CARDINAL GROUP, N-30D, 1996-12-09

CARDINAL GROUP
N-30D, 1996-12-09

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<PAGE> 1
[CARDINAL GROUP LOGO]

CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
CARDINAL TAX EXEMPT MONEY MARKET FUND
THE CARDINAL FUND
CARDINAL AGGRESSIVE GROWTH FUND
CARDINAL BALANCED FUND
CARDINAL GOVERNMENT OBLIGATIONS FUND

[THE OHIO COMPANY LOGO]

(LOGO)

155 E. Broad St. Columbus, Ohio 43215

New Accounts and
General Information:
(614) 464-5511
(800) 282-9446
<PAGE> 2

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

Message from the Chairman and the President
Page 1

Message from the Chief Investment Officer
Page 3

Portfolio Managers' Discussion of Fund Performance
Page 5

Independent Auditors' Report
Page 14

Statements of Assets and Liabilities
Page 15

Statements of Operations
Page 17

Statements of Changes in Net Assets
Page 19

Statements of Investments
Page 24

Notes to Financial Statements
Page 32

Financial Highlights
Page 39
<PAGE> 3

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

We are pleased to present The Cardinal Group's Annual Report for the fiscal year
ended September 30, 1996. This report provides an overview of the markets, a
review of each fund's activity, the performance for the year and updated
financial information.

Over the past year, a number of significant changes were made in the operations
of The Cardinal Group. These events were designed to enhance the attractiveness
of your investment and to attract new shareholders. Throughout this period, we
maintained our focus on achieving the investment objectives set forth in each
fund's prospectus.

PORTFOLIO MANAGEMENT CHANGES

In January 1996, John Bevilacqua assumed responsibility for the investment
management of The Cardinal Fund. John brings over twenty years of
investment experience to the management of the Fund.

In April 1996, The Ohio Company named Harold "Chip" Elliott, Vice President
and Chief Investment Officer. Chip comes to The Ohio Company with a variety
of prior experiences during his twenty-eight year investment career. In
July 1996, Chip assumed responsibility for the investment management of
Cardinal Aggressive Growth Fund.

In January 1996, John R. Carle and David C. Will assumed the investment
management of Cardinal Government Securities Money Market Fund and Cardinal
Tax Exempt Money Market Fund, respectively.

REORGANIZATION

Earlier this year, shareholders of The Cardinal Fund Inc., Cardinal
Government Obligations Fund, Cardinal Government Securities Trust and
Cardinal Tax Exempt Money Trust approved a Plan of Reorganization aimed at
streamlining operations and improving efficiencies. As a result of this
Reorganization, we are beginning to realize cost savings through the
elimination of future Annual Meeting expenses, a reduction in certain
printing and mailing expenditures, lowering of regulatory filing expenses
and a reduction of professional and other fees.

1
<PAGE> 4

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT (CONTINUED)
- --------------------------------------------------------------------------------

NEW NAMES

Following the Reorganization, certain Cardinal Funds underwent name
changes. The new names are more accurate and concise and are as follows:

<TABLE>
<S> <C>
Old Name/Designation New Name/Designation
Cardinal Family of Funds The Cardinal Group
The Cardinal Fund Inc. The Cardinal Fund
Cardinal Government Securities Trust Cardinal Government Securities Money Market Fund
Cardinal Tax Exempt Money Trust Cardinal Tax Exempt Money Market Fund
Cardinal Government Obligations Fund Cardinal Government Obligations Fund
</TABLE>

Thank you for your investment in The Cardinal Group. We remain dedicated to
providing you with attractive investments and quality services that will meet
your needs in the years to come.

Sincerely,

<TABLE>
<S> <C>
/s/ H. KEITH ALLEN /s/ FRANK W. SIEGEL
- ------------------------- ----------------------------
H. Keith Allen Frank W. Siegel, CFA
Chairman President
</TABLE>

2
<PAGE> 5

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
MESSAGE FROM THE CHIEF INVESTMENT OFFICER
- --------------------------------------------------------------------------------

DEAR SHAREHOLDERS:

The fiscal year ended September 30, 1996, was another good one for most
investors. As a result of the continuing positive environment of moderate
economic growth, low inflation, growing corporate profits and reasonably stable
interest rates, stock prices rose by almost 18% (S&P 500 Index 18.2%) and bonds
provided positive returns as evidenced by the return of 5.1% on the Lehman
Brothers Government/Corporate bond index.

INTEREST RATES, THE FED AND THE BOND MARKET

While the entire fiscal year was positive, market action was not as "smooth" as
one would wish. During the first half of the year yields on short and
intermediate maturity bonds actually declined modestly or were essentially
unchanged while yields on long maturity bonds rose slightly. During the later
half of the year interest rates on virtually all types and qualities of bonds
rose between one-quarter and one-half percent.

The reason for the increase in yields was strong economic growth in the first
calendar quarter of 1996, a rise in some commodity prices, the fear that these
combined actions would result in higher levels of inflation (which did not
occur), and an eventual Fed tightening. By late summer economic activity began
to moderate, inflation fears cooled, the Fed did not increase rates (which we
correctly anticipated) and thus the bond market rallied.

CORPORATE PROFITS, THE FED, THE STOCK MARKET AND RECORD HIGHS

During the first half of the fiscal year the economy grew, interest rates were
"flat" to down and inflation was benign. That environment combined with growth
in corporate profits, and substantial flows of cash into equity mutual funds
provided just the right "diet" of strong fundamentals to grow equity values and
generate price appreciation of the S&P 500 of 10.9%. From late September 1995,
through late March 1996, the stock market reached new highs almost daily.

The second six months of the year were different. Like the bond market, the
stock market too was affected by concerns of an over-heating economy, inflation
and fear that the Fed would increase interest rates. As a result, volatility
increased during the April to September period, caused a rather dramatic decline
in July and generally was the basis for a good deal of investor concern. As the
summer progressed, however, a slowing economy, lack of action by the Fed, and
positive profit announcements by corporations again pushed stock prices to
record levels.

WHAT WILL THE FUTURE BRING?

Looking forward into 1997 and beyond we see a continuation of positive economic,
inflation and demographic trends which should have positive implications for all
financial markets. Moderate economic growth creates opportunities for corporate
profit growth (critical to stock valuations) while low inflation creates the
opportunity for stable to declining interest rates (critical to both stock and
bond valuations).

3
<PAGE> 6

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
MESSAGE FROM THE CHIEF INVESTMENT OFFICER (CONTINUED)
- --------------------------------------------------------------------------------

This combination plus the continued demand for both stocks and bonds as a result
of a population with more resources to save and invest is in part the basis for
our optimism. The increased competitiveness of U.S. business and the improving
financial condition of the U.S. government is further "ammunition".

While optimistic about the short and longer term outlook, we are not
unrealistically bullish. With an important U.S. election to digest and an
anticipated economic recovery taking place in Europe and Japan, the demand for
capital and other resources will at times alter the perception and perhaps the
reality of the economic/financial landscape and may require reevaluation. These
are factors that we monitor daily and if necessary, alter our suggested asset
allocations, bond maturities or stock selection criteria to reflect fundamental
change. Currently we remain optimistic.

Harold C. Elliott
Chief Investment Officer
The Ohio Company

4
<PAGE> 7

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

For the year ended September 30, 1996, the Cardinal Government Securities Money
Market Fund produced a total return of 4.70%. The fund, which invests in
repurchase agreements and other short-term obligations of the U.S. Government
and its agencies, is designed to provide monthly income from a high quality and
liquid investment portfolio.

WHAT WAS THE MONEY MARKET ENVIRONMENT OVER THE PAST 12 MONTHS?

Money market interest rates remained at higher than expected levels in response
to actual and anticipated efforts of the Federal Reserve to tighten credit
availability in an economy that continually gained strength throughout much of
our fund's fiscal year.

WHAT IS THE OUTLOOK FOR THE COMING YEAR?

A slowing economy should bring somewhat lower interest rates in the coming
months.

As portfolio manager of Cardinal Government Securities Money Market Fund, John
R. Carle, CFA, is responsible for the day-to-day management of the fund's
portfolio. Mr. Carle has 29 years of investment experience and has been
portfolio manager for the fund since January 1, 1996.

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

For the year ended September 30, 1996, Cardinal Tax Exempt Money Market Fund
produced a total return of 2.67%. The fund had a current average maturity of 54
days as of September 30, 1996. Many of the bonds in the portfolio are credit
enhanced, meaning they are insured or backed by an irrevocable bank letter of
credit.

During the past six months the strategy in managing this fund has been to
modestly increase maturity to preserve yields in an anticipated declining
interest rate environment.

Since January 1, 1996, Cardinal Tax Exempt Money Market Fund has been managed by
David C. Will, who holds a bachelor's degree in Finance from Franklin University
and has 25 years of experience in portfolio management.

5
<PAGE> 8

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
THE CARDINAL FUND
- --------------------------------------------------------------------------------
The fiscal year ended September 30, 1996, started strong and continued that way
through most of the twelve month period. Although not without the usual peaks
and troughs, the market pursued its forward path and again rose to record
levels. The strongest advance came in the January-February time period, while
the most difficult time of our fiscal year was the June-July retracement.

HOW WOULD YOU ASSESS YOUR PERFORMANCE FOR THE YEAR?

We are pleased to report a double digit investment return in The Cardinal Fund
for the second consecutive year. Our strategies, which resulted in a total
return, exclusive of the sales charge, of 17.96% enabled The Cardinal Fund to be
ranked in the upper 50% of comparable funds by the Lipper Analytical Services,
for the period ended September 30, 1996. This return was quite good from both an
absolute and relative standpoint, but our goal is to consistently rank above the
majority of similar investment funds.

WHAT IS YOUR STRATEGY FOR STOCK SELECTION?

The Cardinal strategy has been one of continued participation in the advance, by
maintaining a near fully invested position throughout the year. We have pursued
an investment theme of acquiring stocks of companies with strong management
teams, valued products/services, superior distribution avenues and, where
possible, global acceptance of product primarily through brand name recognition
and a top tier market share. Also, the portfolio is positioned in stocks of
companies that are/or will be beneficiaries of re-engineering efforts occurring
on a world wide basis by many of today's top corporations.

WHAT AREAS OF THE MARKET PERFORMED WELL, AND WHERE DO YOU CURRENTLY SEE VALUE?

In viewing the portfolio one should note that The Cardinal Fund has significant
exposure in the TECHNOLOGY sector of the market. Companies such as Intel,
Microsoft, Compaq Computers, Gateway 2000 and Tellabs are but a few of the
companies that are participants in technological advancements and beneficiaries
of corporate productivity enhancements. This is an ongoing process in today's
global business environment. Also, the HEALTH CARE sector of the market is one
we believe will be of value to investors as the demographics of our society move
toward a more mature age group and have a need for more health care products and
medication. Participation in companies such as Merck, Pfizer, Johnson & Johnson
and Boston Scientific are some of the issues we have invested in to generate
focus in this area of the market. Finally, the FINANCIAL SERVICES sector has
been an area of primary focus for our fund and one that has given above market
performance for most of the year. The lower interest rate environment, which we
have been espousing, combined with further consolidation in the industry, has
made for attractive returns in this group with very moderate levels of risk.

6
<PAGE> 9

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
THE CARDINAL FUND (CONTINUED)
- --------------------------------------------------------------------------------

WHAT IS YOUR OUTLOOK FOR THE FUND?

Our outlook moving forward continues to be positive. We expect interest rates to
remain stable with a strong possibility of heading lower as we move into next
year. This should provide an opportunity for well managed companies to continue
to enhance earnings and create an environment to maintain or expand their
respective market share positions. Barring signs of prolonged economic weakness,
and/or rising interest rates, we expect to remain fully invested in diversified
sectors of the economy which meet the standards we have adopted and implemented
as a part of our overall strategy.

As of September 30, 1996, the fund's top five holdings were General Electric
(4.78%), Texaco (3.45%), Cincinnati Financial (3.25%), Royal Dutch Petroleum
(3.07%), and Mobil (2.93%).

John Bevilacqua assumed the management of The Cardinal Fund on January 1, 1996.
He has in excess of 21 years of investment experience. He received his MBA from
Xavier University and Bachelors of Science from Franklin University.

<TABLE>
<CAPTION>
The Cardinal Fund
Average Annual
Total Return as of 9/30/96*
<S> <C> <C> <C>
One Year 12.65%
Five Year 10.48%
Ten Year 10.86%
</TABLE>

GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Cardinal Funds S&P
<S> <C> <C>
9/86 9550 10000
9/87 11938 14340
9/88 11524 12562
9/89 14004 16695
9/90 12177 15142
9/91 16261 19851
9/92 18708 22035
9/93 20014 24899
9/94 20691 25821
9/95 23753 33464
9/96 28029 39537
</TABLE>

--The CARDINAL FUND* ------S&P 500 Stock Index

The performance of The Cardinal Fund is measured against the S&P 500 Stock
Index, an unmanaged index generally considered to be representative of the U.S.
stock market. The index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
However, the fund's performance reflects these value-added services. Past
performance is not predictive of future results.

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

* Reflects 4.50% sales charge.

7
<PAGE> 10

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
For the year ended September 30, 1996, Cardinal Aggressive Growth Fund produced
a total return, exclusive of the sales charge, of -1.13%. As a basis of
comparison the Russell 2000 Index of smaller capitalization companies achieved a
total return of 12.5%.

Cardinal Aggressive Growth Fund is managed by Harold C. Elliott. Mr. Elliott who
took over management of this fund in mid-July of this year holds an MBA from
Xavier University and a bachelor's degree in Finance and Marketing from The
University of Cincinnati; has more than 20 years experience in the investment
business and is currently the Chief Investment Officer for The Ohio Company.

DESCRIBE THE FUND'S FISCAL YEAR PERFORMANCE AND YOUR ASSESSMENT OF THAT
PERFORMANCE.

The significant underperformance of this or any Cardinal Fund is unacceptable
and requires immediate attention. To this end, action was taken to introduce a
new manager to the fund, further diversify the portfolio to help moderate
volatility and continue to strengthen the underlying fundamentals of the
portfolio through investment in even stronger companies. Between the time that
these changes were made in mid-July and the end of the fiscal year the
performance of this fund has improved.

WHICH SECTORS OF THE PORTFOLIO HELPED OR HINDERED PERFORMANCE AND DO YOU
ANTICIPATE ANY CHANGES?

Investment in technology, specifically semiconductor and related companies
negatively impacted performance. The relatively small exposure to healthcare and
financial services provide the few positive aspects of performance.

DESCRIBE YOUR PHILOSOPHY AND STRATEGY IN MANAGING THE CARDINAL AGGRESSIVE GROWTH
FUND.

The objective of Cardinal Aggressive Growth Fund is superior investment results
through investment in the stocks of small and mid-size companies. Historically,
investment in these types of companies has resulted in investment results that
averaged a compound rate of return 2% better than that of the Standard & Poors
500 stock index. The reason for this superior performance is generally
associated with the fact that these smaller companies can pursue niche markets;
can focus 100% of their attention on one or a limited number of products or
services; the fact that their managements are very entrepreneurial, work very
close to "the production floor" and have a good deal of their own net-worth
invested in the company. Thus the need to succeed is critical. In addition
smaller companies are often not as encumbered by government regulation and are
often targets of take-overs.

With respect to the stock selection process, the objective is to build a
reasonably diversified portfolio of companies with the ability to "grow" their
revenues and earnings consistently and at above average rates, enjoy positive
cash flow, produce unique and value added products and/or services, and enjoy
above average margins and return on equity.

Generally the companies that pass the "tests" described above are technology (in
the broadest sense), health care, and/or consumer staple oriented.

8
<PAGE> 11

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL AGGRESSIVE GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
WHAT IS THE OUTLOOK FOR THE FUND FOR THE FORESEEABLE FUTURE?
As described in the introduction of this report, we believe that the overall
environment for financial assets remains quite positive due to the expectation
for continued, but subdued economic growth, low inflation and stable interest
rates. In this environment smaller, primarily domestic and growth oriented
companies should do relatively better than most because they are better
insulated from general economic trends. Also, because these companies tend to
focus on a limited number of (new) products or services they are in effect
creating new markets that, while more modest in size, tend to grow much faster.
We believe the valuations of these types of companies remain modest and will
provide superior performance.
<TABLE>
<CAPTION>
Cardinal Aggressive
Growth Fund Average
Annual Total Return as of 9/30/96*
<S> <C> <C> <C>
One Year -5.58%
Since Inception
(6/24/93) 4.98%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Cardinal Aggressive
(Fiscal Year Covered) Growth Fund Russell 2000
6/30/93 9550 10000
<S> <C> <C>
9/93 9999 10870
9/94 9525 11163
9/95 11849 13776
9/96 11719 15543
</TABLE>

The performance of Cardinal Aggressive Growth Fund is measured against the
Russell 2000 Stock Index, an unmanaged index generally considered to be
representative of the U.S. smaller capitalization stock market. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the fund's performance
reflects these value-added services. Past performance is not predictive of
future results.

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

* Reflects 4.50% sales charge.

<PAGE> 12

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
For the year ended September 30, 1996, Cardinal Balanced Fund achieved a total
return, exclusive of the sales charge, of 10.26%.

Since October 1, 1996, Cardinal Balanced Fund has been managed by David C. Will
and Joseph A. Miner, C.F.A. Mr. Will, who holds a bachelor's degree in Finance
from Franklin University, has 25 years of experience in portfolio management.
Mr. Miner, who holds a bachelor's degree in Banking and Finance from Wheeling
Jesuit College, has 15 years of experience in financial analysis and portfolio
management.

HOW DID THE MIXTURE OF STOCKS AND BONDS CHANGE DURING THIS PERIOD?

For the twelve month period ended September 30, 1996 asset mix changed little.
Our outlook has been and continues to be positive for financial assets,
especially stocks, so the Balanced Fund has had a weighting of 55% common stock
and/or securities convertible into common stock with 40-45% of the portfolio in
bonds and the balance in money market funds for liquidity and investment
opportunities.

HOW WOULD YOU ASSESS THE PERFORMANCE OF THE BALANCED FUND?

While investment results were quite strong on an absolute basis, we were not
fully satisfied with the fund's performance from a relative standpoint.

During the first six months of the fiscal year, the Balanced Fund underperformed
its benchmarks. This relative underperformance was concentrated in the common
stock portion of the portfolio and was due to being concentrated in certain
economic sectors. Since that time steady progress has been made to further
diversify the equity portion and to enhance the "internal dynamics" of the
equity portfolio by investing in companies where revenue, earnings and dividend
growth are more assured.

WHAT STOCKS HAVE BEEN THE STRONGEST?

Monsanto has been a strong performer over the past year. The company is a large
chemical company that has diversified into agricultural herbicides, seed
development, and pharmaceutical products. Tribune Company has been an excellent
performing stock. The company continues to expand from a strong base in
newspaper publishing into television broadcasting and educational products.
American Express too has been a good performer for the fund. This company has
above average potential for good earnings growth, due to its involvement in
consumer finance services. The stock also has an above average dividend yield.

WHAT IS OUR OUTLOOK FOR THE FUND?

We continue to expect the economy to show a moderate rate of growth as we head
into 1997. Inflation should be well behaved due to increasing price competition
in all end-user markets and further improvement in productivity gains. We
believe this outlook will be favorable for the performance for both stocks and
bonds due to our expectation that interest rates will decline from here.

10
<PAGE> 13

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL BALANCED FUND (CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Cardinal Balanced Fund
Average Annual
Total Return as of 9/30/96*
<S> <C> <C> <C>
One Year 5.30%
Since Inception
(6/24/93) 8.26%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Cardinal Balanced
(Fiscal Year Covered) Fund S&P Lehman Government
6/30/93 9550 10000 10000
<S> <C> <C> <C>
9/93 9664 10260 10230
9/94 9720 10640 10056
9/95 11741 13789 11504
9/96 12951 16292 12022
</TABLE>

The performance of Cardinal Balanced Fund is measured against the S&P 500 Stock
Index, an unmanaged index generally considered to be representative of the U.S.
stock market, and the Lehman Brothers Govt./Corp. Bond Index, an unmanaged
broad-based index generally considered to be representative of the bond market
as a whole. These indices do not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
However, the fund's performance reflects these value-added services. Past
performance is not predictive of future results.

For the period ended September 30, 1995 reported in last year's annual report,
the comparative index used in this presentation was a calculated index
representing the sum of 30% of the S&P 500 Index, 50% of the Lehman Brothers
Govt./Corp. Bond Index, and 20% of the U.S. Treasury Bill return, all of which
are considered to be broad-based market indices. Management believes that the
two separate broad-based indices reflected in the graph above represents a more
meaningful presentation.

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

* Reflects 4.50% sales charge.

<PAGE> 14

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------

For the year ended September 30, 1996, Cardinal Government Obligations Fund,
which invests in a portfolio of U.S. Government agency securities, earned a
total return, exclusive of the sales charge, of 6.04%.

The fund is managed by John R. Carle, CFA, who has 29 years of securities
investment experience and has managed the fund since its inception in February,
1986.

HOW WOULD YOU ASSESS THE FUND'S PERFORMANCE?

The fund's performance over the past 12 months has been excellent as the fund's
returns ranked second among the 52 funds included in the Lipper universe of
Ginnie Mae funds (mutual funds investing primarily in securities issued by The
Government National Mortgage Association (GNMA)). The average fund of this group
produced a 4.45% total return compared to the Cardinal Government Obligations
Fund's return, exclusive of the sales charge, of 6.04%. For the past three years
the fund ranks sixth when compared to this peer group.

WHAT WAS YOUR STRATEGY DURING THE PAST 12 MONTHS?

The strategy for most of the past 12 months has been to maintain an average-life
in the fund's portfolio that was shorter than the peer group. This strategy
turned out to be the correct approach as the fixed income markets lost value
during a good part of the past 12 months. The shorter life of the portfolio
allowed the fund to maintain its relative value in the face of some very
difficult market conditions.

WHAT IS YOUR OUTLOOK FOR THE COMING YEAR?

Currently, we see a slowing domestic economy which should help the fixed-income
markets. In anticipation of the slowing, we have increased the life of the
portfolio in an effort to more fully participate in an improving market
environment. This action has modestly increased yields.

12
<PAGE> 15

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL GOVERNMENT OBLIGATIONS FUND (CONTINUED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Cardinal
Government Obligations Fund
Average Annual
Total Return as of 9/30/96*
<S> <C> <C> <C>
One Year 1.27%
Five Year 5.10%
Ten Year 7.05%
</TABLE>
<TABLE>
<CAPTION>
Measurement Period Cardinal
(Fiscal Year Covered) Government Salomon
<S> <C> <C>
9/86 9550 10000
9/87 9628 10190
9/88 10874 11718
9/89 11832 13008
9/90 13018 14295
9/91 14721 16625
9/92 16026 18487
9/93 16800 19763
9/94 16755 19565
9/95 18648 22207
9/96 19767 23508
</TABLE>

The performance of Cardinal Government Obligations Fund is measured against the
Salomon Mortgage Index, an unmanaged broad-based index generally considered to
be representative of GNMA/mortgage-backed securities. The index does not reflect
the deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. However, the fund's performance reflects
these value-added services. Past performance is not predictive of future
results.

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

* Reflects 4.50% sales charge.

14
<PAGE> 16

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

The Shareholders and Board of Trustees
The Cardinal Group:

We have audited the accompanying statements of assets and liabilities of The
Cardinal Group -- Cardinal Government Securities Money Market Fund, Cardinal Tax
Exempt Money Market Fund, The Cardinal Fund, Cardinal Aggressive Growth Fund,
Cardinal Balanced Fund, and Cardinal Government Obligations Fund, including the
statements of investments, as of September 30, 1996, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the periods indicated herein. These financial statements
and financial highlights are the responsibility of The Cardinal Group's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1996, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Cardinal Group at September 30, 1996,
the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Columbus, Ohio
November 15, 1996

14
<PAGE> 17

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

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at amortized cost....................... $497,155 $ 60,084
Cash.............................................................. 143 7
Interest receivable............................................... 3,239 261
Receivable for investment securities sold......................... 0 1,600
Receivable for Fund shares sold................................... 0 1
Other assets (note 5)............................................. 312 52
Deferred organizational cost...................................... 160 27
-------- --------
Total assets.......................................... 501,009 62,032
-------- --------
LIABILITIES:
Payable for investment securities purchased....................... 20,000 1,700
Payable for Fund shares redeemed.................................. 2,750 348
Payable for shareholder distributions............................. 17 7
Accrued investment management, accounting and transfer agent fees
(note 4)........................................................ 285 36
Other accrued expenses............................................ 82 26
-------- --------
Total liabilities..................................... 23,134 2,117
-------- --------
Commitments and contingencies (note 5)

NET ASSETS:
Paid in capital................................................... 477,875 59,915
Accumulated net realized loss on investments...................... (312) 0
Undistributed net investment income............................... 312 0
-------- --------
Total net assets...................................... $477,875 $ 59,915
======== ========
Outstanding shares of beneficial interest......................... 477,875 59,915
======== ========
NET ASSET VALUE PER SHARE......................................... $1.00 $1.00
======== ========
</TABLE>

See accompanying notes to financial statements.

15
<PAGE> 18

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
CARDINAL CARDINAL
AGGRESSIVE CARDINAL GOVERNMENT
THE CARDINAL GROWTH BALANCED OBLIGATIONS
FUND FUND FUND FUND
------------ ---------- -------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value (cost
$170,743, $8,728, $12,708, and $141,941).. $228,493 $9,685 $14,181 $142,240
Cash........................................ 45 49 99 71
Dividends and interest receivable........... 602 3 79 910
Receivable for investment securities sold... 2,782 0 0 0
Receivable for Fund shares sold............. 140 41 16 71
Other assets (note 5)....................... 110 6 5 109
Deferred organizational cost................ 62 19 20 38
-------- ------ ------- --------
Total assets...................... 232,234 9,803 14,400 143,439
-------- ------ ------- --------
LIABILITIES:
Payable for investment securities
purchased................................. 2,056 0 0 9,327
Payable for Fund shares redeemed............ 543 40 17 342
Payable for shareholder distributions....... 0 0 0 355
Accrued investment management, accounting
and transfer agent fees (note 4).......... 129 10 11 76
Call options written, at market............. 408 57 0 0
Other accrued expenses...................... 56 27 27 41
-------- ------ ------- --------
Total liabilities................. 3,192 134 55 10,141
-------- ------ ------- --------
Commitments and contingencies (note 5)
NET ASSETS:
Paid in capital............................. 151,520 8,852 12,109 154,038
Accumulated net realized gain (loss) on
investments............................... 19,716 0 763 (21,038)
Undistributed net investment loss........... 0 (132) 0 0
Unrealized gain on investments.............. 57,806 949 1,473 298
-------- ------ ------- --------
Total net assets.................. $229,042 $9,669 $14,345 $133,298
======== ====== ======= ========
Outstanding shares of beneficial interest... 17,438 855 1,210 16,557
======== ====== ======= ========
NET ASSET VALUE PER SHARE................... $13.13 $11.31 $11.86 $8.05
============ ====== ========= ============
</TABLE>

See accompanying notes to financial statements.

16
<PAGE> 19

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

YEAR ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
--------------------- -----------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $26,454 $ 2,389
----------- --------
EXPENSES:
Investment management fees (note 4)................. 2,408 338
Transfer agent fees and expenses (note 4)........... 993 75
Accounting fees (note 4)............................ 67 18
----------- --------
Total affiliated expenses................. 3,468 431
----------- --------
Custodian fees...................................... 35 15
Professional fees................................... 75 46
Reports to shareholders............................. 103 30
Trustees' fees...................................... 31 10
Registration fees................................... 45 31
Other expenses...................................... 107 23
Amortization of deferred organizational cost (note
2)................................................ 14 2
----------- --------
Total non-affiliated expenses............. 410 157
----------- --------
Total expenses............................ 3,878 588
----------- --------
Net increase in net assets from
operations.............................. $22,576 $ 1,801
=========== =======
</TABLE>

See accompanying notes to financial statements.

17
<PAGE> 20

YEAR ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
CARDINAL CARDINAL
AGGRESSIVE CARDINAL GOVERNMENT
THE CARDINAL GROWTH BALANCED OBLIGATIONS
FUND FUND FUND FUND
------------ ---------- -------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................... $ 5,467 $ 23 $ 316 $ 0
Interest.................................... 621 19 437 11,713
------- ----- ------ -------
Total income...................... 6,088 42 753 11,713
------- ----- ------ -------
EXPENSES:
Investment management fees (note 4)......... 1,248 74 109 716
Shareholder service fees (note 4)........... 227 22 33 138
Transfer agent fees and expenses (note 4)... 223 25 23 152
Accounting fees (note 4).................... 18 3 5 39
Expenses voluntarily waived (note 4)........ (227) (22) (33) (138)
------- ----- ------ -------
Total affiliated expenses......... 1,489 102 137 907
------- ----- ------ -------
Custodian fees.............................. 26 7 11 45
Professional fees........................... 64 27 28 55
Reports to shareholders..................... 48 25 22 35
Trustees' fees.............................. 17 4 4 13
Registration fees........................... 22 15 17 24
Other expenses.............................. 47 4 10 35
Amortization of deferred organizational cost
(note 2).................................. 5 10 9 3
------- ----- ------ -------
Total non-affiliated expenses..... 229 92 101 210
------- ----- ------ -------
Total expenses.................... 1,718 194 238 1,117
------- ----- ------ -------
Net investment income (loss)...... 4,370 (152) 515 10,596
------- ----- ------ -------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions.............................. 35,032 77 856 (1,240)
Increase (decrease) in unrealized gain on
investments............................... (1,098) (63) 47 (826)
------- ----- ------ -------
Net realized gain (loss) and
increase in unrealized gain
(loss) on investments........... 33,934 14 903 (2,066)
------- ----- ------ -------
Net increase (decrease) in net
assets from operations.......... $38,304 $(138) $1,418 $ 8,530
======= ===== ====== ========
</TABLE>

See accompanying notes to financial statements.

18
<PAGE> 21

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

YEARS ENDED SEPTEMBER 30, 1996 AND 1995

<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
-------------------------- ---------------------
1996 1995 1996 1995
----------- ---------- -------- --------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income......................... $ 22,576 $ 20,010 $ 1,801 $ 2,043
----------- ---------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders........... (22,576) (20,010) (1,801) (2,043)
----------- ---------- -------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from sale of fund shares............. 1,272,767 1,052,266 159,477 154,643
Reinvestment of distributions to
shareholders................................ 22,143 19,567 1,700 1,917
Cost of fund shares redeemed.................. (1,262,409) (993,975) (166,042) (172,311)
----------- ---------- -------- --------
Increase (decrease) in net assets from
capital share transactions............. 32,501 77,858 (4,865) (15,751)
----------- ---------- -------- --------
Net increase (decrease) in net assets.... 32,501 77,858 (4,865) (15,751)
NET ASSETS -- beginning of period............. 445,374 367,516 64,780 80,531
----------- ---------- -------- --------
NET ASSETS -- end of period................... $ 477,875 $ 445,374 $ 59,915 $ 64,780
============ ========== ========= =========
</TABLE>

See accompanying notes to financial statements.

19
<PAGE> 22

YEARS ENDED SEPTEMBER 30, 1996 AND 1995

<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE
THE CARDINAL FUND GROWTH FUND
--------------------- -------------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)......................... $ 4,370 $ 6,723 $ (152) $ (86)
Net realized gain from security transactions......... 35,032 17,719 77 999
Increase (decrease) in unrealized gain on
investments........................................ (1,098) 8,122 (63) 1,158
-------- -------- ------- -------
Net increase (decrease) in net assets from
operations...................................... 38,304 32,564 (138) 2,071
-------- -------- ------- -------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income............... (4,551) (6,566) 0 0
Distribution of net realized gains from security
transactions....................................... (34,597) (15,750) (766) 0
-------- -------- ------- -------
Total distributions to shareholders................ (39,148) (22,316) (766) 0
-------- -------- ------- -------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from sale of fund shares.................... 8,454 8,266 2,503 1,809
Reinvestment of distributions to shareholders........ 36,392 20,894 743 0
Cost of fund shares redeemed......................... (41,141) (59,809) (3,107) (2,906)
-------- -------- ------- -------
Increase (decrease) in net assets from capital
share transactions.............................. 3,705 (30,649) 139 (1,097)
-------- -------- ------- -------
Net increase (decrease) in net assets.............. 2,861 (20,401) (765) 974
NET ASSETS -- beginning of period.................... 226,181 246,582 10,434 9,460
-------- -------- ------- -------
NET ASSETS -- end of period.......................... $229,042 $226,181 $ 9,669 $10,434
========= ========= ======== ========
</TABLE>

See accompanying notes to financial statements.

20
<PAGE> 23

YEARS ENDED SEPTEMBER 30, 1996 AND 1995

<TABLE>
<CAPTION>
CARDINAL CARDINAL GOVERNMENT
BALANCED FUND OBLIGATIONS FUND
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income.............................. $ 515 $ 441 $ 10,596 $ 12,473
Net realized gain (loss) from security
transactions..................................... 856 307 (1,240) (4,514)
Increase (decrease) in unrealized gain on
investments...................................... 47 1,810 (826) 8,934
-------- -------- -------- --------
Net increase in net assets from operations....... 1,418 2,558 8,530 16,893
-------- -------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income............. (519) (453) (10,496) (12,572)
Tax return of capital distribution................. 0 0 (214) 0
Distribution of net realized gains from security
transactions..................................... (483) (49) 0 0
-------- -------- -------- --------
Total distributions to shareholders.............. (1,002) (502) (10,710) (12,572)
-------- -------- -------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from sale of fund shares.................. 2,334 1,485 5,062 5,355
Reinvestment of distributions to shareholders...... 927 458 6,056 7,272
Cost of fund shares redeemed....................... (3,867) (3,437) (27,351) (34,766)
-------- -------- -------- --------
Decrease in net assets from capital share
transactions.................................. (606) (1,494) (16,233) (22,139)
-------- -------- -------- --------
Net increase (decrease) in net assets............ (190) 562 (18,413) (17,818)
NET ASSETS -- beginning of period.................. 14,535 13,973 151,711 169,529
-------- -------- -------- --------
NET ASSETS -- end of period........................ $ 14,345 $ 14,535 $133,298 $151,711
========= ========= ========= =========
</TABLE>

See accompanying notes to financial statements.

21
<PAGE> 24

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --

CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS 6.21%
U.S. Treasury Bills......... 12/19/96 $ 30,000 $ 29,655
---------
TOTAL U.S. TREASURY
OBLIGATIONS............... 29,655
---------
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY OBLIGATIONS
56.50%
Federal Farm Credit Bank
Note, 5.41%............... 10-01-96 15,000 15,000
Federal Farm Credit Bank
Note, 5.45%............... 11-01-96 30,000 30,000
Federal Farm Credit Bank
Note, 5.34%............... 12-02-96 25,000 25,000
Federal Farm Credit Bank
Note, 5.56%............... 1-02-97 10,000 10,000
Federal Farm Credit Bank
Note, 5.33%............... 1-02-97 20,000 20,000
Federal Home Loan Bank Bank
Note, 5.83%............... 9-04-97 5,000 5,000
Student Loan Marketing
Association Note, 5.44%... 10-10-96 25,000 25,000
Student Loan Marketing
Association Note, 5.43%... 11-14-96 30,000 30,000
Student Loan Marketing
Association Note, 5.38%... 12-12-96 30,000 30,000
Student Loan Marketing
Association Note, 5.38%... 1-09-97 25,000 25,000
Student Loan Marketing
Association Note, 5.46%... 2-13-97 30,000 30,000
Student Loan Marketing
Association Note, 5.41%... 3-13-97 25,000 25,000
---------
TOTAL U.S. GOVERNMENT-
SPONSORED ENTERPRISES AND
FEDERAL AGENCY
OBLIGATIONS............... 270,000
---------

<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS 41.33%
Daiwa Securities America
Inc., 5.75%
(collateralized by
$35,768,000 U.S. Treasury
Note, 8.00%, 8-15-99,
value--$37,740,641)....... 10-01-96 $ 37,000 $ 37,000
Fifth Third Bank, 5.65%
(collateralized by
$4,455,000 Government
National Mortgage
Association, 8.50%,
5-15-10, value--
$4,635,984)............... 10-01-96 4,500 4,500
Merrill Lynch Government
Securities Inc., 5.42%
(collateralized by
$69,363,977 Federal Agency
Obligations, 0.00% through
7.00%,
9-01-13 through 9-01-26,
value--$35,701,199)....... 10-01-96 35,000 35,000
The Nikko Securities Co.
International, Inc., 5.75%
(collateralized by
$43,833,744 Federal Agency
Obligations, 6.50%, 1-1-26
through 8-1-26, value--
$40,981,637).............. 10-01-96 40,000 40,000
Paine Webber Inc., 5.27%
(collateralized by
$82,295,000 Federal Agency
Obligations, 0.00%,
8-01-26,
value--$41,820,724)....... 10-04-96 41,000 41,000
Smith Barney Shearson, 5.32%
(collateralized by Federal
Agency Obligations, 6.00%
through 7.50%, 3-25-20
through 2-15-24, value--
$40,800,000).............. 10-03-96 40,000 40,000
---------
TOTAL REPURCHASE
AGREEMENTS................ 197,500
---------
TOTAL INVESTMENTS AT
AMORTIZED COST 104.04%.... $497,155
==========
</TABLE>

Percentages indicated are based on net assets.
Cost also represents cost for Federal income tax purposes.

See accompanying notes to financial statements.

22
<PAGE> 25

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --

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

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
FINAL AMORTIZED
2A-7* MATURITY FACE COST
MATURITY DATE AMOUNT (NOTE 2)
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
VARIABLE RATE DEMAND MUNICIPAL SECURITIES 95.22%
Alaska IDR Authority, Providence Medical, currently 3.70%, LOC by Krediet Bank
N.V.......................................................................... 11-01-96 6-01-10 $ 2,130 $ 2,130
Albuquerque, New Mexico Hospital Revenue, currently 3.80%...................... 10-03-96 5-15-22 2,500 2,500
Ashtabula County, Ohio, Brighton Manor Project, currently 4.05%, LOC by Bank
One Columbus, N.A............................................................ 10-02-96 12-01-16 2,400 2,400
Clackamas County, Oregon, Kaiser Permanente, currently 3.40%................... 4-01-97 4-01-14 2,175 2,175
Clackamas County, Oregon, Kaiser Permanente, currently 3.65%................... 4-01-97 4-01-14 700 700
Connecticut Development, Light & Power Co., currently 3.90%, LOC by Deutsche
Bank A.G., Bonn.............................................................. 10-02-96 9-01-28 3,400 3,400
Cornell Township, Michigan, Economic Development, IRB, currently 3.60%......... 1-08-97 3-01-15 3,100 3,100
Erie County, Ohio, Brighton Manor Project, currently 4.05%, LOC by Bank One
Columbus, N.A................................................................ 10-02-96 11-01-16 600 600
Grand Prairie, Texas Housing Finance Authority, currently 3.85%, Guaranteed by
General Electric Capital Corp................................................ 10-02-96 6-01-10 1,800 1,800
Greater Texas Student Loan Corporation, currently 4.05%, LOC by SLMA........... 9-01-97 9-01-02 2,300 2,300
Hockley County, Texas PCRB, currently 3.75%.................................... 3-01-97 3-01-14 1,750 1,750
Indiana Secondary Education Loans, currently 3.90%............................. 10-02-96 12-01-14 1,000 1,000
Jackson County, Mississippi, Water Systems, currently 3.70%.................... 2-03-97 11-01-24 1,000 1,000
Kentucky Development Financial Authority, currently 3.80%...................... 10-03-96 12-01-15 900 900
Lisle, Illinois, Multifamily Revenue, currently 3.80%, LOC by Credit Suisse.... 10-02-96 12-15-25 2,500 2,500
Livermore, California, Multifamily Revenue, currently 3.70%.................... 10-02-96 8-01-18 1,000 1,000
Louisiana Public Facility Authority, currently 3.80%, Guaranteed by General
Electric Capital Corp........................................................ 10-02-96 10-01-22 2,000 2,000
Marion County, West Virginia Waste Disposal, RB, currently 4.00%, LOC by
National Westminster......................................................... 10-02-96 10-01-17 1,000 1,000
Muldrow Oklahoma Public Works Authority, IRB, currently 4.00%, LOC by Rabobank
Nederland.................................................................... 10-01-96 2-01-15 3,000 3,000
Ohio Higher Education, RB, currently 3.80%, LOC by Bank One Columbus, N.A...... 10-03-96 12-01-06 1,200 1,200
Pennsylvania State Higher Education, RB, currently 3.80%, LOC by SLMA.......... 10-01-96 7-01-18 1,500 1,500
Platte County, Wyoming PCR, currently 4.10%.................................... 10-01-96 7-01-14 1,000 1,000
Port Anacortes, Washington, IRB, currently 3.40%............................... 10-08-96 6-15-19 2,000 2,000
Sandusky County, Ohio, Brighton Manor Project, IDR, currently 4.05%, LOC by
Bank One Columbus, N.A....................................................... 10-02-96 12-01-16 500 500
Springfield, Illinois, Second and Adams Project, IRB, currently 3.85%, LOC by
First of America Bank -- Illinois............................................ 10-01-96 12-01-15 1,140 1,140
Texas State, Veterans Housing Assistance, currently 3.80%...................... 10-02-96 12-01-16 3,000 3,000
Utah City, Utah Environmental, USX Corp. Project, IDR, currently 3.65%......... 4-01-97 11-01-17 1,000 1,000
Utah State Board of Regents Student Loans, currently 3.90%, LOC by Barclay's
Bank PLC., Guaranteed by AMBAC............................................... 10-01-96 11-01-31 1,500 1,500
Washington State Housing Financial Commission, VRN, currently 3.75%, LOC by
Harris Trust & Savings Bank.................................................. 10-01-96 1-01-10 4,000 4,000
York County, South Carolina PCRB, currently 3.80%.............................. 3-15-97 9-15-14 1,955 1,955
York County, South Carolina Saluda PCRB, currently 3.65%....................... 2-15-97 8-15-14 1,000 1,000
York County, South Carolina Saluda PCRB, currently 3.65%....................... 2-15-97 8-15-14 2,000 2,000
---------
TOTAL VARIABLE RATE DEMAND MUNICIPAL SECURITIES................................ 57,050
---------
REGULATED INVESTMENT COMPANIES 5.06%
Federated Tax-Free Trust, currently 3.37%...................................... 10-07-96 -- 3,034
---------
TOTAL REGULATED INVESTMENT COMPANIES........................................... 3,034
---------
TOTAL INVESTMENTS AT AMORTIZED COST 100.28%.................................... $60,084
==========
</TABLE>

IDR -- Industrial Development Revenue Bonds

IRB -- Industrial Revenue Bonds
PCRB -- Pollution Control Revenue Bonds
RB -- Revenue Bonds
LOC -- Irrevocable Letter of Credit
* Rule 2a-7, of the Investment Company Act of 1940, defines maturity as the
longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered
through demand.
Percentages indicated are based on net assets.
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.

23
<PAGE> 26

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

THE CARDINAL FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK 97.47%
ADVANCED MEDICAL DEVICES .43%
Biomet, Inc.*.................... 60,000 $ 982
--------
BANKS, MONEY CENTERS .48%
Citicorp......................... 12,000 1,088
--------
BEVERAGES 3.66%
Anheuser Busch Cos, Inc.......... 50,000 1,881
Coca-Cola Co. ................... 100,000 5,087
PepsiCo Inc...................... 50,000 1,413
--------
8,381
--------
CENTRAL STATES BANKS 6.80%
Banc One Corp.................... 100,000 4,100
Charter One Financial, Inc....... 105,000 4,200
Huntington Bancshares, Inc....... 125,000 2,875
KeyCorp.......................... 100,000 4,400
--------
15,575
--------
COMMODITY CHEMICALS 3.23%
Arco Chemical Co.*............... 40,000 2,000
Dow Chemical Co.................. 50,000 4,013
du Pont (EI) deNemours........... 15,700 1,386
--------
7,399
--------
COMMUNICATIONS 2.80%
Cisco Systems*................... 25,000 1,552
DSC Communications*.............. 100,000 2,500
Tellabs, Inc.*................... 15,000 1,059
U.S. Robotics Corp.*............. 20,000 1,293
--------
6,404
--------
COMPUTERS 5.03%
Compaq Computer Corp.*........... 70,000 4,489
Gateway 2000*.................... 57,000 2,729
Hewlett Packard Co............... 40,000 1,950
Micron Technology, Inc........... 10,000 305
Tektronix, Inc................... 50,000 2,043
--------
11,516
--------

<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
CONGLOMERATES 5.51%
Johnson Controls, Inc............ 50,000 $ 3,750
Tenneco, Inc..................... 50,000 2,506
Textron, Inc..................... 75,000 6,375
--------
12,631
--------
CONSUMER SERVICES .40%
Service Corp. Int'l.............. 30,000 908
--------
COSMETICS/PERSONAL CARE .79%
Gillette Co...................... 25,000 1,803
--------
DIVERSIFIED FINANCIAL SERVICES 1.26%
Beneficial Corp.................. 50,000 2,875
--------
DIVERSIFIED INDUSTRIALS 2.93%
Minnesota Mining &
Manufacturing Co............... 70,000 4,891
Potash Corp...................... 25,000 1,828
--------
6,719
--------
DIVERSIFIED TECHNOLOGY 1.81%
Texas Instruments, Inc........... 75,000 4,134
--------
ELECTRICAL COMPONENTS 6.17%
ABB AB........................... 20,000 2,100
General Electric Co.............. 120,400 10,956
Kent Electronics*................ 50,000 1,081
--------
14,137
--------
ELECTRIC UTILITIES .76%
Western Resources................ 60,000 1,747
--------
ENTERTAINMENT .69%
Disney (Walt) Co................. 25,000 1,584
--------
FOREST PRODUCTS .57%
Williamette Industries Inc....... 20,000 1,310
--------
GAS .89%
Williams Cos Inc................. 40,000 2,040
--------
<FN>

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

*Non-income producing
</TABLE>

(continued)

24
<PAGE> 27

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
THE CARDINAL FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
HEALTH CARE PRODUCTS 5.64%
Columbia/HCA Healthcare Corp..... 40,000 $ 2,275
Johnson & Johnson................ 80,000 4,100
Medtronic, Inc................... 35,000 2,244
Procter & Gamble, Co............. 35,000 3,413
Tenet Healthcare Corp.*.......... 40,000 890
--------
12,922
--------
HOUSEHOLD PRODUCTS (NON-DURABLE) .58%
Kimberly-Clark Corp.............. 15,000 1,322
--------
INDUSTRIAL/COMMERCIAL SERVICES .52%
U.S. Filter Corp.*............... 35,000 1,194
--------
INSURANCE 6.48%
American International Group..... 30,000 3,022
Marsh & McLennan Cos Inc......... 45,000 4,371
Cincinnati Financial Corp........ 130,000 7,443
--------
14,836
--------
INTEGRATED OILS 9.45%
Mobil Corp....................... 58,000 6,714
Royal Dutch Petroleum Co......... 45,000 7,026
Texaco, Inc...................... 86,000 7,912
--------
21,652
--------
MEDICAL SUPPLIES .50%
Boston Scientific Corp.*......... 20,000 1,150
--------
OILFIELD EQUIPMENT .74%
Schlumberger, Ltd................ 20,000 1,690
--------
OTHER NONFERROUS METALS 1.65%
Alcoa............................ 30,000 1,770
Worthington Industries, Inc...... 100,000 2,000
--------
3,770
--------
PAPER PRODUCTS 1.41%
Boise Cascade Corp............... 45,000 1,530
International Paper Co........... 40,000 1,700
--------
3,230
--------
FACE/ MARKET
SHARES VALUE
--------- --------
COMMON STOCK (CONTINUED)
PHARMACEUTICALS 5.61%
American Home Products Corp...... 80,000 $ 5,100
Merck & Co., Inc................. 50,000 3,519
Mylan Laboratories, Inc.......... 85,000 1,456
Pfizer, Inc...................... 35,000 2,769
--------
12,844
--------
PUBLISHING-MEDIA 2.97%
Dun and Bradstreet Corp.......... 30,000 1,789
Gannett Co., Inc................. 30,000 2,111
New York Times Co.
(Class A)...................... 40,000 1,350
Tribune Co....................... 20,000 1,560
--------
6,810
--------
RESTAURANTS .62%
McDonald's Corp.................. 30,000 1,421
--------
SEMICONDUCTOR & RELATED 6.09%
Applied Materials, Inc........... 40,000 1,105
Atmel Corp.*..................... 90,000 2,779
Intel Corp....................... 65,000 6,203
Motorola, Inc.................... 75,000 3,872
--------
13,959
--------
SOFTWARE & PROCESSING 3.26%
Microsoft Inc.*.................. 40,000 5,275
Novell, Inc.*.................... 200,000 2,200
--------
7,475
--------
SPECIALTY/RETAILERS 1.35%
Limited, Inc..................... 108,780 2,080
Lowes Cos, Inc................... 25,000 1,022
--------
3,102
--------
TELEPHONE SERVICES 3.84%
Cellular Technical Services,
Inc.*.......................... 25,000 494
GTE Corp......................... 100,000 3,850
Lucent Technologies, Inc......... 40,000 1,835
Sprint Corp...................... 40,000 1,555
Worldcom, Inc.*.................. 50,000 1,069
--------
8,803
--------
<FN>

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

*Non-income producing
</TABLE>

(continued)

25
<PAGE> 28

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
--------- --------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TOBACCO 2.55%
Philip Morris Cos, Inc........... 65,000 $ 5,834
--------
TOTAL COMMON STOCK
(COST $165,417,440)............ 223,247
--------
INDEX OPTIONS .23%
Morgan Stanley Hi-Tech Dec 350
Puts, 300 contracts............ 536
--------
TOTAL INDEX OPTIONS
(COST $572,151).............. 536
--------
REPURCHASE AGREEMENTS .35%
Fifth Third Bank 5.65%, due
10-01-96 (collateralized by
$818,000 Federal Home Loan Mtg.
Corp., 7.50%, 5-11-11, market
value-$824,135)................ 800,000 800
--------
TOTAL REPURCHASE AGREEMENTS
(COST $800,000).............. 800
--------
U.S. TREASURY OBLIGATIONS 1.71%
U.S. Treasury Bill 5.14%, due
12-19-96+...................... 2,500,000 2,442
U.S. Treasury Bill 4.86%, due
12-19-96+...................... 1,500,000 1,468
--------
TOTAL U.S. TREASURY
OBLIGATIONS
(COST $3,953,303)............ 3,910
--------
TOTAL INVESTMENTS
(COST $170,742,894)(A)
99.76%....................... $228,493
=========
</TABLE>

<TABLE>
<CAPTION>
MARKET
CONTRACTS VALUE
--------- --------
<S> <C> <C>
OPTIONS WRITTEN
Morgan Stanley Hi-Tech Index, Dec.
380 calls....................... 300 $ 278
U.S. Robotics Corp. Oct. 60
calls........................... 200 130
--------
TOTAL OPTIONS WRITTEN
(PREMIUM RECEIVED
$462,665)(A)................ $ 408
=========
</TABLE>

Percentages indicated are based on net assets.

+ Security is segregated as collateral for call options written.

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

<TABLE>
<S> <C>
Unrealized appreciation (including unrealized appreciation on
options written)................................................. $ 60,485
Unrealized depreciation............................................ (2,679)
-----------
Net unrealized appreciation........................................ $ 57,806
===========
</TABLE>

See accompanying notes to financial statements.

26
<PAGE> 29

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK 100.17%
APPAREL RETAILERS 3.43%
AnnTaylor Stores*................... 7,500 $ 127
Men's Warehouse, Inc.*.............. 4,000 100
Saks Holdings, Inc.*................ 3,000 105
------
$ 332
------
COMMUNICATIONS 21.28%
Arch Communications Group, Inc.*.... 10,000 137
Ascend Communications, Inc.......... 1,500 99
BroadBand Technologies, Inc.*....... 10,000 205
DSC Communications Corp.*........... 8,000 200
FORE Systems, Inc.*................. 2,000 83
MFS Communications, Inc.*........... 9,000 392
Motorola, Inc....................... 5,000 258
Tellabs, Inc.*...................... 6,000 424
U.S. Robotics Corp*................. 4,000 259
------
2,057
------
COMPUTERS & INFORMATION 12.16%
Compaq Computer Corp.*.............. 5,000 321
EMC Corp.*.......................... 11,000 249
Gateway 2000, Inc.*................. 5,000 239
Hewlett-Packard Co.................. 3,000 146
Silicon Graphics, Inc.*............. 10,000 221
------
1,176
------
CONSUMER SERVICES 2.60%
Cort Business Services Corp.*....... 5,000 102
H&R Block, Inc...................... 5,000 149
------
251
------
DIVERSIFIED TECHNOLOGY 7.79%
GenRad, Inc.*....................... 15,000 249
KLA Instrument Corp.*............... 3,000 68
Lecroy Corp.*....................... 5,000 130
Photon Dynamics, Inc.*.............. 7,000 50
Texas Instruments, Inc.............. 3,000 165
X-Rite, Inc......................... 5,000 91
------
753
------

<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
ELECTRICAL COMPONENTS 2.12%
Integrated Device Tech.*............ 15,000 $ 149
Pioneer Standard Electronics,
Inc............................... 5,000 56
------
205
------
HEALTH CARE PROVIDERS 4.85%
ARV Assisted Living, Inc.*.......... 5,000 73
Humana, Inc.*....................... 5,000 101
Maxicare Healthplans, Inc.*......... 10,000 190
Medaphis Corp.*..................... 7,000 105
------
$ 469
------
INDUSTRIAL/COMMERCIAL SERVICES 0.81%
Personnel Group of America, Inc.*... 3,000 78
------
MEDIA-PUBLISHING 1.04%
New York Times Co. (Class A)........ 3,000 101
------
MEDICAL/BIO TECHNOLOGY 6.30%
IDEXX Labs, Inc.*................... 2,000 91
Interneuron Pharmaceuticals,
Inc.*............................. 2,000 57
Matrix Pharmaceuticals, Inc.*....... 14,000 112
Vertex Pharmaceuticals, Inc.*....... 8,000 235
Vivus, Inc.*........................ 3,000 114
------
609
------
MEDICAL DEVICES 5.35%
Biomet, Inc.*....................... 15,000 246
Dentsply International, Inc.*....... 2,000 89
Eclipse Surgical Tech.*............. 2,500 30
Respironics*........................ 4,000 97
Uromed Corp.*....................... 5,000 55
------
517
------
PHARMACEUTICALS 5.57%
Duramed Pharmaceuticals, Inc.*...... 3,000 43
Mylan Labs, Inc..................... 10,000 171
TEVA Pharmaceutical Industries...... 7,000 325
------
539
------
RESTAURANTS 0.94%
Lone Star Steakhouse/Saloon*........ 3,000 91
------
<FN>

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

* Non-income producing
</TABLE>

(continued)

27
<PAGE> 30

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
SEMICONDUCTOR & RELATED 10.48%
Analog Devices, Inc.*............... 8,000 $ 217
Atmel Corp.*........................ 8,000 247
Intel Corp.......................... 4,000 381
Lattice Semiconductor Corp.*........ 3,000 87
National Semiconductor Corp.*....... 4,000 81
------
1,013
------
SOFTWARE & PROCESSING 12.23%
Advent Software, Inc.*.............. 3,000 90
Computer Sciences Corp.*............ 4,500 345
Microsoft Corp.*.................... 2,000 264
Optical Data Systems Inc.*.......... 10,000 170
SpaceTec IMC Corp.*................. 15,000 165
Sybase, Inc.*....................... 10,000 149
------
$1,183
------
TELEPHONE SERVICES/SYSTEMS 3.22%
AirTouch Communications, Inc.*...... 7,000 193
Pacific Gateway Exchange, Inc.*..... 4,000 118
------
311
------
TOTAL COMMON STOCK
(COST $8,728,447)............... 9,685
------
TOTAL INVESTMENTS
(COST $8,728,447)(A) 100.17%.... $9,685
======
</TABLE>

<TABLE>
<CAPTION>
MARKET
CONTRACTS VALUE
--------- ------
<S> <C> <C>
OPTIONS WRITTEN
U.S. Robotics Corp., Oct. 55
calls........................... 20 $ 20
U.S. Robotics Corp., Oct. 60
calls........................... 20 13
TEVA Pharmaceutical Industries,
Oct. 40 calls................... 25 17
TEVA Pharmaceutical Industries,
Oct. 45 calls................... 25 7
------
TOTAL OPTIONS WRITTEN
(PREMIUM RECEIVED
$49,459)(A)................... $ 57
=======
</TABLE>

Percentages indicated are based on net assets.

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

<TABLE>
<S> <C>
Unrealized appreciation..................................................................... $ 1,867
Unrealized depreciation (including unrealized depreciation on options written).............. (918)
-----------
Net unrealized appreciation................................................................. $ 949
==========
<FN>

* Non-income producing
</TABLE>

See accompanying notes to financial statements.

28
<PAGE> 31

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --

CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMON STOCK 43.24%
American Express Co............... 8,000 $ 369
American Health Properties,
Inc............................. 10,000 219
Arco Chemical Co.**............... 5,000 250
Banc One Corp..................... 5,000 205
C-Cor Electronics, Inc.*.......... 5,000 81
Cinergy Corp...................... 7,500 232
Commerce Bancshares, Inc.......... 5,512 215
Consolidated Papers, Inc.......... 5,000 260
Dow Chemical Co................... 4,500 360
Excel Industries, Inc............. 12,000 204
Ford Motor Co..................... 4,898 153
Forest Labs, Inc.*................ 3,000 108
GTE Corp.......................... 5,000 193
ICG Communications, Inc.*......... 12,000 252
Mellon Bank Corp.................. 4,000 237
Monsanto Co....................... 12,000 438
Mutual Risk Management Ltd........ 6,666 193
National Semiconductor Co.*....... 7,500 151
Neogen Corp.*..................... 10,000 80
Novell, Inc.*..................... 10,000 110
New York Times Co. (Class A)...... 5,000 169
PNC Bank Corp..................... 5,000 167
PLD Telekom, Inc.*................ 15,000 109
Progress Software Corp.*.......... 10,000 160
Repap Enterprises, Inc............ 25,000 92
Sequent Computer Systems, Inc.*... 12,500 163
SIGCORP, Inc...................... 6,000 205
Structural Dynamics Research
Corp.*.......................... 5,000 119
Tribune Co........................ 5,000 390
Trinova Corp...................... 6,000 189
Universal Foods Corp.............. 4,000 130
-------
TOTAL COMMON STOCK
(COST $4,900,057)............. 6,203
-------
CONVERTIBLE PREFERRED STOCK 5.31%
AirTouch, (Series C).............. 3,000 143
Forest Oil Corp.*................. 12,000 122
Glendale Federal 8.75%, (Series
E).............................. 4,000 188
U.S. Surgical Corp., (Series A)... 7,500 310
-------
TOTAL CONVERTIBLE PREFERRED
STOCK (COST $629,135)......... 763
-------

<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
PREFERRED STOCK 7.71%
American General Capital, 8.45%
MIP............................. 7,500 $ 192
Chase Manhatten Corp., 8.40%,
Cumulative...................... 7,500 191
Enron Capital Resources, 9.00%,
MIP (Series A).................. 6,000 157
Textron Capital I, 7.92%.......... 7,500 181
Time Warner Capital I, 8.875%..... 7,500 188
UtiliCorp Capital, 8.875%, MIP.... 7,500 197
-------
TOTAL PREFERRED STOCK
(COST $1,097,200)............. 1,106
-------
CONVERTIBLE CORPORATE BONDS 6.80%
Ashland Oil, Inc., 6.75%,
7-01-04......................... 150,000 154
Big B Inc., 6.50%, 3-15-03........ 150,000 205
Enserch Corp., 6.375%, 4-01-02.... 150,000 150
Gran Care, 6.50%, 1-15-03......... 100,000 105
Magna Int'l., 5.00%, 10-15-02..... 200,000 213
Repap Enterprises, Inc., 8.50%,
8-01-97......................... 150,000 148
-------
TOTAL CONVERTIBLE CORPORATE
BONDS (COST $899,386)......... 975
-------
U.S. GOVERNMENT AGENCY OBLIGATIONS 9.29%
GNMA I, 7.00%, 11-15-08........... 233,762 233
GNMA I, 7.50%, 6-15-23............ 257,556 256
GNMA II, 7.50%, 6-20-23........... 302,106 299
GNMA II, 8.00%, 7-20-23........... 289,742 293
GNMA II, 8.00%, 8-20-26........... 249,778 251
-------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST
$1,385,180)................... 1,332
-------
<FN>

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

* Non-income producing
</TABLE>

(continued)

29
<PAGE> 32

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
CORPORATE BONDS 18.14% ------- -------
<S> <C> <C>
American Airlines (Series 91A)
10.18%, 1-02-13................. 250,000 $ 291
Consumers Power, 7.50%, 6-01-02... 300,000 305
Dole Foods, 7.00%, 5-15-03........ 200,000 197
Duquesne Light Co., 6.63%,
6-15-04......................... 300,000 285
General Motors Acceptance Corp.,
7.00%, 9-15-02.................. 200,000 200
Kemper Corp., 6.88%, 9-15-03...... 250,000 247
Limited Inc., 7.50%, 3-15-23...... 250,000 218
Pulte Homes, 7.00%, 12-15-03...... 150,000 145
Tele-Communications, Inc., 7.25%,
8-01-05......................... 250,000 233
Time Warner Entertainment Co.,
7.25%, 9-01-08.................. 250,000 235
U.S. West Capital Funding Corp.,
6.31%, 11-01-05................. 250,000 246
-------
TOTAL CORPORATE BONDS
(COST $2,596,985)............. 2,602
-------

<CAPTION>
FACE/ MARKET
SHARES VALUE
------- -------
<S> <C> <C>
COMMERCIAL PAPER 4.88%
General Electric Capital Corp.,
5.28%, 10-02-96................. 700,000 $ 700
-------
TOTAL COMMERCIAL PAPER
(COST $700,000)............... 700
-------
REPURCHASE AGREEMENTS 3.49%
Fifth Third Bank 5.65%,
10-01-96 (collateralized by
$512,000 Federal Home Loan Mtg.
Corp., 7.50%, 5-11-11,
value--$518,933)................ 500,000 500
-------
TOTAL REPURCHASE AGREEMENTS
(COST $500,000)............... 500
-------
TOTAL INVESTMENTS 98.86%
(COST $12,707,944)(A)......... $14,181
========
</TABLE>

Percentages indicated are based on net assets.

GNMA -- Government National Mortgage Association

MIP -- Monthly Income Payment

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

<TABLE>
<S> <C>
Unrealized appreciation..................................................................... $ 1,753
Unrealized depreciation..................................................................... (280)
-----------
Net unrealized appreciation................................................................. $ 1,473
==========
</TABLE>

See accompanying notes to financial statements.

30
<PAGE> 33

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (PRINCIPAL AMOUNTS AND MARKET VALUE IN THOUSANDS) --

CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
-------- --------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS 104.61%
GNMA CLC Notes, 7.375% maturing
1-15-98......................... $ 2,613 $ 2,630
GNMA CLC Notes, 7.750% maturing
12-15-98........................ 2,151 2,112
GNMA CLC Notes, 8.000% maturing
11-15-97 through 10-15-98....... 5,351 5,304
GNMA CLC Notes, 8.875% maturing
5-15-35......................... 1,262 1,329
GNMA PL Notes, 8.000% maturing
11-15-97 through 8-15-35........ 15,663 15,909
GNMA PL Notes, 8.125% maturing
6-15-29......................... 494 503
GNMA PL Notes, 8.150% maturing
1-15-24......................... 2,315 2,374
GNMA PL Notes, 8.250% maturing
3-15-97 through 11-15-34........ 8,059 8,221
GNMA PL Notes, 8.500% maturing
6-15-22 through 3-15-30......... 8,210 8,472
GNMA PL Notes, 9.000% maturing
10-15-21 through 12-15-34....... 7,339 7,637
GNMA PL Notes, 9.250% maturing
3-15-30 through 2-15-33......... 1,652 1,740
GNMA PL Notes, 9.500% maturing
1-15-19......................... 187 199
GNMA PL Notes, 10.250% maturing
12-15-22........................ 1,633 1,715
GNMA PL Notes, 10.500% maturing
7-15-14......................... 1,020 1,080
GNMA I Notes, 8.000% maturing
5-15-22 through 9-15-26......... 14,896 15,073
GNMA I Notes, 8.500% maturing
5-15-16 through 8-15-17......... 9,400 9,782
GNMA I Notes, 8.750% maturing
12-15-16 through 1-15-25........ 1,369 1,437
GNMA I Notes, 9.000% maturing
5-15-16 through 4-15-21......... 19,452 20,613

<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
-------- --------
<S> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA I Notes, 11.000% maturing
1-15-10 through 6-15-20......... $ 4,949 $ 5,530
GNMA II Notes, 8.000% maturing
5-20-22 through 12-20-25........ 2,803 2,819
GNMA II Notes, 9.000% maturing
10-20-15 through 10-20-19....... 8,625 9,075
GNMA II Notes, 9.500% maturing
2-20-18 through 12-20-22........ 1,886 2,015
GNMA II Notes, 10.000% maturing
1-20-14 through 2-20-21......... 8,920 9,450
Federal Home Loan Mtg. Corp.,
7.000% maturing 1-01-11......... 2,809 2,778
Federal Home Loan Mtg. Corp.,
7.500% maturing 5-01-10 through
6-01-10......................... 1,632 1,643
--------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS (COST
$139,141,465)............... 139,440
--------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY
U.S. GOVERNMENT OBLIGATIONS 2.10%
Fifth Third Bank, 5.650%, dated
9-30-96, due 10-01-96
(collateralized by $2,863,000
Federal Home Loan Mtg. Corp.,
7.50%, 5-11-11,
value--$2,884,472)................ 2,800 2,800
--------
TOTAL REPURCHASE AGREEMENTS
(COST $2,800,000)........... 2,800
--------
TOTAL INVESTMENTS
(COST $141,941,465)(A)
106.71%..................... $142,240
=========
</TABLE>

Percentages indicated are based on net assets.

CLC -- Construction Loan Contract

GNMA -- Government National Mortgage Association

PL -- Project Loan

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

<TABLE>
<S> <C>
Unrealized appreciation......................................................................... $ 1,562
Unrealized depreciation......................................................................... (1,264)
-------
Net unrealized appreciation..................................................................... $ 298
======
</TABLE>

See accompanying notes to financial statements.

31
<PAGE> 34

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

SEPTEMBER 30, 1996
1. ORGANIZATION

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

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

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

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

The Cardinal Fund Inc. was acquired by The Cardinal Fund

Cardinal Government Obligations Fund was acquired by Cardinal Government
Obligations Fund

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

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies that the Group
follows in the preparation of its financial statements and the calculation of
daily net asset values. The policies are in conformity with generally accepted
accounting principles and the Investment Company Act of 1940 (the "Act"), as
amended. The preparation of these financial statements requires the management
of the Group to make estimates and assumptions which affect the reported amounts
of assets and liabilities as of September 30, 1996 and the income and expenses
reported for the period. Actual results could differ significantly from those
estimates.

SECURITIES VALUATION Investments in Cardinal Government Securities Money Market
Fund and Cardinal Tax Exempt Money Market Fund (the "money market funds") are
valued at amortized cost, which approximates the market value. Any premiums and
discounts are amortized on a straight-line method to the maturity of the
particular security. The use of the amortized cost method requires that the
money

(continued)

32
<PAGE> 35

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

SEPTEMBER 30, 1996

market funds purchase only securities with a remaining maturity of 397 calendar
days or less (longer if certain maturity shortening provisions in Rule 2a-7, of
the Act, apply) and maintain a dollar weighted portfolio maturity of 90 days or
less.

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

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

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

DEFERRED ORGANIZATIONAL COST Costs incurred with the initial organization of
the Group have been deferred and are being amortized on a straight-line basis
over the 60 month period from the commencement of operations on June 24, 1993.
In the event that any of the initial shares of the Original Portfolios are
redeemed by CMC or any subsequent holders thereof during the 60 month
amortization period, the Group will reduce the redemption proceeds otherwise
payable by any unamortized initial organizational costs in the same proportion
as the number of initial shares of the Original Portfolios being redeemed bears
to the number of initial shares of the Original Portfolios outstanding at the
time of redemption.

The costs incurred with the acquisitions of the Acquired Funds have been
deferred and are being amortized over the 60 month period beginning May 1, 1996,
the effective date of the acquisitions.

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

(continued)

33
<PAGE> 36

SEPTEMBER 30, 1996

DISTRIBUTIONS TO SHAREHOLDERS The money market funds and Cardinal Government
Obligations Fund declare dividends from net investment income daily and pay them
to shareholders monthly. The Cardinal Fund, Cardinal Aggressive Growth Fund and
Cardinal Balanced Fund declare and pay dividends from net investment income, if
any, quarterly. Realized capital gains, if any, are declared and paid annually
for the Group. Distributions of net investment income and realized capital gains
are determined in accordance with the Internal Revenue Code and may differ from
those calculated in accordance with generally accepted accounting principles.
For the period ended September 30, 1996, approximately $77,000 in net investment
losses for the Cardinal Aggressive Growth Fund were used to offset short-term
capital gains for Federal income tax purposes. In addition, approximately
$132,000, representing a portion of the Cardinal Aggressive Growth Fund's
redemptions during the period ended September 30, 1995 were classified as
capital gain distributions under income equalization rates allowed for Federal
income tax purposes.

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

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

3. PURCHASES AND SALES OF SECURITIES

The purchases and sales of investment securities (excluding short-term
securities) for the year ended September 30, 1996 are as follows:

<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
The Cardinal Fund................................ $122,662,180 $139,899,369
Cardinal Aggressive Growth Fund.................. 6,009,928 4,625,459
Cardinal Balanced Fund........................... 3,615,769 2,314,135
Cardinal Government Obligations Fund............. 56,071,163 48,602,463
</TABLE>

4. TRANSACTIONS WITH AFFILIATES

CMC, an affiliated company, acts as the Investment Adviser, Fund Accountant and
Transfer Agent for the Group under contracts monitored and annually approved by
the Board of Trustees. CMC receives a fee

(continued)

34
<PAGE> 37

SEPTEMBER 30, 1996

based on the average net assets of each portfolio, plus reimbursement of
out-of-pocket costs, for these services as outlined below as of September 30,
1996:

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

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

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

CMC receives an annual fee of .03% of the average daily net assets up to $100
million and .01% of any balance over $100 million for Fund Accounting services.

TOC serves as the Group's distributor. TOC receives fees from the Fund for
providing services under the Distribution and Shareholder Service Plan (the
"Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940. Under the
Plan, the non-money market funds pay TOC an annual fee not to exceed .25% of the
average net assets of those funds for providing distribution and shareholder
services. For the year ended September 30, 1996 TOC voluntarily waived all fees
from the Plan for the Group.

TOC reported to the Group that it received the following commissions (loads),
after discounts to dealers, from the sale of shares of the portfolios of the
Group for the year ended September 30, 1996:

<TABLE>
<S> <C>
The Cardinal Fund................................................... $ 170,108
Cardinal Aggressive Growth Fund..................................... 138,327
Cardinal Balanced Fund.............................................. 44,967
Cardinal Government Obligations Fund................................ 24,561
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

The portfolios of the Group have available lines of credit with Fifth Third Bank
of Cincinnati, the Custodian, which were unused at September 30, 1996. When
used, borrowings under this arrangement are secured by investment securities and
can be used only for short-term needs of the borrowing portfolio. Compensating

(continued)

35
<PAGE> 38

SEPTEMBER 30, 1996

balances are not required and the interest is calculated at 106% of the
Custodian's prime lending rate. The amounts available under this arrangement are
as follows:

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

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

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

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

6. FEDERAL INCOME TAXES

For Federal income tax purposes, at September 30, 1996 Cardinal Government
Obligations Fund had a capital loss carryforward available to offset future
capital gains, if any, that will expire over the next eight years. Approximately
$2,600,000 of the capital loss carryforward expired during the year ended
September 30, 1996. Cardinal Government Obligations Fund will not declare any
capital gain distributions

(continued)

36
<PAGE> 39

SEPTEMBER 30, 1996

until the carryforward amount has been offset or expired. The amount of the
capital loss carryforward and the years they expire are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
-------------------------------------------- ------------
<S> <C>
1997........................................ $ 1,943,362
1998........................................ 1,867,822
1999........................................ 194,311
2001........................................ 1,489,408
Thereafter.................................. 14,206,099
------------
$ 19,701,002
============
</TABLE>

Additionally, at September 30, 1996 Cardinal Government Securities Money Market
Fund had a capital loss carryforward of approximately $312,000 available to
offset future capital gains, if any. This capital loss carryforward will expire
in 2002.

7. CAPITAL SHARES TRANSACTIONS

Transactions in capital shares for the Group for the years ended September 30,
1996 and 1995 were as follows:

<TABLE>
<CAPTION>
CARDINAL GOVERNMENT CARDINAL TAX EXEMPT
SECURITIES MONEY MARKET FUND MONEY MARKET FUND
-------------------------------- --------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 445,373,567 367,516,480 64,779,828 80,531,046
-------------- -------------- -------------- --------------
Share Transactions:
Issued........................... 1,272,767,547 1,052,265,662 159,476,954 154,643,119
Reinvested....................... 22,142,798 19,567,048 1,700,566 1,916,504
Redeemed......................... (1,262,408,528) (993,975,623) (166,042,433) (172,310,841)
-------------- -------------- -------------- --------------
Net change in shares............. 32,501,817 77,857,087 (4,864,913) (15,751,218)
-------------- -------------- -------------- --------------
End of period.................... 477,875,384 445,373,567 59,914,915 64,779,828
============= ============= ============= =============
</TABLE>

(continued)

37
<PAGE> 40

SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
THE CARDINAL FUND CARDINAL AGGRESSIVE GROWTH FUND
-------------------------------- --------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 17,099,016 19,373,221 843,808 951,438
-------------- -------------- -------------- --------------
Share Transactions:
Issued........................... 650,183 677,512 218,186 160,511
Reinvested....................... 2,834,816 1,830,954 66,252 0
Redeemed......................... (3,145,938) (4,782,671) (273,387) (268,141)
-------------- -------------- -------------- --------------
Net change in shares............. 339,061 (2,274,205) 11,051 (107,630)
-------------- -------------- -------------- --------------
End of period.................... 17,438,077 17,099,016 854,859 843,808
============= ============= ============= =============
</TABLE>

<TABLE>
<CAPTION>
CARDINAL GOVERNMENT
CARDINAL BALANCED FUND OBLIGATIONS FUND
-------------------------------- --------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPT. 30, 1996 SEPT. 30, 1995 SEPT. 30, 1996 SEPT. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 1,261,727 1,411,294 18,543,620 21,285,926
-------------- -------------- -------------- --------------
Share Transactions:
Issued........................... 201,799 140,750 622,614 669,572
Reinvested....................... 81,266 44,785 745,343 908,617
Redeemed......................... (334,795) (335,102) (3,354,343) (4,320,495)
-------------- -------------- -------------- --------------
Net change in shares............. (51,730) (149,567) (1,986,386) (2,742,306)
-------------- -------------- -------------- --------------
End of period.................... 1,209,997 1,261,727 16,557,234 18,543,620
============= ============= ============= =============
</TABLE>

38
<PAGE> 41

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

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT ACTIVITIES:
Net investment income............................ 0.05 0.05 0.03 0.02 0.04
------- ------- ------- ------- -------
Total from Investment Activities............. 0.05 0.05 0.03 0.02 0.04
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.05) (0.05) (0.03) (0.02) (0.04)
------- ------- ------- ------- -------
Total Distributions.......................... (0.05) (0.05) (0.03) (0.02) (0.04)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total return..................................... 4.70% 4.98% 2.84%* 2.41% 3.58%
Net Assets at end of period (000)................ 477,875 445,374 367,516 402,758 472,521
Ratio of expenses to average net assets.......... 0.81% 0.81% 0.85% 0.79% 0.76%
Ratio of net investment income to average
net assets..................................... 4.74% 4.92% 2.94% 2.38% 3.52%
<FN>

- ---------------
* During the year ended September 30, 1994, CMC contributed $1,151,186 to
Cardinal Government Securities Trust, the fund's predecessor, to offset losses
incurred by the predecessor. Without the capital contribution, the 1994 total
return would have been 2.55%.
</TABLE>

See notes to financial statements.

39
<PAGE> 42

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- CARDINAL TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT ACTIVITIES:
Net investment income............................ 0.03 0.03 0.02 0.02 0.03
------- ------- ------- ------- -------
Total from Investment Activities............. 0.03 0.03 0.02 0.02 0.03
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.03) (0.03) (0.02) (0.02) (0.03)
------- ------- ------- ------- -------
Total Distributions.......................... (0.03) (0.03) (0.02) (0.02) (0.03)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return..................................... 2.67% 3.02% 1.78% 1.81% 2.62%
Net Assets at end of period (000)................ 59,915 64,780 80,531 91,159 70,054
Ratio of expenses to average net assets.......... 0.89% 0.81% 0.76% 0.77% 0.76%
Ratio of net investment income to average
net assets..................................... 2.66% 2.99% 1.78% 1.80% 2.59%
</TABLE>

See notes to financial statements.

40
<PAGE> 43

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- THE CARDINAL FUND
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
-----------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 13.23 $ 12.73 $ 12.91 $ 12.95 $ 11.88
INVESTMENT ACTIVITIES:
Net investment income............................ 0.25 0.36 0.31 0.32 0.35
Net realized and unrealized gain on
investments.................................... 1.95 1.32 0.12 0.55 1.37
------- ------- ------- ------- -------
Total from Investment Activities............... 2.20 1.68 0.43 0.87 1.72
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.26) (0.35) (0.33) (0.29) (0.36)
From net realized gains.......................... (2.04) (0.83) (0.28) (0.62) (0.29)
------- ------- ------- ------- -------
Total Distributions............................ (2.30) (1.18) (0.61) (0.91) (0.65)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 13.13 $ 13.23 $ 12.73 $ 12.91 $ 12.95
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)................ 17.96% 14.84% 3.38% 6.98% 15.05%
Net Assets at end of period (000)................ 229,042 226,181 246,581 282,125 261,392
Ratio of expenses to average net assets.......... 0.75% 0.70% 0.72% 0.68% 0.67%
Ratio of net investment income after expenses to
average net assets............................. 1.90% 2.89% 2.40% 2.46% 2.83%
Ratio of incurred expenses to average net assets
(a)............................................ 0.85% 0.70% 0.72% 0.68% 0.69%
Ratio of net investment income after incurred
expenses to average net assets (a)............. 1.80% 2.89% 2.40% 2.46% 2.83%
Portfolio turnover rate.......................... 57.93% 19.78% 23.20% 11.11% 6.22%
Average commission rate paid (b)................. $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08
<FN>

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

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

See notes to financial statements.

41
<PAGE> 44

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

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

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

* Commencement of operations.

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

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

See notes to financial statements.

42
<PAGE> 45

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

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

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

* Commencement of operations.

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

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

See notes to financial statements.

43
<PAGE> 46

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

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996
-----------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING......................... $ 8.18 $ 7.96 $ 8.63 $ 8.95 $ 8.99
INVESTMENT ACTIVITIES:
Net investment income............................ 0.60 0.64 0.66 0.74 0.80
Net realized and unrealized gain (loss) on
investments.................................... (0.12) 0.22 (0.68) (0.32) (0.04)
------- ------- ------- ------- -------
Total from Investment Activities............... 0.48 0.86 (0.02) 0.42 0.76
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income....................... (0.60) (0.64) (0.65) (0.74) (0.80)
Tax return of capital............................ (0.01) 0.00 0.00 0.00 0.00
------- ------- ------- ------- -------
Total Distributions............................ (0.61) (0.64) (0.65) (0.74) (0.80)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................ $ 8.05 $ 8.18 $ 7.96 $ 8.63 $ 8.95
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)................ 6.04% 11.27% (0.27)% 4.83% 8.87%
Net Assets at end of period (000)................ 133,298 151,711 169,529 208,883 172,139
Ratio of expenses to average net assets.......... 0.78% 0.76% 0.75% 0.73% 0.76%
Ratio of net investment income after charged
expenses to average net assets................. 7.39% 7.93% 7.88% 8.32% 8.89%
Ratio of incurred expenses to average net assets
(a)............................................ 0.88% 0.76% 0.75% 0.73% 0.76%
Ratio of net investment income after incurred
expenses to average net assets (a)............. 7.29% 7.93% 7.88% 8.32% 8.89%
Portfolio turnover rate.......................... 33.58% 36.71% 21.95% 24.94% 17.15%
<FN>

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

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

See notes to financial statements.

44
<PAGE> 47

[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 48

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

- ---------------------------------------------------------
INVESTMENT ADVISER
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215

TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215

DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215

CUSTODIAN
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 The
Cardinal Group and is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective Prospectus.

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

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

[CARDINAL GROUP LOGO]

-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1996
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND

CARDINAL TAX EXEMPT
MONEY MARKET FUND

THE CARDINAL FUND

CARDINAL AGGRESSIVE GROWTH FUND

CARDINAL BALANCED FUND

CARDINAL GOVERNMENT
OBLIGATIONS FUND

[THE OHIO COMPANY LOGO]

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