CARDINAL GROUP, 497, 1998-02-04

CARDINAL GROUP
497, 1998-02-04

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<PAGE> 1

Rule 497(c)
File No. 033-59984
811-07588

PROSPECTUS
THE CARDINAL FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND

INSTITUTIONAL SHARES

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").
Each Fund offers multiple classes of Shares.

This Prospectus relates only to one class of Shares of The Cardinal
Fund, the Balanced Fund and the Aggressive Growth Fund - Institutional Shares.
Institutional Shares of each Fund are offered to banks, broker-dealers, savings
and loan associations, trust companies (including The Ohio Company), qualified
investment advisers and certain other financial institutions acting in a
fiduciary capacity on behalf of their customers or beneficiaries. Each Fund also
offers Investor Shares to the public. 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, the other
funds of the Group, or of the Investor Shares of the Funds, should contact The
Ohio Company. Additional information about the Funds, contained in a Statement
Of Additional Information dated January 30, 1998, 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 address
below or by calling the phone number provided below.

This Prospectus sets forth concisely the information about the
Institutional Shares of the Funds that a prospective investor ought to know
before investing in any of the Funds. This Prospectus should be retained for
future reference.

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.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

The Ohio Company

The date of this Prospectus is January 30, 1998.

(Continued on the next page)

<PAGE> 2

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.

- --------------------------------------------------------------------------------

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

- --------------------------------------------------------------------------------

<PAGE> 3

PROSPECTUS HIGHLIGHTS

INVESTMENT OBJECTIVES.......... THE CARDINAL FUND seeks long-term growth of
capital and income. Current income is a
secondary objective. (See page 11.)

THE BALANCED FUND seeks current income and
long-term growth of both capital and income.
(See page 11.)

THE AGGRESSIVE GROWTH FUND seeks
appreciation of capital. (See page 11.)

INVESTMENT POLICIES............ THE CARDINAL FUND generally invests in
equity securities which are growth oriented.
(See page 11.)

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 11
through 14.)

The AGGRESSIVE GROWTH FUND will invest
primarily in common stocks and securities
convertible into common stocks of
growth-oriented companies. (See page 14.)

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 Institutional 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 15 through 19.)

PURCHASES...................... Purchases are made at the public offering
price which is equal to net asset value per
share. (See page 20.)

REDEMPTIONS.................... Shares can be redeemed at net asset value
per share without charge if redeemed through
the Funds' distributor, The Ohio Company.
(See page 21.)

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<PAGE> 4

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"), each a separate
diversified investment fund of the Group.
(See page 25.)

-2-

<PAGE> 5

FEE TABLE

Institutional Shares of

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) 0% 0% 0%

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

Management Fees .60% .75% .75%

12b-1 Fees None None None

Other Expenses .40% .66% 1.01%
---- ---- ----

Total Fund Operating Expenses 1.00% 1.41% 1.76%
==== ==== ====

</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:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
The Cardinal Fund $10 $32 $55 $122

Balanced Fund $14 $45 $77 $169

Aggressive Growth Fund $18 $55 $95 $207
</TABLE>

The information set forth in the foregoing Fee Table and Example
relates only to Institutional Shares of the Funds. Each of the Funds also offers
another class of Shares known as Investor Shares. The two classes of Shares of
the Funds are subject to the same expenses except that the Investor Shares are
not subject to an administrative services fee but are subject to a Rule 12b-1
fee and are generally sold with a front-end sales charge.

The purpose of the above table is to assist a potential purchaser of a
Fund's Institutional 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.

-3-

<PAGE> 6

FINANCIAL HIGHLIGHTS

The following Financial Highlights have been audited by KPMG Peat
Marwick LLP, independent auditors, for the following periods: (1) from January
2, 1997 through September 30, 1997, with respect to the Institutional Shares of
The Cardinal Fund, the Balanced Fund, and the Aggressive Growth Fund, (2) each
of the years in the ten year period ended September 30, 1997, with respect to
the Investor Shares of The Cardinal Fund, and (3) each of the years in the four
year period ended September 30, 1997 and the period from June 24, 1993 through
September 30, 1993, with respect to the Investor Shares of the Balanced Fund and
the Aggressive Growth Fund. The report of KPMG Peat Marwick LLP on these
Financial Highlights, insofar as it relates to each of the years and/or periods
in the five year period ended September 30, 1997, is contained in the Funds'
Statement of Additional Information, which 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,
through April 30, 1996. 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.

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<PAGE> 7

Financial Highlights for Each Share of Beneficial Interest
Outstanding Throughout Each Period
- ----------------------------------

THE CARDINAL FUND
(Institutional
Shares)
For the period Years Ended September 30,
From January 2,
1997 through
September 30,
1997(a) 1997(a) 1996 1995 1994 1993 1992
------- ------- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING $12.92 $13.13 $13.23 $12.73 $12.91 $12.95 $11.88

Investment Activities:

Net investment income .12 .14 .25 .36 .31 .32 .35

Net realized and
unrealized gain (loss)
on investments 3.70 4.64 1.95 1.32 .12 .55 1.37
-------- -------- -------- -------- -------- --------

Total from Investment
Activities 3.82 4.78 2.20 1.68 .43 .87 1.72
------- -------- -------- -------- -------- -------- --------

Distributions:

From net investment
income (.10) (.13) (.26) (.35) (.33) (.29) (.36)

From net realized gains -- (1.13) (2.04) (.83) (.28) (.62) (.29)

Returns of capital -- -- -- -- -- -- --
------- -------- -------- -------- -------- -------- --------

Total Distributions (.10) (1.26) (2.30) (1.18) (.61) (.91) (.65)
------- -------- -------- -------- -------- -------- --------

NET ASSET VALUE ENDING $16.64 $16.65 $13.13 $13.23 $12.73 $12.91 $12.95
======= ======== ======== ======== ======== ======== ========

RATIOS/SUPPLEMENTAL DATA:

Total Return (without
sales load) 29.77%** 39.17% 17.96% 14.84% 3.38% 6.98% 15.05%

Net assets at end
of period (000) $26,881 $267,908 $229,042 $226,181 $246,581 $282,125 $261,392

Ratio of expenses to average
net assets 1.00% 1.06% 0.75% 0.70% 0.72% 0.68% 0.67%

Ratio of net investment
income after expenses
to average net assets 1.04% .97% 1.90% 2.89% 2.40% 2.46% 2.83%

Ratio of incurred expenses
to average net assets (b) 1.00% 1.12% 0.85% 0.70% 0.72% 0.68% 0.67%

Ratio of net investment
income after incurred
expenses to average net
assets (b) 1.04% .91% 1.80% 2.89% 2.40% 2.46% 2.83%

Portfolio turnover rate 12.73% 12.73% 57.93% 19.78% 23.20% 11.11% 6.22%

Average commission rate
paid (c) $0.08 $0.08 $0.08 $0.08 $0.08 $0.08 $0.08
</TABLE>

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<PAGE> 8

Years Ended September 30,

1991 1990 1989 1988
---- ---- ---- ----

<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING $9.28 $11.75 $10.38 $11.73

Investment Activities:

Net investment income .35 .42 .41 .37

Net realized and
unrealized gain (loss)
on investments 2.70 (1.87) 1.73 (.82)
----------- ----------- ----------- -----------

Total from Investment Activities 3.05 (1.45) 2.14 (.45)
----------- ----------- ----------- -----------

Distributions:

From net investment income (.38) (.53) (.39) (.47)

From net realized gains (.07) (.49) (.38) (.43)

Returns of capital -- -- -- --
----------- ----------- ----------- -----------

Total Distributions (.45) (1.02) (.77) (.90)
----------- ----------- ----------- -----------

NET ASSET VALUE ENDING $11.88 $9.28 $11.75 $10.38
=========== =========== =========== ===========

RATIOS/SUPPLEMENTAL DATA:

Total Return (without
sales load) 33.54% (13.42)% 22.04% (3.46)%

Net assets at end
of period (000) $221,428 $168,184 $174,156 $130,978

Ratio of expenses to
average net assets 0.67% 0.74% 0.70% 0.73%

Ratio of net investment
income after expenses to
average net assets 3.15% 3.98% 3.93% 3.77%

Ratio of incurred expenses
to average net assets (b) 0.67% 0.74% 0.70% 0.73%

Ratio of net investment
income after incurred
expenses to average net
assets (b) 3.15% 3.98% 3.93% 3.77%

Portfolio turnover rate 33.27% 27.10% 23.20% 12.3%

Average commission rate
paid (c) N/A N/A N/A N/A

<FN>
* 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.

** 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.

(a) Effective January 2, 1997, the Board of Trustees of the Group reclassified
each Fund's outstanding Shares into Investor A Shares (also known as
Investor Shares) and authorized the issuance of Investor Y Shares (also
known as Institutional Shares). The Financial Highlights presented for each
of the periods prior to January 2, 1997 and for the one-year period ended
September 30, 1997 represent the financial highlights of what are now known
as the Investor Shares.

(b) During the period certain fees were voluntarily waived. Had the fees been
charged, the effective ratio would reflect the incurred expenses as
indicated above.
</TABLE>

-6-

<PAGE> 9

(c) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.

N/A Not available.

-7-

<PAGE> 10

THE BALANCED FUND

Period from
June 24, 1993
(Institutional (date of
Shares) commencement
For the period of operations)
from January 2, Years Ended September 30, through
1997 through
September 30, September 30,
1997(a) 1997(a) 1996 1995 1994 1993*
------- ------- ---- ---- ---- -----

<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING $11.16 $11.86 $11.52 $9.90 $10.13 $10.00

Investment Activities:

Net investment income 0.16 0.27 0.41 0.34 0.23 0.02

Net realized and unrealized
gain (loss) on investments 2.08 2.40 0.73 1.67 (0.20) 0.12
---- ---- ---- ---- ------ ----

Total from Investment Activities 2.24 2.67 1.14 2.01 0.03 0.14
---- ---- ---- ---- ---- ----

Distributions:

From net investment income (.17) (0.24) (0.41) (0.35) (0.23) (0.01)

From net realized gains -- (1.06) (0.39) (0.04) (0.03) --

Returns of capital -- -- -- -- -- --
------ ------ ------- ------- ------ -----

Total Distributions (0.17) (1.30) (0.80) (0.39) (0.26) (0.01)
------ ------ ------- ------- ------ -----

NET ASSET VALUE ENDING $13.23 $13.23 $11.86 $11.52 $9.90 $10.13
======= ======= ======= ======= ====== =======

RATIOS/SUPPLEMENTAL DATA:

Total Return (without sales load) 20.17%** 24.71% 10.26% 20.76% 0.37% 1.40%**

Net assets at end of period (000) $1,708 $15,616 $14,345 $14,535 $13,973 $10,811

Ratio of expenses to average net
assets 1.51% 1.44% 1.64% 1.94% 2.07% 0.70%

Ratio of net investment income after
expenses to average net assets 1.99% 2.23% 3.54% 3.24% 2.44% 0.35%

Ratio of incurred expenses to
average net assets (b) 1.51% 1.50% 1.86% 1.95% 2.07% 0.70%

Ratio of net investment income after
incurred expenses to average net
assets (b) 1.99% 2.17% 3.32% 3.23% 2.44% 0.35%

Portfolio turnover rate 61.23% 61.23% 18.34% 37.62% 59.09% 60.67%

Average commission rate paid (c) $0.09 $0.09 $0.09 $0.09 $0.10 $0.10

<FN>
* 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.
</TABLE>

-8-

<PAGE> 11

(b) During the period certain fees were voluntarily waived. Had the fees been
charged, the effective ratio would reflect the incurred expenses as
indicated above.

(c) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.

-9-

<PAGE> 12

THE AGGRESSIVE GROWTH FUND

Period from
(Institutional June 24, 1993
Shares) (date of
For the period commencement
from January of operations)
2,1997 Years Ended September 30, through
through
September 30, September 30,
1997(a) 1997(a) 1996 1995 1994 1993*
------- ------- ---- ---- ---- -----

<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING $11.62 $11.31 $12.37 $9.94 $10.47 $10.00

Investment Activities:

Net investment loss (0.15) (0.20) (0.17) (0.10) (0.13) (0.03)

Net realized and unrealized
gain (loss) on investments 3.24 3.86 0.01 2.53 (0.36) 0.50
---- ---- ---- ---- ------ ----

Total from Investment Activities 3.09 3.66 (0.16) 2.43 (0.49) 0.47
---- ---- ------ ---- ------ ----

Distributions:

From net investment income -- -- -- -- -- --

From net realized gains 0.00 0.27 (0.90) -- (0.04) --

Returns of capital -- -- -- -- -- --
------ ------- ------ ------ -----

Total Distributions 0.00 (0.27) (0.90) 0.00 (0.04) 0.00
---- ------ ------ ---- ------ ----

NET ASSET VALUE ENDING $14.71 $14.70 $11.31 $12.37 $9.94 $10.47
====== ====== ====== ====== ===== ======

RATIOS/SUPPLEMENTAL DATA:

Total Return (without sales load) 26.59%** 32.95% (1.13%) 24.35% (4.74%) 4.70%**

Net assets at end of period (000) $4,062 $9,792 $9,669 $10,434 $9,460 $6,320

Ratio of expenses to average net
assets 2.11% 1.86% 1.95% 2.24% 2.51% 0.91%

Ratio of net investment income
after expenses to average net
assets (1.71%) (1.50%) (1.52%) (0.92%) (1.50%) (0.53%)

Ratio of incurred expenses to
average net assets (b) 2.11% 1.93% 2.17% 2.25% 2.51% 0.91%

Ratio of net investment income
after incurred expenses to
average net assets (b) (1.71%) (1.57%) (1.75)% (0.93)% (1.50%) (0.53%)

Portfolio turnover rate 34.43% 34.43% 48.60% 80.35% 95.70% 31.15%

Average commission rate paid (c) $0.07 $0.07 $0.07 $0.07 $0.09 $0.08

<FN>

* Commencement of operations.

-10-

<PAGE> 13

(also known as Institutional Shares). The Financial Highlights presented for
each of the periods prior to January 2, 1997 and for the one-year period
ended September 30, 1997 represent the financial highlights of what are now
known as the Investor Shares.

(b) During the period certain fees were voluntarily waived. Had the fees been
charged, the effective ratio would reflect the incurred expenses as
indicated above.

(c) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.

See notes to financial statements appearing in the Funds' Statement of
Additional Information.

-11-

<PAGE> 14

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 (including any
predecessor thereof). 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, if any, 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, if any,
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.

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., Morningstar, Inc. and CDA Investment Technologies,
Inc. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, The
Columbus Dispatch, Business Week, U.S.A. Today and Consumer Reports. In addition
to performance information, general information about 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 each Fund is contained in
the Funds' 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. Performance quotations are computed separately for Investor and
Institutional Shares. Because of differences in the fees and/or expenses borne
by Investor and Institutional Shares, the net yield and total return on each
such class can be expected, at any given time, to differ from the net yield and
total return of such other class.

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 Cardinal
Fund was

-12-

<PAGE> 15

organized for the purposes of acquiring all of the assets and liabilities of
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.

WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUNDS?

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 Balanced 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 the value 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.

-13-

<PAGE> 16

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 generally are traded either in established over-the-counter markets or on
national exchanges. As described below, however, the Balanced Fund may invest in
privately placed or restricted securities.

The Adviser will select convertible securities based primarily upon its
determination 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 the issuer's 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.

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<PAGE> 17

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 a wide range of U.S. corporate issuers. Such obligations may be secured or
unsecured promises to pay and will in most cases differ in their interest rates,
maturities and times of issuance.

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 to be 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 to be 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.

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<PAGE> 18

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 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 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. The
characteristics and risks associated with such high risk securities are
discussed more fully above under "The Balanced Fund." In the event that a
convertible debt security's rating falls below a "B" by an NRSRO, 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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<PAGE> 19

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
and that have caused the effective maturity of securities with prepayment
features to be extended, thus effectively converting short or intermediate term
securities (which tend to be less volatile in price) into longer-term securities
(which tend to be more volatile in price).

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 any 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 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

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<PAGE> 20

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 the
yield available in the market when delivery takes place. The Balanced Fund will
not pay for such 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 Adviser to manage it might be adversely affected.

MEDIUM-GRADE SECURITIES. As described above, the Balanced Fund and the
Aggressive Growth Fund may each invest in 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 speculative characteristics and to be 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 or the Aggressive Growth Fund to fall below BBB or Baa, as
the case may be, the Adviser will consider such an event in determining whether
that Fund should continue to hold that security. In no event, however, would
such Funds be required to liquidate any such portfolio security where the 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"). ADRs are receipts typically issued by a
United States bank or trust company evidencing ownership of the underlying
foreign securities and are denominated in U.S. dollars. Institutions issuing
ADRs may not be sponsored by the issuer. Unsponsored ADRs may be less liquid
than sponsored ADRS, and there may be less information available regarding the
underlying foreign issuer for unsponsored ADRs since a non-sponsored institution
is not required to provide the same shareholder information that a sponsored
institution is required to provide under its contractual arrangements with the
issuer.

Investment in foreign securities, including ADRs, 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 or
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"), including securities issued
in reliance on the so-called "private placement" exemption from registration
which is afforded by Section

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<PAGE> 21

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 assist in
the placement of 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 placed and resell such securities to certain qualified
institutional buyers 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.

REITS. Each of the Funds may also invest in securities of equity real
estate investment trusts ("REITs"). REITs pool investors' funds for investment
primarily in commercial real estate properties. Investment in REITs may subject
a Fund to certain risks. REITs may be affected by changes in the value of the
property they own. REITs are dependent upon specialized management skill, may
not be diversified and are subject to the risks of financing projects. REITs are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for the beneficial tax
treatment available to REITs under the Internal Revenue Code and to maintain
their exemption from the 1940 Act. As a shareholder in a REIT, a Fund would
bear, along with other shareholders, its pro rata portion of the REIT's
operating expenses. These expenses would be in addition to the advisory and
other expenses that the Fund bears directly in connection with its own
operations.

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 exchange-traded 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 and call options only on securities in
which the Fund may otherwise invest. Each Fund may also engage in selling
(writing) exchange-traded options from time to time as the Adviser deems
appropriate for purposes of gaining additional income in the form of premiums
paid by the purchaser of the option and/or for hedging purposes. 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 had 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.

Each Fund, as part of its option transactions, also may purchase
exchange-traded index put and call options and write exchange-traded index
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.

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<PAGE> 22

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 will be
required to segregate assets and/or provide an initial margin to cover index
options that would require it to pay cash upon exercise. Under normal market
conditions, it is not expected that the underlying value of portfolio securities
and/or cash subject to such options written by a Fund (including any assets
segregated in connection therewith), when added to the greater of the market
value or the cost of any options purchased by that Fund, will exceed 10% of the
net assets of that Fund at any one time.

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.

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.

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<PAGE> 23

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.

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 will not:

1. Purchase or otherwise acquire any securities, if as a
result, more than 15% of the Fund's net assets would be invested in
securities that are illiquid.

HOW DO I PURCHASE INSTITUTIONAL SHARES OF THE FUNDS?

GENERAL

Each Fund's Institutional Shares are continuously offered and may be
purchased through procedures established by The Ohio Company, principal
underwriter of the Funds' Shares, in connection with accounts for which banks,
broker-dealers, savings and loan associations, trust companies (including The
Ohio Company),

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<PAGE> 24

qualified investment advisers and certain other financial institutions serve in
a fiduciary capacity on behalf of customers or beneficiaries (collectively,
"Financial Institutions"). Normally, Financial Institutions will hold
Institutional Shares of record for their customers or beneficiaries. With
respect to Institutional Shares so sold, it is the responsibility of the holder
of record to transmit purchase or redemption orders to The Ohio Company and to
deliver funds for the purchase thereof on a timely basis. Beneficial ownership
of Institutional Shares of the Funds may be recorded by the Financial
Institutions and reflected in the account statements provided to their customers
or beneficiaries.

The Group reserves the right to reject any order for the purchase of
Institutional Shares in whole or in part. The applicable Financial Institution
will receive a confirmation of each new transaction in its account. Certificates
representing Institutional Shares will not be issued.

Institutional Shares are purchased at the net asset value per share
(see "HOW IS NET ASSET VALUE CALCULATED?") next determined after receipt by The
Ohio Company or its agents of an order and payment. There is no sales charge
imposed in connection with the purchase of Institutional Shares of any Fund.
Depending upon the terms of a particular account, a Financial Institution may
charge customer account fees for services provided in connection with an
investment in a Fund. Information concerning these services and any charges may
be obtained from such Financial Institution. This Prospectus should be read in
conjunction with any such information so received.

From time to time, The Ohio Company, from its own resources, may
provide 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.

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 shall be paid 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 Cardinal Management
Corp., the Funds' transfer agent (the "Transfer Agent"), dividends and
distributions will be made only in additional full and fractional Institutional
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 Institutional Shares
in a Fund.

Each Fund's net investment income available for distribution to the
holders of Institutional Shares will be reduced by the amount of administrative
services fees paid under the Services Plan described below.

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<PAGE> 25

HOW MAY I REDEEM MY INSTITUTIONAL SHARES?

Investors may redeem Institutional Shares of a Fund on any Business Day
at the net asset value per Institutional 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 Institutional
Shares and may charge a fee for such services.

The Group will make payment for redeemed Institutional 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 Institutional Shares where such
Institutional 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 Institutional Shares by wire transfer of federal funds would avoid
any such delay.

The Group intends to pay cash for all Institutional 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 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 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 Institutional 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.

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<PAGE> 26

REDEMPTION BY TELEPHONE

Shareholders may redeem Institutional 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 Institutional Shares by mail as described above.

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 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

Holders of Institutional Shares 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, at
respective net asset values, Institutional Shares of any Fund for Institutional
Shares of another Fund or for:

Institutional Shares of Cardinal
Government Obligations Fund, a fund
investing in securities issued or
guaranteed by the U.S. Government;

Shares of Cardinal Government Securities
Money Market Fund, a U.S. Government securities
money market fund; or

Shares of Cardinal Tax Exempt Money Market Fund, a tax-free money
market fund.

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<PAGE> 27

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.

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 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 class of shares of a 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 accrued but not
received) allocable to such class minus all liabilities (including estimated
accrued expenses) allocable to such class by the total number of Shares of that
class 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 a Fund or
valuation of net assets of a Fund is not reasonably practicable, or (d) the
Commission has by order permitted such suspension.

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 all or
substantially all of such Fund's investment company taxable income (before
deduction of dividends paid).

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<PAGE> 28

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 mid-term or net long-term
capital gain over net short-term capital loss is taxable to shareholders as
mid-term or long-term capital gain, respectively, 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.

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 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?

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<PAGE> 29

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. The Ohio
Company receives no fees under its Distribution Agreement with the Group with
respect to Institutional Shares of the Funds, but may receive fees under the
Administrative Services 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 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.

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, The Cardinal Fund's
predecessor, 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 October 1, 1996, David C. Will and Joseph A. Miner have been responsible
jointly for the day-to-day management of the Balanced Fund's portfolio. 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. Mr. Miner has been a
Vice President and Senior Portfolio Manager of the Adviser and/or The Ohio
Company since August, 1995. Prior thereto and since 1992, Mr. Miner was a Vice
President and Portfolio Manager with Key Trust Company of Ohio. From 1987 to
1992, Mr. Miner was an investment strategist and an Assistant Vice President of
Citizens Fidelity Capital Management Company, Louisville, Kentucky. Since August
12, 1996, Mr. Harold C. Elliott has been primarily responsible for the
day-to-day management of the Aggressive Growth Fund's portfolio. Mr. Elliott has
been a Vice President and Chief Investment Officer of The Ohio Company since
March, 1996. Prior thereto, from May, 1993 to March, 1996, Mr. Elliott was Vice
President and Chief Investment Officer of The Bank of Tokyo Trust Company (New
York City), a wholly-owned subsidiary of The Bank of Tokyo Limited, Tokyo,
Japan. Prior thereto, from December, 1984 to May, 1993, Mr. Elliott was employed
by First Fidelity Bank, Philadelphia, Pennsylvania.

In addition, pursuant to the Investment Advisory and Management
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 and Management 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

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<PAGE> 30

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.

On December 22, 1997, The Ohio Company, Fifth Third Bankcorp., and its
wholly owned subsidiary, Fifth Third M Corp., entered into an Agreement and Plan
of Merger pursuant to which The Ohio Company will be acquired by Fifth Third M
Corp. The acquisition is subject to a number of conditions, including the
approval by Trustees and shareholders of the Group of a "new" investment
advisory and management agreement with the Adviser, identical in all material
respects to the Group's current Investment Advisory and Management Agreement
with the Adviser, to become effective on the effective date of The Ohio
Company's acquisition. On such effective date, it is also expected that the
Group will have entered into an underwriting agreement with a new principal
underwriter. In addition, it is expected that Fountain Square Funds, a regulated
investment company with net assets of approximately $3.1 billion as of December
31, 1997, advised by Fifth Third Bank, a subsidiary of Fifth Third Bankcorp.,
will propose the combination of the Group and Fountain Square Funds in a
transaction which, if approved by the Group's Trustees, would be submitted to
the Group's shareholders for consideration and approval.

On January 16, 1998 the Board of Trustees of the Group approved such a
new investment advisory and management agreement and have called a Special
Meeting of Shareholders to be held in March, 1998 to vote on such agreement.

DIVIDEND AND TRANSFER AGENT

The Group has entered into a Transfer Agency Agreement with 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.

DISTRIBUTOR

The Group has entered into a Distribution Agreement 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. The Ohio Company receives no compensation under the Distribution
Agreement with respect to distribution of the Institutional Shares of the Funds.

EXPENSES
The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager and transfer agent other than the
cost of securities (including brokerage commissions, if any) purchased for the
Funds. The Trustees reserve the right to allocate certain other expenses, which
can reasonably be identified as relating to a particular class, solely to such
class, including Institutional Shares, as they deem appropriate ("Class
Expenses"). Such expenses include (a) transfer agency fees identified as being
attributable to a specific class; (b) printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxy statements to current shareholders of a specific class; (c) Blue Sky
registration fees incurred by a class of shares; (d) SEC registration fees
incurred by a class; (e) expenses of administrative personnel and services as
required to support the shareholders of a specific class; (f) litigation or
other legal expenses and audit or other accounting expenses relating solely to
one class; (g) trustees' fees or expenses incurred as a result of issues
relating to one class; and (h) shareholder meeting costs that relate to a
specific class.

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<PAGE> 31

ADMINISTRATIVE SERVICES PLAN

The Group has adopted an Administrative Services Plan with respect to
each Fund's Institutional Shares (the "Services Plan") pursuant to which each
Fund is authorized to pay compensation to Financial Institutions, which may
include The Ohio Company, which agree to provide certain ministerial, record
keeping and/or administrative support services for their customers, account
holders or beneficiaries (collectively, "customers") who are the beneficial or
record owner of Institutional Shares of a Fund. In consideration for such
services, a Financial Institution receives a fee from such Fund, computed daily
and paid monthly, at an annual rate of up to .15% of the average daily net asset
value of Institutional Shares of that Fund owned beneficially or of record by
such Financial Institution's customers for whom the Financial Institution
provides such services.

The servicing agreements adopted under the Services Plan (the
"Servicing Agreements") require the Financial Institutions receiving such
compensation to perform certain ministerial, record keeping and/or
administrative support services with respect to the beneficial or record owners
of Institutional Shares of the Funds, such as processing dividend and
distribution payments from the Fund on behalf of customers, providing periodic
statements to customers showing their positions in the Institutional Shares of
that Fund, providing sub-accounting with respect to Institutional Shares
beneficially owned by such customers and providing customers with a service that
invests the assets of their accounts in Institutional Shares of a Fund pursuant
to specific or preauthorized instructions.

As authorized by the Services Plan, the Group has entered into a
Servicing Agreement with The Ohio Company pursuant to which The Ohio Company has
agreed to provide certain administrative support services in connection with
Institutional Shares of the Funds owned of record or beneficially by its
customers for whom The Ohio Company provides fiduciary or trust services. Such
administrative support services may include, but are not limited to, (i)
processing dividend and distribution payments from the Funds on behalf of
customers; (ii) providing periodic statements to its customers showing their
positions in the Institutional Shares; (iii) arranging for bank wires; (iv)
responding to routine customer inquiries relating to services performed by The
Ohio Company; (v) providing sub-accounting with respect to the Institutional
Shares beneficially owned by The Ohio Company's customers or the information
necessary for sub-accounting; (vi) if required by law, forwarding shareholder
communications from a Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (vii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Institutional Shares pursuant to
specific or pre-authorized instructions. In consideration of such services, the
Group, on behalf of each Fund, has agreed to pay The Ohio Company a monthly fee,
computed at the annual rate of .15% of the average aggregate net asset value of
Institutional Shares of that Fund held during the period by customers for whom
The Ohio Company has provided services under the Servicing Agreement. Any fees
paid by a Fund to Financial Institutions under the Services Plan will be borne
solely by the Institutional Shares of that Fund.

CUSTODIAN AND FUND ACCOUNTANT

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. In addition, Fifth
Third, pursuant to a Fund Accounting and Services Agreement, has agreed with
the Group to provide certain fund accounting services to each of the Funds.

WHAT ARE MY RIGHTS AS A SHAREHOLDER?

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<PAGE> 32

("CTEMMF"), are currently offered in two separate classes: Investor A Shares,
otherwise referred to as Investor Shares, and Investor Y Shares, otherwise
referred to as Institutional Shares. CGSMMF and CTEMMF each only have one class
of shares. 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.

In the event the status of a shareholder or the capacity in which a
shareholder holds Institutional Shares changes such that the shareholder is no
longer eligible to purchase or hold Institutional Shares of a Fund, then such
Institutional Shares will be automatically converted into Investor Shares of
such Fund at respective net asset values. Such conversion of Institutional
Shares into Investor Shares will not result in gain or loss to the shareholder
for federal income tax purposes, and the basis and holding period of the Shares
so converted will not be affected.

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 or class 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 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, although
Trustees may under certain circumstances fill vacancies, including vacancies
created by expanding the size of the Board. Trustees 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
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

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<PAGE> 33

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.

-31-

<PAGE> 34

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 LLP
65 East State Street
Columbus, Ohio 43215

Independent Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215

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<PAGE> 35

TABLE OF CONTENTS

Page
----

PROSPECTUS HIGHLIGHTS............................................... 1
FEE TABLE........................................................... 3
FINANCIAL HIGHLIGHTS................................................ 4
PERFORMANCE INFORMATION............................................. 12
WHAT ARE THE FUNDS?................................................. 12
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUNDS?................................. 13
HOW DO I PURCHASE INSTITUTIONAL SHARES OF THE
FUNDS?..................................................... 21
WHAT DISTRIBUTIONS WILL I RECEIVE?.................................. 22
HOW MAY I REDEEM MY INSTITUTIONAL SHARES?........................... 23
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED?.................................................. 24
HOW IS NET ASSET VALUE CALCULATED?.................................. 25
DO THE FUNDS PAY FEDERAL INCOME TAX?................................ 25
WHAT ABOUT MY TAXES?................................................ 26
WHO MANAGES MY INVESTMENT IN THE FUNDS?............................. 26
WHAT ARE MY RIGHTS AS A SHAREHOLDER?................................ 29

----------

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

January 30, 1998

The Ohio Company

THE CARDINAL FUND

CARDINAL
BALANCED FUND

CARDINAL
AGGRESSIVE
GROWTH FUND

INSTITUTIONAL
SHARES

THE CARDINAL GROUP

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<PAGE> 36

Rule 497(c)
File No. 033-59984
811-07588

PROSPECTUS
CARDINAL GOVERNMENT OBLIGATIONS FUND

INSTITUTIONAL SHARES

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 offers multiple classes of 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.

This Prospectus relates only to one class of Shares of the Fund -
Institutional Shares. Institutional Shares of the Fund are offered to banks,
broker-dealers, savings and loan associations, trust companies (including The
Ohio Company), qualified investment advisers and certain other financial
institutions acting in a fiduciary capacity on behalf of their customers or
beneficiaries. The Fund also offers Investor Shares to the public. 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, the other funds of the
Group, or of the Investor Shares of the Fund, should contact The Ohio Company.
Additional information about the Fund, contained in a Statement Of Additional
Information dated January 30, 1998, 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 below address or by
calling the phone number provided below.

This Prospectus sets forth concisely the information about the
Institutional Shares of the Fund that a prospective investor ought to know
before investing in the Fund. This Prospectus should be retained for future
reference.

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.

The Ohio Company

The date of this Prospectus is January 30, 1998.

- --------------------------------------------------------------------------------

For further information regarding the Fund or for assistance in opening an
accountor 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
- --------------------------------------------------------------------------------

<PAGE> 37

PROSPECTUS HIGHLIGHTS

INVESTMENT OBJECTIVES.............. The Fund seeks to maximize safety of
capital and, consistent with such
objective, earn the highest available
current income obtainable from government
securities. (See page 6.)

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 6 and 7.)

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 12.)

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 10.)

PURCHASES.......................... Purchases are made at the public offering
price which is equal to net asset value
per share. (See page 11.)

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 12.)

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"), each a
separate diversified investment fund of
the Group. (See page 16.)

-1-

<PAGE> 38

FEE TABLE

SHAREHOLDER TRANSACTION EXPENSES Institutional Shares
--------------------
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0%

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

Management Fees .50%
12b-1 Fees None
Other Expenses .43
----
Total Fund Operating Expenses .93%
----
</TABLE>

EXAMPLE 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

<S> <C> <C> <C> <C>
You would pay the following
expenses on a $1,000 invest-
ment, assuming (1) 5% annual
return and (2) redemption at
the end of each time period: $ 9 $30 $51 $114
</TABLE>

The information set forth in the foregoing Fee Table and Example
relates only to Institutional Shares of the Fund. The Fund also offers another
class of Shares known as Investor Shares. The two classes of Shares of the Fund
are subject to the same expenses except that the Investor Shares are not subject
to an administrative services fee but are subject to a Rule 12b-1 fee and are
generally sold with a front-end sales charge.

The purpose of the above table is to assist a potential purchaser of
the Fund's Institutional 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.

FINANCIAL HIGHLIGHTS

The following Financial Highlights with respect to the period from
January 2, 1997 through September 30, 1997 (Institutional Shares), and with
respect to each of the years in the ten year period ended September 30, 1997
(Investor Shares), have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon, insofar as it relates to each of the years in
the five year period ended September 30, 1997, is 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, through April 30,
1996. 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.

-2-

<PAGE> 39

FINANCIAL HIGHLIGHTS FOR EACH SHARE OF BENEFICIAL
INTEREST OUTSTANDING THROUGHOUT EACH PERIOD
- -------------------------------------------

(Institutional
Shares)
For the period
from January 2, Years Ended September 30,
1997 through -------------------------
September 30,
1997(a) 1997(a) 1996 1995 1994 1993
------- ------- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $8.09 $8.05 $8.18 $7.96 $8.63 $8.95
BEGINNING

Investment Activities:
Net investment income .42 .61 .60 .64 .66 .74

Net realized
and unrealized gain (loss)
on investments .12 .11 (.12) .22 (.68) (.32)
--- --- --- --- --- ---

Total from Investment
Activities .54 .72 .48 .86 (.02) .42
--- --- --- --- --- ---

Distributions:
From net
investment income (.43) (.57) (.60) (.64) (.65) (.74)

From capital gains -- -- -- -- -- --

Tax return of capital -- -- (.01) -- -- --
----- ----- ----- ----- ----- -----

Total Distributions (.43) (.57) (.61) (.64) (.65) (.74)
----- ----- ----- ----- ----- -----

NET ASSET VALUE, ENDING $8.20 $8.20 $8.05 $8.18 $7.96 $8.63
==== ==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:

Total Return (without sales load) 6.86%* 9.28% 6.04% 11.27% (0.27%) 4.83%

Net assets at end of
period (000) $5,803 $120,342 $133,298 $151,711 $169,529 $208,883

Ratio of expenses to
average net assets 0.93% 1.01% 0.78% 0.76% 0.75% 0.73%

Ratio of net investment
income after charged expenses
to average net assets 7.00% 7.06% 7.39% 7.93% 7.88% 8.32%

Ratio of incurred expenses to
average net assets (b) 0.93% 1.08% 0.88% 0.76% 0.75% 0.73%

Ratio of net investment income
after incurred expenses to
average net assets (b) 7.00% 6.99% 7.29% 7.93% 7.88% 8.32%

Portfolio Turnover Rate 34.53% 34.53% 33.58% 36.71% 21.95% 24.94%
</TABLE>

-3-

<PAGE> 40

<TABLE>

Years Ended September 30,
-------------------------

1992 1991 1990 1989 1988
---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, $8.99 $8.71 $8.71 $8.82 $8.60
BEGINNING

Investment Activities:
Net investment income .80 .81 .84 .84 .86

Net realized
and unrealized gain (loss)
on investments (.04) .28 -- (.11) .22
--- --- --- --- ---

Total from Investment
Activities .76 1.09 .84 .73 1.08
--- ---- --- --- ----

Distributions:
From net
investment income (.80) (.81) (.84) (.84) (.86)

From capital gains -- -- -- -- --

Tax return of capital -- -- -- -- --
----- ---- ---- ---- ----

Total Distributions (.80) (.81) (.84) (.84) (.86)
----- ----- ----- ----- -----

NET ASSET VALUE, ENDING $8.95 $8.99 $8.71 $8.71 $8.82
==== ==== ==== ==== ====

RATIOS/SUPPLEMENTAL DATA:

Total Return (without sales
load) 8.87% 13.07% 10.03% 8.81% 12.94%

Net assets at end of
period (000) $172,139 $128,569 $114,890 $118,958 $146,745

Ratio of expenses to
average net assets 0.76% 0.76% 0.76% 0.73% 0.74%

Ratio of net investment
income after charged expenses
to average net assets 8.89% 9.20% 9.55% 9.73% 9.64%

Ratio of incurred expenses to
average net assets (a) 0.76% 0.76% 0.76% 0.73% 0.74%

Ratio of net investment income
after incurred expenses to
average net assets (a) 8.89% 9.20% 9.55% 9.73% 9.64%

Portfolio Turnover Rate 17.15% 34.81% 30.90% .92% 5.76%

<FN>
* 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.

(a) Effective January 2, 1997, the Board of Trustees of the Group
reclassified the Fund's outstanding Shares into Investor A Shares (also known as
Investor Shares) and authorized the issuance of Investor Y Shares (also known as
Institutional Shares). The Financial Highlights presented for each of the
periods prior to January 2, 1997 and for the one-year period ended September 30,
1997 represent the financial highlights of what are now known as the Investor
Shares.

(b) During the period certain fees were voluntarily waived. Had the
fees been charged, the effective ratio would reflect the incurred expenses as
indicated above.
</TABLE>

See notes to financial statements appearing in the Fund's Statement Of
Additional Information.

----------------------------------

-4-

<PAGE> 41

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, if any, 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, if any, 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.

In addition, from time to time the Fund may include in its sales
literature and shareholder reports a quote of the current "distribution" rate
for the Fund. A distribution rate is simply a measure of the level of dividends
distributed for a specified period and is computed by dividing the total amount
of dividends per share paid by the Fund during the past 12 months by a current
maximum offering price. It differs from yield, which is a measure of the income
actually earned by the Fund's investments, and from total return, which is a
measure of the income actually earned by, plus the effect of any realized and
unrealized appreciation or depreciation of, such investments during a stated
period. A distribution rate is, therefore, not intended to be a complete measure
of performance. A distribution rate may sometimes be greater than yield since,
for instance, it may include short-term and possibly long-term gains (which may
be non-recurring), may not include the effect of amortization of bond premiums
and does not reflect unrealized gains or losses.

Investors may also judge the performance of the Fund by comparing or
referencing its performance to the performance of other mutual funds or mutual
fund portfolios with comparable investment objectives and policies through
various mutual fund or market indices such as those prepared by Dow Jones & Co.,
Inc. and Standard & Poor's Corporation, and to data prepared by Lipper
Analytical Services, Inc., Morningstar, Inc. and CDA Investment Technologies,
Inc. Comparisons may also be made to indices or data published in Money
Magazine, Forbes, Barron's, The Wall Street Journal, The New York Times, The
Columbus Dispatch, Business Week, U.S.A. Today and Consumer Reports. In addition
to performance information, general information about the Fund that appears in a
publication such as those mentioned above may be included in advertisements and
in reports to shareholders.

Further information about the performance of the Fund is contained in
an 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. Performance quotations will be computed separately for Investor and
Institutional Shares. Because of differences in the fees and/or expenses borne
by Investor and Institutional Shares, the net yield and total return on each
such class can be expected, at any given time, to differ from the net yield and
total return of such other class.

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

-5-

<PAGE> 42

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.

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 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 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.

-6-

<PAGE> 43

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 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.

-7-

<PAGE> 44

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. Since the Fund
invests in bonds, investors in the Fund are 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 although certain types of bonds are subject to the risks of
prepayment as described above when interest rates fall. There have been in the
recent past extended periods of cyclical increases in interest rates that have
caused significant declines in bond prices and have caused the effective
maturity of securities with prepayment features to be extended, thus effectively
converting short or intermediate term securities (which tend to be less volatile
in price) into longer term securities (which tend to be more volatile in price).

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.

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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 exchange-traded 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 and call options only on securities in
which the Fund may otherwise invest. The Fund may also engage in selling
(writing) exchange-traded call options from time to time as the Adviser deems
appropriate for purposes of gaining additional income in the form of premiums
paid by the purchaser of the option and/or for hedging purposes. 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 had 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.

The Fund, as part of its option transactions, also may purchase
exchange-traded index put and call options and write exchange-traded index
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 will be
required to segregate assets and/or provide an initial margin to cover index
options that would require it to pay cash upon exercise. Under normal market
conditions, it is not expected that the underlying value of portfolio securities
and/or cash subject to such options written by the Fund (including any assets
segregated in connection therewith), when added to the greater of the market
value or the cost of any options purchased by the Fund, will exceed 10% of the
net assets of the Fund at any one time.

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.

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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 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:

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The following additional investment restriction may be changed without
the vote of a majority of the outstanding Shares of the Fund. The Fund will not:

1. Purchase or otherwise acquire any securities, if as a
result, more than 15% of the Fund's net assets would be invested in
securities that are illiquid.

HOW DO I PURCHASE INSTITUTIONAL SHARES OF THE FUND?

GENERAL

The Fund's Institutional Shares are continuously offered and may be
purchased through procedures established by The Ohio Company, principal
underwriter of the Fund's Shares, in connection with accounts for which banks,
broker-dealers, savings and loan associations, trust companies (including The
Ohio Company), qualified investment advisers and certain other financial
institutions serve in a fiduciary capacity on behalf of customers or
beneficiaries (collectively, "Financial Institutions"). Normally, Financial
Institutions will hold Institutional Shares of record for their customers or
beneficiaries. With respect to Institutional Shares so sold, it is the
responsibility of the holder of record to transmit purchase or redemption orders
to The Ohio Company and to deliver funds for the purchase thereof on a timely
basis. Beneficial ownership of Institutional Shares of the Fund may be recorded
by the Institutions and reflected in the account statements provided to their
customers or beneficiaries.

Institutional Shares are purchased at the net asset value per share
(see "HOW IS NET ASSET VALUE CALCULATED?") next determined after receipt by The
Ohio Company or its agents of an order and payment. There is no sales charge
imposed in connection with the purchase of Institutional Shares of the Fund.
Depending upon the terms of a particular account, a Financial Institution may
charge customer account fees for services provided in connection with an
investment in the Fund. Information concerning these services and any charges
may be obtained from such Financial Institution. This Prospectus should be read
in conjunction with any such information so received.

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<PAGE> 48

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.

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 Institutional 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 Institutional Shares in the Fund.

The Fund's net investment income available for distribution to the
holders of Institutional Shares will be reduced by the amount of administrative
services fees paid under the Services Plan described below.

HOW MAY I REDEEM MY INSTITUTIONAL SHARES?

Investors may redeem Institutional Shares of the Fund on any Business
Day at the net asset value per Institutional Share next determined following the
receipt by Cardinal Management Corp., the Fund's transfer agent (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 or her
Institutional Shares and may charge a fee for such services.

The Group will make payment for redeemed Institutional 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 Institutional Shares where such
Institutional 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 Institutional 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 in which the determination of net asset value is suspended.
See "HOW IS NET ASSET VALUE CALCULATED?".

Due to the high cost of maintaining accounts, the Group reserves the
right to redeem involuntarily Shares in any account at the then current net
asset value if at any time redemptions (but not as a result of a decrease in the
market price of such Shares) 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 at least
$500 before the redemption is

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<PAGE> 49

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 Institutional 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 Institutional 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
Institutional Shares by mail as described above.

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 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

Holders of Institutional Shares 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, at
respective net asset values, Institutional Shares of the Fund for:

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Institutional Shares of Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation of capital;

Institutional Shares of Cardinal Balanced Fund, a fund seeking current
income and long-term growth of both capital and income;

Institutional Shares of The Cardinal Fund, an equity fund seeking
long-term growth of capital and income;

Shares of Cardinal Government Securities Money Market Fund,
a U.S. Government securities money market fund; or

Shares of Cardinal Tax Exempt Money Market Fund, a tax-free money
market fund.

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 requested is
within the same account or into an existing account of the shareholder held in
the same name or names and in the same capacity as the account from which the
exchange is to be made. Shareholders may also authorize an exchange of Shares of
the Fund by telephone. Neither the Group, the Fund nor any of its service
providers will be liable for any loss, damages, expense or cost arising out of
any telephone exchange authorization to the extent and subject to the
requirements set forth under "HOW MAY I REDEEM MY SHARES? -- Redemption by
telephone" above.

For tax purposes, an exchange is treated as a redemption and a new
purchase.

The Group may, at any time, modify or terminate the foregoing exchange
privilege. The Group, however, will give shareholders of the Fund 60 days'
advance written notice of any such modification or termination.

HOW IS NET ASSET VALUE CALCULATED?

The 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 each class of Shares 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) allocable to such class minus all liabilities (including estimated
accrued expenses) allocable to such class by the total number of Shares of that
class 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.

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<PAGE> 51

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 Internal Revenue Code of 1986, as
amended (the "Code") for so long as such qualification is in the best interest
of that fund's shareholders. Qualification as a regulated investment company
under the Code requires, among other things, that the regulated investment
company distribute to its shareholders at least 90% of its investment company
taxable income. The Fund contemplates declaring as dividends all or
substantially all of the Fund's investment company taxable income (before
deduction of dividends paid).

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 mid-term or net
long-term capital gain over net short-term capital loss is taxable to
shareholders as mid-term or long-term capital gain, respectively, 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.

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.

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<PAGE> 52

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.
Unless so required by the Group's Declaration of Trust or By-Laws or by Ohio
law, at any given time all of the Trustees may not have been elected by the
shareholders of the Group. The Trustees are empowered to elect officers and
contract with and provide for the compensation of agents, consultants and other
professionals to assist and advise it in its day-to-day operations. The Group
will be managed in accordance with its Declaration of Trust and the laws of Ohio
governing business trusts.

The Trustees of the Group receive fees and are reimbursed for their
expenses in connection with each meeting of the Board of Trustees they attend.
However, no officer or employee of the Adviser or The Ohio Company receives any
compensation from the Group for acting as a Trustee of the Group. The officers
of the Group receive no compensation directly from the Group for performing the
duties of their offices. The Adviser receives fees from the Group for acting as
investment adviser and manager and as dividend and transfer agent. The Ohio
Company receives no fees under its Distribution Agreement with the Group with
respect to Institutional Shares of the Fund but may receive fees under the
Administrative Services 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 the Fund. The Adviser is also the investment
adviser and manager of each of the other Cardinal Funds.

The Ohio Company, an investment banking firm organized in 1925, is a
member of the New York 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
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 and Management 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 and Management 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.

On December 22, 1997, The Ohio Company, Fifth Third Bankcorp., and its
wholly owned subsidiary, Fifth Third M Corp., entered into an Agreement and
Plan of Merger pursuant to which The Ohio Company will be acquired by
Fifth Third M Corp. The acquisition is subject to a number of conditions,
including the approval by Trustees and shareholders of the Group of a "new"
investment advisory and management agreement with Adviser, identical in all
material respects to the Group's current Investment Advisory and Management
Agreement with Adviser, to become effective on the effective date of The Ohio
Company's acquisition. On such effective date, it also expected that the Group
will have entered into an underwriting agreement with a new principal
underwriter. In addition, it is expected that Fountain Square Funds, a regulated
investment company with net assets of

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<PAGE> 53

approximately $3.1 billion as of December 31, 1997, advised by Fifth Third
Bank, a subsidiary of Fifth Third Bankcorp., will propose the combination of the
Group and Fountain Square Funds in a transaction which, if approved by the
Group's Trustees, would be submitted to the Group's shareholders for
consideration and approval.

On January 16, 1998, the Board of Trustees of the Group approved such
a new investment advisory and management agreement and have called a Special
Meeting of Shareholders to be held in March, 1998 to vote on such agreement.

DIVIDEND AND TRANSFER AGENT

The Group has entered into a Transfer Agency Agreement with 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.

DISTRIBUTOR

The Group has entered into a Distribution Agreement 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. The Ohio Company receives no compensation under the Distribution
Agreement with respect to distribution of the Institutional Shares of the Fund.

EXPENSES

The Adviser bears all expenses in connection with the performance of
its services as investment adviser, manager and transfer agent other than the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The Trustees reserve the right to allocate certain other expenses, which
can reasonably be identified as relating to a particular class, solely to such
class, including Institutional Shares, as they deem appropriate ("Class
Expenses"). Such expenses include (a) transfer agency fees identified as
being attributable to a specific class; (b) printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxy statements to current shareholders of a specific class;
(c) Blue Sky registration fees incurred by a class of shares; (d) SEC
registration fees incurred by a class; (e) expenses of administrative personnel
and services as required to support the shareholders of a specific class; (f)
litigation or other legal expenses and audit or other accounting expenses
relating solely to one class; (g) trustees' fees or expenses incurred as a
result of issues relating to one class; and (h) shareholder meeting costs that
relate to a specific class.

ADMINISTRATIVE SERVICES PLAN

The Group has adopted an Administrative Services Plan with respect to
the Fund's Institutional Shares (the "Services Plan") pursuant to which the Fund
is authorized to pay compensation to Financial Institutions, which may include
The Ohio Company, which agree to provide certain ministerial, record keeping
and/or administrative support services for their customers, account holders or
beneficiaries (collectively, "customers") who are the beneficial or record owner
of Institutional Shares of the Fund. In consideration for such services, a
Financial Institution receives a fee from the Fund, computed daily and paid
monthly, at an annual rate of up to .15% of the average daily net asset value of
Institutional Shares of the Fund owned beneficially or of record by such
Financial Institution's customers for whom the Financial Institution provides
such services.

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<PAGE> 54

with respect to Institutional Shares beneficially owned by such customers and
providing customers with a service that invests the assets of their accounts in
Institutional Shares of the Fund pursuant to specific or pre-authorized
instructions.

As authorized by the Services Plan, the Group has entered into a
Servicing Agreement with The Ohio Company pursuant to which The Ohio Company has
agreed to provide certain administrative support services in connection with
Institutional Shares of the Fund owned of record or beneficially by its
customers for whom The Ohio Company provides fiduciary or trust services. Such
administrative support services may include, but are not limited to, (i)
processing dividend and distribution payments from the Fund on behalf of
customers; (ii) providing periodic statements to its customers showing their
positions in the Institutional Shares; (iii) arranging for bank wires; (iv)
responding to routine customer inquiries relating to services performed by The
Ohio Company; (v) providing sub-accounting with respect to the Institutional
Shares beneficially owned by The Ohio Company's customers or the information
necessary for sub-accounting; (vi) if required by law, forwarding shareholder
communications from the Fund (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
its customers; (vii) aggregating and processing purchase, exchange, and
redemption requests from customers and placing net purchase, exchange, and
redemption orders for customers; and (viii) providing customers with a service
that invests the assets of their account in the Institutional Shares pursuant to
specific or pre-authorized instructions. In consideration of such services, the
Group, on behalf of the Fund, has agreed to pay The Ohio Company a monthly fee,
computed at the annual rate of .15% of the average aggregate net asset value of
Institutional Shares of the Fund held during the period by customers for whom
The Ohio Company has provided services under the Servicing Agreement. Any fees
paid by the Fund to Financial Institutions under the Services Plan will be borne
solely by the Institutional Shares of the Fund.

CUSTODIAN AND FUND ACCOUNTANT

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. In addition, Fifth
Third, pursuant to a Fund Accounting and Services Agreement, has agreed with
the Group to provide certain fund accounting services to 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. The shares of each of the funds of
the Group, other than the two money market funds, Cardinal Government Securities
Money Market Fund ("CGSMMF") and Cardinal Tax Exempt Money Market Fund
("CTEMMF"), are currently offered in two separate classes: Investor A Shares,
otherwise referred to as Investor Shares, and Investor Y Shares, otherwise
referred to as Institutional Shares. CGSMMF and CTEMMF each only have one class
of shares. 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.

In the event the status of a shareholder or the capacity in which a
shareholder holds Institutional Shares changes such that the shareholder is no
longer eligible to purchase or hold Institutional Shares of the Fund, then such
Institutional Shares will be automatically converted into Investor Shares of the
Fund at respective net asset value per share. Such conversion of Institutional
Shares into Investor Shares will not result in gain or loss to the shareholder
for federal income tax purposes, and the basis and holding period of the Shares
so converted will not be affected.

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 or class 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

-18-

<PAGE> 55

shareholders of the Group, for purposes of approval of amendments to the
investment advisory agreement as it relates to the Fund or any of the Fund's
fundamental policies.

Overall responsibility for the management of the Fund is vested in the
Board of Trustees of the Group. See "WHO MANAGES MY INVESTMENT OF THE FUND?"
Individual Trustees are elected by the shareholders of the Group, although
Trustees may under certain circumstances fill vacancies, including vacancies
created by expanding the size of the Board. Trustees 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.

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.

-19-

<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 LLP
65 East State Street
Columbus, Ohio 43215

Independent Auditors
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215

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<PAGE> 57

TABLE OF CONTENTS
Page
----

PROSPECTUS HIGHLIGHTS..................................................... 1
FEE TABLE................................................................. 2
FINANCIAL HIGHLIGHTS...................................................... 2
PERFORMANCE INFORMATION................................................... 5
WHAT IS THE FUND?......................................................... 5
WHAT ARE THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND?................................................. 6
HOW DO I PURCHASE INSTITUTIONAL SHARES OF THE FUND?....................... 11
WHAT DISTRIBUTIONS WILL I RECEIVE?........................................ 12
HOW MAY I REDEEM MY INSTITUTIONAL SHARES?................................. 12
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?............................. 13
HOW IS NET ASSET VALUE CALCULATED?........................................ 14
DOES THE FUND PAY FEDERAL INCOME TAX?..................................... 15
WHAT ABOUT MY TAXES?...................................................... 15
WHO MANAGES MY INVESTMENT IN THE FUND?.................................... 16
WHAT ARE MY RIGHTS AS A SHAREHOLDER?...................................... 18

----------------

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
------------

January 30, 1998

THE OHIO COMPANY

CARDINAL
GOVERNMENT
OBLIGATIONS FUND

INSTITUTIONAL SHARES

THE CARDINAL GROUP

<PAGE> 58

Rule 497(c)
File No. 033-59984
811-07588

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").

-------------------------------------------------------

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 respective Funds, each dated
as of January 30, 1998, 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.

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.

JANUARY 30, 1998

<PAGE> 59

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<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-18

MANAGEMENT OF THE GROUP....................................................................................... B-19

PRINCIPAL SHAREHOLDERS OF THE GROUP........................................................................... B-22

THE ADVISER................................................................................................... B-23

PORTFOLIO TRANSACTIONS........................................................................................ B-25

TRANSFER AND DIVIDEND AGENT................................................................................... B-27

FUND ACCOUNTANT............................................................................................... B-29

THE DISTRIBUTOR............................................................................................... B-31

CUSTODIAN..................................................................................................... B-33

LEGAL COUNSEL AND INDEPENDENT AUDITORS........................................................................ B-34

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................................................ B-34
Determination of Net Asset Value..................................................................... B-36

TAXES......................................................................................................... B-37

ADDITIONAL INFORMATION........................................................................................ B-41
Description of Shares................................................................................ B-41
Vote of a Majority of the Outstanding Shares......................................................... B-42
Miscellaneous........................................................................................ B-42

PERFORMANCE INFORMATION....................................................................................... B-43
Yields............................................................................................... B-43
Calculation of Total Return.......................................................................... B-44
Performance Comparisons.............................................................................. B-46

FINANCIAL STATEMENTS.......................................................................................... B-47

APPENDIX ..................................................................................................... A-1
</TABLE>

<PAGE> 60

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 published

B-1

<PAGE> 61

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

B-2

<PAGE> 62

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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<PAGE> 63

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

B-4

<PAGE> 64

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

B-5

<PAGE> 65

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

B-6

<PAGE> 66

"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

B-7

<PAGE> 67

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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<PAGE> 68

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

B-9

<PAGE> 69

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.

B-10

<PAGE> 70

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

B-11

<PAGE> 71

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, including ADRs,
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

B-12

<PAGE> 72

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.

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 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, CBF, CAGF 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 Prospectuses for CBF and
CAGF, CBF and CAGF 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. The value and liquidity of Medium-Grade Securities may be
diminished by adverse publicity and investor perceptions.

B-13

<PAGE> 73

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 a Fund 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 and CAGF 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 such Fund 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.

Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner.

B-14

<PAGE> 74

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 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).

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;

B-15

<PAGE> 75

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); or

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);

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

B-16

<PAGE> 76

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;

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:

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;

B-17

<PAGE> 77

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.

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, 1997 and 1996 were as
follows:

B-18

<PAGE> 78

Fiscal Year Ended September 30,

<TABLE>
<CAPTION>
Fund 1997 1996
- ---- ---- ----
<S> <C> <C>
TCF 12.73% 57.93%(1)

CGOF 34.53% 33.58%(1)

CBF 61.23% 18.34%

CAGF 34.43% 48.60%
</TABLE>

- -----------

(1) Includes periods prior to the effective date of the Reorganization.

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 trustee who is an "interested person" of the Group,
as that term is defined in the 1940 Act, is indicated by an asterisk.

Name, Business Position(s) Held Principal Occupation(s)
Address and Age with the Group During Past 5 Years
- --------------- ---------------- -----------------------

*H. Keith Allen Chairman and Chief Operating Officer,
155 East Broad Street Trustee, Member of Secretary, Treasurer and
Columbus, Ohio 43215 Executive, a Director of The Ohio
Age: 56 Nominating and Company (investment
Investment Com- banking); formerly Senior
mittees Executive Vice President
of The Ohio Company.

Gordon B. Carson Trustee, Member of Principal, Whitfield
5413 Gardenbrook Drive Executive and Robert Associates (con-
Midland, Michigan 48642 Contract Committees struction consulting
Age: 86 firm).

Michael J. Knilans Trustee, Member of From November, 1989 to
1119 Kingsdale Terrace Executive and August, 1995, Member of
Columbus, Ohio 43220 Contract Committees the Ohio Bureau of
Age: 70 Workers' Compensation and
Chairman from 1992
through August, 1995.

*James I. Luck Trustee President, The Columbus
1234 East Broad Street Foundation (philanthropic
Columbus, Ohio 43205 public foundation).
Age: 52

B-19

<PAGE> 79

David L. Nelson Trustee, Member of Chairman of the Board of
295 Whispering Way Audit and Nominat- Directors of Herman
Holland, Michigan ing Committees Miller, Inc. (furniture
49424-6635 manufacturer); former
Age: 67 Vice President, Customer
Support, Americas Region,
and Vice President,
Customer Satisfaction,
Industry Segment, of Asea
Brown Boveri, Inc. (de-
signer and manufacturer
of process automation
systems for basic indus-
tries).

*C. A. Peterson Trustee and Member of Chartered Financial
150 E. Wilson Bridge Rd. Contract Committee Analyst, former Senior
Suite 230 Executive Vice President
Worthington, Ohio 43085 and Director of The Ohio
Age: 71 Company (investment
banking).

Lawrence H. Rogers II Trustee and Member of Self-employed author;
4600 Drake Road Audit Committee former Vice Chairman,
Cincinnati, Ohio 45243 Motor Sports Enterprises,
Age: 76 Inc.

*Frank W. Siegel President and Chartered Financial
155 East Broad Street Trustee, Member of Analyst and Senior Vice
Columbus, Ohio 43215 Executive and President, The Ohio
Age: 45 Nominating Commit- Company (investment
tees banking); former Vice
President, Keystone Group
(mutual fund
management/adminis-
tration); former Senior
Vice President, Trust
Advisory Group (mutual
fund consulting).

Joseph H. Stegmayer Trustee, Member of President of Champion
724 Hampton Roads Dr. Audit and Nomi- Homes, Inc. (manufactured
Knoxville, TN 37922-4071 nating Committees homes); former President
Age: 46 and a Director of Clayton
Homes, Inc. (manufactured
homes); former Vice
President, Treasurer,
Chief Financial Officer
and a Director of
Worthington Industries,
Inc. (specialty steel and
plastics manufacturer).

Karen J. Hipsher Secretary Executive Secretary, The
155 East Broad Street Ohio Company (investment
Columbus, Ohio 43215 banking).
Age: 52

James M. Schrack II Treasurer Vice President of The
155 East Broad Street Ohio Company (investment
Columbus, Ohio 43215 banking).
Age: 39

Anthony W. Howard Assistant Employee of The Ohio
155 East Broad Street Treasurer Company (investment
Columbus, Ohio 43215 banking).
Age: 33

B-20

<PAGE> 80

As of January 22, 1998, 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 President, Secretary 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, 1997. The Group has no pension or retirement
plans.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position Compensation From the Group and
With the Group* From the Group the Fund Complex**
- --------------- -------------- ------------------
<S> <C> <C>
H. Keith Allen $ 0 $ 0
Chairman, Trustee and
Member of Executive,
Nominating and
Investment Committees

Gordon B. Carson $ 7,500 $ 7,500
Trustee and Member of
Executive and Contract
Committees

Michael J. Knilans $12,500 $12,500
Trustee and Member of
Executive and Contract
Committees

James I. Luck $12,500 $12,500
Trustee
</TABLE>

B-21

<PAGE> 81

<TABLE>
<S> <C> <C>
David L. Nelson $10,500 $10,500
Trustee and Member of
Audit and Nominating
Committees

C.A. Peterson $12,500 $12,500
Trustee and Member of
Contract Committee

Lawrence H. Rogers, II $13,000 $13,000
Trustee and Member of
Audit Committee

Frank W. Siegel $ 0 $ 0
Trustee, President and
Member of Executive and
Nominating Committees

Joseph H. Stegmayer $13,500 $13,500
Trustee and Member of
Audit and Nominating
Committees
</TABLE>

- ----------------

*During the fiscal year ended September 30, 1997, John B. Gerlach served
as a trustee of the Group but no longer does so as of the date hereof. During
the fiscal year ended September 30, 1997, Mr. Gerlach received $8,000
compensation from the Group and $8,000 compensation from the Fund Complex for
his service as a trustee.

**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.

PRINCIPAL SHAREHOLDERS OF THE GROUP

As of January 22, 1998, the following are the only persons known to the
Group who own 5% or more of any of the Funds' shares:

<TABLE>
<CAPTION>
Name and Address of 5%
Fund or more Beneficial Owner Percentage Owned
- ---- ------------------------ ----------------
<S> <C> <C>
TCF The Ohio Company(1) 74.49%
(Institutional 155 East Broad Street
Shares) Columbus, Ohio 43215
</TABLE>

B-22

<PAGE> 82

<TABLE>
<S> <C> <C>
CBF The Ohio Company(1) 92.76%
(Institutional 155 East Broad Street
Shares) Columbus, Ohio 43215

CAGF The Ohio Company(1) 91.39%
(Institutional 155 East Broad Street
Shares) Columbus, Ohio 43215

COGF The Ohio Company(1) 76.59%
(Institutional 155 East Broad Street
Shares) Columbus, Ohio 43215
</TABLE>

- -------------

(1) The Ohio Company beneficially owns such securities in its capacity as a
trustee of certain plans or trusts.

There were no other persons known to the Group to be the beneficial
owner of 5% or more of any other Fund's Investor Shares or Institutional Shares
or of the total number of the Group's Shares outstanding as of January 22, 1998.

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 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.

B-23

<PAGE> 83

For the fiscal years ended September 30, 1997, 1996, and 1995, the
investment advisory fees incurred by each of the Funds (including their
respective predecessors prior to the Reorganization) were as follows:

Fees Incurred for Year Ended September 30,

<TABLE>
<CAPTION>
Fund 1997 1996 1995
- ---- ---- ---- ----
<S> <C> <C> <C>
TCF $1,563,425 $1,247,921 $1,158,534

CGOF 654,206 715,946 783,803

CGSMMF 2,583,453 2,407,624 2,031,367

CTEMMF 326,321 337,669 344,000

CBF 112,981 109,021 101,585

CAGF 85,746 74,235 71,508
</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.

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

B-24

<PAGE> 84

Adviser in the performance of its duties, or from negligent disregard by the
Adviser of its duties and obligations thereunder.

On December 22, 1997, The Ohio Company, Fifth Third Bankcorp., and its
wholly owned subsidiary, Fifth Third M Corp., entered into an Agreement and Plan
of Merger pursuant to which The Ohio Company will be acquired by Fifth Third M
Corp. The acquisition is subject to a number of conditions, including the
approval by Trustees and shareholders of the Group of a "new" investment
advisory and management agreement with Adviser, identical in all material
respects to the Group's current Investment Advisory and Management Agreement
with the Adviser, to become effective on the effective date of The Ohio
Company's acquisition. On such effective date, it also expected that the Group
will have entered into an underwriting agreement with a new principal
underwriter. In addition, it is expected that Fountain Square Funds, a regulated
investment company with net assets of approximately $3.1 billion as of December
31, 1997, advised by Fifth Third Bank, a subsidiary of Fifth Third Bankcorp.,
will propose the combination of the Group and Fountain Square Funds in a
transaction which, if approved by the Group's Trustees, would be submitted to
the Group's shareholders for consideration and approval.

On January 16, 1998, the Board of Trustees of the Group approved such a
new investment advisory and management agreement and have called a Special
Meeting of Shareholders to be held in March 1998 to vote on such agreement.

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, 1997, 1996, and 1995 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.

B-25

<PAGE> 85

Brokerage Commissions Incurred
for Year Ended September 30,

<TABLE>
<CAPTION>
Fund 1997 1996 1995
- ---- ---- ---- ----
<S> <C> <C> <C>
TCF $312,417 $382,627 $215,180

CBF 12,560 8,670 20,490

CAGF 21,574 19,440 22,011
</TABLE>

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 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.

During the fiscal year ended September 30, 1997, the Group had
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. Such brokerage transactions are subject to
the requirements as to execution and price described above. However, Lipper Data
for the Group is no longer acquired in this manner.

B-26

<PAGE> 86

Investment decisions for a Fund are made independently from those for
another Fund of the Group or any other investment company or account managed by
the Adviser. Any such other Funds, investment company or account may also invest
in the same securities as a Fund. When a purchase or sale of the same security
is made at substantially the same time on behalf of one Fund and another Fund,
investment company or account, the transaction will be averaged as to price and
available investments will be allocated as to amount in a manner which the
Adviser believes to be equitable to the Fund and such other Fund, investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
by that Fund. To the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for a Fund with those to be sold or purchased
for other funds or for other investment companies or accounts in order to obtain
best execution. As provided by the Investment Advisory Agreement, in making
investment recommendations for the Group, the Adviser will not inquire or take
into consideration whether an issuer of securities proposed for purchase or sale
by the Group is a customer of the Adviser, its parent or its subsidiaries or
affiliates and, in dealing with its customers, the Adviser, its parent,
subsidiaries and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Group.

During the fiscal year ended September 30, 1997, each of the Funds
except CTEMMF held securities of one or more of the following brokers or
dealers (or companies affiliated with such brokers or dealers), each of which
is a regular broker or dealer of the Group as defined in Rule 10b-1 of the 1940
Act: Paine Webber Inc., Smith Barney Shearson, Hambrecht & Quist Group Inc.,
Daiwa Securities America Inc., The Nikko Securities Co., Intl., Inc., Merrill
Lynch Government Securities Inc., The Fifth Third Bank, and AG Edwards, Inc. As
of September 30, 1997, CGSMMF was a party to a $22,000,000 repurchase agreement
with Merrill Lynch Government Securities Inc., a $12,000,000 repurchase
agreement with The Nikko Securities Co., Intl., Inc., a $7,000,000 repurchase
agreement with Paine Webber Inc., and a $39,000,000 repurchase agreement with
Smith Barney Shearson; TCF was a party to a $1,206,000 repurchase agreement
with The Fifth Third Bank and an $18,700,000 repurchase agreement with Paine
Webber Inc; CAGF was a party to a $214,000 repurchase agreement with The Fifth
Third Bank; CBF was a party to a $778,000 repurchase agreement with The Fifth
Third Bank; and CGOF was a party to a $2,402,000 repurchase agreement with The
Fifth Third Bank. In addition, as of September 30, 1997, CAGF owned common
stock of AG Edwards, Inc. and Paine Webber Group valued at $51,000 and $70,000,
respectively, and CBF owned common stock of Traveler's Group valued at $182,000.

Pursuant to the 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 and Fund Accounting and Services Agreements
and by the Adviser under the Transfer Agency Agreement).

The Adviser has agreed to maintain office facilities; furnish
statistical and research data, clerical, certain bookkeeping services and
stationery and office supplies; prepare the periodic reports to the Commission
on Form N-SAR or any replacement forms therefor; compile data for, prepare for
execution by each Fund and file all of a Fund's federal and state tax returns
and required tax filings other than those required to be made by each Fund's
custodian and Transfer Agent; prepare compliance filings pursuant to state
securities laws with the advice of the Group's counsel; assist to the extent
requested by the Group with the Group's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statement (on Form N-1A
or any replacement therefor); compile data for, prepare and file timely Notices
to the Commission required pursuant to Rule 24f-2 under the 1940 Act; keep and
maintain the financial accounts and records of each Fund, including calculation
of daily expense accruals; and generally assist in all aspects of each Fund's
operations.

B-27

<PAGE> 87

TRANSFER AND DIVIDEND AGENT

The Group has entered into a Transfer Agency Agreement dated as of
January 22, 1997 (the "Transfer Agency Agreement") with the Transfer Agent,
pursuant to which the Transfer Agent has agreed to act as the transfer agent and
dividend disbursing agent 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, pursuant to a Transfer Agency and Fund Accounting Agreement
dated as of June 18, 1993, as amended as of January 10, 1996 (the "Transfer
Agency and Fund Accounting Agreement"), with the Transfer Agent, the Transfer
Agent provided certain fund accounting services to each of the Funds until
January 22, 1997, when the Group entered into a new Fund Accounting and Services
Agreement (described below) with The Fifth Third Bank. Such fund accounting
services included 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 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 of up to $100 million and .01% of
such Fund's average daily net assets in excess of $100 million.

For the fiscal years ended September 30, 1997, 1996, and 1995, the fees
and expenses incurred by each of the Funds (including their respective
predecessors prior to the Reorganization) for

B-28

<PAGE> 88

transfer agency and fund accounting services provided by the Transfer Agent
under the Transfer Agency Agreement and the Transfer Agency and Fund Accounting
Agreement were as follows:

Year Ended September 30,

<TABLE>
<CAPTION>
Fund 1997 1996 1995
- ---- ---- ---- ----
<S> <C> <C> <C>
TCF $222,167 $241,047 $255,882(1)

CGOF 139,470 191,505 215,273

CGSMMF 1,261,339 1,060,106 895,470

CTEMMF 83,219 92,904 79,777

CBF 22,479 27,697 25,950

CAGF 24,978 27,955 25,079
</TABLE>

- ---------------

(1) TCFI, as predecessor to TCF, did not incur any fund accounting fees.

FUND ACCOUNTANT

The Group has entered into a Fund Accounting and Services Agreement
dated as of January 22, 1997 (the "Fund Accounting Agreement") with The Fifth
Third Bank, pursuant to which The Fifth Third Bank has agreed to provide fund
accounting and other services to each of the Funds. Such services include but
are not limited to maintaining accounting books and records for each Fund,
recording investment, capital share, and income and expense activities of each
Fund, maintaining individual ledgers for the investment securities of each Fund,
reconciling cash and investment balances with each Fund's custodian, preparing
financial statements for each Fund, preparing the Group's federal and state tax
returns, assisting in the preparation of the Group's annual and semi-annual
reports to shareholders, registration statements, and other documents required
to be filed with the Securities and Exchange Commission, obtaining daily market
quotations from independent pricing services for the securities portfolio of
each Fund (other than the money market Funds), and calculating the daily net
asset value per share for each class of shares within a Fund.

In consideration for the services provided by The Fifth Third Bank under
the Fund Accounting Agreement, each Fund has agreed to pay The Fifth Third Bank
an annual fee, calculated daily and paid monthly, at an annual rate of 0.03% of
the first $100 million of such Fund's average daily net assets, 0.02% of the
next $100 million of such Fund's average daily net assets, and 0.01% of such
Fund's average daily net assets in excess of $200 million. At a minimum,
however, each Fund is required to pay The Fifth Third Bank $2,500 per month. In
addition, each Fund is required to pay an annual fee of $7,000 for each
additional class of shares and to pay a $500 monthly surcharge if more than 10%
of its securities portfolio consists of international securities.

B-29

<PAGE> 89

For the fiscal year ended September 30, 1997, the fees and expenses
incurred by each of the Funds under the Fund Accounting Agreement were as
follows:

Fund Year Ended September 30, 1997
---- -----------------------------
TCF $24,140

CGOF 37,225

CGSMMF 47,124

CTEMMF 13,040

CBF 10,230

CAGF 16,412

ADMINISTRATIVE SERVICES PLAN

As described in the Prospectuses of TCF, CGOF, CBF and CAGF with respect
to their Institutional Shares, the Group has also adopted an Administrative
Services Plan with respect to Institutional Shares (the "Services Plan") under
which each such Fund is authorized to pay banks, broker-dealers, savings and
loan associations, trust companies (including The Ohio Company), qualified
investment advisers and certain other financial institutions which serve in a
fiduciary capacity on behalf of customers or beneficiaries (collectively,
"Financial Institutions"), to provide certain ministerial, record keeping, and
administrative support services to their customers who own of record or
beneficially Institutional Shares in a Fund. Payments to such Financial
Institutions are made pursuant to Servicing Agreements between the Group and the
Financial Institution. The Services Plan authorizes each of TCF, CGOF, CBF and
CAGF to make payments to Service Organizations in an amount, on an annual basis,
of up to 0.15% of the average daily net asset value of the Institutional Shares
that Fund. The Services Plan has been approved by the Board of Trustees of the
Group, including a majority of the Trustees who are not interested persons of
the Group (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operation of the Services Plan or in any Servicing
Agreements thereunder (the "Disinterested Trustees"). The Services Plan may be
terminated as to a Fund by a vote of a majority of the Disinterested Trustees.
The Trustees review quarterly a written report of the amounts expended pursuant
to the Services Plan and the purposes for which such expenditures were made. The
Services Plan may be amended by a vote of the Trustees, provided that any
material amendments also require the vote of a majority of the Disinterested
Trustees. For so long as the Services Plan is in effect, selection and
nomination of those Disinterested Trustees shall be committed to the discretion
of the Group's Disinterested Trustees. All Servicing Agreements may be
terminated at any time without the payment of any penalty by a vote of a
majority of the Disinterested Trustees. The Services Plan

B-30

<PAGE> 90

will continue in effect for successive one-year periods, provided that each such
continuance is specifically approved by a majority of the Board of Trustees,
including a majority of the Disinterested Trustees.

As authorized by the Services Plan, the Group has entered into a
Servicing Agreement with The Ohio Company pursuant to which The Ohio Company has
agreed to provide certain administrative support services in connection with
Institutional Shares of the Funds owned of record or beneficially by its
customers for whom The Ohio Company serves as a fiduciary. Such administrative
support services may include, but are not limited to, (i) processing dividend
and distribution payments from a Fund on behalf of customers; (ii) providing
periodic statements to its customers showing their positions in the
Institutional Shares; (iii) arranging for bank wires; (iv) responding to routine
customer inquiries relating to services performed by The Ohio Company; (v)
providing sub-accounting with respect to the Institutional Shares beneficially
owned by The Ohio Company's customers or the information necessary for
sub-accounting; (vi) if required by law, forwarding shareholder communications
from a Fund (such as proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to its
customers; (vii) aggregating and processing purchase, exchange, and redemption
requests from customers and placing net purchase, exchange, and redemption
orders for customers; and (viii) providing customers with a service that invests
the assets of their account in the Institutional Shares pursuant to specific or
pre-authorized instructions. In consideration of such services, the Group, on
behalf of each of TCF, CGOF, CBF and CAGF, has agreed to pay The Ohio Company a
monthly fee, computed at the annual rate of .15% of the average aggregate net
asset value of Institutional Shares of that Fund held during the period by
customers for whom The Ohio Company has provided services under the Servicing
Agreement. For the fiscal year ended September 30, 1997, amounts paid to The
Ohio Company under the Servicing Agreement on behalf of TCF, CGOF, CBF, and CAGF
were $28,412, $5,877, $2,021, and $4,031, respectively.

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 2, 1997 (the "Distribution Agreement"). Unless otherwise
terminated, the Distribution Agreement remains in effect for successive annual
periods ending on June 18 if approved at least annually (i) by the Group's Board
of Trustees or by the vote of a majority of the outstanding shares of the Group,
and (ii) by the vote of a majority of the Trustees of the Group who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.

B-31

<PAGE> 91

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
with respect to sales of Investor Shares of TCF, CGOF, CBF and CAGF 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, 1997, 1996, and 1995,
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 $1,144,205 (Investor Shares only), $377,963, and $439,190,
respectively.

As described in the Prospectus, the Group has adopted a Distribution and
Shareholder Service Plan with respect to Investor Shares (the "12b-1 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, with respect to such Fund's Investor Shares,
for payments The Ohio Company 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 12b-1 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 the Investor Shares of that 12b-1 Fund.

As required by Rule 12b-1, the 12b-1 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 12b-1
Plan (the "Independent Trustees"). The 12b-1 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 Investor Shares of that 12b-1 Fund. Any change in
the 12b-1 Plan that would materially increase the distribution cost to a 12b-1
Fund requires Investor shareholder approval. The Trustees review quarterly a
written report of such costs and the purposes for which such costs have been
incurred. The 12b-1 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 12b-1 Plan is in effect, selection and
nomination of those Trustees who are not interested persons of the Group shall
be committed to the discretion of such disinterested persons. All agreements
with any person relating to the implementation of the 12b-1 Plan with respect to
a 12b-1 Fund may be terminated at any time on 60 days'

B-32

<PAGE> 92

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 Investor
Shares of such 12b-1 Fund.

The 12b-1 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 12b-1 Plan should be implemented or continued. In addition the Trustees in
approving the 12b-1 Plan must determine that there is a reasonable likelihood
that the 12b-1 Plan will benefit the 12b-1 Funds and their Investor
Shareholders.

The Board of Trustees of the Group believes that the 12b-1 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 12b-1 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 Investor Shares of a
12b-1 Fund purchased and held by The Ohio Company for the accounts of its
customers and Investor 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 Investor 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, 1997, fees earned by The Ohio Company under this Rule 12b-1
Agreement prior to any fee waiver, with respect to CBF were $43,215, with
respect to CAGF were $33,069, with respect to TCF were $756,425, and, with
respect to CGOF, were $391,397. The Ohio Company waived all such fees earned
during the period from October 1, 1996 through December 31, 1996. The amount of
fees waived during this period was as follows: $9,478, with respect to CBF;
$5,962, with respect to CAGF; $147,315, with respect to TCF; and $83,627 with
respect to CGOF. Payments made under the 12b-1 Plan by a 12b-1 Fund are borne
solely by the Investor Shareholders of that Fund.

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.

B-33

<PAGE> 93

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 LLP, 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 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

As of January 2, 1997, the Board of Trustees of the Group reclassified
the issued and outstanding Shares of TCF, CGOF, CBF and CAGF as Investor A
Shares, otherwise known as Investor Shares. The Board of Trustees also
authorized the issuance of Investor Y Shares, otherwise referred to as
Institutional Shares. Investor Shares and Institutional Shares of a Fund
represent the same interest in the underlying portfolio securities of that Fund
and are subject to the same expenses and fees, except that Investor Shares are
sold subject to a front-end sales charge and subject to fees payable under the
Rule 12b-1 Plan described above. Institutional Shares are sold at net asset
value without any front-end sales charge and are not subject to a Rule 12b-1 fee
but are subject to fees payable under the Administrative Services Plan described
above.

The Funds' Shares 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.
Investor Shares of each of TCF, CGOF, CBF and CAGF and shares of CGSMMF and
CTEMMF may also be purchased through other broker-dealers who are members of the
National Association of Securities Dealers, Inc. and have sales agreements with
The Ohio Company. Institutional Shares of TCF, CGOF, CBF and CAGF, may also be
purchased at net asset value through procedures established by The Ohio Company
in connection with the requirements of accounts for which banks, broker-dealers,
savings and loan associations, trust companies (including The Ohio Company),
qualified investment advisers and certain other financial institutions serve in
a fiduciary capacity on behalf of customers or beneficiaries (collectively,
"Financial Institutions").

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<PAGE> 94

Based upon the value of TCF's portfolio securities and other assets and
the number of outstanding shares as of the fiscal year ended September 30, 1997,
the net asset values and redemption prices per Investor A Share and Investor Y
Share were $16.65 and $16.64, respectively. The total offering price per
Investor A Share was $17.43 per share (net asset value / .9550, assuming the
then current maximum sales charge of 4.5% of the offering price); the total
offering price per Investor Y Share was $16.64 (no sales charge is imposed on
the purchase of Investor Y Shares).

Based upon the value of CGOF's portfolio securities and other assets and
the number of outstanding Shares as of the fiscal period ended September 30,
1997, the net asset values and redemption prices per Investor A Share and
Investor Y Share were each $8.20. The total offering price per Investor A Share
was $8.59 per share (net asset value / .9550, assuming the then current maximum
sales charge of 4.50% of the offering price); the total offering price per
Investor Y Share was $8.20 (no sales charge is imposed on the purchase of
Investor Y Shares).

Based upon the value of CBF's portfolio securities and other assets and
the number of outstanding Shares as of the fiscal period ended September 30,
1997, the net asset values and redemption prices per Investor A Share and
Investor Y Share were each $13.23. The total offering price per Investor A Share
was $13.85 per share (net asset value / .955, assuming the then current maximum
sales charge of 4.50% of the offering price); the total offering price per
Investor Y Share was $13.23 (no sales charge is imposed on the purchase of
Investor Y Shares).

Based upon the value of CAGF's portfolio securities and other assets and
the number of outstanding Shares as of the fiscal period ended September 30,
1997, the net asset values and redemption prices per Investor A Share and
Investor Y Share were $14.70 and $14.71, respectively. The total offering price
per Investor A Share was $15.39 per share (net asset value / .955, assuming the
then current maximum sales charge of 4.50% of the offering price); the total
offering price per Investor Y Share was $14.71 (no sales charge is imposed on
the purchase of Investor Y Shares).

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 by shareholders of CGSMMF
and CTEMMF 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

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<PAGE> 95

participating shareholder under this procedure for not honoring a check that
exceeds the value of Shares in a shareholder's account, for honoring checks
properly drafted, for effecting redemptions pursuant to payment thereof or for
returning checks not accepted for payment. This procedure may be terminated at
any time by the Group, the Bank or the participating shareholder. A shareholder
participating in the check-writing redemption procedure has not established a
checking or other account with the Bank for the purposes of Federal Deposit
Insurance or otherwise.

Determination of Net Asset Value

The Group values the portfolio securities of CGSMMF and CTEMMF
(collectively, the "Money Market Funds" and individually a "Money Market Fund")
using the amortized cost valuation method. This method involves valuing a
security at its cost and thereafter accruing any discount or premium at a
constant rate to maturity. By declaring these accruals to the Money Market
Funds' shareholders in the daily dividend, the value of a Money Market Fund's
assets, and, thus, its net asset value per share, will generally remain
constant. Although this method provides certainty in valuation, it may result in
periods during which the value of a Money Market Fund's securities, as
determined by amortized cost, is higher or lower than the price the Money Market
Fund would receive if it sold the securities. During such periods, the yield on
Shares of the Money Market Fund may differ somewhat from that obtained in a
similar fund with identical investments utilizing a method of valuation based
upon market prices and estimates of market prices 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

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Municipal Securities having variable interest rates and demand features that
permit CTEMMF to calculate the maturity of such obligations to a point in time
prior to their stated maturity. In the event the Board of Trustees determines
that deviation in net asset value exists, the Board of Trustees will take such
corrective action as it deems necessary and appropriate, which action might
include redemption of Shares in kind, selling portfolio securities prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity, withholding dividends, reduction of the number of Shares outstanding
(i.e. the declaration of a negative dividend) or establishing a net asset value
per share by using available market quotations.

TAXES

General. Each Fund intends to qualify as a "regulated investment
company" under the Code for so long as such qualification is in the best
interest of that Fund's shareholders. In order to qualify as a regulated
investment company, a Fund must, among other things: derive at least 90% of its
gross income from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies, or other income derived with respect to its business of investing in
such stocks, securities, or currencies; 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
mid-term or 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

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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.

Distribution by a Fund of the excess of net mid-term or long-term
capital gain over net short-term capital loss is taxable to shareholders as
mid-term or long-term capital gain, respectively, 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.

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.

Long-term capital gains of individuals are subject to a maximum tax rate
of 20% (or 10% for individuals in the 15% ordinary income tax bracket). Mid-term
capital gains of individuals are subject to tax at the same rates applicable to
ordinary income; however, the tax rate on mid-term 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. The holding period for mid-term capital gains is more than one year but
not more than eighteen months; the holding period for long-term capital gains is
more than eighteen months.

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.

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Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by that
Fund for its taxable year that qualifies for the dividends received deduction.

A Fund will be required in certain cases to withhold and remit to the
United States Treasury 31% of taxable dividends paid to any shareholder who has
provided either an incorrect tax identification number or no number at all, or
who is subject to withholding by the Internal Revenue Service for failure
properly to include on his return payments of interest or dividends.

Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of a Fund. No attempt has been made to present a detailed explanation
of the federal income tax treatment of a Fund or its shareholders and this
discussion is not intended as a substitute for careful tax planning.
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 de-

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<PAGE> 99

ductible 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.

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

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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
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, which represent interests in each series of the Group. The Shares of
each of the Funds of the Group, other than the Money Market Funds, are divided
into four separate classes: Investor A Shares, Investor B Shares, Investor C
Shares and Investor Y Shares, which are otherwise referred to as Institutional
Shares, although currently Investor B and C Shares are not being offered. Shares
of the Money Market Funds are being offered only in one class. 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.

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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.

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 ss.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.

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<PAGE> 102

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.

PERFORMANCE INFORMATION

The following performance information as of September 30, 1997, for the
Funds 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, 1997, the yields of the
Investor Shares of CGOF and CBF were 6.18% and 1.41%, respectively. For this
same period, the yields of the Institutional Shares of CGOF and CBF were 6.82%
and 1.69%, respectively. The yields of the Investor Shares and Institutional
Shares 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 yields of
the Investor Shares and Institutional Shares 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 the Investor Shares and
Institutional Shares of CGOF and CBF and to the relative risks associated with
the investment objectives and policies of those Funds.

For the seven-day period ended September 30, 1997, the current yields
for CGSMMF and CTEMMF were 4.72% and 3.06%, respectively, and their effective
yields were 4.82% and 3.11%, respectively. The current (average annualized)
yield of CGSMMF and CTEMMF for any

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<PAGE> 103

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.

For the seven-day period ended September 30, 1997, the tax equivalent
yield and the tax equivalent effective yield for CTEMMF were 2.58% and 4.28%,
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,
1997, and the respective periods from commencement of operations to September
30, 1997, the average annual returns and cumulative total returns for the
Investor A Shares of TCF, CGOF, CBF and CAGF, CGSMMF and CTEMMF were as follows:

<TABLE>
<CAPTION>
Average Annual Cumulative
-------------- ----------
Since Since
Fund 1 Year 5 Year 10 Year Inception 1 Year 5 Year 10 Year Inception
---- ------ ------ ------- --------- ------ ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TCF(1) 32.90% 14.80% 12.10% 15.47% 32.90% 99.12% 212.03% 2388.57%

CGOF(2) 4.40% 5.20% 7.90% 7.33% 4.40% 28.73% 114.27% 128.17%

CBF(3) 19.10% -- -- 11.30% 19.10% -- -- 60.70%

CAGF(3) 27.00% -- -- 11.00% 27.00% -- -- 55.68%

CGSMMF(4) 4.67% 3.97% 5.32% 7.20% 4.67% 21.50% 67.92% 227.52%

CTEMMF(5) 2.72% 2.41% 3.46% 3.79% 2.72% 12.64% 40.54% 68.83%
</TABLE>

(1) Commenced operations May 30, 1975.

(2) Commenced operations February 3, 1986.

(3) Commenced operations June 23, 1993.

(4) Commenced operations September 11, 1980.

(5) Commenced operations September 7, 1983.

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<PAGE> 104

For the period from January 2, 19971 through September 30, 1997, the
aggregate total return for the Investor Y Shares of TCF, CGOF, CBF, and CAGF
was as follows:

Fund For the Period From
---- January 2, 1997 through
September 30, 1997
------------------
TCF 29.77%

CGOF 6.86%

CBF 20.17%

CAGF 26.59%

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 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, 1997, the distribution rates of the Investor Shares of CGOF and
CBF were 6.58% and 2.01%, respectively. For this same period, the distribution
rates of the Institutional Shares of CGOF and CBF were 6.98% and 2.19%,
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

- --------
(1) Commencement of operations.

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<PAGE> 105

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., Lehman
Brothers, The Frank Russell Group, 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-46

<PAGE> 106

- ------------------------------------------------------------------------------

FINANCIAL STATEMENTS

- ------------------------------------------------------------------------------

B-47

<PAGE> 107
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

The Shareholders and Board of Trustees
The Cardinal Group:

We have audited the accompanying statements of assets and liabilities of The
Cardinal Group -- Cardinal Government Securities Money Market Fund, Cardinal Tax
Exempt Money Market Fund, The Cardinal Fund, Cardinal Aggressive Growth Fund,
Cardinal Balanced Fund, and Cardinal Government Obligations Fund, including the
statements of investments, as of September 30, 1997, and the related statements
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 Cardinal Group'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 audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. 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, 1997, 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 each
of the aforementioned funds comprising The Cardinal Group at September 30, 1997,
the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Columbus, Ohio
November 14, 1997

B-48
<PAGE> 108

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at amortized cost....................... $417,475 $ 60,736
Repurchase agreements, at cost.................................... 116,899 0
--------- ---------
Total investments..................................... 534,374 60,736
Cash.............................................................. 0 301
Interest receivable............................................... 4,929 345
Receivable for Fund shares sold................................... 30 0
Other assets (note 5)............................................. 450 70
--------- ---------
Total assets.......................................... 539,783 61,452
--------- ---------

LIABILITIES:
Payable for investment securities purchased....................... 35,000 1,100
Payable for Fund shares redeemed.................................. 43 7
Payable for shareholder distributions............................. 0 0
Accrued investment management and transfer agent fees (note 4).... 341 35
Other accrued expenses............................................ 135 26
--------- ---------
Total liabilities..................................... 35,519 1,168
--------- ---------
Commitments and contingencies (note 5)

NET ASSETS:
Paid in capital................................................... 504,282 60,284
Accumulated net realized loss on investments...................... (404) 0
Undistributed net investment income............................... 386 0
--------- ---------
Total net assets...................................... $504,264 $ 60,284
========= =========
Outstanding shares of beneficial interest......................... 504,282 60,284
========= =========
NET ASSET VALUE PER SHARE......................................... $1.00 $1.00
========= =========
</TABLE>

See accompanying notes to financial statements.

B-49
<PAGE> 109

<TABLE>
<CAPTION>
CARDINAL CARDINAL
AGGRESSIVE CARDINAL GOVERNMENT
THE CARDINAL GROWTH BALANCED OBLIGATIONS
FUND FUND FUND FUND
------------ ---------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$154,248, $8,643, $13,409, and $123,417)..... $275,108 $ 13,805 $16,525 $126,397
Repurchase agreements, at cost................. 19,906 214 778 2,402
--------- -------- -------- ---------
Total investments..................... 295,014 14,019 17,303 128,799
--------- -------- -------- ---------
Dividends and interest receivable.............. 481 5 70 818
Receivable for investment securities sold...... 0 258 0 8,307
Receivable for Fund shares sold................ 13 4 2 7
Other assets (note 5).......................... 210 7 30 99
Deferred organizational cost................... 0 5 5 0
--------- -------- -------- ---------
Total assets.......................... 295,718 14,298 17,410 138,030
--------- -------- -------- ---------
LIABILITIES:
Payable for investment securities purchased.... 0 328 0 10,889
Payable for Fund shares redeemed............... 23 6 0 17
Payable for shareholder distributions.......... 0 0 0 726
Accrued investment management and transfer
agent fees (note 4).......................... 175 11 10 69
Call options written, at market................ 368 61 31 0
Other accrued expenses......................... 364 38 45 184
--------- -------- -------- ---------
Total liabilities..................... 930 444 86 11,885
--------- -------- -------- ---------
Commitments and contingencies (note 5)
NET ASSETS:
Paid in capital................................ 153,546 9,503 13,149 142,346
Accumulated net realized gain (loss) on
investments.................................. 19,707 (840) 969 (19,250)
Undistributed net investment income (loss)..... 186 0 46 69
Unrealized gain on investments................. 121,350 5,191 3,160 2,980
--------- -------- -------- ---------
Total net assets...................... $294,789 $ 13,854 $17,324 $126,145
========= ======== ======== =========
NET ASSETS:
Investor shares................................ $267,908 $ 9,792 $15,616 $120,342
Institutional shares........................... 26,881 4,062 1,708 5,803
--------- -------- -------- ---------
Total................................. $294,789 $ 13,854 $17,324 $126,145
========= ======== ======== =========
OUTSTANDING SHARES OF BENEFICIAL INTEREST
Investor shares................................ 16,094 666 1,180 14,679
Institutional shares........................... 1,615 276 129 708
--------- -------- -------- ---------
Total................................. 17,709 942 1,309 15,387
========= ======== ======== =========
NET ASSET VALUE
Investor shares................................ $ 16.65 $ 14.70 $ 13.23 $ 8.20
Institutional shares........................... $ 16.64 $ 14.71 $ 13.23 $ 8.20
========= ======== ======== =========
</TABLE>

See accompanying notes to financial statements.

B-50
<PAGE> 110

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
--------------------- -----------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $27,592 $ 2,293
-------- -------

EXPENSES:
Investment management fees (note 4)................. 2,583 326
Transfer agent fees and expenses (note 4)........... 1,245 79
-------- -------
Total affiliated expenses................. 3,828 405
-------- -------
Custodian fees...................................... 31 6
Accounting fees..................................... 66 17
Professional fees................................... 140 27
Reports to shareholders............................. 122 5
Trustees' fees...................................... 55 8
Registration fees................................... 45 23
Other expenses...................................... 97 13
Amortization of deferred organizational cost........ 35 6
-------- -------
Total non-affiliated expenses............. 591 105
-------- -------
Total expenses............................ 4,419 510
-------- -------
Net investment income..................... $23,173 $ 1,783
-------- -------
Net realized loss from security
transactions............................ (92) 0
-------- -------
Net increase in net assets from
operations.............................. 23,081 1,783
======== =======
</TABLE>

See accompanying notes to financial statements.

B-51
<PAGE> 111

YEAR ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
CARDINAL CARDINAL
AGGRESSIVE CARDINAL GOVERNMENT
THE CARDINAL GROWTH BALANCED OBLIGATIONS
FUND FUND FUND FUND
------------ ---------- -------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................... $ 4,274 $ 26 $ 171 $ 0
Interest.................................... 1,010 16 391 10,542
-------- ------- ------- --------
Total income...................... 5,284 42 562 10,542
-------- ------- ------- --------
EXPENSES:
Investment management fees (note 4)......... 1,563 86 113 654
Distribution fees (note 4).................. 756 33 43 391
Administrative service fees (note 4)........ 28 4 2 6
Transfer agent fees and expenses (note 4)... 214 19 18 126
Expenses voluntarily waived (note 4)........ (147) (6) (9) (84)
-------- ------- ------- --------
Total affiliated expenses......... 2,414 136 167 1,093
-------- ------- ------- --------
Custodian fees.............................. 36 9 10 37
Accounting fees............................. 32 23 14 51
Professional fees........................... 69 9 2 37
Reports to shareholders..................... 57 4 1 26
Trustees' fees.............................. 33 6 2 20
Registration fees........................... 25 16 11 27
Other expenses.............................. 65 3 4 23
Amortization of deferred organizational
cost...................................... 14 10 11 8
-------- ------- ------- --------
Total non-affiliated expenses..... 331 80 55 229
-------- ------- ------- --------
Total expenses.................... 2,745 216 222 1,322
-------- ------- ------- --------
Net investment income (loss)...... 2,539 (174) 340 9,220
-------- ------- ------- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions.............................. 19,070 (809) 1,440 (155)
Increase in unrealized gain on
investments............................... 63,545 4,242 1,687 2,682
-------- ------- ------- --------
Net realized gain (loss) and
increase in unrealized gain on
investments..................... 82,615 3,433 3,127 2,527
-------- ------- ------- --------
Net increase in net assets from
operations...................... $ 85,154 $3,259 $3,467 $ 11,747
======== ======= ======= ========
</TABLE>

See accompanying notes to financial statements.

B-52
<PAGE> 112

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
-------------------------- ---------------------
1997 1996 1997 1996
----------- ---------- -------- --------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income......................... $ 23,173 $ 22,576 $ 1,783 $ 1,801
Net realized loss from security
transactions................................ (92) 0 0 0
----------- ----------- --------- ---------
Net increase in net assets from
operations........................ 23,081 22,576 1,783 1,801
----------- ----------- --------- ---------

FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders........... (23,099) (22,576) (1,783) (1,801)
----------- ----------- --------- ---------

FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from sale of fund shares............. 1,330,914 1,272,767 155,053 159,477
Reinvestment of distributions to
shareholders................................ 22,599 22,143 1,668 1,700
Cost of fund shares redeemed.................. (1,327,106) (1,262,409) (156,352) (166,042)
----------- ----------- --------- ---------
Increase (decrease) in net assets from
capital share transactions............. 26,407 32,501 369 (4,865)
----------- ----------- --------- ---------
Net increase (decrease) in net assets.... 26,389 32,501 369 (4,865)
NET ASSETS -- beginning of period............. 477,875 445,374 59,915 64,780
----------- ----------- --------- ---------
NET ASSETS -- end of period................... $ 504,264 $ 477,875 $ 60,284 $ 59,915
=========== =========== ========= =========
</TABLE>

See accompanying notes to financial statements.

B-53
<PAGE> 113

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE
THE CARDINAL FUND GROWTH FUND
--------------------- -------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)......................... $ 2,539 $ 4,370 $ (174) $ (152)
Net realized gain (loss) from security
transactions....................................... 19,070 35,032 (809) 77
Increase (decrease) in unrealized gain on
investments........................................ 63,545 (1,098) 4,242 (63)
--------- --------- -------- --------
Net increase (decrease) in net assets from
operations...................................... 85,154 38,304 3,259 (138)
--------- --------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income -- Investor
shares............................................. (2,179) (4,551) 0 0
Distributions of net investment
income -- Institutional shares..................... (174) 0 0 0
Tax return of capital distribution................... 0 0 (192) 0
Distribution of net realized gains from security
transactions....................................... (19,080) (34,597) (31) (766)
--------- --------- -------- --------
Total distributions to shareholders................ (21,433) (39,148) (223) (766)
--------- --------- -------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
INVESTOR SHARES:
Proceeds from sale of fund shares.................... 12,835 8,454 1,736 2,503
Reinvestment of distributions to shareholders........ 19,793 36,392 218 743
Cost of fund shares redeemed......................... (51,330) (41,141) (4,087) (3,107)
--------- --------- -------- --------
Increase (decrease) in net assets from Investor
share transactions.............................. (18,702) 3,705 (2,133) 139
--------- --------- -------- --------
INSTITUTIONAL SHARES:
Proceeds from sale of fund shares.................... 24,912 0 3,720 0
Reinvestment of distributions to shareholders........ 174 0 0 0
Cost of fund shares redeemed......................... (4,358) 0 (438) 0
--------- --------- -------- --------
Increase in net assets from Institutional share
transactions....................................... 20,728 0 3,282 0
--------- --------- -------- --------
Net increase (decrease) in net assets.............. 65,747 2,861 4,185 (765)
NET ASSETS -- beginning of period.................... 229,042 226,181 9,669 10,434
--------- --------- -------- --------
NET ASSETS -- end of period.......................... $294,789 $229,042 $13,854 $ 9,669
========= ========= ======== ========
</TABLE>

See accompanying notes to financial statements.

B-54
<PAGE> 114

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
CARDINAL CARDINAL GOVERNMENT
BALANCED FUND OBLIGATIONS FUND
------------------- ---------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income................................ $ 340 $ 515 $ 9,220 $ 10,596
Net realized gain (loss) from security
transactions....................................... 1,440 856 (155) (1,240)
Increase (decrease) in unrealized gain on
investments........................................ 1,687 47 2,682 (826)
-------- -------- --------- ---------
Net increase in net assets from operations......... 3,467 1,418 11,747 8,530
-------- -------- --------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income -- Investor
shares............................................. (274) (519) (8,849) (10,496)
Distributions of net investment
income -- Institutional shares..................... (20) 0 (301) 0
Tax return of capital distribution................... 0 0 0 (214)
Distribution of net realized gains from security
transactions....................................... (1,235) (483) 0 0
-------- -------- --------- ---------
Total distributions to shareholders................ (1,529) (1,002) (9,150) (10,710)
-------- -------- --------- ---------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
INVESTOR SHARES:
Proceeds from sale of fund shares.................... 1,191 2,334 8,628 5,062
Reinvestment of distributions to shareholders........ 1,413 927 4,918 6,056
Cost of fund shares redeemed......................... (3,029) (3,867) (28,973) (27,351)
-------- -------- --------- ---------
Decrease in net assets from Investor share
transactions.................................... (425) (606) (15,427) (16,233)
-------- -------- --------- ---------
INSTITUTIONAL SHARES:
Proceeds from sale of fund shares.................... 2,004 0 6,374 0
Reinvestment of distributions to shareholders........ 20 0 301 0
Cost of fund shares redeemed......................... (558) 0 (998) 0
-------- -------- --------- ---------
Increase in net assets from Institutional share
transactions....................................... 1,466 0 5,677 0
-------- -------- --------- ---------
Net increase (decrease) in net assets.............. 2,979 (190) (7,153) (18,413)
NET ASSETS -- beginning of period.................... 14,345 14,535 133,298 151,711
-------- -------- --------- ---------
NET ASSETS -- end of period.......................... $17,324 $14,345 $126,145 $133,298
======== ======== ========= =========
</TABLE>

See accompanying notes to financial statements.

B-55
<PAGE> 115
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --

CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY OBLIGATIONS 83%
Federal Farm Credit Bank Note
5.50%.......................... 11-03-97 $ 20,000 $ 20,000
Federal Farm Credit Bank Note
5.53%.......................... 02-02-98 7,500 7,500
Federal Farm Credit Bank Note
5.51%.......................... 12-01-97 25,000 25,000
Federal Farm Credit Bank Note
5.50%.......................... 01-02-98 25,000 25,000
Federal Farm Credit Bank Note
5.47%.......................... 04-02-98 5,000 5,000
Federal Farm Credit Bank Note
5.71%.......................... 03-13-98 10,000 9,995
Federal Farm Credit Bank Note
5.77%.......................... 08-18-98 10,000 10,000
Federal Farm Credit Bank Note
5.69%.......................... 10-01-97 35,000 35,000
Federal Farm Credit Bank Note
5.63%.......................... 01-02-98 10,000 10,000
Federal Home Loan Bank Note
5.53%.......................... 12-16-97 10,000 10,000
Federal Home Loan Bank Note
5.52%.......................... 02-02-98 10,000 9,982
Federal Home Loan Bank Note
5.81%.......................... 02-13-98 10,000 10,000
Federal Home Loan Bank Note
5.70%.......................... 03-04-98 10,000 10,000
Federal Home Loan Bank Note
5.91%.......................... 04-02-98 10,000 9,997
Federal Home Loan Bank Note
5.82%.......................... 06-16-98 10,000 10,000
Federal Home Loan Bank Note
5.72%.......................... 06-30-98 10,000 9,991
Federal Home Loan Bank Note
5.88%.......................... 08-12-98 5,000 5,000
Federal Home Loan Bank Note
5.86%.......................... 09-02-98 20,000 20,000
Federal Home Loan Bank Note
5.90%.......................... 09-16-98 5,000 5,000
Federal Home Loan Bank Note
5.80%.......................... 09-18-98 15,000 15,010
Federal Home Loan Bank Note
5.84%.......................... 10-14-98 5,000 5,000
Student Loan Marketing
Association Note 5.63%......... 12-12-97 5,000 5,000
Student Loan Marketing
Association Note 5.26%*........ 12-18-97 60,000 60,000
Student Loan Marketing
Association Note 5.17%*........ 10-16-97 5,000 5,000

<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY OBLIGATIONS 83%
(CONTINUED)
Student Loan Marketing
Association Note 5.17%*........ 11-20-97 $ 25,000 $ 25,000
Student Loan Marketing
Association Note 5.26%*........ 01-15-98 5,000 5,000
Student Loan Marketing
Association Note 5.27%*........ 02-19-98 30,000 30,000
Student Loan Marketing
Association Note 5.32%*........ 03-19-98 20,000 20,000
---------
TOTAL U.S. GOVERNMENT-SPONSORED
ENTERPRISES AND FEDERAL AGENCY
OBLIGATIONS.................... 417,475
---------
REPURCHASE AGREEMENTS 23%
Daiwa Securities America Inc.
5.50%
(collateralized by $31,495,000
U.S. Treasury notes, 6.75%,
05-31-99, value $32,640,545.... 10-03-97 32,000 32,000
Fifth Third Bank 6.00%
(collateralized by $4,886,000
FNMA Notes, 6.00%, 06-01-15 ,
value $5,047,141).............. 10-01-97 4,899 4,899
Merrill Lynch Gov't. Securities
Inc. 5.56%
(collateralized by $28,277,035
U.S. Federal Agency notes,
6.50%-7.50%, 4-1-08 through
4-1-24, value $22,442,698)..... 10-02-97 22,000 22,000
The Nikko Securities Co. Int'l,
Inc. 5.62%
(collateralized by $16,035,000
GNMA Notes, 6.00% through
7.575%, 5-20-24 through
7-20-27, value $12,577,068).... 10-06-97 12,000 12,000
Paine Webber Inc. 5.50%
(collateralized by $36,055,000
FNMA Notes, 0.00%, 04-01-23 ,
value $7,140,850).............. 10-07-97 7,000 7,000
Smith Barney Shearson 5.54%
(collateralized by $39,500,683
U.S. Federal Agency notes,
5.75% through 9.9375%, 3-15-04
through 2-25-31 , value
$39,780,001)................... 10-01-97 39,000 39,000
---------
TOTAL REPURCHASE AGREEMENTS...... 116,899
---------
TOTAL INVESTMENTS AT AMORTIZED
COST 106%...................... $534,374
=========
</TABLE>

Percentages indicated are based on net assets.
Cost also represents cost for Federal income tax purposes.
* 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. The 2a-7 maturity for the indicated Bonds is October 7, 1997.

See accompanying notes to financial statements.

B-56
<PAGE> 116
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --

CARDINAL TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
FINAL FACE AMORTIZED
2a-7* MATURITY AMOUNT/ COST
MATURITY DATE SHARES (NOTE 2)
--------- -------- ------- ---------
<S> <C> <C> <C> <C>
GENERAL OBLIGATION BONDS 24%
District of Columbia Refunding Series B currently 7.70%................ 6-01-98 6-01-04 1,000 $ 1,045
Indiana Secondary Market Educational Loans Inc. currently 4.10%........ 10-07-97 12-01-14 1,000 1,000
Mason, Ohio City School District Bond Anticipation currently 4.45%..... 3-20-98 3-20-98 1,000 1,003
Columbus, Ohio Adjustable Series 1 currently 3.90%..................... 10-07-97 12-01-17 3,100 3,100
Ohio School District Cash Flow Borrowing Program currently 4.47%....... 6-30-98 6-30-98 2,000 2,008
Ohio State Public Facilities currently 7.00%........................... 6-01-98 6-01-00 1,000 1,040
Cincinnati, Ohio City School District Tax currently 3.75%.............. 12-01-97 12-01-97 1,500 1,500
Summit County, Ohio Bond Anticipation currently 4.50%.................. 6-04-98 6-04-98 1,000 1,004
Texas State Refunding currently 4.10%.................................. 10-07-97 12-01-16 2,900 2,900
-------
14,600
-------
REVENUE BONDS 72%
Alaska Industrial Development Authority currently 3.60%................ 10-07-97 6-01-10 2,055 2,055
Connecticut State Development Authority currently 4.00%................ 10-07-97 9-01-28 3,400 3,400
Kentucky Development Financial Authority currently 4.05%............... 10-07-97 12-01-15 900 900
Clark County, Kentucky Pollution Control currently 3.75%............... 10-15-97 10-15-14 2,300 2,300
Louisiana Public Facilities Authority Refunding currently 4.05%........ 10-07-97 10-01-22 2,000 2,000
Howard County, Maryland Multifamily Housing currently 4.00%............ 10-07-97 6-15-26 2,300 2,300
Cornell Township, Michigan Economic Development currently 3.55%........ 1-15-98 3-01-15 3,100 3,100
Buffalo County, Nebraska Hospital Authority currently 3.95%............ 10-07-97 5-01-18 1,970 1,970
North Carolina Medical Care Community Hospital currently 4.05%......... 10-07-97 9-01-02 1,600 1,600
Albuquerque, New Mexico Hospitals currently 4.05%...................... 10-07-97 5-15-22 2,500 2,500
Ohio State Higher Education Facilities Commission currently 3.95%...... 10-07-97 12-01-06 1,115 1,115
Ashtabula County, Ohio Industrial Development currently 3.95%.......... 10-07-97 12-01-16 2,400 2,400
Clackamas County, Oregon Hospital Facilities Authority currently
3.55%................................................................ 4-01-98 4-01-14 1,100 1,100
Pennsylvania State Higher Education Assistance currently 4.10%......... 10-07-97 7-01-18 1,500 1,500
York County, South Carolina Pollution Control currently 3.64%.......... 11-01-97 8-15-14 980 980
York County, South Carolina Pollution Control currently 3.64%.......... 11-01-97 8-15-14 1,955 1,955
Lower Neches Valley Authority, Texas currently 3.75%................... 2-17-98 2-15-17 1,000 1,000
Grand Prairie, Texas Housing -- Refunding currently 4.10%.............. 10-07-97 6-01-10 1,800 1,800
Hockley County, Texas Industrial Development currently 3.75%........... 11-01-97 3-01-14 1,750 1,752
Utah State Board of Regents currently 4.10%............................ 10-07-97 11-01-31 1,500 1,500
Peninsula Ports Authority, Virginia, Revenue currently 3.80%........... 11-01-97 12-01-05 2,000 2,000
Marion County, West Virginia Common Solid Waste currently 4.25%........ 10-07-97 10-01-17 1,000 1,000
Uinta County, Wyoming Pollution Control currently 3.75%................ 10-01-97 8-15-20 2,900 2,900
-------
43,127
-------
REGULATED INVESTMENT COMPANY 5%
Goldman Sacs Financial Square Tax Exempt Fund currently 3.25%.......... 10-01-97 3,009 3,009
-------
TOTAL INVESTMENTS AT AMORTIZED COST 101%............................... $60,736
=======
</TABLE>

* 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.
Percentages indicated are based on net assets.
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.

B-57
<PAGE> 117
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

THE CARDINAL FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK 92%
BASIC MATERIALS 6%
Aluminum Co. of America.......... 25,000 $ 2,050
Boise Cascade Corp............... 30,000 1,262
Dow Chemical Company............. 35,000 3,173
Dupont de Nemours and Co......... 51,400 3,164
International Paper.............. 40,000 2,203
Monsanto Company................. 25,000 975
Potash Corp. Saskatchewan........ 25,000 1,963
Solutia Incorporated*............ 5,000 100
Willamete Industries............. 40,000 1,530
Worthington Industries Inc....... 30,000 608
--------
17,028
--------
CONSUMER CYCLICALS 5%
Dun & Bradstreet................. 30,000 851
Gannett Company, Inc............. 30,000 3,238
Gucci Group ADR.................. 10,000 469
Kohl's Corp.*.................... 20,000 1,420
Limited Inc...................... 50,000 1,222
Lowe's Companies................. 35,000 1,361
New York Times Company Cl 'A'.... 40,000 2,100
Nike Incorporated................ 15,000 795
Saks Holdings, Inc.*............. 25,000 522
Service Corporation
International.................. 30,000 966
Tribune Company.................. 40,000 2,132
--------
15,076
--------
CAPITAL GOODS 11%
ASEA AB ADR...................... 10,000 1,415
Boeing Company................... 20,000 1,089
Caterpillar, Inc................. 30,000 1,618
Deere & Company.................. 25,000 1,344
General Electric Company......... 170,000 11,571
Johnson Controls Inc............. 25,000 1,239
Minnesota Mining & Manufacturing
Co............................. 50,000 4,625
Textron, Incorporated............ 120,000 7,800
Tyco International Ltd........... 12,000 985
U.S. Filter Corporation*......... 35,000 1,506
--------
33,192
--------

<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
COMMUNICATIONS 4%
Cellular Technical Services*..... 25,000 $ 145
GTE Corp......................... 100,000 4,538
LCI International, Inc.*......... 50,000 1,331
Pacific Gateway Exchange*........ 15,000 587
Sprint Corporation............... 40,000 2,000
WorldCom, Inc*................... 70,000 2,476
--------
11,077
--------
ENERGY 11%
Exxon Corp....................... 40,000 2,563
Global Marine*................... 30,000 998
Mobil Corp....................... 116,000 8,584
Royal Dutch Petroleum............ 150,000 8,325
Schlumberger Ltd................. 40,000 3,368
Texaco, Incorporated............. 100,000 6,144
Transocean Offshore,
Incorporated................... 20,000 957
--------
30,939
--------
FINANCIAL SERVICES 16%
American International Group,
Inc............................ 45,000 4,643
Banc One Corporation............. 100,000 5,581
Bank of New York Co. Inc......... 15,000 720
Bankers Trust NY................. 15,000 1,838
Beneficial Corporation........... 50,000 3,809
Charter One Financial Corp....... 105,000 6,208
Cincinnati Financial Corp........ 75,000 6,150
Citicorp......................... 12,000 1,607
Federal National Mortgage........ 20,000 940
Huntington Bancshares............ 60,000 2,164
Key Corp......................... 100,000 6,363
Marsh & McLennan, Inc............ 90,000 6,896
T. Rowe Price Associates Inc..... 10,000 673
--------
47,592
--------
</TABLE>

* Non-income producing (continued)

B-58
<PAGE> 118
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --

THE CARDINAL FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTHCARE 10%
American Home Products........... 80,000 $ 5,840
Amgen, Incorporated*............. 15,000 719
Biomet, Inc...................... 60,000 1,440
Boston Scientific*............... 20,000 1,104
Cardinal Health Inc.............. 15,000 1,065
HEALTHSOUTH Corporation*......... 50,000 1,334
Johnson & Johnson................ 80,000 4,610
Medtronic, Inc................... 70,000 3,290
Merck & Company, Inc............. 50,000 4,997
Pfizer, Inc...................... 70,000 4,204
Tenet Healthcare Corporation..... 40,000 1,165
Warner Lambert Inc............... 10,000 1,349
--------
31,117
--------
CONSUMER STAPLES 10%
Anheuser Busch Cos., Inc......... 50,000 2,256
Coca Cola Company................ 100,000 6,094
Gillette Company................. 25,000 2,158
Imax Inc.*....................... 20,000 523
Kimberly-Clark Corp.............. 30,000 1,468
McDonald's Corporation........... 30,000 1,429
PepsiCo Incorporated............. 50,000 2,028
Philip Morris Companies, Inc..... 150,000 6,234
Playtex Incorporated*............ 75,000 759
Proctor & Gamble Company......... 70,000 4,834
The Walt Disney Company.......... 25,000 2,016
--------
29,799
--------
FACE/ MARKET
SHARES VALUE
--------- --------
COMMON STOCK (CONTINUED)
TECHNOLOGY 17%
3Com Corp.*...................... 20,000 $ 1,025
Applied Materials*............... 25,000 2,381
Atmel Corporation*............... 40,000 1,458
Cisco Systems*................... 25,000 1,827
Compaq Computer Corp............. 75,000 5,606
Dell Computer Corp.*............. 10,000 969
Gateway 2000*.................... 30,000 943
Hewlett Packard.................. 40,000 2,783
Intel Corp....................... 90,000 8,308
International Business Machines
Corp........................... 30,000 3,178
Kent Electronics*................ 25,000 988
Lucent Technologies.............. 40,000 3,255
Microsoft Corp.*................. 55,000 7,277
Motorola Inc..................... 40,000 2,875
Oracle Corp.*.................... 15,000 547
Tektronix, Incorporated.......... 30,000 2,023
Tellabs, Incorporated*........... 30,000 1,545
Texas Instruments, Inc........... 25,000 3,377
--------
50,365
--------
UTILITIES 2%
Western Resources................ 60,000 2,059
Williams Companies, Inc.......... 60,000 2,809
--------
4,868
--------
TOTAL COMMON STOCK............... 271,053
--------
(cost $150,081,175)
INDEX OPTIONS 1%
Standard and Poor's Index 500
December 940 puts.............. 200 638
Standard and Poor's Index 500
December 950 puts.............. 400 1,445
--------
TOTAL INDEX OPTIONS.............. 2,083
--------
(cost $2,194,300)
</TABLE>

* Non-income producing (continued)

B-59
<PAGE> 119
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --

THE CARDINAL FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENTS 6%
Fifth Third Bank 6.00%
due 10/1/97 (collateralized by
$1,203,000 FNMA, 6.00%, 6/1/15,
value $1,242,474).............. 1,206,176 $ 1,206
Paine Webber Inc. 6.10%
due 10/1/97 (collateralized by
$49,177,401 U.S. Federal Agency
notes, 0.00%, 3/1/20 through
6/1/29, value $19,074,854)..... 18,700,000 18,700
--------
TOTAL REPURCHASE AGREEMENTS.... 19,906
--------
(cost $19,906,176)
U.S. TREASURY OBLIGATIONS 1%
U.S. Treasury Bill 5.04%, due
1/8/98......................... 2,000,000 1,972
--------
TOTAL U.S. TREASURY
OBLIGATIONS.................. 1,972
--------
(cost $1,971,988)
TOTAL INVESTMENTS 100%......... $295,014
========
(cost $174,153,639)(a)
</TABLE>

<TABLE>
<CAPTION>
MARKET
CONTRACTS VALUE
--------- ------
<S> <C> <C>
OPTIONS WRITTEN
Standard and Poor's Index 500
December 1050 calls............... (600) $(368)
------
TOTAL OPTIONS WRITTEN (premium
received $858,191)(a)......... (600) $(368)
=======
</TABLE>

Percentages indicated are based on net assets.

(a) Represents cost for Federal income tax purposes. Cost differs from market
value by net unrealized appreciation of securities as follows:

<TABLE>
<S> <C>
Unrealized appreciation (including unrealized appreciation on
options written)................................................. $ 122,716
Unrealized depreciation............................................ (1,366)
-----------
Net unrealized appreciation........................................ $ 121,350
===========
</TABLE>

See accompanying notes to financial statements.

B-60
<PAGE> 120
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMON STOCK 97%
BASIC MATERIALS 1%
Buckeye Cellulose*................ 2,000 $ 81
CONSUMER CYCLICALS 7%
Cort Business Services*........... 4,000 160
Gartner Group 'A'*................ 2,000 60
Kohl's Corp.*..................... 2,000 142
La Quinta Inns.................... 3,000 71
Little Fuse*...................... 5,000 174
New York Times Company Cl 'A'..... 3,000 158
Personal Group of America*........ 4,000 137
Pierce Leahy*..................... 3,500 94
-------
996
-------
CAPITAL GOODS 2%
Lancer Corp.*..................... 7,500 120
U.S. Filter*...................... 3,000 129
Westinghouse Elec................. 3,000 81
-------
330
COMMUNICATIONS 5%
AirTouch Communications*.......... 7,000 248
Pacific Gateway Exchange*......... 4,000 157
WorldCom inc*..................... 10,000 353
-------
758
-------
FINANCIAL SERVICES 15%
Amer Capital Strategies*.......... 10,000 200
AmSouth Bancorp................... 2,500 121
Bear Stearns Cos.................. 1,550 68
CMAC Investment................... 3,000 161
Corestates Financial.............. 1,000 66
Crestar Financial................. 2,500 117
Edwards (AG) Inc.................. 1,000 51
First Tenn Natl................... 3,000 171
Fleet Financial Group............. 1,500 98
Legg Mason Inc.................... 1,333 70
McDonald & Co. Invest............. 2,000 58
Mellon Bank Corp.................. 1,500 82
Nationwide Finl Svcs. 'A'......... 5,000 139
Paine Webber Group................ 1,500 70
PNC Bank Corp..................... 2,000 98
Raymond James Finl................ 2,500 90
Salomon Inc....................... 2,000 150
Summit Bancorp.................... 1,500 67

<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Union BanCal Corp................. 1,500 $ 130
Union Planters.................... 2,000 113
-------
2,120
-------
HEALTHCARE 10%
Alkermes Inc.*.................... 5,000 103
Biomet, Inc....................... 10,000 240
Centecor Inc.*.................... 2,000 95
Cygnus Inc.*...................... 4,000 79
Dentsply International............ 2,000 112
Genzyme Corp. -- Genl Div*........ 3,000 89
Genzyme spin off -- Tissue
Repair*......................... 90 1
Hfs Inc.*......................... 1,000 74
Maxicare Health Plans*............ 10,000 186
Teva Pharm Inds ADR............... 4,000 224
Vertex Pharmaceuticals Inc.*...... 5,000 189
-------
1,392
-------
CONSUMER STAPLES 5%
Chancelor Media Corp 'A'*......... 3,000 158
Emmis Broadcasting 'A'*........... 2,000 96
Imax Inc.*........................ 6,000 157
Philip Morris Companies, Inc...... 3,000 125
Pixar*............................ 4,000 93
-------
629
-------
TECHNOLOGY -- SEMICONDUCTORS 24%
Analog Devices*................... 8,667 290
Applied Materials*................ 4,000 381
Atmel Corporation*................ 7,000 255
CFM Technologies*................. 3,500 137
Cymer Inc.*....................... 2,000 55
DuPont Photomasks*................ 2,500 180
Intel Corp........................ 5,500 508
KLA-Tencor Corp.*................. 5,000 338
Lam Research*..................... 1,500 70
Lattice Semiconductor*............ 3,000 195
National Semiconductors*.......... 4,000 164
PRI Automation*................... 5,000 293
Texas Instruments................. 3,000 405
-------
3,271
-------
</TABLE>

* Non-income producing (continued)

B-61
<PAGE> 121
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --

CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TECHNOLOGY -- SOFTWARE 6%
Computer Science*................. 4,500 $ 318
Microsoft Corp.*.................. 3,000 397
Netscape Communications*.......... 2,000 72
-------
787
-------
TECHNOLOGY -- HARDWARE/NETWORKING
22%
3Com Corp.*....................... 3,000 154
Asyst Technologies*............... 4,000 178
CHS Electronics*.................. 3,000 82
Compaq Computer Corp.............. 5,000 374
Dell Computer Corp.*.............. 3,000 291
EMC Corp*......................... 7,000 409
GenRad, Inc.*..................... 13,000 375
Hewlett-Packard................... 3,000 209
Lecroy Corp....................... 5,000 221
Motorola, Inc..................... 4,000 288
Photon Dynamics, Inc.*............ 9,000 67
Silicon Graphics*................. 7,000 184
Tellabs, Inc*..................... 5,500 283
-------
3,115
-------
TOTAL COMMON STOCK.............. 13,479
(cost $8,321,463) -------

<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
INDEX OPTIONS 2%
Morgan Stanley High Tech Index
Dec. 490 Puts................... 55 $ 95
Russell 2000 Index Options Dec.
415 Calls....................... 50 231
-------
TOTAL INDEX OPTIONS............. 326
(cost $320,815) -------

REPURCHASE AGREEMENT 2%
Fifth Third Bank, 6.00% due 10/1/97,
collateralized by $214,000 FNMA,
6.00%, 6/1/15, value $221,022).... 214,320 214
-------
TOTAL REPURCHASE AGREEMENTS
(cost $214,320) 214
-------
TOTAL INVESTMENTS 101%.......... $14,019
(cost $8,856,589)(a) ========

OPTION WRITTEN
Morgan Stanley High Tech Index
Dec. 575 call................... (55) $ (61)
(premium received $89,898)(a) ========
</TABLE>

Percentages indicated are based on net assets.

(a) Represents cost for Federal income tax purposes. Cost differs from market
value by net unrealized appreciation of securities as follows:

<TABLE>
<S> <C>
Unrealized appreciation..................................................................... $ 5,470
Unrealized depreciation (including unrealized depreciation on options written).............. (279)
-----------
Net unrealized appreciation................................................................. $ 5,191
==========
</TABLE>

* Non-income producing

See accompanying notes to financial statements.

B-62
<PAGE> 122
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMON STOCK 63%
BASIC MATERIALS 2%
DuPont de Nemours and Co.......... 2,000 $ 123
Monsanto Co....................... 3,500 137
Solutia Inc.*..................... 700 14
-------
274
-------
CONSUMER CYCLICALS 4%
Consolidated Stores*.............. 3,000 126
New York Times Co. Cl 'A'......... 3,500 184
Nike Inc. Cl 'B'.................. 2,000.. 106
Service Corporation Intl.......... 3,000 97
Tribune Co........................ 4,000 212
-------
725
-------
CAPITAL GOODS 7%
Avery Dennison Corp............... 4,500 180
Crane Co.......................... 4,500 185
Deere & Co........................ 3,000 161
Emerson Electric.................. 2,000 115
General Electric.................. 4,000 272
Textron, Inc...................... 2,400 156
Tyco International Limited........ 2,500 206
-------
1,275
-------
COMMUNICATIONS 1%
Worldcom, Inc.*................... 7,000 248
-------
ENERGY 5%
Amoco Corp........................ 1,500 145
Exxon Corp........................ 3,000 192
Mobil Corp........................ 2,000 148
Schlumberger Ltd.................. 2,000 168
Transocean Offshore,
Incorporated.................... 6,000 288
-------
941
-------

<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
FINANCIAL SERVICES 14%
Ahmanson (H F) & Co............... 4,000 $ 227
AmSouth Bancorp................... 2,200 107
Am. Express....................... 2,000 164
Am. General Hospitality........... 4,000 117
Am. Intl Group.................... 1,500 155
Bank of Boston Corp............... 1,200 106
Bank of New York Co., Inc......... 3,500 168
Bay Apartment Communities......... 2,500 100
Ben Franklin Resources............ 2,300 214
Citicorp.......................... 1,000 134
Federal National Mortgage Assn.... 2,500 118
Inmc Mortgage Holdings, Inc....... 7,000 175
Mellon Bank Corp.................. 3,000 164
Traveler's Group.................. 2,667 182
T. Rowe Price Assocation.......... 3,500 234
-------
2,365
-------
HEALTHCARE 8%
Amgen, Inc.*...................... 2,000 96
Cardinal Health, Inc.............. 2,000 142
HealthSource Corp.*............... 9,000 240
Johnson & Johnson................. 3,000 173
Medtronic, Inc.................... 5,000 235
Merck & Company, Inc.............. 2,000 200
Pfizer Inc........................ 2,000 120
Quorum Health Group*.............. 4,500 110
Tenet Healthcare Corporation...... 4,000 116
-------
1,432
-------
CONSUMER STAPLES 9%
Coca Cola Co...................... 3,000 183
Colgate-Palmolive................. 3,000 209
Disney (Walt) Co.................. 1,900 153
Gillette Co....................... 2,500 216
McDonald's Corp................... 2,000 95
Pepsico Inc....................... 3,000 122
Philip Morris Company, Inc........ 3,000 125
Procter & Gamble Company.......... 2,000 138
Robert Mondavi Cl 'A'*............ 3,000 164
Wendy's Intl...................... 5,000 106
-------
1,511
-------
</TABLE>

* Non-income producing (continued)

B-63
<PAGE> 123
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --

CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
TECHNOLOGY 10%
Applied Materials*................ 3,000 $ 286
Cisco Systems*.................... 2,000 146
Compaq Computer Corp.............. 2,000 150
Computer Sciences*................ 2,000 142
Hewlett-Packard................... 3,000 209
Intel Corp........................ 2,600 240
Lucent Technologies............... 3,500 285
Microsoft Corp.*.................. 1,000 131
-------
1,589
-------
TRANSPORTATION 2%
Burlington Northern Santa Fe...... 1,500 145
Federal Express*.................. 2,500 200
-------
345
-------
UTILITIES 1%
Williams Cos...................... 3,000 140
-------
TOTAL COMMON STOCK.............. 10,845
(Cost $8,016,209) -------

INDEX OPTION 1%
Standard and Poor index 500
December 940 puts............... 50 181
-------
TOTAL INDEX OPTIONS............. 181
(Cost $202,650) -------

PREFERRED STOCK 2%
Glendale Federal Bank 8.750%
preferred series E.............. 4,000 297
-------
TOTAL PREFERRED STOCK........... 297
(Cost $170,400) -------

FACE/ MARKET
SHARES VALUE
------- -------
CORPORATE BONDS 14%
AMR Corp. 10.18%, 1-2-13.......... 250,000 $ 309
Anheuser-Busch Co. 7.00%, 9-1-05.. 250,000 254
Consumers Power 7.50%, 6-1-02..... 300,000 305
CSX Transportation 6.72%,
6-1-06.......................... 250,000 251
Dole Foods Company 7.00%, 5-15-
03.............................. 200,000 203
G.M. Acceptance 7.00%, 9-15-02.... 200,000 205
Kemper Corp. 6.875%, 9-15-03...... 250,000 253
Limited Incorporated 7.50%,
3-15-23......................... 250,000 237
Nordstrom Inc. 6.70%, 7-1-05...... 250,000 250
United States Filter Corp. 4.50%,
12-15-01........................ 150,000 185
-------
TOTAL CORPORATE BONDS........... 2,452
(Cost $2,298,373) -------

U.S. GOVERNMENT-SPONSORED ENTERPRISES
AND FEDERAL AGENCY OBLIGATIONS 10%
Federal National Mortgage
Association 7.09%, 3-13-07 250,000 254
Federal National Mortgage
Association 6.99%, 7-9-07....... 250,000 253
Federal National Mortgage
Association 6.94%, 3-14-11...... 500,000 497
Federal National Mortgage
Association 7.00%, 9-3-03....... 250,000 252
Federal National Mortgage
Association 7.03%, 10-25-06..... 250,000 255
Federal National Mortgage
Association 7.50%, 11-15-06..... 250,000 254
-------
TOTAL U.S. GOVERNMENT-SPONSORED
ENTERPRISES AND FEDERAL AGENCY
OBLIGATIONS (Cost
$1,751,077)................... 1,765
-------
U.S. GOVERNMENT OBLIGATIONS 6%
U.S. Treasury Note 5.875%,
Due 2-15-04..................... 500,000 494
U.S. Treasury Strips 11.25%,
Due 2-15-09, principal only..... 1,000,000 491
-------
TOTAL U.S. GOVERNMENT
OBLIGATIONS................... 985
(Cost $895,882) -------

</TABLE>

* Non-income producing (continued)

B-64
<PAGE> 124
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --

CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
REPURCHASE AGREEMENT 4%
Fifth Third Bank 6.00%, due
10-1-97
(collateralized by $6.00% FNMA
notes, 6.00%, 6-1-15, value
$801,463)....................... 777,532 $ 778
-------
TOTAL REPURCHASE AGREEMENTS..... 778
(Cost $777,532) -------

TOTAL INVESTMENTS 100%.......... $17,303
(Cost $14,187,122)(a) ========

OPTIONS WRITTEN
Standard and Poor Index 500, Dec
1050 calls...................... (50) $ (31)
-------
TOTAL OPTIONS WRITTEN (premium
received $74,850)(a).......... $ (31)
========
</TABLE>

Percentages indicated are based on net assets.

(a) Represents cost for Federal income tax purposes. Cost differs from market
value by net unrealized appreciation of securities as follows:

<TABLE>
<S> <C>
Unrealized appreciation..................................................................... $ 3,265
Unrealized depreciation..................................................................... (105)
-----------
Net unrealized appreciation................................................................. $ 3,160
==========
</TABLE>

See accompanying notes to financial statements.

B-65
<PAGE> 125
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (PRINCIPAL AMOUNTS AND MARKET VALUE IN THOUSANDS) --

CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
-------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS 99%
GNMA CLC Notes, 7.375%, stated
maturity 01-15-98................... $ 443 $ 447
GNMA CLC Notes, 7.75%, stated maturity
12-15-98............................ 143 147
GNMA CLC Notes, 8.00%, maturing
06-15-98 through 10-15-98........... 500 522
GNMA CLC Notes, 8.125%, stated
maturity 05-15-99................... 1,307 1,372
GNMA PL Notes, 8.00% stated maturity
11-15-24............................ 1,658 1,723
GNMA PL Notes, 8.125% stated maturity
6-15-29............................. 491 514
GNMA PL Notes, 8.25% stated maturity
7-15-27............................. 2,768 2,862
GNMA PL Notes, 8.50% stated maturity
9-15-29............................. 2,149 2,281
GNMA PL Notes, 9.00% stated maturities
5-15-16 through 10-15-21............ 2,415 2,529
GNMA PL Notes, 9.00% stated maturity
10-15-16+........................... 1,607 1,739
GNMA I Note, 7.35% stated maturity
01-15-98............................ 2,169 2,185
GNMA I Notes, 7.50% stated maturities
from 10-15-25 through 03-15-27...... 14,582 14,846
GNMA I Note, 7.75% stated maturity
02-15-98............................ 2,008 2,081
GNMA I Notes, 8.00% stated maturities
from 06-15-98 through 04-15-37...... 21,400 22,355
GNMA I Notes, 8.125% stated maturity
05-15-99............................ 2,495 2,620
GNMA I Notes, 8.25% stated maturities
from 03-15-22 through 10-15-36...... 5,327 5,628
GNMA I Notes, 8.50% stated maturities
from 05-15-16 through 03-15-30...... 15,816 16,714
GNMA I Note, 8.875% stated maturity
05-15-35............................ 1,258 1,352

<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
-------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA I Notes, 9.00% stated maturities
from 06-15-16 through 03-15-33...... $ 16,251 $ 17,547
GNMA I Notes, 9.25% stated maturities
from 03-15-30 through 02-15-33...... 1,646 1,786
GNMA I Notes, 9.50% stated maturities
from 01-15-19 through 02-15-23...... 800 843
GNMA I Note, 10.25% stated maturity
12-15-22............................ 1,620 1,710
GNMA I Note, 10.50% stated maturity
06-15-14............................ 999 1,047
GNMA II Notes, 7.50% stated maturities
from 07-20-27 through 08-20-27...... 8,930 9,075
GNMA II Notes, 8.00% stated maturities
from 05-20-22 through 12-20-26...... 3,493 3,602
GNMA II Notes, 10.00% stated
maturities from 01-20-14 through 12-
20-21............................... 7,213 7,875
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST -------- --------
$122,422,184)................... 119,488 125,402
-------- --------
U.S. TREASURY OBLIGATIONS 1%
U.S. Treasury Note 5.875%, 09-30-02
(cost $994,660)....................... 1,000 995
--------
REPURCHASE AGREEMENT 2%
Fifth Third Bank 6.00%, Due 10-1-97
(collateralized by $2,396,006 FNMA
6.00%, 6-1-15, value $2,474,620, cost
$2,401,996) 2,402 2,402
--------
TOTAL INVESTMENTS (COST
$125,818,840) (a) 102%.......... $128,799
========
</TABLE>

Percentages indicated are based on net assets.
CLC -- Construction Loan Contract
GNMA -- Government National Mortgage Association
PL -- Project Loan
+ Security is segregated as collateral for construction loans

(a) Represents cost for Federal income tax purposes. Cost differs from market
value by net unrealized appreciation of securities as follows:

<TABLE>
<S> <C>
Unrealized appreciation......................................................................... $ 3,029
Unrealized depreciation......................................................................... (49)
-------
Net unrealized appreciation..................................................................... $ 2,980
======
</TABLE>

See accompanying notes to financial statements.

B-66
<PAGE> 126

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

1. ORGANIZATION

The Cardinal Group (the "Group") is an open-end management investment company,
sponsored by The Ohio Company ("TOC"), established as an Ohio Business Trust on
March 23, 1993. The Group is authorized to issue an unlimited number of shares
which are units of beneficial interest without par value. Before June 24, 1993
the Group had no operations other than those relating to organizational matters,
including the issuance of 5,000 shares of beneficial interest in each of
Cardinal Balanced Fund and Cardinal Aggressive Growth Fund (the "Original
Portfolios") for cash at $10.00 per share on June 4, 1993 to Cardinal Management
Corp. ("CMC"), the Group's Investment Adviser and a wholly owned subsidiary of
TOC.

Effective May 1, 1996 the Group acquired the assets and assumed the liabilities
of four open-end management investment companies also sponsored by TOC in
exchange for shares of corresponding portfolios of the Group. Cardinal
Government Securities Trust, Cardinal Tax Exempt Money Trust, The Cardinal Fund
Inc., and Cardinal Government Obligations Fund (collectively the "Acquired
Funds") were acquired by portfolios of the Group as follows:

Cardinal Government Securities Trust was acquired by Cardinal Government
Securities Money Market Fund

Cardinal Tax Exempt Money Trust was acquired by Cardinal Tax Exempt Money
Market Fund

The Cardinal Fund Inc. was acquired by The Cardinal Fund

Cardinal Government Obligations Fund was acquired by Cardinal Government
Obligations Fund

The new portfolios retained the basic investment objectives and assumed the
historical performance of the Acquired Funds.

Effective January 1, 1997, as authorized by the Board of Trustees, the Group
began to issue shares of two classes, Investor and Institutional, of units of
beneficial interest of The Cardinal Fund, Cardinal Government Obligations Fund,
Cardinal Balanced Fund and Cardinal Aggressive Growth Fund portfolios Qualifying
Shareholder Accounts.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies that the Group
follows in the preparation of its financial statements and the calculation of
daily net asset values. The policies are in conformity with generally accepted
accounting principles and the Investment Company Act of 1940 (the "Act"), as
amended. The preparation of these financial statements requires the management
of the Group to make estimates and assumptions which affect the reported amounts
of assets and liabilities as of September 30, 1997 and the income and expenses
reported for the period. Actual results could differ significantly from those
estimates.

(continued)

B-67
<PAGE> 127
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

SECURITIES VALUATION Investments in Cardinal Government Securities Money Market
Fund and Cardinal Tax Exempt Money Market Fund (the "money market funds") are
valued at amortized cost, which approximates the market value. Any premiums and
discounts are amortized on a straight-line method to the maturity of the
particular security. The use of the amortized cost method requires that the
money market funds purchase only securities with a remaining maturity of 397
calendar days or less (longer if certain maturity shortening provisions in Rule
2a-7, of the Act, apply) and maintain a dollar weighted portfolio maturity of 90
days or less.

Investments in The Cardinal Fund, Cardinal Aggressive Growth Fund, Cardinal
Balanced Fund and Cardinal Government Obligations Fund (collectively the
"non-money market funds") listed or traded on a national securities exchange are
valued at the last sale 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 as may be quoted by the National Association of Securities Dealers
Automated Quotation System. If no quotations are available the portfolio
securities are valued in good faith using methods approved by the Board of
Trustees.

SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are recorded
on the trade date, which is the date they are purchased or sold. Interest income
is recognized on the accrual basis. Dividend income, if any, is recognized on
the ex-dividend date. Realized gains or losses are calculated using the
First-In/First-Out (FIFO) basis.

REPURCHASE AGREEMENTS It is the policy of the Group for its Custodian, Fifth
Third Bank of Cincinnati, or a third-party bank reporting to the Custodian, to
take possession of all securities pledged to the Group as collateral for the
funds loaned in repurchase agreements. Repurchase agreements entered into by the
Group must mature in seven days or less and be fully collateralized by
securities eligible for purchase by the participating portfolio. The Group may
only participate in repurchase transactions with those banks and securities
broker/dealers that meet the credit criteria established by the Board of
Trustees and monitored by CMC.

DEFERRED ORGANIZATIONAL COST Costs incurred with the initial organization of
Cardinal Aggressive Growth Fund and Cardinal Balanced Fund have been deferred
and are being amortized on a straight-line basis over the 60 month period from
the commencement of operations on June 24, 1993.

FEDERAL INCOME TAXES The Group has made no provision for Federal income taxes.
It is the intention of the management of the Group to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
make sufficient distributions of taxable income and gains within the required
time, to relieve it from all, or substantially all, Federal income taxes.

DISTRIBUTIONS TO SHAREHOLDERS The money market funds and Cardinal Government
Obligations Fund declare dividends from net investment income daily and pay them
to shareholders monthly. The Cardinal Fund, Cardinal Aggressive Growth Fund and
Cardinal Balanced Fund declare and pay dividends from net

(continued)

B-68
<PAGE> 128

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1997

investment income, if any, quarterly. Realized capital gains, if any, are
declared and paid annually by the Group. Distributions of net investment income
and realized capital gains are determined in accordance with the Internal
Revenue Code and may differ from those calculated in accordance with generally
accepted accounting principles. Dividends and distributions which exceed net
investment income and net realized gains for tax purposes are reported as
distributions of capital. In the current year, the Cardinal Aggressive Growth
Fund distributed capital gains which exceeded net realized gains by
approximately $192,000, therefore qualifying as a distribution of capital.

OPTION WRITING When a portfolio of the Group writes an option, an amount equal
to the premium received is recorded as a liability and is subsequently adjusted
to the current market value of the option written. Premiums received from
options written that expire unexercised are recognized as realized gains by the
portfolio on the expiration date. The difference, if any, between the premium
received and the amount paid in a closing transaction is also treated as a
realized gain or loss. If a written option is exercised, the premium received is
added to proceeds from sales of the underlying securities for call options
written or deducted from the cost basis of securities purchased for put options
written. The portfolios making use of option writing bear the market risk of an
unfavorable change in the price of any security/index underlying the written
option.

Written option activity for the year ended September 30, 1997 was as follows:

<TABLE>
<CAPTION>
THE CARDINAL AGGRESSIVE THE CARDINAL BALANCED
THE CARDINAL FUND GROWTH FUND FUND
----------------------- ----------------------- -----------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUM OPTIONS PREMIUM OPTIONS PREMIUM
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
September 30, 1996........ 500 $ 462,665 90 $ 49,459 0 $ 0
Options written............. 800 1,197,591 635 1,071,392 65 88,117
Options canceled in closing
purchase transactions..... (500) (635,991) (600) (875,286) 0 0
Options expired prior to
exercise.................. (200) (166,074) (270) (155,667) (15) (13,267)
---- --------- ---- --------- --- -------
Options outstanding at
September 30, 1997........ 600 $ 858,191 55 $ 89,898 50 $74,850
==== ========= ==== ========= === =======
</TABLE>

EXPENSE ALLOCATION Expenses directly related to one of the Group's portfolios
or classes are charged to that portfolio or class. Other operating expenses are
allocated to the portfolios of the Group based on their relative net assets.

(continued)

B-69
<PAGE> 129

SEPTEMBER 30, 1997

3. PURCHASES AND SALES OF SECURITIES

The purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1997 are as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
--------- -------
<S> <C> <C>
The Cardinal Fund.......................................... $ 30,510 $40,159
Cardinal Aggressive Growth Fund............................ 7,618 3,781
Cardinal Balanced Fund..................................... 14,144 8,798
Cardinal Government Obligations Fund....................... 46,055 61,624
</TABLE>

4. TRANSACTIONS WITH AFFILIATES

CMC, an affiliated company, acts as the Investment Adviser and Transfer Agent
for the Group under contracts monitored and annually approved by the Board of
Trustees. CMC receives a fee based on the average net assets of each portfolio,
plus reimbursement of out-of-pocket costs, for these services as outlined below
as of September 30, 1997:

<TABLE>
<CAPTION>
INVESTMENT ADVISER TRANSFER AGENT
FEE AS A PERCENT OF FEE -- ANNUAL
AVERAGE NET ASSETS PER ACCOUNT CHARGE
-------------------- ------------------
<S> <C> <C>
Money market funds......................... 0.50% $21.00
The Cardinal Fund*......................... 0.60% 18.00
Cardinal Aggressive Growth Fund............ 0.75% 18.00
Cardinal Balanced Fund..................... 0.75% 18.00
Cardinal Government Obligations Fund....... 0.50% 21.00
</TABLE>

- ---------------

* Prior to May 1, 1996, TOC served as Investment Adviser to The Cardinal Fund's
predecessor, The Cardinal Fund, Inc., and was paid an investment adviser fee
of 0.50% of average net assets.

TOC serves as the Group's distributor. TOC receives fees from the Fund for
providing services under the Distribution and Shareholder Service Plan, pursuant
to Rule 12b-1 of the Investment Company Act of 1940, and the Administrative
Service Plan. Under the Plan, the non-money market funds pay TOC an annual fee
not to exceed .25% of the average net assets of the Investor shares of those
funds for providing distribution and shareholder services. Under the
Administrative Services Plan, TOC receives .15% of the average net assets of the
Institutional shares of those funds for providing shareholder services. For the
period from October 1, 1996 through December 31, 1996, The Ohio Company waived
the fees under the Distribution and Shareholder Service and Administrative
Services Plans.

CMC also acted as the Fund Accountant for the Group until January 20, 1997 when
Fifth Third Bank, the Custodian for the Group, assumed that function.

(continued)

B-70
<PAGE> 130

SEPTEMBER 30, 1997

TOC reported to the Group that it received the following commissions (loads),
after discounts to dealers, from the sale of shares of the portfolios of the
Group for the year ended September 30, 1997:

<TABLE>
<S> <C>
The Cardinal Fund --Investor Shares................................. $ 732,412
Cardinal Aggressive Growth Fund --Investor Shares................... 60,397
Cardinal Balanced Fund --Investor Shares............................ 53,812
Cardinal Government Obligations Fund --Investor Shares.............. 297,584
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

The portfolios of the Group have available lines of credit with Fifth Third Bank
of Cincinnati, the Custodian, which were unused at September 30, 1997. When
used, borrowings under this arrangement are secured by investment securities and
can be used only for short-term needs of the borrowing portfolio. Compensating
balances are not required and the interest is calculated at 106% of the
Custodian's prime lending rate. The amounts available under this arrangement are
as follows:

<TABLE>
<S> <C>
Cardinal Government Securities Money Market Fund................. $ 25,000,000
Cardinal Tax Exempt Money Market Fund............................ 10,000,000
The Cardinal Fund................................................ 25,000,000
Cardinal Aggressive Growth Fund.................................. 2,000,000
Cardinal Balanced Fund........................................... 2,000,000
Cardinal Government Obligations Fund............................. 25,000,000
</TABLE>

The aggregate limit on borrowing for the Group under this arrangement is
$25,000,000.

(continued)

B-71
<PAGE> 131

SEPTEMBER 30, 1997

Fidelity Bond and Errors/Omissions insurance coverage for the Group and its
officers and Trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Certain portfolios
include in other assets deposits made for the initial capital and certificates
of deposits that collateralize standby letters of credit supporting potential
capital needs of ICI Mutual. In addition, these portfolios are also committed to
provide additional capital should ICI Mutual experience unusual losses arising
from its insurance underwriting. The following table details the deposits,
certificates of deposit and additional capital commitments of the Group:

<TABLE>
<CAPTION>
CERTIFICATES
OF ADDITIONAL
DEPOSITS DEPOSIT COMMITMENTS
-------- --------- ---------
<S> <C> <C> <C>
Cardinal Government Securities Money Market Fund....... $ 87,459 $ 175,000 $ 262,377
Cardinal Tax Exempt Money Market Fund.................. 13,291 27,000 39,873
The Cardinal Fund...................................... 28,588 56,600 85,764
Cardinal Government Obligations Fund................... 30,644 61,000 91,932
</TABLE>

6. FEDERAL INCOME TAXES

For Federal income tax purposes, at September 30, 1997 Cardinal Government
Obligations Fund had a capital loss carryforward available to offset future
capital gains, if any, that will expire over the next eight years. Approximately
$2,000,000 of the capital loss carryforward expired during the year ended
September 30, 1997.

At September 30, 1997, the following Funds have capital loss carryforwards which
are available to offset future capital gains, if any. The amount of the capital
loss carryforward and the years they expire are as follows:

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT
CARDINAL GOVERNMENT SECURITIES CARDINAL AGGRESSIVE
YEAR OBLIGATIONS FUND MONEY MARKET FUND GROWTH FUND
------------------------------ ------------------- ----------------- -------------------
<S> <C> <C> <C>
1998.......................... $ 1,867,822 -- --
1999.......................... 194,311 -- --
2001.......................... 1,489,408 -- --
2002.......................... 4,601,711 -- --
Thereafter.................... 10,979,417 404,405 809,788
----------- -------- --------
$19,132,669 $ 404,405 $ 809,788
=========== ======== ========
</TABLE>

(continued)

B-72
<PAGE> 132

SEPTEMBER 30, 1997

7. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for the Group for the years ended September 30,
1996 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
CARDINAL GOVERNMENT CARDINAL TAX EXEMPT
SECURITIES MONEY MARKET FUND MONEY MARKET FUND
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.................... 477,875 445,374 59,915 64,780
---------- ---------- -------- --------
Share Transactions:
Issued................................. 1,330,914 1,272,768 155,053 159,477
Reinvested............................. 22,599 22,143 1,668 1,701
Redeemed............................... (1,327,106) (1,262,409) (156,352) (166,043)
---------- ---------- -------- --------
Net change in shares................... 26,407 32,502 369 (4,865)
---------- ---------- -------- --------
End of period.......................... 504,282 477,875 60,284 59,915
========== ========== ======== ========
</TABLE>

<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE GROWTH FUND
THE CARDINAL FUND
INVESTOR SHARES INVESTOR SHARES
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.................... 17,438 17,099 855 844
---------- ---------- -------- --------
Share Transactions:
Issued................................. 989 650 140 218
Reinvested............................. 1,512 2,835 19 66
Redeemed............................... (3,845) (3,146) (348) (273)
---------- ---------- -------- --------
Net change in shares................... 1,344 339 (189) 11
---------- ---------- -------- --------
End of period.......................... 16,094 17,438 666 855
========== ========== ======== ========
</TABLE>

(continued)

B-73
<PAGE> 133

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
CARDINAL GOVERNMENT
CARDINAL BALANCED FUND OBLIGATIONS FUND
INVESTOR SHARES INVESTOR SHARES
--------------------------------- ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1997 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.................... 1,210 1,262 16,557 18,544
------ ------ ------- -------
Share Transactions:
Issued................................. 105 202 1,050 623
Reinvested............................. 126 81 606 745
Redeemed............................... (261) (335) (3,534) (3,355)
------ ------ ------- -------
Net change in shares................... (30) (52) (1,878) (1,987)
------ ------ ------- -------
End of period.......................... 1,180 1,210 14,679 16,557
====== ====== ======= =======
</TABLE>

B-74
<PAGE> 134

SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE
THE CARDINAL FUND GROWTH FUND
INSTITUTIONAL SHARES INSTITUTIONAL SHARES
----------------------- -----------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
JANUARY 2, 1997 THROUGH JANUARY 2, 1997 THROUGH
SEPT. 30, 1997 SEPT. 30, 1997
----------------------- -----------------------
<S> <C> <C>
Shares outstanding:
Beginning of period...................................... 0 0
------ ------
Share Transactions:
Issued................................................... 1,894 308
Reinvested............................................... 12 0
Redeemed................................................. (291) (32)
------ ------
Net change in shares..................................... 1,615 276
------ ------
End of period............................................ 1,615 276
====== ======
</TABLE>

<TABLE>
<CAPTION>
CARDINAL CARDINAL GOVERNMENT
BALANCED FUND OBLIGATIONS FUND
INSTITUTIONAL SHARES INSTITUTIONAL SHARES
----------------------- -----------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
JANUARY 2, 1997 THROUGH JANUARY 2, 1997 THROUGH
SEPT. 30, 1997 SEPT. 30, 1997
----------------------- -----------------------
<S> <C> <C>
Shares outstanding:
Beginning of period...................................... 0 0
------- -------
Share Transactions:
Issued................................................... 172 793
Reinvested............................................... 2 37
Redeemed................................................. (45) (122)
------- -------
Net change in shares..................................... 129 708
------- -------
End of period............................................ 129 708
================== ==================
</TABLE>

B-75
<PAGE> 135

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT ACTIVITIES:
Net investment income............................ 0.05 0.05 0.05 0.03 0.02
------- ------- ------- ------- -------
Total from Investment Activities............. 0.05 0.05 0.05 0.03 0.02
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.05) (0.05) (0.05) (0.03) (0.02)
------- ------- ------- ------- -------
Total Distributions.......................... (0.05) (0.05) (0.05) (0.03) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total return..................................... 4.67% 4.70% 4.98% 2.84%* 2.41%
Net Assets at end of period (000)................ 504,264 477,875 445,374 367,516 402,758
Ratio of expenses to average net assets.......... 0.88% 0.81% 0.81% 0.85% 0.79%
Ratio of net investment income to average
net assets..................................... 4.57% 4.74% 4.92% 2.94% 2.38%
</TABLE>

- ---------------
* During the year ended September 30, 1994, CMC contributed $1,151,186 to
Cardinal Government Securities Trust, the fund's predecessor, to offset losses
incurred by the predecessor. Without the capital contribution, the 1994 total
return would have been 2.55%.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CARDINAL TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT ACTIVITIES:
Net investment income............................ 0.03 0.03 0.03 0.02 0.02
------- ------- ------- ------- -------
Total from Investment Activities............. 0.03 0.03 0.03 0.02 0.02
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.03) (0.03) (0.03) (0.02) (0.02)
------- ------- ------- ------- -------
Total Distributions.......................... (0.03) (0.03) (0.03) (0.02) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return..................................... 2.72% 2.67% 3.02% 1.78% 1.81%
Net Assets at end of period (000)................ 60,284 59,915 64,780 80,531 91,159
Ratio of expenses to average net assets.......... 0.80% 0.89% 0.81% 0.76% 0.77%
Ratio of net investment income to average
net assets..................................... 2.79% 2.66% 2.99% 1.78% 1.80%
</TABLE>

See notes to financial statements.

B-76
<PAGE> 136

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- THE CARDINAL FUND INVESTOR SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING................... $ 13.13 $ 13.23 $ 12.73 $ 12.91 $ 12.95
INVESTMENT ACTIVITIES:
Net investment income...................... 0.14 0.25 0.36 0.31 0.32
Net realized and unrealized gain on
investments.............................. 4.64 1.95 1.32 0.12 0.55
-------- -------- -------- -------- --------
Total from Investment Activities......... 4.78 2.20 1.68 0.43 0.87
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income................. (0.13) (0.26) (0.35) (0.33) (0.29)
From net realized gains.................... (1.13) (2.04) (0.83) (0.28) (0.62)
-------- -------- -------- -------- --------
Total Distributions...................... (1.26) (2.30) (1.18) (0.61) (0.91)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING...................... $ 16.65 $ 13.13 $ 13.23 $ 12.73 $ 12.91
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load).......... 39.17% 17.96% 14.84% 3.38% 6.98%
Net Assets at end of period (000).......... $267,908 $229,042 $226,181 $246,581 $282,125
Ratio of expenses to average net assets.... 1.06% 0.75% 0.70% 0.72% 0.68%
Ratio of net investment income after
expenses to average net assets........... 0.97% 1.90% 2.89% 2.40% 2.46%
Ratio of incurred expenses to average net
assets (a)............................... 1.12% 0.85% 0.70% 0.72% 0.68%
Ratio of net investment income after
incurred expenses to average net assets
(a)...................................... 0.91% 1.80% 2.89% 2.40% 2.46%
Portfolio turnover rate.................... 12.73% 57.93% 19.78% 23.20% 11.11%
Average commission rate paid (b)........... $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
</TABLE>

- ---------------

<TABLE>
<S> <C>
(a) During the period certain fees were voluntarily waived. Had the fees been charged, the effective ratio would reflect the
incurred expenses as indicated above.
(b) Represents the total amount of commissions paid in portfolio equity transactions divided by the total number of shares
purchased and sold by the fund for which commissions were charged.
</TABLE>

See notes to financial statements.

B-77
<PAGE> 137

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- THE CARDINAL FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
THROUGH
SEPT. 30, 1997
-----------------------
<S> <C>
NET ASSET VALUE, BEGINNING.............................................................. $ 12.92
INVESTMENT ACTIVITIES:
Net investment income................................................................. 0.12
Net realized and unrealized gain on investments....................................... 3.70
--------
Total from Investment Activities.................................................... 3.82
--------
DISTRIBUTIONS:
From net investment income............................................................ (0.10)
From net realized gains............................................................... 0
--------
Total Distributions................................................................. (0.10)
--------
NET ASSET VALUE, ENDING................................................................. $ 16.64
========
RATIOS/SUPPLEMENTAL DATA:
Total Return.......................................................................... 29.77%
Net Assets at end of period (000)..................................................... $26,881
--------
Ratio of expenses to average net assets............................................... 1.00%
Ratio of net investment income after expenses to average net assets................... 1.04%
Portfolio turnover rate............................................................... 12.73%
Average commission rate paid (a)...................................................... $ 0.08
========
</TABLE>

- ---------------

(a) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
fund for which commissions were charged.

* Commencement of operations.

See notes to financial statements.

B-78
<PAGE> 138
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL AGGRESSIVE GROWTH FUND INVESTOR SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, JUNE 24, 1993*
------------------------------------------ THROUGH
1997 1996 1995 1994 SEPTEMBER 30, 1993
------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING.................... $11.31 $12.37 $ 9.94 $10.47 $10.00
INVESTMENT ACTIVITIES:
Net investment loss......................... (0.20) (0.17) (0.10) (0.13) (0.03)
Net realized and unrealized gain (loss)
on investments............................ 3.86 0.01 2.53 (0.36) 0.50
------- ------- ------- ------- -------
Total from Investment Activities........ 3.66 (0.16) 2.43 (0.49) 0.47
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net realized gains..................... (0.27) (0.90) 0.00 (0.04) 0.00
------- ------- ------- ------- -------
Total Distributions..................... (0.27) (0.90) 0.00 (0.04) 0.00
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING....................... $14.70 $11.31 $12.37 $ 9.94 $10.47
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)........... 32.95% (1.13)% 24.35% (4.74)% 4.70%
Net Assets at end of period (000)........... $9,792 $9,669 $10,434 $9,460 $6,320
Ratio of expenses to average net assets..... 1.86% 1.95% 2.24% 2.51% 0.91%
Ratio of net investment loss after
expenses to average net assets............ (1.50)% (1.52)% (0.92)% (1.50)% (0.53)%
Ratio of incurred expenses to average net
assets (a)................................ 1.93% 2.17% 2.25% 2.51% 0.91%
Ratio of net investment loss after incurred
expenses to average net assets (a)........ (1.57)% (1.75)% (0.93)% (1.50)% (0.53)%
Portfolio turnover rate..................... 34.43% 48.60% 80.35% 95.70% 31.15%
Average commission rate paid (b)............ $ 0.07 $ 0.07 $ 0.07 $ 0.09 $ 0.08
</TABLE>

- ---------------

* Commencement of operations.

(a) During the period certain fees were voluntarily waived. Had the fees been
charged, the effective ratio would reflect the incurred expenses as
indicated above.

(b) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
fund for which commissions were charged.

See notes to financial statements.

B-79
<PAGE> 139

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL AGGRESSIVE GROWTH FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
THROUGH
SEPT. 30, 1997
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING............................................................ $11.62
INVESTMENT ACTIVITIES:
Net investment loss................................................................. (0.15)
Net realized and unrealized gain (loss)
on investments.................................................................... 3.24
-------
Total from Investment Activities................................................ 3.09
-------
DISTRIBUTIONS:
From net realized gains............................................................. 0.00
-------
Total Distributions............................................................. 0.00
-------
NET ASSET VALUE, ENDING............................................................... $14.71
=======
RATIOS/SUPPLEMENTAL DATA:
Total Return........................................................................ 26.59%
Net Assets at end of period (000)................................................... $4,062
Ratio of expenses to average net assets............................................. 2.11%
Ratio of net investment loss after
expenses to average net assets.................................................... (1.71)%
Portfolio turnover rate............................................................. 34.43%
Average commission rate paid (a).................................................... $ 0.07
</TABLE>

- ---------------

* Commencement of operations.

(a) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
fund for which commissions were charged.

See notes to financial statements.

B-80
<PAGE> 140

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL BALANCED FUND INVESTOR SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, JUNE 24, 1993*
---------------------------------------------- THROUGH
1997 1996 1995 1994 SEPTEMBER 30, 1993
------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING................ $ 11.86 $ 11.52 $ 9.90 $ 10.13 $ 10.00
INVESTMENT ACTIVITIES:
Net investment income................... 0.27 0.41 0.34 0.23 0.02
Net realized and unrealized gain (loss)
on investments........................ 2.40 0.73 1.67 (0.20) 0.12
-------- -------- -------- -------- --------
Total from Investment Activities.... 2.67 1.14 2.01 0.03 0.14
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income.............. (0.24) (0.41) (0.35) (0.23) (0.01)
From net realized gains................. (1.06) (0.39) (0.04) (0.03) 0.00
-------- -------- -------- -------- --------
Total Distributions................. (1.30) (0.80) (0.39) (0.26) (0.01)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING................... $ 13.23 $ 11.86 $ 11.52 $ 9.90 $ 10.13
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)....... 24.71% 10.26% 20.76% 0.37% 1.40%
Net Assets at end of period (000)....... $15,616 $14,345 $14,535 $13,973 $ 10,811
Ratio of expenses to average net
assets................................ 1.44% 1.64% 1.94% 2.07% 0.70%
Ratio of net investment income after
expenses to average net assets........ 2.23% 3.54% 3.24% 2.44% 0.35%
Ratio of incurred expenses to average
net assets (a)........................ 1.50% 1.86% 1.95% 2.07% 0.70%
Ratio of net investment income after
incurred expenses to average net
assets (a)............................ 2.17% 3.32% 3.23% 2.44% 0.35%
Portfolio turnover rate................. 61.23% 18.34% 37.62% 59.09% 60.67%
Average commission rate paid (b)........ $ 0.09 $ 0.09 $ 0.09 $ 0.10 $ 0.10
</TABLE>

- ---------------

* Commencement of operations.

(a) During the period certain fees were voluntarily waived. Had the fees been
charged, the effective ratio would reflect the incurred expenses as
indicated above.

(b) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.

See notes to financial statements.

B-81
<PAGE> 141

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CARDINAL BALANCED FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
THROUGH
SEPT. 30, 1997
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING............................................................ $ 11.16
INVESTMENT ACTIVITIES:
Net investment income............................................................... 0.16
Net realized and unrealized gain (loss) on investments.............................. 2.08
--------
Total from Investment Activities................................................ 2.24
--------
DISTRIBUTIONS:
From net investment income.......................................................... (0.17)
--------
Total Distributions............................................................. (0.17)
--------
NET ASSET VALUE, ENDING............................................................... $ 13.23
========
RATIOS/SUPPLEMENTAL DATA:
Total Return........................................................................ 20.17%
Net Assets at end of period (000)................................................... $ 1,708
Ratio of expenses to average net assets............................................. 1.51%
Ratio of net investment income after expenses to average net assets................. 1.99%
Portfolio turnover rate............................................................. 61.23%
Average commission rate paid (a).................................................... $ 0.09
</TABLE>

- ---------------

* Commencement of operations.

(a) Represents the total amount of commissions paid in portfolio equity
transactions divided by the total number of shares purchased and sold by the
Fund for which commissions were charged.

See notes to financial statements.

B-82
<PAGE> 142

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT OBLIGATIONS FUND INVESTOR SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING................... $ 8.05 $ 8.18 $ 7.96 $ 8.63 $ 8.95
INVESTMENT ACTIVITIES:
Net investment income...................... 0.61 0.60 0.64 0.66 0.74
Net realized and unrealized gain (loss) on
investments.............................. 0.11 (0.12) 0.22 (0.68) (0.32)
-------- -------- -------- -------- --------
Total from Investment Activities......... 0.72 0.48 0.86 (0.02) 0.42
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income................. (0.57) (0.60) (0.64) (0.65) (0.74)
Tax return of capital...................... 0.00 (0.01) 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total Distributions...................... (0.57) (0.61) (0.64) (0.65) (0.74)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING...................... $ 8.20 $ 8.05 $ 8.18 $ 7.96 $ 8.63
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load).......... 9.28% 6.04% 11.27% (0.27)% 4.83%
Net Assets at end of period (000).......... $120,342 $133,298 $151,711 $169,529 $208,883
Ratio of expenses to average net assets.... 1.01% 0.78% 0.76% 0.75% 0.73%
Ratio of net investment income after
charged expenses to average net assets... 7.06% 7.39% 7.93% 7.88% 8.32%
Ratio of incurred expenses to average net
assets (a)............................... 1.08% 0.88% 0.76% 0.75% 0.73%
Ratio of net investment income after
incurred expenses to average net assets
(a)...................................... 6.99% 7.29% 7.93% 7.88% 8.32%
Portfolio turnover rate.................... 34.53% 33.58% 36.71% 21.95% 24.94%
</TABLE>

- ---------------

<TABLE>
<S> <C>
(a) During the period certain fees were voluntarily waived. Had the fees been charged, the effective ratio would reflect the
incurred expenses as indicated above.
</TABLE>

See notes to financial statements.

B-83
<PAGE> 143

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
THROUGH
SEPT. 30, 1997
-----------------------
<S> <C>
NET ASSET VALUE, BEGINNING........................................................... $ 8.09
INVESTMENT ACTIVITIES:
Net investment income.............................................................. 0.42
Net realized and unrealized gain (loss) on investments............................. 0.12
-------
Total from Investment Activities................................................. 0.54
-------
DISTRIBUTIONS: 0.43
From net investment income......................................................... 0.00
-------
Total Distributions.............................................................. 0.43
-------
NET ASSET VALUE, ENDING.............................................................. $ 8.20
=======
RATIOS/SUPPLEMENTAL DATA:
Total Return....................................................................... 6.86%
Net Assets at end of period (000).................................................. $ 5,803
Ratio of expenses to average net assets............................................ 0.93%
Ratio of net investment income after charged expenses to average net assets........ 7.00%
Portfolio turnover rate............................................................ 34.53%
</TABLE>

- ---------------

* Commencement of operations.

See notes to financial statements.

B-84
<PAGE> 144

APPENDIX

Commercial Paper Ratings. Commercial paper ratings of Standard & Poor's
Corporation ("S&P") are current assessments of the likelihood of timely payment
of debts having original maturities of no more than 365 days. Commercial paper
rated A-1 by S&P indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics are denoted A-1+. Commercial paper rated A-2
by S&P indicates that capacity for timely payment on issues is strong. However,
the relative degree of safety is not as high as for issues designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of Prime-1 rated issuers, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variations.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.

Commercial paper rated F-1 by Fitch Investors Service ("Fitch") is
regarded as having the strongest degree of assurance for timely payments.
Commercial paper rated F-2 by Fitch is regarded as having an assurance of timely
payment only slightly less than the strongest rating, i.e., F-1.

The plus (+) sign is used after a rating symbol to designate the
relative position of an issuer within the rating category.

Corporate Debt Ratings. A S&P corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated A has a strong capacity to
pay interest and repay principal although it is somewhat more susceptible to
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories. Debt
rated BB and

A-1

<PAGE> 145

B is regard as having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the lease degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions. Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.

The following summarizes the six highest ratings used by Moody's for
corporate debt. Bonds that are rated Aaa by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Bonds
that are rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities. Bonds that are
rated A by Moody's possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Bonds that
are rated Baa by Moody's are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds that are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated

A-2

<PAGE> 146

B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

Moody's applies numerical modifiers (1, 2, and 3) with respect to bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.

The following summarizes the six highest long-term debt ratings by Duff.
Debt rated AAA has the highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury debt. Debt rated AA
has a high credit quality and protection factors are strong. Risk is modest but
may vary slightly from time to time because of economic conditions. Debt rated A
has protection factors that are average but adequate. However, risk factors are
more variable and greater in periods of economic stress. Debt rated BBB has
below average protection factors but is still considered sufficient for prudent
investment. However, there is considerable variability in risk during economic
cycles. Debt rated BB is below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category. Debt rated B is below
investment grade and possesses risk that obligations will not be met when due.
Financial protection factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists for frequent
changes in the rating within this category or into a higher or lower rating
grade.

To provide more detailed indications of credit quality, the ratings from
AA to B may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.

The following summarizes the six highest long-term debt ratings by Fitch
(except for AAA ratings, plus or minus signs are used with a rating symbol to
indicate the relative position of the credit within the rating category). Bonds
rated AAA are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events. Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally

A-3

<PAGE> 147

rated "F-1+." Bonds rated as A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings. Bonds
rated BBB are considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore,
impair timely payment. The likelihood that the ratings for these bonds will fall
below investment grade is higher than for bonds with higher ratings. Bonds rated
BB are considered speculative. The obligor's ability to pay interest and repay
principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements. Bonds rated B are
considered highly speculative. While bonds in this class are currently meeting
debt service requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of safety and the
need for reasonable business and economic activity throughout the life of the
issue.

The following summarizes IBCA's six highest long-term debt ratings.
Obligations rated AAA are those for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly. Obligations
rated AA are those for which there is a very low expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial. Adverse
changes in business, economic, or financial conditions may increase investment
risk albeit not very significantly. Obligations rated A are those for which
there is a low expectation of investment risk. Capacity for timely repayment of
principal and interest is strong, although adverse changes in business, economic
or financial conditions may lead to increased investment risk. Obligations rated
BBB are those for which there is currently a low expectation of investment risk.
Capacity for timely repayment of principal and interest is adequate, although
adverse changes in business, economic, or financial conditions are more likely
to lead to increased investment risk than for obligations in other categories.
Obligations rated BB are those for which there is a possibility of investment
risk developing. Capacity for timely repayment of principal and interest exists,
but is susceptible over time to adverse changes in business, economic or
financial conditions. Obligations rated B are those for which investment risk
exists. Timely repayment of principal and interest is not sufficiently protected
against adverse changes in business, economic or financial conditions.

A-4

<PAGE> 148

The following summarizes Thomson's description of its six highest
long-term debt ratings (Thomson may include a plus (+) or minus (-) designation
to indicate where within the respective category the issue is placed). AAA is
the highest category and indicates that the ability to repay principal and
interest on a timely basis is very high. AA is the second highest category and
indicates a superior ability to repay principal and interest on a timely basis
with limited incremental risk versus issues rated in the highest category. A is
the third highest category and indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
BBB is the lowest investment grade category and indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than obligations
with higher ratings. While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations. Issuer rated B show a higher degree of uncertainty and
therefore greater likelihood of default that higher-rated issuers. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis.

Definitions of Certain Money Market Instruments

Commercial Paper

Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.

Certificates of Deposit

Certificates of Deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.

Bankers' Acceptances

Bankers' acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for specific merchandise, which
are "accepted" by a bank, meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on maturity.

U.S. Treasury Obligations

U.S. Treasury Obligations are obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
Government. These obligations may include

A-5

<PAGE> 149

Treasury bills, notes and bonds, and issues of agencies and instrumentalities of
the U.S. Government, provided such obligations are guaranteed as to payment of
principal and interest by the full faith and credit of the U.S. Government.

U.S. Government Agency and Instrumentality Obligations

Obligations of the U.S. Government include Treasury bills, certificates
of indebtedness, notes and bonds, and issues of agencies and instrumentalities
of the U.S. Government, such as the Government National Mortgage Association,
the Export-Import Bank of the United States, the Tennessee Valley Authority, the
Farmers Home Administration, the Federal Home Loan Banks, the Federal
Intermediate Credit Banks, the Federal Farm Credit Banks, the Federal Land
Banks, the Federal Housing Administration, the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation, and the Student Loan
Marketing Association. Some of these obligations, such as those of the
Government National Mortgage Association and the Export-Import Bank of the
United States, are supported by the full faith and credit of the U.S. Treasury;
others, such as those of the Federal National Mortgage Association, are
supported by the right of the issuer to borrow from the Treasury; others, such
as those of the Student Loan Marketing Association, are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks, are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S.
Government-sponsored instrumentalities if it is not obligated to do so by law.

A-6