<PAGE> 1
As filed with the Securities
and Exchange Commission on April 26, 1996
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. 5 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 6 /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)
-----
X on May 1, 1996 pursuant to paragraph (b)
-----
60 days after filing pursuant to paragraph (a)(1)
-----
on (date) pursuant to paragraph (a)(1)
-----
75 days after filing pursuant to paragraph (a)(2)
-----
on (date) pursuant to paragraph (a)(2) of Rule 485
-----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
----- previously filed post-effective amendment.
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 1, 1995, the Registrant filed its Rule 24f-2
Notice with respect to the fiscal year ended September 30, 1995.
<PAGE> 2
THE CARDINAL FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND
Three Funds of
The Cardinal Group
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) .......................................... "Financial Highlights"
(b) .......................................... "Financial Highlights"
(c) .......................................... "Performance Information"
(d) .......................................... "Performance Information"
4.(a)(i)(A) .................................... "What Are The Funds?"
(i)(B) .................................... "What Are The Funds?"
(ii) ....................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(A) .................................... *
(ii)(B)(1) ................................. "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(B)(2) ................................. *
(ii)(C) .................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(D) .................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(b)(i) ....................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii) ........................................ "What Are The Investment Objectives
And Policies Of The Funds?"
(c) .......................................... "What Are The Investment Objectives
and Policies Of The Funds?"
5.(a) .......................................... "Who Manages My Investment In The
Funds?"
(b)(i) ....................................... "Who Manages My Investment In The
Funds?"
(b)(ii) ...................................... "Who Manages My Investment In The
Funds?"
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
(b)(iii) .................................... "Who Manages My Investment In The
Funds?"
(c) ......................................... "Who Manages My Investment In The
Funds?"
(d) ......................................... "Who Manages My Investment In The
Funds?"
(e) ......................................... "Who Manages My Investment In The
Funds?"
(f) ......................................... "Who Manages My Investment In The
Funds?"
(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) ......................................... "Do The Funds Pay Federal Income Tax?";
"What About My Taxes?"
7.(a) ......................................... "How Do I Purchase Shares Of The Funds?"
(b) ......................................... "How Do I Purchase Shares Of The Funds?";
"How Is Net Asset Value Calculated?"
(c) ......................................... "How May I Qualify For Quantity Discounts?"
(d) ......................................... "How Do I Purchase Shares Of The Funds?"
(e) ......................................... "Who Manages My Investment In The Funds?"
(f) ......................................... "Who Manages My Investment In The Funds?"
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. ........................................... *
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- ii -
<PAGE> 4
PROSPECTUS----------------------------------------------------------------------
[LOGO]
THE CARDINAL FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND
The Cardinal Fund, Cardinal Balanced Fund (the "Balanced Fund") and Cardinal
Aggressive Growth Fund (the "Aggressive Growth Fund") (together called the
"Funds" or individually a "Fund") are three separate diversified investment
funds of The Cardinal Group (the "Group"), an open-end, management investment
company. The Trustees of the Group have divided each Fund's beneficial ownership
into an unlimited number of transferable units called shares (the "Shares").
The Cardinal Fund's investment objectives are long-term growth of capital and
income. Current income is a secondary objective. The Cardinal Fund seeks to
achieve its objectives through selective participation in the long-term progress
of businesses and industries. The policy of The Cardinal Fund is generally to
invest in equity securities.
The Balanced Fund's investment objectives are current income and long-term
growth of both capital and income.
The Aggressive Growth Fund's investment objective is appreciation of capital.
The Aggressive Growth Fund intends to invest primarily in common stocks and
securities convertible into common stocks.
There can be no assurance that any of the Funds' investment objectives will be
achieved.
THE SHARES OF THE FUNDS 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 A FUND INVOLVES CERTAIN
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
The Prospectus relates only to The Cardinal Fund, the Balanced Fund and the
Aggressive Growth Fund, currently three of six funds of the Group. Interested
persons who wish to obtain prospectuses of Cardinal Government Obligations Fund,
Cardinal Government Securities Money Market Fund or Cardinal Tax Exempt Money
Market Fund should contact The Ohio Company. Additional information about the
Funds, contained in a Statement Of Additional Information dated May 1, 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 Group at the above address or by calling the phone number provided
above.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing in any of the Funds. 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.
[LOGO]
The date of this Prospectus is May 1, 1996.
- --------------------------------------------------------------------------------
<PAGE> 5
- --------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES.......... THE CARDINAL FUND seeks long-term growth of capital and
income. Current income is a secondary objective. (See
page 9.)
THE BALANCED FUND seeks current income and long-term
growth of both capital and income. (See page 9.)
THE AGGRESSIVE GROWTH FUND seeks appreciation of capital.
(See page 9.)
INVESTMENT POLICIES............ THE CARDINAL FUND generally invests in equity securities
which are growth oriented. (See page 9.)
Under normal market conditions, the BALANCED FUND will
invest in common stocks, preferred stocks, fixed income
securities and securities convertible into common stocks.
At least 25% of the value of the Balanced Fund's assets
will be invested in fixed income senior securities. (See
pages 9 through 12.)
The AGGRESSIVE GROWTH FUND will invest primarily in
common stocks and securities convertible into common
stocks of growth-oriented companies. (See page 12.)
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
such Fund at no charge. (See page 20.)
RISK FACTORS AND SPECIAL
CONSIDERATIONS............... An investment in a mutual fund such as any of the Funds
involves a certain amount of risk and may not be suitable
for all investors. Some investment policies of the Funds
may entail certain risks. (See "WHAT ARE THE INVESTMENT
OBJECTIVES AND POLICIES OF THE FUNDS? -- Risk Factors and
Investment Techniques" on pages 13 through 16.)
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
PURCHASES...................... There is a minimum initial investment of $1,000 with
subsequent minimums of $50. (See page 17.) 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 18) and waived for certain purchasers for
whom The Ohio Company serves as a trustee or investment
adviser. (See page 18.)
REDEMPTIONS.................... Shares can be redeemed at net asset value per share
without charge, if redeemed through the Funds'
distributor, The Ohio Company. (See page 20.)
INVESTMENT ADVISER AND
MANAGER...................... Cardinal Management Corp. (the "Adviser"), a wholly-owned
subsidiary of The Ohio Company, is the Funds' investment
adviser. The Adviser also serves as investment adviser
for Cardinal Government Obligations Fund, Cardinal
Government Securities Money Market Fund and Cardinal Tax
Exempt Money Market Fund (collectively, with the Funds,
the "Cardinal Funds"). (See page 24.)
</TABLE>
3
<PAGE> 7
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE AGGRESSIVE
CARDINAL BALANCED GROWTH
FUND FUND FUND
-------- -------- ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)................................... 4.50% 4.50% 4.50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees......................................... .60% .75% .75%
12b-1 Fees After Fee Waiver(1).......................... 0 0 0
Other Expenses.......................................... .21 .96 1.25
---- ---- ----
Total Fund Operating Expenses................... .81% 1.71% 2.00%
==== ==== ====
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cardinal Fund........................... $ 53 $ 70 $ 88 $141
Balanced Fund........................... $ 62 $ 96 $134 $238
Aggressive Growth Fund.................. $ 64 $105 $148 $267
</TABLE>
(1) The Ohio Company, as the Funds' 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
1.06% for the Cardinal Fund, 0.25% and 1.96% for the Balanced Fund, and
0.25% and 2.25% for the Aggressive Growth Fund, respectively.
The purpose of the above table is to assist a potential purchaser of a 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
FUNDS?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Funds. The example and expenses above
reflect current fees. 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> 8
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1995 through 1986, with respect to The Cardinal Fund, and
the two fiscal years ended September 30, 1995 and 1994, and the period from June
24, 1993, through September 30, 1993, with respect to the Balanced Fund and the
Aggressive Growth Fund, have been audited by KPMG Peat Marwick LLP, independent
auditors, whose reports thereon, together with certain financial statements, are
contained in the Funds' Statement of Additional Information and may be obtained
by shareholders and prospective investors.
The following Financial Highlights for The Cardinal Fund reflect the operations
of The Cardinal Fund Inc. ("TCFI"), The Cardinal Fund's predecessor. On May 1,
1996, The Cardinal Fund acquired all of the assets and liabilities of TCFI and
is deemed to have succeeded to the financial and performance history of TCFI.
FINANCIAL HIGHLIGHTS FOR EACH SHARE OF BENEFICIAL INTEREST
OUTSTANDING THROUGHOUT EACH PERIOD
THE CARDINAL FUND
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, Beginning of period............ $ 12.73 $ 12.91 $ 12.95 $ 11.88 $ 9.28 $ 11.75
Income from investment operations:
Net investment income......................... .36 .31 .32 .35 .35 .42
Net gains or losses on securities (both
realized and unrealized).................... 1.32 .12 .55 1.37 2.70 (1.87)
-------- -------- -------- -------- -------- --------
Total from investment operations.............. 1.68 .43 .87 1.72 3.05 (1.45)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)........ (.35) (.33) (.29) (.36) (.38) (.53)
Distributions (from capital gains)............ (.83) (.28) (.62) (.29) (.07) (.49)
Returns of capital............................ -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions........................... (1.18) (.61) (.91) (.65) (.45) (1.02)
Net asset value, End of period.................. $ 13.23 $ 12.73 $ 12.91 $ 12.95 $ 11.88 $ 9.28
========= ========= ========= ========= ========= =========
Total Return**.................................. 14.84% 3.38% 6.98% 15.05% 33.54% (13.42)%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted....... $226,181 $246,581 $282,125 $261,392 $221,428 $168,184
Ratio of expenses to average net assets....... 0.70% 0.72% 0.68% 0.67% 0.67% 0.74%
Ratio of net investment income to average net
assets...................................... 2.89% 2.40% 2.46% 2.83% 3.15% 3.98%
Portfolio Turnover Rate....................... 19.78% 23.20% 11.11% 6.22% 33.27% 27.10%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1989 1988 1987 1986
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, Beginning of period................................. $ 10.38 $ 11.73 $ 10.35 $ 8.55
Income from investment operations:
Net investment income.............................................. .41 .37 .33 .22
Net gains or losses on securities (both realized and unrealized)... 1.73 (.82) 2.05 2.37
-------- -------- -------- --------
Total from investment operations................................... 2.14 (.45) 2.38 2.59
-------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............................. (.39) (.47) (.28) (.23)
Distributions (from capital gains)................................. (.38) (.43) (.72) (.56)
Returns of capital................................................. -- -- -- --
-------- -------- -------- --------
Total Distributions................................................ (.77) (.90) (1.00) (.79)
Net asset value, End of period....................................... $ 11.75 $ 10.38 $ 11.73 $ 10.35
========= ========= ========= =========
Total Return**....................................................... 22.04% (3.46)% 25.00% 32.56%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............................ $174,158 $130,978 $136,619 $ 84,972
Ratio of expenses to average net assets............................ 0.70% 0.73% 0.75% 0.89%
Ratio of net investment income to average net assets............... 3.93% 3.77% 3.32% 3.12%
Portfolio Turnover Rate............................................ 23.20% 12.3% 13.2% 10.3%
</TABLE>
- ---------------
* The Information included in the Financial Highlights for the Cardinal Fund
has been restated to reflect a three-for-two stock split made on January
11, 1990.
** The total return figure does not reflect the imposition of the maximum
front-end sales load.
5
<PAGE> 9
THE BALANCED FUND
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 24, 1993
(DATE OF
YEARS ENDED SEPTEMBER 30, COMMENCEMENT OF
------------------------- OPERATIONS) THROUGH
1995 1994 SEPTEMBER 30, 1993*
------- ------- -------------------
<S> <C> <C> <C>
Net asset value, Beginning of period............. $ 9.90 $ 10.13 $ 10.00
------- ------- -------
Income from investment operations:
Net investment income.......................... 0.34 0.23 0.02
Net gains or losses on securities (both
realized and unrealized).................... 1.67 (0.20) 0.12
------- ------- -------
Total from investment operations............... 2.01 0.03 0.14
------- ------- -------
Less Distributions:
Dividends (from net investment income)......... (0.35) (0.23) (0.01)
Distributions (from capital gains)............. (0.04) (0.03) --
Returns of capital............................. -- -- --
------- ------- -------
Total Distributions............................ (0.39) (0.26) (0.01)
------- ------- -------
Net asset value, End of period................... $ 11.52 $ 9.90 $ 10.13
======= ======= =======
Ratios/Supplemental Data:
Total Return****................................. 20.76%*** 0.37% 1.40%**
Net assets, End of period (000) omitted........ $14,535 $13,973 $10,811
Ratio of expenses to average net assets........ 1.94%*** 2.07% 0.70%
Ratio of net investment income to average net
assets...................................... 3.24%*** 2.44% 0.35%
Portfolio Turnover Rate........................ 37.62% 59.09% 60.67%
</TABLE>
- ---------------
* Commencement of operations.
** This total return figure reflects aggregate total return. Aggregate total
return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of
annualized.
*** Effective September 15, 1995, The Ohio Company began waiving payments under
the Distribution and Shareholder Service Plan. Had the payments been
charged, the 1995 total return, ratio of expenses to average net assets,
and ratio of net investment income to average net assets would have been
20.75%, 1.95%, and 3.23%, respectively.
**** The total return figure does not reflect the imposition of the maximum
front-end sales load.
6
<PAGE> 10
THE AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 24, 1993
(DATE OF
YEARS ENDED SEPTEMBER 30, COMMENCEMENT OF
------------------------- OPERATIONS) THROUGH
1995 1994 SEPTEMBER 30, 1993*
------- ------- -------------------
<S> <C> <C> <C>
Net asset value, Beginning of period............. $ 9.94 $ 10.47 $10.00
------- ------- ------
Income (Loss) from investment operations:
Net investment loss............................ (0.10) (0.13) (0.03)
Net gains or losses on securities (both
realized and unrealized).................... 2.53 (0.36) 0.50
------- ------- ------
Total from investment operations............... 2.43 (0.49) 0.47
------- ------- ------
Less Distributions:
Dividends (from net investment loss)........... -- -- --
Distributions (from capital gains)............. -- (0.04) --
Returns of capital............................. -- -- --
------- ------- ------
Total Distributions............................ 0 (0.04) 0
------- ------- ------
Net asset value, End of period................... $ 12.37 $ 9.94 $10.47
======= ======= ======
Ratios/Supplemental Data:
Total Return****................................. 24.35%*** (4.74%) 4.70%**
Net assets, End of period (000) omitted........ $10,434 $ 9,460 $6,320
Ratio of expenses to average net assets***..... 2.24%*** 2.51% 0 .91%
Ratio of net investment loss to average net
assets***................................... (0.92%)*** (1.50%) (0.53%)
Portfolio Turnover Rate........................ 80.35% 95.70% 31.15%
</TABLE>
- ---------------
* Commencement of operations.
** This total return figure reflects aggregate total return. Aggregate total
return is calculated similarly to average annual total return except that
the return figure is aggregated over the relevant period instead of
annualized.
*** Effective September 15, 1995, The Ohio Company began waiving payments under
the Distribution and Shareholder Service Plan. Had the payments been
charged, the 1995 total return, ratio of expenses to average net assets,
and ratio of net investment loss to average net assets would have been
24.34%, 2.25%, and (0.93%), respectively.
**** The total return figure does not reflect the imposition of the maximum
front-end sales load.
See notes to financial statements appearing in the Funds' Statement of
Additional Information.
Pursuant to certain Revolving Credit Agreements with The Fifth Third Bank, each
Fund may borrow money from The Fifth Third Bank subject to certain limitations.
The table below sets forth certain information concerning loans made to TCFI (as
predecessor to the Cardinal Fund) and to the Balanced Fund. The Aggresive Growth
Fund has not yet borrowed from The Fifth Third Bank under such Agreement.
THE CARDINAL FUND
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
YEAR ENDED OUTSTANDING AT END DEBT OUTSTANDING OUTSTANDING DURING DEBT PER SHARE
SEPTEMBER 30, OF PERIOD DURING THE PERIOD THE PERIOD DURING THE PERIOD
- ------------------ ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1995 $0 $ 0 19,004,227 $ 0
1994 $0 $4,565 20,614,531 $0.0002214
1993 $0 $1,018 21,018,555 $0.0000484
</TABLE>
THE BALANCED FUND
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
YEAR ENDED OUTSTANDING AT END DEBT OUTSTANDING OUTSTANDING DURING DEBT PER SHARE
SEPTEMBER 30, OF PERIOD DURING THE PERIOD THE PERIOD DURING THE PERIOD
- ------------------ ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1995 $0 $ 0 1,285,211 $ 0
1994 $0 $532 1,239,389 $0.0004292
</TABLE>
7
<PAGE> 11
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time each Fund may advertise its average annual total return,
cumulative total return and/or yield. SUCH TOTAL RETURN FIGURES AND YIELD
FIGURES ARE BASED UPON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE
FUTURE PERFORMANCE. The average annual total return advertised by a Fund refers
to the return generated by an investment in that Fund over certain specified
periods since the establishment of such 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 total 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 a Fund's net investment income per share earned during a
recent one-month period by such 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 total return and yield
advertised would be higher.
In addition, from time to time the Balanced Fund may include in its sales
literature and shareholder reports a quote of the current "distribution" rate
for such 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 Balanced 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 Balanced 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 a 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. and Morningstar, 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 a
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 a Fund is contained in that Fund's
Annual Report to Shareholders which may be obtained without charge by contacting
the Group at the telephone number set forth on the cover page of this
Prospectus.
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WHAT ARE THE FUNDS?
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Each 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 Cardinal Fund
was organized for the purposes of acquiring all of the assets and liabilities
TCFI to effect a reorganization of TCFI from a stand alone investment company to
a separate series of the Group (the "Reorganization"). The Reorganization was
effected as of May 1, 1996.
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WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?
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IN GENERAL
The investment objectives of The Cardinal Fund are to achieve long-term growth
of capital and income. Current income is a secondary objective. The Cardinal
Fund seeks to achieve its objectives through selective participation in the
long-term progress of businesses and industries.
The investment objectives of the Balanced Fund are to seek current income and
long-term growth of both capital and income. The Balanced Fund intends to invest
based on combined considerations of risk, income and capital enhancement.
The investment objective of the Aggressive Growth Fund is to seek appreciation
of capital. The Aggressive Growth Fund will invest primarily in common stocks
and securities convertible into common stocks of growth oriented companies.
The investment objectives of each Fund are fundamental policies and as such may
not be changed without a vote of the holders of a majority of the outstanding
Shares of that Fund (as defined below under "WHAT ARE MY RIGHTS AS A
SHAREHOLDER?"). No Fund is intended to provide a complete and balanced
investment program for an investor. There can be no assurance that the
investment objectives of any Fund will be achieved.
THE CARDINAL FUND
The policy of The Cardinal 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 Cardinal 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 Cardinal 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 Cardinal Fund's equity position
should be reduced. At such times, and otherwise for cash management purposes,
The Cardinal 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.
THE BALANCED FUND
Under normal market conditions the Fund will invest in common stocks, preferred
stocks, fixed income securities and securities convertible into common stocks
(i.e., warrants, rights, convertible preferred stock, fixed rate preferred stock
and convertible fixed-income securities). At least 25% of the value of the
Balanced Fund's assets will be invested in fixed income senior securities. For
purposes of compliance with such 25% limitation, only that portion of any
convertible senior security attributable to its fixed income characteristics
will be used. By investing primarily in common stocks the Balanced Fund will
pursue its objectives of long-term growth of both capital and income. However,
the Balanced Fund, through its fixed-income and convertible securities as well
as the dividend attributes of certain of its common and preferred stock holdings
will place considerable emphasis on generating current income.
The common and preferred stocks and securities convertible into common stocks
will be selected if the Adviser believes that such securities can contribute to
the Balanced Fund's objectives of providing current income and growth in income
and/or long-term growth of capital. The Balanced Fund will invest in the common
and preferred stocks and securities convertible into common stocks of domestic
issuers and foreign issuers (subject to the limitations described below), with
market capitalizations of not less than $10 million and which are traded either
in established over-the-counter markets or on national exchanges.
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The Adviser will select convertible securities primarily upon its evaluation
that the underlying common stocks meet the criteria for selection of common
stocks as described above. The Balanced Fund may invest up to 10% of its net
assets in non-investment grade convertible debt securities rated no lower than
"B" by an appropriate nationally recognized statistical rating organization (an
"NRSRO") or in unrated securities which are deemed by the Adviser to be of
comparable quality. Non-investment grade securities are commonly referred to as
high yield or high risk securities. High yield, high risk securities are
generally riskier than higher quality securities and are subject to more credit
risk, including risk of default, and volatility than higher quality securities.
In addition, such securities have less liquidity and experience more price
fluctuation than higher quality securities.
Convertible debt securities which are rated "B" by Moody's Investor Services
("Moody's") generally lack characteristics of a desirable investment, since the
assurance of interest and principal payments or maintenance of other terms of
the contract over any long period of time may be small. Debt rated "B" by
Standard & Poor's Corporation ("S&P") is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. While such debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. In the event that a
convertible debt security's rating falls below a "B" by the appropriate NRSROs,
the Adviser will reevaluate the security in order to determine whether to sell
or convert, if possible, such security. In such an event, however, the Balanced
Fund would not be required to liquidate such security if it would suffer a loss
on the sale of such security.
The Balanced Fund's fixed income senior securities consist of bonds, debentures,
notes, zero-coupon securities, mortgage-related securities, obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities,
certificates of deposit, time deposits, high quality commercial paper and
bankers' acceptances. The Balanced Fund may also invest in repurchase
agreements.
The Balanced Fund expects to invest in a variety of bills, notes and bonds
issued by the U.S. Treasury, differing in their interest rates, maturities, and
times of issuance, as well as "stripped" U.S. Treasury obligations such as
Treasury Receipts issued by the U.S. Treasury representing either future
interest or principal payments, and other obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities. Stripped securities
are issued at a discount to their "face value" and may exhibit greater price
volatility than ordinary debt securities because of the manner in which their
principal and interest are returned to investors. Certain of such U.S.
Government obligations may have variable or floating rates of interest, whose
value on the adjustment of its interest rate can reasonably be expected to
approximate its par value. However, in the event the interest rate of such
security is tied to an index or interest rate that may from time to time lag
behind other market interest rates, there is the risk that such security's
market value, upon adjustment of its interest rate, will not approximate its par
value. Obligations of certain agencies and instrumentalities of the U.S.
Government, such as 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 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 Balanced 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.
The Balanced Fund also expects to invest in bonds, notes and debentures of U.S.
corporate issuers. Such obligations, in the case of debentures, will represent
unsecured promises to pay, in the case of notes and bonds, may be secured by
mortgages on real property or security interests in personal property and will
in most cases differ in their interest rates, maturities and times of issuance.
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The Balanced Fund will invest only in corporate fixed income senior securities
which are rated at the time of purchase within the four highest rating groups
assigned by an appropriate NRSRO (which are considered to be investment grade)
or, if unrated, which the Adviser deems present attractive opportunities and are
of comparable quality. For a description of the rating symbols of the NRSROs,
see the Appendix to the Statement of Additional Information. For a discussion of
debt securities rated within the fourth highest rating group assigned by an
NRSRO, see "Risk Factors and Investment Techniques -- General" below.
Under normal market conditions, the Balanced Fund may hold up to 10% of the
value of its total assets in short-term obligations (with maturities of 12
months or less) consisting of domestic commercial paper, bankers' acceptances,
certificates of deposit and time deposits of U.S. banks and repurchase
agreements. The Balanced Fund may also invest in securities of other investment
companies, as further described below, and in income participation loans.
The Balanced Fund may invest in obligations of the Export-Import Bank of the
United States, in U.S. dollar denominated international securities for which the
primary trading market is in the United States ("Yankee Securities"), or for
which the primary trading market is abroad ("Eurodollar Securities"), and in
Canadian Bonds and bonds issued by institutions organized for a specific
purpose, such as the World Bank and the European Economic Community, by two or
more sovereign governments ("Supranational Agency Bonds").
The Balanced Fund may also invest in mortgage-related securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities or by
nongovernmental entities which are rated, at the time of purchase, within the
four highest bond rating categories assigned by an appropriate NRSRO, or, if
unrated, which the Adviser deems present attractive opportunities and are of
comparable quality. Under normal market conditions, the Balanced Fund's
investment in mortgage-related securities will not exceed 25% of the value of
its total assets. Such mortgage-related securities 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 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-
throughs 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 obligations are repaid. The opposite
is true for pass-throughs purchased at a discount. The Balanced Fund may
purchase mortgage-related securities at a premium or 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.
Also included among the mortgage-related securities that the Balanced Fund may
purchase are collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by the Government National Mortgage
Association, the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association, and their income streams. Certain CMOs and REMICs are
issued by private issuers. Such securities may be eligible for
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<PAGE> 15
purchase by the Balanced Fund if (1) the issuer has obtained an exemptive order
from the Securities and Exchange Commission regarding purchases by investment
companies of equity interests of other investment companies or (2) such purchase
is within the limitations imposed by Section 12 of the 1940 Act.
The Balanced Fund may also invest in asset-backed securities such as
Certificates of Automobile Receivables ("CARS") and Certificates of Amortized
Revolving Debts ("CARDS"), each of which must be rated at the time of purchase
within the four highest rating groups assigned by Moody's or S&P. For a
description of the fourth highest rating group, see "Risk Factors and Investment
Techniques" below.
The amount invested in stocks, bonds and short-term obligations may be varied
from time to time, depending upon the Adviser's assessment of business, economic
and market conditions, including any potential advantage of price shifts between
the stock market and the bond market. The Balanced Fund reserves the right to
hold short-term securities in whatever proportion deemed desirable for temporary
defensive periods during adverse market conditions as determined by the Adviser.
However, to the extent that the Balanced Fund is so invested, its investment
objectives may not be achieved during that time.
THE AGGRESSIVE GROWTH FUND
In determining the securities to be purchased by the Aggressive Growth Fund,
emphasis will be placed on securities of companies which, in the opinion of the
Adviser, are growth oriented and exhibit the potential for above-average growth
in earnings. The securities to be purchased by the Aggressive Growth Fund are
traded either in established over-the-counter markets or on national exchanges
and are issued by companies having a market capitalization of at least $10
million.
The Adviser will select convertible securities primarily upon its evaluation
that the underlying common stocks meet the criteria for selection of common
stocks as described above. The Aggressive Growth Fund may invest up to 10% of
its net assets in non-investment grade convertible debt securities rated no
lower than B by an appropriate nationally recognized statistical rating
organization (an "NRSRO") or in unrated securities which are deemed by the
Adviser to be of comparable quality. Non-investment grade securities are
commonly referred to as high yield or high risk securities. High yield, high
risk securities are generally riskier than higher quality securities and are
subject to more credit risk, including risk of default, and volatility than
higher quality securities. In addition, such securities may have less liquidity
and experience more price fluctuation than higher quality securities.
Convertible debt securities which are rated B by Moody's Investor Services
generally lack characteristics of a desirable investment, since the assurance of
interest and principal payments or maintenance of other terms of the contract
over any long period of time may be small. Debt rated B by Standard & Poor's
Corporation is regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance with the terms of
the obligation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. In the event that a convertible debt security's
rating falls below a "B" by the appropriate NRSROs, the Adviser will reevaluate
the security in order to determine whether to sell or convert, if possible, such
security. In such an event, however, the Aggressive Growth Fund would not be
required to liquidate such security if it would suffer a loss on the sale of
such security.
The Aggressive Growth Fund will, under normal market conditions, be invested
fully in common stocks and securities convertible into common stocks and may
engage in the investment techniques more fully described below. However, for
cash management purposes the Adviser may invest a portion of the Aggressive
Growth Fund's assets in short-term fixed income securities, consisting of
commercial paper, bankers' acceptances, certificates of deposit, obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, demand and time deposits of domestic banks, repurchase
agreements and securities of other investment companies, as described below.
During temporary defensive periods, as determined by the Adviser, the Aggressive
Growth Fund may hold up to 100% of its total assets in such short-term, fixed
income securities. However, to the extent that the Aggressive Growth Fund is so
invested, the Aggressive Growth Fund is not pursuing and may not achieve its
investment objective.
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RISK FACTORS AND INVESTMENT TECHNIQUES
GENERAL. Like any investment program, an investment in any of the Funds entails
certain risks. As funds investing primarily in common stocks, each Fund is
subject to stock market risk, i.e., the possibility that stock prices in general
will decline over short or even extended periods.
Since the Funds, to different degrees, also invest or may invest in bonds,
investors in a Fund, to the extent so invested, are also exposed to bond market
risk, i.e., fluctuations in the market value of bonds. Bond prices are
influenced primarily by changes in the level of interest rates. When interest
rates rise, the prices of bonds generally fall; conversely, when interest rates
fall, bond prices generally rise. While bonds normally fluctuate less in price
than stock, there have been in the recent past extended periods of cyclical
increases in interest rates that have caused significant declines in bond
prices.
Current income by its nature always contributes positively to total return.
Therefore, the current income expected to be generated from an investment in the
Balanced Fund will counterbalance to some degree the adverse price fluctuations
of the securities held by the Balanced Fund. The effective result should
therefore be lower total return volatility for the Balanced Fund than a fund
which does not provide such current income.
The Aggressive Growth Fund is intended for investors who can accept the higher
risks involved in seeking potentially higher capital appreciation through
investments in growth oriented companies. A growth oriented company typically
invests most of its net income in its enterprise and does not pay out much, if
any, in dividends. Accordingly, the Aggressive Growth Fund does not anticipate
any significant distributions to shareholders from net investment income, and
potential investors should be in a financial position to forego current income
from their investment in the Aggressive Growth Fund. The securities of less
seasoned companies may have limited marketability and may be subject to more
abrupt or erratic market movements over time than securities of more seasoned
companies or the market as a whole.
The Balanced Fund may invest in certain variable or floating rate government
securities and, as described below, each Fund may invest in put and call options
and futures. 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. No Fund will not invest more than 10% of its total
assets in any such derivatives at any one time.
REPURCHASE AGREEMENTS. Securities held by each Fund may be subject to repurchase
agreements. Under the terms of the repurchase agreement, a 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 that 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. A Fund will only enter into a repurchase agreement where
(i) the underlying securities are of the type which such Fund's investment
policies would allow it to purchase directly, (ii) the market value of the
underlying security, including interest accrued, will at all times be 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 such 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 Balanced Fund may also
purchase securities on a when-issued or delayed-delivery basis. The Balanced
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 Balanced Fund
will not pay for such
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<PAGE> 17
securities or start earning interest on them until they are received. When the
Balanced 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
Balanced Fund relies on the seller to complete the transaction; the seller's
failure to do so may cause the Balanced Fund to miss a price or yield considered
to be advantageous.
The Balanced 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 Balanced Fund's liquidity and the ability of
the investment adviser to manage it might be adversely affected.
MEDIUM-GRADE SECURITIES. As described above, the Balanced Fund may invest in
debt securities within the fourth highest rating group assigned by an NRSRO,
(e.g. BBB or Baa by S&P and Moody's, respectively) and comparable unrated
securities. These types of debt securities are considered by Moody's to have
some speculative characteristics, and are more vulnerable to changes in economic
conditions, higher interest rates or adverse issuer-specific developments which
are more likely to lead to a weaker capacity to make principal and interest
payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a debt security purchased by the
Balanced Fund to fall below BBB or Baa, as the case may be, the Adviser will
consider such an event in determining whether the Balanced Fund should continue
to hold that security. In no event, however, would the Balanced Fund be required
to liquidate any such portfolio security where the Balanced Fund would suffer a
loss on the sale of such security.
FOREIGN SECURITIES. Each 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. A Fund will acquire securities issued
by foreign issuers only when the Adviser believes that the risks associated with
such investments are minimal.
RESTRICTED SECURITIES. Securities in which the Balanced Fund may invest include
securities issued by corporations without registration under the Securities Act
of 1933, as amended (the "1933 Act"), in reliance on the exemption from such
registration afforded by Section 3(a)(3) thereof, and securities issued in
reliance on the so-called "private placement" exemption from registration which
is afforded by Section 4(2) of the 1933 Act ("Section 4(2) securities"). Section
4(2) securities are restricted as to disposition under the Federal securities
laws, and generally are sold to institutional investors such as the Balanced
Fund who agree that they are purchasing the securities for investment and not
with a view to public distribution. Any resale must also generally be made in an
exempt transaction. Section 4(2) securities are normally resold to other
institutional investors through or with the assistance of the issuer or
investment dealers who make a market in such Section 4(2) securities, thus
providing some liquidity.
Pursuant to procedures adopted by the Board of Trustees of the Group, the
Adviser may determine Section 4(2) securities to be liquid if such securities
are eligible for resale under Rule 144A under the 1933 Act and are readily
saleable. Rule 144A permits the Balanced Fund to purchase securities which have
been privately
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<PAGE> 18
placed and resell such securities to certain qualified institutional buyers,
such as the Balanced Fund, without restriction. For purposes of determining
whether a Rule 144A security is readily saleable, and therefore liquid, the
Adviser must consider, among other things, the frequency of trades and quotes
for the security, the number of dealers willing to purchase or sell the security
and the number of potential purchasers, dealer undertakings to make a market in
the security, and the nature of the security and marketplace trades of such
security. However, investing in Rule 144A securities, even if such securities
are initially determined to be liquid, could have the effect of increasing the
level of the Balanced Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
PUT AND CALL OPTIONS. Subject to its investment policies and for purposes of
hedging against market risks related to its portfolio securities, each 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
amounts paid as premiums to writers of options. A Fund will purchase put options
only on securities in which the Fund may otherwise invest. Each Fund may also
engage in writing call options from time to time as the Adviser deems
appropriate. Each Fund will write only covered call options (options on
securities owned by that Fund). In order to close out a call option it has
written, a 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, such 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 a Fund.
Each 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,
a Fund will write only covered index call options. Through the writing or
purchase of index options a 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 a Fund owns or intends to purchase probably
will not correlate perfectly with movements in the level of an index and,
therefore, a 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. A 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. Each 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 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.
Each 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, 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 such Fund than might later be available in the
market when it effects anticipated purchases.
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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.
Aggregate initial margin deposits for futures contracts, and premiums paid for
related options, may not exceed five percent of a 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 a Fund's
total assets. Futures transactions will be limited to the extent necessary to
maintain each Fund's qualification as a regulated investment company.
Futures transactions involve brokerage costs and require a Fund to segregate
assets to cover contracts that would require it to purchase securities. A 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 a Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities, limiting such 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. Each 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. Each Fund intends to invest in the
securities of other investment companies which, in the opinion of the Adviser,
will assist such Fund in achieving its objectives and in money market mutual
funds for purposes of short-term cash management. A 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 each 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
Each 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 that Fund (as defined
below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
Each 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.
16
<PAGE> 20
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 a Fund.
Each 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.
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HOW DO I PURCHASE SHARES OF THE FUNDS?
- --------------------------------------------------------------------------------
GENERAL
Each 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 Funds' 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 a 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 Funds' 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.
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 Funds' 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 each 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:
17
<PAGE> 21
<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 with respect to which The Ohio Company serves
either as a trustee or as investment adviser. The Ohio Company may change or
eliminate the foregoing waivers at any time. The Ohio Company may also
periodically waive all or a portion of the sales charge for all investors with
respect to a Fund.
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 a 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 any Fund or its shareholders.
AUTOMATIC INVESTMENT PLAN
The Funds have 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
specified by you on the periodic basis you select. Confirmation of your purchase
of such Fund's 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.
18
<PAGE> 22
- --------------------------------------------------------------------------------
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 a 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 a Fund and of one or more of the
other Cardinal Load Funds. For example, if you concurrently purchase Shares of
the Balanced 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, 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 such 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 such 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.
19
<PAGE> 23
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 Funds. It is the policy of each 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 a 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 a 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.
- --------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
- --------------------------------------------------------------------------------
Investors may redeem Shares of a Fund on any Business Day at the net asset value
per share next determined following 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 applicable Fund). The purchase of 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 readily marketable 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 a 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 not less than 30 days
to increase his investment in such 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.
20
<PAGE> 24
REDEMPTION BY MAIL
Shareholders may redeem Shares of a 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 redeem Shares of a Fund by calling the Group at the telephone
number 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 Funds nor their 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 Funds or their
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.
SYSTEMATIC WITHDRAWAL PLAN
If you are the owner of Shares of a 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 Group's Systematic
Withdrawal Plan. Please contact The Ohio Company for the appropriate form.
- --------------------------------------------------------------------------------
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
- --------------------------------------------------------------------------------
ACH PROCESSING
The Group 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.
21
<PAGE> 25
EXCHANGE PRIVILEGE
Shareholders of a 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 any Fund for Shares of
another Fund (upon the payment of the appropriate sales charge) or for shares
of:
Cardinal Government Obligations Fund,
a fund investing in securities issued
or guaranteed by the U.S. Government
(upon the payment of the appropriate
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 a Fund by telephone. Neither the Group, the Funds nor
any of their 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 a 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 Funds 60 days'
advance written notice of any such modification or termination.
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HOW IS NET ASSET VALUE CALCULATED?
- --------------------------------------------------------------------------------
The net asset value of each 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 such Fund are tendered for redemption and no order to
purchase any Shares of that Fund is received) during which there is a sufficient
degree of trading in a 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 each Fund is computed by dividing
the sum of the value of that Fund's portfolio securities plus any cash and other
assets (including interest and dividends
22
<PAGE> 26
accrued but not received) minus all liabilities (including estimated accrued
expenses) by the total number of Shares of such Fund then outstanding.
The net asset value per share will fluctuate as the value of the investment
portfolio of a 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.
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DO THE FUNDS PAY FEDERAL INCOME TAX?
- --------------------------------------------------------------------------------
Each of the funds of the Group, including the Funds, 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. Each Fund contemplates declaring as dividends
100% of such 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 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. 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 a
Fund bear to its gross income.
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.
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.
23
<PAGE> 27
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 a Fund by foreign countries with respect to its
income from foreign securities. Since less than 50% in value of each Fund's
total assets at the end of its fiscal year are expected to be invested in stock
or securities of foreign corporations, no Fund will be entitled under the Code
to pass through to its shareholders their pro rata share of the foreign taxes
paid by such Fund. These taxes will be taken as a deduction by that Fund.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors in the Funds 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 FUNDS?
- --------------------------------------------------------------------------------
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 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 and for providing certain
fund accounting services. 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 AND MANAGER
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 each of the Funds. 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 and Chicago Stock Exchanges, 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 voting stock, may be considered controlling persons of The Ohio
Company. The Ohio Company serves as the principal underwriter for each of the
Cardinal Funds and for TCFI and served as the investment adviser of TCFI.
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 Funds'
investment objectives and policies, manages each Fund, and makes decisions with
respect to and places orders for all purchases and sales of its portfolio
securities. Since the Reorganization with respect to The Cardinal Fund and since
December 22, 1995, with respect to TCFI,
24
<PAGE> 28
The Cardinal Fund's predecessor, and since August 1995 with respect to the
Aggressive Growth Fund, John Bevilacqua has been primarily responsible for the
day-to-day management of the portfolio of such Funds. Mr. Bevilacqua has been a
Vice President and Portfolio Manager for The Ohio Company since October, 1994.
Prior thereto, and since February, 1984, Mr. Bevilacqua served as Second Vice
President -- Investments for Midland Mutual Life Insurance Company, Columbus,
Ohio. Since the Balanced Fund's inception, Barry G. McMahon has been primarily
responsible for the day-to-day management of the Balanced Fund's portfolio. Mr.
McMahon has been a portfolio manager with the Adviser since 1992. Prior thereto,
Mr. McMahon was a portfolio manager with Columbus Mutual Life Insurance Company.
In addition, pursuant to the Investment Advisory Agreement, the Adviser
generally assists in all aspects of each 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 Funds, the Adviser
receives a fee from the Funds, computed daily and paid monthly at the following
annual rates: with respect to The Cardinal Fund, 0.60% of such Fund's average
daily net assets; and with respect to both the Balanced Fund and the Aggressive
Growth Fund, 0.75% of such Funds' average daily net assets. While in the opinion
of the staff of the Commission such fees with respect to the Balanced Fund and
the Aggressive Growth Fund are higher than the advisory fee paid by most mutual
funds, the Group's Board of Trustees believes them to be comparable to advisory
fees paid by many funds having similar objectives and policies.
The Adviser may periodically waive all or a portion of its advisory fee with
respect to a Fund to increase the net income of such Fund available for
distribution as dividends. The waiver of such fee will cause the return and/or
yield of such 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 Funds' transfer agent and dividend disbursing agent. In consideration of
such services, each 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 Funds. The Transfer Agent receives a fee from each Fund for such services
equal to a fee computed daily and paid periodically at an annual rate of .03% of
that Fund's average daily net assets of up to $100 million and .01% of such
Fund's average daily net assets in excess of $100 million.
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 Funds
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. James M.
Schrack II is an officer 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 Funds.
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 each Fund is authorized
to pay The Ohio Company, as such 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 that Fund. Such amount
may be
25
<PAGE> 29
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 a Fund to be higher than they 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 Funds
purchased and held by The Ohio Company for the accounts of its customers and
Shares of the Funds purchased and held by customers of The Ohio Company
directly, including, but not limited to, answering shareholder questions
concerning the Funds, providing information to shareholders on their investments
in a 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 applicable 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 Funds' 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 Funds.
- --------------------------------------------------------------------------------
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 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 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 Cardinal 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 Cardinal 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 investment advisory agreement as it relates to the Cardinal Fund, the Plan
or any of the Cardinal Fund's fundamental policies.
Overall responsibility for the management of the Funds is vested in the Board of
Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUNDS?" 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.
26
<PAGE> 30
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 does
not intend 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 a 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 a 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 that 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 Funds and annual financial reports audited by
independent auditors.
27
<PAGE> 31
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
<PAGE> 32
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS HIGHLIGHTS....................... 2
FEE TABLE................................... 4
FINANCIAL HIGHLIGHTS........................ 5
PERFORMANCE INFORMATION..................... 8
WHAT ARE THE FUNDS?......................... 8
WHAT ARE THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUNDS?.................... 9
HOW DO I PURCHASE SHARES OF THE FUNDS?...... 17
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?... 19
WHAT DISTRIBUTIONS WILL I RECEIVE?.......... 20
HOW MAY I REDEEM MY SHARES?................. 20
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED?................................. 21
HOW IS NET ASSET VALUE CALCULATED?.......... 22
DO THE FUNDS PAY FEDERAL INCOME TAX?........ 23
WHAT ABOUT MY TAXES?........................ 23
WHO MANAGES MY INVESTMENT IN THE FUNDS?..... 24
WHAT ARE MY RIGHTS AS A SHAREHOLDER?........ 26
</TABLE>
------------------------
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 UPON
AS HAVING BEEN AUTHORIZED BY THE FUNDS, THE ADVISER, OR THE OHIO COMPANY. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUNDS 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 FUNDS TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
----------------------
PROSPECTUS
----------------------
May 1, 1996
[LOGO]
THE
CARDINAL
FUND
CARDINAL
BALANCED
FUND
CARDINAL
AGGRESSIVE
GROWTH FUND
[LOGO]
<PAGE> 33
CARDINAL GOVERNMENT OBLIGATIONS FUND
One Fund of The Cardinal Group
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) .......................................... "Financial Highlights"
(b) .......................................... "Financial Highlights"
(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?"
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- i -
<PAGE> 34
<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) ......................................... "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. ........................................... *
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- ii -
<PAGE> 35
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'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.
There can be no assurance that the Fund's investment 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
prospectuses of The Cardinal Fund, Cardinal Balanced Fund, Cardinal Aggressive
Growth Fund, Cardinal Government Securities Money Market Fund or Cardinal Tax
Exempt Money Market Fund should contact The Ohio Company. Additional information
about the Fund, contained in a Statement Of Additional Information dated May 1,
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 LOGO)*()
The date of this Prospectus is May 1, 1996.
- --------------------------------------------------------------------------------
<PAGE> 36
- --------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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 7.)
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 pages 7 and 8.)
CURRENT INCOME................. Dividends are declared daily and distributions are
generally made monthly as the Group shall determine.
Long-term capital gains, if any, are distributed
annually. (See page 14.)
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 pages 8 through 11.)
PURCHASES...................... There is a minimum initial investment of $1,000 with
subsequent minimums of $50. (See page 12.) 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 12) and waived for certain purchasers for
whom The Ohio Company serves as a trustee or investment
adviser. (See page 12.)
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 14.)
INVESTMENT ADVISER AND
MANAGER...................... 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 (collectively, with the Fund, the "Cardinal Funds").
(See page 19.)
</TABLE>
2
<PAGE> 37
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................................................. 4.50%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees..................................................... .50%
12b-1 Fees After Fee Waiver(1)...................................... 0
Other Expenses...................................................... .24
--------
Total Fund Operating Expenses After Fee Waiver................. .74%
=================
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period:................ $ 52 $ 68 $ 84 $133
</TABLE>
(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.
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 example and expenses above
reflect current fees. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
3
<PAGE> 38
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights with respect to each of the nine fiscal years
ended September 30, 1995, and the period from February 3, 1986, through
September 30, 1986, have been audited by KMPG Peat Marwick LLP, independent
auditors, whose report thereon together with certain financial statements, are
contained in the Fund's statement of Additional Information and which may be
obtained by shareholders and prospective investors.
The following Financial Highlights reflect the operations of Cardinal Government
Obligations Fund ("CGOF"), the Fund's predecessor. On May 1, 1996, the Fund
acquired all of the assets and liabilities of CGOF and is deemed to have
succeeded to the financial and performance history of CGOF.
FINANCIAL HIGHLIGHTS FOR EACH SHARE OF BENEFICIAL
INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, Beginning of
period............................. $ 7.96 $ 8.63 $ 8.95 $ 8.99 $ 8.71 $ 8.71
Income from investment operations:
Net investment income.............. .64 .66 .74 .80 .81 .84
Net gains or losses on securities
(both realized and unrealized)... .22 (.68) (.32) (.04) .28 --
-------- -------- -------- -------- -------- --------
Total from investment operations... .86 (.02) .42 .76 1.09 .84
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment
income).......................... (.64) (.65) (.74) (.80) (.81) (.84)
Distributions (from capital
gains)........................... -- -- -- -- -- --
Returns of capital................. -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions................ (.64) (.65) (.74) (.80) (.81) (.84)
Net asset value, End of period....... $ 8.18 $ 7.96 $ 8.63 $ 8.95 $ 8.99 $ 8.71
========= ========= ========= ========= ========= =========
Total Return***...................... 11.27% (0.27%) 4.83% 8.87% 13.07% 10.03%
Ratios/Supplemental Data:
Net assets, End of period (000)
omitted.......................... $151,711 $169,529 $208,883 $172,139 $128,569 $114,890
Ratio of expenses to average net
assets**......................... 0.76% 0.75% 0.73% 0.76% 0.76% 0.76%
Ratio of net investment income to
average net assets**............. 7.93% 7.88% 8.32% 8.89% 9.20% 9.55%
Portfolio Turnover Rate............ 36.71% 21.95% 24.94% 17.15% 34.81% 30.90%
</TABLE>
4
<PAGE> 39
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 2, 1986
(DATE OF
COMMENCEMENT OF
YEARS ENDED SEPTEMBER 30, OPERATIONS)
---------------------------------------------- THROUGH SEPTEMBER
1989 1988 1987 30, 1986*
------------ ------------ ------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, Beginning of period................... $ 8.82 $ 8.60 $ 9.39 $ 9.53
Income from investment operations:
Net investment income................................ .84 .86 .90 .59
Net gains or losses on securities (both realized and
unrealized)........................................ (.11) .22 (.80) (.11)
------------ ------------ ------------ ----------
Total from investment operations..................... .73 1.08 .10 .48
------------ ------------ ------------ ----------
Less Distributions:
Dividends (from net investment income)............... (.84) (.86) (.89) (.59)
Distributions (from capital gains)................... -- -- -- --
Returns of capital................................... -- -- -- (.03)
------------ ------------ ------------ ----------
Total Distributions.................................. (.84) (.86) (.89) (.62)
Net asset value, End of period......................... $ 8.71 $ 8.82 $ 8.60 $ 9.39
============ ============ ============ ==================
Total Return***...................................... 8.81% 12.94% .82% 5.63%(a)
Ratios/Supplemental Data:
Net assets, End of period (000) omitted.............. $118,958 $146,745 $147,491 $129,629
Ratio of expenses to average net assets**............ 0.73% 0.74% 0.49% 0.87%
Ratio of net investment income to average net
assets**........................................... 9.73% 9.64% 10.03% 9.37%
Portfolio Turnover Rate.............................. .92% 5.76% 45.71% 0%
</TABLE>
- ---------------
* CGOF's operations commenced February 3, 1986. Through February 3, 1986, the
only transaction of CGOF was its initial capitalization through the sale of
10,493 Shares for $100,000 to Cardinal Management Corp., the investment
adviser to CGOF.
** Percentages for less than twelve month periods are annualized.
*** The total return figure does not reflect the imposition of the maximum
front-end sales load.
(a) This total return figure reflects aggregate total return instead of average
annual total return. Aggregate total return is calculated similarly to
average annual total return except that the return figure is aggregated over
the relevant period instead of annualized.
See notes to financial statements appearing in the Fund's Statement Of
Additional Information.
Pursuant to a certain Revolving Credit Agreement with The Fifth Third Bank,
CGOF, the Fund's predecessor, could borrow money from The Fifth Third Bank for
temporary purposes, such as to accommodate abnormally heavy redemption requests,
and only in an amount not exceeding 5% of the value of CGOF's total assets at
the time of borrowing. The table below sets forth certain information concerning
loans made to CGOF.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
YEAR ENDED OUTSTANDING AT END DEBT OUTSTANDING OUTSTANDING DURING DEBT PER SHARE
SEPTEMBER 30, OF PERIOD DURING THE PERIOD THE PERIOD DURING THE PERIOD
- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
1995 $0 $5,553 19,594,413 $0.0002834
1994 $0 $16,422 22,745,526 $0.0007220
1993 $0 $20,118 21,714,427 $0.0009265
</TABLE>
5
<PAGE> 40
- --------------------------------------------------------------------------------
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 investment in the Fund over certain specified periods since the
establishment of the Fund (including the term of CGOF's operations). 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. and Morningstar, 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 CGOF as the Fund's predecessor is
contained in CGOF's Annual Report to Shareholders which may be obtained without
charge by contacting the Group 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 was
organized for the purpose of acquiring all of the assets and liabilities of CGOF
to effect a reorganization of CGOF from a stand-alone investment company to a
separate series of the Group (the "Reorganization"). The Reorganization was
effected as of May 1, 1996.
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<PAGE> 41
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.
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 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
7
<PAGE> 42
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 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.
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<PAGE> 43
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 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 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.
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<PAGE> 44
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 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 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
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<PAGE> 45
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.
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.
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HOW DO I PURCHASE SHARES OF THE FUND?
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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.
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<PAGE> 46
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.
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 with respect to which The Ohio Company serves
either as a trustee or as investment adviser. The Ohio Company may change or
eliminate the foregoing waivers at any time. The Ohio Company may also
periodically waive all or a portion of the sales charge for all investors with
respect to the Fund.
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.
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<PAGE> 47
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.
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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, 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
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<PAGE> 48
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.
- --------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
- --------------------------------------------------------------------------------
Investors may redeem Shares of the Fund on any Business Day 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 readily marketable portfolio
14
<PAGE> 49
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 not less than 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.
REDEMPTION BY MAIL
Shareholders may 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 redeem Shares of the Fund by calling the Group at the telephone
number 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.
15
<PAGE> 50
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 applicable sales charge);
Cardinal Balanced Fund,
a fund seeking current income and long-term
growth of both capital and income (upon
the payment of the applicable sales charge);
The Cardinal Fund,
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).
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
16
<PAGE> 51
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 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.
17
<PAGE> 52
- --------------------------------------------------------------------------------
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 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 and for providing certain
fund accounting services. 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.
18
<PAGE> 53
INVESTMENT ADVISER AND MANAGER
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 and for CGOF.
The Ohio Company, an investment banking firm organized in 1925, is a member of
the New York Stock and Chicago Stock Exchanges, 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 voting stock, may be considered controlling persons of The Ohio
Company. The Ohio Company serves as principal underwriter for each of the
Cardinal Funds and for CGOF.
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 inception of CGOF (the Fund's predecessor) and since the
Reorganization with respect to the Fund, John R. Carle has been primarily
responsible for the day-to-day management of such Funds' portfolios. 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 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 of up to $100 million and .01% of the Fund's
average daily net assets in excess of $100 million.
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. James M.
Schrack II is an officer 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.
19
<PAGE> 54
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 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.
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
investment advisory agreement as it relates to the Fund, the Plan or any of the
Fund's fundamental policies.
20
<PAGE> 55
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 does
not intend 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.
21
<PAGE> 56
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
<PAGE> 57
- ----------------------------------------------------------
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS HIGHLIGHTS....................... 2
FEE TABLE................................... 3
FINANCIAL HIGHLIGHTS........................ 4
PERFORMANCE INFORMATION..................... 6
WHAT IS THE FUND?........................... 6
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?................. 7
HOW DO I PURCHASE SHARES
OF THE FUND?.............................. 11
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?... 13
WHAT DISTRIBUTIONS WILL I RECEIVE?.......... 14
HOW MAY I REDEEM MY SHARES?................. 14
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED?................................. 16
HOW IS NET ASSET VALUE CALCULATED?.......... 17
DOES THE FUND PAY FEDERAL INCOME TAX?....... 17
WHAT ABOUT MY TAXES?........................ 18
WHO MANAGES MY INVESTMENT IN THE FUND?...... 18
WHAT ARE MY RIGHTS AS A
SHAREHOLDER?.............................. 20
</TABLE>
------------------------
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 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.
- ---------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ---------------------------------------------------------
----------------------
PROSPECTUS
----------------------
May 1, 1996
(THE OHIO COMPANY LOGO)*()
CARDINAL
GOVERNMENT
OBLIGATIONS FUND
- ---------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 58
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
CARDINAL TAX EXEMPT MONEY MARKET FUND
Two Funds of
The Cardinal Group
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) .......................................... "Financial Highlights"
(b) .......................................... "Financial Highlights"
(c) .......................................... "Performance Information"
(d) .......................................... "Performance Information"
4.(a)(i)(A) .................................... "What Are The Funds?"
(i)(B) .................................... "What Are The Funds?"
(ii) ....................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(A) .................................... *
(ii)(B)(1) ................................. "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(B)(2) ................................. *
(ii)(C) .................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii)(D) .................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(b)(i) ....................................... "What Are The Investment Objectives
And Policies Of The Funds?"
(ii) ........................................ "What Are The Investment Objectives
And Policies Of The Funds?"
(c) .......................................... "What Are The Investment Objectives
and Policies Of The Funds?"
5.(a) .......................................... "Who Manages My Investment In The
Funds?"
(b)(i) ....................................... "Who Manages My Investment In The
Funds?"
(b)(ii) ...................................... "Who Manages My Investment In The
Funds?"
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- i -
<PAGE> 59
<TABLE>
<CAPTION>
Part A of Form N-1A Item No. Caption(s) in Prospectus
---------------------------- ------------------------
<S> <C>
(b)(iii) .................................... "Who Manages My Investment In The
Funds?"
(c) ......................................... "Who Manages My Investment In The
Funds?"
(d) ......................................... "Who Manages My Investment In The
Funds?"
(e) ......................................... "Who Manages My Investment In The
Funds?"
(f) ......................................... "Who Manages My Investment In The
Funds?"
(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) ......................................... "Do The Funds Pay Federal Income Tax?";
"What About My Taxes?"
7.(a) ......................................... "How Do I Purchase Shares Of The Funds?"
(b) ......................................... "How Do I Purchase Shares Of The Funds?";
"How Is Net Asset Value Calculated?"
(c) ......................................... "How May I Qualify For Quantity Discounts?"
(d) ......................................... "How Do I Purchase Shares Of The Funds?"
(e) ......................................... "Who Manages My Investment In The Funds?"
(f) ......................................... "Who Manages My Investment In The Funds?"
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. ........................................... *
</TABLE>
- ---------------
*Indicates items which are omitted or inapplicable or answer to which
is in the negative and omitted from Prospectus.
- ii -
<PAGE> 60
PROSPECTUS
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
CARDINAL TAX EXEMPT MONEY MARKET FUND
Cardinal Government Securities Money Market Fund (the "Government Securities
Fund") and Cardinal Tax Exempt Money Market Fund (the "Tax Exempt Fund")
(together called the "Funds" or individually a "Fund") are two separate
diversified investment funds of The Cardinal Group (the "Group"), an open-end,
management investment company. The Trustees of the Group have divided each
Fund's beneficial ownership into an unlimited number of transferable units
called shares (the "Shares").
The Government Securities Fund's investment objectives are maximizing current
income while preserving capital and maintaining liquidity. The Government
Securities 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.
The Tax Exempt Fund's investment objectives are maximizing current income exempt
from federal income tax while preserving capital and maintaining liquidity. The
Tax Exempt Fund seeks to attain its objectives 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.
All obligations purchased by each of the Funds will mature, or be deemed to
mature, in thirteen 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 any Fund's investment
objectives will be achieved.
THE SHARES OF THE FUNDS 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 A FUND INVOLVES
CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. EACH 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.
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
The Prospectus relates only to the Government Securities Fund and the Tax Exempt
Fund, currently two of six funds of the Group. Interested persons who wish to
obtain prospectuses of Cardinal Balanced Fund, Cardinal Aggressive Growth Fund,
The Cardinal Fund or Cardinal Government Obligations Fund should contact The
Ohio Company. Additional information about the Funds, contained in a Statement
Of Additional Information dated May 1, 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 Group at the above address or
by calling the phone number provided above.
This Prospectus sets forth concisely the information about the Funds that a
prospective investor ought to know before investing in any of the Funds. 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 LOGO)*()
The date of this Prospectus is May 1, 1996.
- --------------------------------------------------------------------------------
<PAGE> 61
- --------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES.......... The GOVERNMENT SECURITIES FUND seeks to maximize current
income while preserving capital and maintaining liquid-
ity.(See page 7.)
The TAX EXEMPT FUND seeks to maximize current income,
exempt from federal income tax, while preserving capital
and maintaining liquidity. (See page 7.)
INVESTMENT POLICIES............ The GOVERNMENT SECURITIES 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 7 and 8.)
The TAX EXEMPT 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. (See page 8.)
CURRENT INCOME................. Dividends are generally credited daily and paid monthly.
Such distributions are automatically reinvested in
additional Shares of such Fund without charge. Dividends
may also be received in cash. (See page 14.)
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 16.)
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 12.)
INVESTMENT ADVISER............. Cardinal Management Corp. (the "Adviser"), a wholly-owned
subsidiary of The Ohio Company, is the Funds' investment
adviser. The Adviser also serves as investment adviser
for The Cardinal Fund, Cardinal Government Obligations
Fund, Cardinal Balanced Fund and Cardinal Aggressive
Growth Fund (collectively, with the Funds, the "Cardinal
Funds"). (See page 20.)
</TABLE>
2
<PAGE> 62
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GOVERNMENT
SECURITIES TAX EXEMPT
FUND FUND
----------------- -----------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..... 0% 0%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees........................... .50% .50%
12b-1 Fees After Fee Waiver............... 0 0
Other Expenses............................ .29 .32
-------- --------
Total Fund Operating Expenses............. .79% .82%
================= =================
</TABLE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Government Securities Fund.............. $ 8 $ 25 $ 44 $ 98
Tax Exempt Fund......................... $ 8 $ 26 $ 46 $101
</TABLE>
The purpose of the above table is to assist a potential purchaser of a Fund's
Shares in understanding the various costs and expenses that an investor in that
Fund will bear directly or indirectly. See "WHO MANAGES MY INVESTMENT IN THE
FUNDS?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Funds. The example and expenses above
reflect current fees. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
3
<PAGE> 63
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1995, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon together with certain financial
statements, are contained in the Funds' Statement of Additional Information and
which may be obtained by shareholders and prospective investors.
The following Financial Highlights for the Funds reflect the operations of
Cardinal Government Securities Trust ("CGST") and Cardinal Tax Exempt Money
Trust ("CTEMT"), the Government Securities Fund's and Tax Exempt Fund's
predecessors, respectively. On May 1, 1996, the Government Securities Fund and
the Tax Exempt Fund acquired all of the assets and liabilities of CGST and
CTEMT, respectively, and are deemed to have succeeded to the financial and
performance history of CGST and CTEMT, respectively.
FINANCIAL HIGHLIGHTS FOR EACH SHARE OF BENEFICIAL
INTEREST OUTSTANDING THROUGHOUT EACH PERIOD:
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, Beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................................ .05 .03 .02 .04 .06
Net gains or losses on securities (both realized and
unrealized)........................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations..................... .05 .03 .02 .04 .06
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............... (.05) (.03) (.02) (.04) (.06)
Distributions (from capital gains)................... -- -- -- -- --
Returns of capital................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions.................................. (.05) (.03) (.02) (.04) (.06)
Net asset value, End of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total Return........................................... 4.98% 2.84%(1) 2.41% 3.58% 6.20%
Net assets, End of period (000) omitted................ $445,374 $367,516 $402,758 $472,521 $567,841
Ratio of expenses to average net assets.............. 0.81% 0.85% 0.79% 0.76% 0.72%
Ratio of net investment income to average net
assets............................................. 4.92% 2.94% 2.38% 3.52% 6.03%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------------------------
1990 1989 1988 1987 1986
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, Beginning of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................................ .08 .09 .07 .06 .07
Net gains or losses on securities (both realized and
unrealized)........................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations..................... .08 .09 .07 .06 .07
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............... (.08) (.09) (.07) (.06) (.07)
Distributions (from capital gains)................... -- -- -- -- --
Returns of capital................................... -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions.................................. (.08) (.09) (.07) (.06) (.07)
Net asset value, End of period......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total Return........................................... 7.97% 8.88% 6.81% 5.99% 7.09%
Net assets, End of period (000) omitted................ $592,343 $533,266 $411,887 $422,595 $408,681
Ratio of expenses to average net assets.............. 0.73% 0.72% 0.73% 0.72% 0.80%
Ratio of net investment income to average net
assets............................................. 7.69% 8.54% 6.61% 5.83% 6.87%
</TABLE>
- ---------------
(1) Without the $1,151,186 capital contribution as discussed in Note 2 to the
financial statements appearing in the Funds' Statement of Additional
Information, the 1994 total return would have been 2.55%.
4
<PAGE> 64
CARDINAL TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, Beginning of period............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income.......................... .03 .02 .02 .03 .04 .05
Net gains or losses on securities (both
realized and unrealized)..................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total from investment operations............... .03 .02 .02 .03 .04 .05
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends (from net investment income)......... (.03) (.02) (.02) (.03) (.04) (.05)
Distributions (from capital gains)............. -- -- -- -- -- --
Returns of capital............................. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Total Distributions............................ (.03) (.02) (.02) (.03) (.04) (.05)
Net asset value, End of period................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total Return..................................... 3.02% 1.78% 1.81% 2.62% 4.40% 5.41%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted.......... $64,780 $80,531 $91,159 $70,054 $85,488 $82,988
Ratio of expenses to average net assets........ 0.83% 0.76% 0.77% 0.76% 0.72% 0.76%
Ratio of net investment income to average net
assets....................................... 2.99% 1.78% 1.80% 2.59% 4.31% 5.26%
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1989 1988 1987 1986
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, Beginning of period.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................................................. .06 .04 .04 .04
Net gains or losses on securities (both realized and unrealized)...... -- -- -- --
------- ------- ------- -------
Total from investment operations...................................... .06 .04 .04 .04
------- ------- ------- -------
Less Distributions:
Dividends (from net investment income)................................ (.06) (.04) (.04) (.04)
Distributions (from capital gains).................................... -- -- -- --
Returns of capital.................................................... -- -- -- --
------- ------- ------- -------
Total Distributions................................................... (.06) (.04) (.04) (.04)
Net asset value, End of period.......................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return............................................................ 5.95% 4.53% 3.62% 4.47%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted................................. $82,031 $61,771 $63,848 $67,816
Ratio of expenses to average net assets............................... 0.72% 0.75% 0.71% 0.76%
Ratio of net investment income to average net assets.................. 5.79% 4.44% 3.56% 4.38%
</TABLE>
See notes to financial statements appearing in the Funds' Statement of
Additional Information.
------------------------------------
Pursuant to certain Revolving Credit Agreements with The Fifth Third Bank, each
Fund may borrow money from The Fifth Third Bank for temporary or emergency
non-investment purposes and subject to specific limitations as to amount. The
table below sets forth certain information concerning loans made to CGST and to
CTEMT (as predecessors to the Government Securities Fund and the Tax Exempt
Fund, respectively).
5
<PAGE> 65
THE GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF TRUSTS'S SHARES AVERAGE AMOUNT OF
PER YEAR ENDED OUTSTANDING AT END DEBT OUTSTANDING OUTSTANDING DURING DEBT PER SHARE
SEPTEMBER 30, OF PERIOD DURING THE PERIOD THE PERIOD DURING THE PERIOD
- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
1995 $0 $6,619 405,543,685 $0.0000163
1994 $0 $5,977 385,137,301 $0.0000155
1993 $0 $ 449 437,639,426 $0.0000010
</TABLE>
THE TAX EXEMPT FUND
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF TRUSTS'S SHARES AVERAGE AMOUNT OF
YEAR ENDED OUTSTANDING AT END DEBT OUTSTANDING OUTSTANDING DURING DEBT PER SHARE
SEPTEMBER 30, OF PERIOD DURING THE PERIOD THE PERIOD DURING THE PERIOD
- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
1995 $0 $ 2,425 67,530,425 $0.0000359
1994 $0 $19,159 85,845,213 $0.0002232
1993 $0 $ 6,439 80,606,522 $0.0000799
1992 $0 $ 637 88,243,903 $0.0000072
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time each of the Funds may advertise its "yield" or "annualized
yield" and its "effective yield". In addition, the Tax Exempt Fund may advertise
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 a 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 Tax Exempt 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 Tax Exempt 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 a 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.,
Morningstar, Inc. and Standard & Poor's Corporation and to data prepared by
Lipper Analytical Services, 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 Funds that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.
6
<PAGE> 66
- --------------------------------------------------------------------------------
WHAT ARE THE FUNDS?
- --------------------------------------------------------------------------------
Each 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 Government
Securities Fund and the Tax Exempt Fund were organized for the purposes of
acquiring all of the assets and liabilities of CGST and CTEMT, respectively, to
effect a reorganization of CGST and CTEMT from separate stand alone investment
companies to separate series of the Group (the "Reorganization").
- --------------------------------------------------------------------------------
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS?
- --------------------------------------------------------------------------------
IN GENERAL
The investment objectives of the Government Securities Fund are to maximize
current income while preserving capital and maintaining liquidity. The
investment objectives of the Tax Exempt Fund are to maximize current income
exempt from federal income tax while preserving capital and maintaining
liquidity. The investment objectives with respect to each Fund are fundamental
policies and as such may not be changed without a vote of the holders of a
majority of the outstanding Shares of that Fund (as defined below under "WHAT
ARE MY RIGHTS AS A SHAREHOLDER?"). There can be no assurance that the objectives
of any Fund will be achieved.
Each of the Funds, as a money market funds 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 a Fund may not exceed 90 days.
THE GOVERNMENT SECURITIES FUND
The Government Securities 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 Government Securities
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.
Subject to the foregoing limitations and in order to achieve its investment
objectives, the Government Securities 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 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
7
<PAGE> 67
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 Government Securities 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 Government Securities Fund will
invest in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.
THE TAX EXEMPT FUND
As a matter of policy, under normal market conditions, the Tax Exempt 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 objectives, the Tax Exempt Fund expects to invest in the
following types of securities (collectively, "Municipal Securities"): 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 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 Tax Exempt 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 Tax Exempt 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 Funds' 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. CTEMT, as the Tax Exempt Fund's predecessor, invested
and the Tax Exempt Fund 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 Tax
Exempt Fund is invested in such securities, the degree of fluctuation in the
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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 Tax Exempt 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 lower than
current market rates for fixed rate obligations of comparable quality with
similar maturities. The Tax Exempt 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 Tax Exempt 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 Tax Exempt Fund can be
maintained at $1.00 per share while the highest possible yield can be returned
to investors. To the extent the Tax Exempt 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 Tax Exempt 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 Tax
Exempt 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 Tax Exempt Fund invests
may be supported by bank letters of credit or comparable guarantees of financial
institutions. To the extent that 25% or more of the Tax Exempt Fund's assets are
invested in variable rate demand Municipal Securities supported by such letters
of credit or guarantees, the Tax Exempt Fund may be deemed to be concentrated in
the banking industry. (See "Certain Factors" below.)
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 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 Funds will only enter into a repurchase agreement where
(i) the underlying securities are of the type which that Fund's investment
policies would allow it to purchase directly, (ii) the market value of the
underlying security, including interest accrued, will at all times be 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 Funds' custodian or a bank acting as agent.
The Adviser will be responsible for continuously monitoring such requirements.
Use of repurchase agreements may cause the Tax Exempt Fund to earn income which
would be taxable to its shareholders.
INVESTMENT COMPANY SECURITIES. Each 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 Funds intend to invest in the
securities of other money market mutual funds for purposes of short-term cash
management. A 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 Funds' investments in other
investment companies, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments -- Securities of Other Investment
Companies" in the Funds' Statement of Additional Information.
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WHEN-ISSUED AND DELAYED-DELIVERY TRANSACTIONS. Each Fund may also purchase
securities on a when-issued or delayed-delivery basis. A 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. A 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 a 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, a 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.
Each 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, such Fund's liquidity and the ability of the Adviser to
manage it might be adversely affected.
TAXABLE MONEY MARKET SECURITIES. Under normal market conditions, the assets of
the Tax Exempt Fund will be managed with a view towards producing only income
that is exempt from federal income taxation. However, the Tax Exempt 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, bankers' acceptances, high-grade commercial paper guaranteed or
issued by domestic corporations and repurchase agreements secured by such
obligations.
CERTAIN FACTORS. Naturally, there can be no assurance that any Fund will achieve
its investment objective or be able continuously to maintain a net asset value
per share of $1.00. Specifically, with respect to the Tax Exempt Fund, the
characteristics of short-term Municipal Securities are such that the price
stability and liquidity of the Tax Exempt 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 Tax Exempt 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 Tax Exempt Fund expects that substantially all the demand
rights of the Tax Exempt 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
Each of the Funds is subject to a number of investment restrictions that may be
changed only by a vote of a majority of the outstanding Shares of that Fund (as
defined below under "WHAT ARE MY RIGHTS AS A SHAREHOLDER?").
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The Government Securities 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 such
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
such 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. 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 objectives and policies.
The Tax Exempt 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 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
such 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 such 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. Make loans, other than by entering into repurchase agreements and
through the purchase of participations in privately negotiated loans and
portions of publicly issued debt obligations that are in accordance with
its investment objectives and policies; provided, however, that such
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.
In addition, each of the Funds may not borrow money or issue senior securities,
except that a 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 such Fund's total assets at the time of such borrowing and
except as permitted pursuant to an exemption from the 1940 Act. Each Fund will
not purchase securities while its borrowings (including reverse repurchase
agreements and dollar roll agreements) exceed 5% of its total assets.
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The following additional investment restriction may be changed without the vote
of a majority of the outstanding Shares of a Fund.
Each 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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HOW DO I PURCHASE SHARES OF THE FUNDS?
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GENERAL
Shares of the Funds 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 Funds' 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 Group 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 Funds 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 Funds 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 Funds 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. Each 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 that Fund's portfolio securities that
such 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 transaction in your
account, which will also show the total number of Shares being held in
safekeeping by Cardinal Management Corp., the Funds' 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
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<PAGE> 72
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 a 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 Funds or their
shareholders.
PURCHASE BY FEDERAL FUNDS WIRE
Investments in Shares of the Funds 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 Group at (800) 282-9446, toll
free, 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: [Name of Applicable Fund]
[Include Fund Account Number and Name of Account Holder]
Funds transmitted by wire will be invested in Shares of the appropriate 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 Funds may be made by mail by sending a check payable
to the order of the appropriate Fund together with, in the case of an initial
purchase, an Application Form to:
The Cardinal Group c/o [Name of Applicable 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 applicable
Fund within one Business Day following receipt by The Ohio Company. Checks drawn
on non-member banks may take considerably longer. THE GROUP STRONGLY RECOMMENDS
THAT INVESTORS OF SUBSTANTIAL AMOUNTS USE FEDERAL FUNDS TO PURCHASE SHARES.
AUTOMATIC INVESTMENT PLAN
The Group 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 a 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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WHAT DISTRIBUTIONS WILL I RECEIVE?
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Each Fund's net income is declared as a dividend and accrued on each Business
Day immediately prior to the determination of such 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 accretion of discount and amortization of premium), plus realized net
short-term capital gains (losses) due to portfolio transactions (if any), less
the accrued expenses of that Fund applicable to that dividend period. The Funds
do not expect to realize any long-term capital gains due to their 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 applicable Fund at the net
asset value on the last Business Day of each month. Shareholders, however, may
elect to receive monthly 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 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 a 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 a Fund's net asset
value per share were reduced, or expected to be reduced, below $1.00, the
Trustees might suspend further dividend declarations until the net asset value
returned to $1.00. Thus, extraordinary expenses, losses or depreciation may
result in no dividends being declared for the period during which an investor
holds Shares as well as a redemption price lower than the purchase price for
such Shares.
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HOW MAY I REDEEM MY SHARES?
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Investors may redeem Shares of a Fund on any Business Day at the net asset value
per share 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?".
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<PAGE> 74
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 in a
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 not
less than 30 days to increase his investment in that Fund to at least $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 redeem Shares of a 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 redeem Shares of a Fund by calling the Group at the telephone
number 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 Funds nor their 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 Funds or their
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 Group 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 Group at any
time after making an initial investment.
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An investor may also elect to have redemption proceeds sent by federal funds
wire to The Ohio Company, the Funds' 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 Group 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 Group'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
appropriate 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 $250. 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 such 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 Group 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.
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WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
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ACH PROCESSING
The Funds offer 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.
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EXCHANGE PRIVILEGE
Shareholders of a 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 a Fund for Shares of the
other Fund (without payment of any sales charge) or for shares of:
Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of
capital (upon the payment of the
applicable sales charge);
Cardinal Balanced Fund,
a fund seeking current income and long-term
growth of both capital and income (upon the
payment of the applicable sales charge);
The Cardinal Fund,
an equity fund seeking long-term growth
of capital and income (upon the payment of
the applicable sales charge); or
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).
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 a
Fund to be exchanged were acquired as a result of an exchange of shares of a
Cardinal Load Fund, the sales charge to be paid on the present exchange may be
reduced by the sales charge previously paid.
The foregoing exchange privilege 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 Funds nor
any of their 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 Funds 60 days'
advance written notice of any such modification or termination.
- --------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
- --------------------------------------------------------------------------------
The Funds' 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 a Fund, less its liabilities, by the
total number of Shares outstanding. Expenses and fees of the Funds, including
the
17
<PAGE> 77
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 each Fund to use its best
efforts, under normal circumstances, to maintain a constant net asset value of
$1.00 per share. Each 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. A 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.
- --------------------------------------------------------------------------------
DO THE FUNDS PAY FEDERAL INCOME TAX?
- --------------------------------------------------------------------------------
Each of the funds of the Group, including the Funds, 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. Each Fund contemplates declaring as dividends 100% of that 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?
- --------------------------------------------------------------------------------
THE GOVERNMENT SECURITIES FUND
It is expected that the Government Securities 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
Government Securities Fund and not in cash. Since all of the Government
Securities 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 Government Securities 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 Government Securities
Fund were to realize any long-term capital gains, distribution by such 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 Government Securities Fund may be subject to state and local taxes with
respect to their ownership of that Fund's Shares or distributions from the
Government Securities Fund.
18
<PAGE> 78
THE TAX EXEMPT FUND
FEDERAL TAXES. The Tax Exempt 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 would be so excluded, constitute "exempt-interest dividends" when
designated as such by the Tax Exempt 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 Tax Exempt Fund will also be treated as tax
preference items in computing the alternative minimum tax to the extent, if any,
that distributions by the Tax Exempt Fund are attributable to interest earned by
the Tax Exempt 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 Tax Exempt 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 Tax
Exempt 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 purposes that, if received directly,
would be exempt from such income taxes. The Tax Exempt 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 Tax Exempt Fund during the preceding year.
GENERAL
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors in a 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 FUNDS?
- --------------------------------------------------------------------------------
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
19
<PAGE> 79
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 and for providing certain
fund accounting services. The Ohio Company receives no fees under its
Distribution Agreement with the Group with respect to the Funds.
INVESTMENT ADVISER AND MANAGER
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 each of the Funds. 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 and Chicago Stock Exchanges, 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 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 Funds'
investment objectives and policies, manages each Fund, and makes decisions with
respect to and places orders for all purchases and sales of its portfolio
securities. John R. Carle has been primarily responsible for the day-to-day
management of the portfolio of the Government Securities Fund since the date of
the Reorganization. Prior to the Reorganization and since December 22, 1995, Mr.
Carle was primarily responsible for the day-to-day management of the portfolio
of CGST, the Government Securities Fund's predecessor. Mr. Carle has been a
portfolio manager with the Adviser and/or The Ohio Company since 1971 and has
more than 28 years of management experience.
David C. Will has been primarily responsible for the day-to-day management of
the portfolio of the Tax Exempt Fund since the date of the Reorganization. Prior
to the Reorganization and since December 22, 1995, Mr. Will was primarily
responsible for the day-to-day management of the portfolio of CTEMT, the Tax
Exempt Fund's predecessor. Mr. Will has been a Vice President of the Adviser and
The Ohio Company since 1990 and has more than 25 years of investment management
experience.
In addition, pursuant to the Investment Advisory Agreement, the Adviser
generally assists in all aspects of the Funds' administration and operation.
For the services provided and expenses assumed pursuant to its investment
advisory agreement with the Group with respect to the Funds, the Adviser
receives a fee from each Fund, computed daily and paid monthly at the annual
rate of .50% of average net daily assets of that Fund. The Adviser may
periodically waive all or a portion of its advisory fee with respect to a Fund
to increase the net income of that Fund available for distributions as
dividends. The waiver of such fee will cause the yield of such 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 Funds' transfer agent and dividend disbursing agent. In consideration of
such services, each 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
20
<PAGE> 80
fund accounting services for the Funds. The Transfer Agent receives a fee from
each Fund for such services equal to a fee computed daily and paid periodically
at an annual rate of .03% of that Fund's average daily net assets of up to $100
million and .01% of such Fund's average daily net assets in excess of $100
million.
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 Funds
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. James M.
Schrack II is an officer 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 Funds.
CUSTODIAN
The Group has appointed The Fifth Third Bank ("Fifth Third"), 38 Fountain Square
Plaza, Cincinnati, Ohio 45263, as the Funds' 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 Funds.
- --------------------------------------------------------------------------------
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 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 Government Securities 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 Government Securities 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 investment advisory agreement as it relates to the
Government Securities Fund or any of the Government Securities Fund's
fundamental policies.
Overall responsibility for the management of the Funds is vested in the Board of
Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUNDS?" 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 does
not intend to have an annual or special meeting.
21
<PAGE> 81
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 a 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 a 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
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 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.
22
<PAGE> 82
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
<PAGE> 83
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- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS HIGHLIGHTS....................... 2
FEE TABLE................................... 3
FINANCIAL HIGHLIGHTS........................ 4
PERFORMANCE INFORMATION..................... 6
WHAT ARE THE FUNDS?......................... 7
WHAT ARE THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUNDS?.................... 7
HOW DO I PURCHASE SHARES OF THE FUNDS?...... 12
WHAT DISTRIBUTIONS WILL I RECEIVE?.......... 14
HOW MAY I REDEEM MY SHARES?................. 14
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED?................................. 16
HOW IS NET ASSET VALUE CALCULATED?.......... 17
DO THE FUNDS PAY FEDERAL INCOME TAX?........ 18
WHAT ABOUT MY TAXES?........................ 18
WHO MANAGES MY INVESTMENT IN THE FUNDS?..... 19
WHAT ARE MY RIGHTS AS A SHAREHOLDER?........ 21
</TABLE>
------------------------
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 UPON
AS HAVING BEEN AUTHORIZED BY THE FUNDS, 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 FUNDS TO MAKE
SUCH AN OFFER IN SUCH JURISDICTION.
- ---------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
- ---------------------------------------------------------
----------------------
PROSPECTUS
----------------------
May 1, 1996
(The Ohio Company LOGO)*()
CARDINAL
GOVERNMENT
SECURITIES
MONEY MARKET
FUND
CARDINAL
TAX EXEMPT
MONEY MARKET
FUND
- ---------------------------------------------------------
- ----------------------------------------------------------
<PAGE> 84
STATEMENT OF ADDITIONAL INFORMATION
THE CARDINAL FUND
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
CARDINAL TAX EXEMPT MONEY MARKET FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND
SIX INVESTMENT PORTFOLIOS OF
THE CARDINAL GROUP
The Cardinal Fund ("TCF"), Cardinal Government Obligations Fund
("CGOF"), Cardinal Government Securities Money Market Fund ("CGSMMF"), Cardinal
Tax Exempt Money Market Fund ("CTEMMF"), Cardinal Balanced Fund ("CBF") and
Cardinal Aggressive Growth Fund ("CAGF") (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. The investment objectives of CBF are current income
and long-term growth of both capital and income. The investment objective of
CAGF is appreciation of capital.
-------------------------------------------------------------
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 May 1, 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.
MAY 1, 1996
<PAGE> 85
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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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-15
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19
MANAGEMENT OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
PRINCIPAL SHAREHOLDERS OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . B-24
THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
TRANSFER AND DIVIDEND AGENT AND FUND ACCOUNTANT . . . . . . . . . . . . . . . . . . B-29
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
THE DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . B-33
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . B-33
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . B-34
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-35
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
Description of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . B-40
Vote of a Majority of the Outstanding Shares . . . . . . . . . . . . . . . B-41
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-41
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42
Calculation of Total Return . . . . . . . . . . . . . . . . . . . . . . . B-43
Performance Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . B-44
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-45
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
<PAGE> 86
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"), Cardinal Tax
Exempt Money Market Fund ("CTEMMF"), Cardinal Balanced Fund ("CBF") and
Cardinal Aggressive Growth Fund ("CAGF") (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 respective Prospectus, CTEMMF,
CBF and CAGF may each 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 such Funds will be those guaranteed by
domestic and foreign banks having, at the time of investment, assets in excess
of $100,000,000 (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 $100,000,000 (as of the date of its most recently
B-1
<PAGE> 87
published financial statements) [, or (b) the principal amount of the
instrument is insured in full by the Federal Deposit Insurance Corporation].
COMMERCIAL PAPER. Commercial paper in which each of the Funds, other
than CGSMMF, may invest consists of unsecured promissory notes issued by
corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.
Such Funds 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,
CTEMMF, CBF and CAGF 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
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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 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,
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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.
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
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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
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
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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.
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. Provided,
however, that prior to CTEMMF's so investing its net assets CTEMMF will amend
its Prospectus to disclose such practice. 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
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"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.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES. CGOF, CGSMMF, CTEMMF and
CBF may each 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, such 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, CTEMMF's nor CBF's commitments to purchase "when-issued" or
"delayed-delivery" securities will exceed 25% of the value of its assets.
When such a Fund engages in "when-issued" or "delayed-delivery"
transactions, it 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,
CTEMMF and CBF 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.
MORTGAGE-RELATED SECURITIES. CBF may, consistent with its investment
objectives and policies, invest in mortgage-related securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. CBF
may, in addition, invest in mortgage-related securities issued by
nongovernmental entities; provided, however, that to the extent CBF purchases
mortgage-related securities from such issuers which may, solely for purposes of
Section 12 of the 1940 Act, be deemed to be investment companies, CBF's
investment in such securities will be subject to
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the limitations on its investment in investment company securities set forth
below in its investment restrictions.
Mortgage-related securities, for purposes of CBF's Prospectus and this
Statement of Additional Information, represent pools of mortgage loans
assembled for sale to investors by various governmental agencies such as the
Government National Mortgage Association and government- related organizations
such as the Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not so secured. If CBF purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the
mortgages underlying the securities are prone to prepayment, thereby shortening
the average life of the security 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
period of time over which income at the lower rate is received. For these and
other reasons, a mortgage-related security's average maturity may be shortened
or lengthened as a result of interest rate fluctuations and, therefore, it is
not possible to predict accurately the security's return to CBF. In addition,
regular payments received in respect of mortgage-related securities include
both interest and principal. No assurance can be given as to the return CBF
will receive when these amounts are reinvested.
CBF may invest in mortgage-related securities which are collateralized
mortgage obligations structured on pools of mortgage pass-through certificates
or mortgage loans. Collateralized mortgage obligations will be purchased only
if rated in the four highest bond rating categories assigned by an appropriate
NRSRO or, if unrated, which the Adviser deems to present attractive
opportunities and are of comparable quality.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities issued
by the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. Government corporation within
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the Department of Housing and Urban Development. GNMA certificates also are
supported by the authority of GNMA to borrow funds from the U.S. Treasury to
make payments under its guarantee. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of FNMA and are not backed by or entitled to the full faith and
credit of the United States. FNMA is a government-sponsored organization owned
entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of the principal and interest by FNMA. Mortgage-related securities
issued by the Federal Home Loan Mortgage Corporation ("FHLMC") include FHLMC
Mortgage Participation Certificates (also known as "Freddie Macs" or "PCs").
FHLMC is a corporate instrumentality of the United States, created pursuant to
an Act of Congress, which is owned entirely by Federal Home Loan Banks.
Freddie Macs are not guaranteed by the United States or by any Federal Home
Loan Banks and do not constitute a debt or obligation of the United States or
of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by FHLMC. FHLMC guarantees either
ultimate collection or timely payment of all principal payments on the
underlying mortgage loans. When FHLMC does not guarantee timely payment of
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
OTHER ASSET-BACKED SECURITIES. CBF may also invest in interests in
pools of receivables, such as motor vehicle installment purchase obligations
(known as Certificates of Automobile Receivables or CARS) and credit card
receivables (known as Certificates of Amortizing Revolving Debts or CARDS).
Such securities are generally issued as pass-through certificates, which
represent undivided fractional ownership interests in the underlying pools of
assets. Such securities may also be debt instruments which are also known as
collateralized obligations and are generally issued as the debt of a special
purpose entity organized solely for the purpose of owning such assets and
issuing such debt.
Such securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a financial institution
(such as a bank or insurance company) unaffiliated with the issuers of such
securities. Non-mortgage backed securities will be purchased by CBF only when
rated in one of the four highest rating categories by an appropriate NRSRO at
the time of purchase.
The development of these asset-backed securities is at an early state
compared to mortgage backed securities. While the
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market for asset-backed securities is becoming increasingly liquid, the market
for mortgage backed securities issued by certain private organization and
non-mortgage backed securities is not as well developed. The Adviser will
limit purchases of asset-backed securities to securities that are deemed to be
readily marketable by the Adviser at the time of purchase.
Asset-backed securities held by CBF arise through the grouping by
governmental, government-related and private organizations of loans,
receivables and other assets originated by various lenders. Interests in pools
of these assets differ from other forms of debt securities, which normally
provide for periodic payment of interest in fixed amounts with principal paid
at maturity or specified call dates. Instead, asset-backed securities provide
periodic payments which generally consist of both interest and principal
payments.
The estimated life of an asset-backed security may vary with the
prepayment experience with respect to the underlying debt instruments. The
rate of such prepayments, and hence the life of an asset-backed security, will
be a function of current market interest rates and other economic and
demographic factors. Since prepayment experience can vary, asset-backed
securities may be a less effective vehicle for locking in high long-term
yields.
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, CGOF, CBF and CAGF 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 will be payable by such Fund and, therefore, will be borne directly by
shareholders.
INCOME PARTICIPATION LOANS. CBF may make or acquire participation in
privately negotiated loans to borrowers. Frequently, such loans have variable
interest rates and may be backed by a bank letter of credit; in other cases
they may be unsecured. Such transactions may provide an opportunity to achieve
higher yields than those that may be available from other securities offered
and sold to the general public.
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Privately arranged loans, however, will generally not be rated by a
credit rating agency and will normally be liquid, if at all, only through a
provision requiring repayment following demand by the lender. Such loans made
by CBF may have a demand provision permitting such Fund to require repayment
within seven days. Participation in such loans, however, may not have such a
demand provision and may not be otherwise marketable. To the extent these
securities are not readily marketable, they will be subject to CBF's 15%
limitation on investments in illiquid securities. Recovery of an investment in
any such loan that is illiquid and payable on demand will depend on the ability
of the borrower to meet an obligation for full repayment of principal and
payment of accrued interest within the demand period, normally seven days or
less (unless such Fund determines that a particular loan issue, unlike most
such loans, has a readily available market). As it deems appropriate, the
Group's Board of Trustees will establish procedures to monitor the credit
standing of each such borrower, including its ability to honor contractual
payment obligations.
CBF will purchase income participation loans only if such instruments
are, in the opinion of the Adviser, of comparable quality to securities rated
within the four highest rating groups assigned by an applicable NRSRO.
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
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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 AGREEMENTS. 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, a
Fund may be affected favorably or unfavorably by changes in currency rates and
in 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 a Fund'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, CBF and CAGF will acquire such securities only when the Adviser
believes the risks associated with such investments are minimal.
OPTIONS TRADING. Each of TCF, CGOF, CBF and CAGF 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
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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 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.
MEDIUM-GRADE DEBT SECURITIES. As stated in the Prospectus for CBF,
CBF may invest in securities within the four highest rating groups assigned by
an appropriate NRSRO (e.g. S&P and Moody's), including securities rated BBB by
S&P or Baa by Moody's or, if unrated, judged by the Adviser to be of comparable
quality ("Medium-Grade Securities").
As with other fixed-income securities, Medium-Grade Securities are
subject to credit risk and market risk. Market risk relates to changes in a
security's value as a result of changes in interest rates. Credit risk relates
to the ability of the issuer to make payments of principal and interest.
Medium-Grade Securities are considered by Moody's to have speculative
characteristics.
Medium-Grade Securities are generally subject to greater credit risk
than comparable higher-rated securities because issuers are more vulnerable to
economic downturns, higher interest rates or adverse issuer-specific
developments. In addition, the prices of Medium-Grade Securities are generally
subject to greater market risk and therefore react more sharply to changes in
interest rates.
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The value and liquidity of Medium-Grade Securities may be diminished by adverse
publicity and investor perceptions.
Because certain Medium-Grade Securities are traded only in markets
where the number of potential purchasers and sellers, if any, is limited, the
ability of CBF to sell such securities at their fair value either to meet
redemption requests or to respond to changes in the financial markets may be
limited.
Particular types of Medium-Grade Securities may present special
concerns. The prices of payment-in-kind or zero-coupon securities may react
more strongly to changes in interest rates than the prices of other
Medium-Grade Securities. Some Medium-Grade Securities in which CBF may invest
may be subject to redemption or call provisions that may limit increases in
market value that might otherwise result from lower interest rates while
increasing the risk that CBF may be required to reinvest redemption or call
proceeds during a period of relatively low interest rates.
The credit ratings issued by NRSROs are subject to various
limitations. For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of Medium-Grade Securities. In
certain circumstances, the ratings may not reflect in a timely fashion adverse
developments affecting an issuer. For these reasons, the Adviser conducts its
own independent credit analysis of Medium-Grade Securities.
FUTURES CONTRACTS. As discussed in the Prospectuses of the TCF, CGOF,
CBF and CAGF, 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
B-14
<PAGE> 100
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 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).
B-15
<PAGE> 101
In addition to the investment restrictions set forth in their
respective Prospectuses, each of TCF, CGOF, CBF and CAGF 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 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 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).
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 participations 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 the 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";
B-16
<PAGE> 102
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 securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio securities.
CTEMMF will not:
1. Pledge, mortgage or hypothecate its assets, except that to
secure permitted borrowings 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;
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 securities on margin, except for use of short-term
credit necessary for clearance of purchases of portfolio securities;
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:
B-17
<PAGE> 103
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;
3. Invest more than 15% of the Fund's total assets in securities
which are restricted as to disposition; or
4. Purchase or retain securities of any issuer if the officers
and trustees of the Group and the officers and directors of its investment
adviser, who each owns beneficially more than 1/2 of 1% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
securities.
In addition, each of TCF, CBF and CAGF has the following
nonfundamental investment restrictions: each such Fund may not (1) mortgage or
hypothecate the Fund's assets in excess of one-third of the Fund's total
assets, (2) 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 (3) invest more than 10% of the Fund's
total assets in securities of issuers which, together with any predecessors,
have a record of less than three years' continuous operation.
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 may acquire or retain securities of other open-end
management investment companies only 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.
B-18
<PAGE> 104
The Group has represented to the Texas State Securities Board on behalf
of each of TCF, CBF and CAGF that each such Fund will limit its investments in
warrants, valued at the lower of cost or market, to no more than 5% of the
value of its net assets. Included within such amount (but not in excess of 2%
of the value of such Fund's net assets) are warrants which are not listed on
the New York or American Stock Exchanges. For purposes of this limitation,
warrants acquired in units or attached to other securities will be deemed to be
without value. The Group has also represented to the Texas State Securities
Board on behalf of each of CBF and CAGF that neither Fund may purchase or sell
interests in real estate limited partnerships, although investments in readily
marketable interests in real estate investment trusts or readily marketable
securities of companies or limited partnerships which invest in real estate are
not prohibited.
The Group intends to comply with these representations on behalf of a
Fund for so long as such Fund has its Shares registered for sale in the state
to which such representations were made.
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 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
portfolio turnover rates for the fiscal years ended September 30, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
Fund 1995 1994
---- ---- ----
<S> <C> <C>
TCF(1) 19.78% 23.20%
CGOF(1) 36.71% 21.95%
CBF 37.62% 59.09%
CAGF 80.35% 95.70%
<FN>
_________________________________
1 Includes periods prior to the effective date of the Reorganization.
</TABLE>
B-19
<PAGE> 105
For such Funds, the 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 served as a
director of TCFI and as a trustee of CGST, CTEMT and Cardinal Government
Obligations Fund, CGOF's predecessor, prior to the Reorganization. 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>
*H. Keith Allen Chairman and Trustee, Chief Operating Officer, Secretary,
155 East Broad Street Member of Executive, Treasurer and a Director of The
Columbus, Ohio 43215 Nominating and Investment Ohio Company (investment banking);
Age: 54 Committees formerly Senior Executive Vice
President of The Ohio Company.
Gordon B. Carson Trustee, Member of Principal, Whitfield Robert
5413 Gardenbrook Drive Executive Committee Associates (construction consulting
Midland, Michigan 48642 firm).
Age: 84
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 From November, 1989 to August,
1119 Kingsdale Terrace Executive Committee 1995, Member of the Ohio Bureau of
Columbus, Ohio 43220 Workers' Compensation and Chairman
Age: 68 from 1992 through August, 1995.
James I. Luck Trustee President, The Columbus Foundation
1234 East Broad Street (philanthropic public foundation).
Columbus, Ohio 43205
Age: 50
</TABLE>
B-20
<PAGE> 106
<TABLE>
<S> <C> <C>
David L. Nelson Trustee, Member of Audit Chairman of the Board of Directors
18 James Lane and Nominating Committees of Herman Miller, Inc. (furniture
Stamford, CT 06903 manufacturer); former Vice
Age: 65 President, Customer Support,
Americas Region, and Vice
President, Customer Satisfaction,
Industry Segment, of Asea Brown
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries).
*C. A. Peterson Trustee Chartered Financial Analyst, former
150 E. Wilson Bridge Rd. Senior Executive Vice President and
Worthington, Ohio 43085 Director of The Ohio Company
Age: 69 (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
*Frank W. Siegel President and Chartered Financial Analyst and
155 East Broad Street Trustee, Member of Senior Vice President, The Ohio
Columbus, Ohio 43215 Executive and Nominating Company (investment banking);
Age: 43 Committees former Vice President, Keystone
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).
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
155 East Broad Street Officer of The Ohio Company
Columbus, Ohio 43215 investment banking).
Age: 37
</TABLE>
B-21
<PAGE> 107
<TABLE>
<CAPTION>
<S> <C> <C>
Bruce E. McKibben Assistant Employee of The Ohio
155 East Broad Street Treasurer Company (investment banking).
Columbus, Ohio 43215
Age: 26
</TABLE>
As of April 19, 1996, 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 and Siegel are Chairman, President and a director, and
Vice President and a director, respectively, of the Adviser, and Mr. Schrack is
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
and Siegel 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.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Name and Position Aggregate Compensation Total Compensation From the
With the Group* From the Group Group and the Fund Complex**
--------------- -------------- ----------------------------
<S> <C> <C>
H. Keith Allen $ 0 $ 0
Chairman, Trustee and Member of
Executive, Nominating and Investment
Committees
Gordon B. Carson $2,000 $12,000
Trustee and Member of Executive
Committee
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
</TABLE>
B-22
<PAGE> 108
<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>
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
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>
___________________________________
*During the fiscal year ended September 30, 1995, John L. Schlater, a
former officer of The Ohio Company and the Adviser, had served as a trustee of
the Group but no longer does so as of the date hereof. Mr. Schlater did not
receive any compensation from the Group or the Fund Complex.
**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>
B-23
<PAGE> 109
PRINCIPAL SHAREHOLDERS OF THE GROUP
As of April 19, 1996, the following are the only persons known to the
Group who were expected to own 5% or more of TCF's, CGSMMF's or CTEMMF's shares
upon consummation of the Reorganization:
<TABLE>
<CAPTION>
Fund Name and Address of 5% or more Beneficial Owner Percentage Owned (2)
---- ----------------------------------------------- ----------------
<S> <C> <C>
TCF The Ohio Company1 6.18%
155 East Broad Street
Columbus, Ohio 43215
CGSMMF The Ohio Company1 9.23%
155 East Broad Street
Columbus, Ohio 43215
CTEMMF The Ohio Company1 6.41%
155 East Broad Street
Columbus, Ohio 43215
<FN>
__________________________
1 Either directly or in its capacity as a trustee of certain plans or
trusts.
2 As of April 19, 1996 with respect to the applicable predecessor Fund.
</TABLE>
There were no persons known to the Group to be the beneficial owner of
more than 5% of any other Fund's Shares or of the total number of the Group's
Shares outstanding as of April 19, 1996.
THE ADVISER
The Group has entered into an Investment Advisory and Management
Agreement dated as of June 18, 1993, as amended January 10, 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; (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; and (3) from each of CBF and CAGF, computed and accrued
daily and paid monthly, based on an annual rate of .75% of the daily net asset
value of that Fund.
Prior to the effective date of the Reorganization, the Adviser provided
investment advisory and management services to Cardinal Government Obligations
Fund, CGST and CTEMT and received a fee at the same annual rate for such
services as described above for CGOF, CGSMMF and CTEMMF, respectively. The
Ohio Company, prior to the
B-24
<PAGE> 110
effective date of the Reorganization, provided investment advisory services to
TCFI, and received a fee for such services based on an annual rate of .50% of
the daily net value of such Fund.
For the fiscal years ended September 30, 1995, 1994, and 1993, the
investment advisory fees incurred by each of the Funds (including their
respective predecessors prior to the Reorganization) were as follows:
<TABLE>
<CAPTION>
Fees Incurred for Year Ended September 30,
<S> <C> <C> <C>
Fund 1995 1994 1993
- ---- ---- ---- ----
TCF $1,158,534 $1,325,607 $1,370,536
CGOF 783,803 947,139 972,887
CGSMMF 2,031,367 1,978,541 2,227,209
CTEMMF 344,000 449,777 449,464
CBF 101,585 103,264 11,128(1)
CAGF 71,508 66,792 5,058(1)
<FN>
______________________________
1 Commenced operations June 24, 1993.
</TABLE>
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 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 Fund,
or by the Adviser. The Investment Advisory Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
B-25
<PAGE> 111
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.
For the fiscal years ended September 30, 1995, 1994 and 1993, the
brokerage fees incurred by each of TCF (including its predecessor, TCFI, prior
to the Reorganization), CBF and CAGF are set forth in the following table.
None of those commissions were paid to The Ohio Company, and during such
periods, none of CGOF, CGSMMF or CTEMMF (nor any of their predecessors prior to
the Reorganization) incurred any brokerage commissions.
<TABLE>
<CAPTION>
Brokerage Commissions Incurred
for Year Ended September 30,
<S> <C> <C> <C>
Fund 1995 1994 1993
- ---- ---- ---- ----
TCF $215,180 $188,616 $101,220
CBF 20,490 18,285 3,260(1)
CAGF 22,011 20,634 7,530(1)
<FN>
______________________________
1 Commenced operations June 24, 1993.
</TABLE>
B-26
<PAGE> 112
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 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. For the fiscal year ended September 30, 1995,
the amount of such transactions and related commissions on behalf of The
Cardinal Fund Inc., predecessor to TCF, were $2,631,275 and $4,400,
respectively. 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.
As of April 7, 1996, the Adviser and The Ohio Company entered into an
agreement with Baseline Financial whereby the Adviser will direct brokerage
transactions to Baseline Financial in part as compensation for certain research
services. Such services include fundamental and technical portfolio management
information with respect to equity securities.
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
B-27
<PAGE> 113
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.
During the fiscal year ended September 30, 1995, none of the Funds,
except CBF, held any securities of its regular brokers or dealers, as defined
in Rule 10b-1 under the 1940 Act, or their parent companies. During each year,
CBF held commercial paper of Ford Motor Credit Corp., CIGNA Corp., Sears
Acceptance Corp. and General Motors Acceptance Corp, each of which is a regular
dealer for CBF. As of September 30, 1995, CBF held $500,000 of commercial
paper of each such dealer.
Pursuant to Investment Advisory Agreement, the Adviser also serves as
general manager and administrator to each of the Funds. 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,
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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 10, 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 $18 (for TCF, CBF and
CAGF) or $21 (for CGOF, CGSMMF and CTEMMF) 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 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.
For the fiscal years ended September 30, 1995, 1994 and 1993, the fees
incurred by each of the Funds (including their respective
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predecessors prior to the Reorganization) for transfer agency and fund
accounting services provided by the Transfer Agent were as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
Fund 1995 1994 1993
- ---- ---- ---- ----
<S> <C> <C> <C>
TCF $255,882(1) $ 327,423(1) $297,199(1)
CGOF 215,273 255,671 253,174
CGSMMF 895,470 1,054,325 977,828
CTEMMF 79,777 95,478 94,836
CBF 25,950 25,266 3,536(2)
CAGF 25,079 25,671 3,184(2)
<FN>
__________________________
1 TCFI, as predecessor to TCF, did not incur any fund accounting fees.
2 Commenced operations June 23, 1993.
</TABLE>
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 10, 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
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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
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, CGOF, CBF and CAGF.
For the fiscal years ended September 30, 1995, 1994 and 1993,
commissions paid to The Ohio Company with respect to the sale of Shares of TCF,
CGOF (and their respective predecessors), CBF and CAGF, after discounts to
dealers, were $439,190, $1,261,115 and $4,250,912, respectively.
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, CGOF, CBF and CAGF (collectively, the "12b-1 Funds"
and individually a "12b-1 Fund") 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
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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 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. For the fiscal year ended September 30, 1995,
fees earned by The Ohio Company under this Rule 12b-1 Agreement, with respect
to CBF, were $32,534, and, with respect to CAGF, were $22,594.
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.
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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 10, 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. The financial
statements of the Funds (or their respective predecessors) included in this
Statement of Additional Information have been included herein in reliance upon
the report of KPMG Peat Marwick LLP, independent auditors, given upon the
authority of said firm as experts in accounting and auditing.
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.
Based upon the value of TCFI's portfolio securities and other assets and
the number of outstanding shares as of the fiscal year ended September 30,
1995, the net asset value and redemption price per share was $13.23. The total
offering price per share was $13.85 per share (net asset value / .9550,
assuming the then current maximum sales charge of 4.5% of the offering price).
The total offering price is reduced on sales of $100,000 or more.
Based upon the value of Cardinal Government Obligations Fund's portfolio
securities and other assets and the number of outstanding shares as of the
fiscal year end September 30, 1995, the net asset value and redemption price
per share was $8.18. The total offering price per share was $8.57 per share
(net asset value / .9550, assuming the then current maximum sales charge of
4.50% of the offering price). The total offering price is reduced on sales of
$100,000 or more.
Based upon the value of CBF's portfolio securities and other assets and
the number of outstanding Shares as of the fiscal year ended September 30,
1995, the net asset value and redemption price
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per share was $11.52. The total offering price per share was $12.06 per share
(net asset value / .955, assuming the then current maximum sales charge of
4.50% of the offering price). The total offering price is reduced on sales of
$100,000 or more.
Based upon the value of CAGF's portfolio securities and other assets and
the number of outstanding Shares as of the fiscal year ended September 30,
1995, the net asset value and redemption price per share was $12.37. The total
offering price per share was $12.95 per share (net asset value / .955, assuming
the then current maximum sales charge of 4.50% of the offering price). The
total offering price is reduced on sales of $100,000 or more.
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
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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 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
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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 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,
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regardless of how long the shareholder has held the Shares. Such distributions
are not eligible for the dividends-received deduction.
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
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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. 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 its taxable year the percentage and source, on a
state-by-state
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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 and the election of
Trustees may be effectively acted upon by shareholders of the Group voting
without regard to series.
B-40
<PAGE> 126
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.
B-41
<PAGE> 127
PERFORMANCE INFORMATION
The following performance information as of September 30, 1995, for TCF,
CGOF, CGSMMF and CTEMMF includes the performance of their respective
predecessor funds for periods prior to the effective date of the
Reorganization. TCF and CGOF are subject to certain additional fees that, if
such fees had been imposed prior to the Reorganization, would have affected
such Funds' performance.
YIELDS
For the 30-day period ended September 30, 1995, the yields of CGOF and
CBF were 6.40% and 2.48%, respectively. The yields of CGOF and CBF are
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
CGOF and CBF 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 such a Fund'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
CGOF's and CBF's Shares and to the relative risks associated with the
investment objectives and policies of those Funds.
For the seven-day period ended September 30, 1995, the current yields
for CGSMMF and CTEMMF were 5.11% and 3.45%, respectively, and their effective
yields were 5.24% and 3.51%, respectively. 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.
B-42
<PAGE> 128
For the seven-day period ended September 30, 1995, the tax equivalent
yield and the tax equivalent effective yield for CTEMMF were 5.71% and 5.81%,
respectively. 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.
CALCULATION OF TOTAL RETURN
For the one year, five year and ten year periods ended September 30,
1995, and the respective periods from commencement of operations to September
30, 1995, the average annual returns and cumulative total returns for TCF,
CGOF, CBF and CAGF were as follows:
<TABLE>
<CAPTION>
Average Annual Cumulative
-------------- ----------
Fund 1 Year 5 Year 10 Year Since Inception 1 Year 5 Year 10 Year Since Inception
- ---- ------ ----- ------- --------------- ------ ------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TCF(1) 9.67% 13.26% 12.16% 14.91% 9.67% 86.28% 215.05% 1,511.18%
CGOF(2) 6.20% 6.46% -- 7.27% 6.20% 36.75% -- 96.91%
CBF(3) 15.29% -- -- 7.32% 15.29% -- -- 17.39%
CAGF(3) 18.75% -- -- 7.75% 18.75% -- -- 18.45%
- --------------------
<FN>
1 Commenced operations May 30, 1975.
2 Commenced operations February 3, 1986.
3 Commenced operations June 23, 1993.
</TABLE>
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:
n
P(T + 1) = 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
B-43
<PAGE> 129
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 their respective Prospectuses, from time to
time CGOF and CBF may include in their sales literature and shareholder reports
a quote of a current "distribution" rate. For the 12-month period ended
September 30, 1995, CGOF's and CBF's distribution rates were 7.24% and 2.88%,
respectively. The current distribution rate is computed by dividing the total
amount of dividends per share paid by the Fund 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, CGOF, CBF and CAGF expressed as the net asset
values per share, will vary just as yields and total return will vary.
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.
B-44
<PAGE> 130
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
<PAGE> 131
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- --------
<S> <C> <C>
COMMON STOCK 91.28%
AEROSPACE/DEFENSE 3.33%
Harris Corporation........................................................ 75,200 $ 4,127
Raytheon Company.......................................................... 40,000 3,400
--------
7,527
--------
APPAREL/RETAILERS 2.69%
Jacobson Stores, Incorporated............................................. 79,000 770
May Department Stores Company............................................. 110,000 4,813
Shopko Stores, Incorporated............................................... 40,000 495
--------
6,078
--------
AUTOMOTIVE MANUFACTURING 1.79%
Ford Motor Company........................................................ 130,000 4,046
--------
AUTOMOTIVE PARTS 2.01%
Amcast Industrial Corporation............................................. 109,800 2,114
Cooper Tire & Rubber Company.............................................. 100,200 2,430
--------
4,544
--------
BEVERAGES 0.69%
Anheuser-Busch Companies Incorporated..................................... 25,000 1,559
--------
CENTRAL STATES BANKS 7.46%
Banc One Corporation...................................................... 130,500 4,763
Huntington Bancshares Incorporated........................................ 203,747 4,585
KeyCorp................................................................... 220,000 7,535
--------
16,883
--------
COMMODITY CHEMICALS 4.38%
Akzo Nobel N.V............................................................ 70,214 4,221
ARCO Chemical Company..................................................... 25,000 1,219
Dow Chemical Company...................................................... 60,000 4,470
--------
9,910
--------
</TABLE>
(continued)
B-19
<PAGE> 132
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
COMPUTERS 2.84%
Compaq Computer Corporation*.............................................. 70,000 $ 3,386
Tektronix Incorporated.................................................... 51,600 3,044
--------
6,430
--------
CONGLOMERATES 8.14%
Johnson Controls, Incorporated............................................ 100,000 6,325
Tenneco, Incorporated..................................................... 150,500 6,961
Textron, Incorporated..................................................... 75,000 5,118
--------
18,404
--------
CONSUMER SERVICES 0.59%
Scotts Company, Class A*.................................................. 60,000 1,328
--------
CONTAINERS/PACKAGING 0.40%
Liqui-Box Corporation..................................................... 30,390 900
--------
DIVERSIFIED FINANCIAL SERVICES 2.43%
Beneficial Corp........................................................... 105,000 5,486
--------
DIVERSIFIED INDUSTRIALS 3.45%
Minnesota Mining & Manufacturing Company.................................. 70,000 3,955
Myers Industries, Incorporated............................................ 181,802 2,772
Raven Industries, Incorporated............................................ 60,050 1,081
--------
7,808
--------
ELECTRIC 1.90%
Northern States Power Company............................................. 95,000 4,311
--------
ELECTRICAL COMPONENTS 6.59%
Asea Brown-Boveri, Incorporated........................................... 50,300 5,024
General Electric Company.................................................. 120,400 7,675
Houston Industries, Incorporated.......................................... 50,000 2,206
--------
14,905
--------
</TABLE>
*Non-income producing (continued)
B-20
<PAGE> 133
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FOOD 2.40%
GoodMark Foods, Incorporated.............................................. 184,000 $ 3,404
Super Food Services, Incorporated......................................... 160,800 2,030
--------
5,434
--------
GAS 1.03%
Williams Companies Incorporated........................................... 60,000 2,340
--------
HEALTHCARE PROVIDERS 0.78%
U.S. HealthCare, Incorporated............................................. 50,000 1,769
--------
INDUSTRIAL SERVICES 1.57%
Graphic Industries, Incorporated.......................................... 123,500 1,266
New England Business Services, Incorporated............................... 110,500 2,279
--------
3,545
--------
INSURANCE 2.38%
Equitable of Iowa Companies............................................... 50,300 1,861
Marsh & McLennan Companies Incorporated................................... 40,000 3,515
--------
5,376
--------
INTEGRATED OILS 9.42%
Mobil Corporation......................................................... 75,000 7,471
Royal Dutch Petroleum Company............................................. 60,000 7,365
Texaco Incorporated....................................................... 100,000 6,463
--------
21,299
--------
MEDICAL SUPPLIES 0.43%
Fisher Scientific International, Incorporated............................. 30,000 971
--------
OTHER NONFERROUS METALS 2.24%
Worthington Industries, Incorporated...................................... 275,776 5,067
--------
PAPER 2.54%
Federal Paper Board Company............................................... 89,800 3,446
Union Camp Corporation.................................................... 40,000 2,305
--------
5,751
--------
</TABLE>
(continued)
B-21
<PAGE> 134
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
PHARMACEUTICALS 2.32%
American Home Products Corporation........................................ 50,000 $ 4,244
Mylan Laboratories, Incorporated.......................................... 50,000 1,000
--------
5,244
--------
PIPELINES 0.52%
Coastal Corporation....................................................... 35,000 1,177
--------
PROPERTY/CASUALTY INSURERS 3.91%
Cincinnati Financial Corporation.......................................... 162,750 8,850
--------
PUBLISHING 0.77%
Dun and Bradstreet Corporation............................................ 30,000 1,736
--------
SPECIALTY/RETAILERS 2.71%
Limited, Incorporated..................................................... 200,000 3,800
Stanley Works............................................................. 35,000 1,518
Sun Television and Appliances............................................. 70,000 429
Wolohan Lumber Company.................................................... 34,000 387
--------
6,134
--------
TELEPHONE 5.15%
GTE Corporation........................................................... 189,716 7,446
Sprint Corporation........................................................ 120,000 4,200
--------
11,646
--------
TOBACCO 2.77%
Philip Morris Companies, Incorporated..................................... 75,000 6,263
--------
TRANSPORTATION 1.65%
GATX Corporation.......................................................... 72,300 3,742
--------
TOTAL COMMON STOCK (COST $147,559,806)............................... 206,463
--------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS 7.30%
Fifth Third Bank, 6.25%, dated 9/29/95, due 10/02/95...................... 16,500
--------
TOTAL REPURCHASE AGREEMENTS (COST $16,500,000)....................... 16,500
--------
TOTAL INVESTMENTS (COST $164,059,806) 98.58%......................... $222,963
=========
</TABLE>
See accompanying notes to financial statements.
B-22
<PAGE> 135
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
ASSETS
<TABLE>
<S> <C>
Investments in securities, at value (cost $164,060)................................... $222,963
Cash.................................................................................. 206
Receivable for investment securities sold............................................. 2,999
Dividends and interest receivable..................................................... 825
Receivable for Fund shares sold....................................................... 102
Other assets.......................................................................... 111
--------
Total assets................................................................ 227,206
--------
LIABILITIES
Payable for Fund shares redeemed...................................................... 660
Accrued investment management and transfer agent fees (note 3)........................ 314
Other accrued expenses................................................................ 51
--------
Total liabilities........................................................... 1,025
--------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 17,099,016 outstanding no par value shares of beneficial
interest (authorized 30,000,000).................................................... $226,181
=========
NET ASSET VALUE PER SHARE............................................................. $ 13.23
=========
</TABLE>
See accompanying notes to financial statements.
B-23
<PAGE> 136
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends.............................................................................. $ 7,504
Interest............................................................................... 847
-------
Total income................................................................. 8,351
-------
EXPENSES:
Investment management fees (note 3).................................................... 1,159
Transfer agent fees and expenses (note 3).............................................. 256
-------
Total affiliated expenses.................................................... 1,415
-------
Custodian fees......................................................................... 25
Professional fees...................................................................... 60
Reports to shareholders................................................................ 37
Directors' fees........................................................................ 21
Registration fees...................................................................... 6
Other expenses......................................................................... 64
-------
Total non-affiliated expenses................................................ 213
-------
Total expenses............................................................... 1,628
-------
Net investment income........................................................ 6,723
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions........................................... 17,719
Increase in unrealized gain on investments............................................. 8,122
-------
Net realized gain and increase in unrealized gain on investments............. 25,841
-------
Net increase in net assets from operations................................... $32,564
========
</TABLE>
See accompanying notes to financial statements.
B-24
<PAGE> 137
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................... $ 6,723 $ 6,351
Net realized gain from security transactions.................... 17,719 17,362
Increase (decrease) in unrealized gain on investments........... 8,122 (14,821)
------------- -------------
Net increase in net assets from operations.................... 32,564 8,892
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.35 and $.33 per share,
respectively)................................................. (6,566) (6,601)
Distribution of net realized gains from security transactions
($.83 and $.28 per share, respectively)....................... (15,750) (6,006)
------------- -------------
Total distributions to shareholders........................... (22,316) (12,607)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares............................... 8,266 14,876
Net asset value of Fund shares issued in connection with
reinvestment of distributions to shareholders................. 20,894 11,831
------------- -------------
29,160 26,707
Cost of Fund shares redeemed.................................... (59,809) (58,535)
------------- -------------
Decrease in net assets derived from capital share
transactions............................................... (30,649) (31,828)
------------- -------------
Net decrease in net assets.................................... (20,401) (35,543)
NET ASSETS -- beginning of period............................... 246,582 282,125
------------- -------------
NET ASSETS -- end of period (undistributed net investment income
of $176 and $20, respectively)................................ $ 226,181 $ 246,582
============== ==============
</TABLE>
See accompanying notes to financial statements.
B-25
<PAGE> 138
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Cardinal Fund Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as a diversified, open-end management investment company. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles for investment companies.
Security Valuation--Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at the last sale price. If no quotations are available, portfolio
securities are valued in good faith by the Board of Directors to reflect their
fair value.
Security Transactions and Investment Income--Security transactions are accounted
for on the trade date and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of the securities has been
determined on the first-in, first-out (FIFO) cost basis. It is the Fund's policy
for its Custodian, or a third-party bank, to take possession of all securities
pledged as collateral for repurchase agreements and monitor the market value of
the collateral to ensure that it remains sufficient to cover the repurchase
agreements.
Distributions to Shareholders--Distributions and dividends are recorded by the
Fund on the record date. Income dividends are declared quarterly and any capital
gain distribution is declared annually.
Federal Income Taxes--No provision has been made for Federal taxes on the Fund's
income, since it is the policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
(2) -- PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the year ended September 30, 1995
aggregated $43,227,000 and $91,217,776, respectively.
During the year ended September 30, 1995 the Fund realized on a FIFO cost basis
a net capital gain of $17,719,277 and $17,777,501 for book and tax purposes,
respectively.
At September 30, 1995, the book cost of investment securities was $164,059,806
and the tax cost was $164,085,672. The difference between book and tax cost is
attributable to securities acquired in the 1975 acquisition of the Ohio Capital
Fund, Inc. and remaining in the Fund's portfolio with a book cost of $68,235 and
a tax cost of $38,594.
As of September 30, 1995, for tax purposes, gross unrealized gains and gross
unrealized losses on investment securities were $60,316,804 and $1,439,149
respectively; resulting in a net unrealized gain of $58,877,655.
(3) -- TRANSACTIONS WITH AFFILIATES
As investment manager for the Fund, The Ohio Company (the Adviser), with whom
certain officers and directors of the Fund are affiliated is allowed an annual
fee of 0.5% of the average daily net assets of the Fund. For the year ended the
Fund paid or accrued $1,158,534 for investment management services. The Adviser
has agreed that if the aggregate expenses of the Fund, as defined, for any
fiscal year exceed the
(continued)
B-26
<PAGE> 139
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
expense limitation of any state having jurisdiction over the Fund, the Adviser
will refund to the Fund, or otherwise bear, such excess. This limitation did not
affect the calculation of the management fee during the year ended September 30,
1995. In addition to providing management and advisory services, The Ohio
Company pays the compensation of all officers and employees of the Fund and
provides office space and certain related facilities required by the Fund.
The Ohio Company, acting as the General Distributor and Dealer, reported to the
Fund that it received commissions after discounts to dealers from the sale of
shares of the Fund of $170,827 for the year ended September 30, 1995. Cardinal
Management Corp., a wholly-owned subsidiary of The Ohio Company, provides
transfer agent services to the Fund. Transfer agent service fees are based on a
monthly charge per shareholder account plus out-of-pocket expenses. For the year
ended September 30, 1995 the Fund paid or accrued $255,882 for transfer agent
services provided by Cardinal Management Corp.
(4) -- COMMITMENTS AND CONTINGENCIES
The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and directors has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $28,588, for the initial capital of ICI
Mutual. The Fund is also committed to provide $85,764 should ICI Mutual
experience the need for additional capital contributions.
Included in other assets is a $56,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.
(5) -- CAPITAL STOCK
At September 30, 1995, there were 30,000,000 shares of no par value capital
stock authorized and the capital amounts were as follows:
<TABLE>
<S> <C>
Paid in capital.................................................................... $147,820,440
Accumulated net realized gains on investments...................................... 19,280,863
Unrealized gain on investments..................................................... 58,903,521
Undistributed net investment income................................................ 176,409
------------
Net assets......................................................................... $226,181,233
=============
</TABLE>
(continued)
B-27
<PAGE> 140
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Shares sold........................................................ 677,512 1,161,378
Shares issued in connection with reinvestment of distributions
to shareholders.................................................. 1,830,954 936,172
Shares repurchased................................................. (4,782,671) (4,580,169)
---------- ----------
Net decrease....................................................... (2,274,205) (2,482,619)
Shares outstanding:
Beginning of period................................................ 19,373,221 21,855,840
---------- ----------
End of period...................................................... 17,099,016 19,373,221
========== ==========
</TABLE>
(6) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Directors approved an Agreement and Plan of
Reorganization and Liquidation between the Fund and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Fund to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Fund and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning............. $ 12.73 $ 12.91 $ 12.95 $ 11.88 $ 9.28
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................ 0.36 0.31 0.32 0.35 0.35
Net realized and unrealized gains
(losses) on investments............ 1.32 0.12 0.55 1.37 2.70
-------- -------- -------- -------- --------
Total from investment operations....... 1.68 0.43 0.87 1.72 3.05
-------- -------- -------- -------- --------
Less distributions:
Dividends............................ (0.35) (0.33) (0.29) (0.36) (0.38)
Capital gain distribution............ (0.83) (0.28) (0.62) (0.29) (0.07)
-------- -------- -------- -------- --------
Total distributions.................... (1.18) (0.61) (0.91) (0.65) (0.45)
-------- -------- -------- -------- --------
Net Asset Value, ending................ $ 13.23 $ 12.73 $ 12.91 $ 12.95 $ 11.88
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Total return........................... 14.84% 3.38% 6.98% 15.05% 33.54%
======== ======== ======== ======== ========
Net assets, ending (000)............... $226,181 $246,581 $282,125 $261,392 $221,428
======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.70% 0.72% 0.68% 0.67% 0.67%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 2.89% 2.40% 2.46% 2.83% 3.15%
======== ======== ======== ======== ========
Portfolio turnover rate................ 19.78% 23.20% 11.11% 6.22% 33.27%
======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
B-28
<PAGE> 141
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Directors
The Cardinal Fund Inc.:
We have audited the accompanying statement of assets and liabilities of The
Cardinal Fund Inc. (the Fund), including the statement of investments, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Cardinal Fund Inc. as of September 30, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-29
<PAGE> 142
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
SECURITIES AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------- -------- ---------
<S> <C> <C>
DIRECT U.S. GOVERNMENT OBLIGATIONS 1.35%
U.S. Treasury Notes, 6.50% maturing 8/15/05................................. $ 2,000 $ 2,050
-------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS.............................. 2,000 2,050
-------- ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS 99.44%
GNMA I PL Notes, 8.00% maturing 9/15/23 through 8/15/35..................... 4,692 4,757
GNMA I PL Notes, 8.15% maturing 1/15/24..................................... 2,334 2,411
GNMA I PL Notes, 8.25% maturing 11/15/96 through 11/15/34................... 11,903 12,171
GNMA I PL Notes, 8.50% maturing 6/15/22 through 12/15/30.................... 8,868 9,223
GNMA I PL Notes, 8.75% maturing 8/15/24 through 4/15/25..................... 3,614 3,777
GNMA I PL Notes, 9.00% maturing 10/15/21 through 12/15/34................... 7,997 8,336
GNMA I PL Notes, 9.25% maturing 3/15/30 through 2/15/33..................... 1,658 1,746
GNMA I PL Notes, 9.50% maturing 1/15/19 through 8/15/22..................... 1,309 1,343
GNMA I PL Notes, 9.75% maturing 12/15/25.................................... 1,879 1,981
GNMA I PL Notes, 10.25% maturing 2/15/17 through 12/15/22................... 1,644 1,705
GNMA I PL Notes, 10.50% maturing 7/15/14.................................... 1,039 1,080
GNMA I Notes, 8.00% maturing 10/15/24 through 5/15/25....................... 3,880 3,992
GNMA I Notes, 8.50% maturing 5/15/16 through 8/15/17........................ 11,463 12,032
GNMA I Notes, 8.75% maturing 12/15/16 through 1/15/25....................... 1,916 2,021
GNMA I Notes, 9.00% maturing 5/15/16 through 4/15/21........................ 23,411 24,837
GNMA I Notes, 9.50% maturing 4/15/16 through 3/15/20........................ 2,106 2,259
GNMA I Notes, 11.00% maturing 1/15/10 through 6/15/20....................... 6,775 7,605
GNMA II Notes, 9.00% maturing 10/20/15 through 10/20/19..................... 10,629 11,170
GNMA II Notes, 9.50% maturing 1/20/16 through 12/20/22...................... 5,331 5,649
GNMA II Notes, 10.00% maturing 1/20/14 through 12/20/21..................... 11,416 12,401
GNMA II Notes, 10.50% maturing 9/20/13 through 9/20/19...................... 2,421 2,639
GNMA II Notes, 11.00% maturing 10/20/13 through 1/20/21..................... 2,806 3,074
Fed. Home Loan Mtg. Corp., 7.00% maturing 9/01/10........................... 3,055 3,067
Fed. Home Loan Mtg. Corp., 7.50% maturing 5/01/09 through 6/01/10........... 5,318 5,414
Fed. Home Loan Mtg. Corp., 8.00% maturing 11/01/09 through 7/01/10.......... 6,000 6,171
-------- ---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS.............................. 143,464 150,861
-------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT OBLIGATIONS 0.66%
Fifth Third Bank, 6.25%, dated 9/29/95, due 10/02/95........................ 1,000 1,000
-------- ---------
TOTAL REPURCHASE AGREEMENTS........................................... 1,000 1,000
-------- ---------
TOTAL INVESTMENTS (COST $152,787) 101.45%............................. $146,464 $153,911
======== =========
</TABLE>
GNMA -- Government National Mortgage Association
PL -- Project Loan
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
B-24
<PAGE> 143
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $152,787)........................... $ 153,911
Cash.......................................................................... 338
Interest receivable........................................................... 1,101
Receivable for Fund shares sold............................................... 23
Other assets.................................................................. 112
---------
Total assets........................................................ 155,485
---------
LIABILITIES
Payable for investment securities purchased................................... 3,094
Dividends payable............................................................. 405
Payable for Fund shares redeemed.............................................. 152
Accrued investment management, accounting and transfer agent fees (note 3).... 83
Other accrued expenses........................................................ 40
---------
Total liabilities................................................... 3,774
---------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS--applicable to 18,543,620 outstanding no par value shares of
beneficial interest (unlimited number of shares authorized)................. $ 151,711
=========
NET ASSET VALUE PER SHARE..................................................... $ 8.18
=========
</TABLE>
See accompanying notes to financial statements.
B-25
<PAGE> 144
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest......................................................................... $13,679
-------
EXPENSES:
Investment management fees (note 3).............................................. 784
Transfer agent fees and expenses (note 3)........................................ 174
Accounting fees (note 3)......................................................... 41
-------
Total affiliated expenses............................................ 999
-------
Custodian fees................................................................... 47
Professional fees................................................................ 51
Reports to shareholders.......................................................... 33
Directors' fees.................................................................. 19
Registration fees................................................................ 7
Other expenses................................................................... 50
-------
Total non-affiliated expenses........................................ 207
-------
Total expenses....................................................... 1,206
-------
Net investment income................................................ 12,473
-------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 2):
Net realized loss from security transactions..................................... (4,514)
Increase in unrealized gain on investments....................................... 8,934
-------
Net realized loss and increase in unrealized gain on investments..... 4,420
-------
Net increase in net assets from operations........................... $16,893
========
</TABLE>
See accompanying notes to financial statements.
B-26
<PAGE> 145
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................................................ $ 12,473 $ 14,842
Net realized loss from security transactions......................... (4,514) (5,070)
Increase (decrease) in unrealized gain on investments................ 8,934 (10,125)
-------- --------
Net increase (decrease) in net assets from operations........... 16,893 (353)
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.64 and $.65 per share,
respectively)...................................................... (12,572) (14,708)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares.................................... 5,355 12,690
Net asset value of Fund shares issued in connection with reinvestment
of distributions to shareholders................................... 7,272 8,662
-------- --------
12,627 21,352
Cost of Fund shares redeemed......................................... (34,766) (45,645)
-------- --------
Decrease in net assets derived from capital share
transactions................................................... (22,139) (24,293)
-------- --------
Net decrease in net assets...................................... (17,818) (39,354)
NET ASSETS--beginning of period...................................... 169,529 208,883
-------- --------
NET ASSETS--end of period (overdistributed net investment income of
$100 and $2, respectively)......................................... $151,711 $169,529
========= =========
</TABLE>
See accompanying notes to financial statements.
B-27
<PAGE> 146
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Government Obligations Fund (the "Fund") is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated November 15, 1985 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
Security Valuation -- Portfolio securities for which over-the-counter market
quotations are readily available are valued at the bid price. If no quotations
are available, portfolio securities are valued in good faith by the Board of
Trustees of the Fund to reflect their fair value.
Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis.
Premiums and discounts are recognized as realized gains or losses from security
transactions as securities are sold or as principal reductions are received. In
determining the net realized gain or loss on securities sold, the cost of the
securities has been determined on first-in, first-out (FIFO) cost basis.
Federal Income Taxes -- No provision has been made for Federal taxes on the
Fund's income, since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
make sufficient distributions of taxable income and capital gains within the
required time to relieve it from all, or substantially all, Federal income
taxes.
Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly, at net asset value, in additional shares of the Fund.
(2) -- PURCHASES AND SALES OF SECURITIES
Purchases and sales of U.S. government agency obligations (excluding short-term
obligations) during the year ended September 30, 1995 aggregated $57,596,492 and
$60,730,057, respectively.
As of September 30, 1995, gross unrealized gains and gross unrealized losses on
investment securities were $2,136,800 and $1,012,380, respectively; resulting in
a net unrealized gain of $1,124,420 on investment securities with a cost basis
of $152,786,945.
(3) -- TRANSACTIONS WITH AFFILIATES
As investment manager for the Fund, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Fund. CMC has agreed that if the aggregate expenses of the Fund,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Fund, CMC will refund to the Fund, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the year ended September 30, 1995.
(continued)
B-28
<PAGE> 147
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
CMC also serves the Fund as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Fund. For the year ended September 30, 1995 the Fund paid or
accrued $174,394 and $40,879 for transfer agent and fund accounting services,
respectively.
The Ohio Company, sole shareholder of CMC, acting as distributor for the Fund,
reported that it received commissions after discounts to dealers from the sale
of shares of the Fund of $147,536 for the year ended September 30, 1995.
(4) -- COMMITMENTS AND CONTINGENCIES
The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $30,644, for the initial capital of ICI
Mutual. The Fund is also committed to provide $91,932 should ICI Mutual
experience the need for additional capital contributions.
Included in other assets is a $61,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.
(5) -- CAPITAL STOCK
At September 30, 1995, there were an unlimited number of shares of no par value
capital stock authorized and the capital amounts were as follows:
<TABLE>
<S> <C>
Paid in capital.................................................................... $ 173,076,183
Accumulated net realized loss on investments....................................... (22,389,694)
Unrealized gain on investments..................................................... 1,124,420
Overdistributed net investment income.............................................. (100,238)
-------------
Net assets......................................................................... $ 151,710,671
=============
</TABLE>
For tax purposes, the accumulated net realized loss on investments (capital loss
carryforwards) of approximately $22,800,000 expire throughout the next eight
years. Approximately $3,800,000 of capital loss carryforwards expired during the
year ended September 30, 1995. The Fund will not declare any capital gain
distributions until the carryforwards have been offset or expired.
B-29
<PAGE> 148
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Shares sold.......................................................... 669,572 1,514,461
Shares issued in connection with reinvestment of distributions to
shareholders....................................................... 908,617 1,045,107
----------- -----------
1,578,189 2,559,568
Shares repurchased................................................... (4,320,495) (5,478,768)
----------- -----------
Net decrease......................................................... (2,742,306) (2,919,200)
Shares outstanding:
Beginning of period.................................................. 21,285,926 24,205,126
----------- -----------
End of period........................................................ 18,543,620 21,285,926
========== ==========
</TABLE>
(6) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Fund and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Fund to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Fund and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.
B-30
<PAGE> 149
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning.............. $ 7.96 $ 8.63 $ 8.95 $ 8.99 $ 8.71
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................. 0.64 0.66 0.74 0.80 0.81
Net realized and unrealized gains
(losses) on securities............. 0.22 (0.68) (0.32) (0.04) 0.28
-------- -------- -------- -------- --------
Total from investment operations........ 0.86 (0.02) 0.42 0.76 1.09
-------- -------- -------- -------- --------
Less distributions:
Dividends............................. (0.64) (0.65) (0.74) (0.80) (0.81)
-------- -------- -------- -------- --------
Net Asset Value, ending................. $ 8.18 $ 7.96 $ 8.63 $ 8.95 $ 8.99
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total return............................ 11.27% (0.27%) 4.83% 8.87% 13.07%
========= ========= ========= ========= =========
Net assets, ending (000)................ $151,711 $169,529 $208,883 $172,139 $128,569
========= ========= ========= ========= =========
Ratio of expenses to average net
assets................................ 0.76% 0.75% 0.73% 0.76% 0.76%
========= ========= ========= ========= =========
Ratio of net investment income to
average net assets.................... 7.93% 7.88% 8.32% 8.89% 9.20%
========= ========= ========= ========= =========
Portfolio turnover rate................. 36.71% 21.95% 24.94% 17.15% 34.81%
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
B-31
<PAGE> 150
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Cardinal Government Obligations Fund:
We have audited the accompanying statement of assets and liabilities of Cardinal
Government Obligations Fund (the Fund), including the statement of investments,
as of September 30, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Obligations Fund as of September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-32
<PAGE> 151
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
SECURITIES DATE AMOUNT (NOTE 1)
- ----------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
DIRECT U.S. GOVERNMENT OBLIGATIONS 34.50%
U.S. Treasury Bills.................................................... 10/19/95 $ 40,000 $ 39,894
U.S. Treasury Bills.................................................... 11/02/95 20,000 19,904
U.S. Treasury Bills.................................................... 11/16/95 20,000 19,864
U.S. Treasury Bills.................................................... 12/07/95 35,000 34,660
U.S. Treasury Bills.................................................... 01/18/96 20,000 19,687
U.S. Treasury Bills.................................................... 02/08/96 20,000 19,625
--------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS......................... 155,000 153,634
--------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT AND
FEDERAL AGENCY OBLIGATIONS 65.90%
Smith Barney Shearson, 5.80%, dated 9/25/95............................ 10/02/95 80,000 80,000
Paine Webber Inc., 5.80%, dated 9/25/95................................ 10/02/95 93,000 93,000
Merrill Lynch Securities, 6.35%, dated 9/29/95......................... 10/02/95 39,000 39,000
Fifth Third Bank, 6.25%, dated 9/29/95................................. 10/02/95 6,500 6,500
Fifth Third Bank, 5.75%, dated 9/26/95................................. 10/03/95 75,000 75,000
--------- ---------
TOTAL REPURCHASE AGREEMENTS...................................... 293,500 293,500
--------- ---------
TOTAL INVESTMENTS AT AMORTIZED COST 100.40%...................... $ 448,500 $ 447,134
======== ========
</TABLE>
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
B-21
<PAGE> 152
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities at amortized cost...................................... $ 447,134
Cash............................................................................. 401
Interest receivable.............................................................. 291
Other assets..................................................................... 314
---------
Total assets......................................................... 448,140
---------
LIABILITIES
Payable for Trust shares redeemed................................................ 2,360
Payable for shareholder distributions............................................ 26
Accrued investment management, accounting and transfer agent fees (note 2)....... 274
Other accrued expenses........................................................... 106
---------
Total liabilities.................................................... 2,766
---------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 445,373,567 outstanding $.01 par value shares of
beneficial interest (unlimited number of shares authorized).................... $ 445,374
=========
NET ASSET VALUE PER SHARE........................................................ $1.00
=========
</TABLE>
See accompanying notes to financial statements.
B-22
<PAGE> 153
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 23,311
--------
EXPENSES:
Investment management fees (note 2).................................. 2,032
Transfer agent fees and expenses (note 2)............................ 842
Accounting fees (note 2)............................................. 53
--------
Total affiliated expenses.................................. 2,927
--------
Custodian fees....................................................... 34
Professional fees.................................................... 90
Reports to shareholders.............................................. 65
Trustees' fees....................................................... 25
Registration fees.................................................... 9
Other expenses....................................................... 151
--------
Total non-affiliated expenses.............................. 374
--------
Total expenses............................................. 3,301
--------
Net increase in net assets from operations................. $ 20,010
========
</TABLE>
See accompanying notes to financial statements.
B-23
<PAGE> 154
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................... $ 20,010 $ 11,615
Net realized loss from security transactions.................... 0 (1,463)
----------- ------------
Net increase in net assets from operations................. 20,010 10,152
----------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (20,010) (11,303)
----------- ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 1,052,266 987,709
Reinvestment of distributions to shareholders................... 19,567 11,027
Cost of shares redeemed......................................... (993,975) (1,033,978)
----------- ------------
Increase (decrease) in net assets derived from capital
share transactions....................................... 77,858 (35,242)
----------- ------------
FROM CAPITAL CONTRIBUTIONS (NOTE 2):
Capital contributed by Cardinal Management Corp................. 0 1,151
----------- ------------
Net increase (decrease) in net assets...................... 77,858 (35,242)
NET ASSETS -- beginning of period............................... 367,516 402,758
----------- ------------
NET ASSETS -- end of period..................................... $ 445,374 $ 367,516
========== ============
</TABLE>
See accompanying notes to financial statements.
B-24
<PAGE> 155
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Government Securities Trust (the Trust) is a diversified, open-end
investment company created under the laws of Pennsylvania by a Declaration of
Trust dated March 21, 1980 and is registered under the Investment Company Act of
1940. According to the terms of the Declaration of Trust, Trust investments must
be obligations (or collateralized by obligations) of the U.S. Government or
agencies thereof. The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
Security Valuation -- Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.
Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis. It
is the Trust's policy for its Custodian or a third-party bank to take possession
of all securities pledged as collateral for repurchase agreements and monitor
the market value of the collateral to ensure that it remains sufficient to cover
the repurchase agreements.
Federal Income Taxes -- No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.
Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.
(2) -- TRANSACTIONS WITH AFFILIATES
As investment manager for the Trust, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Trust. CMC has agreed that if the aggregate expenses of the Trust,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Trust, CMC will refund to the Trust, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the year ended September 30, 1995.
CMC also serves the Trust as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1995 the Trust paid or
accrued $842,187 and $53,283 for transfer agent and fund accounting services,
respectively.
To offset capital losses incurred by the Trust, CMC contributed $1,151,186 to
the Trust during the year ended September 30, 1994. The amount contributed was
equal to the investment management, transfer agent service and the fund
accounting fees for the period from May 1, 1994 through September 30, 1994.
(continued)
B-25
<PAGE> 156
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the year ended September 30, 1995 the Trust
incurred no expenses related to the distribution of its shares.
(3) -- COMMITMENTS AND CONTINGENCIES
The Trust has an available $6,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $87,459 for the initial capital of ICI
Mutual. The Trust is also committed to provide $262,377 should ICI Mutual
experience the need for additional capital contributions.
Included in other assets is a $175,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.
(4) -- CAPITAL STOCK
At September 30, 1995, there were an unlimited number of $.01 par value shares
of capital stock and the capital amounts were as follows:
<TABLE>
<S> <C>
Paid in capital.................................................................. $446,524,753
Accumulated net realized loss on investments..................................... (1,463,438)
Undistributed net investment income.............................................. 312,252
------------
Net assets....................................................................... $445,373,567
=============
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
--------------------------------
1995 1994
------------- --------------
<S> <C> <C>
Shares sold..................................................... 1,052,265,662 987,708,658
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 19,567,048 11,026,622
------------- --------------
1,071,832,710 998,735,280
Shares repurchased.............................................. (993,975,623) (1,033,976,922)
------------- --------------
Net increase (decrease)......................................... 77,857,087 (35,241,642)
Shares outstanding:
Beginning of period............................................. 367,516,480 402,758,122
------------- --------------
End of period................................................... 445,373,567 367,516,480
============= ==============
</TABLE>
B-26
<PAGE> 157
(5) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Trust and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Trust to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Trust and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.
B-27
<PAGE> 158
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................................ 0.05 0.03 0.02 0.04 0.06
Less distributions:
Dividends............................................ (0.05) (0.03) (0.02) (0.04) (0.06)
--------- --------- --------- --------- ---------
Net Asset Value, ending................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Total return*.......................................... 4.98% 2.84% 2.41% 3.58% 6.20%
======== ======== ======== ======== ========
Net assets, ending (000)............................... $ 445,374 $ 367,516 $ 402,758 $ 472,521 $ 567,841
======== ======== ======== ======== ========
Ratio of expenses to average net assets................ 0.81% 0.85% 0.79% 0.76% 0.72%
======== ======== ======== ======== ========
Ratio of net investment income to average net assets... 4.92% 2.94% 2.38% 3.52% 6.03%
======== ======== ======== ======== ========
</TABLE>
* Without the capital contribution discussed in note 2, the 1994 total return
would have been 2.55%.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Cardinal Government Securities Trust:
We have audited the accompanying statement of assets and liabilities of Cardinal
Government Securities Trust (the Trust), including the statement of investments,
as of September 30, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Securities Trust as of September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-28
<PAGE> 159
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
2A-7* FINAL PRINCIPAL VALUE
SECURITIES MATURITY MATURITY AMOUNT (NOTE 1)
- ------------------------------------------------------------------------------ --------- --------- --------- --------
<S> <C> <C> <C> <C>
MUNICIPAL SECURITIES 98.95%
Ashtabula County, Ohio, Brighton Manor Project, VRN, currently 4.60%.......... 10/04/95 12/01/16 $ 2,200 $ 2,200
Connecticut Development (Light & Power Co.), VRN, currently 4.40%............. 10/04/95 9/01/28 3,400 3,400
Cornell Township, Michigan, Economic Development, IRB, currently 3.80%........ 10/02/95 3/01/15 3,100 3,100
Erie County, Ohio, Brighton Manor Project, VRN, currently 4.60%............... 10/04/95 11/01/16 600 600
Florida Housing Agency, VRN, currently 4.35%.................................. 10/04/95 12/01/11 3,400 3,400
Grand Prairie, Texas Housing Finance Authority, VRN, currently 4.35%.......... 10/04/95 6/01/10 1,800 1,800
Greater East Texas Higher Education, VRN, currently 4.30%..................... 10/05/95 9/01/02 2,300 2,300
Hillsborough County, Florida, VRN, currently 4.50%............................ 10/02/95 9/01/25 3,300 3,300
Hockley County, Texas, PCRB, currently 3.65%.................................. 3/01/96 3/01/14 1,750 1,750
Jackson County, Mississippi, PCRB, currently 4.40%............................ 10/02/95 12/01/16 1,800 1,800
Jackson County, Mississippi, PCRB, currently 4.40%............................ 10/02/95 6/01/23 300 300
Lincoln County, Wyoming, PCRB, currently 4.60%................................ 10/02/95 11/01/14 3,000 3,000
Lisle, Illinois, VRN, currently 4.30%......................................... 10/05/95 12/15/25 2,500 2,500
Louisiana Public Facilities Authority (Kenner Hotels), IRB, currently 4.60%... 10/02/95 12/01/15 2,000 2,000
Louisiana Public Facilities Authority, VRN, currently 4.35%................... 10/04/95 10/01/22 1,000 1,000
Marion County, West Virginia Waste Disposal, RB, currently 4.55%.............. 10/04/95 10/01/17 1,000 1,000
Marion County, West Virginia Waste Disposal, RB, currently 4.50%.............. 10/04/95 10/01/17 2,200 2,200
Marion County, West Virginia Waste Disposal, RB, currently 4.50%.............. 10/04/95 10/01/17 1,000 1,000
Muldrow, Oklahoma Public Wks. Authority, IRB, currently 4.45%................. 10/03/95 2/01/15 3,000 3,000
New York City Municipal Water Finance Agency, VRN, currently 4.60%............ 10/02/95 6/15/23 2,000 2,000
New York State Energy Research & Development Authority, VRN, currently
4.10%....................................................................... 10/04/95 6/01/27 3,000 3,000
Ohio, Higher Education, RB, currently 4.40%................................... 10/05/95 12/01/06 1,280 1,280
Platte County, Wyoming, VRN, currently 4.60%.................................. 10/02/95 7/01/14 1,800 1,800
Port of Anacortes, Washington, IRB, currently 3.50%........................... 10/05/95 6/15/19 3,000 3,000
Private College & University, Georgia, RB, currently 3.60%.................... 10/16/95 10/01/15 3,000 3,000
Saint Charles, Louisiana, PCRB, currently 4.20%............................... 10/04/95 6/01/05 3,200 3,200
Sandusky County, Ohio, Brighton Manor Project, IRB, currently 4.60%........... 10/04/95 12/01/16 500 500
Springfield, Illinois, Second and Adams Project, RB, currently 4.45%.......... 10/03/95 12/01/15 1,170 1,170
Washington State Fin. Commiss. Rev., RB, currently 4.55%...................... 10/03/95 1/01/10 4,000 4,000
West Feliciana, Louisiana, VRN, currently 4.50%............................... 10/02/95 12/01/15 1,500 1,500
--------- --------
TOTAL INVESTMENTS AT AMORTIZED COST 98.95%.................................. $64,100 $64,100
======== =========
</TABLE>
VRN -- Variable Rate Notes
IRB -- Variable Rate Industrial Revenue Bonds
RB -- Variable Rate Revenue Bonds
PCRB -- Variable Rate Pollution Control Revenue Bonds
* Rule 2a-7, of the Investment Company Act of 1940, defines maturity as the
longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered
through demand.
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
B-30
<PAGE> 160
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities at amortized cost...................................... $64,100
Cash............................................................................. 974
Interest receivable.............................................................. 228
Receivable for Trust shares sold................................................. 2
Other assets..................................................................... 55
-----------------
Total assets........................................................... 65,359
-----------------
LIABILITIES
Payable for Trust shares redeemed................................................ 510
Payable for shareholder distributions............................................ 9
Accrued investment management, accounting and transfer agent fees (note 2)....... 35
Other accrued expenses........................................................... 25
-----------------
Total liabilities...................................................... 579
-----------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 64,779,828 outstanding $.10 par value shares of
beneficial interest (unlimited number of shares authorized).................... $64,780
=================
NET ASSET VALUE PER SHARE........................................................ $ 1.00
=================
</TABLE>
See accompanying notes to financial statements.
B-31
<PAGE> 161
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest................................................................. $2,608
------
EXPENSES:
Investment management fees (note 2)...................................... 344
Transfer agent fees and expenses (note 2)................................ 63
Accounting fees (note 2)................................................. 17
------
Total affiliated expenses...................................... 424
------
Custodian fees........................................................... 17
Professional fees........................................................ 41
Reports to shareholders.................................................. 30
Trustees' fees........................................................... 17
Registration fees........................................................ 8
Other expenses........................................................... 28
------
Total non-affiliated expenses.................................. 141
------
Total expenses................................................. 565
------
Net increase in net assets from operations..................... $2,043
======
</TABLE>
See accompanying notes to financial statements.
B-32
<PAGE> 162
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
FROM OPERATIONS:
Net increase in net assets from operations...................... $ 2,043 $ 1,601
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (2,043) (1,601)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 154,643 164,948
Reinvestment of distributions to shareholders................... 1,917 1,510
Cost of shares redeemed......................................... (172,311) (177,086)
-------- --------
Decrease in net assets derived from capital share
transactions............................................... (15,751) (10,628)
-------- --------
Net decrease in net assets.................................... (15,751) (10,628)
NET ASSETS -- beginning of period............................... 80,531 91,159
-------- --------
NET ASSETS -- end of period..................................... $ 64,780 $ 80,531
========= =========
</TABLE>
See accompanying notes to financial statements.
B-33
<PAGE> 163
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Tax Exempt Money Trust (the Trust) is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated January 13, 1983 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
Security Valuation--Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.
Variable Rate Demand Municipal Securities--Variable and adjustable 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, at
redemption dates provided by contract 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 interest rates shown for
variable rate securities are the rates in effect on September 30, 1995.
Security Transactions and Investment Income--Security transactions are recorded
on the trade date. Interest income is recorded on the accrual basis.
Federal Income Taxes--No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.
Dividends to Shareholders--Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.
(2) -- TRANSACTIONS WITH AFFILIATES
As investment manager for the Trust, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Trust. CMC has agreed that if the aggregate expenses of the Trust,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Trust, CMC will refund to the Trust, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the year ended September 30, 1995.
CMC also serves as the Trust's transfer agent and fund accountant. Transfer
agent service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1995 the Trust paid or
accrued $62,542 and $17,235 for transfer agent and fund accounting services,
respectively.
(continued)
B-34
<PAGE> 164
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the year ended September 30, 1995 the Trust
incurred no expenses relating to the distribution of its shares.
(3) -- COMMITMENTS AND CONTINGENCIES
The Trust has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $13,291 for the initial capital of ICI
Mutual. The Trust is also committed to provide $39,873 should ICI Mutual
experience the need for additional capital contributions.
Included in other assets is a $27,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.
(4) -- CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Shares sold..................................................... 154,643,119 164,947,710
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 1,916,504 1,509,540
------------ -------------
156,559,623 166,457,250
Shares repurchased.............................................. (172,310,841) (177,085,583 )
------------ -------------
Net decrease.................................................... (15,751,218) (10,628,333 )
Shares outstanding:
Beginning of period............................................. 80,531,046 91,159,379
------------ -------------
End of period................................................... 64,779,828 80,531,046
============= ==============
</TABLE>
(5) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Trust and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Trust to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Trust and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.
B-35
<PAGE> 165
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning................ $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................... 0.03 0.02 0.02 0.03 0.04
Less distributions:
Dividends............................... (0.03) (0.02) (0.02) (0.03) (0.04)
--------- --------- --------- --------- ---------
Net Asset Value, ending................... $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Total return.............................. 3.02% 1.78% 1.81% 2.62% 4.40%
========== ========== ========== ========== ==========
Net assets, ending (000).................. $64,780 $80,531 $91,159 $70,054 $85,488
========== ========== ========== ========== ==========
Ratio of expenses to average net assets... 0.83% 0.76% 0.77% 0.76% 0.72%
========== ========== ========== ========== ==========
Ratio of net investment income to average
net assets.............................. 2.99% 1.78% 1.80% 2.59% 4.31%
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Cardinal Tax Exempt Money Trust:
We have audited the accompanying statement of assets and liabilities of Cardinal
Tax Exempt Money Trust (the Trust), including the statement of investments, as
of September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Tax Exempt Money Trust as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-36
<PAGE> 166
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
COMMON STOCK 44.23%
America West Airlines Class B*...................................................... 12,000 $ 186
American Express Company............................................................ 8,000 355
American Health Properties.......................................................... 10,000 216
Arco Chemical Company............................................................... 7,500 366
Banc One Corporation................................................................ 8,000 292
Cinergy Corporation................................................................. 10,000 279
Commerce Bancshares Incorporated.................................................... 5,250 207
Dow Chemical Company................................................................ 4,500 335
Excel Industries Incorporated....................................................... 15,000 210
Forest Laboratories*................................................................ 3,000 133
GTE Corporation..................................................................... 7,500 294
Glendale Federal Savings Bank*...................................................... 5,000 82
IntelCom Group Incorporated*........................................................ 15,000 191
Mellon Bank Corporation............................................................. 7,500 335
Monsanto Company.................................................................... 3,500 353
Mutual Risk Management.............................................................. 5,000 197
National Semiconductor Company*..................................................... 5,000 138
J.C. Penney Company Incorporated.................................................... 6,000 298
Progress Software Corporation*...................................................... 4,000 268
Reliastar Financial Corporation..................................................... 1,000 41
Southern Indiana Gas and Electric................................................... 6,000 202
Structural Dynamics Research*....................................................... 15,000 278
Tribune Company..................................................................... 5,000 332
Trinova Corporation................................................................. 6,000 202
Universal Foods Corporation......................................................... 4,000 139
U.S. Healthcare Incorporated........................................................ 5,000 177
Viewlogic Systems Incorporated*..................................................... 4,000 56
Willamette Industries Incorporated.................................................. 4,000 267
-----------
TOTAL COMMON STOCK (COST $4,982,002).............................................. 6,429
-----------
CONVERTIBLE PREFERRED STOCK 3.24%
California Federal Bank............................................................. 6,000 145
Ford Motor Company, 8.40%, Series A................................................. 1,500 154
Glendale Federal, 8.75%, Series E................................................... 4,000 172
-----------
TOTAL CONVERTIBLE PREFERRED STOCK (COST $471,349)................................. 471
-----------
PREFERRED STOCK 5.95%
American General Capital, 8.45%..................................................... 7,500 189
American Health Psychiatric Group Preferred......................................... 8,250 134
Chase Manhattan Corporation, 8.40%, Cumulative Series M............................. 7,500 193
Enron Capital Resources, 9.00%, Series A, LP........................................ 6,000 157
Utilicorp Capital, 8.875%........................................................... 7,500 192
-----------
TOTAL PREFERRED STOCK (COST $864,463)............................................. 865
-----------
*Non-income producing
(continued)
</TABLE>
B-33
<PAGE> 167
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- -----------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS 6.02%
Ashland Oil, Inc., 6.75%, due 7-01-2014............................................. 150,000 $ 147
Beverly Enterprises, 7.625%, due 3-15-2003.......................................... 100,000 98
Cabot Medical Co., 7.50%, due 3-01-1999............................................. 100,000 101
Enserch Corporation, 6.375%, due 4-01-2002.......................................... 150,000 147
Federated Department Stores, 9.72%, due 2-15-2004................................... 150,000 151
Gran Care Incorporated, 6.50%, due 1-15-2003........................................ 100,000 95
Masco Corporation, 5.25%, due 2-15-2012............................................. 150,000 136
-----------
TOTAL CONVERTIBLE CORPORATE BONDS (COST $888,296)................................. 875
-----------
U.S. GOVERNMENT AGENCY OBLIGATIONS 8.41%
GNMA I # 368080, 7.00%, due 11-15-2008.............................................. 268,378 271
GNMA I # 251959, 7.50%, due 6-15-2023............................................... 260,649 263
GNMA II # 1213, 7.50%, due 6-20-2023................................................ 337,135 338
GNMA II # 1268, 8.00%, due 7-20-2023................................................ 343,197 351
-----------
TOTAL U.S. GOVERNMENT AGENCIES (COST $1,268,259).................................. 1,223
-----------
CORPORATE BONDS 14.90%
American Airlines, Series 91A, 10.18%, due 1-02-2013................................ 250,000 289
Consumers Power Co., 7.50%, due 6-01-2002........................................... 300,000 306
Dole Foods Inc., 7.00%, due 5-15-2003............................................... 200,000 198
First USA Bank, Wilmington, 5.75%, due 1-15-1999.................................... 300,000 293
General Motors Acceptance Corp., 7.00%, due 9-15-2002............................... 200,000 204
Kemper Corp., 6.875%, due 9-15-2003................................................. 250,000 246
Pulte Homes Corp., 7.00%, due 12-15-2003............................................ 150,000 143
Tele-Communications Inc., 7.25%, due 8-01-2005...................................... 250,000 244
Time Warner, 7.25%, due 9-01-2008................................................... 250,000 243
-----------
TOTAL CORPORATE BONDS (COST $2,129,904)........................................... 2,166
-----------
COMMERCIAL PAPER 13.76%
Ford Motor Credit Corporation, 5.75%, due 10-02-1995................................ 500,000 500
Sears Acceptance Corporation, 5.74%, due 10-03-1995................................. 500,000 500
General Motors Acceptance Corporation, 5.80%, due 10-04-1995........................ 500,000 500
Cigna Corporation, 5.88%, due 10-10-1995............................................ 500,000 500
-----------
TOTAL COMMERCIAL PAPER (COST $1,999,839).......................................... 2,000
-----------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT OBLIGATIONS 3.10%
The Fifth Third Bank, 5.95%, dated 9-29-95, due 10-04-95............................ 450,000 450
-----------
TOTAL REPURCHASE AGREEMENTS (COST $450,000)....................................... 450
-----------
TOTAL INVESTMENTS (COST $13,054,112) 99.61%....................................... $ 14,479
===========
</TABLE>
GNMA -- Government National Mortgage Association
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
B-34
<PAGE> 168
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $13,054)............................... $ 14,479
Cash............................................................................. 42
Receivable for Fund shares sold.................................................. 113
Interest receivable.............................................................. 56
Dividends receivable............................................................. 16
Prepaid expenses................................................................. 7
Deferred organizational cost..................................................... 27
--------
Total assets........................................................... 14,740
--------
LIABILITIES
Payable for investment securities purchased...................................... 125
Payable for Fund shares redeemed................................................. 47
Accrued investment management, shareholder service, accounting and transfer agent
fees (note 3).................................................................. 14
Other accrued expenses........................................................... 19
--------
Total liabilities...................................................... 205
--------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 1,261,727 outstanding no par value shares of
beneficial interest (unlimited number of shares authorized).................... $ 14,535
========
NET ASSET VALUE PER SHARE........................................................ $ 11.52
========
</TABLE>
See accompanying notes to financial statements.
B-35
<PAGE> 169
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................................ $ 245
Interest......................................................................... 461
-------
Total income................................................................ 706
-------
EXPENSES:
Investment management fees (note 3).............................................. 102
Transfer agent fees and expenses (note 3)........................................ 26
Shareholder service fees (note 3)................................................ 32
Accounting fees (note 3)......................................................... 5
-------
Total affiliated expenses.............................................. 165
-------
Custodian fees................................................................... 13
Professional fees................................................................ 26
Reports to shareholders.......................................................... 21
Directors' fees.................................................................. 8
Registration fees................................................................ 13
Other expenses................................................................... 9
Amortization of organizational cost (note 1)..................................... 10
-------
Total non-affiliated expenses.......................................... 100
-------
Total expenses......................................................... 265
-------
Net investment income.................................................. 441
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions..................................... 307
Increase in unrealized gain on investments....................................... 1,810
-------
Net realized gain and increase in unrealized gain on investments............ 2,117
-------
Net increase in net assets from operations.................................. $ 2,558
======
</TABLE>
See accompanying notes to financial statements.
B-36
<PAGE> 170
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
FROM OPERATIONS:
Net investment income..................................................... $ 441 $ 335
Net realized gain from security transactions.............................. 307 158
Increase (decrease) in unrealized gain on investments..................... 1,810 (462)
-------- --------
Net increase in net assets from operations........................... 2,558 31
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distribution of net investment income ($.35 and $.23 per share,
respectively)........................................................... (453) (333)
Distribution of net realized gains from security transactions ($.04 and
$.03 per share, respectively)........................................... (49) (36)
-------- --------
Total distributions to shareholders.................................. (502) (369)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sales of Fund shares........................................ 1,485 5,251
Net asset value of Fund shares issued in connection with reinvestment of
distributions to shareholders........................................... 458 335
-------- --------
1,943 5,586
Cost of Fund shares redeemed.............................................. (3,437) (2,086)
-------- --------
Increase (decrease) in net assets derived from capital share
transactions........................................................ (1,494) 3,500
-------- --------
Net increase in net assets........................................... 562 3,162
NET ASSETS -- beginning of period......................................... 13,973 10,811
-------- --------
NET ASSETS -- end of period (undistributed net investment income of $3 and
$15, respectively)...................................................... $ 14,535 $ 13,973
======== ========
</TABLE>
See accompanying notes to financial statements.
B-37
<PAGE> 171
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Balanced Fund (the "Fund") is one of two portfolios of The Cardinal
Group (the "Group"), a diversified open-end management investment company
established as an Ohio Business Trust on March 23, 1993. The Group currently
consists of Cardinal Aggressive Growth Fund and Cardinal Balanced Fund. Before
June 24, 1993 the Fund had no operations other than those relating to
organizational matters, including the issuance of 5,000 shares of beneficial
interest for cash at $10.00 per share on June 4, 1993 to Cardinal Management
Corp. ("CMC"), the Group's investment adviser. The following is a summary of
significant accounting policies followed by the Fund in preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles for investment companies.
Security Valuation -- Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at either the mean between the bid and ask prices or the last sale price.
If no quotations are available, portfolio securities are valued in good faith by
the Board of Trustees to reflect their fair value.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes,
when applicable, the pro rata amortization of premium or accretion of discount.
In determining the net realized gain or loss on securities sold, the cost of the
securities will be determined by the first-in, first-out (FIFO) basis. It is the
Group's policy for its Custodian, or a third-party bank, to take possession of
all securities pledged as collateral for repurchase agreements and monitor the
market value of the collateral to ensure that it remains sufficient to cover the
repurchase agreements.
Deferred Organizational Cost -- Costs incurred with the organization and
registration of the Fund have been deferred and are being amortized on a
straight-line basis over a 60 month period from the commencement of public
offering of its shares. In the event that any of the initial shares of the Fund
are redeemed by the Fund's investment adviser or any subsequent holders thereof
during the 60 month amortization period, the Fund will reduce the redemption
proceeds otherwise payable by any unamortized organizational costs of the Fund
in the same proportion as the number of initial shares of the Fund being
redeemed bears to the number of initial shares of the Fund outstanding at the
time of redemption.
Distributions to Shareholders -- Distributions and dividends will be recorded on
the record date. The Fund intends to declare income dividends quarterly and any
capital gain distributions annually.
Federal Income Tax -- The Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
(continued)
B-38
<PAGE> 172
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(2) -- PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the period ended September 30, 1995
aggregated $4,318,959 and $6,447,176, respectively.
During the period ended September 30, 1995 the Fund realized on a FIFO cost
basis a net capital gain of $306,446 for both book and tax purposes.
As of September 30, 1995, for both book and tax purposes, gross unrealized gains
and gross unrealized losses on investment securities were $1,612,056 and
$186,699, respectively; resulting in a net unrealized gain of $1,425,357.
(3) -- TRANSACTIONS WITH AFFILIATES
As investment adviser for the Fund, CMC, an affiliated company, is allowed an
annual fee of 0.75% of the average daily net assets of the Fund. CMC has agreed
that if the aggregate expenses of the Fund, as defined, for any fiscal year
exceed the expense limitation of any state having jurisdiction over the Fund,
CMC will refund to the Fund, or otherwise bear, such excess. This limitation did
not affect the calculation of the management fee during the period ended
September 30, 1995. CMC also serves the Fund as transfer agent and fund
accountant. Under the terms of the Group's Transfer Agency and Fund Accounting
Agreement, the transfer agent is entitled to receive fees based on a monthly
charge per shareholder account plus out-of-pocket expenses and the fund
accountant is entitled to receive fees based on a percentage of the average net
assets of the Fund. For the period ended September 30, 1995 the Fund paid or
accrued $25,950 and $4,697 for transfer agent and fund accounting services,
respectively.
The Ohio Company ("TOC") serves the Group as distributor. TOC receives fees from
the Fund for providing services under the Distribution and Shareholder Service
Plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940.
Under the Plan, the Fund pays TOC a fee not to exceed, on an accrual basis,
0.25% of the average daily net assets of the Fund for payments it makes to
banks, broker/dealers, including TOC, and other institutions for providing
shareholder services. The Fund paid or accrued shareholder service fees of
$32,534 for the period ended September 30, 1995. The Ohio Company reported to
the Fund that it had received commissions after discounts to dealers from the
sale of shares of the Fund of $66,772 for the period ended September 30, 1995.
(4) -- COMMITMENTS AND CONTINGENCIES
The Fund has an available $2,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
(continued)
B-39
<PAGE> 173
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(5) -- CAPITAL STOCK
At September 30, 1995, there were an unlimited number of no par value shares of
capital stock and the capital amounts were as follows:
<TABLE>
<S> <C>
Paid in capital............................................................... $12,716,361
Accumulated net realized gain on investments.................................. 390,571
Unrealized gain on investments................................................ 1,425,357
Undistributed net investment income........................................... 3,201
-----------
Net assets.................................................................... $14,535,490
============
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Shares sold.......................................................... 140,750 519,358
Shares issued in connection with reinvestment of distributions
to shareholders.................................................... 44,785 33,364
----------- -----------
185,535 552,722
Shares repurchased................................................... (335,102) (208,912)
----------- -----------
Net increase (decrease).............................................. (149,567) 343,810
Shares outstanding:
Beginning of period.................................................. 1,411,294 1,067,484
----------- -----------
End of period........................................................ 1,261,727 1,411,294
========== ==========
</TABLE>
(6) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Group and The Cardinal Fund Inc.,
Cardinal Government Securities Trust, Cardinal Tax Exempt Money Trust, and
Cardinal Government Obligations Fund (collectively the "Old Funds"). The plan
calls for the transfer of all assets and liabilities of each of the Old Funds to
newly created series of the Group with the same basic investment objectives and
restrictions. The Trustees have determined that this action is in the best
interests of the shareholders of the Old Funds and the Group. Shareholders of
the Old Funds must approve the transaction before any transfer can take place.
B-40
<PAGE> 174
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
PERIOD
FROM JUNE
YEARS ENDED 24, 1993*
SEPTEMBER 30, THROUGH
---------------------- SEPTEMBER
1995 1994 30, 1993
-------- -------- ---------
<S> <C> <C> <C>
Net Asset Value, beginning............................................ $ 9.90 $ 10.13 $ 10.00
-------- -------- ---------
Income from investment operations:
Net investment income............................................... 0.34 0.23 0.02
Net realized and unrealized gain (loss) on securities............... 1.67 (0.20) 0.12
-------- -------- ---------
Total from investment operations...................................... 2.01 0.03 0.14
-------- -------- ---------
Less distributions:
Dividends........................................................... (0.35) (0.23) (0.01)
Capital gain distribution........................................... (0.04) (0.03) 0
-------- -------- ---------
Total distributions................................................... (0.39) (0.26) (0.01)
-------- -------- ---------
Net Asset Value, ending............................................... $ 11.52 $ 9.90 $ 10.13
======= ======= ========
Ratios/Supplemental Data:
Total return (aggregate return for period)**.......................... 20.76% 0.37% 1.40%
======= ======= ========
Net assets, ending (000).............................................. $ 14,535 $ 13,973 $10,811
======= ======= ========
Ratio of expenses to average net assets**............................. 1.94% 2.07% 0.70%
======= ======= ========
Ratio of net investment income to average net assets**................ 3.24% 2.44% 0.35%
======= ======= ========
Portfolio turnover rate............................................... 37.62% 59.09% 60.67%
======= ======= ========
<FN>
*Commencement of operations
**Effective September 15, 1995, The Ohio Company began waiving payments under
the Distribution and Shareholder Service Plan. Had the payments been charged,
total return, the ratio of expenses to average net assets, and the ratio of
net investment income to average net assets would have been 20.75%, 1.95%, and
3.23%, respectively.
</TABLE>
See accompanying notes to financial statements.
B-41
<PAGE> 175
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Cardinal Balanced Fund:
We have audited the accompanying statement of assets and liabilities of Cardinal
Balanced Fund (the Fund), including the statement of investments, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Balanced Fund as of September 30, 1995, the results of its operations
for the year then ended, the changes in its net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
periods indicated herein, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-42
<PAGE> 176
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK 79.22%
ADVANCED MEDICAL DEVICES 2.48%
Biomet, Inc.*....................................................... 15,000 $ 259
----------
BIO TECHNOLOGY 6.43%
Alkermes, Inc.*..................................................... 8,000 52
Cytel Corporation*.................................................. 15,000 105
Magainin Pharmaceuticals*........................................... 12,000 131
Matrix Pharmaceuticals*............................................. 14,000 196
Vertex Pharmaceuticals*............................................. 10,000 187
----------
671
----------
BROADLINE RETAILERS 2.66%
Consolidated Stores Corp.*.......................................... 12,000 278
----------
COMMERCIAL SERVICES 1.61%
Medaphis Corporation*............................................... 6,000 168
----------
COMMUNICATIONS 20.49%
Airtouch Communications*............................................ 10,000 306
Arch Communications Group*.......................................... 10,000 262
BroadBand Technologies*............................................. 5,000 108
DSC Communications Corp.*........................................... 4,000 237
General DataComm Industries*........................................ 12,500 184
MFS Communications Co., Inc.*....................................... 9,000 394
Metricom, Inc.*..................................................... 11,000 248
Motorola, Inc....................................................... 3,000 229
Tellabs, Inc.*...................................................... 4,000 169
----------
2,137
----------
COMPUTERS/INFORMATION 5.47%
Compaq Computer Corp.*.............................................. 9,000 435
E M C Corporation*.................................................. 7,500 136
----------
571
----------
CONSUMER SERVICES 4.99%
Banta Corporation................................................... 6,000 255
Block, H&R, Inc..................................................... 7,000 266
----------
521
----------
DIVERSIFIED FINANCIAL SERVICES 3.25%
Bear Stearns Companies, Inc......................................... 15,750 339
----------
EDUCATIONAL 1.45%
Westcott Communications, Inc.*...................................... 10,000 151
----------
<FN>
*Non-income producing
</TABLE>
(continued)
B-43
<PAGE> 177
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
COMMON STOCK (CONTINUED)
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
-------- ------------
<S> <C> <C>
ELECTRICAL COMPONENTS 0.92%
GenRad, Inc.*...................................................... 10,000 $ 96
------------
HEALTH-CARE PROVIDERS 4.39%
Humana, Inc.*...................................................... 10,000 201
Mariner Health Group, Inc.*........................................ 5,000 71
Maxicare Healthplans, Inc.*........................................ 10,000 186
------------
458
------------
INTEGRATED OILS 2.32%
Triton Energy Corp.*............................................... 5,000 242
------------
PHARMACEUTICALS 2.87%
Mylan Laboratories, Inc............................................ 15,000 300
------------
SEMICONDUCTORS 11.47%
Advanced Micro Devices*............................................ 9,000 262
Analog Devices, Inc.*.............................................. 8,000 277
Intel Corporation.................................................. 4,500 270
National Semiconductor*............................................ 14,000 387
------------
1,196
------------
SOFTWARE/PROCESSING 8.42%
Computer Sciences Corp.*........................................... 4,500 290
Optical Data Systems Corp.*........................................ 6,000 234
Sybase Incorporated*............................................... 10,000 321
Telescan, Inc.*.................................................... 5,000 34
------------
879
------------
TOTAL COMMON STOCK (COST $7,254,464)............................. 8,266
------------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT
OBLIGATIONS 16.29%
Fifth Third Bank, 5.75%, dated 9/28/95, due 10/02/95............... 1,700,000 1,700
------------
TOTAL REPURCHASE AGREEMENTS (COST $1,700,000).................... 1,700
------------
TOTAL INVESTMENTS (COST $8,954,464) 95.51%....................... $ 9,966
==========
<FN>
*Non-income producing
Cost also represents cost for Federal income tax purposes.
</TABLE>
See accompanying notes to financial statements.
B-44
<PAGE> 178
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $8,954)................................ $ 9,966
Cash............................................................................. 375
Receivable for Fund shares sold.................................................. 125
Dividends receivable............................................................. 6
Interest receivable.............................................................. 1
Deferred organizational cost..................................................... 27
Prepaid expenses................................................................. 7
--------
Total assets................................................................ 10,507
--------
LIABILITIES
Payable for investment securities purchased...................................... 45
Accrued investment management, shareholder service, accounting and transfer agent
fees (note 3).................................................................. 11
Other accrued expenses........................................................... 17
--------
Total liabilities........................................................... 73
--------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 843,808 outstanding no par value shares of beneficial
interest (unlimited number of shares authorized)............................... $ 10,434
========
NET ASSET VALUE PER SHARE........................................................ $ 12.37
========
</TABLE>
See accompanying notes to financial statements.
B-45
<PAGE> 179
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................................ $ 71
Interest......................................................................... 58
--------
Total income......................................................... 129
--------
EXPENSES:
Investment management fees (note 3).............................................. 71
Transfer agent fees and expenses (note 3)........................................ 25
Shareholder service fees (note 3)................................................ 23
Accounting fees (note 3)......................................................... 3
--------
Total affiliated expenses............................................ 122
--------
Custodian fees................................................................... 10
Professional fees................................................................ 23
Reports to shareholders.......................................................... 23
Directors' fees.................................................................. 8
Registration fees................................................................ 14
Other expenses................................................................... 5
Amortization of organizational cost (note 1)..................................... 10
--------
Total non-affiliated expenses........................................ 93
--------
Total expenses....................................................... 215
--------
Net loss from investment activities.................................. (86)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions..................................... 999
Increase in unrealized gain on investments....................................... 1,158
--------
Net realized gain and increase in unrealized gain on investments..... 2,157
--------
Net increase in net assets from operations........................... $ 2,071
========
</TABLE>
See accompanying notes to financial statements.
B-46
<PAGE> 180
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
YEARS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
FROM OPERATIONS:
Net loss from investment activities......................................... $ (86) $ (136)
Net realized gain from security transactions................................ 999 118
Increase (decrease) in unrealized gain on investments....................... 1,158 (444)
-------- -------
Net increase (decrease) in net assets from operations..................... 2,071 (462)
-------- -------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distribution of net realized gains from security transactions ($0 and $.04
per share, respectively).................................................. 0 (30)
-------- -------
Total distributions to shareholders.................................... 0 (30)
-------- -------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares........................................... 1,809 5,108
Net asset value of Fund shares issued in connection with reinvestment of
distributions to shareholders............................................. 0 30
-------- -------
1,809 5,138
Cost of Fund shares redeemed................................................ (2,906) (1,506)
-------- -------
Increase (decrease) in net assets derived from capital share
transactions........................................................... (1,097) 3,632
-------- -------
Net increase in net assets................................................ 974 3,140
NET ASSETS -- beginning of period........................................... 9,460 6,320
-------- -------
NET ASSETS -- end of period (undistributed net investment loss of $113 and
$113, respectively)....................................................... $ 10,434 $ 9,460
======== ======
</TABLE>
See accompanying notes to financial statements.
B-47
<PAGE> 181
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Aggressive Growth Fund (the "Fund") is one of two portfolios of The
Cardinal Group (the "Group"), a diversified open-end management investment
company established as an Ohio Business Trust on March 23, 1993. The Group
currently consists of Cardinal Aggressive Growth Fund and Cardinal Balanced
Fund. Before June 24, 1993 the Fund had no operations other than those relating
to organizational matters, including the issuance of 5,000 shares of beneficial
interest for cash at $10.00 per share on June 4, 1993 to Cardinal Management
Corp. ("CMC"), the Group's investment adviser. The following is a summary of
significant accounting policies followed by the Fund in preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles for investment companies.
Security Valuation -- Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at either the mean between the bid and ask prices or the last sale price.
If no quotations are available, portfolio securities are valued in good faith by
the Board of Trustees to reflect their fair value.
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes,
when applicable, the pro rata amortization of premium or accretion of discount.
In determining the net realized gain or loss on securities sold, the cost of the
securities is determined by the first-in, first-out (FIFO) basis. It is the
Group's policy for its Custodian, or a third-party bank, to take possession of
all securities pledged as collateral for repurchase agreements and monitor the
market value of the collateral to ensure that it remains sufficient to cover the
repurchase agreements.
Deferred Organizational Cost -- Costs incurred with the organization and
registration of the Fund have been deferred and are being amortized on a
straight-line basis over a 60 month period from the commencement of public
offering of its shares. In the event that any of the initial shares of the Fund
are redeemed by the Fund's investment adviser or any subsequent holders thereof
during the 60 month amortization period, the Fund will reduce the redemption
proceeds otherwise payable by any unamortized organizational costs of the Fund
in the same proportion as the number of initial shares of the Fund being
redeemed bears to the number of initial shares of the Fund outstanding at the
time of redemption.
Distributions to Shareholders -- Distributions and dividends will be recorded on
the record date. The Fund intends to declare income dividends quarterly and any
capital gain distributions annually.
Federal Income Tax -- The Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
(continued)
B-48
<PAGE> 182
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(2) -- PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the period ended September 30, 1995
aggregated $6,912,244 and $10,041,187, respectively.
During the period ended September 30, 1995 the Fund realized on a FIFO cost
basis a net capital gain of $999,587 for both book and tax purposes.
As of September 30, 1995, for both book and tax purposes, gross unrealized gains
and gross unrealized losses on investment securities were $1,268,610 and
$257,136, respectively; resulting in a net unrealized gain of $1,011,474.
(3) -- TRANSACTIONS WITH AFFILIATES
As investment adviser for the Fund, CMC, an affiliated company, is allowed an
annual fee of 0.75% of the average daily net assets of the Fund. CMC has agreed
that if the aggregate expenses of the Fund, as defined, for any fiscal year
exceed the expense limitation of any state having jurisdiction over the Fund,
CMC will refund to the Fund, or otherwise bear, such excess. This limitation did
not affect the calculation of the management fee during the period ended
September 30, 1995. CMC also serves the Fund as transfer agent and fund
accountant. Under the terms of the Group's Transfer Agency and Fund Accounting
Agreement, the transfer agent is entitled to receive fees based on a monthly
charge per shareholder account plus out-of-pocket expenses and the fund
accountant is entitled to receive fees based on a percentage of the average net
assets of the Fund. For the period ended September 30, 1995 the Fund paid or
accrued $25,079 and $3,255 for transfer agent and fund accounting services,
respectively.
The Ohio Company ("TOC") serves the Group as distributor. TOC receives fees from
the Fund for providing services under the Distribution and Shareholder Service
Plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940.
Under the Plan, the Fund pays TOC a fee not to exceed, on an accrual basis,
0.25% of the average daily net assets of the Fund for payments it makes to
banks, broker/dealers, including TOC, and other institutions for providing
shareholder services. The Fund paid or accrued shareholder service fees of
$22,594 for the period ended September 30, 1995. The Ohio Company reported to
the Fund that it had received commissions after discounts to dealers from the
sale of shares of the Fund of $54,055 for the period ended September 30, 1995.
(4) -- COMMITMENTS AND CONTINGENCIES
The Fund has an available $2,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
(continued)
B-49
<PAGE> 183
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1995
(5) -- CAPITAL STOCK
At September 30, 1995, there were an unlimited number of no par value shares of
capital stock and the capital amounts were as follows:
<TABLE>
<S> <C>
Paid in capital.................................................................. $ 8,618,852
Accumulated net realized gain on investments..................................... 916,812
Unrealized gain on investments................................................... 1,011,474
Undistributed net investment loss................................................ (112,926)
---------------
Net assets....................................................................... $10,434,212
===============
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
------------------------
1995 1994
--------- ---------
<S> <C> <C>
Shares sold............................................................. 160,511 499,598
Shares issued in connection with reinvestment of distributions to
shareholders.......................................................... 0 2,836
--------- ---------
160,511 502,434
Shares repurchased...................................................... (268,141) (154,659)
--------- ---------
Net increase (decrease)................................................. (107,630) 347,775
Shares outstanding:
Beginning of period..................................................... 951,438 603,663
--------- ---------
End of period........................................................... 843,808 951,438
========= =========
</TABLE>
(6) -- SUBSEQUENT EVENT
On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Group and The Cardinal Fund Inc.,
Cardinal Government Securities Trust, Cardinal Tax Exempt Money Trust, and
Cardinal Government Obligations Fund (collectively the "Old Funds"). The plan
calls for the transfer of all assets and liabilities of each of the Old Funds to
newly created series of the Group with the same basic investment objectives and
restrictions. The Trustees have determined that this action is in the best
interests of the shareholders of the Old Funds and the Group. Shareholders of
the Old Funds must approve the transaction before any transfer can take place.
B-50
<PAGE> 184
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
PERIOD FROM
YEARS ENDED JUNE 24, 1993*
SEPTEMBER 30, THROUGH
---------------------- SEPTEMBER 30,
1995 1994 1993
-------- -------- ---------------
<S> <C> <C> <C>
Net Asset Value, beginning.............................. $ 9.94 $ 10.47 $ 10.00
-------- -------- ---------------
Income from investment operations:
Net investment loss................................... (0.10) (0.13) (0.03)
Net realized and unrealized gain (loss) on
securities......................................... 2.53 (0.36) 0.50
-------- -------- ---------------
Total from investment operations........................ 2.43 (0.49) 0.47
-------- -------- ---------------
Less distributions:
Capital gain distribution............................. 0 (0.04) 0
-------- -------- ---------------
Total distributions..................................... 0 (0.04) 0
-------- -------- ---------------
Net Asset Value, ending................................. $ 12.37 $ 9.94 $ 10.47
======== ======== ===============
Ratios/Supplemental Data:
Total return (aggregate return for period)**............ 24.35% (4.74%) 4.70%
======== ======== ===============
Net assets, ending (000)................................ $ 10,434 $ 9,460 $ 6,320
======== ======== ===============
Ratio of expenses to average net assets**............... 2.24% 2.51% 0.91%
======== ======== ===============
Ratio of net investment loss to average net assets**.... (0.92%) (1.50%) (0.53%)
======== ======== ===============
Portfolio turnover rate................................. 80.35% 95.70% 31.15%
======== ======== ===============
<FN>
*Commencement of operations
**Effective September 15, 1995, The Ohio Company began waiving payments under
the Distribution and Shareholder Service Plan. Had the payments been charged,
total return, the ratio of expenses to average net assets, and the ratio of
net investment loss to average net assets would have been 24.34%, 2.25%, and
(0.93%), respectively.
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Shareholders and Board of Trustees
Cardinal Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of Cardinal
Aggressive Growth Fund (the Fund), including the statement of investments, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Aggressive Growth Fund as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
B-51
<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 10, 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-6
<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
</TABLE>
THE CARDINAL GROUP
By
---------------------------
Name Frank W. Siegel
--------------------------
Title President
-------------------------
CARDINAL MANAGEMENT CORP.
By
---------------------------
Name H. Keith Allen
--------------------------
Title President
-------------------------
_____________________
* All fees are computed and paid monthly.
A-7
<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" shall mean any registration statement and any
prospectus and Statement of Additional Information relating to the Funds filed
-2-
<PAGE> 4
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 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
-3-
<PAGE> 5
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 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
-4-
<PAGE> 6
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 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
-5-
<PAGE> 7
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 information 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.
-6-
<PAGE> 8
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 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.
-7-
<PAGE> 9
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).
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.
-8-
<PAGE> 10
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 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
Cardinal Government Securities Money
Market Fund January 10, 1996
Cardinal Tax Exempt Money Market Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Chief
Operating Officer
A-1
<PAGE> 12
Dated: January 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Chief
Operating Officer
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 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By ______________________________
Frank W. Siegel, President
THE OHIO COMPANY
By ______________________________
H. Keith Allen, Chief
Operating Officer
D-1
<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.
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<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 subcustodian 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,
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<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;
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<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
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<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
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<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
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<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
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<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.
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<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.
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<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
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<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
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<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 subcustody 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
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<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 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
Cardinal Government Securities Money
Market Fund January 10, 1996
Cardinal Tax Exempt Money Market Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By___________________________
Frank w. Siegel, President
THE FIFTH THIRD BANK
By___________________________
(Name) (Title)
-21-
<PAGE> 23
Dated: January 10, 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
- ------------------------------------------- -------------------------------------------
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
----------------------------------
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>
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 13, 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
TRANSACTION FEES
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
CASH BALANCE CREDITS/CHARGES
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 "Subtransfer 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 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
Cardinal Government Securities Money January 10, 1996
Market Fund
Cardinal Tax Exempt Money Market Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By
------------------------------
Frank W. Siegel
CARDINAL MANAGEMENT CORP.
By
------------------------------
H. Keith Allen, President
- 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 10, 1996
SCHEDULE C
----------
Fees
----
Transfer Agent and Dividend
---------------------------
Disbursing Agent
----------------
Annual fees per Fund:
- --------------------
$18.00 per account annually (payable monthly) for The Cardinal Fund, Cardinal
Balanced Fund and Cardinal Aggressive Growth Fund
$21.00 per account annually (payable monthly) for 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 of up to $100,000,000 and 0.01% of such Fund's average daily
net assets in excess of $100,000,000. Such fee is calculated daily and paid
monthly.
THE CARDINAL GROUP
By
------------------------------
Frank W. Siegel, President
CARDINAL MANAGEMENT CORP.
By
------------------------------
H. Keith Allen, President
- 13 -
<PAGE> 15
Date: January 10, 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 (11)
<PAGE> 2
CONSENT OF KPMG PEAT MARWICK LLP
To the Board of Trustees
The Cardinal Group:
We consent to the use of our reports dated November 17, 1995, included
herein and to the references to our firm under the heading "Financial
Highlights" in the Prospectuses and under the heading "Legal Counsel and
Independent Auditors" in the Statement Of Additional Information.
Columbus, Ohio
April 25, 1996 KPMG PEAT MARWICK LLP
<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 10, 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 10, 1996
Cardinal Government Obligations Fund January 10, 1996
</TABLE>
THE CARDINAL GROUP
By
---------------------------------
Frank W. Siegel President
THE OHIO COMPANY
By
---------------------------------
H. Keith Allen, Chief
Operating Officer
- 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 16(c)
<PAGE> 2
The Cardinal Fund Inc.
(Predecessor to the Cardinal Fund)
Cardinal Fund Inc. 1 Year Return @ 4.50% Load
<TABLE>
<CAPTION>
MONTH END
NET ASSET DIVIDENDS CAP GAINS REINVEST REINVEST REINVEST AMOUNT LOAD FULL TOTAL TOTAL TOTAL
DATE VALUE PER SHARE PER SHARE PRICE SHARES SHARES INVESTED ASK SHARES VALUE RETURN
DIVIDEND CAP GAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-94 12.73 0.09 13.03 0.000 0.000 $1,000.00 4.50% $13.33 75.019 954.99 -4.50%
31-Oct-94 12.70 0.000 0.000 75.019 952.74 -4.73%
30-Nov-94 12.14 0.000 0.000 75.019 910.73 -8.93%
31-Dec-94 11.27 0.085 0.825 11.17 0.571 5.541 81.131 914.34 -8.57%
31-Jan-95 11.45 0.000 0.000 81.131 928.95 -7.11%
28-Feb-95 11.87 0.000 0.000 81.131 963.02 -3.70%
31-Mar-95 11.98 0.09 11.74 0.622 0.000 81.753 979.40 -2.06%
30-Apr-95 12.26 0.000 0.000 81.753 1,002.29 0.23%
31-May-95 12.72 0.000 0.000 81.753 1,039.89 3.99%
30-Jun-95 12.65 0.085 12.56 0.553 0.000 82.306 1,041.17 4.12%
31-Jul-95 12.95 0.000 0.000 82.306 1,065.86 6.59%
31-Aug-95 12.93 0.000 0.000 82.306 1,064.22 6.42%
30-Sep-95 13.23 0.0925 12.92 0.589 0.000 82.895 1,096.70 9.67%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FORMULA: T = (ERV/P)(POW)1/N - 1
AGGREGATE TOTAL RETURN FORMULA: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
CALCULATIONS:
AVERAGE ANNUAL TOTAL RETURN: (1,096.70/1,000)(POW)(1/1) - 1 = 9.67 %
AGGREGATE TOTAL RETURN: (1,096.70/1,000) - 1 = 9.67 %
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 3
The Cardinal Fund Inc.
Total Return
Cardinal Fund Inc. Performance Sep. 30, 1990 thru Sep. 30, 1995 @ 4.50% Load
<TABLE>
<CAPTION>
MONTH END
NET ASSET DIVIDENDS CAP GAINS REINVEST REINVEST REINVEST AMOUNT LOAD FULL TOTAL TOTAL TOTAL
DATE VALUE PER SHARE PER SHARE PRICE SHARES SHARES INVESTED LEVEL ASK SHARES VALUE RETURN
DIVIDEND CAP GAIN PRICE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-90 9.27 0.10 9.67 0.000 0.000 $1,000.00 4.50% 9.710 102.987 954.69 -4.53%
31-Oct-90 9.27 0.000 0.000 102.987 954.69 -4.53%
30-Nov-90 9.85 0.000 0.000 102.987 1,014.42 1.44%
31-Dec-90 9.94 0.11 0.07 9.88 1.147 0.730 104.863 1,042.34 4.23%
31-Jan-91 10.54 0.000 0.000 104.863 1,105.26 10.53%
28-Feb-91 11.23 0.000 0.000 104.863 1,177.61 17.76%
29-Mar-91 11.24 0.09 11.45 0.824 0.000 105.688 1,187.93 18.79%
30-Apr-91 11.30 0.000 0.000 105.688 1,194.27 19.43%
31-May-91 11.89 0.000 0.000 105.688 1,256.62 25.66%
30-Jun-91 11.41 0.09 11.61 0.819 0.000 106.507 1,215.24 21.52%
31-Jul-91 11.75 0.000 0.000 106.507 1,251.46 25.15%
31-Aug-91 12.12 0.000 0.000 106.507 1,290.86 29.09%
30-Sep-91 11.88 0.09 11.85 0.809 0.000 107.316 1,274.91 27.49%
31-Oct-91 12.10 0.000 0.000 107.316 1,298.52 29.85%
30-Nov-91 11.67 0.000 0.000 107.316 1,252.37 25.24%
30-Dec-91 12.44 0.09 0.29 11.44 0.844 2.720 110.880 1,379.35 37.94%
31-Jan-92 12.47 0.000 0.000 110.880 1,382.68 38.27%
29-Feb-92 12.59 0.000 0.000 110.880 1,395.98 39.60%
31-Mar-92 12.49 0.09 12.36 0.807 0.000 111.688 1,394.98 39.50%
30-Apr-92 12.79 0.000 0.000 111.688 1,428.49 42.85%
29-May-92 12.85 0.000 0.000 111.688 1,435.19 43.52%
30-Jun-92 12.50 0.09 12.69 0.792 0.000 112.480 1,406.00 40.60%
31-Jul-92 12.99 0.000 0.000 112.480 1,461.11 46.11%
31-Aug-92 12.96 0.000 0.000 112.480 1,457.74 45.77%
30-Sep-92 12.95 0.09 12.96 0.781 0.000 113.261 1,466.73 46.67%
30-Oct-92 12.94 0.000 0.000 113.261 1,465.60 46.56%
30-Nov-92 13.27 0.000 0.000 113.261 1,502.97 50.30%
31-Dec-92 12.67 0.08 0.62 12.56 0.721 5.591 119.573 1,514.99 51.50%
31-Jan-93 12.52 0.000 0.000 119.573 1,497.06 49.71%
28-Feb-93 12.64 0.000 0.000 119.573 1,511.41 51.14%
31-Mar-93 12.88 0.07 12.71 0.659 0.000 120.232 1,548.59 54.86%
30-Apr-93 12.66 0.000 0.000 120.232 1,522.14 52.21%
31-May-93 12.79 0.000 0.000 120.232 1,537.77 53.78%
30-Jun-93 12.63 0.07 12.76 0.660 0.000 120.891 1,526.86 52.69%
31-Jul-93 12.62 0.000 0.000 120.891 1,525.65 52.57%
31-Aug-93 13.03 0.000 0.000 120.891 1,575.22 57.52%
30-Sep-93 12.91 0.07 12.95 0.653 0.000 121.545 1,569.15 56.91%
30-Oct-93 12.98 0.000 0.000 121.545 1,577.65 57.77%
30-Nov-93 12.82 0.000 0.000 121.545 1,558.21 55.82%
31-Dec-93 12.85 0.06 0.278 12.50 0.583 2.703 124.832 1,604.08 60.41%
31-Jan-94 13.15 0.000 0.000 124.832 1,641.53 64.15%
28-Feb-94 13.07 0.000 0.000 124.832 1,631.55 63.15%
31-Mar-94 12.52 0.07 12.96 0.674 0.000 125.506 1,571.33 57.13%
30-Apr-94 12.69 0.000 0.000 125.506 1,592.67 59.27%
31-May-94 12.69 0.000 0.000 125.506 1,592.67 59.27%
30-Jun-94 12.27 0.105 12.59 1.047 0.000 126.552 1,552.80 55.28%
31-Jul-94 12.76 0.000 0.000 126.552 1,614.81 61.48%
31-Aug-94 13.19 0.000 0.000 126.552 1,669.23 66.92%
30-Sep-94 12.73 0.09 13.03 0.874 0.000 127.427 1,622.14 62.21%
31-Oct-94 12.70 0.000 0.000 127.427 1,618.32 61.83%
30-Nov-94 12.14 0.000 0.000 127.427 1,546.96 54.70%
31-Dec-94 11.27 0.085 0.825 11.17 0.970 9.412 137.808 1,553.09 55.31%
31-Jan-95 11.45 0.000 0.000 137.808 1,577.90 57.79%
28-Feb-95 11.87 0.000 0.000 137.808 1,635.78 63.58%
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-95 11.98 0.09 11.74 1.056 0.000 138.864 1,663.59 66.36%
30-Apr-95 12.26 0.000 0.000 138.864 1,702.48 70.25%
31-May-95 12.72 0.000 0.000 138.864 1,766.35 76.64%
30-Jun-95 12.65 0.085 12.56 0.940 0.000 139.804 1,768.52 76.85%
31-Jul-95 12.95 0.000 0.000 139.804 1,810.46 81.05%
31-Aug-95 12.93 0.000 0.000 139.804 1,807.67 80.77%
30-Sep-95 13.23 0.0925 12.92 1.001 0.000 140.805 1,862.85 86.28%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FORMULA: T = (ERV/P)(POW)1/N - 1
AGGREGATE TOTAL RETURN FORMULA: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
CALCULATIONS:
AVERAGE ANNUAL TOTAL RETURN: (1,862.85/1,000)(POW)(1/(5)) - 1 = 13.25 %
AGGREGATE TOTAL RETURN: (1,862.85/1,000) - 1 = 86.28 %
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 5
The Cardinal Fund Inc.
Total Return
Cardinal Fund Inc. Performance Sep. 30, 1985 thru Sep. 30, 1995 @ 4.50% Load
<TABLE>
<CAPTION>
MONTH END
NET ASSET DIVIDENDS CAP GAINS REINVEST REINVEST REINVEST AMOUNT LOAD FULL TOTAL TOTAL TOTAL
DATE VALUE PER SHARE PER SHARE PRICE SHARES SHARES INVESTED LEVEL ASK SHARES VALUE RETURN
DIVIDEND CAP GAIN PRICE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-85 8.55 0.000 0.000 $1,000.00 4.50% 8.950 111.732 955.31 -4.47%
31-Oct-85 8.13 0.11 0.56 8.06 1.479 7.763 120.974 983.52 -1.65%
30-Nov-85 8.63 0.000 0.000 120.974 1,044.00 4.40%
31-Dec-85 8.99 0.000 0.000 120.974 1,087.55 8.76%
31-Jan-86 9.83 0.000 0.000 120.974 1,189.17 18.92%
28-Feb-86 9.17 0.000 0.000 120.974 1,109.33 10.93%
31-Mar-86 10.41 0.000 0.000 120.974 1,259.34 25.93%
30-Apr-86 10.29 0.12 10.52 1.380 0.000 122.354 1,259.02 25.90%
31-May-86 10.78 0.000 0.000 122.354 1,318.97 31.90%
30-Jun-86 11.00 0.000 0.000 122.354 1,345.89 34.59%
31-Jul-86 10.53 0.000 0.000 122.354 1,288.38 28.84%
31-Aug-86 10.95 0.000 0.000 122.354 1,339.77 33.98%
30-Sep-86 10.35 0.000 0.000 122.354 1,266.36 26.64%
31-Oct-86 9.91 0.13 0.72 9.69 1.600 9.094 133.048 1,318.51 31.85%
30-Nov-86 10.03 0.000 0.000 133.048 1,334.47 33.45%
31-Dec-86 9.76 0.000 0.000 133.048 1,298.55 29.85%
31-Jan-87 10.69 0.000 0.000 133.048 1,422.28 42.23%
28-Feb-87 11.09 0.000 0.000 133.048 1,475.50 47.55%
31-Mar-87 11.13 0.000 0.000 133.048 1,480.82 48.08%
30-Apr-87 10.87 0.15 10.73 1.901 0.000 134.949 1,466.89 46.69%
31-May-87 10.90 0.000 0.000 134.949 1,470.94 47.09%
30-Jun-87 11.41 0.000 0.000 134.949 1,539.76 53.98%
31-Jul-87 11.78 0.000 0.000 134.949 1,589.70 58.97%
31-Aug-87 12.13 0.000 0.000 134.949 1,636.93 63.69%
30-Sep-87 11.73 0.000 0.000 134.949 1,582.95 58.29%
31-Oct-87 9.07 0.28 0.43 10.05 3.759 5.727 144.434 1,310.02 31.00%
30-Nov-87 8.58 0.000 0.000 144.434 1,239.25 23.92%
31-Dec-87 9.13 0.000 0.000 144.434 1,318.69 31.87%
31-Jan-88 9.52 0.000 0.000 144.434 1,375.02 37.50%
29-Feb-88 10.03 0.000 0.000 144.434 1,448.68 44.87%
31-Mar-88 9.93 0.000 0.000 144.434 1,434.23 43.42%
30-Apr-88 9.96 0.09 9.85 1.270 0.000 145.705 1,451.22 45.12%
31-May-88 9.95 0.000 0.000 145.705 1,449.76 44.98%
30-Jun-88 10.40 0.000 0.000 145.705 1,515.33 51.53%
31-Jul-88 10.33 0.11 10.27 1.513 0.000 147.218 1,520.76 52.08%
31-Aug-88 10.06 0.000 0.000 147.218 1,481.01 48.10%
30-Sep-88 10.38 0.000 0.000 147.218 1,528.12 52.81%
31-Oct-88 9.96 0.10 0.38 9.94 1.481 5.628 154.327 1,537.09 53.71%
30-Nov-88 9.76 0.000 0.000 154.327 1,506.23 50.62%
31-Dec-88 9.87 0.10 9.81 1.574 0.000 155.900 1,538.74 53.87%
31-Jan-89 10.40 0.000 0.000 155.900 1,621.36 62.14%
28-Feb-89 10.27 0.000 0.000 155.900 1,601.10 60.11%
31-Mar-89 10.41 0.000 0.000 155.900 1,622.92 62.29%
30-Apr-89 10.77 0.09 10.43 1.395 0.000 157.295 1,694.07 69.41%
31-May-89 11.03 0.000 0.000 157.295 1,734.97 73.50%
30-Jun-89 10.98 0.000 0.000 157.295 1,727.10 72.71%
31-Jul-89 11.55 0.10 11.07 1.420 0.000 158.716 1,833.17 83.32%
31-Aug-89 11.86 0.000 0.000 158.716 1,882.37 88.24%
30-Sep-89 11.75 0.000 0.000 158.716 1,864.91 86.49%
31-Oct-89 10.89 0.11 0.49 10.80 1.666 7.152 167.533 1,824.44 82.44%
30-Nov-89 11.06 0.000 0.000 167.533 1,852.92 85.29%
29-Dec-89 11.11 0.11 10.83 1.753 0.000 169.286 1,880.76 88.08%
31-Jan-90 10.59 0.000 0.000 169.286 1,792.74 79.27%
28-Feb-90 10.66 0.000 0.000 169.286 1,804.59 80.46%
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar-90 10.84 0.000 0.000 169.286 1,835.06 83.51%
30-Apr-90 10.48 0.10 10.71 1.581 0.000 170.866 1,790.68 79.07%
31-May-90 11.13 0.000 0.000 170.866 1,901.74 90.17%
30-Jun-90 11.04 0.10 11.22 1.523 0.000 172.389 1,903.18 90.32%
31-Jul-90 10.91 0.000 0.000 172.389 1,880.77 88.08%
31-Aug-90 9.86 0.000 0.000 172.389 1,699.76 69.98%
30-Sep-90 9.27 0.10 9.67 1.783 0.000 174.172 1,614.57 61.46%
31-Oct-90 9.27 0.000 0.000 174.172 1,614.57 61.46%
30-Nov-90 9.85 0.000 0.000 174.172 1,715.59 71.56%
31-Dec-90 9.94 0.11 0.07 9.88 1.939 1.234 177.345 1,762.81 76.28%
31-Jan-91 10.54 0.000 0.000 177.345 1,869.22 86.92%
28-Feb-91 11.23 0.000 0.000 177.345 1,991.59 99.16%
29-Mar-91 11.24 0.09 11.45 1.394 0.000 178.739 2,009.03 100.90%
30-Apr-91 11.30 0.000 0.000 178.739 2,019.75 101.98%
31-May-91 11.89 0.000 0.000 178.739 2,125.21 112.52%
30-Jun-91 11.41 0.09 11.61 1.386 0.000 180.125 2,055.22 105.52%
31-Jul-91 11.75 0.000 0.000 180.125 2,116.47 111.65%
31-Aug-91 12.12 0.000 0.000 180.125 2,183.11 118.31%
30-Sep-91 11.88 0.09 11.85 1.368 0.000 181.493 2,156.13 115.61%
31-Oct-91 12.10 0.000 0.000 181.493 2,196.06 119.61%
30-Nov-91 11.67 0.000 0.000 181.493 2,118.02 111.80%
30-Dec-91 12.44 0.09 0.29 11.44 1.428 4.601 187.521 2,332.77 133.28%
31-Jan-92 12.47 0.000 0.000 187.521 2,338.39 133.84%
29-Feb-92 12.59 0.000 0.000 187.521 2,360.89 136.09%
31-Mar-92 12.49 0.09 12.36 1.365 0.000 188.887 2,359.20 135.92%
30-Apr-92 12.79 0.000 0.000 188.887 2,415.86 141.59%
29-May-92 12.85 0.000 0.000 188.887 2,427.20 142.72%
30-Jun-92 12.50 0.09 12.69 1.340 0.000 190.226 2,377.83 137.78%
31-Jul-92 12.99 0.000 0.000 190.226 2,471.04 147.10%
31-Aug-92 12.96 0.000 0.000 190.226 2,465.33 146.53%
30-Sep-92 12.95 0.09 12.96 1.321 0.000 191.547 2,480.54 148.05%
30-Oct-92 12.94 0.000 0.000 191.547 2,478.62 147.86%
30-Nov-92 13.27 0.000 0.000 191.547 2,541.83 154.18%
31-Dec-92 12.67 0.08 0.62 12.56 1.220 9.455 202.223 2,562.16 156.22%
31-Jan-93 12.52 0.000 0.000 202.223 2,531.83 153.18%
28-Feb-93 12.64 0.000 0.000 202.223 2,556.10 155.61%
31-Mar-93 12.88 0.07 12.71 1.114 0.000 203.337 2,618.97 161.90%
30-Apr-93 12.66 0.000 0.000 203.337 2,574.24 157.42%
31-May-93 12.79 0.000 0.000 203.337 2,600.67 160.07%
30-Jun-93 12.63 0.07 12.76 1.115 0.000 204.452 2,582.23 158.22%
31-Jul-93 12.62 0.000 0.000 204.452 2,580.18 158.02%
31-Aug-93 13.03 0.000 0.000 204.452 2,664.01 166.40%
30-Sep-93 12.91 0.07 12.95 1.105 0.000 205.557 2,653.74 165.37%
30-Oct-93 12.98 0.000 0.000 205.557 2,668.13 166.81%
30-Nov-93 12.82 0.000 0.000 205.557 2,635.24 163.52%
31-Dec-93 12.85 0.06 0.278 12.50 0.987 4.572 211.115 2,712.83 171.28%
31-Jan-94 13.15 0.000 0.000 211.115 2,776.17 177.62%
28-Feb-94 13.07 0.000 0.000 211.115 2,759.28 175.93%
31-Mar-94 12.52 0.07 12.96 1.140 0.000 212.256 2,657.44 165.74%
30-Apr-94 12.69 0.000 0.000 212.256 2,693.53 169.35%
31-May-94 12.69 0.000 0.000 212.256 2,693.53 169.35%
30-Jun-94 12.27 0.105 12.59 1.770 0.000 214.026 2,626.10 162.61%
31-Jul-94 12.76 0.000 0.000 214.026 2,730.97 173.10%
31-Aug-94 13.19 0.000 0.000 214.026 2,823.00 182.30%
30-Sep-94 12.73 0.09 13.03 1.478 0.000 215.504 2,743.37 174.34%
31-Oct-94 12.70 0.000 0.000 215.504 2,736.90 173.69%
30-Nov-94 12.14 0.000 0.000 215.504 2,616.22 161.62%
31-Dec-94 11.27 0.085 0.825 11.17 1.640 15.917 233.061 2,626.60 162.66%
31-Jan-95 11.45 0.000 0.000 233.061 2,668.55 166.85%
28-Feb-95 11.87 0.000 0.000 233.061 2,766.43 176.64%
31-Mar-95 11.98 0.09 11.74 1.787 0.000 234.848 2,813.48 181.35%
30-Apr-95 12.26 0.000 0.000 234.848 2,879.23 187.92%
31-May-95 12.72 0.000 0.000 234.848 2,987.26 198.73%
30-Jun-95 12.65 0.085 12.56 1.589 0.000 236.437 2,990.93 199.09%
31-Jul-95 12.95 0.000 0.000 236.437 3,061.86 206.19%
31-Aug-95 12.93 0.000 0.000 236.437 3,057.13 205.71%
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-95 13.23 0.0925 12.92 1.693 0.000 238.130 3,150.46 215.05%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FORMULA: T = (ERV/P)(POW)1/N - 1
AGGREGATE TOTAL RETURN FORMULA: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
CALCULATIONS:
AVERAGE ANNUAL TOTAL RETURN: (3,150.46/1,000)(POW)(1/(10)) - 1 = 12.16 %
AGGREGATE TOTAL RETURN: (3,150.46/1,000) - 1 = 215.05 %
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 8
CARDINAL FUND PERFORMANCE MAY 31, 1975 THRU 30-Sep-95
<TABLE>
<CAPTION>
4.50%
MONTH END
NET ASSET DIVIDENDS CAP GAINS REINVEST REINVEST REINVEST AMOUNT LOAD FULL TOTAL TOTAL TOTAL
DATE VALUE PER SHARE PER SHARE PRICE SHARES SHARES INVESTED LEVEL ASK SHARES VALUE RETURN
DIVIDEND CAP GAIN PRICE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-May-75 4.05
30-Jun-75 4.23
31-Jul-75 4.03
31-Aug-75 3.89
30-Sep-75 3.81 $1,000.00 4.50% $3.99 250.627 954.89 -4.51%
31-Oct-75 3.93 0.06 3.83 3.923 0.000 254.550 1,000.38 0.04%
30-Nov-75 4.04 0.000 0.000 254.550 1,028.38 2.84%
31-Dec-75 4.06 0.000 0.000 254.550 1,033.47 3.35%
31-Jan-76 4.59 0.000 0.000 254.550 1,168.38 16.84%
29-Feb-76 4.66 0.000 0.000 254.550 1,186.20 18.62%
31-Mar-76 4.71 0.000 0.000 254.550 1,198.93 19.89%
30-Apr-76 4.68 0.07 4.56 3.721 0.000 258.271 1,208.71 20.87%
31-May-76 4.65 0.000 0.000 258.271 1,200.96 20.10%
30-Jun-76 4.87 0.000 0.000 258.271 1,257.78 25.78%
31-Jul-76 4.79 0.000 0.000 258.271 1,237.12 23.71%
31-Aug-76 4.85 0.000 0.000 258.271 1,252.62 25.26%
30-Sep-76 4.97 0.000 0.000 258.271 1,283.61 28.36%
31-Oct-76 4.87 0.07 0.08 4.81 3.582 4.334 266.188 1,296.33 29.63%
30-Nov-76 4.99 0.000 0.000 266.188 1,328.28 32.83%
31-Dec-76 5.29 0.000 0.000 266.188 1,408.13 40.81%
31-Jan-77 5.19 0.000 0.000 266.188 1,381.51 38.15%
28-Feb-77 5.10 0.000 0.000 266.188 1,357.56 35.76%
31-Mar-77 5.09 0.000 0.000 266.188 1,354.90 35.49%
30-Apr-77 5.03 0.08 5.13 4.154 0.000 270.342 1,359.82 35.98%
31-May-77 5.01 0.000 0.000 270.342 1,354.41 35.44%
30-Jun-77 5.38 0.000 0.000 270.342 1,454.44 45.44%
31-Jul-77 5.28 0.000 0.000 270.342 1,427.40 42.74%
31-Aug-77 5.18 0.000 0.000 270.342 1,400.37 40.04%
30-Sep-77 5.23 0.000 0.000 270.342 1,413.89 41.39%
31-Oct-77 4.67 0.09 0.29 4.83 5.220 16.407 291.969 1,363.50 36.35%
30-Nov-77 4.93 0.000 0.000 291.969 1,439.41 43.94%
31-Dec-77 5.04 0.000 0.000 291.969 1,471.52 47.15%
31-Jan-78 5.14 0.000 0.000 291.969 1,500.72 50.07%
28-Feb-78 4.76 0.000 0.000 291.969 1,389.77 38.98%
31-Mar-78 4.94 0.000 0.000 291.969 1,442.33 44.23%
30-Apr-78 5.24 0.09 5.05 5.393 0.000 297.362 1,558.17 55.82%
31-May-78 5.49 0.000 0.000 297.362 1,632.51 63.25%
30-Jun-78 5.45 0.000 0.000 297.362 1,620.62 62.06%
31-Jul-78 5.79 0.000 0.000 297.362 1,721.72 72.17%
31-Aug-78 6.03 0.000 0.000 297.362 1,793.09 79.31%
30-Sep-78 5.99 0.000 0.000 297.362 1,781.20 78.12%
31-Oct-78 5.09 0.10 0.14 5.75 5.169 7.270 309.800 1,576.88 57.69%
30-Nov-78 5.23 0.000 0.000 309.800 1,620.26 62.03%
31-Dec-78 5.36 0.000 0.000 309.800 1,660.53 66.05%
31-Jan-79 5.67 0.000 0.000 309.800 1,756.57 75.66%
28-Feb-79 5.51 0.000 0.000 309.800 1,707.00 70.70%
31-Mar-79 5.80 0.000 0.000 309.800 1,796.84 79.68%
30-Apr-79 5.83 0.10 5.78 5.360 0.000 315.160 1,837.38 83.74%
31-May-79 5.70 0.000 0.000 315.160 1,796.41 79.64%
30-Jun-79 5.87 0.000 0.000 315.160 1,849.99 85.00%
31-Jul-79 5.95 0.000 0.000 315.160 1,875.20 87.52%
31-Aug-79 6.34 0.000 0.000 315.160 1,998.12 99.81%
30-Sep-79 6.35 0.000 0.000 315.160 2,001.27 100.13%
31-Oct-79 5.50 0.12 0.30 5.95 6.353 16.093 337.606 1,856.83 85.68%
30-Nov-79 5.89 0.000 0.000 337.606 1,988.50 98.85%
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Dec-79 6.05 0.000 0.000 337.606 2,042.52 104.25%
31-Jan-80 6.25 0.000 0.000 337.606 2,110.04 111.00%
29-Feb-80 6.15 0.000 0.000 337.606 2,076.28 107.63%
31-Mar-80 5.37 0.000 0.000 337.606 1,812.95 81.29%
30-Apr-80 5.55 0.12 5.53 7.322 0.000 344.928 1,914.35 91.43%
31-May-80 5.91 0.000 0.000 344.928 2,038.52 103.85%
30-Jun-80 6.09 0.000 0.000 344.928 2,100.61 110.06%
31-Jul-80 6.48 0.000 0.000 344.928 2,235.13 123.51%
31-Aug-80 6.68 0.000 0.000 344.928 2,304.12 130.41%
30-Sep-80 6.86 0.000 0.000 344.928 2,366.20 136.62%
31-Oct-80 6.43 0.13 0.34 6.50 7.075 17.830 369.833 2,378.03 137.80%
30-Nov-80 7.01 0.000 0.000 369.833 2,592.53 159.25%
31-Dec-80 6.73 0.000 0.000 369.833 2,488.98 148.90%
31-Jan-81 6.43 0.000 0.000 369.833 2,378.03 137.80%
28-Feb-81 6.53 0.000 0.000 369.833 2,415.01 141.50%
31-Mar-81 6.74 0.000 0.000 369.833 2,492.68 149.27%
30-Apr-81 6.75 0.13 6.67 7.397 0.000 377.230 2,546.30 154.63%
31-May-81 6.86 0.000 0.000 377.230 2,587.80 158.78%
30-Jun-81 6.73 0.000 0.000 377.230 2,538.76 153.88%
31-Jul-81 6.66 0.000 0.000 377.230 2,512.35 151.24%
31-Aug-81 6.33 0.000 0.000 377.230 2,387.87 138.79%
30-Sep-81 6.02 0.000 0.000 377.230 2,270.92 127.09%
31-Oct-81 5.89 0.13 0.45 5.78 8.702 29.369 415.301 2,446.12 144.61%
30-Nov-81 6.09 0.000 0.000 415.301 2,529.18 152.92%
31-Dec-81 6.02 0.000 0.000 415.301 2,500.11 150.01%
31-Jan-82 5.88 0.000 0.000 415.301 2,441.97 144.20%
28-Feb-82 5.64 0.000 0.000 415.301 2,342.30 134.23%
31-Mar-82 5.62 0.000 0.000 415.301 2,333.99 133.40%
30-Apr-82 5.67 0.13 5.66 9.783 0.000 425.084 2,410.23 141.02%
31-May-82 5.48 0.000 0.000 425.084 2,329.46 132.95%
30-Jun-82 5.43 0.000 0.000 425.084 2,308.21 130.82%
31-Jul-82 5.39 0.000 0.000 425.084 2,291.20 129.12%
31-Aug-82 5.93 0.000 0.000 425.084 2,520.75 152.08%
30-Sep-82 6.05 0.000 0.000 425.084 2,571.76 157.18%
31-Oct-82 6.11 0.13 0.45 5.80 9.772 33.225 468.081 2,859.98 186.00%
30-Nov-82 6.47 0.000 0.000 468.081 3,028.49 202.85%
31-Dec-82 6.71 0.000 0.000 468.081 3,140.83 214.08%
31-Jan-83 6.83 0.000 0.000 468.081 3,197.00 219.70%
28-Feb-83 7.01 0.000 0.000 468.081 3,281.25 228.13%
31-Mar-83 7.37 0.000 0.000 468.081 3,449.76 244.98%
30-Apr-83 7.79 0.13 7.41 8.426 0.000 476.508 3,711.99 271.20%
31-May-83 7.82 0.000 0.000 476.508 3,726.29 272.63%
30-Jun-83 8.18 0.000 0.000 476.508 3,897.83 289.78%
31-Jul-83 8.07 0.000 0.000 476.508 3,845.42 284.54%
31-Aug-83 8.02 0.000 0.000 476.508 3,821.59 282.16%
30-Sep-83 8.27 0.000 0.000 476.508 3,940.72 294.07%
31-Oct-83 7.65 0.12 0.40 7.69 7.433 24.982 508.922 3,893.25 289.33%
30-Nov-83 7.79 0.000 0.000 508.922 3,964.50 296.45%
31-Dec-83 7.81 0.000 0.000 508.922 3,974.68 297.47%
31-Jan-84 7.61 0.000 0.000 508.922 3,872.89 287.29%
29-Feb-84 7.26 0.000 0.000 508.922 3,694.77 269.48%
31-Mar-84 7.41 0.000 0.000 508.922 3,771.11 277.11%
30-Apr-84 7.41 0.12 7.20 8.482 0.000 517.404 3,833.96 283.40%
31-May-84 7.11 0.000 0.000 517.404 3,678.74 267.87%
30-Jun-84 7.41 0.000 0.000 517.404 3,833.96 283.40%
31-Jul-84 7.25 0.000 0.000 517.404 3,751.18 275.12%
31-Aug-84 7.97 0.000 0.000 517.404 4,123.71 312.37%
30-Sep-84 7.95 0.000 0.000 517.404 4,113.36 311.34%
31-Oct-84 7.29 0.12 0.51 7.17 8.664 37.061 563.128 4,105.20 310.52%
30-Nov-84 7.17 0.000 0.000 563.128 4,037.63 303.76%
31-Dec-84 7.37 0.000 0.000 563.128 4,150.25 315.03%
31-Jan-85 7.96 0.000 0.000 563.128 4,482.50 348.25%
28-Feb-85 8.13 0.000 0.000 563.128 4,578.23 357.82%
31-Mar-85 8.16 0.000 0.000 563.128 4,595.12 359.51%
30-Apr-85 8.17 0.12 8.16 8.281 0.000 571.409 4,668.41 366.84%
31-May-85 8.59 0.000 0.000 571.409 4,908.40 390.84%
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Jun-85 8.79 0.000 0.000 571.409 5,022.69 402.27%
31-Jul-85 8.75 0.000 0.000 571.409 4,999.83 399.98%
31-Aug-85 8.77 0.000 0.000 571.409 5,011.26 401.13%
30-Sep-85 8.55 0.000 0.000 571.409 4,885.55 388.55%
31-Oct-85 8.13 0.11 0.56 8.06 7.562 39.701 618.672 5,029.80 402.98%
30-Nov-85 8.63 0.000 0.000 618.672 5,339.14 433.91%
31-Dec-85 8.99 0.000 0.000 618.672 5,561.86 456.19%
31-Jan-86 9.83 0.000 0.000 618.672 6,081.55 508.15%
28-Feb-86 9.17 0.000 0.000 618.672 5,673.22 467.32%
31-Mar-86 10.41 0.000 0.000 618.672 6,440.38 544.04%
30-Apr-86 10.29 0.12 10.52 7.057 0.000 625.729 6,438.75 543.88%
31-May-86 10.78 0.000 0.000 625.729 6,745.36 574.54%
30-Jun-86 11.00 0.000 0.000 625.729 6,883.02 588.30%
31-Jul-86 10.53 0.000 0.000 625.729 6,588.93 558.89%
31-Aug-86 10.95 0.000 0.000 625.729 6,851.73 585.17%
30-Sep-86 10.35 0.000 0.000 625.729 6,476.30 547.63%
31-Oct-86 9.91 0.13 0.72 9.69 8.182 46.510 680.421 6,742.98 574.30%
30-Nov-86 10.03 0.000 0.000 680.421 6,824.63 582.46%
31-Dec-86 9.76 0.000 0.000 680.421 6,640.91 564.09%
31-Jan-87 10.69 0.000 0.000 680.421 7,273.70 627.37%
28-Feb-87 11.09 0.000 0.000 680.421 7,545.87 654.59%
31-Mar-87 11.13 0.000 0.000 680.421 7,573.09 657.31%
30-Apr-87 10.87 0.15 10.73 9.720 0.000 690.142 7,501.84 650.18%
31-May-87 10.90 0.000 0.000 690.142 7,522.54 652.25%
30-Jun-87 11.41 0.000 0.000 690.142 7,874.52 687.45%
31-Jul-87 11.78 0.000 0.000 690.142 8,129.87 712.99%
31-Aug-87 12.13 0.000 0.000 690.142 8,371.42 737.14%
30-Sep-87 11.73 0.000 0.000 690.142 8,095.36 709.54%
31-Oct-87 9.07 0.28 0.43 10.05 19.221 29.290 738.653 6,699.58 569.96%
30-Nov-87 8.58 0.000 0.000 738.653 6,337.64 533.76%
31-Dec-87 9.13 0.000 0.000 738.653 6,743.90 574.39%
31-Jan-88 9.52 0.000 0.000 738.653 7,031.98 603.20%
29-Feb-88 10.03 0.000 0.000 738.653 7,408.69 640.87%
31-Mar-88 9.93 0.000 0.000 738.653 7,334.82 633.48%
30-Apr-88 9.96 0.09 9.85 6.497 0.000 745.150 7,421.69 642.17%
31-May-88 9.95 0.000 0.000 745.150 7,414.24 641.42%
30-Jun-88 10.40 0.000 0.000 745.150 7,749.56 674.96%
31-Jul-88 10.33 0.11 10.27 7.737 0.000 752.887 7,777.32 677.73%
31-Aug-88 10.06 0.000 0.000 752.887 7,574.04 657.40%
30-Sep-88 10.38 0.000 0.000 752.887 7,814.96 681.50%
31-Oct-88 9.96 0.10 0.38 9.94 7.574 28.782 789.243 7,860.86 686.09%
30-Nov-88 9.76 0.000 0.000 789.243 7,703.01 670.30%
31-Dec-88 9.87 0.10 9.81 8.048 0.000 797.291 7,869.27 686.93%
31-Jan-89 10.40 0.000 0.000 797.291 8,291.83 729.18%
28-Feb-89 10.27 0.000 0.000 797.291 8,188.18 718.82%
31-Mar-89 10.41 0.000 0.000 797.291 8,299.80 729.98%
30-Apr-89 10.77 0.09 10.43 7.132 0.000 804.424 8,663.64 766.36%
31-May-89 11.03 0.000 0.000 804.424 8,872.79 787.28%
30-Jun-89 10.98 0.000 0.000 804.424 8,832.57 783.26%
31-Jul-89 11.55 0.10 11.07 7.265 0.000 811.688 9,375.00 837.50%
31-Aug-89 11.86 0.000 0.000 811.688 9,626.62 862.66%
30-Sep-89 11.75 0.000 0.000 811.688 9,537.34 853.73%
31-Oct-89 10.89 0.11 0.49 10.80 8.518 36.576 856.782 9,330.36 833.04%
30-Nov-89 11.06 0.000 0.000 856.782 9,476.01 847.60%
29-Dec-89 11.11 0.11 10.83 8.963 0.000 865.745 9,618.43 861.84%
31-Jan-90 10.59 0.000 0.000 865.745 9,168.24 816.82%
28-Feb-90 10.66 0.000 0.000 865.745 9,228.84 822.88%
31-Mar-90 10.84 0.000 0.000 865.745 9,384.68 838.47%
30-Apr-90 10.48 0.10 10.71 8.084 0.000 873.829 9,157.72 815.77%
31-May-90 11.13 0.000 0.000 873.829 9,725.71 872.57%
30-Jun-90 11.04 0.10 11.22 7.788 0.000 881.617 9,733.05 873.30%
31-Jul-90 10.91 0.000 0.000 881.617 9,618.44 861.84%
31-Aug-90 9.86 0.000 0.000 881.617 8,692.74 769.27%
30-Sep-90 9.27 0.10 9.67 9.117 0.000 890.734 8,257.10 725.71%
31-Oct-90 9.27 0.000 0.000 890.734 8,257.10 725.71%
30-Nov-90 9.85 0.000 0.000 890.734 8,773.73 777.37%
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Dec-90 9.94 0.11 0.07 9.88 9.917 6.311 906.962 9,015.20 801.52%
31-Jan-91 10.54 0.000 0.000 906.962 9,559.38 855.94%
28-Feb-91 11.23 0.000 0.000 906.962 10,185.18 918.52%
29-Mar-91 11.24 0.09 11.45 7.129 0.000 914.091 10,274.38 927.44%
30-Apr-91 11.30 0.000 0.000 914.091 10,329.22 932.92%
31-May-91 11.89 0.000 0.000 914.091 10,868.54 986.85%
30-Jun-91 11.41 0.09 11.61 7.086 0.000 921.177 10,510.62 951.06%
31-Jul-91 11.75 0.000 0.000 921.177 10,823.82 982.38%
31-Aug-91 12.12 0.000 0.000 921.177 11,164.66 1016.47%
30-Sep-91 11.88 0.09 11.85 6.996 0.000 928.173 11,026.69 1002.67%
31-Oct-91 12.10 0.000 0.000 928.173 11,230.89 1023.09%
30-Nov-91 11.67 0.000 0.000 928.173 10,831.78 983.18%
30-Dec-91 12.44 0.09 0.29 11.44 7.302 23.529 959.004 11,930.01 1093.00%
31-Jan-92 12.47 0.000 0.000 959.004 11,958.78 1095.88%
29-Feb-92 12.59 0.000 0.000 959.004 12,073.86 1107.39%
31-Mar-92 12.49 0.09 12.36 6.983 0.000 965.987 12,065.17 1106.52%
30-Apr-92 12.79 0.000 0.000 965.987 12,354.97 1135.50%
29-May-92 12.85 0.000 0.000 965.987 12,412.93 1141.29%
30-Jun-92 12.50 0.09 12.69 6.851 0.000 972.838 12,160.47 1116.05%
31-Jul-92 12.99 0.000 0.000 972.838 12,637.16 1163.72%
31-Aug-92 12.96 0.000 0.000 972.838 12,607.98 1160.80%
30-Sep-92 12.95 0.09 12.96 6.756 0.000 979.594 12,685.74 1168.57%
30-Oct-92 12.94 0.000 0.000 979.594 12,675.94 1167.59%
30-Nov-92 13.27 0.000 0.000 979.594 12,999.21 1199.92%
31-Dec-92 12.67 0.08 0.62 12.56 6.239 48.356 1,034.189 13,103.17 1210.32%
31-Jan-93 12.52 0.000 0.000 1,034.189 12,948.04 1194.80%
28-Feb-93 12.64 0.000 0.000 1,034.189 13,072.15 1207.21%
31-Mar-93 12.88 0.07 12.71 5.696 0.000 1,039.885 13,393.71 1239.37%
30-Apr-93 12.66 0.000 0.000 1,039.885 13,164.94 1216.49%
31-May-93 12.79 0.000 0.000 1,039.885 13,300.12 1230.01%
30-Jun-93 12.63 0.07 12.76 5.705 0.000 1,045.589 13,205.79 1220.58%
31-Jul-93 12.62 0.000 0.000 1,045.589 13,195.34 1219.53%
31-Aug-93 13.03 0.000 0.000 1,045.589 13,624.03 1262.40%
30-Sep-93 12.91 0.07 12.95 5.652 0.000 1,051.241 13,571.52 1257.15%
30-Oct-93 12.98 0.000 0.000 1,051.241 13,645.11 1264.51%
30-Nov-93 12.82 0.000 0.000 1,051.241 13,476.91 1247.69%
31-Dec-93 12.85 0.06 0.278 12.50 5.046 23.380 1,079.667 13,873.72 1287.37%
31-Jan-94 13.15 0.000 0.000 1,079.667 14,197.62 1319.76%
28-Feb-94 13.07 0.000 0.000 1,079.667 14,111.24 1311.12%
31-Mar-94 12.52 0.07 12.96 5.832 0.000 1,085.498 13,590.44 1259.04%
30-Apr-94 12.69 0.000 0.000 1,085.498 13,774.97 1277.50%
31-May-94 12.69 0.000 0.000 1,085.498 13,774.97 1277.50%
30-Jun-94 12.27 0.105 12.59 9.053 0.000 1,094.551 13,430.14 1243.01%
31-Jul-94 12.76 0.000 0.000 1,094.551 13,966.47 1296.65%
31-Aug-94 13.19 0.000 0.000 1,094.551 14,437.13 1343.71%
30-Sep-94 12.73 0.09 13.03 7.560 0.000 1,102.111 14,029.88 1302.99%
31-Oct-94 12.70 0.000 0.000 1,102.111 13,996.81 1299.68%
30-Nov-94 12.14 0.000 0.000 1,102.111 13,379.63 1237.96%
31-Dec-94 11.27 0.085 0.825 11.17 8.387 81.400 1,191.898 13,432.69 1243.27%
31-Jan-95 11.45 0.000 0.000 1,191.898 13,647.24 1264.72%
28-Feb-95 11.87 0.000 0.000 1,191.898 14,147.83 1314.78%
31-Mar-95 11.98 0.09 11.74 9.137 0.000 1,201.036 14,388.41 1338.84%
30-Apr-95 12.26 0.000 0.000 1,201.036 14,724.70 1372.47%
31-May-95 12.72 0.000 0.000 1,201.036 15,277.17 1427.72%
30-Jun-95 12.65 0.085 12.56 8.128 0.000 1,209.164 15,295.92 1429.59%
31-Jul-95 12.95 0.000 0.000 1,209.164 15,658.67 1465.87%
31-Aug-95 12.93 0.000 0.000 1,209.164 15,634.49 1463.45%
30-Sep-95 13.23 0.0925 12.92 8.657 0.000 1,217.821 16,111.77 1511.18%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN FORMULA: T = (ERV/P)(POW)1/N - 1
<PAGE> 12
AGGREGATE TOTAL RETURN FORMULA: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
CALCULATIONS:
AVERAGE ANNUAL TOTAL RETURN: (16,111.77/1,000)(POW)(1/20) - 1 = 14.91 %
AGGREGATE TOTAL RETURN: (16,111.77/1,000) - 1 = 1,511.18 %
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
14.91%
<PAGE> 1
EXHIBIT 16(d)
<PAGE> 2
Cardinal Government Obligations Fund - Returns for one Year
<TABLE>
<CAPTION>
Avg. Annual Aggregate
Initial Reinvest Monthend Dividend Shares Dividend Total Dividends Ending Redeem Cumm Total Total
Month Purchase Price NAV Rate Purchased Shr. Added Shares Earned Value Days Return * Return*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-94 1000.0 7.96 7.96 0.05658 119.905 0.000 119.905 $954.44
31-Oct-94 7.90 7.89 0.05375 0.000 0.815 120.721 6.44 952.49 31 -43.63% -4.75%
30-Nov-94 7.80 7.82 0.05375 0.000 0.832 121.553 6.49 950.54 61 -26.18% -4.95%
31-Dec-94 7.82 7.82 0.05375 0.000 0.835 122.388 6.53 957.08 92 -15.98% -4.29%
31-Jan-95 7.89 7.90 0.05375 0.000 0.834 123.222 6.58 973.45 123 -7.67% -2.65%
28-Feb-95 8.01 8.02 0.05375 0.000 0.827 124.049 6.62 994.87 151 -1.24% -0.51%
31-Mar-95 7.99 7.99 0.05375 0.000 0.834 124.883 6.67 997.82 182 -0.44% -0.22%
30-Apr-95 8.02 8.02 0.05375 0.000 0.837 125.720 6.71 1,008.28 212 1.43% 0.83%
31-May-95 8.13 8.13 0.05375 0.000 0.831 126.551 6.76 1,028.86 243 4.37% 2.89%
30-Jun-95 8.13 8.13 0.05375 0.000 0.837 127.388 6.80 1,035.67 273 4.80% 3.57%
31-Jul-95 8.12 8.12 0.05167 0.000 0.811 128.199 6.58 1,040.97 304 4.94% 4.10%
31-Aug-95 8.15 8.15 0.05167 0.000 0.813 129.011 6.62 1,051.44 335 5.62% 5.14%
30-Sep-95 8.18 8.18 0.05167 0.000 0.815 129.826 6.67 1,061.98 365 6.20% 6.20%
</TABLE>
Average Annual Total Return Formula: T = (ERV/P)*1/N - 1
Aggregate Total Return Formula: T - (ERV/P) - 1
P = a hypotheticAL INITIAL PAYMENT OF $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
Calculations:
Average Annual Total Return: (1,061.98/1,000)(POW)(1/(365/385)) - 1 = 6.20%
Aggregate Total Return: (1,061.98/1,000) - 1 = 6.20%
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 3
Cardinal Government Obligations Fund - Returns for One Year
<TABLE>
<CAPTION>
Initial Reinvest Monthend Dividend Shares Dividend Total Dividends Ending Redeem. Cumm.
Month Purchase Price NAV Rate Purchased Shr. Added Shares Earned Value Days
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-94 1000.00 7.96 7.96 0.05658 119.905 0.000 119.905 $954.44
31-Oct-94 7.90 7.89 0.05375 0.000 0.816 120.721 6.44 952.49 31
30-Nov-94 7.80 7.82 0.05375 0.000 0.832 121.553 6.49 950.54 61
31-Dec-94 7.82 7.82 0.05375 0.000 0.835 122.388 6.53 957.08 92
31-Jan-95 7.89 7.90 0.05375 0.000 0.834 123.222 6.58 973.45 123
28-Feb-95 8.01 8.02 0.05375 0.000 0.827 124.049 6.62 994.87 151
31-Mar-95 7.99 7.99 0.05375 0.000 0.834 124.883 6.67 997.82 182
30-Apr-95 8.02 8.02 0.05375 0.000 0.837 125.720 6.71 1,008.28 212
31-May-95 8.13 8.13 0.05375 0.000 0.831 126.551 6.76 1,028.86 243
30-Jun-95 8.13 8.13 0.05375 0.000 0.837 127.388 6.80 1,035.67 273
31-Jul-95 8.12 8.12 0.05167 0.000 0.811 128.199 6.58 1,040.97 304
31-Aug-95 8.15 8.15 0.05167 0.000 0.813 129.011 6.62 1,051.44 335
30-Sep-95 8.18 8.18 0.05167 0.000 0.815 129.826 6.67 1,061.98 365
</TABLE>
<TABLE>
<CAPTION> Avg. Annual Aggregate
Total Total
Month Return * Return *
<S> <C> <C>
30-Sep-94
31-Oct-94 -43.63% -4.75%
30-Nov-94 -26.18% -4.95%
31-Dec-94 -15.98% -4.29%
31-Jan-95 -7.67% -2.65%
28-Feb-95 -1.24% -0.51%
31-Mar-95 -0.44% -0.22%
30-Apr-95 1.43% 0.83%
31-May-95 4.37% 2.89%
30-Jun-95 4.80% 3.57%
31-Jul-95 4.94% 4.10%
31-Aug-95 5.62% 5.14%
30-Sep-95 6.20% 6.20%
</TABLE>
Average Annual Total Return Formula: T = (ERV/P) to the power of 1/N - 1
Aggregate Total Return Formula: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
Calculations:
Average Annual Total Return: (1,061.98/1,000) to the power of
(1/(365/365)) - 1 = 6.20%
Aggregate Total Return: (1,061.98/1,000) - 1 = 6.20%
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 4
<TABLE>
<CAPTION>
Cardinal Government Obligations Fund - Returns for Five Years
Initial Reinvest Monthend Dividend Shares Dividend Total Dividends Ending Redeem. Cumm.
Month Purchase Price NAV Rate Purchased Shr. Added Shares Earned Value Days
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Sep-90 1000.00 8.70 8.71 109.644 0.000 109.644 0.00 955.00
31-Oct-90 8.71 8.72 0.06890 0.000 0.867 110.511 7.55 963.66 31
30-Nov-90 8.79 8.81 0.07117 0.000 0.895 111.406 7.87 981.49 61
31-Dec-90 8.81 8.83 0.06672 0.000 0.844 112.250 7.43 991.17 92
31-Jan-91 8.87 8.88 0.06672 0.000 0.844 113.094 7.49 1,004.28 123
28-Feb-91 8.87 8.86 0.06227 0.000 0.794 113.888 7.04 1,009.05 151
31-Mar-91 8.85 8.85 0.06894 0.000 0.887 114.775 7.85 1,015.76 182
30-Apr-91 8.87 8.89 0.06672 0.000 0.863 115.639 7.66 1,028.03 212
31-May-91 8.91 8.91 0.07339 0.000 0.953 116.591 8.49 1,038.83 243
30-Jun-91 8.86 8.87 0.06227 0.000 0.819 117.411 7.26 1,041.43 273
31-Jul-91 8.90 8.90 0.06894 0.000 0.910 118.320 8.09 1,053.05 304
30-Aug-91 8.94 8.93 0.07339 0.000 0.971 119.292 8.68 1,065.27 334
30-Sep-91 8.99 8.99 0.06227 0.000 0.826 120.118 7.43 1,079.86 365
31-Oct-91 9.03 9.04 0.06894 0.000 0.917 121.035 8.28 1,094.16 396
29-Nov-91 9.04 9.04 0.06894 0.000 0.923 121.958 8.34 1,102.50 425
31-Dec-91 9.10 9.11 0.06894 0.000 0.924 122.882 8.41 1,119.46 457
31-Jan-92 9.01 9.03 0.07117 0.000 0.971 123.853 8.75 1,118.39 488
29-Feb-92 9.01 9.02 0.06227 0.000 0.856 124.709 7.71 1,124.87 517
31-Mar-92 8.94 8.94 0.06672 0.000 0.931 125.639 8.32 1,123.22 548
30-Apr-92 8.91 8.91 0.06672 0.000 0.941 126.580 8.38 1,127.83 578
31-May-92 8.93 8.94 0.06724 0.000 0.953 127.533 8.51 1,140.15 609
30-Jun-92 8.98 8.97 0.06507 0.000 0.924 128.457 8.30 1,152.26 639
31-Jul-92 8.90 8.89 0.07158 0.000 1.033 129.491 9.19 1,151.17 670
31-Aug-92 8.92 8.94 0.06290 0.000 0.913 130.404 8.15 1,165.81 701
30-Sep-92 8.95 8.95 0.06507 0.000 0.948 131.352 8.49 1,175.60 731
31-Oct-92 8.89 8.88 0.06678 0.000 0.987 132.338 8.77 1,175.17 762
30-Nov-92 8.88 8.89 0.06052 0.000 0.902 133.240 8.01 1,184.51 792
31-Dec-92 8.88 8.87 0.07096 0.000 1.065 134.305 9.45 1,191.29 823
31-Jan-93 8.89 8.89 0.05844 0.000 0.883 135.188 7.85 1,201.82 854
28-Feb-93 8.89 8.88 0.05844 0.000 0.889 136.077 7.90 1,208.36 882
31-Mar-93 8.87 8.87 0.06470 0.000 0.993 137.069 8.80 1,215.80 913
30-Apr-93 8.84 8.84 0.06502 0.000 1.008 138.077 8.91 1,220.60 943
31-May-93 8.83 8.82 0.05893 0.000 0.921 138.999 8.14 1,225.97 974
30-Jun-93 8.76 8.76 0.06096 0.000 0.967 139.966 8.47 1,226.10 1,004
31-Jul-93 8.72 8.72 0.06272 0.000 1.007 140.973 8.78 1,229.28 1,035
31-Aug-93 8.68 8.68 0.05880 0.000 0.955 141.928 8.29 1,231.93 1,066
30-Sep-93 8.63 8.63 0.05304 0.000 0.872 142.800 7.53 1,232.36 1,096
31-Oct-93 8.58 8.60 0.05481 0.000 0.912 143.712 7.83 1,235.93 1,127
30-Nov-93 8.55 8.55 0.05304 0.000 0.892 144.604 7.62 1,236.36 1,157
31-Dec-93 8.54 8.54 0.05834 0.000 0.988 145.592 8.44 1,243.35 1,188
31-Jan-94 8.53 8.53 0.05127 0.000 0.875 146.467 7.46 1,249.36 1,219
28-Feb-94 8.46 8.46 0.04950 0.000 0.857 147.324 7.25 1,246.36 1,247
31-Mar-94 8.28 8.27 0.05481 0.000 0.975 148.299 8.07 1,226.43 1,278
30-Apr-94 8.18 8.17 0.05481 0.000 0.994 149.293 8.13 1,219.72 1,308
31-May-94 8.14 8.12 0.05304 0.000 0.973 150.266 7.92 1,220.16 1,339
30-Jun-94 8.09 8.07 0.05304 0.000 0.985 151.251 7.97 1,220.59 1,369
31-Jul-94 8.07 8.11 0.05481 0.000 1.027 152.278 8.29 1,234.97 1,400
31-Aug-94 8.07 8.08 0.05481 0.000 1.034 153.312 8.35 1,238.76 1,431
30-Sep-94 7.96 7.96 0.05658 0.000 1.090 154.402 8.67 1,229.04 1,461
31-Oct-94 7.90 7.89 0.05375 0.000 1.051 155.452 8.30 1,226.52 1,492
30-Nov-94 7.80 7.82 0.05375 0.000 1.071 156.524 8.36 1,224.01 1,522
31-Dec-94 7.82 7.82 0.05375 0.000 1.076 157.599 8.41 1,232.43 1,553
31-Jan-95 7.89 7.90 0.05375 0.000 1.074 158.673 8.47 1,253.52 1,584
28-Feb-95 8.01 8.02 0.05375 0.000 1.065 159.738 8.53 1,281.10 1,612
31-Mar-95 7.99 7.99 0.05375 0.000 1.075 160.812 8.59 1,284.89 1,643
30-Apr-95 8.02 8.02 0.05375 0.000 1.078 161.890 8.64 1,298.36 1,673
31-May-95 8.13 8.13 0.05375 0.000 1.070 162.960 8.70 1,324.87 1,704
30-Jun-95 8.13 8.13 0.05375 0.000 1.077 164.038 8.76 1,333.63 1,734
31-Jul-95 8.12 8.12 0.05167 0.000 1.044 165.082 8.48 1,340.46 1,765
31-Aug-95 8.15 8.15 0.05167 0.000 1.047 166.128 8.53 1,353.95 1,796
30-Sep-95 8.18 8.18 0.05167 0.000 1.049 167.178 8.58 1,367.51 1,826
</TABLE>
<TABLE>
<CAPTION>
Avg. Annual Aggregate
Total Total
Month Return * Return *
<S> <C> <C>
30-Sep-90
31-Oct-90 -35.33% -3.63%
30-Nov-90 -10.58% -1.85%
31-Dec-90 -3.46% -0.88%
31-Jan-91 1.27% 0.43%
28-Feb-91 2.20% 0.90%
31-Mar-91 3.19% 1.58%
30-Apr-91 4.87% 2.80%
31-May-91 5.89% 3.88%
30-Jun-91 5.58% 4.14%
31-Jul-91 6.40% 5.31%
30-Aug-91 7.15% 6.53%
30-Sep-91 7.99% 7.99%
31-Oct-91 8.65% 9.42%
29-Nov-91 8.74% 10.25%
31-Dec-91 9.43% 11.95%
31-Jan-92 8.73% 11.84%
29-Feb-92 8.66% 12.49%
31-Mar-92 8.05% 12.32%
30-Apr-92 7.89% 12.78%
31-May-92 8.18% 14.01%
30-Jun-92 8.43% 15.23%
31-Jul-92 7.97% 15.12%
31-Aug-92 8.32% 16.58%
30-Sep-92 8.41% 17.56%
31-Oct-92 8.04% 17.52%
30-Nov-92 8.12% 18.45%
31-Dec-92 8.07% 19.13%
31-Jan-93 8.17% 20.18%
28-Feb-93 8.15% 20.84%
31-Mar-93 8.13% 21.58%
30-Apr-93 8.02% 22.06%
31-May-93 7.93% 22.60%
30-Jun-93 7.69% 22.61%
31-Jul-93 7.55% 22.93%
31-Aug-93 7.40% 23.19%
30-Sep-93 7.21% 23.24%
31-Oct-93 7.10% 23.59%
30-Nov-93 6.92% 23.64%
31-Dec-93 6.92% 24.34%
31-Jan-94 6.89% 24.94%
28-Feb-94 6.66% 24.64%
31-Mar-94 6.00% 22.64%
30-Apr-94 5.70% 21.97%
31-May-94 5.57% 22.02%
30-Jun-94 5.46% 22.06%
31-Jul-94 5.66% 23.50%
31-Aug-94 5.61% 23.88%
30-Sep-94 5.29% 22.90%
31-Oct-94 5.12% 22.65%
30-Nov-94 4.97% 22.40%
31-Dec-94 5.03% 23.24%
31-Jan-95 5.34% 25.35%
28-Feb-95 5.77% 28.11%
31-Mar-95 5.73% 28.49%
30-Apr-95 5.86% 29.84%
31-May-95 6.21% 32.49%
30-Jun-95 6.25% 33.36%
31-Jul-95 6.25% 34.05%
31-Aug-95 6.35% 35.39%
30-Sep-95 6.46% 36.75%
</TABLE>
<PAGE> 5
Average Annual Total Return Formula: T = (ERV/P) to the power of 1/N - 1
Aggregate Total Return Formula: T = (ERV/P) - 1
P = a hypothetical initial payment of $1,000
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
Calculations:
Average Annual Total Return: (1,367.51/1,000) to the power of
(1/(1,826/365)) - 1 = 6.46%
Aggregate Total Return: (1,367.51/1,000) - 1 = 36.75%
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 6
Cardinal Government Obligations Fund - Returns Since Inception
<TABLE>
<CAPTION>
Avg. Annual Aggregate
Initial Reinvest Monthend Dividend Shares Dividend Total Dividends Ending Redeem. Cumm. Total Total
Month Purchase Price NAV Rate Purchased Shr. Added Shares Earned Value Days Return * Return *
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
03-Feb-86 $1,000 9.53 9.53 100.210 0.000 100.210 0.00 $955.00
28-Feb-86 9.61 9.61 0.07050 0.000 0.735 100.945 7.06 970.08 25 -35.82% -2.99%
31-Mar-86 9.54 9.54 0.08742 0.000 0.925 101.870 8.82 971.84 56 -16.99% -2.82%
30-Apr-86 9.50 9.50 0.08340 0.000 0.894 102.764 8.50 976.26 86 -9.69% -2.37%
31-May-86 9.34 9.34 0.08220 0.000 0.904 103.669 8.45 968.27 117 -9.57% -3.17%
30-Jun-86 9.33 9.34 0.08494 0.000 0.944 104.613 8.81 977.08 147 -5.59% -2.29%
31-Jul-86 9.41 9.40 0.08494 0.000 0.944 105.557 8.89 992.23 178 -1.59% -0.78%
31-Aug-86 9.41 9.41 0.07904 0.000 0.887 106.443 8.34 1,001.63 209 0.29% 0.16%
30-Sep-86 9.40 9.39 0.08672 0.000 0.982 107.425 9.23 1,008.73 239 1.34% 0.87%
31-Oct-86 9.38 9.37 0.08401 0.000 0.962 108.388 9.02 1,015.59 270 2.11% 1.56%
30-Nov-86 9.37 9.37 0.07476 0.000 0.865 109.252 8.10 1,023.69 300 2.89% 2.37%
31-Dec-86 9.35 9.35 0.08211 0.000 0.959 110.212 8.97 1,030.48 331 3.37% 3.05%
31-Jan-87 9.35 9.35 0.07350 0.000 0.866 111.078 8.10 1,038.58 362 3.89% 3.86%
28-Feb-87 9.38 9.37 0.06860 0.000 0.812 111.891 7.62 1,048.41 390 4.52% 4.84%
31-Mar-87 9.35 9.35 0.07456 0.000 0.892 112.783 8.34 1,054.52 421 4.71% 5.45%
30-Apr-87 9.08 9.08 0.06990 0.000 0.868 113.651 7.88 1,031.95 451 2.58% 3.20%
31-May-87 8.97 9.00 0.06757 0.000 0.856 114.507 7.68 1,030.56 482 2.31% 3.06%
30-Jun-87 9.13 9.10 0.07456 0.000 0.935 115.442 8.54 1,050.52 512 3.58% 5.05%
31-Jul-87 9.08 9.08 0.07200 0.000 0.915 116.358 8.31 1,056.53 543 3.77% 5.65%
31-Aug-87 9.01 9.01 0.07200 0.000 0.930 117.288 8.38 1,056.76 574 3.57% 5.68%
30-Sep-87 8.66 8.60 0.07110 0.000 0.963 118.250 8.34 1,016.95 604 1.02% 1.70%
31-Oct-87 8.76 8.77 0.07110 0.000 0.960 119.210 8.41 1,045.47 635 2.59% 4.55%
30-Nov-87 8.82 8.85 0.07347 0.000 0.993 120.203 8.76 1,063.80 665 3.45% 6.38%
31-Dec-87 8.88 8.85 0.07347 0.000 0.995 121.198 8.83 1,072.60 696 3.74% 7.26%
31-Jan-88 9.05 9.07 0.06870 0.000 0.920 122.118 8.33 1,107.61 727 5.27% 10.76%
28-Feb-88 9.07 9.07 0.07347 0.000 0.989 123.107 8.97 1,116.58 755 5.48% 11.66%
31-Mar-88 8.99 8.99 0.07220 0.000 0.989 124.096 8.89 1,115.62 787 5.21% 11.56%
29-Apr-88 8.90 8.90 0.06757 0.000 0.942 125.038 8.39 1,112.84 816 4.90% 11.28%
31-May-88 8.78 8.77 0.07456 0.000 1.062 126.100 9.32 1,105.89 848 4.43% 10.59%
30-Jun-88 8.89 8.91 0.06990 0.000 0.991 127.091 8.81 1,132.38 878 5.30% 13.24%
29-Jul-88 8.80 8.80 0.06757 0.000 0.976 128.067 8.59 1,126.99 907 4.93% 12.70%
31-Aug-88 8.72 8.73 0.07689 0.000 1.129 129.196 9.85 1,127.88 940 4.78% 12.79%
30-Sep-88 8.80 8.82 0.06990 0.000 1.026 130.222 9.03 1,148.56 970 5.35% 14.86%
31-Oct-88 8.90 8.91 0.07223 0.000 1.057 131.279 9.41 1,169.70 1,001 5.88% 16.97%
30-Nov-88 8.73 8.75 0.06990 0.000 1.051 132.330 9.18 1,157.89 1,031 5.33% 15.79%
30-Dec-88 8.61 8.61 0.06990 0.000 1.074 133.405 9.25 1,148.62 1,061 4.88% 14.86%
31-Jan-89 8.66 8.66 0.07456 0.000 1.149 134.553 9.95 1,165.23 1,093 5.24% 16.52%
28-Feb-89 8.54 8.55 0.06524 0.000 1.028 135.581 8.78 1,159.22 1,121 4.93% 15.92%
31-Mar-89 8.45 8.48 0.06524 0.000 1.047 136.628 8.85 1,158.61 1,152 4.77% 15.86%
28-Apr-89 8.54 8.57 0.06524 0.000 1.044 137.672 8.91 1,179.85 1,180 5.25% 17.98%
31-May-89 8.69 8.68 0.07689 0.000 1.218 138.890 10.59 1,205.56 1,213 5.79% 20.56%
30-Jun-89 8.80 8.82 0.06990 0.000 1.103 139.993 9.71 1,234.74 1,243 6.39% 23.47%
31-Jul-89 8.87 8.87 0.07223 0.000 1.140 141.133 10.11 1,251.85 1,274 6.65% 25.19%
31-Aug-89 8.75 8.75 0.07223 0.000 1.165 142.298 10.19 1,245.11 1,305 6.32% 24.51%
30-Sep-89 8.71 8.71 0.07223 0.000 1.180 143.478 10.28 1,249.70 1,335 6.28% 24.97%
31-Oct-89 8.79 8.79 0.06900 0.000 1.126 144.605 9.90 1,271.07 1,366 6.62% 27.11%
30-Nov-89 8.82 8.82 0.06900 0.000 1.131 145.736 9.98 1,285.39 1,396 6.78% 28.54%
31-Dec-89 8.82 8.80 0.07360 0.000 1.216 146.952 10.73 1,293.18 1,427 6.80% 29.32%
31-Jan-90 8.70 8.72 0.06900 0.000 1.165 148.117 10.14 1,291.58 1,458 6.62% 29.16%
28-Feb-90 8.70 8.67 0.06440 0.000 1.096 149.214 9.54 1,293.68 1,486 6.53% 29.37%
31-Mar-90 8.65 8.64 0.07360 0.000 1.270 150.483 10.98 1,300.18 1,517 6.52% 30.02%
30-Apr-90 8.55 8.56 0.06670 0.000 1.174 151.657 10.04 1,298.19 1,547 6.35% 29.82%
31-May-90 8.67 8.68 0.07130 0.000 1.247 152.905 10.81 1,327.21 1,578 6.77% 32.72%
30-Jun-90 8.71 8.71 0.07360 0.000 1.292 154.197 11.25 1,343.05 1,608 6.92% 34.31%
31-Jul-90 8.81 8.80 0.06900 0.000 1.208 155.404 10.64 1,367.56 1,639 7.22% 36.76%
31-Aug-90 8.72 8.72 0.07790 0.000 1.388 156.792 12.11 1,367.23 1,670 7.08% 36.72%
30-Sep-90 8.70 8.71 0.06005 0.000 1.082 157.875 9.42 1,375.09 1,700 7.08% 37.51%
31-Oct-90 8.71 8.72 0.06890 0.000 1.249 159.124 10.88 1,387.56 1,731 7.15% 38.76%
30-Nov-90 8.79 8.81 0.07117 0.000 1.288 160.412 11.32 1,413.23 1,761 7.43% 41.32%
</TABLE>
<PAGE> 7
T = total return
N = number of years
ERV = ending redeemable value at the end of the period of a hypothetical
$1,000 investment made at the beginning of the period
Calculations:
Average Annual Total Return: (1,969.06/1,000)(POW)(1/(3,526/365)) - 1 = 7.27%
Aggregate Total Return: (1,969.06/1,000) - 1 = 96.91%
* - The performance data reflects a deduction of the maximum sales charge of
4.50% of the public offering price.
<PAGE> 1
EXHIBIT 16(e)
<PAGE> 2
Cardinal Government Securities Trust
(Predecessor to Cardinal Government Securities Money Market Fund)
7 Day Yield
<TABLE>
<CAPTION>
<S> <C> <C>
Account Balance - 1 share at $1.00 1.00
Dividend Declaration
25-Sep-95 0.00014079
26-Sep-95 0.00013884
27-Sep-95 0.00013849
28-Sep-95 0.00013906
29-Sep-95 0.00014071
30-Sep-95 0.00014071
01-Oct-95 0.00014071
------------
0.00097932
Less: Deductions from Shareholders Accounts 0.00
------------
Ending Account Balance 1.00097932
Less: Beginning Account Balance -1.00
------------
Difference 0.00097932
Base Period Return
( Difference/Beginning Account Balance ) 0.00097932
Yield Quotation
( Base Period Return * 365/7 ) 5.11%
Effective Yield Quotation
[ ( Base Period Return + 1 ) (POW) 365/7 ] - 1 5.24%
</TABLE>
The quotations were computed based on the seven days ending
September 30, 1995.
<PAGE> 1
EXHIBIT 16(f)
<PAGE> 2
Cardinal Tax Exempt Money Trust 7 Day Yield
(Predecessor to Cardinal Tax Exempt Money Market Fund)
<TABLE>
<CAPTION>
<S> <C> <C>
Account Balance - 1 share at $1.00 1.00
Dividend Declaration
25-Sep-95 0.00009571
26-Sep-95 0.00008932
27-Sep-95 0.00009071
28-Sep-95 0.00009954
29-Sep-95 0.00009890
30-Sep-95 0.00009890
01-Oct-95 0.00009890
------------
0.00066198
Less: Deductions from Shareholders Accounts 0.00
------------
Ending Account Balance 1.00066198
Less: Beginning Account Balance -1.00
------------
Difference 0.00066198
Base Period Return
( Difference/Beginning Account Balance ) 0.00066198
Yield Quotation
( Base Period Return * 365/7 ) 3.45%
Effective Yield Quotation
[ ( Base Period Return + 1 ) (POW) 365/7 ] - 1 3.51%
</TABLE>
The quotations were computed based on the seven days ending
September 30, 1995.
Tax Equivalent Computations
<TABLE>
<S> <C>
Portion of Yield which is tax-exempt 100%
Tax Equivalent Yield Quotation
( 3.45/(1-.396) ) 5.71%
Tax Equivalent Yield Quotation
( 3.51/(1-.396) ) 5.81%
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000017493
<NAME> THE CARDINAL FUND INC.
<SERIES>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 222,963
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 3,926
<ASSETS-OTHER> 111
<OTHER-ITEMS-ASSETS> 206
<TOTAL-ASSETS> 227,206
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,025
<TOTAL-LIABILITIES> 1,025
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,820
<SHARES-COMMON-STOCK> 17,099
<SHARES-COMMON-PRIOR> 19,373
<ACCUMULATED-NII-CURRENT> 176
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19,281
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 58,904
<NET-ASSETS> 226,181
<DIVIDEND-INCOME> 7,504
<INTEREST-INCOME> 847
<OTHER-INCOME> 0
<EXPENSES-NET> 1,628
<NET-INVESTMENT-INCOME> 6,723
<REALIZED-GAINS-CURRENT> 17,719
<APPREC-INCREASE-CURRENT> 8,122
<NET-CHANGE-FROM-OPS> 32,564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,566
<DISTRIBUTIONS-OF-GAINS> 15,750
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,266
<NUMBER-OF-SHARES-REDEEMED> 59,809
<SHARES-REINVESTED> 20,894
<NET-CHANGE-IN-ASSETS> (20,401)
<ACCUMULATED-NII-PRIOR> 20
<ACCUMULATED-GAINS-PRIOR> 17,311
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,628
<AVERAGE-NET-ASSETS> 232,976
<PER-SHARE-NAV-BEGIN> 12.73
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.32
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.83
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.23
<EXPENSE-RATIO> 0.70%
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000783413
<NAME> CARDINAL GOVERNMENT OBLIGATIONS FUND
<SERIES>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 153,911
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1,124
<ASSETS-OTHER> 112
<OTHER-ITEMS-ASSETS> 338
<TOTAL-ASSETS> 155,485
<PAYABLE-FOR-SECURITIES> 3,094
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 680
<TOTAL-LIABILITIES> 3,774
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 173,076
<SHARES-COMMON-STOCK> 18,544
<SHARES-COMMON-PRIOR> 21,286
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 100
<ACCUMULATED-NET-GAINS> (22,390)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,124
<NET-ASSETS> 151,711
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,679
<OTHER-INCOME> 0
<EXPENSES-NET> 1,206
<NET-INVESTMENT-INCOME> 12,473
<REALIZED-GAINS-CURRENT> (4,514)
<APPREC-INCREASE-CURRENT> 8,934
<NET-CHANGE-FROM-OPS> 16,893
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,572
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,355
<NUMBER-OF-SHARES-REDEEMED> 34,766
<SHARES-REINVESTED> 7,272
<NET-CHANGE-IN-ASSETS> (17,818)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (21,655)
<OVERDISTRIB-NII-PRIOR> 2
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 784
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,206
<AVERAGE-NET-ASSETS> 157,936
<PER-SHARE-NAV-BEGIN> 7.96
<PER-SHARE-NII> 0.64
<PER-SHARE-GAIN-APPREC> 0.22
<PER-SHARE-DIVIDEND> 0.64
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.18
<EXPENSE-RATIO> 0.76%
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000315779
<NAME> CARDINAL GOVERNMENT SECURITIES TRUST
<SERIES>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 447,134
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 291
<ASSETS-OTHER> 314
<OTHER-ITEMS-ASSETS> 401
<TOTAL-ASSETS> 448,140
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,766
<TOTAL-LIABILITIES> 2,766
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 446,525
<SHARES-COMMON-STOCK> 445,374
<SHARES-COMMON-PRIOR> 367,516
<ACCUMULATED-NII-CURRENT> 312
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,463)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 445,374
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 23,311
<OTHER-INCOME> 0
<EXPENSES-NET> 3,301
<NET-INVESTMENT-INCOME> 20,010
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 20,010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,010
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,052,266
<NUMBER-OF-SHARES-REDEEMED> 993,975
<SHARES-REINVESTED> 19,567
<NET-CHANGE-IN-ASSETS> 77,858
<ACCUMULATED-NII-PRIOR> 312
<ACCUMULATED-GAINS-PRIOR> (1,463)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,032
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,301
<AVERAGE-NET-ASSETS> 405,544
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.81%
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<RESTATED>
<CIK> 0000716313
<NAME> CARDINAL TAX EXEMPT MONEY TRUST
<SERIES>
<NUMBER> 0
<NAME> 0
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 64,100
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 230
<ASSETS-OTHER> 55
<OTHER-ITEMS-ASSETS> 974
<TOTAL-ASSETS> 65,359
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 579
<TOTAL-LIABILITIES> 579
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64,780
<SHARES-COMMON-STOCK> 64,780
<SHARES-COMMON-PRIOR> 80,531
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 64,780
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,608
<OTHER-INCOME> 0
<EXPENSES-NET> 565
<NET-INVESTMENT-INCOME> 2,043
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,043
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,043
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 154,643
<NUMBER-OF-SHARES-REDEEMED> 172,311
<SHARES-REINVESTED> 1,917
<NET-CHANGE-IN-ASSETS> (15,751)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 344
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 565
<AVERAGE-NET-ASSETS> 68,530
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.83%
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899580
<NAME> CARDINAL BALANCED FUND
<SERIES>
<NUMBER> 2
<NAME> THE CARDINAL GROUP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 14,479
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 185
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 76
<TOTAL-ASSETS> 14,740
<PAYABLE-FOR-SECURITIES> 125
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,716
<SHARES-COMMON-STOCK> 1,262
<SHARES-COMMON-PRIOR> 1,411
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 391
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,425
<NET-ASSETS> 14,535
<DIVIDEND-INCOME> 245
<INTEREST-INCOME> 461
<OTHER-INCOME> 0
<EXPENSES-NET> 265
<NET-INVESTMENT-INCOME> 441
<REALIZED-GAINS-CURRENT> 307
<APPREC-INCREASE-CURRENT> 1,810
<NET-CHANGE-FROM-OPS> 2,558
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 453
<DISTRIBUTIONS-OF-GAINS> 49
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,485
<NUMBER-OF-SHARES-REDEEMED> 3,437
<SHARES-REINVESTED> 458
<NET-CHANGE-IN-ASSETS> 562
<ACCUMULATED-NII-PRIOR> 15
<ACCUMULATED-GAINS-PRIOR> 133
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 102
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 265
<AVERAGE-NET-ASSETS> 13,662
<PER-SHARE-NAV-BEGIN> 9.90
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 1.67
<PER-SHARE-DIVIDEND> 0.35
<PER-SHARE-DISTRIBUTIONS> 0.04
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.52
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000899580
<NAME> CARDINAL AGGRESSIVE GROWTH FUND
<SERIES>
<NUMBER> 1
<NAME> THE CARDINAL GROUP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 9,966
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 132
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 409
<TOTAL-ASSETS> 10,507
<PAYABLE-FOR-SECURITIES> 45
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 28
<TOTAL-LIABILITIES> 73
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,619
<SHARES-COMMON-STOCK> 844
<SHARES-COMMON-PRIOR> 951
<ACCUMULATED-NII-CURRENT> (113)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 917
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,011
<NET-ASSETS> 10,434
<DIVIDEND-INCOME> 71
<INTEREST-INCOME> 58
<OTHER-INCOME> 0
<EXPENSES-NET> 215
<NET-INVESTMENT-INCOME> (86)
<REALIZED-GAINS-CURRENT> 999
<APPREC-INCREASE-CURRENT> 1,158
<NET-CHANGE-FROM-OPS> 2,071
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,809
<NUMBER-OF-SHARES-REDEEMED> 2,906
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 974
<ACCUMULATED-NII-PRIOR> (113)
<ACCUMULATED-GAINS-PRIOR> 3
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 71
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 215
<AVERAGE-NET-ASSETS> 9,586
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 2.53
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.37
<EXPENSE-RATIO> 2.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<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
April 25, 1996
