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INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
------------------------
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.
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CARDINAL FUNDS [LOGO]
CARDINAL
GOVERNMENT
SECURITIES
TRUST
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SEMI-ANNUAL REPORT
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MARCH 31, 1995
THE OHIO COMPANY
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DEAR SHAREHOLDER:
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Each day brings new challenges, and the past six months have been no exception.
During the first half of our fiscal year, we witnessed the stabilization of
interest rates, improved corporate profitability, record highs for the stock
market and moderate inflation. Our outlook for the next six months calls for a
continuation of this favorable investment environment.
Against this backdrop, assets invested in mutual funds continued to rise.
According to recent industry studies, about one-fourth of Americans own mutual
funds today. Most cite investing for retirement and college education as their
primary goals. Over eight out of ten mutual fund investors rely upon a financial
advisor for mutual fund advice.
As a shareholder of Cardinal Government Securities Trust, your investment seeks
to maximize current income while preserving capital and maintaining liquidity.
We remain dedicated to achieving these objectives and will continue to work hard
on your behalf.
The challenges Cardinal Government Securities Trust faces today seem more
exciting than ever. We have a sound operations staff, a strong portfolio
management team, dedicated employees and an excellent shareholder base. By
maintaining our focus on providing consistent performance and quality service,
we hope to meet your investment needs in the years to come.
Thank you for your investment in Cardinal Government Securities Trust.
/s/ Walter R. Chambers /s/ Frank W. Siegel
Walter R. Chambers Frank W. Siegel
Chairman President
1
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MESSAGE FROM THE TRUST'S PORTFOLIO MANAGER
We are pleased to present our March 31, 1995 Semi-Annual Report for Cardinal
Government Securities Trust which contains the portfolio of investments and
financial statements.
The Federal Reserve Board was certainly a friend to investors in money market
funds during 1994 and in the first quarter of this year. They raised short term
interest rates seven times during the cycle, and this is reflected in the yield
of your Trust. The annualized adjusted yield for the six month period, October
1994 through March of this year was 4.79% and at this writing, April 26, 1995
the 30 day adjusted yield is 5.25%.
The big surprise so far in 1995 has been the weakness of the U.S. dollar. The
severity of this problem has the potential to alter an otherwise constructive
inflation outlook. While we are looking for a turnaround in the dollar, we
probably won't see it surge back to levels that would ameliorate the pressures
of rising import prices. Total import prices are now rising at a 5.7%
year-over-year rate which is more than twice the inflation rate of domestically
produced goods.
How does the Federal Reserve look at this? Undoubtedly they view this with
growing concern, but for the time being should remain neutral. Eventually
though, if the deceleration in the pace of real economic output shows signs of
running its course and the pressures of imported inflation start to surface, the
Federal Reserve will no doubt respond. We could make a case for a half point
boost in the Fed Funds rate by late summer.
In the meantime we continue to focus on the safety, quality and stability of the
portfolio of investments. We will continue to seek the highest current return
consistent with these objectives.
We look forward to serving you in the future and appreciate your continued
support.
/s/ Hannibal L. Godwin
Hannibal L. Godwin
Vice President
As portfolio manager for Cardinal Government Securities Trust, Hannibal L.
Godwin is primarily responsible for the day-to-day management of the Trust's
portfolio. Mr. Godwin has 25 years of investment management experience and has
been the portfolio manager for Cardinal Government Securities Trust since its
inception in 1980.
2
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CARDINAL GOVERNMENT SECURITIES TRUST
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STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
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MARCH 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
MATURITY PRINCIPAL VALUE
SECURITIES DATE AMOUNT (NOTE 1)
- ----------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
DIRECT U.S. GOVERNMENT OBLIGATIONS 67.36%
U.S. Treasury Bills.................................................... 4/20/95 $ 25,000 $ 24,932
U.S. Treasury Bills.................................................... 4/20/95 25,000 24,932
U.S. Treasury Bills.................................................... 4/20/95 50,000 49,864
U.S. Treasury Bills.................................................... 4/20/95 25,000 24,932
U.S. Treasury Bills.................................................... 5/11/95 40,000 39,759
U.S. Treasury Bills.................................................... 5/18/95 40,000 39,715
U.S. Treasury Bills.................................................... 5/25/95 50,000 49,586
U.S. Treasury Bills.................................................... 6/01/95 20,000 19,815
--------- ---------
TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS........................... 275,000 273,535
--------- ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT AND
FEDERAL AGENCY OBLIGATIONS 33.00%
Merrill Lynch Securities, 6.32%, dated 3/31/95......................... 4/03/95 35,000 35,000
Smith Barney Shearson, 6.30%, dated 3/31/95............................ 4/03/95 45,000 45,000
Paine Webber Inc., 6.35%, dated 3/31/95................................ 4/03/95 45,000 45,000
Fifth Third Bank, 6.20%, dated 3/31/95................................. 4/03/95 9,000 9,000
--------- ---------
TOTAL REPURCHASE AGREEMENTS........................................ 134,000 134,000
--------- ---------
TOTAL INVESTMENTS AT AMORTIZED COST 100.36%........................ $ 409,000 $ 407,535
======== ========
</TABLE>
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
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CARDINAL GOVERNMENT SECURITIES TRUST
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STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
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MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities at amortized cost...................................... $ 407,535
Cash............................................................................. 222
Interest receivable.............................................................. 71
Other assets..................................................................... 316
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Total assets......................................................... 408,144
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LIABILITIES
Payable for Trust shares redeemed................................................ 1,763
Accrued investment management, accounting and transfer agent fees (note 2)....... 290
Other accrued expenses........................................................... 35
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Total liabilities.................................................... 2,088
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COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 406,055,512 outstanding $.01 par value shares of
beneficial interest (unlimited number of shares authorized).................... $ 406,056
=========
NET ASSET VALUE PER SHARE........................................................ $ 1.00
=========
</TABLE>
See accompanying notes to financial statements.
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CARDINAL GOVERNMENT SECURITIES TRUST
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STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
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SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest............................................................. $ 10,672
--------
EXPENSES:
Investment management fees (note 2).................................. 966
Transfer agent fees and expenses (note 2)............................ 366
Accounting fees (note 2)............................................. 25
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Total affiliated expenses................................ 1,357
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Custodian fees....................................................... 16
Professional fees.................................................... 40
Reports to shareholders.............................................. 13
Trustees' fees....................................................... 10
Other expenses....................................................... 66
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Total non-affiliated expenses............................ 145
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Total expenses........................................... 1,502
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Net increase in net assets from operations............... $ 9,170
========
</TABLE>
See accompanying notes to financial statements.
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CARDINAL GOVERNMENT SECURITIES TRUST
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STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
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FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED SEPTEMBER
MARCH 31, 30,
1995 1994
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<S> <C> <C>
FROM OPERATIONS:
Net investment income........................................... $ 9,170 $ 11,615
Net realized loss from security transactions.................... 0 (1,463)
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Net increase in net assets from operations................. 9,170 10,152
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FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders............................. (9,170) (11,303)
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FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares.................................... 505,201 987,709
Reinvestment of distributions to shareholders................... 8,960 11,027
Cost of shares redeemed......................................... (475,621) (1,033,978)
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Increase (decrease) in net assets derived from capital
share transactions....................................... 38,540 (35,242)
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FROM CAPITAL CONTRIBUTIONS (NOTE 2):
Capital contributed by Cardinal Management Corp. ............... 0 1,151
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Net increase (decrease) in net assets...................... 38,540 (35,242)
NET ASSETS -- beginning of period............................... 367,516 402,758
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NET ASSETS -- end of period..................................... $ 406,056 $ 367,516
========== ============
</TABLE>
See accompanying notes to financial statements.
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CARDINAL GOVERNMENT SECURITIES TRUST
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NOTES TO FINANCIAL STATEMENTS
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MARCH 31, 1995 (UNAUDITED)
(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 six months ended March 31, 1995.
CMC also serves the Trust as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the six months ended March 31, 1995 the Trust paid
or accrued $366,022 and $25,013 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)
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CARDINAL GOVERNMENT SECURITIES TRUST
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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MARCH 31, 1995 (UNAUDITED)
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 six months ended March 31, 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 March 31, 1995. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $87,459 for the initial capital of ICI
Mutual. The Trust is also committed to provide $262,377 should ICI Mutual
experience the need for additional capital contributions.
Included in other assets is a $175,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.
(4) -- CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
1995 1994
-------------- --------------
<S> <C> <C>
Shares sold..................................................... 505,199,759 987,708,658
Shares issued in connection with reinvestment of distributions
to shareholders............................................... 8,959,803 11,026,622
-------------- --------------
514,159,562 998,735,280
Shares repurchased.............................................. (475,620,530) (1,033,976,922)
-------------- --------------
Net increase (decrease)......................................... 38,539,032 (35,241,642)
Shares outstanding:
Beginning of period............................................. 367,516,480 402,758,122
-------------- --------------
End of period................................................... 406,055,512 367,516,480
============== ==============
</TABLE>
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CARDINAL GOVERNMENT SECURITIES TRUST
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FINANCIAL HIGHLIGHTS
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Selected data for each share of capital stock outstanding throughout each
period:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEARS ENDED SEPTEMBER 30,
MARCH 31, -----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- --------- ---------
Income from investment op-
erations:
Net investment income.... 0.02 0.03 0.02 0.04 0.06 0.08
Less distributions:
Dividends................ (0.02) (0.03) (0.02) (0.04) (0.06) (0.08)
--------- --------- --------- --------- --------- ---------
Net Asset Value, ending.... $ 1.00 $ 1.00 $ 1.00 $ 1,00 $ 1.00 $ 1.00
========= ========= ========= ========= ========= =========
Total return*.............. 4.74% 2.84% 2.41% 3.58% 6.20% 7.97%
========= ========= ========= ========= ========= =========
Ratios/Supplemental Data:
Net assets, ending (000)... $ 406,056 $ 367,516 $ 402,758 $ 472,521 $ 567,841 $ 592,343
========= ========= ========= ========= ========= =========
Ratio of expenses to
average net assets....... 0.78% 0.85% 0.79% 0.76% 0.72% 0.73%
========= ========= ========= ========= ========= =========
Ratio of net investment in-
come to average net as-
sets..................... 4.68% 2.94% 2.38% 3.52% 6.03% 7.69%
========= ========= ========= ========= ========= =========
</TABLE>
*Without the capital contribution discussed in note 2, the 1994 total return
would have been 2.55%.
See accompanying notes to financial statements.
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[LOGO]
THE CARDINAL FUND INC.
CARDINAL GOVERNMENT SECURITIES TRUST
CARDINAL TAX EXEMPT MONEY TRUST
CARDINAL GOVERNMENT OBLIGATIONS FUND
CARDINAL BALANCED FUND
CARDINAL AGGRESSIVE GROWTH FUND
155 E. Broad St. Columbus, Ohio 43215
<TABLE>
<S> <C>
New Accounts and Toll-free Lines
General Information: In Ohio 800-282-9446
(614) 464-5511 Outside Ohio 800-848-7734
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000315779
<NAME> CARDINAL GOVERNMENT SECURITIES TRUST
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 407,535
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 293
<ASSETS-OTHER> 316
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 408,144
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,088
<TOTAL-LIABILITIES> 2,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 406,056
<SHARES-COMMON-PRIOR> 367,516
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 406,056
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,672
<OTHER-INCOME> 0
<EXPENSES-NET> 1,502
<NET-INVESTMENT-INCOME> 9,170
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 9,170
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,170
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 505,201
<NUMBER-OF-SHARES-REDEEMED> 475,621
<SHARES-REINVESTED> 8,960
<NET-CHANGE-IN-ASSETS> 38,540
<ACCUMULATED-NII-PRIOR> 11,615
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 966
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,502
<AVERAGE-NET-ASSETS> 387,105
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
