<PAGE> 1
CARDINAL TAX EXEMPT MONEY TRUST
SUPPLEMENT DATED DECEMBER 11, 1995,
TO PROSPECTUS DATED FEBRUARY 1, 1995
Capitalized terms used in this Supplement have the meaning assigned to them
in the Prospectus.
The Trust has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of December 1, 1995 (the "Plan"), with The Cardinal Group,
an Ohio business trust (the "Group"). Pursuant to the Plan, Cardinal Tax Exempt
Money Market Fund, a series of the Group (the "Acquiring Fund"), would acquire
all of the assets of the Trust in exchange for the assumption of all of the
Trust's liabilities and a number of full and fractional shares of the Acquiring
Fund having an aggregate net asset value equal to the Trust's net assets (the
"Reorganization"). The Trust would then be liquidated, and the shares of the
Acquiring Fund would be distributed to Trust shareholders.
The Reorganization is subject to certain regulatory approvals and to
approval by the shareholders of the Trust at the Annual Shareholders Meeting
currently expected to be held in February, 1996. If the shareholders approve the
Reorganization, it is expected that the Reorganization would be effected on or
about March 31, 1996; however, the Reorganization may be effected on such
earlier or later date as the Group and the Trust may determine. There can be no
assurance that the Reorganization will take place when or as currently proposed.
The following paragraph is added to the cover page of this Prospectus:
THE SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE FUND INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
The second sentence of the first paragraph under the heading "CHECK-WRITING
REDEMPTION PROCEDURE" on page 14 of the Prospectus is deleted and is replaced
with the following:
These checks may be made payable to the order of any person in any amount
not less than $250.
The second sentence of the second paragraph under the heading
"CHECK-WRITING REDEMPTION PROCEDURE" on page 14 of the Prospectus is deleted.
The following two sentences are added at the end of the second paragraph
under the heading "WHO MANAGES MY INVESTMENT IN THE TRUST? -- Investment Adviser
and Manager" on page 16 of the Prospectus:
As of December 22, 1995, David C. Will will be primarily responsible for
the day-to-day management of the Trust's portfolio. Mr. Will has been a
Vice President of The Ohio Company and the Adviser since 1990 and has more
than 25 years of investment management experience.
This Prospectus Supplement supersedes in its entirety the prospectus
supplement dated February 22, 1995.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
<PAGE> 2
PROSPECTUS
- --------------------------------------------------------------------------------
[LOGO]
CARDINAL TAX EXEMPT MONEY TRUST
Cardinal Tax Exempt Money Trust (the "Trust") is a no-load, diversified,
open-end management investment company. The Trust has an investment objective of
maximizing current income exempt from federal income tax while preserving
capital and maintaining liquidity. The Trust seeks to attain its objective
through professional management of a high-grade portfolio of short-term
municipal bonds and notes, tax-exempt commercial paper and tax-exempt short-term
discount notes, some of which may be secured by the full faith and credit of the
U.S. Government. All obligations purchased by the Trust will mature, or be
deemed to mature, in 397 days (13 months) or less or will have interest rates
adjusted in accordance with established indexes (e.g. the prime rate) not less
frequently than semi-annually. There can be no assurance that the Trust's
objective will be achieved.
THE INVESTMENT DESCRIBED IN THIS PROSPECTUS IS NOT INSURED OR GUARANTEED BY THE
UNITED STATES GOVERNMENT. THE TRUST SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE
OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT NET ASSET VALUE WILL NOT
VARY.
The Trust is designed for institutions and individuals who desire current income
exempt from federal income tax that reflects prevailing interest rates for
short-term tax-exempt investments together with a high degree of liquidity.
- --------------------------------------------------------------------------------
For further information regarding the Trust or for assistance
in opening an account or redeeming shares, please call:
In Columbus 464-5512 (opening accounts and further information)
464-5511 (redeeming shares)
From other Ohio locations (800) 282-9446 toll free
From outside Ohio (800) 848-7734 toll free
Inquiries may also be made by mail addressed to the Trust
at its principal office:
155 East Broad Street
Columbus, Ohio 43215
- --------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing in the Trust. This
Prospectus should be retained for future reference. A Statement of Additional
Information respecting the Trust, dated February 1, 1995, has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Such Statement is available upon request without charge from the Trust at the
above address or by calling the phone numbers provided above.
Investors should read and retain this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE OHIO COMPANY
The date of this Prospectus is February 1, 1995.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
KEY FEATURES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TAX ADVANTAGES.................The Trust seeks to invest in securities which are free of
federal income tax, and in turn, pass through to the
investor tax free income. State and local taxes have not
been considered. (See page 7.)
HIGH CURRENT YIELDS............The Trust seeks the maximum yield available through
investment in securities which earn attractive rates of
return free of federal income tax. (See page 7.)
MONTHLY DISTRIBUTIONS..........Monthly distributions are automatically reinvested in
additional shares of the Trust without charge or may be
received in cash. (See pages 4 and 12.)
INSTANT LIQUIDITY..............Through the free check writing privilege or telephone
transfer of funds, all or part of an investor's shares may
be redeemed on any business day at the net asset value
without charge. (See pages 13 and 14.)
LOW INITIAL INVESTMENT.........An investor can acquire shares of a high quality portfolio
of tax exempt securities with a smaller investment than
would be needed to purchase a similar portfolio directly.
(See page 10.)
PROFESSIONAL MANAGERS..........The Trust's portfolio is fully managed by professional
portfolio managers. (See page 16.)
FLEXIBILITY....................You may switch once each calendar quarter from one mutual
fund to another within the Cardinal Group of Funds as your
personal circumstances or market conditions dictate. Under
certain circumstances, however, a sales charge may be im-
posed on exchanges for shares of The Cardinal Fund Inc.,
Cardinal Government Obligations Fund, Cardinal Balanced
Fund and Cardinal Aggressive Growth Fund. (See page 17.)
MAXIMUM YIELD..................As there is no sales charge to reduce the yield, investors
receive the maximum yield on their investment. Service
fees and charges have not been considered. (See pages 4
and 16.)
ACH PROCESSING.................Investors may use Automated Clearing House ("ACH")
processing for subsequent purchases of shares,
redemptions, and/or distributions paid. (See page 17.)
</TABLE>
2
<PAGE> 4
- --------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHARES OFFERED.................The Trust is authorized to issue an unlimited number of
full and fractional shares of beneficial interest, all of
one class, with a par value of $.10 per share (the
"Shares"). (See page 6.)
OFFERING PRICE.................The public offering price is equal to net asset value per
share next determined after order. The Trust intends to
use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share.
There can be no assurance that it will be able to maintain
such a net asset value. There is no sales charge. (See
pages 10 and 14.)
MINIMUM PURCHASE...............$1,000 minimum initial investment and $100 minimum subse-
quent investments, although such minimums may be waived
under certain circumstances. (See page 10.)
TYPE OF COMPANY................No-load, diversified, open-end management investment com-
pany, established under Ohio law by a Declaration of Trust
dated January 13, 1983. (See page 6.)
INVESTMENT OBJECTIVE...........To maximize current income exempt from federal income tax
while preserving capital and maintaining liquidity. There
is no assurance that such objective will be achieved. (See
page 7.)
INVESTMENT POLICIES............The Trust invests in short-term tax exempt securities
including, but not limited to, bond anticipation notes,
construction loan notes, project notes, revenue
anticipation notes and tax anticipation notes as well as
municipal bonds and participations therein. These
investments entail certain risks. (See pages 7 through
10.)
INVESTMENT ADVISER.............The Trust has entered into an investment advisory and man-
agement agreement with Cardinal Management Corp., a
wholly-owned subsidiary of The Ohio Company. Cardinal
Management Corp. also acts as investment adviser for
Cardinal Government Securities Trust, Cardinal Government
Obligations Fund, Cardinal Balanced Fund and Cardinal
Aggressive Growth Fund. (See page 16.)
MANAGEMENT FEE.................The annual rate is .5% of the average daily net assets of
the Trust. (See page 16.)
DISTRIBUTIONS..................Distributions from net investment income are credited to
the shareholder's account daily and are automatically
reinvested in additional Shares of the Trust monthly,
unless a cash dividend option is selected. (See pages 11
and 12.)
REDEMPTION.....................At net asset value per share without charge, except that
broker-dealers may charge a service fee for assisting in a
redemption. The Trust may require a redemption of Shares
if the value of the account is less than $500. (See page
12.)
TRANSFER AGENT.................Cardinal Management Corp. (See page 16.)
</TABLE>
3
<PAGE> 5
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................... 0%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................... 0%
Deferred Sales Load
(as a percentage of original purchase price or redemption
proceeds, as applicable)..................................... 0%
Redemption Fees
(as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................... $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................................ .50%
12b-1 Fees..................................................... .00
Other Expenses................................................. .26
-------
Total Fund Operating Expenses............................. .76%
=======
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each period:...... $8 $24 $42 $94
</TABLE>
The purpose of the above table is to assist a potential purchaser of the Trust's
Shares in understanding the various costs and expenses that an investor in the
Trust will bear directly or indirectly. See "WHO MANAGES MY INVESTMENT IN THE
TRUST?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Trust. THE FOREGOING EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
4
<PAGE> 6
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1994, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon together with certain financial
statements, are contained in the Trust's Statement of Additional Information and
which may be obtained by shareholders and prospective investors.
FINANCIAL HIGHLIGHTS FOR EACH SHARE OF BENEFICIAL INTEREST OUTSTANDING
THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .02 .02 .03 .04 .05
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations.................. .02 .02 .03 .04 .05
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............ (.02) (.02) (.03) (.04) (.05)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions............................... (.02) (.02) (.03) (.04) (.05)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return........................................ 1.78% 1.81% 2.62% 4.40% 5.41%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 80,531 $ 91,159 $ 70,054 $ 85,488 $ 82,988
Ratio of expenses to average net assets............. 0.76% 0.77% 0.76% 0.72% 0.76%
Ratio of net investment income to average net
assets............................................ 1.78% 1.80% 2.59% 4.31% 5.26%
</TABLE>
<TABLE>
<CAPTION>
1989 1988 1987 1986 1985
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .06 .04 .04 .04 .05
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations.................. .06 .04 .04 .04 .05
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............ (.06) (.04) (.04) (.04) (.05)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions............................... (.06) (.04) (.04) (.04) (.05)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return........................................ 5.95% 4.53% 3.62% 4.47% 4.93%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 82,031 $ 61,771 $ 63,848 $ 67,816 $ 34,653
Ratio of expenses to average net assets............. 0.72% 0.75% 0.71% 0.76% 0.75%
Ratio of net investment income to average net
assets............................................ 5.79% 4.44% 3.56% 4.38% 4.82%
</TABLE>
See notes to financial statements appearing in the Trust's Statement of
Additional Information.
- ---------------------------------------
Pursuant to a Revolving Credit Agreement between the Trust and The Fifth Third
Bank dated April 10, 1992 (the "Loan Agreement"), the Trust may borrow money
from The Fifth Third Bank for temporary or emergency non-investment purposes,
such as to accommodate abnormally heavy redemption requests,
5
<PAGE> 7
and only in an amount not exceeding 5% of the value of the Trust's total assets
at the time of borrowing. The table below sets forth certain information
concerning the Loan Agreement.
<TABLE>
<CAPTION>
AVERAGE NUMBER
AMOUNT OF DEBT AVERAGE AMOUNT OF OF TRUST'S SHARES AVERAGE AMOUNT
YEAR ENDED OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING OF DEBT PER SHARE
SEPTEMBER 30, END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
- ---------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
1994 $0 $19,159 85,845,213 $.0002232
1993 $0 $6,439 80,606,522 $.0000799
1992 $0 $ 637 88,243,903 $.0000072
</TABLE>
From time to time the Trust may advertise its "yield" or "annualized yield," its
"effective yield," its "tax equivalent yield" and its "tax equivalent effective
yield." ALL YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "yield" or "annualized yield" of the Trust
refers to the income generated by an investment in the Trust over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Trust
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" or "annualized yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of the Trust. The
"tax-equivalent effective yield" is calculated similarly to the "tax-equivalent
yield" but, when annualized, the income earned by an investment in the Trust is
assumed to be reinvested. The "tax-equivalent effective yield" will be slightly
higher than the "tax-equivalent yield" because of the compounding effect of this
assumed reinvestment.
Investors may also judge the performance of the Trust by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as those prepared by Dow Jones & Co., Inc. and Standard &
Poor's Corporation and to data prepared by Lipper Analytical Services, Inc. and
CDA Investment Technologies, Inc. Comparisons may also be made to indices or
data published in Donoghue's MONEY FUND REPORT of Holliston, Massachusetts, a
nationally recognized money market fund reporting service, Money Magazine,
Forbes, Barron's, The Wall Street Journal, The New York Times, The Columbus
Dispatch, Business Week, Consumer Reports and U.S.A. Today. In addition to
performance information, general information about the Trust that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
- --------------------------------------------------------------------------------
WHAT IS THE TRUST?
- --------------------------------------------------------------------------------
The Trust is a diversified open-end management investment company established
under Ohio law by a Declaration of Trust dated January 13, 1983. The Declaration
of Trust permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest, all of one class, with par value of
$.10 per share, and authorizes the Trustees to issue separate series of shares
differing only in certain specified respects. The Trustees have not currently
authorized separate series of shares. Each Share offered hereunder represents an
equal pro rata interest in the Trust's common portfolio. Upon liquidation,
shareholders are entitled to share pro rata in the net assets of the Trust
available for distribution to shareholders. Shares are freely transferable, have
no preemptive or conversion rights and are redeemable as set forth herein under
"HOW MAY I REDEEM MY SHARES?" Shares issued pursuant to the terms of the
Declaration of Trust are fully paid and nonassessable. Any additional series of
shares must be issued in compliance with the Investment Company Act of 1940, as
amended, and must not constitute a security that is senior to the Shares offered
pursuant to this Prospectus.
6
<PAGE> 8
- --------------------------------------------------------------------------------
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES OF THE TRUST?
- --------------------------------------------------------------------------------
The investment objective of the Trust is to maximize current income exempt from
federal income tax while preserving capital and maintaining liquidity. The
investment objective with respect to the Trust is a fundamental policy and as
such may not be changed without a vote of the holders of a majority of the
outstanding Shares of the Trust.
As a money market fund, the Trust invests exclusively in United States
dollar-denominated instruments which the Trustees of the Trust and the Trust's
investment adviser determine present minimal credit risks and which at the time
of acquisition are rated by one or more appropriate nationally recognized
statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation
and Moody's Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations or, if unrated, are of comparable quality. All
securities or instruments in which the Trust invests have, or are deemed to
have, remaining maturities of 397 calendar days (thirteen months) or less. The
dollar-weighted average maturity of the obligations in the Trust will not exceed
90 days.
As a matter of policy, under normal market conditions, the Trust will invest at
least 80% of its net assets in a diversified portfolio of Municipal Securities
(as defined below), the interest on which is both exempt from federal income tax
and not treated as a preference item for purposes of the federal alternative
minimum tax. Subject to the foregoing limitations and in order to achieve its
investment objective, the Trust expects to invest in the following types of
securities.
The Trust may invest in bond anticipation notes, construction loan notes,
project notes, revenue anticipation notes and tax anticipation notes, as well as
municipal bonds and participation interests therein, including industrial
development revenue bonds and pollution control revenue bonds (collectively,
"Municipal Securities"). The Trust may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a "stand-by
commitment" a dealer agrees to purchase, at the Trust's option, specified
Municipal Securities at a specified price which ordinarily is substantially the
same as the value of the underlying Municipal Security.
Specific types of Municipal Securities which the Trust may purchase include bond
anticipation notes, construction loan notes, project notes, revenue anticipation
notes and tax anticipation notes which, in each case (1) are backed by the full
faith and credit of the United States, (2) are rated MIG-1 or MIG-2, or
subsequent equivalents by Moody's Investors Service, Inc. ("Moody's") or (3) if
the notes are not rated, are, as determined by Cardinal Management Corp., the
Trust's adviser (the "Adviser") in accordance with guidelines established by the
Board of Trustees, of a quality equivalent to MIG-1 or MIG-2. The Trust may also
invest in municipal bonds and participation interests therein, including
industrial development revenue bonds and pollution control revenue bonds, which
(1) are rated Aaa or Aa by Moody's, (2) are rated AAA or AA by Standard & Poor's
Corporation ("S&P") or (3) if not rated, have, in the opinion of the Adviser
determined in accordance with guidelines established by the Board of Trustees,
essentially the same characteristics and quality as bonds having the above
ratings. In addition, the Trust may purchase other types of tax-exempt Municipal
Securities such as short-term discount notes. These investments must (1) be
rated Prime-1 or Prime-2 by Moody's or (2) if not rated, possess equivalent
characteristics and quality in the opinion of the Adviser determined in
accordance with guidelines established by the Board of Trustees.
As of December 31, 1994, the Trust was 100% invested in Municipal Securities
rated AAA or AA (bonds), SP-1 (notes) or A-1 (variable rate demand obligations)
by S&P, or Aaa or Aa (bonds), MIG-1 (notes) or VMIG-I (variable rate demand
obligations) by Moody's. Current income earned on such Municipal Securities may
not be as great as current income that could be earned on lower quality
securities that have less liquidity and/or a greater risk of nonpayment or
securities that have a longer term.
The Trust has invested and intends to continue to invest more than 25% of its
assets in certain variable or floating rate demand Municipal Securities,
including participation interests therein. The value of such securities may
change with changes in interest rates generally. However, the variable or
floating rate nature of such securities should reduce, to the extent the Trust
is invested in such securities, the degree of
7
<PAGE> 9
fluctuation in the value of portfolio investments. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation and the risk
of potential capital depreciation is less than would be the case with a
portfolio composed entirely of fixed income securities. The portfolio may
contain variable or floating rate demand securities on which stated minimum or
maximum rates set by state law limit the degree to which interest on such
securities may fluctuate; to the extent it does, increases or decreases in value
may be somewhat greater than would be the case without such limits. Because the
adjustment of interest rates on the variable or floating rate demand securities
is made in relation to movements of the applicable indexes (e.g. the prime
rate), such securities are not comparable to longer-term fixed rate securities.
Accordingly, interest rates on such securities may be higher or lower than
current market rates for fixed rate obligations of comparable quality with
similar maturities. The Trust, however, will only acquire variable or floating
rate securities the interest rates on which are determined by reference to other
short-term market rates of interest. The Trust will attempt to achieve a balance
of variable or floating and fixed rate securities such that under normal
circumstances the net asset value of the Trust can be maintained at $1.00 per
share while the highest possible yield can be returned to investors. To the
extent the Trust's portfolio is invested in variable or floating rate
securities, yield can be expected to decline in periods of falling interest
rates more rapidly than if the Trust's portfolio is invested solely in
longer-term fixed rate securities. Conversely, yield, under the same
circumstances, can be expected to increase more rapidly in periods of rising
interest rates. Such instruments may be considered to be derivatives. A
derivative is generally defined as an instrument whose value is based upon, or
derived from, some underlying index, reference rate (e.g., interest rates),
security, commodity or other asset. As stated above, the Fund has no limit as to
the percentage of its total assets that may be invested in such variable or
floating rate securities.
Variable rate demand Municipal Securities in which the Trust invests may be
supported by bank letters of credit or comparable guarantees of financial
institutions. To the extent that 25% or more of the Trust's assets are invested
in variable rate demand Municipal Securities supported by such letters of credit
or guarantees, the Trust may be deemed to be concentrated in the banking
industry. (See "Certain Factors.")
In addition, the Trust may enter into commitments to purchase Municipal
Securities on a "when-issued" basis. Pursuant to such commitments, delivery and
payment for the Municipal Securities normally takes place at a date after the
commitment to purchase although the payment obligation and the coupon rate have
been established before the time the Trust enters into the commitment. The
settlement date usually occurs within one week of the purchase of notes and
within one month of the purchase of bonds. At the time the Trust makes such a
commitment to purchase a Municipal Security, it will record the transaction and
reflect the value of the obligation in determining its net asset value. No
interest accrues to the Trust until delivery and payment take place. The
Custodian will maintain on a daily basis a separate Trust account consisting of
cash or liquid debt securities with a value at least equal to the amount of the
Trust's commitments to purchase when-issued obligations.
Municipal Securities purchased on a when-issued basis or held in the Trust's
portfolio are subject to changes in market value based not only upon the
public's perception of the credit worthiness of the issuer but also upon changes
in the level of interest rates. Such changes in value will generally result in
both changing in value in the same way, i.e. both appreciating when interest
rates decline and depreciating when interest rates rise. Therefore, if to
achieve higher interest income the Trust remains substantially fully invested at
the same time that it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the Trust's assets will
vary from $1.00 per share. (See "HOW IS NET ASSET VALUE CALCULATED?") In
addition, the Trust may, when it purchases Municipal Securities on a when-issued
basis, obtain on the settlement date, Municipal Securities yielding higher or
lower rates of interest than are otherwise available. However, the Trust does
not believe that under normal circumstances its net asset value or income will
be affected by its purchase of Municipal Securities on a when-issued basis.
TAXABLE MONEY MARKET SECURITIES
Under normal operating circumstances, Trust assets will be managed with a view
towards producing only income that is exempt from federal income taxation.
However, the Trust may invest up to 20% of its assets in "temporary
investments," that is, money market instruments consisting of marketable
obligations issued
8
<PAGE> 10
or guaranteed by the U.S. Government, its agencies or instrumentalities, deposit
obligations of banks and savings and loans which are members of the Federal
Deposit Insurance Corporation ("FDIC"), bankers' acceptances, high-grade
commercial paper guaranteed or issued by domestic corporations and instruments
(including repurchase agreements) secured by such obligations.
A repurchase agreement is an instrument under which the purchaser acquires
ownership of the obligation but the seller agrees, at the time of sale, to
repurchase the obligation at a mutually agreed upon time and price. The resale
price reflects an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. Repurchase agreements are
considered under the Investment Company Act of 1940, as amended (the "1940 Act")
to be loans made by the Trust. The Trust will only enter into a repurchase
agreement where (i) the underlying securities are of the type which the Trust's
investment guidelines would allow it to purchase directly, (ii) the market value
of the underlying security, including interest accrued, will be at all times
equal to or exceed the value of the repurchase agreement, and (iii) payment for
the underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
The Adviser will be responsible for continuously monitoring such requirements.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Trust could experience both delays in liquidating the underlying
securities and losses, including: (a) possible decline in the value of the
underlying security during the period while the Trust seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.
The Trust will not enter into repurchase agreements in violation of the 1940
Act. The Trust may not enter into a repurchase agreement if, as a result
thereof, more than 10% of its total assets would be subject to repurchase
agreements maturing in more than seven days.
LOANS AND LOAN PARTICIPATIONS
The Trust may, for temporary or emergency non-investment purposes, such as to
accommodate abnormally heavy redemption requests, borrow money in an amount not
exceeding 5% of the value of the Trust's total assets at the time of borrowing.
The Trust may also acquire participations in privately negotiated loans to
municipal borrowers, provided that the interest received by the Trust is exempt,
in the opinion of bond counsel to the municipal borrower, from federal income
tax. Loan participations are loans subject to the Trust's investment
restrictions applicable to these activities. (See "INVESTMENT LIMITATIONS" in
the Statement of Additional Information.)
INVESTMENT COMPANY SECURITIES
The Trust may also invest up to 10% of the value of its total assets in the
securities of other investment companies subject to the limitations set forth in
the 1940 Act. The Trust intends to invest in money market mutual funds for
purposes of short-term cash management. The Trust's investment in such other
investment companies may result in the duplication of fees and expenses,
particularly investment advisory fees. For a further discussion of the
limitations on the Trust's investments in other investment companies, see
"INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Securities of Other Investment Companies" in the Trust's
Statement of Additional Information.
CERTAIN FACTORS
Naturally, there can be no assurance that the Trust will achieve its investment
objective or be able continuously to maintain a net asset value per share of
$1.00. The characteristics of short-term Municipal Securities are such that the
price stability and liquidity of the Trust may not be equal to that of a money
market fund which exclusively invests in short-term taxable money market
securities. While the Adviser believes that the purchase of variable rate demand
Municipal Securities will facilitate maintaining a $1.00 per share net asset
value, the Trust is still expected to have a significantly longer average
maturity than a
9
<PAGE> 11
general purpose taxable money market fund with the result that the pricing of
its portfolio will tend to be more subject to short-term interest rate
fluctuations.
In addition, the Trust expects that substantially all the demand rights of the
Trust with respect to variable rate demand Municipal Securities will be
supported by letters of credit of major commercial banks. Trust investors should
be aware that banks are subject to extensive governmental regulation which may
limit both the amounts and type of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of this industry is largely dependent upon the availability and cost of capital
funds for the purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an important part in
the operations of this industry and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations under a letter of credit.
- --------------------------------------------------------------------------------
HOW DO I PURCHASE SHARES OF THE TRUST?
- --------------------------------------------------------------------------------
GENERAL
Shares of the Trust are sold on a continuing basis without a sales charge at the
net asset value next determined after an order is received by The Ohio Company,
the Trust's principal underwriter, and federal funds (monies credited to a
member bank's account in a Federal Reserve Bank) are received by The Ohio
Company as hereinafter provided. The minimum initial investment is $1,000 and
subsequent investments must be in amounts of at least $100. The Trust may, at
its discretion, waive the subsequent investment minimum for purchases effected
through the automatic reinvestment of distributions from unit investment trusts
sponsored by The Ohio Company, and may waive both the initial and subsequent
investment minimums for purchases effected with cash balances in brokerage
accounts of customers of The Ohio Company. Shares of the Trust may be purchased
through a securities dealer, investment adviser, agent or other fiduciary which
may charge a fee for its services in connection with the purchase. No sales
charge is imposed by the Trust or by The Ohio Company.
Each new investor must complete an Application Form and send it to the Trust at
the indicated address either prior to or concurrently with the transmittal of
funds by wire or mail.
All Shares purchased will be credited to shareholder accounts after receipt of
an order and federal funds by The Ohio Company, at the net asset value next
determined. The Trust currently determines net asset value and enters purchases
and redemptions of its Shares as of 4:00 p.m. Eastern time on each day that the
New York Stock Exchange is open for business ("Business Day"). If a properly
completed order and federal funds (or other immediately available funds) are
received at or prior to 12:00 noon Eastern time on a Business Day, then the
purchase will be entered as of 4:00 p.m. Eastern time on that day and dividends
will commence on that day. If either federal funds (or other immediately
available funds) or the completed purchase order are received after 12:00 noon
Eastern time (but prior to 4:00 p.m. Eastern time) Shares will be credited to
the shareholder's account as of 4:00 p.m. Eastern time on that day but will not
earn dividends until the following day. The Trust reserves the right to reject
any order to purchase its Shares. Certificates representing Shares of the Trust
will not be issued. All Shares purchased are confirmed to the investor and
credited to the investor's account on the Trust's books maintained by Cardinal
Management Corp. The investor will have the same rights and ownership with
respect to such Shares as if certificates had been issued.
PURCHASE BY FEDERAL FUNDS WIRE
Investments in Shares of the Trust may be made by wire transfer of federal
funds, avoiding delays of the mail and the normal check clearance process
described below. An investor may telephone the Trust (464-5511 from Columbus,
Ohio; (800) 282-9446, toll free from other Ohio locations; or (800) 848-7734,
toll free from outside Ohio) prior to wire transfer of its investment to advise
the Trust of the investment and, if a new investor, to obtain an account number.
If an investor does not telephone the Trust for wire
10
<PAGE> 12
instructions and the investor's wire transfer does not include sufficient
information, such purchase will be delayed until the proper information is
received. An investor must instruct its bank to "wire transfer" the investment
immediately to:
The Huntington National Bank
Account Number 01891688407
Routing Number 044000024
17 South High Street
Columbus, Ohio 43215
Attn: Cardinal Tax Exempt Money Trust
[Include Trust Account Number and Name of Account
Holder]
Funds transmitted by wire will be invested in Shares of the Trust at the net
asset value next computed after receipt thereof as follows. Investment will
occur on the same day as the transfer of funds so long as federal funds are
received by The Ohio Company prior to 12:00 noon Eastern Time on any Business
Day. Federal funds received by The Ohio Company after 12:00 noon Eastern Time
will not be invested until the next Business Day. Dividends will accrue on the
day a purchase is effected only if federal funds are received by The Ohio
Company by 12:00 noon Eastern Time. A bank may charge for its services in
effecting wire transfers of funds.
Subsequent purchases of Shares of the Trust may be made by ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.
PURCHASE BY MAIL
Investment in Shares of the Trust may be made by mail by sending a check or
other negotiable bank draft payable to the order of "Cardinal Tax Exempt Money
Trust" together with, in the case of an initial purchase, an Application Form
to:
Cardinal Tax Exempt Money Trust
155 East Broad Street
Columbus, Ohio 43215
Money transmitted by check drawn on a member of the Federal Reserve System will
normally be converted to federal funds and invested in Shares of the Trust
within one Business Day following receipt by The Ohio Company. Checks drawn on
non-member banks may take considerably longer. Cardinal Management Corp. or the
Trust will attempt to notify the investor upon receipt of the latter type of
check as to the possible delay and to arrange for a better means of transmittal
of funds. THE TRUST STRONGLY RECOMMENDS THAT INVESTORS OF SUBSTANTIAL AMOUNTS
USE FEDERAL FUNDS TO PURCHASE SHARES.
AUTOMATIC INVESTMENT PLAN
The Trust has made arrangements to enable you to make automatic monthly or
quarterly investments, in the minimum amount of $50 per transaction, from your
checking account. Assuming the cooperation of your financial institution, your
checking account therein will be debited to purchase Shares of the Trust on the
periodic basis you select. Confirmation of your purchase of Trust Shares will be
provided by the Trust. The debit to your checking account will be reflected in
the checking account statement you receive from your financial institution.
Please contact The Ohio Company for the appropriate form.
- --------------------------------------------------------------------------------
WHAT DISTRIBUTIONS WILL I RECEIVE?
- --------------------------------------------------------------------------------
The Trust's net income is declared as a dividend and accrued on each Business
Day, immediately prior to the determination of the Trust's net asset value at
4:00 p.m. Eastern Time. Net interest income (from the time of the immediately
preceding declaration) consists of interest accrued on the portfolio of the
Trust (including accrued discount earned and premium amortized), plus realized
net short-term capital gains (losses) due to portfolio transactions (if any),
less the accrued expenses of the Trust applicable to that
11
<PAGE> 13
dividend period. While the Trust does not expect to realize any long-term
capital gains due to its policy of investing in securities maturing in 13 months
or less, any net long-term gain is expected to be distributed in January of the
fiscal year following realization. Long-term capital gains, if any, will be paid
in additional Shares of the Trust unless the shareholder elects to receive cash.
All dividends of net income are credited to each shareholder's account daily and
automatically reinvested in additional Shares of the Trust at the net asset
value on the last Business Day of each month. Shareholders, however, may elect
to receive monthly the dividends of $10 or more declared on their Shares in cash
by checking the appropriate box on the Account Information Form or by otherwise
notifying Cardinal Management Corp. in writing. In addition, investors may
obtain cash at any time without charge by redeeming Shares at net asset value.
If the entire account of a shareholder is withdrawn, all dividends accrued to
the time of withdrawal will be paid at that time.
Shareholders may elect to receive cash distributions by using ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.
Should the Trust incur or anticipate any extraordinary expense or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Trustees would at that time consider whether
to adhere to the present dividend policy described above or to revise it in
light of the then-prevailing circumstances. For example, if the Trust's net
asset value per share were reduced, or expected to be reduced, below $1.00, the
Trustees might suspend further dividend accruals until the net asset value
returned to $1.00. Thus, extraordinary expenses or losses or depreciation may
result in no dividends being accrued for the period during which an investor
holds Shares as well as a redemption price lower than the purchase price for
such Shares.
- --------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
- --------------------------------------------------------------------------------
Investors may redeem Shares of the Trust on any Business Day at the net asset
value next determined following receipt by the Trust's transfer agent, Cardinal
Management Corp., 215 East Capital Street, Columbus, Ohio 43215, of a written or
telephonic notice to redeem, or by check, each as more fully described below.
See "HOW IS NET ASSET VALUE CALCULATED?" below, for a description of when net
asset value is determined.
As requested, The Ohio Company, on behalf of a shareholder, will forward the
foregoing notice to redeem to Cardinal Management Corp. without charge. Other
broker-dealers may assist a shareholder in redeeming his Shares and may charge a
fee for such services.
Proceeds of redemption requests received by Cardinal Management Corp. in proper
form before (1) 4:00 p.m. Eastern Time for shareholders who are customers of The
Ohio Company and who have submitted their redemption request through their
broker at The Ohio Company or (2) 12:00 noon Eastern Time for all other
redemption requests, will be sent by mail on the next Business Day or, if the
expedited redemption option is available, by federal funds wire on the next
Business Day for use on that day.
The Trust reserves the right to delay payment for the redemption of Shares where
such Shares were purchased with other than immediately available funds, but only
until the purchase payment has cleared (which may take fifteen or more days from
the date the purchase payment is received by the Trust). The purchase of Trust
Shares by wire transfer of federal funds would avoid any such delay.
The Trust may suspend the right of redemption or may delay payment during any
period the determination of net asset value is suspended. See "HOW IS NET ASSET
VALUE CALCULATED?".
Due to the high cost of maintaining accounts, the Trust reserves the right to
redeem involuntarily Shares in any account at the then current net asset value
if at any time redemptions have reduced a shareholder's total investment to a
net asset value below $500. A shareholder will be notified in writing that the
value of the account is less than $500 and allowed not less than 30 days to
increase the account to $500 before the
12
<PAGE> 14
redemption is processed. Proceeds of redemptions so processed, including
dividends declared to the date of redemption, will be promptly paid to the
shareholder.
REDEMPTION BY MAIL
Shareholders may elect to redeem Shares of the Trust by submitting a written
request therefor to Cardinal Management Corp., the Trust's transfer agent at 215
East Capital Street, Columbus, Ohio 43215. Cardinal Management Corp. will
request a signature guarantee by an eligible guarantor institution as described
below. However, a signature guarantee will not be required if (1) the redemption
check is payable to the Shareholder(s) of record, and (2) the redemption check
is mailed to the Shareholder(s) at the address of record, provided, however,
that the address of record has not been changed within the preceding 15 days.
For purposes of this policy, an "eligible guarantor institution" shall include
banks, brokers, dealers, credit unions, securities exchanges and associations,
clearing agencies and savings associations as those terms are defined in the
Securities Exchange Act of 1934. Cardinal Management Corp. reserves the right to
reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine or (2) it has reason to believe that the transaction
would otherwise be improper.
REDEMPTION BY TELEPHONE
Shareholders may elect to redeem Shares of the Trust by calling the Trust at the
telephone numbers set forth on the front of this Prospectus. The Shareholder may
direct that the redemption proceeds be mailed to the address of record or
another address.
Neither the Trust nor its service providers will be liable for any loss,
damages, expense or cost arising out of any telephone redemption effected in
accordance with the Trust's telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. The Trust will employ procedures
designed to provide reasonable assurances that instructions by telephone are
genuine; if these procedures are not followed, the Trust or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures may include recording all phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, and verification of account name and account number or tax
identification number. If, due to temporary adverse conditions, investors are
unable to effect telephone transactions, Shareholders may also redeem their
Shares by mail as described above.
EXPEDITED REDEMPTION
Any investor may elect to use the expedited redemption procedure by designating
on the Account Information Form submitted at the time of initial investment the
name of a commercial bank and account number to receive proceeds of redemption.
If this election is made, requests for redemption may be made by mail or by
telephone as described above.
An investor may elect to have redemption proceeds sent by federal funds wire to
the designated U.S. bank account if the proceeds are $1,000 or more. Otherwise,
proceeds will be sent by mail. No signature guarantee will be required of
investors electing this procedure. Requests to change bank or account
designations may only be made in writing to the Trust with the type of signature
guarantee and other documentation specified under "Redemption by Mail" above. To
participate in this procedure, an investor must complete the expedited
redemption portion of the Account Information Form or notify the Trust at any
time after making an initial investment.
An investor may also elect to have redemption proceeds sent by federal funds
wire to The Ohio Company, the Trust's distributor, if the proceeds are $500 or
more. If the investor elects to have federal funds so wired, the investor may
pick up a check at The Ohio Company's main office at 155 East Broad Street,
Columbus, Ohio or The Ohio Company will mail a check to the investor's address
of record. The Trust may, at its discretion, waive the minimum redemption
requirement for redemptions effected to cover debit balances in brokerage
accounts of customers of The Ohio Company.
13
<PAGE> 15
AUTOMATIC WITHDRAWAL
Shareholders may elect to have the proceeds from redemptions of Shares
transmitted to an authorized bank account at a Federal Reserve member bank
through ACH processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED? - ACH Processing" below.
SYSTEMATIC WITHDRAWAL PLAN
As a shareholder, you may elect to redeem your Shares monthly or quarterly in
amounts of $50 or more, pursuant to the Trust's Systematic Withdrawal Plan.
Please contact The Ohio Company for the appropriate form.
CHECK-WRITING REDEMPTION PROCEDURE
Cardinal Management Corp., as Transfer Agent for the Trust, will provide any
shareholder who so requests with a supply of checks, imprinted with the
shareholder's name, which may be drawn against the Trust's account maintained by
The Fifth Third Bank (the "Bank"), for redemption of Trust Shares. These checks
may be made payable to the order of any person in any amount not less than $500.
To participate in this procedure, an investor must complete the Check-Writing
Redemption Form available from Cardinal Management Corp. When a check is
presented to the Bank for payment, Cardinal Management Corp. (as your agent)
will cause the Trust to redeem sufficient Shares in your account to cover the
amount of the check. Shares continue earning daily dividends until the day on
which the check is presented to the Bank for payment. Cancelled checks will be
returned to you. Due to the delay caused by the requirement that redemptions be
priced at the next computed net asset value, the Bank will only accept for
payment checks presented through normal bank clearing channels. Shareholders
should not attempt to withdraw the full amount of an account or to close out an
account by using this procedure.
No charge will be made to a shareholder for participation in the check-writing
redemption procedure or for the clearance of any checks. A charge of $10.00 per
check will be deducted from the shareholder's account if any check is returned
due to insufficient funds or if any check is written for less than $500.
In order to stop payment on a check, the shareholder must notify the Trust in
writing before the check has been presented to the Bank for payment. A charge of
$8.50 will be deducted from the shareholder's account for each stop payment
order.
- --------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
- --------------------------------------------------------------------------------
The net asset value per share of the Trust is currently determined as of 4:00
p.m. Eastern Time on each Business Day (and at such other time or times as the
Board of Trustees may determine). The net asset value per share is computed by
dividing the total value of the assets of the Trust, less its liabilities, by
the total number of Shares outstanding.
The Board of Trustees has adopted a policy requiring the Trust to use its best
efforts, under normal circumstances, to maintain a constant net asset value of
$1.00 per Share. The Trust values its portfolio securities by the amortized cost
method which involves valuing a security at its cost and thereafter accruing any
discount or premium at a constant rate to maturity. The Trust will normally
include any accrued discount or premium in its daily dividend and will thereby
keep constant the value of the Trust's assets and, consequently, its net asset
value per share. This method does not take into account unrealized capital gains
or losses or the effect of fluctuating interest rates.
- --------------------------------------------------------------------------------
DOES THE TRUST PAY FEDERAL INCOME TAX?
- --------------------------------------------------------------------------------
The Trust intends to qualify as a "regulated investment company" under the Code
for so long as such qualification is in the best interest of the Trust's
shareholders. Qualification as a regulated investment
14
<PAGE> 16
company under the Code requires, among other things, that the regulated
investment company distribute to its shareholders at least 90% of its investment
company taxable income and 90% of its exempt interest income. The Trust
contemplates declaring as dividends 100% of the Trust's investment company
taxable income (before deduction of dividends paid) and 100% of its exempt
interest income.
A non-deductible 4% excise tax is imposed on regulated investment companies that
do not distribute in each calendar year (regardless of whether they otherwise
have a non-calendar taxable year) an amount equal to 98% of their ordinary
income for the calendar year plus 98% of their capital gain net income for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. If distributions
during a calendar year were less than the required amount, the Trust would be
subject to a nondeductible excise tax equal to 4% of the deficiency.
- --------------------------------------------------------------------------------
WHAT ABOUT MY TAXES?
- --------------------------------------------------------------------------------
FEDERAL TAXES
The Trust will distribute substantially all of its net investment income and net
capital gains to shareholders. Dividends derived from interest earned on
Municipal Securities the interest on which is excluded from gross income for
federal income tax purposes, including insurance proceeds representing maturing
interest on defaulted Municipal Securities the interest on which would be so
excluded, constitute "exempt-interest dividends" when designated as such by the
Trust and will be excluded from gross income for federal income tax purposes.
However, interest excluded from gross income for federal income tax purposes
that is received by individuals and corporations on certain municipal
obligations issued on or after August 8, 1986, to finance certain private
activities will be treated as a tax preference item in computing the alternative
minimum tax. It is likely that exempt-interest dividends received by
shareholders from the Trust will also be treated as tax preference items in
computing the alternative minimum tax to the extent, if any, that distributions
by the Trust are attributable to interest earned by the Trust on such
obligations. Also, a portion of all other interest excluded from gross income
for federal income tax purposes earned by a corporation may be subject to the
alternative minimum tax as a result of the inclusion in alternative minimum
taxable income of 75% of the excess of adjusted current earnings over adjusted
net book income preference alternative minimum taxable income.
Distributions, if any, derived from capital gains will generally be taxable to
shareholders as capital gains for federal income tax purposes to the extent so
designated by the Trust. Dividends, if any, derived from sources other than
interest excluded from gross income for federal income tax purposes and capital
gains will be taxable to shareholders as ordinary income for federal income tax
purposes whether or not reinvested in additional Shares. Shareholders not
subject to federal income tax on their income will not, of course, be required
to pay federal income tax on any amounts distributed to them. The Trust
anticipates that substantially all of its dividends will be excluded from gross
income for federal income tax purposes and will notify each shareholder annually
of the tax status of all distributions.
If a shareholder receives an exempt-interest dividend with respect to any Share
and such Share is held by the shareholder for six months or less, any loss on
the sale or exchange of such Share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a shareholder.
STATE AND LOCAL TAXES
Under state or local law, distributions of net investment income may be taxable
to shareholders as dividend income even though a substantial portion of such
distribution may be derived from interest excluded from gross income for federal
income tax purposes that, if received directly, would be exempt from such income
taxes. The Trust will report to its shareholders annually after the close of its
taxable year the percentage and
15
<PAGE> 17
source, on a state-by-state basis, of interest income earned on Municipal
Securities held by the Trust during the preceding year.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Trust and its shareholders. Potential
investors in the Trust are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situation.
Cardinal Management Corp. will inform shareholders at least annually of the
amount and nature of such income and capital gains.
- --------------------------------------------------------------------------------
WHO MANAGES MY INVESTMENT IN THE TRUST?
- --------------------------------------------------------------------------------
Pursuant to the laws of Ohio and the Trust's Declaration of Trust, the
responsibility for the management of the Trust is vested in its Board of
Trustees which, among other things, is empowered by the Trust's Declaration Of
Trust to elect officers of the Trust and contract with and provide for the
compensation of agents, consultants and other professionals to assist and advise
in such management.
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp. (the "Adviser"), located at 155 East Broad Street,
Columbus, Ohio 43215, is a wholly-owned subsidiary of The Ohio Company and is
also the investment adviser to Cardinal Government Securities Trust ("CGST"),
Cardinal Government Obligations Fund ("CGOF"), Cardinal Balanced Fund ("CBF")
and Cardinal Aggressive Growth Fund ("CAGF"). The Adviser also acts as dividend
and transfer agent for The Cardinal Fund Inc., another open-end diversified
management investment company ("CFI"), CGST, CGOF, CBF, CAGF and the Trust. The
Ohio Company is a member of the New York Stock Exchange, Inc., the Midwest Stock
Exchange, Inc., other regional exchanges and the National Association of
Securities Dealers, Inc. In addition to acting as the principal underwriter for
the Trust, CGST, CGOF, CBF and CAGF, The Ohio Company acts as investment adviser
and principal underwriter for CFI, and as the sponsor of various series of
separate unit investment trusts.
Pursuant to the Investment Advisory Contract, the Adviser manages the investment
and reinvestment of the assets of the Trust in accordance with the Trust's
investment objective, policies and restrictions, subject to the general
supervision and control of the Trust's Board of Trustees. Since the Trust's
inception, Hannibal L. Godwin III has been primarily responsible for the
day-to-day management of the Trust's portfolio. Mr. Godwin has been a portfolio
manager with the Adviser and/or The Ohio Company since 1981.
As compensation for its services to the Trust, the Adviser receives monthly from
the Trust a management fee at the annual rate of .5% of the average daily net
assets of the Trust. The Adviser may, however, periodically waive all or a
portion of its advisory fee with respect to the Trust to increase the net income
of the Trust available for distribution as dividends. The waiver of such fee
will cause the yield of the Trust to be higher than it would otherwise be in the
absence of such a waiver.
DIVIDEND AND TRANSFER AGENT
Cardinal Management Corp., 215 East Capital Street, Columbus, Ohio 43215, has
been selected to act as the Trust's Dividend and Transfer Agent. Cardinal
Management Corp. is also the Trust's investment adviser.
DISTRIBUTOR
The Trust has entered into a Distributor's Contract with The Ohio Company, 155
East Broad Street, Columbus, Ohio 43215, pursuant to which Shares of the Trust
continuously will be offered on a best efforts basis by The Ohio Company and
dealers selected by The Ohio Company. Walter R. Chambers is an officer and
trustee/director of both the Trust and The Ohio Company. Frank W. Siegel and
Hannibal L. Godwin III, each an officer and trustee of the Trust, are officers
of The Ohio Company. John L. Schlater, a trustee of the
16
<PAGE> 18
Trust, is an officer of The Ohio Company. David C. Will and James M. Schrack II
are officers of both the Trust and The Ohio Company.
CUSTODIAN
The Trust has appointed The Fifth Third Bank ("Fifth Third") 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, as the Trust's custodian. In such capacity Fifth
Third will hold or arrange for the holding of all portfolio securities and other
assets acquired and owned by the Trust.
- --------------------------------------------------------------------------------
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
- --------------------------------------------------------------------------------
ACH PROCESSING
The Trust now offers ACH privileges. Investors may use ACH processing to make
subsequent purchases, redeem Shares and/or electronically transfer distributions
paid on Trust Shares, in addition to the other methods described in this
Prospectus. ACH provides a method by which funds may be automatically
transferred to or from an authorized bank account at a Federal Reserve member
bank that is an ACH member. Please contact your representative if you are
interested in ACH processing.
EXCHANGE PRIVILEGE
Investors may, provided the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized, exchange Shares of the Trust for shares of:
Cardinal Government Securities Trust, a short-term U.S.
Government securities fund (without payment of any sales charge);
Cardinal Aggressive Growth Fund, an equity fund seeking
appreciation of capital (upon the payment of the applicable sales
charge);
Cardinal Balanced Fund, a fund seeking current income and
long-term growth of both capital and income (upon the payment of
the applicable sales charge);
The Cardinal Fund Inc., an equity fund (upon payment of
applicable sales charge); or
Cardinal Government Obligations Fund, a U.S. Government bond fund
(upon payment of applicable sales charge).
Notwithstanding the foregoing and subject to the limitations contained in the
following paragraph, exchanges of Trust Shares for shares of CFI, CGOF, CBF or
CAGF (individually, a "Cardinal Load Fund") generally may be completed upon the
payment of a sales charge equal to the sales charge payable upon purchase of
shares of that Cardinal Load Fund. If, however, the Shares of Trust to be
exchanged were acquired as a result of an exchange of shares of a Cardinal Load
Fund, the sales charge to be paid on the present exchange may be reduced by the
sales charge previously paid.
The foregoing exchange privilege may be exercised only once in each calendar
quarter and must be made by written or telephonic authorization. A shareholder
should notify The Ohio Company of his desire to make an exchange, and The Ohio
Company will furnish, as necessary, a prospectus and an application form to open
the account. Cardinal Management Corp., as transfer agent, will require that any
written authorization of an exchange include a signature guarantee as described
above under "HOW MAY I REDEEM MY SHARES? -- Redemption by mail." However, a
signature guarantee will not be required if the exchange is requested to be made
within the same account or into an existing account of the shareholder
17
<PAGE> 19
held in the same name or names and in the same capacity as the account from
which the exchange is to be made. Shareholders may also authorize an exchange of
shares of the Trust by telephone. Neither the Trust nor any of its service
providers will be liable of any loss, damages, expense or cost arising out of
any telephone exchange authorization to the extent and subject to the
requirements set forth under "HOW MAY I REDEEM MY SHARES? -- Redemption by
telephone" above.
For tax purposes, an exchange is treated as a redemption and a new purchase.
The Trust may, at any time, modify or terminate the foregoing exchange
privilege. The Trust, however, will give shareholders of the Trust 60 days
advance written notice of any such modification or termination.
- --------------------------------------------------------------------------------
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
- --------------------------------------------------------------------------------
Each Share is entitled to one vote (and fractional Shares to proportionate
fractional votes) in the election of Trustees and on other matters submitted to
the vote of shareholders. Voting rights are not cumulative, so that the holders
of more than 50% of the Shares voting in the election of Trustees have the power
to elect all of the Trustees of the Trust. Whenever the approval of a majority
of the outstanding Shares of the Trust is required in connection with
shareholder approvals of the Investment Advisory Contract, the Distribution
Contract or changes in the investment objective and policies or the investment
restrictions of the Trust, a "majority" shall mean the vote of (i) 67% or more
of the Shares of the Trust present at a meeting, if the holders of more than 50%
of the outstanding Shares are present in person or by proxy, or (ii) more than
50% of the outstanding Shares of the Trust, whichever is less.
- --------------------------------------------------------------------------------
WHAT SHAREHOLDER REPORTS WILL I RECEIVE?
- --------------------------------------------------------------------------------
An account summary will be furnished to each shareholder monthly and will
include information as to all purchases, redemptions and income dividends paid
with respect to the preceding month. Financial statements of the Trust will be
furnished to shareholders semiannually.
Holders of Shares should direct all inquiries concerning such matters to
Cardinal Management Corp., 155 East Broad Street, Columbus, Ohio 43215.
18
<PAGE> 20
Investment Adviser and Manager
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
Distributor
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
Transfer Agent and Dividend Paying
Agent
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
Custodian
The Fifth Third Bank
38 Fountain Square
Cincinnati, Ohio 45263
Legal Counsel
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
Independent Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
<PAGE> 21
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
------
<S> <C>
Key Features................................ 2
Prospectus Highlights....................... 3
Fee Table................................... 4
Financial Highlights........................ 5
What is the Trust?.......................... 6
What Are the Investment Objective and
Policies of the Trust?.................... 7
How Do I Purchase Shares of the Trust?...... 10
What Distributions Will I Receive?.......... 11
How May I Redeem My Shares?................. 12
How is Net Asset Value Calculated?.......... 14
Does the Trust Pay Federal Income Tax?...... 14
What About My Taxes?........................ 15
Who Manages My Investment in the Trust?..... 16
What Other Shareholder Programs Are
Provided?................................. 17
What Are My Rights as a Shareholder?........ 18
What Shareholder Reports Will I Receive?.... 18
</TABLE>
------------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D.C., UNDER THE SECURITIES ACT OF 1933, AND
TO WHICH REFERENCE IS MADE.
------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THE TRUST IS REGISTERED AS AN OPEN-END MANAGEMENT INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION DOES NOT IMPLY THAT
THE TRUST OR ANY OF ITS SHARES HAVE BEEN GUARANTEED, SPONSORED, RECOMMENDED OR
APPROVED BY THE UNITED STATES OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.
------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.
----------------------
PROSPECTUS
----------------------
February 1, 1995
THE OHIO COMPANY
CARDINAL
TAX EXEMPT
MONEY
TRUST
[LOGO]
