<PAGE> 1
As filed with the Securities
and Exchange Commission on October 27, 1995
1933 Act Registration No. 33-59984
1940 Act File No. 811-7588
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post Effective Amendment No. 3 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 4 /X/
THE CARDINAL GROUP
(Exact Name of Registrant as Specified in Charter)
155 East Broad Street, Columbus, Ohio 43215
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 614/464-5511
Frank W. Siegel, 155 East Broad Street, Columbus, Ohio 43215
(Name and Address of Agent for Service)
Copy to: Charles H. Hire, Esq.
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
Approximate Date of Proposed Public Offering:
Immediately, upon effectiveness
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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X 75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
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previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. On November 23, 1994, the Registrant
filed its Rule 24f-2 Notice for its fiscal year ended September 30, 1994.
<PAGE> 2
THE CARDINAL FUND
Cross Reference Sheet Required By
Rule 481(a) under the Securities Act of 1933
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<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
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1.(a)(i) ............................. Cover Page
(ii) ............................. Cover Page
(iii) ............................. Cover Page
(iv) ............................. Cover Page
(v) ............................. Cover Page
(vi) ............................. *
(vii)............................. *
(b) ................................ *
2.(a)(i) ............................. "Fee Table"
(ii) ............................. *
(b) ................................ "Prospectus Highlights"
(c) ................................ "Prospectus Highlights"
3.(a) ................................ *
(b) ................................ *
(c) ................................ "Performance Information"
(d) ................................ "Performance Information"
4.(a)(i)(A) .......................... "What Is The Fund?"
(i)(B) .......................... "What Is The Fund?"
(ii) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(A) .......................... *
(ii)(B)(1) ....................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(B)(2) ....................... *
(ii)(C) .......................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(D) .......................... "What Are The Investment Objectives And Policies Of The Fund?"
(b)(i) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(ii) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(c) ................................ "What Are The Investment Objectives And Policies Of The Fund?"
5.(a) ................................ "Who Manages My Investment In The Fund?"
(b)(i) ............................. "Who Manages My Investment In The Fund?"
(b)(ii) ............................ "Who Manages My Investment In The Fund?"
<FN>
_______________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
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<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
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<S> <C>
(b)(iii) ....................... "Who Manages My Investment In The Fund?"
(c) ............................ "Who Manages My Investment In The Fund?"
(d) ............................ "Who Manages My Investment In The Fund?"
(e) ............................ "Who Manages My Investment In The Fund?"
(f) ............................ "Who Manages My Investment In The Fund?"
(g)(i)(A) ...................... *
(g)(i)(B) ...................... *
(g)(i)(C) ...................... *
(g)(ii) ........................ *
5A.(a) ........................... *
(b) ............................ *
(c) ............................ *
6.(a) ............................ "What Are My Rights As A Shareholder?"
(b) ............................ "What Are My Rights As A Shareholder?"
(c) ............................ *
(d) ............................ "What Are My Rights As A Shareholder?"
(e) ............................ "What Are My Rights As A Shareholder?"; "Who Provides Shareholder Reports?"
(f) ............................ "What Distributions Will I Receive?"
(g) ............................ "Does The Fund Pay Federal Income Tax?"; "What About My Taxes?"
7.(a) ............................ "How Do I Purchase Shares Of The Fund?"
(b) ............................ "How Do I Purchase Shares Of The Fund?"; "How Is Net Asset Value Calculated?"
(c) ............................ "May My Tax Sheltered Retirement Plan Invest In The Fund?"; "How May I Qualify For
Quantity Discounts?"
(d) ............................ "How Do I Purchase Shares Of The Fund?"
(e) ............................ "Who Manages My Investment In The Fund?"
(f) ............................ "Who Manages My Investment In The Fund?"
8.(a) ............................ "How May I Redeem My Shares?"
(b) ............................ "How May I Redeem My Shares?"
(c) ............................ "How May I Redeem My Shares?"
(d) ............................ "How May I Redeem My Shares?"
9. .............................. *
<FN>
_____________________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
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PROSPECTUS
THE CARDINAL FUND
The Cardinal Fund (the "Fund") is a diversified investment fund of The
Cardinal Group (the "Group"), an open-end, management investment company. The
Trustees of the Group have divided the Fund's beneficial ownership into an
unlimited number of transferable units called shares (the "Shares").
The Fund's investment objectives are long-term growth of capital and
income. Current income is a secondary objective. The Fund seeks to achieve
its objectives through selective participation in the long-term progress of
businesses and industries. The policy of the Fund is generally to invest in
equity securities. There can be no assurance that the Fund's objectives will
be achieved.
THE SHARES OF THE FUND 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.
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For further information regarding the Fund or for
assistance in opening an account or redeeming Shares,
please call (800) 282-9446 toll free.
Inquiries may also be made by mail addressed
to the Fund at its principal office:
155 East Broad Street
Columbus, Ohio 43215
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The Prospectus relates only to The Cardinal Fund, currently one of six
funds of the Group. Interested persons who wish to obtain copies of the
prospectus of Cardinal Government Obligations Fund, Cardinal Government
Securities Money Market Fund, Cardinal Tax Exempt Money Market Fund, Cardinal
Balanced Fund or Cardinal Aggressive Growth Fund, the other funds of the Group
(collectively, with the Fund, the "Cardinal Funds"), should contact The Ohio
Company at the number above. Additional information about the Fund, contained
in a Statement Of Additional Information dated as of January __, 1996, has been
filed with the Securities and Exchange Commission and is incorporated herein by
reference. Such
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Statement is available upon request without charge from the Fund at the above
address or by calling the phone number provided above.
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing in the Fund. This
Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "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 January __, 1996.
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PROSPECTUS HIGHLIGHTS
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INVESTMENT OBJECTIVES . . . . . . . . . . . . The Fund seeks long-term growth of capital and income. Current income is a
secondary objective. (See page __.)
INVESTMENT POLICIES . . . . . . . . . . . . . The Fund generally invests in equity securities which are growth oriented.
Current income, while a factor in portfolio selection, is secondary to the
primary objective. (See page __.)
PURCHASES . . . . . . . . . . . . . . . . . . There is a minimum initial investment of $1,000 with subsequent minimums of $50.
(See page __.) Purchases are made at the public offering price which is equal
to net asset value per share plus a sales charge. This charge is equal to 4.50%
of the public offering price (4.71% of net amount invested) reduced on
investments of $100,000 or more (see page __) and waived for certain purchasers
for whom The Ohio Company serves as a trustee or investment adviser. (See
page __.)
REDEMPTIONS . . . . . . . . . . . . . . . . . Shares can be redeemed at net asset value per share without charge, if redeemed
through the Fund's distributor, The Ohio Company. (See page __.)
RISK FACTORS AND SPECIAL
CONSIDERATIONS . . . . . . . . . . . . . . An investment in a mutual fund such as the Fund involves a certain amount of risk
and may not be suitable for all investors. Some investment policies of the Fund
may entail certain risks. (See "WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES
OF THE FUND? -- Risk Factors and Investment Techniques" on page ___.)
INVESTMENT ADVISER . . . . . . . . . . . . . Cardinal Management Corp. (the "Adviser"), a wholly-owned subsidiary of The Ohio
Company, is the
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<TABLE>
<S> <C>
Fund's investment adviser. The Adviser also serves as investment adviser for
Cardinal Government Obligations Fund, Cardinal Government Securities Money Market
Fund, Cardinal Tax Exempt Money Market Fund, Cardinal Balanced Fund and Cardinal
Aggressive Growth Fund. (See page __.)
DIVIDENDS . . . . . . . . . . . . . . . . . . Dividends and capital gains distributions are made with such frequency as the
Group shall determine. Generally, dividends are declared quarterly and long-term
capital gains, if any, are declared annually. Such dividends and distributions
may be invested in additional Shares of the Fund at no charge. (See page __.)
</TABLE>
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FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .60%
12b-1 Fees After Fee Waiver(1) 0
Other Expenses(2) .22
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Total Fund Operating Expenses
After Fee Waiver .82%
=====
EXAMPLE 1 Year 3 Years
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You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption at
the end of each time period: $53 $71
__________________
1 The Ohio Company, as the Fund's distributor, has agreed with the
Group to waive all of its Rule 12b-1 fees until September 30, 1996. Absent
such waiver, Rule 12b-1 Fees and Total Fund Operating Expenses would be 0.25%
and 1.07%, respectively.
2 "Other Expenses" are based upon estimated amounts for the current
fiscal year.
The purpose of the above table is to assist a potential purchaser of
the Fund's Shares in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. See "WHO MANAGES MY
INVESTMENT IN THE FUND?" for a more complete discussion of the shareholder
transaction expenses and annual operating expenses of the Fund. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
________________
PERFORMANCE INFORMATION
From time to time the Fund may advertise its average annual total
return and cumulative return. SUCH RETURN FIGURES ARE BASED UPON HISTORICAL
EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The average
annual total return advertised by the Fund refers to the return generated by an
investment in the Fund
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over certain specified periods since the establishment of the Fund. The
average annual total return over a period equates the amount of an initial
investment in the Fund to the amount redeemable at the end of that period
assuming that any dividends and distributions earned by an investment in the
Fund are immediately reinvested and the maximum applicable sales charge
(currently 4.5%) is deducted from the initial investment at the time of
investment. Such figure is then annualized. The cumulative return advertised
refers to the total return on a hypothetical investment over the relevant
period and equates the amount of an initial investment in the Fund to the
amount redeemable at the end of that period assuming that any dividends and
distributions are immediately reinvested and the maximum sales charge is
deducted from the initial investment. If the sales charge were not deducted,
the average annual total return and cumulative return advertised would be
higher.
Investors may also judge the performance of the Fund by comparing or
referencing 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., Morningstar, Inc. and CDA Investment Technologies,
Inc. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, The
Columbus Dispatch, Business Week, U.S.A. Today and Consumer Reports. In
addition to performance information, general information about the Fund that
appears in a publication such as those mentioned above may be included in
advertisements and in reports to shareholders.
Further information about the performance of the Fund is contained in
the Fund's Annual Report to Shareholders which may be obtained without charge
by contacting the Fund at the telephone number set forth on the cover page of
this Prospectus.
WHAT IS THE FUND?
The Fund is one separate diversified investment fund of the Group,
which was organized on March 23, 1993, as an Ohio business trust. The Group is
registered and operates as an open-end management investment company as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
has been organized for the purpose of acquiring all of the assets and
liabilities of The Cardinal Fund Inc. ("TCFI") to effect a reorganization of
TCFI from a stand alone investment company to a separate series of the Group.
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WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?
IN GENERAL
The investment objectives of the Fund are to achieve long-term growth
of capital and income. Current income is a secondary objective. The Fund
seeks to achieve its objectives through selective participation in the
long-term progress of businesses and industries. The investment objectives
with respect to the Fund are 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 Fund (as defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
The Fund is not intended to provide a complete and balanced investment program
for an investor. There can be no assurance that the investment objectives of
the Fund will be achieved.
The policy of the Fund is generally to invest in equity securities of
companies which, in the opinion of the Adviser, are growth oriented. The
securities purchased by the Fund are traded in either established
over-the-counter markets or on national exchanges and are issued by companies
having a market capitalization of at least $10 million. This policy of
normally investing in equity securities believed to have a potential for
long-term capital appreciation means that the assets of the Fund will generally
be subject to greater risk than may be involved in securities which do not have
such growth characteristics. It is recognized, however, that there may be
times when, as a temporary, defensive measure, the Fund's equity position
should be reduced. At such times, and otherwise for cash management purposes,
the Fund may hold its assets in cash or invest its assets in investment grade
debt securities, U.S. Government securities, securities of other investment
companies, repurchase agreements and preferred stock.
RISK FACTORS AND INVESTMENT TECHNIQUES
GENERAL. Like any investment program, an investment in the Fund
entails certain risks. As a fund investing primarily in common stocks, the
Fund is subject to stock market risk, i.e., the possibility that stock prices
in general will decline over short or even extended periods.
The Fund may invest in put and call options and futures, as described
below. Such instruments are 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. The Fund will not invest more than 10% of its total
assets in such derivatives at any one time.
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<PAGE> 11
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of the repurchase agreement, the Fund
would acquire securities from a financial institution such as a
well-established securities dealer or a bank which is a member of the Federal
Reserve System which the Adviser deems creditworthy under guidelines approved
by the Group's Board of Trustees. At the time of purchase, the bank or
securities dealer agrees to repurchase the underlying securities from the Fund
at a specified time and price. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. The Fund will only enter into a
repurchase agreement where (i) the underlying securities are of the type which
the Fund's investment policies 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 Fund's custodian or a
bank acting as agent. The Adviser will be responsible for continuously
monitoring such requirements.
FOREIGN SECURITIES. The Fund may also invest up to 25% of its net
assets in foreign securities through the purchase of sponsored and unsponsored
American Depositary Receipts ("ADRs"). Unsponsored ADRs may be less liquid
than sponsored ADRs, and there may be less information available regarding the
underlying foreign issuer for unsponsored ADRs. Investment in foreign
securities is subject to special investment risks that differ in some respects
from those related to investments in securities of U.S. domestic issuers. Such
risks include trade balances and imbalances, and related economic policies,
future adverse political, economic and social developments, the possible
imposition of withholding taxes on interest income, possible seizure,
nationalization, or expropriation of foreign investments or deposits, less
stringent disclosure requirements, the possible establishment of exchange
controls or taxation at the source, or the adoption of other foreign
governmental restrictions. In addition, foreign issuers may be subject to
different accounting, auditing, reporting, and recordkeeping standards than
those applicable to U.S. domestic issuers, and securities markets in foreign
countries may be structured differently from and may not be as liquid as the
U.S. markets. The Fund will acquire securities issued by foreign issuers only
when the Adviser believes that the risks associated with such investments are
minimal.
PUT AND CALL OPTIONS. Subject to its investment policies and for
purposes of hedging against market risks related to its portfolio securities,
the Fund may purchase put and call options on securities. Purchasing options
is a specialized investment technique that entails a substantial risk of a
complete loss of the
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amounts paid as premiums to writers of options. The Fund will purchase put
options only on securities in which the Fund may otherwise invest. The Fund
may also engage in writing call options from time to time as the Adviser deems
appropriate. The Fund will write only covered call options (options on
securities owned by the Fund). In order to close out a call option it has
written, the Fund will enter into a "closing purchase transaction" -- the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously has written. When
a portfolio security subject to a call option is sold, the Fund will effect a
closing purchase transaction to close out any existing call option on that
security. If the Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the option expires or
the Fund delivers the underlying security upon exercise. Under normal market
conditions, it is not expected that the underlying value of portfolio
securities subject to such options would exceed 25% of the net assets of the
Fund.
The Fund, as part of its option transactions, also may purchase index
put and call options and write index options. As with options on individual
securities, the Fund will write only covered index call options. Through the
writing or purchase of index options the Fund can achieve many of the same
objectives as through the use of options on individual securities. Options on
securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Price movements in securities which the Fund owns or intends to
purchase probably will not correlate perfectly with movements in the level of
an index and, therefore, the Fund bears the risk of a loss on an index option
that is not completely offset by movements in the price of such securities.
Because index options are settled in cash, a call writer cannot determine the
amount of its settlement obligations in advance and, unlike call writing on
specific securities, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities. The
Fund may be required to segregate assets or provide an initial margin to cover
index options that would require it to pay cash upon exercise.
FUTURES CONTRACTS. The Fund may also enter into contracts for the
future delivery of securities and futures contracts based on a specific
security, class of securities or an index, purchase or sell options on any such
futures contracts and engage in related
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closing transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
The Fund may engage in such futures contracts in an effort to hedge
against market risks. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, the Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market
values are expected to rise, the Fund, through the purchase of such contracts,
can attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give the Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed five percent of the Fund's total
assets, and the value of securities that are the subject of such futures and
options (both for receipt and delivery) may not exceed one-third of the market
value of the Fund's total assets. Futures transactions will be limited to the
extent necessary to maintain the Fund's qualification as a regulated investment
company.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase
securities. The Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of
the Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities, limiting the Fund's
ability to hedge effectively against interest rate and/or market risk and
giving rise to additional risks. There is no assurance of liquidity in the
secondary market for purposes of closing out futures positions.
INVESTMENT COMPANY SECURITIES. The Fund 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 Fund intends to
invest in the securities of other investment companies which, in the opinion of
the Adviser, will
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<PAGE> 14
assist the Fund in achieving its investment objectives and in money market
mutual funds for purposes of short-term cash management. The Fund'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 Fund's investments in other investment companies, see
"INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Securities of Other Investment Companies" in the Group's
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of the Fund (as
defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
The Fund will not:
1. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, if, immediately after such purchase,
more than 5% of the value of the Fund's total assets would be invested
in such issuer or the Fund would hold more than 10% of the outstanding
voting securities of the issuer, except that up to 25% of the value of
the Fund's total assets may be invested without regard to such
limitations. There is no limit to the percentage of assets that may
be invested in U.S. Treasury bills, notes or other obligations issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than
25% of the value of the Fund's total assets at the time of purchase to
be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that:
(a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a
separate industry.
3. Borrow money or issue senior securities, except that
the Fund may borrow from banks or enter into reverse
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<PAGE> 15
repurchase agreements or dollar roll agreements for temporary purposes
in amounts up to 10% of the value of its total assets at the time of
such borrowing and except as permitted pursuant to an exemption from
the 1940 Act. The Fund will not purchase securities while its
borrowings (including reverse repurchase agreements and dollar roll
agreements) exceed 5% of its total assets.
4. Make loans, except that the Fund may purchase or hold
debt instruments and lend portfolio securities in accordance with its
investment objectives and policies, make time deposits with financial
institutions and enter into repurchase agreements.
The following additional investment restriction may be changed without
the vote of a majority of the outstanding Shares of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any securities, if as a
result, more than 15% of the Fund's net assets would be invested in
securities that are illiquid.
HOW DO I PURCHASE SHARES OF THE FUND?
GENERAL
The Fund's Shares may be purchased at the public offering price, as
described below under "Public Offering Price," through The Ohio Company,
principal underwriter of the Fund's Shares, at its address and telephone number
set forth on the cover page of this Prospectus, and through other
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with The Ohio Company.
Subsequent purchases of Shares of the Fund may be made by ACH
processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -
ACH Processing" below. In addition, if an Account Information Form has
previously been received by The Ohio Company, Shares may also be purchased by
wiring funds to the Fund's custodian. Prior to wiring any such funds and to in
order to ensure that wire orders are invested properly, you must call The Ohio
Company to obtain the necessary instructions and information.
The minimum initial investment for individuals is $1,000, except the
initial investment for an applicant investing by means of the Automatic
Investment Plan, as described below, must be at least $50. Subsequent
investments must be in amounts of at least $50.
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<PAGE> 16
The Group reserves the right to reject any order for the purchase of
Shares in whole or in part. You will receive a confirmation of each new
transaction in your account, which will also show the total number of Shares
owned by you and the number of Shares being held in safekeeping by Cardinal
Management Corp., as the Fund's transfer agent (the "Transfer Agent"), for your
account. Certificates representing Shares will not be issued.
PUBLIC OFFERING PRICE
The public offering price of Shares of the Fund is the net asset value
per share (see "HOW IS NET ASSET VALUE CALCULATED?") next determined after
receipt by The Ohio Company, its agents or broker-dealers with whom it has an
agreement, of an order and payment, plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge As a Percentage
as a of Offering Price
Percentage -----------------
Amount of of the Net Sales Dealer's
Single Transaction Amount Invested Charge Concession
------------------ --------------- ------ ----------
<S> <C> <C> <C>
Less than $100,000 4.71% 4.50% 4.00%
$100,000 but less than $250,000 3.63 3.50 3.00
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 1.52 1.50 1.00
$1,000,000 or more 0.50 0.50 0.40
</TABLE>
(See "HOW IS NET ASSET VALUE CALCULATED?" for a description of the
computation of net asset value per share.)
The above charges on investments of $100,000 or more are applicable to
purchases made at one time by an individual, or an individual, his spouse and
their children not of legal age, or a trustee, guardian or other like fiduciary
of certain single trust estates or certain single fiduciary accounts.
No sales charge is imposed on purchases of Shares by (1) officers,
trustees, and employees of the Group, (2) full-time employees of The Ohio
Company or the Adviser who have been such for at least 90 days or by qualified
retirement plans for such persons, or (3) accounts or trusts which are managed
and advised in whole or in part by The Ohio Company or the Adviser.
From time to time, The Ohio Company, from its own resources, may also
provide additional compensation to securities dealers in connection with sales
of Shares of the Cardinal Funds. Such compensation will include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales
- 13 -
<PAGE> 17
campaigns and/or shareholder services and programs regarding one or more of the
Cardinal Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Cardinal Funds. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Securities dealers may not use sales of the Fund's Shares to qualify
for this compensation to the extent such may be prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. In addition, The Ohio Company may make ongoing
payments to brokerage firms, financial institutions (including banks) and
others to facilitate the administration and servicing of shareholder accounts.
None of the aforementioned additional compensation is paid for by the Fund or
its shareholders.
AUTOMATIC INVESTMENT PLAN
The Fund 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 Fund on
the periodic basis you select. Confirmation of your purchase of Fund Shares
will be provided by the Transfer Agent. The debit of 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.
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND?
Shares of the Fund qualify for purchase in connection with the
following tax sheltered retirement plans:
-- Individual retirement account ("IRAs") plans
-- Simplified Employee Pension Plans
-- 403(b)(7) Custodial Plans sponsored by certain tax-exempt employers
-- Pension, profit-sharing and 401(k) plans qualifying under
Section 401(a) of the Internal Revenue Code
- 14 -
<PAGE> 18
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?
LETTER OF INTENTION
If you (including your spouse and children not of legal age) intend to
purchase $100,000 or more of Shares of the Fund and of any other Cardinal Fund
sold with a sales charge (a "Cardinal Load Fund") during any 13-month period
you may sign a letter of intention to that effect obtained from The Ohio
Company and pay the reduced sales charge applicable to the total amount of
Shares to be so purchased. The 13-month period during which the Letter of
Intention is in effect will begin on the date of the earliest purchase to be
included. In addition, trustees, guardians or other like fiduciaries of single
trust estates or certain single fiduciary accounts may take advantage of the
quantity discounts pursuant to a letter of intention.
A letter of intention is not a binding obligation upon you to purchase
the full amount indicated. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in your name) to secure
payment of the higher sales charge applicable to the shares actually purchased.
If the full amount indicated is not purchased, such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary.
Dividends on escrowed Shares, whether paid in cash or reinvested in additional
Shares of the applicable Cardinal Load Fund, are not subject to escrow. The
escrowed Shares will not be available for disposal by you until all purchases
pursuant to the letter of intention have been made or the higher sales charge
has been paid. When the full amount indicated has been purchased, the escrow
will be released. To the extent that you purchase more than the dollar amount
indicated on the Letter of Intention and qualify for a further reduced sales
charge, the sales charge will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in sales charge will be, as you
instruct, either delivered to you in cash or used to purchase additional Shares
of the Cardinal Load Fund designated by you subject to the rate of sales charge
applicable to the actual amount of the aggregate purchases. This program,
however, may be modified or eliminated at any time or from time to time by the
Group without notice.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, you have the
privilege of combining "concurrent purchases" of Shares of the Fund and of one
or more of the other Cardinal Load Funds. For example, if you concurrently
purchase Shares of the Fund at the total public offering price of $50,000 and
shares of another Cardinal Load Fund at the total public offering price of
$50,000,
- 15 -
<PAGE> 19
the sales charge would be that applicable to a $100,000 purchase as shown in
the table above. "Concurrent purchases," as described above, shall include the
combined purchases of you, your spouse and your children not of legal age. To
receive the applicable public offering price pursuant to this privilege, you
must, at the time of purchase, give The Ohio Company sufficient information to
permit confirmation of qualification. This privilege, however, may be modified
or eliminated at any time or from time to time by the Group without notice
thereof.
RIGHTS OF ACCUMULATION
After your initial purchase of Shares you may also be eligible to pay
a reduced sales charge for your subsequent purchases of Shares where the total
public offering price of Shares then being purchased plus the then aggregate
current net asset value of Shares of the Fund and of shares of any Cardinal
Load Fund held in your account equals $100,000 or more. You would be able to
purchase Shares at the public offering price applicable to the total of (a) the
total public offering price of the Shares of the Fund then being purchased plus
(b) the then current net asset value of Shares of the Fund and of shares of any
other Cardinal Load Fund held in your account. For purposes of determining the
aggregate current net asset value of Shares held in your account, you may
include Shares then owned by your spouse and children not of legal age.
You may obtain additional information about the foregoing special
purchase method from The Ohio Company. You are responsible for notifying The
Ohio Company at the time of purchase when purchases may be accumulated to take
advantage of the reduced sales charge. This program, however, may be modified
or eliminated at any time or from time to time by the Group without notice
thereof.
WHAT DISTRIBUTIONS WILL I RECEIVE?
Dividends and distributions shall be made with such frequency (long
term capital gains normally will be distributed only once annually) and in such
amounts as the Group from time to time shall determine and from net income and
net realized capital gains of the Fund. It is the policy of the Fund to
distribute, at least annually, substantially all of its net investment income
and to distribute annually any net realized capital gains. Unless a
shareholder specifically requests otherwise in writing to the Transfer Agent,
dividends and distributions will be made only in additional full and fractional
Shares of the Fund and not in cash. Dividends are paid in cash not later than
seven days after a shareholder's complete redemption of his Shares in the Fund.
- 16 -
<PAGE> 20
Shareholders may also elect to receive dividends and distributions in
cash by using ACH processing as described under "WHAT OTHER SHAREHOLDER
PROGRAMS ARE PROVIDED? - ACH Processing" below.
HOW MAY I REDEEM MY SHARES?
Investors may redeem Shares of the Fund at the net asset value per
share next determined following the receipt by the Transfer Agent, 215 East
Capital Street, Columbus, Ohio 43215, of written or telephonic notice to
redeem, as described more fully 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 the Transfer Agent without charge.
Other broker-dealers may assist a shareholder in redeeming his Shares and may
charge a fee for such services.
The Group will make payment for redeemed Shares as promptly as
practicable but in no event more than seven days after receipt by the Transfer
Agent of the foregoing notice. The Group 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 Fund). The purchase of Fund Shares by wire transfer of federal
funds would avoid any such delay.
The Group intends to pay cash for all Shares redeemed, but, under
abnormal conditions which make payment in cash unwise, the Group may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
The Group 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 Group reserves the
right to redeem, at net asset value, involuntarily Shares in any account at the
then current net asset value if at any time redemptions (but not as a result of
a decrease in the market price of such Shares or the deduction of any sales
charge) have reduced a shareholder's total investment in the Fund to a net
asset value below $500. A shareholder will be notified in writing that the
value of Fund Shares in the account is less than $500 and allowed 30 days to
increase his investment in the Fund to $500 before the redemption is processed.
Proceeds of redemptions so
- 17 -
<PAGE> 21
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 Fund by submitting a
written request therefor to the Transfer Agent, at 215 East Capital Street,
Columbus, Ohio 43215. The Transfer Agent 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. The Transfer Agent 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 Fund by calling the
Group 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.
Neither the Group, the Fund 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 Group's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Group will employ
procedures designed to provide reasonable assurances that instructions by
telephone are genuine; if these procedures are not followed, the Group, the
Fund 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.
- 18 -
<PAGE> 22
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
If you are the owner of Shares of the Fund having a total value of
$10,000 or more at the current net asset value, you may elect to redeem your
Shares monthly or quarterly in amounts of $50 or more, pursuant to the Fund's
Systematic Withdrawal Plan. Please contact The Ohio Company for the
appropriate form.
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
ACH PROCESSING
The Fund offers ACH privileges. Investors may use ACH processing to
make subsequent purchases, redeem Shares and/or electronically transfer
distributions paid on Fund 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
Shareholders of the Fund 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 Fund for
shares of:
Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of
capital (upon the payment of the appli-
cable 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);
- 19 -
<PAGE> 23
Cardinal Government Obligations Fund,
a fund investing in securities issued
or guaranteed by the U.S. Government
(upon the payment of the applicable
sales charge);
Cardinal Government Securities Money Market Fund,
a U.S. Government securities money market fund
(without payment of any sales charge); or
Cardinal Tax Exempt Money Market Fund,
a tax-free money market fund
(without payment of any sales charge).
Notwithstanding the foregoing and subject to the limitations contained
in the following paragraph, (i) exchanges by holders of Fund Shares, for whom
the sales charge has been waived, for shares of a Cardinal Load Fund may be
completed without the payment of a sales charge, and (ii) exchanges of Fund
Shares by all other shareholders for shares of a Cardinal Load Fund may be
completed upon the payment of a sales charge equal to the difference, if any,
between the sales charge payable upon purchase of shares of such Cardinal Load
Fund and the sales charge previously paid on the Fund Shares to be exchanged.
The foregoing exchange privilege 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. The 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 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 Fund by telephone. Neither the Group, the Fund
nor any of its service providers will be liable for 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. However, a shareholder may not include any sales charge on Shares of
the Fund for purposes of calculating the gain or loss realized upon an exchange
of those Shares within 90 days of their purchase.
- 20 -
<PAGE> 24
The Group may, at any time, modify or terminate the foregoing exchange
privilege. The Group, however, will give shareholders of the Fund 60 days'
advance written notice of any such modification or termination.
HOW IS NET ASSET VALUE CALCULATED?
The net asset value of the Fund is determined once daily as of 4:00
P.M. Eastern Time, on each Business Day. A "Business Day" is a day on which
the New York Stock Exchange is open for business and any other day (other than
a day on which no Shares of the Fund are tendered for redemption and no order
to purchase any Shares of the Fund is received) during which there is a
sufficient degree of trading in the Fund's portfolio securities that the net
asset value might be materially affected by changes in the value of the
portfolio securities. The net asset value per share of the Fund is computed by
dividing the sum of the value of the Fund's portfolio securities plus any cash
and other assets (including interest and dividends accrued but not received)
minus all liabilities (including estimated accrued expenses) by the total
number of Shares then outstanding.
The net asset value per share will fluctuate as the value of the
investment portfolio of the Fund changes.
Portfolio securities which are traded on United States stock exchanges
are valued at the last sale price on such an exchange as of the time of
valuation on the day the securities are being valued. Securities traded in the
over-the-counter market are valued at either the mean between the bid and ask
prices or the last sale price as one or the other may be quoted by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") as of
the time of valuation on the day the securities are being valued. The Group
uses one or more pricing services to provide such market quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Group.
Determination of the net asset value may be suspended at times when
(a) trading on the New York Stock Exchange is restricted by applicable rules
and regulations of the Commission, (b) the New York Stock Exchange is closed
for other than customary weekend and holiday closings, (c) an emergency exists
as a result of which disposal by the Group of portfolio securities owned by the
Fund or valuation of net assets of the Fund is not reasonably practicable, or
(d) the Commission has by order permitted such suspension.
- 21 -
<PAGE> 25
DOES THE FUND PAY FEDERAL INCOME TAX?
Each of the funds of the Group, including the Fund, is treated as a
separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company" under the Code for so long as such qualification
is in the best interest of that fund's shareholders. Qualification as a
regulated investment 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. The Fund contemplates declaring as
dividends 100% of the Fund's investment company taxable income (before
deduction of dividends paid).
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
Fund would be subject to a nondeductible excise tax equal to 4% of the
deficiency.
WHAT ABOUT MY TAXES?
It is expected that the Fund will distribute annually to shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal
income tax purposes, even if paid in additional Shares of the Fund and not in
cash. The dividends-received deduction for corporations will apply to the
aggregate of such ordinary income distributions in the same proportion as the
aggregate dividends eligible for the dividends received deduction, if any,
received by the Fund bear to its gross income.
Distribution by the Fund of the excess of net long-term capital gain
over net short-term capital loss is taxable to shareholders as long-term
capital gain in the year in which it is received, regardless of how long the
shareholder has held the Shares. Such distributions are not eligible for the
dividends-received deduction.
If the net asset value of a Share is reduced below the shareholder's
cost of that Share by the distribution of income or gain realized on the sale
of securities, the distribution is a return of invested principal, although
taxable as described above.
- 22 -
<PAGE> 26
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of
such dividends or distributions, although in effect a return of capital, is
subject to tax.
Foreign taxes may be imposed on the Fund by foreign countries with
respect to its income from foreign securities. Since less than 50% in value of
the Fund's total assets at the end of its fiscal year are expected to be
invested in stock or securities of foreign corporations, the Fund will not be
entitled under the Code to pass through to its shareholders their pro rata
share of the foreign taxes paid by the Fund. These taxes will be taken as a
deduction by the Fund.
The foregoing is intended only as a brief summary of some of the
important tax considerations generally affecting the Fund and its shareholders.
Potential investors in the Fund 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.
The Transfer Agent will inform shareholders at least annually of the
amount and nature of such income and capital gains.
WHO MANAGES MY INVESTMENT IN THE FUND?
Except where shareholder action is required by law, all of the
authority of the Group is exercised under the direction of the Group's
Trustees, who are elected by the shareholders of the Group's funds and who are
empowered to elect officers and contract with and provide for the compensation
of agents, consultants and other professionals to assist and advise it in its
day-to-day operations. The Group will be managed in accordance with its
Declaration of Trust and the laws of Ohio governing business trusts.
The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of the Adviser or The Ohio Company receives any
compensation from the Group for acting as a Trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. The Adviser receives fees from the Group for acting
as investment adviser and manager and as dividend and transfer agent. The Ohio
Company receives no fees
- 23 -
<PAGE> 27
under its Distribution Agreement with the Group but may retain all or a portion
of the sales charge and may receive fees under the Distribution Plan discussed
below.
INVESTMENT ADVISER
Cardinal Management Corp. (the "Adviser"), 155 East Broad Street,
Columbus, Ohio 43215, a wholly owned subsidiary of The Ohio Company, is the
investment adviser and manager of the Fund. The Adviser is also the investment
adviser and manager of each of the other Cardinal Funds.
The Ohio Company, an investment banking firm organized in 1925, is a
member of the New York Stock Exchange, the Midwest Stock Exchange, other
regional stock exchanges and the National Association of Securities Dealers,
Inc. Descendants of H.P. and R.F. Wolfe, deceased, and members of their
families, through their possession of a majority of a voting stock, may be
considered controlling persons of The Ohio Company.
In its capacity as investment adviser, and subject to the ultimate
authority of the Group's Board of Trustees, the Adviser, in accordance with the
Fund's investment objectives and policies, manages the Fund, and makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities. Since 1989, John L. Schlater has been primarily
responsible for the day-to-day management of the Fund's portfolio. Mr.
Schlater has been a portfolio manager with and an officer of the Adviser and
The Ohio Company since 1986. In addition, pursuant to the Investment Advisory
Agreement, the Adviser generally assists in all aspects of the Fund's
administration and operation.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Group with respect to the Fund, the
Adviser receives a fee from the Fund, computed daily and paid monthly at the
annual rate of .60% of average net daily assets of the Fund.
DIVIDEND AND TRANSFER AGENT AND FUND ACCOUNTANT
The Group has entered into a Transfer Agency and Fund Accounting
Agreement with Cardinal Management Corp. (the "Transfer Agent"), 215 East
Capital Street, Columbus, Ohio 43215, pursuant to which the Transfer Agent has
agreed to act as the Fund's transfer agent and dividend disbursing agent. In
consideration of such services, the Fund has agreed to pay the Transfer Agent
an annual fee, paid monthly, equal to $18 per shareholder account plus
out-of-pocket expenses. In addition, the Transfer Agent provides certain fund
accounting services for the Fund. The Transfer Agent receives a fee from the
Fund for such services equal to a fee computed daily
- 24 -
<PAGE> 28
and paid periodically at an annual rate of .03% of the Fund's average daily net
assets.
DISTRIBUTOR
The Group has entered into a Distributor's Contract with The Ohio
Company, 155 East Broad Street, Columbus, Ohio 43215, pursuant to which Shares
of the Fund will be offered continuously on a best efforts basis by The Ohio
Company and dealers selected by The Ohio Company. H. Keith Allen is an
officer and trustee of the Group and an officer and director of The Ohio
Company. Frank W. Siegel is an officer and trustee of the Group and an officer
of The Ohio Company. Barry C. McMahon, John Bevilacqua, David C. Will and
James M. Schrack II are officers of both the Group and The Ohio Company.
EXPENSES
The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager, transfer agent and fund accountant
other than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund will bear the following expenses relating to
its operations: organizational expenses, taxes, interest, any brokerage fees
and commissions, fees and expenses of the Trustees of the Group, Commission
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to the Fund's current
shareholders, outside auditing and legal expenses, advisory fees, fees and
out-of-pocket expenses of the custodian and Transfer Agent, costs for
independent pricing services, certain insurance premiums, costs of maintenance
of the Group's existence, costs of shareholders' reports and meetings,
distribution expenses incurred pursuant to the Distribution and Shareholder
Service Plan described below, and any extraordinary expenses incurred in the
Fund's operation.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which the Fund is
authorized to pay or reimburse The Ohio Company, as the Fund's principal
underwriter, a periodic amount calculated at an annual rate not to exceed
twenty-five one-hundredths of one percent (.25%) of the average daily net asset
value of the Fund. Such amount may be used by The Ohio Company to pay
broker-dealers (including The Ohio Company), banks and other institutions (a
"Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between The Ohio Company and the
Participating Organization or for distribution assistance and/or shareholder
service provided by The Ohio Company
- 25 -
<PAGE> 29
pursuant to an agreement between The Ohio Company and the Group. Under the
Plan, a Participating Organization may include The Ohio Company, its
subsidiaries, and its affiliates. The Ohio Company may from time to time
waive all or a portion of the fees payable to it pursuant to the Plan. Any
such waiver will cause the total return of the Fund to be higher than it would
otherwise be absent such a waiver.
As authorized by the Plan, The Ohio Company has entered into a Rule
12b-1 Agreement with the Group pursuant to which The Ohio Company has agreed to
provide certain shareholder services in connection with Shares of the Fund
purchased and held by The Ohio Company for the accounts of its customers and
Shares of the Fund purchased and held by customers of The Ohio Company
directly, including, but not limited to, answering shareholder questions
concerning the Fund, providing information to shareholders on their investments
in the Fund and providing such personnel and communication equipment as is
necessary and appropriate to accomplish such matters. In consideration of such
services the Group has agreed to pay The Ohio Company a monthly fee, computed
at the annual rate of .25% of the average aggregate net asset value of Shares
held during the period in customer accounts for which The Ohio Company has
provided services under this Agreement. Such fees paid by the Group will be
borne solely by the Fund. Such fee may exceed the actual costs incurred by The
Ohio Company in providing such services.
In addition, The Ohio Company may enter into, from time to time, other
Rule 12b-1 Agreements with selected dealers pursuant to which such dealers will
provide certain shareholder services such as those described above.
CUSTODIAN
The Group has appointed The Fifth Third Bank ("Fifth Third") 38
Fountain Square Plaza, Cincinnati, Ohio 45263, as the Fund'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 Fund.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
The Group was organized as an Ohio business trust on March 23, 1993.
The Group currently consists of six funds, each having its own class of shares.
The other funds of the Group are Cardinal Balanced Fund, Cardinal Aggressive
Growth Fund, Cardinal Government Obligations Fund, Cardinal Government
Securities Money Market Fund and Cardinal Tax Exempt Money Market Fund. Each
share represents an equal proportional interest in a fund with other shares of
the same fund, and is entitled to such dividends and distributions out
- 26 -
<PAGE> 30
of the income earned on the assets belonging to that fund as are declared at
the discretion of the Trustees.
Shareholders are entitled to one vote for each dollar of value
invested and a proportionate fractional vote for any fraction of a dollar
invested, and will vote in the aggregate and not by series except as otherwise
expressly required by law. For example, shareholders of the Fund will vote in
the aggregate with other shareholders of the Group with respect to the election
of trustees and ratification of the selection of independent accountants.
However, shareholders of the Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of amendments to
the Fund's investment advisory agreement, the Plan or any of the Fund's
fundamental policies.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUND?"
Individual Trustees are elected by the shareholders of the Group and may be
removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and Ohio law.
See "ADDITIONAL INFORMATION - Miscellaneous" in the Statement of Additional
Information for further information.
An annual or special meeting of shareholders to conduct necessary
business is not required by the Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Declaration of Trust, approve the investment advisory agreement and to satisfy
certain other requirements. To the extent that such a meeting is not required,
the Group may elect not to have an annual or special meeting.
The Group has represented to the Commission that the Trustees will
call a special meeting of shareholders for purposes of considering the removal
of one or more Trustees upon written request thereof from shareholders holding
not less than 10% of the outstanding votes of the Group and that the Group will
assist in communications with other shareholders as required by Section 16(c)
of the 1940 Act. At such meeting, a quorum of shareholders (constituting a
majority of votes attributable to all outstanding shares of the Group), by
majority vote, has the power to remove one or more Trustees.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by
the fund upon the issuance or sale of shares in that fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds,
- 27 -
<PAGE> 31
and any general assets of the Group not readily identified as belonging to a
particular fund that are allocated to the fund by the Group's Board of
Trustees. The Board of Trustees may allocate such general assets in any manner
it deems fair and equitable. Determinations by the Board of Trustees of the
Group as to the timing of the allocation of general liabilities and expenses
and as to the timing and allocable portion of any general assets with respect
to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of the Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser
of (a) 67% or more of the votes of shareholders of the Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of shareholders of
the Fund.
Shareholders should direct all inquiries concerning such matters to
the Transfer Agent in writing to 215 East Capital Street, Columbus, Ohio 43215,
or by calling (800) 282-9446.
Shareholders will receive unaudited semi-annual reports describing the
investment operations of the Fund and annual financial reports audited by
independent auditors.
- 28 -
<PAGE> 32
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 Plaza
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
- 29 -
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
____________
Page
---- PROSPECTUS
PROSPECTUS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ____________
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHAT IS THE FUND? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND? . . . . . . . . . . . . . . . . . . . 7
HOW DO I PURCHASE SHARES OF THE FUND? . . . . . . . . . . . . . . . . . . 12 January __, 1996
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND? . . . . . . . . . . . . . . . . . . . . 14
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS? . . . . . . . . . . . . . . . . 15
WHAT DISTRIBUTIONS WILL I RECEIVE? . . . . . . . . . . . . . . . . . . . 16
HOW MAY I REDEEM MY SHARES? . . . . . . . . . . . . . . . . . . . . . . . 17
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? . . . . . . . . . . . . . . 19 THE OHIO COMPANY
HOW IS NET ASSET VALUE CALCULATED? . . . . . . . . . . . . . . . . . . . 21
DOES THE FUND PAY FEDERAL INCOME TAX? . . . . . . . . . . . . . . . . . . 22
WHAT ABOUT MY TAXES? . . . . . . . . . . . . . . . . . . . . . . . . . . 22
WHO MANAGES MY INVESTMENT IN THE FUND? . . . . . . . . . . . . . . . . . 23
WHAT ARE MY RIGHTS AS A SHAREHOLDER? . . . . . . . . . . . . . . . . . . 26 THE CARDINAL
FUND
________________
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in
this Prospectus, in connection with the offer contained in this Prospectus [LOGO]
and, if given or made, such other information or representations must not be CARDINAL FUNDS
relied upon as having been authorized by the Fund, the Adviser, or The Ohio
Company. This Prospectus does not constitute an offer by the Fund or by The
Ohio Company to sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful for the
Fund to make such an offer in such jurisdiction.
</TABLE>
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<PAGE> 34
CARDINAL GOVERNMENT OBLIGATIONS FUND
Cross Reference Sheet Required By
Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
1.(a)(i) ......................... Cover Page
(ii) ......................... Cover Page
(iii) ......................... Cover Page
(iv) ......................... Cover Page
(v) ......................... Cover Page
(vi) ......................... *
(vii)......................... *
(b) ............................ *
2.(a)(i) ......................... "Fee Table"
(ii) ......................... *
(b) ............................ "Prospectus Highlights"
(c) ............................ "Prospectus Highlights"
3.(a) ............................ *
(b) ............................ *
(c) ............................ "Performance Information"
(d) ............................ "Performance Information"
4.(a)(i)(A) ...................... "What Is The Fund?"
(i)(B) ...................... "What Is The Fund?"
(ii) ......................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(A) ...................... *
(ii)(B)(1) ................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(B)(2) ................... *
(ii)(C) ...................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(D) ...................... "What Are The Investment Objectives And Policies Of The Fund?"
(b)(i) ......................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii) ......................... "What Are The Investment Objectives And Policies Of The Fund?"
(c) ............................ "What Are The Investment Objectives and Policies Of The Fund?"
5.(a) ............................ "Who Manages My Investment In The Fund?"
(b)(i) ......................... "Who Manages My Investment In The Fund?"
(b)(ii) ........................ "Who Manages My Investment In The Fund?"
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
- i -
<PAGE> 35
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
(b)(iii) ....................... "Who Manages My Investment In The Fund?"
(c) ............................ "Who Manages My Investment In The Fund?"
(d) ............................ "Who Manages My Investment In The Fund?"
(e) ............................ "Who Manages My Investment In The Fund?"
(f) ............................ "Who Manages My Investment In The Fund?"
(g)(i)(A) ...................... *
(g)(i)(B) ...................... *
(g)(i)(C) ...................... *
(g)(ii) ........................ *
5A.(a) ........................... *
(b) ............................ *
(c) ............................ *
6.(a) ............................ "What Are My Rights As A Shareholder?"
(b) ............................ "What Are My Rights As A Shareholder?"
(c) ............................ *
(d) ............................ "What Are My Rights As A Shareholder?"
(e) ............................ "What Are My Rights As A Shareholder?"; "Who Provides Shareholder Reports?"
(f) ............................ "What Distributions Will I Receive?"
(g) ............................ "Does The Fund Pay Federal Income Tax?"; "What About My Taxes?"
7.(a) ............................ "How Do I Purchase Shares Of The Fund?"
(b) ............................ "How Do I Purchase Shares Of The Fund?"; "How Is Net Asset Value Calculated?"
(c) ............................ "May My Tax Sheltered Retirement Plan Invest In The Fund?"; "How May I Qualify
For Quantity Discounts?"
(d) ............................. "How Do I Purchase Shares Of The Fund?"
(e) ............................. "Who Manages My Investment In The Fund?"
(f) ............................. "Who Manages My Investment In The Fund?"
8.(a) ............................. "How May I Redeem My Shares?"
(b) ............................. "How May I Redeem My Shares?"
(c) ............................. "How May I Redeem My Shares?"
(d) ............................. "How May I Redeem My Shares?"
9. ............................... *
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
- ii -
<PAGE> 36
PROSPECTUS
CARDINAL GOVERNMENT OBLIGATIONS FUND
Cardinal Government Obligations Fund (the "Fund") is a diversified
investment fund of The Cardinal Group (the "Group"), an open-end, management
investment company. The Trustees of the Group have divided the Fund's
beneficial ownership into an unlimited number of transferable units called
shares (the "Shares").
The Fund seeks as its investment objectives to maximize safety of
capital and, consistent with such objective, earn the highest available current
income obtainable from government securities. The current income earned from
such government securities may not be as great as the current income earned on
lower quality securities which have less liquidity and greater risk of
nonpayment. There can be no assurance that the Fund's objectives will be
achieved.
THE SHARES OF THE FUND 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.
_______________________________________________________________________________
For further information regarding the Fund or for
assistance in opening an account or redeeming Shares,
please call (800) 282-9446 toll free.
Inquiries may also be made by mail addressed
to the Fund at its principal office:
155 East Broad Street
Columbus, Ohio 43215
_______________________________________________________________________________
The Prospectus relates only to Cardinal Government Obligations Fund,
currently one of six funds of the Group. Interested persons who wish to obtain
copies of the prospectus of The Cardinal Fund, Cardinal Government Securities
Money Market Fund, Cardinal Tax Exempt Money Market Fund, Cardinal Balanced
Fund or Cardinal Aggressive Growth Fund, the other funds of the Group
(collectively, with the Fund, the "Cardinal Funds"), should contact The Ohio
Company at the number above. Additional information about the Fund, contained
in a Statement Of Additional Information, dated as of January __, 1996, 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 Fund at the above address or by calling the phone number provided
above.
- 1 -
<PAGE> 37
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing in the Fund. This
Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "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 January __, 1996.
- 2 -
<PAGE> 38
PROSPECTUS HIGHLIGHTS
INVESTMENT OBJECTIVES . . . . The Fund seeks to maximize safety of capital and,
consistent with such objective, earn the highest
available current income obtainable from
government securities. (See page __.)
INVESTMENT POLICIES . . . . . Under normal market conditions, the Fund invests
substantially all but in no event less than 65%
of its total assets in obligations issued or
guaranteed by the U.S. Government, its agencies
or instrumentalities and repurchase agreements
secured by securities of the U.S. Government.
Under present market conditions, the Fund expects
to invest a substantial amount of its portfolio
in Ginnie Mae certificates. These investments
entail certain risks. (See page __.)
PURCHASES . . . . . . . . . . There is a minimum initial investment of $1,000
with subsequent minimums of $50. (See page __.)
Purchases are made at the public offering price
which is equal to net asset value per share plus
a sales charge. This charge is equal to 4.50% of
the public offering price (4.71% of net amount
invested) reduced on investments of $100,000 or
more (see page __) and waived for certain
purchasers for whom The Ohio Company serves as a
trustee or investment adviser. (See page __.)
REDEMPTIONS . . . . . . . . . Shares can be redeemed at net asset value per
share without charge, if redeemed through the
Fund's distributor, The Ohio Company. (See
page __.)
RISK FACTORS AND SPECIAL
CONSIDERATIONS . . . . . An investment in a mutual fund such as the Fund
involves a certain amount of risk and may not be
- 3 -
<PAGE> 39
suitable for all investors. Some investment
policies of the Fund may entail certain risks.
(See "WHAT ARE THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND? -- Risk Factors and
Investment Techniques" on page ___.)
INVESTMENT ADVISER . . . . . . Cardinal Management Corp. (the "Adviser"), a
wholly-owned subsidiary of The Ohio Company, is
the Fund's investment adviser. The Adviser
also serves as investment adviser for The
Cardinal Fund, Cardinal Government Securities
Money Market Fund, Cardinal Tax Exempt Money
Market Fund, Cardinal Balanced Fund and
Cardinal Aggressive Growth Fund. (See page __.)
DIVIDENDS . . . . . . . . . . . Dividends are declared daily and distributions
are generally made monthly as the Fund shall
determine. Long-term capital gains, if any,
are distributed annually. (See page__.)
- 4 -
<PAGE> 40
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 4.50%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .50%
12b-1 Fees After Fee Waiver(1) 0
Other Expenses(2) .24
----
Total Fund Operating Expenses After Fee Waiver .74%
====
EXAMPLE 1 Year 3 Years
------ -------
[S] [C] [C]
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $52 $68
____________________
1 The Ohio Company, as the Fund's distributor, has agreed with the
Group to waive all of its Rule 12b-1 fees until September 30, 1996. Absent
such waiver, Rule 12b-1 Fees and Total Fund Operating Expenses would be 0.25%
and 0.99%, respectively.
2 "Other Expenses" are based upon estimated amounts for the current
fiscal year.
The purpose of the above table is to assist a potential purchaser of
the Fund's Shares in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. See "WHO MANAGES MY
INVESTMENT IN THE FUND?" for a more complete discussion of the shareholder
transaction expenses and annual operating expenses of the Fund. THE FOREGOING
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
__________________
PERFORMANCE INFORMATION
From time to time the Fund may advertise its average annual total
return, cumulative return and/or yield. SUCH RETURN AND YIELD FIGURES ARE
BASED UPON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The average annual total return advertised by the Fund refers to
the return generated by an
- 5 -
<PAGE> 41
investment in the Fund over certain specified periods since the establishment
of the Fund. The average annual total return over a period equates the amount
of an initial investment in the Fund to the amount redeemable at the end of
that period assuming that any dividends and distributions earned by an
investment in the Fund are immediately reinvested and the maximum applicable
sales charge (currently 4.5%) is deducted from the initial investment at the
time of investment. Such figure is then annualized. The cumulative return
advertised refers to the total return on a hypothetical investment over the
relevant period and equates the amount of an initial investment in the Fund to
the amount redeemable at the end of that period assuming that any dividends and
distributions are immediately reinvested and the maximum sales charge is
deducted from the initial investment. Yield will be computed by dividing the
Fund's net investment income per share earned during a recent one-month period
by the Fund's per share maximum offering price (reduced by any undeclared
earned income expected to be paid shortly as a dividend) on the last day of the
period and annualizing the result. If the sales charge were not deducted, the
average annual total return, cumulative return and yield advertised would be
higher.
In addition, from time to time the Fund may include in its sales
literature and shareholder reports a quote of the current "distribution" rate
for the Fund. A distribution rate is simply a measure of the level of
dividends distributed for a specified period and is computed by dividing the
total amount of dividends per share paid by the Fund during the past 12 months
by a current maximum offering price. It differs from yield, which is a measure
of the income actually earned by the Fund's investments, and from total return,
which is a measure of the income actually earned by, plus the effect of any
realized and unrealized appreciation or depreciation of, such investments
during a stated period. A distribution rate is, therefore, not intended to be
a complete measure of performance. A distribution rate may sometimes be
greater than yield since, for instance, it may include short-term and possibly
long-term gains (which may be non-recurring), may not include the effect of
amortization of bond premiums and does not reflect unrealized gains or losses.
Investors may also judge the performance of the Fund by comparing or
referencing 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., Morningstar, Inc. and CDA Investment Technologies,
Inc. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, The
Columbus Dispatch, Business Week,
- 6 -
<PAGE> 42
U.S.A. Today and Consumer Reports. In addition to performance information,
general information about the Fund that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
shareholders.
Further information about the performance of the Fund is contained in
the Fund's Annual Report to Shareholders which may be obtained without charge
by contacting the Fund at the telephone number set forth on the cover page of
this Prospectus.
WHAT IS THE FUND?
The Fund is one separate diversified investment fund of the Group,
which was organized on March 23, 1993, as an Ohio business trust. The Group is
registered and operates as an open-end management investment company as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
has been organized for the purpose of acquiring all of the assets and
liabilities of Cardinal Government Obligations Fund ("CGOF") to effect a
reorganization of CGOF from a stand-alone investment company to a separate
series of the Group.
The Fund is designed for individuals, corporations, fiduciaries, and
institutions who wish to invest for current income in a diversified,
professionally managed portfolio of securities issued by the U.S. Government
and securities directly guaranteed by the full faith and credit of the U.S.
Government -- without having to become involved in the detailed accounting and
safekeeping procedures normally associated with direct investment in these
securities.
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?
IN GENERAL
The Fund's investment objectives are to maximize safety of capital
and, consistent with such objective, earn the highest available current income
obtainable from government securities. The current income earned from such
government securities may not be as great as the current income earned on lower
quality securities which have less liquidity and greater risk of nonpayment.
The Fund's investment objectives are a fundamental policy of the Fund,
which means that they may be changed only with the approval of a majority of
the outstanding Shares of the Fund (as defined below under "WHAT ARE MY RIGHTS
AS A SHAREHOLDER?). There can be no assurance that the investment objectives
of the Fund will be achieved.
- 7 -
<PAGE> 43
Under normal market conditions, the Fund will invest substantially
all, but in no event less than 65% of the value of its total assets, in
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities"). The Fund may also invest,
under normal market conditions, in the fixed income instruments described below
and in repurchase agreements. It may also engage in the options transactions
described below.
The Fund may, for daily cash management purposes, invest in high
quality money market securities and in repurchase agreements. In addition, the
Fund may invest, without limit, in any combination of U.S. Government
Securities, money market securities and repurchase agreements when, in the
opinion of the Adviser, it is determined that a temporary defensive position is
warranted based upon current market conditions. The Fund may also invest in
securities of other investment companies, as described more fully below.
The types of U.S. Government Securities invested in by the Fund will
include obligations issued by or guaranteed as to payment of principal and
interest by the full faith and credit of the U.S. Treasury, such as Treasury
bills, notes, bonds and certificates of indebtedness, and obligations issued or
guaranteed by the agencies or instrumentalities of the U.S. Government, but not
supported by such full faith and credit. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as the Government National
Mortgage Association ("Ginnie Mae") and the Export-Import Bank of the United
States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the right of the issuer to borrow from the Treasury; others are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; still others, such as those of the Federal Farm Credit
Banks or the Federal Home Loan Mortgage Corporation, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
Government would provide financial support to U.S. Government sponsored
agencies or instrumentalities if it is not obligated to do so by law. The Fund
will invest in the obligations of such agencies or instrumentalities only when
the Adviser believes that the credit risk with respect thereto is minimal.
Certain securities held by the Fund may have mortgage obligations
backing such securities, including among others, conventional thirty year fixed
rate mortgage obligations, graduated payment mortgage obligations, fifteen year
mortgage obligations and adjustable rate mortgage obligations. All of these
mortgage obligations can be used to create pass-through securities. A
pass-through security is created when mortgage obligations are pooled
- 8 -
<PAGE> 44
together and undivided interests in the pool or pools are sold. The cash flow
from the mortgage obligations is passed through to the holders of the
securities in the form of periodic payments of interest, principal and
prepayments (net of a service fee). Prepayments occur when the holder of an
individual mortgage obligation prepays the remaining principal before the
mortgage obligation's scheduled maturity date. As a result of the pass-through
of prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Because the prepayment characteristics of the
underlying mortgage obligations vary, it is not possible to predict accurately
the realized yield or average life of a particular issue of pass-through
certificates. Prepayment rates are important because of their effect on the
yield and price of the securities. Accelerated prepayments have an adverse
impact on yields for pass-through certificates purchased at a premium (i.e., a
price in excess of principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the time the
obligation is repaid. The opposite is true for pass-through certificates
purchased at a discount. The Fund may purchase mortgage-related securities at
a premium or at a discount. Reinvestment of principal payments may occur at
higher or lower rates than the original yield on such securities. Due to the
prepayment feature and the need to reinvest payments and prepayments of
principal at current rates, mortgage-related securities can be less effective
than typical bonds of similar maturities at maintaining yields during periods
of declining interest rates.
Certain debt securities such as, but not limited to, mortgage backed
securities, as well as other securities subject to prepayment of principal
prior to the stated maturity date, are expected to be repaid prior to their
stated maturity dates. As a result, the effective maturity of these securities
is expected to be shorter than the stated maturity. For purposes of
calculating the Fund's weighted average portfolio maturity, the effective
maturity of such securities will be used.
Under present market conditions, the Fund expects to invest a
substantial amount of its portfolio in Ginnie Mae certificates, which are
mortgage-backed securities representing part ownership in a specific pool of
mortgage loans insured by the Federal Housing Administration or Farmers Home
Administration or guaranteed by the Veterans Administration. Should market or
economic conditions warrant, this practice may be changed at the discretion of
the Adviser. Ginnie Mae guarantees the timely payment of monthly installments
of principal and interest on its certificates, when due, whether or not
payments are received on the underlying mortgage loans, and the full faith and
credit of the United States
- 9 -
<PAGE> 45
is pledged to the timely payment by Ginnie Mae of such principal and interest.
Although the mortgage loans in the pool underlying a Ginnie Mae
certificate will have maturities of up to thirty years, the actual average life
of the Ginnie Mae certificates typically will be substantially less because the
mortgage loans will be subject to normal principal amortization and may be
prepaid prior to maturity. Prepayment rates vary widely and may be affected by
changes in market interest rates and general economic conditions. In periods
of falling interest rates, the rate of prepayment tends to increase, thereby
shortening the actual average life of the Ginnie Mae certificates and
shortening the period of time over which income at the higher rate is received.
Conversely, when interest rates are rising, the rate of prepayment tends to
decrease, thereby lengthening the actual average life of the Ginnie Mae
certificates and extending the period of time over which income at the lower
rates is received. Accordingly, it is not possible to accurately predict the
average life of a particular pool. Standard practice is to treat Ginnie Mae
certificates as having effective maturities of twelve years. Reinvestment of
principal payments may occur at higher or lower rates than the original yield
on the certificates. Due to the prepayment feature and the need to reinvest
payments and prepayments of principal at current rates, Ginnie Mae certificates
can be less effective than typical bonds of similar maturities at maintaining
yields during periods of declining interest rates.
RISK FACTORS AND INVESTMENT TECHNIQUES
GENERAL. Like any investment program, an investment in the Fund
entails certain risks. The value of the Fund's portfolio securities, and
therefore the Fund's net asset value per share, may increase or decrease due to
various factors, principally changes in prevailing interest rates. Generally,
a rise in interest rates will result in a decrease in the Fund's net asset
value per share, while a drop in interest rates will result in an increase in
the Fund's net asset value per share.
The Fund may invest in put and call options and futures, as described
below. Such instruments are 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. The Fund will not invest more than 10% of its total
assets in such derivatives at any one time.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of the repurchase agreement, the Fund
would acquire securities from a financial institution such as a
well-established securities dealer or a bank
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<PAGE> 46
which is a member of the Federal Reserve System which the Adviser deems
creditworthy under guidelines approved by the Group's Board of Trustees. At the
time of purchase, the bank or securities dealer agrees to repurchase the
underlying securities from the Fund at a specified time and price. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the underlying security.
The Fund will only enter into a repurchase agreement where (i) the underlying
securities are of the type which the Fund's investment policies 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 Fund's custodian or a bank acting as agent. The Adviser will be
responsible for continuously monitoring such requirements.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. The Fund may also
purchase securities on a when-issued or delayed-delivery basis. The Fund will
engage in when-issued and delayed-delivery transactions only for the purpose of
acquiring portfolio securities consistent with its investment objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. The Fund will
not pay for such securities or start earning interest on them until they are
received. When the Fund agrees to purchase such securities, its custodian will
set aside cash or liquid securities equal to the amount of the commitment in a
separate account. Securities purchased on a when-issued basis are recorded as
an asset and are subject to changes in the value based upon changes in the
general level of interest rates. In when-issued and delayed-delivery
transactions, the Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause the Fund to miss a price or yield
considered to be advantageous.
The Fund's commitments to purchase when-issued securities will not
exceed 25% of the value of its total assets absent unusual market conditions.
In the event that its commitments to purchase when-issued securities ever
exceed 25% of the value of its assets, the Fund's liquidity and the ability of
the Adviser to manage it might be adversely affected.
PUT AND CALL OPTIONS. Subject to its investment policies and for
purposes of hedging against market risks related to its portfolio securities,
the Fund may purchase put and call options on securities. Purchasing options
is a specialized investment
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<PAGE> 47
technique that entails a substantial risk of a complete loss of the amounts
paid as premiums to writers of options. The Fund will purchase put options
only on securities in which the Fund may otherwise invest. The Fund may also
engage in writing call options from time to time as the Adviser deems
appropriate. The Fund will write only covered call options (options on
securities owned by the Fund). In order to close out a call option it has
written, the Fund will enter into a "closing purchase transaction" -- the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which the Fund previously has written. When
a portfolio security subject to a call option is sold, the Fund will effect a
closing purchase transaction to close out any existing call option on that
security. If the Fund is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the option expires or
the Fund delivers the underlying security upon exercise. Under normal market
conditions, it is not expected that the underlying value of portfolio
securities subject to such options would exceed 25% of the net assets of the
Fund.
The Fund, as part of its option transactions, also may purchase index
put and call options and write index options. As with options on individual
securities, the Fund will write only covered index call options. Through the
writing or purchase of index options the Fund can achieve many of the same
objectives as through the use of options on individual securities. Options on
securities indices are similar to options on a security except that, rather
than the right to take or make delivery of a security at a specified price, an
option on a securities index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
Price movements in securities which the Fund owns or intends to
purchase probably will not correlate perfectly with movements in the level of
an index and, therefore, the Fund bears the risk of a loss on an index option
that is not completely offset by movements in the price of such securities.
Because index options are settled in cash, a call writer cannot determine the
amount of its settlement obligations in advance and, unlike call writing on
specific securities, cannot provide in advance for, or cover, its potential
settlement obligations by acquiring and holding the underlying securities. The
Fund may be required to segregate assets or provide an initial margin to cover
index options that would require it to pay cash upon exercise.
FUTURES CONTRACTS. The Fund may also enter into contracts for the
future delivery of securities and futures contracts based on a specific
security, class of securities or an index, purchase or
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<PAGE> 48
sell options on any such futures contracts and engage in related closing
transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
The Fund may engage in such futures contracts in an effort to hedge
against market risks. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, the Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market
values are expected to rise, the Fund, through the purchase of such contracts,
can attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give the Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Aggregate initial margin deposits for futures contracts, and premiums
paid for related options, may not exceed five percent of the Fund's total
assets, and the value of securities that are the subject of such futures and
options (both for receipt and delivery) may not exceed one-third of the market
value of the Fund's total assets. Futures transactions will be limited to the
extent necessary to maintain the Fund's qualification as a regulated investment
company.
Futures transactions involve brokerage costs and require the Fund to
segregate assets to cover contracts that would require it to purchase
securities. The Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of
the Fund's futures positions may not prove to be perfectly or even highly
correlated with the value of its portfolio securities, limiting the Fund's
ability to hedge effectively against interest rate and/or market risk and
giving rise to additional risks. There is no assurance of liquidity in the
secondary market for purposes of closing out futures positions.
INVESTMENT COMPANY SECURITIES. The Fund 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 Fund intends to
invest in the securities of other
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<PAGE> 49
investment companies which, in the opinion of the Adviser, will assist the Fund
in achieving its objectives and in money market mutual funds for purposes of
short-term cash management. The Fund'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
Fund's investments in other investment companies, see "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Information on Portfolio Instruments -- Securities
of Other Investment Companies" in the Fund's Statement of Additional
Information.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of the Fund (as
defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
The Fund will not:
1. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, if, immediately after such purchase,
more than 5% of the value of the Fund's total assets would be invested
in such issuer, or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that up to 25% of
the value of the Fund's total assets may be invested without regard to
such limitations. There is no limit to the percentage of assets that
may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than
25% of the value of the Fund's total assets at the time of purchase to
be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that:
(a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a
separate industry.
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<PAGE> 50
3. Borrow money or issue senior securities, except that
the Fund may borrow from banks or enter into reverse repurchase
agreements or dollar roll agreements for temporary purposes in amounts
up to 10% of the value of its total assets at the time of such
borrowing and except as permitted pursuant to an exemption from the
1940 Act. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements and dollar roll agreements)
exceed 5% of its total assets.
4. Make loans, except that the Fund may purchase or hold
debt instruments and lend portfolio securities in accordance with its
investment objectives and policies, make time deposits with financial
institutions and enter into repurchase agreements.
The following additional investment restriction may be changed without
the vote of a majority of the outstanding Shares of the Fund. The Fund may
not:
1. Purchase or otherwise acquire any securities, if as a
result, more than 15% of the Fund's net assets would be invested in
securities that are illiquid.
HOW DO I PURCHASE SHARES OF THE FUND?
GENERAL
The Fund's Shares may be purchased at the public offering price, as
described below under "Public Offering Price," through The Ohio Company,
principal underwriter of the Fund's Shares, at its address and telephone number
set forth on the cover page of this Prospectus, and through other
broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with The Ohio Company.
Subsequent purchases of Shares of the Fund may be made by ACH
processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -
ACH Processing" below. In addition, if an Account Information Form has
previously been received by The Ohio Company, Shares may also be purchased by
wiring funds to the Fund's custodian. Prior to wiring any such funds and to in
order to ensure that wire orders are invested properly, you must call The Ohio
Company to obtain the necessary instructions and information.
The minimum initial investment for individuals is $1,000, except the
initial investment for an applicant investing by means of the Automatic
Investment Plan, as described below, must be at least $50. Subsequent
investments must be in amounts of at least $50.
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<PAGE> 51
The Group reserves the right to reject any order for the purchase of
Shares in whole or in part. You will receive a confirmation of each new
transaction in your account, which will also show the total number of Shares
owned by you and the number of Shares being held in safekeeping by Cardinal
Management Corp., as the Fund's transfer agent (the "Transfer Agent"), for your
account. Certificates representing Shares will not be issued.
PUBLIC OFFERING PRICE
The public offering price of Shares of the Fund is the net asset value
per share (see "HOW IS NET ASSET VALUE CALCULATED?") next determined after
receipt by The Ohio Company, its agents or broker-dealers with whom it has an
agreement, of an order and payment, plus a sales charge as follows:
Sales Charge As a Percentage
as a of Offering Price
Percentage -----------------
Amount of of the Net Sales Dealer's
Single Transaction Amount Invested Charge Concession
------------------ --------------- ------ ----------
Less than $100,000 4.71% 4.50% 4.00%
$100,000 but less than $250,000 3.63 3.50 3.00
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 1.52 1.50 1.00
$1,000,000 or more 0.50 0.50 0.40
(See "HOW IS NET ASSET VALUE CALCULATED?" for a description of the
computation of net asset value per share.)
The above charges on investments of $100,000 or more are applicable to
purchases made at one time by an individual, or an individual, his spouse and
their children not of legal age, or a trustee, guardian or other like fiduciary
of certain single trust estates or certain single fiduciary accounts.
No sales charge is imposed on purchases of Shares by (1) officers,
trustees, and employees of the Group, (2) full-time employees of The Ohio
Company or the Adviser who have been such for at least 90 days or by qualified
retirement plans for such persons, or (3) accounts or trusts which are managed
and advised in whole or in part by The Ohio Company or the Adviser.
From time to time, The Ohio Company, from its own resources, may also
provide additional compensation to securities dealers in connection with sales
of Shares of the Cardinal Funds. Such compensation will include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales
- 16 -
<PAGE> 52
campaigns and/or shareholder services and programs regarding one or more of the
Cardinal Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Cardinal Funds. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Securities dealers may not use sales of the Fund's Shares to qualify
for this compensation to the extent such may be prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. In addition, The Ohio Company may make ongoing
payments to brokerage firms, financial institutions (including banks) and
others to facilitate the administration and servicing of shareholder accounts.
None of the aforementioned additional compensation is paid for by the Fund or
its shareholders.
AUTOMATIC INVESTMENT PLAN
The Fund 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 Fund on
the periodic basis you select. Confirmation of your purchase of Fund Shares
will be provided by the Transfer Agent. The debit of 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.
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND?
Shares of the Fund qualify for purchase in connection with the
following tax sheltered retirement plans:
-- Individual retirement account ("IRAs") plans
-- Simplified Employee Pension Plans
-- 403(b)(7) Custodial Plans sponsored by certain tax-exempt employers
-- Pension, profit-sharing and 401(k) plans qualifying under
Section 401(a) of the Internal Revenue Code
- 17 -
<PAGE> 53
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?
LETTER OF INTENTION
If you (including your spouse and children not of legal age) intend to
purchase $100,000 or more of Shares of the Fund and of any other Cardinal Fund
sold with a sales charge (a "Cardinal Load Fund") during any 13-month period
you may sign a letter of intention to that effect obtained from The Ohio
Company and pay the reduced sales charge applicable to the total amount of
Shares to be so purchased. The 13-month period during which the Letter of
Intention is in effect will begin on the date of the earliest purchase to be
included. In addition, trustees, guardians or other like fiduciaries of single
trust estates or certain single fiduciary accounts may take advantage of the
quantity discounts pursuant to a letter of intention.
A letter of intention is not a binding obligation upon you to purchase
the full amount indicated. Shares purchased with the first 5% of such amount
will be held in escrow (while remaining registered in your name) to secure
payment of the higher sales charge applicable to the Shares actually purchased.
If the full amount indicated is not purchased, such escrowed Shares will be
involuntarily redeemed to pay the additional sales charge, if necessary.
Dividends on escrowed Shares, whether paid in cash or reinvested in additional
Shares of the applicable Cardinal Load Fund, are not subject to escrow. The
escrowed Shares will not be available for disposal by you until all purchases
pursuant to the letter of intention have been made or the higher sales charge
has been paid. When the full amount indicated has been purchased, the escrow
will be released. To the extent that you purchase more than the dollar amount
indicated on the Letter of Intention and qualify for a further reduced sales
charge, the sales charge will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in sales charge will be, as you
instruct, either delivered to you in cash or used to purchase additional Shares
of the Cardinal Load Fund designated by you subject to the rate of sales charge
applicable to the actual amount of the aggregate purchases. This program,
however, may be modified or eliminated at any time or from time to time by the
Group without notice.
CONCURRENT PURCHASES
For purposes of qualifying for a lower sales charge, you have the
privilege of combining "concurrent purchases" of Shares of the Fund and of one
or more of the other Cardinal Load Funds. For example, if you concurrently
purchase Shares of the Fund at the total public offering price of $50,000 and
shares of another Cardinal Load Fund at the total public offering price of
$50,000,
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<PAGE> 54
the sales charge would be that applicable to a $100,000 purchase as shown in
the table above. "Concurrent purchases," as described above, shall include the
combined purchases of you, your spouse and your children not of legal age. To
receive the applicable public offering price pursuant to this privilege, you
must, at the time of purchase, give The Ohio Company sufficient information to
permit confirmation of qualification. This privilege, however, may be modified
or eliminated at any time or from time to time by the Group without notice
thereof.
RIGHTS OF ACCUMULATION
After your initial purchase of Shares you may also be eligible to pay
a reduced sales charge for your subsequent purchases of Shares where the total
public offering price of Shares then being purchased plus the then aggregate
current net asset value of Shares of the Fund and of shares of any Cardinal
Load Fund held in your account equals $100,000 or more. You would be able to
purchase Shares at the public offering price applicable to the total of (a) the
total public offering price of the Shares of the Fund then being purchased plus
(b) the then current net asset value of Shares of the Fund and of shares of any
other Cardinal Load Fund held in your account. For purposes of determining the
aggregate current net asset value of Shares held in your account, you may
include Shares then owned by your spouse and children not of legal age.
You may obtain additional information about the foregoing special
purchase method from The Ohio Company. You are responsible for notifying The
Ohio Company at the time of purchase when purchases may be accumulated to take
advantage of the reduced sales charge. This program, however, may be modified
or eliminated at any time or from time to time by the Group without notice
thereof.
WHAT DISTRIBUTIONS WILL I RECEIVE?
A dividend consisting of net income is declared daily to Shareholders
of the Fund at the close of business on the day of declaration, and such
dividends are generally paid monthly. Dividends consisting of long-term
capital gains normally will be distributed only once annually. Dividends and
distributions will be paid only in additional Shares and not in cash; except,
however, that for dividends and distributions of $10 or more, a shareholder may
specifically request that such amounts be paid to him in cash. Dividends are
paid in cash not later than seven days after a shareholder's complete
redemption of his Shares in the Fund.
Shareholders may also elect to receive dividends and distributions in
cash by using ACH processing as described under "WHAT OTHER SHAREHOLDER
PROGRAMS ARE PROVIDED? - ACH Processing" below.
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<PAGE> 55
HOW MAY I REDEEM MY SHARES?
Investors may redeem Shares of the Fund at the net asset value per
share next determined following the receipt by the Transfer Agent, 215 East
Capital Street, Columbus, Ohio 43215, of written or telephonic notice to
redeem, as described more fully 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 the Transfer Agent without charge.
Other broker-dealers may assist a shareholder in redeeming his Shares and may
charge a fee for such services.
The Group will make payment for redeemed Shares as promptly as
practicable but in no event more than seven days after receipt by the Transfer
Agent of the foregoing notice. The Group 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 Fund). The purchase of Fund Shares by wire transfer of federal
funds would avoid any such delay.
The Group intends to pay cash for all Shares redeemed, but, under
abnormal conditions which make payment in cash unwise, the Group may make
payment wholly or partly in portfolio securities at their then market value
equal to the redemption price. In such cases, an investor may incur brokerage
costs in converting such securities to cash.
The Group 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 Group reserves the
right to redeem, at net asset value, involuntarily Shares in any account at the
then current net asset value if at any time redemptions (but not as a result of
a decrease in the market price of such Shares or the deduction of any sales
charge) have reduced a shareholder's total investment in the Fund to a net
asset value below $500. A shareholder will be notified in writing that the
value of Fund Shares in the account is less than $500 and allowed 30 days to
increase his investment in the Fund to $500 before the redemption is processed.
Proceeds of redemptions so processed, including dividends declared to the date
of redemption, will be promptly paid to the shareholder.
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<PAGE> 56
REDEMPTION BY MAIL
Shareholders may elect to redeem Shares of the Fund by submitting a
written request therefor to the Transfer Agent, at 215 East Capital Street,
Columbus, Ohio 43215. The Transfer Agent 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. The Transfer Agent 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 Fund by calling the
Group 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.
Neither the Group, the Fund 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 Group's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Group will employ
procedures designed to provide reasonable assurances that instructions by
telephone are genuine; if these procedures are not followed, the Group, the
Fund 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.
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.
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<PAGE> 57
SYSTEMATIC WITHDRAWAL PLAN
If you are the owner of Shares of the Fund having a total value of
$25,000 or more at the current net asset value, you may elect to redeem your
Shares monthly or quarterly in amounts of $50 or more, pursuant to the Fund's
Systematic Withdrawal Plan. Please contact The Ohio Company for the
appropriate form.
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
ACH PROCESSING
The Fund offers ACH privileges. Investors may use ACH processing to
make subsequent purchases, redeem Shares and/or electronically transfer
distributions paid on Fund 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
Shareholders of the Fund 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 Fund for
shares of:
Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of
capital (upon the payment of the appli-
cable 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,
an equity fund seeking long-term growth
of capital and income (upon the payment of
the applicable sales charge);
Cardinal Government Securities Money Market Fund,
a U.S. Government securities money market fund
(without payment of any sales charge); or
Cardinal Tax Exempt Money Market Fund,
a tax-free money market fund
(without payment of any sales charge).
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<PAGE> 58
Notwithstanding the foregoing and subject to the limitations contained
in the following paragraph, (i) exchanges by holders of Fund Shares, for whom
the sales charge has been waived, for shares of a Cardinal Load Fund may be
completed without the payment of a sales charge, and (ii) exchanges of Fund
Shares by all other shareholders for shares of a Cardinal Load Fund may be
completed upon the payment of a sales charge equal to the difference, if any,
between the sales charge payable upon purchase of shares of such Cardinal Load
Fund and the sales charge previously paid on the Fund Shares to be exchanged.
The foregoing exchange privilege 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. The 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 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 Fund by telephone. Neither the Group, the Fund
nor any of its service providers will be liable for 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. However, a shareholder may not include any sales charge on Shares of
the Fund for purposes of calculating the gain or loss realized upon an exchange
of those Shares within 90 days of their purchase.
The Group may, at any time, modify or terminate the foregoing exchange
privilege. The Group, however, will give shareholders of the Fund 60 days'
advance written notice of any such modification or termination.
HOW IS NET ASSET VALUE CALCULATED?
The net asset value of the Fund is determined once daily as of 4:00
P.M. Eastern Time, on each Business Day. A "Business Day" is a day on which
the New York Stock Exchange is open for business and any other day (other than
a day on which no Shares of the Fund are tendered for redemption and no order
to purchase any Shares of the Fund is received) during which there is a
sufficient degree of trading in the Fund's portfolio securities that the net
asset value might be materially affected by changes in the value of the
portfolio securities. The net asset value per share of the Fund is
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<PAGE> 59
computed by dividing the sum of the value of the Fund's portfolio securities
plus any cash and other assets (including interest and dividends accrued but
not received) minus all liabilities (including estimated accrued expenses) by
the total number of Shares then outstanding.
The net asset value per share will fluctuate as the value of the
investment portfolio of the Fund changes.
Portfolio securities for which over-the-counter market quotations are
readily available are valued at the bid price. The Fund uses one or more
pricing services to provide such market quotations. Securities and other
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees of the Group.
Determination of the net asset value may be suspended at times when
(a) trading on the New York Stock Exchange is restricted by applicable rules
and regulations of the Commission, (b) the New York Stock Exchange is closed
for other than customary weekend and holiday closings, (c) an emergency exists
as a result of which disposal by the Group of portfolio securities owned by the
Fund or valuation of net assets of the Fund is not reasonably practicable, or
(d) the Commission has by order permitted such suspension.
DOES THE FUND PAY FEDERAL INCOME TAX?
Each of the funds of the Group, including the Fund, is treated as a
separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company" under the Code for so long as such qualification
is in the best interest of that fund's shareholders. Qualification as a
regulated investment 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. The Fund contemplates declaring as
dividends 100% of the Fund's investment company taxable income (before
deduction of dividends paid).
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
Fund would be subject to a nondeductible excise tax equal to 4% of the
deficiency.
- 24 -
<PAGE> 60
WHAT ABOUT MY TAXES?
It is expected that the Fund will distribute annually to shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal
income tax purposes, even if paid in additional Shares of the Fund and not in
cash. Since all of the Fund's net investment income is expected to be derived
from earned interest and short-term capital gains, it is anticipated that no
part of any distribution will be eligible for the dividends-received deduction
for corporations.
Distribution by the Fund of the excess of net long-term capital gain
over net short-term capital loss is taxable to shareholders as long-term
capital gain in the year in which it is received, regardless of how long the
shareholder has held the Shares. Such distributions are not eligible for the
dividends-received deduction.
If the net asset value of a Share is reduced below the shareholder's
cost of that Share by the distribution of income or gain realized on the sale
of securities, the distribution is a return of invested principal, although
taxable as described above.
Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of
such dividends or distributions, although in effect a return of capital, is
subject to tax.
The foregoing is intended only as a brief summary of some of the
important tax considerations generally affecting the Fund and its shareholders.
Potential investors in the Fund 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.
The Transfer Agent will inform shareholders at least annually of the
amount and nature of such income and capital gains.
WHO MANAGES MY INVESTMENT IN THE FUND?
Except where shareholder action is required by law, all of the
authority of the Group is exercised under the direction of the Group's
Trustees, who are elected by the shareholders of the Group's funds and who are
empowered to elect officers and contract
- 25 -
<PAGE> 61
with and provide for the compensation of agents, consultants and other
professionals to assist and advise it in its day-to-day operations. The Group
will be managed in accordance with its Declaration of Trust and the laws of
Ohio governing business trusts.
The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of the Adviser or The Ohio Company receives any
compensation from the Group for acting as a Trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. The Adviser receives fees from the Group for acting
as investment adviser and manager and as dividend and transfer agent. The Ohio
Company receives no fees under its Distribution Agreement with the Group but
may retain all or a portion of the sales charge and may receive fees under the
Distribution Plan discussed below.
INVESTMENT ADVISER
Cardinal Management Corp. (the "Adviser"), 155 East Broad Street,
Columbus, Ohio 43215, a wholly owned subsidiary of The Ohio Company, is the
investment adviser and manager of the Fund. The Adviser is also the investment
adviser and manager of each of the other Cardinal Funds.
The Ohio Company, an investment banking firm organized in 1925, is a
member of the New York Stock Exchange, the Midwest Stock Exchange, other
regional stock exchanges and the National Association of Securities Dealers,
Inc. Descendants of H.P. and R.F. Wolfe, deceased, and members of their
families, through their possession of a majority of a voting stock, may be
considered controlling persons of The Ohio Company.
In its capacity as investment adviser, and subject to the ultimate
authority of the Group's Board of Trustees, the Adviser, in accordance with the
Fund's investment objectives and policies, manages the Fund, and makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities. Since the Fund's inception, John R. Carle has been
primarily responsible for the day-to-day management of the Fund's portfolio.
Mr. Carle has been a portfolio manager with the Adviser and/or The Ohio Company
since 1971. In addition, pursuant to the Investment Advisory Agreement, the
Adviser generally assists in all aspects of the Fund's administration and
operation.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Group with respect to the Fund, the
Adviser receives a fee from the Fund, computed daily and paid monthly at the
annual rate of .50% of average net daily assets
- 26 -
<PAGE> 62
of the Fund. The Adviser may, however, periodically waive all or a portion of
its advisory fee with respect to the Fund to increase the net income of the
Fund available for distribution as dividends. The waiver of such fee will
cause the yield of the Fund to be higher than it would otherwise be in the
absence of such a waiver.
DIVIDEND AND TRANSFER AGENT AND FUND ACCOUNTANT
The Group has entered into a Transfer Agency and Fund Accounting
Agreement with Cardinal Management Corp. (the "Transfer Agent"), 215 East
Capital Street, Columbus, Ohio 43215, pursuant to which the Transfer Agent has
agreed to act as the Fund's transfer agent and dividend disbursing agent. In
consideration of such services, the Fund has agreed to pay the Transfer Agent
an annual fee, paid monthly, equal to $21 per shareholder account plus
out-of-pocket expenses. In addition, the Transfer Agent provides certain fund
accounting services for the Fund. The Transfer Agent receives a fee from the
Fund for such services equal to a fee computed daily and paid periodically at
an annual rate of .03% of the Fund's average daily net assets.
DISTRIBUTOR
The Group has entered into a Distributor's Contract with The Ohio
Company, 155 East Broad Street, Columbus, Ohio 43215, pursuant to which Shares
of the Fund will be offered continuously on a best efforts basis by The Ohio
Company and dealers selected by The Ohio Company. H. Keith Allen is an
officer and trustee of the Group and an officer and director of The Ohio
Company. Frank W. Siegel is an officer and trustee of the Group and an officer
of The Ohio Company. Barry C. McMahon, John Bevilacqua, David C. Will and
James M. Schrack II are officers of both the Group and The Ohio Company.
EXPENSES
The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager, transfer agent and fund accountant
other than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund will bear the following expenses relating to
its operations: organizational expenses, taxes, interest, any brokerage fees
and commissions, fees and expenses of the Trustees of the Group, Commission
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to the Fund's current
shareholders, outside auditing and legal expenses, advisory fees, fees and
out-of-pocket expenses of the custodian and Transfer Agent, costs for
independent pricing services, certain insurance premiums, costs of maintenance
of the Group's existence, costs of shareholders' reports and meetings,
distribution expenses incurred pursuant to the Distribution and
- 27 -
<PAGE> 63
Shareholder Service Plan described below, and any extraordinary expenses
incurred in the Fund's operation.
DISTRIBUTION PLAN
Pursuant to Rule 12b-1 under the 1940 Act, the Group has adopted a
Distribution and Shareholder Service Plan (the "Plan"), under which the Fund is
authorized to pay or reimburse The Ohio Company, as the Fund's principal
underwriter, a periodic amount calculated at an annual rate not to exceed
twenty-five one-hundredths of one percent (.25%) of the average daily net asset
value of the Fund. Such amount may be used by The Ohio Company to pay
broker-dealers (including The Ohio Company), banks and other institutions (a
"Participating Organization") for distribution and/or shareholder service
assistance pursuant to an agreement between The Ohio Company and the
Participating Organization or for distribution assistance and/or shareholder
service provided by The Ohio Company pursuant to an agreement between The Ohio
Company and the Group. Under the Plan, a Participating Organization may
include The Ohio Company, its subsidiaries, and its affiliates. The Ohio
Company may from time to time waive all or a portion of the fees payable to it
pursuant to the Plan. Any such waiver will cause the total return and yield of
the Fund to be higher than it would otherwise be absent such a waiver.
As authorized by the Plan, The Ohio Company has entered into a Rule
12b-1 Agreement with the Group pursuant to which The Ohio Company has agreed to
provide certain shareholder services in connection with Shares of the Fund
purchased and held by The Ohio Company for the accounts of its customers and
Shares of the Fund purchased and held by customers of The Ohio Company
directly, including, but not limited to, answering shareholder questions
concerning the Fund, providing information to shareholders on their investments
in the Fund and providing such personnel and communication equipment as is
necessary and appropriate to accomplish such matters. In consideration of such
services the Group has agreed to pay The Ohio Company a monthly fee, computed
at the annual rate of .25% of the average aggregate net asset value of Shares
held during the period in customer accounts for which The Ohio Company has
provided services under this Agreement. Such fees paid by the Group will be
borne solely by the Fund. Such fee may exceed the actual costs incurred by The
Ohio Company in providing such services.
In addition, The Ohio Company may enter into, from time to time, other
Rule 12b-1 Agreements with selected dealers pursuant to which such dealers will
provide certain Shareholder services such as those described above.
- 28 -
<PAGE> 64
CUSTODIAN
The Group has appointed The Fifth Third Bank ("Fifth Third") 38
Fountain Square Plaza, Cincinnati, Ohio 45263, as the Fund'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 Fund.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
The Group was organized as an Ohio business trust on March 23, 1993.
The Group currently consists of six funds, each having its own class of shares.
The other funds of the Group are Cardinal Balanced Fund, Cardinal Aggressive
Growth Fund, The Cardinal Fund, Cardinal Government Securities Money Market
Fund and Cardinal Tax Exempt Money Market Fund. Each share represents an equal
proportional interest in a fund with other shares of the same fund, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that fund as are declared at the discretion of the
Trustees.
Shareholders are entitled to one vote for each dollar of value
invested and a proportionate fractional vote for any fraction of a dollar
invested, and will vote in the aggregate and not by series except as otherwise
expressly required by law. For example, shareholders of the Fund will vote in
the aggregate with other shareholders of the Group with respect to the election
of trustees and ratification of the selection of independent accountants.
However, shareholders of the Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of amendments to
the Fund's investment advisory agreement, the Plan or any of the Fund's
fundamental policies.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUND?"
Individual Trustees are elected by the shareholders of the Group and may be
removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and Ohio law.
See "ADDITIONAL INFORMATION - Miscellaneous" in the Statement of Additional
Information for further information.
An annual or special meeting of shareholders to conduct necessary
business is not required by the Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Declaration of Trust, approve the investment advisory agreement and to satisfy
certain other requirements. To the extent that such a meeting is not required,
the Group may elect not to have an annual or special meeting.
- 29 -
<PAGE> 65
The Group has represented to the Commission that the Trustees will
call a special meeting of shareholders for purposes of considering the removal
of one or more Trustees upon written request therefor from shareholders holding
not less than 10% of the outstanding votes of the Group and that the Group will
assist in communications with other shareholders as required by Section 16(c)
of the 1940 Act. At such meeting, a quorum of shareholders (constituting a
majority of votes attributable to all outstanding shares of the Group), by
majority vote, has the power to remove one or more Trustees.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by
the fund upon the issuance or sale of shares in that fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds, and any general assets of the Group not readily identified as
belonging to a particular fund that are allocated to the fund by the Group's
Board of Trustees. The Board of Trustees may allocate such general assets in
any manner it deems fair and equitable. Determinations by the Board of
Trustees of the Group as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding Shares" of the Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser
of (a) 67% or more of the votes of shareholders of the Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of shareholders of
the Fund.
Shareholders should direct all inquiries concerning such matters to
the Transfer Agent in writing to 215 East Capital Street, Columbus, Ohio 43215,
or by calling (800) 282-9446.
Shareholders will receive unaudited semi-annual reports describing the
investment operations of the Fund and annual financial reports audited by
independent auditors.
- 30 -
<PAGE> 66
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 Plaza
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
- 31 -
<PAGE> 67
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page ____________
----
PROSPECTUS
PROSPECTUS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . 3 ____________
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . 5
WHAT IS THE FUND? . . . . . . . . . . . . . . . . . . . . . . 7
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND? . . . . . . . . . . . . . . . . . 7
HOW DO I PURCHASE SHARES OF THE FUND? . . . . . . . . . . . . 15 January __, 1996
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND? . . . . . . . . . . . . . . . . . 17
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS? . . . . . . . . . . 18
WHAT DISTRIBUTIONS WILL I RECEIVE? . . . . . . . . . . . . . 19
HOW MAY I REDEEM MY SHARES? . . . . . . . . . . . . . . . . . 20
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? . . . . . . . . 22 THE OHIO COMPANY
HOW IS NET ASSET VALUE CALCULATED? . . . . . . . . . . . . . 23
DOES THE FUND PAY FEDERAL INCOME TAX? . . . . . . . . . . . . 24
WHAT ABOUT MY TAXES? . . . . . . . . . . . . . . . . . . . . 25
WHO MANAGES MY INVESTMENT IN THE FUND? . . . . . . . . . . . 25
WHAT ARE MY RIGHTS AS A SHAREHOLDER? . . . . . . . . . . . . 29
________________ CARDINAL
GOVERNMENT
No dealer, salesman or any other person has been authorized OBLIGATIONS FUND
to give any information or to make any representations,
other than those contained in this Prospectus, in connection
with the offer contained in this Prospectus and, if given or
made, such other information or representations must not be
relied upon as having been authorized by the Fund, the
Adviser, or The Ohio Company. This Prospectus does not
constitute an offer by the Fund or by The Ohio Company to
sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is
unlawful for the Fund to make such an offer in such jurisdiction.
[LOGO]
CARDINAL FUNDS
</TABLE>
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<PAGE> 68
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
Cross Reference Sheet Required By
Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
1.(a)(i) ....................... Cover Page
(ii) ....................... Cover Page
(iii) ....................... Cover Page
(iv) ....................... Cover Page
(v) ....................... Cover Page
(vi) ....................... *
(vii)....................... *
(b) .......................... *
2.(a)(i) ....................... "Fee Table"
(ii) ....................... *
(b) .......................... "Prospectus Highlights"
(c) .......................... "Prospectus Highlights"
3.(a) .......................... *
(b) .......................... *
(c) .......................... "Performance Information"
(d) .......................... "Performance Information"
4.(a)(i)(A) .................... "What Is The Fund?"
(i)(B) .................... "What Is The Fund?"
(ii) ....................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(A) .................... *
(ii)(B)(1) ................. "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(B)(2).................. *
(ii)(C) .................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(D) .................... "What Are The Investment Objectives And Policies Of The Fund?"
(b)(i) ....................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii) ....................... "What Are The Investment Objectives And Policies Of The Fund?"
(c) .......................... "What Are The Investment Objectives and Policies Of The Fund?"
5.(a) .......................... "Who Manages My Investment In The Fund?"
(b)(i) ....................... "Who Manages My Investment In The Fund?"
(b)(ii) ...................... "Who Manages My Investment In The Fund?"
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
- i -
<PAGE> 69
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
(b)(iii) .................... "Who Manages My Investment In The Fund?"
(c) ......................... "Who Manages My Investment In The Fund?"
(d) ......................... "Who Manages My Investment In The Fund?"
(e) ......................... "Who Manages My Investment In The Fund?"
(f) ......................... "Who Manages My Investment In The Fund?"
(g)(i)(A) ................... *
(g)(i)(B) ................... *
(g)(i)(C) ................... *
(g)(ii) ..................... *
5A.(a) ........................ *
(b) ......................... *
(c) ......................... *
6.(a) ......................... "What Are My Rights As A Shareholder?"
(b) ......................... "What Are My Rights As A Shareholder?"
(c) ......................... *
(d) ......................... "What Are My Rights As A Shareholder?"
(e) ......................... "What Are My Rights As A Shareholder?"; "Who Provides Shareholder Reports?"
(f) ......................... "What Distributions Will I Receive?"
(g) ......................... "Does The Fund Pay Federal Income Tax?"; "What About My Taxes?"
7.(a) ......................... "How Do I Purchase Shares Of The Fund?"
(b) ......................... "How Do I Purchase Shares Of The Fund?"; "How Is Net Asset Value Calculated?"
(c) ......................... "May My Tax Sheltered Retirement Plan Invest In The Fund?"; "How May I Qualify For
Quantity Discounts?"
(d) ......................... "How Do I Purchase Shares Of The Fund?"
(e) ......................... "Who Manages My Investment In The Fund?"
(f) ......................... "Who Manages My Investment In The Fund?"
8.(a) ......................... "How May I Redeem My Shares?"
(b) ......................... "How May I Redeem My Shares?"
(c) ......................... "How May I Redeem My Shares?"
(d) ......................... "How May I Redeem My Shares?"
9. ........................... *
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is in the negative and omitted from Prospectus.
</TABLE>
- ii -
<PAGE> 70
PROSPECTUS
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
Cardinal Government Securities Money Market Fund (the "Fund") is a
diversified investment fund of The Cardinal Group (the "Group"), an open-end,
management investment company. The Trustees of the Group have divided the
Fund's beneficial ownership into an unlimited number of transferable units
called shares (the "Shares").
The Fund seeks as its investment objectives maximizing current income
while preserving capital and maintaining liquidity. The Fund seeks to attain
its objectives by investing as fully as possible, but in no event less than 80%
of its total assets, in U.S. Treasury bills, notes and bonds, other obligations
issued or guaranteed by the United States, its agencies or instrumentalities,
and repurchase agreements relating to such obligations. All obligations
purchased by the Fund will mature, or be deemed to mature, in thirteen months
or less. There can be no assurance that the Fund's objectives will be
achieved.
THE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED OR
GUARANTEED BY THE UNITED STATES 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 FUND INTENDS 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 Fund is designed for institutions and individuals who desire
current income that reflects prevailing interest rates for short-term
investments together with a high degree of liquidity and the security of a
portfolio invested only in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements
collateralized by such obligations.
_______________________________________________________________________________
For further information regarding the Fund or for
assistance in opening an account or redeeming Shares,
please call (800) 282-9446 toll free.
Inquiries may also be made by mail addressed
to the Fund at its principal office:
155 East Broad Street
Columbus, Ohio 43215
_______________________________________________________________________________
- 1 -
<PAGE> 71
The Prospectus relates only to Cardinal Government Securities Money
Market Fund, currently one of six funds of the Group. Interested persons who
wish to obtain copies of the prospectus of Cardinal Balanced Fund, Cardinal
Aggressive Growth Fund, The Cardinal Fund, Cardinal Government Obligations Fund
or Cardinal Tax Exempt Money Market Fund, the other funds of the Group
(collectively, with the Fund, the "Cardinal Funds"), should contact The Ohio
Company at the number above. Additional information about the Fund, contained
in a Statement Of Additional Information dated January __, 1996, 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
Fund at the above address or by calling the phone number provided above.
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing in the Fund. This
Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "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 January __, 1996.
- 2 -
<PAGE> 72
PROSPECTUS HIGHLIGHTS
INVESTMENT OBJECTIVES . . . . The Fund seeks to maximize current income while
maintaining liquidity and preserving capital.
(See page ____.)
INVESTMENT POLICIES . . . . . The Fund invests as fully as possible, but in
no event less than 80% of its total assets, in
short-term obligations issued or guaranteed by
the U.S. Government and its agencies and
instrumentalities, and repurchase agreements
secured by such obligations. (See pages ____.)
CURRENT INCOME . . . . . . . Dividends are generally credited daily and paid
monthly. Such distributions are automatically
reinvested in additional Shares of the Fund
without charge. Dividends may also be received
in cash. (See page ___.)
LIQUIDITY . . . . . . . . . . Through the free check writing privilege or
telephone transfer, Shares may be redeemed on
any Business Day at the net asset value without
charge. (See page ___.)
PURCHASES . . . . . . . . . . There is a minimum initial investment of $1,000
with subsequent minimums of $100. Such minimums
may be waived under certain circumstances. (See
page __.)
INVESTMENT ADVISER . . . . . Cardinal Management Corp. (the "Adviser"), a
wholly-owned subsidiary of The Ohio Company, is
the Fund's investment adviser. The Adviser also
serves as investment adviser for The Cardinal
Fund, Cardinal Government Obligations Fund,
Cardinal Tax Exempt Money Market Fund, Cardinal
Balanced Fund and Cardinal Aggressive Growth
Fund. (See page __.)
- 3 -
<PAGE> 73
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .50%
12b-1 Fees 0
Other Expenses(1) .34
---
Total Fund Operating Expenses .84%
===
EXAMPLE 1 Year 3 Years
------ -------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption at
the end of each time period: $9 $27
1 "Other Expenses" are based upon estimated amounts for the current
fiscal year.
The purpose of the above table is to assist a potential purchaser of
the Fund's Shares in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. See "WHO MANAGES MY
INVESTMENT IN THE FUND?" for a more complete discussion of the shareholder
transaction expenses and annual operating expenses of the Fund. 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> 74
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "yield" or "annualized
yield" and its "effective yield". BOTH YIELD FIGURES ARE BASED ON HISTORICAL
EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" or
"annualized yield" of the Fund refers to the income generated by an investment
in the Fund 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 Fund 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.
Investors may also judge the performance of the Fund 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 Fund that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
WHAT IS THE FUND?
The Fund is one separate diversified investment fund of the Group,
which was organized on March 23, 1993, as an Ohio business trust. The Group is
registered and operates as an open-end management investment company as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
has been organized for the purpose of acquiring all of the assets and
liabilities of Cardinal Government Securities Trust ("CGST") to effect a
reorganization of CGST from a stand alone investment company to a series of the
Group.
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WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?
IN GENERAL
The investment objectives of the Fund are to maximize current income
while preserving capital and maintaining liquidity. The investment objectives
with respect to the Fund are 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 Fund (as defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
There can be no assurance that the objectives of the Fund will be achieved.
The Fund seeks to attain its investment objectives by investing as
fully as possible, but in no event less than 80% of its total assets, in U.S.
Treasury bills, notes and bonds, other obligations issued or guaranteed by the
United States, its agencies or instrumentalities and repurchase agreements
relating to such obligations. The Fund will purchase only obligations which
have, or are deemed to have, maturities, from the date of purchase, of thirteen
months or less. Current income earned on such 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 non-payment or securities that have a
longer term.
Notwithstanding any of the foregoing, the Fund, as a money market fund
subject to Rule 2a-7 of the 1940 Act, must invest exclusively in United States
dollar-denominated instruments which the Trustees of the Group and the 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 ("NRSROs") (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. In
addition, the dollar-weighted average maturity of the obligations in the Fund
may not exceed 90 days.
Subject to the foregoing limitations and in order to achieve its
investment objectives, the Fund expects to invest in the following types of
securities.
Direct obligations issued by the U.S. Treasury include bills, notes
and bonds which differ from each other only in interest rates, maturities and
times of issuance: Treasury bills have maturities of one year or less;
Treasury notes have maturities of one to ten years and Treasury bonds generally
have maturities of greater than ten years.
Examples of obligations issued by agencies or instrumentalities of the
U.S. Government include, among others, securities
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issued by the General Services Administration, Federal Housing Administration,
Farmers Home Administration, Government National Mortgage Association, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks, Federal
Home Loan Mortgage Corporation, Central Bank for Cooperatives, Maritime
Administration, The Tennessee Valley Authority, Washington, D.C. Armory Board,
Export-Import Bank of the United States, the International Bank for
Reconstruction and Development, Federal National Mortgage Association and
Student Loan Marketing Association.
Certain of such U.S. Government obligations may have variable or
floating rates of interest. The Fund intends to invest in variable and
floating rate instruments whose market value, upon reset of the interest rate,
will approximate par value because their interest rates will be tied to
short-term market rates. Some obligations issued or guaranteed by U.S.
Government agencies or instrumentalities are supported by the full faith and
credit of the U.S. Treasury; others by U.S. Treasury guarantees; and others,
such as those issued by Federal Home Loan Banks, by the right of the issuer to
borrow from the Treasury. In addition, some obligations of U.S. Government
agencies or instrumentalities, such as those issued by the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality,
and others, such as those issued by the Student Loan Marketing Association, are
supported solely by the credit of the issuing agency or instrumentality itself.
No assurance can be given that the U.S. Government will provide financial
support to such U.S. Government sponsored agencies or instrumentalities in the
future, since it is not obligated to do so by law. The Fund will invest in
such securities only when it is satisfied that the credit risk with respect to
the issuer is minimal.
RISK FACTORS AND INVESTMENT TECHNIQUES
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of the repurchase agreement, the Fund
would acquire securities from a financial institution such as a
well-established securities dealer or a bank which is a member of the Federal
Reserve System which the Adviser deems creditworthy under guidelines approved
by the Group's Board of Trustees. At the time of purchase, the bank or
securities dealer agrees to repurchase the underlying securities from the Fund
at a specified time and price. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. The Fund will only enter into a
repurchase agreement where (i) the underlying securities are of the type which
the Fund's investment policies would allow it to purchase directly, (ii) the
market value
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<PAGE> 77
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 Fund's custodian or a bank acting as
agent. The Adviser will be responsible for continuously monitoring such
requirements.
INVESTMENT COMPANY SECURITIES. The Fund 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 Fund intends to
invest in the securities of other money market mutual funds for purposes of
short-term cash management. The Fund'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
Fund's investments in other investment companies, see "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Information on Portfolio Instruments -- Securities
of Other Investment Companies" in the Fund's Statement of Additional
Information.
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. The Fund may also
purchase securities on a when-issued or delayed-delivery basis. The Fund will
engage in when-issued and delayed-delivery transactions only for the purpose of
acquiring portfolio securities consistent with its investment objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. The Fund will
not pay for such securities or start earning interest on them until they are
received. When the Fund agrees to purchase such securities, its custodian will
set aside cash or liquid securities equal to the amount of the commitment in a
separate account. Securities purchased on a when-issued basis are recorded as
an asset and are subject to changes in the value based upon changes in the
general level of interest rates. In when-issued and delayed-delivery
transactions, the Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause the Fund to miss a price or yield
considered to be advantageous.
The Fund's commitments to purchase when-issued securities will not
exceed 25% of the value of its total assets absent unusual market conditions.
In the event that its commitments to purchase when-issued securities ever
exceed 25% of the value of its assets, the Fund's liquidity and the ability of
the Adviser to manage it might be adversely affected.
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<PAGE> 78
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of the Fund (as
defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
The Fund will not:
1. Purchase securities of any one issuer, other than
obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, if, immediately after such purchase,
more than 5% of the value of the Fund's total assets would be invested
in such issuer, or the Fund would hold more than 10% of the
outstanding voting securities of the issuer, except that up to 25% of
the value of the Fund's total assets may be invested without regard to
such limitations. There is no limit to the percentage of assets that
may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than
25% of the value of the Fund's total assets at the time of purchase to
be invested in securities of one or more issuers conducting their
principal business activities in the same industry, provided that:
(a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned
finance companies will be considered to be in the industries of their
parents if their activities are primarily related to financing the
activities of their parents; and (c) utilities will be divided
according to their services. For example, gas, gas transmission,
electric and gas, electric, and telephone will each be considered a
separate industry.
3. Borrow money except from banks for temporary or
emergency non-investment purposes, such as to accommodate abnormally
heavy redemption requests, and then only in an amount not exceeding
10% of the value of the Fund's total assets at the time of borrowing;
provided that so long as any borrowings exceed 5% of the value of the
Fund's total assets, the Fund shall not purchase portfolio securities.
4. Make loans, other than by entering into repurchase
agreements to the extent allowed herein and through the purchase of
other obligations in accordance with its investment objective and
policies.
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<PAGE> 79
The following additional investment restriction may be changed without
the vote of a majority of the outstanding shares of the Fund.
The Fund may not:
1. Purchase otherwise acquire any securities, if as a
result, more than 10% of the Fund's net assets would be invested in
securities that are illiquid.
HOW DO I PURCHASE SHARES OF THE FUND?
GENERAL
Shares of the Fund 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, 155 East Broad Street, Columbus, Ohio 43215, the Fund'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 for individuals is $1,000 and subsequent
investments must be in amounts of at least $100. The Fund 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. Institutions may place orders for
any number of individual accounts with a minimum initial purchase of $1,000 for
each individual account. Subsequent purchases may be made in minimum amounts
of $100 for each individual account. Shares of the Fund 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 Group or by The Ohio Company.
Subsequent purchases of Shares of the Fund may be made by ACH
processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -
ACH Processing" below. In addition, if an Account Information Form has
previously been received by The Ohio Company, Shares may also be purchased by
wiring funds to the Fund's custodian, as described below under "Purchase by
Federal Funds Wire."
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 Fund 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 and on such
other days on which there
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<PAGE> 80
is a sufficient degree of trading in the Fund's portfolio securities that the
Fund's net asset value might be materially affected by changes in the value of
the portfolio securities ("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 Group reserves the right to reject any order for the purchase of
Shares in whole or in part. You will receive a confirmation of each new
transaction in your account, which will also show the total number of Shares
owned by you and the number of Shares being held in safekeeping by Cardinal
Management Corp., the Fund's transfer agent (the "Transfer Agent"), for your
account. Certificates representing Shares will not be issued.
From time to time, The Ohio Company, from its own resources, may also
provide additional compensation to securities dealers in connection with sales
of shares of the Cardinal Funds. Such compensation will include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and/or shareholder services and programs regarding one or more
of the Cardinal Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Cardinal Funds. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Securities dealers may not use sales of the Fund's Shares to qualify
for this compensation to the extent such may be prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. In addition, The Ohio Company may make ongoing
payments to brokerage firms, financial institutions (including banks) and
others to facilitate the administration and servicing of shareholder accounts.
None of the aforementioned additional compensation is paid for by the Fund or
its shareholders.
PURCHASE BY FEDERAL FUNDS WIRE
Investments in Shares of the Fund 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
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<PAGE> 81
Fund (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 Group of the investment and, if a new
investor, to obtain an account number. If an investor does not telephone the
Group for wire 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 Government Securities Fund
[Include Fund Account Number and Name of Account Holder]
Funds transmitted by wire will be invested in Shares of the Fund at
the net asset value next computed after receipt thereof as described above
under "General." A bank may charge for its services in effecting wire
transfers of funds.
PURCHASE BY MAIL
Investment in Shares of the Fund may be made by mail by sending a
check or other negotiable bank draft payable to the order of "Cardinal
Government Securities Money Market Fund" together with, in the case of an
initial purchase, an Application Form to:
Cardinal Government Securities Money Market Fund
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 Fund within one Business Day following receipt by The Ohio Company. Checks
drawn on non-member banks may take considerably longer. The Transfer Agent or
the Group 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 GROUP STRONGLY RECOMMENDS THAT INVESTORS OF
SUBSTANTIAL AMOUNTS USE FEDERAL FUNDS TO PURCHASE SHARES.
AUTOMATIC INVESTMENT PLAN
The Fund 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 Fund on
the periodic basis you select. Confirmation of your purchase of Fund Shares
will be provided by the Transfer Agent. The debit of your checking account
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<PAGE> 82
will be reflected in the checking account statement you receive from your
financial institution. Please contact The Ohio Company for the appropriate
form.
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND?
Shares of the Fund qualify for purchase in connection with the
following tax sheltered retirement plans:
-- Individual retirement account ("IRAs") plans
-- Simplified Employee Pension Plans
-- 403(b)(7) Custodial Plans sponsored by certain tax-exempt employers
-- Pension, profit-sharing and 401(k) plans qualifying under Section
401(a) of the Internal Revenue Code
WHAT DISTRIBUTIONS WILL I RECEIVE?
The Fund's net income is declared as a dividend and accrued on each
Business Day immediately prior to the determination of the Fund's net asset
value at 4:00 p.m. Eastern Time. Net investment income (from the time of the
immediately preceding declaration) consists of interest accrued on the
portfolio of the Fund (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 Fund
applicable to that dividend period. The Fund does not expect to realize any
long-term capital gains due to its policy of investing in securities maturing
in 13 months or less.
All dividends of net income are credited to each shareholder's account
daily and automatically reinvested in additional Shares of the Fund 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 the Transfer Agent 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 also elect to receive dividends and distributions in
cash by using ACH processing as described under "WHAT OTHER SHAREHOLDER
PROGRAMS ARE PROVIDED? - ACH Processing" below.
Should the Fund incur or anticipate any extraordinary expense, loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Trustees
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<PAGE> 83
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 Fund'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, 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 Fund on any Business Day at the net
asset value next determined following receipt by the Transfer Agent, 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 the Transfer Agent 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 the Transfer Agent 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 Group 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 Fund). The
purchase of Fund Shares by wire transfer of federal funds would avoid any such
delay.
The Group 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 Group 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
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<PAGE> 84
$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 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 Fund by submitting a
written request therefor to the Transfer Agent, at 215 East Capital Street,
Columbus, Ohio 43215. The Transfer Agent 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. The Transfer Agent 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 Fund by calling the
Fund 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.
Neither the Group, the Fund 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 Fund's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Fund will employ
procedures designed to provide reasonable assurances that instructions by
telephone are genuine; if these procedures are not followed, the Fund 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.
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<PAGE> 85
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 Fund 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 Fund
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 Fund'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 Fund 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.
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 Fund's Systematic
Withdrawal Plan. Please contact The Ohio Company for the appropriate form.
CHECK-WRITING REDEMPTION PROCEDURE
The Transfer Agent will provide any shareholder who so requests with a
supply of checks, imprinted with the shareholder's name, which may be drawn
against the Fund's account maintained by The Fifth Third Bank (the "Bank"), for
redemption of Fund Shares.
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<PAGE> 86
These checks may be made payable to the order of any person in any amount not
less than $100. To participate in this procedure, an investor must complete
the Check-Writing Redemption Form available from the Transfer Agent. When a
check is presented to the Bank for payment, the Transfer Agent (as your agent)
will cause the Fund 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.
However, charges for copies ($5 each), returned checks ($15 each) and returned
items of deposit ($15 each) will be deducted from a shareholder's account.
In order to stop payment on a check, the shareholder must notify the
Fund in writing before the check has been presented to the Bank for payment. A
charge of $15 will be deducted from the shareholder's account for each stop
payment order.
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
ACH PROCESSING
The Fund offers ACH privileges. Investors may use ACH processing to
make subsequent purchases, redeem Shares and/or electronically transfer
distributions paid on Fund 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
Shareholders of the Fund 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 Fund for
shares of:
Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of
capital (upon the payment of the appli-
cable sales charge);
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<PAGE> 87
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,
an equity fund seeking long-term growth
of capital and income (upon the payment of
the applicable sales charge);
Cardinal Government Obligations Fund,
a fund investing in securities issued
or guaranteed by the U.S. Government
(upon the payment of the applicable
sales charge); or
Cardinal Tax Exempt Money Market Fund,
a tax-free money market fund
(without payment of any sales charge).
Notwithstanding the foregoing and subject to the limitations contained
in the following paragraph, exchanges of Fund Shares for shares of The Cardinal
Fund, Cardinal Government Obligations Fund, Cardinal Balanced Fund or Cardinal
Aggressive Growth Fund (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
Fund to be exchanged were acquired as a result of an exchange of shares of the
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 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. The 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 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 Fund by telephone. Neither the Group, the Fund
nor any of its service providers will be liable for 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.
- 18 -
<PAGE> 88
For tax purposes, an exchange is treated as a redemption and a new
purchase.
The Group may, at any time, modify or terminate the foregoing exchange
privilege. The Group, however, will give shareholders of the Fund 60 days'
advance written notice of any such modification or termination.
HOW IS NET ASSET VALUE CALCULATED?
The Fund's net asset value per share is currently determined as of
4:00 p.m. Eastern Time on each Business Day. Net asset value per share is
computed by dividing the total value of the assets of the Fund, less its
liabilities, by the total number of Shares outstanding. Expenses and fees of
the Fund, including the management fee, are accrued daily and taken into
account for the purpose of determining the net asset value.
The Board of Trustees has adopted a policy requiring the Fund to use
its best efforts, under normal circumstances, to maintain a constant net asset
value of $1.00 per share. The Fund 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 Fund will normally include any accrued discount or premium in its daily
dividend and will thereby keep constant the value of the Fund'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 FUND PAY FEDERAL INCOME TAX?
Each of the funds of the Group, including the Fund, is treated as a
separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), for so long as such qualification is in the best interest
of that fund's shareholders. Qualification as a regulated investment 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. The Fund contemplates declaring as dividends 100% of the
Fund's investment company taxable income (before deduction of dividends paid).
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
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<PAGE> 89
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
Fund would be subject to a nondeductible excise tax equal to 4% of the
deficiency.
WHAT ABOUT MY TAXES?
It is expected that the Fund will distribute annually to shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal
income tax purposes, even if paid in additional Shares of the Fund and not in
cash. Since all of the Fund's net investment income is expected to be derived
from earned interest and short-term capital gains, it is anticipated that no
part of any distribution will be eligible for the dividends received deduction
for corporations. The Fund does not expect to realize any long-term capital
gains and, therefore, does not foresee paying any "capital gains dividends" as
described in the Code. However, if the Fund were to realize any long-term
capital gains, distribution by the Fund of the excess of any such net long-term
capital gain over net short-term capital loss is taxable to shareholders as
long-term capital gain in the year in which it is received, regardless of how
long the shareholder has held the Shares. Such distributions are not eligible
for the dividends-received deduction.
Even though a substantial portion of distributions of net income will
be attributable to interest on U.S. Government obligations, which may be exempt
from state or local tax if received directly by a shareholder, shareholders of
the Fund may be subject to state and local taxes with respect to their
ownership of Fund Shares or distributions from the Fund.
The foregoing is intended only as a brief summary of some of the
important tax considerations generally affecting the Fund and its shareholders.
Potential investors in the Fund 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.
The Transfer Agent will inform shareholders at least annually of the
amount and nature of such income and capital gains.
WHO MANAGES MY INVESTMENT IN THE FUND?
Except where shareholder action is required by law, all of the
authority of the Group is exercised under the direction of the Group's
Trustees, who are elected by the shareholders of the Group's funds and who are
empowered to elect officers and contract
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<PAGE> 90
with and provide for the compensation of agents, consultants and other
professionals to assist and advise it in its day-to-day operations. The Group
will be managed in accordance with its Declaration of Trust and the laws of
Ohio governing business trusts.
The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of the Adviser or The Ohio Company receives any
compensation from the Group for acting as a Trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. The Adviser receives fees from the Group for acting
as investment adviser and manager and as dividend and transfer agent. The Ohio
Company receives no fees under its Distribution Agreement with the Group.
INVESTMENT ADVISER
Cardinal Management Corp. (the "Adviser"), 155 East Broad Street,
Columbus, Ohio 43215, a wholly owned subsidiary of The Ohio Company, is the
investment adviser and manager of the Fund. The Adviser is also the investment
adviser and manager of each of the other Cardinal Funds.
The Ohio Company, an investment banking firm organized in 1925, is a
member of the New York Stock Exchange, the Midwest Stock Exchange, other
regional stock exchanges and the National Association of Securities Dealers,
Inc. Descendants of H.P. and R.F. Wolfe, deceased, and members of their
families, through their possession of a majority of a voting stock, may be
considered controlling persons of The Ohio Company. The Ohio Company serves as
principal underwriter for each of the Cardinal Funds.
In its capacity as investment adviser, and subject to the ultimate
authority of the Group's Board of Trustees, the Adviser, in accordance with the
Fund's investment objectives and policies, manages the Fund, and makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities. Since the Fund's inception, Hannibal L. Godwin III has
been primarily responsible for the day-to-day management of the Fund's
portfolio. Mr. Godwin has been a portfolio manager with the Adviser and/or The
Ohio Company since 1981. In addition, pursuant to the Investment Advisory
Agreement, the Adviser generally assists in all aspects of the Fund's
administration and operation.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Group with respect to the Fund, the
Adviser receives a fee from the Fund, computed daily and paid monthly at the
annual rate of .50% of average net daily assets
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<PAGE> 91
of the Fund. The Adviser has, however, and may in the future periodically
waive all or a portion of its advisory fee with respect to the Fund to increase
the net income of the Fund available for distributions as dividends. The
waiver of such fee will cause the yield of the Fund to be higher than it would
otherwise be in the absence of such waiver.
DIVIDEND AND TRANSFER AGENT AND FUND ACCOUNTANT
The Group has entered into a Transfer Agency and Fund Accounting
Agreement with Cardinal Management Corp. (the "Transfer Agent"), 215 East
Capital Street, Columbus, Ohio 43215, pursuant to which the Transfer Agent has
agreed to act as the Fund's transfer agent and dividend disbursing agent. In
consideration of such services, the Fund has agreed to pay the Transfer Agent
an annual fee, paid monthly, equal to $21 per shareholder account plus
out-of-pocket expenses. In addition, the Transfer Agent provides certain fund
accounting services for the Fund. The Transfer Agent receives a fee from the
Fund for such services equal to a fee computed daily and paid periodically at
an annual rate of .03% of the Fund's average daily net assets.
DISTRIBUTOR
The Group has entered into a Distributor's Contract with The Ohio
Company, 155 East Broad Street, Columbus, Ohio 43215, pursuant to which Shares
of the Fund will be offered continuously on a best efforts basis by The Ohio
Company and dealers selected by The Ohio Company. H. Keith Allen is an
officer and trustee of the Group and an officer and director of The Ohio
Company. Frank W. Siegel is an officer and trustee of the Group and an officer
of The Ohio Company. Barry C. McMahon, David C. Will and James M. Schrack II
are officers of both the Group and The Ohio Company.
EXPENSES
The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager, transfer agent and fund accountant
other than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund will bear the following expenses relating to
its operations: organizational expenses, taxes, interest, any brokerage fees
and commissions, fees and expenses of the Trustees of the Group, Commission
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to the Fund's current
shareholders, outside auditing and legal expenses, advisory fees, fees and
out-of-pocket expenses of the custodian and Transfer Agent, costs for
independent pricing service, certain insurance premiums, costs of maintenance
of the
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<PAGE> 92
Group's existence, costs of shareholders' reports and meetings, and any
extraordinary expenses incurred in the Fund's operation.
CUSTODIAN
The Group has appointed The Fifth Third Bank ("Fifth Third") 38
Fountain Square Plaza, Cincinnati, Ohio 45263, as the Fund'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 Fund.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
The Group was organized as an Ohio business trust on March 23, 1993.
The Group currently consists of six funds, each having its own class of shares.
The other funds of the Group are The Cardinal Fund, Cardinal Government
Obligations Fund, Cardinal Tax Exempt Money Market Fund, Cardinal Balanced Fund
and Cardinal Aggressive Growth Fund. Each share represents an equal
proportional interest in a fund with other shares of the same fund, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to that fund as are declared at the discretion of the
Trustees.
Shareholders are entitled to one vote for each dollar of value
invested and a proportionate fractional vote for any fraction of a dollar
invested, and will vote in the aggregate and not by series except as otherwise
expressly required by law. For example, shareholders of the Fund will vote in
the aggregate with other shareholders of the Group with respect to the election
of trustees and ratification of the selection of independent accountants.
However, shareholders of the Fund will vote as a fund, and not in the aggregate
with other shareholders of the Group, for purposes of approval of amendments to
the Fund's investment advisory agreement or any of the Fund's fundamental
policies.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUND?"
Individual Trustees are elected by the shareholders of the Group and may be
removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and Ohio law.
See "ADDITIONAL INFORMATION - Miscellaneous" in the Statement of Additional
Information for further information.
An annual or special meeting of shareholders to conduct necessary
business is not required by the Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Declaration of Trust, approve the investment advisory agreement and to satisfy
certain other requirements.
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<PAGE> 93
To the extent that such a meeting is not required, the Group may elect not to
have an annual or special meeting.
The Group has represented to the Commission that the Trustees will
call a special meeting of shareholders for purposes of considering the removal
of one or more Trustees upon written request therefor from shareholders holding
not less than 10% of the outstanding votes of the Group and that the Group will
assist in communications with other shareholders as required by Section 16(c)
of the 1940 Act. At such meeting, a quorum of shareholders (constituting a
majority of votes attributable to all outstanding shares of the Group), by
majority vote, has the power to remove one or more Trustees.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by
the fund upon the issuance or sale of shares in that fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds, and any general assets of the Group not readily identified as
belonging to a particular fund that are allocated to the fund by the Group's
Board of Trustees. The Board of Trustees may allocate such general assets in
any manner it deems fair and equitable. Determinations by the Board of
Trustees of the Group as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to the Fund are conclusive.
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding shares" of the Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser
of (a) 67% or more of the votes of shareholders of the Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of shareholders of
the Fund.
Shareholders should direct all inquiries concerning such matters to
the Transfer Agent in writing to 215 East Capital Street, Columbus, Ohio 43215,
or by calling (800) 282-9446.
Shareholders will receive unaudited semi-annual reports describing the
investment operations of the Fund and annual financial reports audited by
independent auditors.
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<PAGE> 94
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 Plaza
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
- 25 -
<PAGE> 95
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page
---- ____________
PROSPECTUS
PROSPECTUS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ____________
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHAT IS THE FUND? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND? . . . . . . . . . . . . . . . . . . . 6
HOW DO I PURCHASE SHARES OF THE FUND? . . . . . . . . . . . . . . . . . . 10 January __, 1996
MAY MY TAX SHELTERED RETIREMENT
PLAN INVEST IN THE FUND? . . . . . . . . . . . . . . . . . . . . 13
WHAT DISTRIBUTIONS WILL I RECEIVE? . . . . . . . . . . . . . . . . . . . 13
HOW MAY I REDEEM MY SHARES? . . . . . . . . . . . . . . . . . . . . . . . 14
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? . . . . . . . . . . . . . . 17
HOW IS NET ASSET VALUE CALCULATED? . . . . . . . . . . . . . . . . . . . 19 THE OHIO COMPANY
DOES THE FUND PAY FEDERAL INCOME TAX? . . . . . . . . . . . . . . . . . . 19
WHAT ABOUT MY TAXES? . . . . . . . . . . . . . . . . . . . . . . . . . . 20
WHO MANAGES MY INVESTMENT IN THE FUND? . . . . . . . . . . . . . . . . . 20
WHAT ARE MY RIGHTS AS A SHAREHOLDER? . . . . . . . . . . . . . . . . . . 23
________________ CARDINAL
GOVERNMENT SECURITIES
MONEY MARKET FUND
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied [LOGO]
upon as having been authorized by the Fund, the Adviser, or The Ohio Company. CARDINAL FUNDS
This Prospectus does not constitute an offer by the Fund or by The Ohio Company
to sell or a solicitation of an offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Fund to
make such an offer in such jurisdiction.
</TABLE>
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<PAGE> 96
CARDINAL TAX EXEMPT MONEY MARKET FUND
Cross Reference Sheet Required By
Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
1.(a)(i) ............................. Cover Page
(ii) ............................. Cover Page
(iii) ............................. Cover Page
(iv) ............................. Cover Page
(v) ............................. Cover Page
(vi) ............................. *
(vii)............................. *
(b) ................................ *
2.(a)(i) ............................. "Fee Table"
(ii) ............................. *
(b) ................................ "Prospectus Highlights"
(c) ................................ "Prospectus Highlights"
3.(a) ................................ *
(b) ................................ *
(c) ................................ "Performance Information"
(d) ................................ "Performance Information"
4.(a)(i)(A) .......................... "What Is The Fund?"
(i)(B) .......................... "What Is The Fund?"
(ii) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(A) .......................... *
(ii)(B)(1) ....................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(B)(2) ....................... *
(ii)(C) .......................... "What Are The Investment Objectives And Policies Of The Fund?"
(ii)(D) .......................... "What Are The Investment Objectives And Policies Of The Fund?"
(b)(i) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(ii) ............................. "What Are The Investment Objectives And Policies Of The Fund?"
(c) ................................ "What Are The Investment Objectives and Policies Of The Fund?"
5.(a) ................................ "Who Manages My Investment In The Fund?"
(b)(i) ............................. "Who Manages My Investment In The Fund?"
(b)(ii) ............................ "Who Manages My Investment In The Fund?"
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is
in the negative and omitted from Prospectus.
</TABLE>
- i -
<PAGE> 97
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
(b)(iii) ........................... "Who Manages My Investment In The Fund?"
(c) ................................ "Who Manages My Investment In The Fund?"
(d) ................................ "Who Manages My Investment In The Fund?"
(e) ................................ "Who Manages My Investment In The Fund?"
(f) ................................ "Who Manages My Investment In The Fund?"
(g)(i)(A) .......................... *
(g)(i)(B) .......................... *
(g)(i)(C) .......................... *
(g)(ii) ............................ *
5A.(a) ............................... *
(b) ................................ *
(c) ................................ *
6.(a) ................................ "What Are My Rights As A Shareholder?"
(b) ................................ "What Are My Rights As A Shareholder?"
(c) ................................ *
(d) ................................ "What Are My Rights As A Shareholder?"
(e) ................................ "What Are My Rights As A Shareholder?"; "Who Provides Shareholder Reports?"
(f) ................................ "What Distributions Will I Receive?"
(g) ................................ "Does The Fund Pay Federal Income Tax?"; "What About My Taxes?"
7.(a) ................................ "How Do I Purchase Shares Of The Fund?"
(b) ................................ "How Do I Purchase Shares Of The Fund?"; "How Is Net Asset Value Calculated?"
(c) ................................ "May My Tax Sheltered Retirement Plan Invest In The Fund?"; "How May I Qualify For Quantity
Discounts?"
(d) ................................. "How Do I Purchase Shares Of The Fund?"
(e) ................................. "Who Manages My Investment In The Fund?"
(f) ................................. "Who Manages My Investment In The Fund?"
8.(a) ................................. "How May I Redeem My Shares?"
(b) ................................. "How May I Redeem My Shares?"
(c) ................................. "How May I Redeem My Shares?"
(d) ................................. "How May I Redeem My Shares?"
9. ................................... *
<FN>
______________
*Indicates items which are omitted or inapplicable or answer to which is
in the negative and omitted from Prospectus.
</TABLE>
- ii -
<PAGE> 98
PROSPECTUS
CARDINAL TAX EXEMPT MONEY MARKET FUND
Cardinal Tax Exempt Money Market Fund (the "Fund") is a diversified
investment fund of The Cardinal Group (the "Group"), an open-end, management
investment company. The Trustees of the Group have divided the Fund's
beneficial ownership into an unlimited number of transferable units called
shares (the "Shares").
The Fund has an investment objectives of maximizing current income
exempt from federal income tax while preserving capital and maintaining
liquidity. The Fund 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 Fund 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 Fund's objectives will be
achieved.
THE SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED OR
GUARANTEED BY THE UNITED STATES 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 FUND INTENDS 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 Fund 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 Fund or for
assistance in opening an account or redeeming Shares,
please call (800) 282-9446 toll free.
Inquiries may also be made by mail addressed
to the Fund at its principal office:
155 East Broad Street
Columbus, Ohio 43215
_______________________________________________________________________________
- 1 -
<PAGE> 99
The Prospectus relates only to Cardinal Tax Exempt Money Market Fund,
currently one of six funds of the Group. Interested persons who wish to obtain
copies of the prospectus of Cardinal Balanced Fund, Cardinal Aggressive Growth
Fund, The Cardinal Fund, Cardinal Government Obligations Fund or Cardinal
Government Securities Money Market Fund, the other funds of the Group
(collectively, with the Fund, the "Cardinal Funds"), should contact The Ohio
Company at the number above. Additional information about the Fund, contained
in a Statement Of Additional Information dated January __, 1996, 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
Fund at the above address or by calling the phone number provided above.
This Prospectus sets forth concisely the information about the Fund
that a prospective investor ought to know before investing in the Fund. This
Prospectus should be retained for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "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 January __, 1996.
- 2 -
<PAGE> 100
PROSPECTUS HIGHLIGHTS
INVESTMENT OBJECTIVES . . . The Funds seeks to maximize current income, exempt
from federal income tax, while preservin capital
and maintaining liquidity. (See page __.)
INVESTMENT POLICIES . . . . The Fund 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. (See page __.)
CURRENT INCOME . . . . . . Dividends are generally credited daily and paid
monthly. Such distributions are automatically
reinvested in additional Shares of the Fund
without charge. Dividends may also be received in
cash. (See page ___.)
LIQUIDITY . . . . . . . . . Through the free check writing privilege or
telephone transfer, Shares may be redeemed on any
Business Day at the net asset value without
charge. (See page ___.)
PURCHASES . . . . . . . . . There is a minimum initial investment of $1,000
with subsequent minimums of $100. Such minimums
may be waived under certain circumstances. (See
page __.)
INVESTMENT ADVISER . . . . Cardinal Management Corp. (the "Adviser"), a
wholly-owned subsidiary of The Ohio Company, is
the Fund's investment adviser. The Adviser also
serves as investment adviser for The Cardinal
Fund, Cardinal Government Obligations Fund,
Cardinal Government Securities Money Market Fund,
Cardinal Balanced Fund and Cardinal Aggressive
Growth Fund. (See page __.)
- 3 -
<PAGE> 101
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0%
ESTIMATED ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees .50%
12b-1 Fees 0
Other Expenses(1) .25
---
Total Fund Operating Expenses .75%
===
EXAMPLE 1 Year 3 Years
------ -------
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption at
the end of each time period: $8 $24
__________________
1 "Other Expenses" are based upon estimated amounts for the current
fiscal year.
The purpose of the above table is to assist a potential purchaser of
the Fund's Shares in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. See "WHO MANAGES MY
INVESTMENT IN THE FUND?" for a more complete discussion of the shareholder
transaction expenses and annual operating expenses of the Fund. 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> 102
PERFORMANCE INFORMATION
From time to time the Fund 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 Fund refers to the income generated by an investment
in the Fund 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 Fund 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 Fund. The "tax-equivalent effective
yield" is calculated similarly to the "tax-equivalent yield" but, when
annualized, the income earned by an investment in the Fund 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 Fund 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 Fund that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
WHAT IS THE FUND?
The Fund is one separate diversified investment fund of the Group,
which was organized on March 23, 1993, as an Ohio business trust. The Group is
registered and operates as an open-end management investment company as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
has been organized for the purpose of acquiring all of the assets and
liabilities of Cardinal Tax Exempt Money Trust ("CTEMT") to effect a
reorganization of CTEMT from a stand-alone investment company to a separate
series of the Group.
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WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?
IN GENERAL
The investment objectives of the Fund is to maximize current income
exempt from federal income tax while preserving capital and maintaining
liquidity. The investment objectives with respect to the Fund are 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 Fund.
As a money market fund, the Fund invests exclusively in United States
dollar-denominated instruments which the Trustees of the Group and the 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 ("NRSROs") (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 Fund 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 Fund will not exceed
90 days.
As a matter of policy, under normal market conditions, the Fund 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 Fund expects to invest in the
following types of securities.
The Fund 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").
Specific types of Municipal Securities which the Fund 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 in
one of the two highest rating categories by an appropriate NRSRO for short-term
tax exempt securities (e.g., MIG-1 or MIG-2, by Moody's Investors Service,
Inc.) or (3) if the notes are not rated, are, as
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determined by the Adviser in accordance with guidelines established by the
Group's Board of Trustees, of a quality equivalent to securities so rated. The
Fund may also invest in municipal bonds and participation interests therein,
including industrial development revenue bonds and pollution control revenue
bonds, which have, or are deemed to have, remaining maturities of 397 days or
less and (1) are rated in one of the two highest rating categories by an
appropriate NRSRO for short-term tax exempt securities, or (2) if not rated,
are, as determined by the Adviser in accordance with guidelines established by
the Group's Board of Trustees, of a quality equivalent to securities so rated.
In addition, the Fund may purchase other types of tax-exempt Municipal
Securities such as short-term discount notes. These investments must (1) be
rated in one of the two highest rating categories by an appropriate NRSRO for
short-term tax exempt securities, or (2) if not rated, possess equivalent
characteristics and quality to securities so rated in the opinion of the
Adviser as determined in accordance with guidelines established by the Board of
Trustees. For further information regarding the rating categories of the
NRSROs, please see the Appendix to the Fund's Statement of Additional
Information.
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.
RISK FACTORS AND INVESTMENT TECHNIQUES
VARIABLE RATE SECURITIES. The Fund 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 Fund is invested in such securities, the
degree of 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 Fund's 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
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lower than current market rates for fixed rate obligations of comparable
quality with similar maturities. The Fund, 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 Fund 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 Fund can be
maintained at $1.00 per share while the highest possible yield can be returned
to investors. To the extent the Fund'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 Fund'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" below)
WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. The Fund may also
purchase securities on a when-issued or delayed-delivery basis. The Fund will
engage in when-issued and delayed-delivery transactions only for the purpose of
acquiring portfolio securities consistent with its investment objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield and
thereby involve a risk that the yield obtained in the transaction will be less
than those available in the market when delivery takes place. The Fund will
not pay for such securities or start earning interest on them until they are
received although the payment obligation and the coupon rate have been
established before the time the Fund enters into the commitment. When the Fund
agrees to purchase such securities, its custodian will set aside cash or liquid
securities equal to the amount of the commitment in a separate account.
Securities purchased on a when-issued basis are recorded as an asset and are
subject to changes in the value based upon changes in the general level of
interest rates. In when-issued and delayed-delivery transactions, the Fund
relies on the
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seller to complete the transaction; the seller's failure to do so may cause the
Fund to miss a price or yield considered to be advantageous.
The Fund's commitments to purchase when-issued securities will not
exceed 25% of the value of its total assets absent unusual market conditions.
In the event that its commitments to purchase when-issued securities ever
exceed 25% of the value of its assets, the Fund's liquidity and the ability of
the Adviser to manage it might be adversely affected.
TAXABLE MONEY MARKET SECURITIES. Under normal operating
circumstances, Fund assets will be managed with a view towards producing only
income that is exempt from federal income taxation. However, the Fund may
invest up to 20% of its assets in "temporary investments," that is, money
market instruments consisting of marketable obligations issued 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 repurchase agreements secured
by such obligations.
REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of the repurchase agreement, the Fund
would acquire securities from a financial institution such as a
well-established securities dealer or a bank which is a member of the Federal
Reserve System which the Adviser deems creditworthy under guidelines approved
by the Group's Board of Trustees. At the time of purchase, the bank or
securities dealer agrees to repurchase the underlying securities from the Fund
at a specified time and price. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. The Fund will only enter into a
repurchase agreement where (i) the underlying securities are of the type which
the Fund's investment policies 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 Fund's custodian or a
bank acting as agent. The Adviser will be responsible for continuously
monitoring such requirements. Use of repurchase agreements may cause the Fund
to earn income which would be taxable to its shareholders.
INVESTMENT COMPANY SECURITIES. The Fund 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 Fund intends to
invest in the securities of other
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money market mutual funds for purposes of short-term cash management. The
Fund'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 Fund's investments in other
investment companies, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments -- Securities of Other Investment
Companies" in the Fund's Statement of Additional Information.
CERTAIN FACTORS. Naturally, there can be no assurance that the Fund
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 Fund 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 Fund is still expected to have a
significantly longer average maturity than a 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 Fund expects that substantially all the demand rights
of the Fund with respect to variable rate demand Municipal Securities will be
supported by letters of credit of major commercial banks. Fund 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.
INVESTMENT RESTRICTIONS
The Fund is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of the Fund (as
defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
The Fund will not:
1. Purchase securities, if as a result of such purchase more
than 5% of its total assets would be invested in the
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<PAGE> 108
securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
which securities include project notes for purposes of this
restriction), except that up to 25% of the value of the Fund's assets
may be invested without regard to this 5% limitation (for purposes of
this test, the non-governmental user of facilities financed by
industrial development or pollution control revenue bonds and a bank
issuing a letter of credit or comparable guarantee supporting a
variable rate demand municipal security is considered to be the
issuer).
2. Purchase the securities of issuers conducting their
principal business activity in the same industry if as a result of
such purchase more than 25% of its total assets would be invested in
the securities of issuers in that industry; provided that such
limitation shall not apply to the purchase of Municipal Securities,
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, or securities issued by domestic branches of
domestic banks (the only securities issued by domestic branches of
domestic banks that the Fund contemplates investing in are variable
rate demand Municipal Securities supported by letters of credit or
guarantees issued by domestic branches of domestic banks).
3. Borrow money or enter into reverse repurchase
agreements except for temporary or emergency non-investment purposes,
such as to accommodate abnormally heavy redemption requests, and then
only in an amount not exceeding 5% of the value of the Fund's total
assets at the time of borrowing.
4. Make loans, other than by entering into repurchase
agreements and through the purchase of participation in privately
negotiated loans and portions of publicly issued debt obligations that
are in accordance with its investment objective and policies;
provided, however, that the Fund 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.
The following additional investment restriction may be changed without
the vote of a majority of the outstanding Shares of the Fund.
The Fund may not:
1. Purchase or otherwise acquire any securities, if as a
result, more than 10% of the Fund's net assets would be invested in
securities that are illiquid.
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<PAGE> 109
HOW DO I PURCHASE SHARES OF THE FUND?
GENERAL
Shares of the Fund 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, 155 East Broad Street, Columbus, Ohio 43215, the Fund'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 for individuals is $1,000 and subsequent
investments must be in amounts of at least $100. The Fund 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. Institutions may place orders for
any number of individual accounts with a minimum initial purchase of $1,000 for
each individual account. Subsequent purchases may be made in minimum amounts
of $100 for each individual account. Shares of the Fund 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 Group or by The Ohio Company.
Subsequent purchases of Shares of the Fund may be made by ACH
processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -
ACH Processing" below. In addition, if an Account Information Form has
previously been received by The Ohio Company, Shares may also be purchased by
wiring funds to the Fund's custodian as described below under "Purchase by
Federal Funds Wire."
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 Fund 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 and on such
other days on which there is a sufficient degree of trading in the Fund's
portfolio securities that the Fund's net asset value might be materially
affected by changes in the value of the portfolio securities ("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.
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<PAGE> 110
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 Group reserves the right to reject any order for the purchase of
Shares in whole or in part. You will receive a confirmation of each new
transaction in your account, which will also show the total number of Shares
owned by you and the number of Shares being held in safekeeping by Cardinal
Management Corp., as the Fund's transfer agent (the "Transfer Agent"), for your
account. Certificates representing Shares will not be issued.
From time to time, The Ohio Company, from its own resources, may also
provide additional compensation to securities dealers in connection with sales
of shares of the Cardinal Funds. Such compensation will include financial
assistance to securities dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns and/or shareholder services and programs regarding one or more
of the Cardinal Funds and other dealer-sponsored programs or events. In some
instances, this compensation may be made available only to certain securities
dealers whose representatives have sold or are expected to sell significant
amounts of shares of the Cardinal Funds. Compensation will include payment for
travel expenses, including lodging, incurred in connection with trips taken by
invited registered representatives and members of their families to locations
within or outside of the United States for meetings or seminars of a business
nature. Securities dealers may not use sales of the Fund's Shares to qualify
for this compensation to the extent such may be prohibited by the laws of any
state or any self-regulatory agency, such as the National Association of
Securities Dealers, Inc. In addition, The Ohio Company may make ongoing
payments to brokerage firms, financial institutions (including banks) and
others to facilitate the administration and servicing of shareholder accounts.
None of the aforementioned additional compensation is paid for by the Fund or
its shareholders.
PURCHASE BY FEDERAL FUNDS WIRE
Investments in Shares of the Fund 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 Fund (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 Group of the investment and, if a new investor, to obtain an
account number. If an investor does not telephone the Group for wire
instructions and the investor's wire transfer does not include sufficient
information, such purchase will be delayed until the
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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 Market Fund
[Include Fund Account Number and Name of Account Holder]
Funds transmitted by wire will be invested in Shares of the Fund at
the net asset value next computed after receipt thereof as described above
under "General." A bank may charge for its services in effecting wire
transfers of funds.
PURCHASE BY MAIL
Investment in Shares of the Fund may be made by mail by sending a
check or other negotiable bank draft payable to the order of "Cardinal Tax
Exempt Money Market Fund" together with, in the case of an initial purchase, an
Application Form to:
Cardinal Tax Exempt Money Market Fund
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 Fund within one Business Day following receipt by The Ohio Company. Checks
drawn on non-member banks may take considerably longer. The Transfer Agent or
the Group 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 GROUP STRONGLY RECOMMENDS THAT INVESTORS OF
SUBSTANTIAL AMOUNTS USE FEDERAL FUNDS TO PURCHASE SHARES.
AUTOMATIC INVESTMENT PLAN
The Fund 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 Fund on
the periodic basis you select. Confirmation of your purchase of Fund Shares
will be provided by the Transfer Agent. The debit of 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.
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<PAGE> 112
WHAT DISTRIBUTIONS WILL I RECEIVE?
The Fund's net income is declared as a dividend and accrued on each
Business Day immediately prior to the determination of the Fund's net asset
value at 4:00 p.m. Eastern Time. Net investment income (from the time of the
immediately preceding declaration) consists of interest accrued on the
portfolio of the Fund (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 Fund
applicable to that dividend period. The Fund does not expect to realize any
long-term capital gains due to its policy of investing in securities maturing
in 13 months or less.
All dividends of net income are credited to each shareholder's account
daily and automatically reinvested in additional Shares of the Fund 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 the Transfer Agent 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 also elect to receive dividends and distributions in
cash by using ACH processing as described under "WHAT OTHER SHAREHOLDER
PROGRAMS ARE PROVIDED? - ACH Processing" below.
Should the Fund incur or anticipate any extraordinary expense, 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 Fund'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 Fund on any Business Day at the net
asset value next determined following receipt by the Transfer Agent, 215 East
Capital Street, Columbus, Ohio 43215, of a written or telephonic notice to
redeem, or by check, each as more
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<PAGE> 113
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 the Transfer Agent 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 the Transfer Agent 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 Group 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 Fund). The
purchase of Fund Shares by wire transfer of federal funds would avoid any such
delay.
The Group 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 Group 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 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 Fund by submitting a
written request therefor to the Transfer Agent, at 215 East Capital Street,
Columbus, Ohio 43215. The Transfer Agent 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,
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<PAGE> 114
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. The Transfer Agent 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 Fund by calling the
Fund 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.
Neither the Group, the Fund 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 Fund's telephone redemption procedures, acting
upon instructions reasonably believed to be genuine. The Fund will employ
procedures designed to provide reasonable assurances that instructions by
telephone are genuine; if these procedures are not followed, the Group, the
Fund 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 Fund with the type of
signature guarantee and other documentation specified under "Redemption by
Mail" above. To participate in this procedure, an
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investor must complete the expedited redemption portion of the Account
Information Form or notify the Fund 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 Fund'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 Fund 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.
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 Fund's Systematic
Withdrawal Plan. Please contact The Ohio Company for the appropriate form.
CHECK-WRITING REDEMPTION PROCEDURE
The Transfer Agent will provide any shareholder who so requests with a
supply of checks, imprinted with the shareholder's name, which may be drawn
against the Fund's account maintained by The Fifth Third Bank (the "Bank"), for
redemption of Fund Shares. These checks may be made payable to the order of
any person in any amount not less than $100. To participate in this procedure,
an investor must complete the Check-Writing Redemption Form available from the
Transfer Agent. When a check is presented to the Bank for payment, the
Transfer Agent (as your agent) will cause the Fund 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
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<PAGE> 116
checks. However, charges for copies ($5 each), returned checks ($15 each) and
returned items of deposit ($15 each) will be deducted from a shareholder's
account.
In order to stop payment on a check, the shareholder must notify the
Fund in writing before the check has been presented to the Bank for payment. A
charge of $15 will be deducted from the shareholder's account for each stop
payment order.
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
ACH PROCESSING
The Fund offers ACH privileges. Investors may use ACH processing to
make subsequent purchases, redeem Shares and/or electronically transfer
distributions paid on Fund 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
Shareholders of the Fund 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 Fund for
shares of:
Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of
capital (upon the payment of the appli-
cable 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,
an equity fund seeking long-term growth
of capital and income (upon the payment of
the applicable sales charge);
Cardinal Government Obligations Fund,
a fund investing in securities issued
or guaranteed by the U.S. Government
(upon the payment of the applicable
sales charge); or
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<PAGE> 117
Cardinal Government Securities Money Market Fund,
a short-term U.S. Government securities fund
(without payment of any sales charge).
Notwithstanding the foregoing and subject to the limitations contained
in the following paragraph, exchanges of Fund Shares for shares of The Cardinal
Fund, Cardinal Government Obligations Fund, Cardinal Balanced Fund or Cardinal
Aggressive Growth Fund (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
Fund to be exchanged were acquired as a result of an exchange of shares of the
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 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. The 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 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 Fund by telephone. Neither the Group, the Fund
nor any of its service providers will be liable for 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 Group may, at any time, modify or terminate the foregoing exchange
privilege. The Group, however, will give shareholders of the Fund 60 days'
advance written notice of any such modification or termination.
HOW IS NET ASSET VALUE CALCULATED?
The Fund's net asset value per share is currently determined as of
4:00 p.m. Eastern Time on each Business Day. Net asset value per share is
computed by dividing the total value of the assets of the Fund, less its
liabilities, by the total number of Shares outstanding. Expenses and fees of
the Fund, including the
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<PAGE> 118
management fee, are accrued daily and taken into account for the purpose of
determining the net asset value.
The Board of Trustees has adopted a policy requiring the Fund to use
its best efforts, under normal circumstances, to maintain a constant net asset
value of $1.00 per share. The Fund 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 Fund will normally include any accrued discount or premium in its daily
dividend and will thereby keep constant the value of the Fund'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 FUND PAY FEDERAL INCOME TAX?
Each of the funds of the Group, including the Fund, is treated as a
separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code"), for so long as such qualification is in the best interest
of that fund's shareholders. Qualification as a regulated investment 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. The Fund contemplates declaring as dividends 100% of the
Fund's investment company taxable income (before deduction of dividends paid).
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
Fund would be subject to a nondeductible excise tax equal to 4% of the
deficiency.
WHAT ABOUT MY TAXES?
FEDERAL TAXES
The Fund 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
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<PAGE> 119
would be so excluded, constitute "exempt-interest dividends" when designated as
such by the Fund 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 Fund will also be treated as tax preference items in
computing the alternative minimum tax to the extent, if any, that distributions
by the Fund are attributable to interest earned by the Fund 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.
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 Fund. 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 Fund anticipates that substantially all of its dividends will be
excluded from gross income for federal income tax purposes and will not be a
preference item for individuals for purposes of the federal alternative minimum
tax.
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
- 22 -
<PAGE> 120
purposes that, if received directly, would be exempt from such income taxes.
The Fund will report to its shareholders annually after the close of its
taxable year the percentage and source, on a state-by-state basis, of interest
income earned on Municipal Securities held by the Fund during the preceding
year.
The foregoing is intended only as a brief summary of some of the
important tax considerations generally affecting the Fund and its shareholders.
Potential investors in the Fund 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.
The Transfer Agent will inform shareholders at least annually of the
amount and nature of such income and capital gains.
WHO MANAGES MY INVESTMENT IN THE FUND?
Except where shareholder action is required by law, all of the
authority of the Group is exercised under the direction of the Group's
Trustees, who are elected by the shareholders of the Group's funds and who are
empowered to elect officers and contract with and provide for the compensation
of agents, consultants and other professionals to assist and advise it in its
day-to-day operations. The Group will be managed in accordance with its
Declaration of Trust and the laws of Ohio governing business trusts.
The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of the Adviser or The Ohio Company receives any
compensation from the Group for acting as a Trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. The Adviser receives fees from the Group for acting
as investment adviser and manager and as dividend and transfer agent. The Ohio
Company receives no fees under its Distribution Agreement with the Group.
INVESTMENT ADVISER
Cardinal Management Corp. (the "Adviser"), 155 East Broad Street,
Columbus, Ohio 43215, a wholly owned subsidiary of The Ohio Company, is the
investment adviser and manager of the Fund. The Adviser is also the investment
adviser and manager of each of the other Cardinal Funds.
The Ohio Company, an investment banking firm organized in 1925, is a
member of the New York Stock Exchange, the Midwest Stock Exchange, other
regional stock exchanges and the National Associ-
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<PAGE> 121
ation of Securities Dealers, Inc. Descendants of H.P. and R.F. Wolfe,
deceased, and members of their families, through their possession of a majority
of a voting stock, may be considered controlling persons of The Ohio Company.
The Ohio Company serves as principal underwriter for each of the Cardinal
Funds.
In its capacity as investment adviser, and subject to the ultimate
authority of the Group's Board of Trustees, the Adviser, in accordance with the
Fund's investment objectives and policies, manages the Fund, and makes
decisions with respect to and places orders for all purchases and sales of its
portfolio securities. Since the Fund's inception, Hannibal L. Godwin III has
been primarily responsible for the day-to-day management of the Fund's
portfolio. Mr. Godwin has been a portfolio manager with the Adviser and/or The
Ohio Company since 1981. In addition, pursuant to the Investment Advisory
Agreement, the Adviser generally assists in all aspects of the Fund's
administration and operation.
For the services provided and expenses assumed pursuant to its
investment advisory agreement with the Group with respect to the Fund, the
Adviser receives a fee from the Fund, computed daily and paid monthly at the
annual rate of .50% of average net daily assets of the Fund. The Adviser has,
however, and may in the future periodically waive all or a portion of its
advisory fee with respect to the Fund to increase the net income of the Fund
available for distributions as dividends. The waiver of such fee will cause
the yield of the Fund to be higher than it would otherwise be in the absence of
such waiver.
DIVIDEND AND TRANSFER AGENT AND FUND ACCOUNTANT
The Group has entered into a Transfer Agency and Fund Accounting
Agreement with Cardinal Management Corp. (the "Transfer Agent"), 215 East
Capital Street, Columbus, Ohio 43215, pursuant to which the Transfer Agent has
agreed to act as the Fund's transfer agent and dividend disbursing agent. In
consideration of such services, the Fund has agreed to pay the Transfer Agent
an annual fee, paid monthly, equal to $21 per shareholder account plus
out-of-pocket expenses. In addition, the Transfer Agent provides certain fund
accounting services for the Fund. The Transfer Agent receives a fee from the
Fund for such services equal to a fee computed daily and paid periodically at
an annual rate of .03% of the Fund's average daily net assets.
DISTRIBUTOR
The Group has entered into a Distributor's Contract with The Ohio
Company, 155 East Broad Street, Columbus, Ohio 43215, pursuant to which Shares
of the Fund will be offered continuously on a best efforts basis by The Ohio
Company and dealers selected by The Ohio
- 24 -
<PAGE> 122
Company. H. Keith Allen is an officer and trustee of the Group and an officer
and director of The Ohio Company. Frank W. Siegel is an officer and trustee of
the Group and an officer of The Ohio Company. Barry C. McMahon, David C. Will
and James M. Schrack II are officers of both the Group and The Ohio Company.
EXPENSES
The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager, transfer agent and fund accountant
other than the cost of securities (including brokerage commissions, if any)
purchased for the Fund. The Fund will bear the following expenses relating to
its operations: organizational expenses, taxes, interest, any brokerage fees
and commissions, fees and expenses of the Trustees of the Group, Commission
fees, state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to the Fund's current
shareholders, outside auditing and legal expenses, advisory fees, fees and
out-of-pocket expenses of the custodian and Transfer Agent, costs for
independent pricing services, certain insurance premiums, costs of maintenance
of the Group's existence, costs of shareholders' reports and meetings, and any
extraordinary expenses incurred in the Fund's operation.
CUSTODIAN
The Group has appointed The Fifth Third Bank ("Fifth Third") 38
Fountain Square Plaza, Cincinnati, Ohio 45263, as the Fund'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 Fund.
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
The Group was organized as an Ohio business trust on March 23, 1993.
The Group currently consists of six funds, each having its own class of shares.
The other funds of the Group are The Cardinal Fund, Cardinal Government
Obligations Fund, Cardinal Government Securities Money Market Fund, Cardinal
Balanced Fund and Cardinal Aggressive Growth Fund. Each share represents an
equal proportional interest in a fund with other shares of the same fund, and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that fund as are declared at the discretion of the
Trustees.
Shareholders are entitled to one vote for each dollar of value
invested and a proportionate fractional vote for any fraction of a dollar
invested, and will vote in the aggregate and not by series except as otherwise
expressly required by law. For example, shareholders of the Fund will vote in
the aggregate with other share-
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<PAGE> 123
holders of the Group with respect to the election of trustees and ratification
of the selection of independent accountants. However, shareholders of the Fund
will vote as a fund, and not in the aggregate with other shareholders of the
Group, for purposes of approval of amendments to the Fund's investment advisory
agreement or any of the Fund's fundamental policies.
Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUND?"
Individual Trustees are elected by the shareholders of the Group and may be
removed by the Board of Trustees or shareholders in accordance with the
provisions of the Declaration of Trust and By-Laws of the Group and Ohio law.
See "ADDITIONAL INFORMATION - Miscellaneous" in the Statement of Additional
Information for further information.
An annual or special meeting of shareholders to conduct necessary
business is not required by the Declaration of Trust, the 1940 Act or other
authority except, under certain circumstances, to elect Trustees, amend the
Declaration of Trust, approve the investment advisory agreement and to satisfy
certain other requirements. To the extent that such a meeting is not required,
the Group may elect not to have an annual or special meeting.
The Group has represented to the Commission that the Trustees will
call a special meeting of shareholders for purposes of considering the removal
of one or more Trustees upon written request thereof from shareholders holding
not less than 10% of the outstanding votes of the Group and that the Group will
assist in communications with other shareholders as required by Section 16(c)
of the 1940 Act. At such meeting, a quorum of shareholders (constituting a
majority of votes attributable to all outstanding shares of the Group), by
majority vote, has the power to remove one or more Trustees.
As used in this Prospectus and in the Statement of Additional
Information, "assets belonging to a fund" means the consideration received by
the fund upon the issuance or sale of shares in that fund, together with all
income, earnings, profits, and proceeds derived from the investment thereof,
including any proceeds from the sale, exchange, or liquidation of such
investments, and any funds or amounts derived from any reinvestment of such
proceeds, and any general assets of the Group not readily identified as
belonging to a particular fund that are allocated to the fund by the Group's
Board of Trustees. The Board of Trustees may allocate such general assets in
any manner it deems fair and equitable. Determinations by the Board of
Trustees of the Group as to the timing of the allocation of general liabilities
and expenses and as to the timing and allocable portion of any general assets
with respect to the Fund are conclusive.
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<PAGE> 124
As used in this Prospectus and in the Statement of Additional
Information, a "vote of a majority of the outstanding shares" of the Fund means
the affirmative vote, at a meeting of shareholders duly called, of the lesser
of (a) 67% or more of the votes of shareholders of the Fund present at a
meeting at which the holders of more than 50% of the votes attributable to
shareholders of record of the Fund are represented in person or by proxy, or
(b) the holders of more than 50% of the outstanding votes of shareholders of
the Fund.
Shareholders should direct all inquiries concerning such matters to
the Transfer Agent in writing to 215 East Capital Street, Columbus, Ohio 43215,
or by calling (800) 282-9446.
Shareholders will receive unaudited semi-annual reports describing the
investment operations of the Fund and annual financial reports audited by
independent auditors.
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<PAGE> 125
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 Plaza
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
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<PAGE> 126
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page
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PROSPECTUS
PROSPECTUS HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 3 -------------
FEE TABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHAT IS THE FUND? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND? . . . . . . . . . . . . . . . . . . . . . 6
HOW DO I PURCHASE SHARES OF THE FUND? . . . . . . . . . . . . . . . . . . 12 January __, 1996
WHAT DISTRIBUTIONS WILL I RECEIVE? . . . . . . . . . . . . . . . . . . . 15
HOW MAY I REDEEM MY SHARES? . . . . . . . . . . . . . . . . . . . . . . . 15
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
HOW IS NET ASSET VALUE CALCULATED? . . . . . . . . . . . . . . . . . . . 20
DOES THE FUND PAY FEDERAL INCOME TAX? . . . . . . . . . . . . . . . . . . 21 THE OHIO COMPANY
WHAT ABOUT MY TAXES? . . . . . . . . . . . . . . . . . . . . . . . . . . 21
WHO MANAGES MY INVESTMENT IN THE FUND? . . . . . . . . . . . . . . . . . 23
WHAT ARE MY RIGHTS AS A SHAREHOLDER? . . . . . . . . . . . . . . . . . . 25
________________
No dealer, salesman or any other person has been authorized to give any CARDINAL
information or to make any representations, other than those contained in this TAX EXEMPT MONEY
Prospectus, in connection with the offer contained in this Prospectus and, if MARKET FUND
given or made, such other information or representations must not be relied upon
as having been authorized by the Fund, the Adviser, or The Ohio Company. This
Prospectus does not constitute an offer by the Fund or by The Ohio Company to
sell or a solicitation of an offer to buy any of the securities offered hereby [LOGO]
in any jurisdiction to any person to whom it is unlawful for the Fund to make CARDINAL FUNDS
such an offer in such jurisdiction.
</TABLE>
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<PAGE> 127
STATEMENT OF ADDITIONAL INFORMATION
THE CARDINAL FUND
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
CARDINAL TAX EXEMPT MONEY MARKET FUND
FOUR INVESTMENT PORTFOLIOS OF
THE CARDINAL GROUP
The Cardinal Fund ("TCF"), Cardinal Government Obligations Fund
("CGOF"), Cardinal Government Securities Money Market Fund ("CGSMMF") and
Cardinal Tax Exempt Money Market Fund ("CTEMMF") (collectively, the "Funds" and
individually a "Fund") are each a separate diversified, investment portfolio of
The Cardinal Group, an open-end, management investment company (the "Group").
The investment objectives of TCF are long-term growth of capital and income.
Current income is a secondary objective. The investment objectives of CGOF are
to maximize safety of capital and, consistent with such objective, earn the
highest available current income obtainable from government securities. The
investment objectives of CGSMMF are to maximize current income while preserving
capital and maintaining liquidity. The investment objectives of CTEMMF are to
maximize current income exempt from federal income tax while preserving capital
and maintaining liquidity.
_______________________________________________________________________
For further information regarding the Funds or for assistance
in opening an account or redeeming Shares, please call (800)
282-9446 toll free.
Inquiries may also be made by mail addressed to the Group at its
principal office:
155 East Broad Street
Columbus, Ohio 43215
This Statement Of Additional Information is not a prospectus and
should be read in conjunction with the Prospectuses of the Funds, each dated as
of January __, 1996, which have been filed with the Securities and Exchange
Commission. This Statement of Additional Information is incorporated by
reference in its entirety into the Prospectuses. The Prospectuses are
available upon request without charge from the Group at the above address or by
calling the phone number provided above.
JANUARY __, 1996
<PAGE> 128
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
THE CARDINAL GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Additional Information on Portfolio Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15
PRINCIPAL SHAREHOLDERS OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
TRANSFER AND DIVIDEND AGENT AND FUND ACCOUNTANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-23
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Vote of a Majority of the Outstanding Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-34
Calculation of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
THE CARDINAL GROUP
The Cardinal Group (the "Group") is an open-end management investment
company which currently offers six separate diversified investment portfolios,
each with different investment objectives.
This Statement of Additional Information contains information about
The Cardinal Fund ("TCF"), Cardinal Government Obligations Fund ("CGOF"),
Cardinal Government Securities Money Market Fund ("CGSMMF") and Cardinal Tax
Exempt Money Market Fund ("CTEMMF") (collectively, the "Funds" and individually
a "Fund").
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the respective
Fund. Capitalized terms not defined herein are defined in the Prospectuses.
No investment in Shares of a Fund should be made without first reading the
Prospectus of that Fund.
INVESTMENT OBJECTIVES AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the investment objectives and
policies of the Funds as set forth in their respective Prospectuses.
BANK OBLIGATIONS. As described in its Prospectus, CTEMMF may invest
in bank obligations consisting of bankers' acceptances, certificates of
deposit, and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by CTEMMF will be those guaranteed by domestic
and foreign banks having, at the time of investment, assets in excess of
$500,000,000 (as of the date of their most recently published financial
statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of
deposit and time deposits will be those of domestic banks and savings and loan
associations, if at the time of investment the depository institution has
assets in excess of $500,000,000 (as of the date of its most recently published
financial statements).
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COMMERCIAL PAPER. Commercial paper in which TCF, CGOF and CTEMMF may
invest consists of unsecured promissory notes issued by corporations. Issues
of commercial paper normally have maturities of less than nine months and fixed
rates of return.
TCF, CGOF and CTEMMF will invest only in commercial paper which is
rated at the time of purchase within the two highest rating groups assigned by
one or more appropriate NRSROs, or if unrated, which the Adviser determines to
be of comparable quality. For a description of the rating symbols of the
NRSROs, see the Appendix.
U.S. GOVERNMENT OBLIGATIONS. CGOF and CGSMMF invest in, and TCF and
CTEMMF may invest in, obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer to
borrow from the Treasury; others are supported by the discretionary authority
of the U.S. Government to purchase the agency's obligations; and still others
are supported only by the credit of the instrumentality. No assurance can be
given that the U.S. Government would provide financial support to U.S.
Government-sponsored agencies or instrumentalities if it is not obligated to
do so by law.
MUNICIPAL SECURITIES. Municipal Securities which may be purchased by
CTEMMF currently can be divided into two basic groups: Municipal Notes and
Municipal Bonds.
Municipal Notes generally provide capital for short-term needs and
have maturities of one year or less. They include:
1. PROJECT NOTES. Project notes are sold through the
Department of Housing and Urban Development to raise funds for
federally sponsored urban renewal, neighborhood development and
housing programs. In low-income housing, proceeds from project notes
are chiefly used for construction financing prior to permanent
financing. In urban renewal the funds have generally been used for
land acquisition and site improvements. (No new urban renewal
projects are currently being undertaken as that program has been
superseded by the Community Block Grant Program contained in the
Housing and Community Development Act of 1974.) Project notes are
issued by public bodies created under the laws of one of the states,
territories or U.S. possessions and are referred to as Local Issuing
Agencies. Project Notes generally range in maturity from three months
to one year. While they are the primary obligations of the public
housing agencies or the local urban renewal agencies which have issued
them, they are also secured by the full faith and credit of the U.S.
Government. Payment by the United States pursuant to its full faith
and credit
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obligation does not impair the tax-exempt character of the income from
project notes.
2. TAX ANTICIPATION NOTES. Tax anticipation notes are
issued by state and local governments in anticipation of collection of
taxes to finance the current operations of such governments. The
notes are generally payable only from tax collections and often only
from the proceeds of the specific tax levy whose collection they
anticipate.
3. REVENUE ANTICIPATION NOTES. Revenue anticipation
notes are issued by governmental entities in anticipation of revenues
to be received later in the then current fiscal year.
4. BOND ANTICIPATION NOTES. Bond anticipation notes are
issued in anticipation of a later issuance of bonds and are usually
payable from the proceeds of the sale of the bonds anticipated or of
renewal notes.
5. CONSTRUCTION LOAN NOTES. Construction loan notes,
issued to provide construction financing for specific projects, are
often redeemed after the projects are completed and accepted with
funds obtained from the Federal Housing Administration under "Fannie
Mae" (Federal National Mortgage Association) or "Ginnie Mae"
(Government National Mortgage Association).
6. TAX-EXEMPT COMMERCIAL PAPER. Tax-exempt commercial
paper is issued by state and local governments and agencies thereof to
finance seasonal working capital needs or in anticipation of longer
term financing. The stated maturity is 365 days or less.
Municipal Bonds are usually issued to obtain funds for various public
purposes, to refund outstanding obligations, to meet general operating expenses
or to obtain funds to lend to other public institutions and facilities. They
are generally classified as either "general obligation" or "revenue" bonds and
frequently have maturities in excess of one year at the time of issuance,
although issues having variable interest rates with demand features may permit
CTEMMF to treat them as having maturities of less than 397 days. See
"ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Determination of Net Asset
Value" herein and "HOW IS NET ASSET VALUE CALCULATED?" in CTEMMF's Prospectus.
1. GENERAL OBLIGATION BONDS. General obligation bonds
are issued by states, counties, regional districts, cities, towns and
school districts for a variety of purposes including mass
transportation, highway, bridge, school, road, and water and sewer
system construction, repair or improvement. Payment of these bonds is
secured by a pledge of the issuer's full faith and credit and taxing
(usually property tax) power.
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2. REVENUE BONDS. Revenue bonds are payable solely from
the revenues generated from the operations of the facility or
facilities being financed or from other non-tax sources. These bonds
are often secured by debt service reserve funds, rent subsidies and/or
mortgage collateral to finance the construction of housing, highways,
bridges, tunnels, hospitals, university and college buildings, port
and airport facilities, and electric, water, gas and sewer systems.
3. INDUSTRIAL DEVELOPMENT REVENUE AND PRIVATE ACTIVITY
BONDS. Industrial development revenue bonds and private activity
bonds are usually issued by local government bodies or their
authorities to provide funding for industrial facilities, privately
operated housing, health care facilities, airports, docks and mass
commuting facilities, certain water and sewage facilities, qualified
hazardous waste facilities and high speed innercity rail facilities.
Under prior law, these bonds also were issued to finance commercial
facilities, sports facilities, convention and trade show facilities
and pollution control facilities. Payment of principal and interest
on such bonds is not secured by the taxing power of the governmental
body. Rather, payment is dependent solely upon the ability of the
users of the facilities financed by the bonds to meet their financial
obligations and the pledge, if any, of the real and personal property
financed by such bonds as security for payment.
Legislation to restrict or eliminate the federal income tax exemption
for interest on certain Municipal Securities has been enacted periodically in
the recent past and additional legislation may be enacted in the future. This
legislation may adversely affect the availability of Municipal Securities for
CTEMMF's portfolio. If any such legislation has a materially adverse effect on
CTEMMF's ability to achieve its investment objectives, CTEMMF will re-evaluate
its investment objectives and submit to its shareholders for approval necessary
changes in the objectives and policies of CTEMMF.
The Municipal Securities described above represent those which CTEMMF
currently expects to purchase. However, several new types of municipal bonds
and notes, particularly those with shorter maturities, have been introduced in
recent years and the Adviser believes that other types of municipal bonds and
notes may be offered in the future. Therefore, in order to preserve maximum
flexibility in seeking to attain its investment objectives, CTEMMF has
determined not to limit its purchase to the types of Municipal Securities
described herein, although it will purchase only municipal obligations which
have the credit characteristics described herein. In addition, CTEMMF may not
purchase any municipal bonds or notes having characteristics or terms that are
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inconsistent with the investment objectives or investment policies of CTEMMF.
Subsequent to CTEMMF's purchase of a security, it may be assigned a
lower rating or cease to be rated. In such an event the Adviser is required to
promptly reassess the credit quality of such security. If such security no
longer presents minimal credit risks or if the security is deemed to be an
"Unrated Security" or a "Second-Tier Security," within the meaning of Rule 2a-7
of the 1940 Act, and receives a rating by any NRSRO below the second highest
rating category, the Adviser is generally required to sell such security within
five business days of becoming aware of such an event.
VARIABLE RATE DEMAND MUNICIPAL SECURITIES. Variable rate demand
Municipal Securities are tax-exempt obligations that provide for a periodic
adjustment in the interest rate paid on the securities and permit the holder to
demand payment of the unpaid principal balance plus accrued interest upon a
specified number of days' notice either from the issuer or by drawing on a bank
letter of credit or comparable guarantee issued with respect to such security.
The issuer of a variable rate demand security may have a corresponding right to
prepay in its discretion the outstanding principal of the instrument plus
accrued interest upon notice comparable to that required for the holder to
demand payment.
The terms of the securities must provide that interest rates are
adjustable at intervals ranging from weekly up to semi-annually. The
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
variable rate demand securities purchased by CTEMMF are subject to the quality
characteristics for Municipal Securities described above. While these
securities are expected to have maturities in excess of one year, the Adviser
will determine at least monthly that such securities are of high quality. The
Trustees have instructed the Adviser to exercise its right to demand payment of
principal and accrued interest thereon, if a variable rate demand security held
by CTEMMF no longer meets the quality standards of CTEMMF, unless, of course,
the security can be sold for a greater amount in the market.
The principal and accrued interest payable to CTEMMF on demand will be
supported by an irrevocable letter of credit or comparable guarantee of a
financial institution (generally a commercial bank) whose short-term taxable
debt meets the quality criteria for investment by CTEMMF in Municipal
Securities, except in cases where the security itself meets the credit criteria
of CTEMMF without such letter of credit or comparable guarantee. Thus,
although a variable rate demand security may be unrated, CTEMMF will have at
all times an alternate high quality credit source to draw upon for payment with
respect to such security.
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The variable rate demand securities which CTEMMF may purchase include
participation interests in variable rate securities. Such participation
interests will have, as part of the participation agreement between CTEMMF and
the selling financial institution, a demand feature which permits CTEMMF to
demand payment from the seller of the principal amount of CTEMMF's
participation plus accrued interest thereon. This demand feature always will
be supported by a letter of credit or comparable guarantee provided by the
selling financial institution. Such financial institution will retain a
service and a letter of credit fee, and a fee for issuing commitments to
purchase on demand, in an amount equal to the excess of the interest paid on
the variable rate security in which CTEMMF has a participation interest over
the negotiated yield at which the participation interest was purchased by
CTEMMF. Accordingly, CTEMMF will purchase such participation interests only
when the yield to CTEMMF, net of such fees, is equal to or greater than the
yield then available on other variable rate demand securities or short-term
fixed rate tax exempt securities of comparable quality and where the fees are
reasonable in relation to the services provided by the financial institution
and the security and liquidity provided by the letter of credit or guarantee.
CONCENTRATION. CTEMMF may invest more than 25% of its net assets in
(i) Municipal Securities whose issuers are in the same state, (ii) Municipal
Securities the interest upon which is paid solely from revenues of similar
projects and (iii) industrial development and pollution control revenue bonds
which are not variable rate demand Municipal Securities, i.e., Municipal
Securities which are related in such a way that an economic, business or
political development or change affecting one such Municipal Security would
also affect the other Municipal Securities; for example, Municipal Securities
the interest on which is paid from revenues of similar type projects or
Municipal Securities whose issuers are located in the same state. The District
of Columbia, each state, each of its political subdivisions, agencies,
instrumentalities and authorities, and each multi-state agency of which a state
is a member, is a separate "issuer" as that term is used in this Statement of
Additional Information and in CTEMMF's investment restrictions contained in its
Prospectus. The identification of the "issuer" depends on the terms and
conditions of the security. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the security is supported
only by the assets and revenues of the subdivision, such subdivision would be
deemed to be the sole "issuer." Similarly, in the case of an industrial
development or pollution control revenue bond, if that bond is supported only
by the assets and revenues of the nongovernmental user, then such
nongovernmental user would be deemed to be the sole "issuer." If, however, in
either case, the creating government or some other entity guarantees a
security, such a guarantee would be considered a separate security and must be
separately valued.
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WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. CGOF, CGSMMF and CTEMMF
may purchase securities on a "when-issued" or "delayed-delivery" basis (i.e.,
for delivery beyond the normal settlement date at a stated price and yield).
When a Fund agrees to purchase securities on a "when-issued" or
"delayed-delivery" basis, the Fund's custodian will set aside in a separate
account cash or liquid portfolio securities equal to the amount of the
commitment. Normally, the custodian will set aside portfolio securities to
satisfy the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of such Fund's
commitment. It may be expected that a Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or liquid portfolio securities to satisfy its purchase commitments
in the manner described above, such Fund's liquidity and the ability of the
Adviser to manage it might be affected in the event its commitments to purchase
"when-issued" or "delayed-delivery" securities ever exceeded 25% of the value
of its assets. Under normal market conditions, however, neither CGOF's,
CGSMMF's nor CTEMMF's commitments to purchase "when-issued" or
"delayed-delivery" securities will exceed 25% of the value of its assets.
When CGOF, CGSMMF or CTEMMF engages in "when-issued" or
"delayed-delivery" transactions, such Fund relies on the seller to consummate
the trade. Failure of the seller to do so may result in that Fund's incurring
a loss or missing the opportunity to obtain a price considered to be
advantageous. CGOF, CGSMMF and CTEMMF will engage in "when-issued" or
"delayed-delivery" transactions only for the purpose of acquiring portfolio
securities consistent with such Fund's investment objectives and policies and
not for investment leverage.
SECURITIES OF OTHER INVESTMENT COMPANIES. Each Fund may invest in
securities issued by other investment companies. Each Fund currently intends
to limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 5% of the value of its total assets will
be invested in the securities of any one investment company; (b) not more than
10% of the value of its total assets will be invested in the aggregate in
securities of investment companies as a group; and (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by such
Fund. As a shareholder of another investment company, a Fund would bear, along
with other shareholders, its pro rata portion of that company's expenses,
including advisory fees. These expenses would be in addition to the advisory
and other expenses that such Fund bears directly in connection with its own
operations. Investment companies in which TCF and CGOF may invest may also
impose a sales or distribution charge in connection with the purchase or
redemption of their shares and other types of commissions or charges. Such
charges
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will be payable by such Fund and, therefore, will be borne directly by
shareholders.
REPURCHASE AGREEMENTS. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from member banks of the Federal Reserve System
and registered broker-dealers which the Adviser deems creditworthy under
guidelines approved by the Group's Board of Trustees, subject to the seller's
agreement to repurchase such securities at a mutually agreed-upon date and
price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain at all times the
value of collateral held pursuant to the agreement at not less than the
repurchase price (including accrued interest). In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Fund could experience
both delays in liquidating the underlying securities and losses, including:
(a) possible decline in the value of the underlying securities during the
period while the Fund 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. Additionally, there is no controlling
legal precedent confirming that the Fund would be entitled, as against a claim
by such seller or its receiver or trustee in bankruptcy, to retain the
underlying securities, although the Board of Trustees of the Group believes
that, under the regular procedures normally in effect for custody of the Fund's
securities subject to repurchase agreements and under federal laws, a court of
competent jurisdiction would rule in favor of the Group if presented with the
question. Securities subject to repurchase agreements will be held by the
Group's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENT. CTEMMF is permitted to enter into
reverse repurchase agreements for temporary or emergency non-investment
purposes in an amount not exceeding (together with other borrowings) 5% of the
value of CTEMMF's assets at the time of entering into the agreement. CTEMMF,
however, has not entered into such agreements in the past and does not intend
to enter into such agreements in the foreseeable future.
FOREIGN INVESTMENT. Investment in foreign securities is subject to
special investment risks that differ in some respects from those related to
investments in securities of U.S. domestic issuers. Since investments in the
securities of foreign issuers may involve currencies of foreign countries, TCF
may be affected favorably or unfavorably by changes in currency rates and in
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exchange control regulations and may incur costs in connection with conversions
between various currencies.
Since foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies, there may be less publicly
available information about a foreign company than about a U.S. company.
Securities of many foreign companies are less liquid and more volatile than
securities of comparable U.S. companies.
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 TCF's investments 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.
TCF will acquire such securities only when the Adviser believes the
risks associated with such investments are minimal.
OPTIONS TRADING. Each of TCF and CGOF may purchase put and call
options. A call option gives the purchaser of the option the right to buy, and
a writer has the obligation to sell, the underlying security at the stated
exercise price at any time prior to the expiration of the option, regardless of
the market price of the security. The premium paid to the writer is
consideration for undertaking the obligations under the option contract. A put
option gives the purchaser the right to sell the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by such Funds will be valued at the last sale price, or in the absence of such
a price, at the mean between bid and asked price.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the
traded option is the last sale price or, in the absence of a sale, the average
of the closing bid and asked prices. If an option expires on the stipulated
expiration date or if the Fund enters into a closing purchase transaction, it
will realize a gain (or a loss if the cost of a closing purchase transaction
exceeds the net premium received when the option is sold) and the deferred
credit related to such option will be eliminated. If an option is exercised,
the Fund may deliver the underlying security in the open market. In either
event, the proceeds of the sale will be increased by the net
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premium originally received and the Fund will realize a gain or loss.
TCF and CGOF may also purchase or sell index options. Index options
(or options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
FUTURES CONTRACTS. As discussed in the Prospectuses of the TCF and
CGOF, each of those Funds may enter into futures contracts. This investment
technique is designed primarily to hedge against anticipated future changes in
market conditions which otherwise might adversely affect the value of
securities which a Fund holds or intends to purchase. For example, when
interest rates are expected to rise or market values of portfolio securities
are expected to fall, a Fund can seek through the sale of futures contracts to
offset a decline in the value of its portfolio securities. When interest rates
are expected to fall or market values are expected to rise, a Fund, through the
purchase of such contracts, can attempt to secure better rates or prices for
the Fund than might later be available in the market when it effects
anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Fund had not entered into any futures
transactions. In addition, the value of a Fund's futures positions may not
prove to be perfectly or even highly correlated with the value of its portfolio
securities, limiting the Fund's ability to hedge effectively against interest
rate and/or market risk and giving rise to additional risks. There is no
assurance of liquidity in the secondary market for purposes of closing out
futures positions.
REGULATORY RESTRICTIONS. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, a Fund will
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maintain in a segregated account cash or liquid high-grade securities equal to
the value of such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for
futures contracts held by such Fund plus premiums paid by it for open options
on futures would exceed 5% of such Fund's total assets. A Fund will not engage
in transactions in financial futures contracts or options thereon for
speculation, but only to attempt to hedge against changes in market conditions
affecting the values of securities which such Fund holds or intends to
purchase. When futures contracts or options thereon are purchased to protect
against a price increase on securities intended to be purchased later, it is
anticipated that at least 25% of such intended purchases will be completed.
When other futures contracts or options thereon are purchased, the underlying
value of such contracts will at all times not exceed the sum of: (1) accrued
profit on such contracts held by the broker; (2) cash or high quality money
market instruments set aside in an identifiable manner; and (3) cash proceeds
from investments due in 30 days.
Investment Restrictions
- -----------------------
Each Fund's investment objectives are fundamental policies and as such
may not be changed without a vote of the holders of a majority of that Fund's
outstanding Shares. In addition, the following investment restrictions of the
Funds may be changed only by a vote of a majority of the outstanding Shares of
a Fund (as defined under "ADDITIONAL INFORMATION - Vote of a Majority of the
Outstanding Shares" in this Statement of Additional Information).
Each of TCF and CGOF may not:
1. Purchase securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio securities and except
as may be necessary to make margin payments in connection with derivative
securities transactions;
2. Underwrite the securities of other persons, except to the
extent that the Fund may be deemed to be an underwriter under certain
securities laws in the disposition of "restricted securities";
3. Purchase or sell real estate (although investments in
marketable securities of companies engaged in such activities and securities
secured by real estate or interests therein are not prohibited by this
restriction).
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4. Purchase or sell commodities or commodities contracts, except
to the extent disclosed in the current Prospectus of the Fund.
In addition, CGOF may not:
1. Purchase participation or other direct interests in oil, gas,
or other mineral exploration or development programs; or
2. Mortgage, pledge, hypothecate or, in any other manner,
transfer as security for indebtedness any security owned by a Fund, except as
may be necessary in connection with permissible borrowings, in which event such
mortgaging, pledging or hypothecating may not exceed 5% of a Fund's assets,
valued at cost and except that the deposit of assets in escrow in connection
with writing covered call options will not be deemed to be the mortgage,
pledge, hypothecation or transfer of assets as security described above.
CGSMMF will not:
1. Pledge, mortgage or hypothecate its assets, except that to
secure borrowings permitted for temporary or emergency non- investment
purposes, the Trust may pledge securities having a market value at the time of
pledge not exceeding 15% of its total assets (so long as certain state law
restrictions are applicable, the market value of securities subject to any such
pledge will not exceed 10% of the market value of the Trust's total assets);
2. Underwrite the securities issued by other persons, except to
the extent that the Fund may be deemed to be an underwriter under certain
securities laws in the disposition of "restricted securities";
3. Purchase or sell real estate or real estate mortgage loans;
4. Purchase commodities or commodities contracts;
5. Purchase participations or other direct interests in oil, gas
or other mineral exploration or development programs; or
6. Purchase any securities on margin, except for such short term
credits as are necessary for the clearance of portfolio transactions.
CTEMMF will not:
1. Pledge, mortgage or hypothecate its assets, except that to
secure borrowing permitted by (3) above, it may pledge securities having a
market value at the time of pledge not exceeding 15% of the Trust's total
assets; provided, however, so long as certain state law restrictions are
applicable, the market value of securities subject to any such pledge will not
exceed 10% of the market value of the Trust's total assets;
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2. Underwrite the securities issued by other persons, except to
the extent that the Fund may be deemed to be an underwriter under certain
securities laws in the disposition of "restricted securities";
3. Purchase or sell real estate, although the Trust may invest in
Municipal Securities or temporary investments secured by interests in real
estate;
4. Purchase or sell commodities or commodity contracts;
5. Purchase any securities on margin, except for such short term
credits as are necessary for the clearance of portfolio transactions;
6. Write, purchase or sell put or call options, except to the
extent that securities subject to a demand obligation or stand-by commitment
may be acquired;
7. Purchase participations or other direct interests in oil, gas,
or other mineral exploration or development programs; or
8. Purchase securities which are not Municipal Securities and the
income from which is subject to federal income tax, if such purchase would
cause more than 20% of the Trust's total assets to be invested in such
securities.
The following additional investment restrictions may be changed
without the majority vote of the outstanding Shares of any of the Funds. Each
Fund may not:
1. Purchase securities of other investment companies, except (a)
in connection with a merger, consolidation, acquisition or reorganization, and
(b) to the extent permitted by the 1940 Act or pursuant to any exemptions
therefrom;
2. Engage in any short sales; or
3. Invest more than 15% of the Fund's total assets in securities
which are restricted as to disposition.
In addition, TCF has the following nonfundamental investment
restrictions: (1) TCF may not purchase or retain any securities of an issuer
if, to the knowledge of the Group, the officers and trustees of the Group or
the officers and directors of the Adviser individually owning more than 1/2 of
1% of the securities of such issuer together own beneficially more than 5% of
the securities of such issuer, (2) mortgage or hypothecate the Fund's assets in
excess of one-third of the Fund's total assets, (3) purchase participations or
direct interests in oil, gas or other mineral exploration or development
programs (although investments by the Fund in marketable securities of
companies engaged in such activities are not prohibited by this restriction),
or (4) purchase securities of enterprises which have a record of less than
three years' continuous operation, if such purchase would cause more than
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<PAGE> 142
10% of the total assets of the Fund to be invested in the securities of such
enterprises.
If a percentage restriction or requirement set forth above is met at
the time of investment, a later increase or decrease in such percentage
resulting from a change in net asset value will not be considered a violation
of the policy. However, should a change in net asset value or other external
events cause a Fund's investments in illiquid securities to exceed the
limitation in its non-fundamental policy as set forth in its Prospectus, the
Fund will act to cause the aggregate amount of illiquid securities to come
within such limit as soon as reasonably practicable. In such an event,
however, the Fund would not be required to liquidate any portfolio securities
where the Fund would suffer a loss on the sale of such securities.
The Group has represented to the California Department of Corporations
on behalf of each of the Funds that, in order to comply with applicable
regulations, each Fund will acquire or retain securities of other open-end
management investment companies if such investments are made in open-end
management investment companies sold with no sales commission and the Fund's
investment adviser waives its management fee with respect to such investments.
The Group intends to comply with this undertaking with respect to a Fund for so
long as such Fund has its Shares registered for sale in the State of California
or such representation is required by the California Department of
Corporations.
In addition, the Group, on behalf of TCF, has represented to the Texas
State Securities Board that TCF will (1) limit its investment in warrants,
valued at the lower of cost or market, to 5% or less of the value of TCF's net
assets, provided that included within that amount, but not to exceed 2% of
TCF's net assets, may be warrants which are not listed on the New York or
American Stock Exchanges and that warrants acquired by TCF in units or attached
to securities may be deemed to be without value, and (2) not invest in oil, gas
or other mineral leases.
Portfolio Turnover
- ------------------
The portfolio turnover rate for each Fund is calculated by dividing
the lesser of that Fund's purchases or sales of portfolio securities for the
year by the monthly average value of the portfolio securities. The Securities
and Exchange Commission (the "Commission") requires that the calculation
exclude all securities whose remaining maturities at the time of acquisition
were one year or less.
Because CGSMMF and CTEMMF intend to invest entirely in securities with
maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover with respect to each of CGSMMF and CTEMMF is expected to be
zero percent for regulatory purposes. For each of the other Funds, the
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<PAGE> 143
portfolio turnover rate may vary greatly from year to year as well as within a
particular year, and may also be affected by cash requirements for redemptions
of Shares. Portfolio turnover will not be a limiting factor in making
investment decisions.
MANAGEMENT OF THE GROUP
The trustees and officers of the Group, together with their addresses
and principal business occupations and other affiliations during the last five
years, are shown below. Each person named as a trustee also serves as a
director of The Cardinal Fund Inc. and also serves as a trustee of Cardinal
Government Securities Trust, Cardinal Tax Exempt Money Trust and Cardinal
Government Obligations Fund. Each trustee who is an "interested person" of the
Group, as that term is defined in the 1940 Act, is indicated by an asterisk.
<TABLE>
<CAPTION>
Name, Business Position(s) Held Principal Occupation(s)
Address and Age with the Group During Past 5 Years
- --------------- ---------------- ----------------------
<S> <C> <C>
Gordon B. Carson Trustee, Member of Principal, Whitfield Robert
5413 Gardenbrook Drive Executive Committee Associates (construction consulting
Midland, Michigan 48642 firm) since 1988; formerly, Vice
Age: 84 President of Michigan Molecular
Institute (polymer science research
institute).
*H. Keith Allen Chairman and Trustee, Senior Executive Vice President and
155 East Broad Street Member of Executive, a Director of The Ohio Company
Columbus, Ohio 43215 Nominating and Investment (investment banking).
Age: ___ Committees
John B. Gerlach, Jr. Trustee, Member of Audit Since 1994, President and a
37 West Broad Street Committee Director of Lancaster Colony
Columbus, Ohio 43215 Corporation (diversified consumer
Age: 41 products); prior thereto, Executive
Vice President, Secretary and a
Director of Lancaster Colony
Corporation.
Michael J. Knilans Trustee, Member of Chairman, Ohio Bureau of Workers'
1119 Kingsdale Terrace Executive Committee Compensation.
Columbus, Ohio 43220
Age: 68
James I. Luck Trustee President, The Columbus Foundation
1234 East Broad Street (philanthropic public foundation).
Columbus, Ohio 43205
Age: 50
</TABLE>
B-15
<PAGE> 144
<TABLE>
<S> <C> <C>
David L. Nelson Trustee, Member of Audit Vice President, Customer
18 James Lane and Nominating Committees Satisfaction, Industry Segment, and
Stamford, CT 06903 former President, ABB Process
Age: 65 Automation Business of Asea Brown
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries);
former President, Process
Automation Business, of Combustion
Engineering, Inc. (designer and
manufacturer of process automation
systems for basic industries).
*C. A. Peterson Trustee Retired; Chartered Financial
150 E. Wilson Bridge Rd. Analyst, former Senior Executive
Worthington, Ohio 43085 Vice President and Director of The
Age: 69 Ohio Company (investment banking).
Lawrence H. Rogers II Trustee Self-employed author; former Vice
4600 Drake Road Chairman, Motor Sports Enterprises,
Cincinnati, Ohio 45243 Inc.
Age: 74
*John L. Schlater Trustee Chartered Financial Analyst and
155 East Broad Street Executive Vice President, The Ohio
Columbus, Ohio 43215 Company (investment banking).
Age: 43
*Frank W. Siegel President and Senior Vice President, The Ohio
155 East Broad Street Trustee, Member of Company (investment banking);
Columbus, Ohio 43215 Executive and Nominating former Vice President, Keystone
Age: 43 Committees Group (mutual fund
management/administration); former
Senior Vice President, Trust
Advisory Group (mutual fund
consulting).
Joseph H. Stegmayer Trustee, Member of Audit President and a Director of Clayton
724 Hampton Roads Dr. and Nominating Committees Homes, Inc. (manufactured homes);
Knoxville, TN 37922-4071 former Vice President, Treasurer,
Age: 44 Chief Financial Officer and a
Director of Worthington Industries,
Inc. (specialty steel and plastics
manufacturer).
Barry G. McMahon Vice President Vice President of The Ohio Company
155 East Broad Street (investment banking); formerly,
Columbus, Ohio 43215 Assistant Vice President of The
Age: 38 Ohio Company.
</TABLE>
B-16
<PAGE> 145
<TABLE>
<S> <C> <C>
David C. Will Vice President Vice President of The Ohio Company
155 East Broad Street (investment banking); formerly
Columbus, Ohio 43215 Senior Portfolio Manager,
Age: 54 Huntington National Bank, Trust
Investments.
Karen J. Hipsher Secretary Executive Secretary, The Ohio
155 East Broad Street Company (investment banking).
Columbus, Ohio 43215
Age: 50
James M. Schrack II Treasurer Vice President and Trust Officer of
155 East Broad Street The Ohio Company (investment
Columbus, Ohio 43215 banking).
Age: 37
Bruce E. McKibben Assistant Treasurer Since April, 1992, Employee of The
155 East Broad Street Ohio Company (investment banking);
Columbus, Ohio 43215 prior thereto, student at The Ohio
Age: 26 State University.
</TABLE>
As of October 26, 1995, all trustees and officers of the Group as a
group owned fewer than one percent of the Shares of each Fund then outstanding.
Pursuant to the ultimate authority of the Board of Trustees of the
Group, the Executive Committee is responsible for the general management of the
affairs of the Group. This Committee's actions are reported to and reviewed by
the Board of Trustees.
Messrs. Allen, Siegel and Schlater are Chairman, President and a
director, Vice President and a director, and Vice President and a director,
respectively, of the Adviser, and Messrs. Godwin, McMahon, Schrack and Will are
each a Vice President of the Adviser. The compensation of trustees and
officers of the Group who are employed by The Ohio Company is paid by The Ohio
Company. Trustees' fees plus expenses are paid by the Group, except that
Messrs. Allen, Siegel and Schlater receive no fees from the Group.
The following table sets forth information regarding all compensation
paid by the Group to its Trustees for their services as trustees during the
fiscal year ended September 30, 1995. The Group has no pension or retirement
plans.
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<PAGE> 146
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Position Aggregate Compensation Total Compensation From the
With the Group From the Group Group and the Fund Complex*
-------------- -------------- ---------------------------
<S> <C> <C>
Gordon B. Carson $2,000 $12,000
Trustee and Member of Executive
Committee
H. Keith Allen $ 0 $ 0
Chairman, Trustee and Member of
Executive, Nominating and Investment
Committees
John B. Gerlach $2,000 $13,000
Trustee and Member of Audit Committee
Michael J. Knilans $2,000 $12,000
Trustee and Member of Executive
Committee
James I. Luck $2,000 $12,000
Trustee
David L. Nelson $2,000 $13,000
Trustee and Member of Audit and
Nominating Committees
C.A. Peterson $2,000 $12,000
Trustee
Lawrence H. Rogers, II $2,000 $12,000
Trustee
John L. Schlater $ 0 $ 0
Trustee
Frank W. Siegel $ 0 $ 0
Trustee, President and Member of
Executive and Nominating Committees
Joseph H. Stegmayer $1,500 $10,000
Trustee and Member of Audit and
Nominating Committees
<FN>
___________________________________
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Group, which have a common investment adviser or
affiliated investment advisers or which hold themselves out to the public as
being related.
</TABLE>
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<PAGE> 147
PRINCIPAL SHAREHOLDERS OF THE GROUP
There were no persons known to the Group to be the beneficial owner of
more than 5% of any Fund's Shares or of the total number of the Group's shares
outstanding as of October 26, 1995.
THE ADVISER
The Group has entered into an Investment Advisory and Management
Agreement dated as of June 18, 1993, as amended January __, 1996 (the
"Investment Advisory Agreement"), with Cardinal Management Corp. (the
"Adviser"). Pursuant to the Investment Advisory Agreement, the Adviser has
agreed to provide investment advisory and management services as described in
the Prospectuses of the Funds. As compensation for such services, facilities
and expenses, the Adviser receives a fee (1) from each of CGOF, CGSMMF and
CTEMMF, computed and accrued daily and paid monthly, based on an annual rate of
.50% of the daily net asset value of that Fund and (2) from TCF, computed and
accrued daily and paid monthly, based on an annual rate of 0.60% of the daily
net asset value of TCF. In addition, the Adviser also provides similar
services to the other two funds of the Group, Cardinal Balanced Fund ("CBF")
and Cardinal Aggressive Growth Fund ("CAGF"), and receives a fee from each such
Fund, computed and accrued daily and paid monthly, based on an annual rate of
.75% of the daily net asset value of that Fund. For the fiscal years ended
September 30, 1995 and 1994, and the fiscal period ended September 30, 1993,
fees earned under the Investment Advisory Agreement, with respect to CBF, were
$101,585, $103,264 and $11,128, respectively, and, with respect to CAGF, were
$71,508, $66,792 and $5,058, respectively.
The Adviser is a wholly owned subsidiary of The Ohio Company, an
investment banking firm organized in 1925. Descendants of H. P. and R. F.
Wolfe, deceased, and members of their families, through their possession of a
majority of the voting stock, may be considered controlling persons of The Ohio
Company. H. Keith Allen is an officer and director of The Ohio Company. Frank
W. Siegel, John L. Schlater, Hannibal L. Godwin III, and James M. Schrack II,
are each officers of The Ohio Company.
Unless sooner terminated, the Investment Advisory Agreement with respect
to a Fund continues for successive one-year periods ending June 18 of each year
if such continuance is approved at least annually by the Group's Board of
Trustees or by vote of a majority of the outstanding Shares of that Fund (as
defined under "ADDITIONAL INFORMATION -- Vote of a Majority of the Outstanding
Shares" below), and a majority of the Trustees who are not parties to the
Investment Advisory Agreement or interested persons (as defined in the 1940
Act) of any party to the Investment Advisory Agreement by votes cast in person
at a meeting called for such purpose. The Investment Advisory Agreement is
terminable as to a Fund at any time on 60 days' written notice without penalty
by the Trustees, by vote of a majority of the outstanding Shares of that
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<PAGE> 148
Fund, or by the Adviser. The Investment Advisory Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Group in connection with the performance of the Investment Advisory
Agreement, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or negligence on the part of the Adviser in the
performance of its duties, or from negligent disregard by the Adviser of its
duties and obligations thereunder.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Agreement, the Adviser, subject to
the policies established by the Board of Trustees of the Group and in
accordance with the Funds' investment restrictions and policies, is responsible
for each Fund's portfolio decisions and the placing of the Funds' portfolio
transactions. Purchases and sales of portfolio securities which are debt
securities usually are principal transactions in which such portfolio
securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from underwriters of
portfolio securities generally include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
may include the spread between the bid and asked price. Transactions on stock
exchanges involve the payment of negotiated brokerage commissions.
Transactions in the over-the-counter market are generally principal
transactions with dealers. With respect to the over-the-counter market, the
Group, where possible, will deal directly with dealers who make a market in the
securities involved except in those circumstances where better price and
execution are available elsewhere.
In executing such transactions, the Adviser seeks to obtain the best net
results for a Fund taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of order, difficulties
of execution and operational facilities of the firm involved and the firm's
risk in positioning a block of securities. While the Adviser generally seeks
reasonably competitive commission rates, for the reasons stated in the prior
sentence, a Fund will not necessarily be paying the lowest commission or spread
available.
The Adviser may consider provision of research, statistical and other
information to the Group, a Fund or the Adviser in the selection of qualified
broker-dealers who effect portfolio transactions for a Fund so long as the
Adviser's ability to obtain the best net results for portfolio transactions of
that Fund is not diminished. Such research services include supplemental
research, securities and economic analyses, and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Such research services may
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<PAGE> 149
also be useful to the Adviser in connection with its services to other clients.
Similarly, research services provided by brokers serving such other clients may
be useful to the Adviser in connection with its services to a Fund. Although
this information is useful to a Fund and the Adviser, except as described
below, it is not possible to place a dollar value on it. It is the opinion of
the Board of Trustees and the Adviser that the review and study of this
information will not reduce the overall cost to the Adviser of performing its
duties to the Funds under the Investment Advisory Agreement. The Adviser, on
behalf of the Funds, may direct brokerage transactions to Columbine Research in
return for the provision of research services. Such brokerage transactions
are subject to the requirements as to price and execution as described above.
The Group is not authorized to pay brokerage commissions which are in excess of
those which another qualified broker would charge solely by reason of brokerage
and research services provided.
In addition, the Group has authorized the Adviser to place brokerage
transactions through Pershing and Company, a division of Donaldson, Lufkin &
Jenrette, in return for Lipper Data information prepared for the Group's
Trustees relating to information on fees and expenses of other mutual funds.
However, such brokerage transactions are subject to the requirements as to
execution and price described above.
Investment decisions for a Fund are made independently from those for
another Fund of the Group or any other investment company or account managed by
the Adviser. Any such other Funds, investment company or account may also
invest in the same securities as a Fund. When a purchase or sale of the same
security is made at substantially the same time on behalf of one Fund and
another Fund, investment company or account, the transaction will be averaged
as to price and available investments will be allocated as to amount in a
manner which the Adviser believes to be equitable to the Fund and such other
Fund, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained by that Fund. To the extent permitted by law, the
Adviser may aggregate the securities to be sold or purchased for a Fund with
those to be sold or purchased for other funds or for other investment companies
or accounts in order to obtain best execution. As provided by the Investment
Advisory Agreement, in making investment recommendations for the Group, the
Adviser will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Group is a customer of the
Adviser, its parent or its subsidiaries or affiliates and, in dealing with its
customers, the Adviser, its parent, subsidiaries and affiliates will not
inquire or take into consideration whether securities of such customers are
held by the Group.
Pursuant to Investment Advisory Agreement, the Adviser also serves as
general manager and administrator to each of the Funds.
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<PAGE> 150
The Adviser assists in supervising all operations of each Fund (other than
those performed by The Fifth Third Bank under the Custodian Agreement and by
the Adviser under the Transfer Agency and Fund Accounting Agreement).
The Adviser has agreed to maintain office facilities; furnish
statistical and research data, clerical, certain bookkeeping services and
stationery and office supplies; prepare the periodic reports to the Commission
on Form N-SAR or any replacement forms therefor; compile data for, prepare for
execution by each Fund and file all of a Fund's federal and state tax returns
and required tax filings other than those required to be made by each Fund's
custodian and Transfer Agent; prepare compliance filings pursuant to state
securities laws with the advice of the Group's counsel; assist to the extent
requested by the Group with the Group's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statement (on Form
N-1A or any replacement therefor); compile data for, prepare and file timely
Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act;
keep and maintain the financial accounts and records of each Fund, including
calculation of daily expense accruals; and generally assist in all aspects of
each Fund's operations.
TRANSFER AND DIVIDEND AGENT AND FUND ACCOUNTANT
The Group has entered into a Transfer Agency and Fund Accounting
Agreement dated as of June 18, 1993, as amended as of January __, 1996 (the
"Transfer Agency Agreement"), with the Transfer Agent, pursuant to which the
Transfer Agent has agreed to act as the transfer agent, dividend disbursing
agent and administrator of plans for each Fund and to provide certain fund
accounting services for each Fund. Pursuant to the Transfer Agency Agreement,
the Transfer Agent, among other things, performs the following services in
connection with each Fund's shareholders of record: maintenance of shareholder
records for the Fund's shareholders of record; processing shareholder purchase
and redemption orders; processing transfers and exchanges of shares of the
Group on the shareholder files and records; processing dividend payments and
reinvestment; and assistance in the mailing of shareholder reports and proxy
solicitation materials. In consideration of such services each Fund has agreed
to pay the Transfer Agent monthly an annual fee equal to $21 per shareholder
account plus out-of-pocket expenses.
In addition, the Transfer Agency provides certain fund accounting
services to each of the Funds, including maintaining the accounting books and
records for each Fund, including journals containing an itemized daily record
of all purchases and sales of portfolio securities, all receipts and
disbursements of cash and all other debits and credits, general and auxiliary
ledgers reflecting all asset, liability, reserve, capital, income and expense
accounts, including interest accrued and interest received, and other required
separate ledger accounts; maintaining a monthly
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<PAGE> 151
trial balance of all ledger accounts; performing certain accounting services
for each Fund, including calculation of the net asset value per share,
calculation of the dividend and capital gain distributions, if any, and of
yield, reconciliation of cash movements with such Fund's custodian, affirmation
to that Fund's custodian of all portfolio trades and cash settlements,
verification and reconciliation with that Fund's custodian of all daily trade
activity; providing certain reports; obtaining dealer quotations, prices from a
pricing service or matrix prices on all portfolio securities in order to mark
the portfolio to the market; and preparing an interim balance sheet, statement
of income and expense, and statement of changes in net assets for each Fund.
In consideration for such services, each Fund has agreed to pay the Transfer
Agent a fee, computed daily and paid periodically at an annual rate of .03% of
such Fund's average daily net assets.
EXPENSES
If total expenses borne by a Fund in any fiscal year exceed expense
limitations imposed by applicable state securities regulations, the Adviser
will reimburse that Fund by the amount of such excess. As of the date of this
Statement of Additional Information, the most restrictive expense limitation
applicable to the Funds limit each Fund's aggregate annual expenses, including
management and advisory fees but excluding interest, taxes, brokerage
commissions, and certain other expenses, to 2 1/2% of the first $30 million of
a Fund's average net assets, 2% of the next $70 million of such Fund's average
net assets, and 1 1/2% of such Fund's remaining average net assets. Any
expense reimbursements will be estimated daily and reconciled and paid on a
monthly basis.
THE DISTRIBUTOR
The Ohio Company serves as agent for the Funds in the distribution of
their Shares pursuant to a Distribution Agreement dated June 18, 1993, as
amended as of January __, 1996 (the "Distribution Agreement"). Unless
otherwise terminated, the Distribution Agreement remains in effect for
successive annual periods ending on June 18 if approved at least annually (i)
by the Group's Board of Trustees or by the vote of a majority of the
outstanding shares of the Group, and (ii) by the vote of a majority of the
Trustees of the Group who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement may be terminated in the
event of any assignment, as defined in the 1940 Act.
In its capacity as Distributor, The Ohio Company solicits orders for the
sale of Shares, advertises and pays the costs of advertising, office space and
the personnel involved in such activities. The Distributor receives no
compensation from the Group under the Distribution Agreement, but may receive
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<PAGE> 152
compensation under the Distribution and Shareholder Service Plan described
below and retain all or a portion of the sales charges with respect to its
sales of Shares of TCF and CGOF.
As described in the Prospectus, the Group has adopted a Distribution and
Shareholder Service Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act
under which each of TCF and CGOF (collectively, the "12b-1 Funds") is
authorized to pay The Ohio Company for payments it makes to broker-dealers,
including The Ohio Company, banks and other institutions (with all of the
foregoing organizations being referred to as "Participating Organizations") for
providing distribution or shareholder service assistance or for distribution
assistance and/or shareholder service provided by The Ohio Company pursuant to
an agreement between The Ohio Company and the Group. Payments to such
Participating Organizations may be made pursuant to agreements entered into
with The Ohio Company. The Plan authorizes each 12b-1 Fund to make payments to
The Ohio Company in an amount not in excess, on an annual basis, of 0.25% of
the average daily net asset value of that 12b-1 Fund.
As required by Rule 12b-1, the Plan was approved by the initial sole
shareholder of each 12b-1 Fund and by the Board of Trustees, including a
majority of the Trustees who are not interested persons of that 12b-1 Fund and
who have no direct or indirect financial interest in the operation of the Plan
(the "Independent Trustees"). The Plan may be terminated as to a 12b-1 Fund by
vote of a majority of the Independent Trustees, or by vote of majority of the
outstanding Shares of that 12b-1 Fund. Any change in the Plan that would
materially increase the distribution cost to a 12b-1 Fund requires shareholder
approval. The Trustees review quarterly a written report of such costs and the
purposes for which such costs have been incurred. The Plan may be amended by
vote of the Trustees, including a majority of the Independent Trustees, cast in
person at a meeting called for that purpose. For so long as the Plan is in
effect, selection and nomination of those Trustees who are not interested
persons of the Group shall be committed to the discretion of such disinterested
persons. All agreements with any person relating to the implementation of the
Plan with respect to a 12b-1 Fund may be terminated at any time on 60 days'
written notice without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of the majority of the outstanding Shares of
such 12b-1 Fund.
The Plan will continue in effect for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the Independent Trustees, and (ii) by a vote of a majority of the
entire Board of Trustees cast in person at a meeting called for that purpose.
The Board of Trustees has a duty to request and evaluate such information as
may be reasonably necessary for them to make an informed determination of
whether the Plan should be implemented or continued. In addition the Trustees
in approving the Plan must determine that
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<PAGE> 153
there is a reasonable likelihood that the Plan will benefit the 12b-1 Funds and
their Shareholders.
The Board of Trustees of the Group believes that the Plan is in the best
interests of the 12b-1 Funds since it encourages Fund growth and retention of
Fund assets. As a 12b-1 Fund grows in size, certain expenses, and therefore
total expenses per Share, may be reduced and overall performance per Share may
be improved.
As authorized by the Plan, the Group has entered into a Rule 12b-1
Agreement with The Ohio Company pursuant to which The Ohio Company has agreed
to provide certain shareholder services in connection with Shares of a 12b-1
Fund purchased and held by The Ohio Company for the accounts of its customers
and Shares of a 12b-1 Fund purchased and held by customers of The Ohio Company
directly, including, but not limited to, answering Shareholder questions
concerning the 12b-1 Funds, providing information to Shareholders on their
investments in the 12b-1 Funds and providing such personnel and communication
equipment as is necessary and appropriate to accomplish such matters. In
consideration of such services the Group, on behalf of each 12b-1 Fund, has
agreed to pay The Ohio Company a monthly fee, computed at the annual rate of
.25% of the average aggregate net asset value of Shares of that 12b-1 Fund held
during the period in customer accounts for which The Ohio Company has provided
services under this Agreement.
In addition, The Ohio Company may enter into, from time to time, Rule
12b-1 Agreements with selected dealers pursuant to which such dealers will
provide certain Shareholder services including, but not limited to, those
discussed above.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263,
has been selected to serve as the Funds' custodian pursuant to the Custody
Agreement dated June 18, 1993, as amended as of January __, 1996. In such
capacity the custodian will hold or arrange for the holding of all portfolio
securities and other assets of the Funds.
LEGAL COUNSEL AND INDEPENDENT AUDITORS
Baker & Hostetler, 65 East State Street, Columbus, Ohio 43215, is
counsel to the Group and will pass upon the legality of the Shares offered
thereby. The Group has selected KPMG Peat Marwick LLP, Two Nationwide Plaza,
Columbus, Ohio 43215, as independent auditors for the Funds.
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<PAGE> 154
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Funds' Shares may be purchased at the public offering price and are
sold on a continuous basis through The Ohio Company, principal underwriter of
the Funds' Shares, at its address and number set forth on the cover page of
this Statement of Additional Information, and through other broker-dealers who
are members of the National Association of Securities Dealers, Inc. and have
sales agreements with The Ohio Company.
The Group may suspend the right of redemption or postpone the date of
payment for Shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension, or
(d) an emergency exists as a result of which (i) disposal by the Group of
securities owned by it is not reasonably practical or (ii) it is not reasonably
practical for the Group to determine the fair value of its net assets.
Use of the check-writing redemption procedure will be subject to the
rules and regulations of The Fifth Third Bank (the "Bank") governing checking
accounts. Neither the Bank nor the Group shall incur any liability to a
participating shareholder under this procedure for not honoring a check that
exceeds the value of Shares in a shareholder's account, for honoring checks
properly drafted, for effecting redemptions pursuant to payment thereof or for
returning checks not accepted for payment. This procedure may be terminated at
any time by the Group, the Bank or the participating shareholder. A
shareholder participating in the check-writing redemption procedure has not
established a checking or other account with the Bank for the purposes of
Federal Deposit Insurance or otherwise.
Determination of Net Asset Value
- --------------------------------
The Group values the portfolio securities of CGSMMF and CTEMMF
(collectively, the "Money Market Funds" and individually a "Money Market Fund")
using the amortized cost valuation method. This method involves valuing a
security at its cost and thereafter accruing any discount or premium at a
constant rate to maturity. By declaring these accruals to the Money Market
Funds' shareholders in the daily dividend, the value of a Money Market Fund's
assets, and, thus, its net asset value per share, will generally remain
constant. Although this method provides certainty in valuation, it may result
in periods during which the value of a Money Market Fund's securities, as
determined by amortized cost, is higher or lower than the price the Money
Market Fund would receive if it sold the securities. During such periods, the
yield on Shares of the Money Market Fund may differ somewhat from that obtained
in a similar fund with identical investments utilizing a method of valuation
based upon market prices and estimates of market prices
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for all of its portfolio securities. For example, if the use of amortized cost
by a Money Market Fund resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Money Market Fund would be able
to obtain a somewhat higher yield than would result from investment in a
similar fund utilizing solely market values, and existing investors in the
Money Market Fund would receive less investment income.
The valuation of the Money Market Funds' portfolio securities based upon
their amortized cost and the maintenance of the Money Market Funds' per share
net asset value of $1.00 is permitted based on the Money Market Funds'
adherence to certain conditions, including maintaining a dollar-weighted
average portfolio maturity of 90 days or less and purchasing only portfolio
securities having remaining maturities of 397 days or less. The Board of
Trustees has also established procedures designed to stabilize, to the extent
reasonably possible, the Money Market Funds' net asset value per share, as
computed for the purpose of sales and redemptions, at $1.00. Such procedures
include review of the Money Market Funds' portfolio holdings by the Board of
Trustees at such intervals as it may deem appropriate to determine whether the
Money Market Funds' net asset value calculated by using available market
quotations deviates from $1.00 per Share and, if so, whether such deviation may
result in material dilution or may be otherwise unfair to existing
shareholders. These procedures also include a review by the Adviser in
accordance with policies established by the Board of Trustees not less
frequently than [monthly] of the quality of certain Municipal Securities having
variable interest rates and demand features that permit CTEMMF to calculate the
maturity of such obligations to a point in time prior to their stated maturity.
In the event the Board of Trustees determines that deviation in net asset value
exists, the Board of Trustees will take such corrective action as it deems
necessary and appropriate, which action might include redemption of Shares in
kind, selling portfolio securities prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding dividends,
reduction of the number of Shares outstanding (i.e. the declaration of a
negative dividend) or establishing a net asset value per share by using
available market quotations.
TAXES
GENERAL. Each Fund intends to qualify as a "regulated investment
company" under the Code for so long as such qualification is in the best
interest of that Fund's shareholders. In order to qualify as a regulated
investment company, a Fund must, among other things: derive at least 90% of
its gross income 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 derived with respect to its business of investing
in such stocks, securities, or currencies; derive less than 30% of its gross
income from the sale or other disposition of
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<PAGE> 156
stocks, securities, options, future contracts or foreign currencies held less
than three months; and diversify its investments within certain prescribed
limits. In addition, to utilize the tax provisions specially applicable to
regulated investment companies, a Fund must distribute to its shareholders at
least 90% of its investment company taxable income for the year. In general, a
Fund's investment company taxable income will be its taxable income subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year.
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, such
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.
Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, a Fund
may be subject to the tax laws of such states or localities. In addition, if
for any taxable year a Fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to federal tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and
would be eligible for the dividends received deduction for corporations.
It is expected that each Fund will distribute annually to shareholders
all or substantially all of that Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal
income tax purposes, even if paid in additional Shares of the Fund and not in
cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to shareholders as long-term capital
gain in the year in which it is received, regardless of how long the
shareholder has held the Shares. Such distributions are not eligible for the
dividends-received deduction.
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Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in
excess of 39.6%, because adjustments reduce or eliminate the benefit of the
personal exemption and itemized deductions for individuals with gross income in
excess of certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss
each year to offset ordinary income. Excess net capital loss may be carried
forward to future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%.
Further, a corporation's federal taxable income in excess of $15 million is
subject to an additional tax equal to 3% of taxable income over $15 million,
but not more than $100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset
capital gains and excess net capital loss may be carried back three years and
forward five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.
A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder who has
provided either an incorrect tax identification number or no number at all, or
who is subject to withholding by the Internal Revenue Service for failure
properly to include on his return payments of interest or dividends.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of a Fund. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its shareholders
and this discussion is not intended as a substitute for careful tax planning.
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<PAGE> 158
Accordingly, potential purchasers of Shares of a Fund are urged to consult
their tax advisers with specific reference to their own tax situation. In
addition, the tax discussion in the Prospectuses and this Statement of
Additional Information is based on tax laws and regulations which are in effect
on the date of the Prospectuses and this Statement of Additional Information;
such laws and regulations may be changed by legislative or administrative
action.
SPECIFIC INFORMATION REGARDING CTEMMF. An exempt-interest dividend
is any dividend or part thereof (other than a capital gain dividend) paid by
CTEMMF that is derived from interest received by CTEMMF that is excluded from
gross income for federal income tax purposes, net of certain deductions,
provided the dividend is designated as an exempt-interest dividend in a written
notice mailed to shareholders not later than sixty days after the close of
CTEMMF's taxable year. The percentage of the total dividends paid by CTEMMF
during any taxable year that qualifies as exempt-interest dividends will be the
same for all shareholders receiving dividends during such year.
Exempt-interest dividends shall be treated by CTEMMF's shareholders as items of
interest excludable from their gross income for Federal income tax purposes
under Section 103(a) of the Code. However, a shareholder is advised to consult
his tax adviser with respect to whether exempt-interest dividends retain the
exclusion under Section 103(a) of the Code if such shareholder is a
"substantial user" or a "related person" to such user under Section 147(a) of
the Code with respect to any of the Municipal Securities held by CTEMMF. 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 shall be disallowed to the extent of the amount
of such exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry Shares of CTEMMF is not deductible for federal
income tax purposes if CTEMMF distributes exempt-interest dividends during the
shareholder's taxable year. A shareholder of CTEMMF that is a financial
institution may not deduct interest expense attributable to indebtedness
incurred or continued to purchase or carry Shares of CTEMMF if CTEMMF
distributes exempt-interest dividends during the shareholder's taxable year
(except that 80% in the case of interest expense attributable to tax-exempt
obligations acquired after December 31, 1982, and prior to August 7, 1986 may
be deducted). Certain federal income tax deductions of property and casualty
insurance companies holding Shares of CTEMMF and receiving exempt-interest
dividends may also be adversely affected. In certain limited instances, the
portion of Social Security benefits received by a shareholder which may be
subject to federal income tax may be affected by the amount of tax-exempt
interest income, including exempt-interest dividends received by shareholders
of CTEMMF.
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In the unlikely event CTEMMF realizes long-term capital gains, CTEMMF
intends to distribute any realized net long-term capital gains annually. If
CTEMMF distributes such gains, CTEMMF will have no tax liability with respect
to such gains, and the distributions will be taxable to shareholders as
long-term capital gains regardless of how long the shareholders have held the
Shares. Any such distributions will be designated as a capital gain dividend
in a written notice mailed by CTEMMF to the shareholders not later than sixty
days after the close of CTEMMF's taxable year. It should be noted, however,
that capital gains are taxed like ordinary income except that net capital gains
of individuals are subject to a maximum federal income tax rate of 28%. Net
capital gains are the excess of net long-term capital gains over net short-term
capital losses. Any net short-term capital gains are taxed at ordinary income
tax rates. If a shareholder receives a capital gain dividend with respect to
any Share and then sells the Share before he has held it for more than six
months, any loss on the sale of the Share is treated as long-term capital loss
to the extent of the capital gain dividend received.
Interest earned 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 CTEMMF will also be treated as tax preference items in
computing the alternative minimum tax to the extent that distributions by
CTEMMF are attributable to 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 and profits over pre-book alternative minimum taxable
income. Adjusted current earnings and profits would include exempt-interest
dividends distributed by CTEMMF to corporate shareholders.
For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a rate of 0.12 of one percent on the
excess over $2,000,000 of such corporation's "modified alternative minimum
taxable income," which would include a portion of the exempt-interest dividends
distributed by CTEMMF to such corporation, and exempt-interest dividends
distributed to certain foreign corporations doing business in the United States
could be subject to a branch profits tax imposed by Section 884 of the Code.
Distributions of exempt-interest dividends by CTEMMF may be subject to
state and local taxes even though a substantial portion of such distributions
may be derived from interest on obligations which, if received directly, would
be exempt from such taxes. CTEMMF will report to its shareholders annually
after the close of
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its taxable year the percentage and source, on a state-by-state basis, of
interest income earned on municipal obligations held by CTEMMF during the
preceding year. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes.
ADDITIONAL INFORMATION
Description of Shares
- ---------------------
The Group is an Ohio business trust. The Group was organized on March
23, 1993, and the Group's Declaration of Trust was filed with the Secretary of
State of Ohio on March 23, 1993. The Declaration of Trust authorizes the Board
of Trustees to issue an unlimited number of Shares, which are units of
beneficial interest, without par value. The Group presently has six series of
Shares, four of which represent interests in the Funds. The Group's
Declaration of Trust authorizes the Board of Trustees to divide or redivide any
unissued Shares of the Group into one or more additional series by setting or
changing in any one or more respects their respective preferences, conversion
or other rights, voting power, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the respective Prospectus
and this Statement of Additional Information, a Fund's Shares will be fully
paid and non-assessable. In the event of a liquidation or dissolution of the
Group, shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Fund, of any general assets
not belonging to any particular Fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Group shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a series will be required
in connection with a matter, a series will be deemed to be affected by a matter
unless it is clear that the interests of each series in the matter are
identical, or that the matter does not affect any interest of the series.
Under Rule 18f-2, the approval of any amendment to the Investment Advisory
Agreement or any change in investment policy submitted to shareholders would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, Rule 18f-2 also provides
that the ratification of independent public accountants
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<PAGE> 161
and the election of Trustees may be effectively acted upon by shareholders of
the Group voting without regard to series.
Vote of a Majority of the Outstanding Shares
- --------------------------------------------
As used in the Prospectuses and this Statement of Additional
Information, "vote of a majority of the outstanding Shares" of the Group or a
Fund, means the affirmative vote, at an annual or special meeting of
shareholders duly called, of the lesser of (a) 67% or more of the votes of
shareholders of the Group or that Fund present at such meeting at which the
holders of more than 50% of the votes attributable to the shareholders of
record of the Group or that Fund are represented in person or by proxy, or (b)
the holders of more than 50% of the outstanding votes of shareholders of the
Group or such Fund.
Miscellaneous
- -------------
Individual Trustees are elected by the Shareholders and, subject to
removal by the vote of two-thirds of the Board of Trustees, serve for a term
lasting until the next meeting of shareholders at which Trustees are elected.
Such meetings are not required to be held at any specific intervals.
Generally, shareholders owning not less than 20% of the outstanding shares of
the Group entitled to vote may cause the Trustees to call a special meeting.
However, the Group has represented to the Commission that the Trustees will
call a special meeting for the purpose of considering the removal of one or
more Trustees upon written request therefor from shareholders owning not less
than 10% of the outstanding votes of the Group entitled to vote and that the
Group will assist in communications with other shareholders as required by
Section 16(c) of the 1940 Act. At such a meeting, a quorum of shareholders
(constituting a majority of votes attributable to all outstanding shares of the
Group), by majority vote, has the power to remove one or more Trustees.
The Group is registered with the Commission as a management investment
company. Such registration does not involve supervision by the Commission of
the management or policies of the Group.
The Prospectuses and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Commission. Copies of such information may be obtained from the Commission
upon payment of the prescribed fee.
The Prospectuses and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized
to give any information or make any representation other than those contained
in the Prospectuses and this Statement of Additional Information.
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<PAGE> 162
PERFORMANCE INFORMATION
Yields
- ------
The yield of TCF and CGOF will be computed by annualizing net investment
income per share for a recent 30-day period and dividing that amount by a
Share's maximum offering price (as of the date hereof, 4.5%) (reduced by any
undeclared earned income expected to be paid shortly as a dividend) on the last
trading day of that period. Net investment income will reflect amortization of
any market value premium or discount of fixed income securities (except for
obligations backed by mortgages or other assets) and may include recognition of
a pro rata portion of the stated dividend rate of dividend paying portfolio
securities. The yield of TCF and CGOF will vary from time to time depending
upon market conditions, the composition of such Fund's portfolio and operating
expenses of the Group allocated to that Fund. These factors and possible
differences in the methods used in calculating yield should be considered when
comparing TCF's or CGOF's yield to yields published for other investment
companies and other investment vehicles. Yield should also be considered
relative to changes in the value of TCF's and CGOF's Shares and to the relative
risks associated with the investment objectives and policies of those Funds.
The current (average annualized) yield of CGSMMF and CTEMMF for any
seven-day period is calculated by dividing the average daily net income per
Share earned by that Fund during the seven-day calendar period by such Fund's
average price per Share over the same period and annualizing this quotient on a
365 day basis. For purposes of this calculation, the daily net income reflects
dividends declared on the original Share and dividends declared on any Shares
purchased with dividends on that Share. Capital changes that are excluded from
the calculation are realized gains and losses from the sale of securities as
well as unrealized appreciation and depreciation with respect to the Fund's
portfolio.
The effective or compounded yield of CGSMMF and CTEMMF for any seven-day
period is computed by adding the number one to the daily net income per Share
earned by such Fund during the seven-day calendar period, raising the sum to a
power equal to 365 divided by seven, and subtracting the number one from the
result.
CTEMMF's tax-equivalent yield is computed by dividing that portion of
CTEMMF's yield which is tax-exempt by 1 minus the stated income tax rate and
adding the result to that portion, if any, of CTEMMF's yield that is not
tax-exempt. CTEMMF's tax-equivalent effective yield is computed by dividing
that portion of the effective yield which is tax-exempt by 1 minus the stated
income tax rate and adding to that result the portion, if any, of CTEMMF's
effective yield that is not tax-exempt.
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<PAGE> 163
Calculation of Total Return
- ---------------------------
Each quotation of average annual total return will be computed by
finding the average annual compounded rate of return over that period which
would equate the value of an initial amount of $1,000 invested in a Fund equal
to the ending redeemable value, according to the following formula:
P(T + 1)n = ERV
Where: P = a hypothetical initial payment of $1,000, T = average annual
total return, n = number of years, and ERV = ending redeemable value of a
hypothetical $1,000 payment at the beginning of the period at the end of the
period for which average annual total return is being calculated assuming a
complete redemption. The calculation of average annual total return assumes
the deduction of the maximum sales charge from the initial investment of
$1,000, assumes the reinvestment of all dividends and distributions at the
price stated in the then effective Prospectus on the reinvestment dates during
the period and includes all recurring fees that are charged to all shareholder
accounts assuming such Fund's average account size. Cumulative return is
computed by using average annual total return, as calculated above, for each
year of the relevant period to determine the total return on a hypothetical
initial investment of $1,000 over such period.
In addition, as described in CGOF's Prospectus, from time to time CGOF
may include in its sales literature and shareholder reports a quote of a
current "distribution" rate. The current distribution rate is computed by
dividing the total amount of dividends per share paid by CGOF during the past
twelve months by a current maximum offering price. Under certain
circumstances, such as when there has been a change in the amount of dividend
payout, or a fundamental change in investment policies, it might be appropriate
to annualize the dividends paid over the period such changed policies were in
effect, rather than using the dividends during the past twelve months. The
current distribution rate differs from the current yield computation because it
may include distributions to shareholders from sources other than dividends and
interest, such as premium income from option writing, short-term capital gains
and net equalization credits and is calculated over a different period of time.
At any time in the future, yields and total return may be higher or
lower than past yields and total return and there can be no assurance that any
historical results will continue. Investors in the Funds are specifically
advised that Share prices of TCF and CGOF, expressed as the net asset values
per share, will vary just as yields and total return will vary.
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<PAGE> 164
Performance Comparisons
- -----------------------
Investors may also judge the performance of a Fund 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.,
Morningstar, 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, U.S.A. Today and Consumer
Reports. In addition to performance information, general information about the
Funds that appears in a publication such as those mentioned above may be
included in advertisements and in reports to shareholders.
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<PAGE> 165
APPENDIX
COMMERCIAL PAPER RATINGS. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debts having original maturities of no more than 365 days. Commercial paper
rated A-1 by S&P indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted A-1+. Commercial paper rated
A-2 by S&P indicates that capacity for timely payment on issues is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of Prime-1 rated issuers, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variations.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternative liquidity is maintained.
Commercial paper rated F-1 by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-2 by Fitch is regarded as having an assurance of
timely payment only slightly less than the strongest rating, i.e., F-1.
The plus (+) sign is used after a rating symbol to designate the
relative position of an issuer within the rating category.
CORPORATE DEBT RATINGS. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong. Debt rated AA has a
very strong capacity to pay interest and to repay principal and differs from
the highest rated issues only in small degree. Debt rated A has a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. Debt rated BBB is regarded as
having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
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<PAGE> 166
The following summarizes the four highest ratings used by Moody's for
corporate debt. Bonds that are rated Aaa by Moody's are judged to be of the
best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues. Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities. Bonds that are rated A by Moody's possess many favorable
investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment some time in the future. Bonds that are rated Baa by Moody's are
considered as medium grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through Baa. The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
The following summarizes the four highest long-term debt ratings by
Duff. Debt rated AAA has the highest credit quality. The risk factors are
negligible being only slightly more than for risk-free U.S. Treasury debt.
Debt rated AA has a high credit quality and protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions. Debt rated A has protection factors that are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress. Debt rated BBB has below average protection factors but is still
considered sufficient for prudent investment. However, there is considerable
variability in risk during economic cycles.
To provide more detailed indications of credit quality, the ratings from
AA to BBB may be modified by the addition of a plus or
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<PAGE> 167
minus sign to show relative standing within this major rating category.
The following summarizes the four highest long-term debt ratings by
Fitch (except for AAA ratings, plus or minus signs are used with a rating
symbol to indicate the relative position of the credit within the rating
category). Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated AA are considered to be investment grade and
of very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated "F-1+." Bonds rated as A are considered to be investment
grade and of high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with higher
ratings. Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
for these bonds will fall below investment grade is higher than for bonds with
higher ratings.
The following summarizes IBCA's four highest long-term debt ratings.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly. Obligations
rated AA are those for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic, or financial conditions may increase
investment risk albeit not very significantly. Obligations rated A are those
for which there is a low expectation of investment risk. Capacity for timely
repayment of principal and interest is strong, although adverse changes in
business, economic or financial conditions may lead to increased investment
risk. Obligations rated BBB are those for which there is currently a low
expectation of investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic, or
financial conditions are more likely to lead to increased investment risk than
for obligations in other categories.
B-3
<PAGE> 168
The following summarizes Thomson's description of its four highest
long-term debt ratings (Thomson may include a plus (+) or minus (-) designation
to indicate where within the respective category the issue is placed). AAA is
the highest category and indicates that the ability to repay principal and
interest on a timely basis is very high. AA is the second highest category and
indicates a superior ability to repay principal and interest on a timely basis
with limited incremental risk versus issues rated in the highest category. A
is the third highest category and indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB is the lowest investment grade category and indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
Definitions of Certain Money Market Instruments
- -----------------------------------------------
Commercial Paper
Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Certificates of Deposit
Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.
Bankers' Acceptances
Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
U.S. Treasury Obligations
U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Government. These obligations may include Treasury bills, notes and bonds, and
issues of agencies and instrumentalities of the U.S. Government, provided such
obligations are guaranteed as to payment of principal and interest by the full
faith and credit of the U.S. Government.
B-4
<PAGE> 169
U.S. Government Agency and Instrumentality Obligations
Obligations of the U.S. Government include Treasury bills, certificates
of indebtedness, notes and bonds, and issues of agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage Association,
the Export-Import Bank of the United States, the Tennessee Valley Authority,
the Farmers Home Administration, the Federal Home Loan Banks, the Federal
Intermediate Credit Banks, the Federal Farm Credit Banks, the Federal Land
Banks, the Federal Housing Administration, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the Student Loan
Marketing Association. Some of these obligations, such as those of the
Government National Mortgage Association and the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Student Loan Marketing Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks, are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.
B-5
<PAGE> 170
Registration Statement
of
THE CARDINAL GROUP
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A:
(i) Cardinal Balanced Fund
Financial Highlights
(ii) Cardinal Aggressive Growth Fund
Financial Highlights
(iii) The Cardinal Fund
To be filed by amendment
(iv) Cardinal Government Obligations Fund
To be filed by amendment
(v) Cardinal Government Securities Money Market Fund
To be filed by amendment
(vi) Cardinal Tax Exempt Money Market Fund
To be filed by amendment
Included in Part B:
(i) Cardinal Balanced Fund
-- Statement of Investments
September 30, 1994
-- Statement of Assets and Liabilities
September 30, 1994
-- Statement of Operations for the year ended
September 30, 1994
<PAGE> 171
-- Statement of Changes in Net Assets for the
year ended September 30, 1994 and the period
ended September 30, 1993
-- Notes to Financial Statements
September 30, 1994
-- Independent Auditors' Report dated
November 18, 1994
(ii) Cardinal Aggressive Growth Fund
-- Statement of Investments
September 30, 1994
-- Statement of Assets and Liabilities
September 30, 1994
-- Statement of Operations for the year ended
September 30, 1994
-- Statement of Changes in Net Assets for the
year ended September 30, 1994 and the period
ended September 30, 1993
-- Notes to Financial Statements
September 30, 1994
-- Independent Auditors' Report dated
November 18, 1994
(iii) The Cardinal Fund
To be filed by amendment
(iv) Cardinal Government Obligations Fund
To be filed by amendment
(v) Cardinal Government Securities Money Market
Fund
To be filed by amendment
(vi) Cardinal Tax Exempt Money Market Fund
To be filed by amendment
(vii) All required financial statements are
included in Part B hereof. All other
financial statements and schedules are
inapplicable.
C-2
<PAGE> 172
(b) Exhibits
(1) (a) Declaration of Trust, dated as of
March 23, 1993.
(b) Amendment to Declaration of Trust
as adopted October 20, 1995.
(2) By-Laws.
(3) None.
(4) None.
(5) Investment Advisory and Management Agreement
dated as of June 18, 1993, as proposed to be
amended between Registrant and Cardinal
Management Corp.
(6) (a) Distribution Agreement dated as of
June 18, 1993, as proposed to be
amended between Registrant and The
Ohio Company.
(b) Form of revised Selected Dealer
Agreement.
(7) None.
(8) Custody Agreement dated as of June 18, 1993,
as proposed to be amended between Registrant
and The Fifth Third Bank.
(9) Transfer Agency and Fund Accounting Agreement
dated as of June 18, 1993, as proposed to be
amended between Registrant and Cardinal
Management Corp.
(10) Opinion of Counsel with respect to shares of
The Cardinal Fund, Cardinal Government
Obligations Fund, Cardinal Government
Securities Money Market Fund and Cardinal Tax
Exempt Money Market Fund. An Opinion of
Counsel with respect to the Shares of
Cardinal Balanced Fund and Cardinal
Aggressive Growth Fund was filed with
Registrant's Notice filed on November 23,
1994, pursuant to Rule 24f-2.
(11) Consent of KPMG Peat Marwick LLP.
(12) None.
C-3
<PAGE> 173
(13) Purchase Agreement dated June 4, 1993,
between Registrant and Cardinal Management
Corp.
(14) None.
(15) (a) Rule 12b-1 Plan.
(b) Rule 12b-1 Agreement dated June 18,
1993, as proposed to be amended
between Registrant and The Ohio
Company (a related agreement under
the Rule 12b-1 Plan).
(c) Form of revised Selected Dealer
Agreement (a related agreement
under the Rule 12b-1 Plan).
(16) (a) Computation of Performance
Quotations for Cardinal Balanced
Fund is incorporated by reference to
Exhibit (16)(a) of Post-Effective
Amendment No. 2 to Registrant's
Registration Statement on Form N-1A
(File No. 33-59984) filed on
December 1, 1994.
(b) Computation of Performance
Quotations for Cardinal Aggressive
Growth Fund is incorporated by
reference to Exhibit (16)(b) of
Post-Effective Amendment No. 2 to
Registrant's Registration Statement
on Form N-1A (File No. 33-59984)
filed on December 1, 1994.
(c) Computation of Performance
Quotations for The Cardinal Fund to
be filed by amendment.
(d) Computation of Performance
Quotations for Cardinal Government
Obligations Fund to be filed by
amendment.
(e) Computation of Performance
Quotations for Cardinal Government
Securities Money Market Fund to be
filed by amendment.
(f) Computation of Performance
Quotations for Cardinal Tax Exempt
Money Market Fund to be filed by
amendment.
(17) Financial Data Schedule to be filed by
amendment.
(18) None.
C-4
<PAGE> 174
(19) (a) Consent of Baker & Hostetler.
(b) Powers of Attorney of H. Keith
Allen, Gordon B. Carson, John B.
Gerlach, Jr., Michael J. Knilans,
James I. Luck, David L. Nelson, C.
A. Peterson, John L. Schlater, Frank
W. Siegel, Joseph H. Stegmayer,
Lawrence H. Rogers II and James M.
Schrack, II.
Item 25. Persons Controlled Or Under Common Control With Registrant
----------------------------------------------------------
None
Item 26. Number Of Holders Of Securities
-------------------------------
The following table sets forth as of October 19, 1995, the
number of record holders of each series of shares of
Registrant:
Number of
Title of Series Record Holders
--------------- --------------
Cardinal Balanced Fund 1,247
Cardinal Aggressive Growth Fund 1,241
The Cardinal Fund 0
Cardinal Government Obligations
Fund 0
Cardinal Government Securities
Money Market Fund 0
Cardinal Tax Exempt Money Market
Fund 0
Item 27. Indemnification
---------------
Article VI, Section 6.4 of the Registrant's Declaration of
Trust, filed as Exhibit 1 hereto, provides for the
indemnification of Registrant's Trustees and officers.
Indemnification of the Group's principal underwriter,
custodian, investment adviser and manager, and transfer agent
is provided for, respectively, in Section 1.11 of the
Distribution Agreement filed as Exhibit 6(a) hereto, Section
8.1 of the Custody Agreement filed as Exhibit 8 hereto,
Section 6 of the Investment Advisory and Management Agreement
filed as Exhibit 5 hereto, and Section 10 of the Transfer
Agency and Fund Accounting
C-5
<PAGE> 175
Agreement filed as Exhibit 9 hereto. As of the
effective date of this Registration Statement, the Group will
have obtained from a major insurance carrier a trustees' and
officers' liability policy covering certain types of errors
and omissions. In no event will Registrant indemnify any of
its trustees, officers, employees or agents against any
liability to which such person would otherwise be subject by
reason of his willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of
his reckless disregard of the duties involved in the conduct
of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Information with respect to Cardinal Management Corp. and its
officers and directors as set forth under the captions "WHO
MANAGES MY INVESTMENT IN THE FUND?" contained in Prospectuses
and "MANAGEMENT OF THE GROUP" contained in the Statements of
Additional Information which are a part of this Registration
Statement is hereby incorporated herein by reference.
To the knowledge of Registrant, none of the directors or
officers of Cardinal Management Corp., except those set forth
below, is or has been at any time during the past two fiscal
years engaged in any other business,
C-6
<PAGE> 176
profession, vocation or employment of a substantial nature. Set forth
below are the names, principal businesses and addresses of those
businesses of the directors and officers of Cardinal Management Corp.
who are or have been engaged in any other business, profession,
vocation or employment of a substantial nature during the past two
fiscal years.
<TABLE>
<CAPTION>
Officer or Director
of Cardinal Name and Address Nature of
Management Corp. of Business Connection
- ------------------- ---------------- -----------
<S> <C> <C>
H. Keith Allen The Ohio Company Chief Operating Officer,
155 East Broad Street Secretary/Treasurer and
Columbus, Ohio 43215 Director
Ad Management Corp. Secretary/Treasurer and
155 East Broad Street Director
Columbus, Ohio 43215
Cardinal Financial Secretary/Treasurer and
Management Corp. Director
155 East Broad Street
Columbus, Ohio 43215
Midwest Parking, Inc. Secretary/Treasurer
155 East Broad Street and Director
Columbus, Ohio 43215
InsuranceOhio Company Secretary/Treasurer and
Agency Director
155 East Broad Street
Columbus, Ohio 43215
Ohio Equities Inc. Secretary/Treasurer and
395 East Broad Street Director
Columbus, Ohio 43215
The Cardinal Fund Inc. Director and Chairman
155 East Broad Street
Columbus, Ohio 43215
Cardinal Tax Exempt Trustee and Chairman
Money Trust
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government Trustee and Chairman
Obligations Fund
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government Trustee and Chairman
Securities Trust
155 East Broad Street
Columbus, Ohio 43215
</TABLE>
C-7
<PAGE> 177
<TABLE>
<CAPTION>
Officer or Director
of Cardinal Name and Address Nature of
Management Corp. of Business Connection
- ------------------- ---------------- ----------
<S> <C> <C>
The Cardinal Group Trustee and Chairman
155 East Broad Street
Columbus, Ohio 43215
John L. Schlater The Ohio Company Senior Vice President
155 East Broad Street
Columbus, Ohio 43215
The Cardinal Fund Inc. Director
155 East Broad Street
Columbus, Ohio 43215
Cardinal Tax Exempt Trustee
Money Trust
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government Trustee
Obligations Fund
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government Trustee
Securities Trust
155 East Broad Street
Columbus, Ohio 43215
The Cardinal Group Trustee
155 East Broad Street
Columbus, Ohio 43215
Frank W. Siegel The Ohio Company Senior Vice President
155 East Broad Street
Columbus, Ohio 43215
The Cardinal Fund Inc. President and Director
155 East Broad Street
Columbus, Ohio 43215
Cardinal Tax Exempt President and Trustee
Money Trust
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government President and Trustee
Obligations Fund
155 East Broad Street
Columbus, Ohio 43215
Cardinal Government President and Trustee
Securities Trust
155 East Broad Street
Columbus, Ohio 43215
The Cardinal Group President and Trustee
155 East Broad Street
Columbus, Ohio 43215
</TABLE>
C-8
<PAGE> 178
<TABLE>
<CAPTION>
Officer or Director
of Cardinal Name and Address Nature of
Management Corp. of Business Connection
- ------------------- ---------------- ----------
<S> <C> <C>
Keystone Group Vice President
200 Berkeley Street
Boston, Massachusetts 02116
Trust Advisory Group Senior Vice President
1 Morningstar Drive North
Westport, Connecticut 06880
</TABLE>
Item 29. Principal Underwriter
---------------------
(a) The Ohio Company acts as principal underwriter for
Registrant. The Ohio Company also is the principal
underwriter of The Cardinal Fund Inc., Cardinal
Government Obligations Fund, Cardinal Government
Securities Trust and Cardinal Tax Exempt Money Trust.
The Ohio Company also acts as Sponsor of Cardinal
Tax-Exempt Bond Trust, First through Thirty-Fifth
Series (there is no Thirteenth Series of this Trust)
and as Sponsor of Cardinal GNMA Trust, First, Second
and Third Series. The Ohio Company participates as a
member of various underwriting and selling groups and
as agent of other investment companies. It executes
orders for the purchase and sale of securities of
investment companies and, from time to time, sells
securities to such companies in its capacity as a
broker-dealer in securities.
(b) The Officers and Directors of The Ohio Company and
their positions with Registrant are as follows:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- ---------------------
<S> <C> <C>
John F. Wolfe Chairman of the Board,
34 South Third Street President and Chief Exec.
Columbus, Ohio 43215 Officer and Director
William C. Wolfe Director
34 South Third Street
Columbus, Ohio 43215
H. Keith Allen Chief Operating Officer, Chairman and Trustee
155 East Broad Street Secretary, Treasurer
Columbus, Ohio 43215 and Director
John P. Campbell Senior Executive
155 East Broad Street Vice President and
Columbus, Ohio 43215 Director
Daniel A. Fronk Senior Executive
155 East Broad Street Vice President and
Columbus, Ohio 43215 Director
</TABLE>
C-9
<PAGE> 179
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- ---------------------
<S> <C> <C>
Curtis E. Stumpf Senior Executive
155 East Broad Street Vice President, Director
Columbus, Ohio 43215 and General Sales Manager
Martin H. Vogtsberger Senior Executive
155 East Broad Street Vice President and
Columbus, Ohio 43215 Director
Thomas A. Brownfield Senior Vice President
155 East Broad Street
Columbus, Ohio 43215
James A. Francis Senior Vice President/
155 East Broad Street Compliance
Columbus, Ohio 43215
Hannibal L. Godwin III Senior Vice President/ Vice President
155 East Broad Street Portfolio Fixed
Columbus, Ohio 43215 Income Manager
Jerry L. Greene Senior Vice President/
155 East Broad Street Accounting
Columbus, Ohio 43215
Kenneth S. Koralewski Senior Vice President &
155 East Broad Street Manager, Municipal
Columbus, Ohio 43215 Syndicate & Trading
Curtis D. Milner Senior Vice President
155 East Broad Street
Columbus, Ohio 43215
John L. Schlater Senior Vice President Trustee, Member of
155 East Broad Street Investment Committee
Columbus, Ohio 43215
Frank W. Siegel Senior Vice President President and Trustee
155 East Broad Street
Columbus, Ohio 43215
Thomas G. Terry Senior Vice President/
155 East Broad Street OTC Trading
Columbus, Ohio 43215
George E. Tootle, Jr. Senior Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
G. Douglas Voelz Senior Vice President
155 East Broad Street
Columbus, Ohio 43215
John C. Adams Vice President/Public
155 East Broad Street Finance-Negotiated
Columbus, Ohio 43215
William N. Anderson Vice President/NYSE
155 East Broad Street Floor Broker
Columbus, Ohio 43215
</TABLE>
C-10
<PAGE> 180
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- ---------------------
<S> <C> <C>
Gary E. Baird Vice President/Sales
155 East Broad Street
Columbus, Ohio 43215
John Bevilacqua Vice President/Asset
155 East Broad Street Management
Columbus, Ohio 43215
John R. Carle Vice President/Cardinal
155 East Broad Street Government Obligations
Columbus, Ohio 43215 Fund
Mark R. Chambers Vice President/Public
155 East Broad Street Finance-Negotiated
Columbus, Ohio 43215
G. John Cooper Vice President/Public
155 East Broad Street Finance-Negotiated
Columbus, Ohio 43215
Robert A. Corea Vice President/Corporate
155 East Broad Street Finance
Columbus, Ohio 43215
Albert W. Erickson, III Vice President/Public
155 East Broad Street Finance-Negotiated
Columbus, Ohio 43215
Michael Goodman Vice President/Municipal
155 East Broad Street Trading
Columbus, Ohio 43215
Douglas W. Hindenlang Vice President/OTC Trading
155 East Broad Street
Columbus, Ohio 43215
Mark E. Koprucki Vice President/Research
155 East Broad Street
Columbus, Ohio 43215
Elwood W. Lewis Vice President/Asset
155 East Broad Street Management
Columbus, Ohio 43215
Barry G. McMahon Vice President/Asset Vice President
155 East Broad Street Management
Columbus, Ohio 43215
John R. Merrell Vice President/Sales
155 East Broad Street
Columbus, Ohio 43215
Thomas E. Murphy Vice President/Corporate
155 East Broad Street Finance
Columbus, Ohio 43215
C. Thomas Pfister Vice President/Public Finance
155 East Broad Street - Negotiated
Columbus, Ohio 43215
</TABLE>
C-11
<PAGE> 181
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- --------------
<S> <C> <C>
Larry J. Rapp Vice President/Manager,
155 East Broad Street Technical Services
Columbus, Ohio 43215
Kara L. Rider Vice President/Municipal
155 East Broad Street Trading
Columbus, Ohio 43215
James M. Schrack II Vice President/Trust and Treasurer
155 East Broad Street Trust Officer
Columbus, Ohio 43215
Richard H. Stillman Vice President/Public
155 East Broad Street Finance-Negotiated
Columbus, Ohio 43215
Michael S. Tedesco Vice President/Municipal
155 East Broad Street Trading
Columbus, Ohio 43215
James W. Trapp Vice President/Sales
155 East Broad Street
Columbus, Ohio 43215
William T. Weldon Vice President/Operations
155 East Broad Street
Columbus, Ohio 43215
David C. Will Vice President/Asset Vice President
155 East Broad Street Management
Columbus, Ohio 43215
Rodney A. Yeager Vice President/
155 East Broad Street Telecommunications
Columbus, Ohio 43215
Mark E. Backes Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Daniel G. Bandi Assistant Vice President/
155 East Broad Street Research
Columbus, Ohio 43215
Roger W. Butler Assistant Vice President/
155 East Broad Street Compliance
Columbus, Ohio 43215
James W. Carey Assistant Vice President/
155 East Broad Street Corporate Finance
Columbus, Ohio 43215
Scott E. Decker Assistant Vice President/
155 East Broad Street Trust-Internal Auditor
Columbus, Ohio 43215
William J. Denehy Assistant and Vice President/
155 East Broad Street Corporate Bond Trading
Columbus, Ohio 43215
</TABLE>
C-12
<PAGE> 182
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- ---------------------
<S> <C> <C>
Dave G. Duncan Assistant Vice President/
155 East Broad Street Syndicate
Columbus, Ohio 43215
Carolyn A. Garner Assistant Vice President
155 East Broad Street
Columbus, Ohio 43215
Charles H. Graves, Sr. Assistant Vice President/
155 East Broad Street Sales
Columbus, Ohio 43215
Ronald G. Hall Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Helen J. Huntington Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Jon P. Jones Assistant Vice President/
155 East Broad Street Municipal Trading
Columbus, Ohio 43215
Donna M. Knapp Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Lawrence W. Landenberger Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Matthew E. Lee Assistant Vice President/
155 East Broad Street Trading
Columbus, Ohio 43215
Virginia L. McCargish Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Kevin P. Morrow Assistant Vice President/
155 East Broad Street Research
Columbus, Ohio 43215
Richard D. Oltean Assistant Vice President/
155 East Broad Street Trust - Qualified Plans
Columbus, Ohio 43215
Mark Ostroske Assistant Vice President/
155 East Broad Street Asset Management
Columbus, Ohio 43215
</TABLE>
C-13
<PAGE> 183
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------ -------------------- ---------------------
<S> <C> <C>
E. Eugene Robinson Assistant Vice President/
155 East Broad Street Research
Columbus, Ohio 43215
Michael C. Roney Assistant Vice President/
155 East Broad Street Asset Management
Columbus, Ohio 43215
David A. Seely, Jr. Assistant Vice President/
155 East Broad Street Operations
Columbus, Ohio 43215
Susan H. Shaw Assistant Vice President/
155 East Broad Street National Syndicate
Columbus, Ohio 43215
Ronald J. Trubisky Assistant Vice President/
155 East Broad Street Corporate Bond Trading
Columbus, Ohio 43215
Douglas J. Walouke Assistant Vice President/
155 East Broad Street Corporate Bond Trading
Columbus, Ohio 43215
Richard J. Wayman Assistant Vice President/
155 East Broad Street Research
Columbus, Ohio 43215
Lori A. Wells Assistant Vice President/
155 East Broad Street Technical Services
Columbus, Ohio 43215
Elizabeth V. Wicks Assistant Vice President/
155 East Broad Street Asset Management
Columbus, Ohio 43215
</TABLE>
Item 30. Location of Accounts and Records
--------------------------------
(1) Cardinal Management Corp., 155 East Broad Street,
Columbus, Ohio 43215 (records relating to its functions as
investment adviser and manager, Declaration of Trust,
By-Laws and Minute Books).
(2) The Ohio Company, 155 East Broad Street, Columbus, Ohio
43215 (records relating to its function as distributor).
(3) Cardinal Management Corp., 215 East Capital Street,
Columbus, Ohio 43215 (records relating to its functions as
dividend and transfer agent and fund accountant).
(4) The Fifth Third Bank, 38 Fountain Square Plaza,
Cincinnati, Ohio 45263 (records relating to its functions
as custodian).
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<PAGE> 184
Item 31. Management Services
-------------------
None.
Item 32. Undertakings
------------
Registrant hereby undertakes to file a post-effective amendment
to its registration statement on or before the effective date of
its acquisition of all of the assets and liabilities of The
Cardinal Fund Inc., Cardinal Government Obligations Fund,
Cardinal Government Securities Trust and Cardinal Tax Exempt
Money Trust (collectively, the "Acquired Funds") to include the
audited financial statements of the Acquired Funds with respect
to The Cardinal Fund, Cardinal Government Obligations Fund,
Cardinal Government Securities Money Market Fund and Cardinal Tax
Exempt Money Market Fund, four new series of the Registrant whose
shares are being registered by this post-effective amendment.
C-15
<PAGE> 185
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, in the City of Columbus and State of Ohio on the 24th day of
October, 1995.
THE CARDINAL GROUP
By /s/ Frank W. Siegel
--------------------------------
Frank W. Siegel, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Frank W. Siegel President (Principal October 24, 1995
- ------------------------ Executive Officer)
Frank W. Siegel
/s/*H. Keith Allen Chairman and Trustee October 24, 1995
- -------------------------
H. Keith Allen
/s/*Gordon B. Carson Trustee October 24, 1995
- -------------------------
Gordon B. Carson
/s/*John B. Gerlach, Jr. Trustee October 24, 1995
- -------------------------
John B. Gerlach, Jr.
/s/*Michael J. Knilans Trustee October 24, 1995
- -------------------------
Michael J. Knilans
/s/*James I. Luck Trustee October 24, 1995
- -------------------------
James I. Luck
/s/*David L. Nelson Trustee October 24, 1995
- -------------------------
David L. Nelson
/s/*C. A. Peterson Trustee October 24, 1995
- -------------------------
C. A. Peterson
/s/*Lawrence H. Rogers II Trustee October 24, 1995
- -------------------------
Lawrence H. Rogers II
/s/*John L. Schlater Trustee October 24, 1995
- -------------------------
John L. Schlater
/s/*Joseph H. Stegmayer Trustee October 24, 1995
- -------------------------
Joseph H. Stegmayer
/s/ James M. Schrack II Treasurer (Principal October 24, 1995
- -------------------------- Financial and
James M. Schrack II Accounting Officer)
*By/s/James M. Schrack II October 24, 1995
- --------------------------
James M. Schrack II
Attorney-In-Fact
C-16
<PAGE> 186
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------------------------------------- ----
<S> <C> <C>
(1)(a) Declaration of Trust, dated as of March 23, 1993.
(b) Amendment to Declaration of Trust as adopted October 20, 1995.
(2) By-Laws.
(3) None
(4) None
(5) Investment Advisory and Management Agreement dated as of June 18, 1993, as proposed to
be amended between Registrant and Cardinal Management Corp.
(6)(a) Distribution Agreement dated as of June 18, 1993, as proposed to be amended between Registrant
and The Ohio Company.
(b) Form of revised Selected Dealer Agreement.
(7) None
(8) Custody Agreement dated as of June 18, 1993, as proposed to be amended between Registrant and The
Fifth Third Bank.
(9) Transfer Agency and Fund Accounting Agreement dated as of June 18, 1993, as proposed to be amended
between Registrant and Cardinal Management Corp.
(10) Opinion of Counsel with respect to shares of The Cardinal Fund, Cardinal Government Obligations Fund,
Cardinal Government Securities Money Market Fund and Cardinal Tax Exempt Money Market Fund. An
Opinion of Counsel with respect to the Shares of Cardinal Balanced Fund and Cardinal Aggressive
Growth Fund was filed with Registrant's Notice filed on November 23, 1994, pursuant to Rule 24f-2.
(11) Consent of KPMG Peat Marwick LLP.
</TABLE>
C-17
<PAGE> 187
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------------------------------------- ----
<S> <C> <C>
(12) None
(13) Purchase Agreement dated June 4, 1993, between Registrant and Cardinal Management Corp.
(14) None
(15)(a) Rule 12b-1 Plan.
(b) Rule 12b-1 Agreement dated June 18, 1993, as proposed to be amended, between Registrant and
The Ohio Company (a related agreement under the Rule 12b-1 Plan).
(c) Form of revised Selected Dealer Agreement (a related agreement under the Rule 12b-1 Plan).
(16)(a) Computation of Performance Quotations for Cardinal Balanced Fund was filed as Exhibit (16)(a) to
Post-Effective Amendment No. 2 to Registrant's Registration Statement on December 1, 1994.
(b) Computation of Performance Quotations for Cardinal Aggressive Growth Fund was filed as Exhibit (16)(a)
to Post-Effective Amendment No. 2 to Registrant's Registration Statement on December 1, 1994.
(c) Computation of Performance Quotations for The Cardinal Fund to be filed by amendment.
(d) Computation of Performance Quotations for Cardinal Government Obligations Fund to be filed
by amendment.
(e) Computation of Performance Quotations for Cardinal Government Securities Money Market Fund to be
filed by amendment.
(f) Computation of Performance Quotations for Cardinal Tax Exempt Money Market Fund to be filed
by amendment.
</TABLE>
C-18
<PAGE> 188
<TABLE>
<CAPTION>
Exhibit No. Description Page
- ----------- ----------------------------------------- ----
<S> <C> <C>
(17) Financial Data Schedule to be filed by amendment.
(18) None.
(19)(a) Consent of Baker & Hostetler.
(b) Powers of Attorney of H. Keith Allen, Gordon B. Carson, John B. Gerlach, Jr., Michael J. Knilans,
James I. Luck, David L. Nelson, C. A. Peterson, John L. Schlater, Frank W. Siegel,
Joseph H. Stegmayer, Lawrence H. Rogers II and James M. Schrack, II.
</TABLE>
C-19
<PAGE> 189
Filed with the Securities and Exchange Commission October 27, 1995
1933 Act Registration No. 33-59984
1940 Act File No. 811-7588
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post Effective Amendment No. 3 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT / X /
COMPANY ACT OF 1940
Amendment No. 4 / X /
The Cardinal Group
(Exact Name of Registrant as Specified in Charter)
155 East Broad Street
Columbus, Ohio 43215
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(614) 464-5511
C-20
<PAGE> 1
EXHIBIT (1)(A)
<PAGE> 2
THE CARDINAL GROUP
DECLARATION OF TRUST
DATED AS OF MARCH 23, 1993
<PAGE> 3
THE CARDINAL GROUP
DECLARATION OF TRUST
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I NAME, PRINCIPAL OFFICE AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Name and Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURPOSES OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III THE TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3.1 Number, Designation, Election, Term, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Initial Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(d) Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(g) Effect of Death, Resignation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(h) No Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Powers of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Distribution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Ownership Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Form of Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(g) Allocation of Assets, Liabilities and Expenses to Series or Sub-Series . . . . . . . . . . . . . . . . 6
(h) Reorganization, Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(i) Voting Trusts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(j) Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(k) Partnerships, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(l) Borrowing and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(m) Guarantees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(n) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(o) Pensions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(p) Corporate Acts or Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
- i -
<PAGE> 4
<TABLE>
<CAPTION>
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----
<S> <C>
Section 3.3 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Advisory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Custodian and Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Transfer and Dividend Disbursing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Shareholder Servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(g) Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Payment of Fund Expenses and Compensation
of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.2 Establishment and Designation of Series and Sub-Series. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Assets Belonging to a Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Liabilities Belonging to a Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(f) Redemption by Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Redemption by Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(h) Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(j) Equality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Fractions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(l) Conversion Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.3 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.4 Investments in the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.5 No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.6 Status of Shares and Limitation of Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V SHAREHOLDERS' VOTING POWERS AND MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.3 Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4 Quorum and Required Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.5 Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.6 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
- ii -
<PAGE> 5
<TABLE>
<CAPTION>
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----
<S> <C> <C>
Section 5.7 Additional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VI LIMITATION OF LIABILITY; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.1 Trustees, Shareholders, etc. Not Personally Liable; Notice . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.3 Indemnification of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.4 Indemnification of Trustees, Officers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.5 Advances of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.6 Indemnification Not Exclusive, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.7 Liability of Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.1 Duration and Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.2 Sale or Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.3 Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 7.5 Filing of Copies; References; Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.6 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
- iii -
<PAGE> 6
THE CARDINAL GROUP
DECLARATION OF TRUST
--------------------
DECLARATION OF TRUST made at Columbus, Ohio, as of the 23rd day of March,
1993, by the Trustees hereunder, and by the holders of Shares of beneficial
interest to be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, the Trust has been formed to carry on the business of an investment
company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of an Ohio business trust in accordance with the provisions
of Chapter 1746, Ohio Revised Code, and as hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of Shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
---------
NAME, PRINCIPAL OFFICE AND DEFINITIONS
--------------------------------------
SECTION 1.1 NAME AND PRINCIPAL OFFICE. The Trust shall be known as "The
Cardinal Group" and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine. The
principal office of the Trust is located in Columbus, Ohio.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(b) "Commission" shall have the meaning given it in the 1940 Act;
- 1 -
<PAGE> 7
(c) "Declaration of Trust" shall mean this Declaration of Trust as amended
or restated from time to time;
(d) The "1940 Act" refers to the Investment Company Act of 1940, the Rules,
Regulations and any Orders of the Commission applicable to the Trust
thereunder, all as amended from time to time;
(e) "Series" refers to a series of Shares established and designated under
or in accordance with the provisions of Article IV;
(f) "Share" or "Shares" refers to the transferable unit or units of
interest into which the beneficial interest in the Trust or any Series of the
Trust (as the context may require) shall be divided from time to time;
(g) "Shareholder" or "Shareholders" means a record owner or owners of a
Share or Shares;
(h) "Sub-Series" refers to one or more classes or sub-series of Shares
established and designated under or in accordance with the provisions of
Article IV.
(i) The "Trust" refers to the Ohio business trust established by this
Declaration of Trust, as amended from time to time; and
(j) "Trustee" or "Trustees" refers to the trustee or trustees of the Trust
named herein or selected in accordance with Article III.
ARTICLE II
----------
PURPOSES OF TRUST
-----------------
The purposes of the Trust are to operate as an investment company as defined
in the 1940 Act and to engage in any lawful act or activity for which business
trusts may be formed under Chapter 1746, Ohio Revised Code.
- 2 -
<PAGE> 8
ARTICLE III
-----------
THE TRUSTEES
------------
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. Upon their execution of this Declaration of Trust
or a counterpart hereof or some other writing in which they accept such
trusteeship and agree to the provisions hereof, Walter R. Chambers and John
L. Schlater shall become the initial Trustees of the Trust.
(b) NUMBER. The Trustees serving as such, whether named above or
hereafter becoming a Trustee, may increase or decrease the number of Trustees
to a number other than the number theretofore determined. A Trustee shall
qualify by accepting in writing his election or appointment and agreeing to
be bound by the Declaration of Trust. No decrease in the number of Trustees
shall have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to subsection (e) of this
Section 3.1. Except as set forth in subsection (f) of this Section 3.1,
Trustees (other than the Initial Trustees described in Section 3.1(a)) shall
be elected by the Shareholders, who shall vote as a single class and not by
Series and at such times as the Trustees shall determine that such election
is required by the 1940 Act or is otherwise advisable.
(c) TERM. Each Trustee, whether named above or hereafter becoming a
Trustee, shall serve as a Trustee during the continued lifetime of the Trust
until he dies, resigns or is removed, or, if sooner, until the next meeting
of Shareholders called for the purpose of electing Trustees, and until the
election and qualification of his successor.
(d) RESIGNATION. Any Trustee may resign his trust as a Trustee, by
written instrument signed by him and delivered to the other Trustees or to
any officer of the Trust or at a meeting of the Trustees, and such
resignation shall take effect upon such delivery or upon such later date as
is specified in such instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause at any time
either by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date upon which such removal
shall become effective, or by the Shareholders at any meeting called
- 3 -
<PAGE> 9
for that purpose. No Trustee shall be entitled to any damages on account of
such removal.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, removal or
incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the Trustees, may (but need not unless required by the
1940 Act) be filled either by a majority of the remaining Trustees through
the appointment in writing of such other person as such remaining Trustees in
their discretion shall determine (unless a shareholder election is required
by the 1940 Act) or by the election by the Shareholders, at a meeting called
for the purpose, of a person to fill such vacancy, and such appointment or
election shall be effective upon the written acceptance of the person named
therein to serve as a Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such appointment or
election in anticipation of a vacancy to occur by reason of resignation or
increase in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of said resignation or increase
in number of Trustees. As soon as any Trustee so appointed or elected shall
have accepted such appointment or election and shall have agreed in writing
to be bound by this Declaration of Trust and the appointment or election is
effective, the Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act of conveyance.
Notwithstanding the foregoing, to the extent the Trust adopts and
implements a written plan pursuant to Rule 12b-1 under the 1940 Act, and so
long as otherwise required by the 1940 Act, the selection and nomination of
Trustees who are not "interested persons" of the Trust as defined in the 1940
Act, shall be committed to the discretion of the Trustees who are not
"interested persons," as so defined.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, removal,
or incapacity of the Trustees, or any one of them, shall not operate to annul
or terminate the Trust or to revoke or terminate any existing agency or
contract created or entered into pursuant to the terms of this Declaration of
trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person ceasing to
be a Trustee as a result of his death, resignation, removal or incapacity
(nor the estate of any such person) shall be required to make an
- 4 -
<PAGE> 10
accounting to the Shareholders or remaining Trustees upon such cessation.
SECTION 3.2 POWERS OF TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purposes of the Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; they may as they consider appropriate
elect and remove officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing of whom may be a
Trustee, and may provide for the compensation of all of the foregoing; they may
appoint from their own number, define the responsibility and authority of, and
terminate, any one or more committees consisting of two or more Trustees,
including without implied limitation an executive committee, which may, when
the Trustees are not in session and subject to the 1940 Act, exercise some or
all of the power and authority of the Trustees as the Trustees may determine;
in accordance with Section 3.3 they may employ one or more Advisers,
Administrators, Depositories and Custodians and may authorize any Depository or
Custodian to employ sub-custodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments, retain transfer, dividend, accounting and Shareholder
servicing agents or any of the foregoing, provide for the distribution of
Shares by the Trust through one or more distributors, principal underwriters or
otherwise, set record dates or times for the determination of Shareholders or
various of them with respect to various matters; they may compensate or provide
for the compensation of the Trustees, officers, advisers, administrators,
custodians, other agents, consultants and employees of the Trust or the
Trustees on such terms as they deem appropriate; and in general they may
delegate to any officer of the Trust, to any committee of the Trustees and to
any employee, adviser, administrator, distributor, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable
or appropriate for the conduct of the business and affairs of the Trust,
including without implied limitation the power and authority to act in the name
of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority:
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(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the
Trust;
(c) DISTRIBUTION OF SECURITIES. To act as a distributor of shares and as
underwriter of, or broker or dealer in, securities or other property;
(d) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to such person
or persons such power and discretion with relation to securities, debt
instruments or property as the Trustees shall deem proper;
(e) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(f) FORM OF HOLDING. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or in the
name of a custodian, sub-custodian or other depository or a nominee or
nominees or otherwise;
(g) ALLOCATION OF ASSETS, LIABILITIES AND EXPENSES TO SERIES OR
SUB-SERIES. To allocate assets, liabilities and expenses of the Trust to a
particular Series or Sub-Series of Shares or to apportion the same among two
or more Series or Sub-Series, provided that any liabilities or expenses
incurred by a particular Series or Sub-Series of Shares shall be payable
solely out of the assets of that Series;
(h) REORGANIZATION, MERGER AND CONSOLIDATION. To consent to or
participate in any plan for the reorganization, consolidation or merger of
any corporation or issuer the security or debt instrument of which is or was
held in the Trust; to consent to any contract, lease, mortgage, purchase or
sale or property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security or debt instrument held in the
Trust;
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(i) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depository or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depository or trustee as the Trustees shall deem proper;
(j) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy, including but not
limited to claims for taxes;
(k) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(l) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(m) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship,
or otherwise assume liability for payment thereof; and to mortgage and pledge
the Trust property or any part thereof to secure any of or all such
obligations;
(n) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith),
of the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or omitted by
any such person in any such capacity, including any action taken or omitted
that may be determined to constitute negligence, whether or not the
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Trust would have the power to indemnify such person against such liability;
(o) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust; and
(p) CORPORATE ACTS OR ACTIVITIES. To engage in any other lawful act or
activity in which corporations organized under Chapter 1701, Ohio Revised
Code, may engage.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the By-Laws, any action to be taken by the Trustees may
be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in office (or such
larger or different number as may be required by the 1940 Act or other
applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
exclusive or non-exclusive contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships, other types of organizations,
or individuals ("Contracting Party") to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or of the Trust and/or the Trustees, and to provide
for the performance and assumption of such other services, duties and
responsibilities in addition to those set forth below as the Trustees may
determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of
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the assets belonging to a Series of Shares (as that phrase is defined in
subsection (a) of Section 4.2), to manage such investments and assets, make
investment decisions with respect thereto, and to place purchase and sale
orders for portfolio transactions relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust, to supervise all or any part of the operations of
the Trust, and to provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust, to be
principal underwriter of such Shares, and/or to act as agent of the Trust
in the sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and accounting records in connection
therewith;
(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) ACCOUNTING. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties,
Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the
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Trust or a Contracting Party from entering into sub-contractual arrangements
relative to any of the matters referred to in Sections 3.3(a) through (g)
hereof.
Subject to the provisions of the 1940 Act, the fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any Contracting
Party, or of or for any parent or affiliate of any Contracting Party or that
the Contracting Party or any parent or affiliate thereof is a Shareholder or
has an interest in the Trust, or that
(b) any Contracting Party may have a contract providing for the rendering
of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations, or
has other business or interests,
shall not affect the validity of any contract for the performance and
assumption of services, duties and responsibilities to, for or of the Trust
and/or the Trustees or disqualify any Shareholder, Trustee or officer of the
Trust from voting upon or executing the same or create any liability or
accountability to the Trust or its Shareholders, provided that in the case of
any relationship or interest referred to in the preceding clause (a) on the
part of any Trustee or officer of the Trust either (i) the material facts as to
such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), (ii) the material facts as to
such relationship or interest and as to the contract have been disclosed to or
are known by the Shareholders entitled to vote thereon and the contract
involved is specifically approved in good faith by vote of the Shareholders, or
(iii) the specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
SECTION 3.4 PAYMENT OF FUND EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and
to charge or allocate the same to, between or among such one or more of the
Series or Sub-Series that may be established and designated pursuant to Article
IV, as the Trustees deem fair, all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust, or in connection
with the management thereof, including, but
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not limited to, the Trustees' compensation and such expenses and charges for
the services of the Trust's officers, employees, investment adviser or
advisers, administrator, distributor, principal underwriter, auditor, counsel,
depository, custodian, transfer agent, dividend disbursing agent, accounting
agent, Shareholder servicing agent, and such other agents, consultants and
independent contractors and such other expenses and charges as the Trustees may
deem necessary or proper to incur. Without limiting the generality of any
other provision hereof, the Trustees shall be entitled to reasonable
compensation from the Trust for their services as Trustees and may fix the
amount of such compensation.
ARTICLE IV
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SHARES
------
SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value and, except as hereinafter
set forth, of one class, but the Trustees shall have the authority from time to
time, without the approval of Shareholders and upon the amendment of the
Declaration of Trust, to divide the class of Shares into two or more Series of
Shares (in addition to the Series initially established and designated in
Section 4.2), as they deem necessary or desirable, to establish and designate
such Series, and to fix, determine and amend the relative rights and
preferences as between the different Series of Shares as to right of redemption
and the price, terms and manner of redemption, special and relative rights as
to dividends and other distributions and on liquidation, sinking or purchase
fund provisions,conversion rights, and conditions under which the several
Series shall have separate voting rights or no voting rights and such other
matters as the Trustees deem appropriate. Except as aforesaid all Shares of
the different Series shall be identical.
The Shares of each Series may be issued or reissued from time to time in one
or more classes or Sub-Series, as determined by the Board of Trustees without
the approval of Shareholders and upon the amendment of the Declaration of
Trust. Each Sub-Series shall be appropriately designated by some
distinguishing letter, number or title. All Shares within a Sub-Series shall
be alike in every particular. All Shares of each Series shall be of equal rank
and have the same powers, preferences and rights, and shall be subject to the
same qualifications, limitations and restrictions without distinction between
the Shares of different Sub-Series thereof, except such differences among such
Sub-Series as the Board of Trustees shall from time to time determine to be
appropriate and necessary to comply with the 1940 Act and other applicable
laws,
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including differences in the allocation of expenses, right of redemption, rate
or rates of dividends or distributions, conversion rights and separate voting
rights. The Board of Trustees is hereby empowered to classify or reclassify
from time to time any unissued Shares of each Series by fixing or altering the
terms thereof and by assigning such unissued Shares to an existing or newly
created Sub-Series. In addition, the Board of Trustees is empowered, without
shareholder approval, (a) to classify all or any part of the issued Shares of
any Series to make them part of an existing or newly created Sub-Series, and
(b) to redesignate any issued Shares of any Series by assigning a
distinguishing letter, number or title to such Shares.
The number of authorized Shares and the number of Shares of each Series and
Sub-Series that may be issued is unlimited, and the Trustees may issue Shares
of any Series for such consideration and on such terms as they may determine
(or for no consideration if pursuant to a Share dividend or split-up), all
without action or approval of the Shareholders. All Shares when so issued on
the terms determined by the Trustees shall be fully paid and non-assessable
(but may be subject to mandatory contribution back to the Trust as provided in
subsection (h) of Section 4.2). The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Series
into one or more Series that may be established and designated from time to
time. The Trustees may hold as treasury Shares (of the same or some other
Series), reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares of any
Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
The establishment and designation of any Series of Shares in addition to
those initially established and designated in Section 4.2, or of any Sub-Series
of Shares, shall be effective upon the amendment of the Declaration of Trust,
which may take place without Shareholder approval, setting forth the
establishment and designation and relative rights and preferences of such
Series or Sub-Series. At any time that there are no Shares outstanding of any
particular Series or Sub-Series previously established and designated the
Trustees may by an amendment to the Declaration of Trust and without
Shareholder approval abolish that Series or Sub-Series and the establishment
and designation thereof.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of
Shares of any Series of the Trust to the
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same extent as if such person were not a Trustee, officer, or other agent of
the Trust; and the Trust may issue and sell or cause to be issued and sold and
may purchase Shares of any Series from any such person or any such organization
subject only to the general limitations, restrictions or other provisions
applicable to the sale or purchase of Shares of such Series generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES AND SUB-SERIES. Without
limiting the authority of the Trustees set forth in Section 4.1 to establish
and designate any further Series or Sub-Series or to classify all or any part
of the issued Shares of any Series to make them part of an existing or newly
created Sub-Series or to amend the rights and preferences of new or existing
Series or Sub-Series, including the following Series, all without Shareholder
approval, there are hereby established and designated initial Series of Shares
designated Series A, which shall represent interests in Cardinal Balanced Fund,
and Series B, which shall represent interests in Cardinal Aggressive Growth
Fund. Shares of Series A and Series B and, unless provisions to the contrary
are set forth in an amendment of the Declaration of Trust, Shares of each
additional Series, shall have the following relative rights and preferences:
(a) ASSETS BELONGING TO A SERIES. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together
with all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds
or payments derived from any reinvestment of such proceeds in whatever form
the same may be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the
books of account of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds, in whatever form the same may be,
together with any General Items allocated to that Series as provided in the
following sentence, are herein referred to as "assets belonging to" that
Series. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable
as belonging to any particular Series (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable; and
any General Items so allocated to a particular Series shall belong to that
Series. Each such allocation by the Trustees shall be
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conclusive and binding upon the Shareholders of all Series for all purposes.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(b) LIABILITIES BELONGING TO A SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in
respect of that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged by the
Trustees to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as the Trustees
in their sole discretion deem fair and equitable. The liabilities, expenses,
costs, charges and reserves allocated and so charged to a Series are herein
referred to as "liabilities belonging to" that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from such of the income
and capital gains, accrued or realized, from the assets belonging to that
Series, as the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series. All dividends and distributions on
Shares of a particular Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that Series held by such
holders at the date and time of record established for the payment of such
dividends and distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend
or distribution shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by the time or times
established by the Trustees under such program or procedure. Such dividends
and distributions may be made in cash or Shares or a combination thereof as
determined by the Trustees or pursuant to any program that the Trustees may
have in effect at the time for
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the election by each Shareholder of the mode of the making of such dividend
or distribution to that Shareholder. Any such dividend or distribution paid
in Shares will be paid at the net asset value thereof as determined in
accordance with subsection (h) of Section 4.2.
The Trust intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended, or any successor or comparable
statute thereto, and regulations promulgated thereunder. Inasmuch as the
computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Trust, the Board of Trustees
shall have the power, in its sole discretion, to distribute in any fiscal
year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board
of Trustees, to enable the Trust to qualify as a regulated investment company
and to avoid liability of the Trust for federal income and excise tax in
respect to that year. However, nothing in the foregoing shall limit the
authority of the Board of Trustees to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company and to
avoid liability of the Trust for such tax.
(d) LIQUIDATION. In event of the liquidation and dissolution of the Trust
or any one or more of the Series, the Shareholders of each Series that has
been established and designated and which is to be liquidated and dissolved
shall be entitled to receive, as a Series, when and as declared by the
Trustees, the excess of the assets belonging to that Series over the
liabilities belonging to that Series. The assets so distributable to the
Shareholders of any particular Series shall be distributed among such
Shareholders in proportion to the number of Shares of that Series held by
them and recorded on the books of the Trust.
(e) VOTING. All Shares of all Series shall have "equal voting rights" as
provided in Section 18(i) of the Investment Company Act of 1940, as amended,
except as otherwise permitted by the 1940 Act, including Rule 18f-2
thereunder. The holder of each of the Shares shall be entitled to one vote
for each dollar of value attributable thereto. On each matter submitted to a
vote of the Shareholders, all Shares of all Series shall vote as a single
class ("Single Class Voting"), provided, however, that (a) as to any matter
with respect to which a separate vote of any Series is required by the 1940
Act, such requirements as to a separate vote by that Series shall apply in
lieu of Single Class Voting as described above; (b) in the event that the
separate vote requirements referred
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to in (a) above apply with respect to one or more Series, then, subject to
(c) below, the Shares of all other Series shall vote as a single class; and
(c) as to any matter which does not affect the interest of a particular
Series, only the holders of Shares of the one or more affected Series shall
be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the Trust,
but no less frequently than once each week, to require the Trust to redeem
all or any part of his Shares of that Series at a redemption price equal to
the net asset value per Share of that Series next determined in accordance
with subsection (h) of this Section 4.2 after the Shares are properly
tendered for redemption. Payment of the redemption price shall be in cash;
provided, however, that if the Trustees determine, which determination shall
be conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in securities or
other assets belonging to the Series of which the Shares being redeemed are
part at the value of such securities or assets used in such determination of
net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of any
Series to require the Trust to redeem Shares of that Series during any period
or at any time when and to the extent permissible under the 1940 Act, and
such redemption is conditioned upon the Trust having funds or property
legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series that has been
established and designated is subject to redemption by the Trust at the
redemption price which would be applicable if such Share was then being
redeemed by the Shareholder pursuant to subsection (f) of this Section 4.2:
(i) at any time, if the Trustees determine in their sole discretion that
failure to so redeem may have materially adverse consequences to all or any
of the holders of the Shares, or any Series thereof, of the Trust, or (ii)
upon such other conditions as may from time to time be determined by the
Trustees and set forth in the then current Prospectus of the Trust applicable
to such Shares or any Series thereof with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such redemption the holders
of the Shares so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
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(h) NET ASSET VALUE. The net asset value per Share of the Shares of any
Series shall be the quotient obtained by dividing the value of the net assets
of that Series (being the value of the assets belonging to that Series less
the liabilities belonging to that Series) by the total number of Shares of
that Series outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to rounding,
established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of
any Series at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series as dividends payable in
additional Shares of that Series at the designated constant dollar amount and
for the handling of any losses attributable to that Series. Such procedures
may provide that in the event of any loss each Shareholder shall be deemed to
have contributed to the capital of the Trust attributable to that Series his
pro rata portion of the total number of Shares required to be cancelled in
order to permit the net asset value per Share of that Series to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have agreed, by his
investment in any Series with respect to which the Trustees shall have
adopted any such procedure, to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) TRANSFER. All Shares of each particular Series shall be transferable,
but transfers of Shares of a particular Series will be recorded on the Share
transfer records of the Trust applicable to that Series only at such times as
Shareholders shall have the right to require the Trust to redeem Shares of
that Series and at such other times as may be permitted by the Trustees.
(j) EQUALITY. Except as otherwise may be set forth in this Declaration of
Trust all Shares of each particular Series shall represent an equal
proportionate interest in the assets belonging to that Series (subject to the
liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series; but the provisions
of this sentence shall not restrict any distinctions permissible under
subsection (c) of this Section 4.2 that may exist with respect to dividends
and distributions on Shares of the same Series. The Trustees may from time
to time divide or combine the Shares of any particular Series into a greater
or lesser number of Shares of that Series
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without thereby changing the proportionate beneficial interest in the assets
belonging to that Series or in any way affecting the rights of Shares of any
other Series.
(k) FRACTIONS. Any fractional Share of any Series, if any such
fractional Share is outstanding, shall carry proportionately all the rights
and obligations of a whole share of that Series, including with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Series shall have the right to convert said Shares into Shares
of one or more other Series in accordance with such requirements and
procedures as may be established by the Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series and
Sub-Series that has been established and designated. No certificates
certifying the ownership of Shares need be issued except as the Trustees may
otherwise determine from time to time. The Trustees may make such rules as
they consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust which are kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders
and as to the number of Shares of each Series and Sub-Series held from time to
time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration,
not inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Shares that conform to such authorized terms and to reject any purchase orders
for Shares whether or not conforming to such authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 4.6 STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by
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<PAGE> 24
virtue of having become a Shareholder shall be held to have expressly assented
and agreed to the terms hereof and to have become a party hereto. The death of
a Shareholder during the continuance of the Trust shall not operate to
terminate the Trust nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Declaration
of Trust. Ownership of Shares shall not entitle the Shareholder to any title
in or to the whole or any part of the Trust property or right to call for a
partition or division of the same or for an accounting, nor shall the ownership
of Shares constitute the Shareholders partners. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
ARTICLE V
---------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
SECTION 5.1 VOTING POWERS. The Shareholders shall have power, and shall be
entitled, to vote only (i) for the election or removal of Trustees as provided
in Section 3.1, (ii) with respect to any contract with a Contracting Party as
provided in Section 3.3 as to which Shareholder approval is required by the
1940 Act, (iii) with respect to any termination or reorganization of the Trust
or any Series to the extent and as provided in Sections 7.1, 7.2 and 7.3, (iv)
with respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 7.4, (v) to the same extent as the stockholders of an Ohio
corporation organized under Chapter 1701, Ohio Revised Code, as to whether or
not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vi) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, this Declaration of Trust, the
By-Laws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees otherwise may consider necessary or
desirable. There shall be no cumulative voting in the election of any Trustee
or Trustees. Shares may be voted in person or by proxy. A proxy with respect
to Shares may be voted in person or by proxy. A proxy with respect to Shares
held in the name of two or more persons shall be valid if executed by any one
of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden or
- 19 -
<PAGE> 25
proving invalidity shall rest on the challenger. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
SECTION 5.2 MEETINGS. Meetings of the Shareholders of Trust or of any one
or more of its Series or Sub-Series may be called by the Trustees, and shall be
called by the Trustees whenever required by law or upon the written request of
holders of at least twenty percent of all votes attributable to the outstanding
Shares of the Trust or, as applicable, any one or more of its Series or
Sub-Series, entitled to vote.
Written notice, stating the place, day, and hour of each meeting of
Shareholders and the general nature of the business to be transacted, shall be
given by, or at the direction of, the person calling the meeting to each
Shareholder of record entitled to vote at the meeting at least ten days prior
to the day named for the meeting, unless in a particular case a different
period of notice is required by law.
SECTION 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine;
or without closing the transfer books the Trustees may fix a date and time not
more than 90 days prior to the date of any meeting of Shareholders or other
action as the date and time of record for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to be treated as
Shareholders of record for purposes of such other action, and any Shareholder
who was a Shareholder at the date and time so fixed shall be entitled to vote
at such meeting or any adjournment thereof or (subject to any provisions
permissible under subsection (c) of Section 4.2 with respect to dividends or
distributions on Shares that have not been ordered and/or paid for by the time
or times established by the Trustees under the applicable dividend or
distribution program or procedure then in effect) to be treated as a
Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for
purposes of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. At any meeting of the Shareholders at
which the only actions to be taken are actions permitted by the 1940 Act to be
taken by vote of all Shareholders
- 20 -
<PAGE> 26
of the Trust, voting together, a quorum for the transaction of business shall
consist of a majority represented in person or by proxy of all votes
attributable to the outstanding Shares (without regard to individual Series or
Sub-Series) entitled to vote with respect to the matters; provided, however,
that at any meeting at which the only actions to be taken are actions involving
matters required by the 1940 Act to be taken by vote of the Shareholders of
one or more individual Series or Sub-Series, voting separately by Series or
Sub-Series, a quorum with respect to such matters shall consist of a majority
of all votes attributable to the outstanding Shares of such individual Series
or Sub-Series entitled to vote thereon, and provided further that at any
meeting at which the actions to be taken shall have been determined by the
Board of Trustees to include both actions permitted by the 1940 Act to be voted
on by all Shareholders of the Trust, voting together, and actions required by
the 1940 Act to be voted on by the Shareholders of one or more of the Series or
Sub-Series, voting separately by Series or Sub-Series, the meeting shall be
divided into the number of meetings equal to the number of matters being voted
upon and a quorum shall be determined by issue or matter to be voted on as set
forth in the foregoing provisions; and provided further, that reasonable
adjournments of such meeting or meetings or any portion thereof until a quorum
is obtained may be made by a vote attributable to the Shares present in person
or by proxy and entitled to vote on the matter or matters.
A majority of the votes shall decide any question and a plurality shall elect
a Trustee, subject to any applicable requirements of law or of this Declaration
of Trust or the By-Laws; provided, however, that when any provision of law or
of this Declaration of Trust requires the holders of Shares of any particular
Series or Sub-Series to vote by Series or Sub-Series and not in the aggregate
with respect to a matter, then a majority of all votes attributable to the
outstanding Shares of that Series or Sub-Series shall decide such matter
insofar as that particular Series or Sub-Series shall be concerned.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such other proportion thereof as shall be required by the 1940 Act
or by any express provision of this Declaration of Trust or the By-Laws)
consent to the action in writing and such written consents are filed with the
records of the meetings of Shareholders. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open to
inspection by Shareholders to the same
- 21 -
<PAGE> 27
extent as is permitted stockholders of an Ohio corporation organized under
Chapter 1701, Ohio Revised Code.
SECTION 5.7 ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
----------
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of
the Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been executed or done only
by or for the Trust or the Trustees and not personally. Nothing in this
Declaration of Trust shall protect any Trustee or officer against any liability
to the Trust or the Shareholders to which such Trustee or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
A note, bond, contract, instrument, certificate or undertaking made or issued
by the Trust or Trustees or by any officer, employee or agent may give notice
that this Declaration of Trust is on file with the Secretary of State of Ohio
and may recite to the effect that the same was executed or made by or on behalf
of the Trust or by them as Trustee, officer, employee or agent and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, as set forth in Section 1746.13(A), Ohio
Revised Code, but the omission thereof shall not operate to bind any Trustee,
officer, employee, agent or Shareholder individually.
SECTION 6.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing
- 22 -
<PAGE> 28
else, and shall not be liable for errors of judgment or mistakes of fact or
law. Subject to the foregoing, (a) the Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee, consultant, adviser, administrator, distributor or principal
underwriter, custodian or transfer, dividend disbursing, Shareholder servicing
or accounting agent of the Trust, nor shall any Trustee be responsible for the
act or omission of any other Trustee; (b) the Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with such advice or for failing
to follow such advice; and (c) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon the books of account of
the Trust and upon written reports made to the Trustees by any officer
appointed by them, any independent public accountant, and (with respect to the
subject matter of the contract involved) any officer, partner or responsible
employee of a Contracting Party authorized by the Trustees pursuant to Section
3.3. The Trustees as such shall not be required to give any bond or surety or
any other security for the performance of their duties.
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder shall be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request by the Shareholder)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled
out of the assets of the Trust estate to be held harmless from and indemnified
against all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
indemnify each of its Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person") against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or settlement or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
- 23 -
<PAGE> 29
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Covered Person and except that no Covered Person shall be indemnified
against any liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such Covered Person's office ("disabling conduct"). Anything herein contained
to the contrary notwithstanding, no Covered Person shall be indemnified for any
liability to the Trust or its Shareholders to which such Covered Person would
otherwise be subject unless (a) a final decision on the merits is made by a
court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of disabling conduct or, (b)
in the absence of such a decision, a reasonable determination is made, based
upon a review of the facts, that the Covered Person was not liable by reason of
disabling conduct, by (i) the vote of a majority of a quorum of Trustees who
are neither "interested persons" of the Trust as defined in the 1940 Act nor
parties to the proceeding ("disinterested, non-party Trustees"), or (ii) an
independent legal counsel in a written opinion.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees
or other expenses incurred by a Covered Person in defending a proceeding, upon
the undertaking by or on behalf of the Covered Person to repay the advance
unless it is ultimately determined that such Covered Person is entitled to
indemnification, so long as one of the following conditions is met: (a) the
Covered Person shall provide security for his undertaking, (b) the Trust shall
be insured against losses arising by reason of any lawful advances, or (c) a
majority of a quorum of the disinterested non-party Trustees of the Trust, or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be
found entitled to indemnification.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article VI, "Covered Person" shall include such person's heirs, executors
and administrators. Nothing contained in this Article VI shall affect any
rights to indemnification to which personnel of the Trust, other than any
Covered Person, may be entitled, by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on behalf of
any such person.
- 24 -
<PAGE> 30
SECTION 6.7 LIABILITY OF SERIES. Liabilities belonging to any Series or
Sub-Series of the Trust, including, without limitation, expenses, fees,
charges, taxes, and liabilities incurred or arising in connection with a
particular Series or Sub-Series, or in connection with the management thereof,
shall be paid only from the assets belonging to that Series or Sub-Series.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by the vote of Shareholders holding at
least a majority of the votes attributable to the outstanding Shares without
regard to Series or Sub-Series, or by the Trustees by written notice to the
Shareholders. Any Series of Shares may be terminated at any time by vote of
Shareholders holding at least a majority of the votes attributable to the
outstanding Shares of such Series, without regard to Sub-Series, or by the
Trustees by written notice to the Shareholders of such Series.
Upon termination of the Trust or of any one or more Series, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, of the Trust or of the particular Series as may
be determined by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the remaining assets to
distributable form in cash or shares or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series
involved, ratably according to the number of Shares of such Series held by the
several Shareholders of such Series on the date of termination, all as set
forth in subsection (d) of Section 4.2.
SECTION 7.2 SALE OR DISPOSITION OF ASSETS. The Trustees may sell, convey
and transfer the assets of the Trust, or the assets belonging to any one or
more Series, to another trust, partnership, association or corporation
organized under the laws of any state of the United States, or to the Trust to
be held as assets belonging to another Series of the Trust, in exchange for
cash, shares or other securities (including, in the case of a transfer to
another Series of the Trust, Shares of such other Series) with such transfer
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each Series the assets of which are so transferred;
provided, however, that if shareholder approval is required by the 1940 Act, no
assets belonging to any particular Series shall be so transferred unless
- 25 -
<PAGE> 31
the terms of such transfer shall have first been approved at a meeting called
for that purpose by the affirmative vote of Shareholders holding a majority of
the voting power of that Series. Following such transfer, the Trustees shall
distribute such cash, shares or other securities (giving due effect to the
assets and liabilities belonging to and any other differences among the various
Series the assets belonging to which have so been transferred) among the
Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred,
the Trust shall be terminated.
SECTION 7.3 MERGER OR CONSOLIDATION. The Trust or any Series thereof may be
a party, with one or more entities (including another Series) to an agreement
of merger or consolidation; provided, however, that any such agreement of
merger or consolidation shall be approved by the Trustees and, if Shareholder
approval is required by the 1940 Act, by the affirmative vote of Shareholders
holding a majority of the voting power of the Trust or of each Series affected.
SECTION 7.4 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the Shareholders without
the express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the
Trust pursuant to the vote of a majority of such Trustees), when authorized so
to do by the vote, in accordance with subsection (e) of Section 4.2, of
Shareholders holding a majority of the voting power of Shares entitled to vote,
except that amendments either (i) establishing and designating any new Series
or Sub-Series of Shares and changing the rights of the Shares of any existing
or new Series or Sub-Series, or (ii) abolishing any Series or Sub-Series under
the circumstances described in Sections 4.1 or 7.1, or having the purpose of
changing the name of the Trust or the name of any Series or Sub-Series
theretofore established and designated or of conforming the provisions hereof
to the requirements of state or federal law or of supplying any omission,
curing any ambiguity or curing, correcting or supplementing any provision
hereof which is internally inconsistent with any other provision hereof or
which is defective or inconsistent with the 1940 Act or with the requirements
of the Internal Revenue Code of 1986 and applicable regulations for the Trust's
obtaining the most favorable treatment thereunder available to regulated
investment companies, shall not
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<PAGE> 32
require authorization by Shareholder vote. In addition, amendment of this
Declaration of Trust as it may affect any one or more Series may be effected by
vote of the Trustees at any time when the Trust has no outstanding Shares or
Shareholders of such Series. Subject to the foregoing, any such amendment
shall be effective as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate (which may be a part
of such instrument) executed by a Trustee or officer of the Trust to the effect
that such amendment has been duly adopted.
SECTION 7.5 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. An original of this
instrument and each amendment hereto, or a copy of this instrument and of each
amendment hereto certified as true and correct by a Trustee before a Notary
Public, shall be filed by the Trust with the Secretary of the State of Ohio,
together with the report required by Section 1746.04, Ohio Revised Code.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such amendments have been made, as to the
identities of the Trustees and officers, and as to any matters in connection
with the Trust hereunder; and, with the same effect as if it were the original,
may rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder" shall be deemed to refer to this instrument as a whole
as the same may be amended or affected by any such amendments. The masculine
gender shall include the feminine and neuter genders. Headings are placed
herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. This instrument may be executed in any number of counterparts each
of which shall be deemed an original.
SECTION 7.6 APPLICABLE LAW. This Declaration of Trust is made in the State
of Ohio and it is created under and is to be governed by and construed and
administered according to the laws of said State, as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or in the By-Laws or under Chapter 1746, Ohio
Revised Code, or as to which an ambiguity may exist thereunder, shall be
resolved as if the Trust were an Ohio corporation organized under Chapter 1701,
Ohio Revised Code.
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<PAGE> 33
IN WITNESS WHEREOF, the undersigned have hereunto set their hands in the City
of Columbus, Ohio for themselves and their assigns, as of the day and year
first above written.
/s/ WALTER R. CHAMBERS
______________________________
Walter R. Chambers
/s/ JOHN L. SCHLATER
______________________________
John L. Schlater
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<PAGE> 1
EXHIBIT (1)(B)
<PAGE> 2
THE CARDINAL GROUP
------------------
AMENDMENT TO DECLARATION OF TRUST
---------------------------------
Adopted: October 20, 1995
The first paragraph of Article IV, Section 4.2 of the Group's Declaration of
Trust dated as of March 23, 1993, is amended by deleting such first paragraph
of Article IV, Section 4.2 in its entirety and substituting in place thereof
the following new first paragraph of Article IV, Section 4.2:
"Without limiting the authority of the Trustees set forth in Section 4.1
to establish and designate any further Series or Sub-Series or to classify
all or any part of the issued Shares of any Series to make them part of an
existing or newly created Sub-Series or to amend the rights and preferences
of new or existing Series or Sub-Series, including the following Series, all
without Shareholder approval, there are hereby established and designated
initial Series of Shares designated Series A, which shall represent
interests in Cardinal Balanced Fund, and Series B, which shall represent
interests in Cardinal Aggressive Growth Fund, and there is further
established and designated additional Series of Shares designated Series C,
which shall represent interests in The Cardinal Fund, Series D, which shall
represent interests in Cardinal Government Obligations Fund, Series E, which
shall represent interests in Cardinal Government Securities Money Market
Fund, and Series F, which shall represent interests in Cardinal Tax Exempt
Money Market Fund. Shares of Series A, Series B, Series C, Series D, Series
E, and Series F, and, unless provisions to the contrary are set forth in an
amendment of the Declaration of Trust, Shares of each additional Series,
shall have the following relative rights and preferences:"
<PAGE> 1
EXHIBIT (2)
<PAGE> 2
BY-LAWS
OF
THE CARDINAL GROUP
------------------
ARTICLE I
---------
Declaration of Trust and Offices
--------------------------------
1.1 DECLARATION OF TRUST. These By-Laws shall be subject to the Declaration
of Trust, as from time to time in effect (the "Declaration of Trust"), of The
Cardinal Group, the Ohio business trust established by the Declaration of Trust
(the "Trust").
1.2 OFFICES. The Trust shall maintain its principal office in Columbus,
Ohio, or in such other city as the Trustees otherwise may determine.
ARTICLE II
----------
Trustees
--------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time
to time determine, provided that notice of the first regular meeting following
any such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Board, President or the Treasurer or by two or more Trustees,
sufficient notice thereof being given to each Trustee by the Secretary or an
Assistant Secretary or by the officer of the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him or
her. Neither notice of a meeting nor a waiver of a notice need specify the
purposes of the meeting.
<PAGE> 3
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting
except as otherwise provided by the Investment Company Act of 1940.
2.6 ACTION BY CONSENT. Unless otherwise required by the Investment Company
Act of 1940, any action required or permitted to be taken at any meeting of the
Trustees or any committee thereof may be taken without a meeting, if a written
consent of such action is signed by a majority of the Trustees then in office
or a majority of the members of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Trustees of
such committee.
2.7 CHAIRMAN OF THE BOARD. The Trustees may at any time appoint one of
their number as Chairman of the Board, who shall serve at the pleasure of the
Trustees and who shall perform and execute such duties as the Trustees may from
time to time provide but who shall not by reason of performing or executing
these duties be deemed an officer or employee of the Trust.
ARTICLE III
------------
Officers
--------
3.1 NUMBER. The officers of the Trust shall be chosen by the Trustees and
shall include a President, who shall be a Trustee, a Secretary and a Treasurer.
The Board of Trustees may, from time to time, elect or appoint one or more Vice
Presidents, Assistant Secretaries, and Assistant Treasurers.
3.2 OTHER OFFICERS. The Trustees may from time to time appoint such other
officers and agents as they shall deem advisable, who shall hold their offices
for such terms and shall exercise such powers and perform such duties as shall
be determined from time to time by the Trustees. The Trustees may delegate to
one or more officers or agents the power to appoint any such subordinate
officers or agents and to prescribe their respective rights, terms of office,
authorities, and duties.
3.3 ELECTION AND TENURE. The officers of the Trust shall be chosen annually
by the Trustees. Two or more offices may be held
-2-
<PAGE> 4
by the same person but no officer shall execute, acknowledge, or verify any
instrument in more than one capacity, if such instrument is required by law,
the Declaration of Trust, or these By-Laws to be executed, acknowledged, or
verified by two or more officers. Any officer or agent may be removed by the
Trustees. An officer of the Trust may resign by filing a written resignation
with the President, with the Trustees, or with the Secretary. Any vacancy
occurring in any office of the Trust by death, resignation, removal, or
otherwise shall be filled by the Trustees.
3.4 COMPENSATION. The salaries or other compensation of all officers and
agents of the Trust shall be fixed by the Trustees, except that the Trustees
may delegate to any committee the power to fix the salary or other compensation
of any officer of the Trust.
3.5 PRESIDENT. The President shall be the chief executive officer of the
Trust, shall preside at all meetings of the Shareholders and the Trustees
unless a chairman has been designated, shall be a member ex officio of all
standing committees, and shall see that all orders and resolutions of the
Trustees are carried into effect. The President, or such person as the
President may designate, shall sign, execute, and acknowledge, in the name of
the Trust, deeds, mortgages, bonds, contracts, and other instruments authorized
by the Trustees, except in the case where the signing and execution thereof
shall be delegated by the Trustees to some other officer or agent of the Trust.
The President shall also be the chief administrative officer of the Trust and
shall perform such other duties and have such other powers as the Trustees may
from time to time prescribe.
3.6 VICE PRESIDENTS. The Vice Presidents, if any, in the order of their
seniority, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such other
duties as the Trustees may from time to time prescribe.
3.7 SECRETARY. The Secretary shall attend meetings of the Trustees and
meetings of the Shareholders and record all the proceedings thereof and shall
perform like duties for any committee when required. The Secretary shall give,
or cause to be given, notice of meetings of the Shareholders and of the
Trustees, and shall perform such other duties as may be prescribed by the
Trustees or the President, under whose supervision he or she shall be.
3.8 ASSISTANT SECRETARIES. The Assistant Secretaries, if any, when so
directed by the Secretary, or in the absence or disability of the Secretary, in
order of their seniority, shall perform the duties and exercise the powers of
the Secretary and shall perform such other duties as the Trustees shall
prescribe.
-3-
<PAGE> 5
3.9 TREASURER. The Treasurer shall be the chief financial officer of the
Trust and shall be responsible for the maintenance of its accounting records
and shall render to the Trustees when the Trustees so require an account of all
the Trust's financial transactions and a report of the financial condition of
the Trust.
3.10 ASSISTANT TREASURERS. The Assistant Treasurers, if any, when so
directed by the Treasurer, or in the absence or disability of the Treasurer, in
the order of their seniority, shall perform the duties and exercise the powers
of the Treasurer and shall perform such other duties as the Trustees may from
time to time prescribe.
ARTICLE IV
----------
Committees
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these By-Laws may not be delegated. Except
as the Trustees may otherwise determine, any such committee may make rules for
the conduct of its business, but unless otherwise provided by the Trustees or
in such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All
members of such committees shall hold offices at the pleasure of the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect.
ARTICLE V
---------
Reports
-------
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable laws.
Officers and Committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE VI
----------
Fiscal Year
-----------
6.1 GENERAL. The fiscal year of the Trust shall be fixed, and shall be
subject to change by the Trustees.
-4-
<PAGE> 6
ARTICLE VII
-----------
Seal
----
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio," together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be
placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE VIII
------------
Issuance of Share Certificates
------------------------------
8.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders
of certificates for such shares as if they had accepted such certificates and
shall be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating the
number of shares owned by him, in such form as shall be prescribed from time to
time by the Trustees. Such certificate shall be signed by the President or a
Vice President and by the Treasurer or Assistant Treasurer. Such signatures
may be facsimiles if the certificate is signed by a transfer agent, or by a
registrar, other than a Trustee, officer or employee of the Trust. In case any
officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued,
it may be issued by the Trust with the same effect as if he were such officer
at the time of its issue.
8.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
8.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates have
been issued, a pledgee of shares transferred as collateral security shall be
entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate shall express on its face that it is held as collateral security,
and the
-5-
<PAGE> 7
name of the pledgor shall be stated thereon, who alone shall be liable as a
shareholder and entitled to vote thereon.
8.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE IX
----------
Custodian
---------
9.1 GENERAL. The Trust shall at all times employ a bank or trust company
having a capital, surplus and undivided profits of at least Twenty-Five Million
Dollars ($25,000,000) as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such
basis as shall be agreed upon from time to time between the Trust and the
Custodian.
ARTICLE X
---------
Dealings with Trustees and Officers
-----------------------------------
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may acquire,
own and dispose of shares of the Trust to the same extent as if he were not a
Trustee, officer or agent; and the Trust may accept subscriptions to shares or
repurchase shares from any firm or company in which he or she is interested.
ARTICLE XI
----------
Amendments to the By-Laws
-------------------------
11.1 GENERAL. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
-6-
<PAGE> 1
EXHIBIT (5)
<PAGE> 2
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Agreement is made as of June 18, 1993, between The Cardinal Group, an
Ohio business trust (the "Group"), and Cardinal Management Corp., an Ohio
corporation (the "Manager").
WHEREAS, the Group is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, the Group desires to retain the Manager to furnish investment
advisory and administrative services to the newly created investment portfolios
of the Group and may retain the Manager to serve in such capacity to certain
additional investment portfolios of the Group, all as now or hereafter may be
identified in Schedule A hereto (such initial investment portfolios any such
additional investment portfolios together called the "Funds") and the Manager
represents that it is willing and possesses legal authority to so furnish such
services;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement, the parties hereto agree as follows:
Section 1. APPOINTMENT. The Group hereby appoints the Manager to (a) act as
investment adviser to the Funds and (b) furnish administrative facilities and
services to the Funds, for the period and on the terms and subject to the
conditions set forth in this Agreement. The Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation herein
provided. Additional investment portfolios may from time to time be added to
those covered by this Agreement by the parties executing a new Schedule A which
shall become effective upon its execution and shall supersede any Schedule A
having an earlier date.
Section 2. INVESTMENT ADVISORY SERVICES. Subject to the supervision of the
Group's Board of Trustees, the Manager shall provide a continuous investment
program for the Funds, including investment, research and management with
respect to all securities and investments and cash equivalents in the Funds.
The Manager shall determine from time to time what securities and other
investments will be purchased, retained or sold by the Group with respect to
the Funds. The Manager shall provide the services under this Agreement in
accordance with each of the Fund's investment objectives, policies, and
restrictions as stated in such Fund's most current Prospectus and Statement of
Additional Information, as presently in effect, and all amendments or
supplements thereto, and resolutions of the Group's Board of Trustees. The
Manager further agrees that it:
<PAGE> 3
(a) will use the same skill and care in providing such services as it uses
in providing services to any fiduciary accounts for which it has investment
responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission (the "Commission") and, in addition, will
conduct its activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to the investment
advisory activities of the Manager;
(c) will place orders pursuant to its investment determinations for the
Funds either directly with the issuer or with any broker or dealer. In
placing orders with brokers and dealers, the Manager will attempt to obtain
and is hereby directed to obtain prompt execution of orders in an effective
manner at the most favorable price. Consistent with this obligation, when
the execution and price offered by two or more brokers or dealers are
comparable, the Manager may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide the Manager with
research advice and other services. In no instance will portfolio securities
be purchased from or sold to The Ohio Company, the Manager, or any affiliated
person of the Group, The Ohio Company or the Manager unless otherwise
permitted by the 1940 Act, an exemption therefrom, or an order thereunder;
(d) will maintain all books and records with respect to the securities
transactions of the Funds and will furnish the Group's Board of Trustees such
periodic and special reports as the Board may request; and
(e) will advise and assist the officers of the Group in taking such
actions as may be necessary or appropriate to carry out the decisions of the
Group's Board of Trustees and of the appropriate committees of such Board
regarding the conduct of the business of the Funds; and
Section 3. ADMINISTRATIVE SERVICES. Subject to the supervision of the
Group's Board of Trustees, the Manager will provide the Group, with respect to
the operations of the Funds, overall management of the Funds' business affairs
except those performed by the custodians for the Funds under their custodian
agreements and the transfer agent and fund accountant for the Funds under their
transfer agency and fund accounting agreements.
The Manager shall maintain office facilities (which may be in the offices of
the Manager or of an affiliate but shall be in such location as the Group shall
reasonably determine); furnish statistical and research data, clerical and
certain bookkeeping services, personnel (including officers) and stationery and
office supplies; prepare the periodic reports to the Commission on Form N-SAR
or any
2
<PAGE> 4
replacement forms therefor; compile data for, prepare for execution by the
Funds and file all the Funds' federal and state tax returns and required tax
filings other than those required to be made by the Funds' custodian and
transfer agent; prepare compliance filings pursuant to state securities laws
with the advice of the Group's counsel; assist to the extent requested by the
Group with the Group's preparation of its Annual and Semi-Annual Reports to
Shareholders and its Registration Statements (on Form N-1A or any replacement
therefor); compile data for, prepare and file timely Notices to the Commission
required pursuant to Rule 24f-2 under the 1940 Act; keep and maintain the
financial accounts and records of the Funds, including calculation of daily
expense accruals; in the case of money market funds, determine the actual
variance from $1.00 of the Fund's net asset value per share; and generally
assist in all aspects of the operations of the Funds. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that
all records which it maintains for the Group are the property of the Group and
further agrees to surrender promptly to the Group any such records upon the
Group's request. The Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act.
Section 4. EXPENSES. During the term of this Agreement, the Manager will
pay all expenses incurred by it in connection with its activities, duties and
obligations under this Agreement, other than the costs of securities (including
brokerage fees, if any) purchased for the Funds.
Section 5. COMPENSATION. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Funds will pay the Manager and the
Manager will accept as full compensation therefor a fee set forth on Schedule A
hereto. The obligations of the Funds to pay the above-described fee to the
Manager will begin as of the respective dates of the initial public sale of
shares in the Funds.
If in any fiscal year the aggregate expenses of any of the Funds (as defined
under the securities regulations of any state having jurisdiction over the
Group) exceed the expense limitations of any such state, the Manager will
reimburse such Fund for such excess expenses. The obligation of the Manager to
reimburse the Funds hereunder is limited in any fiscal year to the amount of
its fee hereunder for such fiscal year; provided, however, that notwithstanding
the foregoing, the Manager shall reimburse the Funds for such excess expenses
regardless of the amount of fees paid to it during such fiscal year to the
extent that the securities regulations of any state having jurisdiction over
the Group so require. Such expense reimbursement, if any, will be estimated
daily and reconciled and paid on a monthly basis.
Section 6. LIMITATION OF LIABILITY. The Manager shall not be liable for any
error of judgment or mistake of law or for any loss
3
<PAGE> 5
suffered by the Funds in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Manager in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
Section 7. DURATION AND TERMINATION. This Agreement will become effective
as of the date first written above (or, if a particular Fund is not in
existence on that date, on the date a registration statement relating to that
Fund becomes effective with the Commission), provided that it shall have been
approved by vote of a majority of the outstanding voting securities of such
Fund, in accordance with the requirements, if any, under the 1940 Act, and,
unless sooner terminated as provided herein, shall continue in effect until
June 18, 1994.
Thereafter, if not terminated, this Agreement shall continue in effect as to
a particular Fund for successive periods of twelve months each ending on June
18 of each year, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Group's Board of
Trustees who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the vote of a majority of the Group's Board
of Trustees or by the vote of a majority of all votes attributable to the
outstanding Shares of such Fund. Notwithstanding the foregoing, this Agreement
may be terminated as to a particular Fund at any time on sixty days' written
notice, without the payment of any penalty, by the Group (by vote of the
Group's Board of Trustees or by vote of a majority of the outstanding voting
securities of such Fund) or by the Manager. This Agreement will immediately
terminate in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities," "interested persons" and
"assignment" shall have the same meanings as ascribed to such terms in the 1940
Act.)
Section 8. MANAGER'S REPRESENTATIONS. The Manager hereby represents and
warrants that it is willing and possesses all requisite legal authority to
provide the services contemplated by this Agreement without violation of
applicable laws and regulations.
Section 9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
Section 10. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or
4
<PAGE> 6
delimit any of the provisions hereof or otherwise affect their construction or
effect. 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. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
shall be governed by the laws of the State of Ohio.
The Cardinal Group is a business trust organized under Chapter 1746, Ohio
Revised Code and under a Declaration of Trust, to which reference is hereby
made and a copy of which is on file at the office of the Secretary of State of
Ohio as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "The Cardinal Group" entered into in the
name or on behalf thereof by any of the Trustees, officers, employees or agents
are made not individually, but in such capacities, and are not binding upon any
of the Trustees, officers, employees, agents or shareholders of the Group
personally, but bind only the assets of the Group, as set forth in Section
1746.13(A), Ohio Revised Code, and all persons dealing with any of the Funds of
the Group must look solely to the assets of the Group belonging to such Fund
for the enforcement of any claims against the Group.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE CARDINAL GROUP
By /s/ John L. Schlater
------------------------
Name John L. Schlater
---------------------
Title President
--------------------
CARDINAL MANAGEMENT CORP.
By /s/ H. Keith Allen
------------------------
Name H. Keith Allen
---------------------
Title Treasurer
--------------------
5
<PAGE> 7
Dated January __, 1996
Schedule A
to the
Investment Advisory and Management Agreement
between The Cardinal Group and
Cardinal Management Corp.
dated as of June 18, 1993
<TABLE>
<CAPTION>
Name of Fund Compensation*
------------ ------------
<S> <C>
Cardinal Balanced Fund Annual rate of seventy five one-hundredths of one
percent (.75%) of the average daily net assets of
such Fund
Cardinal Aggressive Growth Fund Annual rate of seventy five one-hundredths of one
percent (.75%) of the average daily net assets of
such Fund
The Cardinal Fund Annual rate of sixty one-hundredths of one percent
(.60%) of the average daily net assets of such
Fund
Cardinal Government Obligations Fund Annual rate of fifty one-hundredths of one percent
(.50%) of the average daily net assets of such
Fund
Cardinal Government Securities Money Market Fund Annual rate of fifty one-hundredths of one percent
(.50%) of the average daily net assets of such
Fund
</TABLE>
A-1
<PAGE> 8
<TABLE>
<S> <C>
Cardinal Tax Exempt Money Market Fund Annual rate of fifty one-hundredths of one percent
(.50%) of the average daily net assets of such
Fund
THE CARDINAL GROUP
By
---------------------------
Name Frank W. Siegel
-------------------------
Title President
------------------------
CARDINAL MANAGEMENT CORP.
By
---------------------------
Name
-------------------------
Title
------------------------
<FN>
_____________________
* All fees are computed and paid monthly.
</TABLE>
A-2
<PAGE> 1
EXHIBIT (6)(A)
<PAGE> 2
DISTRIBUTION AGREEMENT
June 18, 1993
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, The Cardinal Group, an Ohio business
trust (the "Group"), has agreed that The Ohio Company, an Ohio corporation
("Distributor"), shall be, for the period of this Distribution Agreement (the
"Agreement"), the distributor of the shares of beneficial interest of each
currently constituted investment portfolio and any additional investment
portfolios of the Group, as each are or will be identified on Schedule A hereto
(such current investment portfolios and any additional investment portfolios
together called the "Funds"). Such shares of beneficial interest are
hereinafter called "Shares."
1. Services as Distributor.
------------------------
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Group then
in effect under the Securities Act of 1933, as amended (the "1933 Act").
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Group understands that Distributor is now and, in the future, may be the
distributor of the shares of several investment companies or series (together,
"Companies") including Companies having investment objectives similar to those
of the Funds of the Group. The Group further understands that investors and
potential investors in the Group may invest in shares of such other Companies.
The Group agrees that Distributor's duties to such Companies shall not be
deemed in conflict with its duties to the Group under this paragraph 1.2.
Except as provided in Section 2 herein, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 All activities by Distributor and its shareholders, directors,
agents, and employees as distributor of the Shares shall comply with all
applicable laws, rules and regulations, including, without limitation, all
rules and regulations made or adopted
<PAGE> 3
pursuant to the Investment Company Act of 1940 ("1940 Act") by the Securities
and Exchange Commission (the "Commission") or any securities association
registered under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Group and
the Funds.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for
the Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Group's officers may decline to accept any orders for, or make any
sales of the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Group agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification
of the Shares for sale in such states as Distributor may designate.
1.9 The Group shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Group
warrants that the statements contained in any such information shall fairly
show or represent what they purport to show or represent. The Group shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Group, (b) quarterly earnings
statements prepared by the Group, (c) a monthly itemized list of the securities
in the Funds, (d) monthly balance sheets as soon as practicable after the end
of each month, and (e) from time to time such additional information regarding
the financial condition of the Funds as Distributor may reasonably request.
1.10 The Group represents to Distributor that all registration
statements and prospectuses filed by the Group with the Commission under the
1933 Act with respect to the Shares have been carefully prepared in conformity
with the requirements of the 1933 Act and rules and regulations of the
Commission thereunder. As used in this agreement the terms "registration
statement" and "prospectus"
- 2 -
<PAGE> 4
shall mean any registration statement and any prospectus and Statement of
Additional Information relating to the Funds filed with the Commission and any
amendments and supplements thereto which at any time shall have been filed with
the Commission. The Group represents and warrants to Distributor that any
registration statement and prospectus, when such registration statement becomes
effective, will contain all statements required to be stated therein in
conformity with the 1993 Act and the rules and regulations of the Commission;
that all statements of fact contained in any such registration statement and
prospectus will be true and correct when such registration statement becomes
effective; and that neither any registration statement nor any prospectus when
such registration statement becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Shares. The Group may but shall not be obligated to propose
from time to time such amendment or amendments to any registration statement
and such supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Group's counsel, be necessary or
advisable. If the Group shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Group of a
written request from Distributor to do so, Distributor may, at its option,
terminate this agreement. The Group shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this agreement shall in any way limit the Group's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Group may deem
advisable, such right being in all respects absolute and unconditional.
1.11 The Group authorizes Distributor and dealers to use any
prospectus in the form most recently furnished in connection with the sale of
the Shares. The Group agrees to indemnify, defend and hold Distributor, its
directors, shareholders and employees, and any person who controls Distributor
within the meaning of Section 15 of the 1933 Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its
shareholders, directors and employees, or any such controlling person, may
incur under the 1933 Act or under common law or otherwise, arising out of or
based upon any untrue statement, or alleged untrue statement, of a material
fact contained in any registration statement or any prospectus or arising out
of or based upon any omission, or alleged omission, to state a material fact
required to be stated in either any registration statement or any prospectus or
necessary to make the statements in either
- 3 -
<PAGE> 5
thereof not misleading; provided, however, that the Group's agreement to
indemnify Distributor, its shareholders, directors or employees, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations as are
contained in any prospectus and in such financial and other statements as are
furnished in writing to the Group by Distributor and used in the answers to the
registration statement or in the corresponding statements made in the
prospectus, or arising out of or based upon any omission or alleged omission to
state a material fact in connection with the giving of such information
required to be stated in such answers or necessary to make the answers not
misleading; and further provided that the Group's agreement to indemnify
Distributor and the Group's representations and warranties hereinbefore set
forth in paragraph 1.10 shall not be deemed to cover any liability to the Group
or its Shareholders to which Distributor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of Distributor's reckless disregard of its obligations and
duties under this agreement. The Group's agreement to indemnify Distributor,
its shareholders, directors and employees, and any such controlling person, as
aforesaid, is expressly conditioned upon the Group's being notified of any
action brought against Distributor, its shareholders, directors or employees,
or any such controlling person, such notification to be given by letter or by
telegram addressed to the Group at its principal office in Columbus, Ohio and
sent to the Group by the person against whom such action is brought, within 10
days after the summons or other first legal process shall have been served.
The failure to so notify the Group of any such action shall not relieve the
Group from any liability which the Group may have to the person against whom
such action is brought by reason of any such untrue, or allegedly untrue,
statement or omission, or alleged omission, otherwise than on account of the
Group's indemnity agreement contained in this paragraph 1.11. The Group will
be entitled to assume the defense of any suit brought to enforce any such
claim, demand or liability, but, in such case, such defense shall be conducted
by counsel of good standing chosen by the Group and approved by Distributor,
which approval shall not be unreasonably withheld. In the event the Group
elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any of
them; but in case the Group does not elect to assume the defense of any such
suit, or in case Distributor reasonably does not approve of counsel chosen by
the Group, the Group will reimburse Distributor, its shareholders, directors
and employees, or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
Distributor or them. The Group's indemnification agreement
- 4 -
<PAGE> 6
contained in this paragraph 1.11 and the Group's representations and warranties
in this agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Distributor, its
shareholders, directors and employees, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to Distributor's benefit, to the benefit of its several
shareholders, directors and employees, and their respective estates, and to the
benefit of the controlling persons and their successors. The Group agrees
promptly to notify Distributor of the commencement of any litigation or
proceedings against the Group or any of its officers or Trustees in connection
with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the Group,
its several officers and Trustees and any person who controls the Group within
the meaning of Section 15 of the 1933 Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Group, its officers or
Trustees or any such controlling person, may incur under the 1933 Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Group, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in
information furnished in writing by Distributor to the Group and used in the
answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus, or shall arise out of or be
based upon any omission, or alleged omission, to state a material fact in
connection with such information furnished in writing by Distributor to the
Group required to be stated in such answers or necessary to make such
information not misleading. Distributor's agreement to indemnify the Group,
its officers and Trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon Distributor's being notified of any action brought
against the Group, its officers or Trustees, or any such controlling person,
such notification to be given by letter or telegram addressed to Distributor at
its principal office in Columbus, Ohio, and sent to Distributor by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. Distributor shall have the right
of first control of the defense of such action, with counsel of its own
choosing, satisfactory to the Group, if such action is based solely upon such
alleged misstatement or omission on Distributor's part, and in any other event
the Group, its officers or Trustees or such controlling person shall each have
the right to participate in the defense or preparation of the defense of any
such action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have
- 5 -
<PAGE> 7
to the Group, its officers or Trustees, or to such controlling person by reason
of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Group
under any of the provisions of this agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Group if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 10(a) of
the 1933 Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.13 shall in any way restrict or have an
application to or bearing upon the Group's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Group's prospectus,
Declaration of Trust, or By-Laws.
1.14 The Group agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor:
(a) of any request by the Commission for amendments to
the registration statement or prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any
stop order suspending the effectiveness of the registration statement
or prospectus then in effect or the initiation by service of process
on the Group of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a change in
such registration statement or prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus which may from
time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary informa-
- 6 -
<PAGE> 8
tion of the Group all records and other information relative to the Group and
its prior, present or potential Shareholders, and not to use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Group, which approval shall not be unreasonably withheld and may not be
withheld where Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the Group.
1.16 This Agreement shall be governed by the laws of the State of
Ohio.
2. Fee.
----
The Distributor shall receive from the Funds identified on Schedule B
hereto a distribution fee at the rate and upon the terms and conditions set
forth in the Distribution and Shareholder Service Plan attached as Schedule C
hereto, and as amended from time to time. The distribution fee described above
shall be accrued daily and shall be paid on the first business day of each
month, or at such time(s) as Distributor shall reasonably request.
3. Sale and Payment.
-----------------
Under this Agreement, the following provisions shall apply with
respect to the sale of and payment of Shares of any class sold at an offering
price which includes a sales load (collectively, "Load Shares") as described in
the prospectuses of any Funds identified on Schedule D hereto (collectively,
the "Load Funds" and individually, a "Load Fund"):
(a) The Distributor shall have the right, as principal,
to purchase Load Shares from the Load Funds at their net asset value
and to sell such Load Shares to the public against orders therefor at
the applicable public offering price, as defined in Section 4 hereof.
Distributor shall also have the right, as principal, to sell Load
Shares to dealers against orders therefor at the public offering price
less a concession determined by the Distributor, which concession
shall not exceed the amount of the sales charge or underwriting
discount, if any, referred to in Section 4 below.
(b) Prior to the time of delivery of any Load Shares by a
Load Fund to, or on the order of, the Distributor, the Distributor
shall pay or cause to be paid to the Load Fund or to
- 7 -
<PAGE> 9
its order an amount in federal funds equal to the applicable net asset
value of such Load Shares. Distributor may retain so much of any
sales charge or underwriting discount as is not allowed by Distributor
as a concession to dealers.
4. Public Offering Price.
----------------------
The public offering price shall be the net asset value of Load Shares,
plus any applicable sales charge, all as set forth in the current prospectus of
the Load Fund. The net asset value of Load Shares shall be determined in
accordance with the provisions of the Declaration of Trust and By-Laws of the
Group and the then current prospectus of the Load Fund.
5. Issuance of Shares.
-------------------
The Load Funds reserve the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Group or the Load Fund(s) with any other investment company or the
acquisition by the Group or the Load Fund(s) of all or substantially all of the
assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Load Shares
in the nature of a stock dividend or split; (c) upon the exercise of
subscription rights granted to the holders of Load Shares on a pro rata basis;
(d) in connection with the issuance of Load Shares pursuant to any exchange and
reinvestment privileges described in any then current prospectus of the Load
Fund; and (e) otherwise in accordance with any then current prospectus of the
Load Fund.
6. Term and Matters Relating to the Group as an Ohio Business Trust.
-----------------------------------------------------------------
This Agreement shall become effective on June 18, 1993, and, unless
sooner terminated as provided herein, shall continue until June 18, 1994, and
thereafter shall continue automatically for successive annual periods ending on
June 18 of each year with respect to each of the Funds, provided such
continuance is specifically approved at least annually by (i) the Group's Board
of Trustees or (ii) by "vote of a majority of the outstanding voting
securities" (as defined below) of the Group, provided, however, that in either
event the continuance is also approved by the majority of the Group's Trustees
who are not parties to the agreement or interested persons (as defined in the
1940 Act) of any party to this agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. This Agreement is
terminable without penalty, on not less than sixty days' notice, by the Group's
Board of Trustees, by vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of the Group or by Distributor. This Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act).
- 8 -
<PAGE> 10
The Cardinal Group is a business trust organized under Chapter 1746,
Ohio Revised Code, and under a Declaration of Trust to which reference is
hereby made and a copy of which is on file at the office of the Secretary of
the State of Ohio as required by law, and to any and all amendments thereto so
filed or hereafter filed. The obligations of "The Cardinal Group" entered into
in the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, Shareholders, officers, employees or agents of the
Group personally, but bind only the assets of the Group, as set forth in
Section 1746.13(A), Ohio Revised Code, and all persons dealing with any of the
Funds of the Group must look solely to the assets of the Group belonging to
such series for the enforcement of any claims against the Group.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Yours very truly,
THE CARDINAL GROUP
By /s/ John L. Schlater
--------------------------------
John L. Schlater, President
Accepted:
THE OHIO COMPANY
By /s/ H. Keith Allen
-----------------------------
H. Keith Allen, Senior
Executive Vice President
- 9 -
<PAGE> 11
Dated: January __, 1996
Schedule A
to the
Distribution Agreement
between The Cardinal Group and
The Ohio Company
June 18, 1993
<TABLE>
<CAPTION>
Name of Fund Date
- ------------ ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
Cardinal Government Securities Money
Market Fund January __, 1996
Cardinal Tax Exempt Money Market Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Senior
Executive Vice President
A-1
<PAGE> 12
Dated: January __, 1996
Schedule B
to the
Distribution Agreement
between The Cardinal Group and
The Ohio Company
June 18, 1993
<TABLE>
<CAPTION>
Name of Plan Fund Date
- ----------------- ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Senior
Executive Vice President
B-1
<PAGE> 13
Schedule C
to the
Distribution Agreement
between The Cardinal Group and
The Ohio Company
June 18, 1993
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
This Plan (the "Plan") constitutes a distribution and shareholder
service plan of The Cardinal Group, an Ohio business trust (the "Group"),
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Plan relates to shares of those investment
portfolios identified on Schedule B to the Group's Distribution Agreement and
as amended from time to time (the "Plan Funds").
SECTION 1. Each Plan Fund shall pay to The Ohio Company, an Ohio
corporation and the distributor (the "Distributor") of the Group's shares of
beneficial interest (the "Shares"), a fee in an amount not to exceed on an
annual basis .25% of the average daily net asset value of such Fund (the "Plan
Fee") for: (a) payments the Distributor makes to broker/dealers, banks and
other institutions (a "Participating Organization") for distribution assistance
and/or Shareholder service pursuant to an agreement with the Participating
Organization or for distribution assistance and/or Shareholder service provided
by the Distributor pursuant to an agreement between the Distributor and the
Group; or (b) reimbursement of expenses incurred by a Participating
Organization pursuant to an agreement in connection with distribution
assistance and/or Shareholder service including, but not limited to, the
reimbursement of expenses relating to printing and distributing prospectuses to
persons other than Shareholders of a Plan Fund, printing and distributing
advertising and sales literature and reports to Shareholders used in connection
with the sale of Shares, and personnel and communication equipment used in
servicing Shareholder accounts and prospective shareholder inquiries. For
purposes of the Plan, a Participating Organization may include the Distributor
or any of its affiliates or subsidiaries.
SECTION 2. The Plan Fee shall be paid by the Plan Funds to the
Distributor only to compensate or to reimburse the Distributor for payments or
expenses incurred pursuant to Section 1.
SECTION 3. The Plan shall not take effect with respect to a Plan Fund
until it has been approved by the vote of the initial Shareholder of such Fund.
C-1
<PAGE> 14
SECTION 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Group, and (b) the Independent Trustees of the Group cast in person at a
meeting called for the purpose of voting on the Plan or such agreement.
SECTION 5. The Plan shall continue in effect for a period of more
than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Plan Funds pursuant to the Plan or any related agreement
shall provide to the Trustees of the Group, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
SECTION 7. The Plan may be terminated at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding Shares of a Plan Fund.
SECTION 8. All agreements with any person relating to implementation
of the Plan shall be in writing, and any agreement related to the Plan shall
provide:
(a) That such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Independent Trustees or by vote of a majority of the outstanding
voting securities of the Plan Fund, on not more than 60 days' written
notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 9. The Plan may not be amended to increase materially the
amount of distribution expenses of a Fund permitted pursuant to Section 1
hereof without approval by a vote of at least a majority of the outstanding
voting securities of such Fund, and all material amendments to the Plan shall
be approved in the manner provided for approval of the Plan in Section 4.
SECTION 10. As used in the Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Group who are not interested persons of the
Group, and have no direct or indirect financial interest in the operation of
the Plan or any agreements
C-2
<PAGE> 15
related to it, and (b) the terms "assignment", "interested person" and
"majority of the outstanding voting securities" shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
C-3
<PAGE> 16
Dated: January __, 1996
Schedule D
to the
Distribution Agreement
between The Cardinal Group and
The Ohio Company
June 18, 1993
<TABLE>
<CAPTION>
Name of Load Fund Date
- ----------------- ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Senior
Executive Vice President
D-1
<PAGE> 1
EXHIBIT (6)(B)
<PAGE> 2
THE OHIO COMPANY
155 East Broad Street
Columbus, Ohio 43215
Dealer No.: ___________
Effective Date: __________
The Cardinal Funds
SELECTED DEALER AGREEMENT
Ladies and Gentlemen:
The Ohio Company, an Ohio corporation (the "Company"), which is the principal
underwriter of a certain registered open-end management investment company and
the portfolios thereof (together the "Funds," or singly a "Fund"), hereby
invites the undersigned broker or dealer ("Dealer") to participate in the
distribution of shares of the Funds ("Shares") and to assist in rendering
distribution and shareholder services to the Funds on and subject to the
following terms and conditions:
Section 1. DEALER AUTHORITY. With respect to the distribution and sale of
Shares, Dealer shall have no authority to act as agent for the Funds, the
Company or any other dealer in any respect in such transactions. All orders
are subject to acceptance by the Company and become effective only upon
confirmation by the Company, and are subject to acceptance or rejection by the
Company or the appropriate Fund in its sole discretion. Dealer shall have no
authority to make any representations concerning the Shares of any Fund except
such representations as may be contained in that Fund's then current prospectus
("Prospectus"), in its then current Statement of Additional Information, and in
such other printed information as that Fund or the Company may subsequently
prepare and distribute to Dealer for purposes of selling the Shares, and Dealer
shall have no authority to distribute any other sales material relating to a
Fund or its Shares without the prior written approval of the Company.
Section 2. SALES AND PRICING OF SHARES. Dealer shall offer and sell Shares
only at their respective public offering prices, or net asset values in the
case of money market funds, if any, in accordance with the terms and conditions
of the Prospectus of the Fund whose Shares Dealer offers. An order for the
purchase of Shares shall be accepted at the time such order is received by the
Company and at the price next determined unless the order is otherwise rejected
in accordance with Section 1 above. In addition, the Company will not accept
any order from Dealer which is placed on a conditional basis or subject to any
delay or contingency prior to execution. Dealer shall place orders for Shares
only with the Company and shall date and time stamp all orders received by
Dealer and promptly shall transmit all orders to the Company in time for
processing at the price next determined after receipt of the order by Dealer,
in accordance with the Prospectus of the Fund whose Shares are being sold.
Dealer shall confirm the transaction with
<PAGE> 3
Dealer's customer at the price confirmed in writing by the Company. In the
event of difference between verbal and written price confirmations, the written
confirmations shall be considered final. Prices of the Shares are computed by
a Fund in accordance with its Prospectus.
Dealer shall place orders with the Company only through Dealer's central
order department unless the Company accepts Dealer's written Power of Attorney
authorizing others to place orders on Dealer's behalf.
Section 3. DEALER SERVICES. With respect to shareholder services, the
Company hereby appoints Dealer to render shareholder services to each of the
12b-1 Funds (as defined below). Shareholder services may include, but are not
limited to, answering routine client inquiries regarding the 12b-1 Funds;
providing information to shareholders on their investments in the 12b-1 Funds;
providing personnel and communication equipment used in connection therewith;
and providing such other services as the Company may reasonably request.
Section 4. DEALER COMPENSATION. (a) So long as this Agreement is in effect,
on purchases from the Company of Shares of a Fund sold with a sales charge,
Dealer shall receive a discount from the public offering price (a "Dealer
Concession") at the specified percentages of the public offering price set
forth in those Funds' respective Prospectuses, which are hereby incorporated
herein by reference and which may be modified from time to time by the Company.
Dealer shall not receive any Dealer Concession with respect to certain
transactions which are exempt from sales charges and will receive the reduced
Dealer Concessions which correspond to the reduced sales charges applicable to
certain types of transactions (e.g., transactions involving letters of intent
or rights of accumulation), as described more fully in the applicable Fund's
current Prospectus. Dealer shall not share or rebate any portion of such
Dealer Concessions or otherwise grant any concessions, discounts or other
allowances to any person who is not a broker or dealer actually engaged in the
investment banking or securities business and is not a member in good standing
of the National Association of Securities Dealers, Inc. ("N.A.S.D."). Dealer
will receive Dealer Concessions as described above on all purchase transactions
in shareholder accounts (excluding reinvestment of income dividends and capital
gains distributions) for which Dealer is designated as Dealer of Record except
where the Company determines that any such purchase was made with the proceeds
of a redemption or repurchase of Shares of a Fund whether or not the
transaction constitutes the exercise of the exchange or conversion privilege.
(b) In addition to the compensation described in Section 4(a) above and
subject to any limitations set forth in the N.A.S.D.'s Rules of Fair Practice,
including without limitation Rule 26, the Company will pay Dealer, with respect
to each of the Funds for which a Distribution and Shareholder Service Plan
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act"), is
- 2 -
<PAGE> 4
in place and under which a fee may be paid to broker-dealers for providing
shareholder services ("12b-1 Funds"), a monthly fee computed at the annual rate
.25% of the average aggregate net asset value of Shares of such 12b-1 Fund held
during the period in accounts for which Dealer provides services as described
in Section 3 above.
Section 5. DEALER AUTHORIZATION. Dealer hereby authorizes the Company to
act as its agent in connection with all transactions in shareholder accounts
for which Dealer is designated as Dealer of Record. All designations of Dealer
of Record and all authorizations of the Company to act as Dealer's agent shall
cease upon the termination of this Agreement or upon the shareholders'
instructions to transfer his or her account to another Dealer of Record.
Section 6. PAYMENT FOR SHARES. Payment for all Shares purchased from the
Company by Dealer shall be made to The Fifth Third Bank, Cincinnati, Ohio, as
custodian for each of the Funds (the "Custodian"), and shall be received by the
Custodian for the account of the applicable Fund within three business days
after the acceptance of Dealer's order or by the end of one business day
following receipt of a customer's payment for such Shares, whichever is the
later date. If such payment is not so received by the Custodian, the Company
and the Funds reserve the right, without notice, to immediately cancel the
sale, or, at the Company's option, to sell the Shares ordered by Dealer back to
the Fund in which latter case, the Company may hold Dealer responsible for any
loss, including loss of profit, suffered by the Company or by the Fund
resulting from Dealer's failure to make payment as described above.
Section 7. PURCHASE OF SHARES. Dealer shall purchase Shares of the Fund
only from the Company or from Dealer's customers. If Dealer purchases Shares
from the Company, Dealer agrees that all such purchases shall be made only to
cover orders already received by Dealer from Dealer's customers, or for
Dealer's own bona fide investment without a view to resale. If Dealer
purchases Shares from Dealer's customers, Dealer agrees to pay such customers
the applicable net asset value per share less any contingent deferred sales
charge that would be applicable in such Shares were then tendered for
redemption in accordance with the applicable Prospectus ("Repurchase Price").
Section 8. LIMITATION ON SALE OF SHARES. Dealer shall sell Shares only:
(a) to the Dealer's customers at the prices described in Section 2 above;
or
(b) to the Company as agent for the Fund at the Repurchase Price. In such
sale to the Company, Dealer may act either as principal for Dealer's own
account or as agent for Dealer's customer. If Dealer acts as principal for
Dealer's own account in purchasing Shares for resale to the Company, Dealer
agrees to pay Dealer's customer not
- 3 -
<PAGE> 5
less than nor more than the Repurchase Price which Dealer received from the
Company. If Dealer acts as agent for Dealer's customer in selling Shares to
the Company, Dealer agrees not to charge Dealer's customer more than a fair
commission for handling the transaction.
Section 9. DEALER'S REPRESENTATIONS AND WARRANTIES. Dealer hereby
represents and warrants to the Company that:
(a) Dealer is willing and possesses the legal authority to provide the
services contemplated by this Agreement without violation of applicable
laws;
(b) Dealer is and shall remain throughout the term of the Agreement a
member in good standing of the N.A.S.D. and shall immediately notify the
Company should it cease to be a member of the N.A.S.D.;
(c) Dealer is and shall remain throughout the term of this Agreement a
broker-dealer duly and properly registered and qualified under all
applicable laws, rules and regulations, including, but not limited to, all
state and federal securities laws, rules and regulations, as may be
necessary or appropriate for Dealer to perform and observe all of its
duties, obligations and covenants set forth or contemplated by this
Agreement;
(d) Dealer shall throughout the term of this Agreement comply with the
requirements of all applicable laws, rules and regulations, including, but
not limited to, federal and state securities laws, the rules, regulations
and orders of the Securities and Exchange Commission and the N.A.S.D., in
performing and observing all of its duties, obligations and covenants set
forth or contemplated by this Agreement;
(e) Dealer shall not withhold placing with the Company orders received
from Dealer's customers so as to profit itself as a result of such
withholding;
(f) Dealer shall not offer Shares of any Fund in any state where such
Shares are not qualified for sale under the Blue Sky Laws and Regulations of
such state or where Dealer is not qualified to act as a dealer, except in
appropriate circumstances when under state laws and regulations the Shares
or the sales transactions are exempt from qualification or dealer
registration is not required; and
(g) Dealer shall give the Company at least 30 days advance written notice
of any event which will cause an "assignment" of this Agreement (as defined
in the 1940 Act) by Dealer or its affiliates.
- 4 -
<PAGE> 6
Section 10. REFUND OF COMPENSATION. If any Shares sold to Dealer under the
terms of this Agreement are repurchased by the Fund, or are tendered for
redemption, within seven business days after the date of the Company's
confirmation of the original purchase by Dealer, Dealer shall promptly refund
to the Company the full Dealer Concession received by Dealer pursuant to
Section 4(a) above.
Section 11. INDEMNIFICATION. Dealer shall indemnify and hold harmless the
Company, its affiliates and the Funds against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from (a) any negligence or misfeasance of Dealer or any of its
officers, directors, employees or agents; or (b) any violation of any law, rule
or regulation or any failure to perform or observe any obligations of Dealer
set forth in this agreement by Dealer or any of its officers, directors,
employees or agents.
Section 12. REPORTS. Dealer shall prepare such quarterly reports for the
Company as shall reasonably be required by the Company.
Section 13. PROVISION OF SALES MATERIAL. The Company shall deliver to
Dealer without charge reasonable quantities of the Funds' Prospectuses with any
supplements thereto currently in effect, copies of current shareholder reports
of the respective Funds, and sales material issued by the Company from time to
time.
Section 14. RULE 12B-1 AGREEMENT; TERMINATION. This Agreement is a related
agreement under the Distribution and Shareholder Service Plans as adopted by
the 12b-1 Funds (collectively, the "Plan"). This Agreement may be terminated
as to a 12b-1 Fund at any time, without the payment of any penalty, by the vote
of a majority of the members of the Board of Trustees of such 12b-1 Fund who
are not interested persons of such 12b-1 Fund and have no direct or indirect
financial interest in the operation of the Plan or in any related agreements to
the Plan ("Disinterested Trustees") or by a majority of the outstanding voting
securities of the 12b-1 Fund upon delivery of written notice thereof to the
parties to this Agreement. This Agreement will terminate as to a 12b-1 Fund
automatically in the event of its assignment as defined in the 1940 Act, or
upon the termination of the Distribution Agreement between such 12b-1 Fund and
the Company. In addition, both the Company and Dealer may terminate this
Agreement upon 10 days' prior written notice to the other party.
Section 15. COMPLETE AGREEMENT. This Agreement supersedes and cancels any
prior agreement with respect to the sale of Shares of any Fund and may be
amended at any time and from time to time by written agreement of the parties
hereto.
Section 16. CHOICE OF LAW. This Agreement shall be effective upon
acceptance by the Company in Columbus, Ohio, and all sales hereunder are to be
made, and title to Shares shall pass, in Columbus, Ohio. This Agreement is made
in the State of Ohio and shall be interpreted in accordance with the laws of
Ohio. Each party repre-
- 5 -
<PAGE> 7
sents that the undersigned has authority to act, and to execute this Agreement,
on behalf of such party.
Section 17. NOTICES. All communications and notices to the Company should
be sent to the above address. Any communications or notice to Dealer shall be
duly given if mailed or delivered to Dealer at the address specified by Dealer
below.
Very truly yours,
THE OHIO COMPANY
The undersigned Dealer hereby accepts the Company's invitation to participate
in the distribution of the Funds' Shares and agrees to be bound by and comply
with the terms and conditions of this Agreement as set forth above.
______________________________
Firm
By ___________________________
Officer or Partner
______________________________
Date: __________________________
______________________________
(Address)
States in which Shares will be offered for sale by Dealer:
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
Accepted:
THE OHIO COMPANY
By _____________________________
Date: __________________________
- 6 -
<PAGE> 1
EXHIBIT (8)
<PAGE> 2
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT, is made as of June 18, 1993, by and between The Cardinal
Group, a business trust organized under the laws of the State of Ohio (the
"Trust"), and THE FIFTH THIRD BANK, a banking company organized under the laws
of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Trust desires that the Securities and cash of each of the
investment portfolios and any additional portfolios of the Trust, as each are
or will be identified in Exhibit A hereto (such current investment portfolios
and any additional portfolios individually referred to herein as a "Fund" and
collectively as the "Funds"), be held and administered by the Custodian
pursuant to this Agreement; and
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the qualifications
prescribed in Section 26(a)(i) of the 1940 Act and that it has capital, surplus
and undivided profits of at least $25 million; and
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any officer or other person duly authorized by
resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Trust and named in Exhibit B hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "BOARD OF TRUSTEES" shall mean the Trustees from time to time serving
under the Trust's Declaration of Trust, dated as of March 23, 1993, as from
time to time amended.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31
<PAGE> 3
CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry regulations of
federal agencies as are substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by The
New York Stock Exchange, Inc. and any other day for which the Trust computes
the net asset value of a Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the
Trust.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary
course of business and (iii) orally confirmed by the Custodian. The Trust
shall cause all Oral Instructions to be confirmed by Written Instructions. If
such Written Instructions confirming Oral Instructions are not received by the
Custodian prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Trust. If Oral Instructions
vary from the Written Instructions which purport to confirm them, the Custodian
shall notify the Trust of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.
1.8 "CUSTODY ACCOUNT" shall mean any account in the name of a Fund, which is
provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
(provided that the Custodian shall have received a copy of a resolution of the
Board of Trustees, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Trust) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 (the "1934 Act"), which acts as a system
for the central handling of Securities where all Securities of any particular
class or series of an issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
-2-
<PAGE> 4
1.11 "SECURITIES" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money
market instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.12 "SHARES" shall mean the units of beneficial interest issued by the Trust.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Trustees shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or any other
similar electronic instruction system acceptable to the custodian and approved
by resolutions of the Board of Trustees, a copy of which, certified by an
Officer, shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Trust
with respect to the Funds at any time during the period of this Agreement,
provided that such Securities or cash at all times shall be and remain the
property of the Trust.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the Custodian
for the account of a Fund, except Securities maintained in a Securities
Depository or Book-Entry System, shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian and shall
be identified as subject to this Agreement.
-3-
<PAGE> 5
3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of such Fund which are delivered to it.
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Trustees and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash and to carry out
such other provisions of this Agreement as it may determine, and may also open
and maintain one or more banking accounts with such a bank or trust company
(any such accounts to be in the name of the Custodian and subject only to its
draft or order), provided, however, that the appointment of any such agent
shall not relieve the Custodian of any of its obligations or liabilities under
this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of a Fund's securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by such Fund at any time during the period of this
Agreement, and (b) all cash received by the Funds for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The
Custodian may deposit and/or maintain Securities of the Funds in a Securities
Depository or in a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Trust shall deliver to the
Custodian a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-going basis
to deposit in such Securities Depository or Book-Entry System all
Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns of
collateral consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed for the
deposit of Securities of the Funds, the Trust shall annually re-adopt
such resolution and deliver a copy thereof, certified by an Officer, to
the Custodian.
-4-
<PAGE> 6
(b) Securities of the Funds kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the books of
the Book-Entry System or Securities Depository, as the case may be, with
respect to Securities of a Fund maintained in a Book-Entry System or
Securities Depository shall, by book-entry or otherwise, identify such
Securities as belonging to such Fund.
(d) If Securities purchases by a Fund are to be held in a Book-Entry System
or Securities Depository, the Custodian shall pay for such Securities
upon (i) receipt of advice from the Book-Entry System or Securities
Depository that such Securities have been transferred to the Depository
Account, and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of such Fund. If
Securities sold by a Fund are held in a Book-Entry System or Securities
Depository, the Custodian shall transfer such Securities upon (i)
receipt of advice from the Book-Entry System or Securities Depository
that payment for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of a Fund.
(e) Upon request, the Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or Securities
Depository in which Securities of the Funds are kept) on the internal
accounting controls and procedures for safeguarding Securities deposited
in such Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to Trust
resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the part
of Custodian or any sub-custodian appointed pursuant to Section 3.3
above or any of its or their employees, or (ii) from failure of the
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository. At
its election, the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities
-5-
<PAGE> 7
Depository or any other person for any loss or damage to the Funds
arising from the use of such Book-Entry System or Securities Depository,
if and to the extent that the Trust has been made whole for any such
loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Custody Account but
only in the following cases:
(a) For the purchase of Securities for a Fund but only upon compliance with
4.1 of this Agreement and only (i) in the case of Securities (other than
options on Securities, futures contracts and options on futures
contracts), against the delivery to the Custodian (or any sub-custodian
appointed pursuant to Section 3.3 above) of such Securities registered
as provided in Section 3.9 below in proper form for transfer, or if the
purchase of such Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions forth in
Section 3.5 above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such sub-custodian) of such receipts as
are required by the customs prevailing among dealers in such options;
(iii) in the case of futures contracts and options on futures contracts,
against delivery to the Custodian (or such sub-custodian) of evidence of
title thereto in favor of the Trust or any nominee referred to in
Section 3.9 below; and (iv) in the case of repurchase or reverse
repurchase agreements entered into between the Trust and a bank which is
a member of the Federal Reserve System or between the Trust and a
primary dealer in U.S. Government securities, against delivery of the
purchased Securities either in certificate form or through an entry
crediting the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by a Fund;
(c) For the payment of any dividends or capital gain distributions declared
by a Fund;
(d) In payment of the redemption price of Shares as provided in Section 5.1
below;
(e) For the payment of any expense or liability incurred by the Trust,
including but not limited to the following payments for the account of
a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent,
-6-
<PAGE> 8
custodian, trustee and legal fees; and other operating expenses of a
Fund; in all cases, whether or not such expenses are to be in whole or
in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Trust;
(g) For transfer in accordance with the provisions of any agreement among
the Trust, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any contract market
(or any similar organization or organizations) regarding account
deposits in connection with transactions by the Trust;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of Trustees,
certified by an Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom such payment is to be made.
3.7 DELIVERY OF SECURITIES FROM CUSTODY ACCOUNTS. Upon receipt of Proper
Instructions, the Custodian shall release and deliver Securities from a Custody
Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only against
receipt of payment therefor in cash, by certified or cashiers check or
bank credit;
(b) In the case of a sale effected through a Book-Entry System or Securities
Depository, in accordance with the provisions of Section 3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund;
-7-
<PAGE> 9
provided that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of the
Trust, the Custodian or any sub-custodian appointed pursuant to Section
3.3 above, or of any nominee or nominees of any of the foregoing, or
(ii) for exchange for a different number of certificates or other
evidence representing the same aggregate face amount or number of units;
provided that, in any such case, the new Securities are to be delivered
to the Custodian;
(e) To the broker selling Securities, for examination in accordance with the
"street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided that,
in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the exercise
thereof, provided that, in any such case, the new Securities and cash,
if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund, but
only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowing by the Trust
on behalf of a Fund requiring a pledge of assets by such Fund, but only
against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Trust or a Fund;
(l) For delivery in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered under the 1934
Act and a member
-8-
<PAGE> 10
of the NASD, relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or of any similar organization or organizations) regarding escrow or
other arrangements in connection with transactions by the Trust on
behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Trust on behalf of a Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Trust on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the Board
of Trustees, certified by an Officer, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such Securities shall
be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise instructed
by the Trust, the Custodian shall with respect to all Securities held for a
Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Trust is entitled either by law or pursuant
to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature or
be called, redeemed, or retired, or otherwise payable;
(c) Endorse for collection, in the name of the Trust, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for Securities
in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit the reports to the Internal Revenue Service
-9-
<PAGE> 11
("IRS") and to the Trust at such time, in such manner and containing such
information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of a
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of a Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a Fund
that are issued or issuable only in bearer form shall be held by the Custodian
in that form, provided that any such Securities shall be held in a Book-Entry
System for the account of the Trust on behalf of a Fund, if eligible therefor.
All other Securities held for a Fund may be registered in the name of the Trust
on behalf of such Fund, the Custodian, or any sub-custodian appointed pursuant
to Section 3.3 above, or in the name of any nominee of any of them, or in the
name of a Book-Entry System, Securities Depository or any nominee of either
thereof; provided however, that such Securities are held specifically for the
account of the Trust on behalf of the Fund. The Trust shall furnish to the
Custodian appropriate instruments to enable the Custodian to hold or deliver in
proper form for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Book-Entry System or Securities
Depository, any Securities registered in the name of a Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for
the Trust, including (i) journals or other records of original entry containing
an itemized daily record in detail of all receipts and deliveries of Securities
and all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Trust as the Trust
shall reasonably request or as may be required by the 1940 Act, including, but
not limited to Section 31 and Rules 31a-1 and 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and
-10-
<PAGE> 12
Exchange Commission, (ii) be the property of the Trust and at all times during
the regular business hours of the Custodian be made available upon request for
inspection by duly authorized officers, employees or agents of the Trust and
employees or agents of the Securities and Exchange Commission, and (iii) if
required to be maintained by Rule 31a-1 under the 1940 Act, be preserved for
the periods prescribed in Rule 31a-2 under the 1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with a
daily activity statement by Fund and a summary of all transfers to or from the
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by Fund, of the Securities and moneys held for the Trust under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust with
such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Trust such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. The Custodian will promptly notify
the Trust of corporate actions, limited to those securities registered in
nominee name and to those Securities held at a Securities Depository or a
sub-custodian acting as an agent for the Custodian. The Custodian will be
responsible only if the notice of such corporate actions is published by the
Financial Daily Card Service, J.J. Kenny Called Bond Service, DTC, or received
by first class mail from the agent. For market announcements not yet received
and distributed by the Custodian's services, the Trust will inform its custody
representative with appropriate instructions. The Custodian will, upon receipt
of the Trust's response within the required deadline, affect such action for
receipt or payment for the Trust. For those responses received after the
deadline, the Custodian will affect such action for receipt or payment, subject
to the limitations of the agent(s) affecting such actions. The Custodian will
promptly notify the Trust for put options only if the notice is received by
first class mail from the agent. The Trust will provide, or cause to be
provided, the Custodian with all relevant information contained in the
prospectus for any security which has unique put/option
-11-
<PAGE> 13
provisions and provide the Custodian with specific tender instructions at least
ten business days prior to the beginning date of the tender period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE TRUST
---------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such securities purchased by a Fund pay out
of the moneys held for the account of such Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED. In
any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable to the Trust
for such Securities to the same extent as if the Securities had been received
by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Trust as specified in such Written Instructions,
the Custodian shall deliver such Securities to the person specified in such
Written Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver Securities
and arrange for payment in accordance with the custom prevailing among dealers
in Securities.
-12-
<PAGE> 14
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may
be returned or otherwise held or disposed of by or through the person to whom
they were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from time
to time, the Custodian may credit the relevant Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Trust, and (iii) income from
cash, Securities or other assets of the Trust. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Trust to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of the Trust transactions on behalf of a Fund in its Custody
Account. Any such advance shall be repayable immediately upon demand made by
Custodian.
ARTICLE V
---------
REDEMPTION OF TRUST SHARES
--------------------------
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in
such Proper Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
-13-
<PAGE> 15
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust, the
Custodian and a broker-dealer registered under the 1934 Act and a member
of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions
by the Trust,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection with
financial futures contracts (or options thereon) purchased or sold by a
Fund,
(c) which constitute collateral for loans of Securities made by a Fund,
(d) for purposes of compliance by the Trust with requirements under the 1940
Act for the maintenance of segregated accounts by registered investment
companies in connection with reverse repurchase agreements and
when-issued, delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the
Board of Trustees, certified by an Officer, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Trust for any loss, damages, cost, expense
(including attorneys' fees and
-14-
<PAGE> 16
disbursements), liability or claim unless such loss, damages, cost, expense,
liability or claim arises from negligence, bad faith or willful misconduct on
its part or on the part of any sub-custodian appointed pursuant to Section 3.3
above. The Custodian shall be entitled to rely on and may act upon advice of
counsel on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Trust of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Trust is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Trust's charter documents or
by-laws, or its investment objectives and policies as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Trust or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian
shall be entitled to rely upon any Oral Instructions and/or any Written
Instructions actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this
Agreement against the Custodian.
7.7 COOPERATION. The Custodian shall cooperate with and supply necessary
information, by the Trust, to the entity or entities appointed by the Trust to
keep the books of account of the Trust and/or compute the value of the assets
of the Trust. The Custodian shall take all such reasonable actions as the
Trust may from time to time request to enable the Trust to obtain, from year
-15-
<PAGE> 17
to year, favorable opinions from the Trust's independent accountants with
respect to the Custodian's activities hereunder in connection with (a) the
preparation of the Trust's report on Form N-1A and Form N-SAR and any other
reports required by the Securities and Exchange Commission, and (b) the
fulfillment by the Trust of any other requirements of the Securities and
Exchange commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such sub-custodian from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign
securities and/or banking laws) or claim arising directly or indirectly (a)
from the fact that Securities are registered in the name of any such nominee,
or (b) from any action or inaction by the Custodian or such sub-custodian (i)
at the request or direction of or in reliance on the advice of the Trust, or
(ii) upon Proper Instructions, or (c) generally, from the performance of its
obligations under this Agreement or any sub-custody agreement with a
sub-custodian appointed pursuant to Section 3.3 above or, in the case of any
such sub-custodian, from the performance of its obligations under such custody
agreement, provided that neither the Custodian nor any such sub-custodian shall
be indemnified and held harmless from and against any such loss, damage, cost,
expense, liability or claim arising from the Custodian's or such
sub-custodian's negligence, bad faith or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Trust shall be liable for any failure or delay
in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without
-16-
<PAGE> 18
limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; strikes; epidemics; riots; power failures; computer
failure and any such circumstances beyond its reasonable control as may cause
interruption, loss or malfunction of utility, transportation, computer
(hardware or software) or telephone communication service; accidents; labor
disputes, acts of civil or military authority; governmental actions; or
inability to obtain labor, material equipment or transportation; provided,
however, that the Custodian in the event of a failure or delay shall use its
best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the date
first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto way terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of the giving of
such notice. If a successor custodian shall have been appointed by the Board
of Trustees, the Custodian shall, upon receipt of a notice of acceptance by the
successor custodian, on such specified date of termination (a) deliver directly
to the successor custodian all Securities (other than Securities held in a
Book-Entry System or Securities Depository) and cash then owned by the Trust
and held by the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the
benefit of the Trust at the successor custodian, provided that the Trust shall
have paid to the Custodian all fees, expenses and other amounts to the payment
or reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement. The Trust may at any time immediately terminate this Agreement in
the event of the appointment of a conservator or receiver for the Custodian by
regulatory authorities in the State of Ohio or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is not
designated by the Trust on or before the date of termination specified pursuant
to Section 10.2 above, then the Custodian shall have the right to deliver to a
bank or trust company of its own selection, which is (a) a "Bank" as defined in
the 1940 Act, (b) has aggregate capital, surplus and undivided profits as shown
on its then most recent published report of not less than $25 million, and (c)
is doing business in New York, New York, all Securities, cash and other
property held by the Custodian
-17-
<PAGE> 19
under this Agreement and to transfer to an account of or for the Funds at such
bank or trust company all Securities of the Funds held in a Book-Entry System
or Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement. If, after
reasonable inquiry, the Custodian cannot find a successor custodian as
contemplated in this Section 10.3, then the Custodian shall have the right to
deliver to the Trust all securities and cash then owned by the Funds and to
transfer any Securities held in a Book-Entry System or Securities Depository to
an account of or for the Trust. Thereafter, the Trust shall be deemed to be
its own custodian with respect to the Trust and the Custodian shall be relieved
of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XII
-----------
LIMITATION OF LIABILITY
-----------------------
The Trust is a business trust organized under Chapter 1746, Ohio Revised
Code, and under a Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of Ohio as
required by law, and to any and all amendments thereto so filed or hereafter
filed. The obligations of the Trust entered into in the name of the Trust or
on behalf thereof by any of the Trustees, officers, employees or agents are
made not individually, but in such capacities, and are not binding upon any of
the Trustees, officers, employees, agents or shareholders of the Trust or the
Funds personally, but bind only the assets of the Trust, as set forth in
Section 1746.13(A), Ohio Revised Code, and all persons dealing with any of the
Funds of the Trust must look solely to the assets of the Trust belonging to
such Fund for the enforcement of any claims against the Trust.
ARTICLE XIII
------------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be
sent or delivered to the receipt at the address set forth after its name herein
below:
-18-
<PAGE> 20
TO THE TRUST:
The Cardinal Group
155 East Broad Street
Columbus, Ohio 43215
Attn: James M. Schrack II
Telephone: (614) 464-7024
Facsimile: (614) 464-8708
TO THE CUSTODIAN:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
-----------
MISCELLANEOUS
-------------
14.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to the Custodian without the prior written
approval of the Custodian, excepting printed matter contained in the prospectus
or statement of additional information on its registration statement for the
Trust and such other printed matter as merely identifies the Custodian as
custodian for the Trust. The Trust shall submit printed matter requiring
approval to the Custodian in draft form, allowing sufficient time for review by
the Custodian and its counsel prior to any deadline for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment to
this Agreement shall be effective unless evidenced by an instrument in writing
executed by the parties hereto.
-19-
<PAGE> 21
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected
or impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: THE CARDINAL GROUP
/s/ Charles H. Hire By: /s/ John L. Schlater
- ------------------------- -------------------------------
John L. Schlater, President
ATTEST: THE FIFTH THIRD BANK
By: /s/ Tracie D. Hoffman, AVP
- ------------------------- -------------------------------
(Name) (Title)
-20-
<PAGE> 22
Dated: January __, 1996
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
THE CARDINAL GROUP AND THE FIFTH THIRD BANK
JUNE 18, 1993
<TABLE>
<CAPTION>
Name of Fund Date
------------ ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
Cardinal Government Securities Money
Market Fund January __, 1996
Cardinal Tax Exempt Money Market Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By
----------------------------
Frank W. Siegel, President
THE FIFTH THIRD BANK
By
----------------------------
(Name) (Title)
-21-
<PAGE> 23
Dated: January __, 1996
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
THE CARDINAL GROUP AND THE FIFTH THIRD BANK
JUNE 18, 1993
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer each Custody Account.
<TABLE>
<CAPTION>
Name Signature
---- ---------
<S> <C>
H. Keith Allen
- -------------------------- --------------------------
Frank W. Siegel
- -------------------------- --------------------------
Pamela K. Hallfrisch
- -------------------------- --------------------------
Hannibal L. Godwin III
- -------------------------- --------------------------
John Bevilaqua
- -------------------------- --------------------------
Barry G. McMahon
- -------------------------- --------------------------
David C. Will
- -------------------------- --------------------------
James M. Schrack II
- -------------------------- --------------------------
Bruce E. McKibben
- -------------------------- --------------------------
</TABLE>
-22-
<PAGE> 24
SIGNATURE RESOLUTION
--------------------
RESOLVED, That all of the following officers of THE CARDINAL GROUP and any of
them, namely the Chairman, President, Vice Presidents, Secretary and Treasurer,
are hereby authorized as signers for the conduct of business for and on behalf
of the Funds with THE FIFTH THIRD BANK:
<TABLE>
<S> <C> <C>
H. Keith Allen CHAIRMAN
----------------------
Frank W. Siegel PRESIDENT
----------------------
Hannibal L. Godwin, III VICE PRESIDENT
----------------------
Pamela K. Hallfrisch VICE PRESIDENT
----------------------
John Bevilaqua VICE PRESIDENT
----------------------
Barry G. McMahon VICE PRESIDENT
----------------------
David C. Will VICE PRESIDENT
----------------------
James M. Schrack II TREASURER
----------------------
Karen J. Hipsher SECRETARY
----------------------
</TABLE>
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
<TABLE>
<S> <C> <C>
Bruce E. McKibben ASSISTANT
TREASURER ----------------------
</TABLE>
The undersigned officers of THE CARDINAL GROUP hereby certify that the
foregoing is within the parameters of a Resolution adopted by Trustees of the
Trust in a meeting held November __, 1995, directing and authorizing
preparation of documents and to do everything necessary to effect the Custody
Agreement between THE CARDINAL GROUP and THE FIFTH THIRD BANK.
------------------------------
Frank W. Siegel,
President
------------------------------
Karen J. Hipsher,
Secretary
-23-
<PAGE> 25
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
THE CARDINAL GROUP AND THE FIFTH THIRD BANK
JUNE 18, 1993
MUTUAL FUND CUSTODY FEE SCHEDULE
--------------------------------
BASIC ACCOUNT CHARGE
<TABLE>
<CAPTION>
FUND SIZE: Annual Monthly
------ -------
<S> <C> <C>
Less than $50MM $ 5,000 $ 416.67
$50MM - $99MM $10,000 $ 833.34
$100MM - $199MM $15,000 $1,250.00
$200MM - $349MM $20,000 $1,666.67
Greater than $350MM $25,000 $2,083.34
</TABLE>
TRANSACTION FEES
<TABLE>
<S> <C>
DTC Eligible Transactions $12.00
FED Eligible Transactions $12.00
Physical Transactions $30.00
Amortized Securities
(GNMA purchase and sale, each) $50.00
Repurchase Agreements (includes
purchase and sale; $12.50 each) $25.00
Third Party Repurchase Agreements
(includes purchase and sale; $7.50 each) $15.00
Physical Commercial Paper Transactions
(includes purchase and maturity; $45.00
$22.50 each)
DTC Commercial Paper Transactions
(includes purchase and maturity; $20.00
$10.00 each)
Options $45.00
Amortized Security Receipts (principal payments) $ 5.00
Wire/Check Disbursements $ 7.00
Depository/Transfer Agent Rejects $20.00
Class 97 Money Market Transactions $ 5.00
</TABLE>
CASH BALANCE CREDITS/CHARGES
<TABLE>
<S> <C>
Taxable Funds Rate BankSafe Rate
Overdrafts Fed Funds Rate + 0.75%
</TABLE>
All Fifth Third Products are no charge.
All Fountain Square Products are no charge.
Holdings are no charge.
-24-
<PAGE> 1
EXHIBIT (9)
<PAGE> 2
TRANSFER AGENCY AND FUND ACCOUNTING AGREEMENT
---------------------------------------------
This Agreement is made as of June 18, 1993, between The Cardinal Group
(the "Group"), an Ohio business trust having its principal place of business at
155 East Broad Street, Columbus, Ohio 43215, and Cardinal Management Corp.
("Cardinal"), an Ohio corporation having its principal place of business at 215
East Capital Street, Columbus, Ohio 43215.
WHEREAS, the Group desires that Cardinal perform certain services for
the Group, and for each of its series denominated as funds identified in
Schedule A hereto, as such Schedule shall be amended from time to time
(individually referred to herein as a "Fund" and collectively as the "Funds");
and
WHEREAS, Cardinal is willing to perform such services on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
Section 1. TRANSFER AGENT SERVICES. Cardinal shall perform for
the Group the transfer agent services set forth in Schedule B hereto, including
services as transfer agent.
Cardinal also agrees to perform for the Group such special
services incidental to the performance of the services enumerated in this
Section 1 as agreed to by the parties from time to time. Cardinal shall
perform such additional services as are provided on an amendment to Schedule B
hereof, in consideration of such fees as the parties hereto may agree.
Cardinal may, in its discretion, appoint in writing other
parties qualified to perform transfer agency and shareholder services
reasonably acceptable to the Group (individually, a "Sub-transfer Agent") to
carry out some or all of its responsibilities under this Agreement with respect
to a Fund; provided, however, that the Sub-transfer Agent shall be the agent of
Cardinal and not the agent of the Group or such Fund, and that Cardinal shall
be fully responsible for the acts of such Sub-transfer Agent and shall not be
relieved of any of its responsibilities hereunder by the appointment of such
Sub-transfer Agent.
Section 2. FUND ACCOUNTING SERVICES. Cardinal will keep and
maintain the following books and records of each Fund pursuant to Rule 31a-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "1940
Act"):
(a) Journals containing an itemized daily record
in detail of all purchases and sales of securities, all
receipts and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
<PAGE> 3
(b) General and auxiliary ledgers reflecting all
asset, liability, reserve, capital, income and expense
accounts, including interest accrued and interest received, as
required by subsection (b)(2)(i) of the Rule;
(c) Separate ledger accounts required by
subsection (b)(2)(ii) and (iii) of the Rule; and
(d) A monthly trial balance of all ledger
accounts (except shareholder accounts) as required by
subsection (b)(8) of the Rule.
In addition to the maintenance of the books and records
specified above, Cardinal shall perform the following accounting services daily
for each Fund:
(a) Calculate the net asset value per share;
(b) Calculate the dividend and capital gain
distribution, if any;
(c) Calculate the yield;
(d) Reconcile cash movements with the Fund's
custodian;
(e) Affirm to the Fund's custodian all portfolio
trades and cash settlements;
(f) Verify and reconcile with the Fund's
custodian all daily trade activity;
(g) Provide the following reports:
(i) A current security position report;
(ii) A summary report of transactions and
pending maturities (including the principal, cost,
and accrued interest on each portfolio security in
maturity date order); and
(iii) A current cash position report
(including cash available from portfolio sales and
maturities and sales of a Fund's shares less cash
needed for redemptions and settlement of portfolio
purchases); and
(h) Such other similar services with respect to
a Fund as may be reasonably requested by the Group.
- 2 -
<PAGE> 4
Cardinal shall perform the following accounting services for
each Fund at least monthly:
(a) Obtain actual dealer quotations, prices from
a pricing service, or matrix prices on all portfolio
securities (including those with less than 60 days to
maturity) in order to mark the entire portfolio to the market;
and
(b) Prepare an interim balance sheet, statement
of income and expense, and statement of changes in net assets
for the Fund.
Section 3. FEES. The Group shall pay Cardinal for the services
to be provided by Cardinal under this Agreement in accordance with, and in the
manner set forth, in Schedule C hereto. Fees for any additional services to be
provided by Cardinal pursuant to an amendment to Schedule C hereto shall be
subject to mutual agreement at the time such amendment to Schedule C is
proposed.
Section 4. REIMBURSEMENT OF EXPENSES. In addition to paying
Cardinal the fees described in Section 3 hereof, the Group agrees to reimburse
Cardinal for Cardinal's out-of-pocket expenses in providing services hereunder,
including without limitation the following:
(a) All freight and other delivery and bonding charges incurred by
Cardinal in delivering materials to and from the Group and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by Cardinal in
communication with the Group, a Fund's investment adviser or
custodian, dealers, shareholders or others as required for
Cardinal to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other form of printed material which shall
be required by Cardinal for the performance of the services to
be provided hereunder;
(d) The cost of microfilm or microfiche of records or other
materials;
(e) Costs of pricing the portfolio securities of each Fund; and
(f) Any expenses Cardinal shall incur at the written direction of
a duly authorized officer of the Group.
- 3 -
<PAGE> 5
Section 5. EFFECTIVE DATE. This Agreement shall become
effective with respect to a Fund as of the date first written above (or, if a
particular Fund is not in existence on that date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is executed) (the "Effective
Date").
Section 6. TERM. This Agreement shall continue in effect,
unless earlier terminated by either party hereto as provided hereunder, until
June 18, 1993, and thereafter shall be renewed automatically for successive
one-year terms unless written notice not to renew is given by the non-renewing
party to the other party at least 60 days prior to the expiration of the
then-current term; provided, however, that after such termination, for so long
as Cardinal, with the written consent of the Group, in fact continues to
perform any one or more of the services contemplated by this Agreement or any
Schedule or exhibit hereto, the provisions of this Agreement, including without
limitation the provisions dealing with indemnification, shall continue in full
force and effect. Fees and out-of-pocket expenses incurred by Cardinal but
unpaid by the Group upon such termination shall be immediately due and payable
upon and notwithstanding such termination. Subsequent to such termination,
Cardinal shall return to Group documents or records remaining in its
possession. Further, this Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties hereto or for "cause" (as
defined below) by the party alleging "cause," in either case on not less than
60 days' notice by the Group's Board of Trustees or by Cardinal.
For purposes of this Agreement, "cause" shall mean (a) willful
misfeasance, bad faith, gross negligence, or reckless disregard on the part of
the party to be terminated with respect to its obligations and duties set forth
herein; (b) a final, unappealable judicial, regulatory or administrative ruling
or order in which the party to be terminated has been found guilty of criminal
or unethical behavior in the conduct of its business; (c) financial
difficulties on the part of the party to be terminated which are evidenced by
the authorization or commencement of, or involvement by way of pleading,
answer, consent, or acquiescence in, a voluntary or involuntary case under
Title 11 of the United States Code, as from time to time is in effect, or any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration
of the rights of creditors; or (d) any circumstance which substantially impairs
the performance of the obligations and duties as contemplated herein of the
party to be terminated.
Section 7. UNCONTROLLABLE EVENTS. Cardinal assumes no
responsibility hereunder, and shall not be liable, for any damage, loss of
data, delay or any other loss whatsoever caused by events beyond its reasonable
control.
- 4 -
<PAGE> 6
Section 8. LEGAL ADVICE. Cardinal shall notify the Group at any
time Cardinal believes that it is in need of the advice of counsel (other than
counsel in the regular employ of Cardinal or any affiliated companies) with
regard to Cardinal's responsibilities and duties pursuant to this Agreement;
and after so notifying the Group, Cardinal, at its discretion, shall be
entitled to seek, receive and act upon advice of legal counsel of its choosing,
and shall in no event be liable to the Group or any Fund or any shareholder or
beneficial owner of the Group for any action reasonably taken pursuant to such
advice.
Section 9. INSTRUCTIONS. Whenever Cardinal is requested or
authorized to take action hereunder pursuant to instructions from a shareholder
or a properly authorized agent of a shareholder ("shareholder's agent")
concerning an account in a Fund, Cardinal shall be entitled to rely upon any
certificate, letter or other instrument or communication, whether in writing,
by electronic or telephone transmission, believed by Cardinal to be genuine and
to have been properly made, signed or authorized by an officer or other
authorized agent of the Group or by the shareholder or shareholder's agent, as
the case may be, and shall be entitled to receive as conclusive proof of any
fact or matter required to be ascertained by it hereunder a certificate signed
by an officer of the Group or any other person authorized by the Group's Board
of Trustees or by the shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, Cardinal may rely
conclusively upon the terms of the most recent Prospectuses and Statements of
Additional Information of the Group relating to the Funds to the extent that
such services are described therein unless Cardinal receives written
instructions to the contrary in a timely manner from the Group.
Section 10. STANDARD OF CARE; INDEMNIFICATION. Cardinal shall
use its best efforts to ensure the accuracy of all services performed under
this Agreement, but shall not be liable to the Group for any action taken or
omitted by Cardinal in the absence of bad faith, willful misfeasance or
negligence. The Group agrees to indemnify and hold harmless Cardinal, its
employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to Cardinal's actions taken or nonactions with
respect to the performance of services under this Agreement or based, if
applicable, upon reasonable reliance on information, records, instructions or
requests given or made to Cardinal by the Group, the investment adviser and on
any records provided by any custodian thereof; provided that this
indemnification shall not apply to actions or omissions of Cardinal in cases of
its own willful misfeasance or
- 5 -
<PAGE> 7
negligence, and further provided that prior to confessing any claim against it
which may be the subject of this indemnification, Cardinal shall give the Group
written notice of and reasonable opportunity to defend against such claim in
its own name or in the name of Cardinal.
Section 11. RECORD RETENTION AND CONFIDENTIALITY. Cardinal shall
keep and maintain on behalf of the Group all books and records which the Group
or Cardinal is, or may be, required to keep and maintain pursuant to any
applicable statutes, rules and regulations, including without limitation Rules
31a-1 and 31a-2 under the 1940 Act relating to the maintenance of books and
records in connection with the services to be provided hereunder. Cardinal
further agrees that all such books and records shall be the property of the
Group and to make such records available for inspection by the Group or by the
Securities and Exchange Commission at reasonable times and otherwise to keep
confidential all books and records and other information relative to the Group
and its shareholders, except when requested to divulge such information by
duly-constituted authorities or court process, or requested by a shareholder
with respect to information concerning an account as to which such shareholder
has either a legal or beneficial interest or when requested by the Group, the
shareholder, or the dealer of record as to such account.
Section 12. REPORTS. Cardinal will furnish to the Group and to
its properly authorized auditors, investment advisers, examiners, distributors,
dealers, underwriters, salesmen, insurance companies and others designated by
the Group in writing, such reports at such times as are prescribed in Schedule
D attached hereto, or as subsequently agreed upon by the parties pursuant to an
amendment to Schedule D. The Group agrees to examine each such report or copy
promptly and will report or cause to be reported any errors or discrepancies
therein no later than three business days from the receipt thereof. In the
event that errors or discrepancies, except such errors and discrepancies as may
not reasonably be expected to be discovered by the recipient within three days
after conducting a diligent examination, are not so reported within the
aforesaid period of time, a report will for all purposes be accepted by and
binding upon the Group and any other recipient, and Cardinal shall have no
liability for errors or discrepancies therein and shall have no further
responsibility with respect to such report except to perform reasonable
corrections of such errors and discrepancies within a reasonable time after
requested to do so by the Group.
Section 13. RETURN OF RECORDS. Cardinal may at its option at any
time, and shall promptly upon the Group's demand, turn over to the Group and
cease to retain Cardinal's files, records and documents created and maintained
by Cardinal pursuant to this Agreement which are no longer needed by Cardinal
in the performance of its services or for its legal protection. If not so
turned over to the Group, such documents and records will be retained by
Cardinal for six
- 6 -
<PAGE> 8
years from the year of creation. At the end of such six-year period, such
records and documents will be turned over to the Group unless the Group
authorizes in writing the destruction of such records and documents.
Section 14. BANK ACCOUNTS. The Group and the Funds shall
establish and maintain such bank accounts with such bank or banks as are
selected by the Group and as are necessary in order that Cardinal may perform
the services required to be performed hereunder. To the extent that the
performance of such services shall require Cardinal directly to disburse
amounts for payment of dividends, redemption proceeds or other purposes, the
Group and Funds shall provide such bank or banks with all instructions and
authorizations necessary for Cardinal to effect such disbursements.
Section 15. REPRESENTATIONS OF CARDINAL. Cardinal represents and
warrants that: (a) Cardinal has been in, and shall continue to be in,
substantial compliance with all provisions of law, including Section 17A(c) of
the Securities Exchange Act of 1934, as amended, required in connection with
the performance of its duties under this Agreement; and (b) the various
procedures and systems which Cardinal has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other
cause of the blank checks, records, and other data of the Group and Cardinal'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 are required for the secure performance of its
obligations hereunder.
Section 16. INSURANCE. Cardinal shall notify the Group should
its insurance coverage with respect to professional liability or errors and
omissions coverage be changed for any reason. Such notification shall include
the date of change and the reasons therefor. Cardinal shall notify the Group
of any material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify
the Group from time to time as may be appropriate of the total outstanding
claims made by Cardinal under its insurance coverage.
Section 17. INFORMATION FURNISHED BY CARDINAL. Cardinal has
furnished to the Group the following:
(a) Cardinal's Articles of Incorporation.
(b) Cardinal's Code of Regulations and any amendments thereto.
(c) Certified copies of actions of Cardinal covering the following
matters:
- 7 -
<PAGE> 9
1. Approval of this Agreement, and authorization of a
specified officer of Cardinal to execute and deliver
this Agreement;
2. Authorization of Cardinal to act as transfer agent
and fund accountant for the Funds.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with
the Securities and Exchange Commission pursuant to Rule
17Ad-13 of the Securities Exchange Act of 1934, as amended.
Section 18. COMPLIANCE WITH LAW. Except for the obligations of
Cardinal set forth in Section 11 hereof, the Group assumes full responsibility
for the preparation, contents and distribution of each prospectus of the Group
as to compliance with all applicable requirements of the Securities Act of
1933, as amended, the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction.
Section 19. NOTICES. Any notice provided hereunder shall be
sufficiently given when sent by registered or certified mail to the party
required to be served with such notice, at that party's address set forth at
the beginning of this Agreement, or at such other address as such party may
from time to time specify in writing to the other party pursuant to this
Section.
Section 20. HEADINGS. Paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
Section 21. ASSIGNMENT. This Agreement and the rights and duties
hereunder shall not be assignable by either of the parties hereto except by the
specific written consent of the other party. This Section 21 shall not limit
or in any way affect Cardinal's right to appoint a Sub-transfer Agent pursuant
to Section 1 hereof.
Section 22. GOVERNING LAW. This Agreement shall be governed by
and provisions shall be construed in accordance with the laws of the State of
Ohio.
Section 23. LIMITATION OF LIABILITY OF THE TRUSTEES AND
SHAREHOLDERS. The Cardinal Group is a business trust organized under Chapter
1746, Ohio Revised Code and under a Declaration of Trust, to which reference is
hereby made and a copy of which is on file at the Office of the Secretary of
State of Ohio as required by law, and to any and all amendments thereto so
filed or hereafter filed. The obligations of "The Cardinal Group" entered into
in the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, officers, employees, agents
- 8 -
<PAGE> 10
or shareholders of the Group personally, but bind only the assets of the Group,
as set forth in Section 1746.13(A), Ohio Revised Code, and all persons dealing
with any of the Funds of the Group must look solely to the assets of the Group
belonging to such Fund for the enforcement of any claims against the Group.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed all as of the day and year first above written.
THE CARDINAL GROUP
By /s/ John L. Schlater
-------------------------------
John L. Schlater, President
CARDINAL MANAGEMENT CORP.
By /s/ H. Keith Allen
-------------------------------
H. Keith Allen, Treasurer
- 9 -
<PAGE> 11
January __, 1996
SCHEDULE A
----------
to the Transfer Agency and
Fund Accounting Agreement
between The Cardinal Group
and Cardinal Management Corp.
<TABLE>
<CAPTION>
Name of Fund Date
------------ ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
Cardinal Government Securities Money January __, 1996
Market Fund
Cardinal Tax Exempt Money Market Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel
CARDINAL MANAGEMENT CORP.
By ______________________________
H. Keith Allen, ______________
- 10 -
<PAGE> 12
SCHEDULE B
----------
TRANSFER AGENCY SERVICES
------------------------
1. Shareholder Transactions
------------------------
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identifications number and wire instructions.
c. Issue confirmation for every transaction.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchasing of new
shares through dividend reinvestment.
2. Shareholder Information Services
--------------------------------
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detail history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements, or marketing material to
current shareholders.
3. Compliance Reporting
--------------------
a. Provide reports to the Securities and Exchange Commission, the
NASD and the States in which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and
capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
- 11 -
<PAGE> 13
4. Dealer/Load Processing (if applicable)
--------------------------------------
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchases of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchases in
a load Fund.
5. Shareholder Account Maintenance
-------------------------------
a. Maintain all shareholder records for each account in the Group.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
- 12 -
<PAGE> 14
Date: January __, 1996
SCHEDULE C
----------
Fees
----
Transfer Agent and Dividend
---------------------------
Disbursing Agent
----------------
Annual fees per Fund:
- ---------------------
$18.00 per account annually (payable monthly) for Cardinal Balanced Fund and
Cardinal Aggressive Growth Fund
$21.00 per account annually (payable monthly) for The Cardinal Fund, Cardinal
Government Obligations Fund, Cardinal Government Securities Money Market Fund
and Cardinal Tax Exempt Money Market Fund
Fund Accountant
---------------
Annual fees per Fund:
- ---------------------
A fee per Fund calculated at the annual rate of .03% of such Fund's average
daily net assets.
THE CARDINAL GROUP
By _________________________________________
Frank W. Siegel, President
CARDINAL MANAGEMENT CORP.
By _________________________________________
H. Keith Allen, _________________________
- 13 -
<PAGE> 15
Date: January __, 1996
SCHEDULE D
----------
REPORTS
-------
I. Daily Shareholder Activity Journal
II. Daily Fund Activity Summary Report
A. Beginning Balance
B. Dealer Transactions
C. Shareholder Transactions
D. Reinvested Dividends
E. Exchanges
F. Adjustments
G. Ending Balance
III. Daily Wire and Check Registers
IV. Monthly Dealer Processing Reports
V. Monthly Dividend Reports
VI. Sales Data Reports for Blue Sky Registration
VII. Annual report by independent public accountants concerning Cardinal's
shareholder system and internal accounting control systems to be filed
with the Securities and Exchange Commission pursuant to Rule 17Ad-13
of the Securities Exchange Act of 1934, as amended.
- 14 -
<PAGE> 1
EXHIBIT (10)
<PAGE> 2
October 25, 1995
The Cardinal Group
155 East Broad Street
Columbus, Ohio 43215
Subject: THE CARDINAL GROUP (THE "GROUP") -- POST-EFFECTIVE AMENDMENT NO.
3 TO REGISTRATION STATEMENT ON FORM N-1A, FILE NO. 33-59984,
FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
AMENDMENT NO. 4 TO REGISTRATION STATEMENT ON FORM N-1A, FILE NO.
811-7588, FILED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "AMENDMENT")
Ladies and Gentlemen:
In connection with the filing of the Amendment, it is our opinion that,
upon the effectiveness of the Amendment, the indefinite number of units of
beneficial interest, without par value, of The Cardinal Fund, Cardinal
Government Obligations Fund, Cardinal Government Securities Money Market Fund
and Cardinal Tax Exempt Money Market Fund, four new investment portfolios of
the Group, when issued as described in the Amendment and for the consideration
described in the Amendment, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very truly yours,
BAKER & HOSTETLER
<PAGE> 1
EXHIBIT (11)
<PAGE> 2
AUDITORS' CONSENT
The Board of Trustees
The Cardinal Group:
We consent to the reference to our firm under the heading "Legal Counsel and
Independent Auditors" in the Statement of Additional Information.
KPMG PEAT MARWICK LLP
Columbus, Ohio
October 25, 1995
<PAGE> 1
EXHIBIT (13)
<PAGE> 2
PURCHASE AGREEMENT
------------------
The Cardinal Group, an Ohio business trust (the "Group"), and Cardinal
Management Corp., an Ohio corporation (the "Company"), hereby agree with each
other as follows:
1. The Group hereby offers the Company and the Company hereby purchases 5,000
Series A and 5,000 Series B units of beneficial interest in the Group (such
units of beneficial interest being hereinafter known as "Shares") at a price of
$10.00 per Share. The Company hereby acknowledges purchase of the Shares, and
the Group hereby acknowledges receipt from the Company of the funds in the
amount of $100,000 in full payment for the Shares.
2. The Company represents and warrants to the Group that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. The Company agrees that if it or any direct or indirect transferee of any
of the Shares redeems any of the Shares prior to the fifth anniversary of the
date the Group begins its investment activities, the Company will pay to the
Group an amount equal to the number resulting from multiplying the Group's
total unamortized organizational expenses by a fraction, the numerator of which
is equal to the number of Shares redeemed by the Company or such transferee and
the denominator of which is equal to the number of Shares outstanding as of the
date of such redemption (taking into account the Shares to be redeemed), so
long as the administrative position of the staff of the Securities and Exchange
Commission requires such reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
4th day of June, 1993.
THE CARDINAL GROUP
By /s/ John L. Schlater
---------------------------------
John L. Schlater, President
CARDINAL MANAGEMENT CORP.
By /s/ H. Keith Allen
---------------------------------
H. Keith Allen, Treasurer
<PAGE> 1
EXHIBIT (15)(A)
<PAGE> 2
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
-----------------------------------------
This Plan (the "Plan") constitutes a distribution and shareholder service
plan of The Cardinal Group, an Ohio business trust (the "Group"), adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Plan relates to shares of those investment portfolios
identified on Schedule B to the Group's Distribution Agreement and as amended
from time to time (the "Plan Funds").
SECTION 1. Each Plan Fund shall pay to The Ohio Company, an Ohio corporation
and the distributor (the "Distributor") of the Group's shares of beneficial
interest (the "Shares"), a fee in an amount not to exceed on an annual basis
.25% of the average daily net asset value of such Fund (the "Plan Fee") for:
(a) payments the Distributor makes to broker/dealers, banks and other
institutions (a "Participating Organization") for distribution assistance
and/or Shareholder service pursuant to an agreement with the Participating
Organization or for distribution assistance and/or Shareholder service provided
by the Distributor pursuant to an agreement between the Distributor and the
Group; or (b) reimbursement of expenses incurred by a Participating
Organization pursuant to an agreement in connection with distribution
assistance and/or Shareholder service including, but not limited to, the
reimbursement of expenses relating to printing and distributing prospectuses to
persons other than Shareholders of a Plan Fund, printing and distributing
advertising and sales literature and reports to Shareholders used in connection
with the sale of Shares, and personnel and communication equipment used in
servicing Shareholder accounts and prospective shareholder inquiries. For
purposes of the Plan, a Participating Organization may include the Distributor
or any of its affiliates or subsidiaries.
SECTION 2. The Plan Fee shall be paid by the Plan Funds to the Distributor
only to compensate or to reimburse the Distributor for payments or expenses
incurred pursuant to Section 1.
SECTION 3. The Plan shall not take effect with respect to a Plan Fund until
it has been approved by the vote of the initial Shareholder of such Fund.
SECTION 4. The Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of the
1940 Act or the rules and regulations thereunder) of both (a) the Trustees of
the Group, and (b) the Independent Trustees of the Group cast in person at a
<PAGE> 3
meeting called for the purpose of voting on the Plan or such agreement.
SECTION 5. The Plan shall continue in effect for a period of more than one
year after it takes effect only so long as such continuance is specifically
approved at least annually in the manner provided for approval of the Plan in
Section 4.
SECTION 6. Any person authorized to direct the disposition of monies paid or
payable by the Plan Funds pursuant to the Plan or any related agreement shall
provide to the Trustees of the Group, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
SECTION 7. The Plan may be terminated at any time by vote of a majority of
the Independent Trustees, or by vote of a majority of the outstanding Shares of
a Plan Fund.
SECTION 8. All agreements with any person relating to implementation of the
Plan shall be in writing, and any agreement related to the Plan shall provide:
(a) That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by vote of
a majority of the outstanding voting securities of the Plan Fund, on not more
than 60 days' written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of its
assignment.
SECTION 9. The Plan may not be amended to increase materially the amount of
distribution expenses of a Fund permitted pursuant to Section 1 hereof without
approval by a vote of at least a majority of the outstanding voting securities
of such Fund, and all material amendments to the Plan shall be approved in the
manner provided for approval of the Plan in Section 4.
SECTION 10. As used in the Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Group who are not interested persons of the Group,
and have no direct or indirect financial interest in the operation of the Plan
or any agreements related to it, and (b) the terms "assignment", "interested
person" and "majority of the outstanding voting securities" shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
Adopted: June 18, 1993
C-2
<PAGE> 1
EXHIBIT (15)(B)
<PAGE> 2
RULE 12B-1 AGREEMENT
THE CARDINAL GROUP
This Agreement is made this 18th day of June, 1993, between The
Cardinal Group, an Ohio business trust (the "Group"), and The Ohio Company, and
Ohio corporation (the "Company"), the distributor of shares of beneficial
interest ("Shares") of each of the investment portfolios and any additional
portfolios of the Group, as each are or will be identified in Schedule A hereto
(such investment portfolios and any additional portfolios individually referred
to herein as a "Fund" and collectively as the "Funds"). In consideration of
the mutual covenants hereinafter contained, it is hereby agreed by and between
the parties hereto as follows:
1. The Group hereby appoints the Company to render shareholder
support services to the Funds and their shareholders. Shareholder support
services may include, but are not limited to, answering shareholder questions
concerning the Funds, providing information to shareholders on their
investments in the Funds and providing such personnel and communication
equipment as is necessary and appropriate to accomplish such matters, and
providing such other services as the Group, on behalf of the Funds, may
reasonably request.
2. The Company agrees to release, indemnify and hold harmless the
Funds, the Group and the Funds' custodian from any and all direct or indirect
liabilities or losses resulting from requests, directions, actions or inactions
of or by the Company, its officers, employees or agents regarding the purchase,
redemption, transfer or registration of Shares for accounts of the Company, its
clients and shareholders.
3. The Group will pay the Company such fees as are set forth in
Schedule B hereto. The Company represents and warrants that its investments in
a Fund's Shares will be made in accordance with the Employee Retirement Income
Security Act of 1974 and any similar laws or regulations, including, but not
limited to, Prohibited Transaction Class Exemption 77-4, as may be modified,
supplemented or superseded from time to time.
4. The Group and the Company each acknowledge that either party
may enter into similar agreements with others without the consent of the other
party.
5. The Company shall prepare such quarterly reports for the Group
as shall reasonably be requested by the Group.
6. No person is authorized to make any representations concerning
a Fund or its Shares except those contained in the current prospectus of such
Fund, any such information as may be officially designated as information
supplemental to the prospectus, and advertising, sales literature and other
material approved by the Group.
<PAGE> 3
7. This Agreement is a related agreement under the Group's
Distribution and Shareholder Service Plan (the "Plan").
8. This Agreement may be terminated at any time as to a Fund,
without the payment of any penalty by the vote of a majority of the members of
the Board of Trustees of the Group who are not interested persons of the Group
and have no direct or indirect financial interest in the operation of the Plan
or in any related agreements to the Plan ("Disinterested Trustees") or by a
majority of the outstanding voting securities of the Group on not more than
sixty (60) days written notice to the parties to this Agreement.
9. This Agreement will terminate automatically in the event of
its assignment as defined in the Investment Company Act of 1940, or upon the
termination of the Distribution Agreement between the Group and the Company.
THE CARDINAL GROUP
155 East Broad Street
Columbus, Ohio 43215
Dated: June 18, 1993 By /s/ John L. Schlater
------------------------------
John L. Schlater, President
THE OHIO COMPANY
155 East Broad Street
Columbus, Ohio 43215
Dated: June 18, 1993 By /s/ H. Keith Allen
------------------------------
H. Keith Allen, Senior
Executive Vice President
- 2 -
<PAGE> 4
Dated: January __, 1996
SCHEDULE A
TO THE RULE 12B-1 AGREEMENT
BETWEEN THE CARDINAL GROUP AND THE OHIO COMPANY
June 18, 1993
<TABLE>
<CAPTION>
Name Date
---- ----
<S> <C>
Cardinal Balanced Fund June 18, 1993
Cardinal Aggressive Growth Fund June 18, 1993
The Cardinal Fund January __, 1996
Cardinal Government Obligations Fund January __, 1996
</TABLE>
THE CARDINAL GROUP
By
--------------------------------
Frank W. Siegel President
THE OHIO COMPANY
By
--------------------------------
H. Keith Allen, Senior
Executive Vice President
- 3 -
<PAGE> 5
SCHEDULE B
TO RULE 12B-1 AGREEMENT BETWEEN
THE CARDINAL GROUP AND THE OHIO COMPANY
June 18, 1993
With respect to the Funds listed in Schedule A, The Cardinal Group
will pay The Ohio Company (the "Company") a monthly fee computed at the annual
rate of 0.25% of the average aggregate net asset value of shares of each Fund
held during the period in the accounts for which the Company provides services
under the Rule 12b-1 Agreement.
For the monthly period in which the Rule 12b-1 Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis
of the number of days that the Rule 12b-1 Agreement is in effect during the
period.
- 4 -
<PAGE> 1
EXHIBIT (15)(C)
<PAGE> 2
THE OHIO COMPANY
155 East Broad Street
Columbus, Ohio 43215
Dealer No.: ___________
Effective Date: __________
The Cardinal Funds
SELECTED DEALER AGREEMENT
Ladies and Gentlemen:
The Ohio Company, an Ohio corporation (the "Company"), which is the principal
underwriter of a certain registered open-end management investment company and
the portfolios thereof (together the "Funds," or singly a "Fund"), hereby
invites the undersigned broker or dealer ("Dealer") to participate in the
distribution of shares of the Funds ("Shares") and to assist in rendering
distribution and shareholder services to the Funds on and subject to the
following terms and conditions:
Section 1. DEALER AUTHORITY. With respect to the distribution and sale of
Shares, Dealer shall have no authority to act as agent for the Funds, the
Company or any other dealer in any respect in such transactions. All orders
are subject to acceptance by the Company and become effective only upon
confirmation by the Company, and are subject to acceptance or rejection by the
Company or the appropriate Fund in its sole discretion. Dealer shall have no
authority to make any representations concerning the Shares of any Fund except
such representations as may be contained in that Fund's then current prospectus
("Prospectus"), in its then current Statement of Additional Information, and in
such other printed information as that Fund or the Company may subsequently
prepare and distribute to Dealer for purposes of selling the Shares, and Dealer
shall have no authority to distribute any other sales material relating to a
Fund or its Shares without the prior written approval of the Company.
Section 2. SALES AND PRICING OF SHARES. Dealer shall offer and sell Shares
only at their respective public offering prices, or net asset values in the
case of money market funds, if any, in accordance with the terms and conditions
of the Prospectus of the Fund whose Shares Dealer offers. An order for the
purchase of Shares shall be accepted at the time such order is received by the
Company and at the price next determined unless the order is otherwise rejected
in accordance with Section 1 above. In addition, the Company will not accept
any order from Dealer which is placed on a conditional basis or subject to any
delay or contingency prior to execution. Dealer shall place orders for Shares
only with the Company and shall date and time stamp all orders received by
Dealer and promptly shall transmit all orders to the Company in time for
processing at the price next determined after receipt of the order by Dealer,
in accordance with the Prospectus of the Fund whose Shares are being sold.
Dealer shall confirm the transaction with
<PAGE> 3
Dealer's customer at the price confirmed in writing by the Company. In the
event of difference between verbal and written price confirmations, the written
confirmations shall be considered final. Prices of the Shares are computed by
a Fund in accordance with its Prospectus.
Dealer shall place orders with the Company only through Dealer's central
order department unless the Company accepts Dealer's written Power of Attorney
authorizing others to place orders on Dealer's behalf.
Section 3. DEALER SERVICES. With respect to shareholder services, the
Company hereby appoints Dealer to render shareholder services to each of the
12b-1 Funds (as defined below). Shareholder services may include, but are not
limited to, answering routine client inquiries regarding the 12b-1 Funds;
providing information to shareholders on their investments in the 12b-1 Funds;
providing personnel and communication equipment used in connection therewith;
and providing such other services as the Company may reasonably request.
Section 4. DEALER COMPENSATION. (a) So long as this Agreement is in effect,
on purchases from the Company of Shares of a Fund sold with a sales charge,
Dealer shall receive a discount from the public offering price (a "Dealer
Concession") at the specified percentages of the public offering price set
forth in those Funds' respective Prospectuses, which are hereby incorporated
herein by reference and which may be modified from time to time by the Company.
Dealer shall not receive any Dealer Concession with respect to certain
transactions which are exempt from sales charges and will receive the reduced
Dealer Concessions which correspond to the reduced sales charges applicable to
certain types of transactions (e.g., transactions involving letters of intent
or rights of accumulation), as described more fully in the applicable Fund's
current Prospectus. Dealer shall not share or rebate any portion of such
Dealer Concessions or otherwise grant any concessions, discounts or other
allowances to any person who is not a broker or dealer actually engaged in the
investment banking or securities business and is not a member in good standing
of the National Association of Securities Dealers, Inc. ("N.A.S.D."). Dealer
will receive Dealer Concessions as described above on all purchase transactions
in shareholder accounts (excluding reinvestment of income dividends and capital
gains distributions) for which Dealer is designated as Dealer of Record except
where the Company determines that any such purchase was made with the proceeds
of a redemption or repurchase of Shares of a Fund whether or not the
transaction constitutes the exercise of the exchange or conversion privilege.
(b) In addition to the compensation described in Section 4(a) above and
subject to any limitations set forth in the N.A.S.D.'s Rules of Fair Practice,
including without limitation Rule 26, the Company will pay Dealer, with respect
to each of the Funds for which a Distribution and Shareholder Service Plan
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act"), is
- 2 -
<PAGE> 4
in place and under which a fee may be paid to broker-dealers for providing
shareholder services ("12b-1 Funds"), a monthly fee computed at the annual rate
.25% of the average aggregate net asset value of Shares of such 12b-1 Fund held
during the period in accounts for which Dealer provides services as described
in Section 3 above.
Section 5. DEALER AUTHORIZATION. Dealer hereby authorizes the Company to
act as its agent in connection with all transactions in shareholder accounts
for which Dealer is designated as Dealer of Record. All designations of Dealer
of Record and all authorizations of the Company to act as Dealer's agent shall
cease upon the termination of this Agreement or upon the shareholders'
instructions to transfer his or her account to another Dealer of Record.
Section 6. PAYMENT FOR SHARES. Payment for all Shares purchased from the
Company by Dealer shall be made to The Fifth Third Bank, Cincinnati, Ohio, as
custodian for each of the Funds (the "Custodian"), and shall be received by the
Custodian for the account of the applicable Fund within three business days
after the acceptance of Dealer's order or by the end of one business day
following receipt of a customer's payment for such Shares, whichever is the
later date. If such payment is not so received by the Custodian, the Company
and the Funds reserve the right, without notice, to immediately cancel the
sale, or, at the Company's option, to sell the Shares ordered by Dealer back to
the Fund in which latter case, the Company may hold Dealer responsible for any
loss, including loss of profit, suffered by the Company or by the Fund
resulting from Dealer's failure to make payment as described above.
Section 7. PURCHASE OF SHARES. Dealer shall purchase Shares of the Fund
only from the Company or from Dealer's customers. If Dealer purchases Shares
from the Company, Dealer agrees that all such purchases shall be made only to
cover orders already received by Dealer from Dealer's customers, or for
Dealer's own bona fide investment without a view to resale. If Dealer
purchases Shares from Dealer's customers, Dealer agrees to pay such customers
the applicable net asset value per share less any contingent deferred sales
charge that would be applicable in such Shares were then tendered for
redemption in accordance with the applicable Prospectus ("Repurchase Price").
Section 8. LIMITATION ON SALE OF SHARES. Dealer shall sell Shares only:
(a) to the Dealer's customers at the prices described in Section 2 above;
or
(b) to the Company as agent for the Fund at the Repurchase Price. In such
sale to the Company, Dealer may act either as principal for Dealer's own
account or as agent for Dealer's customer. If Dealer acts as principal for
Dealer's own account in purchasing Shares for resale to the Company, Dealer
agrees to pay Dealer's customer not
- 3 -
<PAGE> 5
less than nor more than the Repurchase Price which Dealer received from the
Company. If Dealer acts as agent for Dealer's customer in selling Shares to
the Company, Dealer agrees not to charge Dealer's customer more than a fair
commission for handling the transaction.
Section 9. DEALER'S REPRESENTATIONS AND WARRANTIES. Dealer hereby
represents and warrants to the Company that:
(a) Dealer is willing and possesses the legal authority to provide the
services contemplated by this Agreement without violation of applicable
laws;
(b) Dealer is and shall remain throughout the term of the Agreement a
member in good standing of the N.A.S.D. and shall immediately notify the
Company should it cease to be a member of the N.A.S.D.;
(c) Dealer is and shall remain throughout the term of this Agreement a
broker-dealer duly and properly registered and qualified under all
applicable laws, rules and regulations, including, but not limited to, all
state and federal securities laws, rules and regulations, as may be
necessary or appropriate for Dealer to perform and observe all of its
duties, obligations and covenants set forth or contemplated by this
Agreement;
(d) Dealer shall throughout the term of this Agreement comply with the
requirements of all applicable laws, rules and regulations, including, but
not limited to, federal and state securities laws, the rules, regulations
and orders of the Securities and Exchange Commission and the N.A.S.D., in
performing and observing all of its duties, obligations and covenants set
forth or contemplated by this Agreement;
(e) Dealer shall not withhold placing with the Company orders received
from Dealer's customers so as to profit itself as a result of such
withholding;
(f) Dealer shall not offer Shares of any Fund in any state where such
Shares are not qualified for sale under the Blue Sky Laws and Regulations of
such state or where Dealer is not qualified to act as a dealer, except in
appropriate circumstances when under state laws and regulations the Shares
or the sales transactions are exempt from qualification or dealer
registration is not required; and
(g) Dealer shall give the Company at least 30 days advance written notice
of any event which will cause an "assignment" of this Agreement (as defined
in the 1940 Act) by Dealer or its affiliates.
- 4 -
<PAGE> 6
Section 10. REFUND OF COMPENSATION. If any Shares sold to Dealer under the
terms of this Agreement are repurchased by the Fund, or are tendered for
redemption, within seven business days after the date of the Company's
confirmation of the original purchase by Dealer, Dealer shall promptly refund
to the Company the full Dealer Concession received by Dealer pursuant to
Section 4(a) above.
Section 11. INDEMNIFICATION. Dealer shall indemnify and hold harmless the
Company, its affiliates and the Funds against any losses, claims, damages,
liabilities or expenses (including reasonable attorneys' fees and expenses)
resulting from (a) any negligence or misfeasance of Dealer or any of its
officers, directors, employees or agents; or (b) any violation of any law, rule
or regulation or any failure to perform or observe any obligations of Dealer
set forth in this agreement by Dealer or any of its officers, directors,
employees or agents.
Section 12. REPORTS. Dealer shall prepare such quarterly reports for the
Company as shall reasonably be required by the Company.
Section 13. PROVISION OF SALES MATERIAL. The Company shall deliver to
Dealer without charge reasonable quantities of the Funds' Prospectuses with any
supplements thereto currently in effect, copies of current shareholder reports
of the respective Funds, and sales material issued by the Company from time to
time.
Section 14. RULE 12B-1 AGREEMENT; TERMINATION. This Agreement is a related
agreement under the Distribution and Shareholder Service Plans as adopted by
the 12b-1 Funds (collectively, the "Plan"). This Agreement may be terminated
as to a 12b-1 Fund at any time, without the payment of any penalty, by the vote
of a majority of the members of the Board of Trustees of such 12b-1 Fund who
are not interested persons of such 12b-1 Fund and have no direct or indirect
financial interest in the operation of the Plan or in any related agreements to
the Plan ("Disinterested Trustees") or by a majority of the outstanding voting
securities of the 12b-1 Fund upon delivery of written notice thereof to the
parties to this Agreement. This Agreement will terminate as to a 12b-1 Fund
automatically in the event of its assignment as defined in the 1940 Act, or
upon the termination of the Distribution Agreement between such 12b-1 Fund and
the Company. In addition, both the Company and Dealer may terminate this
Agreement upon 10 days' prior written notice to the other party.
Section 15. COMPLETE AGREEMENT. This Agreement supersedes and cancels any
prior agreement with respect to the sale of Shares of any Fund and may be
amended at any time and from time to time by written agreement of the parties
hereto.
Section 16. CHOICE OF LAW. This Agreement shall be effective upon
acceptance by the Company in Columbus, Ohio, and all sales hereunder are to be
made, and title to Shares shall pass, in Columbus, Ohio. This Agreement is made
in the State of Ohio and shall be interpreted in accordance with the laws of
Ohio. Each party repre-
- 5 -
<PAGE> 7
sents that the undersigned has authority to act, and to execute this Agreement,
on behalf of such party.
Section 17. NOTICES. All communications and notices to the Company should
be sent to the above address. Any communications or notice to Dealer shall be
duly given if mailed or delivered to Dealer at the address specified by Dealer
below.
Very truly yours,
THE OHIO COMPANY
The undersigned Dealer hereby accepts the Company's invitation to participate
in the distribution of the Funds' Shares and agrees to be bound by and comply
with the terms and conditions of this Agreement as set forth above.
_____________________________________
Firm
By _________________________________
Officer of Partner
____________________________________
Date: __________________________
____________________________________
(Address)
States in which Shares will be offered for sale by Dealer:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Accepted:
THE OHIO COMPANY
By _____________________________
Date: __________________________
- 6 -
<PAGE> 1
EXHIBIT 19(a)
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our firm
under the caption of "LEGAL COUNSEL AND INDEPENDENT AUDITORS" included in or
made a part of the Registration Statement on Form N-1A, filed under the
Securities Act of 1933, as amended, of The Cardinal Group.
BAKER & HOSTETLER
Columbus, Ohio
October 26, 1995
<PAGE> 1
EXHIBIT (19)(B)
<PAGE> 2
POWER OF ATTORNEY
Frank W. Siegel, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ FRANK W. SIEGEL
------------------------------
FRANK W. SIEGEL
<PAGE> 3
POWER OF ATTORNEY
H. Keith Allen, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ H. KEITH ALLEN
------------------------------
H. KEITH ALLEN
<PAGE> 4
POWER OF ATTORNEY
Gordon B. Carson, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ GORDON B. CARSON
------------------------------
GORDON B. CARSON
<PAGE> 5
POWER OF ATTORNEY
John B. Gerlach, Jr., whose signature appears below, does hereby constitute
and appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ JOHN B. GERLACH, JR.
------------------------------
JOHN B. GERLACH, JR.
<PAGE> 6
POWER OF ATTORNEY
Michael J. Knilans, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ MICHAEL J. KNILANS
------------------------------
MICHAEL J. KNILANS
<PAGE> 7
POWER OF ATTORNEY
James I. Luck, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ JAMES I. LUCK
----------------------------
JAMES I. LUCK
<PAGE> 8
POWER OF ATTORNEY
David L. Nelson, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ DAVID L. NELSON
-------------------------------
DAVID L. NELSON
<PAGE> 9
POWER OF ATTORNEY
C. A. Peterson, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ C. A. PETERSON
------------------------------
C. A. PETERSON
<PAGE> 10
POWER OF ATTORNEY
Lawrence H. Rogers II, whose signature appears below, does hereby constitute
and appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ LAWRENCE H. ROGERS II
------------------------------
LAWRENCE H. ROGERS II
<PAGE> 11
POWER OF ATTORNEY
John L. Schlater, whose signature appears below, does hereby constitute and
appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ JOHN L. SCHLATER
------------------------------
JOHN L. SCHLATER
<PAGE> 12
POWER OF ATTORNEY
Joseph H. Stegmayer, whose signature appears below, does hereby constitute
and appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ JOSEPH H. STEGMAYER
--------------------------------
JOSEPH H. STEGMAYER
<PAGE> 13
POWER OF ATTORNEY
James M. Schrack II, whose signature appears below, does hereby constitute
and appoint H. Keith Allen, James M. Schrack II and Frank W. Seigel, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to
enable The Cardinal Group (the "Fund") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as amended ("Acts"),
and any rules, regulations or requirements of the Securities and Exchange
Commission in respect thereof, in connection with the filing and effectiveness
of the Fund's Registration Statements on Form N-1A and Form N-14 pursuant to
said Acts and any and all amendments thereto (including pre- and post-effective
amendments), including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as trustee and/or officer of the Fund such Registration
Statement(s) and any and all such amendments filed with the Securities and
Exchange Commission under any Acts and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or any of them, shall do or cause to be done by
virtue thereof.
Dated: October 20, 1995 /s/ JAMES M. SCHRACK II
-------------------------------
JAMES M. SCHRACK II
