2 THE CARDINAL FUND INC. SUPPLEMENT DATED DECEMBER 11, 1995, TO PROSPECTUS DATED FEBRUARY 1, 1995 Capitalized terms used in this Supplement have the meaning assigned to them in the Prospectus. The Fund has entered into an Agreement and Plan of...

EXHIBIT (17)(c)

THE CARDINAL FUND INC.

SUPPLEMENT DATED DECEMBER 11, 1995,
TO PROSPECTUS DATED FEBRUARY 1, 1995

Capitalized terms used in this Supplement have the meaning assigned to them
in the Prospectus.

The Fund has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of December 1, 1995 (the "Plan"), with The Cardinal Group,
an Ohio business trust (the "Group"). Pursuant to the Plan, The Cardinal Fund, a
series of the Group (the "Acquiring Fund"), would acquire all of the assets of
the Fund in exchange for the assumption of all of the Fund's liabilities and a
number of full and fractional shares of the Acquiring Fund having an aggregate
net asset value equal to the Fund's net assets (the "Reorganization"). The Fund
would then be liquidated, and the shares of the Acquiring Fund would be
distributed to Fund shareholders.

The Reorganization is subject to certain regulatory approvals and to
approval by the shareholders of the Fund at a special Shareholders Meeting
currently expected to be held in February, 1996. If the shareholders approve the
Reorganization, it is expected that the Reorganization would be effected on or
about March 31, 1996; however, the Reorganization may be effected on such
earlier or later date as the Group and the Fund may determine. There can be no
assurance that the Reorganization will take place when or as currently proposed.

The following paragraph is added to the cover page of this Prospectus:

THE SHARES OF THE 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 following two sentences are added at the end of the second paragraph
under the heading "WHO MANAGES MY INVESTMENT IN THE FUND? -- Investment Adviser"
on pages 13 and 14 of the Prospectus:

As of December 22, 1995, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ will be primarily responsible for
the day-to-day management of the Fund's portfolio. ▇▇. ▇▇▇▇▇▇▇▇▇▇ has been
a Vice President and Portfolio Manager for The Ohio Company since October,
1994. Prior thereto, and since February, 1984, ▇▇. ▇▇▇▇▇▇▇▇▇▇ served as
Second Vice-President -- Investments for Midland Mutual Life Insurance
Company, Columbus, Ohio.

The Prospectus Supplement supersedes in its entirety the prospectus
supplement dated February 22, 1995.

INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
3

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PROSPECTUS
[LOGO]
THE CARDINAL FUND INC.

The Cardinal Fund Inc. (the "Fund") is a diversified, open-end, management
investment company. The primary investment objective of the Fund is to achieve
long-term growth of capital and income through selective participation in the
long-term progress of American businesses and industries. The policy of the Fund
is generally to invest in equity securities. Current income, while a factor in
portfolio selection, is secondary to the Fund's primary objective. There can be
no assurance that the Fund's objective will be achieved.
--------------------------------------------------------------------------------

For further information regarding the Fund or for assistance
in opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed
to the Fund at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing in the Fund. This Prospectus
should be retained for future reference. A Statement Of Additional Information
respecting the Fund dated February 1, 1995, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. Such Statement
is available upon request without charge from the Fund at the above address or
by calling one of the phone numbers provided above.

Investors should read and retain this Prospectus for future reference.

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

THE OHIO COMPANY

The date of this Prospectus is February 1, 1995

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4

--------------------------------------------------------------------------------
KEY FEATURES
--------------------------------------------------------------------------------

PROFESSIONAL MANAGERS.......... The Fund's portfolio is fully managed by professional
portfolio managers. (See page 13.)
DIVERSIFICATION................ The Fund's portfolio of securities represents an interest
in many companies and industries and therefore provides a
diversification of risk.
REDUCED SALES CHARGE........... An investor will pay a reduced sales charge for large
investments. (See page 8.)
LOW INITIAL INVESTMENT......... An investor can acquire shares of a portfolio of common
stocks with a smaller investment than would be needed to
purchase a similar portfolio directly.
FLEXIBILITY.................... You may switch once each calendar quarter from one mutual
fund to another within the Cardinal Group of Funds as
your personal circumstances or market conditions dictate.
(See pages 14 and 15.)
RETIREMENT PROGRAMS............ The Fund is a permissible investment for qualified
retirement plans.
DIVIDEND REINVESTMENT.......... You may reinvest dividends, capital gains or both in
additional shares of the Fund at no charge. (See pages 4
and 10.)
ACH PROCESSING................. Investors may use Automated Clearing House ("ACH")
processing for subsequent purchases of shares,
redemptions, and/or distributions paid. (See page 14.)

2
5

--------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
--------------------------------------------------------------------------------

SHARES OFFERED................. The Fund has authorized 30,000,000 shares of common
stock, without par value (the "Shares"), all of a single
class. (See page 15.)
OFFERING PRICE & SALES
CHARGE....................... The public offering price is equal to net asset value per
share plus a sales charge equal to 4.50% of the public
offering price (4.71% of net amount invested) reduced on
investments of $100,000 or more (see page 8) and waived
if purchasers are Qualifying Plans for whom The Ohio
Company serves as a trustee or investment adviser. (See
page 10.)
MINIMUM PURCHASE............... $1,000 minimum initial investment and $50 minimum subse-
quent investments. (See pages 7 and 8.)
TYPE OF COMPANY................ Diversified, open-end, management investment company,
commonly known as a mutual fund. Organized as an Ohio
corporation on September 16, 1966. (See page 6.)
INVESTMENT OBJECTIVE........... Long-term growth of capital and income through selective
participation in the long-term progress of American
business and industry. (See page 6.)
INVESTMENT POLICIES............ The Fund generally invests in equity securities. Current
income, while a factor in portfolio selection, is
secondary to the primary objective. (See pages 6 and 7.)
RISK FACTORS AND SPECIAL
CONSIDERATIONS............... An investment in a mutual fund such as the Fund involves
a certain amount of risk, including market risk, and may
not be suitable for all investors. Some investment
policies of the Fund may entail certain risks, including
the use of repurchase agreements. (See "WHAT ARE THE
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND?" on pages
6 and 7.)
INVESTMENT ADVISER............. The Fund has entered into an Investment Advisory Agree-
ment with The Ohio Company. Cardinal Management Corp., a
wholly-owned subsidiary of The Ohio Company, acts as the
Fund's transfer agent, and acts as investment adviser to
and transfer agent for Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, Cardinal
Government Obligations Fund, Cardinal Balanced Fund and
Cardinal Aggressive Growth Fund. (See page 13.)
MANAGEMENT FEE................. The annual rate is .5% of the average daily net assets of
the Fund. (See page 14.)
DISTRIBUTIONS.................. Dividends and distributions are made with such frequency
as the Fund shall determine. (See page 10.)
REDEMPTION..................... At net asset value per share without charge, except that
broker-dealers may charge a service fee for assisting in
a redemption. (See page 11.)
TRANSFER AGENT................. Cardinal Management Corp. (See page 14.)

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6

--------------------------------------------------------------------------------
FEE TABLE
--------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................... 0%
Deferred Sales Load
(as a percentage of original purchase price or redemption
proceeds, as applicable)..................................... 0%
Redemption Fees
(as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................... $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................................ .50%
12b-1 Fees..................................................... .00
Other Expenses................................................. .22
--------
Total Fund Operating Expenses.................................. .72%
=================

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------- ---------- ---------- ---------- ----------

You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period:................ $ 52 $ 67 $ 83 $130

The purpose of the above table is to assist a potential purchaser of the Fund's
Shares in understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. See "WHO MANAGES MY INVESTMENT IN THE
FUND?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Fund. The example and expenses above
reflect current fees. THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.

4
7

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1994, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon, together with certain financial
statements, are contained in the Fund's Statement Of Additional Information and
which may be obtained by shareholders and prospective investors.

FINANCIAL HIGHLIGHTS FOR EACH SHARE OF CAPITAL STOCK

OUTSTANDING THROUGHOUT EACH PERIOD*:

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------

Net asset value, Beginning of period................ $ 12.91 $ 12.95 $ 11.88 $ 9.28 $ 11.75
Income from investment operations:
Net investment income............................. .31 .32 .35 .35 .42
Net gains or losses on securities (both realized
and unrealized)................................. .12 .55 1.37 2.70 (1.87)
--------- --------- --------- --------- ---------
Total from investment operations.................. .43 .87 1.72 3.05 (1.45)
--------- --------- --------- --------- ---------
Less Distributions:
Dividends (from net investment income)............ (.33) (.29) (.36) (.38) (.53)
Distributions (from capital gains)................ (.28) (.62) (.29) (.07) (.49)
Returns of capital................................ -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions............................... (.61) (.91) (.65) (.45) (1.02)
Net asset value, End of period...................... $ 12.73 $ 12.91 $ 12.95 $ 11.88 $ 9.28
========= ========= ========= ========= =========
Total Return........................................ 3.38% 6.98% 15.05% 33.54% (13.42)%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 246,581 $ 282,125 $ 261,392 $ 221,428 $ 168,184
Ratio of expenses to average net assets............. 0.72% 0.68% 0.67% 0.67% 0.74%
Ratio of net investment income to average net
assets............................................ 2.40% 2.46% 2.83% 3.15% 3.98%
Portfolio Turnover Rate............................. 23.20% 11.11% 6.22% 33.27% 27.1%

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1989 1988 1987 1986 1985
--------- --------- --------- --------- ---------

Net asset value, Beginning of period................ $ 10.38 $ 11.73 $ 10.35 $ 8.55 $ 7.95
Income from investment operations:
Net investment income............................. .41 .37 .33 .22 .24
Net gains or losses on securities (both realized
and unrealized)................................. 1.73 (.82) 2.05 2.37 1.11
--------- --------- --------- --------- ---------
Total from investment operations.................. 2.14 (.45) 2.38 2.59 1.35
--------- --------- --------- --------- ---------
Less Distributions:
Dividends (from net investment income)............ (.39) (.47) (.28) (.23) (.24)
Distributions (from capital gains)................ (.38) (.43) (.72) (.56) (.51)
Returns of capital................................ -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions............................... (.77) (.90) (1.00) (.79) (.75)
Net asset value, End of period...................... $ 11.75 $ 10.38 $ 11.73 $ 10.35 $ 8.55
========= ========= ========= ========= =========
Total Return........................................ 22.04% (3.46)% 25.00% 32.56% 18.77%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 174,156 $ 130,978 $ 136,619 $ 84,972 $ 34,501
Ratio of expenses to average net assets............. 0.70% 0.73% 0.75% 0.89% 0.89%
Ratio of net investment income to average net
assets............................................ 3.93% 3.77% 3.32% 3.12% 2.91%
Portfolio Turnover Rate............................. 23.2% 12.3% 13.2% 10.3% 14.4%

* The Information included in the Financial Highlights has been restated to
reflect a three-for-two stock split made on January 11, 1990.

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

5
8

Pursuant to a Revolving Credit Agreement between the Fund and The Fifth Third
Bank dated April 10, 1992 (the "Loan Agreement"), the Fund may borrow money from
The Fifth Third Bank for temporary purposes, such as to accommodate abnormally
heavy redemption requests, and only in an amount not exceeding the lesser of 10%
of the Fund's gross assets taken at cost or 5% of the Fund's gross assets taken
at value. The table below sets forth certain information concerning the Loan
Agreement.

AVERAGE AVERAGE NUMBER AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT OF FUND'S SHARES AMOUNT OF
YEAR ENDED OUTSTANDING AT OUTSTANDING OUTSTANDING DEBT PER SHARE
SEPTEMBER 30, END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------------- ------------------ ------------------ ------------------ ------------------

1994 $0 $4,565 20,614,531 $0.0002214
1993............ $0 $1,018 21,018,555 $0.0000484

From time to time the Fund advertises "average annual total return" and
"cumulative return." SUCH TOTAL RETURN FIGURES AND CUMULATIVE RETURN FIGURES ARE
BASED UPON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The average annual total return advertised by the Fund refers to
the return generated by an investment in the Fund over one-, five-and ten-year
periods and from September 30, 1975 (which periods will be stated in the
advertisement). 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 is
deducted from the initial investment at the time of investment. The cumulative
return advertised refers to the total return on a hypothetical investment over
the relevant period and equates the amount of an initial investment in the Fund
to the amount redeemable at the end of that period assuming that any dividends
and distributions are immediately reinvested and the maximum sales charge is
deducted from the initial investment at the time of investment. If the sales
charge were not deducted, the average annual total return and cumulative return
advertised would be higher.

Investors may also judge the performance of the Fund by comparing 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 ▇▇▇▇▇ & 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 the Consumer Price Index and to other 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 and comparisons to such indices or
data may be included in advertisements and in reports to shareholders.

Further information about the performance of the Fund is contained in the Fund's
Annual Report to Shareholders which may be obtained without charge by contacting
the Fund at the telephone numbers set forth on the cover page of this
Prospectus.

--------------------------------------------------------------------------------
WHAT IS THE FUND?
--------------------------------------------------------------------------------

The Fund was organized on September 16, 1966, as an Ohio corporation and is
registered and operates as a diversified, open-end management investment company
as defined in the Investment Company Act of 1940 and commonly known as a mutual
fund.

--------------------------------------------------------------------------------
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES OF THE FUND?
--------------------------------------------------------------------------------

The investment objective of the Fund is to achieve long-term growth of capital
and income through selective participation in the long-term progress of American
business and industries. The investment objective with respect to the Fund is a
fundamental policy and as such may not be changed without a vote

6
9

of the holders of a majority of the outstanding Shares of the Fund. The policy
of the Fund is generally to invest in equity securities of companies which, in
the opinion of The Ohio Company, are growth oriented. The securities purchased
by the Fund are traded in either established over-the-counter markets or on
national exchanges and are issued by companies having a market capitalization of
at least $10 million. Current income, while a factor in portfolio selection, is
secondary to the primary objective. This policy of normally investing in equity
securities believed to have a potential for long-term capital appreciation means
that the assets of the Fund will generally be subject to greater risk than may
be involved in securities which do not have such growth characteristics. It is
recognized, however, that there may be times when, as a temporary, defensive
measure, the Fund's equity position should be reduced. At such times, and
otherwise for cash management purposes, the Fund may hold its assets in cash or
invest its assets in investment grade debt securities, U.S. Government
securities, repurchase agreements and preferred stock.

A repurchase agreement is an agreement under which an investor (such as the
Fund) purchases a security 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 Fund's investment adviser deems creditworthy under
guidelines approved by the Fund's Board of Directors. At the time of purchase,
the bank or securities dealer agrees to repurchase the underlying security 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. Securities subject to repurchase agreements
will be U.S. Government securities. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), repurchase agreements are considered to be loans by
the Fund. The Fund will only enter into a repurchase agreement where (i) the
underlying securities are of the type which the Fund's investment guidelines
would allow it to purchase directly, (ii) the market value of the underlying
security, including interest accrued, will be at all times equal to or exceed
the value of the repurchase agreement, and (iii) payment for the underlying
securities is made only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent. The Ohio
Company will be responsible for continuously monitoring such requirements. In
the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (a) possible decline in the value of the
underlying security during the period while the 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.

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 Ohio Company, 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 Statement of Additional Information.

The Fund is not intended to provide a complete and balanced investment program
for an investor. There is no guarantee that the investment objective of the Fund
will be realized.

--------------------------------------------------------------------------------
HOW DO I PURCHASE SHARES OF THE FUND?
--------------------------------------------------------------------------------

GENERAL

The Fund's Shares may be purchased at the public offering price through The Ohio
Company, principal underwriter of the Fund's Shares, at its address and
telephone number set forth on the cover page of this Prospectus, and through
other broker-dealers who are members of the National Association of Securities
Dealers, Inc. and have sales agreements with The Ohio Company.

7
10

Subsequent purchases of Shares of the Fund may be made by ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

The minimum initial investment for individuals is $1,000, except the initial
investment for an applicant investing by means of the Automatic Investment Plan
(see "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?") must be at least $50.
Subsequent investments must be in amounts of at least $50.

Due to the high cost of maintaining accounts, the Fund reserves the right to
redeem involuntarily Shares in any account at the then current net asset value
if at any time redemptions have reduced a shareholder's total investment to a
net asset value below $500. A shareholder will be notified in writing that the
value of the account is less than $500 and allowed 30 days to increase the
account to $500 before the redemption is processed. Proceeds of redemptions so
processed, including dividends declared to the date of redemption, will be
promptly paid to the shareholder. Shares of the Fund may be redeemed through a
securities dealer, investment adviser, agent or other fiduciary which may charge
a fee for its services in connection with the redemption. No redemption charge
is imposed by the Fund or by The Ohio Company, the Fund's principal distributor.

PUBLIC OFFERING PRICE

The public offering price of Shares of the Fund is the net asset value per share
next determined after receipt by The Ohio Company of an order and payment, plus
a sales charge as follows:

SALES CHARGE AS A PERCENTAGE
AS A OF OFFERING PRICE
PERCENTAGE ------------------------
AMOUNT OF OF THE NET SALES DEALER'S
SINGLE TRANSACTION AMOUNT INVESTED CHARGE CONCESSION
--------------------------------------------------- --------------- ---------- ----------

Less than $100,000................................. 4.71% 4.50% 4.00%
$100,000 but less than $250,000.................... 3.63 3.50 3.00
$250,000 but less than $500,000.................... 2.56 2.50 2.00
$500,000 but less than $1,000,000.................. 1.52 1.50 1.00
$1,000,000 or more................................. 0.50 0.50 0.40

(See "HOW IS NET ASSET VALUE CALCULATED?" for a description of the computation
of net asset value per share.)

The above charges on investments of $100,000 or more are applicable to purchases
made at one time by an individual, or an individual, his or her spouse and their
children not of legal age, or a trustee, guardian or other like fiduciary of
certain single trust estates or certain single fiduciary accounts.

No sales charge is imposed on purchases of Shares by officers, directors, and
employees of the Fund, or by full-time employees of The Ohio Company, who have
been such for at least 90 days or by qualified retirement plans for such
persons.

AUTOMATIC INVESTMENT PLAN

The Fund has made arrangements to enable you to make automatic monthly or
quarterly investments, in the minimum amount of $50 per transaction, from your
checking account. Assuming the cooperation of your financial institution, your
checking account therein will be debited to purchase Shares of the Fund on the
periodic basis you select. Confirmation of your purchase of Fund Shares will be
provided by the Fund. The debit of your checking account will be reflected in
the checking account statement you receive from your financial institution.
Please contact The Ohio Company for the appropriate form.

8
11

--------------------------------------------------------------------------------
MAY MY TAX SHELTERED RETIREMENT PLAN INVEST IN THE FUND?
--------------------------------------------------------------------------------

Shares of the Fund qualify for purchase in connection with the following tax
sheltered retirement plans:

-- Individual retirement account ("IRAs") plans

-- Simplified Employee Pension Plans

-- 403(b)(7) Custodial Plans sponsored by certain tax-exempt employers

-- Pension, profit-sharing and 401(k) plans qualifying under Section 401(a)
of the Internal Revenue Code.

The Ohio Company offers a wide range of services to assist employers in reducing
the cost and complexity of utilizing any of the above retirement programs. These
services include:

Consulting services
Prototype plan documents
Low-cost recordkeeping and IRS reporting
On-going employee educational programs
Investment consultation
Trust services

Please contact your local office of The Ohio Company or call ▇-▇▇▇-▇▇▇-▇▇▇▇
(inside Ohio) or 1-800-237-2170 (outside Ohio) to obtain complete information
regarding The Ohio Company's retirement plan services.

--------------------------------------------------------------------------------
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?
--------------------------------------------------------------------------------

LETTER OF INTENTION

If you (including your spouse and children not of legal age) intend to purchase
$100,000 or more of Shares of the Fund and of any fund of The Cardinal Group or
of Cardinal Government Obligations Fund, other members of the Cardinal family of
funds, which are sold with a sales charge (collectively, the "Cardinal Load
Funds") during any 13-month period, you may sign a letter of intention to that
effect obtained from The Ohio Company and pay the reduced sales charge
applicable to the total amount of shares to be so purchased. The 13-month period
during which the Letter of Intention is in effect will begin on the date of the
earliest purchase to be included. In addition, trustees, guardians or other like
fiduciaries of single trust estates or certain single fiduciary accounts may
take advantage of the quantity discounts pursuant to a letter of intention.

A letter of intention is not a binding obligation upon you to purchase the full
amount indicated. Shares purchased with the first 5% of such amount will be held
in escrow (while remaining registered in your name) to secure payment of the
highest sales charge applicable to the shares actually purchased. If the full
amount indicated is not purchased, such escrowed shares will be involuntarily
redeemed to pay the additional sales charge, if necessary. Dividends on escrowed
shares, whether paid in cash or reinvested in additional shares of the
applicable Cardinal Load Fund, are not subject to escrow. The escrowed shares
will not be available for disposal by you until all purchases pursuant to the
letter of intention have been made or the higher sales charge has been paid.
When the full amount indicated has been purchased, the escrow will be released.
To the extent that you purchase more than the dollar amount indicated on the
Letter of Intention and qualify for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the end of the
13-month period. The difference in sales charge will be, as you instruct, either
delivered to you in cash or used to purchase additional shares of the Cardinal
Load Fund designated by you subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases. This program, however, may be
modified or eliminated at any time or from time to time by the Group without
notice.

9
12

CONCURRENT PURCHASES

For purposes of qualifying for a lower sales charge, you have the privilege of
combining "concurrent purchases" of Shares of the Fund and of one or more of the
other Cardinal Load Funds. For example, if you concurrently purchase Shares of
the Fund at the total public offering price of $50,000 and shares of another
Cardinal Load Fund at the total public offering price of $50,000, the sales
charge would be that applicable to a $100,000 purchase as shown in the table
above. "Concurrent purchases," as described above, shall include the combined
purchases of you, your spouse and your children not of legal age. To receive the
applicable public offering price pursuant to this privilege, you must, at the
time of purchase, give The Ohio Company sufficient information to permit
confirmation of qualification. This privilege, however, may be modified or
eliminated at any time or from time to time by the Group without notice thereof.

RIGHTS OF ACCUMULATION

After your initial purchase of Shares you may also be eligible to pay a reduced
sales charge for your subsequent purchases of Shares where the total public
offering price of Shares then being purchased plus the then aggregate current
net asset value of Shares of the Fund and of shares of any Cardinal Load Fund
held in your account equals $100,000 or more. You would be able to purchase
Shares at the public offering price applicable to the total of (a) the total
public offering price of the Shares of the Fund then being purchased plus (b)
the then current net asset value of Shares of the Fund and of shares of any
other Cardinal Load Fund held in your account. For purposes of determining the
aggregate current net asset value of shares held in your account, you may
include shares then owned by your spouse and children not of legal age.

You may obtain additional information about the foregoing special purchase
method from The Ohio Company. You are responsible for notifying The Ohio Company
at the time of purchase when purchases may be accumulated to take advantage of
the reduced sales charge. This program, however, may be modified or eliminated
at any time or from time to time by the Fund without notice thereof.

--------------------------------------------------------------------------------
ARE THERE ANY SPECIAL PURCHASE PROGRAMS FOR CERTAIN RETIREMENT PLANS?
--------------------------------------------------------------------------------

No sales charge is imposed on purchases of Shares of the Fund by trusts
qualifying under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and by deferred compensation plans of state and local governments
and tax exempt organizations qualifying under section 457 or 403(b) of the Code
(collectively "Qualifying Plans"), so long as The Ohio Company serves as either
a trustee or an investment adviser for the applicable Qualifying Plans.
--------------------------------------------------------------------------------
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 Fund from time to time shall determine and from net income and net realized
capital gains of the Fund. It is the policy of the Fund to distribute, at least
annually, substantially all of its net investment income and to distribute
annually any net realized capital gains. Unless a shareholder specifically
requests otherwise, dividends and distributions will be made only in additional
Shares of the Fund and not in cash.

Shareholders may elect to receive cash distributions by using ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? - ACH Processing"
below.

10
13

--------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
--------------------------------------------------------------------------------

Investors may redeem Shares of the Fund at the net asset value per share next
determined following the receipt by the Fund's transfer agent, Cardinal
Management Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, of the
following: (a) written or telephonic notice to redeem, as described more fully
below, and (b) for Shares represented by certificates, either the share
certificates, properly endorsed, or properly executed stock powers. 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 and any share certificates or stock powers to
Cardinal Management Corp. without charge. Other broker-dealers may assist a
shareholder in redeeming his shares and may charge a fee for such services.

REDEMPTION BY MAIL

Shareholders may elect to redeem Shares of the Fund by submitting a written
request therefor to Cardinal Management Corp., the Fund's Transfer Agent at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. Cardinal Management Corp. will
request a signature guarantee by an eligible guarantor institution as described
below. However, a signature guarantee will not be required if (1) the redemption
check is payable to the Shareholder(s) of record, and (2) the redemption check
is mailed to the Shareholder(s) at the address of record, provided, however,
that the address of record has not been changed within the preceding 15 days.
For purposes of this policy, an "eligible guarantor institution" shall include
banks, brokers, dealers, credit unions, securities exchanges and associations,
clearing agencies and savings associations as those terms are defined in the
Securities Exchange Act of 1934. Cardinal Management Corp. reserves the right to
reject any signature guarantee if (1) it has reason to believe that the
signature is not genuine or (2) it has reason to believe that the transaction
would otherwise be improper.

REDEMPTION BY TELEPHONE

Shareholders may elect to redeem Shares of the Fund by calling the Fund at the
telephone numbers set forth on the front of this Prospectus. The Shareholder may
direct that the redemption proceeds be mailed to the address of record or
another address.

Neither the Fund nor its service providers will be liable for any loss, damages,
expense or cost arising out of any telephone redemption effected in accordance
with the Fund's telephone redemption procedures, acting upon instructions
reasonably believed to be genuine. The Fund will employ procedures designed to
provide reasonable assurances that instructions by telephone are genuine; if
these procedures are not followed, the Fund or its service providers may be
liable for any losses due to unauthorized or fraudulent instructions. These
procedures may include recording all phone conversations, sending confirmations
to Shareholders within 72 hours of the telephone transaction, and verification
of account name and account number or tax identification number. If, due to
temporary adverse conditions, investors are unable to effect telephone
transactions, Shareholders may also redeem their Shares by mail as described
above.

AUTOMATIC WITHDRAWAL

Shareholders may elect to have the proceeds from redemptions of Shares
transmitted to an authorized bank account at a Federal Reserve member bank
through ACH processing as described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED? - ACH Processing" below.

The Fund will make payment for redeemed Shares as promptly as practicable but in
no event more than seven days after receipt by Cardinal Management Corp. of the
foregoing notice and any share certificates and powers. The Fund reserves the
right to delay payment for the redemption of Shares where such Shares were
purchased with other than immediately available funds, but only until the
purchase payment has cleared (which may take fifteen or more days from the date
the purchase payment is received by the Fund). The purchase of Fund Shares by
wire transfer of federal funds would avoid any such delay.

11
14

The Fund 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?".

SYSTEMATIC WITHDRAWAL PLAN

If you are the owner of Shares of the Fund having a total value of $10,000 or
more at the current offering price, you may elect to redeem your Shares monthly
or quarterly in amounts of $50 or more, pursuant to the Fund's Systematic
Withdrawal Plan. Please contact The Ohio Company for the necessary form.

--------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
--------------------------------------------------------------------------------

The net asset value of the Fund is determined once daily as of 4:00 P.M.,
Columbus, Ohio time, on each business day the New York Stock Exchange is open
for business and on 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) where there is sufficient trading in the Fund's portfolio
securities that the net asset value might be materially affected by changes in
the value of the portfolio securities. The net asset value per share of the Fund
is computed by dividing the sum of the value of the Fund's portfolio securities
plus any cash and other assets (including interest and dividends accrued but not
received) minus all liabilities (including estimated accrued expenses) by the
total number of Shares then outstanding.

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 Quotations System ("NASDAQ") as of
the time of valuation on the day the securities are being valued. The Fund uses
one or more pricing services to provide such market prices. 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
Directors of the Fund.

Determination of the net asset value may be suspended at times when (a) trading
on the New York Stock Exchange is restricted or such Exchange is closed for
other than customary weekend and holiday closings, (b) an emergency as
determined by the Securities and Exchange Commission exists making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable, or (c) the Securities and Exchange Commission has by order
permitted such suspension.

--------------------------------------------------------------------------------
DOES THE FUND PAY FEDERAL INCOME TAX?
--------------------------------------------------------------------------------

The Fund intends to qualify as a "regulated investment company" under the Code
for so long as such qualification is in the best interest of the Fund's
shareholders. Qualification as a regulated investment company under the Code
requires, among other things, that the regulated investment company distribute
to its shareholders at least 90% of its investment company taxable income. The
Fund contemplates declaring as dividends 100% of the Fund's investment company
taxable income (before deduction of dividends paid).

A non-deductible 4% excise tax is imposed on regulated investment companies that
do not distribute in each calendar year (regardless of whether they otherwise
have a non-calendar taxable year) an amount equal to 98% of their ordinary
income for the calendar year plus 98% of their capital gain net income for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. If distributions
during a calendar year were less than the required amount, the Fund would be
subject to a nondeductible excise tax equal to 4% of the deficiency.

12
15

--------------------------------------------------------------------------------
WHAT ABOUT MY TAXES?
--------------------------------------------------------------------------------

It is expected that the Fund will distribute annually to shareholders all or
substantially all of the Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to shareholders for federal income tax
purposes, even if paid in additional Shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends received deduction, if any, received by the
Fund bear to its gross income.

Distribution by the Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain in
the year in which it is received, regardless of how long the shareholder has
held the Shares. Such distributions are not eligible for the dividends-received
deduction.

If the net asset value of a Share is reduced below the shareholder's cost of
that Share by the distribution of income or gain realized on the sale of
securities, the distribution is a return of invested principal, although taxable
as described above.

Prior to purchasing Shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of Shares prior to the record
date will have the effect of reducing the per share net asset value of the
Shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.

The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Fund and its shareholders. Potential
investors in the Fund are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situation.

Cardinal Management Corp. will inform shareholders at least annually of the
amount and nature of such income and capital gains.

--------------------------------------------------------------------------------
WHO MANAGES MY INVESTMENT IN THE FUND?
--------------------------------------------------------------------------------

Except where shareholder action is required by law, all of the authority of the
Fund is exercised under the direction of the Fund's Board of Directors, which is
empowered to elect officers and contract with and provide for the compensation
of agents, consultants and other professionals to assist and advise in the
operation of the Fund.

INVESTMENT ADVISER

The Fund has entered into an Investment Advisory Agreement with The Ohio
Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, an investment banking firm
organized in 1925. The Ohio Company is a member of the New York Stock Exchange,
the Midwest Stock Exchange, other regional stock exchanges and the National
Association of Securities Dealers, Inc. Through its wholly-owned subsidiary,
Cardinal Management Corp., The Ohio Company also acts as investment adviser to
Cardinal Government Securities Trust, Cardinal Tax Exempt Money Trust, Cardinal
Government Obligations Fund, Cardinal Balanced Fund and Cardinal Aggressive
Growth Fund. Descendants of H.P. and ▇.▇. ▇▇▇▇▇, deceased, and members of their
families, through their possession of a majority of a voting stock, may be
considered controlling persons of The Ohio Company.

In its capacity as investment adviser, and subject to the ultimate authority of
the Fund's Board of Directors, The Ohio Company is responsible for the overall
management of the Fund's business affairs. Since 1989,

13
16

▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ has been primarily responsible for the day-to-day management of
the Fund's portfolio. ▇▇. ▇▇▇▇▇▇▇▇ has been a portfolio manager with and an
officer of The Ohio Company since 1986.

For the Fund's fiscal year ended September 30, 1994, The Ohio Company received
compensation for its services provided under the Investment Advisory Agreement
of .5% of average net daily assets of the Fund during such year. The Ohio
Company may, however, periodically waive all or a portion of its advisory fee
with respect to the Fund to increase the net income 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.

TRANSFER AGENT

The Fund has entered into an Administration Agreement with Cardinal Management
Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, pursuant to which Cardinal
Management Corp. has agreed to act as the Fund's transfer agent, dividend
disbursing agent and administrator of plans of the Fund. In consideration of
such services, the Fund has agreed to pay Cardinal Management Corp. an annual
fee, paid monthly, equal to $18 per shareholder account plus out-of-pocket
expenses.

DISTRIBUTOR

The Fund has entered into a Distributor's Contract with The Ohio Company, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, pursuant to which Shares of the Fund
continuously will be offered on a best efforts basis by The Ohio Company and
dealers selected by The Ohio Company. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an officer and
director of both the Fund and The Ohio Company. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ are each an officer and director of the Fund and an officer of The Ohio
Company. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ is an officer of both the Fund and The Ohio
Company.

CUSTODIAN

The Fund has appointed The Fifth Third Bank ("Fifth Third") ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as the Fund's custodian. In such capacity, Fifth
Third will hold or arrange for the holding of all portfolio securities and other
assets acquired and owned by the Fund.

--------------------------------------------------------------------------------
WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED?
--------------------------------------------------------------------------------

ACH PROCESSING

The Fund now offers ACH privileges. Investors may use ACH processing to make
subsequent purchases, redeem Shares and/or electronically transfer distributions
paid on Fund Shares, in addition to the other methods described in this
Prospectus. ACH provides a method by which funds may be automatically
transferred to or from an authorized bank account at a Federal Reserve member
bank that is an ACH member. Please contact your representative if you are
interested in ACH processing.

EXCHANGE PRIVILEGE

Shareholders of the Fund may, provided the amount to be exchanged meets the
applicable minimum investment requirements and the exchange is made in states
where it is legally authorized, exchange Shares of the Fund for shares of:

Cardinal Aggressive Growth Fund,
an equity fund seeking appreciation
of capital (upon the payment of the
applicable sales charge);

14
17

Cardinal Balanced Fund,
a fund seeking current income
and long-term growth of both capital and
income (upon the payment of the
applicable sales charge);

Cardinal Government Obligations Fund,
a fund investing in securities issued
or guaranteed by the U.S. Government
or its agencies or instrumentalities
(upon the payment of the appropriate sales charge);

Cardinal Government Securities Trust,
a U.S. Government securities money market fund
(without payment of any sales charge); or

Cardinal Tax Exempt Money Trust,
a tax-free money market fund
(without payment of any sales charge).

Notwithstanding the foregoing and subject to the limitations contained in the
following paragraph, (i) exchanges by Qualifying Plans, for whom The Ohio
Company serves as either a trustee or an investment adviser, of Fund Shares for
shares of a Cardinal Load Fund may be completed without the payment of a sales
charge, and (ii) exchanges of Fund Shares by all other shareholders for shares
of a Cardinal Load Fund may be completed upon the payment of a sales charge
equal to the difference, if any, between the sales charge payable upon purchase
of shares of such Cardinal Load Fund and the sales charge previously paid on the
Fund Shares to be exchanged.

The foregoing exchange privilege may be exercised only once in each calendar
quarter and must be made by written or telephonic authorization. A shareholder
should notify The Ohio Company of his desire to make an exchange, and The Ohio
Company will furnish, as necessary, a prospectus and an application form to open
the account. Cardinal Management Corp., as transfer agent, will require that any
written authorization of an exchange include a signature guarantee as described
above under "HOW MAY I REDEEM MY SHARES? -- Redemption by mail." However, a
signature guarantee will not be required if the exchange is requested to be made
within the same account or into an existing account of the shareholder 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 Fund nor any of its service providers will be
liable for any loss, damages, expense or cost arising out of any telephone
exchange authorization to the extent and subject to the requirements set forth
under "HOW MAY I REDEEM MY SHARES? -- Redemption by telephone" above.

For tax purposes, an exchange is treated as a redemption and a new purchase.
However, a shareholder may not include any sales charge on Shares of the Fund
for purposes of calculating the gain or loss realized upon an exchange of those
securities within 90 days of their purchase.

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

--------------------------------------------------------------------------------
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
--------------------------------------------------------------------------------

The Fund has authorized 30,000,000 shares of Common Stock, without par value,
and all of a single class. Holders of Shares are entitled to one vote or
fraction thereof for each Share or fraction held. As provided by Ohio law, a
shareholder is entitled at any election of directors to cumulate his votes,
which means that a shareholder may give one director a total number of votes
equal to the number of Shares owned times the number of directors to be elected,
or distribute his votes on the same principle among two or more

15
18

directors. All Shares, when issued, are fully paid and nonassessable and have no
preemptive rights. Each outstanding Share or fraction thereof is entitled to
participate on a pro rata basis in dividends, distributions and net assets upon
liquidation. The Fund's Shares carry redemption rights as described under the
caption "HOW MAY I REDEEM MY SHARES?".

Unless a shareholder expressly requests otherwise, dividends and capital gain
distributions will be reinvested in Shares of the Fund and not paid in cash.

--------------------------------------------------------------------------------
WHO PROVIDES SHAREHOLDER REPORTS?
--------------------------------------------------------------------------------

The Fund will provide shareholders monthly a summary statement describing any
purchases and sales of Shares of the Fund and dividend and capital gain
distributions.

Holders of Shares should direct all inquiries concerning such matters to
Cardinal Management Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.

16
19

[THIS PAGE INTENTIONALLY LEFT BLANK]
20

[THIS PAGE INTENTIONALLY LEFT BLANK]
21

Investment Adviser and Distributor
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Transfer Agent and Dividend Paying
Agent
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Custodian
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Legal Counsel
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Independent Auditors
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
22

TABLE OF CONTENTS

PAGE
------

KEY FEATURES................................ 2
PROSPECTUS HIGHLIGHTS....................... 3
FEE TABLE................................... 4
FINANCIAL HIGHLIGHTS........................ 5
WHAT IS THE FUND?........................... 6
WHAT ARE THE INVESTMENT OBJECTIVE
AND POLICIES OF THE FUND?................. 6
HOW DO I PURCHASE SHARES OF THE FUND?....... 7
MAY MY TAX SHELTERED RETIREMENT PLAN INVEST
IN THE FUND?.............................. 9
HOW MAY I QUALIFY FOR QUANTITY DISCOUNTS?... 9
ARE THERE ANY SPECIAL PURCHASE PROGRAMS FOR
CERTAIN RETIREMENT PLANS?................. 10
WHAT DISTRIBUTIONS WILL I RECEIVE?.......... 10
HOW MAY I REDEEM MY SHARES?................. 11
HOW IS NET ASSET VALUE CALCULATED?.......... 12
DOES THE FUND PAY FEDERAL INCOME TAX?....... 12
WHAT ABOUT MY TAXES?........................ 13
WHO MANAGES MY INVESTMENT IN THE FUND?...... 13
WHAT OTHER SHAREHOLDER PROGRAMS ARE
PROVIDED?................................. 14
WHAT ARE MY RIGHTS AS A
SHAREHOLDER?.............................. 15
WHO PROVIDES SHAREHOLDER REPORTS?........... 16

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

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, 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 DISTRIBUTOR. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR 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
----------------------

February 1, 1995

THE OHIO COMPANY

THE
CARDINAL
FUND INC.

[LOGO]
23

CARDINAL GOVERNMENT OBLIGATIONS FUND

SUPPLEMENT DATED DECEMBER 11, 1995,
TO PROSPECTUS DATED FEBRUARY 1, 1995

Capitalized terms used in this Supplement have the meaning assigned to them
in the Prospectus.

The Fund has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of December 1, 1995 (the "Plan"), with The Cardinal Group,
an Ohio business trust (the "Group"). Pursuant to the Plan, Cardinal Government
Obligations Fund, a series of the Group (the "Acquiring Fund"), would acquire
all of the assets of the Fund in exchange for the assumption of all of the
Fund's liabilities and a number of full and fractional shares of the Acquiring
Fund having an aggregate net asset value equal to the Fund's net assets (the
"Reorganization"). The Fund would then be liquidated, and the shares of the
Acquiring Fund would be distributed to Fund shareholders.

The Reorganization is subject to certain regulatory approvals and to
approval by the shareholders of the Fund at the Annual Shareholders Meeting
currently expected to be held in February, 1996. If the shareholders approve the
Reorganization, it is expected that the Reorganization would be effected on or
about March 31, 1996; however, the Reorganization may be effected on such
earlier or later date as the Group and the Fund may determine. There can be no
assurance that the Reorganization will take place when or as currently proposed.

The following paragraph is added to the cover page of this Prospectus:

The Prospectus Supplement supersedes in its entirety the prospectus
supplement dated February 22, 1995.

INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
24

PROSPECTUS
--------------------------------------------------------------------------------
[LOGO]
CARDINAL GOVERNMENT OBLIGATIONS FUND

Cardinal Government Obligations Fund (the "Fund") is a diversified, open-end,
management investment company. The investment objective of the Fund is 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 objective will be
achieved.
--------------------------------------------------------------------------------

For further information regarding the Fund or for assistance
in opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed to the Fund
at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing in the Fund. This Prospectus
should be retained for future reference. A Statement of Additional Information
respecting the Fund dated February 1, 1995, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. Such Statement
is available upon request without charge from the Fund at the above address or
by calling the phone numbers provided above.

Investors should read and retain this Prospectus for future reference.

THE OHIO COMPANY

The date of this Prospectus is February 1, 1995

--------------------------------------------------------------------------------
25

--------------------------------------------------------------------------------
KEY FEATURES
--------------------------------------------------------------------------------

HIGH CURRENT YIELDS............ The Fund seeks the highest available current income
attainable from government securities, consistent with
its policy of protecting principal.
MONTHLY DISTRIBUTIONS.......... Monthly distributions are automatically reinvested in
additional shares of the Fund without charge or may be
received in cash. (See page 4.)
LOW INITIAL INVESTMENT......... An investor can acquire shares of a high quality
portfolio of government securities with a smaller
investment than would be needed to purchase a similar
portfolio directly. (See page 11.)
PROFESSIONAL MANAGERS.......... The Fund's portfolio is fully managed by professional
portfolio managers. (See page 17.)
FLEXIBILITY.................... You may switch once each calendar quarter from one mutual
fund to another within the Cardinal Group of Funds as
your personal circumstances or market conditions dictate.
(See page 18.)
ACH PROCESSING................. Investors may use Automated Clearing House ("ACH")
processing for subsequent purchases of shares,
redemptions, and/or distributions paid. (See page 18.)

2
26

--------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
--------------------------------------------------------------------------------

SHARES OFFERED................. Shares of beneficial interest of the Fund (the "Shares")
are of one class equal to all other shares and are
without par value. (See page 19.)
OFFERING PRICE AND
SALES CHARGE................. The public offering price is equal to net asset value per
share plus a sales charge equal to 4.50% of the public
offering price (4.71% of net amount invested), reduced on
investments of $100,000 or more (see page 11) and waived
if purchasers are Qualifying Plans for whom The Ohio
Company serves as a trustee or investment adviser. (See
page 14.)
MINIMUM PURCHASE............... $1,000 minimum initial investment and $50 minimum subse-
quent investments. (See page 11.)
TYPE OF COMPANY................ Diversified, open-end, management investment company,
commonly known as a mutual fund. Organized as an Ohio
business trust on November 15, 1985. (See page 7.)
INVESTMENT OBJECTIVE........... To maximize safety of capital and, consistent with such
objective, earn the highest available current income
obtainable from government securities. (See page 7.)
INVESTMENT POLICIES............ The Fund invests in obligations issued or guaranteed by
the U.S. Government 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 ▇▇▇▇▇▇ ▇▇▇ certificates. These
investments entail certain risks. (See pages 7 through
11.)
RISK FACTORS AND SPECIAL An investment in a mutual fund such as the Fund involves
CONSIDERATIONS............... 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
OBJECTIVE AND POLICIES OF THE FUND?" on pages 7 through
11.)
INVESTMENT ADVISER............. The Fund has entered into an Investment Advisory and
Management Agreement with Cardinal Management Corp., a
wholly-owned subsidiary of The Ohio Company (the "Ad-
viser"). The Adviser currently provides investment
advisory services for Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, Cardinal Balanced
Fund and Cardinal Aggressive Growth Fund. (See page 17.)
MANAGEMENT FEE................. The annual rate is .5% of the average daily net assets of
the Fund. (See page 17.)
DISTRIBUTIONS.................. Dividends are declared daily and distributions are
generally made monthly as the Fund shall determine.
Long-term capital gains, if any, are distributed
annually. (See page 14.)
REDEMPTION..................... At net asset value per share, without charge, except that
broker-dealers may charge a service fee for assisting in
a redemption. (See page 14.)
TRANSFER AGENT................. Cardinal Management Corp. (See page 17.)

3
27

--------------------------------------------------------------------------------
FEE TABLE
--------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................... 0%
Deferred Sales Load
(as a percentage of original purchase price or redemption
proceeds, as applicable)..................................... 0%
Redemption Fees
(as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................... $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................................ .50%
12b-1 Fees..................................................... .00
Other Expenses................................................. .25
--------
Total Fund Operating Expenses.................................. .75%
========

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------- ---------- ---------- ---------- ----------

You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: ............... $ 52 $ 68 $ 85 $134

The purpose of the above table is to assist a potential purchaser of the Fund's
Shares in understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. See "WHO MANAGES MY INVESTMENT IN THE
FUND?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Fund. THE FOREGOING EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.

4
28

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The following Financial Highlights with respect to each of the eight fiscal
years ended September 30, 1994, and the period from February 3, 1986, through
September 30, 1986, have been audited by KPMG Peat Marwick LLP, independent
auditors, whose report thereon together with certain financial statements, are
contained in the Fund's Statement of Additional Information and which may be
obtained by Shareholders and prospective investors.

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

YEARS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
-------- -------- -------- -------- -------- -------- -------- --------

Net asset value,
Beginning of period..... $ 8.63 $ 8.95 $ 8.99 $ 8.71 $ 8.71 $ 8.82 $ 8.60 $ 9.39
Income from investment
operations:
Net investment income... .66 .74 .80 .81 .84 .84 .86 .90
Net gains or losses on
securities (both
realized and
unrealized)........... (.68) (.32) (.04) .28 -- (.11) .22 (.80)
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............ (.02) .42 .76 1.09 .84 .73 1.08 .10
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends (from net
investment income).... (.65) (.74) (.80) (.81) (.84) (.84) (.86) (.89)
Distributions (from
capital gains)........ -- -- -- -- -- -- -- --
Returns of capital...... -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total Distributions..... (.65) (.74) (.80) (.81) (.84) (.84) (.86) (.89)
Net asset value, End of
period.................... $ 7.96 $ 8.63 $ 8.95 $ 8.99 $ 8.71 $ 8.71 $ 8.82 $ 8.60
========= ========= ========= ========= ========= ========= ========= =========
Total Return................ (0.27%) 4.83% 8.87% 13.07% 10.03% 8.81% 12.94% .82%
Ratios/Supplemental Data:
Net assets, End of period
(000) omitted............. $169,529 $208,883 $172,139 $128,569 $114,890 $118,958 $146,745 $147,491
Ratio of expenses to average
net assets**.............. 0.75% 0.73% 0.76% 0.76% 0.76% 0.73% 0.74% 0.49%
Ratio of net investment
income to average net
assets**.................. 7.88% 8.32% 8.89% 9.20% 9.55% 9.73% 9.64% 10.03%
Portfolio Turnover Rate..... 21.95% 24.94% 17.15% 34.81% 30.90% .92% 5.76% 45.71%

PERIOD FROM
FEBRUARY 3,
1986 (DATE OF
COMMENCEMENT
OF OPERATIONS)
THROUGH
SEPTEMBER 30,
1986*
---------------

Net asset value,
Beginning of period..... $ 9.53
Income from investment
operations:
Net investment income... .59
Net gains or losses on
securities (both
realized and
unrealized)........... (.11)
---------------
Total from investment
operations............ .48
---------------
Less Distributions:
Dividends (from net
investment income).... (.59)
Distributions (from
capital gains)........ --
Returns of capital...... (.03)
---------------
Total Distributions..... (.62)
Net asset value, End of
period.................... $ 9.39
===============
Total Return................ 5.63%(a)
Ratios/Supplemental Data:
Net assets, End of period
(000) omitted............. $ 129,629
Ratio of expenses to average
net assets**.............. 0.87%
Ratio of net investment
income to average net
assets**.................. 9.37%
Portfolio Turnover Rate..... 0%

---------------
*Fund operations commenced February 3, 1986. Through February 3, 1986, the only
transaction of the Fund was its initial capitalization through the sale of
10,493 Shares for $100,000 to Cardinal Management Corp., the investment
adviser to the Fund.

**Percentages for less than twelve month periods are annualized.

(a) This total return figure reflects aggregate total return instead of average
annual total return. Aggregate total return is calculated similarly to average
annual total return except that the return figure is aggregated over the
relevant period instead of annualized.

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

5
29

Pursuant to a Revolving Credit Agreement between the Fund and The Fifth Third
Bank dated April 10, 1992 (the "Loan Agreement"), the Fund may borrow money from
The Fifth Third Bank for temporary purposes, such as to accommodate abnormally
heavy redemption requests, and only in an amount not exceeding 5% of the value
of the Fund's total assets at the time of borrowing. The table below sets forth
certain information concerning the Loan Agreement.

1994 $0 $16,422 22,745,526 $0.0007220
1993 $0 $20,118 21,714,427 $0.0009265

From time to time the Fund advertises "yield," "average annual total return" and
"cumulative return." SUCH YIELD FIGURES AND TOTAL RETURN FIGURES ARE BASED UPON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment over a one-month period assuming reinvestment at a constant rate of
all income so generated is assumed to be generated for 12 consecutive one-month
periods. The "yield" of the Fund assumes the deduction of the maximum applicable
sales charge from the investment. If the sales charge were not deducted, the
yield of the Fund would be higher.

The average annual total return figures advertised by the Fund refer to the
return generated by an investment in the Fund over one- and five-year periods
and the period during which the Fund has been in operation (which periods will
be stated on the advertisement). The 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 reinvested. The return also assumes that the maximum applicable
sales charge is deducted from the initial investment at the time of investment.
The cumulative return advertised refers to the total return on a hypothetical
investment over the relevant period and equates the amount of an initial
investment in the Fund to the amount redeemable at the end of that period
assuming that any dividends and distributions are immediately reinvested and the
maximum sales charge is deducted from the initial investment at the time of
investment. If the sales charge were not deducted, the average annual total
return advertised would be higher.

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

Investors may also judge the performance of the Fund by comparing 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 ▇▇▇▇▇ & 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,
Consumer Reports, and U.S.A. Today. In addition to performance information,
general

6
30

information about the Fund that appears in a publication such as those mentioned
above may be included in advertisements and in reports to shareholders.

--------------------------------------------------------------------------------
WHAT IS THE FUND?
--------------------------------------------------------------------------------

The Fund was organized on November 15, 1985, as a business trust under the laws
of the State of Ohio and is registered and operates as a diversified, open-end,
management investment company as defined in the Investment Company Act of 1940
and as commonly known as a mutual fund. The Trustees of the Fund have divided
its beneficial ownership into an unlimited number of transferable units called
Shares, which will be offered and sold to the public through The Ohio Company,
principal underwriter of the Fund's Shares. The proceeds from such sale, net of
the applicable sales charge, will be invested by the Fund as set forth below.

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.

The Fund's investment objective is to maximize safety of capital and, consistent
with such objective, earn the highest available current income obtainable from
government securities. The current income earned from such government securities
may not be as great as the current income earned on lower quality securities
which have less liquidity and greater risk of nonpayment.

The Fund's investment objective is a fundamental policy of the Fund, which means
that it may be changed only with the approval of a majority of the Fund's
Shares. A majority of the Fund's Shares means the favorable vote, at an annual
or special meeting, of shareholders holding the lesser of (a) 67% or more of the
Shares at such meeting, if holders of more than 50% of the outstanding Shares
are represented in person or by proxy, and (b) more than 50% of the outstanding
Shares. There can be no assurance that the investment objective can be met.

The value of the Fund's portfolio securities, and therefore the Fund's net asset
value per share, may increase or decrease due to various factors, principally
changes in prevailing interest rates. Generally, a rise in interest rates will
result in a decrease in the Fund's net asset value per share, while a drop in
interest rates will result in an increase in the Fund's net asset value per
share.

Under normal market conditions, the Fund will invest substantially all, but in
no event less than 65% of the value of its total assets, in obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities ("U.S.
Government Securities"). The Fund may also invest, under normal market
conditions, in the fixed income instruments described below and in repurchase
agreements. It may also engage in the options transactions described below.

The Fund may, for daily cash management purposes, invest in high quality money
market securities and in repurchase agreements. In addition, the Fund may
invest, without limit, in any combination of U.S. Government Securities, money
market securities and repurchase agreements when, in the opinion of the Adviser,
it is determined that a temporary defensive position is warranted based upon
current market

7
31

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 and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal National Mortgage Association, are supported by the right
of the issuer to borrow from the Treasury; others are supported by the
discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Federal Farm Credit Banks or the
Federal Home Loan Mortgage Corporation, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government sponsored agencies or
instrumentalities if it is not obligated to do so by law. The Fund will invest
in the obligations of such agencies or instrumentalities only when the Adviser
believes that the credit risk with respect thereto is minimal.

Certain securities held by the Fund may have mortgage obligations backing such
securities, including among others, conventional thirty year fixed rate mortgage
obligations, graduated payment mortgage obligations, fifteen year mortgage
obligations and adjustable rate mortgage obligations. All of these mortgage
obligations can be used to create pass-through securities. A pass-through
security is created when mortgage obligations are pooled together and undivided
interests in the pool or pools are sold. The cash flow from the mortgage
obligations is passed through to the holders of the securities in the form of
periodic payments of interest, principal and prepayments (net of a service fee).
Prepayments occur when the 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 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 ▇▇▇▇▇▇ ▇▇▇ 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 in the discretion of the Fund's Adviser.
▇▇▇▇▇▇ Mae guarantees the timely payment of monthly installments of principal
and interest on its certificates, when due, whether or not payments are

8
32

received on the underlying mortgage loans, and the full faith and credit of the
United States is pledged to the timely payment by ▇▇▇▇▇▇ ▇▇▇ of such principal
and interest.

Although the mortgage loans in the pool underlying a ▇▇▇▇▇▇ Mae certificate will
have maturities of up to thirty years, the actual average life of the ▇▇▇▇▇▇ ▇▇▇
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. In periods of falling interest rates, the rate of prepayment
tends to increase, thereby shortening the actual average life of the ▇▇▇▇▇▇ 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
▇▇▇▇▇▇ ▇▇▇ 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
▇▇▇▇▇▇ Mae certificates as having effective maturities of twelve years.
Reinvestment of principal payments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment feature and the need
to reinvest payments and prepayments of principal at current rates, ▇▇▇▇▇▇ ▇▇▇
certificates can be less effective than typical bonds of similar maturities at
maintaining yields during periods of declining interest rates.

The Fund may enter into repurchase agreements, which are transactions through
which an investor (such as the Fund) purchases a security (known as the
"underlying security") 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 Fund's Adviser deems creditworthy under guidelines approved by the
Fund's Board of Trustees. At the time of purchase, the bank or securities dealer
agrees to repurchase the underlying securities at the same price, plus specified
interest. Repurchase agreements are generally for a short period of time, often
less than a week. The Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would then be invested in such repurchase agreements. The Fund
will only enter into a repurchase agreement where (i) the underlying securities
are of the type which the Fund's investment guidelines would allow it to
purchase directly, (ii) the market value of the underlying security, including
interest accrued, will be at all times equal to or exceed the value of the
repurchase agreement, and (iii) payment for the underlying securities is made
only upon physical delivery or evidence of book-entry transfer to the account of
the custodian or a bank acting as agent. The Fund's Adviser will be responsible
for monitoring such requirements. 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 security 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. Under the Investment Company Act of 1940, as amended (the "1940 Act"),
repurchase agreements are considered to be loans by the Fund.

The Fund may from time to time write covered call options on securities in its
portfolio. The Fund will realize a premium when it writes an option. The Fund
will write only covered call options, which means that in each instance the Fund
will continue to own the underlying security for as long as it remains obligated
as the writer of the option. The purchaser of the call option has the right to
purchase the underlying security at the agreed upon price, even though that
price may be less than the value of the security at the time the option is
exercised. The Fund would then suffer a loss equal to the excess, if any, of the
security's appreciation in value over the premium received for writing the
option. To facilitate closing purchase transactions (described below), the Fund
will ordinarily write only call options for which a secondary market exists on a
national securities exchange or in the over-the-counter market.

In order to realize a profit, to prevent an underlying security from being
called or to unfreeze an underlying security (thereby permitting its sale or the
writing of a new option on the security prior to the option's expiration), the
Fund may engage in a closing purchase transaction. The Fund will incur a loss if
the cost of the closing purchase transaction, plus transaction costs, exceeds
the premium received upon writing the original option. To effect a closing
purchase transaction, the Fund would purchase, prior to the exercise of

9
33

an option that it has written, an option of the same series as that on which it
desires to terminate its obligation. There can be no assurance that the Fund
will be able to effect a closing purchase transaction at a time when it wishes
to do so. When the Fund cannot effect a closing purchase transaction, it will
not be able to sell the underlying security unless the option expires without
exercise. Upon expiration of the option, the Fund would continue to bear market
risk in that security. The obligation of the Fund to deliver securities upon the
exercise of a covered call option which it has written terminates upon the
effectuation of a closing purchase transaction.

The Fund may use covered call option strategies as a means of increasing the
total return on the portfolio and also as a means of providing limited
protection against decreases in market value. The Fund will engage in this
activity, if at all, only to the extent permitted by the most stringent
applicable state regulations governing the writing of covered call options in
states where the Fund is selling its Shares. The aggregate value of securities
underlying outstanding options will not exceed 25% of the net assets of the
Fund.

The Fund may purchase put and call options on interest rate futures contracts
which are traded on a United States exchange or board of trade as a hedge
against changes in interest rates, and may enter into closing transactions with
respect to such options to terminate existing positions. An interest rate
futures contract provides for the future sale by one party and purchase by the
other party of a certain amount of a specific financial instrument (debt
security) at a specified price, date, time and place. An option on an interest
rate futures contract, as contrasted with the direct investment in such a
contract, gives the purchaser the right, in return for the premium paid, to
assume a position in an interest rate futures contract at a specified exercise
price at any time prior to the expiration date of the option. The Fund may
purchase put options on interest rate futures contracts to hedge its portfolio
securities against the risk of rising interest rates, and may purchase call
options on interest rate futures contracts to hedge against a decline in
interest rates. The Fund will write put or call options on interest rate futures
contracts only as part of closing purchase transactions to terminate its option
positions, and there is no guarantee that such closing transactions can be
effected. There can be no assurance that there will be a correlation between
price movements in the options on interest rate futures, on the one hand, and
price movements in the Fund's portfolio securities which are the subject of the
hedge, on the other hand. In addition, the Fund's purchase of put or call
options will be based upon predictions as to anticipated interest rate trends,
which could prove to be inaccurate. The Fund will purchase put or call options
on interest rate futures contracts only as a hedge against changes in the value
of securities in the Fund's portfolio that may result from market conditions,
and not for speculative purposes. The potential loss related to the purchase of
an option on interest rate futures contracts is limited to the premium paid for
the option. Options 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 5% of its total assets at any
one time in premiums paid for call options and put options.

Although, except as set forth above, the Fund does not intend to engage in
short-term trading of portfolio securities as a means of achieving its
investment objective, it may sell portfolio securities without regard to the
length of time they have been held whenever such sale will, in the Adviser's
opinion, strengthen the Fund's position and contribute to its investment
objective. Brokerage commissions are not normally charged on the purchase or
sale of securities issued or guaranteed by the U.S. Government, but such
transactions may involve costs in the form of spreads between bid and asked
prices.

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 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 Statement of
Additional Information.

10
34

In addition to the Fund's investment objective, the Fund has established a
number of other fundamental policies, changeable only with the approval of a
majority of the Fund's Shares, all of which are described in the Fund's
Statement Of Additional Information, including policies prohibiting (i) the
investment of more than 10% of the value of the Fund's total assets in
repurchase agreements maturing in more than seven days, (ii) borrowing money,
except from banks as a temporary measure for extraordinary or emergency
purposes, and then only in amounts not exceeding 5% of the value of the Fund's
total assets, (iii) mortgaging, pledging or otherwise encumbering any portfolio
security except as may be necessary in connection with permissible borrowings,
in which case the mortgaging, pledging or encumbering cannot exceed 5% of the
Funds's assets, (iv) investing in covered call options where the aggregate value
of the securities underlying the options exceeds 25% of the net assets of the
Fund, and (v) investing more than 5% of the Fund's assets in premiums paid on
put and call options. Except for the investment objective and the matters
described as fundamental policies in the Statement Of Additional Information,
all other practices of the Fund are not fundamental policies.

--------------------------------------------------------------------------------
HOW DO I PURCHASE SHARES OF THE FUND?
--------------------------------------------------------------------------------

GENERAL

The Fund's Shares may be purchased at the public offering price, described
below, through The Ohio Company, principal distributor of the Fund's Shares, at
its address and telephone number set forth on the cover page of this Prospectus,
and through other broker-dealers who are members of the National Association of
Securities Dealers, Inc. and have sales agreements with The Ohio Company. A
purchase will become effective upon receipt by The Ohio Company of an order and
payment of the public offering price.

Subsequent purchases of Shares of the Fund may be made by ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

Certificates reflecting ownership of the Fund's Shares will not be issued unless
specifically requested by the purchaser. In order to facilitate redemptions, it
is expected that most shareholders will not elect to receive certificates.

The minimum initial investment is $1,000. Subsequent investments must be in
amounts of at least $50.

PUBLIC OFFERING PRICE

The public offering price of Shares of the Fund is the net asset value per share
next determined after receipt by The Ohio Company of an order and payment, plus
a sales charge as follows:

11
35

SALES CHARGE
AS A AS A PERCENTAGE
PERCENTAGE OF OFFERING PRICE
OF THE NET -----------------------------
AMOUNT OF AMOUNT SALES DEALER'S
SINGLE TRANSACTION INVESTED CHARGE CONCESSION
------------------------------------------------------ ------------ ------------ ------------

Less than $100,000.................................... 4.71% 4.50% 4.00%
$100,000 but less than $250,000....................... 3.63 3.50 3.00
$250,000 but less than $500,000....................... 2.56 2.50 2.00
$500,000 but less than $1,000,000..................... 1.52 1.50 1.00
$1,000,000 or more.................................... 0.50 0.50 0.40

(See "HOW IS NET ASSET VALUE CALCULATED?" for a description of the computation
of net asset value per share.)

The above charges on investments of $100,000 or more are applicable to purchases
made at one time by an individual, or an individual, his spouse and their
children not of legal age, or a trustee, guardian or other like fiduciary of
certain single trust estates or certain single fiduciary accounts.

No sales charge is imposed on purchases of Shares by officers, trustees, and
employees of the Fund or by full-time employees of the Adviser or The Ohio
Company, who have been such for at least 90 days or by qualified retirement
plans for such persons.

AUTOMATIC INVESTMENT PLAN

Shares of the Fund qualify for purchase in connection with the following tax
sheltered retirement plans:

-- Individual Retirement Account ("IRAs") plans

-- Simplified Employee Pension Plans

-- 403(b)(7) Custodial Plans sponsored by certain tax exempt employers

-- Pension, profit-sharing and 401(k) plans qualifying under Section 401(a)
of the Internal Revenue Code

The Ohio Company offers a wide range of services to assist employers in reducing
the cost and complexity of utilizing any of the above retirement programs. These
services include:

Consulting services
Prototype plan documents
Low-cost recordkeeping and IRS reporting
On-going employee educational programs
Investment consultation
Trust services

12
36

LETTER OF INTENTION

If you (including your spouse and children not of legal age) intend to purchase
$100,000 or more of Shares of the Fund and of any fund of The Cardinal Group or
of The Cardinal Fund Inc., other members of the Cardinal family of funds which
are sold with a sales charge (collectively, the "Cardinal Load Funds"), during
any 13-month period you may sign a letter of intention to that effect obtained
from The Ohio Company and pay the reduced sales charge applicable to the total
amount of shares to be so purchased. The 13-month period during which the Letter
of Intention is in effect will begin on the date of the earliest purchase to be
included. In addition, trustees, guardians or other like fiduciaries of single
trust estates or certain single fiduciary accounts may take advantage of the
quantity discounts pursuant to a letter of intention.

CONCURRENT PURCHASES

RIGHTS OF ACCUMULATION

After your initial purchase of Shares, you may also be eligible to pay a reduced
sales charge for your subsequent purchases of Shares where the total public
offering price of Shares then being purchased plus the then aggregate current
net asset value of Shares of the Fund and of shares of any Cardinal Load Fund
held in your account equals $100,000 or more. You would be able to purchase
Shares at the public offering price applicable to the total of (a) the total
public offering price of the Shares of the Fund then being

13
37

purchased plus (b) the then current net asset value of Shares of the Fund and of
shares of any other Cardinal Load Fund held in your account. For purposes of
determining the aggregate current net asset value of shares held in your
account, you may include shares then owned by your spouse and children not of
legal age.

No sales charge is imposed on purchases of Shares of the Fund by trusts
qualifying under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and by deferred compensation plans of state and local governments
and tax-exempt organizations qualifying under Section 403(b) or Section 457 of
the Code (collectively, "Qualifying Plans"), so long as The Ohio Company serves
as either a trustee or investment adviser for the applicable Qualifying Plans.

--------------------------------------------------------------------------------
WHAT DISTRIBUTIONS WILL I RECEIVE?
--------------------------------------------------------------------------------

The net income of the Fund is declared daily as a dividend to Shareholders of
the Fund at the close of business on the day of declaration, and such dividends
are generally paid monthly. Dividends consisting of long-term capital gains
normally will be distributed only once annually. Dividends and distributions
will be paid only in additional Shares and not in cash; except, however, that
for dividends and distributions of $10 or more, a shareholder may specifically
request that such amounts be paid to him in cash. Dividends are expected to be
distributed on a monthly basis.

Shareholders may elect to receive cash distributions by using ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.
--------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
--------------------------------------------------------------------------------

REDEMPTION BY MAIL

14
38

record, provided, however, that the address of record has not been changed
within the preceding 15 days. For purposes of this policy, an "eligible
guarantor institution" shall include banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations as those terms are defined in the Securities Exchange Act of 1934.
Cardinal Management Corp. reserves the right to reject any signature guarantee
if (1) it has reason to believe that the signature is not genuine or (2) it has
reason to believe that the transaction would otherwise be improper.

REDEMPTION BY TELEPHONE

AUTOMATIC WITHDRAWAL

The Fund 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?".

SYSTEMATIC WITHDRAWAL PLAN

If you are the owner of Shares of the Fund having a total value of $25,000 or
more at the current offering price, you may elect to redeem your Shares monthly
or quarterly in amounts of $50 or more, pursuant to the Fund's Systematic
Withdrawal Plan. Please contact The Ohio Company for the appropriate form.

--------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
--------------------------------------------------------------------------------

The net asset value of the Fund is determined once daily as of 4:00 P.M.,
Columbus, Ohio time, on each business day the New York Stock Exchange is open
for business and on 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) where there is sufficient trading in the Fund's portfolio
securities that the Fund's net asset value per share might be materially
affected by changes in the value of its portfolio securities. The net asset
value per share of the Fund is computed by dividing the sum of the value of the
Fund's portfolio securities plus

15
39

any cash and other assets (including interest accrued but not received) minus
all liabilities (including estimated accrued expenses) by the total number of
Shares then outstanding.

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 Fund.

--------------------------------------------------------------------------------
DOES THE FUND PAY FEDERAL INCOME TAX?
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
WHAT ABOUT MY TAXES?
--------------------------------------------------------------------------------

16
40

distributions. All or a portion of such dividends or distributions, although in
effect a return of capital, is subject to tax.

Cardinal Management Corp. will inform shareholders at least annually of the
amount and nature of such income and capital gains.

Pursuant to the laws of Ohio and the Fund's Declaration of Trust, the
responsibility for the management of the Fund is vested in its Board of Trustees
which, among other things, is empowered by the Fund's Declaration Of Trust to
elect officers of the Fund and contract with and provide for the compensation of
agents, consultants and other professionals to assist and advise in such
management.

INVESTMENT ADVISER AND MANAGER

The Fund has entered into an Investment Advisory and Management Agreement
("Investment Advisory Agreement") with Cardinal Management Corp., an Ohio
corporation (the "Adviser"), ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, in
which the Adviser has agreed to serve as the Fund's investment adviser and
manager. In such capacity, and subject to the ultimate authority of the Fund's
Board of Trustees, the Adviser has agreed regularly to provide the Fund with
investment advice, including management of the Fund's portfolio securities, and
overall management of the Fund's affairs. Since the Fund's inception, ▇▇▇▇ ▇.
▇▇▇▇▇ has been primarily responsible for the day-to-day management of the Fund's
portfolio. ▇▇. ▇▇▇▇▇ has been a portfolio manager with the Adviser and/or The
Ohio Company since 1971.

The Adviser was organized in March, 1980, and currently provides investment
advisory services to Cardinal Government Securities Trust, Cardinal Tax Exempt
Money Trust, Cardinal Balanced Fund and Cardinal Aggressive Growth Fund. The
Adviser is a wholly-owned subsidiary of The Ohio Company, an Ohio corporation.
The Ohio Company is an investment banking firm organized in 1925 and serves as
the principal underwriter for each of the foregoing funds and as the investment
adviser and principal underwriter for The Cardinal Fund Inc. The Ohio Company is
a member of the New York Stock Exchange, Midwest Stock Exchange, other regional
stock exchanges and the National Association of Securities Dealers, Inc.

As compensation for the investment advice and overall management, the Fund will
pay the Adviser a monthly fee, accrued daily, based on an annual rate of .5% of
the average daily net asset value 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.

ACCOUNTING SERVICES AND TRANSFER AGENT

The Fund has entered into an Accounting Services Agreement with the Adviser
pursuant to which the Adviser has agreed to maintain and keep current the books,
accounts, records, journals and other records of original entry relating to the
business of the Fund and to calculate the Fund's net asset value on a daily
basis. In consideration of such services, the Fund has agreed to pay the Adviser
a fee monthly based on the average monthly net asset value of the Fund.

The Fund has also entered into an Administration Agreement with the Adviser
pursuant to which the Adviser has agreed to act as the Fund's transfer agent,
dividend disbursing agent and administrator of plans

17
41

of the Fund. In consideration of such services the Fund has agreed to pay the
Adviser an annual fee, paid monthly, equal to $21 per shareholder account, plus
the Adviser's out-of-pocket expenses.

DISTRIBUTOR

The Fund has entered into a Distributor's Contract with The Ohio Company, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, pursuant to which Shares of the Fund
continuously will be offered on a best efforts basis by The Ohio Company and
dealers selected by The Ohio Company. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an officer and
trustee/director of both the Fund and The Ohio Company. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇
▇. ▇▇▇▇▇, each an officer and trustee of the Fund, are officers of The Ohio
Company. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, a trustee of the Fund, is an officer of The Ohio
Company. ▇▇▇▇▇ ▇. Will and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ are officers of both the Fund and
The Ohio Company.

CUSTODIAN

The Fund has appointed The Fifth Third Bank ("Fifth Third") ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, 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.

ACH PROCESSING

The Fund now offers ACH privileges. Investors may use ACH processing to make
subsequent purchases, redeem Shares and/or electronically transfer distributions
paid on Fund Shares, in addition to the other methods described in this
Prospectus. ACH provides a method by which funds may be automatically
transferred to or from an authorized bank account at a Federal Reserve member
bank that is an ACH member. Please contract your representative if you are
interested in ACH processing.

EXCHANGE PRIVILEGE

Cardinal Aggressive Growth Fund, an equity fund seeking
appreciation of capital (upon the payment of the applicable sales
charge);

Cardinal Balanced Fund, a fund seeking current income and
long-term growth of both capital and income (upon the payment of
the applicable sales charge);

The Cardinal Fund Inc., an equity fund seeking long-term growth
of capital and income (upon the payment of the applicable sales
charge);

Cardinal Government Securities Trust, a U.S. Government
securities money market fund (without payment of any sales
charge); or

Cardinal Tax Exempt Money Trust, a tax-free money market fund
(without payment of any sales charge).

18
42

adviser, of Fund Shares for shares of a Cardinal Load Fund may be completed
without the payment of a sales charge, and (ii) exchanges of Fund Shares by all
other shareholders for shares of a Cardinal Load Fund may be completed upon the
payment of a sales charge equal to the difference, if any, between the sales
charge payable upon purchase of shares of such Cardinal Load Fund and the sales
charge previously paid on the Fund Shares to be exchanged.

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

--------------------------------------------------------------------------------
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
--------------------------------------------------------------------------------

Shares of the Fund, upon their issuance, are fully paid and nonassessable, are
of one class equal to all other Shares and are without par value. Certificates
representing Shares will not be issued unless specifically requested in writing
upon subscription. Ownership records of Shares will be maintained by the Fund's
transfer agent, Cardinal Management Corp.

Shareholders have equal voting rights on all matters submitted for shareholder
vote. The Declaration of Trust limits the matters requiring a shareholder vote
to the election or removal of Trustees, approval of certain contracts of the
Fund such as the Investment Advisory and Management Agreement with the Adviser
and the Distributor's Contract with The Ohio Company, approval of the
termination or reorganization of the Fund, approval of certain amendments to the
Declaration Of Trust and certain other matters described in such Declaration.
Under certain circumstances where Trustees have failed upon written request to
give notice of a meeting to consider matters requiring a shareholder vote,
shareholders holding at least 25% of the Fund's outstanding Shares may call and
give notice of such a meeting and thereafter a shareholder meeting will be held
to consider such matters.

--------------------------------------------------------------------------------
WHO PROVIDES SHAREHOLDER REPORTS?
--------------------------------------------------------------------------------

The Fund will provide shareholders monthly a summary statement describing any
purchases and sales of Shares of the Fund and dividend and capital gain
distributions.

19
43

[THIS PAGE INTENTIONALLY LEFT BLANK]
44

[THIS PAGE INTENTIONALLY LEFT BLANK]
45

Investment Adviser and Manager
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Distributor
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Transfer Agent and Dividend Paying
Agent
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Custodian
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Legal Counsel
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Independent Auditors
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
46

TABLE OF CONTENTS

PAGE
-----

Key Features............................ 2
Prospectus Highlights................... 3
Fee Table............................... 4
Financial Highlights.................... 5
What is the Fund?....................... 7
What Are the Investment Objective and
Policies of the Fund?................. 7
How Do I Purchase Shares
of the Fund?.......................... 11
May My Tax Sheltered Retirement Plan
Invest in the Fund?................... 12
How May I Qualify for Quantity
Discounts?............................ 13
Are There Any Special Purchase Programs
for Certain Retirement Plans?......... 14
What Distributions Will I Receive?...... 14
How May I Redeem My Shares?............. 14
How is Net Asset Value Calculated?...... 15
Does the Fund Pay Federal Income Tax?... 16
What About My Taxes?.................... 16
Who Manages My Investment in the
Fund?................................. 17
What Other Shareholder Programs Are
Provided?............................. 18
What Are My Rights as a Shareholder?.... 19
Who Provides Shareholder Reports?....... 19

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

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 DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND OR BY THE DISTRIBUTOR 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
----------------------

February 1, 1995

THE OHIO COMPANY

CARDINAL
GOVERNMENT
OBLIGATIONS
FUND

[LOGO]
47

CARDINAL GOVERNMENT SECURITIES TRUST

SUPPLEMENT DATED DECEMBER 11, 1995,
TO PROSPECTUS DATED FEBRUARY 1, 1995

Capitalized terms used in this Supplement have the meaning assigned to them
in the Prospectus.

The Trust has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of December 1, 1995 (the "Plan"), with The Cardinal Group,
an Ohio business trust (the "Group"). Pursuant to the Plan, Cardinal Government
Securities Money Market Fund, a series of the Group (the "Acquiring Fund"),
would acquire all of the assets of the Trust in exchange for the assumption of
all of the Trust's liabilities and a number of full and fractional shares of the
Acquiring Fund having an aggregate net asset value equal to the Trust's net
assets (the "Reorganization"). The Trust would then be liquidated, and the
shares of the Acquiring Fund would be distributed to Trust shareholders.

The Reorganization is subject to certain regulatory approvals and to
approval by the shareholders of the Trust at the Annual Shareholders Meeting
currently expected to be held in February, 1996. If the shareholders approve the
Reorganization, it is expected that the Reorganization would be effected on or
about March 31, 1996; however, the Reorganization may be effected on such
earlier or later date as the Group and the Trust may determine. There can be no
assurance that the Reorganization will take place when or as currently proposed.

The following paragraph is added to the cover page of this Prospectus:

THE SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE TRUST INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.

The second sentence of the first paragraph under the heading "CHECK-WRITING
REDEMPTION PROCEDURE" on page 13 of the Prospectus is deleted and is replaced
with the following:

These checks may be made payable to the order of any person in any amount
not less than $250.

The second sentence of the second paragraph under the heading
"CHECK-WRITING REDEMPTION PROCEDURE" on page 13 of the Prospectus is deleted.

The following two sentences are added at the end of the second paragraph
under the heading "WHO MANAGES MY INVESTMENT IN THE TRUST? -- Investment Adviser
and Manager" on pages 14 and 15 of the Prospectus:

As of December 22, 1995, ▇▇▇▇ ▇. ▇▇▇▇▇ will be primarily responsible for
the day-to-day management of the Trust's portfolio. ▇▇. ▇▇▇▇▇ has been a
portfolio manager with the Adviser and/or The Ohio Company since 1971 and
has more than 28 years of investment management experience.

The Prospectus Supplement supersedes in its entirety the prospectus
supplement dated February 22, 1995.

INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
48

PROSPECTUS
--------------------------------------------------------------------------------
[LOGO]
CARDINAL GOVERNMENT SECURITIES TRUST

Cardinal Government Securities Trust (the "Trust") is a no-load, diversified,
open-end management investment company with an investment objective of
maximizing current income while preserving capital and maintaining liquidity.
The Trust seeks to attain its objectives by investing in U.S. Treasury bills,
notes and bonds, other obligations issued or guaranteed by the United States,
its agencies or instrumentalities, and repurchase agreements relating to such
obligations. All obligations purchased by the Trust will mature in thirteen
months or less. There can be no assurance that the Trust's objective will be
achieved.

THE INVESTMENT DESCRIBED IN THIS PROSPECTUS IS NOT INSURED OR GUARANTEED BY THE
UNITED STATES GOVERNMENT. THE TRUST INTENDS TO MAINTAIN A CONSTANT NET ASSET
VALUE OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT NET ASSET VALUE
WILL NOT VARY.

The Trust is designed for institutions and individuals who desire current income
that reflects prevailing interest rates for short-term investments together with
a high degree of liquidity and the security of a portfolio invested only in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements collateralized by such obligations.
--------------------------------------------------------------------------------

For further information regarding the Trust or for assistance
in opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)
464-5511 (redeeming shares)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed to the Trust
at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------

This Prospectus sets forth concisely the information about the Trust that a
prospective investor ought to know before investing in the Trust. This
Prospectus should be retained for future reference. A Statement of Additional
Information respecting the Trust, dated February 1, 1995, has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Such Statement is available upon request without charge from the Trust at the
above address or by calling the phone numbers provided above.

Investors should read and retain this Prospectus for future reference.

THE OHIO COMPANY

The date of this Prospectus is February 1, 1995

--------------------------------------------------------------------------------
49

--------------------------------------------------------------------------------
KEY FEATURES
--------------------------------------------------------------------------------

HIGH CURRENT YIELD.............The Trust seeks the maximum yield available through
investment in U.S. Government securities. (See pages 6 and
7.)
HIGH DEGREE OF SAFETY..........The investor obtains a high degree of safety due to the
fact the Trust invests solely in obligations issued or
guaranteed by the U.S. Government and its agencies and
instrumentalities, including U.S. Government obligations
subject to repurchase agreements. (See pages 6 and 7.)
MONTHLY DISTRIBUTIONS..........Monthly distributions are automatically reinvested in
additional shares of the Trust without charge or may be
received in cash. (See pages 4 and 10.)
INSTANT LIQUIDITY..............Through the free check writing privilege or telephone
transfer of funds, all or part of an investor's shares may
be redeemed on any business day at the net asset value
without charge. (See page 12.)
LOW INITIAL INVESTMENT.........An investor can acquire shares of a high quality portfolio
of government securities with a smaller investment than
would be needed to purchase a similar portfolio directly.
(See page 8.)
PROFESSIONAL MANAGERS..........The Trust's portfolio is fully managed by professional
portfolio managers. (See page 14.)
FLEXIBILITY....................You may switch once each calendar quarter from one mutual
fund to another within the Cardinal Group of Funds as your
personal circumstances or market conditions dictate. Under
certain circumstances, however, a sales charge may be im-
posed on exchanges for shares of The Cardinal Fund Inc.,
Cardinal Government Obligations Fund, Cardinal Balanced
Fund and Cardinal Aggressive Growth Fund. (See pages 15
and 16.)
MAXIMUM YIELD..................As there is no sales charge to reduce the yield, investors
receive the maximum yield on their investment. Service
fees and charges have not been considered. (See pages 8
and 14.)
ACH PROCESSING.................Investors may use Automated Clearing House ("ACH")
processing for subsequent purchases of shares,
redemptions, and/or distributions paid. (See page 15.)

2
50

--------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
--------------------------------------------------------------------------------

SHARES OFFERED.................The Trust is authorized to issue an unlimited number of
full and fractional shares of beneficial interest, all of
one class, with a par value of $.01 per share (the
"Shares"). (See page 6.)
OFFERING PRICE.................The public offering price is equal to net asset value per
share next determined after order. The Trust intends to
use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share.
There can be no assurance that it will be able to maintain
such a net asset value. There is no sales charge. (See
pages 8 and 13.)
MINIMUM PURCHASE...............$1,000 minimum initial investment and $100 minimum subse-
quent investments, although such minimums may be waived
under certain circumstances. (See page 8.)
TYPE OF COMPANY................No-load, diversified, open-end management investment com-
pany, commonly known as a mutual fund, established under
Pennsylvania law by a Declaration of Trust dated March 21,
1980. (See page 6.)
INVESTMENT OBJECTIVE...........To maximize current income while maintaining liquidity and
preserving capital. There is no assurance that such
objective will be achieved. (See page 6.)
INVESTMENT POLICIES............The Trust invests in obligations issued or guaranteed by
the U.S. Government and its agencies, and
instrumentalities, and repurchase agreements secured by
obligations of the U.S. Government or its agencies or
instrumentalities. These investments entail certain risks.
(See page 7.)
INVESTMENT ADVISER.............The Trust has entered into an Investment Advisory and Man-
agement Agreement with Cardinal Management Corp., a
wholly-owned subsidiary of The Ohio Company ("the Ad-
viser"). Cardinal Management Corp. also acts as investment
adviser for Cardinal Tax Exempt Money Trust and Cardinal
Government Obligations Fund, Cardinal Balanced Fund and
Cardinal Aggressive Growth Fund. (See page 14.)
MANAGEMENT FEE.................The annual rate is .5% of the average daily net assets of
the Trust. (See pages 14 and 15.)
DISTRIBUTIONS..................Distributions from net investment income are credited to
the shareholder's account daily and are automatically
reinvested in additional Shares of the Trust monthly
unless a cash dividend option is selected. (See page 10.)
REDEMPTION.....................At net asset value per share, without charge, except that
broker-dealers may charge a service fee for assisting in a
redemption. The Trust may require a redemption of shares
if the value of the account is less than $500. (See page
11.)
TRANSFER AGENT.................Cardinal Management Corp. (See page 15.)

3
51

--------------------------------------------------------------------------------
FEE TABLE
--------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................... 0%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................... 0%
Deferred Sales Load
(as a percentage of original purchase price or
redemption proceeds, as applicable).......................... 0%
Redemption Fees
(as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................... $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................................ .50%
12b-1 Fees..................................................... .00
Other Expenses................................................. .35
-------
Total Fund Operating Expenses............................. .85%
=======

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------- ----------- ----------- ----------- -----------

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......................................... $9 $27 $47 $105

The purpose of the above table is to assist a potential purchaser of the Trust's
Shares in understanding the various costs and expenses that an investor in the
Trust will bear directly or indirectly. See "WHO MANAGES MY INVESTMENT IN THE
TRUST?" for a more complete discussion of the shareholder transaction expenses
and annual operating expenses of the Trust. THE FOREGOING EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.

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52

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1994, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon, together with certain financial
statements, is contained in the Trust's Statement of Additional Information and
which may be obtained by shareholders and prospective investors.

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

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------

Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .03 .02 .04 .06 .08
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total from investment operations.................. .03 .02 .04 .06 .08
--------- --------- --------- --------- ---------
Less Distributions:
Dividends (from net investment income)............ (0.3) (.02) (.04) (.06) (.08)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions............................... (.03) (.02) (.04) (.06) (.08)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total Return........................................ 2.84%(1) 2.41% 3.58% 6.20% 7.97%
Net assets, End of period (000) omitted............. $ 367,516 $ 402,758 $ 472,521 $ 567,841 $ 592,343
Ratio of expenses to average net assets............. 0.85% 0.79% 0.76% 0.72% 0.73%
Ratio of net investment income to average net
assets............................................ 2.94% 2.38% 3.52% 6.03% 7.69%

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1989 1988 1987 1986 1985
--------- --------- --------- --------- ---------

Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .09 .07 .06 .07 .08
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
--------- --------- --------- --------- ---------
Total from investment operations.................. .09 .07 .06 .07 .08
--------- --------- --------- --------- ---------
Less Distributions:
Dividends (from net investment income)............ (.09) (.07) (.06) (.07) (.08)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
--------- --------- --------- --------- ---------
Total Distributions............................... (.09) (.07) (.06) (.07) (.08)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total Return........................................ 8.88% 6.81% 5.99% 7.09% 8.57%
Net assets, End of period (000) omitted............. $ 533,266 $ 411,887 $ 422,595 $ 408,681 $ 406,808
Ratio of expenses to average net assets............. 0.72% 0.73% 0.72% 0.80% 0.80%
Ratio of net investment income to average net
assets............................................ 8.54% 6.61% 5.83% 6.87% 8.25%

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

(1) Without the $1,151,186 capital contribution as discussed in Note 2 to the
financial statements appearing in the Trust's Statement of Additional
Information, the 1994 total return would have been 2.55%.

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

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

Pursuant to a Revolving Credit Agreement between the Trust and The Fifth Third
Bank dated April 10, 1992 (the "Loan Agreement"), the Trust may borrow money
from The Fifth Third Bank for temporary or emergency non-investment purposes,
such as to accommodate abnormally heavy redemption requests,

5
53

and only in an amount not exceeding 10% of the value of the Trust's total assets
at the time of borrowing. The table below sets forth certain information
concerning the Loan Agreement.

AVERAGE AVERAGE NUMBER AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT OF TRUST'S SHARES AMOUNT OF
YEAR ENDED OUTSTANDING AT OUTSTANDING OUTSTANDING DEBT PER SHARE
SEPTEMBER 30, END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------------- ------------------ ----------------- ------------------ ------------------

1994 $0 $ 5,977 385,137,301 $0.0000155
1993 $0 $ 449 437,639,426 $0.0000010

From time to time the Trust may advertise its "yield" or "annualized yield" and
its "effective yield". BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" or "annualized
yield" of the Trust refers to the income generated by an investment in the Trust
over a seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
the Trust is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" or "annualized yield" because of the compounding effect
of this assumed reinvestment.

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

--------------------------------------------------------------------------------
WHAT IS THE TRUST?
--------------------------------------------------------------------------------

The Trust is a diversified open-end management investment company established
under Pennsylvania law by a Declaration of Trust dated March 21, 1980. The
Declaration of Trust, as amended to date, permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, all of
one class, with par value of $.01 per share, and authorizes the Trustees to
issue separate series of shares differing only in certain specified respects.
The Trustees have not currently authorized separate series of shares. Each Share
offered hereunder represents an equal pro rata interest in the Trust's common
portfolio. Upon liquidation, shareholders are entitled to share pro rata in the
net assets of the Trust available for distribution to shareholders. Shares are
freely transferable, have no preemptive or conversion rights and are redeemable
as set forth herein under "HOW MAY I REDEEM MY SHARES?" Shares are fully paid
and nonassessable, except as set forth under "SHAREHOLDER AND TRUSTEE LIABILITY"
in the Statement of Additional Information. Any additional series of shares must
be issued in compliance with the Investment Company Act of 1940 and must not
constitute a security that is senior to the Shares offered pursuant to this
Prospectus.

--------------------------------------------------------------------------------
WHAT ARE THE INVESTMENT OBJECTIVE AND POLICIES OF THE TRUST?
--------------------------------------------------------------------------------

The investment objective of the Trust is to maximize current income while
preserving capital and maintaining liquidity. There can be no assurance that the
objective of the Trust will be achieved. The investment objective with respect
to the Trust is a fundamental policy and as such may not be changed without a
vote of the holders of a majority of the outstanding Shares of the Trust.

6
54

The Trust seeks to attain its investment objective by investing in U.S. Treasury
bills, notes and bonds, other obligations issued or guaranteed by the United
States, its agencies or instrumentalities and repurchase agreements relating to
such obligations. The Trust will not invest in contracts for forward delivery of
securities (so-called "futures"). The Trust will purchase only obligations
having maturities, from the date of purchase, of 13 months or less. Current
income earned on such securities may not be as great as current income that
could be earned on lower quality securities that have less liquidity and/or a
greater risk of non-payment or securities that have a longer term.

Notwithstanding any of the foregoing, the Trust, as a money market fund subject
to Rule 2a-7 of the Investment Company Act of 1940 (the "1940 Act"), must invest
exclusively in United States dollar-denominated instruments which the Trustees
of the Trust and the Trust's investment adviser determine present minimal credit
risks and which at the time of acquisition are rated by one or more appropriate
nationally recognized statistical rating organizations ("NRSRO") (e.g. Standard
& Poor's Corporation and ▇▇▇▇▇'▇ Investors Service, Inc.) in one of the two
highest rating categories for short-term debt obligations or, if unrated, are
deemed to be of comparable quality. In addition, the dollar-weighted average
maturity of the obligations in the Trust may not exceed 90 days.

Subject to the foregoing limitations and in order to achieve its investment
objective, the Trust expects to invest in the following types of securities.

Direct obligations issued by the U.S. Treasury include bills, notes and bonds
which differ from each other only in interest rates, maturities and times of
issuance; Treasury bills have a maturity of one year or less; Treasury notes
have maturities of one to ten years and Treasury bonds generally have maturities
of greater than ten years.

Examples of obligations issued by agencies or instrumentalities of the U.S.
Government include, among others, securities issued by the General Services
Administration, Federal Housing Administration, Farmers Home Administration,
Government National Mortgage Association, Federal Home Loan Banks, Federal
Intermediate Credit Banks, Federal Land Banks, Federal Home Loan Mortgage
Corporation, Central Bank for Cooperatives, Maritime Administration, The
Tennessee Valley Authority, Washington, D.C. Armory Board, Export-Import Bank of
the United States, the International Bank for Reconstruction and Development,
Federal National Mortgage Association and Student Loan Marketing Association.
Certain of such U.S. Government obligations may have variable or floating rates
of interest. The Trust intends to invest in variable and floating rate
instruments whose market value, upon reset of the interest rate, will
approximate par value because their interest rates will be tied to short-term
market rates. Some obligations issued or guaranteed by U.S. Government agencies
or instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by U.S. Treasury guarantees; and others, such as those issued
by Federal Home Loan Banks, by the right of the issuer to borrow from the
Treasury. In addition, some obligations of U.S. Government agencies or
instrumentalities, such as those issued by the Federal National Mortgage
Association, are supported by the discretionary authority of the U.S. Government
to purchase certain obligations of the agency or instrumentality and others,
such as those issued by the Student Loan Marketing Association, are supported
solely by the credit of the issuing agency or instrumentality itself. No
assurance can be given that the U.S. Government will provide financial support
to such U.S. Government sponsored agencies or instrumentalities in the future,
since it is not obligated to do so by law. The Trust will invest in such
securities only when it is satisfied that the credit risk with respect to the
issuer is minimal.

A repurchase agreement is an instrument under which the purchaser acquires
ownership of the obligation but the seller agrees, at the time of the sale, to
repurchase the obligation at a specified time and price. Although the securities
subject to a repurchase agreement might bear maturities of more than one year,
the settlement date for repurchase agreements entered into by the Trust cannot
be more than seven days after the date of purchase. 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 purchased security. Under the
1940 Act, repurchase agreements are considered to be loans by the Trust. The
Trust will only enter into a repurchase agreement where (i) the underlying
securities are of the type which the Trust's investment guidelines

7
55

would allow it to purchase directly, (ii) the market value of the underlying
security, including interest accrued, will be at all times equal to or exceed
the value of the repurchase agreement, and (iii) payment for the underlying
securities is made only upon physical delivery or evidence of book-entry
transfer to the account of the custodian or a bank acting as agent. The Adviser
will be responsible for continuously monitoring such requirements. In the event
of a bankruptcy or other default of a seller of a repurchase agreement, the
Trust could experience both delays in liquidating the underlying securities and
losses, including: (a) possible decline in the value of the underlying security
during the period while the Trust seeks to enforce its rights thereto; (b)
possible subnormal levels of income and lack of access to income during this
period; and (c) expenses of enforcing its rights.

The Trust may also invest up to 10% of the value of its total assets in the
securities of other investment companies subject to the limitations set forth in
the 1940 Act. The Trust intends to invest for purposes of short-term cash
management in other money market mutual funds. The Trust's investment in such
other investment companies may result in the duplication of fees and expenses,
particularly investment advisory fees. For a further discussion of the
limitations on the Trust's investments in other investment companies, see
"INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments --Securities of Other Investment Companies" in the Trust's Statement
of Additional Information.

The Trust cannot borrow money except from banks for temporary or emergency
non-investment purposes, such as to accommodate abnormally heavy redemption
requests, and then only in an amount not exceeding 10% of the value of the
Trust's total assets at the time of borrowing. The Trust cannot pledge, mortgage
or hypothecate its assets except to secure borrowing for temporary or emergency
non-investment purposes and then only in an amount not exceeding the lesser of
any applicable limitation under state law or 15% of its assets.

The Trust's investment objective and fundamental policies may not be changed
without approval of holders of a majority of the outstanding Shares of the
Trust.

--------------------------------------------------------------------------------
HOW DO I PURCHASE SHARES OF THE TRUST?
--------------------------------------------------------------------------------

Shares of the Trust are sold on a continuing basis without a sales charge at the
net asset value next determined after an order is received by The Ohio Company,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, the Trust's principal underwriter,
and federal funds (monies credited to a member bank's account in a Federal
Reserve Bank) are received by The Ohio Company as hereinafter provided. The
minimum initial investment for individuals is $1,000 and subsequent investments
must be in amounts of at least $100. The Trust may, at its discretion, waive the
subsequent investment minimum for purchases effected through the automatic
reinvestment of distributions from unit investment trusts sponsored by The Ohio
Company, and may waive both the initial and subsequent investment minimums for
purchases effected with cash balances in brokerage accounts of customers of The
Ohio Company. Institutions may place orders for any number of individual
accounts with a minimum initial purchase of $1,000 for each individual account.
Subsequent purchases may be made in minimum amounts of $100 for each individual
account. Shares of the Trust may be purchased through a securities dealer,
investment adviser, agent or other fiduciary which may charge a fee for its
services in connection with the purchase. No sales charge is imposed by the
Trust or by The Ohio Company.

Each new investor must complete an Application Form and send it to the Trust at
the indicated address either prior to or concurrently with the transmittal of
funds by wire or mail.

8
56

commence on that day. If either federal funds (or other immediately available
funds) or the completed purchase order are received after 12:00 noon Eastern
Time (but prior to 4:00 p.m. Eastern Time) Shares will be credited to the
shareholder's account as of 4:00 p.m. Eastern Time on that day but will not earn
dividends until the following day.

The Trust reserves the right to reject any order to purchase its Shares.
Certificates representing Shares of the Trust will not be issued. All Shares
purchased are confirmed to the investor and credited to the investor's account
on the Trust's books maintained by Cardinal Management Corp. The investor will
have the same rights and ownership with respect to such Shares as if
certificates had been issued.

PURCHASE BY FEDERAL FUNDS WIRE

Investments in Shares of the Trust may be made by wire transfer of federal
funds, avoiding delays of the mail and the normal check clearance process
described below. An investor may telephone the Trust (▇▇▇-▇▇▇▇ from Columbus,
Ohio; (▇▇▇) ▇▇▇-▇▇▇▇, toll free from other Ohio locations; or (▇▇▇) ▇▇▇-▇▇▇▇,
toll free from outside Ohio) prior to wire transfer of its investment to advise
the Trust of the investment and, if a new investor, to obtain an account number.
If an investor does not telephone the Trust for wire instructions and the
investor's wire transfer does not include sufficient information, such purchase
will be delayed until the proper information is received. An investor must
instruct its bank to "wire transfer" the investment immediately to:

The Huntington National Bank
Account Number 01891688407
Routing Number ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Cardinal Government Securities Trust
[Include Trust Account Number and Name of Account
Holder]

Funds transmitted by wire will be invested in Shares of the Trust at the net
asset value next computed after receipt thereof as follows. Investment will
occur on the same day as the transfer of funds so long as federal funds are
received by The Ohio Company prior to 12:00 noon Eastern Time on any Business
Day. Federal funds received by The Ohio Company after 12:00 noon Eastern Time
will not be invested until the next Business Day. Dividends will accrue on the
day a purchase is effected only if federal funds are received by The Ohio
Company by 12:00 noon Eastern Time. A bank may charge for its services in
effecting wire transfers of funds.

Subsequent purchases of Shares of the Trust may be made by ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

PURCHASE BY MAIL

Investment in Shares of the Trust may be made by mail by sending a check or
other negotiable bank draft payable to the order of "Cardinal Government
Securities Trust" together with, in the case of an initial purchase, an
Application Form to:

Cardinal Government Securities Trust
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Money transmitted by check drawn on a member of the Federal Reserve System will
normally be converted to federal funds and invested in Shares of the Trust
within one Business Day following receipt by The Ohio Company. Checks drawn on
non-member banks may take considerably longer. Cardinal Management Corp. or the
Trust will attempt to notify the investor upon receipt of the latter type of
check as to the possible delay and to arrange for a better means of transmittal
of funds. THE TRUST STRONGLY RECOMMENDS THAT INVESTORS OF SUBSTANTIAL AMOUNTS
USE FEDERAL FUNDS TO PURCHASE SHARES.

9
57

AUTOMATIC INVESTMENT PLAN

The Trust has made arrangements to enable you to make automatic monthly or
quarterly investments, in the minimum amount of $50 per transaction, from your
checking account. Assuming the cooperation of your financial institution, your
checking account therein will be debited to purchase Shares of the Trust on the
periodic basis you select. Confirmation of your purchase of Trust Shares will be
provided by the Trust. The debit of your checking account will be reflected in
the checking account statement you receive from your financial institution.
Please contact The Ohio Company for the appropriate form.

--------------------------------------------------------------------------------
MAY MY TAX SHELTERED RETIREMENT PLAN INVEST IN THE TRUST?
--------------------------------------------------------------------------------

Shares of the Trust qualify for purchase in connection with the following tax
sheltered retirement plans:

-- Individual retirement account ("IRAs") plans.

-- Simplified Employee Pension Plans.

-- 403(b)(7) Custodial Plans sponsored by certain tax-exempt employers.

-- Pension, profit-sharing and 401(k) plans qualifying under Section 401(a)
of the Internal Revenue Code.

The Ohio Company offers a wide range of services to assist employers in reducing
the cost and complexity of utilizing any of the above retirement programs. These
services include:

Consulting services
Prototype plan documents
Low-cost recordkeeping and IRS reporting
On-going employee educational programs
Investment consultation
Trust services

--------------------------------------------------------------------------------
WHAT DISTRIBUTIONS WILL I RECEIVE?
--------------------------------------------------------------------------------

The Trust's net income is declared as a dividend and accrued on each Business
Day, immediately prior to the determination of the Trust's net asset value at
4:00 p.m. Eastern Time. Net interest income (from the time of the immediately
preceding declaration) consists of interest accrued on the portfolio of the
Trust (including accrued discount earned and premium amortized), plus realized
net short-term capital gains (losses) due to portfolio transactions (if any),
less the accrued expenses of the Trust applicable to that dividend period. The
Trust does not expect to realize any long-term capital gains due to its policy
of investing in securities maturing in 13 months or less.

All dividends of net income are credited to each shareholder's account daily and
automatically reinvested in additional Shares of the Trust at the net asset
value on the last Business Day of each month. Shareholders, however, may elect
to receive monthly the dividends of $10 or more declared on their Shares in cash
by checking the appropriate box on the Account Information Form or by otherwise
notifying Cardinal Management Corp. in writing. In addition, investors may
obtain cash at any time without charge by redeeming Shares at net asset value.
If the entire account of a shareholder is withdrawn, all dividends accrued to
the time of withdrawal will be paid at that time.

Shareholders may elect to receive cash distributions by using ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

10
58

Should the Trust incur or anticipate any extraordinary expense or loss or
depreciation which would adversely affect its net asset value per share or
income for a particular period, the Trustees would at that time consider whether
to adhere to the present dividend policy described above or to revise it in
light of the then-prevailing circumstances. For example, if the Trust's net
asset value per share were reduced, or expected to be reduced, below $1.00, the
Trustees might suspend further dividend accruals until the net asset value
returned to $1.00. Thus, extraordinary expenses or losses or depreciation may
result in no dividends being accrued for the period during which an investor
holds Shares as well as a redemption price lower than the purchase price for
such Shares.

--------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
--------------------------------------------------------------------------------

Investors may redeem Shares of the Trust on any Business Day at the net asset
value next determined following receipt by the Trust's transfer agent, Cardinal
Management Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, of a written or
telephonic notice to redeem, or by check, each as more fully described below.
See "HOW IS NET ASSET VALUE CALCULATED?" below, for a description of when net
asset value is determined.

As requested, The Ohio Company, on behalf of a shareholder, will forward the
foregoing notice to redeem to Cardinal Management Corp. without charge. Other
broker-dealers may assist a shareholder in redeeming his Shares and may charge a
fee for such services.

Proceeds of redemption requests received by Cardinal Management Corp. in proper
form before (1) 4:00 p.m. Eastern Time for shareholders who are customers of The
Ohio Company and who have submitted their redemption request through their
broker at The Ohio Company or (2) 12:00 noon Eastern Time for all other
redemption requests, will be sent by mail on the next Business Day or, if the
expedited redemption option is available, by federal funds wire on the next
Business Day for use on that day.

The Trust reserves the right to delay payment for the redemption of Shares where
such Shares were purchased with other than immediately available funds, but only
until the purchase payment has cleared (which may take fifteen or more days from
the date the purchase payment is received by the Trust). The purchase of Trust
Shares by wire transfer of federal funds would avoid any such delay.

The Trust may suspend the right of redemption or may delay payment during any
period the determination of net asset value is suspended. See "HOW IS NET ASSET
VALUE CALCULATED?".

Due to the high cost of maintaining accounts, the Trust reserves the right to
redeem involuntarily Shares in any account at the then current net asset value
if at any time redemptions have reduced a shareholder's total investment to a
net asset value below $500. A shareholder will be notified in writing that the
value of the account is less than $500 and allowed not less than 30 days to
increase the account to $500 before the redemption is processed. Proceeds of
redemptions so processed, including dividends declared to the date of
redemption, will be promptly paid to the shareholder.

REDEMPTION BY MAIL

Shareholders may elect to redeem Shares of the Trust by submitting a written
request therefor to Cardinal Management Corp., the Trust's transfer agent at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. Cardinal Management Corp. will
request a signature guarantee by an eligible guarantor institution as described
below. However, a signature guarantee will not be required if (1) the redemption
check is payable to the Shareholder(s) of record, and (2) the redemption check
is mailed to the Shareholder(s) at the address of record, provided, however,
that the address of record has not been changed within the preceding 15 days.
For purposes of this policy, an "eligible guarantor institution" shall include
banks, brokers, dealers, credit unions, securities exchanges and associations,
clearing agencies and savings associations as those terms are defined in the
Securities Exchange Act of 1934. Cardinal Management Corp. reserves the right to
reject any

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59

signature guarantee if (1) it has reason to believe that the signature is not
genuine or (2) it has reason to believe that the transaction would otherwise be
improper.

REDEMPTION BY TELEPHONE

Shareholders may elect to redeem Shares of the Trust by calling the Trust at the
telephone numbers set forth on the front of this Prospectus. The Shareholder may
direct that the redemption proceeds be mailed to the address of record or
another address.

Neither the Trust nor its service providers will be liable for any loss,
damages, expense or cost arising out of any telephone redemption effected in
accordance with the Trust's telephone redemption procedures, acting upon
instructions reasonably believed to be genuine. The Trust will employ procedures
designed to provide reasonable assurances that instructions by telephone are
genuine; if these procedures are not followed, the Trust or its service
providers may be liable for any losses due to unauthorized or fraudulent
instructions. These procedures may include recording all phone conversations,
sending confirmations to Shareholders within 72 hours of the telephone
transaction, and verification of account name and account number or tax
identification number. If, due to temporary adverse conditions, investors are
unable to effect telephone transactions, Shareholders may also redeem their
Shares by mail as described above.

EXPEDITED REDEMPTION

Any investor may elect to use the expedited redemption procedure by designating
on the Account Information Form submitted at the time of initial investment the
name of a commercial bank and account number to receive proceeds of redemption.
If this election is made, requests for redemption may be made by mail or by
telephone as described above.

An investor may elect to have redemption proceeds sent by federal funds wire to
the designated U.S. bank account if the proceeds are $1,000 or more. Otherwise,
proceeds will be sent by mail. No signature guarantee will be required of
investors electing this procedure. Requests to change bank or account
designations may only be made in writing to the Trust with the type of signature
guarantee and other documentation specified under "Redemption by Mail" above. To
participate in this procedure, an investor must complete the expedited
redemption portion of the Account Information Form or notify the Trust at any
time after making an initial investment.

An investor may also elect to have redemption proceeds sent by federal funds
wire to The Ohio Company, the Trust's distributor, if the proceeds are $500 or
more. If the investor elects to have federal funds so wired, the investor may
pick up a check at The Ohio Company's main office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ or The Ohio Company will mail a check to the investor's address
of record. The Trust may, at its discretion, waive the minimum redemption
requirement for redemptions effected to cover debit balances in brokerage
accounts of customers of The Ohio Company.

AUTOMATIC WITHDRAWAL

SYSTEMATIC WITHDRAWAL PLAN

As a shareholder, you may elect to redeem your Shares monthly or quarterly in
amounts of $50 or more, pursuant to the Trust's Systematic Withdrawal Plan.
Please contact The Ohio Company for the appropriate form.

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60

CHECK-WRITING REDEMPTION PROCEDURE

Cardinal Management Corp., as Transfer Agent for the Trust, will provide any
shareholder who so requests with a supply of checks, imprinted with the
shareholder's name, which may be drawn against the Trust's account maintained by
The Fifth Third Bank (the "Bank"), for redemption of Trust Shares. These checks
may be made payable to the order of any person in any amount not less than $500.
To participate in this procedure, an investor must complete the Check-Writing
Redemption Form available from Cardinal Management Corp. When a check is
presented to the Bank for payment, Cardinal Management Corp. (as your agent)
will cause the Trust to redeem sufficient Shares in your account to cover the
amount of the check. Shares continue earning daily dividends until the day on
which the check is presented to the Bank for payment. Cancelled checks will be
returned to you. Due to the delay caused by the requirement that redemptions be
priced at the next computed net asset value, the Bank will only accept for
payment checks presented through normal bank clearing channels. Shareholders
should not attempt to withdraw the full amount of an account or to close out an
account by using this procedure.

No charge will be made to a shareholder for participation in the check-writing
redemption procedure or for the clearance of any checks. A charge of $10.00 per
check will be deducted from the shareholder's account if any check is returned
due to insufficient funds or if any check is written for less than $500.

In order to stop payment on a check, the shareholder must notify the Trust in
writing before the check has been presented to the Bank for payment. A charge of
$8.50 will be deducted from the shareholder's account for each stop payment
order.

--------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
--------------------------------------------------------------------------------

The Trust's net asset value per share is currently determined as of 4:00 p.m.
Eastern Time on each Business Day, and on such other days on which there is a
sufficient degree of trading in the Trust's portfolio securities that the
Trust's net asset value might be materially affected by changes in the value of
the portfolio securities. Net asset value per share is computed by dividing the
total value of the assets of the Trust, less its liabilities, by the total
number of Shares outstanding. Expenses and fees of the Trust, including the
management fee, are accrued daily and taken into account for the purpose of
determining the net asset value.

The Board of Trustees has adopted a policy requiring the Trust to use its best
efforts, under normal circumstances, to maintain a constant net asset value of
$1.00 per share. The Trust values its portfolio securities by the amortized cost
method which involves valuing a security at its cost and thereafter accruing any
discount or premium at a constant rate to maturity. The Trust will normally
include any accrued discount or premium in its daily dividend and will thereby
keep constant the value of the Trust's assets and, consequently, its net asset
value per share. This method does not take into account unrealized capital gains
or losses or the effect of fluctuating interest rates.

--------------------------------------------------------------------------------
DOES THE TRUST PAY FEDERAL INCOME TAX?
--------------------------------------------------------------------------------

The Trust intends to qualify as a "regulated investment company" under the Code
for so long as such qualification is in the best interest of the Trust's
shareholders. Qualification as a regulated investment 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
Trust contemplates declaring as dividends 100% of the Trust's investment company
taxable income (before deduction of dividends paid).

13
61

distributed during the next calendar year. If distributions during a calendar
year were less than the required amount, the Trust would be subject to a
nondeductible excise tax equal to 4% of the deficiency.

--------------------------------------------------------------------------------
WHAT ABOUT MY TAXES?
--------------------------------------------------------------------------------

It is expected that the Trust will distribute annually to shareholders all or
substantially all of the Trust'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 Trust and not in cash. Since
all of the Trust's net investment income is expected to be derived from earned
interest and short-term capital gains, it is anticipated that no part of any
distribution will be eligible for the dividends received deduction for
corporations. The Trust does not expect to realize any long-term capital gains
and, therefore, does not foresee paying any "capital gains dividends" as
described in the Code. However, if the Trust were to realize any long-term
capital gains, distribution by the Trust of the excess of any such net long-term
capital gain over net short-term capital loss is taxable to shareholders as
long-term capital gain in the year in which it is received, regardless of how
long the shareholder has held the Shares. Such distributions are not eligible
for the dividends-received deduction.

Even though a substantial portion of distributions of net income will be
attributable to interest on U.S. Government obligations, which may be exempt
from state or local tax if received directly by a shareholder, shareholders of
the Trust may be subject to state and local taxes with respect to their
ownership of Trust Shares or distributions from the Trust.

The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Trust and its shareholders. Potential
investors in the Trust are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situation.

Cardinal Management Corp. will inform shareholders at least annually of the
amount and nature of such income and capital gains.

--------------------------------------------------------------------------------
WHO MANAGES MY INVESTMENT IN THE TRUST?
--------------------------------------------------------------------------------

Pursuant to the laws of Pennsylvania and the Trust's Declaration of Trust, the
responsibility for the management of the Trust is vested in its Board of
Trustees which, among other things, is empowered by the Trust's Declaration of
Trust to elect officers of the Trust and contract with and provide for the
compensation of agents, consultants and other professionals to assist and advise
in such management.

INVESTMENT ADVISER AND MANAGER

The Adviser, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, is a
wholly-owned subsidiary of The Ohio Company. The Adviser also acts as the
investment adviser to Cardinal Tax Exempt Money Trust ("CTEMT"), Cardinal
Government Obligations Fund ("CGOF"), Cardinal Balanced Fund ("CBF") and
Cardinal Aggressive Growth Fund ("CAGF") and as dividend and transfer agent for
The Cardinal Fund Inc., another open-end, diversified management investment
company ("CFI"), CTEMT, CGOF, CBF, CAGF and the Trust. The Ohio Company is a
member of the New York Stock Exchange, Inc., the Midwest Stock Exchange, Inc.,
other regional exchanges and the National Association of Securities Dealers,
Inc. In addition to acting as the principal underwriter for the Trust, CTEMT,
CGOF, CBF and CAGF, The Ohio Company acts as investment adviser and principal
underwriter for CFI and as the sponsor of various series of separate unit
investment trusts.

14
62

▇▇▇▇▇▇ III has been primarily responsible for the day-to-day management of the
Trust's portfolio. ▇▇. ▇▇▇▇▇▇ has been a portfolio manager with the Adviser
and/or The Ohio Company since 1981.

The Adviser performs and bears the cost of research, statistical analysis and
continuous supervision of the investment portfolio of the Trust and furnishes
office facilities and certain clerical and administrative services to the Trust.
In addition, the Adviser bears all promotional expenses, including the costs of
printing and distributing prospectuses utilized for promotional purposes. All
other expenses are borne by the Trust.

For the year ended September 30, 1994, the Adviser received as compensation for
its investment advisory services .5% of average daily net assets of the Trust.
The Adviser has, however, and may in the future periodically waive all or a
portion of its advisory fee with respect to the Trust to increase the net income
of the Trust available for distributions as dividends. The waiver of such fee
will cause the yield of the Trust to be higher than it would otherwise be in the
absence of such waiver.

DIVIDEND AND TRANSFER AGENT

Cardinal Management Corp., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, has
been selected to act as the Trust's Dividend and Transfer Agent. Cardinal
Management Corp. is also the Trust's investment adviser.

DISTRIBUTOR

The Trust has entered into a Distributor's Contract with The Ohio Company, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, pursuant to which Shares of the Trust
continuously will be offered on a best efforts basis by The Ohio Company and
dealers selected by The Ohio Company. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an officer and
trustee/director of both the Trust and The Ohio Company. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
Hannibal ▇. ▇▇▇▇▇▇ III, each an officer and trustee of the Trust, are officers
of The Ohio Company. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is a trustee of the Trust and an officer
of The Ohio Company. ▇▇▇▇▇ ▇. Will and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ are officers of both
the Trust and The Ohio Company.

CUSTODIAN

The Trust has appointed The Fifth Third Bank ("Fifth Third") ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as the Trust's custodian. In such capacity Fifth
Third will hold or arrange for the holding of all portfolio securities and other
assets acquired and owned by the Trust.

ACH PROCESSING

The Trust now offers ACH privileges. Investors may use ACH processing to make
subsequent purchases, redeem Shares and/or electronically transfer distributions
paid on Trust Shares, in addition to the other methods described in this
Prospectus. ACH provides a method by which funds may be automatically
transferred to or from an authorized bank account at a Federal Reserve member
bank that is an ACH member. Please contact your representative if you are
interested in ACH processing.

EXCHANGE PRIVILEGE

Investors may, provided the amount to be exchanged meets the applicable minimum
investment requirements and the exchange is made in states where it is legally
authorized, exchange Shares of the Trust for shares of:

Cardinal Tax Exempt Money Trust, a tax-free money market fund
(without payment of any sales charge);

15
63

Cardinal Aggressive Growth Fund, an equity fund seeking
appreciation of capital (upon the payment of the applicable sales
charge);

Cardinal Balanced Fund, a fund seeking current income and
long-term growth of both capital and income (upon the payment of
the applicable sales charge);

The Cardinal Fund Inc., an equity fund (upon payment of
applicable sales charge); or

Cardinal Government Obligations Fund, a U.S. Government bond fund
(upon payment of applicable sales charge).

Notwithstanding the foregoing and subject to the limitations contained in the
following paragraph, exchanges of Trust Shares for shares of CFI, CGOF, CBF or
CAGF (individually, a "Cardinal Load Fund") generally may be completed upon the
payment of a sales charge equal to the sales charge payable upon purchase of
shares of that Cardinal Load Fund. If, however, the Shares of Trust to be
exchanged were acquired as a result of an exchange of shares of the Cardinal
Load Fund, the sales charge to be paid on the present exchange may be reduced by
the sales charge previously paid.

The foregoing exchange privilege may be exercised only once in each calendar
quarter and must be made by written or telephonic authorization. A shareholder
should notify The Ohio Company of his desire to make an exchange, and The Ohio
Company will furnish, as necessary, a prospectus and an application form to open
the account. Cardinal Management Corp., as transfer agent, will require that any
written authorization of an exchange include a signature guarantee as described
above under "HOW MAY I REDEEM MY SHARES? -- Redemption by mail." However, a
signature guarantee will not be required if the exchange is requested to be made
within the same account or into an existing account of the shareholder held in
the same name or names and in the same capacity as the account from which the
exchange is to be made. Shareholders may also authorize an exchange of shares of
the Trust by telephone. Neither the Trust nor any of its service providers will
be liable of any loss, damages, expense or cost arising out of any telephone
exchange authorization to the extent and subject to the requirements set forth
under "HOW MAY I REDEEM MY SHARES? -- Redemption by telephone" above.

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

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

--------------------------------------------------------------------------------
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
--------------------------------------------------------------------------------

Each Share is entitled to one vote (and fractional shares to proportionate
fractional votes) in the election of Trustees and on other matters submitted to
the vote of shareholders. Voting rights are not cumulative, so that the holders
of more than 50% of the Shares voting in the election of Trustees have the power
to elect all of the Trustees of the Trust. Whenever the approval of a majority
of the outstanding Shares of the Trust is required in connection with
shareholder approvals of the Investment Advisory Contract, the Distribution
Contract or changes in the investment objective and policies or the investment
restrictions of the Trust, a "majority" shall mean the vote of (i) 67% or more
of the Shares of the Trust present at a meeting, if the holders of more than 50%
of the outstanding Shares are present in person or by proxy, or (ii) more than
50% of the outstanding Shares of the Trust, whichever is less.

16
64

--------------------------------------------------------------------------------
WHAT SHAREHOLDER REPORTS WILL I RECEIVE?
--------------------------------------------------------------------------------

An account summary will be furnished to each shareholder monthly and will
include information as to all purchases, redemptions and income dividends paid
during the preceding month. Financial statements of the Trust will be furnished
to shareholders semiannually.

17
65

[THIS PAGE INTENTIONALLY LEFT BLANK]
66

Investment Adviser and Manager
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Distributor
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Transfer Agent and Dividend Paying
Agent
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Custodian
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Legal Counsel
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Independent Auditors
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
67

TABLE OF CONTENTS

PAGE
------

Key Features................................ 2
Prospectus Highlights....................... 3
Fee Table................................... 4
Financial Highlights........................ 5
What is the Trust?.......................... 6
What Are the Investment Objective and
Policies of the Trust?.................... 6
How Do I Purchase Shares of the Trust?...... 8
May My Tax Sheltered Retirement Plan Invest
in the Trust?............................. 10
What Distributions Will I Receive?.......... 10
How May I Redeem My Shares?................. 11
How is Net Asset Value Calculated?.......... 13
Does the Trust Pay Federal Income Tax?...... 13
What About My Taxes?........................ 14
Who Manages My Investment in the Trust?..... 14
What Other Shareholder Programs Are
Provided?................................. 15
What Are My Rights as a Shareholder?........ 16
What Shareholder Reports Will I Receive?.... 17

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

THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND EXHIBITS RELATING THERETO, FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WASHINGTON, D.C., UNDER THE SECURITIES ACT OF 1933, AND
TO WHICH REFERENCE IS MADE.

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

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS OR INCORPORATED HEREIN BY REFERENCE TO THE
TRUST'S STATEMENT OF ADDITIONAL INFORMATION; AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST. THE TRUST IS REGISTERED AS AN OPEN-END MANAGEMENT
INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION
DOES NOT IMPLY THAT THE TRUST OR ANY OF ITS SHARES HAVE BEEN GUARANTEED,
SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE OR ANY
AGENCY OR OFFICER THEREOF.
------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.

----------------------
PROSPECTUS
----------------------

February 1, 1995

THE OHIO COMPANY

CARDINAL
GOVERNMENT
SECURITIES
TRUST

[LOGO]
68

CARDINAL TAX EXEMPT MONEY TRUST

SUPPLEMENT DATED DECEMBER 11, 1995,
TO PROSPECTUS DATED FEBRUARY 1, 1995

Capitalized terms used in this Supplement have the meaning assigned to them
in the Prospectus.

The Trust has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of December 1, 1995 (the "Plan"), with The Cardinal Group,
an Ohio business trust (the "Group"). Pursuant to the Plan, Cardinal Tax Exempt
Money Market Fund, a series of the Group (the "Acquiring Fund"), would acquire
all of the assets of the Trust in exchange for the assumption of all of the
Trust's liabilities and a number of full and fractional shares of the Acquiring
Fund having an aggregate net asset value equal to the Trust's net assets (the
"Reorganization"). The Trust would then be liquidated, and the shares of the
Acquiring Fund would be distributed to Trust shareholders.

The following paragraph is added to the cover page of this Prospectus:

THE SHARES OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY ANY BANK, NOR ARE SUCH SHARES FEDERALLY INSURED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE FUND INVOLVES CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.

The second sentence of the first paragraph under the heading "CHECK-WRITING
REDEMPTION PROCEDURE" on page 14 of the Prospectus is deleted and is replaced
with the following:

These checks may be made payable to the order of any person in any amount
not less than $250.

The second sentence of the second paragraph under the heading
"CHECK-WRITING REDEMPTION PROCEDURE" on page 14 of the Prospectus is deleted.

The following two sentences are added at the end of the second paragraph
under the heading "WHO MANAGES MY INVESTMENT IN THE TRUST? -- Investment Adviser
and Manager" on page 16 of the Prospectus:

As of December 22, 1995, ▇▇▇▇▇ ▇. Will will be primarily responsible for
the day-to-day management of the Trust's portfolio. Mr. Will has been a
Vice President of The Ohio Company and the Adviser since 1990 and has more
than 25 years of investment management experience.

This Prospectus Supplement supersedes in its entirety the prospectus
supplement dated February 22, 1995.

INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS
FOR FUTURE REFERENCE
69

PROSPECTUS
--------------------------------------------------------------------------------
[LOGO]
CARDINAL TAX EXEMPT MONEY TRUST

Cardinal Tax Exempt Money Trust (the "Trust") is a no-load, diversified,
open-end management investment company. The Trust has an investment objective of
maximizing current income exempt from federal income tax while preserving
capital and maintaining liquidity. The Trust seeks to attain its objective
through professional management of a high-grade portfolio of short-term
municipal bonds and notes, tax-exempt commercial paper and tax-exempt short-term
discount notes, some of which may be secured by the full faith and credit of the
U.S. Government. All obligations purchased by the Trust will mature, or be
deemed to mature, in 397 days (13 months) or less or will have interest rates
adjusted in accordance with established indexes (e.g. the prime rate) not less
frequently than semi-annually. There can be no assurance that the Trust's
objective will be achieved.

THE INVESTMENT DESCRIBED IN THIS PROSPECTUS IS NOT INSURED OR GUARANTEED BY THE
UNITED STATES GOVERNMENT. THE TRUST SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE
OF $1.00 PER SHARE, BUT THERE CAN BE NO ASSURANCE THAT NET ASSET VALUE WILL NOT
VARY.

The Trust is designed for institutions and individuals who desire current income
exempt from federal income tax that reflects prevailing interest rates for
short-term tax-exempt investments together with a high degree of liquidity.
--------------------------------------------------------------------------------

For further information regarding the Trust or for assistance
in opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)
464-5511 (redeeming shares)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed to the Trust
at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------

Investors should read and retain this Prospectus for future reference.

THE OHIO COMPANY

The date of this Prospectus is February 1, 1995.

--------------------------------------------------------------------------------
70

--------------------------------------------------------------------------------
KEY FEATURES
--------------------------------------------------------------------------------

TAX ADVANTAGES.................The Trust seeks to invest in securities which are free of
federal income tax, and in turn, pass through to the
investor tax free income. State and local taxes have not
been considered. (See page 7.)
HIGH CURRENT YIELDS............The Trust seeks the maximum yield available through
investment in securities which earn attractive rates of
return free of federal income tax. (See page 7.)
MONTHLY DISTRIBUTIONS..........Monthly distributions are automatically reinvested in
additional shares of the Trust without charge or may be
received in cash. (See pages 4 and 12.)
INSTANT LIQUIDITY..............Through the free check writing privilege or telephone
transfer of funds, all or part of an investor's shares may
be redeemed on any business day at the net asset value
without charge. (See pages 13 and 14.)
LOW INITIAL INVESTMENT.........An investor can acquire shares of a high quality portfolio
of tax exempt securities with a smaller investment than
would be needed to purchase a similar portfolio directly.
(See page 10.)
PROFESSIONAL MANAGERS..........The Trust's portfolio is fully managed by professional
portfolio managers. (See page 16.)
FLEXIBILITY....................You may switch once each calendar quarter from one mutual
fund to another within the Cardinal Group of Funds as your
personal circumstances or market conditions dictate. Under
certain circumstances, however, a sales charge may be im-
posed on exchanges for shares of The Cardinal Fund Inc.,
Cardinal Government Obligations Fund, Cardinal Balanced
Fund and Cardinal Aggressive Growth Fund. (See page 17.)
MAXIMUM YIELD..................As there is no sales charge to reduce the yield, investors
receive the maximum yield on their investment. Service
fees and charges have not been considered. (See pages 4
and 16.)
ACH PROCESSING.................Investors may use Automated Clearing House ("ACH")
processing for subsequent purchases of shares,
redemptions, and/or distributions paid. (See page 17.)

2
71

--------------------------------------------------------------------------------
PROSPECTUS HIGHLIGHTS
--------------------------------------------------------------------------------

SHARES OFFERED.................The Trust is authorized to issue an unlimited number of
full and fractional shares of beneficial interest, all of
one class, with a par value of $.10 per share (the
"Shares"). (See page 6.)
OFFERING PRICE.................The public offering price is equal to net asset value per
share next determined after order. The Trust intends to
use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share.
There can be no assurance that it will be able to maintain
such a net asset value. There is no sales charge. (See
pages 10 and 14.)
MINIMUM PURCHASE...............$1,000 minimum initial investment and $100 minimum subse-
quent investments, although such minimums may be waived
under certain circumstances. (See page 10.)
TYPE OF COMPANY................No-load, diversified, open-end management investment com-
pany, established under Ohio law by a Declaration of Trust
dated January 13, 1983. (See page 6.)
INVESTMENT OBJECTIVE...........To maximize current income exempt from federal income tax
while preserving capital and maintaining liquidity. There
is no assurance that such objective will be achieved. (See
page 7.)
INVESTMENT POLICIES............The Trust invests in short-term tax exempt securities
including, but not limited to, bond anticipation notes,
construction loan notes, project notes, revenue
anticipation notes and tax anticipation notes as well as
municipal bonds and participations therein. These
investments entail certain risks. (See pages 7 through
10.)
INVESTMENT ADVISER.............The Trust has entered into an investment advisory and man-
agement agreement with Cardinal Management Corp., a
wholly-owned subsidiary of The Ohio Company. Cardinal
Management Corp. also acts as investment adviser for
Cardinal Government Securities Trust, Cardinal Government
Obligations Fund, Cardinal Balanced Fund and Cardinal
Aggressive Growth Fund. (See page 16.)
MANAGEMENT FEE.................The annual rate is .5% of the average daily net assets of
the Trust. (See page 16.)
DISTRIBUTIONS..................Distributions from net investment income are credited to
the shareholder's account daily and are automatically
reinvested in additional Shares of the Trust monthly,
unless a cash dividend option is selected. (See pages 11
and 12.)
REDEMPTION.....................At net asset value per share without charge, except that
broker-dealers may charge a service fee for assisting in a
redemption. The Trust may require a redemption of Shares
if the value of the account is less than $500. (See page
12.)
TRANSFER AGENT.................Cardinal Management Corp. (See page 16.)

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72

--------------------------------------------------------------------------------
FEE TABLE
--------------------------------------------------------------------------------

SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................... 0%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................... 0%
Deferred Sales Load
(as a percentage of original purchase price or redemption
proceeds, as applicable)..................................... 0%
Redemption Fees
(as a percentage of amount redeemed, if applicable).......... 0%
Exchange Fee................................................... $ 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................................ .50%
12b-1 Fees..................................................... .00
Other Expenses................................................. .26
-------
Total Fund Operating Expenses............................. .76%
=======

EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------- ----------- ----------- ----------- -----------

You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each period:...... $8 $24 $42 $94

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--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

The following Financial Highlights with respect to each of the ten fiscal years
ended September 30, 1994, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon together with certain financial
statements, are contained in the Trust's Statement of Additional Information and
which may be obtained by shareholders and prospective investors.

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

YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------

Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .02 .02 .03 .04 .05
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations.................. .02 .02 .03 .04 .05
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............ (.02) (.02) (.03) (.04) (.05)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions............................... (.02) (.02) (.03) (.04) (.05)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return........................................ 1.78% 1.81% 2.62% 4.40% 5.41%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 80,531 $ 91,159 $ 70,054 $ 85,488 $ 82,988
Ratio of expenses to average net assets............. 0.76% 0.77% 0.76% 0.72% 0.76%
Ratio of net investment income to average net
assets............................................ 1.78% 1.80% 2.59% 4.31% 5.26%

1989 1988 1987 1986 1985
-------- -------- -------- -------- --------

Net asset value, Beginning of period................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income............................. .06 .04 .04 .04 .05
Net gains or losses on securities (both realized
and unrealized)................................. -- -- -- -- --
-------- -------- -------- -------- --------
Total from investment operations.................. .06 .04 .04 .04 .05
-------- -------- -------- -------- --------
Less Distributions:
Dividends (from net investment income)............ (.06) (.04) (.04) (.04) (.05)
Distributions (from capital gains)................ -- -- -- -- --
Returns of capital................................ -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions............................... (.06) (.04) (.04) (.04) (.05)
Net asset value, End of period...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return........................................ 5.95% 4.53% 3.62% 4.47% 4.93%
Ratios/Supplemental Data:
Net assets, End of period (000) omitted............. $ 82,031 $ 61,771 $ 63,848 $ 67,816 $ 34,653
Ratio of expenses to average net assets............. 0.72% 0.75% 0.71% 0.76% 0.75%
Ratio of net investment income to average net
assets............................................ 5.79% 4.44% 3.56% 4.38% 4.82%

See notes to financial statements appearing in the Trust's Statement of
Additional Information.
---------------------------------------

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and only in an amount not exceeding 5% of the value of the Trust's total assets
at the time of borrowing. The table below sets forth certain information
concerning the Loan Agreement.

AVERAGE NUMBER
AMOUNT OF DEBT AVERAGE AMOUNT OF OF TRUST'S SHARES AVERAGE AMOUNT
YEAR ENDED OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING OF DEBT PER SHARE
SEPTEMBER 30, END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
---------------- ------------------ ------------------ ------------------ ------------------

1994 $0 $19,159 85,845,213 $.0002232
1993 $0 $6,439 80,606,522 $.0000799
1992 $0 $ 637 88,243,903 $.0000072

From time to time the Trust may advertise its "yield" or "annualized yield," its
"effective yield," its "tax equivalent yield" and its "tax equivalent effective
yield." ALL YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "yield" or "annualized yield" of the Trust
refers to the income generated by an investment in the Trust over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized". That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in the Trust
is assumed to be reinvested. The "effective yield" will be slightly higher than
the "yield" or "annualized yield" because of the compounding effect of this
assumed reinvestment. The "tax-equivalent yield" demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of the Trust. The
"tax-equivalent effective yield" is calculated similarly to the "tax-equivalent
yield" but, when annualized, the income earned by an investment in the Trust is
assumed to be reinvested. The "tax-equivalent effective yield" will be slightly
higher than the "tax-equivalent yield" because of the compounding effect of this
assumed reinvestment.

--------------------------------------------------------------------------------
WHAT IS THE TRUST?
--------------------------------------------------------------------------------

The Trust is a diversified open-end management investment company established
under Ohio law by a Declaration of Trust dated January 13, 1983. The Declaration
of Trust permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest, all of one class, with par value of
$.10 per share, and authorizes the Trustees to issue separate series of shares
differing only in certain specified respects. The Trustees have not currently
authorized separate series of shares. Each Share offered hereunder represents an
equal pro rata interest in the Trust's common portfolio. Upon liquidation,
shareholders are entitled to share pro rata in the net assets of the Trust
available for distribution to shareholders. Shares are freely transferable, have
no preemptive or conversion rights and are redeemable as set forth herein under
"HOW MAY I REDEEM MY SHARES?" Shares issued pursuant to the terms of the
Declaration of Trust are fully paid and nonassessable. Any additional series of
shares must be issued in compliance with the Investment Company Act of 1940, as
amended, and must not constitute a security that is senior to the Shares offered
pursuant to this Prospectus.

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The investment objective of the Trust is to maximize current income exempt from
federal income tax while preserving capital and maintaining liquidity. The
investment objective with respect to the Trust is a fundamental policy and as
such may not be changed without a vote of the holders of a majority of the
outstanding Shares of the Trust.

As a money market fund, the Trust invests exclusively in United States
dollar-denominated instruments which the Trustees of the Trust and the Trust's
investment adviser determine present minimal credit risks and which at the time
of acquisition are rated by one or more appropriate nationally recognized
statistical rating organizations ("NRSRO") (e.g., Standard & Poor's Corporation
and ▇▇▇▇▇'▇ Investors Service, Inc.) in one of the two highest rating categories
for short-term debt obligations or, if unrated, are of comparable quality. All
securities or instruments in which the Trust invests have, or are deemed to
have, remaining maturities of 397 calendar days (thirteen months) or less. The
dollar-weighted average maturity of the obligations in the Trust will not exceed
90 days.

As a matter of policy, under normal market conditions, the Trust will invest at
least 80% of its net assets in a diversified portfolio of Municipal Securities
(as defined below), the interest on which is both exempt from federal income tax
and not treated as a preference item for purposes of the federal alternative
minimum tax. Subject to the foregoing limitations and in order to achieve its
investment objective, the Trust expects to invest in the following types of
securities.

The Trust may invest in bond anticipation notes, construction loan notes,
project notes, revenue anticipation notes and tax anticipation notes, as well as
municipal bonds and participation interests therein, including industrial
development revenue bonds and pollution control revenue bonds (collectively,
"Municipal Securities"). The Trust may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a "stand-by
commitment" a dealer agrees to purchase, at the Trust's option, specified
Municipal Securities at a specified price which ordinarily is substantially the
same as the value of the underlying Municipal Security.

Specific types of Municipal Securities which the Trust may purchase include bond
anticipation notes, construction loan notes, project notes, revenue anticipation
notes and tax anticipation notes which, in each case (1) are backed by the full
faith and credit of the United States, (2) are rated MIG-1 or MIG-2, or
subsequent equivalents by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's") or (3) if
the notes are not rated, are, as determined by Cardinal Management Corp., the
Trust's adviser (the "Adviser") in accordance with guidelines established by the
Board of Trustees, of a quality equivalent to MIG-1 or MIG-2. The Trust may also
invest in municipal bonds and participation interests therein, including
industrial development revenue bonds and pollution control revenue bonds, which
(1) are rated Aaa or Aa by Moody's, (2) are rated AAA or AA by Standard & Poor's
Corporation ("S&P") or (3) if not rated, have, in the opinion of the Adviser
determined in accordance with guidelines established by the Board of Trustees,
essentially the same characteristics and quality as bonds having the above
ratings. In addition, the Trust may purchase other types of tax-exempt Municipal
Securities such as short-term discount notes. These investments must (1) be
rated Prime-1 or Prime-2 by Moody's or (2) if not rated, possess equivalent
characteristics and quality in the opinion of the Adviser determined in
accordance with guidelines established by the Board of Trustees.

As of December 31, 1994, the Trust was 100% invested in Municipal Securities
rated AAA or AA (bonds), SP-1 (notes) or A-1 (variable rate demand obligations)
by S&P, or Aaa or Aa (bonds), MIG-1 (notes) or VMIG-I (variable rate demand
obligations) by Moody's. Current income earned on such Municipal Securities may
not be as great as current income that could be earned on lower quality
securities that have less liquidity and/or a greater risk of nonpayment or
securities that have a longer term.

The Trust has invested and intends to continue to invest more than 25% of its
assets in certain variable or floating rate demand Municipal Securities,
including participation interests therein. The value of such securities may
change with changes in interest rates generally. However, the variable or
floating rate nature of such securities should reduce, to the extent the Trust
is invested in such securities, the degree of

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76

fluctuation in the value of portfolio investments. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation and the risk
of potential capital depreciation is less than would be the case with a
portfolio composed entirely of fixed income securities. The portfolio may
contain variable or floating rate demand securities on which stated minimum or
maximum rates set by state law limit the degree to which interest on such
securities may fluctuate; to the extent it does, increases or decreases in value
may be somewhat greater than would be the case without such limits. Because the
adjustment of interest rates on the variable or floating rate demand securities
is made in relation to movements of the applicable indexes (e.g. the prime
rate), such securities are not comparable to longer-term fixed rate securities.
Accordingly, interest rates on such securities may be higher or lower than
current market rates for fixed rate obligations of comparable quality with
similar maturities. The Trust, however, will only acquire variable or floating
rate securities the interest rates on which are determined by reference to other
short-term market rates of interest. The Trust will attempt to achieve a balance
of variable or floating and fixed rate securities such that under normal
circumstances the net asset value of the Trust can be maintained at $1.00 per
share while the highest possible yield can be returned to investors. To the
extent the Trust's portfolio is invested in variable or floating rate
securities, yield can be expected to decline in periods of falling interest
rates more rapidly than if the Trust's portfolio is invested solely in
longer-term fixed rate securities. Conversely, yield, under the same
circumstances, can be expected to increase more rapidly in periods of rising
interest rates. Such instruments may be considered to be derivatives. A
derivative is generally defined as an instrument whose value is based upon, or
derived from, some underlying index, reference rate (e.g., interest rates),
security, commodity or other asset. As stated above, the Fund has no limit as to
the percentage of its total assets that may be invested in such variable or
floating rate securities.

Variable rate demand Municipal Securities in which the Trust invests may be
supported by bank letters of credit or comparable guarantees of financial
institutions. To the extent that 25% or more of the Trust's assets are invested
in variable rate demand Municipal Securities supported by such letters of credit
or guarantees, the Trust may be deemed to be concentrated in the banking
industry. (See "Certain Factors.")

In addition, the Trust may enter into commitments to purchase Municipal
Securities on a "when-issued" basis. Pursuant to such commitments, delivery and
payment for the Municipal Securities normally takes place at a date after the
commitment to purchase although the payment obligation and the coupon rate have
been established before the time the Trust enters into the commitment. The
settlement date usually occurs within one week of the purchase of notes and
within one month of the purchase of bonds. At the time the Trust makes such a
commitment to purchase a Municipal Security, it will record the transaction and
reflect the value of the obligation in determining its net asset value. No
interest accrues to the Trust until delivery and payment take place. The
Custodian will maintain on a daily basis a separate Trust account consisting of
cash or liquid debt securities with a value at least equal to the amount of the
Trust's commitments to purchase when-issued obligations.

Municipal Securities purchased on a when-issued basis or held in the Trust's
portfolio are subject to changes in market value based not only upon the
public's perception of the credit worthiness of the issuer but also upon changes
in the level of interest rates. Such changes in value will generally result in
both changing in value in the same way, i.e. both appreciating when interest
rates decline and depreciating when interest rates rise. Therefore, if to
achieve higher interest income the Trust remains substantially fully invested at
the same time that it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the Trust's assets will
vary from $1.00 per share. (See "HOW IS NET ASSET VALUE CALCULATED?") In
addition, the Trust may, when it purchases Municipal Securities on a when-issued
basis, obtain on the settlement date, Municipal Securities yielding higher or
lower rates of interest than are otherwise available. However, the Trust does
not believe that under normal circumstances its net asset value or income will
be affected by its purchase of Municipal Securities on a when-issued basis.

TAXABLE MONEY MARKET SECURITIES

Under normal operating circumstances, Trust assets will be managed with a view
towards producing only income that is exempt from federal income taxation.
However, the Trust may invest up to 20% of its assets in "temporary
investments," that is, money market instruments consisting of marketable
obligations issued

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or guaranteed by the U.S. Government, its agencies or instrumentalities, deposit
obligations of banks and savings and loans which are members of the Federal
Deposit Insurance Corporation ("FDIC"), bankers' acceptances, high-grade
commercial paper guaranteed or issued by domestic corporations and instruments
(including repurchase agreements) secured by such obligations.

A repurchase agreement is an instrument under which the purchaser acquires
ownership of the obligation but the seller agrees, at the time of sale, to
repurchase the obligation at a mutually agreed upon time and price. The resale
price reflects an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the purchased security. Repurchase agreements are
considered under the Investment Company Act of 1940, as amended (the "1940 Act")
to be loans made by the Trust. The Trust will only enter into a repurchase
agreement where (i) the underlying securities are of the type which the Trust's
investment guidelines would allow it to purchase directly, (ii) the market value
of the underlying security, including interest accrued, will be at all times
equal to or exceed the value of the repurchase agreement, and (iii) payment for
the underlying securities is made only upon physical delivery or evidence of
book-entry transfer to the account of the custodian or a bank acting as agent.
The Adviser will be responsible for continuously monitoring such requirements.
In the event of a bankruptcy or other default of a seller of a repurchase
agreement, the Trust could experience both delays in liquidating the underlying
securities and losses, including: (a) possible decline in the value of the
underlying security during the period while the Trust seeks to enforce its
rights thereto; (b) possible subnormal levels of income and lack of access to
income during this period; and (c) expenses of enforcing its rights.

The Trust will not enter into repurchase agreements in violation of the 1940
Act. The Trust may not enter into a repurchase agreement if, as a result
thereof, more than 10% of its total assets would be subject to repurchase
agreements maturing in more than seven days.

LOANS AND LOAN PARTICIPATIONS

The Trust may, for temporary or emergency non-investment purposes, such as to
accommodate abnormally heavy redemption requests, borrow money in an amount not
exceeding 5% of the value of the Trust's total assets at the time of borrowing.
The Trust may also acquire participations in privately negotiated loans to
municipal borrowers, provided that the interest received by the Trust is exempt,
in the opinion of bond counsel to the municipal borrower, from federal income
tax. Loan participations are loans subject to the Trust's investment
restrictions applicable to these activities. (See "INVESTMENT LIMITATIONS" in
the Statement of Additional Information.)

INVESTMENT COMPANY SECURITIES

The Trust may also invest up to 10% of the value of its total assets in the
securities of other investment companies subject to the limitations set forth in
the 1940 Act. The Trust intends to invest in money market mutual funds for
purposes of short-term cash management. The Trust's investment in such other
investment companies may result in the duplication of fees and expenses,
particularly investment advisory fees. For a further discussion of the
limitations on the Trust's investments in other investment companies, see
"INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Securities of Other Investment Companies" in the Trust's
Statement of Additional Information.

CERTAIN FACTORS

Naturally, there can be no assurance that the Trust will achieve its investment
objective or be able continuously to maintain a net asset value per share of
$1.00. The characteristics of short-term Municipal Securities are such that the
price stability and liquidity of the Trust may not be equal to that of a money
market fund which exclusively invests in short-term taxable money market
securities. While the Adviser believes that the purchase of variable rate demand
Municipal Securities will facilitate maintaining a $1.00 per share net asset
value, the Trust is still expected to have a significantly longer average
maturity than a

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general purpose taxable money market fund with the result that the pricing of
its portfolio will tend to be more subject to short-term interest rate
fluctuations.

In addition, the Trust expects that substantially all the demand rights of the
Trust with respect to variable rate demand Municipal Securities will be
supported by letters of credit of major commercial banks. Trust investors should
be aware that banks are subject to extensive governmental regulation which may
limit both the amounts and type of loans and other financial commitments which
may be made and interest rates and fees which may be charged. The profitability
of this industry is largely dependent upon the availability and cost of capital
funds for the purpose of financing lending operations under prevailing money
market conditions. Also, general economic conditions play an important part in
the operations of this industry and exposure to credit losses arising from
possible financial difficulties of borrowers might affect a bank's ability to
meet its obligations under a letter of credit.

GENERAL

Shares of the Trust are sold on a continuing basis without a sales charge at the
net asset value next determined after an order is received by The Ohio Company,
the Trust's principal underwriter, and federal funds (monies credited to a
member bank's account in a Federal Reserve Bank) are received by The Ohio
Company as hereinafter provided. The minimum initial investment is $1,000 and
subsequent investments must be in amounts of at least $100. The Trust may, at
its discretion, waive the subsequent investment minimum for purchases effected
through the automatic reinvestment of distributions from unit investment trusts
sponsored by The Ohio Company, and may waive both the initial and subsequent
investment minimums for purchases effected with cash balances in brokerage
accounts of customers of The Ohio Company. Shares of the Trust may be purchased
through a securities dealer, investment adviser, agent or other fiduciary which
may charge a fee for its services in connection with the purchase. No sales
charge is imposed by the Trust or by The Ohio Company.

Each new investor must complete an Application Form and send it to the Trust at
the indicated address either prior to or concurrently with the transmittal of
funds by wire or mail.

All Shares purchased will be credited to shareholder accounts after receipt of
an order and federal funds by The Ohio Company, at the net asset value next
determined. The Trust currently determines net asset value and enters purchases
and redemptions of its Shares as of 4:00 p.m. Eastern time on each day that the
New York Stock Exchange is open for business ("Business Day"). If a properly
completed order and federal funds (or other immediately available funds) are
received at or prior to 12:00 noon Eastern time on a Business Day, then the
purchase will be entered as of 4:00 p.m. Eastern time on that day and dividends
will commence on that day. If either federal funds (or other immediately
available funds) or the completed purchase order are received after 12:00 noon
Eastern time (but prior to 4:00 p.m. Eastern time) Shares will be credited to
the shareholder's account as of 4:00 p.m. Eastern time on that day but will not
earn dividends until the following day. The Trust reserves the right to reject
any order to purchase its Shares. Certificates representing Shares of the Trust
will not be issued. All Shares purchased are confirmed to the investor and
credited to the investor's account on the Trust's books maintained by Cardinal
Management Corp. The investor will have the same rights and ownership with
respect to such Shares as if certificates had been issued.

PURCHASE BY FEDERAL FUNDS WIRE

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instructions and the investor's wire transfer does not include sufficient
information, such purchase will be delayed until the proper information is
received. An investor must instruct its bank to "wire transfer" the investment
immediately to:

The Huntington National Bank
Account Number 01891688407
Routing Number ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Cardinal Tax Exempt Money Trust
[Include Trust Account Number and Name of Account
Holder]

Subsequent purchases of Shares of the Trust may be made by ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

PURCHASE BY MAIL

Investment in Shares of the Trust may be made by mail by sending a check or
other negotiable bank draft payable to the order of "Cardinal Tax Exempt Money
Trust" together with, in the case of an initial purchase, an Application Form
to:

Cardinal Tax Exempt Money Trust
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

AUTOMATIC INVESTMENT PLAN

The Trust has made arrangements to enable you to make automatic monthly or
quarterly investments, in the minimum amount of $50 per transaction, from your
checking account. Assuming the cooperation of your financial institution, your
checking account therein will be debited to purchase Shares of the Trust on the
periodic basis you select. Confirmation of your purchase of Trust Shares will be
provided by the Trust. The debit to your checking account will be reflected in
the checking account statement you receive from your financial institution.
Please contact The Ohio Company for the appropriate form.

--------------------------------------------------------------------------------
WHAT DISTRIBUTIONS WILL I RECEIVE?
--------------------------------------------------------------------------------

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dividend period. While the Trust does not expect to realize any long-term
capital gains due to its policy of investing in securities maturing in 13 months
or less, any net long-term gain is expected to be distributed in January of the
fiscal year following realization. Long-term capital gains, if any, will be paid
in additional Shares of the Trust unless the shareholder elects to receive cash.

Shareholders may elect to receive cash distributions by using ACH processing as
described under "WHAT OTHER SHAREHOLDER PROGRAMS ARE PROVIDED? -- ACH
Processing" below.

--------------------------------------------------------------------------------
HOW MAY I REDEEM MY SHARES?
--------------------------------------------------------------------------------

The Trust may suspend the right of redemption or may delay payment during any
period the determination of net asset value is suspended. See "HOW IS NET ASSET
VALUE CALCULATED?".

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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

REDEMPTION BY TELEPHONE

EXPEDITED REDEMPTION

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AUTOMATIC WITHDRAWAL

SYSTEMATIC WITHDRAWAL PLAN

CHECK-WRITING REDEMPTION PROCEDURE

--------------------------------------------------------------------------------
HOW IS NET ASSET VALUE CALCULATED?
--------------------------------------------------------------------------------

The net asset value per share of the Trust is currently determined as of 4:00
p.m. Eastern Time on each Business Day (and at such other time or times as the
Board of Trustees may determine). The net asset value per share is computed by
dividing the total value of the assets of the Trust, less its liabilities, by
the total number of Shares outstanding.

The Board of Trustees has adopted a policy requiring the Trust to use its best
efforts, under normal circumstances, to maintain a constant net asset value of
$1.00 per Share. The Trust values its portfolio securities by the amortized cost
method which involves valuing a security at its cost and thereafter accruing any
discount or premium at a constant rate to maturity. The Trust will normally
include any accrued discount or premium in its daily dividend and will thereby
keep constant the value of the Trust's assets and, consequently, its net asset
value per share. This method does not take into account unrealized capital gains
or losses or the effect of fluctuating interest rates.

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company under the Code requires, among other things, that the regulated
investment company distribute to its shareholders at least 90% of its investment
company taxable income and 90% of its exempt interest income. The Trust
contemplates declaring as dividends 100% of the Trust's investment company
taxable income (before deduction of dividends paid) and 100% of its exempt
interest income.

A non-deductible 4% excise tax is imposed on regulated investment companies that
do not distribute in each calendar year (regardless of whether they otherwise
have a non-calendar taxable year) an amount equal to 98% of their ordinary
income for the calendar year plus 98% of their capital gain net income for the
one-year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. If distributions
during a calendar year were less than the required amount, the Trust would be
subject to a nondeductible excise tax equal to 4% of the deficiency.

--------------------------------------------------------------------------------
WHAT ABOUT MY TAXES?
--------------------------------------------------------------------------------

FEDERAL TAXES

The Trust will distribute substantially all of its net investment income and net
capital gains to shareholders. Dividends derived from interest earned on
Municipal Securities the interest on which is excluded from gross income for
federal income tax purposes, including insurance proceeds representing maturing
interest on defaulted Municipal Securities the interest on which would be so
excluded, constitute "exempt-interest dividends" when designated as such by the
Trust and will be excluded from gross income for federal income tax purposes.
However, interest excluded from gross income for federal income tax purposes
that is received by individuals and corporations on certain municipal
obligations issued on or after August 8, 1986, to finance certain private
activities will be treated as a tax preference item in computing the alternative
minimum tax. It is likely that exempt-interest dividends received by
shareholders from the Trust will also be treated as tax preference items in
computing the alternative minimum tax to the extent, if any, that distributions
by the Trust are attributable to interest earned by the Trust on such
obligations. Also, a portion of all other interest excluded from gross income
for federal income tax purposes earned by a corporation may be subject to the
alternative minimum tax as a result of the inclusion in alternative minimum
taxable income of 75% of the excess of adjusted current earnings over adjusted
net book income preference alternative minimum taxable income.

Distributions, if any, derived from capital gains will generally be taxable to
shareholders as capital gains for federal income tax purposes to the extent so
designated by the Trust. Dividends, if any, derived from sources other than
interest excluded from gross income for federal income tax purposes and capital
gains will be taxable to shareholders as ordinary income for federal income tax
purposes whether or not reinvested in additional Shares. Shareholders not
subject to federal income tax on their income will not, of course, be required
to pay federal income tax on any amounts distributed to them. The Trust
anticipates that substantially all of its dividends will be excluded from gross
income for federal income tax purposes and will notify each shareholder annually
of the tax status of all distributions.

If a shareholder receives an exempt-interest dividend with respect to any Share
and such Share is held by the shareholder for six months or less, any loss on
the sale or exchange of such Share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a shareholder.

STATE AND LOCAL TAXES

Under state or local law, distributions of net investment income may be taxable
to shareholders as dividend income even though a substantial portion of such
distribution may be derived from interest excluded from gross income for federal
income tax purposes that, if received directly, would be exempt from such income
taxes. The Trust will report to its shareholders annually after the close of its
taxable year the percentage and

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source, on a state-by-state basis, of interest income earned on Municipal
Securities held by the Trust during the preceding year.

Cardinal Management Corp. will inform shareholders at least annually of the
amount and nature of such income and capital gains.

Pursuant to the laws of Ohio and the Trust's Declaration of Trust, the
responsibility for the management of the Trust is vested in its Board of
Trustees which, among other things, is empowered by the Trust's Declaration Of
Trust to elect officers of the Trust and contract with and provide for the
compensation of agents, consultants and other professionals to assist and advise
in such management.

INVESTMENT ADVISER AND MANAGER

Cardinal Management Corp. (the "Adviser"), located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, is a wholly-owned subsidiary of The Ohio Company and is
also the investment adviser to Cardinal Government Securities Trust ("CGST"),
Cardinal Government Obligations Fund ("CGOF"), Cardinal Balanced Fund ("CBF")
and Cardinal Aggressive Growth Fund ("CAGF"). The Adviser also acts as dividend
and transfer agent for The Cardinal Fund Inc., another open-end diversified
management investment company ("CFI"), CGST, CGOF, CBF, CAGF and the Trust. The
Ohio Company is a member of the New York Stock Exchange, Inc., the Midwest Stock
Exchange, Inc., other regional exchanges and the National Association of
Securities Dealers, Inc. In addition to acting as the principal underwriter for
the Trust, CGST, CGOF, CBF and CAGF, The Ohio Company acts as investment adviser
and principal underwriter for CFI, and as the sponsor of various series of
separate unit investment trusts.

Pursuant to the Investment Advisory Contract, the Adviser manages the investment
and reinvestment of the assets of the Trust in accordance with the Trust's
investment objective, policies and restrictions, subject to the general
supervision and control of the Trust's Board of Trustees. Since the Trust's
inception, Hannibal ▇. ▇▇▇▇▇▇ III has been primarily responsible for the
day-to-day management of the Trust's portfolio. ▇▇. ▇▇▇▇▇▇ has been a portfolio
manager with the Adviser and/or The Ohio Company since 1981.

As compensation for its services to the Trust, the Adviser receives monthly from
the Trust a management fee at the annual rate of .5% of the average daily net
assets of the Trust. The Adviser may, however, periodically waive all or a
portion of its advisory fee with respect to the Trust to increase the net income
of the Trust available for distribution as dividends. The waiver of such fee
will cause the yield of the Trust to be higher than it would otherwise be in the
absence of such a waiver.

DIVIDEND AND TRANSFER AGENT

DISTRIBUTOR

16
85

Trust, is an officer of The Ohio Company. ▇▇▇▇▇ ▇. Will and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
are officers of both the Trust and The Ohio Company.

CUSTODIAN

ACH PROCESSING

EXCHANGE PRIVILEGE

Cardinal Government Securities Trust, a short-term U.S.
Government securities fund (without payment of any sales charge);

Cardinal Aggressive Growth Fund, an equity fund seeking
appreciation of capital (upon the payment of the applicable sales
charge);

Cardinal Balanced Fund, a fund seeking current income and
long-term growth of both capital and income (upon the payment of
the applicable sales charge);

The Cardinal Fund Inc., an equity fund (upon payment of
applicable sales charge); or

Cardinal Government Obligations Fund, a U.S. Government bond fund
(upon payment of applicable sales charge).

Notwithstanding the foregoing and subject to the limitations contained in the
following paragraph, exchanges of Trust Shares for shares of CFI, CGOF, CBF or
CAGF (individually, a "Cardinal Load Fund") generally may be completed upon the
payment of a sales charge equal to the sales charge payable upon purchase of
shares of that Cardinal Load Fund. If, however, the Shares of Trust to be
exchanged were acquired as a result of an exchange of shares of a Cardinal Load
Fund, the sales charge to be paid on the present exchange may be reduced by the
sales charge previously paid.

17
86

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

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

--------------------------------------------------------------------------------
WHAT ARE MY RIGHTS AS A SHAREHOLDER?
--------------------------------------------------------------------------------

Each Share is entitled to one vote (and fractional Shares to proportionate
fractional votes) in the election of Trustees and on other matters submitted to
the vote of shareholders. Voting rights are not cumulative, so that the holders
of more than 50% of the Shares voting in the election of Trustees have the power
to elect all of the Trustees of the Trust. Whenever the approval of a majority
of the outstanding Shares of the Trust is required in connection with
shareholder approvals of the Investment Advisory Contract, the Distribution
Contract or changes in the investment objective and policies or the investment
restrictions of the Trust, a "majority" shall mean the vote of (i) 67% or more
of the Shares of the Trust present at a meeting, if the holders of more than 50%
of the outstanding Shares are present in person or by proxy, or (ii) more than
50% of the outstanding Shares of the Trust, whichever is less.

An account summary will be furnished to each shareholder monthly and will
include information as to all purchases, redemptions and income dividends paid
with respect to the preceding month. Financial statements of the Trust will be
furnished to shareholders semiannually.

18
87

Investment Adviser and Manager
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Distributor
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Transfer Agent and Dividend Paying
Agent
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Custodian
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Legal Counsel
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

Independent Auditors
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
88

TABLE OF CONTENTS

PAGE
------

Key Features................................ 2
Prospectus Highlights....................... 3
Fee Table................................... 4
Financial Highlights........................ 5
What is the Trust?.......................... 6
What Are the Investment Objective and
Policies of the Trust?.................... 7
How Do I Purchase Shares of the Trust?...... 10
What Distributions Will I Receive?.......... 11
How May I Redeem My Shares?................. 12
How is Net Asset Value Calculated?.......... 14
Does the Trust Pay Federal Income Tax?...... 14
What About My Taxes?........................ 15
Who Manages My Investment in the Trust?..... 16
What Other Shareholder Programs Are
Provided?................................. 17
What Are My Rights as a Shareholder?........ 18
What Shareholder Reports Will I Receive?.... 18

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

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THE TRUST IS REGISTERED AS AN OPEN-END MANAGEMENT INVESTMENT COMPANY
UNDER THE INVESTMENT COMPANY ACT OF 1940. SUCH REGISTRATION DOES NOT IMPLY THAT
THE TRUST OR ANY OF ITS SHARES HAVE BEEN GUARANTEED, SPONSORED, RECOMMENDED OR
APPROVED BY THE UNITED STATES OR ANY STATE OR ANY AGENCY OR OFFICER THEREOF.

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

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE SUCH OFFER IN SUCH STATE.

----------------------
PROSPECTUS
----------------------

February 1, 1995

THE OHIO COMPANY

CARDINAL
TAX EXEMPT
MONEY
TRUST

[LOGO]
89

STATEMENT OF ADDITIONAL INFORMATION

THE CARDINAL FUND INC.

The Cardinal Fund Inc. (the "Fund") is a diversified, open-end
management investment company. The primary investment objective of the Fund is
to achieve long-term growth of capital and income through selective
participation in the long-term progress of American businesses and industries.
The policy of the Fund is generally to invest in equity securities. Current
income, while a factor in portfolio selection, is secondary to the Fund's
primary objective.

_______________________________________________________

For further information regarding the Fund or for assistance
in opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free
From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed
to the Fund at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

_____________________________________________________

This Statement Of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of the Fund, dated February
1, 1995, which has been filed with the Securities and Exchange Commission.
This Statement of Additional Information is incorporated by reference in its
entirety into the Prospectus. The Prospectus is available upon request without
charge from the Fund at the above address or by calling the phone numbers
provided above.

FEBRUARY 1, 1995
90

TABLE OF CONTENTS
-----------------

Page
----

THE CARDINAL FUND INC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . B-1

Additional Information on Portfolio Instruments . . . . . . . . . . . . . B-1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5

MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5

PRINCIPAL SHAREHOLDERS OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . B-8

THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-8

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT . . . . . . . . . . . . . . . . . . . B-10

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . B-11

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . B-16

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▇-▇▇

-▇-
▇▇
▇▇▇▇▇▇▇▇▇ OF ADDITIONAL INFORMATION

THE CARDINAL FUND INC.

The Cardinal Fund Inc. (the "Fund") is an open-end management
investment company. Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectus of the
Fund. Capitalized terms not defined herein are defined in the Prospectus. No
investment in Shares of the Fund should be made without first reading the
Prospectus of the Fund.

INVESTMENT OBJECTIVE AND POLICIES

Additional Information on Portfolio Instruments
-----------------------------------------------

SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
securities issued by other investment companies. The 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 the
Fund. As a shareholder of another investment company, the 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 the Fund bears directly in connection with its own
operations. Investment companies in which the Fund 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 the Fund and, therefore, will be borne directly by shareholders.

B-1
92
(including accrued interest). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action.
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 Fund 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 Fund if presented with the question. Securities subject to repurchase
agreements will be held by the Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by the Fund under the 1940 Act.

Investment Restrictions
-----------------------

The Fund deems the following to be matters of fundamental policy and
as such to be matters which the Fund will not change unless the changed policy
is otherwise lawful and is approved by holders of the majority of the
outstanding Shares of the Fund (defined as the vote, at an annual or special
meeting of shareholders of the Fund, of the lesser of (a) 67% or more of the
voting securities present at such meeting, if the holders of more than 50% of
the outstanding voting securities are present or represented by proxy, or (b)
more than 50% of the outstanding voting securities of the Fund):

The Fund will not:

(1) 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;

(2) make short sales of securities, except to the extent that the same
shall be owned by the Fund (i.e., short sales "against the box") or
purchase securities on margin;

(3) write, purchase or sell puts, calls, or combinations thereof;

(4) underwrite the securities of other issuers, except insofar as the Fund
may technically be deemed an underwriter under the

B-2
93
Securities Act of 1933 in connection with the disposition of portfolio
securities;

(5) purchase securities subject to restrictions on disposition under the
Securities Act of 1933 if at the time of acquisition more than 5% of
the total assets of the Fund would be invested in such securities;

(6) concentrate more than 25% of the value of the total assets of the Fund
(determined at the date of acquisition) in any particular industry;

(7) purchase or sell real estate, except it is permissible to purchase
securities secured by real estate or real estate interests or issued
by companies that invest in real estate or real estate interests;

(8) purchase or sell commodities, commodity contracts or futures
contracts;

(9) make loans, except that the Fund may purchase or hold debt instruments
and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions
and enter into repurchase agreements;

(10) purchase the securities of any issuer if such purchase would cause
more than 5% of the Fund's total assets upon such purchase to be
invested in the securities of any one issuer (not including the
government of the United States or corporations which are the
instrumentalities of the United States);

(11) mortgage, pledge or hypothecate any assets to a greater extent than
15% of its gross assets taken at cost;

(12) purchase the securities of any issuer if such purchase would cause the
Fund to hold (i) more than 10% of the voting securities of such
issuer, (ii) more than 10% of all debt securities of such issuer taken
as a class, or (iii) more than 10% of all equity securities of such
issuer preferred in any way over the common stock of such issuer taken
as a class;

(13) purchase securities of enterprises which have a record of less than
three years' continuous operation, if such purchase would cause more
than 5% of the total assets of the Fund to be invested in the
securities of such enterprises;

(14) purchase or retain any securities of an issuer if, to the knowledge of
the Fund, the officers and directors of the Fund or the officers and
directors of its investment adviser individually owning more than 1/2
of 1% of the securities of

B-3
94
such issuer together own beneficially more than 5% of the securities
of such issuer;

(15) purchase any securities from or sell any securities to (other than
stock issued by the Fund) officers or directors of the Fund, any
person or organization furnishing managerial or advisory services to
the Fund, or related classes of persons as principals;

(16) invest in companies for the purpose of exercising control or
management thereof; or

(17) change its classification as a "management company" under Section 4 of
the Investment Company Act of 1940 or change its subclassifications as
an "open-end company" or as a "diversified company" under Section 5 of
the Investment Company Act of 1940.

The following additional investment restriction may be changed without
the majority vote of the outstanding Shares of the Fund.

The 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.

If a percentage restriction or requirement set forth above is met at
the time of investment, a later failure to comply with the restriction or
requirement resulting from a change in the value of securities held by the Fund
will not be considered a violation of the policy.

The Fund has represented to the California Department of Corporations
that, in order to comply with applicable regulations, it will acquire or retain
securities of other open-end management investment companies if such
investments are made in open-end management investment companies sold with no
sales commission and the Fund's investment adviser waives its management fee
with respect to such investments. The Fund intends to comply with this
undertaking for so long as the Fund has its shares registered for sale in the
State of California or such representation is required by the California
Department of Corporations.

In addition, the Fund has represented to the Texas State Securities
Board that the Fund will (1) limit its investment in warrants, valued at the
lower of cost or market, to 5% or less of the value of the Fund's net assets,
provided that included within that amount, but not to exceed 2% of the Fund's
net assets, may be warrants which are not listed on the New York or American
Stock Exchanges and that warrants acquired by the Fund in units or

B-4
95
attached to securities may be deemed to be without value, and (2) not invest in
oil, gas or other mineral leases.

Portfolio Turnover
------------------

The portfolio turnover rate for the Fund is calculated by dividing the
lesser of the Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation
excludes all securities whose remaining maturities at the time of the
acquisition were one year or less.

The portfolio turnover rate for the Fund for the two fiscal years
ended September 30, 1994 and 1993, were 23.20% and 11.11%, respectively. The
portfolio turnover rate for the Fund 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 FUND

The directors and officers of the Fund, together with their addresses
and principal business occupations and other affiliations during the last five
years, are shown below. Each person named as a director also serves as a
trustee of Cardinal Government Securities Trust, Cardinal Tax Exempt Money
Trust, Cardinal Government Obligations Fund, and The Cardinal Group. Each
director who is an "interested person" of the Fund, as that term is defined in
the Investment Company Act of 1940, is indicated by an asterisk.

Name and Position(s) Held Principal Occupation(s)
Business Address with Fund During Past 5 Years
---------------- ---------------- ----------------------

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director, Member of Principal, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Executive Committee Associates (construction consulting
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ firm) since 1988; formerly, Vice
President of Michigan Molecular
Institute (polymer science research
institute).

*▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chairman and Director, Chairman, President, Chief
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Executive and Executive Officer and a Director of
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Nominating Committees The Ohio Company (investment
banking); prior thereto, Senior
Executive Vice President of The
Ohio Company.

B-5
96

▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Director, Member of Audit Since 1994, President and a
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Committee Director of Lancaster Colony
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Corporation (diversified consumer
products); prior thereto, Executive
Vice President, Secretary and a
Director of Lancaster Colony
Corporation.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Director, Member of Chairman, Ohio Bureau of Workers'
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Executive Committee Compensation.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. Luck Director President, The Columbus Foundation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (philanthropic public foundation).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Director, Member of Audit Vice President, Customer
▇▇ ▇▇▇▇▇ ▇▇▇▇ and Nominating Committees Satisfaction, Industry Segment, and
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ former President, ABB Process
Automation Business of Asea ▇▇▇▇▇
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries);
former President, Process
Automation Business, of Combustion
Engineering, Inc. (designer and
manufacturer of process automation
systems for basic industries).

*C. A. ▇▇▇▇▇▇▇▇ Director Retired; Chartered Financial
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. Analyst, former Senior Executive
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Vice President and Director of The
Ohio Company (investment banking).

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ Director Self-employed author; former Vice
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Chairman, Motor Sports Enterprises,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Inc.

*▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Executive Vice President Chartered Financial Analyst and
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and Director Senior Vice President, The ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Company (investment banking).

*▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and Director, Senior Vice President, The Ohio
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Executive and Company (investment banking);
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Nominating Committees former Vice President, Keystone
Group (mutual fund management/
administration); former Senior Vice
President, Trust Advisory Group
(mutual fund consulting).

B-6
97

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Director, Member of Audit President and a Director of ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. and Nominating Committees Homes, Inc. (manufactured homes);
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ former Vice President, Treasurer,
Chief Financial Officer and a
Director of Worthington Industries,
Inc. (specialty steel and plastics
manufacturer).

▇▇▇▇▇ ▇. Will Vice President Vice President of The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (investment banking); formerly
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Senior Portfolio Manager,
Huntington National Bank, Trust
Investments.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Secretary Executive Secretary of The Ohio
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Company (investment banking).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Treasurer Vice President and Trust Officer of
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Company (investment
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ banking).

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Assistant Treasurer Since April, 1992, Employee of The
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ Company (investment banking;
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ prior thereto, student at The Ohio
State University.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Assistant Employee of The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Treasurer (investment banking).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

As of November 30, 1994, all directors and officers of the Fund as a
group owned fewer than one percent of the Shares of the Fund then outstanding.

Pursuant to the ultimate authority of the Board of Directors of the
Fund, the Executive Committee is responsible for the general management of the
affairs of the Fund. These transactions are reported to and reviewed by the
Board of Directors.

Messrs. Chambers, Siegel, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Will are Chairman,
President and a director, Vice President and a director, Vice President and a
director, a Vice President, and a Vice President, respectively, of Cardinal
Management Corp., the transfer agent for and provider of accounting services to
the Fund. The compensation of directors and officers of the Fund who are
employed by The Ohio Company is paid by The Ohio Company. Directors' fees
(currently $500 per meeting attended, $500 annual retainer and $500 per audit
committee meeting attended) plus expenses are paid by the Fund, except that
Messrs. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ receive no

B-7
98
fees from the Fund. The aggregate amount of compensation and expenses paid to
the directors during the fiscal year ended September 30, 1994, was $19,695.

PRINCIPAL SHAREHOLDERS OF THE FUND

There were no persons known to the Fund to be the beneficial owners of
more than 5% of the Fund's outstanding Shares as of November 22, 1994.

THE ADVISER

The Fund has entered into an Investment Advisory Agreement with The
Ohio Company, an investment banking firm organized in 1925, pursuant to which
The Ohio Company furnishes the Fund with continuous investment advice,
research, statistical services and certain administrative support such as
providing and paying for all officers and employees of the Fund, office space
and supplies. As compensation for such services, facilities and expenses The
Ohio Company receives a quarterly fee, accrued daily, based on an annual rate
of .5% of the daily net asset value of the Fund. For the Fund's three fiscal
years ended September 30, 1994, 1993 and 1992, fees earned by The Ohio Company
under the Investment Advisory Agreement were $1,325,607, $1,370,536 and
$1,221,225, respectively.

Under the Investment Advisory Agreement, if expenses (including the
adviser's fee but excluding interest and taxes) exceed 1-1/2% per annum of the
average daily net asset value for any fiscal year of the Fund, The Ohio Company
shall bear the excess.

The Investment Advisory Agreement also provides that the advisory fee
payable pursuant to such Agreement shall be reduced by the amount of brokerage
commissions derived by The Ohio Company, as adviser, on orders executed by it
for the Fund on a stock exchange of which such Adviser is a member.

Descendants of H. P. and ▇. ▇. ▇▇▇▇▇, 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. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an
officer and director of both the Fund and The Ohio Company. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is
an officer and director of the Fund and an officer of The Ohio Company. ▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ is a director of the Fund and an officer of The Ohio Company.
Hannibal ▇. ▇▇▇▇▇▇ III and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ are officers of both the Fund
and The Ohio Company.

B-8
99
PORTFOLIO TRANSACTIONS

Subject to the policies established by the Board of Directors of the
Fund, The Ohio Company, as Investment Adviser, is responsible for the Fund's
portfolio decisions and the placing of the Fund's portfolio transactions. In
executing such transactions, The Ohio Company seeks to obtain the best net
results for the 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 Ohio Company generally
seeks reasonably competitive commission rates, for the reasons stated in the
prior sentence, the Fund will not necessarily be paying the lowest commission
or spread available. For the Fund's three fiscal years ended September 30,
1994, 1993 and 1992, total brokerage fees paid by the Fund were $188,616,
$101,220 and $82,395, respectively, none of which was paid to The Ohio Company.

The Ohio Company may consider provision of research, statistical and
other information to the Fund or the Adviser in the selection of qualified
broker-dealers who effect portfolio transactions for the Fund so long as The
Ohio Company's ability to obtain the best net results for portfolio
transactions of the 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 Ohio Company in connection with its services to other clients.
Similarly, research services provided by brokers serving such other clients may
be useful to The Ohio Company in connection with its services to the Fund.
Although this information is useful to the Fund and The Ohio Company, except as
described below, it is not possible to place a dollar value on it. It is the
opinion of the Board of Directors and The Ohio Company that the review and
study of this information will not reduce the overall cost to The Ohio Company
of performing its duties to the Fund under the Investment Advisory Agreement.
The Fund has authorized The Ohio Company to place brokerage transactions
through Pershing and Company, a division of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, in
return for Lipper Data information prepared for the Fund's Directors relating
to information on fees and expenses of other mutual funds. In addition, during
the fiscal year ended September 30, 1994, The Ohio Company, on behalf of the
Fund, directed some brokerage transactions to Columbine Capital in return for
the provision of research services. The amount of such transactions and
related commissions were $10,758,000 and $23,588, respectively. Such brokerage
transactions with both Pershing and Company and Columbine Capital are subject
to the requirements as to price and execution as described above. The Fund is
not authorized to pay brokerage commissions which are in excess of those which

B-9
100
another qualified broker would charge solely by reason of brokerage and
research services provided.

Investment decisions for the Fund are made independently from those
for any other investment company or account managed by The Ohio Company. Any
such other investment company or account may also invest in the same securities
as the Fund. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Fund and another 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 Ohio Company
believes to be equitable to the Fund and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained by the
Fund. To the extent permitted by law, The Ohio Company may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased 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 Fund, The Ohio Company will not inquire or
take into consideration whether an issuer of securities proposed for purchase
or sale by the Fund is a customer of The Ohio Company or its subsidiaries or
affiliates and, in dealing with its customers, The Ohio Company or its
subsidiaries and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Fund.

The Fund did not during the fiscal year ended September 30, 1994, hold
any securities of its regular brokers or dealers, as defined in Rule 10b-1
under the 1940 Act, or their parent companies.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The Fund has entered into an Administration Agreement with Cardinal
Management Corp., a wholly-owned subsidiary of The Ohio Company, pursuant to
which Cardinal Management Corp. has agreed to act as the Fund's transfer agent,
dividend disbursing agent and administrator of plans for the Fund. In
consideration of such services the Fund has agreed to pay Cardinal Management
Corp. monthly an annual fee equal to $18 per shareholder account plus
out-of-pocket expenses. For the last three fiscal years ended September 30,
1994, Cardinal Management Corp. received $327,423, $297,199 and $224,908,
respectively, for services to the Fund pursuant to such Agreement.

B-10
101
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Fund's Shares may be purchased at the public offering price
through The Ohio Company, principal underwriter of the Fund's Shares, at its
address and number set forth on the cover page of this Statement of Additional
Information, and through other broker-dealers who are members of the National
Association of Securities Dealers, Inc. and have sales agreements with The Ohio
Company.

Based upon the value of the Fund's portfolio securities and other
assets and the number of outstanding Shares as of the fiscal year ended
September 30, 1994, the net asset value and redemption price per share was
$12.73. The total offering price per share was $13.54 per share (net asset
value / .94, assuming the then current maximum sales charge of 6.00% of the
offering price). The total offering price is reduced on sales of $100,000 or
more. Effective February 1, 1995, the maximum sales charge has been lowered to
4.50% of the offering price.

The net asset value of the Fund is determined once daily as of 4:00
P.M., Columbus, Ohio time, (a) on each business day the New York Stock Exchange
is open for business and a purchase order has been received by the Fund, (b) on
each such business day when a redemption request is received, and (c) at such
other times as there is a sufficient degree of trading in the Fund's portfolio
securities that the net asset value might be materially affected by changes in
the value of the portfolio securities. The net asset value per share of the
Fund is computed by dividing the sum of the value of the Fund's portfolio
securities plus any cash and other assets (including interest and dividends
accrued but not received) minus all liabilities (including estimated accrued
expenses) by the total number of shares then outstanding.

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 Quotations System ("NASDAQ") as of
the time of valuation on the day the securities are being valued. The Fund
uses one or more pricing services to provide such market prices. 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 Directors of the Fund.

B-11
102
closed for other than customary weekend and holiday closings, (c) an emergency
exists as a result of which (i) disposal by the Fund of portfolio securities
owned by it is not reasonably practicable or (ii) it is not reasonably
practicable for the Fund to determine the fair value of its net assets, or (d)
the Securities and Exchange Commission has by order permitted such suspension.

TAXES

The Fund intends to qualify as a "regulated investment company" under
the Code for so long as such qualification is in the best interest of the
Fund's shareholders. In order to qualify as a regulated investment company,
the 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 stock,
securities, or currencies; derive less than 30% of its gross income from the
sale or other disposition of stock, securities, options, future contracts or
foreign currencies held less than three months; and diversify its investments
within certain prescribed limits. In addition, to utilize the tax provisions
specially applicable to regulated investment companies, the Fund must
distribute to its shareholders at least 90% of its investment company taxable
income for the year. In general, the Fund's investment company taxable income
will be its taxable income subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year.

A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of
their ordinary income for the calendar year plus 98% of their capital gain net
income for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.

Although the 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, the Fund
may be subject to the tax laws of such states or localities. In addition, if
for any taxable year the 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

B-12
103
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 the Fund of the excess of net long-term capital gain
over net short-term capital loss is taxable to shareholders as long-term
capital gain in the year in which it is received, regardless of how long the
shareholder has held the Shares. Such distributions are not eligible for the
dividends-received deduction.

Federal taxable income of individuals is subject to graduated tax
rates of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be
in excess of 39.6%, because adjustments reduce or eliminate the benefit of the
personal exemption and itemized deductions for individuals with gross income in
excess of certain threshold amounts.

Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss
each year to offset ordinary income. Excess net capital loss may be carried
forward to future years.

Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%.
Further, a corporation's federal taxable income in excess of $15 million is
subject to an additional tax equal to 3% of taxable income over $15 million,
but not more than $100,000.

Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset
capital gains and excess net capital loss may be carried back three years and
forward five years.

▇-▇▇
▇▇▇
▇▇▇▇▇▇▇ corporations are entitled to a 70% dividends received
deduction for distributions from certain domestic corporations. The 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 the Fund for its taxable year that qualifies for the dividends
received deduction.

The 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 Prospectus 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 the Fund. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Fund or its shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of the Fund are urged to consult
their tax advisers with specific reference to their own tax situation. In
addition, the tax discussion in the Prospectus and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the
date of the Prospectus and this Statement of Additional Information; such laws
and regulations may be changed by legislative or administrative action.

PERFORMANCE INFORMATION

For the one-, five- and ten-year periods ended September 30, 1994, and
the period from September 30, 1975 to September 30, 1994, the average annual
total returns for the Fund were (1.27)%, 7.04, 12.53%, and 14.91%,
respectively. For the one-, five- and ten-year periods ended September 30,
1994, and the period from September 30, 1975 to September 30, 1994, the
cumulative return figures for the Fund were (1.27)%, 40.49%, 225.73% and
1303.15%, respectively. Each quotation of average annual total return was
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
the Fund equal to the ending redeemable value, according to the following
formula:

P(T + 1)n = ERV

Where: P = a hypothetical initial payment of $1,000, T = average
annual total return, n = number of years, and ERV = ending redeemable value of
a hypothetical $1,000 payment at the beginning of the period at the end of the
period for which average annual

B-14
105
total return is being calculated assuming a complete redemption. The
calculation of average annual total return assumes the deduction of the current
maximum applicable sales charge (4.5%) 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 the Fund's average account size. Cumulative return is computed by
using average annual 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.

Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as those prepared by Dow ▇▇▇▇▇ & 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.

DISTRIBUTOR

The Ohio Company serves as the principal underwriter of Shares of the
Fund. In such capacity, and pursuant to a Distributor's Contract with the
Fund, Shares of the Fund continuously are offered on a best efforts basis by
The Ohio Company and dealers selected by The Ohio Company. Pursuant to the
Distributor's Contract, expenses of printing prospectuses and other selling
literature are borne by The Ohio Company. All other expenses of the Fund,
including taxes, fees and commissions, expenses of registering and qualifying
Shares for sale, charges of custodians, transfer agents and registrars and
auditing and legal fees and expenses are borne by the Fund.

For the Fund's three fiscal years ended September 30, 1994, 1993 and
1992, commissions paid The Ohio Company under the Distributor's Contract with
respect to the sale of Fund shares, after discounts to dealers, were $427,597,
$1,218,578 and $1,408,406, respectively.

B-15
106
CUSTODIAN

The Fifth Third Bank, ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
has been selected to serve as the Fund's custodian. In such capacity the
custodian will hold or arrange for the holding of all portfolio securities and
other assets of the Fund.

LEGAL COUNSEL AND INDEPENDENT AUDITORS

Certain legal matters as to the issuance of the Shares offered hereby
have been passed upon by ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇. The Fund has selected KPMG Peat ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as independent auditors for the Fund. The financial
statements of the Fund 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 INFORMATION

The Fund is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve
supervision by the Securities and Exchange Commission of the management or
policies of the Fund.

The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission. Copies of such information may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.

The Prospectus 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 Prospectus and this Statement of Additional Information.

B-16
107

FINANCIAL STATEMENTS

THE CARDINAL FUND INC.

SEPTEMBER 30, 1994

B-17
108

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

FACE/ MARKET
SHARES VALUE
------- -------

COMMON STOCKS 92.71%
AEROSPACE/DEFENSE 3.37%
▇▇▇▇▇▇ Corporation......................................................... 118,200 $ 5,747
Raytheon Company........................................................... 40,000 2,565
-------
8,312
-------
APPAREL/RETAILERS 2.01%
▇▇▇▇▇▇▇▇ Stores............................................................ 124,100 1,598
May Department Stores...................................................... 85,000 3,347
-------
4,945
-------
AUTOMOTIVE MANUFACTURING 1.69%
Ford Motor Company......................................................... 150,000 4,162
-------
AUTOMOTIVE PARTS 3.86%
Amcast Industrial.......................................................... 125,000 2,891
▇▇▇▇▇▇ Tire & Rubber....................................................... 200,200 4,680
▇▇▇▇▇▇▇ Industries......................................................... 150,000 1,950
-------
9,521
-------
CENTRAL STATE BANKS 5.48%
Banc One Corp.............................................................. 100,500 3,002
Huntington Bancshares...................................................... 217,855 3,949
KeyCorp.................................................................... 215,000 6,558
-------
13,509
-------
CHEMICALS/COMMODITY 6.77%
▇▇▇▇ ▇▇▇▇▇ ▇.▇............................................................. 130,214 7,682
Dow Chemical............................................................... 115,000 8,999
-------
16,681
-------
CLOTHING/FABRICS 1.16%
Oxford Industries.......................................................... 111,900 2,853
-------
COMPUTER/INFORMATION 0.71%
Hewlett-Packard............................................................ 20,000 1,748
-------

(continued)
B-18
109

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

FACE/ MARKET
SHARES VALUE
------- -------

COMMON STOCKS (CONTINUED)
CONGLOMERATES 8.31%
▇▇▇▇▇▇ PLC................................................................. 270,000 $ 4,894
▇▇▇▇▇▇▇ Controls........................................................... 100,000 4,975
Tenneco Inc................................................................ 125,500 5,538
Textron, Inc............................................................... 100,000 5,087
-------
20,494
-------
CONSUMER SERVICES 0.38%

Scotts Company A........................................................... 60,000 930
-------
CONTAINERS/PACKAGING 0.43%
Liqui-Box Corp............................................................. 30,390 1,062
-------
DIVERSIFIED FINANCIAL SERVICES 1.65%
Beneficial Corp............................................................ 100,000 4,075
-------
DIVERSIFIED INDUSTRIAL 5.07%
Minnesota Mining & Manufacturing........................................... 100,000 5,525
▇▇▇▇▇ Industries........................................................... 165,275 2,851
Quixote Corp............................................................... 160,800 2,814
Raven Industries........................................................... 70,050 1,313
-------
12,503
-------
EASTERN BANKS 1.41%
BB&T Financial............................................................. 120,000 3,480
-------
ELECTRIC 1.63%
Northern States Power...................................................... 95,000 4,014
-------
ELECTRICAL COMPONENTS 4.74%
Asea ▇▇▇▇▇-Broveri......................................................... 55,300 3,912
General Electric........................................................... 161,400 7,767
-------
11,679
-------
FOODS 2.20%

▇▇▇▇▇▇▇-▇▇▇▇▇ Foods........................................................ 55,925 1,042
Goodmark Foods............................................................. 174,000 2,523
Super Food Services........................................................ 160,800 1,849
-------
5,414
-------

(continued)

B-19
110

SEPTEMBER 30, 1994

FACE/ MARKET
SHARES VALUE
------- -------

COMMON STOCKS (CONTINUED)
FOREST PRODUCTS 0.91%
Potlatch Corp.............................................................. 54,500 $ 2,248
-------
GAS 2.42%
Peoples Energy............................................................. 170,300 4,470
▇▇▇▇▇▇▇▇ Companies......................................................... 50,000 1,500
-------
5,970
-------

HEALTH-CARE PROVIDERS 0.96%

Humana Inc................................................................. 100,400 2,372
-------
HEAVY MACHINERY 0.29%
Monarch Machine Tool....................................................... 73,800 710
-------
INDUSTRIAL COMMERCIAL SERVICES 1.16%
Graphic Industries......................................................... 100,300 1,078
New England Business Services.............................................. 100,500 1,784
-------
2,862
-------

INSURANCE -- LIFE 2.04%

Equitable of Iowa.......................................................... 140,000 5,040
-------
INTEGRATED OILS 7.83%
Mobil Corp................................................................. 85,000 6,726
Royal Dutch Petroleum...................................................... 65,000 6,979
Texaco Inc................................................................. 90,000 5,591
-------
19,296
-------

OIL FIELD EQUIPMENT SERVICES 1.10%

Schlumberger Limited....................................................... 50,000 2,719
-------
OTHER NONFERROUS METALS 2.62%
Worthington Industries..................................................... 300,776 6,467
-------
PAPER 3.02%
Federal Paper Board........................................................ 114,800 3,616
▇▇▇▇▇▇▇▇-▇▇▇▇▇............................................................. 65,000 3,819
-------
7,435
-------

(continued)
B-20
111

SEPTEMBER 30, 1994

FACE/ MARKET
SHARES VALUE
------- --------

COMMON STOCKS (CONTINUED)
PHARMACEUTICALS 4.53%
American Home Products.................................................... 86,000 $ 5,160
▇▇▇▇▇▇▇-▇▇▇▇▇ Squibb...................................................... 85,480 4,904
▇▇▇▇▇▇ Laboratories....................................................... 35,000 1,098
--------
11,162
--------
PROPERTY/CASUALTY 3.18%
Cincinnati Financial...................................................... 150,000 7,838
--------
SEMICONDUCTORS 0.57%
Motorola, Inc............................................................. 26,600 1,403
--------
SPECIALTY/RETAILERS 1.87%
Limited Inc............................................................... 200,000 3,925
▇▇▇▇▇▇▇ Lumber............................................................ 40,000 680
--------
4,605
--------
TELEPHONE 5.65%
GTE Corporation........................................................... 189,716 5,763
MCI Communications........................................................ 75,000 1,922
Telefonos de Mexico, S.A.................................................. 100,000 6,250
--------
13,935
--------
TOBACCO 3.72%

▇▇▇▇▇▇ ▇▇▇▇▇▇ Companies................................................... 150,000 9,169
--------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS 7.14%
Daiwa Securities Inc., 4.65%, dated 9/27/94, due 10/04/94................. 7,000 7,000
▇▇▇▇▇▇, Peabody & Co., 4.65%, dated 9/29/94, due 10/06/94................. 8,000 8,000
Fifth Third Bank, 4.60%, dated 9/30/94, due 10/03/94...................... 2,600 2,600
--------
TOTAL REPURCHASE AGREEMENTS (COST $17,600)........................... 17,600
--------
TOTAL INVESTMENTS (COST $195,431) 99.85%............................. $246,213
=========

See accompanying notes to financial statements.

B-21
112

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

ASSETS

Investments in securities, at value (cost $195,431)................................... $246,213
Cash.................................................................................. 87
Receivable for investment securities sold............................................. 676
Dividends and interest receivable..................................................... 972
Receivable for Fund shares sold....................................................... 70
Other assets.......................................................................... 118
--------
Total assets................................................................ 248,136
--------
LIABILITIES
Payable for Fund shares redeemed...................................................... 1,333
Accrued investment management and transfer agent fees (note 3)........................ 157
Other accrued expenses................................................................ 64
--------
Total liabilities........................................................... 1,554
--------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 19,373,221 outstanding no par value shares of beneficial
interest (authorized 30,000,000).................................................... $246,582
=========
NET ASSET VALUE PER SHARE............................................................. $ 12.73
=========

See accompanying notes to financial statements.

B-22

113

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30, 1994

INVESTMENT INCOME:
Dividends.................................................................... $ 7,508
Interest..................................................................... 732
-------
Total income....................................................... 8,240
-------
EXPENSES:
Investment management fees (note 3).......................................... 1,326
Transfer agent fees and expenses (note 3).................................... 327
-------
Total affiliated expenses.......................................... 1,653
-------
Custodian fees............................................................... 29
Professional fees............................................................ 70
Reports to shareholders...................................................... 47
Directors' fees.............................................................. 20
Registration fees............................................................ 13
Other expenses............................................................... 57
-------
Total non-affiliated expenses...................................... 236
-------
Total expenses..................................................... 1,889
-------
Net investment income.............................................. 6,351
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions................................. 17,362
Decrease in unrealized gain on investments................................... (14,821)
-------
Net realized gain and decrease in unrealized gain on investments... 2,541
-------
Net increase in net assets from operations......................... $ 8,892
========

See accompanying notes to financial statements.

B-23
114

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1994 AND 1993

1994 1993
------------- -------------

FROM OPERATIONS:
Net investment income........................................... $ 6,351 $ 6,762
Net realized gain from security transactions.................... 17,362 5,955
Increase (decrease) in unrealized gain on investments........... (14,821) 5,776
------------- -------------
Net increase in net assets from operations.................... 8,892 18,493
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.33 and $.29 per share,
respectively)................................................. (6,601) (6,221)
Distribution of net realized gains from security transactions
($.28 and $.62 per share, respectively)....................... (6,006) (12,604)
------------- -------------
Total distributions to shareholders........................... (12,607) (18,825)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares............................... 14,876 32,283
Net asset value of Fund shares issued in connection with
reinvestment of distributions to shareholders................. 11,831 17,783
------------- -------------
26,707 50,066
Cost of Fund shares redeemed.................................... (58,535) (29,001)
------------- -------------
Increase (decrease) in net assets derived from capital share
transactions............................................... (31,828) 21,065
------------- -------------
Net increase (decrease) in net assets......................... (35,543) 20,733
NET ASSETS -- beginning of period............................... 282,125 261,392
------------- -------------
NET ASSETS -- end of period (undistributed net investment income
of $20 and $269, respectively)................................ $ 246,582 $ 282,125
============== ==============

See accompanying notes to financial statements.

B-24
115

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Cardinal Fund Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as a diversified, open-end management investment company. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles for investment companies.

Security Valuation--Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at the last sale price. If no quotations are available, portfolio
securities are valued in good faith by the Board of Directors to reflect their
fair value.

Security Transactions and Investment Income--Security transactions are accounted
for on the trade date and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of the securities has been
determined on the first-in, first-out (FIFO) cost basis. It is the Fund's policy
for its Custodian, or a third-party bank, to take possession of all securities
pledged as collateral for repurchase agreements and monitor the market value of
the collateral to ensure that it remains sufficient to cover the repurchase
agreements.

Distributions to Shareholders--Distributions and dividends are recorded by the
Fund on the record date. Income dividends are declared quarterly and any capital
gain distribution is declared annually.

Federal Income Taxes--No provision has been made for Federal taxes on the Fund's
income, since it is the policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.

(2) -- PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities during
the year ended September 30, 1994 aggregated $47,842,357 and $73,744,784,
respectively.

During the year ended September 30, 1994 the Fund realized on a FIFO cost basis
a net capital gain of $17,361,805 and $17,372,034 for book and tax purposes,
respectively.

At September 30, 1994, the book cost of investment securities was $195,431,327
and the tax cost was $195,287,683. The difference between book and tax cost is
attributable to securities acquired in the 1975 acquisition of the Ohio Capital
Fund, Inc. and remaining in the Fund's portfolio with a book cost of $242,011
and a tax cost of $98,367.

As of September 30, 1994, for tax purposes, gross unrealized gains and gross
unrealized losses on investment securities were $54,918,824 and $4,136,858
respectively; resulting in a net unrealized gain of $50,781,966.

(3) -- TRANSACTIONS WITH AFFILIATES

As investment manager for the Fund, The Ohio Company (the Adviser), with whom
certain officers and directors of the Fund are affiliated is allowed an annual
fee of 0.5% of the average daily net assets of the Fund. For the year ended the
Fund paid or accrued $1,325,607 for investment management services. The Adviser
has agreed that if the aggregate expenses of the Fund, as defined, for any
fiscal year exceed the

(continued)

B-25
116

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

expense limitation of any state having jurisdiction over the Fund, the Adviser
will refund to the Fund, or otherwise bear, such excess. This limitation did not
affect the calculation of the management fee during the year ended September 30,
1994. In addition to providing management and advisory services, The Ohio
Company pays the compensation of all officers and employees of the Fund and
provides office space and certain related facilities required by the Fund.

The Ohio Company, acting as the General Distributor and Dealer, reported to the
Fund that it received commissions after discounts to dealers from the sale of
shares of the Fund of $427,597 for the year ended September 30, 1994. Cardinal
Management Corp., a wholly-owned subsidiary of The Ohio Company, provides
transfer agent services to the Fund. Transfer agent service fees are based on a
monthly charge per shareholder account plus out-of-pocket expenses. For the year
ended September 30, 1994 the Fund paid or accrued $327,423 for transfer agent
services provided by Cardinal Management Corp.

(4) -- COMMITMENTS AND CONTINGENCIES

The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1994. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and directors has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $28,588, for the initial capital of ICI
Mutual. The Fund is also committed to provide $85,764 should ICI Mutual
experience the need for additional capital contributions.

Included in other assets is a $56,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.

(5) -- CAPITAL STOCK

At September 30, 1994, there were 30,000,000 shares of no par value capital
stock authorized and the capital amounts were as follows:

Paid in capital.................................................................... $178,469,082
Accumulated net realized gains on investments...................................... 17,311,123
Unrealized gain on investments..................................................... 50,781,966
Undistributed net investment income................................................ 19,545
------------
Net assets......................................................................... $246,581,716
=============

(continued)

B-26
117

SEPTEMBER 30, 1994

Transactions in capital stock were as follows:

YEARS ENDED SEPTEMBER 30,
-------------------------
1994 1993
---------- ----------

Shares sold........................................................ 1,161,378 2,540,431
Shares issued in connection with reinvestment of distributions
to shareholders.................................................. 936,172 1,409,202
Shares repurchased................................................. (4,580,169) (2,275,063)
---------- ----------
Net increase (decrease)............................................ (2,482,619) 1,674,570
Shares outstanding:
Beginning of period................................................ 21,855,840 20,181,270
---------- ----------
End of period...................................................... 19,373,221 21,855,840
========== ==========

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------

(6) - Dividends and Distributions

See caption "Financial Highlights" in the Prospectus for the Financial
Highlights with respect to the Fund for each of the years in the ten-year period
ended September 30, 1994.

B-27
118

--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Directors
The Cardinal Fund Inc.:

We have audited the accompanying statement of assets and liabilities of The
Cardinal Fund Inc., including the statement of investments, as of September 30,
1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1994, by correspondence with the custodian. For payables for
investment securities purchased as of September 30, 1994, we performed
appropriate alternative procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Cardinal Fund Inc. as of September 30, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 18, 1994

B-28
119

STATEMENT OF ADDITIONAL INFORMATION

CARDINAL GOVERNMENT OBLIGATIONS FUND

Cardinal Government Obligations Fund, known as Cardinal Government
Guaranteed Fund prior to February 1, 1991, (the "Fund") is a diversified,
open-end, management investment company. The investment objective of the Fund
is 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 non-payment.

_____________________________________

For further information regarding the Fund or for assistance in
opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed
to the Fund at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

________________________________________

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of the Fund, dated February
1, 1995, which has been filed with the Securities and Exchange Commission.
This Statement of Additional Information is incorporated by reference in its
entirety into the Prospectus. The Prospectus is available upon request without
charge from the Fund at the above address or by calling the phone numbers
provided above.

FEBRUARY 1, 1995
120

TABLE OF CONTENTS
-----------------

Page
----

INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . B-1

Additional Information on Portfolio Instruments . . . . . . . . . B-1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . B-5
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . B-8

MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . B-8

PRINCIPAL SHAREHOLDERS OF THE FUND . . . . . . . . . . . . . . . . . . . . B-11

THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . B-12

ACCOUNTING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-14

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT . . . . . . . . . . . . . . . B-14

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . B-14

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-15

PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . B-18

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20

LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . B-20

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . B-20

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . ▇-▇▇

-▇-
▇▇▇
▇▇▇▇▇▇▇▇▇ OF ADDITIONAL INFORMATION

CARDINAL GOVERNMENT OBLIGATIONS FUND

Cardinal Government Obligations Fund (the "Fund") is an open-end
management investment company. Much of the information contained in this
Statement of Additional Information expands upon subjects discussed in the
Prospectus of the Fund. Capitalized terms not defined herein are defined in
the Prospectus. No investment in Shares of the Fund should be made without
first reading the Prospectus of the Fund.

INVESTMENT OBJECTIVE 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.

U.S. GOVERNMENT OBLIGATIONS. The Fund 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.

B-1
122
other types of commissions or charges. Such charges will be payable by the
Fund and, therefore, will be borne directly by shareholders.

REPURCHASE AGREEMENTS. Securities held by the Fund may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the 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 Fund'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). If the seller were to default on its repurchase
obligation or become insolvent, the Fund would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities by the Fund were delayed pending court action.
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 Fund 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 Fund if presented with the question. Securities subject to repurchase
agreements will be held by the Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by the Fund under the 1940 Act.

OPTIONS. In order to maximize its total return, the Fund may from time
to time engage in the writing of call options on a national securities exchange
or in the over-the-counter market. A call option gives its holder the right to
buy, and obliges the writer to sell, a specified underlying security at a
stated exercise price at any time prior to the option's expiration date. The
Fund will write only covered call options -- that is, the Fund will own the
securities subject to option throughout the period of its obligation as option
writer -- and will ordinarily write only options for which a secondary trading
market exists. It will deposit the underlying security in escrow until the
exercise or expiration of the option (or such time as the Fund enters into a
closing purchase transaction).

Options written by the Fund will normally have expiration dates
between one and six months from the date written. The

B-2
123
exercise price of the options may be below ("in-the-money"), equal to
("at-the-money"), or above ("out-of-the-money") the current market values of
the underlying securities at the times the options are written. The Fund may
engage in buy-and-write transactions, in which the Fund simultaneously
purchases a security and writes a call option thereon. When a call option is
written against a security subsequent to the purchase of that security, the
resulting combined position is also referred to as a buy-and-write.
Buy-and-write transactions using in-the- money call options may be utilized
when it is expected that the price of the underlying security will remain flat
or decline moderately during the option period. In such a transaction, the
Fund's maximum gain will be the premium received from writing the option
reduced by any excess of the price paid by the Fund for the underlying security
over the exercise price. Buy-and-write transactions using at-the-money call
options may be utilized when it is expected that the price of the underlying
security will remain flat or advance moderately during the option period. In
such a transaction, the Fund's gain will be limited to the premiums received
from writing the option. Buy-and-write transactions using out- of-money call
options may be utilized when it is expected that the premiums received from
writing the call option plus the appreciation in the market price of the
underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
foregoing situations, if the market price of the underlying security declines,
the amount of such decline will be offset wholly or in part by the premium
received and the Fund may or may not realize a loss.

The writing of a covered call option will result in the payment of a
premium to the Fund. If the value of the underlying security appreciates, it
is likely that the option holder will exercise its option and call the security
away from the Fund. The Fund would then suffer an economic loss equal to the
excess, if any, of the underlying security's appreciation in value over the
premium it received for writing the option.

When the Fund writes covered call options on GNMA Certificates, the
GNMA Certificates that it holds as cover may, because of scheduled amortization
or unscheduled prepayments, cease to be sufficient cover. The Fund will
compensate by purchasing an appropriate additional amount of GNMA Certificates.

The Fund may purchase put or call options on interest rate futures
contracts solely for the purpose of hedging against changes in the value of its
portfolio securities due to changes in interest rates.

Options on interest rate futures contracts are similar to options on
securities, except that an option on an interest rate futures contract gives
the purchaser the right, in return for the premium paid, to assume a position
in an interest rate futures

B-3
124
contract (rather than to purchase securities) at a specified exercise price at
any time prior to the expiration date of the option. A call option gives the
purchaser of such option the right to buy, and obliges its writer to sell, a
specified underlying futures contract at a stated exercise price at any time
prior to the expiration date of the option. A purchaser of a put option has
the right to sell, and the writer has the obligation to buy, such contract at
the exercise price during the option period. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement
will be made entirely in cash equal to the difference between the exercise
price of the option and the closing price of the interest rate futures contract
on the expiration date. The potential loss related to the purchase of an
option on interest rate futures contracts is limited to the premium paid for
the option (plus transaction costs). Because the value of the option is fixed
at the point of sale, there are no daily cash payments to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change is reflected in the net asset value of the Fund.

The purchase of put options on interest rate futures contracts is
analogous to the purchase of protective puts on debt securities so as to hedge
a portfolio of debt securities against the risk of rising interest rates. The
Fund may purchase put options on interest rate futures contracts if Adviser
anticipates a rise in interest rates. Because of the inverse relationship
between trends in interest rates and the values of debt securities, a put
option on such a contract becomes more valuable as interest rates rise. By
purchasing put options on interest rate futures contracts at a time when
Adviser expects interest rates to rise, the Fund would seek to realize a profit
to offset the loss in value of its portfolio securities, without the need to
sell such securities.

The Fund may purchase call options on interest rate futures contracts
if Adviser anticipates a decline in interest rates. Historically, unscheduled
prepayments on mortgage-backed securities (such as GNMA Certificates) have
increased in periods of declining interest rates, as mortgagors have sought to
refinance at lower interest rates. As a result, were the Fund to purchase such
securities at a premium prior to a period of declining interest rates, the
subsequent prepayments at par would reduce the yield on such securities by
magnifying the effect of the premium in relationship to the principal amount of
securities, and might, under extreme circumstances, result in a loss to the
Fund. This effect might not be offset by any appreciation in value in a debt
security normally attributable to the interest rate decline. To protect itself
against the possible erosion of principal on securities purchased at a
premium, the Fund may purchase call options on interest rate futures. The
option would increase in value as interest rates declined, thereby tending to
offset any reductions of the yield on portfolio securities purchased at a

B-4
125
premium resulting from the effect of prepayments on the amortization of such
premiums.

The Fund may sell put and call options on interest rate futures only
as part of closing sales transactions to terminate its options positions.
There is no guarantee that such closing transactions can be effected.

In addition to the risks that apply to all options transactions, there
are several special risks relating to options on interest rate futures
contracts. The Fund's purchase of put or call options will be based upon
predictions of interest rate trends and predictions of the prepayment
experience of mortgage-backed securities, and such predictions may prove to be
inaccurate. Even if such predictions are correct, there may be an imperfect
correlation between the change in the value of the options and of the Fund's
portfolio securities.

Investment Restrictions
-----------------------

The Fund deems the matters listed in numbered paragraphs (1) through
(15) to be matters of fundamental policy and as such to be matters which the
Fund will not change unless the changed policy is otherwise lawful and is
approved by holders of the majority of the outstanding Shares of the Fund
(defined as the vote, at an annual or special meeting of shareholders of the
Fund, of the lesser of (a) 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (b) more than 50% of the outstanding
voting securities of the Fund):

The Fund may not:

(1) Diversification. 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) Restricted or Illiquid Securities. (i) Purchase securities
with legal or contractual restrictions on resale (restricted
securities), (ii) purchase illiquid securities, (iii) purchase
securities without readily available market quotations, or
(iv) invest more than 10%

B-5
126
of the value of its total assets in repurchase agreements
maturing in more than seven days;

(3) Real Estate. Purchase or sell real estate (although it may
purchase securities secured by real estate or interests
therein);

(4) Commodities. Purchase or sell commodities or commodity
contracts;

(5) Oil and Gas Programs. Purchase participation or other direct
interests in oil, gas, or other mineral exploration or
development programs;

(6) Purchases on Margin. Purchase securities on margin, except
for use of short-term credit necessary for clearance of
purchases of portfolio securities;

(7) Loans. Make loans, although the Fund may enter into
repurchase agreements;

(8) Senior Securities and Borrowing. 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;

(9) Mortgaging. Mortgage, pledge, hypothecate or, in any other
manner, transfer as security for indebtedness any security
owned by a Fund, except as may be necessary in connection with
permissible borrowings, in which event such mortgaging,
pledging or hypothecating may not exceed 5% of a Fund's
assets, valued at cost and except that the deposit of assets
in escrow in connection with writing covered call options will
not be deemed to be the mortgage, pledge, hypothecation or
transfer of assets as security described above;

(10) Underwriting. Underwrite securities issued by other persons,
except: to the extent that a Fund may be deemed to be an
underwriter within the meaning of the Securities Act of 1933
in connection with the purchase of government securities
directly from the issuer in accordance with the Fund's
investment objective, program and restrictions;

B-6
127
(11) Portfolio Securities by Officers and Directors. Purchase or
retain the securities of any issuer if, to the knowledge of
the Fund's management, those officers and trustees of the
Fund, and of its investment adviser, who each owns
beneficially more than .5% of the outstanding securities of
such issuer, together own beneficially more than 5% of such
securities;

(12) Puts, Calls, Etc. Invest in puts, calls, straddles, spreads,
or any combination thereof, except as follows: (a) the Fund
may write covered call options and enter into closing purchase
transactions with respect to such options so long as the
securities underlying outstanding options will not at any one
time exceed 25% of the assets of the Fund, and (b) the Fund
may purchase options in interest rate futures contracts so
long as not more than 5% of the Fund's assets are at any one
time invested in the premiums paid for such options;

(13) Concentration of Investments. Concentrate more than 25% of
the value of the assets of the Fund in investments in any
particular industry;

(14) Short Sales. Engage in any short sales; or

(15) Classification. Change its classification as a "management
company" under Section 4 of the Investment Company Act of 1940
or change its subclassifications as an "open-end company" or
as a "diversified company" under Section 5 of the Investment
Company Act of 1940.

The following additional investment restriction may be changed without
the majority vote of the outstanding Shares of the Fund.

The Fund may not:

(1) Purchase the 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.

B-7
128
If a percentage restriction or requirement set forth above is met at
the time of investment, a later failure to comply with the restriction or
requirement resulting from a change in the value of securities held by the Fund
will not be considered a violation of the policy.

Portfolio Turnover
------------------

The portfolio turnover rate for the Fund for the two fiscal years
ended September 30, 1994, and 1993, were 21.95% and 24.94%, respectively. The
portfolio turnover rate for the Fund 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 FUND

The trustees and officers of the Fund, together with their addresses
and principal business occupations and other affiliations during the last five
years, are shown below. Except for ▇▇. ▇▇▇▇▇, each person named as a trustee
also serves as a director or trustee of The Cardinal Fund Inc., Cardinal
Government Securities Trust, Cardinal Tax Exempt Money Trust, and The Cardinal
Group. Each trustee who is an "interested person" of the Fund, as that term is
defined in the 1940 Act, is indicated by an asterisk.

Name and Position(s) Held Principal Occupation(s)
Business Address with Fund during Past 5 Years
---------------- ---------------- ----------------------

*▇▇▇▇ ▇. ▇▇▇▇▇ Executive Vice President Charter Financial Analyst,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ and Trustee Executive Vice President of The
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Ohio Company (investment banking).

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Principal, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Executive Committee Associates (construction consulting
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ firm) since 1988; formerly, Vice
President of Michigan Molecular
Institute (polymer science research
institute).

B-8
129

*▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chairman and Trustee, Chairman, President, Chief
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Executive and Executive Officer and a Director of
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Nominating Committees The Ohio Company (investment
banking); formerly Senior Executive
Vice President of The Ohio Company.

▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Trustee, Member of Audit Since 1994, President and a
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Committee Director of Lancaster Colony
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Corporation (diversified consumer
products); prior thereto, Executive
Vice President, Secretary and a
Director of Lancaster Colony
Corporation.

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trustee, Member of Chairman, Ohio Bureau of Workers'
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Executive Committee Compensation.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. Luck Trustee President, The Columbus Foundation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (philanthropic public foundation).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Vice President, Customer
▇▇ ▇▇▇▇▇ ▇▇▇▇ Nominating and Audit Satisfaction Industry Segment, and
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Committees former President, ABB Process
Automation Business, of Asea ▇▇▇▇▇
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries);
former President, Process
Automation Business, of Combustion
Engineering, Inc. (designer and
manufacturer of process automation
systems for basic industries).

*C. A. ▇▇▇▇▇▇▇▇ Trustee Retired; Chartered Financial
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. Analyst, former Senior Executive
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Vice President and Director of The
Ohio Company (invest-ment banking).

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ Trustee Self-employed author; former Vice
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, Motor Sports Enterprises,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Inc.

*▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Trustee Chartered Financial Analyst and
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Senior Vice President, The ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Company (investment banking).

B-9
130

*▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and Trustee, Senior Vice President, The Ohio
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Executive and Company (investment banking);
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Nominating Committees former Vice President, Keystone
Group (mutual fund management/
administration); former Senior Vice
President, Trust Advisory Group
(mutual fund consulting).

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trustee, Member of Audit President and a Director of ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. and Nominating Committees Homes, Inc. (manufactured homes);
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ former Vice President, Treasurer,
Chief Financial Officer and a
Director of Worthington Industries,
Inc. (specialty steel and plastics
manufacturer).

▇▇▇▇▇ ▇. Will Vice President Vice President of The Ohio Company;
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ formerly Senior Portfolio Manager,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Huntington National Bank, Trust
Investments.

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Treasurer Vice President and Trust
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ Company
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ (investment banking).

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Assistant Since April, 1992, Employee of The
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ Company (investment banking);
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ prior thereto, student at The Ohio
State University.

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Assistant Treasurer Employee of The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ (investment banking).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

As of November 30, 1994, all trustees and officers of the Fund as a
group owned fewer than one percent of the Shares of the Fund then outstanding.

Subject to the ultimate authority of the Board of Trustees of the Fund,
the Executive Committee is responsible for the general management of the affairs
of the Fund.

Messrs. Chambers, Siegel, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Will are Chairman,
President and a director,

B-10
131
Vice President and a director, Vice President and a director, a Vice President,
and a Vice President, respectively, of Cardinal Management Corp., the
Investment Adviser and Manager, transfer agent and provider of accounting
services of and for the Fund. The compensation of trustees and officers of the
Fund who are employed by The Ohio Company is paid by The Ohio Company.
Trustees' fees (currently $500 per meeting attended) plus expenses are paid by
the Fund, except that Messrs. Chambers, Siegel, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ receive no
fees from the Fund. The aggregate amount of compensation and expenses paid to
the trustees during the fiscal year ended September 30, 1994, was $18,664.

PRINCIPAL SHAREHOLDERS OF THE FUND

There were no persons known to the Fund to be the beneficial owners of
more than 5% of the Fund's outstanding shares as of November 22, 1994.

THE ADVISER

The Fund has entered into an Investment Advisory and Management
Agreement (the "Investment Advisory Agreement") with Cardinal Management Corp.,
an Ohio corporation (the "Adviser"), ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, in which Adviser has agreed to serve as the Fund's investment adviser
and manager. In such capacity, and subject to the ultimate authority of the
Fund's Board of Trustees, the Adviser has agreed regularly to provide the Fund
with investment advice, including management of the Fund's portfolio
securities, and overall management of the Fund's affairs. The Adviser was
organized in March, 1980, and currently provides investment advisory services
to Cardinal Government Securities Trust, Cardinal Tax Exempt Money Trust,
Cardinal Balanced Fund and Cardinal Aggressive Growth Fund. The Adviser is a
wholly-owned subsidiary of The Ohio Company, an Ohio corporation. The Ohio
Company is an investment banking firm organized in 1925 and serves as the
principal underwriter for each of the foregoing funds and as the investment
adviser and principal underwriter for The Cardinal Fund Inc. The Ohio Company
is a member of the New York Stock Exchange, Midwest Stock Exchange, other
regional stock exchanges and the National Association of Securities Dealers.

The Adviser will be responsible for the payment of clerical and
shareholder service staff salary, office space and other office expenses, the
compensation and expenses of any persons rendering any services to the Fund who
are officers, directors, stockholders or employees of the Adviser or The Ohio
Company, and any advertising and promotion expenses.

As compensation for the investment advice and overall management, the
Fund will pay the Adviser a monthly fee, accrued daily,

B-11
132
based on an annual rate of .5% of the daily net asset value of the Fund. For
the fiscal years ended September 30, 1994, 1993 and 1992, the Adviser earned
$947,139, $972,887 and $732,778, respectively, under the Investment Advisory
Agreement. In order to reduce the expenses of the Fund and to improve its
total return to shareholders, the Adviser, at its option may waive some part or
all of the fees to which it is entitled under its Investment Advisory Agreement
with the Fund.

The Adviser has agreed to reimburse the Fund (up to the amount of the
fees received by the Adviser) for the aggregate expenses of the Fund during any
fiscal year which exceed the limits prescribed by any state in which the shares
of the Fund are registered for sale. Currently, the most stringent limitation
provides that annual expenses of the Fund, including investment advisory and
management fees but excluding interest, taxes, brokerage commissions and
extraordinary expenses, shall not exceed two and one-half percent of the first
thirty million dollars of the Fund's average net assets, two percent of the
next seventy million dollars of the Fund's average net assets and one and
one-half percent of the Fund's remaining average net assets.

PORTFOLIO TRANSACTIONS

Pursuant to the Investment Advisory Agreement, the Adviser, subject to
the policies established by the Board of Trustees of the Fund and in accordance
with the Fund's investment restrictions and policies, is responsible for the
Fund's portfolio decisions and the placing of the Fund's 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 in the
over-the-counter market are generally principal transactions with dealers.
With respect to the over-the-counter market, the Fund, 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 last three fiscal years ended September 30, 1994, the Fund
paid no brokerage commissions.

In executing such transactions, the Adviser seeks to obtain the best
net results for the 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

B-12
133
the prior sentence, the 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 Fund or the Adviser in the selection of qualified
broker-dealers who effect portfolio transactions for the Fund so long as the
Adviser's ability to obtain the best net results for portfolio transactions of
the 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 the Fund. Although this information
is useful to the Fund and the Adviser, 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 Fund under the Investment Advisory
Agreement. The Fund 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.

Investment decisions for the Fund are made independently from those
for any other investment company or account managed by the Adviser. Any such
other investment company or account may also invest in the same securities as
the Fund. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Fund and another 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 investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained by the
Fund. To the extent permitted by law, the Adviser may aggregate the securities
to be sold or purchased for the Fund with those to be sold or purchased for
other investment companies or accounts in order to obtain best execution. In
making investment recommendations for the Fund, the Adviser will not inquire or
take into consideration whether an issuer of securities proposed for purchase
or sale by the Fund 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 Fund.

The Fund did not during the fiscal year ended September 30, 1994, hold
securities of its regular brokers or dealers, as defined in Rule 10b-1 under
the 1940 Act, or their parent companies.

B-13
134
Although the Fund does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Adviser's opinion strengthen the Fund's
position and contribute to its investment objective. Such could be the case
during periods of rapid fluctuations of interest rates in portfolio securities.

ACCOUNTING SERVICES

The Fund has entered into an Accounting Services Agreement with the
Adviser pursuant to which the Adviser has agreed to maintain and keep current
the books, accounts, records, journals and other records of original entry
relating to the business of the Fund and to calculate the Fund's net asset
value on a daily basis. In consideration of such services, the Fund has agreed
to pay monthly to the Adviser a fee based on the average monthly net asset
value of the Fund. For the last three fiscal years ended September 30, 1994,
the Adviser received $44,111, $43,375 and $39,764, respectively, for services
to the Fund pursuant to such agreement.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The Fund has entered into an Administration Agreement with the Adviser
pursuant to which the Adviser has agreed to act as the Fund's transfer agent,
dividend disbursing agent and administrator of plans for the Fund. In
consideration of such services, the Fund has agreed to pay the Adviser an
annual fee paid monthly, equal to $21 per shareholder account plus the
Adviser's out-of-pocket expenses. For the last three fiscal years ended
September 30, 1994, the Adviser received $211,560, $209,799 and $169,467,
respectively, for services to the Fund pursuant to such agreement.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Based upon the value of the Fund's portfolio securities and other
assets and the number of outstanding Shares as of the fiscal year end September
30, 1994, the net asset value and redemption price per share was $7.96. The
total offering price per share was $8.34 per share (net asset value divided
by .9550, assuming the then current

B-14
135
maximum sales charge of 4.50% of the offering price). The total offering price
is reduced on sales of $100,000 or more.

The net asset value of the Fund is determined once daily as of 4:00
P.M., Columbus, Ohio time, (a) on each business day the New York Stock Exchange
is open for business and on any other day there is sufficient trading in the
Fund's portfolio securities that the Fund's net asset value per share might be
materially affected by changes in the value of its portfolio securities. The
net asset value per share of the Fund is computed by dividing the sum of the
value of the Fund's portfolio securities plus any cash and other assets
(including interest and dividends accrued but not received) minus all
liabilities (including estimated accrued expenses) by the total number of
shares then outstanding.

Portfolio securities for which over-the-counter 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 Fund.

The Fund may suspend the determination of the net asset value, 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 Securities and Exchange
Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) an emergency exists as a result of which (i) disposal of
portfolio securities owned by the Fund is not reasonably practical or (ii) it
is not reasonably practical for the Fund to determine the fair value of its net
assets, or (d) the Securities and Exchange Commission has by order permitted
such suspension.

TAXES

B-15
136
must distribute to its shareholders at least 90% of its investment company
taxable income for the year. In general, the Fund's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year.

A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of
their ordinary income for the calendar year plus 98% of their capital gain net
income for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Fund would be subject to a non-deductible excise tax equal to 4% of the
deficiency.

Distribution by the Fund of the excess of net long-term capital gain
over net short-term capital loss is taxable to shareholders as long-term
capital gain in the year in which it is received, regardless of how long the
shareholder has held the Shares. Such distributions are not eligible for the
dividends-received deduction.

B-16
137
deductions for individuals with gross income in excess of certain threshold
amounts.

Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss
each year to offset ordinary income. Excess capital loss may be carried
forward to future years.

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 capital losses may be carried back three years and
forward five years.

Certain corporations are entitled to a 70% dividends received
deduction for distributions from certain domestic corporations. The 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 the Fund for its taxable year that qualifies for the dividends
received deduction.

B-17
138
tax laws and regulations which are in effect on the date of the Prospectus and
this Statement of Additional Information; such laws and regulations may be
changed by legislative or administrative action.

Shareholders should consult their tax advisers to assess the general
state and local tax consequences of investing in the Fund and, in particular,
to determine whether dividends paid that represent interest derived from U.S.
government securities is exempt from applicable state and local income taxes.

PERFORMANCE INFORMATION

For the 30-day period ended September 30, 1994, the Fund's yield was
6.55%. Such yield is computed by dividing the net investment income per Share
earned during that period by the maximum offering price per Share on the last
day of the period, according to the following formula:
a - b
YIELD = 2[(------- + 1) to the 6th power - 1]
cd

Where: a = dividends and interest earned during the period; b =
expenses accrued for the period (net of reimbursements); c = the average daily
number of Shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per Share on the last day of the
period. Expenses accrued during the period include all recurring fees that are
charged to all Shareholder accounts in proportion to the length of the base
period and assuming the Fund's average account size. The yield computation
assumes the then applicable maximum initial sales charge is deducted from the
investment in the Fund.

For the one-year and five-year periods ended September 30, 1994, and
the period from the commencement of the Fund's operation (February 3, 1986) to
September 30, 1994, the average annual total returns for the Fund were (4.76)%,
6.22%, and 6.81%, respectively. For the one- and five- periods ended September
30, 1994, and the period from commencement of the Fund's operations (February
3, 1986) to September 30, 1994, the cumulative return figures for the Fund were
(4.76)%, 35.24% and 76.97%, respectively. Each quotation of average annual
total return was 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 the Fund to the ending redeemable value, according to the
following formula:

P(T + 1)n = ERV

Where: P = a hypothetical initial payment of $1,000, T = average
annual total return, n = number of years over which total

B-18
139
return is being calculated and ERV = ending redeemable value of the
hypothetical $1,000 initial payment 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 then
applicable 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 the Fund's average account size. Cumulative return is computed by
using average annual 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 the Fund's Prospectus, from time to time
the Fund may include in its sales literature and shareholder reports a quote of
a current "distribution" rate. For the 12-month period ended September 30,
1994, the Fund's distribution rate was 7.73%. The current distribution rate is
computed by dividing the total amount of dividends per share paid by the Fund
during the past twelve months by a current maximum offering price. Under
certain circumstances, such as when there has been a change in the amount of
dividend payout, or a fundamental change in investment policies, it might be
appropriate to annualize the dividends paid over the period such changed
policies were in effect, rather than using the dividends during the past twelve
months. The current distribution rate differs from the current yield
computation because it may include distributions to shareholders from sources
other than dividends and interest, such as premium income from option writing,
short-term capital gains and net equalization credits and is calculated over a
different period of time.

Investors may also judge the performance of the Fund by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as those prepared by Dow ▇▇▇▇▇ & 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,
Consumer Reports and U.S.A. Today. In addition to performance information,
general information about the Fund that appears in a publication such as those
mentioned above may be included in advertisements and in reports to
shareholders.

B-19
140
DISTRIBUTOR

The Ohio Company serves as the principal underwriter of Shares of the
Fund. In such capacity, and pursuant to a Distributor's Contract with the
Fund, shares of the Fund continuously are offered on a best efforts basis by
The Ohio Company and dealers selected by The Ohio Company. Pursuant to the
Distributor's Contract, expenses of printing prospectuses and other selling
literature are borne by The Ohio Company.

For the Fund's fiscal years ended September 30, 1994, 1993 and 1992,
The Ohio Company was paid $424,187, $1,218,578 and $1,803,068, respectively, in
commissions after discounts to dealers under the Distributor's Contract.

CUSTODIAN

LEGAL COUNSEL AND INDEPENDENT AUDITORS

Certain legal matters as to the issuance of the shares offered hereby
have been passed upon by ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇. The Fund has selected KPMG Peat ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as independent auditors for the Fund. The financial
statements of the Fund 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 INFORMATION

Shareholders have neither any preemptive rights to subscribe for
additional Shares nor any cumulative voting rights.

B-20
141
The Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer, or other person is authorized
to give any information or make any representation other than those contained
in the Prospectuses and this Statement of Additional Information.

B-21
142

FINANCIAL STATEMENTS

CARDINAL GOVERNMENT OBLIGATIONS FUND

SEPTEMBER 30, 1994

B-22

143

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

PRINCIPAL VALUE
SECURITIES AMOUNT (NOTE 1)
---------- -------- ---------

DIRECT U.S. GOVERNMENT OBLIGATIONS 0.66%
U.S. Treasury Notes, 7.75% maturing 2/15/2001 $ 400 $ 407
U.S. Treasury Notes, 8.00% maturing 10/15/1996 700 718
-------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS 1,100 1,125
-------- ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS 98.88%
GNMA I Notes, 8.50% maturing 5/15/2016 through 8/15/2017 13,134 13,138
GNMA I Notes, 8.75% maturing 12/15/2016 through 6/15/2017 1,239 1,255
GNMA I Notes, 9.00% maturing 5/15/2016 through 4/15/2021 26,900 27,622
GNMA I Notes, 9.50% maturing 4/15/2016 through 3/15/2020 2,443 2,568
GNMA I Notes, 10.00% maturing 12/15/2017 through 11/15/2020 1,182 1,268
GNMA I Notes, 11.00% maturing 1/15/2010 through 6/15/2020 8,734 9,700
GNMA I Notes, 11.50% maturing 10/15/2010 through 3/15/2016 1,859 2,092
GNMA I Notes, 12.00% maturing 1/15/2013 through 7/15/2015 1,599 1,817
GNMA I PL Notes, 7.00% maturing 8/15/1995 through 3/15/2029 19,263 16,893
GNMA I PL Notes, 7.125% maturing 1/15/2024 929 823
GNMA I PL Notes, 7.25% maturing 5/15/2022 through 1/15/2031 5,210 4,650
GNMA I PL Notes, 7.875% maturing 7/15/2023 828 781
GNMA I PL Notes, 8.00% maturing 9/15/2023 1,410 1,374
GNMA I PL Notes, 8.125% maturing 5/15/2029 2,006 1,948
GNMA I PL Notes, 8.20% maturing 10/15/2012 692 688
GNMA I PL Notes, 8.25% maturing 7/15/2027 2,822 2,748
GNMA I PL Notes, 8.50% maturing 1/15/2023 through 9/15/2029 5,584 5,521
GNMA I PL Notes, 9.00% maturing 10/15/2021 1,810 1,814
GNMA I PL Notes, 9.50% maturing 1/15/2019 through 8/15/2022 1,319 1,344
GNMA I PL Notes, 9.55% maturing 11/15/1994 2,862 2,776
GNMA I PL Notes, 9.75% maturing 12/15/2025 1,888 1,942
GNMA I PL Notes, 10.00% maturing 10/15/1012 through 3/15/2024 6,735 6,920
GNMA I PL Notes, 10.25% maturing 12/15/2022 1,654 1,704
GNMA I PL Notes, 10.50% maturing 7/15/2014 1,056 1,105
GNMA I PL Notes, 11.00% maturing 9/15/2006 1,125 1,173
GNMA II Notes, 8.50% maturing 6/20/2017 through 11/20/2017 1,180 1,170
GNMA II Notes, 9.00% maturing 10/20/2015 through 10/20/2019 12,988 13,159
GNMA II Notes, 9.25% maturing 10/20/2016 220 225
GNMA II Notes, 9.50% maturing 1/20/2016 through 12/20/2022 6,792 7,034
GNMA II Notes, 10.00% maturing 1/20/2014 through 12/20/2021 13,830 14,591
GNMA II Notes, 10.50% maturing 9/20/2013 through 9/20/2019 2,857 3,062
GNMA II Notes, 11.00% maturing 10/20/2013 through 1/20/2021 3,846 4,165
GNMA GPM I Notes, 9.00% maturing 5/15/2009 through 6/15/2009 1,516 1,529
GNMA GPM I Notes, 9.25% maturing 5/15/2016 through 8/15/2021 701 714
GNMA GPM I Notes, 9.75% maturing 5/15/2020 through 9/15/2021 1,174 1,213
GNMA GPM I Notes, 10.00% maturing 2/15/2010 through 11/15/2013 1,162 1,213
GNMA GPM I Notes, 10.25% maturing 8/15/2020 386 407
GNMA GPM I Notes, 10.75% maturing 12/15/2017 through 7/15/2020 661 709
GNMA GPM I Notes, 11.50% maturing 1/15/2013 through 7/15/2013 491 531
GNMA GPM I Notes, 13.50% maturing 2/15/2011 through 10/15/2012 464 510
GNMA GPM II Notes, 10.25% maturing 8/20/2016 through 9/20/2018 726 760
GNMA GPM II Notes, 10.75% maturing 2/20/2018 265 280
GNMA MH I Notes, 9.75% maturing 12/15/2012 1,339 1,394
Fed. Home Loan Mtg. Corp., 8.50% maturing 4/01/2007 1,283 1,308
-------- ---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 166,164 167,638
-------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT OBLIGATIONS 1.48%
Fifth Third Bank, 4.60%, dated 9/30/94, due 10/03/94 2,500 2,500
-------- ---------
TOTAL REPURCHASE AGREEMENTS 2,500 2,500
-------- ---------
TOTAL INVESTMENTS (COST $179,072) 101.02% $169,764 $171,263
======== =========

GNMA -- Government National Mortgage Association
GPM -- Graduated Payment Mortgage
PL -- Project Loan
MH -- Mobile Home
Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

B-23
144

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

ASSETS
Investments in securities, at value (cost $179,072)........................... $ 171,263
Cash.......................................................................... 95
Interest receivable........................................................... 1,378
Receivable for Fund shares sold............................................... 58
Other assets.................................................................. 115
---------
Total assets........................................................ 172,909
---------
LIABILITIES
Payable for investment securities purchased................................... 1,900
Dividends payable............................................................. 491
Payable for Fund shares redeemed.............................................. 846
Accrued investment management, accounting and transfer agent fees (note 3).... 96
Other accrued expenses........................................................ 47
---------
Total liabilities................................................... 3,380
---------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS--applicable to 21,285,926 outstanding no par value shares of
beneficial interest (unlimited number of shares authorized)................. $ 169,529
=========
NET ASSET VALUE PER SHARE..................................................... $ 7.96
=========

See accompanying notes to financial statements.

B-24
145

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30, 1994

INVESTMENT INCOME:
Interest......................................................................... $16,253
-------
EXPENSES:
Investment management fees (note 3).............................................. 947
Transfer agent fees and expenses (note 3)........................................ 212
Accounting fees (note 3)......................................................... 44
-------
Total affiliated expenses............................................ 1,203
-------
Custodian fees................................................................... 32
Professional fees................................................................ 60
Reports to shareholders.......................................................... 36
Directors' fees.................................................................. 19
Registration fees................................................................ 13
Other expenses................................................................... 48
-------
Total non-affiliated expenses........................................ 208
-------
Total expenses....................................................... 1,411
-------
Net investment income................................................ 14,842
-------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 2):
Net realized loss from security transactions..................................... (5,070)
Decrease in unrealized gain on investments....................................... (10,125)
-------
Net realized loss and decrease in unrealized gain on investments..... (15,195)
-------
Net decrease in net assets from operations........................... $ (353)
========

See accompanying notes to financial statements.

B-25
146

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1994 AND 1993

1994 1993
-------- --------

FROM OPERATIONS:
Net investment income................................................ $ 14,842 $ 16,125
Net realized loss from security transactions......................... (5,070) (4,708)
Decrease in unrealized gain on investments........................... (10,125) (2,568)
-------- --------
Net increase (decrease) in net assets from operations........... (353) 8,849
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.65 and $.74 per share,
respectively)...................................................... (14,708) (16,221)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares.................................... 12,690 57,184
Net asset value of Fund shares issued in connection with reinvestment
of distributions to shareholders................................... 8,662 9,948
-------- --------
21,352 67,132
Cost of Fund shares redeemed......................................... (45,645) (23,016)
-------- --------
Increase (decrease) in net assets derived from capital share
transactions................................................... (24,293) 44,116
-------- --------
Net increase (decrease) in net assets........................... (39,354) 36,744
NET ASSETS--beginning of period...................................... 208,883 172,139
-------- --------
NET ASSETS--end of period (overdistributed net investment income of
$2 and $135, respectively)......................................... $169,529 $208,883
========= =========

See accompanying notes to financial statements.

B-26
147

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cardinal Government Obligations Fund (the "Fund") is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated November 15, 1985 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.

Security Valuation -- Portfolio securities for which over-the-counter market
quotations are readily available are valued at the bid price. If no quotations
are available, portfolio securities are valued in good faith by the Board of
Trustees of the Fund to reflect their fair value.

Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis.
Premiums and discounts are recognized as realized gains or losses from security
transactions as securities are sold or as principal reductions are received. In
determining the net realized gain or loss on securities sold, the cost of the
securities has been determined on first-in, first-out (FIFO) cost basis.

Federal Income Taxes -- No provision has been made for Federal taxes on the
Fund's income, since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
make sufficient distributions of taxable income and capital gains within the
required time to relieve it from all, or substantially all, Federal income
taxes.

Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly, at net asset value, in additional shares of the Fund.

(2) -- PURCHASES AND SALES OF SECURITIES

Purchases and sales of U.S. government agency obligations (excluding short-term
obligations) during the year ended September 30, 1994 aggregated $73,365,364 and
$41,446,743, respectively.

As of September 30, 1994, gross unrealized gains and gross unrealized losses on
investment securities were $730,592 and $8,539,723, respectively; resulting in a
net unrealized loss of $7,809,131 on investment securities with a cost basis of
$179,072,149.

(3) -- TRANSACTIONS WITH AFFILIATES

As investment manager for the Fund, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Fund. CMC has agreed that if the aggregate expenses of the Fund,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Fund, CMC will refund to the Fund, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the year ended September 30, 1994.

(continued)

B-27
148

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
SEPTEMBER 30, 1994

CMC also serves the Fund as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Fund. For the year ended September 30, 1994 the Fund paid or
accrued $211,560 and $44,111 for transfer agent and fund accounting services,
respectively.

The Ohio Company, sole shareholder of CMC, acting as distributor for the Fund,
reported that it received commissions after discounts to dealers from the sale
of shares of the Fund of $424,187 for the year ended September 30, 1994.

(4) -- COMMITMENTS AND CONTINGENCIES
The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1994. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $30,644, for the initial capital of ICI
Mutual. The Fund is also committed to provide $91,932 should ICI Mutual
experience the need for additional capital contributions.

Included in other assets is a $61,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.

(5) -- CAPITAL STOCK
At September 30, 1994, there were an unlimited number of shares of no par value
capital stock authorized and the capital amounts were as follows:

Paid in capital.................................................................... $ 198,994,906
Accumulated net realized loss on investments....................................... (21,655,428)
Unrealized loss on investments..................................................... (7,809,131)
Overdistributed net investment income.............................................. (1,581)
-------------
Net assets......................................................................... $ 169,528,766
=============

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
---------------------------
1994 1993
----------- -----------

Shares sold.......................................................... 1,514,461 6,465,446
Shares issued in connection with reinvestment of distributions to
shareholders....................................................... 1,045,107 1,129,022
----------- -----------
2,559,568 7,594,468
Shares repurchased................................................... (5,478,768) (2,613,070)
----------- -----------
Net increase (decrease).............................................. (2,919,200) 4,981,398
Shares outstanding:
Beginning of period.................................................. 24,205,126 19,223,728
----------- -----------
End of period........................................................ 21,285,926 24,205,126
========== ==========

B-28
149

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------

(6) -- DIVIDENDS AND DISTRIBUTIONS

See caption "FINANCIAL HIGHLIGHTS" in the Prospectus for the Financial
Highlights with respect to the Fund for each of the years in the eight-year
period ended September 30, 1994, and the period from February 3, 1986 (date of
commencement of operations), through September 30, 1986.

B-29
150

--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Trustees
Cardinal Government Obligations Fund:

We have audited the accompanying statement of assets and liabilities of Cardinal
Government Obligations Fund, including the statement of investments, as of
September 30, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Obligations Fund as of September 30, 1994, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 18, 1994

B-30
151

STATEMENT OF ADDITIONAL INFORMATION

CARDINAL GOVERNMENT SECURITIES TRUST

Cardinal Government Securities Trust (the "Trust") is a no-load,
diversified, open-end management investment company with an investment
objective of maximizing current income while preserving capital and maintaining
liquidity. The Trust seeks to attain its objective by investing in U.S.
Treasury bills, notes and bonds, other obligations issued or guaranteed by the
United States, its agencies or instrumentalities, and repurchase agreements
relating to such obligations. All obligations purchased by the Trust will
mature, or be deemed to mature, in thirteen months or less. There can be no
assurance that the Trust's objective will be achieved.

The Trust is designated for institutions and individuals who desire
current income that reflects prevailing interest rates for short-term
investments together with a high degree of liquidity and the security of a
portfolio investing in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and repurchase agreements collateralized by
such obligations.

_____________________________________

For further information regarding the Trust or for assistance in
opening an account or redeeming shares, please call:

In Columbus 464-5512 (opening accounts and further information)
464-5511 (redeeming shares)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed to the Trust
at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

______________________________________

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of the Trust, dated February
1, 1995, which has been filed with the Securities and Exchange Commission.
This Statement of Additional Information is incorporated by reference in its
entirety into the Prospectus. The Prospectus is available upon request without
charge from the Trust at the above address or by calling the phone numbers
provided above.

FEBRUARY 1, 1995
152
TABLE OF CONTENTS

PAGE
----

INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Additional Information on Portfolio Instruments . . . . . . . . . . . . . . . . . . . . . . . B-2
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-4

MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-5

PRINCIPAL SHAREHOLDERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7

THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-7

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-9

ACCOUNTING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-11

LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12

Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-12

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13

Federal Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
State and Local Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17

Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19

- i -
153
STATEMENT OF ADDITIONAL INFORMATION

CARDINAL GOVERNMENT SECURITIES TRUST

Cardinal Government Securities Trust (the "Trust") is an open-end
management investment company. Much of the information contained in this
Statement of Additional Information expands upon subjects discussed in the
Prospectus of the Trust. Capitalized terms not defined herein are defined in
the Prospectus. No investment in Shares of the Trust should be made without
first reading the Prospectus of the Trust.

INVESTMENT OBJECTIVE AND POLICIES

General
-------

The Trustees have adopted a policy requiring that the Trust use its
best efforts to maintain a constant net asset value of $1.00 per share. The
Trust values its portfolio securities on the basis of the amortized cost
valuation method. The valuation of the Trust's portfolio securities based upon
their amortized cost and the maintenance of the Trust's per share net asset
value of $1.00 is permitted based on the Trust's adherence to certain
conditions. The Trust has agreed to maintain a dollar-weighted average
portfolio maturity of 90 days or less, in accordance with Rule 2a-7 of the 1940
Act, and purchase only obligations having, or deemed to have, maturities from
the date of purchase of thirteen months or less. In addition, the Trustees
have agreed to establish procedures designed to stabilize, to the extent
reasonably possible, the Trust's per share price, as computed for the purpose
of sales and redemptions, at $1.00. There is no assurance that the Trust will
at all times be able to maintain a constant net asset value of $1.00 per share.
(See "ADDITIONAL PURCHASE AND REDEMPTION INFORMATION -- Determination of Net
Asset Value.")

Changes in short-term interest rates may affect the value of the
portfolio of the Trust. An increase in interest rates will generally reduce
the value of the portfolio and a decline in interest rates will generally
increase the value of the portfolio. The impact of such changes in prevailing
interest rates is generally minimized due to the short average life of the
portfolio and, under the investment policies described above, such interest
rate changes should not cause, under normal circumstances, changes in net asset
value per share. If abnormally high redemption requests should require an
untimely sale of portfolio securities, the Trust intends to use its limited
borrowing powers to avoid such dispositions to the extent practicable. (See
"Investment Restrictions" below.)

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ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

REPURCHASE AGREEMENTS. Securities held by the Trust may be subject to
repurchase agreements. Under the terms of a repurchase agreement, the Trust
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 Trust'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 Trust 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). If the seller were to default on its repurchase
obligation or become insolvent, the Trust would suffer a loss to the extent
that the proceeds from a sale of the underlying portfolio securities were less
than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Trust were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that the Trust
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 Trust believes that, under the regular procedures normally in
effect for custody of the Trust's securities subject to repurchase agreements
and under federal laws, a court of competent jurisdiction would rule in favor
of the Trust if presented with the question. Securities subject to repurchase
agreements will be held by the Trust's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements
are considered to be loans by the Trust under the 1940 Act.

SECURITIES OF OTHER INVESTMENT COMPANIES. The Trust may invest in
securities issued by other investment companies. The Trust 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 the
Trust. As a shareholder of another investment company, the Trust would bear,
along with other shareholders, its pro rata portion of that company's expenses,
including advisory and other expenses that the Trust bears directly in
connection with its own operations. Investment companies in which the Trust
may invest may also impose a distribution charge in connection with the
purchase or redemption of their shares and other types of commissions or
charges. Such charges will be

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payable by the Trust and, therefore, will be borne directly by shareholders.

Investment Restrictions
-----------------------

The Trust has adopted certain restrictions upon its investment
objective and policies which provide that the Trust may not:

(1) Purchase securities or make any investments other than those
described under "Investment Objective and Policies" in the
Prospectus (there is no limit upon the amount of the Trust's
assets which may be invested in the securities of any one
issuer of permitted obligations);

(2) Borrow money except from banks for temporary or emergency
non-investment purposes, such as to accommodate abnormally
heavy redemption requests, and then only in an amount not
exceeding 10% of the value of the Trust's total assets at the
time of borrowing; provided that so long as any borrowings
exceed 5% of the value of the Trust's total assets, the Trust
shall not purchase portfolio securities;

(3) 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);

(4) Make loans, other than by entering into repurchase agreements
to the extent allowed herein and through the purchase of other
obligations in accordance with its investment objective and
policies;

(5) Effect short sales of securities;

(6) Act as an underwriter of securities;

(7) Enter into a repurchase agreement maturing in more than seven
days or knowingly purchase securities which are subject to
restrictions on resale or for which there is no readily
available market if, as a result, more than 10% of the value
of the Trust's total assets at the time would be invested in
such securities;

(8) Purchase or sell real estate, real estate mortgage loans,
commodities or commodities contracts or oil and gas interests;
or

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(9) Purchase the securities of issuers conducting their principal
business activity in the same industry if as a result of such
purchase more than 25% of its total assets would be invested
in the securities of issuers in that industry; provided that
such limitation shall not apply to the purchase of securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

The following additional investment restriction may be changed without
the majority vote of the outstanding Shares of the Trust. The Trust 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.

The Trust has represented to the California Department of Corporations
that, in order to comply with applicable regulations, it will acquire or retain
securities of other open-end management investment companies if such
investments are made in open-end management investment companies sold with no
sales commission and the Trust's investment adviser waives its management fee
with respect to such investments. The Trust intends to comply with this
undertaking for so long as the Trust has its shares registered for sale in the
State of California or such representation is required by the California
Department of Corporations.

If a percentage restriction is adhered to at the time the relevant
action is taken, a later increase or decrease in percentage resulting from a
change in market value of an investment or in total assets will not be deemed
to result in a violation of the restriction.

Portfolio Turnover
------------------

The portfolio turnover rate for the Trust is calculated by dividing
the lesser of the Trust's purchases or sales of portfolio securities for the
year by the monthly average value of the Trust's portfolio securities. The
Securities and Exchange Commission requires that the calculation exclude all
securities whose remaining maturities at the time of acquisition were one year
or less.

Because the Trust intends to invest almost 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 the Trust is expected to be zero percent for
regulatory purposes.

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MANAGEMENT OF THE TRUST

The trustees and officers of the Trust, together with their addresses
and principal business occupations and other affiliations during the last five
years, are shown below. Except for ▇▇. ▇▇▇▇▇▇, each person named as a Trustee
also serves as a trustee of Cardinal Tax Exempt Money Trust, Cardinal
Government Obligations Fund and The Cardinal Group and as a director of The
Cardinal Fund Inc. ▇▇. ▇▇▇▇▇▇ is also a Trustee of Cardinal Tax Exempt Money
Trust. Each trustee who is an "interested person" of the Trust, as that term
is defined in the 1940 Act, is indicated by an asterisk.

Name and Positions Held Principal Occupation
Business Address with Registrant During Past 5 Years
---------------- --------------- -------------------

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Executive Principal, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Committee Associates (construction consulting
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ firm); formerly Vice President of
Michigan Molecular Institute,
Midland, Michigan (polymer science
research institute).

*▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chairman and Chairman, President, Chief Executive
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Trustee, Member of Executive Officer and a Director of The Ohio
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and Nominating Committees Company (investment banking);
formerly Senior Executive Vice
President of The Ohio Company.

▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Trustee, Member of Audit Since 1994, President and a Director
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Committee of Lancaster Colony Corporation
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ (diversified consumer products);
prior thereto, Executive Vice
President, Secretary and a Director
of Lancaster Colony Corporation.

*Hannibal ▇. ▇▇▇▇▇▇ III Trustee and Senior Vice President of The Ohio
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Executive Vice Company (investment banking).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ President

▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Trustee, Member of Executive Chairman, Ohio Bureau of Workers'
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

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▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Audit and Vice President, Customer
▇▇ ▇▇▇▇▇ ▇▇▇▇ Nominating Committees Satisfaction, Industry Segment, and
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ former President, ABB Process
Automation Business, of Asea ▇▇▇▇▇
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries);
former President, Process Automation
Business, of Combustion Engineering,
Inc. (designer and manufacturer of
process automation systems for basic
industries).

▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇ Trustee Self-employed author; former Vice
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ Chairman of Motor Sports
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Enterprises, Inc.

*▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and Trustee, Senior Vice President, The Ohio
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Company (investment banking); former
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Executive and Nominating Vice President, Keystone Group
Committees (mutual fund management/
administration); former Senior Vice
President, Trust Advisory Group
(mutual fund consulting).

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Trustee, Member of Audit and President and a Director of ▇▇▇▇▇▇▇
724 Hampton Roads Drive Nominating Committees Homes, Inc. (manufactured homes);
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ former Vice President, Treasurer,
Chief Financial Officer and a
Director of Worthington Industries,
Inc. (specialty steel and plastics
manufacturer).

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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ Treasurer Trust Officer and Vice President of
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ Company (investment
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ banking).

▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Assistant Treasurer Since April, 1992, Employee of The
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ Company (investment banking);
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ prior thereto, student at The Ohio
State University.

As of November 30, 1994, all trustees and officers of the Trust as a
group owned fewer than one percent of the Shares of the Trust.

Subject to the ultimate authority and direction of the Board of
Trustees of the Trust, the Executive Committee will exercise the powers of the
Trustees during the intervals between meetings of the Trustees.

Messrs. Chambers, Siegel, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Will are Chairman,
President and a director, Vice President and a director, Vice President and a
director, a Vice President and a Vice President, respectively, of the Adviser.
The compensation of trustees and officers of the Trust who are employed by The
Ohio Company is paid by The Ohio Company. Trustees' fees (currently $500 per
meeting attended, $500 annual retainer and $500 per audit committee meeting
attended) plus expenses are paid by the Trust, except that Messrs. Chambers,
Siegel, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ receive no fees from the Trust. The aggregate
amount of compensation and expenses paid to the Trustees during the fiscal year
ended September 30, 1994, was $22,174.

PRINCIPAL SHAREHOLDERS OF THE TRUST

There were no persons known to the Trust to be the beneficial owners
of more than 5% of the Trust's outstanding Shares as of November 22, 1994.

THE ADVISER

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cost of research, statistical analysis and continuous supervision of the
investment portfolio of the Trust and furnishes office facilities and certain
clerical and administrative services to the Trust. In addition, the Adviser
provides dividend, transfer agency and fund accounting services to the Trust.

The aggregate amount of investment management fees earned by the
Adviser during the fiscal years ended September 30, 1994, 1993 and 1992, was
$1,978,541, $2,227,209 and $2,616,244, respectively. To offset capital losses
incurred by the Trust for the fiscal year ended September 30, 1994, the Adviser
contributed $1,151,168 to the Trust. This amount was equal to the investment
management, transfer agent and fund accounting fees for the period from May 1,
1994, through September 30, 1994.

The Adviser has agreed that if the aggregate expenses of the Trust
(including fees pursuant to the Investment Advisory Contract, but excluding
taxes, interest, brokerage fees and, where permitted under the expense
limitations imposed by state securities administrators, extraordinary expenses)
for any fiscal year exceed 2% of the first $10 million of the Trust's average
net assets, 1 1/2% of the next $30 million of the Trust's average net assets,
and 1% of the Trust's remaining average net assets, or 1 1/2% of average net
assets, whichever is less, the Adviser will refund to the Trust, or otherwise
bear, such excess. The Adviser was not obligated to refund or pay any expenses
of the Trust for the fiscal years ended September 30, 1994, 1993 and 1992 as a
result of such expense limitations.

The Adviser is a wholly owned subsidiary of The Ohio Company, an
investment banking firm organized in 1925. Descendants of H. P. and ▇. ▇.
▇▇▇▇▇, 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. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an officer and director of The Ohio Company.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Hannibal ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
are each an officer of The Ohio Company.

The Investment Advisory Contract will continue in force from year to
year if specifically approved at least annually by the Board of Trustees of the
Trust or by the vote of a majority of the Trustees who are not "interested
persons" of any party to such Contract, cast in person at a meeting called for
such purpose. The Contract may be terminated by either party, at any time,
without penalty, upon sixty days' written notice, and will automatically
terminate in the event of its assignment. Termination will not

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affect the right of the Adviser to receive payments on any unpaid balance of
the compensation earned prior to termination.

PORTFOLIO TRANSACTIONS

Pursuant to the Investment Advisory Contract, the Adviser, subject to
the policies established by the Board of Trustees of the Trust and in
accordance with the Trust's investment restrictions and policies, is
responsible for the Trust's portfolio decisions and the placing of the Trust's
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 in the
over-the-counter market are generally principal transactions with dealers.
With respect to the over-the-counter market, the Trust, where possible, will
deal directly with dealers who make a market in the securities involved except
in those circumstances where better price and execution are available
elsewhere.

In executing such transactions, the Adviser seeks to obtain the best
net results for the Trust 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, the Trust will not necessarily be paying the lowest
commission or spread available. For the past three fiscal years, the Trust has
paid no brokerage commissions.

The Adviser may consider provision of research, statistical and other
information to the Trust or the Adviser in the selection of qualified
broker-dealers who effect portfolio transactions for the Trust so long as the
Adviser's ability to obtain the best net results for portfolio transactions of
the Trust 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 the Trust. Although this
information is useful to the Trust and the Adviser, 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 Trust under the
Investment Advisory Contract. The Trust is not

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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.

Investment decisions for the Trust are made independently from those
for any other investment company or account managed by the Adviser. Any such
other investment company or account may also invest in the same securities as
the Trust. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Trust and another 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 Trust and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Trust or the size of the position obtained by the
Trust. To the extent permitted by law, the Adviser may aggregate the
securities to be sold or purchased for the Trust with those to be sold or
purchased 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 Trust, the Adviser will not inquire or take
into consideration whether an issuer of securities proposed for purchase or
sale by the Trust 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 Trust.

The Trust did not during the fiscal year ended September 30, 1994,
hold any securities of its regular brokers or dealers, as defined in Rule 10b-1
under the 1940 Act, or their parent companies.

ACCOUNTING SERVICES

The Trust has entered into an Accounting Services Agreement with the
Adviser pursuant to which the Adviser has agreed to maintain and keep current
the books, accounts, records, journals and other records of original entry
relating to the business of the Trust and to calculate the Trust's net asset
value on a daily basis. In consideration of such services, the Trust has
agreed to pay monthly to the Adviser a fee based on the average monthly net
asset value of the Trust. For the last three fiscal years ended September 30,
1994, the Adviser received $54,818, $59,614 and $67,928, respectively, for its
services to the Trust pursuant to such Agreement. As described above under
"THE ADVISER," a portion of such fees were contributed to the Trust by the
Adviser.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The Trust has entered into an Administration Agreement with the
Adviser pursuant to which the Adviser has agreed to act as the

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Trust's transfer agent, dividend disbursing agent and administrator of plans
for the Trust. In consideration of such services, the Trust has agreed to pay
the Adviser an annual fee paid monthly, equal to $21 per shareholder account
plus the Adviser's out-of-pocket expenses. For the last three fiscal years
ended September 30, 1994, the Adviser received $999,507, $918,214 and $958,526,
respectively, for its services to the Trust pursuant to such Agreement. As
described above under "THE ADVISER," a portion of such fees were contributed to
the Trust by the Adviser.

DISTRIBUTOR

The Ohio Company, with principal offices located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, serves as the Trust's principal underwriter and,
in connection therewith, is available to receive purchase orders and redemption
requests relating to Shares of the Trust and to transmit such orders and
requests to the Trust's custodian. The Ohio Company does not receive any
compensation from the Trust or charge any fees to investors for its services
rendered as principal underwriter of the Trust's Shares.

The Distribution Contract was last approved by both the trustees and
those trustees who are not "interested persons" (as defined in the ▇▇▇▇ ▇▇▇) of
either the Trust or The Ohio Company at a meeting held for such purpose on
January 20, 1995, and was last approved by the shareholders of the Trust at the
annual meeting of shareholders of the Trust held on January 11, 1983.

The Distribution Contract will continue in effect from year to year if
specifically approved at least annually by the Board of Trustees of the Trust
or by the vote of a majority of the outstanding Shares of the Trust. In either
event, the Distribution Contract must also be approved by vote of a majority of
the trustees who are not "interested persons" of any party to the Distribution
Contract, cast in person at a meeting called for such purpose. The
Distribution Contract will automatically terminate in the event of its
assignment.

CUSTODIAN

The Fifth Third Bank (the "Bank"), ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, has been selected to act as Custodian of the portfolio securities
and cash of the Trust. The Bank has no part in determining the investment
policies of the Trust or in deciding which securities are to be purchased or
sold by the Trust. The Trust may enter into repurchase agreements with the
Bank and may purchase or sell securities from or to the Bank.

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LEGAL COUNSEL AND INDEPENDENT AUDITORS

Certain legal matters as to the issuance of the Shares offered hereby
have been passed upon by ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇. The Trust has selected KPMG Peat ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, as independent auditors for the Trust. The
financial statements of the Trust included in this Statement of Additional
Information have been included herein in reliance upon the report of KPMG Peat
Marwick LLP, independent auditors, given upon the authority of said firm as
experts in accounting and auditing.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The Trust's Shares may be purchased at the public offering price and
are sold on a continuous basis through The Ohio Company, principal underwriter
of the Trust's Shares, at its address and number set forth on the cover page of
this Statement of Additional Information, and through other broker-dealers who
are members of the National Association of Securities Dealers, Inc. and have
sales agreements with The Ohio Company.

The Trust 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 Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (d) an emergency exists
as a result of which (i) disposal by the Trust of securities owned by it is not
reasonably practical or (ii) it is not reasonably practical for the Trust to
determine the fair value of its net assets.

Use of the check-writing redemption procedure will be subject to the
rules and regulations of The Fifth Third Bank (the "Bank") governing checking
accounts. Neither the Bank nor the Trust shall incur any liability to a
participating shareholder under this procedure for not honoring a check that
exceeds the value of Shares in a shareholder's account, for honoring checks
properly drafted, for effecting redemptions pursuant to payment thereof or for
returning checks not accepted for payment. This procedure may be terminated at
any time by the Trust, 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 purpose of
Federal Deposit Insurance or otherwise.

Determination of Net Asset Value
--------------------------------

The Trust values its portfolio securities on the basis of the
amortized cost valuation method, which involves valuing an instrument at its
cost and thereafter assuming a constant

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amortization to maturity of any discount or premium, regardless of the impact
of fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods during
which the value of the Trust's portfolio securities, as determined by the
amortized cost method, is higher or lower than the price the Trust would
receive if it sold the securities. During periods of declining interest rates,
the daily yield on Shares of the Trust computed as described above may tend to
be higher than a like computation made by a fund with market prices and
estimates of market prices for all of its portfolio securities. Thus, if the
use of the amortized cost method by the Trust resulted in a lower aggregate
portfolio value on a particular day, a prospective investor in the Trust would
be able to obtain a somewhat higher yield than would result from investment in
a fund utilizing solely market values, and existing investors in the Trust
would receive less investment income. The converse would apply in a period of
rising interest rates.

The valuation of the Trust's portfolio securities based upon their
amortized cost and the maintenance of the Trust's per share net asset value of
$1.00 is permitted based on the Trust's 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 or
397 days or less. The Trustees have also established procedures designed to
stabilize, to the extent reasonably possible, the Trust's net asset value per
share, as computed for the purpose of sales and redemptions, at $1.00. Such
procedures include review of the Trust's portfolio holdings by the Trustees at
such intervals as they may deem appropriate to determine whether the Trust's
net asset value calculated by using available market quotations deviates from
$1.00 per share and, if so, whether such deviation is unfair to existing
shareholders. In the event the Trustees determine that such a deviation
exists, they have agreed to take such corrective action as they deem necessary
and appropriate, including selling portfolio securities prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity,
withholding dividends or establishing a net asset value per share by using
available market quotations instead of using the amortized cost basis.

TAXES

Federal Taxes
-------------

The Trust intends to qualify as a "regulated investment company" under
the Code for so long as such qualification is in the best interest of the
Trust's shareholders. In order to qualify as a regulated investment company,
the Trust 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 stock,
securities, or currencies; derive less than 30% of its gross

B-13
166
income from the sale or other disposition of stock, securities, options, future
contracts or foreign currencies held less than three months; and diversify its
investments within certain prescribed limits. In addition, to utilize the tax
provisions specially applicable to regulated investment companies, the Trust
must distribute to its shareholders at least 90% of its investment company
taxable income for the year. In general, the Trust's investment company
taxable income will be its taxable income subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year.

A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of
their ordinary income for the calendar year plus 98% of their capital gain net
income for the one-year period ending on October 31 of such calendar year. The
balance of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Trust would be subject to a non-deductible excise tax equal to 4% of the
deficiency.

Although the Trust 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, the
Trust may be subject to the tax laws of such states or localities. In
addition, if for any taxable year the Trust does not qualify for the special
tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of earnings and
profits, and would be eligible for the dividends received deduction for
corporations.

B-14
167
gain in the year in which it is received, regardless of how long the
shareholder has held the Shares.

Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss
each year to offset ordinary income. Excess capital loss may be carried
forward to future years.

Certain corporations are entitled to a 70% dividends received
deduction for distributions from certain domestic corporations. Because all of
the Trust's net investment income is expected to be derived from interest and
short-term capital gains, it is anticipated that no distributions from the
Trust will qualify for the dividends received deduction. However, to the
extent the Trust would have any such distributions, the Trust 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 the
Trust for its taxable year that qualifies for the dividends received deduction.

The Trust 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.

▇-▇▇
▇▇▇
▇▇▇▇▇ and Local Taxes
---------------------

Shareholders of the Trust may be subject to state and local taxes with
respect to their ownership of Trust Shares or distributions from the Trust.
Under the laws of some jurisdictions, distributions of net investment income
may be taxable to shareholders as dividend income even though a substantial
portion of such distributions may be attributable to interest on U.S.
Government obligations which, if received directly, may be exempt from such
income taxes. Each shareholder should consult its tax adviser about the tax
status of distributions from the Trust in the relevant state and locality.

General
-------

Information set forth in the Prospectus 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 the Trust. No attempt has been made to present a detailed
explanation of the federal income tax treatment of the Trust or its
Shareholders and this discussion is not intended as a substitute for careful
tax planning. Accordingly, potential purchasers of Shares of the Trust are
urged to consult their tax advisers with specific reference to their own tax
situation. In addition, the tax discussion in the Prospectus and this
Statement of Additional Information is based on tax laws and regulations which
are in effect on the date of the Prospectus and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.

Shareholders should consult their tax advisers to assess the general
state and local tax consequences of investing in the Trust and, in particular,
to determine whether dividends paid that represent interest derived from U.S.
government securities is exempt from applicable state and local income taxes.

YIELD

The current (average annualized) yield of the Trust for any seven-day
period is calculated by dividing the average daily net income per Share earned
by the Trust during the seven-day calendar period by the Trust'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 Trust's
portfolio. The yield of

B-16
169
the Trust for the seven-day period ended September 30, 1994, was 3.53%.

The effective or compounded yield of the Trust for any seven-day
period is computed by adding the number one to the daily net income per Share
earned by the Trust 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. The effective or compounded yield of the Trust for the seven-day
period ended September 30, 1994, was 3.60%.

Investors may judge the performance of the Trust by comparing its
performance to the performance of other mutual funds or mutual fund portfolios
with comparable investment objectives and policies through various mutual fund
or market indices such as those prepared by Dow ▇▇▇▇▇ & Co., Inc. and Standard
& Poor's Corporation, and to data prepared by Lipper Analytical Services, Inc.,
a widely recognized independent service which monitors the performance of
mutual funds, CDA Investment Technologies, Inc., and the Consumer Price Index.
Comparisons may also be made to indices or data published in ▇▇▇▇▇▇▇▇'▇ MONEY
FUND REPORT of Holliston, Massachusetts, a nationally recognized money market
fund reporting service, Money Magazine, Forbes, Barron's, The Wall Street
Journal, The Columbus Dispatch, The New York Times, Business Week, Consumer
Reports and U.S.A. Today.

Current and effective yields will fluctuate from time to time and
should not be considered representative of future results. Yield is a function
of general economic and money market conditions, portfolio quality and
maturity, type of portfolio instruments and operating expenses. Yield
information may be useful in reviewing the Trust's performance and comparing an
investment in Shares of the Trust with other investment alternative. However,
yield on Shares of the Trust fluctuates unlike yields on bank deposits or other
instruments that pay a fixed yield for a stated period of time.

ADDITIONAL INFORMATION

Shareholder and Trustee Liability
---------------------------------

The Trust is an entity of the type commonly known as a "business
trust." Shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for the obligations of the Trust. The
Declaration of Trust provides that shareholders shall not be subject to any
personal liability for the acts or obligations of the Trust and that every
agreement, obligations or instrument entered into or executed by the Trust
shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Trust has been advised by counsel that no
personal liability will attach to the shareholders

B-17
170
when such a provision is utilized, except possibly in a few jurisdictions.
With respect to all types of claims, contract claims where shareholder
liability is not negated, claims for taxes and certain statutory liabilities, a
shareholder may be held personally liable for obligations of the Trust.
However, upon payment of any such liability, the shareholder will be entitled
to reimbursement from the general assets of the Trust. The Trust is covered by
insurance which the Trustees consider adequate to cover foreseeable tort
claims. The Declaration of Trust provides for indemnification out of Trust
property of any shareholder held personally liable solely by reason of his
being or having been a shareholder. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy any
judgment thereon. Thus, the risk of financial loss to a shareholder on account
of shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations.

The Declaration of Trust further provides that no Trustee, officer or
agent of the Trust shall be personally liable to any person for any action or
failure to act except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties. It also provides that all
persons having any claim against the Trustees or the Trust shall look solely to
the Trust's property for payment. The Trust may enter into repurchase
agreements with the Bank and may purchase or sell securities from or to the
Bank.

The Trust is registered with the Securities and Exchange Commission as
a management investment company. Such registration does not involve
supervision by the Securities and Exchange Commission of the management or
policies of the Trust.

B-18
171

FINANCIAL STATEMENTS

CARDINAL GOVERNMENT SECURITIES TRUST

SEPTEMBER 30, 1994

B-19
172

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

MATURITY PRINCIPAL VALUE
SECURITIES DATE AMOUNT (NOTE 1)
---------- --------- --------- ---------

DIRECT U.S. GOVERNMENT OBLIGATIONS 54.36%
U.S. Treasury Bills.................................................... 10/06/94 $ 50,000 $ 49,982
U.S. Treasury Bills.................................................... 10/06/94 50,000 49,982
U.S. Treasury Bills.................................................... 10/06/94 30,000 29,990
U.S. Treasury Bills.................................................... 10/13/94 20,000 19,977
U.S. Treasury Bills.................................................... 10/20/94 25,000 24,950
U.S. Treasury Bills.................................................... 11/03/94 25,000 24,906
--------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS........................... 200,000 199,787
--------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT AND
FEDERAL AGENCY OBLIGATIONS 46.04%
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co., 5.36%, dated 9/30/94............................ 10/03/94 49,000 49,000
▇▇▇▇▇ ▇▇▇▇▇▇ Inc., 5.20%, dated 9/30/94................................ 10/03/94 49,000 49,000
▇▇▇▇▇ ▇▇▇▇▇▇ Shearson, 4.98%, dated 9/30/94............................ 10/03/94 48,000 48,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities, 4.90%, dated 9/30/94......................... 10/03/94 20,000 20,000
Fifth Third Bank, 4.60%, dated 9/30/94................................. 10/03/94 3,200 3,200
--------- ---------
TOTAL REPURCHASE AGREEMENTS........................................ 169,200 169,200
--------- ---------
TOTAL INVESTMENTS AT AMORTIZED COST 100.40%........................ $ 369,200 $ 368,987
======== ========

Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

B-20
173

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

ASSETS
Investments in securities at amortized cost...................................... $ 368,987
Cash............................................................................. 67
Interest receivable.............................................................. 90
Other assets..................................................................... 320
---------
Total assets......................................................... 369,464
---------
LIABILITIES
Payable for Trust shares redeemed................................................ 1,813
Payable for shareholder distributions............................................ 17
Accrued investment management, accounting and transfer agent fees (note 2)....... 34
Other accrued expenses........................................................... 84
---------
Total liabilities.................................................... 1,948
---------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 367,516,480 outstanding $.01 par value shares of
beneficial interest (unlimited number of shares authorized).................... $ 367,516
=========
NET ASSET VALUE PER SHARE........................................................ $1.00
=========

See accompanying notes to financial statements.

B-21
174

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30, 1994

INVESTMENT INCOME:
Interest............................................................. $ 14,982
--------
EXPENSES:
Investment management fees (note 2).................................. 1,978
Transfer agent fees and expenses (note 2)............................ 1,000
Accounting fees (note 2)............................................. 55
--------
Total affiliated expenses.................................. 3,033
--------
Custodian fees....................................................... 35
Professional fees.................................................... 86
Reports to shareholders.............................................. 62
Trustees' fees....................................................... 22
Registration fees.................................................... 26
Other expenses....................................................... 103
--------
Total non-affiliated expenses.............................. 334
--------
Total expenses............................................. 3,367
--------
Net investment income...................................... 11,615
--------
REALIZED LOSS ON INVESTMENTS:
Realized loss from security transactions............................. (1,463)
--------
Net increase in net assets from operations................. $ 10,152
========

See accompanying notes to financial statements.

B-22
175

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1994 AND 1993

1994 1993
------------ ------------

FROM OPERATIONS:
Net investment income........................................... $ 11,615 $ 10,941
Net realized loss from security transactions.................... (1,463) 0
------------ ------------
Net increase in net assets from operations................. 10,152 10,941
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:.............................
Total distributions to shareholders............................. (11,303) (10,941)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 987,709 1,011,128
Reinvestment of distributions to shareholders................... 11,027 10,654
Cost of shares redeemed......................................... (1,033,978) (1,091,545)
------------ ------------
Decrease in net assets derived from capital share
transactions............................................. (35,242) (69,763)
------------ ------------
FROM CAPITAL CONTRIBUTIONS (NOTE 2):
Capital contributed by Cardinal Management Corp................. 1,151 0
------------ ------------
Net decrease in net assets................................. (35,242) (69,763)
NET ASSETS -- beginning of period............................... 402,758 472,521
------------ ------------
NET ASSETS -- end of period..................................... $ 367,516 $ 402,758
============ ============

See accompanying notes to financial statements.

B-23
176

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cardinal Government Securities Trust (the Trust) is a diversified, open-end
investment company created under the laws of Pennsylvania by a Declaration of
Trust dated March 21, 1980 and is registered under the Investment Company Act of
1940. According to the terms of the Declaration of Trust, Trust investments must
be obligations (or collateralized by obligations) of the U.S. Government or
agencies thereof. The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.

Security Valuation -- Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.

Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis. It
is the Trust's policy for its Custodian or a third-party bank to take possession
of all securities pledged as collateral for repurchase agreements and monitor
the market value of the collateral to ensure that it remains sufficient to cover
the repurchase agreements.

Federal Income Taxes -- No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.

Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.

(2) -- TRANSACTIONS WITH AFFILIATES

As investment manager for the Trust, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Trust. CMC has agreed that if the aggregate expenses of the Trust,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Trust, CMC will refund to the Trust, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the year ended September 30, 1994.

CMC also serves the Trust as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1994 the Trust paid or
accrued $999,508 and $54,818 for transfer agent and fund accounting services,
respectively.

To offset capital losses incurred by the Trust, CMC contributed $1,151,186 to
the Trust during the year ended September 30, 1994. The amount contributed was
equal to the investment management, transfer agent service and the fund
accounting fees for the period from May 1, 1994 through September 30, 1994.
(continued)

B-24
177

CARDINAL GOVERNMENT SECURITIES TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the year ended September 30, 1994 the Trust
incurred no expenses related to the distribution of its shares.

(3) -- COMMITMENTS AND CONTINGENCIES

The Trust has an available $6,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1994. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $87,459 for the initial capital of ICI
Mutual. The Trust is also committed to provide $262,377 should ICI Mutual
experience the need for additional capital contributions.

Included in other assets is a $175,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.

(4) -- CAPITAL STOCK

At September 30, 1994, there were an unlimited number of $.01 par value shares
of capital stock and the capital amounts were as follows:

Paid in capital.................................................................... $ 368,667,666
Accumulated net realized loss on investments....................................... (1,463,438)
Undistributed net investment income................................................ 312,252
-------------
Net assets......................................................................... $ 367,516,480
=============

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
---------------------------------
1994 1993
-------------- --------------

Shares sold..................................................... 987,708,658 1,011,128,520
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 11,026,622 10,653,583
-------------- --------------
998,735,280 1,021,782,103
Shares repurchased.............................................. (1,033,976,922) (1,091,544,710)
-------------- --------------
Net decrease.................................................... (35,241,642) (69,762,607)
Shares outstanding:
Beginning of period............................................. 402,758,122 472,520,729
-------------- --------------
End of period................................................... 367,516,480 402,758,122
============== ==============

B-25
178

CARDINAL GOVERNMENT SECURITIES TRUST
-----------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------------------------------------------------

(5) -- DIVIDENDS AND DISTRIBUTIONS

See caption "FINANCIAL HIGHLIGHTS" in the Prospectus for the Financial
Highlights with respect to the Trust for each of the years in the ten-year
period ended September 30, 1994.

B-26

179
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Trustees
Cardinal Government Securities Trust:

We have audited the accompanying statement of assets and liabilities of Cardinal
Government Securities Trust, including the statement of investments, as of
September 30, 1994, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Securities Trust as of September 30, 1994, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 18, 1994

B-27
180

STATEMENT OF ADDITIONAL INFORMATION

CARDINAL TAX EXEMPT MONEY TRUST

Cardinal Tax Exempt Money Trust (the "Trust") is a no-load,
diversified, open-end management investment company with an investment
objective of maximizing current income exempt from federal income tax while
preserving capital and maintaining liquidity. The Trust seeks to attain its
objective through professional management of a high-grade portfolio of
short-term municipal bonds and notes, tax-exempt commercial paper and
tax-exempt short-term discount notes, some of which may be secured by the full
faith and credit of the U.S. Government. All obligations purchased by the
Trust will mature, or be deemed to mature, in 397 days (13 months) or less or
will have interest rates adjusted in accordance with established indexes (e.g.
the prime rate) not less frequently than semi-annually. There can be no
assurance that the Trust's objective will be achieved.

The Trust is designed for institutions and individuals who desire
current income exempt from federal income tax that reflects prevailing interest
rates for short-term tax-exempt investments together with a high degree of
liquidity.

_________________________________________

For further information regarding the Trust or for assistance
in opening an account or redeeming shares, please call

In Columbus 464-5512 (opening accounts and further information)
464-5511 (redeeming shares)

From other Ohio locations (▇▇▇) ▇▇▇-▇▇▇▇ toll free

From outside Ohio (▇▇▇) ▇▇▇-▇▇▇▇ toll free

Inquiries may also be made by mail addressed to the Trust
at its principal office:

▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

The Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of the Trust, dated February 1,
1995, which has been filed with the Securities and Exchange Commission. This
Statement of Additional Information is incorporated by reference in its
entirety into the Prospectus. The Prospectus is available upon request without
charge from the Trust at the above address or by calling the phone numbers
provided above.

FEBRUARY 1, 1995
181
TABLE OF CONTENTS

Page
----

INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Additional Information on Portfolio Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13

MANAGEMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-13

PRINCIPAL SHAREHOLDERS OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

THE ADVISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-17

ACCOUNTING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19

DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-19

CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20

LEGAL COUNSEL AND INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-21

TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-22

YIELD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26

ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Shareholder and Trustee Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▇-▇

▇▇▇
▇▇▇▇▇▇▇▇▇ OF ADDITIONAL INFORMATION

CARDINAL TAX EXEMPT MONEY TRUST

Cardinal Tax Exempt Money Trust (the "Trust") is an open-end
management investment company. Much of the information contained in this
Statement of Additional Information expands upon subjects discussed in the
Prospectus of the Trust. Capitalized terms not defined herein are defined in
the Prospectus. No investment in Shares of the Trust should be made without
first reading the Prospectus of the Trust.

INVESTMENT OBJECTIVE AND POLICIES

GENERAL

The Trust invests primarily in high grade short-term Municipal
Securities which at the time of investment have, or are deemed to have,
remaining maturities of 397 days (13 months) or less or which have variable
rates, demand features and quality characteristics which permit the Trust to
treat them as maturing in 397 days or less. The dollar weighted average
portfolio will have a maturity of less than 90 days. See "ADDITIONAL PURCHASE
AND REDEMPTION INFORMATION -- Determination of Net Asset Value."

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

GENERAL. The term "Municipal Securities", as used in this Statement of
Additional Information means debt obligations issued by or on behalf of any
state, territory or possession of the United States or the District of Columbia
or their political subdivisions, agencies or instrumentalities, and
participation interests therein, the interest on which is, in the opinion of
counsel for the issuer, wholly exempt from federal income taxation. See
"Municipal Securities" below.

The Trust may also invest in municipal bonds and participation
interests therein, including industrial development revenue bonds and pollution
control revenue bonds, which are (1) rated Aaa or Aa

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by Moody's, (2) rated AAA or AA by Standard & Poor's Corporation ("S&P") or (3)
if not rated, have, in the opinion of the Adviser determined in accordance with
the guidelines established by the Board of Trustees, essentially the same
characteristics and quality as bonds having the above ratings.

In addition, the Trust may purchase other types of tax-exempt
MunicipalSecurities such as short-term discount notes. These investments must
be (1) rated Prime-1 or Prime-2 by Moody's or (2) if not rated, possess
equivalent characteristics and quality in the opinion of the Adviser determined
in accordance with guidelines established by the Board of Trustees.

The Appendix contains a description of the ratings set forth above.

The Trust may acquire participations in privately negotiated loans to
municipal borrowers, provided that the Trust has received an opinion from bond
counsel to the municipal borrower that the interest received by the Trust is
exempt from federal income tax and the loans are otherwise in accordance with
the Trust's investment objective and restrictions.

The Trust may invest more than 25% of its net assets in (i) Municipal
Securities whose issuers are in the same state, (ii) Municipal Securities the
interest upon which is paid solely from revenues of similar projects and (iii)
industrial development and pollution control revenue bonds which are not
variable rate demand Municipal Securities, i.e., Municipal Securities which are
related in such a way that an economic, business or political development or
change affecting one such Municipal Security would also affect the other
Municipal Securities; for example, Municipal Securities the interest on which
is paid from revenues of similar type projects or Municipal Securities whose
issuers are located in the same state. The District of Columbia, each state,
each of its political subdivisions, agencies, instrumentalities and
authorities, and each multi-state agency of which a state is a member, is a
separate "issuer" as that term is used in this Statement of Additional
Information. The identification of the "issuer" depends on the terms and
conditions of the security. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the security is supported
only by the assets and revenues of the subdivision, such subdivision would be
deemed to be the sole "issuer." Similarly, in the case of an industrial
development or pollution control revenue bond, if that bond is supported only
by the assets and revenues of the nongovernmental user, then such
nongovernmental user would be deemed to be the sole "issuer." If, however, in
either case, the creating government or some other entity guarantees a
security, such a guarantee would be considered a separate security and must be
separately valued.

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The Municipal Securities described herein represent those which the
Trust 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 objective, the
Trust 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, the Trust may not purchase any municipal bonds or notes having
characteristics or terms that are inconsistent with the investment objective or
investment policies of the Trust.

Subsequent to the Trust'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 Investment Company Act of 1940 (the "1940 Act"), and receives a rating
by any nationally recognized statistical rating organization 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.

MUNICIPAL SECURITIES. Municipal Securities which may be purchased by
the Trust currently can be divided into two basic groups: Municipal Notes and
Municipal Bonds.

Municipal Notes generally provide capital for short-term needs and
have maturities of one year or less. They include:

1. PROJECT NOTES. Project notes are sold through the
Department of Housing and Urban Development to raise funds for
federally sponsored urban renewal, neighborhood development and
housing programs. In low-income housing, proceeds from project notes
are chiefly used for construction financing prior to permanent
financing. In urban renewal the funds have generally been used for
land acquisition and site improvements. (No new urban renewal
projects are currently being undertaken as that program has been
superseded by the Community Block Grant Program contained in the
Housing and Community Development Act of 1974.) Project notes are
issued by public bodies created under the laws of one of the states,
territories or U.S. possessions and are referred to as Local Issuing
Agencies. Project Notes generally range in maturity from three months
to one year. While they are the primary obligations of the public
housing agencies or the local urban renewal agencies which have issued
them, they are also secured by the full faith and credit of the U.S.
Government. Payment

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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 "▇▇▇▇▇▇ ▇▇▇"
(Federal National Mortgage Association) or "▇▇▇▇▇▇ 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
the Trust to treat them as having maturities of less than 397 days. See
"Determination of Net Asset Value" herein and "HOW IS NET ASSET VALUE
CALCULATED?" in the Prospectus.

1. GENERAL OBLIGATION BONDS. General obligation bonds
are issued by states, counties, regional districts, cities, towns and
school districts for a variety of purposes including mass
transportation, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇, and water and sewer
system construction, repair or improvement. Payment of these bonds is
secured by a pledge of the issuer's full faith and credit and taxing
(usually property tax) power.

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2. REVENUE BONDS. Revenue bonds are payable solely from
the revenues generated from the operations of the facility or
facilities being financed or from other non-tax sources. These bonds
are often secured by debt service reserve funds, rent subsidies and/or
mortgage collateral to finance the construction of housing, highways,
bridges, tunnels, hospitals, university and college buildings, port
and airport facilities, and electric, water, gas and sewer systems.

3. INDUSTRIAL DEVELOPMENT REVENUE AND PRIVATE ACTIVITY BONDS.
Industrial development revenue bonds and private activity bonds are
usually issued by local government bodies or their authorities to
provide funding for industrial facilities, privately operated housing,
health care facilities, airports, docks and mass commuting facilities,
certain water and sewage facilities, qualified hazardous waste
facilities and high speed innercity rail facilities. Under prior law,
these bonds also were issued to finance commercial facilities, sports
facilities, convention and trade show facilities and pollution control
facilities. Payment of principal and interest on such bonds is not
secured by the taxing power of the governmental body. Rather, payment
is dependent solely upon the ability of the users of the facilities
financed by the bonds to meet their financial obligations and the
pledge, if any, of the real and personal property financed by such
bonds as security for payment.

Legislation to restrict or eliminate the federal income tax exemption
for interest on certain Municipal Securities has been enacted periodically in
the recent past and additional legislation may be enacted in the future. This
legislation may adversely affect the availability of Municipal Securities for
the Trust's portfolio. If any such legislation has a materially adverse effect
on the Trust's ability to achieve its investment objective, the Trust will
re-evaluate its investment objective and submit to its shareholders for
approval necessary changes in the objective and policies of the Trust.

VARIABLE RATE DEMAND MUNICIPAL SECURITIE. 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.

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The variable rate demand Municipal Securities in which the Trust may
invest are payable on demand on not more than seven calendar days' notice. 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 the Trust are subject to the quality characteristics
for Municipal Securities described above and in the Appendix to this Statement
of Additional Information. 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 the Trust no
longer meets the quality standards of the Trust, unless, of course, the
security can be sold for a greater amount in the market.

The principal and accrued interest payable to the Trust 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 the Trust in Municipal
Securities, except in cases where the security itself meets the credit criteria
of the Trust without such letter of credit or comparable guarantee. Thus,
although a variable rate demand security may be unrated, the Trust 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 the Trust may purchase
include participation interests in variable rate securities. Such
participation interests will have, as part of the participation agreement
between the Trust and the selling financial institution, a demand feature which
permits the Trust to demand payment from the seller of the principal amount of
the Trust'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 the Trust has a participation interest over
the negotiated yield at which the participation interest was purchased by the
Trust. Accordingly, the Trust will purchase such participation interests only
when the yield to the Trust, 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.

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TAXABLE MONEY MARKET SECURITIES. The Trust may invest up to 20% of its
assets in taxable money market instruments when the Adviser deems such
investments to be in the best interests of shareholders. However, under normal
circumstances, the Trust will be managed with a view towards producing only
income that is exempt from federal income taxes. Permissible taxable
investments are as follows:

1. U.S. GOVERNMENT OBLIGATIONS. Obligations issued by the
U.S. Government include bills, notes and bonds of the U.S. Treasury,
which differ only in their interest rates, maturities and times of
issuance: Treasury bills have a maturity of one year or less,
Treasury notes have maturities of one to ten years and Treasury bonds
generally have maturities of greater than ten years. Obligations
issued by agencies or instrumentalities of the U.S. Government
include, among others, securities issued by General Services
Administration, Federal Housing Administration, Farmers Home
Administration, Government National Mortgage Association, Federal Home
Loan Banks, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Mortgage Corporation, Central Bank for Cooperatives,
Maritime Administration, The Tennessee Valley Authority, Washington,
D.C. Armory Board, Export-Import Bank of the United States, the
International Bank for Reconstruction and Development, Federal
National Mortgage Association and Student Loan Marketing Association.
Some obligations issued or guaranteed by U.S. Government agencies or
instrumentalities are supported by the full faith and credit of the
U.S. Treasury; others by U.S. Treasury guarantees; and others, such as
those issued by Federal Home Loan Banks, by the right of the issuer to
borrow from the Treasury. In addition, some obligations of U.S.
Government agencies or instrumentalities, such as those issued by the
Federal National Mortgage Association, are supported by the
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as
those issued by the Student Loan Marketing Association, are supported
solely by the credit of the issuing agency or instrumentality itself.
No assurance can be given that the U.S. Government will provide
financial support to such U.S. Government sponsored agencies or
instrumentalities in the future, since it is not obligated to do so by
law. The Trust will invest in such securities only when it is
satisfied that the credit risk with respect to the issuer is minimal.

2. OBLIGATIONS OF BANKS AND SAVINGS AND LOANS. Investments
in obligations of banks and savings and loans are limited to (1)
certificates of deposit issued by domestic banks with assets in excess
of five hundred million dollars, (2) certificates of deposit or other
deposit obligations of savings and loans with assets in excess of five
hundred million dollars, and (3) bankers' acceptances and letters of

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credit guaranteed by banks meeting the above criteria. Bankers'
acceptances and letters of credit are short-term credit instruments
used to finance the import, export, transfer or storage of goods.
They are termed "accepted" when a bank guarantees their payment at
maturity. Obligations issued or guaranteed by Federal Deposit
Insurance Corporation ("FDIC") member institutions are not necessarily
guaranteed by the FDIC. Deposit obligations of domestic banks and
savings and loans are insured by the FDIC up to a maximum of $100,000,
which limitation applies to all funds which the Trust may have on
deposit at any one bank or savings and loan. Bankers' acceptances and
letters of credit are not so insured.

3. COMMERCIAL PAPER. Permissible commercial paper
investments of the Trust consist of obligations rated Prime-1 or
Prime-2, or A-1 or A-2, or their subsequent equivalents, by Moody's or
S&P or unrated commercial paper issued by companies with an unsecured
debt issue outstanding which is rated Aa or better by Moody's or AA or
better by S&P. These ratings are described in the Appendix.
Commercial paper constitutes unsecured indebtedness of business or
banking firms issued to finance their short-term financial needs.

The Trust may also invest in repurchase agreements. Repurchase
agreements are described in detail in the Prospectus.

REVERSE REPURCHASE AGREEMENT. The Trust 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 the Trust's assets at the time of entering into the agreement. The
Trust, however, has not entered into such agreements in the past and does not
intend to enter into such agreements in the foreseeable future.

STAND-BY COMMITMENTS. Pursuant to an exemptive order which the Trust
has received under the 1940 Act the Trust may also acquire "stand-by
commitments" with respect to Municipal Securities held in its portfolio. Under
a "stand-by commitment," a dealer agrees to purchase, at the Trust's option,
specified Municipal Securities at a specified price. "Stand-by commitments"
are the equivalent of a "put" option acquired by the Trust with respect to
particular Municipal Securities held in its portfolio.

The amount payable to the Trust upon its exercise of a "stand-by
commitment" will normally be (i) the Trust's acquisition cost of the Municipal
Securities (excluding any accrued interest which the Trust paid on their
acquisition), less any amortized market premium or plus any amortized market or
original issue discount during the period the Trust owned the securities, plus
(ii) all interest accrued on the Municipal Securities since the last interest
payment date during the period such obligations are owned by the Trust.
"Stand-by commitments" which may be acquired by the Trust will be

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190
exercisable by the Trust at any time prior to the underlying security's
maturity. Absent unusual circumstances, the Trust will value the underlying
Municipal Securities on an amortized cost basis. Accordingly, the amount
payable by a dealer during the time a "stand-by commitment" is exercisable is
substantially the same as the value of the underlying Municipal Securities.
The Trust's right to exercise "stand-by commitments" must be unconditional and
unqualified. A "stand-by commitment" is not transferable by the Trust,
although the Trust may sell the underlying Municipal Securities to a third
party at any time.

The Trust expects that "stand-by commitments" will generally be
available without the payment of any direct or indirect consideration.
However, if necessary and advisable, the Trust may pay for "stand-by
commitments" either separately in cash or by paying a higher price for
Municipal Securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities).
The total amount paid in either manner for outstanding "stand-by commitments"
held in the Trust's portfolio may not exceed 1/2 of 1% of the value of the
Trust's total assets calculated immediately after each "stand-by commitment" is
acquired.

The Trust intends to enter into "stand-by commitments" only with
dealers, banks and broker-dealers which in the opinion of the Adviser to the
Trust present minimum credit risks. The Trust's reliance upon the credit of
these dealers, banks and broker-dealers is secured by the value of the
underlying Municipal Securities that are subject to the commitment. However,
the failure of a party to honor a "stand-by commitment" to the Trust could have
an adverse impact on the liquidity of the Trust during periods of rising
interest rates.

The Trust intends to acquire "stand-by commitments" solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The acquisition of a "stand-by commitment"
will not affect the valuation or maturity of the underlying Municipal
Securities which will continue to be valued in accordance with the amortized
cost method. "Stand-by commitments" acquired by the Trust will be valued at
zero in determining net asset value. Where the Trust pays directly or
indirectly for a "stand-by commitment," its cost will be reflected as
unrealized depreciation for the period during which the commitment is held by
the Trust. "Stand-by commitments" will not affect the average weighted
maturity of the Trust's portfolio.

WHEN-ISSUED SECURITIES. When payment is made for when-issued
securities, the Trust will meet its obligations from then-available cash flow,
sale of securities held in the separate account, sale of other securities or,
although it would normally not expect to do so, from sale of the when-issued
securities themselves (which may have a market value greater or less than the
Trust's obligation).

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Sale of securities to meet such obligations would involve a greater potential
for the realization of capital gains, which could cause the Trust to realize
income not exempt from federal income taxation. The Trust intends to make
commitments to purchase Municipal Securities with the intention of actually
acquiring such obligations, but the Trust may sell the obligations before the
settlement date if it is advisable or necessary as a matter of investment
strategy.

SECURITIES OF OTHER INVESTMENT COMPANIE. The Trust may invest in
securities issued by other investment companies. The Trust 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 the
Trust. As a shareholder of another investment company, the Trust 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 the Trust bears directly in connection with its own
operations. Investment companies in which the Trust 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 the Trust and, therefore, will be borne directly by shareholders.

INVESTMENT RESTRICTIONS

In addition to the investment objective of the Trust, which may not be
changed without approval of shareholders owning a majority of the outstanding
Trust Shares (as defined under "WHAT IS THE TRUST?" in the Prospectus), the
Trust had adopted the following investment restrictions and limitations which
may not be changed without similar shareholder approval. The Trust may not:

(1) purchase securities, if as a result of such purchase
more than 5% of its total assets would be invested in the securities
of any one issuer (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, which securities
include project notes for purposes of this restriction), except that
up to 25% of the value of the Trust's assets may be invested without
regard to this 5% limitation (for purposes of this test, the
non-governmental user of facilities financed by industrial development
or pollution control revenue bonds and a bank issuing a letter of
credit or comparable guarantee supporting a variable rate demand
municipal security is considered to be the issuer);

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(2) purchase the securities of issuers conducting their
principal business activity in the same industry if as a result of
such purchase more than 25% of its total assets would be invested in
the securities of issuers in that industry; provided that such
limitation shall not apply to the purchase of Municipal Securities,
securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, or securities issued by domestic branches of
domestic banks (the only securities issued by domestic branches of
domestic banks that the Trust contemplates investing in are variable
rate demand Municipal Securities supported by letters of credit or
guarantees issued by domestic branches of domestic banks);

(3) borrow money or enter into reverse repurchase
agreements except for temporary or emergency non-investment purposes,
such as to accommodate abnormally heavy redemption requests, and then
only in an amount not exceeding 5% of the value of the Trust's total
assets at the time of borrowing;

(4) pledge, mortgage or hypothecate its assets, except
that to secure borrowing permitted by (3) above, it may pledge
securities having a market value at the time of pledge not exceeding
15% of the Trust's total assets; provided, however, so long as certain
state law restrictions are applicable, the market value of securities
subject to any such pledge will not exceed 10% of the market value of
the Trust's total assets;

(5) underwrite any securities issued by others;

(6) purchase or sell real estate, although the Trust may
invest in Municipal Securities or temporary investments secured by
interests in real estate;

(7) purchase or sell commodities, commodity contracts or
oil and gas interests;

(8) make loans, other than by entering into repurchase
agreements and through the purchase of participation in privately
negotiated loans and portions of publicly issued debt obligations that
are in accordance with its investment objective and policies;
provided, however, that the Trust may not enter into a repurchase
agreement if, as a result thereof, more than 10% of its total assets
would be subject to repurchase agreements maturing in more than seven
days;

(9) sell securities short or purchase any securities on
margin, except for such short term credits as are necessary for the
clearance of portfolio transactions;

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193
(10) 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;

(11) purchase or retain securities of any issuer for the
Trust's portfolio if those officers and Trustees of the Trust or
officers and Directors of its Adviser, who individually beneficially
own more than 1/2 of 1% of the outstanding securities of such issuer,
together beneficially own more than 5% of such outstanding securities;

(12) invest in companies for the purposes of exercising
control or management of another company;

(13) purchase from or sell to any of its officers or
Trustees or the officers or Directors of the Adviser, portfolio
securities of the Trust;

(14) purchase securities subject to legal or contractual
restrictions on the resale thereof ("restricted securities") if such
purchase would cause more than 10% of the Trust's assets (including
repurchase agreements maturing in more than seven days) to be invested
in restricted securities and other securities that are not readily
marketable;

(15) 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; or

(16) 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.

If a percentage restriction or limitation is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in values or net assets will not be considered a violation thereof.

▇-▇▇
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇

Because the Trust intends 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 the Trust is expected to be zero percent for
regulatory purposes.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

The trustees and officers of the Trust, together with their addresses
and principal business occupations and other affiliations during the last five
years, are shown below. Each person named as Trustee (except for ▇▇. ▇▇▇▇▇▇)
also serves as a trustee of Cardinal Government Securities Trust, Cardinal
Government Obligations Fund and The Cardinal Group, and as a director of The
Cardinal Fund Inc. ▇▇. ▇▇▇▇▇▇ also serves as a trustee of Cardinal Government
Securities Trust. Each trustee who is an "interested person" of the Trust, as
that term is defined in the 1940 Act, is indicated by an asterisk.

Name and Positions Held Principal Occupation
Business Address with Registrant During Past 5 Years
---------------- --------------- -------------------

▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Executive Principal, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Committee Associates (construction consulting
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ firm) since 1988; formerly, Vice
President of Michigan Molecular
Institute, Midland, Michigan
(polymer science research
institute).

*▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chairman and Chairman, President, Chief Executive
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Trustee, Member of Executive Officer and a Director of The Ohio
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and Nominating Committees Company (investment banking);
formerly, Senior Executive Vice
President of The Ohio Company.

B-13
195

*Hannibal ▇. ▇▇▇▇▇▇ III 155 East Trustee and Executive Vice Senior Vice President of The Ohio
Broad Street President Company (investment banking).
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trustee, Member of Audit and Vice President, Customer
▇▇ ▇▇▇▇▇ ▇▇▇▇ Nominating Committees Satisfaction, Industry Segment, and
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ former President, ABB Process
Automation Business, of Asea ▇▇▇▇▇
Boveri, Inc. (designer and
manufacturer of process automation
systems for basic industries);
formerly President, Process
Automation Business of Combustion
Engineering, Inc. (designer and
manufacturer of process automation
systems for basic industries).

*C.A. ▇▇▇▇▇▇▇▇ Trustee Retired; Chartered Financial
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. Analyst, former Senior Executive
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ Vice President and Director of The
Ohio Company (investment banking).

B-14
196

*▇▇▇▇▇ ▇. ▇▇▇▇▇▇ President and Trustee, Senior Vice President, The Ohio
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Member of Executive Company (investment banking); former
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and Nominating Committees Vice President, Keystone Group
(mutual fund management/
administration); former Senior Vice
President, Trust Advisory Group
(mutual fund consulting).

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As of November 30, 1994, all trustees and officers of the Trust as a
group owned fewer than one percent of the Shares of the Trust then outstanding.

Messrs. Chambers, Siegel, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and Will are Chairman,
President and a director, Vice President and a director, Vice President and a
director, a Vice President and a Vice President, respectively, of the Adviser.
The compensation of trustees and officers of the Trust who are employed by The
Ohio Company is paid by The Ohio Company. Trustees' fees (currently $500 per
meeting attended, $500 annual retainer and $500 per audit committee meeting
attended) plus expenses are paid by the Trust, except that Messrs. Chambers,
Siegel, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ receive no fees from the Trust. The aggregate
amount of compensation and expenses paid to the trustees during the fiscal year
ended September 30, 1994, was $16,885.

PRINCIPAL SHAREHOLDERS OF THE TRUST

The following is the only person known to the Trust to be the
beneficial owner of more than 5% of the Trust's outstanding Shares as of
November 22, 1994: The Dispatch Printing Company, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ - 19.26%.

THE ADVISER

The Trust has entered into an Investment Advisory Contract with
Cardinal Management Corp. (the "Adviser"). Pursuant to the Investment Advisory
Contract, the Adviser has agreed to provide investment advisory and management
services as described in the Prospectus. As compensation for such services to
the Trust, the Adviser receives monthly from the Trust a management fee at the
annual rate of 1/2 of 1% of the average daily net assets of the Trust. Such
fee accrues daily. The Adviser performs and bears the cost of research,
statistical analysis and continuous supervision of the investment portfolio of
the Trust and furnishes office facilities and certain clerical and
administrative services to the Trust. In addition, the Adviser provides
dividend, transfer agency and fund accounting services to the Trust.

The aggregate amount of investment management fees earned by the
Adviser during the fiscal years ended September 30, 1994, 1993 and 1992, was
$449,777, $449,464 and $437,167, respectively.

▇-▇▇
▇▇▇
▇▇▇▇▇▇▇▇ to the Investment Advisory Contract, if the aggregate
expenses of the Trust (including fees pursuant to the Investment Advisory
Contract, but excluding taxes, interest, brokerage fees, commissions and
extraordinary expenses) for any fiscal year exceed 1% of average net assets,
the Adviser is to refund to the Trust, or otherwise bear, such excess. The
Adviser was not obligated to refund or pay any expenses of the Trust for the
three fiscal years ended September 30, 1994.

The Adviser is a wholly owned subsidiary of The Ohio Company, an
investment banking firm organized in 1925. Descendants of H.P. and ▇.▇. ▇▇▇▇▇,
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.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is an officer and director of The Ohio Company. ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Hannibal ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ are each
an officer of The Ohio Company.

The Investment Advisory Contract was last approved by a majority of
both the trustees and those trustees who are not "interested persons" (as
defined in the ▇▇▇▇ ▇▇▇) of either the Trust or the Adviser of the Trust at a
meeting held for such purposes on January 20, 1995, and was last approved by
the shareholders of the Trust on April 9, 1984. The Investment Advisory
Contract will continue in force from year to year if specifically approved at
least annually by the Board of Trustees of the Trust or by the vote of a
majority of the outstanding Shares of the Trust. In either event, the Contract
must also be approved by vote of a majority of the Trustees who are not
"interested persons" of any party to such Contract, cast in person at a meeting
called for such purpose. The Contract may be terminated by either party, at
any time, without penalty, upon sixty days' written notice, and will
automatically terminate in the event of its assignment. Termination will not
affect the right of the Adviser to receive payments on any unpaid balance of
the compensation earned prior to termination.

PORTFOLIO TRANSACTIONS

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199
asked price. Transactions in the over-the-counter market are generally
principal transactions with dealers. With respect to the over-the- counter
market, the Trust, 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.

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200
permitted by law, the Adviser may aggregate the securities to be sold or
purchased for the Trust with those to be sold or purchased 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
Trust, the Adviser will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Trust 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 Trust.

The Trust did not during the fiscal year ended September 30, 1994,
hold any securities of its regular brokers or dealers, as defined in Rule 10b-1
under the 1940 Act, or their parent companies.

ACCOUNTING SERVICES

The Trust has entered into an Accounting Services Agreement with the
Adviser pursuant to which the Adviser has agreed to maintain and keep current
the books, accounts, records, journals and other records of original entry
relating to the business of the Trust and to calculate the Trust's net asset
value on a daily basis. In consideration of such services, the Trust has
agreed to pay monthly to the Adviser a fee based on the average monthly net
asset value of the Trust. For the last three fiscal years ended September 30,
1994, the Adviser received $19,928, $19,819 and $19,351, respectively, for its
services to the Trust pursuant to such Agreement.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

The Trust has entered into an Administration Agreement with the
Adviser pursuant to which the Adviser has agreed to act as the Trust's transfer
agent and dividend disbursing agent and to perform certain check redemption
services for the Trust. In consideration of such services, the Trust has
agreed to pay the Adviser an annual fee paid monthly, equal to $21 per
shareholder account plus the Adviser's out-of-pocket expenses. For the last
three fiscal years ended September 30, 1994, the Adviser received $75,550,
$75,017 and $79,928, respectively, for its services to the Trust pursuant to
such Agreement.

DISTRIBUTOR

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201
purchase orders and redemption requests relating to Shares of the Trust and to
transmit such orders and requests to the Trust's custodian. The Ohio Company
does not receive any compensation from the Trust or charge any fees to
investors for its services rendered as principal underwriter of the Trust's
Shares.

The Distribution Contract was last approved by both the Trustees and
those Trustees who are not "interested persons" (as defined in the ▇▇▇▇ ▇▇▇) of
either the Trust or The Ohio Company at a meeting held for such purpose on
January 20, 1995, and was last approved by the shareholders of the Trust on
April 9, 1984. The Distribution Contract will continue in effect from year to
year if specifically approved at least annually by the Board of Trustees of the
Trust or by the vote of a majority of the outstanding Shares of the Trust. In
either event, the Distribution Contract must also be approved by vote of a
majority of the Trustees who are not "interested persons" of any party to the
Distribution Contract, cast in person at a meeting called for such purpose.
The Distribution Contract will automatically terminate in the event of its
assignment.

CUSTODIAN

LEGAL COUNSEL AND INDEPENDENT AUDITORS

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

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202
Information, and through other broker-dealers who are members of the National
Association of Securities Dealers, Inc. and have sales agreements with The Ohio
Company.

The Trust 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 Securities and Exchange Commission, (b) the Exchange is closed for other
than customary weekend and holiday closings, (c) the Securities and Exchange
Commission has by order permitted such suspension, or (c) an emergency exists
as a result of which (i) disposal by the Trust of securities owned by it is not
reasonably practical or (ii) it is not reasonably practical for the Trust to
determine the fair value of its net assets.

DETERMINATION OF NET ASSET VALUE

The Trust values its portfolio securities 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 Trust's shareholders in the daily dividend, the
value of the Trust'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 the Trust's
securities, as determined by amortized cost, is higher or lower than the price
the Trust would receive if it sold the securities. During such periods, the
yield on Shares of the Trust 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 the Trust resulted in
a lower aggregate portfolio value on a particular day, a prospective investor
in the Trust would be able to obtain a somewhat higher yield than would result
from investment in a similar fund utilizing solely market values, and existing

B-21
203
investors in the Trust would receive less investment income. The converse
would apply in a period of rising interest rates.

The valuation of the Trust's portfolio securities based upon their
amortized cost and the maintenance of the Trust's per share net asset value of
$1.00 is permitted based on the Trust's 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 Trust's net asset
value per share, as computed for the purpose of sales and redemptions, at
$1.00. Such procedures include review of the Trust's portfolio holdings by the
Board of Trustees at such intervals as it may deem appropriate to determine
whether the Trust's net asset value calculated by using available market
quotations deviates from $1.00 per Share and, if so, whether such deviation may
result in material dilution or may be otherwise unfair to existing
shareholders. These procedures also include a review by the Adviser in
accordance with policies established by the Board of Trustees not less
frequently than monthly of the quality of certain Municipal Securities having
variable interest rates and demand features that permit the Trust 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

The Trust has qualified and intends to remain qualified for the
special tax treatment accorded regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). The Code permits a
regulated investment company which invests in Municipal Securities the interest
on which is excluded from gross income for federal income tax purposes to pay
to its shareholders "exempt-interest dividends," which are excluded from gross
income for federal income tax purposes, if at the close of each quarter at
least 50 percent of the value of its total assets consist of Municipal
Securities.

In order to qualify as a regulated investment company, the Trust must,
among other things: derive at least 90% of its gross income from dividends,
interest, payments with respect to

B-22
204
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 stock, securities, or currencies; derive less than 30% of its
gross income from the sale or other disposition of stock, securities, options,
future contracts or foreign currencies held less than three months; and
diversify its investments within certain prescribed limits. In addition, to
utilize the tax provisions specifically applicable to regulated investment
companies, the Trust must distribute to its shareholders at least 90% of its
investment company taxable income for the year and at least 90% of its interest
income that is excluded from gross income for federal income tax purposes, net
of certain deductions. In general, the Trust's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year.

An exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by the Trust that is derived from interest
received by the Trust 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 the Trust's taxable year. The percentage of
the total dividends paid by the Trust 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 the
Trust'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 the Trust. 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.

If the distributions from the Trust are less than the sum of 98% of
the Trust's ordinary income for a calendar year plus 98% of the Trust's capital
gain net income for the one-year period ending on October 31 of the calendar
year, the Trust will be subject to a non- deductible 4% excise tax on the
deficit. The Trust does not intend to incur any excise tax and may make
special distributions to shareholders in order to avoid such tax.

In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry Trust Shares is not deductible

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for federal income tax purposes if the Trust distributes exempt-interest
dividends during the shareholder's taxable year. A shareholder of the Trust
that is a financial institution may not deduct interest expense attributable to
indebtedness incurred or continued to purchase or carry Shares of the Trust if
the Trust 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 the Trust 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 the Trust.

In the unlikely event the Trust realizes long-term capital gains, the
Trust intends to distribute any realized net long-term capital gains annually.
If the Trust distributes such gains, the Trust 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 Trust
Shares. Any such distributions will be designated as a capital gain dividend
in a written notice mailed by the Trust to the shareholders not later than
sixty days after the close of the Trust'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 the Trust will also be treated as tax preference items in
computing the alternative minimum tax to the extent that distributions by the
Trust 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.

▇-▇▇
▇▇▇
▇▇▇▇▇▇▇▇ current earnings and profits would include exempt-interest dividends
distributed by the Trust to corporate shareholders.

For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a rate of 0.12 of one percent on the
excess over $2,000,000 of such corporation's "modified alternative minimum
taxable income", which would include a portion of the exempt-interest dividends
distributed by the Trust 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.

The Trust may acquire variable rate demand Municipal Securities and
"stand-by commitments" or "puts" from bond and municipal securities dealers.
See "INVESTMENT OBJECTIVE AND POLICIES - Stand-By Commitments." With respect
to each such acquisition, an opinion of counsel will be issued that the Trust
will be treated for federal income tax purposes as the owner of the Municipal
Securities acquired subject to such demand features or to such stand-by
commitments and that the interest on the Municipal Securities will be excluded
from the gross income of the Trust for federal income tax purposes. The
purchase prices of Municipal Securities subject to stand-by commitments must be
allocated between such securities and stand-by commitments based upon their
respective fair-market values.

Distributions of exempt-interest dividends by the Trust 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. The Trust 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 the Trust during the preceding year. Shareholders are
advised to consult their tax advisers concerning the application of state and
local taxes.

The Trust may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any shareholder, and the proceeds of any redemption or the values of any
exchanges of Shares of the Trust, if such shareholder (1) fails to furnish the
Trust with a correct taxpayer identification number, (2) under-reports dividend
or interest income, or (3) fails to certify to the Trust that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security number.

The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Trust and its shareholders. No attempt
is made to present a detailed explanation

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207
of the federal income tax treatment of the Trust or its shareholders, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors in the Trust are urged to consult their tax
advisers with specific reference to their own tax situation.

Information as to the federal income tax status of all distributions
will be mailed annually to each shareholder.

YIELD

The current (average annualized) yield of the Trust for any seven-day
period is calculated by dividing the average daily net income per Share earned
by the Trust during the seven-day calendar period by the Trust'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 Trust's
portfolio. The yield of the Trust for the seven-day period ended September 30,
1994, was 2.69%.

For the base period, the tax-equivalent yield of the Trust was 4.45%
(using a federal income tax rate of 39.6%) and its tax-equivalent effective
yield was 4.51% (using a federal income tax rate of 39.6%). The Trust's
tax-equivalent yield was computed by dividing that portion of the Trust's yield
which is tax-exempt by 1 minus the stated income tax rate and adding the result
to that portion, if any, of the Trust's yield that is not tax-exempt. The
Trust's tax-equivalent effective yield was 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 the Trust's effective yield
that is not tax-exempt.

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208
Inc., a widely recognized independent service which monitors the performance of
mutual funds, CDA Investment Technologies, Inc. and the Consumer Price Index.
Comparisons may also be made to indices or data published in ▇▇▇▇▇▇▇▇'▇ 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, Business Week, The Columbus Dispatch, Consumer
Reports and U.S.A. Today.

Current and effective yields will fluctuate from time to time and
should not be considered representative of future results. Yield is a function
of general economic and money market conditions, portfolio quality and
maturity, type of portfolio instruments and operating expenses. Yield
information may be useful in reviewing the Trust's performance and comparing an
investment in Shares of the Trust with other investment alternatives. However,
yield on shares of the Trust fluctuates unlike yields on bank deposits or other
instruments that pay a fixed yield for a stated period of time.

ADDITIONAL INFORMATION

SHAREHOLDER AND TRUSTEE LIABILITY

The Trust is an entity of the type commonly known as a "business
trust" and is organized under Chapter 1746 of the Ohio Revised Code which
limits the liability of its shareholders to the assets of the Trust. The
Declaration of Trust also provides that shareholders shall not be subject to
any personal liability for the acts or obligations of the Trust and that every
agreement, obligation or instrument entered into or executed by the Trust shall
contain a provision to the effect that the shareholders are not personally
liable thereunder. The Trust has been advised by counsel that courts in
jurisdictions other than Ohio should apply Ohio law in determining the
liability of shareholders of the Trust and that shareholder liability
accordingly will be limited to the assets of the Trust.

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209
The Prospectus and this Statement of Additional Information omit
certain of the information contained in the Registration Statement filed with
the Securities and Exchange Commission. Copies of such information may be
obtained from the Securities and Exchange Commission upon payment of the
prescribed fee.

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FINANCIAL STATEMENTS

CARDINAL TAX EXEMPT MONEY TRUST

SEPTEMBER 30, 1994

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211

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------
SEPTEMBER 30, 1994

PRINCIPAL VALUE
SECURITIES MATURITY DATE AMOUNT (NOTE 1)
------------------------------------------------------------------- ------------- --------- --------

MUNICIPAL SECURITIES 104.20%
Alexandria, Virginia, VRN, currently 3.85% 12/01/2016 $ 1,700 $ 1,700
Arapahoe County, Colorado Capital Improvement, ARN, currently 3.90% 8/31/2026 4,890 4,890
Ashtabula County, Ohio Brighton Manor Project, VRN, currently 3.65% 12/01/2016 2,200 2,200
▇▇▇▇▇▇, Minnesota, PCRB, currently 3.30% 10/26/1994 4,100 4,100
Birmingham, Michigan, VRN, currently 3.925% 12/01/2018 1,000 1,000
▇▇▇▇▇ County, Nevada, IRB, currently 3.85% 11/01/2020 2,900 2,900
Clermont County, Ohio, Hospital, VRN, currently 3.50% 12/01/2015 1,345 1,345
Cornell, Michigan, VRN, currently 3.00% 3/01/2015 3,100 3,100
Erie County, Ohio Brighton Manor Project, VRN, currently 3.65% 11/01/2016 600 600
Florida Housing Agency, VRN, currently 3.65% 12/01/2011 2,000 2,000
Grand Prairie, Texas Housing Finance Authority, VRN, currently
3.50% 6/01/2010 1,800 1,800
Hillsborough County, Florida, VRN, currently 3.75% 9/01/2025 3,300 3,300
Hockley County, Texas, PCRB, currently 3.50% 3/01/2014 1,750 1,750
Lincoln County, Wyoming, PCRB, currently 3.65% 11/01/2014 4,000 4,000
Lisle, Illinois, VRN, currently 3.60% 12/15/2015 2,500 2,500
Long Beach, California, VRN, currently 3.05% 10/19/1994 4,000 4,000
Los Angeles, California Airport, VRN, currently 3.75% 12/01/2024 600 600
Louisiana Public Facilities Authority, VRN, currently 3.50% 10/01/2022 1,000 1,000
Lynchburg, Virginia, Hospital Facilities, VRN, currently 3.70% 12/01/2025 600 600
Maine Health and Higher Education, VRN, currently 3.70% 12/01/2025 790 ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇, currently 3.65% 10/01/2017 4,200 4,200
Montgomery, Alabama, BMC Special Care, VRN, currently 3.70% 12/01/2030 2,670 2,670
New York State Environmental Facilities Corp., VRN, currently 3.75% 11/01/2014 1,000 1,000
Ohio, Higher Education, RB, currently 3.75% 12/01/2006 1,355 1,355
Ohio, Higher Education, (Oberlin College), RB, currently 3.50% 10/01/2015 3,000 3,000
Ohio, State of, Economic Development, VRN, currently 3.80% 10/01/1998 1,000 1,000
Platte County, Wyoming, VRN, currently 3.65% 9/26/1996 2,500 2,500
Private College and University, Georgia, RB, currently 3.20% 10/01/2015 3,000 3,000
Sandusky County, Ohio Brighton Manor Project, IRB, currently 3.65% 12/01/2016 500 500
Scioto County, Ohio, Hospital, VRN, currently 3.70% 12/01/2025 3,100 3,100
Springfield, Illinois, Union Square Project, RB, currently 3.85% 9/01/2005 300 300
Springfield, Illinois, Second and ▇▇▇▇▇ Project, RB, currently
3.85% 12/01/2015 1,260 1,260
Vermont Education and Health, VRB, currently 3.70% 12/01/2025 3,350 3,350
Washington State General Obligation Bonds, currently 2.60% 10/03/1994 1,500 1,500
Washington State General Obligation Bonds, currently 2.60% 10/03/1994 3,000 3,000
Washington State Fin. Commiss. Rev., RB, currently 3.60% 1/01/2010 4,000 4,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Louisiana, VRN, currently 3.75% 12/01/2015 4,000 4,000
--------- --------
TOTAL INVESTMENTS AT AMORTIZED COST $83,910 $83,910
======= ========
ARN -- Adjustable Rate Notes
VRN -- Variable Rate Notes
IRB -- Variable Rate Industrial Revenue ▇▇▇▇▇
▇▇ -- Variable Rate Revenue Bonds
VRB -- Variable Rate Bonds
PCRB -- Variable Rate Pollution Control Revenue Bonds

Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

B-30
212

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

ASSETS
Investments in securities at amortized cost...................................... $83,910
Cash............................................................................. 702
Interest receivable.............................................................. 286
Receivable for Trust shares sold................................................. 15
Other assets..................................................................... 52
-----------------
Total assets........................................................... 84,965
-----------------
LIABILITIES
Payable for Trust shares redeemed................................................ 350
Payable for investment securities purchased...................................... 4,000
Payable for shareholder distributions............................................ 8
Accrued investment management, accounting and transfer agent fees (note 2)....... 45
Other accrued expenses........................................................... 31
-----------------
Total liabilities...................................................... 4,434
-----------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 80,531,046 outstanding $.10 par value shares of
beneficial interest (unlimited number of shares authorized).................... $80,531
=================
NET ASSET VALUE PER SHARE........................................................ $ 1.00
=================

See accompanying notes to financial statements.

B-31
213

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30, 1994

INVESTMENT INCOME:
Interest................................................................. $2,282
------
EXPENSES:
Investment management fees (note 2)...................................... 450
Transfer agent fees and expenses (note 2)................................ 75
Accounting fees (note 2)................................................. 20
------
Total affiliated expenses...................................... 545
------
Custodian fees........................................................... 8
Professional fees........................................................ 47
Reports to shareholders.................................................. 24
Trustees' fees........................................................... 17
Registration fees........................................................ 15
Other expenses........................................................... 25
------
Total non-affiliated expenses.................................. 136
------
Total expenses................................................. 681
------
Net increase in net assets from operations..................... $1,601
======

See accompanying notes to financial statements.

▇-▇▇
▇▇▇

▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ MONEY TRUST
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1994 AND 1993

1994 1993
-------- --------

FROM OPERATIONS:
Net increase in net assets from operations...................... $ 1,601 $ 1,590
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (1,601) (1,590)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 164,948 190,272
Reinvestment of distributions to shareholders................... 1,510 1,499
Cost of shares redeemed......................................... (177,086) (170,666)
-------- --------
Increase (decrease) in net assets derived from capital share
transactions............................................... (10,628) 21,105
-------- --------
Net increase (decrease) in net assets......................... (10,628) 21,105
NET ASSETS -- beginning of period............................... 91,159 70,054
-------- --------
NET ASSETS -- end of period..................................... $ 80,531 $ 91,159
========= =========

See accompanying notes to financial statements.

B-33
215

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cardinal Tax Exempt Money Trust (the Trust) is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated January 13, 1983 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.

Security Valuation--Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.

Variable Rate Demand Municipal Securities--Variable and adjustable rate demand
municipal securities are tax-exempt obligations that provide for a periodic
adjustment in the interest rate paid on the securities and permit the holder to
demand payment of the unpaid principal balance, plus accrued interest, at
redemption dates provided by contract upon a specified number of days notice
either from the issuer or by drawing on a bank letter of credit or comparable
guarantee issued with respect to such security. The interest rates shown for
variable rate securities are the rates in effect on September 30, 1994.

Security Transactions and Investment Income--Security transactions are recorded
on the trade date. Interest income is recorded on the accrual basis.

Federal Income Taxes--No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.

Dividends to Shareholders--Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.

(2) -- TRANSACTIONS WITH AFFILIATES

(continued)

▇-▇▇
▇▇▇

▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ MONEY TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1994

CMC also serves as the Trust's transfer agent and fund accountant. Transfer
agent service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1994 the Trust paid or
accrued $75,550 and $19,928 for transfer agent and fund accounting services,
respectively.

(3) -- COMMITMENTS AND CONTINGENCIES

The Trust has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1994. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $13,291 for the initial capital of ICI
Mutual. The Trust is also committed to provide $39,873 should ICI Mutual
experience the need for additional capital contributions.

Included in other assets is a $27,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.

(4) -- CAPITAL STOCK

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
------------------------------
1994 1993
------------ -------------

Shares sold..................................................... 164,947,710 190,272,577
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 1,509,540 1,499,173
------------ -------------
166,457,250 191,771,750
Shares repurchased.............................................. (177,085,583) (170,666,036)
------------ -------------
Net increase (decrease)......................................... (10,628,333) 21,105,714
Shares outstanding:
Beginning of period............................................. 91,159,379 70,053,665
------------ -------------
End of period................................................... 80,531,046 91,159,379
============= ==============

▇-▇▇
▇▇▇

▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ MONEY TRUST
---------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
---------------------------------------------------------------------------

(5) - Dividends and Distributions

See caption "FINANCIAL HIGHLIGHTS" in the Prospectus for the Financial
Highlights with respect to the Trust for each of the years in the ten-year
period ended September 30, 1994.

B-36

218
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Trustees
Cardinal Tax Exempt Money Trust:

We have audited the accompanying statement of assets and liabilities of Cardinal
Tax Exempt Money Trust, including the statement of investments, as of September
30, 1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year period
then ended and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Tax Exempt Money Trust as of September 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 18, 1994

B-37
219
APPENDIX

RATINGS OF PERMISSIBLE INVESTMENTS

Set forth below are excerpts from ▇▇▇▇▇'▇ Investors Service and
Standard & Poor's Corporation ratings of obligations that are permissible
investments for the Trust.

COMMERCIAL PAPER RATING. 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
▇▇▇▇▇'▇ 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.

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.

To provide more detailed indications of credit quality, the ratings of
AA 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 two 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 edge." Interest payments are protected by a
large or by an

A-1
220
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.

Moody's applies numerical modifiers (1, 2, and 3) with respect to
bonds rated Aa. 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.

Municipal Obligations Ratings

The following summarizes the two highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 and
VMIG-1 designations are of the best quality, enjoying strong protection by
established cash flows, superior liquidity support or demonstrated broadbased
access to the market for refinancing. Obligations rated "MIG-2" or "VMIG-2"
denote high quality with ample margins of protection although not so large as
in the preceding rating group.

S&P SP-1 and SP-2 municipal note ratings (the two highest ratings
assigned) are described as follows:

"SP-1": Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.

"SP-2": Satisfactory capacity to pay principal and interest.

The following summarizes the two highest ratings used by Moody's for
state and municipal bonds:

"Aaa": Bonds judged to be of the best quality. They carry
the smallest degree of investment risk and are generally
referred to as "gilt edge." 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.

A-2
221
"Aa": Bonds 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.

The following summarizes the two highest ratings used by S&P for state
and municipal bonds:

"AAA": Debt which has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.

"AA": Debt which has a very strong capacity to pay
interest and repay principal and differs from the higher rated
issues only in small degree.

DEFINITIONS OF CERTAIN MONEY MARKET INSTRUMENTS

Commercial Paper

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

Certificates of Deposit

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

Bankers' Acceptances

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

U.S. Treasury Obligations

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

A-3
222
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-4
223

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

---------------------------------------------------------
INVESTMENT ADVISER AND DISTRIBUTOR
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

CUSTODIAN
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

LEGAL COUNSEL
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

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

This report has been prepared for the information of shareholders of The
Cardinal Fund Inc. and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective Prospectus.

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

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

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

[LOGO]
THE
CARDINAL
FUND INC.
-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1995

THE OHIO COMPANY

---------------------------------------------------------
----------------------------------------------------------
224

DEAR CARDINAL SHAREHOLDER:

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

Thank you for your confidence and investment in the Cardinal Family of Funds. We
appreciate your support and extend a special welcome to all new shareholders. We
are pleased to provide you with our Annual Report for the fiscal year ended
September 30, 1995.

Over the past decade, the mutual fund industry has experienced an unprecedented
level of growth. Between 1984 and 1995, the number of mutual fund shareholders
has increased from approximately 20 million to over 75 million. At The Ohio
Company, we believe that this phenomenal growth rate is attributable to the
special benefits that mutual funds provide, in particular professional
management. A team of professional managers gives every investor access to
full-time experts who evaluate economic trends, monitor the markets and select
individual securities.

What distinguishes our professional portfolio management team? Talent and
experience. The investment professionals responsible for managing the Cardinal
Family of Funds possess, on average, more than seventeen years of investment
experience. Collectively, our team of portfolio managers have guided assets
through bull markets, bear markets and uncertain markets. While each has a
specialized role, our team works together toward one primary goal: To attain
superior investment results according to each fund's investment objective.

We remain committed to providing you with outstanding investment performance and
top quality shareholder services. We look forward to meeting your investment
needs in the years to come and welcome your comments and suggestions.

Sincerely,

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CFA
Chairman President

1
225

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

On behalf of The Cardinal Fund, Inc. Directors and Officers, we are pleased to
present our September 30, 1995 Annual Report which contains audited financial
statements, including the portfolio of investments.

The Cardinal Fund, Inc. increased 14.8% during fiscal year, 1995. This is in
comparison to a gain of 23.1% for the average growth and income fund as tracked
by Lipper Analytical Services, Inc. As the stock market rebounded from a
sluggish previous year, technology issues led the advances. Although technology
stocks represented roughly 5% of the Fund's assets throughout the year, this
concentration was obviously not enough for the Fund to keep pace with the
market. Additionally, the underperformance in the first fiscal quarter of this
year, due to holdings of financial and cyclical issues, hindered the Funds first
few month's results.

Over the past twelve months, the Fund benefited from strong performance in
technology stocks such as Hewlett Packard, Intel, and Tektronics. Also
benefitting performance were holdings in bank and finance related issues such as
Bank One, Huntington, and Beneficial.

In contrast, our holdings in energy, insurance, and certain industrial issues,
while up, did not outperform the indices. Slower economic activity and concerns
over pricing held back gains with a number of these issues.

New to the portfolio's holdings are a diverse group of stocks. Additions during
the past year included Mylan Labs, Coastal Corporation, U.S. Healthcare, Compaq
Computers, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, and Dun & Bradstreet. All are strong financially
and hold large market share positions in their respective industries.

Combined, The Cardinal Fund's holdings compare favorably to the market when
viewed in context of our disciplines and philosophy.

THE CARDINAL FUND, INC.* S&P 500
------------------------ -------

Earnings Per Share growth**.................. 9.0% 10.7%
Dividends Per Share growth**................. 6.2% 2.1%
Price/Latest 12 Month Earnings............... 14.7X 16.7X
Dividend Yield............................... 3.1% 2.5%

* Dollar-weighted Average for portfolio.

** Compounded annual rate for latest five years.

While we are not satisfied with our past year's relative investment performance,
we are pleased to see nearer term results compare more favorably. As we look to
the future, we remain dedicated to keeping The Cardinal Fund, Inc. shares
performing for your benefit.

We appreciate your confidence and are looking forward to fiscal year, 1996.

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman President Vice President

As portfolio manager for The Cardinal Fund Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ is primarily
responsible for the day-to-day management of the Fund's portfolio. ▇▇. ▇▇▇▇▇▇▇▇
has 18 years of investment management experience and has served as portfolio
manager for The Cardinal Fund Inc. since 1989.

226

THE CARDINAL FUND INC.
--------------------------------------------------------------------------------
RETURN ON A $10,000 INVESTMENT
--------------------------------------------------------------------------------

The S&P 500 Index is considered to be a broad based market index for the purpose
of this presentation. The value of The Cardinal Fund Inc. investment includes
the relevant fund expenses and sales load, whereas, the value of the investment
in the S&P 500 Index does not. Past performance is not predictive of future
performance.

Measurement Period The Cardinal
(Fiscal Year Covered) S&P 500 Fund Inc.

30-Sep-85 10000 9550
30-Sep-86 13170 12659
30-Sep-87 18886 15824
30-Sep-88 16544 15277
30-Sep-89 21987 18644
30-Sep-90 19942 16142
30-Sep-91 26144 21556
30-Sep-92 29020 24800
30-Sep-93 32793 26531
30-Sep-94 34006 27428
30-Sep-95 44070 31487

AVERAGE ANNUAL TOTAL RETURN*
FOR THE PERIODS ENDING SEPTEMBER 30,
1995:
-------------------------------------
ONE YEAR FIVE YEAR TEN YEAR
RETURN RETURN RETURN
-------- --------- --------

The Cardinal Fund Inc............................. 9.63% 13.25% 12.15%
========= ========= ========

* Returns include all relevant fund expenses and sales load.

3
227

SEPTEMBER 30, 1995

FACE/ MARKET
SHARES VALUE
------- --------

COMMON STOCK 91.28%
AEROSPACE/DEFENSE 3.33%
▇▇▇▇▇▇ Corporation........................................................ 75,200 $ 4,127
Raytheon Company.......................................................... 40,000 3,400
--------
7,527
--------
APPAREL/RETAILERS 2.69%
▇▇▇▇▇▇▇▇ Stores, Incorporated............................................. 79,000 770
May Department Stores Company............................................. 110,000 4,813
Shopko Stores, Incorporated............................................... 40,000 495
--------
6,078
--------
AUTOMOTIVE MANUFACTURING 1.79%
Ford Motor Company........................................................ 130,000 4,046
--------
AUTOMOTIVE PARTS 2.01%
Amcast Industrial Corporation............................................. 109,800 2,114
▇▇▇▇▇▇ Tire & Rubber Company.............................................. 100,200 2,430
--------
4,544
--------
BEVERAGES 0.69%
Anheuser-▇▇▇▇▇ Companies Incorporated..................................... 25,000 1,559
--------
CENTRAL STATES BANKS 7.46%
Banc One Corporation...................................................... 130,500 4,763
Huntington Bancshares Incorporated........................................ 203,747 4,585
KeyCorp................................................................... 220,000 7,535
--------
16,883
--------
COMMODITY CHEMICALS 4.38%
▇▇▇▇ ▇▇▇▇▇ ▇.▇............................................................ 70,214 4,221
ARCO Chemical Company..................................................... 25,000 1,219
Dow Chemical Company...................................................... 60,000 4,470
--------
9,910
--------

(continued)

4
228

SEPTEMBER 30, 1995

FACE/ MARKET
SHARES VALUE
------- --------

COMMON STOCK (CONTINUED)
COMPUTERS 2.84%
Compaq Computer Corporation*.............................................. 70,000 $ 3,386
Tektronix Incorporated.................................................... 51,600 3,044
--------
6,430
--------
CONGLOMERATES 8.14%
▇▇▇▇▇▇▇ Controls, Incorporated............................................ 100,000 6,325
Tenneco, Incorporated..................................................... 150,500 6,961
Textron, Incorporated..................................................... 75,000 5,118
--------
18,404
--------
CONSUMER SERVICES 0.59%
Scotts Company, Class A*.................................................. 60,000 1,328
--------
CONTAINERS/PACKAGING 0.40%
Liqui-Box Corporation..................................................... 30,390 900
--------
DIVERSIFIED FINANCIAL SERVICES 2.43%
Beneficial Corp........................................................... 105,000 5,486
--------
DIVERSIFIED INDUSTRIALS 3.45%
Minnesota Mining & Manufacturing Company.................................. 70,000 3,955
▇▇▇▇▇ Industries, Incorporated............................................ 181,802 2,772
Raven Industries, Incorporated............................................ 60,050 1,081
--------
7,808
--------
ELECTRIC 1.90%
Northern States Power Company............................................. 95,000 4,311
--------
ELECTRICAL COMPONENTS 6.59%
Asea ▇▇▇▇▇-▇▇▇▇▇▇, Incorporated........................................... 50,300 5,024
General Electric Company.................................................. 120,400 7,675
Houston Industries, Incorporated.......................................... 50,000 2,206
--------
14,905
--------

*Non-income producing (continued)

5
229

SEPTEMBER 30, 1995

FACE/ MARKET
SHARES VALUE
------- --------

COMMON STOCK (CONTINUED)
FOOD 2.40%
GoodMark Foods, Incorporated.............................................. 184,000 $ 3,404
Super Food Services, Incorporated......................................... 160,800 2,030
--------
5,434
--------
GAS 1.03%

▇▇▇▇▇▇▇▇ Companies Incorporated........................................... 60,000 2,340
--------
HEALTHCARE PROVIDERS 0.78%
U.S. HealthCare, Incorporated............................................. 50,000 1,769
--------
INDUSTRIAL SERVICES 1.57%
Graphic Industries, Incorporated.......................................... 123,500 1,266
New England Business Services, Incorporated............................... 110,500 2,279
--------
3,545
--------

INSURANCE 2.38%

Equitable of Iowa Companies............................................... 50,300 1,861
▇▇▇▇▇ & McLennan Companies Incorporated................................... 40,000 3,515
--------
5,376
--------
INTEGRATED OILS 9.42%

Mobil Corporation......................................................... 75,000 7,471
Royal Dutch Petroleum Company............................................. 60,000 7,365
Texaco Incorporated....................................................... 100,000 6,463
--------
21,299
--------
MEDICAL SUPPLIES 0.43%

▇▇▇▇▇▇ Scientific International, Incorporated............................. 30,000 971
--------
OTHER NONFERROUS METALS 2.24%
Worthington Industries, Incorporated...................................... 275,776 5,067
--------
PAPER 2.54%
Federal Paper Board Company............................................... 89,800 3,446
Union Camp Corporation.................................................... 40,000 2,305
--------
5,751
--------

(continued)

6
230

SEPTEMBER 30, 1995

FACE/ MARKET
SHARES VALUE
------- --------

COMMON STOCK (CONTINUED)
PHARMACEUTICALS 2.32%
American Home Products Corporation........................................ 50,000 $ 4,244
Mylan Laboratories, Incorporated.......................................... 50,000 1,000
--------
5,244
--------
PIPELINES 0.52%

Coastal Corporation....................................................... 35,000 1,177
--------
PROPERTY/CASUALTY INSURERS 3.91%
Cincinnati Financial Corporation.......................................... 162,750 8,850
--------
PUBLISHING 0.77%
Dun and Bradstreet Corporation............................................ 30,000 1,736
--------
SPECIALTY/RETAILERS 2.71%
Limited, Incorporated..................................................... 200,000 3,800
▇▇▇▇▇▇▇ Works............................................................. 35,000 1,518
Sun Television and Appliances............................................. 70,000 ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Company.................................................... 34,000 387
--------
6,134
--------
TELEPHONE 5.15%

GTE Corporation........................................................... 189,716 7,446
Sprint Corporation........................................................ 120,000 4,200
--------
11,646
--------
TOBACCO 2.77%

▇▇▇▇▇▇ ▇▇▇▇▇▇ Companies, Incorporated..................................... 75,000 6,263
--------
TRANSPORTATION 1.65%
GATX Corporation.......................................................... 72,300 3,742
--------
TOTAL COMMON STOCK (COST $147,559,806)............................... 206,463
--------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S.
GOVERNMENT OBLIGATIONS 7.30%
Fifth Third Bank, 6.25%, dated 9/29/95, due 10/02/95...................... 16,500
--------
TOTAL REPURCHASE AGREEMENTS (COST $16,500,000)....................... 16,500
--------
TOTAL INVESTMENTS (COST $164,059,806) 98.58%......................... $222,963
=========

See accompanying notes to financial statements.

7
231

SEPTEMBER 30, 1995

ASSETS

Investments in securities, at value (cost $164,060)................................... $222,963
Cash.................................................................................. 206
Receivable for investment securities sold............................................. 2,999
Dividends and interest receivable..................................................... 825
Receivable for Fund shares sold....................................................... 102
Other assets.......................................................................... 111
--------
Total assets................................................................ 227,206
--------
LIABILITIES
Payable for Fund shares redeemed...................................................... 660
Accrued investment management and transfer agent fees (note 3)........................ 314
Other accrued expenses................................................................ 51
--------
Total liabilities........................................................... 1,025
--------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 17,099,016 outstanding no par value shares of beneficial
interest (authorized 30,000,000).................................................... $226,181
=========
NET ASSET VALUE PER SHARE............................................................. $ 13.23
=========

See accompanying notes to financial statements.

8
232

YEAR ENDED SEPTEMBER 30, 1995

INVESTMENT INCOME:
Dividends.............................................................................. $ 7,504
Interest............................................................................... 847
-------
Total income................................................................. 8,351
-------
EXPENSES:
Investment management fees (note 3).................................................... 1,159
Transfer agent fees and expenses (note 3).............................................. 256
-------
Total affiliated expenses.................................................... 1,415
-------
Custodian fees......................................................................... 25
Professional fees...................................................................... 60
Reports to shareholders................................................................ 37
Directors' fees........................................................................ 21
Registration fees...................................................................... 6
Other expenses......................................................................... 64
-------
Total non-affiliated expenses................................................ 213
-------
Total expenses............................................................... 1,628
-------
Net investment income........................................................ 6,723
-------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions........................................... 17,719
Increase in unrealized gain on investments............................................. 8,122
-------
Net realized gain and increase in unrealized gain on investments............. 25,841
-------
Net increase in net assets from operations................................... $32,564
========

See accompanying notes to financial statements.

9
233

YEARS ENDED SEPTEMBER 30, 1995 AND 1994

1995 1994
------------- -------------

FROM OPERATIONS:
Net investment income........................................... $ 6,723 $ 6,351
Net realized gain from security transactions.................... 17,719 17,362
Increase (decrease) in unrealized gain on investments........... 8,122 (14,821)
------------- -------------
Net increase in net assets from operations.................... 32,564 8,892
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.35 and $.33 per share,
respectively)................................................. (6,566) (6,601)
Distribution of net realized gains from security transactions
($.83 and $.28 per share, respectively)....................... (15,750) (6,006)
------------- -------------
Total distributions to shareholders........................... (22,316) (12,607)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares............................... 8,266 14,876
Net asset value of Fund shares issued in connection with
reinvestment of distributions to shareholders................. 20,894 11,831
------------- -------------
29,160 26,707
Cost of Fund shares redeemed.................................... (59,809) (58,535)
------------- -------------
Decrease in net assets derived from capital share
transactions............................................... (30,649) (31,828)
------------- -------------
Net decrease in net assets.................................... (20,401) (35,543)
NET ASSETS -- beginning of period............................... 246,582 282,125
------------- -------------
NET ASSETS -- end of period (undistributed net investment income
of $176 and $20, respectively)................................ $ 226,181 $ 246,582
============== ==============

See accompanying notes to financial statements.

10
234

SEPTEMBER 30, 1995

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Distributions to Shareholders--Distributions and dividends are recorded by the
Fund on the record date. Income dividends are declared quarterly and any capital
gain distribution is declared annually.

(2) -- PURCHASES AND SALES OF SECURITIES

The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the year ended September 30, 1995
aggregated $43,227,000 and $91,217,776, respectively.

During the year ended September 30, 1995 the Fund realized on a FIFO cost basis
a net capital gain of $17,719,277 and $17,777,501 for book and tax purposes,
respectively.

At September 30, 1995, the book cost of investment securities was $164,059,806
and the tax cost was $164,085,672. The difference between book and tax cost is
attributable to securities acquired in the 1975 acquisition of the Ohio Capital
Fund, Inc. and remaining in the Fund's portfolio with a book cost of $68,235 and
a tax cost of $38,594.

As of September 30, 1995, for tax purposes, gross unrealized gains and gross
unrealized losses on investment securities were $60,316,804 and $1,439,149
respectively; resulting in a net unrealized gain of $58,877,655.

(3) -- TRANSACTIONS WITH AFFILIATES

As investment manager for the Fund, The Ohio Company (the Adviser), with whom
certain officers and directors of the Fund are affiliated is allowed an annual
fee of 0.5% of the average daily net assets of the Fund. For the year ended the
Fund paid or accrued $1,158,534 for investment management services. The Adviser
has agreed that if the aggregate expenses of the Fund, as defined, for any
fiscal year exceed the

(continued)

11
235

SEPTEMBER 30, 1995

expense limitation of any state having jurisdiction over the Fund, the Adviser
will refund to the Fund, or otherwise bear, such excess. This limitation did not
affect the calculation of the management fee during the year ended September 30,
1995. In addition to providing management and advisory services, The Ohio
Company pays the compensation of all officers and employees of the Fund and
provides office space and certain related facilities required by the Fund.

The Ohio Company, acting as the General Distributor and Dealer, reported to the
Fund that it received commissions after discounts to dealers from the sale of
shares of the Fund of $170,827 for the year ended September 30, 1995. Cardinal
Management Corp., a wholly-owned subsidiary of The Ohio Company, provides
transfer agent services to the Fund. Transfer agent service fees are based on a
monthly charge per shareholder account plus out-of-pocket expenses. For the year
ended September 30, 1995 the Fund paid or accrued $255,882 for transfer agent
services provided by Cardinal Management Corp.

(4) -- COMMITMENTS AND CONTINGENCIES

The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

(5) -- CAPITAL STOCK

At September 30, 1995, there were 30,000,000 shares of no par value capital
stock authorized and the capital amounts were as follows:

Paid in capital.................................................................... $147,820,440
Accumulated net realized gains on investments...................................... 19,280,863
Unrealized gain on investments..................................................... 58,903,521
Undistributed net investment income................................................ 176,409
------------
Net assets......................................................................... $226,181,233
=============

(continued)

12
236

SEPTEMBER 30, 1995

Transactions in capital stock were as follows:

YEARS ENDED SEPTEMBER 30,
-------------------------
1995 1994
---------- ----------

Shares sold........................................................ 677,512 1,161,378
Shares issued in connection with reinvestment of distributions
to shareholders.................................................. 1,830,954 936,172
Shares repurchased................................................. (4,782,671) (4,580,169)
---------- ----------
Net decrease....................................................... (2,274,205) (2,482,619)
Shares outstanding:
Beginning of period................................................ 19,373,221 21,855,840
---------- ----------
End of period...................................................... 17,099,016 19,373,221
========== ==========

(6) -- SUBSEQUENT EVENT

On November 13, 1995 the Board of Directors approved an Agreement and Plan of
Reorganization and Liquidation between the Fund and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Fund to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Fund and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for each share of capital stock outstanding throughout each
period:

YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------

Net Asset Value, beginning............. $ 12.73 $ 12.91 $ 12.95 $ 11.88 $ 9.28
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................ 0.36 0.31 0.32 0.35 0.35
Net realized and unrealized gains
(losses) on investments............ 1.32 0.12 0.55 1.37 2.70
-------- -------- -------- -------- --------
Total from investment operations....... 1.68 0.43 0.87 1.72 3.05
-------- -------- -------- -------- --------
Less distributions:
Dividends............................ (0.35) (0.33) (0.29) (0.36) (0.38)
Capital gain distribution............ (0.83) (0.28) (0.62) (0.29) (0.07)
-------- -------- -------- -------- --------
Total distributions.................... (1.18) (0.61) (0.91) (0.65) (0.45)
-------- -------- -------- -------- --------
Net Asset Value, ending................ $ 13.23 $ 12.73 $ 12.91 $ 12.95 $ 11.88
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Total return........................... 14.84% 3.38% 6.98% 15.05% 33.54%
======== ======== ======== ======== ========
Net assets, ending (000)............... $226,181 $246,581 $282,125 $261,392 $221,428
======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.70% 0.72% 0.68% 0.67% 0.67%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 2.89% 2.40% 2.46% 2.83% 3.15%
======== ======== ======== ======== ========
Portfolio turnover rate................ 19.78% 23.20% 11.11% 6.22% 33.27%
======== ======== ======== ======== ========

See accompanying notes to financial statements.

13
237

--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Directors
The Cardinal Fund Inc.:

We have audited the accompanying statement of assets and liabilities of The
Cardinal Fund Inc. (the Fund), including the statement of investments, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Cardinal Fund Inc. as of September 30, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995

--------------------------------------------------------------------------------
TEN-YEAR DISTRIBUTION HISTORY
--------------------------------------------------------------------------------

PER SHARE DISTRIBUTION
NET ASSET -------------------------
PERIOD VALUE PER FROM FROM REALIZED
ENDING SHARE INCOME CAPITAL GAINS
----------------------------------------------------- --------- ------ -------------

9/30/95.............................................. $ 13.23 $0.35 $0.83
9/30/94.............................................. 12.73 0.33 0.28
9/30/93.............................................. 12.91 0.29 0.62
9/30/92.............................................. 12.95 0.36 0.29
9/30/91.............................................. 11.88 0.38 0.07
9/30/90.............................................. 9.28 0.53 0.49
9/30/89.............................................. 11.75 0.39 0.38
9/30/88.............................................. 10.38 0.47 0.43
9/30/87.............................................. 11.73 0.28 0.72
9/30/86.............................................. 10.35 0.23 0.56

14
238

[THIS PAGE LEFT BLANK INTENTIONALLY]
239

[THIS PAGE LEFT BLANK INTENTIONALLY]
240

[THIS PAGE LEFT BLANK INTENTIONALLY]
241

THE CARDINAL FUND INC.
CARDINAL GOVERNMENT SECURITIES TRUST
CARDINAL TAX EXEMPT MONEY TRUST
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND

▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

New Accounts and Toll-free Lines
General Information: In Ohio ▇▇▇-▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Outside Ohio ▇▇▇-▇▇▇-▇▇▇▇

242

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

---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

DISTRIBUTOR
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

CUSTODIAN
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

LEGAL COUNSEL
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

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

This report has been prepared for the information of shareholders of Cardinal
Government Obligations Fund and is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective Prospectus.

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

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

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

[LOGO]
CARDINAL
GOVERNMENT
OBLIGATIONS
FUND
-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1995

THE OHIO COMPANY

---------------------------------------------------------
----------------------------------------------------------
243

DEAR CARDINAL SHAREHOLDER:

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

Sincerely,

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CFA
Chairman President

1
244

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

On behalf of the Cardinal Government Obligations Fund Trustees and Officers, we
are pleased to present our September 30, 1995 Annual Report which contains
audited financial statements including the portfolio of investments.

When we communicated with you at the end of our 1994 fiscal year, your
management felt that 1995 would be a good year for the fixed-income markets as
the economy was projected to make a soft landing, and inflation would remain
under control. With that outlook, we made adjustments in your Fund's portfolio
of mortgage-backed securities by extending the average life of the portfolio
which allowed the Fund to more fully participate in the expected market rally.
As anticipated, interest rates fell sharply, and the past 12 months have indeed
been one of the best periods on record for the fixed-income markets. The
Cardinal Government Obligations Fund participated in the market rally and
produced a total return of 11.27%, while gaining $0.22 in net asset value per
share during the year that ended September 30, 1995.

As we look ahead, the projections for the domestic economy remain optimistic,
but the outlook for some of our major trading partners is less than rosy. In the
near term, inflation should remain under control. Longer term, there are some
troublesome signs appearing, mainly in those sectors of the global economy where
commodity prices have increased steadily over the past few years. Additionally,
there are continuing concerns about the Japanese banking system because of the
heavy concentration of questionable real estate loans in those institutions. Our
efforts will be directed toward maintaining a portfolio with a low level of
price volatility to assure the preservation of the Fund's capital while
continuing to provide as high a dividend payout as is possible.

We thank you for your continuing support and look forward to assisting you in
meeting the challenges the future is sure to bring.

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇
Chairman President Executive Vice President

As portfolio manager for Cardinal Government Obligations Fund, ▇▇▇▇ ▇. ▇▇▇▇▇ is
primarily responsible for the day-to-day management of the Fund's portfolio. ▇▇.
▇▇▇▇▇ has 28 years of investment management experience and has been the
portfolio manager for Cardinal Government Obligations Fund since its inception
in 1986.
245

CARDINAL GOVERNMENT OBLIGATIONS FUND
--------------------------------------------------------------------------------
RETURN ON A $10,000 INVESTMENT
--------------------------------------------------------------------------------

The Salomon Mortgage Fund Index is considered to be a broad based market index
for the purpose of this presentation. The value of the Cardinal Government
Obligations Fund investment includes the relevant fund expenses and sales load,
whereas, the value of the investment in the Salomon Mortgage Fund Index does
not. Past performance is not predictive of future performance.

Cardinal
Salomon Government
Measurement Period Mortgage Fund Obligations
(Fiscal Year Covered) Index Fund

03-Feb-86 10000 9550
30-Sep-86 10410 10088
30-Sep-87 10608 10170
30-Sep-88 12199 11486
30-Sep-89 13541 12498
30-Sep-90 14881 13752
30-Sep-91 17307 15549
30-Sep-92 19245 16929
30-Sep-93 20573 17746
30-Sep-94 20368 17698
30-Sep-95 23117 19698

AVERAGE ANNUAL TOTAL RETURN*
FOR THE PERIODS ENDING SEPTEMBER 30,
1995:
-------------------------------------
SINCE
ONE FIVE FEBRUARY 3,
YEAR YEARS 1986**
---- ---- -----------------

Cardinal Government Obligations Fund............... 6.29% 6.47% 7.27%
==== ==== =================

* Returns include all relevant fund expenses and sales load.

** Date of commencement of operations.

3
246

SEPTEMBER 30, 1995

PRINCIPAL VALUE
SECURITIES AMOUNT (NOTE 1)
---------------------------------------------------------------------------- -------- ---------

DIRECT U.S. GOVERNMENT OBLIGATIONS 1.35%
U.S. Treasury Notes, 6.50% maturing 8/15/05................................. $ 2,000 $ 2,050
-------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS.............................. 2,000 2,050
-------- ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS 99.44%
GNMA I PL Notes, 8.00% maturing 9/15/23 through 8/15/35..................... 4,692 4,757
GNMA I PL Notes, 8.15% maturing 1/15/24..................................... 2,334 2,411
GNMA I PL Notes, 8.25% maturing 11/15/96 through 11/15/34................... 11,903 12,171
GNMA I PL Notes, 8.50% maturing 6/15/22 through 12/15/30.................... 8,868 9,223
GNMA I PL Notes, 8.75% maturing 8/15/24 through 4/15/25..................... 3,614 3,777
GNMA I PL Notes, 9.00% maturing 10/15/21 through 12/15/34................... 7,997 8,336
GNMA I PL Notes, 9.25% maturing 3/15/30 through 2/15/33..................... 1,658 1,746
GNMA I PL Notes, 9.50% maturing 1/15/19 through 8/15/22..................... 1,309 1,343
GNMA I PL Notes, 9.75% maturing 12/15/25.................................... 1,879 1,981
GNMA I PL Notes, 10.25% maturing 2/15/17 through 12/15/22................... 1,644 1,705
GNMA I PL Notes, 10.50% maturing 7/15/14.................................... 1,039 1,080
GNMA I Notes, 8.00% maturing 10/15/24 through 5/15/25....................... 3,880 3,992
GNMA I Notes, 8.50% maturing 5/15/16 through 8/15/17........................ 11,463 12,032
GNMA I Notes, 8.75% maturing 12/15/16 through 1/15/25....................... 1,916 2,021
GNMA I Notes, 9.00% maturing 5/15/16 through 4/15/21........................ 23,411 24,837
GNMA I Notes, 9.50% maturing 4/15/16 through 3/15/20........................ 2,106 2,259
GNMA I Notes, 11.00% maturing 1/15/10 through 6/15/20....................... 6,775 7,605
GNMA II Notes, 9.00% maturing 10/20/15 through 10/20/19..................... 10,629 11,170
GNMA II Notes, 9.50% maturing 1/20/16 through 12/20/22...................... 5,331 5,649
GNMA II Notes, 10.00% maturing 1/20/14 through 12/20/21..................... 11,416 12,401
GNMA II Notes, 10.50% maturing 9/20/13 through 9/20/19...................... 2,421 2,639
GNMA II Notes, 11.00% maturing 10/20/13 through 1/20/21..................... 2,806 3,074
Fed. Home Loan Mtg. Corp., 7.00% maturing 9/01/10........................... 3,055 3,067
Fed. Home Loan Mtg. Corp., 7.50% maturing 5/01/09 through 6/01/10........... 5,318 5,414
Fed. Home Loan Mtg. Corp., 8.00% maturing 11/01/09 through 7/01/10.......... 6,000 6,171
-------- ---------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS.............................. 143,464 150,861
-------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT OBLIGATIONS 0.66%
Fifth Third Bank, 6.25%, dated 9/29/95, due 10/02/95........................ 1,000 1,000
-------- ---------
TOTAL REPURCHASE AGREEMENTS........................................... 1,000 1,000
-------- ---------
TOTAL INVESTMENTS (COST $152,787) 101.45%............................. $146,464 $153,911
======== =========

GNMA -- Government National Mortgage Association
PL -- Project Loan
Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

4
247

SEPTEMBER 30, 1995

ASSETS
Investments in securities, at value (cost $152,787)........................... $ 153,911
Cash.......................................................................... 338
Interest receivable........................................................... 1,101
Receivable for Fund shares sold............................................... 23
Other assets.................................................................. 112
---------
Total assets........................................................ 155,485
---------
LIABILITIES
Payable for investment securities purchased................................... 3,094
Dividends payable............................................................. 405
Payable for Fund shares redeemed.............................................. 152
Accrued investment management, accounting and transfer agent fees (note 3).... 83
Other accrued expenses........................................................ 40
---------
Total liabilities................................................... 3,774
---------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS--applicable to 18,543,620 outstanding no par value shares of
beneficial interest (unlimited number of shares authorized)................. $ 151,711
=========
NET ASSET VALUE PER SHARE..................................................... $ 8.18
=========

See accompanying notes to financial statements.

5
248

YEAR ENDED SEPTEMBER 30, 1995

INVESTMENT INCOME:
Interest......................................................................... $13,679
-------
EXPENSES:
Investment management fees (note 3).............................................. 784
Transfer agent fees and expenses (note 3)........................................ 174
Accounting fees (note 3)......................................................... 41
-------
Total affiliated expenses............................................ 999
-------
Custodian fees................................................................... 47
Professional fees................................................................ 51
Reports to shareholders.......................................................... 33
Directors' fees.................................................................. 19
Registration fees................................................................ 7
Other expenses................................................................... 50
-------
Total non-affiliated expenses........................................ 207
-------
Total expenses....................................................... 1,206
-------
Net investment income................................................ 12,473
-------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 2):
Net realized loss from security transactions..................................... (4,514)
Increase in unrealized gain on investments....................................... 8,934
-------
Net realized loss and increase in unrealized gain on investments..... 4,420
-------
Net increase in net assets from operations........................... $16,893
========

See accompanying notes to financial statements.

6
249

YEARS ENDED SEPTEMBER 30, 1995 AND 1994

1995 1994
-------- --------

FROM OPERATIONS:
Net investment income................................................ $ 12,473 $ 14,842
Net realized loss from security transactions......................... (4,514) (5,070)
Increase (decrease) in unrealized gain on investments................ 8,934 (10,125)
-------- --------
Net increase (decrease) in net assets from operations........... 16,893 (353)
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.64 and $.65 per share,
respectively)...................................................... (12,572) (14,708)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares.................................... 5,355 12,690
Net asset value of Fund shares issued in connection with reinvestment
of distributions to shareholders................................... 7,272 8,662
-------- --------
12,627 21,352
Cost of Fund shares redeemed......................................... (34,766) (45,645)
-------- --------
Decrease in net assets derived from capital share
transactions................................................... (22,139) (24,293)
-------- --------
Net decrease in net assets...................................... (17,818) (39,354)
NET ASSETS--beginning of period...................................... 169,529 208,883
-------- --------
NET ASSETS--end of period (overdistributed net investment income of
$100 and $2, respectively)......................................... $151,711 $169,529
========= =========

See accompanying notes to financial statements.

7
250

SEPTEMBER 30, 1995

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Federal Income Taxes -- No provision has been made for Federal taxes on the
Fund's income, since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
make sufficient distributions of taxable income and capital gains within the
required time to relieve it from all, or substantially all, Federal income
taxes.

(2) -- PURCHASES AND SALES OF SECURITIES

Purchases and sales of U.S. government agency obligations (excluding short-term
obligations) during the year ended September 30, 1995 aggregated $57,596,492 and
$60,730,057, respectively.

As of September 30, 1995, gross unrealized gains and gross unrealized losses on
investment securities were $2,136,800 and $1,012,380, respectively; resulting in
a net unrealized gain of $1,124,420 on investment securities with a cost basis
of $152,786,945.

(3) -- TRANSACTIONS WITH AFFILIATES

8
251

SEPTEMBER 30, 1995

CMC also serves the Fund as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Fund. For the year ended September 30, 1995 the Fund paid or
accrued $174,394 and $40,879 for transfer agent and fund accounting services,
respectively.

(4) -- COMMITMENTS AND CONTINGENCIES

(5) -- CAPITAL STOCK

At September 30, 1995, there were an unlimited number of shares of no par value
capital stock authorized and the capital amounts were as follows:

Paid in capital.................................................................... $ 173,076,183
Accumulated net realized loss on investments....................................... (22,389,694)
Unrealized gain on investments..................................................... 1,124,420
Overdistributed net investment income.............................................. (100,238)
-------------
Net assets......................................................................... $ 151,710,671
=============

For tax purposes, the accumulated net realized loss on investments (capital loss
carryforwards) of approximately $22,800,000 expire throughout the next eight
years. Approximately $3,800,000 of capital loss carryforwards expired during the
year ended September 30, 1995. The Fund will not declare any capital gain
distributions until the carryforwards have been offset or expired.

9
252

SEPTEMBER 30, 1995

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------

Shares sold.......................................................... 669,572 1,514,461
Shares issued in connection with reinvestment of distributions to
shareholders....................................................... 908,617 1,045,107
----------- -----------
1,578,189 2,559,568
Shares repurchased................................................... (4,320,495) (5,478,768)
----------- -----------
Net decrease......................................................... (2,742,306) (2,919,200)
Shares outstanding:
Beginning of period.................................................. 21,285,926 24,205,126
----------- -----------
End of period........................................................ 18,543,620 21,285,926
========== ==========

(6) -- SUBSEQUENT EVENT

On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Fund and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Fund to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Fund and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.

10
253

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for each share of capital stock outstanding throughout each
period:

YEARS ENDED SEPTEMBER 30,
------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------

Net Asset Value, beginning.............. $ 7.96 $ 8.63 $ 8.95 $ 8.99 $ 8.71
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income................. 0.64 0.66 0.74 0.80 0.81
Net realized and unrealized gains
(losses) on securities............. 0.22 (0.68) (0.32) (0.04) 0.28
-------- -------- -------- -------- --------
Total from investment operations........ 0.86 (0.02) 0.42 0.76 1.09
-------- -------- -------- -------- --------
Less distributions:
Dividends............................. (0.64) (0.65) (0.74) (0.80) (0.81)
-------- -------- -------- -------- --------
Net Asset Value, ending................. $ 8.18 $ 7.96 $ 8.63 $ 8.95 $ 8.99
========= ========= ========= ========= =========
Ratios/Supplemental Data:
Total return............................ 11.27% (0.27%) 4.83% 8.87% 13.07%
========= ========= ========= ========= =========
Net assets, ending (000)................ $151,711 $169,529 $208,883 $172,139 $128,569
========= ========= ========= ========= =========
Ratio of expenses to average net
assets................................ 0.76% 0.75% 0.73% 0.76% 0.76%
========= ========= ========= ========= =========
Ratio of net investment income to
average net assets.................... 7.93% 7.88% 8.32% 8.89% 9.20%
========= ========= ========= ========= =========
Portfolio turnover rate................. 36.71% 21.95% 24.94% 17.15% 34.81%
========= ========= ========= ========= =========

See accompanying notes to financial statements.

11
254

--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Trustees
Cardinal Government Obligations Fund:

We have audited the accompanying statement of assets and liabilities of Cardinal
Government Obligations Fund (the Fund), including the statement of investments,
as of September 30, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Obligations Fund as of September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995

12
255

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256

THE CARDINAL FUND INC.
CARDINAL GOVERNMENT SECURITIES TRUST
CARDINAL TAX EXEMPT MONEY TRUST
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND

▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

New Accounts and Toll-free Lines
General Information: In Ohio ▇▇▇-▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Outside Ohio ▇▇▇-▇▇▇-▇▇▇▇

257

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

DISTRIBUTOR
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

CUSTODIAN
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

LEGAL COUNSEL
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

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

This report has been prepared for the information of shareholders of Cardinal
Government Securities Trust and is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective Prospectus.

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

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

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

[LOGO]
CARDINAL
GOVERNMENT
SECURITIES
TRUST
-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1995

THE OHIO COMPANY

---------------------------------------------------------
----------------------------------------------------------
258

DEAR CARDINAL SHAREHOLDER:

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

Sincerely,

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CFA
Chairman President

1
259

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

We are pleased to present our September 30, 1995 Annual Report which includes
audited financial statements as well as the portfolio of investments.

Capital markets during the past 12 months have performed in a much better
fashion than in 1994. You will remember that the Federal Reserve was very
concerned in 1994 about the inflationary trends inherent in an expanding
economy, so they boosted short-term rates on five different occasions.

Apparently this action was effective. The economy slowed and the Consumer Price
Index (CPI) as of September, 1995 was up only 2.5% for the preceding twelve
months. The Fed lowered the federal funds target rate a quarter of 1% in July,
and it is thought, by many, that we will see additional decreases before year
end. We tend to believe the Fed will again shift its focus to inflation
concerns. The economic data we have seen since July, i.e., industrial
production, new and existing home sales, gross domestic product, etc., has been
surprising on the upside and, in truth, this performance may be much stronger on
the surface than underneath. But we think the Fed will wait to make sure.

Those looking for Fed easing also believe that enactment of deficit reduction by
the Congress will favorably impress the Fed governors. The proposed budget plan,
however, defers 70% of the approximately $900 billion spending cuts until after
the turn of the century. We're reminded of the ▇▇▇▇▇-▇▇▇▇▇▇ deals of the 1980s
which failed completely to deliver promises in the future. We find it difficult
to believe the Fed would lower current interest rates as a vote of confidence
for what may or may not happen in the future.

For the year ending September 30, the yield on your trust was 4.98% up from
2.84% the previous year, and the assets grew by 21% from $367 million to $445
million.

The portfolio is composed of roughly 35% U.S. Treasury bills and 65% Repurchase
Agreements fully collaterized by U.S. Treasury and United States government
agency securities. The average maturity of the portfolio remains in the 25-30
day range due to a relatively flat yield curve with little reward for extending
maturities.

You are part of a shareholder group that now numbers over 40,000. We value your
confidence and support and will continue to work hard to meet the Fund's
objectives.

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Hannibal ▇. ▇▇▇▇▇▇
Chairman President Vice President

As portfolio manager for Cardinal Government Securities Trust, Hannibal ▇.
▇▇▇▇▇▇ is primarily responsible for the day-to-day management of the Trust's
portfolio. ▇▇. ▇▇▇▇▇▇ has 28 years of investment management experience and has
been the portfolio manager for Cardinal Government Securities Trust since its
inception in 1980.

260

SEPTEMBER 30, 1995

MATURITY PRINCIPAL VALUE
SECURITIES DATE AMOUNT (NOTE 1)
----------------------------------------------------------------------- --------- --------- ---------

DIRECT U.S. GOVERNMENT OBLIGATIONS 34.50%
U.S. Treasury Bills.................................................... 10/19/95 $ 40,000 $ 39,894
U.S. Treasury Bills.................................................... 11/02/95 20,000 19,904
U.S. Treasury Bills.................................................... 11/16/95 20,000 19,864
U.S. Treasury Bills.................................................... 12/07/95 35,000 34,660
U.S. Treasury Bills.................................................... 01/18/96 20,000 19,687
U.S. Treasury Bills.................................................... 02/08/96 20,000 19,625
--------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS......................... 155,000 153,634
--------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT AND
FEDERAL AGENCY OBLIGATIONS 65.90%
▇▇▇▇▇ ▇▇▇▇▇▇ Shearson, 5.80%, dated 9/25/95............................ 10/02/95 80,000 80,000
▇▇▇▇▇ ▇▇▇▇▇▇ Inc., 5.80%, dated 9/25/95................................ 10/02/95 93,000 93,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ Securities, 6.35%, dated 9/29/95......................... 10/02/95 39,000 39,000
Fifth Third Bank, 6.25%, dated 9/29/95................................. 10/02/95 6,500 6,500
Fifth Third Bank, 5.75%, dated 9/26/95................................. 10/03/95 75,000 75,000
--------- ---------
TOTAL REPURCHASE AGREEMENTS...................................... 293,500 293,500
--------- ---------
TOTAL INVESTMENTS AT AMORTIZED COST 100.40%...................... $ 448,500 $ 447,134
======== ========

Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

3
261

SEPTEMBER 30, 1995

ASSETS
Investments in securities at amortized cost...................................... $ 447,134
Cash............................................................................. 401
Interest receivable.............................................................. 291
Other assets..................................................................... 314
---------
Total assets......................................................... 448,140
---------
LIABILITIES
Payable for Trust shares redeemed................................................ 2,360
Payable for shareholder distributions............................................ 26
Accrued investment management, accounting and transfer agent fees (note 2)....... 274
Other accrued expenses........................................................... 106
---------
Total liabilities.................................................... 2,766
---------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 445,373,567 outstanding $.01 par value shares of
beneficial interest (unlimited number of shares authorized).................... $ 445,374
=========
NET ASSET VALUE PER SHARE........................................................ $1.00
=========

See accompanying notes to financial statements.

4
262

YEAR ENDED SEPTEMBER 30, 1995

INVESTMENT INCOME:
Interest............................................................. $ 23,311
--------
EXPENSES:
Investment management fees (note 2).................................. 2,032
Transfer agent fees and expenses (note 2)............................ 842
Accounting fees (note 2)............................................. 53
--------
Total affiliated expenses.................................. 2,927
--------
Custodian fees....................................................... 34
Professional fees.................................................... 90
Reports to shareholders.............................................. 65
Trustees' fees....................................................... 25
Registration fees.................................................... 9
Other expenses....................................................... 151
--------
Total non-affiliated expenses.............................. 374
--------
Total expenses............................................. 3,301
--------
Net increase in net assets from operations................. $ 20,010
========

See accompanying notes to financial statements.

5
263

YEARS ENDED SEPTEMBER 30, 1995 AND 1994

1995 1994
----------- ------------

FROM OPERATIONS:
Net investment income........................................... $ 20,010 $ 11,615
Net realized loss from security transactions.................... 0 (1,463)
----------- ------------
Net increase in net assets from operations................. 20,010 10,152
----------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (20,010) (11,303)
----------- ------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 1,052,266 987,709
Reinvestment of distributions to shareholders................... 19,567 11,027
Cost of shares redeemed......................................... (993,975) (1,033,978)
----------- ------------
Increase (decrease) in net assets derived from capital
share transactions....................................... 77,858 (35,242)
----------- ------------
FROM CAPITAL CONTRIBUTIONS (NOTE 2):
Capital contributed by Cardinal Management Corp................. 0 1,151
----------- ------------
Net increase (decrease) in net assets...................... 77,858 (35,242)
NET ASSETS -- beginning of period............................... 367,516 402,758
----------- ------------
NET ASSETS -- end of period..................................... $ 445,374 $ 367,516
========== ============

See accompanying notes to financial statements.

6
264

SEPTEMBER 30, 1995

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.

(2) -- TRANSACTIONS WITH AFFILIATES

CMC also serves the Trust as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1995 the Trust paid or
accrued $842,187 and $53,283 for transfer agent and fund accounting services,
respectively.

(continued)

7
265

SEPTEMBER 30, 1995

The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the year ended September 30, 1995 the Trust
incurred no expenses related to the distribution of its shares.

(3) -- COMMITMENTS AND CONTINGENCIES

The Trust has an available $6,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

(4) -- CAPITAL STOCK

At September 30, 1995, there were an unlimited number of $.01 par value shares
of capital stock and the capital amounts were as follows:

Paid in capital.................................................................. $446,524,753
Accumulated net realized loss on investments..................................... (1,463,438)
Undistributed net investment income.............................................. 312,252
------------
Net assets....................................................................... $445,373,567
=============

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
--------------------------------
1995 1994
------------- --------------

Shares sold..................................................... 1,052,265,662 987,708,658
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 19,567,048 11,026,622
------------- --------------
1,071,832,710 998,735,280
Shares repurchased.............................................. (993,975,623) (1,033,976,922)
------------- --------------
Net increase (decrease)......................................... 77,857,087 (35,241,642)
Shares outstanding:
Beginning of period............................................. 367,516,480 402,758,122
------------- --------------
End of period................................................... 445,373,567 367,516,480
============= ==============

8
266

(5) -- SUBSEQUENT EVENT

On November 13, 1995 the Board of Trustees approved an Agreement and Plan of
Reorganization and Liquidation between the Trust and The Cardinal Group ("TCG").
The plan calls for the transfer of all assets and liabilities of the Trust to a
series of TCG with the same basic investment objectives and restrictions. The
Trustees have determined that this action is in the best interests of the
shareholders of the Trust and TCG. Shareholder approval will be sought and is
needed to ratify the transaction.

9
267

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for each share of capital stock outstanding throughout each
period:

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------

Net Asset Value, beginning............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................................ 0.05 0.03 0.02 0.04 0.06
Less distributions:
Dividends............................................ (0.05) (0.03) (0.02) (0.04) (0.06)
--------- --------- --------- --------- ---------
Net Asset Value, ending................................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Total return*.......................................... 4.98% 2.84% 2.41% 3.58% 6.20%
======== ======== ======== ======== ========
Net assets, ending (000)............................... $ 445,374 $ 367,516 $ 402,758 $ 472,521 $ 567,841
======== ======== ======== ======== ========
Ratio of expenses to average net assets................ 0.81% 0.85% 0.79% 0.76% 0.72%
======== ======== ======== ======== ========
Ratio of net investment income to average net assets... 4.92% 2.94% 2.38% 3.52% 6.03%
======== ======== ======== ======== ========

* Without the capital contribution discussed in note 2, the 1994 total return
would have been 2.55%.

See accompanying notes to financial statements.
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

The Shareholders and Board of Trustees
Cardinal Government Securities Trust:

We have audited the accompanying statement of assets and liabilities of Cardinal
Government Securities Trust (the Trust), including the statement of investments,
as of September 30, 1995, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Government Securities Trust as of September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995

10
268

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269

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270

[THIS PAGE LEFT BLANK INTENTIONALLY]
271

THE CARDINAL FUND INC.
CARDINAL GOVERNMENT SECURITIES TRUST
CARDINAL TAX EXEMPT MONEY TRUST
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND

▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

New Accounts and Toll-free Lines
General Information: In Ohio ▇▇▇-▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Outside Ohio ▇▇▇-▇▇▇-▇▇▇▇

272

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DISTRIBUTOR
The Ohio Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

CUSTODIAN
The Fifth Third Bank
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

LEGAL COUNSEL
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

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

This report has been prepared for the information of shareholders of Cardinal
Tax Exempt Money Trust and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective Prospectus.

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[LOGO]
CARDINAL
TAX EXEMPT
MONEY
TRUST
-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1995

THE OHIO COMPANY

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273

DEAR CARDINAL SHAREHOLDER:

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

Sincerely,

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CFA
Chairman President

1
274

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

On behalf of the Trustees and Officers of your Trust, we are pleased to present
our September 30, 1995 Annual Report which includes audited financial statements
as well as the portfolio of investments.

During the third quarter of this year, a bond market rally began when the
Federal Reserve lowered the federal funds target rate one quarter of a point at
their July meeting. However, economic data released shortly thereafter indicated
that the economy was doing better than expected and was unlikely to slide into
any type of recession.

The strength of the economy has continued to surprise everyone on the upside.
Data on industrial production, new and existing home sales, gross domestic
product, etc., has been very strong and, quite possibly, this performance may be
stronger on the surface than underneath. But we believe the Fed is now focused
on the threat of inflation and will not be inclined to lower rates again until
they are convinced we have a much slower economy than is currently indicated.

Those looking for Fed easing also believe that enactment of deficit reduction by
the Congress will favorably impress the Fed governors. The proposed budget plan,
however, defers 70% of the approximately $900 billion in spending cuts until
after the turn of the century. We're reminded of the ▇▇▇▇▇-▇▇▇▇▇▇ deals of the
1980s which failed completely to deliver promises in the future. We find it
difficult to believe the Fed would lower current interest rates as a vote of
confidence for what may or may not happen in the future.

For the year ending September 30, the yield on your Trust was 3.02%, up very
nicely from 1.78% the previous year. The portfolio is currently structured with
a relatively short average maturity because the yield curve is very flat, and it
does not really pay to extend maturities.

We continue to pursue an objective of maximizing current income exempt from
federal income tax while preserving capital and maintaining liquidity.

Thank you for your continued support and interest. We look forward to serving
you in the future.

H. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Hannibal ▇. ▇▇▇▇▇▇
Chairman President Vice President

As portfolio manager for Cardinal Tax Exempt Money Trust, Hannibal ▇. ▇▇▇▇▇▇ is
primarily responsible for the day-to-day management of the Trust's portfolio.
▇▇. ▇▇▇▇▇▇ has 28 years of investment management experience and has been the
portfolio manager for Cardinal Tax Exempt Money Trust since its inception in
1983.

275

2A-7* FINAL PRINCIPAL VALUE
SECURITIES MATURITY MATURITY AMOUNT (NOTE 1)
------------------------------------------------------------------------------ --------- --------- --------- --------

MUNICIPAL SECURITIES 98.95%
Ashtabula County, Ohio, Brighton Manor Project, VRN, currently 4.60%.......... 10/04/95 12/01/16 $ 2,200 $ 2,200
Connecticut Development (Light & Power Co.), VRN, currently 4.40%............. 10/04/95 9/01/28 3,400 3,400
Cornell Township, Michigan, Economic Development, IRB, currently 3.80%........ 10/02/95 3/01/15 3,100 3,100
Erie County, Ohio, Brighton Manor Project, VRN, currently 4.60%............... 10/04/95 11/01/16 600 600
Florida Housing Agency, VRN, currently 4.35%.................................. 10/04/95 12/01/11 3,400 3,400
Grand Prairie, Texas Housing Finance Authority, VRN, currently 4.35%.......... 10/04/95 6/01/10 1,800 1,800
Greater East Texas Higher Education, VRN, currently 4.30%..................... 10/05/95 9/01/02 2,300 2,300
Hillsborough County, Florida, VRN, currently 4.50%............................ 10/02/95 9/01/25 3,300 3,300
Hockley County, Texas, PCRB, currently 3.65%.................................. 3/01/96 3/01/14 1,750 1,750
▇▇▇▇▇▇▇ County, Mississippi, PCRB, currently 4.40%............................ 10/02/95 12/01/16 1,800 1,800
▇▇▇▇▇▇▇ County, Mississippi, PCRB, currently 4.40%............................ 10/02/95 6/01/23 300 300
Lincoln County, Wyoming, PCRB, currently 4.60%................................ 10/02/95 11/01/14 3,000 3,000
Lisle, Illinois, VRN, currently 4.30%......................................... 10/05/95 12/15/25 2,500 2,500
Louisiana Public Facilities Authority (Kenner Hotels), IRB, currently 4.60%... 10/02/95 12/01/15 2,000 2,000
Louisiana Public Facilities Authority, VRN, currently 4.35%................... 10/04/95 10/01/22 1,000 1,000
▇▇▇▇▇▇ County, West Virginia Waste Disposal, RB, currently 4.55%.............. 10/04/95 10/01/17 1,000 1,000
▇▇▇▇▇▇ County, West Virginia Waste Disposal, RB, currently 4.50%.............. 10/04/95 10/01/17 2,200 2,200
▇▇▇▇▇▇ County, West Virginia Waste Disposal, RB, currently 4.50%.............. 10/04/95 10/01/17 1,000 1,000
Muldrow, Oklahoma Public Wks. Authority, IRB, currently 4.45%................. 10/03/95 2/01/15 3,000 3,000
New York City Municipal Water Finance Agency, VRN, currently 4.60%............ 10/02/95 6/15/23 2,000 2,000
New York State Energy Research & Development Authority, VRN, currently
4.10%....................................................................... 10/04/95 6/01/27 3,000 3,000
Ohio, Higher Education, RB, currently 4.40%................................... 10/05/95 12/01/06 1,280 1,280
Platte County, Wyoming, VRN, currently 4.60%.................................. 10/02/95 7/01/14 1,800 1,800
Port of Anacortes, Washington, IRB, currently 3.50%........................... 10/05/95 6/15/19 3,000 3,000
Private College & University, Georgia, RB, currently 3.60%.................... 10/16/95 10/01/15 3,000 3,000
Saint ▇▇▇▇▇▇▇, Louisiana, PCRB, currently 4.20%............................... 10/04/95 6/01/05 3,200 3,200
Sandusky County, Ohio, Brighton Manor Project, IRB, currently 4.60%........... 10/04/95 12/01/16 500 500
Springfield, Illinois, Second and ▇▇▇▇▇ Project, RB, currently 4.45%.......... 10/03/95 12/01/15 1,170 1,170
Washington State Fin. Commiss. Rev., RB, currently 4.55%...................... 10/03/95 1/01/10 4,000 4,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Louisiana, VRN, currently 4.50%............................... 10/02/95 12/01/15 1,500 1,500
--------- --------
TOTAL INVESTMENTS AT AMORTIZED COST 98.95%.................................. $64,100 $64,100
======== =========

VRN -- Variable Rate Notes
IRB -- Variable Rate Industrial Revenue ▇▇▇▇▇
▇▇ -- Variable Rate Revenue Bonds
PCRB -- Variable Rate Pollution Control Revenue Bonds
* Rule 2a-7, of the Investment Company Act of 1940, defines maturity as the
longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered
through demand.

Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

3
276

SEPTEMBER 30, 1995

ASSETS
Investments in securities at amortized cost...................................... $64,100
Cash............................................................................. 974
Interest receivable.............................................................. 228
Receivable for Trust shares sold................................................. 2
Other assets..................................................................... 55
-----------------
Total assets........................................................... 65,359
-----------------
LIABILITIES
Payable for Trust shares redeemed................................................ 510
Payable for shareholder distributions............................................ 9
Accrued investment management, accounting and transfer agent fees (note 2)....... 35
Other accrued expenses........................................................... 25
-----------------
Total liabilities...................................................... 579
-----------------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 64,779,828 outstanding $.10 par value shares of
beneficial interest (unlimited number of shares authorized).................... $64,780
=================
NET ASSET VALUE PER SHARE........................................................ $ 1.00
=================

See accompanying notes to financial statements.

4
277

YEAR ENDED SEPTEMBER 30, 1995

INVESTMENT INCOME:
Interest................................................................. $2,608
------
EXPENSES:
Investment management fees (note 2)...................................... 344
Transfer agent fees and expenses (note 2)................................ 63
Accounting fees (note 2)................................................. 17
------
Total affiliated expenses...................................... 424
------
Custodian fees........................................................... 17
Professional fees........................................................ 41
Reports to shareholders.................................................. 30
Trustees' fees........................................................... 17
Registration fees........................................................ 8
Other expenses........................................................... 28
------
Total non-affiliated expenses.................................. 141
------
Total expenses................................................. 565
------
Net increase in net assets from operations..................... $2,043
======

See accompanying notes to financial statements.

5
278

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
--------------------------------------------------------------------------------

YEARS ENDED SEPTEMBER 30, 1995 AND 1994

1995 1994
-------- --------

FROM OPERATIONS:
Net increase in net assets from operations...................... $ 2,043 $ 1,601
-------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (2,043) (1,601)
-------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 154,643 164,948
Reinvestment of distributions to shareholders................... 1,917 1,510
Cost of shares redeemed......................................... (172,311) (177,086)
-------- --------
Decrease in net assets derived from capital share
transactions............................................... (15,751) (10,628)
-------- --------
Net decrease in net assets.................................... (15,751) (10,628)
NET ASSETS -- beginning of period............................... 80,531 91,159
-------- --------
NET ASSETS -- end of period..................................... $ 64,780 $ 80,531
========= =========

See accompanying notes to financial statements.

6
279

SEPTEMBER 30, 1995

(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Security Valuation--Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.

Security Transactions and Investment Income--Security transactions are recorded
on the trade date. Interest income is recorded on the accrual basis.

Federal Income Taxes--No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.

Dividends to Shareholders--Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.

(2) -- TRANSACTIONS WITH AFFILIATES

CMC also serves as the Trust's transfer agent and fund accountant. Transfer
agent service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the year ended September 30, 1995 the Trust paid or
accrued $62,542 and $17,235 for transfer agent and fund accounting services,
respectively.
(continued)

7
280

CARDINAL TAX EXEMPT MONEY TRUST
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

SEPTEMBER 30, 1995

The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the year ended September 30, 1995 the Trust
incurred no expenses relating to the distribution of its shares.

(3) -- COMMITMENTS AND CONTINGENCIES

The Trust has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at September 30, 1995. When used, borrowings under
this arrangement are secured by portfolio securities and can be used only for
short term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.

Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $13,291 for the initial capital of ICI
Mutual. The Trust is also committed to provide $39,873 should ICI Mutual
experience the need for additional capital contributions.

(4) -- CAPITAL STOCK

Transactions in capital stock were as follows:

YEARS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
------------ -------------

Shares sold..................................................... 154,643,119 164,947,710
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 1,916,504 1,509,540
------------ -------------
156,559,623 166,457,250
Shares repurchased.............................................. (172,310,841) (177,085,583 )
------------ -------------
Net decrease.................................................... (15,751,218) (10,628,333 )
Shares outstanding:
Beginning of period............................................. 80,531,046 91,159,379
------------ -------------
End of period................................................... 64,779,828 80,531,046
============= ==============

(5) -- SUBSEQUENT EVENT

8
281

--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Selected data for each share of capital stock outstanding throughout each
period:

YEARS ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------

Net Asset Value, beginning................ $1.00 $1.00 $1.00 $1.00 $1.00
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income................... 0.03 0.02 0.02 0.03 0.04
Less distributions:
Dividends............................... (0.03) (0.02) (0.02) (0.03) (0.04)
--------- --------- --------- --------- ---------
Net Asset Value, ending................... $1.00 $1.00 $1.00 $1.00 $1.00
========== ========== ========== ========== ==========
Ratios/Supplemental Data:
Total return.............................. 3.02% 1.78% 1.81% 2.62% 4.40%
========== ========== ========== ========== ==========
Net assets, ending (000).................. $64,780 $80,531 $91,159 $70,054 $85,488
========== ========== ========== ========== ==========
Ratio of expenses to average net assets... 0.83% 0.76% 0.77% 0.76% 0.72%
========== ========== ========== ========== ==========
Ratio of net investment income to average
net assets.............................. 2.99% 1.78% 1.80% 2.59% 4.31%
========== ========== ========== ========== ==========

The Shareholders and Board of Trustees
Cardinal Tax Exempt Money Trust:

We have audited the accompanying statement of assets and liabilities of Cardinal
Tax Exempt Money Trust (the Trust), including the statement of investments, as
of September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the five-year period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Tax Exempt Money Trust as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.

KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995

9
282

THE CARDINAL FUND INC.
CARDINAL GOVERNMENT SECURITIES TRUST
CARDINAL TAX EXEMPT MONEY TRUST
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND

▇▇▇ ▇. ▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇

New Accounts and Toll-free Lines
General Information: In Ohio ▇▇▇-▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ Outside Ohio ▇▇▇-▇▇▇-▇▇▇▇

2 THE CARDINAL FUND INC. SUPPLEMENT DATED DECEMBER 11, 1995, TO PROSPECTUS DATED FEBRUARY 1, 1995 Capitalized terms used in this Supplement have the meaning assigned to them in the Prospectus. The Fund has entered into an Agreement and Plan of...

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