to tax on its taxable income at corporate rates and all
distributions from earnings and profits, including any distributions from net
tax-exempt income and net long-term capital gains, would be taxable to
shareholders as ordinary income. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying as a RIC.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts. For this and other purposes, dividends and other distributions
declared by the Fund in October, November or December of any year and payable
to shareholders of record on a date in one of those months will be deemed to
have been paid by the Fund and received by the shareholders on December 31 of
that year if they are paid by the Fund during the following January.
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as a long-term, instead of short-term, capital
loss to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if Fund shares are purchased shortly
before the record date for any dividend or capital gain distribution, the
shareholder will pay full price for the shares and will receive some portion
of the price back as a taxable distribution.
If the Fund makes a distribution to shareholders in excess of its current
and accumulated "earnings and profits" in any taxable year, the excess
distribution will be treated by each shareholder as a return of capital to the
extent of the shareholder's tax basis and thereafter as capital gain.
Although a return of capital is not taxable, it does reduce a shareholder's
tax basis.
FOREIGN INVESTMENTS. Dividends and interest received by the Fund may be
subject to income, withholding or other taxes imposed by foreign countries
that would reduce the yield on its securities. Tax conventions between
certain countries and the United States may reduce or eliminate these foreign
taxes, however, and many foreign countries do not impose taxes on capital
gains in respect of investments by foreign investors.
29
<PAGE>
If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of securities of foreign corporations, the Fund will
be eligible to, and may, file an election with the Internal Revenue Service
that will enable its shareholders, in effect, to benefit from any foreign tax
credit or deduction that is available with respect to foreign income taxes
paid by the Fund. If the election is made, the Fund will treat those taxes as
dividends paid to its shareholders and each shareholder will be required to
(1) include in gross income, and treat as paid by the shareholder, a
proportionate share of those taxes, (2) treat that share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as
the shareholder's own income from those sources and (3) either deduct the
taxes deemed paid by the shareholder in computing taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the shareholder's federal income tax. The Fund will report
annually to its shareholders the respective amounts per share of the Fund's
income from sources within, and taxes paid to, foreign countries if it makes
this election.
Special rules apply to the holding of stock in a "passive foreign
investment company " ("PFIC"), which is a foreign corporation that, in
general, meets either of the following tests: (a) at least 75% of its gross
income is passive or (b) an average of at least 50% of its assets produce, or
are held for the production of, passive income. If the Fund acquires stock in
a PFIC and holds the stock beyond the end of the year of acquisition, the Fund
will be subject to federal income tax on a portion of any "excess
distribution" received on the stock or of any gain from disposition of the
stock (collectively, "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's investment company
taxable income and, accordingly, will not be taxable to the Fund to the extent
it is distributed to its shareholders. If the Fund invests in a PFIC and
elects to treat the PFIC as a "qualified electing fund," then in lieu of the
foregoing tax and interest obligation, the Fund will be required to include in
income each year its pro rata share of the qualified electing fund's annual
ordinary earnings and net capital gain (the excess of net long-term capital
gain over net short-term capital loss), even if they are not distributed to
the Fund; those amounts most likely would have to be distributed to satisfy
the Distribution Requirement and to avoid imposition of the Excise Tax. It may
be very difficult, if not impossible, to make this election because of certain
requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would
be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market value
of such a PFIC's stock over the owner's adjusted basis in that stock
(including mark-to-market gain for each prior year for which an election was
in effect).
30
<PAGE>
HEDGING TRANSACTIONS. The use of hedging strategies, such as purchasing
and writing (selling) options and futures and entering into forward currency
contracts, involves complex rules that will determine for federal income tax
purposes the character and timing of recognition of the gains and losses the
Fund realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, futures and forward currency contracts derived by the
Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures (other than those
on foreign currencies) will be subject to the Short-Short Limitation if they
are held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and futures with respect to securities) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund satisfies
the Short-Short Limitation. Thus, only the net gain (if any) from the
designated hedge will be included in gross income for purposes of that
limitation. The Fund intends that, when it engages in hedging transactions,
they will qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of the Fund's hedging
transactions. To the extent this treatment is not available, the Fund may be
forced to defer the closing out of certain options, futures and forward
currency contracts beyond the time when it otherwise would be advantageous to
do so, in order for the Fund to continue to qualify as a RIC.
Futures and forward currency contracts that are subject to Section 1256
of the Code (other than such contracts that are part of a "mixed straddle"
with respect to which the Fund has made an election not to have the following
rules apply) ("Section 1256 Contracts") and that are held by the Fund at the
end of its taxable year generally will be deemed to have been sold at market
value for federal income tax purposes. Sixty percent of any net gain or loss
recognized on these deemed sales, and 60% of any net realized gain or loss
from any actual sales of Section 1256 Contracts, will be treated as long-term
capital gain or loss, and the balance will be treated as short-term capital
gain or loss. Section 988 of the Code also may apply to forward currency
contracts and options on foreign currencies. Under Section 988, each foreign
currency gain or loss generally is computed separately and treated as ordinary
income or loss. In the case of overlap between Sections 1256 and 988, special
provisions determine the character and timing of any income, gain or loss.
The Fund attempts to monitor its Section 988 transactions to minimize any
adverse tax impact.
31
<PAGE>
WASH SALES. The "wash sale" rules of the Code generally postpone
deduction of a loss incurred on the disposition of securities if, within
thirty days before or after the disposition, the taxpayer acquires, or enters
into a contract or purchases an option to acquire, substantially identical
securities. Because either sub-adviser of the Fund may not be fully aware, on
a current basis, of purchases and sales effected by the other sub-adviser, it
is possible that a loss incurred on the sale of certain securities by one sub-
adviser may not be deductible currently for tax purposes, because the other
sub-adviser has purchased or does purchase, within the applicable period,
substantially identical securities. The Fund attempts to reduce the
likelihood of adverse tax consequences from the operation of the wash sale
rules by making each sub-adviser aware of losses sustained by the other sub-
adviser.
DESCRIPTION OF THE FUND
The Fund is the only series of the Corporation, which was incorporated in
Maryland on July 24, 1987. The Articles of Incorporation permit the Board of
Directors to establish an unlimited number of additional series and multiple
classes of shares, although the Directors have no present intention of doing
so. At present, the Corporation's authorized capital consists of 100,000,000
shares of common stock, par value $.01 per share, all of which are of one
class and have equal rights as to voting, dividends, redemption and in
liquidation.
In accordance with Maryland law and the Articles of Incorporation, the
Fund does not intend to hold annual shareholders' meetings, except when the
1940 Act requires a shareholder vote on certain matters (including election of
directors, approval of an advisory contract and ratification of the selection
of independent public accountants). Special shareholders' meetings may be
held at any time if properly requested in accordance with the By-Laws.
The Articles of Incorporation also provide that obligations of the Fund
are not binding upon the Directors individually but only upon the property of
the Corporation and its series, that the Directors and officers will not be
liable for errors of judgment or mistakes of fact or law, or for any action
taken by the Directors in good faith reliance upon the records of the
Corporation and upon requests made by persons selected in good faith by the
Directors as qualified to make such reports, and that the Corporation will
indemnify its Directors and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Corporation, except if it is determined in the manner
provided in the Articles of Incorporation that they have not acted in good
faith in the reasonable belief that their actions were in the best interests
of the Fund. Nothing in the Articles of Incorporation protects or indemnifies
a Director or officer against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. By
purchasing shares of the Fund, a shareholder agrees to be bound by the terms
of the Articles of Incorporation.
All issued and outstanding shares will be fully paid and nonassessable by
the Corporation and redeemable as described in this Statement of Additional
Information and in the Fund's Prospectus.
32
<PAGE>
OTHER INFORMATION
INDEPENDENT AUDITORS. Ernst & Young LLP, 1 North Charles Street,
Baltimore, MD 21201, serve as the Fund's independent auditors, providing
services which include (1) auditing of the annual financial statements, (2)
assistance and consultation in connection with SEC filings and (3) preparation
of the annual federal and state income tax returns of the Fund.
The financial statements and financial highlights of the Fund appearing
or incorporated by reference in the Fund's Prospectus, this Statement of
Additional Information and Registration Statement have been audited by Ernst &
Young LLP, independent auditors, to the extent indicated in their reports
thereon also appearing elsewhere herein and in the Registration Statement or
incorporated by reference. Such financial statements have been included
herein or incorporated herein by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., 2nd Floor, Washington, D.C. 20036, counsel to the Corporation, has
passed upon the legality of the shares offered by the Prospectus and this
Statement of Additional Information.
CUSTODIAN AND TRANSFER AGENT. The Chase Manhattan Bank, N.A., One Chase
Manhattan Plaza, New York, NY 10081, serves as the Fund's custodian. RSMC,
Rodney Square North, 1105 North Market Street, Wilmington, DE 19801, serves
as the Fund's Transfer Agent and Dividend Paying Agent. The Fund pays RSMC $7
per account per year plus various other transaction fees, subject to a minimum
fee of $1,000 per month, plus out-of-pocket expenses.
SUBSTANTIAL SHAREHOLDERS. As of January 31, 1996, no shareholder other
than WTC owned of record or beneficially more than 5% of the outstanding
shares of the Fund. WTC owned of record 90.1% of the shares, including 82.4%
owned beneficially, all on behalf of its customer accounts.
FINANCIAL STATEMENTS
The Schedule of Investments as of October 31, 1995; the Statement of
Assets and Liabilities as of October 31, 1995; the Statement of Operations for
the fiscal year ended October 31, 1995; the Statements of Changes in Net
Assets for the fiscal years ended October 31, 1995 and October 31, 1994;
Financial Highlights for the fiscal years ended October 31, 1995, 1994, 1993,
1992 and 1991; the Notes to Financial Statements and the Report of Independent
Auditors, each of which is included in the Annual Report to the Shareholders
of the Fund as of and for the fiscal year ended October 31, 1995 are attached
hereto, and are hereby incorporated by reference.
33
<PAGE>
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.
AR 1
<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.
AR 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
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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.
AR 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
AR 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.
AR 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)
AR 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
AR 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.
AR 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
AR COVER
<PAGE>
APPENDIX
DESCRIPTION OF HEDGING STRATEGIES
The following describes the Fund's hedging strategies. These strategies
will not be changed without the approval of the Board of Directors and the
prior notification of shareholders.
FUTURES AND FORWARD CURRENCY CONTRACTS
The purchaser of a futures contract agrees to buy a specified underlying
instrument or currency at a specified future date. Conversely, the seller of a
futures contract agrees to sell the underlying instrument or currency at a
specified future date. The date and price of the purchase or sale are fixed at
the time the contract is entered into. Some currently available contracts are
based on specific securities, some are based on indices of securities and some
are based on foreign currencies. Futures contracts can be held until their
delivery dates, or can be closed out before then, if a liquid secondary market
is available. A futures contract is closed out by entering into an opposite
position in an identical futures contract (for example, by purchasing a
contract on the same instrument and with the same delivery date as a contract
the party had sold) at the current price as determined on the futures
exchange.
The value of a futures contract tends to increase and decrease with the
value of the underlying instrument. The purchase of a futures contract will
tend to increase exposure to positive and negative price fluctuations in the
underlying instrument in the same manner as if the underlying instrument had
been purchased directly. By contrast, the sale of a futures contract will tend
to offset both positive and negative market price changes, in the same manner
as if the underlying instrument had been sold.
As the purchaser or seller of a futures contract, the Fund would not be
required to deliver or pay for the underlying instrument or currency unless
the contract is held until the delivery date. However, the Fund would be
required to deposit with its custodian, in the name of the futures broker
(known as a futures commission merchant, or "FCM"), a percentage of the
contract's value. This amount, which is known as initial margin, generally
equals 10% or less of the value of the futures contract. Unlike margins in
securities transactions, initial margin on futures contracts does not involve
borrowing to finance the futures transactions. Rather, initial margin is in
the nature of a good faith deposit or performance bond, and would be returned
to the Fund when the futures position has been terminated and all contractual
obligations have been satisfied. Initial margin may be maintained either in
cash or in liquid high-quality debt securities, such as U.S. Government
Securities.
A-1
<PAGE>
As the contract's value fluctuates, payments known as variation margin or
maintenance margin are made to or received from the FCM. If the contract's
value moves against the Fund (i.e., the Fund's futures position declines in
value), the Fund may be required to make variation margin payments to the FCM,
and, conversely, the Fund may be entitled to receive payments from the FCM if
the value of its futures position increases. This process is known as "marking
to market" and takes place on a daily basis. Variation margin does not involve
borrowing to finance the futures transactions, but rather represents a daily
settlement of the Fund's obligations to or from a clearing organization.
The Fund may also utilize forward currency contracts to purchase or sell
foreign currencies for a fixed amount of U.S. dollars or another foreign
currency. Forward currency contracts generally are entered into by the Fund
with major U.S. or foreign banks and securities or currency dealers on a
principal, rather than a brokered, basis. Accordingly, forward currency
contracts generally do not require margin deposits or the payment of
commissions. When the Fund enters into a forward currency contract, it relies
on its counterparty to make or take delivery of the underlying currency at the
maturity of the contract. Failure of the counterparty to do so would result in
the loss of any expected benefit of the transaction.
OPTIONS ON SECURITIES AND FUTURES CONTRACTS
PURCHASING PUT OR CALL OPTIONS. By purchasing a put (or call) option,
the Fund obtains the right (but not the obligation) to sell (or buy) the
underlying instrument at a fixed strike price. The option's underlying
instrument may be a specific security, a securities index, a foreign currency
or a futures contract. The option may give the Fund the right to sell (or buy)
only on the option's expiration date ("European Option"), or may be
exercisable at any time up to and including that date ("American Option"). In
return for this right, the Fund pays the current market price for the option
(known as the option premium).
The Fund may terminate its position in an option it has purchased by
allowing the option to expire, closing it out in the secondary market at its
current price, if a liquid secondary market exists, or by exercising it. If
the option is allowed to expire, the Fund will lose the entire premium paid.
WRITING PUT OR CALL OPTIONS. By writing a put (or call) option, the Fund
takes the opposite side of the transaction from the option's purchaser (or
seller). In return for receipt of the premium, the Fund assumes the obligation
to pay the strike price for the option's underlying instrument (or to sell or
deliver the option's underlying instrument) if the other party to the option
chooses to exercise it. When writing an option on a futures contract, the Fund
will be required to make margin payments to an FCM as described above for
futures contracts.
Before exercise, the Fund may seek to terminate its position in an option
it has written by closing out the option in the secondary market at its
current price. If the secondary market is not liquid for an option the Fund
has written, however, the Fund must continue to be prepared to pay the strike
price or to deliver the underlying instrument while the option is outstanding,
regardless of price changes, and must continue to set aside assets to cover
its position.
A-2
<PAGE>
COVER FOR OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACTS
The Fund will not use leverage in connection with its use of options,
futures and forward currency contracts. The Fund will not enter into an
options, futures or forward currency contract transaction that exposes the
Fund to an obligation to another party unless the Fund owns either (i) an
offsetting ("covered ") position in securities, options, futures or forward
currency contracts or (ii) has cash, receivables and liquid debt securities
with a value sufficient at all times to cover its potential obligations. The
Fund will comply with guidelines established by the SEC with respect to
coverage of these strategies by mutual funds and, if the guidelines so
require, will set aside cash and/or liquid, high-grade debt securities in a
segregated account with its custodian in the amount prescribed. Securities,
options, futures and forward currency contracts used for cover and securities
held in a segregated account cannot be sold or closed out while the strategy
is outstanding, unless they are replaced with similar assets. As a result,
there is a possibility that the use of cover or segregation involving a large
percentage of the Fund's assets, but not expected to exceed 30% of those
assets, could impede management of the portfolio or the Fund's ability to meet
redemption requests or other current obligations.
FUTURES AND RELATED OPTIONS STRATEGIES
The Fund may engage in futures strategies to attempt to reduce the
overall investment risk that would normally be expected to be associated with
ownership of the securities in which the Fund invests. For example, the Fund
may sell a stock index futures contract in anticipation of a general market or
market sector decline that could adversely affect the market value of the
Fund's portfolio. To the extent that the Fund's portfolio correlates with a
given stock index, the sale of futures contracts on that index could reduce
the risks associated with a market decline and thus provide an alternative to
the liquidation of securities positions. Similarly, if the Fund has uninvested
cash and anticipates that equity markets will move higher, the Fund may buy
stock index futures contracts (on a covered basis) or purchase option
contracts on stock index futures contracts to protect the Fund's buying power
when the Fund anticipates purchasing equity securities at a later date.
The Fund may sell an interest rate futures contract to offset price
changes of debt securities it already owns. This strategy is intended to
minimize any price changes in the debt securities the Fund owns (whether
increases or decreases) caused by interest rate changes, because the value of
the futures contract would be expected to move in the opposite direction from
the value of the securities owned by the Fund. The Fund may purchase a call
option on an interest rate futures contract to hedge against a market advance
in debt securities that the Fund plans to acquire at a future date, or as a
substitute for taking an actual position in such securities, when in the
Fund's view this would be less expensive and/or less risky than acquiring such
A-3
<PAGE>
actual position. The purchase of such an option is analogous to the purchase
of a call option on an individual debt security that can be used as a
temporary substitute for a position in the security itself. The Fund may write
covered call options on stock index futures as a partial hedge against a
decline in the prices of stocks held in the Fund's portfolio. This is
analogous to writing covered call options on securities. The Fund may purchase
put options on stock index futures contracts. This is analogous to the
purchase of protective put options on individual stocks where a level of
protection is sought below which no additional economic loss would be incurred
by the Fund. The Fund may purchase and write options in combination with each
other to adjust the risk and return of the overall position. For example, the
Fund may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position where risk and return
characteristics are similar to selling a futures contract.
The Fund may sell foreign currency futures contracts to hedge against
possible variations in the exchange rates of foreign currencies in relations
to the U.S. dollar. In addition, the Fund may sell foreign currency futures
contracts when a sub-adviser anticipates a general weakening of foreign
currency exchange rates that could adversely affect the market values of the
Fund's foreign securities holdings. In this case, the sale of futures
contracts on the underlying currency may reduce the risk to the Fund of a
reduction in market value caused by foreign currency exchange rate variations
and, by so doing, provide an alternative to the liquidation of securities
positions and resulting transaction costs. When a sub-adviser anticipates a
significant foreign currency exchange rate increase while intending to invest
in a security denominated in that currency, the Fund may purchase a foreign
currency futures contract to hedge against that increase pending completion of
the anticipated transaction. Such a purchase would serve as a temporary
measure to protect the Fund against any rise in the foreign exchange rate that
may add additional costs to acquiring the foreign security position. The Fund
may also purchase call or put options on foreign currency futures contracts to
obtain a fixed foreign exchange rate at limited risk. The Fund may purchase a
call option on a foreign currency futures contract to hedge against a rise in
the foreign exchange rate while intending to invest in a security denominated
in that currency. The Fund may purchase put options on foreign currency
futures contracts as a partial hedge against a decline in the foreign exchange
rates or the value of its foreign portfolio securities. The Fund may write a
call option on a foreign currency futures contract as a partial hedge against
the effects of declining foreign exchange rates on the value of foreign
securities.
The Fund's futures transactions must constitute bona fide hedging or
other permissible transactions pursuant to regulations promulgated by the
Commodity Futures Trading Commission. In addition, the Fund may not engage in
such activities generally if the sum of the amount of initial margin deposits
and premiums paid for unexpired options on futures contracts would exceed 5%
of the fair market value of the Fund's assets provided, however, that in the
case of an option that is in-the-money at the time of purchase, the in-the-
money amount may be excluded in calculating the 5% limit.
A-4
<PAGE>
OPTION STRATEGIES
The Fund may purchase put options to hedge positions in securities, in a
manner similar to selling futures contracts. If stock prices or currency
values fall, the value of the put option would be expected to rise and offset
all or a portion of the Fund's resulting losses in its portfolio. However,
option premiums tend to decrease over time as the expiration date nears.
Therefore, because of the cost of the option (in the form of the premium and
transaction costs), the Fund would expect to suffer a loss in the put option
if prices do not decline sufficiently to offset the deterioration in the value
of the option premium.
The Fund may write put options as an alternative to purchasing actual
securities or currencies. If stock prices or currency values rise, the Fund
would expect to profit from a written put option, although its gain would be
limited to the amount of the premium it received. If stock prices or currency
values remain the same over time, it is likely that the Fund will also profit,
because it should be able to close out the option at a lower price. If stock
prices or currency values fall, the Fund would expect to suffer a loss.
By purchasing a call option, the Fund would attempt to participate in
potential price increases of the underlying security or index or in potential
increases in the exchange rate of the underlying currency, with results
similar to those obtainable from purchasing a futures contract, but with risk
limited to the cost of the option if stock prices and currency values fell. At
the same time, the Fund can expect to suffer a loss if stock prices or
currency values do not rise sufficiently to offset the cost of the option.
The characteristics of writing call options are similar to those of
writing put options, as described above, except that writing covered call
options generally is a profitable strategy if prices and exchange rates remain
the same or fall. Through receipt of the option premium, the Fund would seek
to mitigate the effects of a price or currency exchange rate decline. At the
same time, the Fund would give up its ability to participate in security price
and exchange rate increases when writing call options.
RISKS OF FUTURES AND RELATED OPTIONS TRADING
Successful use of futures contracts and related options by the Fund
depends upon the ability of the Fund to assess market movements in currency
values and in the securities and interest rate markets, which requires
different skills and techniques than assessing the value of individual
securities. Moreover, futures contracts relate not to the current value of the
underlying instrument, but to the anticipated value at some point in the
future; trading of stock index futures may not reflect the trading of the
securities that are used to formulate the index or even actual fluctuations in
the index itself. There is, in addition, the risk that the movements in the
price of the futures contract will not correlate with the movements in the
prices of the securities being hedged. Price distortions in the market place,
such as result from increased participation by speculators in the futures
market, may also impair the correlation between movements in the prices of
futures contracts with movements in the prices of the hedged securities or
A-5
<PAGE>
currencies. If the price of the futures contract moves less than the price of
securities or currencies that are the subject of the hedge, the hedge will not
be fully effective; however, if the price of the securities or currencies
being hedged has moved in an unfavorable direction, the Fund would be in a
better position than if it had not hedged at all. If the price of securities
or currencies being hedged has moved in a favorable direction, this advantage
may be partially offset by losses on the futures position.
As is the case with futures contracts, holders and writers of forward
currency contracts can enter into offsetting closing transactions by selling
or purchasing, respectively, an instrument identical to the instrument held or
written. Since secondary markets generally do not exist for forward currency
contracts, closing transactions generally can be made for forward currency
contracts only by negotiating directly with the contra party. There can be no
assurance that the Fund will in fact be able to liquidate a forward currency
contract at a favorable price prior to maturity. Also, the precise matching of
forward currency contract amounts and the value of the related securities will
not generally be possible due to changes in the value of the securities
following the date on which the forward currency contract is established.
Options have a limited life and thus can only be disposed of within a
specific time period. Positions in futures contracts may be closed out only on
an exchange or board of trade that provides a secondary market for such
futures contracts. Although the Fund intends to purchase and sell futures only
on exchanges or boards of trade where there appears to be a liquid secondary
market, there can be no assurance that such a market will exist for any
particular contract at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make variation margin
payments.
Purchasers of options on futures contracts pay a premium in cash at the
time of purchase, which in the event of adverse price movements, could be
lost. Sellers of options or futures contracts must post initial margin and are
subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, the Fund's activities in the futures
markets may result in a higher portfolio turnover rate and additional
transaction costs in the form of added brokerage commissions. Because combined
options positions involve multiple trades, they result in higher transaction
costs and may be more difficult to open and close out.
RISKS OF OPTIONS TRADING
The success of the Fund's option strategies depends on many factors, the
most significant of which is its ability to assess movements in the direction
of individual securities and currencies and the overall securities, currencies
and interest rate markets.
A-6
<PAGE>
The exercise price of the options may be below, equal to or above the
current market value of the underlying securities, currencies or indices.
Purchased options that expire unexercised have no value. Unless an option
purchased by the Fund is exercised or unless a closing transaction is effected
with respect to that position, the Fund will realize a loss in the amount of
the premium paid and any transaction costs.
The Fund may purchase and write both exchange-listed and over-the-counter
("OTC") options. Most exchange-listed options relate to stocks. Exchange
markets for options on debt securities and foreign currencies exist, but they
are relatively new, and the majority of such options currently are traded on
the OTC market.
The ability to establish and close out positions on the exchanges is
subject to the maintenance of a liquid secondary market. A position in an
exchange-listed option may be closed out only on an exchange that provides a
secondary market for identical options. Although the Fund intends to purchase
or write only those exchange-traded options for which there appears to be an
active secondary market, there can be no assurance that a liquid secondary
market will exist for any particular option at any specific time. Closing
transactions may be effected with respect to options traded in the OTC markets
(currently the primary markets for options on debt securities and foreign
currencies) only by negotiating directly with the other party to the option
contract or in a secondary market for the option if such market exists.
Although the Fund will enter into OTC options only with dealers that agree to
enter into, and that are expected to be capable of entering into, closing
transactions with the Fund, there is no assurance that the Fund will be able
to liquidate an OTC option at a favorable price at any time prior to
expiration. In the event of insolvency of the contra-party, the Fund may be
unable to liquidate an OTC option. Accordingly, it may not be possible to
effect closing transactions with respect to certain options, with the result
that the Fund would have to exercise those options which it has purchased in
order to realize any profit. With respect to options written by the Fund, the
inability to enter into a closing transaction may result in material losses to
the Fund. For example, because the Fund must maintain a covered position with
respect to any call option it writes on a security or currency, the Fund may
not sell the underlying security or currency (or invest any cash, government
securities or short-term debt securities used to cover an index option) during
the period it is obligated under the option. This requirement may impair the
Fund's ability to sell a portfolio security or make an investment at a time
when such a sale or investment might be advantageous.
Options on indices are settled exclusively in cash. If the Fund writes a
call option on an index, the Fund will not know in advance the difference, if
any, between the closing value of the index on the exercise date and the
exercise price of the call option itself, and thus will not know the amount of
cash payable upon settlement. In addition, a holder of an index option who
exercised it before the closing index value for the day is available runs the
risk that the level of the underlying index may subsequently change.
The Fund's activities in the options markets may result in higher
portfolio turnover rates and additional brokerage costs.
A-7
<PAGE>
SPECIAL RISKS RELATED TO FOREIGN CURRENCY OPTIONS AND FUTURES CONTRACTS
Options and futures contracts on foreign currencies are affected by all
of those factors that influence foreign exchange rates and investments
generally. The value of a foreign currency option or futures contract depends
upon the value of the underlying currency relative to the U.S. dollar. As a
result, the price of the Fund's position in a foreign currency option or
currency contract may vary with changes in the value of either or both
currencies and may have no relationship to the investment merits of a foreign
security. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved in
the use of foreign currency options or futures transactions, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) at prices that are less favorable than
for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (that is, less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global, around-the-
clock market. To the extent that the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options or futures markets until they reopen.
As with other options and futures positions, the Fund's ability to
establish and close out such positions in foreign currencies is subject to the
maintenance of a liquid secondary market. Trading of some such positions is
relatively new. Although the Fund will not purchase or write such positions
unless and until, in WTC's opinion, the market for them has developed
sufficiently to ensure that the risks in connection with such positions are
not greater than the risks in connection with the underlying currency, there
can be no assurance that a liquid secondary market will exist for a particular
option or futures contract at any specific time. Moreover, the Fund will not
enter into OTC options that are illiquid if, as a result, more than 15% of its
net assets would be invested in illiquid securities.
Settlement of a foreign currency futures contract must occur within the
country issuing the underlying currency. Thus, the Fund must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign
banking arrangements by U.S. residents, and it may be required to pay any
fees, taxes and charges associated with such delivery that are assessed in the
issuing country.
A-8
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A
PART C. - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
a. Financial Statements:
Included in Part A of this Registration Statement:
Financial Highlights for each of the eight years in the period ended
October 31, 1995.
Included in Part B of this Registration Statement:
Investments, October 31, 1995
Statement of Assets and Liabilities, October 31, 1995
Statement of Operations, for the fiscal year ended October 31, 1995
Statement of Changes in Net Assets, for the fiscal years ended
October 31, 1995 and 1994
Financial Highlights, for each of the five years in the period ended
October 31. 1995
Notes to Financial Statements.
Statements, schedules and historical information other than those listed
above have been omitted since they are either not applicable or are not
required.
b. Exhibits:
1. (a) Articles of Incorporation dated July 24, 1987.
(Incorporated by reference to Exhibit (1) to original
Registration Statement filed on July 24, 1987.)
(b) Articles of Amendment dated November 13, 1992 to the
Articles of Incorporation dated July 24, 1987. (Incorporated
by reference to Exhibit (1)(b) of Post-Effective Amendment No.
6 to this Registration Statement filed on December 31, 1992.)
(c) Articles of Amendment dated February 1, 1993 to the
Articles of Incorporation dated July 24, 1987. (Incorporated
by reference to Exhibit (1)(c) of Post-Effective Amendment No.
7 to this Registration Statement filed on December 31, 1993.)
2. (a) By-Laws of the Corporation. (Incorporated by reference
to Exhibit (2) to original Registration Statement filed on
July 24, 1987.)
(b) By-Laws of the Corporation as Amended on October 2, 1987.
(Incorporated by reference to Exhibit (2) of Pre-Effective
Amendment No. 2 to this Registration Statement.)
3. Voting Trust Agreement - None.
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
4. Instruments Defining the Rights of Shareholders.
(a) Articles of Incorporation dated July 24, 1987 as Amended
November 13, 1992 and February 1, 1993 (relevant portions).
(Incorporated by reference to Exhibit 4(a) to Post-Effective
Amendment No. 7 to this Registration Statement filed on
December 30, 1993.)
(b) By-Laws of the Registrant as Amended October 2, 1987
(relevant portions). (Incorporated by reference to Exhibit
4(b) to Post-Effective Amendment No. 7 to this Registration
Statement filed on December 30, 1993.)
5. (a) Investment Advisory Agreement between the Registrant and
Wilmington Trust Company effective February 1, 1993.
(Incorporated by reference to Exhibit (5)(a) of Post-Effective
Amendment No. 6 to this Registration Statement filed on
December 31, 1992.)
(b) Sub-Advisory Agreement among the Registrant, Wilmington
Trust Company and Scudder, Stevens & Clark, Inc., effective
February 1, 1993.
(c) Sub-Advisory Agreement among the Registrant, Wilmington
Trust Company and Clemente Capital, Inc., effective February
1, 1993.
6. (a) Distribution Agreement between the Registrant and Rodney
Square Distributors, Inc., effective December 31, 1992.
(b) Form of Selected Dealer Agreement between Rodney Square
Distributors, Inc. and the broker-dealer listed in Schedule B
to the Agreement effective December 31, 1993. (Incorporated
by reference to Exhibit 6(b) to Post-Effective Amendment No. 7
to this registration statement filed on December 30, 1993.
7. Bonus, Profit Sharing or Pension Plans - None.
8. (a) Custodian Contract between the Registrant and The Chase
Manhattan Bank dated October 21, 1987. (Incorporated by
reference to Exhibit 8 to Pre-Effective Amendment No. 2 to
this Registration Statement.)
(b) Fee Schedule for Exhibit 8(a). (Incorporated by
reference to Exhibit 8(b) to Post-Effective Amendment No. 2 to
this Registration Statement filed on December 30, 1988.)
2
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
(c) First Amendment to The Rodney Square International
Securities Fund, Inc. Global Custody Agreement between the
Registrant and The Chase Manhattan Bank dated February 20,
1989. (Incorporated by reference to Exhibit 8(c) to Post-
Effective Amendment No. 3 to this Registration Statement filed
on December 29, 1989.)
9. (a) Accounting Services Agreement between Registrant and
Rodney Square Management Corporation dated February 1, 1991.
(Incorporated by reference to Exhibit 9(a) to Post-Effective
Amendment No. 5 to this Registration Statement filed on
December 27, 1991.)
(b) Transfer Agency Agreement between the Registrant and
Rodney Square Management Corporation effective December 31,
1992.
(c) Administration Agreement between the Registrant and
Rodney Square Management Corporation effective December 31,
1992. (Incorporated by reference to Exhibit (9)(c) of Post-
Effective Amendment No. 6 to this Registration Statement filed
on December 31, 1992.)
10. (a) Opinion of Kirkpatrick & Lockhart. (Incorporated by
reference to Exhibit 10 to original Registration Statement
filed on July 24, 1987.)
(b) Opinion of Kirkpatrick & Lockhart LLP relating to Rule
24e-2 Registration.
11. Consent of Ernst & Young LLP, independent auditors for Registrant.
12. Financial Statements omitted from Part B - None.
13. Letter of Investment Intent. (Incorporated by reference to Exhibit
(13) of Pre-Effective Amendment No. 2 to this Registration
Statement.)
14. Prototype Retirement Plan - None.
15. Revised Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940 of the Registrant with respect to
The Rodney Square International Equity Fund effective February 1,
1993.
16. Schedule for Computation of Performance Quotations.
17. Financial Data Schedule.
3
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (CONTINUED).
Power of Attorney included as part of the signature page of this Post-
Effective
Amendment No. 9.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
a. Persons Controlled by Registrant: None
b. Persons who may be deemed to be under Common Control with Registrant in
the event Wilmington Trust Corporation ("WT Corp.") and/or Wilmington
Trust Company ("WTC") may be deemed to be a controlling person(s) of the
Registrant:
MUTUAL FUNDS
The Rodney Square Fund
The Rodney Square Tax-Exempt Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund
% HELD
CORPORATE ENTITY STATE OF ORG. BY WT CORP.
--------------- ------------- -----------
Wilmington Trust Company Delaware 100%
Wilmington Trust FSB Federally Chartered 100%
Wilmington Trust of
Pennsylvania Pennsylvania 100%
% HELD
CORPORATE ENTITY STATE OF ORG. BY WT CORP.
--------------- ------------- -----------
Brandywine Insurance Agency, Inc. Delaware 100%
Brandywine Finance Corp. Delaware 100%
Brandywine Life Insurance
Company, Inc. Delaware 100%
Compton Realty Corporation Delaware 100%
Delaware Corp. Management Delaware 100%
Drew-I Ltd. Delaware 100%
Drew-VIII Ltd. Delaware 100%
Holiday Travel Agency, Inc. Delaware 100%
Rodney Square Distributors, Inc. Delaware 100%
Rodney Square Management
Corporation Delaware 100%
Siobain-VI Ltd. Delaware 100%
Wilmington Brokerage Services
Company Delaware 100%
Wilmington Capital Management,
Inc. Delaware 100%
WTC Corporate Services, Inc. Delaware 100%
WTC Investments Inc. Delaware 100%
100 West 10th St. Corporation Delaware 100%
4
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
(CONTINUED).
PARTNERSHIPS
------------
Rodney Square Investors, L.P.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF JANUARY 31, 1996).
(1) (2)
TITLE OF CLASS NUMBER OF RECORD SHAREHOLDERS
-------------- -----------------------------
Shares of common stock
$.01 par value
The Rodney Square International
Equity Fund 440
ITEM 27. INDEMNIFICATION.
Article Tenth, Section 10.1 of the Registrant's Articles of Incorporation
provides that to the maximum extent permitted by law, no director or officer
of the Registrant shall be liable to the Registrant or its stockholders for
monetary damages. Section 10.2 provides that the Registrant shall indemnify
its present and past directors, officers, employees, and agents and persons
who are serving or have served at the request of the Registrant as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust or enterprise, ("covered person"), to the maximum extent
permitted by law; provided that no director, officer, investment adviser or
principal underwriter of the Registrant shall be indemnified in violation of
Section (h) or (i) of the Investment Company Act of 1940 ("1940 Act"). The
Registrant may maintain insurance policies on behalf of any covered person
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such.
Paragraph 7(a) of the Investment Advisory Agreement between Wilmington
Trust Company ("WTC") and the Registrant dated February 1, 1993 provides that,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties on the part of WTC, WTC shall not be
subject to liability to the Registrant or to any shareholder of the Registrant
or its Series for any act or omission in the course of performing its duties
under the contract or for any losses that may be sustained in the purchase,
holding or sale of any security. Paragraph 7(c) provides that no provision of
the contract shall be construed to protect any director or officer of the
Registrant, or WTC, from liability in violation of Sections 17(h) or 17(i) of
the 1940 Act.
5
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 27. INDEMNIFICATION (CONTINUED).
Paragraph 12 of the Sub-Advisory Agreements between the Registrant, WTC
and each of Scudder, Stevens & Clark, Inc. and Clemente Capital, Inc. (each a
"Sub-Adviser"), dated February 1, 1993, provides that the Sub-Adviser shall
not be liable for any action taken, omitted or suffered to be taken by it in
its reasonable judgment, in good faith and believed by it to be authorized or
within its discretion or rights or powers, or in accordance with (or in the
absence of) specific directions or instructions from the Registrant or WTC,
provided, however, that such acts or omissions shall not have resulted from
the Sub-Adviser's willful misfeasance, bad faith, gross negligence or a
reckless disregard of duty. Paragraph 12 also states that no provision of
Paragraph 12 shall be construed in a manner inconsistent with Sections 17(i)
of the 1940 Act.
Paragraph 11 of the Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc. ("RSD") dated December 31, 1992, provides
that the Registrant agrees to indemnify and hold harmless RSD against any
loss, liability, claim, damages or expense arising by reason of any person
acquiring any shares, based upon the Securities Act of 1933 (the "1933 Act")
or any other statute or common law, alleging any wrongful act of the
Registrant or any of its employees or representatives, or based upon the
grounds that the registration statements, or other information filed or made
public by the Registrant included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order
to make the statements not misleading. RSD, however, will not be indemnified
to the extent that the statement or omission is based on information provided
in writing by RSD. In addition, RSD will not be indemnified if it acts with
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations.
Paragraph 18 of the Transfer Agency Agreement between the Registrant and
RSMC dated December 31, 1992 provides that RSMC and its nominees shall be held
harmless from all taxes, charges, expenses, assessments, claims and
liabilities including, without limitation, liabilities arising under the 1933
Act, the Securities Exchange Act of 1934 and any state or foreign securities
and blue sky laws, and amendments thereto, and expenses including without
limitation reasonable attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which RSMC takes at the request
of or on the direction of or in reliance on the advice of the Registrant or
upon oral or written instructions in the absence of RSMC or its nominees' own
willful misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under such Agreement.
Paragraph 13 of the Accounting Services Agreement between the Registrant
and RSMC dated February 1, 1991 is similar to Paragraph 18 of the Transfer
Agency Agreement.
6
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 27. INDEMNIFICATION (CONTINUED).
Registrant undertakes to carry out all indemnification provisions of its
Articles of Incorporation, Investment Advisory Agreement, Sub-Advisory
Agreements, Distribution Agreement, Accounting Services Agreement and Transfer
Agency Agreement in accordance with Investment Company Act Release No. 11330
(September 4, 1980) and successor releases.
Insofar as indemnification for liability arising under the 1933 Act may
be permitted to Directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such Director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction in question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be governed
by the final adjudication of such issue.
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER.
Wilmington Trust Company ("WTC"), a Delaware corporation, serves as
investment adviser to the Registrant. It currently manages large
institutional accounts and collective investment funds.
The directors and principal executive officer of the Adviser have held
the following positions of a substantial nature in the past two years:
BUSINESS OR OTHER CONNECTIONS OF PRINCIPAL
EXECUTIVE OFFICERS AND DIRECTORS OF
NAME REGISTRANT'S ADVISER
---- ------------------------------------------
Robert H. Bolling, Jr. Owner, R.H. Bolling, Jr. P.E. (consulting
engineering firm)
Carolyn S. Burger President and Chief Executive Officer of
Diamond State Telephone Company
Ted T. Cecala Vice Chairman and Chief Operating Officer,
Wilmington Trust Company
Richard R. Collins Retired President, American Life Insurance
Company
Charles S. Crompton, Esq. Attorney, Partner, Potter Anderson & Corroon
(law firm)
H. Stewart Dunn, Jr., Esq. Attorney, Partner, Ivins, Phillips & Barker
(law firm)
Edward B. du Pont Private investor; Director, E. I. du Pont de
Nemours & Co., Inc.; Retired Chairman,
Atlantic Aviation Corporation
7
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER (CONTINUED).
BUSINESS OR OTHER CONNECTIONS OF PRINCIPAL
EXECUTIVE OFFICERS AND DIRECTORS OF
NAME REGISTRANT'S ADVISER
---- ------------------------------------------
Robert C. Forney Retired Executive Vice President and
Director, E. I. du Pont de Nemours & Co.,
Inc.
Thomas L. Gossage Chairman and Chief Executive Officer,
Hercules Incorporated
Robert V.A. Harra, Jr. President and Treasurer, Wilmington Trust
Company
Andrew B. Kirkpatrick, Jr., Esq. Attorney, Partner, Morris, Nichols, Arsht &
Tunnell (law firm)
Rex L. Mears President of Ray L. Mears & Sons, Inc.
(farming corporation)
Hugh E. Miller Retired Executive, Formerly Vice Chairman,
ICI Americas, Inc.; has been with parent
Imperial Chemicals Industries PLC for 20
years including management positions in the
United States and Europe
Stacey J. Mobley Senior Vice President of Communications, E.
I. du Pont de Nemours & Co., Inc.
Leonard W. Quill Chairman and Chief Executive Officer,
Wilmington Trust Company; formerly
President and Chief Operating Officer
David P. Roselle President, University of Delaware
Thomas P. Sweeney, Esq. Attorney, member, Richards, Layton & Finger
(law firm)
Bernard J. Taylor, II Retired Chairman and Chief Executive Officer,
Wilmington Trust Company
Mary Jornlin Theisen Former New Castle County Executive
Robert W. Tunnell, Jr. Managing Partner of Tunnell Companies, L.P.,
owner and developer of real estate
WTC and the Registrant have entered into Sub-Advisory Agreements with the
registered investment advisers listed below who will act as sub-advisers and
will advise WTC with regard to the Registrant. The description of the
selection and evaluation of sub-advisers given in the Prospectus entitled
"Management of the Fund" is hereby incorporated by reference. Each sub-
adviser is described in its Form ADV, on file with the Securities and Exchange
Commission. Such Forms ADV are hereby incorporated by reference. The
corresponding identification number of each such Form ADV is listed below.
FORM ADV
PORTFOLIO ADVISER IDENTIFICATION NUMBER
----------------- ---------------------
Scudder, Stevens & Clark, Inc. File No. 801-252
Clemente Capital, Inc. File No. 801-16247
8
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) The Rodney Square Fund
The Rodney Square Strategic Fixed-Income Fund
The Rodney Square Multi-Manager Fund
The Rodney Square Tax-Exempt Fund
1838 Investment Advisors Funds
Dracena Funds, Inc.
Heitman Real Estate Fund - Heitman/PRA Institutional Class
The HomeState Group
Kiewit Mutual Fund
The Olstein Funds
(b)
(1) (2) (3)
POSITION AND
NAME AND PRINCIPAL POSITION AND OFFICES WITH OFFICES WITH
BUSINESS ADDRESS RODNEY SQUARE DISTRIBUTORS, INC. REGISTRANT
- ------------------ -------------------------------- ------------
Jeffrey O. Stroble President, Secretary, None
1105 North Market Street Treasurer & Director
Wilmington, DE 19890
Martin L. Klopping Director President &
Director
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Cornelius G. Curran Vice President None
1105 North Market Street
Wilmington, DE 19890
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Certain accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder and the records relating to the duties of the Registrant's transfer
agent are maintained by Wilmington Trust Company and Rodney Square Management
Corporation, respectively both at Rodney Square North, 1100 North Market
Street, Wilmington, DE 19890-0001. Records relating to the duties of the
Registrant's custodian are maintained by Chase Manhattan Bank, N.A., One Chase
Manhattan Plaza, New York, NY 10081.
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
9
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
Items Required By Form N-1A (CONTINUED)
PART C. - OTHER INFORMATION (CONTINUED)
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish a copy of the Registrant's latest
Annual Report to Shareholders to each person to whom a copy of the
Registrant's Prospectus is delivered, upon request and without charge.
9
<PAGE>
File No. 33-16056
File No. 811-5255
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 9
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 11
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
<PAGE>
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
EXHIBIT INDEX
Exhibit 5(b) Sub-Advisory Agreement among the Registrant, Wilmington
Trust Company and Scudder,Stevens & Clark, Inc......... EX-5.B
Exhibit 5(c) Sub-Advisory Agreement among the Registrant, Wilmington
Trust Company and Clemente Capital, Inc................ EX-5.C
Exhibit 6(a) Distribution Agreement between the Registrant and
Rodney Square Distributors, Inc........................ EX-6.A
Exhibit 9(b) Transfer Agency Agreement between the Registrant and
Rodney Square Management Corporation................... EX-9.B
Exhibit 10(b) Opinion of Kirkpatrick & Lockhart LLP relating to 24e-2
registration........................................... EX-10.B
Exhibit 11 Consent of Ernst & Young LLP independent auditors for
Registrant............................................. EX-11
Exhibit 15 Revised Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940 of the
Registrant with respect to The Rodney Square
International Equity Fund effective February 1, 1993.. EX-15
Exhibit 16 Schedule for Computation of Performance
Quotations............................................. EX-16
Exhibit 17 Financial Data Schedule ............................... EX-17
Exhibit 6(a)
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of the 31st day of December, 1992,
between The Rodney Square International Securities Fund, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"), having its
principal place of business in Wilmington, Delaware, and Rodney Square
Distributors, Inc., a corporation organized under the laws of the State of
Delaware (the "Distributor"), having its principal place of business in
Wilmington, Delaware.
WHEREAS, the Fund wishes to employ the services of Distributor, with such
assistance from its affiliates as the latter may provide, such employment to
take effect at the close of business on December 31, 1992; and
WHEREAS, Distributor wishes to provide distribution services to the Fund
as set forth below;
NOW, THEREFORE, in consideration of the mutual promises and undertakings
herein contained, the parties agree as follows:
1. SALE OF SHARES. The Fund grants to the Distributor the right to sell
shares of common stock, par value $0.01 per share, of all series of the
Fund, now or hereafter created, (the "shares") on its behalf during the
term of this Agreement and subject to the registration requirements of
the Securities Act of 1933, as amended (the "1933 Act"), and of the laws
governing the sale of securities in various states (the "Blue Sky Laws")
under the following terms and conditions: the Distributor (i) shall have
the right to sell, as agent on behalf of the Fund, shares authorized for
issue and registered under the 1933 Act; (ii) may sell shares under
offers of exchange, if available, between and among the funds distributed
by Distributor and advised by Rodney Square Management Corporation or
Wilmington Trust Company; and (iii) shall sell such shares only in
compliance with the terms set forth in the Fund's currently effective
registration statement. Distributor may enter into selling agreements
with selected dealers and others for the sale of Fund shares and will act
only on its own behalf as principal in entering into such selling
agreements.
2. SALE OF SHARES BY THE FUND. The rights granted to the Distributor shall
be non-exclusive in that the Fund reserves the right to sell its shares
to investors on applications received and accepted by the Fund. Further,
the Fund reserves the right to issue shares in connection with (a) the
merger or consolidation, or acquisition by the Fund through purchase or
otherwise, with any other investment company, trust or personal holding
company; and (b) a pro rata distribution directly to the holders of
shares in the nature of a stock dividend or split-up.
3. SHARES COVERED BY THIS AGREEMENT. This Agreement shall apply to issued
shares of all series of the Fund, shares of all series of the Fund held
in its treasury in the event that in the discretion of the Fund treasury
shares shall be sold, and shares of all series of the Fund repurchased
for resale.
<PAGE>
4. PUBLIC OFFERING PRICE. Except as otherwise noted in the Fund's current
Prospectus (the "Prospectus") or Statement of Additional Information (the
"SAI") with respect to each series, all shares sold to investors by the
Distributor or the Fund will be sold at the public offering price. The
public offering price for all accepted subscriptions will be the net
asset value per share, determined in the manner described in the Fund's
current Prospectus or SAI with respect to the applicable series plus a
sales charge (if any) described in that Prospectus or SAI. The Fund
shall in all cases receive the net asset value per share on all sales.
If a sales charge is in effect, the Distributor shall have the right,
subject to the Rules of Fair Practice of the National Association of
Securities Dealers and to such rules or regulations of the Securities and
Exchange Commission as may then be in effect pursuant to Section 22 of
the Investment Company Act of 1940, as amended (the "1940 Act"), to pay a
portion of the sales charge to dealers or others who have sold shares of
the applicable series.
5. SUSPENSION OF SALES. If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further
orders for shares shall be processed by the Distributor except such
unconditional orders placed with the Distributor before it had knowledge
of the suspension. In addition, the Fund reserves the right to suspend
sales and the Distributor's authority to process orders for shares on
behalf of the Fund if, in the judgment of the Fund, it is in the best
interests of the Fund to do so. Suspension will continue for such period
as may be determined by the Fund. In addition, the Distributor reserves
the right to reject any purchase order.
6. SOLICITATION OF SALES. In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, to secure purchasers for shares of
the Fund. This shall not prevent the Distributor from entering into like
arrangements (including arrangements involving the payment of
underwriting commissions) with other issuers. Distributor agrees to use
all reasonable efforts to ensure that taxpayer identification numbers
provided for shareholders of the Fund are correct.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the
Fund to give any information or to make any representations other than
those contained in the appropriate registration statements, Prospectuses
or SAI's filed with the Securities and Exchange Commission under the 1933
Act (as those registration statements, Prospectuses and SAI's may be
amended from time to time), or contained in shareholder reports or other
material that may be prepared by or on behalf of the Fund for the
Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing, in compliance with
applicable laws and regulations, sales literature or other material as it
may deem appropriate. Distributor will furnish or cause to be furnished
copies of such sales literature or other material to the President of the
Fund or his designee and will provide him with a reasonable opportunity
to comment on it. Distributor agrees to take appropriate action to cease
using such sales literature or other material to which the Fund
reasonably objects as promptly as practicable after receipt of the
objection.
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<PAGE>
8. PORTFOLIO SECURITIES. Portfolio securities of every series of the Fund
may be bought or sold by or through the Distributor, and the Distributor
may participate directly or indirectly in brokerage commissions or
"spreads" for transactions in portfolio securities of any series of the
Fund. However, all sums of money received by the Distributor as a result
of such purchases and sales or as a result of such participation must,
after reimbursement of actual expenses of the Distributor in connection
with such activity, be paid over by the Distributor to or for the benefit
of the applicable series.
9. REGISTRATION OF SHARES. The Fund agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval, if any, of its shareholders) so that there will be available
for sale the number of shares the Distributor may reasonably be expected
to sell. The Fund shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor
may reasonably request for use in connection with the distribution of
shares of each series of the Fund.
10. EXPENSES, COMPENSATION AND REIMBURSEMENT
(a) The Fund shall pay all fees and expenses:
(i) in connection with the preparation, setting in type and
filing of any registration statement, Prospectus and SAI
under the 1933 Act, and any amendments thereto, for the
issue of its shares;
(ii) in connection with the registration and qualification of
shares for sale in the various states in which the Board of
Directors of the Fund shall determine it advisable to
qualify such shares for sale (including registering the Fund
or Series as a broker or dealer or any officer of the Fund
as agent or salesperson in any state);
(iii) of preparing, setting in type, printing and mailing any
report or other communication to shareholders of the Fund in
their capacity as such; and
(iv) of preparing, setting in type, printing and mailing
Prospectuses, SAI's, and any supplements thereto, sent to
existing shareholders.
(b) The Distributor shall pay expenses of:
(i) printing and distributing Prospectuses, SAI's and reports
prepared for its use in connection with the offering of the
shares for sale to the public;
(ii) any other literature used in connection with such offering;
and
(iii) advertising in connection with such offering.
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<PAGE>
(c) In addition to the services described above, Distributor will
provide services including assistance in the production of marketing
and advertising materials for the sale of shares of the Fund and
their review for compliance with applicable regulatory requirements,
entering into dealer agreements with broker-dealers to sell shares
of the Fund and monitoring their financial strength and contractual
compliance, providing, directly or through its affiliates certain
investor support services, personal service, and the maintenance of
shareholder accounts.
(d) In connection with the services to be provided by the Distributor
under this Agreement, the Distributor shall receive:
(i) a service fee and reimbursement from the Fund (which may
include reimbursement for the expenses incurred pursuant to
Section 10(b) hereof), to the extent and under the terms and
conditions set forth in any Plan of Distribution of the Fund
or its series ("Plan"), as such Plan may be in effect from
time to time, and subject to any further limitations on such
fee or reimbursement as the Board of Directors of the Fund
may impose, and
(ii) any sales charge, as set forth in the Fund's registration
statement, paid by any purchaser of Fund shares.
11. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless the Distributor and
each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
1933 Act against any loss, liability, claim, damages or expense
(including the reasonable cost of investigating or defending any
alleged loss, liability, claim, damages, or expense and reasonable
counsel fees incurred in connection therewith) arising by reason of
any person acquiring any shares, based upon the 1933 Act or any
other statute or common law, alleging any wrongful act of the Fund
or any of its employees or representatives, or based upon the
grounds that the registration statements, Prospectuses, SAI's,
shareholder reports or other information filed or made public by the
Fund (as from time to time amended) included an untrue statement of
a material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading.
However, the Fund does not agree to indemnify the Distributor or
hold it harmless to the extent that the statement or omission was
made in reliance upon, and in conformity with, information furnished
to the Fund in writing by or on behalf of the Distributor. In no
case (i) is the indemnity of the Fund in favor of the Distributor or
any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Fund or its security holders
to which the Distributor or such person would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of its reckless disregard
of its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in this
Section 11(a) with respect to any claim made against the Distributor
or any person indemnified unless the Distributor or person, as the
4
<PAGE>
case may be, shall have notified the Fund in writing of the
claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim
shall have been served upon the Distributor or any such person or
after the Distributor or such person shall have received notice of
service on any designated agent. However, failure to notify the
Fund of any claim shall not relieve the Fund from any liability
which it may have to the Distributor or any person against whom such
action is brought other than on account of its indemnity agreement
contained in this Section 11(a). The Fund shall be entitled to
participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any claims, but
if the Fund elects to assume the defense, the defense shall be
conducted by counsel chosen by it and satisfactory to the
Distributor, or person or persons, defendant or defendants in the
suit. In the event the Fund elects to assume the defense of any
suit and retain counsel, the Distributor, officers or directors or
controlling person(s) or defendant(s) in the suit, shall bear the
fees and expenses of any additional counsel retained by them. If
the Fund does not elect to assume the defense of any suit, it will
reimburse the Distributor, officers or directors or controlling
person(s) or defendant(s) in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees to notify
the Distributor promptly of the commencement of any litigation or
proceedings against it or any of its officers or Directors in
connection with the issuance or sale of any of the shares.
(b) The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of the members of its Board of
Directors and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act, against any
loss, liability, damages, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in
connection therewith) arising by reason of any person acquiring any
shares, based upon the 1933 Act or any other statute or common law,
alleging any wrongful act of the Distributor or any of its employees
or representatives, or alleging that the registration statements,
Prospectuses, SAI's, shareholder reports or other information filed
or made public by the Fund (as from time to time amended) included
an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make
the statements not misleading, insofar as the statement or omission
was made in reliance upon, and in conformity with, information
furnished in writing to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor in favor of the
Fund or any person indemnified to be deemed to protect the Fund or
any person against any liability to which the Fund or such person
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under
this Agreement, or (ii) is the Distributor to be liable under its
indemnity agreement contained in this Section 11(b) with respect to
any claim made against the Fund or any person indemnified unless the
Fund or person, as the case may be, shall have notified the
Distributor in writing of the claim within a reasonable time after
5
<PAGE>
the summons or other first written notification giving information
of the nature of the claim shall have been served upon the Fund
or any such person or after the Fund or such person shall have
received notice of service on any designated agent. However,
failure to notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Fund or any
person against whom the action is brought other than on account of
its indemnity agreement contained in this Section 11(b). In the
case of any notice to the Distributor, it shall be entitled to
participate, at its own expense, in the defense, or, if it so
elects, to assume the defense of any suit brought to enforce any
claims, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by it and satisfactory
to the Fund, to its officers and Board of Directors and to any
controlling person(s) or any defendants(s) in the suit. In the
event the Distributor elects to assume the defense of any suit and
retain counsel, the Fund or controlling person(s) or defendant(s) in
the suit, shall bear the fees and expenses of any additional counsel
retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Fund, its officers or
Board of Directors, controlling person(s) or defendant(s) in the
suit, for the reasonable fees and expenses of any counsel retained
by them. The Distributor agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against it in
connection with the issue and sale of any of the shares.
12. EFFECTIVENESS, TERMINATION, ETC. This Agreement shall become effective
at the close of business on December 31, 1992, and unless terminated as
provided, shall continue in force for one (1) year from the date of its
execution and thereafter from year to year, provided continuance after
the one (1) year period is approved at least annually by either (i) the
vote of a majority of the Board of Directors of the Fund, or by the vote
of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of those Directors of the Fund who are not
interested persons of the Fund, who have no direct or indirect financial
interest in the operation of any Plan of the Fund or any agreements
related to the Plan and who are not parties to this Agreement or
interested persons of any party, cast in person at a meeting called for
the purpose of voting on the approval. This Agreement shall
automatically terminate in the event of its assignment. As used in this
Section 12, the terms "vote of a majority of the outstanding voting
securities," "assignment" and "interested person" shall have the
respective meanings specified in the 1940 Act and the rules enacted
thereunder as now in effect or as hereafter amended. In addition to
termination by failure to approve continuance or by assignment, this
Agreement may at any time be terminated without the payment of any
penalty by vote of a majority of the Directors of the Fund who are not
interested persons of the Fund and who have no direct or indirect
financial interest in the operation of any Plan of the Fund or any
agreements related to the Plan, or by vote of a majority of the
outstanding voting securities of the Fund, on not more than sixty (60)
days' written notice to the Fund. This Agreement may be terminated by
the Distributor upon not less than sixty (60) days' prior written notice
to the Fund..
6
<PAGE>
13. NOTICE. Any notice under this Agreement shall be given in writing
addressed and hand delivered or sent by registered or certified mail,
postage prepaid, to the other party to this Agreement at its principal
place of business.
14. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
15. GOVERNING LAW. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
16. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed in two counterparts, each of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
By: /s/ Peter J. Succoso
--------------------------------------
Peter J. Succoso, President
RODNEY SQUARE DISTRIBUTORS, INC.
By: /s/ Jeffrey O. Stroble
--------------------------------------
Jeffrey O. Stroble, President
7
Exhibit 9(b)
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
TRANSFER AGENCY AGREEMENT
THIS TRANSFER AGENCY AGREEMENT is made as of the 31st day of December,
1992, between The Rodney Square International Securities Fund, Inc., a
corporation organized under the laws of the State of Maryland (the "Fund"),
having its principal place of business in Wilmington, Delaware, and Rodney
Square Management Corporation, a corporation organized under the laws of the
State of Delaware ("RSMC"), having its principal place of business in
Wilmington, Delaware.
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company and
offers for public sale distinct series of shares of common stock, par value
$0.01 per share, each corresponding to a distinct portfolio ("Portfolio");
WHEREAS, each share of a Portfolio represents an undivided interest in
the assets, subject to the liabilities, allocated to that Portfolio and each
Portfolio has a separate investment objective and policies;
WHEREAS, the Fund desires to avail itself of the services of RSMC to
serve as the Fund's transfer agent; and
WHEREAS, RSMC is willing to furnish such services to the Fund with
respect to each of the Portfolios listed in Schedule A to this Agreement on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Fund and RSMC agree as follows:
1. APPOINTMENTS. The Fund hereby appoints RSMC as transfer agent, registrar
and dividend disbursing agent for the shares of common stock (the
"Shares") of the Fund and as servicing agent in connection with the
disbursements of dividends and distributions and as shareholders'
servicing agent for the Fund, each such appointment to take effect at the
close of business on December 31, 1992, and RSMC shall act as such and
perform its obligations thereof upon the terms and conditions hereafter
set forth and in accordance with the principles of principal and agent
enunciated by the common law.
2. DOCUMENTS. The Fund has furnished RSMC with copies of the Fund's
Articles of Incorporation, By-Laws, Investment Advisory Agreement, Sub-
Advisory Agreements, Custodian Agreement, Administration Agreement,
Distribution Agreement, Accounting Services Agreement, most recent
Registration Statement on Form N-1A, current Prospectus and Statement of
Additional Information (the "SAI"), all forms relating to any plan,
program or service offered by the Fund and a certified copy of the
resolution of its Board of Directors approving RSMC's appointment
hereunder and identifying and containing the signatures of the Fund's
officers authorized to issue Oral Instructions and to sign Written
Instructions, as hereinafter defined, on behalf of the Portfolio and to
execute stock certificates representing Shares. Subject to the
provisions of Section 21 hereof, the Fund shall furnish promptly to RSMC
INTLTRAG
<PAGE>
a copy of any amendment or supplement to the above-listed documents. The
Fund shall furnish to RSMC any additional documents necessary for it to
perform its functions hereunder.
3. DEFINITIONS.
(a) Authorized Person. As used in this Agreement, the term "Authorized
Person" means any officer of the Fund and any other person, whether or
not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Oral and Written
Instructions on behalf of the Portfolio and certified by the Secretary or
Assistant Secretary of the Fund or any amendment thereto as may be
received by RSMC from time to time.
(b) Oral Instructions. As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by RSMC from an
Authorized Person or from a person reasonably believed by RSMC to be an
Authorized Person. The Fund agrees to deliver to RSMC, at the time and
in the manner specified in Section 4(b) of this Agreement, Written
Instructions confirming Oral Instructions.
(c) Written Instructions. As used in this Agreement, the term "Written
Instructions" means written instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device, and received by RSMC
and signed by an Authorized Person.
4. INSTRUCTIONS CONSISTENT WITH ARTICLES OF INCORPORATION, ETC.
(a) Unless otherwise provided in this Agreement, RSMC shall act only
upon Oral or Written Instructions. Although RSMC may know of the
provisions of the Articles of Incorporation and By-Laws of the Fund, RSMC
may assume that any Oral or Written Instructions received hereunder are
not in any way inconsistent with any provisions of such Articles of
Incorporation or By-Laws or any vote, resolution or proceeding of the
shareholders, or of the Board of Directors, or of any committee thereof.
(b) RSMC shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by RSMC pursuant to this
Agreement. The Fund agrees to forward to RSMC Written Instructions
confirming Oral Instructions in such manner that the Written Instructions
are received by RSMC by the close of business of the same day that such
Oral Instructions are given to RSMC. The Fund agrees that the fact that
such confirming Written Instructions are not received by RSMC shall in no
way affect the validity of the transactions or enforceability of the
transactions authorized by such Oral Instructions. The Fund agrees that
RSMC shall incur no liability to the Fund in acting upon Oral
Instructions given to RSMC hereunder concerning such transactions,
provided such instructions reasonably appear to have been received from
an Authorized Person.
5. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, RSMC is authorized to take the following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from the
Distributor, as defined in the Distribution Agreement between the Fund
and Rodney Square Distributors, Inc. or a prospective shareholder for the
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<PAGE>
purchase of Shares and sufficient information to enable RSMC to establish
a shareholder account or to issue Shares to an existing shareholder
account, and after confirmation of receipt or crediting of Federal funds
for such order from RSMC's designated bank, RSMC shall issue and credit
the account of the investor or other record holder with Shares in the
manner described in the Prospectus. RSMC shall deposit all checks
received from prospective shareholders into an account on behalf of the
Fund, and shall promptly transfer all Federal funds received from such
checks to the Custodian, as defined in the Custodian Agreement between
the Fund and Wilmington Trust Company. (References herein to "Custodian"
shall also be construed to refer to a "Sub-Custodian" if such appointment
has been made.) If so directed by the Distributor, the confirmation
supplied to the shareholder to mark such issuance will be accompanied by
a Prospectus.
(b) Transfer of Shares; Uncertificated Securities. Where a shareholder
does not hold a certificate representing the number of Shares in its
account and does provide RSMC with instructions for the transfer of such
Shares which include a signature guaranteed by a commercial bank, trust
company or member firm of a national securities exchange and such other
appropriate documentation to permit a transfer, then RSMC shall register
such Shares and shall deliver them pursuant to instructions received from
the transferor, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"), and the laws of the State of
Maryland relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Portfolio issues stock
certificates, the following provisions will apply:
(i) The Fund will supply RSMC with a sufficient supply of stock
certificates representing Shares, in the form approved from time to time
by the Board of Directors of the Fund, and, from time to time, shall
replenish such supply upon request of RSMC. Such stock certificates
shall be properly signed, manually or by facsimile signature, by the duly
authorized officers of the Fund, and shall bear the corporate seal or
facsimile thereof of the Fund, and notwithstanding the death, resignation
or removal of any officer of the Fund, such executed certificates bearing
the manual or facsimile signature of such officer shall remain valid and
may be issued to shareholders until RSMC is otherwise directed by Written
Instructions.
(ii) In the case of the loss or destruction of any certificate
representing Shares, no new certificate shall be issued in lieu thereof,
unless there shall first have been furnished an appropriate bond of
indemnity issued by the surety company approved by RSMC.
(iii) Upon receipt of signed stock certificates, which shall be in
proper form for transfer, and upon cancellation or destruction thereof,
RSMC shall countersign, register and issue new certificates for the same
number of Shares and shall deliver them pursuant to instructions received
from the transferor, the rules and regulations of the SEC, and the laws
of the State of Maryland relating to the transfer of shares of common
stock.
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<PAGE>
(iv) Upon receipt of the stock certificates, which shall be in
proper form for transfer, together with the shareholder's instructions to
hold such stock certificates for safekeeping, RSMC shall reduce such
Shares to uncertificated status, while retaining the appropriate
registration in the name of the shareholder upon the transfer books.
(v) Upon receipt of written instructions from a shareholder of
uncertificated securities for a certificate in the number of shares in
its account, RSMC will issue such stock certificates and deliver them to
the shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from the
Distributor or a shareholder, RSMC shall redeem the number of Shares
indicated thereon from the redeeming shareholder's account and receive
from the Fund's Custodian and disburse pursuant to the redeeming
shareholder's instructions the redemption proceeds therefor, or arrange
for direct payment of redemption proceeds by the Custodian to the
redeeming shareholder or as instructed by the shareholder, in accordance
with such procedures and controls as are mutually agreed upon from time
to time by and among the Fund, RSMC and the Fund's Custodian.
6. AUTHORIZED ISSUED AND OUTSTANDING SHARES. RSMC shall record issues of
all Shares and shall notify the Fund in case any proposed issue of Shares
by the Fund shall result in an over-issue as defined in Section 8-104(2)
of Article 8 of the Maryland Uniform Commercial Code. In case any issue
of Shares would result in such an over-issue, RSMC shall refuse to issue
said Shares and shall not countersign and issue certificates for such
Shares. The Fund agrees to notify RSMC promptly of any change in the
number of authorized Shares and of any change in the number of Shares
registered under the Securities Act of 1933, as amended or termination of
the Fund's declaration under Rule 24f-2 of the 1940 Act. The Fund has
advised RSMC, as of the date hereof, of the number of Shares (i) held in
any redemption or repurchase account, and (ii) registered under the
Securities Act of 1933, as amended, which are unsold. In the event that
the Fund shall declare a stock dividend or a stock split, the Fund shall
deliver to RSMC a certificate, upon which RSMC shall be entitled to rely
for all purposes, certifying (i) the number of Shares involved, (ii) that
all appropriate corporate action has been taken, and (iii) that any
amendment to the Articles of Incorporation of the Fund which may be
required has been filed and is effective. Such certificate shall be
accompanied by an opinion of counsel to the Fund relating to the legal
adequacy and effect of the transaction.
7. DIVIDENDS AND DISTRIBUTIONS. The Fund shall furnish RSMC with
appropriate evidence of action by the Fund's Board of Directors
authorizing the declaration and payment of dividends and distributions as
described in the Prospectus. After deducting any amount required to be
withheld by any applicable tax laws, rules and regulations or other
applicable laws, rules and regulations, RSMC shall in accordance with the
instructions in proper form from a shareholder and the provisions of the
Fund's Articles of Incorporation and Prospectus, issue and credit the
account of the shareholder with Shares, or, if the shareholder so elects,
pay such dividends or distributions in cash to the shareholders in the
manner described in the Prospectus. In lieu of receiving from the Fund's
Custodian and paying to shareholders cash dividends or distributions,
4
<PAGE>
RSMC may arrange for the direct payment of cash dividends and
distributions to shareholders by the Custodian, in accordance with such
procedures and controls as are mutually agreed upon from time to time by
and among the Fund, RSMC and the Fund's Custodian.
RSMC shall prepare, file with the Internal Revenue Service and other
appropriate taxing authorities, and address and mail to shareholders such
returns and information relating to dividends and distributions paid by
the Fund as are required to be so prepared, filed and mailed by
applicable laws, rules and regulations, or such substitute form of notice
as may from time to time be permitted or required by the Internal Revenue
Service. On behalf of the Portfolio, RSMC shall mail certain requests
for shareholders' certifications under penalties of perjury and pay on a
timely basis to the appropriate Federal authorities any taxes to be
withheld on dividends and distributions paid by the Portfolio, all as
required by applicable Federal tax laws and regulation.
In accordance with the Prospectus, resolutions of the Fund's Board of
Directors that are not inconsistent with this Agreement and are provided
to RSMC from time to time, and such procedures and controls as are
mutually agreed upon from time to time by and among the Fund, RSMC and
the Fund's Custodian, RSMC shall (a) arrange for issuance of Shares
obtained through transfers of funds from shareholders' accounts at
financial institutions; (b) arrange for the exchange of Shares for Shares
of other Portfolios of the Fund, or of shares of other eligible Funds in
the Rodney Square Complex, when permitted by the Prospectus.
8. COMMUNICATIONS WITH SHAREHOLDERS.
(a) Communications to Shareholders. RSMC will address and mail all
communications by the Portfolio to its shareholders, including reports to
shareholders, confirmations of purchases and sales of Shares, monthly
statements, dividend and distribution notices and proxy material for its
meetings of shareholders. RSMC will receive and tabulate the proxy cards
for the meetings of the shareholders of the Portfolio.
(b) Correspondence. RSMC will answer such correspondence from
shareholders, securities brokers and others relating to its duties
hereunder and such other correspondence as may from time to time be
mutually agreed upon between RSMC and the Fund.
9. SERVICES TO BE PERFORMED. RSMC shall be responsible for administering
and/or performing transfer agent functions, for acting as service agent
in connection with dividend and distribution functions and for performing
shareholder account administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination
with the Fund's custodian bank in connection with shareholder redemption
by check) of the Fund's Shares as set forth in Schedule B. The details
of the operating standards and procedures to be followed shall be
determined from time to time by agreement between RSMC and the Fund and
may be expressed in written schedules which shall constitute attachments
to this Agreement.
10. RECORD KEEPING AND OTHER INFORMATION.
(a) RSMC shall maintain records of the accounts for each Shareholder
showing the items listed in Schedule C.
5
<PAGE>
(b) RSMC shall create and maintain all necessary records in accordance
with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act and the
rules thereunder, as the same may be amended from time to time, and those
records pertaining to the various functions performed by it hereunder.
All records shall be the property of the Fund at all times and shall be
available for inspection and use by the Fund. Where applicable, such
records shall be maintained by RSMC for the periods and in the places
required by Rule 31a-2 under the 1940 Act.
11. AUDIT, INSPECTION AND VISITATION. RSMC shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the
Fund or any person retained by the Fund. Upon reasonable notice by the
Fund, RSMC shall make available during regular business hours its
facilities and premises employed in connection with its performance of
this Agreement for reasonable visitation by the Fund, or any person
retained by the Fund.
12. COMPENSATION. Compensation for services and duties performed pursuant to
this Agreement is provided in Schedule D hereto. Certain other fees due
and expenses incurred pursuant to this Agreement are payable by the Fund
or the shareholder on whose behalf the service is performed and are also
listed in Schedule D.
The Fund shall reimburse RSMC for all reasonable out-of-pocket expenses
incurred by RSMC or its agents in the performance of its obligations
hereunder. Such reimbursement for expenses incurred in any calendar
month shall be made on or before the tenth day of the next succeeding
month.
The term "out-of-pocket expenses" shall mean the following expenses
incurred by RSMC in the performance of its obligations hereunder: the
cost of stationery and forms (including but not limited to checks, proxy
cards, and envelopes), the cost of postage, the cost of insertion of non-
standard size materials in mailing envelopes and other special mailing
preparation by outside firms, the cost of first-class mailing insurance,
the cost of external electronic communications as approved by the Board
of Directors (to include telephone and telegraph equipment and an
allocable portion of the cost of personnel responsible for the
maintenance of such equipment), toll charges, data communications
equipment and line charges and the cost of microfilming of shareholder
records (including both the cost of storage as well as charges for access
to such records). If RSMC shall undertake the responsibility for
microfilming shareholder records, it may be separately compensated
therefor in an amount agreed upon by the principal financial officer of
the Fund and RSMC, such amount not to exceed the amount which would be
paid to an outside firm for providing such microfilming services.
13. USE OF RSMC'S NAME. The Fund shall not use the name of RSMC in any
Prospectus, SAI, sales literature or other material relating to the Fund
in a manner not approved prior thereto, provided, however, that RSMC
shall approve all uses of its name which merely refer in accurate terms
to its appointments hereunder or which are required by the SEC or a state
securities commission and, provided further, that in no event shall such
approval be unreasonably withheld.
6
<PAGE>
14. USE OF FUND'S NAME. RSMC shall not use the name of the Fund or the
Portfolio of the Fund or material relating to the Fund or the Portfolio
on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not approved prior thereto, provided, however,
that the Fund shall approve all uses of its name which merely refer in
accurate terms to the appointment of RSMC hereunder or which are required
by the SEC or a state securities commission, and, provided, further, that
in no event shall such approval be unreasonably withheld.
15. SECURITY. RSMC represents and warrants that, to the best of its
knowledge, the various procedures and systems which RSMC has implemented
with regard to safeguarding from loss or damage attributable to fire,
theft or any other cause (including provision for twenty-four hours a day
restricted access) the Fund's blank checks, records and other data and
RSMC's records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as in its judgment are
required for the secure performance of its obligations hereunder. The
parties shall review such systems and procedures on a periodic basis.
16. INSURANCE. RSMC shall notify the Fund should any of its insurance
coverage be materially changed. Such notification shall include the date
of change and the reason or reasons therefor. RSMC shall notify the Fund
of any material claims against it, whether or not they may be covered by
insurance and shall notify the Fund from time to time as may be
appropriate of the total outstanding claims made by RSMC under its
insurance coverage.
17. ASSIGNMENT OF DUTIES TO OTHERS. Neither this Agreement nor any rights or
obligations hereunder may be assigned by RSMC without the written consent
of the Fund. RSMC may, however, at any time or times in its discretion
appoint (and may at any time remove) any other bank or trust company,
which is itself qualified under the Securities Exchange Act of 1934 to
act as a transfer agent, as its agent to carry out such of the services
to be performed under this agreement as RSMC may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve RSMC of any of its responsibilities or liabilities hereunder.
18. INDEMNIFICATION.
(a) The Fund agrees to indemnify and hold harmless RSMC and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
including, without limitation, liabilities arising under the Securities
Act of 1933, the Securities Exchange Act of 1934 and any state and
foreign securities and blue sky laws, and amendments thereto (the
"Securities Laws"), and expenses, including without limitation reasonable
attorneys' fees and disbursements arising directly or indirectly from any
action or omission to act which RSMC takes (i) at the request of or on
the direction of or in reliance on the advice of the Fund or (ii) upon
Oral or Written Instructions. Neither RSMC nor any of its nominees shall
be indemnified against any liability (or any expenses incident to such
liability) arising out of RSMC's or its nominees' own willful
misfeasance, bad faith, negligence or reckless disregard of its duties
and obligations under this Agreement.
7
<PAGE>
(b) RSMC agrees to indemnify and hold harmless the Fund from all taxes,
charges, expenses, assessments, claims and liabilities arising from
RSMC's obligations pursuant to this Agreement (including, without
limitation, liabilities arising under the Securities Laws, and any state
and foreign securities and blue sky laws, and amendments thereto) and
expenses, including (without limitation) reasonable attorneys' fees and
disbursements arising directly or indirectly out of RSMC's or its
nominees' own willful misfeasance, bad faith, negligence or reckless
disregard of its duties and obligations under this Agreement.
(c) In order that the indemnification provisions contained in this
Section 18 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion,
and shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other party's
prior written consent.
19. RESPONSIBILITY OF RSMC. RSMC shall be under no duty to take any action
on behalf of the Fund except as specifically set forth herein or as may
be specifically agreed to by RSMC in writing. RSMC shall be obligated to
exercise due care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts in performing
services provided for under this Agreement. RSMC shall be liable for any
damages arising out of or in connection with RSMC's performance of or
omission or failure to perform its duties under this Agreement to the
extent such damages arise out of RSMC's negligence, reckless disregard of
its duties, bad faith or willful misfeasance.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, RSMC, in connection with its duties under
this Agreement, shall not be under any duty or obligation to inquire into
and shall not be liable for (a) the validity or invalidity or authority
or lack thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, and which RSMC reasonably believes to be genuine; or (b)
subject to the provisions of Section 20, delays or errors or loss of data
occurring by reason of circumstances beyond RSMC's control, including
acts of civil or military authority, national emergencies, labor
difficulties, fire, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power
supply.
20. ACTS OF GOD, ETC. RSMC shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies,
labor difficulties, fire, flood or catastrophe, acts of God,
insurrection, war, riots, or failure of the mails, transportation,
communication or power supply. In the event of equipment breakdowns
beyond its control, RSMC shall, at no additional expense to the Fund,
take reasonable steps to minimize service interruptions but shall have no
8
<PAGE>
liability with respect thereto. RSMC shall enter into and shall maintain
in effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
21. AMENDMENTS. RSMC and the Fund shall regularly consult with each other
regarding RSMC's performance of its obligations and its compensation
hereunder. In connection therewith, the Fund shall submit to RSMC at a
reasonable time in advance of filing with the SEC copies of any amended
or supplemented registration statements (including exhibits) under the
Securities Act of 1933, as amended, and the 1940 Act, and a reasonable
time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by
the Fund. Any change in such material which would require any change
in RSMC's obligations hereunder shall be subject to RSMC's approval,
which shall not be unreasonably withheld. In the event that such change
materially increases the cost to RSMC of performing its obligations
hereunder, RSMC shall be entitled to receive reasonable compensation
therefor.
22. DURATION, TERMINATION, ETC. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only
by written instrument which shall make specific reference to this
Agreement and which shall be signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
This Agreement shall become effective at the close of business on
December 31,1992, and shall continue in effect for one year from the
effective date, and thereafter as the parties may mutually agree;
provided, however, that this Agreement may be terminated at any time by
six months' written notice given by RSMC to the Fund or six months'
written notice given by the Fund to RSMC; and provided further that this
Agreement may be terminated immediately at any time for cause either by
the Fund or by RSMC in the event that such cause remains unremedied for a
period of time not to exceed ninety days after receipt of written
specification of such cause. Any such termination shall not affect the
rights and obligations of the parties under Section 18 hereof.
Upon the termination hereof, the Fund shall reimburse RSMC for any out-of-
pocket expenses reasonably incurred by RSMC during the period prior to
the date of such termination. In the event that the Fund designates a
successor to any of RSMC's obligations hereunder, RSMC shall, at the
expense and direction of the Fund, transfer to such successor a certified
list of the shareholders of the Fund (with name, address, and, if
provided, tax identification or Social Security number), a complete
record of the account of each shareholder, and all other relevant books,
records and other data established or maintained by RSMC hereunder. RSMC
shall be liable for any losses sustained by the Fund as a result of
RSMC's failure to accurately and promptly provide these materials.
23. REGISTRATION AS A TRANSFER AGENT. RSMC represents that it is currently
registered with the appropriate Federal agency for the registration of
transfer agents, and that it will remain so registered for the duration
of this Agreement. RSMC agrees that it will promptly notify the Fund in
the event of any material change in its status as a registered transfer
9
<PAGE>
agent. Should RSMC fail to be registered with the Federal Deposit
Insurance Corporation or any successor regulatory authority as a transfer
agent at any time during this Agreement, the Fund may, on written notice
to RSMC, immediately terminate this Agreement.
24. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other party to
this Agreement at its principal place of business.
25. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
26. GOVERNING LAW. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
27. MISCELLANEOUS. Both parties agree to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two counterparts, each of
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of
the day and year first above written.
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
By: /s/ Peter J. Succoso
------------------------------------
Peter J. Succoso, President
RODNEY SQUARE MANAGEMENT CORPORATION
By: /s/ Martin L. Klopping
------------------------------------
Martin L. Klopping, President
10
<PAGE>
SCHEDULE A
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
PORTFOLIO LISTING
The Rodney Square International Equity Fund
A-1
<PAGE>
SCHEDULE B
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
SERVICES TO BE PERFORMED
Rodney Square Management Corporation ("RSMC") will perform the following
functions as transfer agent on an ongoing basis with respect to the Portfolio:
(a) furnish state-by-state registration reports;
(b) calculate sales load or compensation payment and provide such
information;
(c) calculate dealer commissions;
(d) provide toll-free lines for direct shareholder use, plus customer liaison
staff with on-line inquiry capacity;
(e) mail duplicate confirmations to dealers of their clients' activity,
whether executed through the dealer or directly with RSMC;
(f) provide detail for underwriter or broker confirmations and other
participating dealer shareholder accounting, in accordance with such
procedures as may be agreed upon between the Fund and RSMC;
(g) provide shareholder lists and statistical information concerning accounts
of the Portfolio to the Fund; and,
(h) provide timely notification of Portfolio activity and such other
information as may be agreed upon from time to time between RSMC and the
Portfolio or the Custodian, to the Fund or the Custodian.
B-1
<PAGE>
SCHEDULE C
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
SHAREHOLDER RECORDS
Rodney Square Management Corporation ("RSMC") shall maintain records of the
accounts for each shareholder showing the following information:
(a) name, address and United States Tax Identification or Social Security
number;
(b) number of Shares held and number of Shares for which certificates, if
any, have been issued, including certificate numbers and denominations;
(c) historical information regarding the account of each shareholder,
including dividends and distributions paid and the date and price for all
transactions on a shareholder's account;
(d) any stop or restraining order placed against a shareholder's account;
(e) any correspondence relating to the current maintenance of a shareholder's
account;
(f) information with respect to withholdings; and,
(g) any information required in order for RSMC to perform any calculations
contemplated or required by this Agreement.
C-1
<PAGE>
SCHEDULE D
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
FEE SCHEDULE
ANNUAL MAINTENANCE FEE FOR EACH ACCOUNT
1/12th of the annual maintenance fee shall be charged and payable each
month. The fee will be charged for any account which at any time
during the month had a share balance in the Fund.
FEE PER ANNUM
TYPE OF FUND/ACCOUNT PER ACCOUNT
-------------------- -------------
Annual Dividend $ 7.00
Semi-Annual Dividend 8.50
Quarterly Dividend 10.00
Monthly Dividend 18.00
Inactive Account 0.30
OTHER FEES
Monthly return of checks $ 0.44 per check
Non-return of check 0.10 per check
Out of pocket expenses shall be reimbursed by the Fund to Rodney Square
Management Corporation ("RSMC") or paid directly by the Fund. Such
expenses include but are not limited to the following:
a. Toll-free lines (if required)
b. Forms, envelopes, checks, checkbooks
c. Postage (bulk, pre-sort, first-class at current prevailing rates)
d. Hardware/phone lines for remote terminal(s) (if required)
e. Microfiche/Microfilm
f. Wire fee for receipt or disbursement - $7.50 per wire
g. Mailing fee - approximately $30.00 per 1,000 items
h. Cost of proxy solicitation, mailing and tabulation (if required)
i. Certificate issuance - $2.00 per certificate
j. Development/programming costs/special projects - time and material
NATIONAL SECURITIES CLEARING CORPORATION ("NSCC") FUND/SERV CHARGES (NON-
MONEY MARKET SERIES)
Participation Fee: $50.00 per month
CPU Access Fee: $40.00 per month
Transaction Fee: $ 0.50 each
NSCC will deduct its monthly fee on the 15th of each month from RSMC's
cash settlement that day. These charges will be included on the next bill
as out-of-pocket expenses.
D-1
<PAGE>
SYSTEM ACCESS CHARGES (PER TRUST)
Transaction fees based on each month's total:
NUMBER OF TRANSACTIONS FEE PER TRANSACTION
---------------------- -------------------
1- 400 $.75
401- 800 $.60
801- 1,200 $.50
1,201- 1,500 $.45
1,501- 2,000 $.40
over 2,000 $.35
PLUS: out-of-pocket expenses for settlements, wire charges, NSCC pickup
charges, hardware, CRT's modems, lines (if required), etc.
MINIMUM MONTHLY FEE:
Rodney Square International Equity Fund $1,000 per month
Each New Series $1,000 per month
ADDITIONAL EXPENSES (PAID BY SHAREHOLDER):
Direct IRA/Keogh processing $10.00 per account per annum
$ 5.00 new account set-up fee
$ 2.50 per distribution
$10.00 per transfer out
Account transcripts most recent seven years$35.00
Account transcripts beyond seven years $50.00
Checkwriting charges
Stop payments $ 7.50 per stop
Non-sufficient funds $12.50 per return
Check copy $ 2.00 per copy
PAYMENT
The above will be billed within the first five (5) business days of each
month and will be paid by wire within five (5) business days of receipt.
D-2
Exhibit 10(b)
--------------------------
KIRKPATRICK & LOCKHART LLP
--------------------------
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
ARTHUR J. BROWN
(202) 778-9046
[email protected]
February 27, 1996
The Rodney Square International
Securities Fund, Inc.
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Dear Sir or Madam:
The Rodney Square International Securities Fund, Inc. (the "Registrant") was
incorporated in Maryland on July 24, 1987. We understand that the Registrant is
about to file Post-Effective Amendment No. 9 to its Registration Statement on
Form N-lA for the purpose of registering additional shares of capital stock of
its only series, The Rodney Square International Equity Fund ("Fund"), under
the Securities Act of 1933, as amended ("1933 Act"), pursuant to Section
24(e)(1) of the Investment Company Act of 1940, as amended ("1940 Act").
We have, as counsel, participated in various business and other proceedings
relating to the Fund. We have examined copies, either certified or otherwise
proved to be genuine, of the Registrant's Articles of Incorporation and By-Laws,
as now in effect, the minutes of meetings of its board of directors and other
documents relating to its organization and operation, and we are generally
familiar with its affairs. Based upon the foregoing, it is our opinion that the
shares of capital stock in the Fund currently being registered pursuant to
Section 24(e)(1) as reflected in Post-Effective Amendment No. 9, when sold in
accordance with the Registrant's Articles of Incorporation and By-Laws, will be
legally issued, fully paid and non-assessable, subject to compliance with the
1933 Act, the 1940 Act and applicable state laws regulating the offer and sale
of securities.
DC-250397.1
BOSTON - HARRISBURG - MIAMI - NEW YORK - PITTSBURGH - WASHINGTON
<PAGE>
- --------------------------
KIRKPATRICK & LOCKHART LLP
- --------------------------
The Rodney Square International
Securities Fund, Inc.
February 27, 1996
Page Two
We hereby consent to this opinion accompanying Post-Effective Amendment No.
9 which you are about to file with the Securities and Exchange Commission. We
also consent to the reference to our firm under the caption "Other Information -
Legal Counsel" in the statement of additional information incorporated by
reference into the prospectus of the Fund, filed as part of the Registrant's
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur Brown
------------------------
Arthur J. Brown
Exhibit 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference in this Post-Effective Amendment Number 9 to Registration
Statement Number 33-16056 (Form N-1A) of our report dated November 30, 1995, on
the financial statements and financial highlights of The Rodney Square
International Equity Fund for the year ended October 31, 1995, included in the
1995 Annual Report to Shareholders.
/s/ Ernst & Young LLP
Baltimore, Maryland
February 22, 1996
Exhibit 15
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
OF THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
WITH RESPECT TO THE RODNEY SQUARE INTERNATIONAL EQUITY FUND
WHEREAS, The Rodney Square International Securities Fund, Inc. (the
"Fund") operates as an open-end investment company registered under the
Investment Company Act of 1940 (the "Act");
WHEREAS, the Fund's shares of common stock, par value $0.01 per share,
are divided into separate series ("portfolios");
WHEREAS, at the present time, the Fund has one portfolio, The Rodney
Square International Equity Fund (the "Portfolio");
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to
Rule 12b-1 under the Act;
WHEREAS, the Fund has entered into a Distribution Agreement pursuant
to which the Fund has employed a Distributor of the securities of the Fund
(the "Distributor") during the continuous offering of shares of its
portfolios;
NOW THEREFORE, the Fund hereby adopts this Plan of Distribution (the
"Plan") on behalf of the Portfolio in accordance with Rule 12b-1 under the
Act.
1. (a) The Fund shall pay the Distributor, as reimbursement for the
expenses incurred with respect to the Portfolio by the Distributor pursuant to
the Distribution Agreement ("Distribution Expenses"), promptly after the last
day of each month a fee not greater than the Distribution Expenses incurred by
the Distributor during that month and any prior month to the extent that
Distribution Expenses in such prior month had not previously been paid to the
Distributor because of the "provided" clause of this paragraph; provided that
payment shall be made for any month only to the extent that such payment shall
not exceed (i) on an annualized basis, 0.75% of the Fund's average annual net
assets; (ii) when combined with sales load proceeds, 7.25% of the Fund's gross
new sales; and (iii) limitations set from time to time by the Board of
Directors.
(b) Distribution Expenses from prior months that have not been
reimbursed may be carried forward and presented for reimbursement in
subsequent months subject to the expense limitations set forth above, provided
that such reimbursement shall be made on a first-in, first-out basis.
Interest or finance charges on such carried forward Distribution Expenses may
be payable to the Distributor, but only with express authorization by the
Board of Directors.
2. For purposes hereof, "Distribution Expenses" shall mean all
expenses which the Distributor bears with respect to the Portfolio under the
Distribution Agreement and consists of the amounts paid and expenses incurred
by the Distributor for distribution activities encompassed by Rule 12b-1, such
as public relations services, telephone services, sales presentations, media
charges, preparation, printing and mailing advertising and sales literature,
INTL12B1
<PAGE>
data processing necessary to support a distribution effort, printing and
mailing of prospectuses, and distribution and shareholder servicing activities
of broker/dealers and other financial institutions. Such expenses may include
fairly allocable internal expenses of the Distributor and payments to third
parties.
3. Nothing in this Plan shall operate or be construed to limit the
extent to which the Fund's administrator, investment adviser (the "Adviser")
or any other person, other than the Fund, may incur costs and bear expenses
associated with the distribution of securities of which the Portfolio is the
issuer.
4. It is contemplated by the Plan that the Adviser may from time to
time make payments to third parties out of its advisory fee, not to exceed the
amount of that fee, including payments of fees for shareholder servicing and
transfer agency functions. If such payments are deemed to be indirect
financing of an activity primarily intended to result in the sale of shares
issued by the Portfolio within the context of Rule 12b-1 under the Act, such
payments shall be authorized by this Plan.
5. This Plan shall not take effect until it has been approved by a
vote of at least a majority of the outstanding voting securities of the
Portfolio (as defined in the Act).
6. (a) This Plan shall not take effect until it has been approved by
votes of the majority of both (i) the Board of Directors of the Fund and (ii)
the Directors who are not interested persons of the Fund within the meaning of
Section 2(a)(19) of the Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
("Independent Directors"), cast in person at a meeting called for the purpose
of voting on this Plan.
(b) Any limitations set by the Board of Directors on the amount
of Distribution Expenses that are reimbursable shall be approved by vote of
the majority of both the Board of Directors of the Fund and the Independent
Directors. Payment of interest or finance charges on carried-forward
unreimbursed Distribution Expenses shall also be approved by a vote of the
majority of both the Board of Directors and the Independent Directors.
7. This plan shall remain in effect for one year from the date of its
effectiveness and may continue in effect thereafter if it is approved at least
annually by a vote of the Board of Directors of the Fund, and of the
Independent Directors, cast in person at a meeting called for the purpose of
voting on the Plan.
8. This Plan may be terminated at any time by a majority vote of the
Independent Directors or by vote of a majority of the outstanding voting
securities of the Portfolio. Upon such termination or upon termination of the
Distribution Agreement, any Distribution Expenses incurred by the Distributor,
including any carried forward unreimbursed Distribution Expenses and any
interest or finance charges thereon, to the date of termination shall be
presented to the Fund for payment subject to the expense limitations in
paragraph (1) hereof. Any Distribution Expenses incurred by the Distributor,
including any carried forward unreimbursed Distribution Expenses and any
interest or finance charges thereon, prior to the effective date of
termination shall be paid by the Fund in accordance with the Plan except that
2
<PAGE>
any expenses, fees and charges not properly payable by the Fund by fiscal year-
end shall expire at fiscal year-end. The Fund shall have no obligation to
make any other payment of the Distributor under this Plan or the Distribution
Agreement.
9. The Distributor shall provide, on at least a quarterly basis, a
written report to the Fund's Board of Directors of the Distribution Expenses
incurred by the Distributor, including any carried forward unreimbursed
Distribution expenses and any interest or finance charges thereon, the amounts
paid on behalf of the Portfolio by the Fund during the most recently completed
quarter pursuant to this Plan or any related agreements and the purposes for
which such expenditures were made.
10. While this plan is in effect, the selection and nomination of
those Directors who are not interested persons of the Fund within the meaning
of Section 2(a)(19) of the Act shall be committed to the discretion of the
Directors then in office who are not interested persons of the Fund.
11. All material amendments to this Plan must be approved by a
majority vote of the Board of Directors of the Fund and of the Independent
Directors, cast in person at a meeting called for the purpose of voting
thereon. In addition, this Plan may not be amended to increase materially the
amounts authorized to be spent in paragraphs (1) and (8) hereof without
approval of a majority of the outstanding shares of the Portfolio.
Dated: February 1, 1993
3
[ARTICLE] 6
[CIK] 0000819341
[NAME] RODNEY SQUARE INTERNATIONAL SECURITIES FUND
[SERIES]
[NUMBER] 1
[NAME] RODNEY SQUARE INTERNATIONAL EQUITY FUND
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-START] NOV-01-1994
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 12247
[INVESTMENTS-AT-VALUE] 14066
[RECEIVABLES] 1836
[ASSETS-OTHER] 1496
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 17398
[PAYABLE-FOR-SECURITIES] 420
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1739
[TOTAL-LIABILITIES] 2159
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 13092
[SHARES-COMMON-STOCK] 12
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 56
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 247
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1832
[NET-ASSETS] 15239
[DIVIDEND-INCOME] 318
[INTEREST-INCOME] 109
[OTHER-INCOME] (34)
[EXPENSES-NET] 337
[NET-INVESTMENT-INCOME] 56
[REALIZED-GAINS-CURRENT] 247
[APPREC-INCREASE-CURRENT] (978)
[NET-CHANGE-FROM-OPS] (675)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 1851
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 220
[NUMBER-OF-SHARES-REDEEMED] 903
[SHARES-REINVESTED] 108
[NET-CHANGE-IN-ASSETS] (6692)
[ACCUMULATED-NII-PRIOR] 633
[ACCUMULATED-GAINS-PRIOR] 1070
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 193
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 484
[AVERAGE-NET-ASSETS] 19254
[PER-SHARE-NAV-BEGIN] 13.36
[PER-SHARE-NII] 0.03
[PER-SHARE-GAIN-APPREC] (0.25)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.00)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.14
[EXPENSE-RATIO] 1.75
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
Exhibit 5(b)
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 1st day of February, 1993,
among The Rodney Square International Securities Fund, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"), Wilmington
Trust Company ("WTC"), a corporation organized under the laws of the State of
Delaware and Scudder, Stevens & Clark, Inc., a corporation organized under the
laws of the State of Delaware (the "Sub-Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company,
subject to the rules and regulations promulgated under the 1940 Act and offers
for public sale distinct series of shares of common stock ("portfolios"), par
value $0.01 per share;
WHEREAS, at the present time, the Fund has one portfolio, The Rodney
Square International Equity Fund (the "Portfolio");
WHEREAS, each such share of the Portfolio represents an undivided
interest in the assets, subject to the liabilities, allocated to the
Portfolio; and
WHEREAS, WTC (the "Adviser") acts as the investment adviser for the Fund
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities. However,
specific portfolio purchases and sales for the investment portfolio of the
Portfolio of the Fund, or a portion thereof, may be made by advisory
organizations recommended by the Adviser and approved by the Board of
Directors of the Fund;
NOW THEREFORE, the Fund, the Adviser and the Sub-Adviser agree as
follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund being duly authorized hereby
appoints and employs the Sub-Adviser as a discretionary portfolio
manager, on the terms and conditions set forth herein, of those assets of
the Portfolio which the Adviser determines to assign to the Sub-Adviser
(those assets being referred to as the "Portfolio Account"). The Adviser
may, from time to time, with the consent of the Sub-Adviser, make
additions to the Portfolio Account and may, from time to time, upon
notice to the Sub-Adviser, make withdrawals from the Portfolio Account;
provided, however, that the Adviser at any time on oral or written notice
to the Sub-Adviser may make withdrawals of cash and cash equivalents from
the Portfolio Account. The consent of the Sub-Adviser shall not be
required for the allocation of cash available to the Portfolio Account
for investment as a result of the proceeds of sales of shares of the
Portfolio exceeding redemption of shares of the Portfolio.
SUBADVAG.DOC
<PAGE>
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Sub-Adviser
accepts the appointment as a discretionary portfolio manager and agrees
to use its professional judgment to make investment decisions for the
Portfolio with respect to the investments of the Portfolio Account and to
implement such decisions on a timely basis in accordance with the
provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to
place orders for the execution of such portfolio transactions in
accordance with Sections 5 and 6 hereof and Schedule A hereto (as amended
from time to time). In providing portfolio management services to the
Portfolio Account, the Sub-Adviser shall be subject to and shall conform
to such investment restrictions as are set forth in the 1940 Act and the
rules thereunder, the Internal Revenue Code, applicable state securities
laws, applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Directors of the Fund, such
specific instructions as the Board of Directors may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions
of the Fund applicable to the Portfolio furnished pursuant to Section 4
of this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto
(as amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect
to any decision made by it with respect to the investments of the
Portfolio Account.
4. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide
the Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Fund as contained in the Fund's Prospectus
and Statement of Additional Information, and any instructions adopted by
the Board of Directors supplemental thereto. The Fund will provide the
Sub-Adviser with such further information concerning the investment
objective, policies and restrictions applicable thereto as the Sub-
Adviser may from time to time reasonably request. The Fund retains the
right, on written notice to the Sub-Adviser from the Fund or the Adviser,
to modify any such objective, policies or restrictions in any manner at
any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by the custodian designated by the Fund (the "Custodian"),
or such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof
or any responsibility or liability with respect thereto. The Sub-Adviser
shall advise the Custodian and confirm in writing to the Fund and to the
administrator designated by the Fund or any other designated agent of the
2
<PAGE>
Fund, all investment orders for the Portfolio Account placed by it with
brokers and dealers at the time and in the manner set forth in Schedule B
hereto (as amended from time to time). The Fund shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Sub-Adviser. The Fund
shall be responsible for all custodial arrangements and the payment of
all custodial charges and fees, and, upon giving proper instructions to
the Custodian, the Sub-Adviser shall have no responsibility or liability
with respect to custodial arrangements or the acts, omissions or other
conduct of the Custodian, except that it shall be the responsibility of
the Sub-Adviser to take appropriate action if the Custodian fails to
confirm in writing proper execution of the instructions.
6. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio
transactions initiated by the Sub-Adviser, and for the selection of the
markets on or in which the transactions will be executed, subject to the
following and subject to conformance with the policies disclosed in the
Fund's Prospectus and Statement of Additional Information.
(a) In doing so, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
brokers, subject to review by the Fund's Board of Directors from
time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price and efficient execution.
In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
3
<PAGE>
The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
(b) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser, the Consultant (as
defined in the Investment Advisory Agreement between the Fund and
the Adviser) or any Sub-Adviser for any Portfolio of the Fund; (ii)
a principal underwriter of the Fund's shares; or (iii) an affiliated
person of such an affiliated person or principal underwriter. The
Adviser agrees that it will provide the Sub-Adviser with a list of
such brokers and dealers.
7. PROXIES. The Fund will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Portfolio Account may be
invested from time to time. At the request of the Fund or the Adviser,
the Sub-Adviser shall provide the Fund with its recommendations as to the
voting of such proxies.
8. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
9. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of
the Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
10. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges
that the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 6(b) hereof, the Fund agrees that
the Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the
timing or nature of action taken with respect to the Portfolio Account,
provided that the Sub-Adviser acts in good faith, and provided further,
that it is the Sub-Adviser's policy to allocate, within its reasonable
discretion, investment opportunities to the Portfolio Account over a
period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objective and policies of
the Portfolio and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio
Account may have an interest from time to time, whether in transactions
4
<PAGE>
which involve the Portfolio Account or otherwise. The Sub-Adviser shall
have no obligation to acquire for the Portfolio Account a position in any
investment which any Affiliated Account may acquire, and the Fund shall
have no first refusal, co-investment or other rights in respect of any
such investment, either for the Portfolio Account or otherwise.
11. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser
shall furnish to each other from time to time certified copies of the
resolutions of their Boards of Directors or executive committees, as the
case may be, evidencing the authority of officers and employees who are
authorized to act on behalf of the Fund, a Portfolio Account, the Adviser
and/or the Sub-Adviser.
12. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or
instructions from the Fund or the Adviser, provided, however, that such
acts or omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 12 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information
pertaining to the Portfolio Account and the actions of the Sub-Adviser,
the Adviser and the Fund in respect thereof.
14. ASSIGNMENT. No assignment of this Agreement shall be made by the Sub-
Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the Sub-
Adviser.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Directors of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
5
<PAGE>
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Directors of
the Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The Sub-
Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act"); or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act or an "insurance
company" as defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and will provide the Fund with a copy of the
code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this
Agreement is in effect, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the Sub-
Adviser has complied with the requirements of Rule 17j-1 and Section
204A during the previous year and that there has been no violation
of the Sub-Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Fund, the Sub-Adviser
shall permit the Fund, its employees or its agents to examine the
reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
6
<PAGE>
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Directors and the shareholders of the Portfolio
in the manner required by the 1940 Act and the rules thereunder, subject
to any applicable exemptive order of the Securities and Exchange
Commission modifying the provisions of the 1940 Act with respect to
approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time of two
years from such date, and from year to year thereafter but only so long
as such continuance is specifically approved at least annually by the
vote of a majority of the Directors who are not interested persons of the
Fund, the Adviser or the Sub-Adviser, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder.
20. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Fund, upon thirty (30) days'
written notice to the other parties hereto, but any such termination
shall not affect the status, obligations or liabilities of any party
hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the Sub-
Adviser, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
21. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption issued by the
Securities and Exchange Commission.
22. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
7
<PAGE>
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
24. GOVERNING LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND,
INC. on behalf of THE RODNEY SQUARE
INTERNATIONAL EQUITY FUND
By: /s/ Peter J. Succoso
---------------------------
Peter J. Succoso, President
SCUDDER, STEVENS & CLARK, INC.
By: /s/ Douglas M. Loudon
---------------------------
Title: Managing Director
------------------------
WILMINGTON TRUST COMPANY
By: /s/ Peter J. Succoso
---------------------------
Peter J. Succoso, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C. Fee Schedule
8
<PAGE>
SCHEDULE A
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate
(i) the monitoring of the Fund's compliance with the restrictions and
limitations applicable to the operations of a registered investment company
and (ii) the preparation of reports to the Board of Directors, regulatory
authorities and shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or
a supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser,
on behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33% of the voting securities of such issuer to be held in the
Portfolio Account (1940 Act Section 5(b)(1); IRC* Section 851(b)(4)
(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1% of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act Section 12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5% of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(iii)),
- ---------------------------
* Internal Revenue Code
A-1
<PAGE>
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the Adviser,
the Consultant (as defined in the Investment Advisory
Agreement), or any other investment adviser to the Fund (1940
Act Section 12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would
cause more than 3.33% of the outstanding voting securities of any
insurance company to be held in the Portfolio Account (1940 Act
Section 12(d)(2)); or
4. purchase securities of or any interest in any person who is a
broker, a dealer, is engaged in the business of underwriting, is an
investment adviser to an investment company or is a registered
investment adviser under the Investment Advisers Act of 1940, unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues
from securities-related activities (1940 Act Rule 12d3-1(a)),
or
b. despite the fact that such purchase is of any security of any
issuer that derived more than 15% of its gross revenues from
securities-related activities:
(1) after the purchase of any equity security, the
Portfolio Account would not own more than 1.67%
of outstanding securities of that class of the
issuer's equity securities;
(2) after the purchase not more than 5% of the
Portfolio Account's total assets would be
invested in the issuer's securities (whether
debt or equity);
(3) when acquired, any equity security is a "margin
security" under Regulation T of the Federal
Reserve, which generally includes any registered
security or one trading on a national exchange;
(4) after the purchase of any debt security, the
Portfolio Account would not own more than 3.33%
of the outstanding principal amount of the
issuer's debt securities; and
(5) when acquired, any debt security is investment
grade, as determined by the Fund's Board of
Directors.
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in
A-2
<PAGE>
the number of Sub-Advisers and the proportionate decrease or increase in
the percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source
other than dividends, interest, payments with respect to securities
loans (as defined in IRC Section 512(a)(5)), and gains from the sale or
other disposition of stock or securities (as defined in the 1940 Act
Section 2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRC Section 851(b)(2)).
E. The Sub-Adviser will manage the Portfolio Account so that less than 30%
of the gross income of the Portfolio Account is derived from the sale or
other disposition of stock or securities held for less than three months
(IRC Section 851(b)(3)).
A-3
<PAGE>
SCHEDULE B
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-1(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf
of the Portfolio Account for, or in connection with, the purchase or sale
of securities, whether executed or unexecuted. Such records shall
include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-1(b)(9)). A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases (e.g. execution ability, execution and research) upon
which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale
orders. Such record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers to:
(1) the Fund,
(2) the Adviser,
(3) the Consultant, if any,
(4) the Sub-Adviser, and
(5) any person other than the foregoing; and
c. any other consideration other than the technical qualifications
of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
B-1
<PAGE>
C. (Rule 31a-1(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained as
part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of portfolio securities
and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to the
extent such records are necessary or appropriate to record the Sub-
Adviser's transactions with respect to the Portfolio Account.
- ----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation, i.e., buy, sell, hold) or any internal
reports or portfolio adviser reviews.
B-2
<PAGE>
SCHEDULE C
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
FEE SCHEDULE
For the services to be provided to the Fund pursuant to the attached Sub-
Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee
calculated as a percentage of the Adviser's monthly fee ("MF", which is
equal to 1/12 of 1% of the daily values placed upon the net assets of the
Portfolio during the month) in accordance with the following formula:
Sub-Adviser's
monthly fee = .5MF X Average of the value of the net assets in
the Portfolio Account on the last business
day of the prior month and last business
day of the month
Divided By
Average of the value of the net assets in
all Portfolio Accounts in the Portfolio on
the last business day of the prior month
and last business day of the month
Such fee shall be payable in arrears within ten business days following
the end of each month.
C-1
Exhibit 5(c)
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
SUB-ADVISORY AGREEMENT
THIS SUB-ADVISORY AGREEMENT is made as of the 1st day of February, 1993,
among The Rodney Square International Securities Fund, Inc., a corporation
organized under the laws of the State of Maryland (the "Fund"), Wilmington
Trust Company ("WTC"), a corporation organized under the laws of the State of
Delaware and Clemente Capital, Inc., a corporation organized under the laws
of the State of New York (the "Sub-Adviser").
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company,
subject to the rules and regulations promulgated under the 1940 Act and offers
for public sale distinct series of shares of common stock ("portfolios"), par
value $0.01 per share;
WHEREAS, at the present time, the Fund has one portfolio, The Rodney
Square International Equity Fund (the "Portfolio");
WHEREAS, each such share of the Portfolio represents an undivided
interest in the assets, subject to the liabilities, allocated to the
Portfolio; and
WHEREAS, WTC (the "Adviser") acts as the investment adviser for the Fund
pursuant to the terms of an Investment Advisory Agreement between the Fund and
the Adviser under which the Adviser is responsible for the coordination of
investment of the Portfolio's assets in portfolio securities. However,
specific portfolio purchases and sales for the investment portfolio of the
Portfolio of the Fund, or a portion thereof, may be made by advisory
organizations recommended by the Adviser and approved by the Board of
Directors of the Fund;
NOW THEREFORE, the Fund, the Adviser and the Sub-Adviser agree as
follows:
1. APPOINTMENT OF SUB-ADVISER. The Fund being duly authorized hereby
appoints and employs the Sub-Adviser as a discretionary portfolio
manager, on the terms and conditions set forth herein, of those assets of
the Portfolio which the Adviser determines to assign to the Sub-Adviser
(those assets being referred to as the "Portfolio Account"). The Adviser
may, from time to time, with the consent of the Sub-Adviser, make
additions to the Portfolio Account and may, from time to time, upon
notice to the Sub-Adviser, make withdrawals from the Portfolio Account;
provided, however, that the Adviser at any time on oral or written notice
to the Sub-Adviser may make withdrawals of cash and cash equivalents from
the Portfolio Account. The consent of the Sub-Adviser shall not be
required for the allocation of cash available to the Portfolio Account
for investment as a result of the proceeds of sales of shares of the
Portfolio exceeding redemption of shares of the Portfolio.
SUBADVAG.DOC
<PAGE>
2. ACCEPTANCE OF APPOINTMENT; STANDARD OF PERFORMANCE. The Sub-Adviser
accepts the appointment as a discretionary portfolio manager and agrees
to use its professional judgment to make investment decisions for the
Portfolio with respect to the investments of the Portfolio Account and to
implement such decisions on a timely basis in accordance with the
provisions of this Agreement.
3. PORTFOLIO MANAGEMENT SERVICES OF THE SUB-ADVISER. The Sub-Adviser is
hereby employed and authorized to select portfolio securities for
investment by the Portfolio, to purchase and to sell securities for the
Portfolio Account, and upon making any purchase or sale decision, to
place orders for the execution of such portfolio transactions in
accordance with Sections 5 and 6 hereof and Schedule A hereto (as amended
from time to time). In providing portfolio management services to the
Portfolio Account, the Sub-Adviser shall be subject to and shall conform
to such investment restrictions as are set forth in the 1940 Act and the
rules thereunder, the Internal Revenue Code, applicable state securities
laws, applicable statutes and regulations of foreign jurisdictions, the
supervision and control of the Board of Directors of the Fund, such
specific instructions as the Board of Directors may adopt and communicate
to the Sub-Adviser, the investment objective, policies and restrictions
of the Fund applicable to the Portfolio furnished pursuant to Section 4
of this Agreement, the provisions of Schedule A and Schedule B hereto and
other instructions communicated to the Sub-Adviser by the Adviser. The
Sub-Adviser is not authorized by the Fund to take any action, including
the purchase or sale of securities for the Portfolio Account, in
contravention of any restriction, limitation, objective, policy or
instruction described in the previous sentence. The Sub-Adviser shall
maintain on behalf of the Fund the records listed in Schedule B hereto
(as amended from time to time). At the Fund's reasonable request, the
Sub-Adviser will consult with the Fund or with the Adviser with respect
to any decision made by it with respect to the investments of the
Portfolio Account.
4. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS. The Fund will provide
the Sub-Adviser with the statement of investment objective, policies and
restrictions applicable to the Fund as contained in the Fund's Prospectus
and Statement of Additional Information, and any instructions adopted by
the Board of Directors supplemental thereto. The Fund will provide the
Sub-Adviser with such further information concerning the investment
objective, policies and restrictions applicable thereto as the Sub-
Adviser may from time to time reasonably request. The Fund retains the
right, on written notice to the Sub-Adviser from the Fund or the Adviser,
to modify any such objective, policies or restrictions in any manner at
any time.
5. TRANSACTION PROCEDURES. All transactions will be consummated by payment
to or delivery by the custodian designated by the Fund (the "Custodian"),
or such depositories or agents as may be designated by the Custodian in
writing, of all cash and/or securities due to or from the Portfolio
Account, and the Sub-Adviser shall not have possession or custody thereof
or any responsibility or liability with respect thereto. The Sub-Adviser
shall advise the Custodian and confirm in writing to the Fund and to the
administrator designated by the Fund or any other designated agent of the
2
<PAGE>
Fund, all investment orders for the Portfolio Account placed by it with
brokers and dealers at the time and in the manner set forth in Schedule B
hereto (as amended from time to time). The Fund shall issue to the
Custodian such instructions as may be appropriate in connection with the
settlement of any transaction initiated by the Sub-Adviser. The Fund
shall be responsible for all custodial arrangements and the payment of
all custodial charges and fees, and, upon giving proper instructions to
the Custodian, the Sub-Adviser shall have no responsibility or liability
with respect to custodial arrangements or the acts, omissions or other
conduct of the Custodian, except that it shall be the responsibility of
the Sub-Adviser to take appropriate action if the Custodian fails to
confirm in writing proper execution of the instructions.
6. ALLOCATION OF BROKERAGE. The Sub-Adviser shall have authority and
discretion to select brokers and dealers to execute portfolio
transactions initiated by the Sub-Adviser, and for the selection of the
markets on or in which the transactions will be executed, subject to the
following and subject to conformance with the policies disclosed in the
Fund's Prospectus and Statement of Additional Information.
(a) In doing so, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution.
Consistent with this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be a
party to any such transaction or other transactions to which other
clients of the Sub-Adviser may be a party. It is understood that
neither the Fund, the Adviser nor the Sub-Adviser has adopted a
formula for allocation of the Fund's investment transaction
business. It is also understood that it is desirable for the Fund
that the Sub-Adviser have access to supplemental investment and
market research and security and economic analyses provided by
certain brokers who may execute brokerage transactions at a higher
commission to the Fund than may result when allocating brokerage to
other brokers on the basis of seeking the lowest commission.
Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolio with such certain
brokers, subject to review by the Fund's Board of Directors from
time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such
brokers may be useful to the Sub-Adviser in connection with its
services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as
other clients, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price and efficient execution.
In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund in respect of
the Portfolio and to such other clients.
3
<PAGE>
The Adviser shall render regular reports to the Fund of the total
brokerage business placed and the manner in which the allocation has
been accomplished.
(b) The Sub-Adviser agrees that it will not execute without the prior
written approval of the Adviser any portfolio transactions for the
Portfolio Account with a broker or dealer which is (i) an affiliated
person of the Fund, including the Adviser, the Consultant (as
defined in the Investment Advisory Agreement between the Fund and
the Adviser) or any Sub-Adviser for any Portfolio of the Fund; (ii)
a principal underwriter of the Fund's shares; or (iii) an affiliated
person of such an affiliated person or principal underwriter. The
Adviser agrees that it will provide the Sub-Adviser with a list of
such brokers and dealers.
7. PROXIES. The Fund will vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Portfolio Account may be
invested from time to time. At the request of the Fund or the Adviser,
the Sub-Adviser shall provide the Fund with its recommendations as to the
voting of such proxies.
8. REPORTS TO THE SUB-ADVISER. The Fund will provide the Sub-Adviser with
such periodic reports concerning the status of the Portfolio Account as
the Sub-Adviser may reasonably request.
9. FEES FOR SERVICES. The compensation of the Sub-Adviser for its services
under this Agreement shall be calculated and paid by the Adviser in
accordance with the attached Schedule C. Pursuant to the provisions of
the Investment Advisory Agreement between the Fund and the Adviser, the
Adviser is solely responsible for the payment of fees to the Sub-Adviser,
and the Sub-Adviser agrees to seek payment of the Sub-Adviser's fees
solely from the Adviser.
10. OTHER INVESTMENT ACTIVITIES OF THE SUB-ADVISER. The Fund acknowledges
that the Sub-Adviser or one or more of its affiliated persons may have
investment responsibilities or render investment advice to or perform
other investment advisory services for other individuals or entities and
that the Sub-Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in any
securities for its or their respective accounts ("Affiliated Accounts").
Subject to the provisions of Section 6(b) hereof, the Fund agrees that
the Sub-Adviser or its affiliated persons may give advice or exercise
investment responsibility and take such other action with respect to
other Affiliated Accounts which may differ from the advice given or the
timing or nature of action taken with respect to the Portfolio Account,
provided that the Sub-Adviser acts in good faith, and provided further,
that it is the Sub-Adviser's policy to allocate, within its reasonable
discretion, investment opportunities to the Portfolio Account over a
period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objective and policies of
the Portfolio and any specific investment restrictions applicable
thereto. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Portfolio
Account may have an interest from time to time, whether in transactions
4
<PAGE>
which involve the Portfolio Account or otherwise. The Sub-Adviser shall
have no obligation to acquire for the Portfolio Account a position in any
investment which any Affiliated Account may acquire, and the Fund shall
have no first refusal, co-investment or other rights in respect of any
such investment, either for the Portfolio Account or otherwise.
11. CERTIFICATE OF AUTHORITY. The Fund, the Adviser and the Sub-Adviser
shall furnish to each other from time to time certified copies of the
resolutions of their Boards of Directors or executive committees, as the
case may be, evidencing the authority of officers and employees who are
authorized to act on behalf of the Fund, a Portfolio Account, the Adviser
and/or the Sub-Adviser.
12. LIMITATION OF LIABILITY. The Sub-Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement, or in
accordance with (or in the absence of) specific directions or
instructions from the Fund or the Adviser, provided, however, that such
acts or omissions shall not have resulted from the Sub-Adviser's willful
misfeasance, bad faith, gross negligence or a reckless disregard of duty.
Nothing in this Section 12 shall be construed in a manner inconsistent
with Section 17(i) of the 1940 Act.
13. CONFIDENTIALITY. Subject to the duty of the Sub-Adviser, the Adviser and
the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto
shall treat as confidential all material non public information
pertaining to the Portfolio Account and the actions of the Sub-Adviser,
the Adviser and the Fund in respect thereof.
14. ASSIGNMENT. No assignment of this Agreement shall be made by the Sub-
Adviser, and this Agreement shall terminate automatically in the event of
such assignment. The Sub-Adviser shall notify the Fund and the Adviser
in writing sufficiently in advance of any proposed change of control
within the meaning of the 1940 Act to enable the Fund and the Adviser to
take the steps necessary to enter into a new contract with the Sub-
Adviser.
15. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE FUND. The Fund
represents, warrants and agrees that:
(a) The Sub-Adviser has been duly appointed by the Board of Directors of
the Fund to provide investment services to the Portfolio Account as
contemplated hereby.
(b) The Fund will deliver to the Sub-Adviser a true and complete copy of
its then current Prospectus and Statement of Additional Information
as effective from time to time and such other documents or
instruments governing the investment of the Portfolio Account and
such other information as is necessary for the Sub-Adviser to carry
out its obligations under this Agreement.
(c) The Fund is currently in compliance and shall at all times continue
to comply with the requirements imposed upon the Fund by applicable
law and regulations.
5
<PAGE>
16. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ADVISER. The Adviser
represents, warrants and agrees that:
(a) The Adviser has been duly authorized by the Board of Directors of
the Fund to delegate to the Sub-Adviser the provision of investment
services to the Portfolio Account as contemplated hereby.
(b) The Adviser is currently in compliance and shall at all times
continue to comply with the requirements imposed upon the Adviser by
applicable law and regulations.
17. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE SUB-ADVISER. The Sub-
Adviser represents, warrants and agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Investment Advisers Act of 1940 ("Advisers Act"); or is a "bank" as
defined in Section 202(a)(2) of the Advisers Act or an "insurance
company" as defined in Section 202(a)(2) of the Advisers Act.
(b) The Sub-Adviser will maintain, keep current and preserve on behalf
of the Fund, in the manner required or permitted by the 1940 Act,
the records identified in Schedule B. The Sub-Adviser agrees that
such records (unless otherwise indicated on Schedule B) are the
property of the Fund, and will be surrendered to the Fund promptly
upon request.
(c) The Sub-Adviser will complete such reports concerning purchases or
sales of securities on behalf of the Portfolio Account as the
Adviser or the Fund may from time to time require to ensure
compliance with the 1940 Act, the Internal Revenue Code, applicable
state securities laws and applicable statutes and regulations of
foreign jurisdictions.
(d) The Sub-Adviser will adopt a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and Section 204A
of the Advisers Act and will provide the Fund with a copy of the
code of ethics and evidence of its adoption. Within forty-five (45)
days of the end of the last calendar quarter of each year while this
Agreement is in effect, the president or a vice president or general
partner of the Sub-Adviser shall certify to the Fund that the Sub-
Adviser has complied with the requirements of Rule 17j-1 and Section
204A during the previous year and that there has been no violation
of the Sub-Adviser's code of ethics or, if such a violation has
occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Fund, the Sub-Adviser
shall permit the Fund, its employees or its agents to examine the
reports required to be made to the Sub-Adviser by Rule 17j-1(c)(1).
(e) The Sub-Adviser will promptly after filing with the Securities and
Exchange Commission an amendment to its Form ADV furnish a copy of
such amendment to the Fund and the Adviser.
(f) The Sub-Adviser will immediately notify the Fund and the Adviser of
the occurrence of any event which would disqualify the Sub-Adviser
6
<PAGE>
from serving as an investment adviser of an investment company
pursuant to Section 9 of the 1940 Act or otherwise.
18. AMENDMENT. This Agreement may be amended at any time, but only by
written agreement among the Sub-Adviser, the Adviser and the Fund, which
amendment, other than amendments to Schedules A and B, is subject to the
approval of the Board of Directors and the shareholders of the Portfolio
in the manner required by the 1940 Act and the rules thereunder, subject
to any applicable exemptive order of the Securities and Exchange
Commission modifying the provisions of the 1940 Act with respect to
approval of amendments to this Agreement.
19. EFFECTIVE DATE; TERM. This Agreement shall become effective on the date
first written above and shall remain in force for a period of time of two
years from such date, and from year to year thereafter but only so long
as such continuance is specifically approved at least annually by the
vote of a majority of the Directors who are not interested persons of the
Fund, the Adviser or the Sub-Adviser, cast in person at a meeting called
for the purpose of voting on such approval, and by a vote of the Board of
Directors or of a majority of the outstanding voting securities of the
Portfolio. The aforesaid requirement that this Agreement may be
continued "annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder.
20. TERMINATION.
(a) This Agreement may be terminated by the Fund (by a vote of the Board
of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Portfolio), without the payment
of any penalty, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Fund, upon thirty (30) days'
written notice to the other parties hereto, but any such termination
shall not affect the status, obligations or liabilities of any party
hereto to the others.
(b) This Agreement may also be terminated by the Adviser or the Sub-
Adviser, immediately upon written notice to the other parties
hereto, in the event of a breach of any provision thereof by the
party so notified or otherwise by the Adviser or the Sub-Adviser
upon sixty (60) days' written notice to the other parties hereto,
but any such termination shall not affect the status, obligations or
liabilities of any party hereto to the others.
21. DEFINITIONS. As used in this Agreement, the terms "affiliated person,"
"assignment," "control," "interested person," "principal underwriter" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to any applicable orders of exemption issued by the
Securities and Exchange Commission.
22. NOTICE. Any notice under this Agreement shall be given in writing
addressed and delivered or mailed, postage prepaid, to the other parties
to this Agreement at their principal place of business.
7
<PAGE>
23. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
24. GOVERNING LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter
enacted, as the same may be amended from time to time, this Agreement
shall be administered, construed and enforced according to the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND,
INC. on behalf of THE RODNEY SQUARE
INTERNATIONAL EQUITY FUND
By: /s/ Peter J. Succoso
---------------------------
Peter J. Succoso, President
CLEMENTE CAPITAL, INC.
By: /s/ Leopoldo M. Clemente
---------------------------
Title: President
------------------------
WILMINGTON TRUST COMPANY
By: /s/ Peter J. Succoso
---------------------------
Peter J. Succoso, Senior Vice President
SCHEDULES: A. Operating Procedures
B. Record Keeping Requirements
C. Fee Schedule
8
<PAGE>
SCHEDULE A
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
OPERATING PROCEDURES
From time to time the Adviser shall issue written Operating Procedures which
shall govern reporting of transactions and other matters so as to facilitate
(i) the monitoring of the Fund's compliance with the restrictions and
limitations applicable to the operations of a registered investment company
and (ii) the preparation of reports to the Board of Directors, regulatory
authorities and shareholders.
SUBSTANTIVE LIMITATIONS
A. The Sub-Adviser will manage the Portfolio Account as if the Portfolio
Account were a registered investment company subject to the investment
objective, policies and limitations applicable to the Portfolio stated in
the Fund's Prospectus and Statement of Additional Information, as from
time to time in effect, included in the Fund's registration statement or
a supplement thereto under the Securities Act of 1933 and the Investment
Company Act of 1940 (the "1940 Act"), as each may be amended from time to
time; provided, however, that if a more stringent restriction or
limitation than any of the foregoing is stated in Section B of this
Schedule, the more stringent restriction or limitation shall apply to the
Portfolio Account.
B. The Sub-Adviser shall not, without the written approval of the Adviser,
on behalf of the Portfolio Account:
1. purchase securities of any issuer if such purchase would cause more
than 3.33% of the voting securities of such issuer to be held in the
Portfolio Account (1940 Act Section 5(b)(1); IRC* Section 851(b)(4)
(a)(ii));
2. purchase securities if such purchase would cause:
a. more than 1% of the outstanding voting stock of any other
investment company to be held in the Portfolio Account (1940
Act Section 12(d)(1)(A)(i)),
b. securities issued by any other investment company having an
aggregate value in excess of 5% of the value of the total
assets in the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(i)),
c. securities issued by all other investment companies having an
aggregate value in excess of 10% of the value of the total
assets of the Portfolio Account to be held in the Portfolio
Account (1940 Act Section 12(d)(1)(A)(iii)),
- ---------------------------
* Internal Revenue Code
A-1
<PAGE>
d. more than 3.33% of the outstanding voting stock of any
registered closed-end investment company to be held in the
Portfolio Account, and by any other investment company having
as its investment adviser any of the Sub-Advisers, the Adviser,
the Consultant (as defined in the Investment Advisory
Agreement), or any other investment adviser to the Fund (1940
Act Section 12(d)(1)(C));
3. purchase securities of any insurance company if such purchase would
cause more than 3.33% of the outstanding voting securities of any
insurance company to be held in the Portfolio Account (1940 Act
Section 12(d)(2)); or
4. purchase securities of or any interest in any person who is a
broker, a dealer, is engaged in the business of underwriting, is an
investment adviser to an investment company or is a registered
investment adviser under the Investment Advisers Act of 1940, unless
a. such purchase is of a security of any issuer that, in its most
recent fiscal year, derived 15% or less of its gross revenues
from securities-related activities (1940 Act Rule 12d3-1(a)),
or
b. despite the fact that such purchase is of any security of any
issuer that derived more than 15% of its gross revenues from
securities-related activities:
(1) after the purchase of any equity security, the
Portfolio Account would not own more than 1.67%
of outstanding securities of that class of the
issuer's equity securities;
(2) after the purchase not more than 5% of the
Portfolio Account's total assets would be
invested in the issuer's securities (whether
debt or equity);
(3) when acquired, any equity security is a "margin
security" under Regulation T of the Federal
Reserve, which generally includes any registered
security or one trading on a national exchange;
(4) after the purchase of any debt security, the
Portfolio Account would not own more than 3.33%
of the outstanding principal amount of the
issuer's debt securities; and
(5) when acquired, any debt security is investment
grade, as determined by the Fund's Board of
Directors.
C. In the event that the number of Sub-Advisers shall vary from three (3),
the percentage limitations of Subsections B1, B2a, B2d, B3, B4b(1) and
B4b(4) of this Schedule shall be adjusted (i) in the case of an increase
in the number of Sub-Advisers, proportionately downward and (ii) in the
case of a decrease of the number of Sub-Advisers, proportionately upward.
The Adviser shall notify the Sub-Adviser of an increase or decrease in
A-2
<PAGE>
the number of Sub-Advisers and the proportionate decrease or increase in
the percentages specified in the subsections enumerated in the preceding
sentence, but the Adviser's failure to do so shall not affect the
operation of this Section C of this Schedule.
D. The Sub-Adviser will manage the Portfolio Account so that no more than
10% of the gross income of the Portfolio Account is derived from any
source
other than dividends, interest, payments with respect to securities
loans (as defined in IRC Section 512(a)(5)), and gains from the sale or
other disposition of stock or securities (as defined in the 1940 Act
Section 2(a)(36)) or foreign currencies, or other income (including,
but not limited to, gains from options, futures, or forward contracts)
derived with respect to the Portfolio's business of investing in such
stock, securities, or currencies (IRC Section 851(b)(2)).
E. The Sub-Adviser will manage the Portfolio Account so that less than 30%
of the gross income of the Portfolio Account is derived from the sale or
other disposition of stock or securities held for less than three months
(IRC Section 851(b)(3)).
A-3
<PAGE>
SCHEDULE B
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
RECORD KEEPING REQUIREMENTS
RECORDS TO BE MAINTAINED BY THE SUB-ADVISER:
A. (Rule 31a-1(b)(5) and (6)). A record of each brokerage order, and all
other portfolio purchases and sales, given by the Sub-Adviser on behalf
of the Portfolio Account for, or in connection with, the purchase or sale
of securities, whether executed or unexecuted. Such records shall
include:
1. the name of the broker;
2. the terms and conditions of the order and of any modification or
cancellation thereof;
3. the time of entry or cancellation;
4. the price at which executed;
5. the time of receipt of a report of execution; and
6. the name of the person who placed the order on behalf of the
Portfolio Account.
B. (Rule 31a-1(b)(9)). A record for each fiscal quarter, completed within
ten (10) days after the end of the quarter, showing specifically the
basis or bases (e.g. execution ability, execution and research) upon
which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers was effected, and the division of
brokerage commissions or other compensation on such purchase and sale
orders. Such record:
1. shall include the consideration given to:
a. the sale of shares of the Fund by brokers or dealers;
b. the supplying of services or benefits by brokers or dealers to:
(1) the Fund,
(2) the Adviser,
(3) the Consultant, if any,
(4) the Sub-Adviser, and
(5) any person other than the foregoing; and
c. any other consideration other than the technical qualifications
of the brokers and dealers as such;
2. shall show the nature of the services or benefits made available;
3. shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions
or other compensation; and
4. shall show the name of the person responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation.
B-1
<PAGE>
C. (Rule 31a-1(b)(10)). A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its
members who participate in the authorization. There shall be retained as
part of this record: any memorandum, recommendation or instruction
supporting or authorizing the purchase or sale of portfolio securities
and such other information as is appropriate to support the
authorization.*
D. (Rule 31a-1(f)). Such accounts, books and other documents as are
required to be maintained by registered investment advisers by rule
adopted under Section 204 of the Investment Advisers Act of 1940, to the
extent such records are necessary or appropriate to record the Sub-
Adviser's transactions with respect to the Portfolio Account.
- ----------------------
* Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage
firms (including their recommendation, i.e., buy, sell, hold) or any internal
reports or portfolio adviser reviews.
B-2
<PAGE>
SCHEDULE C
THE RODNEY SQUARE INTERNATIONAL SECURITIES FUND, INC.
FEE SCHEDULE
For the services to be provided to the Fund pursuant to the attached Sub-
Advisory Agreement, the Adviser shall pay the Sub-Adviser a monthly fee
calculated as a percentage of the Adviser's monthly fee ("MF", which is
equal to 1/12 of 1% of the daily values placed upon the net assets of the
Portfolio during the month) in accordance with the following formula:
Sub-Adviser's
monthly fee = .5MF X Average of the value of the net assets in
the Portfolio Account on the last business
day of the prior month and last business
day of the month
Divided By
Average of the value of the net assets in
all Portfolio Accounts in the Portfolio on
the last business day of the prior month
and last business day of the month
Such fee shall be payable in arrears within ten business days following
the end of each month.
C-1
EXHIBIT 16
FUND NAME: RODNEY SQUARE INTERNATIONAL EQUITY FUND
HYPOTHETICAL $10,000 INVESTMENT
For the Period November 2, 1987 (Commencement of Operations)
through October 31, 1995
Value of Initial $10,000 = ($10,000 / beginning NAV) * Ending NAV
Investment = ($10,000 / $10.00) * $12.14
= $12,140.00
Value of Reinvested Income = Shares Reinvested from Income Dividends
Dividends * Ending NAV
= 31.54 * $12.14
= $382.90
Value of Reinvested Capital = Shares Reinvested from Capital Gain
Gain Distributions Distributions * Ending NAV
= 247.07 * $12.14
= $2,999.43
TOTAL VALUE = $12,140.00 + $382.90 + $2,999.43 = $15,522.33
<PAGE>
FUND NAME: RODNEY SQUARE INTERNATIONAL EQUITY FUND
(STANDARDIZED RETURNS)
1 YR 5 YR INCEPTION
---------- ---- ---------
# YEARS IN PERIOD 1 5 8.002740
AVERAGE ANNUAL TOTAL RETURN (5.13)% 4.97% 5.11%
MAXIMUM SALES LOAD 4.00% 4.00% 4.00%
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------
(ERV/P)**(1/N) -1 = T
($948.68/1,000)1 -1 = T
(.0513) = T
(5.13)% = T
FOR THE PERIOD NOVEMBER 1, 1990 THROUGH OCTOBER 31, 1995
- ------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------
(ERV/P)**(1/N) -1 = T
($1,274.38/1,000)**(1/5) -1 = T
.0497 = T
4.97% = T
INCEPTION THROUGH OCTOBER 31, 1995
- ------------------------------------------------------------------------
Average Annual Total Return
- ---------------------------
(ERV/P)**(1/N) -1 = T
($1,490.14/1,000)1/8.002740 -1 = T
.0511 = T
5.11% = T
<PAGE>
FUND NAME: RODNEY SQUARE INTERNATIONAL EQUITY FUND
(NON-STANDARDIZED RETURNS)
1 YR 5 YR INCEPTION
---------- ---- ---------
# YEARS IN PERIOD 1 5 8.002740
CUMULATIVE TOTAL RETURN
(Excluding Maximum Sales Load) (1.18)% 32.75% 55.22%
CUMULATIVE TOTAL RETURN
(After Deducting Maximum
Sales Load) (5.13)% 27.44% 49.01%
AVERAGE ANNUAL TOTAL RETURN (1.18)% 5.83% 5.65%
MAXIMUM SALES LOAD 4.00% 4.00% 4.00%
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1995
- ------------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(ERV/P) - 1 = T (ERV/P)**(1/N) -1 = T
($988.21/1,000) -1 = T ($988.21/1,000)1 -1 = T
(.0118) = T (.0118) = T
(1.18)% = T (1.18)% = T
FOR THE PERIOD NOVEMBER 1, 1990 THROUGH OCTOBER 31, 1995
- ------------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(Excluding Maximum Sales Load)
- ------------------------------
(ERV/P)**(1/N) -1 = T (ERV/P)**(1/N) -1 = T
($1,327.48/1,000) -1 = T ($1,327.48/1,000)1/5 -1 = T
.3275 = T .0583 = T
32.75% = T 5.83% = T
Cumulative Total Return (After Deducting Maximum Sales Load)
- -------------------------------------------------------------
(ERV/P) -1 = T
($1,274.38/1,000) -1 = T
.2744 = T
27.44% = T
INCEPTION THROUGH OCTOBER 31, 1995
- ------------------------------------------------------------------------
Cumulative Total Return Average Annual Total Return
- ----------------------- ---------------------------
(Excluding Maximum Sales Load)
------------------------------
(ERV/P) -1 = T (ERV/P)**(1/N) -1 = T
($1,552.23/1,000) -1 = T ($1,552.23/1,000)1/8.002740 -1 = T
.5522 = T .0565 = T
55.22% = T 5.65% = T
Cumulative Total Return (After Deducting Maximum Sales Load)
- -------------------------------------------------------------
(ERV/P) -1 = T
($1,490.14/1,000) -1 = T
.4901 = T
49.01% = T
<PAGE>
