CARDINAL GROUP
N-30D, 1996-06-07
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<PAGE>   1
 
- ----------------------------------------------------------
- ---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
 
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of Cardinal
Aggressive Growth Fund and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective Prospectus.
 
- ---------------------------------------------------------
- ----------------------------------------------------------
        [CARDINAL LOGO]
             CARDINAL
            AGGRESSIVE
              GROWTH
               FUND
- ----------------------------------
        SEMI-ANNUAL REPORT
- ----------------------------------

          MARCH 31, 1996
         The Ohio Company
- ---------------------------------------------------------
- ----------------------------------------------------------
<PAGE>   2
 
MESSAGE TO CARDINAL AGGRESSIVE GROWTH FUND SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of Cardinal Aggressive Growth
Fund for the six month period ending March 31, 1996. The complete financial
statements, and portfolio of investment, can be found on the following pages
along with a message from the Fund's portfolio manager. We encourage you to read
this information.
 
For the six month period, the Cardinal Aggressive Growth Fund reported a total
return of -1.5% in a very arduous market environment and finished with $9.8
million in assets and a net asset value of $11.27.
 
The pursuit of appreciation of capital continues to attract investors to
Cardinal Aggressive Growth Fund. We remain committed to achieving this goal and
providing you with superior service.
 
If you would like more information about Cardinal Aggressive Growth Fund, please
contact your Account Executive or call us direct at our toll-free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,

/S/ Keith Allen                   /s/ Frank W. Siegel, CFA 
H. Keith Allen                    Frank W. Siegel, CFA
Chairman                          President
 
                                                                              1
<PAGE>   3
 
- ------------------------------------------------------
 
      MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of the Cardinal Aggressive Growth Fund
Trustees and Officers, we welcome and extend our
appreciation to shareholders for their support during
the first half of our fiscal year.
 
As most investors are aware, the equity markets were
quite strong during the past six months (the first
half of The Fund's fiscal year). Declining interest
rates, large flows of capital into equity mutual funds
and continued modest economic growth all provided
incentives for investors to purchase stock.
 
Despite the above, the fourth quarter of 1995 and
early first quarter of 1996 proved to be a more
difficult market environment for smaller
capitalization stocks and more importantly, technology
issues. Fears that both consumers and businesses were
decreasing their demand for computers, computer
equipment and software, and an overall decline in
cellular communication equipment were running rampant
in the marketplace.
 
As quarterly and year-end earnings were reported, it
became evident that although earnings were positive,
in general they did not meet previously forecasted
expectations. We view this unique period as one which
provided an opportunity to purchase many selected
issues at prices well below their year earlier highs.
In many instances stocks were being purchased 20-50%
below their highs of 1995.
 
The Fund has continued to pursue many smaller
capitalization issues as well as business and medical
technology stocks. These stocks represent companies
which have very favorable long-term prospects of
achieving earnings growth in excess of many larger
companies, in the foreseeable future. Investments
which have had the greatest positive impact on the
portfolio during this period include: Genrad, Cort,
Hewlett-Packard, MFS Communications and Tellabs Inc.
 
We continue to dedicate our resources toward achieving
above average returns for our shareholders and
implementing investment strategies which will achieve
the objectives of the Fund and the required results
necessary to maintain your confidence. We believe that
over time, we will be successful in building
shareholder wealth.
 

/s/ H. Keith Allen          /s/ Frank W. Siegel         /s/ John Bevilacqua  
H. Keith Allen              Frank W. Siegel             John Bevilacqua
Chairman                    President                   Vice President
 
2
<PAGE>   4
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                FACE/                MARKET
                                                                                SHARES               VALUE
                                                                               --------            ----------
<S>                                                                            <C>                 <C>
COMMON STOCK 99.30%
APPAREL RETAILERS 1.37%
Ann Taylor Stores Corporation*......................................              7,500            $      135
                                                                                                   ----------
ADVANCED MEDICAL DEVICES 2.14%
Biomet, Inc.*.......................................................             15,000                   210
                                                                                                   ----------
BIO TECHNOLOGY 5.99%
Matrix Pharmaceuticals*.............................................             14,000                   324
Vertex Pharmaceuticals*.............................................             10,000                   265
                                                                                                   ----------
                                                                                                          589
                                                                                                   ----------
BROADCASTING 3.61%
Westcott Communications*............................................             20,000                   355
                                                                                                   ----------
COMMERCIAL SERVICES 4.44%
Medaphis Corporation*...............................................              9,000                   437
                                                                                                   ----------
COMMUNICATIONS 21.05%
Airtouch Communications*............................................             10,000                   311
Arch Communications Group*..........................................             10,000                   231
BroadBand Technologies*.............................................             10,000                   255
DSC Communications Corp.*...........................................              8,000                   216
MFS Communications Co., Inc.*.......................................              6,500                   405
Motorola, Inc.......................................................              5,000                   265
Tellabs, Inc.*......................................................              8,000                   387
                                                                                                   ----------
                                                                                                        2,070
                                                                                                   ----------
COMPUTERS/INFORMATION 10.95%
Compaq Computer Corp.*..............................................              9,000                   348
E M C Corporation*..................................................             11,000                   241
Hewlett Packard.....................................................              3,000                   282
Microsoft Corporation*..............................................              2,000                   206
                                                                                                   ----------
                                                                                                        1,077
                                                                                                   ----------
CONSUMER SERVICES 6.85%
Banta Corporation...................................................              9,000                   241
Block, H&R, Inc.....................................................              7,000                   253
Cort Business Services*.............................................             10,000                   180
                                                                                                   ----------
                                                                                                          674
                                                                                                   ----------
DIVERSIFIED FINANCIAL SERVICES 2.29%
LeCroy Corporation*.................................................              5,000                    73
Texas Instruments...................................................              3,000                   153
                                                                                                   ----------
                                                                                                          225
                                                                                                   ----------
</TABLE>
 
*Non-income producing
                                                                     (continued)
 
                                                                               3
<PAGE>   5
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
COMMON STOCK (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                               FACE/                 MARKET
                                                                               SHARES                VALUE
                                                                              --------            ------------
<S>                                                                           <C>                 <C>
ELECTRICAL COMPONENTS 3.89%
GenRad, Inc.*......................................................             30,000            $        383
                                                                                                  ------------
HEALTH-CARE PROVIDERS 5.09%
Humana, Inc.*......................................................             10,000                     251
Maxicare Healthplans, Inc.*........................................             10,000                     249
                                                                                                  ------------
                                                                                                           501
                                                                                                  ------------
PHARMACEUTICALS 3.20%
Mylan Laboratories, Inc............................................             15,000                     315
                                                                                                  ------------
SEMICONDUCTORS 15.35%
Advanced Micro Devices*............................................              9,000                     155
Analog Devices, Inc.*..............................................             12,000                     336
Atmel Corporation*.................................................             10,000                     255
Integrated Device Technologies*....................................             25,000                     284
Intel Corporation..................................................              5,000                     284
National Semiconductor*............................................             14,000                     194
                                                                                                  ------------
                                                                                                         1,509
                                                                                                  ------------
SOFTWARE/PROCESSING 12.58%
Computer Sciences Corp.*...........................................              4,500                     317
Optical Data Systems Corp.*........................................             10,000                     205
Silicon Graphics Incorporated*.....................................             10,000                     250
SpaceTec IMC*......................................................             15,000                     233
Sybase Incorporated*...............................................             10,000                     233
                                                                                                  ------------
                                                                                                         1,237
                                                                                                  ------------
TOBACCO .51%
Philip Morris Sept. 95 puts*.......................................              5,000                      50
                                                                                                  ------------
  TOTAL INVESTMENTS (COST $8,824,074) 99.30%.......................                               $      9,765
                                                                                                    ==========
</TABLE>
 
*Non-income producing
 
Cost also represents cost for Federal income tax purposes.
 
See accompanying notes to financial statements.
 
4
<PAGE>   6
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
ASSETS
Investments in securities, at value (cost $8,824)................................    $  9,765
Cash.............................................................................          79
Receivable for Fund shares sold..................................................           5
Dividends receivable.............................................................           4
Deferred organizational cost.....................................................          22
Prepaid expenses.................................................................           6
                                                                                     --------
     Total assets................................................................       9,881
                                                                                     --------
LIABILITIES
Payable for fund shares redeemed.................................................           2
Accrued investment management, shareholder service, accounting and transfer agent
  fees (note 3)..................................................................           9
Other accrued expenses...........................................................          36
                                                                                     --------
     Total liabilities...........................................................          47
                                                                                     --------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 872,531 outstanding no par value shares of beneficial
  interest (unlimited number of shares authorized)...............................    $  9,834
                                                                                     ========
NET ASSET VALUE PER SHARE........................................................    $  11.27
                                                                                     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                             5
<PAGE>   7
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                       <C>
INVESTMENT INCOME:
Dividends............................................................................     $     12
Interest.............................................................................           15
                                                                                          --------
            Total income.............................................................           27
                                                                                          --------
EXPENSES:
Investment management fees (note 3)..................................................           37
Transfer agent fees and expenses (note 3)............................................           11
Shareholder service fees (note 3)....................................................            0
Accounting fees (note 3).............................................................            3
                                                                                          --------
            Total affiliated expenses................................................           51
                                                                                          --------
Custodian fees.......................................................................            3
Professional fees....................................................................           13
Reports to shareholders..............................................................           12
Directors' fees......................................................................            5
Registration fees....................................................................            8
Other expenses.......................................................................            1
Amortization of organizational cost (note 1).........................................            5
                                                                                          --------
            Total non-affiliated expenses............................................           47
                                                                                          --------
            Total expenses...........................................................           98
                                                                                          --------
            Net loss from investment activities......................................          (71)
                                                                                          --------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized loss from security transactions.........................................          (13)
Decrease in unrealized gain on investment............................................          (70)
                                                                                          --------
            Net realized loss and decrease in unrealized gain on investments.........          (83)
                                                                                          --------
            Net decrease in net assets from operations...............................     $   (154)
                                                                                          ========
</TABLE>
 
See accompanying notes to financial statements.
 
6
<PAGE>   8
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                     SIX MONTHS
                                                                       ENDED          YEAR ENDED
                                                                     MARCH 31,       SEPTEMBER 30,
                                                                        1996             1995
                                                                     ----------      -------------
<S>                                                                  <C>             <C>
FROM OPERATIONS:
Net loss from investment activities...............................    $    (71)         $   (86)
Net realized gain (loss) from security transactions...............         (13)             999
Increase (decrease) in unrealized gain on investments.............         (70)           1,158
                                                                     ----------      -------------
  Net increase (decrease) in net assets from operations...........        (154)           2,071
                                                                     ----------      -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distribution of net realized gains from security transactions
  ($.90 and $0.00 per share, respectively)........................        (743)               0
                                                                     ----------      -------------
     Total distributions to shareholders..........................        (743)               0
                                                                     ----------      -------------
Proceeds from sale of Fund shares.................................       1,267            1,809
Net asset value of Fund shares issued in connection with
  reinvestment of distributions to shareholders...................         721                0
                                                                     ----------      -------------
                                                                         1,988            1,809
Cost of Fund shares redeemed......................................      (1,691)          (2,906)
                                                                     ----------      -------------
  Increase (decrease) in net assets derived from capital share
     transactions.................................................         297           (1,097)
                                                                     ----------      -------------
  Net increase (decrease) in net assets...........................        (600)             974
NET ASSETS -- beginning of period.................................      10,434            9,460
                                                                     ----------      -------------
NET ASSETS -- end of period (undistributed net investment loss of
  $312 and $113, respectively)....................................    $  9,834          $10,434
                                                                     ==========      ==============
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                              7
<PAGE>   9
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cardinal Aggressive Growth Fund (the "Fund") is one of two portfolios of The
Cardinal Group (the "Group"), a diversified open-end management investment
company established as an Ohio Business Trust on March 23, 1993. The Group
currently consists of Cardinal Aggressive Growth Fund and Cardinal Balanced
Fund. Before June 24, 1993 the Fund had no operations other than those relating
to organizational matters, including the issuance of 5,000 shares of beneficial
interest for cash at $10.00 per share on June 4, 1993 to Cardinal Management
Corp. ("CMC"), the Group's investment adviser. The following is a summary of
significant accounting policies followed by the Fund in preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles for investment companies.
 
Security Valuation -- Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at either the mean between the bid and ask prices or the last sale price.
If no quotations are available, portfolio securities are valued in good faith by
the Board of Trustees to reflect their fair value.
 
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes,
when applicable, the pro rata amortization of premium or accretion of discount.
In determining the net realized gain or loss on securities sold, the cost of the
securities is determined by the first-in, first-out (FIFO) basis. It is the
Group's policy for its Custodian, or a third-party bank, to take possession of
all securities pledged as collateral for repurchase agreements and monitor the
market value of the collateral to ensure that it remains sufficient to cover the
repurchase agreements.
 
Deferred Organizational Cost -- Costs incurred with the organization and
registration of the Fund have been deferred and are being amortized on a
straight-line basis over a 60 month period from the commencement of public
offering of its shares. In the event that any of the initial shares of the Fund
are redeemed by the Fund's investment adviser or any subsequent holders thereof
during the 60 month amortization period, the Fund will reduce the redemption
proceeds otherwise payable by any unamortized organizational costs of the Fund
in the same proportion as the number of initial shares of the Fund being
redeemed bears to the number of initial shares of the Fund outstanding at the
time of redemption.
 
Distributions to Shareholders -- Distributions and dividends will be recorded on
the record date. The Fund intends to declare income dividends quarterly and any
capital gain distributions annually.
 
Federal Income Tax -- The Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
 
                                                                     (continued)
 
8                                        
<PAGE>   10
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(2) -- PURCHASES AND SALES OF SECURITIES
 
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the six months ended March 31, 1996
aggregated $3,292,283 and $1,709,936, respectively.
 
During the six months ended March 31, 1996 the Fund realized on a FIFO cost
basis a net capital loss of $12,736 for both book and tax purposes.
 
As of March 31, 1996, for both book and tax purposes, gross unrealized gains and
gross unrealized losses on investment securities were $1,711,894 and $771,280,
respectively; resulting in a net unrealized gain of $940,614.
 
(3) -- TRANSACTIONS WITH AFFILIATES
 
As investment adviser for the Fund, CMC, an affiliated company, is allowed an
annual fee of 0.75% of the average daily net assets of the Fund. CMC has agreed
that if the aggregate expenses of the Fund, as defined, for any fiscal year
exceed the expense limitation of any state having jurisdiction over the Fund,
CMC will refund to the Fund, or otherwise bear, such excess. This limitation did
not affect the calculation of the management fee during the six months ended
March 31, 1996. CMC also serves the Fund as transfer agent and fund accountant.
Under the terms of the Group's Transfer Agency and Fund Accounting Agreement,
the transfer agent is entitled to receive fees based on a monthly charge per
shareholder account plus out-of-pocket expenses and the fund accountant is
entitled to receive fees based on a percentage of the average net assets of the
Fund. For the six months ended March 31, 1996 the Fund paid or accrued $10,795
and $1,788 for transfer agent and fund accounting services, respectively.
 
The Ohio Company ("TOC") serves the Group as distributor. TOC receives fees from
the Fund for providing services under the Distribution and Shareholder Service
Plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940.
Under the Plan, the Fund pays TOC a fee not to exceed, on an accrual basis,
0.25% of the average daily net assets of the Fund for payments it makes to
banks, broker/dealers, including TOC, and other institutions for providing
shareholder services. TOC waived shareholder service fees for the six months
ended March 31, 1996. The Ohio Company reported to the Fund that it had received
commissions after discounts to dealers from the sale of shares of the Fund of
$11,729 for the six months ended March 31, 1996.
 
(4) -- COMMITMENTS AND CONTINGENCIES
 
The Fund has an available $2,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
 
                                                                     (continued)
 
                                                                              9
<PAGE>   11
 
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(5) -- CAPITAL STOCK
 
At March 31, 1996, there were an unlimited number of no par value shares of
capital stock and the capital amounts were as follows:
 
<TABLE>
<S>                                                                    <C>           <C>
Paid in capital..................................................................     $ 8,916,038
Accumulated net realized gain on investments.....................................         289,550
Unrealized gain on investments...................................................         940,614
Undistributed net investment loss................................................        (312,360)
                                                                                     -------------
Net assets.......................................................................     $ 9,833,842
                                                                                     ==============
</TABLE>
 
Transactions in capital stock were as follows:
 
<TABLE>
<CAPTION>
                                                                       SIX MONTHS
                                                                         ENDED        YEAR ENDED
                                                                       MARCH 31,     SEPTEMBER 30,
                                                                          1996           1995
                                                                       ----------    -------------
<S>                                                                    <C>           <C>
Shares sold.........................................................     109,482          160,511
Shares issued in connection with reinvestment of distributions to
  shareholders......................................................      66,252                0
                                                                       ----------    -------------
                                                                         175,734          160,511
Shares repurchased..................................................    (147,011)        (268,141)
                                                                       ----------    -------------
Net increase (decrease).............................................      28,723         (107,630)
Shares outstanding:
Beginning of period.................................................     843,808          951,438
                                                                       ----------    -------------
End of period.......................................................     872,531          843,808
                                                                       ==========    ==============
</TABLE>
 
(6) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
 
10
<PAGE>   12
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                                       SIX                                   PERIOD FROM
                                                     MONTHS           YEARS ENDED          JUNE 24, 1993*
                                                      ENDED          SEPTEMBER 30,             THROUGH
                                                    MARCH 31,    ----------------------     SEPTEMBER 30,
                                                      1996         1995         1994            1993
                                                    ---------    ---------    ---------    ---------------
<S>                                                 <C>          <C>          <C>          <C>
Net Asset Value, beginning........................   $ 12.37      $   9.94     $  10.47        $ 10.00
                                                    ---------    ---------    ---------    ---------------
Income from investment operations:
  Net investment loss.............................     (0.09)        (0.10)       (0.13)         (0.03)
  Net realized and unrealized gain (loss) on
     securities...................................     (0.10)         2.53        (0.36)          0.50
                                                    ---------    ---------    ---------    ---------------
Total from investment operations..................     (0.20)         2.43        (0.49)          0.47
                                                    ---------    ---------    ---------    ---------------
Less distributions:
  Capital gain distribution.......................     (0.90)         0.00        (0.04)          0.00
                                                    ---------    ---------    ---------    ---------------
Total distributions...............................     (0.90)         0.00        (0.04)          0.00
                                                    ---------    ---------    ---------    ---------------
Net Asset Value, ending...........................   $ 11.27      $  12.37     $   9.94        $ 10.47
                                                    ==========    ========     ========    ===============
Ratios/Supplemental Data:
Total return (aggregate return for period)**......    (1.48%)       24.35%       (4.74%)         4.70%
                                                    ==========    ========     ========    ===============
Net assets, ending (000)..........................   $ 9,834      $ 10,434     $  9,460        $ 6,320
                                                    ==========    ========     ========    ===============
Ratio of expenses to average net assets**.........     1.96%         2.24%        2.51%          0.91%
                                                    ==========    ========     ========    ===============
Ratio of net investment loss to average net
  assets**........................................    (1.41%)       (0.92%)      (1.50%)        (0.53%)
                                                    ==========    ========     ========    ===============
Portfolio turnover rate...........................    17.13%        80.35%       95.70%         31.15%
                                                    ==========    ========     ========    ===============
</TABLE>
 
 *Commencement of operations
 
**Effective September 15, 1995, The Ohio Company began waiving payments under
  the Distribution and Shareholder Service Plan. Had the payments been charged,
  total return, the ratio of expenses to average net assets, and the ratio of
  net investment loss to average net assets would have been (1.61)%, 2.09%, and
  (1.54)%, respectively.
 
See accompanying notes to financial statements.
 
                                                                             11
<PAGE>   13
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                                                                         PERIOD FROM
                                                                YEARS ENDED            JUNE 24, 1993*
                                                               SEPTEMBER 30,               THROUGH
                                                           ----------------------       SEPTEMBER 30,
                                                             1995          1994             1993
                                                           --------      --------      ---------------
<S>                                                        <C>           <C>           <C>
Net Asset Value, beginning..............................   $   9.94      $  10.47          $ 10.00
                                                           --------      --------      ---------------
Income from investment operations:
  Net investment loss...................................      (0.10)        (0.13)           (0.03)
  Net realized and unrealized gain (loss) on
     securities.........................................       2.53         (0.36)            0.50
                                                           --------      --------      ---------------
Total from investment operations........................       2.43         (0.49)            0.47
                                                           --------      --------      ---------------
Less distributions:
  Capital gain distribution.............................          0         (0.04)               0
                                                           --------      --------      ---------------
Total distributions.....................................          0         (0.04)               0
                                                           --------      --------      ---------------
Net Asset Value, ending.................................   $  12.37      $   9.94          $ 10.47
                                                           ========      ========      ===============
Ratios/Supplemental Data:
Total return (aggregate return for period)**............     24.35%        (4.74%)           4.70%
                                                           ========      ========      ===============
Net assets, ending (000)................................   $ 10,434      $  9,460          $ 6,320
                                                           ========      ========      ===============
Ratio of expenses to average net assets**...............      2.24%         2.51%            0.91%
                                                           ========      ========      ===============
Ratio of net investment loss to average net assets**....     (0.92%)       (1.50%)          (0.53%)
                                                           ========      ========      ===============
Portfolio turnover rate.................................     80.35%        95.70%           31.15%
                                                           ========      ========      ===============
</TABLE>
 
 *Commencement of operations
 
**Effective September 15, 1995, The Ohio Company began waiving payments under
  the Distribution and Shareholder Service Plan. Had the payments been charged,
  total return, the ratio of expenses to average net assets, and the ratio of
  net investment loss to average net assets would have been 24.34%, 2.25%, and
  (0.93%), respectively.
 
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
 
The Shareholders and Board of Trustees
Cardinal Aggressive Growth Fund:
 
We have audited the accompanying statement of assets and liabilities of Cardinal
Aggressive Growth Fund (the Fund), including the statement of investments, as of
September 30, 1995, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the periods
indicated herein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1995, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cardinal Aggressive Growth Fund as of September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the periods indicated herein, in conformity with generally accepted
accounting principles.
 
                                           KPMG Peat Marwick LLP
Columbus, Ohio
November 17, 1995
 
                                       12
<PAGE>   14
                               [CARDINAL LOGO]
 
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 
   New Accounts and                                 Toll-free Lines
   General Information:                             In Ohio 800-282-9446
   (614) 464-5511                                   Outside Ohio 800-848-7734
<PAGE>   15
 
- ----------------------------------------------------------
 
- ---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
 
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of Cardinal
Balanced Fund and is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective Prospectus.
 
- ----------------------------------------------------------
 
- ---------------------------------------------------------
 
         [CARDINAL LOGO]
             CARDINAL
             BALANCED
               FUND
- ----------------------------------
        SEMI-ANNUAL REPORT
- ----------------------------------

          MARCH 31, 1996

         The Ohio Company 
- ---------------------------------------------------------
- ----------------------------------------------------------



                                                                           
<PAGE>   16
 
MESSAGE TO CARDINAL BALANCED FUND SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of Cardinal Balanced Fund for
the six month period ending March 31, 1996. The complete financial statements,
and portfolio of investments, can be found on the following pages along with a
message from the Fund's portfolio manager. We encourage you to read this
information.
 
We are also pleased to report that Cardinal Balanced Fund achieved solid
investment results and modest asset growth over the past six months. The Fund
finished the six month period with $14.7 million in assets and a net asset value
of $11.60 per share.
 
The pursuit of current income and long-term growth of both capital and income
continues to attract investors to Cardinal Balanced Fund. We remain committed to
achieving this goal and providing you with superior service.
 
If you would like more information about Cardinal Balanced Fund, please contact
your Account Executive or call us direct at our toll-free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,

/s/ H. Keith Allen                /s/ Frank W. Siegel, CFA 
H. Keith Allen                    Frank W. Siegel, CFA
Chairman                          President
 
                                                                             1
<PAGE>   17
 
- --------------------------------------------------------------------------------
 
                   MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of the Cardinal Balanced Fund Trustees and Officers, we are pleased to
present our March 31, 1996 Semi-Annual Report.
 
The two most prominate features in financial markets over the past six months
have been the continuation of the rollercoaster ride that interest rates and the
bond market have been experiencing for the last several years and the enormous
inflows of money into the equity markets via mutual funds. As a balanced fund we
participate in both the fixed-income and equity markets and so naturally both
have impacted our results.
 
During the first half of our fiscal year, which ended March 31, 1996, the rate
of return on net asset value for Cardinal Balanced Fund was 6.0%. This compares
with a 6.6% advance for the Balanced Fund Index compiled by Lipper Analytical
Services Inc.
 
The fourth quarter of 1995 witnessed the culmination of 1995's bond market rally
as bond prices rose and interest rates declined amid signs of a listless
economy. The first quarter of 1996 saw this trend reversed in stunningly swift
fashion as perceptions about the economy and the likely course of action by the
Federal Reserve changed. This back-up in interest rates has impacted our
performance negatively although the interest we earn on our fixed-income
holdings helps to enhance our dividend.
 
Cardinal Balanced Fund has as one of its goals to provide an attractive dividend
yield relative to an all equity alternative. We are pleased to report our
quarterly dividend rate has been steadily increasing. The March 1996 quarterly
distribution of 10.5 cents per share represents, at an annual rate, an
approximately 3.6% yield at the March 31 N.A.V. of $11.60. This compares to an
approximately 2.25% dividend yield for the Standard & Poor's 500.
 
If the bond market is fighting a headwind, the equity markets are riding a
tailwind of money flowing into equity mutual funds which continue to exert
upward pressure on major equity indices. While this trend was benefiting us
generally, our equity holdings were slightly behind the major indices over the
last six months. Sensing better value in some of the neglected, smaller
capitalization regions of the market, we have been focusing our efforts there.
As March ended we were closing the performance gap as the market came our way
and we would expect this trend to continue as the outlook for the economy
continues to improve.
 
As always, we appreciate your support, and will continue our efforts diligently
on your behalf in the year ahead.
                             
                             
/s/ H. Keith Allen             /s/ Frank W. Siegel     /s/ Barry McMahon   
H. Keith Allen                 Frank W. Siegel         Barry McMahon
Chairman                       President               Vice President


2
<PAGE>   18
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                FACE/            MARKET
                                                                                               SHARES             VALUE
                                                                                              ---------        -----------
  <S>                                                                                         <C>              <C>
  COMMON STOCK 44.27%
    American Express Company............................................................          8,000              $ 395
    American Health Properties..........................................................         10,000                225
    Arco Chemical Company...............................................................          7,500                389
    Banc One Corporation................................................................          6,600                235
    C-Cor Electronics*..................................................................          5,000                 78
    Cinergy Corporation.................................................................          7,500                225
    Commerce Bancshares Incorporated....................................................          5,513                192
    Consolidated Papers.................................................................          5,000                281
    Dow Chemical Company................................................................          4,500                391
    Excel Industries Incorporated.......................................................         15,000                171
    Ford Motor Company..................................................................          4,898                168
    Forest Laboratories*................................................................          3,000                146
    GTE Corporation.....................................................................          5,000                219
    IntelCom Group Incorporated*........................................................         15,000                266
    Masland Corporation.................................................................          5,000                 88
    Mellon Bank Corporation.............................................................          5,000                276
    Monsanto Company....................................................................          3,500                537
    Mutual Risk Management..............................................................          5,000                207
    National Semiconductor Company*.....................................................          7,500                104
    Neogen*.............................................................................         10,000                 59
    Novell Incorporated*................................................................         10,000                134
    PNC Bank Corporation................................................................          6,000                185
    Progress Software Corporation*......................................................         10,000                150
    SIGCORP Incorporated................................................................          6,000                209
    Structural Dynamics Research*.......................................................          5,000                169
    Tribune Company.....................................................................          5,000                329
    Trinova Corporation.................................................................          6,000                191
    Universal Foods Corporation.........................................................          4,000                153
    U.S. Healthcare Incorporated........................................................          5,000                229
    Viewlogic Systems Incorporated*.....................................................          9,000                 99
                                                                                                               -----------
      TOTAL COMMON STOCK (COST $5,080,588)..............................................                             6,499
                                                                                                               -----------
  CONVERTIBLE PREFERRED STOCK 4.03%
    California Federal Bank.............................................................          6,000                156
    Glendale Federal, 8.75%, Series E...................................................          4,000                191
    U.S. Surgical, Series A.............................................................          7,500                245
                                                                                                               -----------
      TOTAL CONVERTIBLE PREFERRED STOCK (COST $505,949).................................                               591
                                                                                                               -----------
  PREFERRED STOCK 8.48%
    American General Capital, 8.45%.....................................................          7,500                193
    American Health Psychiatric Group Preferred.........................................          8,250                136
    Chase Manhattan Corporation, 8.40%, Cumulative Series M.............................          7,500                194
    Enron Capital Resources, 9.00%, Series A, LP........................................          6,000                157
    Textron Capital I, 7.92%............................................................          7,500                183
    Time Warner Capital I, 8.875%.......................................................          7,500                189
    Utilicorp Capital, 8.875%...........................................................          7,500                193
                                                                                                               -----------
      TOTAL PREFERRED STOCK (COST $1,235,713)...........................................                             1,245
                                                                                                               -----------
  *Non-income producing
                                                                                                               (continued)
</TABLE>
 
                                                                              3
<PAGE>   19
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                                FACE/            MARKET
                                                                                               SHARES             VALUE
                                                                                              ---------        -----------
  <S>                                                                                         <C>              <C>
  CONVERTIBLE CORPORATE BONDS 6.79%
    Ashland Oil, Inc., 6.75%, due 7-01-2014.............................................        150,000        $       153
    Beverly Enterprises, 7.625%, due 3-15-2003..........................................        100,000                 93
    Big B Incorporated, 6.50%, due 3-15-2003............................................        150,000                151
    Enserch Corporation, 6.375%, due 4-01-2002..........................................        150,000                150
    Gran Care Incorporated, 6.50%, due 1-15-2003........................................        100,000                 93
    Magna International, 5.00%, due 10-15-2002..........................................        200,000                208
    Repap Entertainment, 8.50%, due 8-01-1997...........................................        150,000                149
                                                                                                               -----------
      TOTAL CONVERTIBLE CORPORATE BONDS (COST $997,061).................................                               997
                                                                                                               -----------
  U.S. GOVERNMENT AGENCY OBLIGATIONS 7.92%
    GNMA I # 368080, 7.00%, due 11-15-2008..............................................        261,856                263
    GNMA I # 251959, 7.50%, due 6-15-2023...............................................        259,124                260
    GNMA II # 1213, 7.50%, due 6-20-2023................................................        319,384                318
    GNMA II # 1268, 8.00%, due 7-20-2023................................................        315,381                321
                                                                                                               -----------
      TOTAL U.S. GOVERNMENT AGENCIES (COST $1,211,881)..................................                             1,162
                                                                                                               -----------
  CORPORATE BONDS 16.37%
    American Airlines, Series 91A, 10.18%, due 1-02-2013................................        250,000                284
    Consumers Power Co., 7.50%, due 6-01-2002...........................................        300,000                306
    Dole Foods Inc., 7.00%, due 5-15-2003...............................................        200,000                199
    Duquesne Light, 6.625%, due 6-15-2004...............................................        300,000                288
    General Motors Acceptance Corp., 7.00%, due 9-15-2002...............................        200,000                202
    Kemper Corp., 6.875%, due 9-15-2003.................................................        250,000                247
    Pulte Homes Corp., 7.00%, due 12-15-2003............................................        150,000                144
    Tele-Communications Inc., 7.25%, due 8-01-2005......................................        250,000                246
    Time Warner, 7.25%, due 9-01-2008...................................................        250,000                241
    U.S. West Capital, 6.31%, 11-01-2005................................................        250,000                248
                                                                                                               -----------
      TOTAL CORPORATE BONDS (COST $2,382,485)...........................................                             2,403
                                                                                                               -----------
  COMMERCIAL PAPER 11.24%
    Cigna Corporation, 5.42%, due 4-01-1996.............................................        400,000                400
    IBM Corporation, 5.38%, due 4-01-1996...............................................        500,000                500
    Ford Motor Credit Corporation, 5.45%, due 4-03-1996.................................        750,000                750
                                                                                                               -----------
      TOTAL COMMERCIAL PAPER (COST $1,650,000)..........................................                             1,650
                                                                                                               -----------
      TOTAL INVESTMENTS (COST $13,063,678) 99.10%.......................................                       $    14,548
                                                                                                               ===========
</TABLE>
 
GNMA -- Government National Mortgage Association
 
Cost also represents cost for Federal income tax purposes.
 
See accompanying notes to financial statements.
 
4
<PAGE>   20
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
ASSETS
Investments in securities, at value (cost $13,064)...............................    $ 14,548
Cash.............................................................................          57
Receivable for Fund shares sold..................................................          12
Interest receivable..............................................................          68
Dividends receivable.............................................................          24
Prepaid expenses.................................................................           6
Deferred organizational cost.....................................................          22
                                                                                     --------
          Total assets...........................................................      14,737
                                                                                     --------
LIABILITIES
Payable for Fund shares redeemed.................................................           6
Accrued investment management, shareholder service, accounting and transfer agent
  fees (note 3)..................................................................          12
Other accrued expenses...........................................................          38
                                                                                     --------
          Total liabilities......................................................          56
                                                                                     --------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 1,265,920 outstanding no par value shares of
  beneficial interest (unlimited number of shares authorized)....................    $ 14,681
                                                                                     ========
NET ASSET VALUE PER SHARE........................................................    $  11.60
                                                                                     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                             5
<PAGE>   21
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
INVESTMENT INCOME:
Dividends........................................................................    $   160
Interest.........................................................................        215
                                                                                     -------
     Total income................................................................        375
                                                                                     -------
EXPENSES:
Investment management fees (note 3)..............................................         54
Transfer agent fees and expenses (note 3)........................................         11
Shareholder service fees (note 3)................................................          0
Accounting fees (note 3).........................................................          3
                                                                                     -------
          Total affiliated expenses..............................................         68
                                                                                     -------
Custodian fees...................................................................          5
Professional fees................................................................         14
Reports to shareholders..........................................................         11
Directors' fees..................................................................          5
Registration fees................................................................          8
Other expenses...................................................................          3
Amortization of organizational cost (note 1).....................................          5
                                                                                     -------
          Total non-affiliated expenses..........................................         51
                                                                                     -------
          Total expenses.........................................................        119
                                                                                     -------
          Net investment income..................................................        256
                                                                                     -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):
Net realized gain from security transactions.....................................        544
Increase in unrealized gain on investments.......................................         59
                                                                                     -------
     Net realized gain and increase in unrealized gain on investments............        603
                                                                                     -------
     Net increase in net assets from operations..................................    $   859
                                                                                      ======
</TABLE>
 
See accompanying notes to financial statements.
 
6
<PAGE>   22
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                    SIX MONTHS
                                                                      ENDED          YEAR ENDED
                                                                    MARCH 31,       SEPTEMBER 30,
                                                                       1996             1995
                                                                    ----------      -------------
<S>                                                                 <C>             <C>
FROM OPERATIONS:
Net investment income............................................    $    256          $   441
Net realized gain from security transactions.....................         544              307
Increase (decrease) in unrealized gain on investments............          59            1,810
                                                                    ----------      -------------
     Net increase in net assets from operations..................         859            2,558
                                                                    ----------      -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distribution of net investment income ($.21 and $.35 per share,
  respectively)..................................................        (260)            (453)
Distribution of net realized gains from security transactions
  ($.39 and $.04 per share, respectively)........................        (483)             (49)
                                                                    ----------      -------------
     Total distributions to shareholders.........................        (743)            (502)
                                                                    ----------      -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sales of Fund shares...............................       1,300            1,485
Net asset value of Fund shares issued in connection with
  reinvestment of distributions to shareholders..................         687              458
                                                                    ----------      -------------
                                                                        1,987            1,943
Cost of Fund shares redeemed.....................................      (1,957)          (3,437)
                                                                    ----------      -------------
     Increase (decrease) in net assets derived from capital share
      transactions...............................................          30           (1,494)
                                                                    ----------      -------------
     Net increase (decrease) in net assets.......................         146              562
NET ASSETS -- beginning of period................................      14,535           13,973
                                                                    ----------      -------------
NET ASSETS -- end of period ((over) undistributed net investment
  income, of ($1) and $3, respectively)..........................    $ 14,681          $14,535
                                                                    ==========      ==============
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                              7
<PAGE>   23
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cardinal Balanced Fund (the "Fund") is one of two portfolios of The Cardinal
Group (the "Group"), a diversified open-end management investment company
established as an Ohio Business Trust on March 23, 1993. The Group currently
consists of Cardinal Aggressive Growth Fund and Cardinal Balanced Fund. Before
June 24, 1993 the Fund had no operations other than those relating to
organizational matters, including the issuance of 5,000 shares of beneficial
interest for cash at $10.00 per share on June 4, 1993 to Cardinal Management
Corp. ("CMC"), the Group's investment adviser. The following is a summary of
significant accounting policies followed by the Fund in preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles for investment companies.
 
Security Valuation -- Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at either the mean between the bid and ask prices or the last sale price.
If no quotations are available, portfolio securities are valued in good faith by
the Board of Trustees to reflect their fair value.
 
Security Transactions and Investment Income -- Security transactions are
accounted for on the trade date and dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes,
when applicable, the pro rata amortization of premium or accretion of discount.
In determining the net realized gain or loss on securities sold, the cost of the
securities will be determined by the first-in, first-out (FIFO) basis. It is the
Group's policy for its Custodian, or a third-party bank, to take possession of
all securities pledged as collateral for repurchase agreements and monitor the
market value of the collateral to ensure that it remains sufficient to cover the
repurchase agreements.
 
Deferred Organizational Cost -- Costs incurred with the organization and
registration of the Fund have been deferred and are being amortized on a
straight-line basis over a 60 month period from the commencement of public
offering of its shares. In the event that any of the initial shares of the Fund
are redeemed by the Fund's investment adviser or any subsequent holders thereof
during the 60 month amortization period, the Fund will reduce the redemption
proceeds otherwise payable by any unamortized organizational costs of the Fund
in the same proportion as the number of initial shares of the Fund being
redeemed bears to the number of initial shares of the Fund outstanding at the
time of redemption.
 
Distributions to Shareholders -- Distributions and dividends will be recorded on
the record date. The Fund intends to declare income dividends quarterly and any
capital gain distributions annually.
 
Federal Income Tax -- The Fund intends to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
 
                                                                     (continued)
 
8
<PAGE>   24
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(2) -- PURCHASES AND SALES OF SECURITIES
 
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the six months ended March 31, 1996
aggregated $1,507,313 and $1,547,416, respectively.
 
During the six months ended March 31, 1996 the Fund realized on a FIFO cost
basis a net capital gain of $545,292 for both book and tax purposes.
 
As of March 31, 1996, for both book and tax purposes, gross unrealized gains and
gross unrealized losses on investment securities were $1,759,340 and $274,823,
respectively; resulting in a net unrealized gain of $1,484,517.
 
(3) -- TRANSACTIONS WITH AFFILIATES
 
As investment adviser for the Fund, CMC, an affiliated company, is allowed an
annual fee of 0.75% of the average daily net assets of the Fund. CMC has agreed
that if the aggregate expenses of the Fund, as defined, for any fiscal year
exceed the expense limitation of any state having jurisdiction over the Fund,
CMC will refund to the Fund, or otherwise bear, such excess. This limitation did
not affect the calculation of the management fee during the period ended March
31, 1996. CMC also serves the Fund as transfer agent and fund accountant. Under
the terms of the Group's Transfer Agency and Fund Accounting Agreement, the
transfer agent is entitled to receive fees based on a monthly charge per
shareholder account plus out-of-pocket expenses and the fund accountant is
entitled to receive fees based on a percentage of the average net assets of the
Fund. For the period ended March 31, 1996 the Fund paid or accrued $10,823 and
$2,629 for transfer agent and fund accounting services, respectively.
 
The Ohio Company ("TOC") serves the Group as distributor. TOC receives fees from
the Fund for providing services under the Distribution and Shareholder Service
Plan (the "Plan") pursuant to Rule 12b-1 of the Investment Company Act of 1940.
Under the Plan, the Fund pays TOC a fee not to exceed, on an accrual basis,
0.25% of the average daily net assets of the Fund for payments it makes to
banks, broker/dealers, including TOC, and other institutions for providing
shareholder services. TOC waived shareholder service fees for the six months
ended March 31, 1996. The Ohio Company reported to the Fund that it had received
commissions after discounts to dealers from the sale of shares of the Fund of
$19,032 for the six months ended March 31, 1996.
 
(4) -- COMMITMENTS AND CONTINGENCIES
 
The Fund has an available $2,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
                                                                     (continued)
 
                                                                               9
<PAGE>   25
 
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(5) -- CAPITAL STOCK
 
At March 31, 1996, there were an unlimited number of no par value shares of
capital stock and the capital amounts were as follows:
 
<TABLE>
<S>                                                                               <C>
Paid in capital...............................................................    $ 12,745,976
Accumulated net realized gain on investments..................................         451,301
Unrealized gain on investments................................................       1,484,517
Overdistributed net investment income.........................................          (1,046)
                                                                                  ------------
Net assets....................................................................    $ 14,680,748
                                                                                  ============
</TABLE>
 
Transactions in capital stock were as follows:
 
<TABLE>
<CAPTION>
                                                                        SIX MONTHS
                                                                           ENDED          YEAR ENDED
                                                                         MARCH 31,       SEPTEMBER 30,
                                                                           1996              1995
                                                                        -----------      -------------
<S>                                                                     <C>              <C>
Shares sold..........................................................       113,193          140,750
Shares issued in connection with reinvestment of distributions
  to shareholders....................................................        60,687           44,785
                                                                        -----------      -------------
                                                                            173,880          185,535
Shares repurchased...................................................      (169,687)        (335,102)
                                                                        -----------      -------------
Net increase (decrease)..............................................         4,193         (149,567)
Shares outstanding:
Beginning of period..................................................     1,261,727        1,411,294
                                                                        -----------      -------------
End of period........................................................     1,265,920        1,261,727
                                                                          =========      ===========
</TABLE>
 
(6) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
 
10
<PAGE>   26
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                                                                                            PERIOD
                                                                                                           FROM JUNE
                                                           SIX MONTHS             YEARS ENDED              24, 1993*
                                                             ENDED               SEPTEMBER 30,              THROUGH
                                                           MARCH 31,       --------------------------      SEPTEMBER
                                                              1996            1995            1994         30, 1993
                                                           ----------      ----------      ----------      ---------
<S>                                                        <C>             <C>             <C>             <C>
Net Asset Value, beginning..............................    $  11.52        $    9.90       $   10.13       $ 10.00
                                                           ----------      ----------      ----------      ---------
Income from investment operations:
  Net investment income.................................        0.20             0.34            0.23          0.02
  Net realized and unrealized gain (loss) on
    securities..........................................        0.48             1.67           (0.20)         0.12
                                                           ----------      ----------      ----------      ---------
Total from investment operations........................        0.68             2.01            0.03          0.14
                                                           ----------      ----------      ----------      ---------
Less distributions:
  Dividends.............................................       (0.21)           (0.35)          (0.23)        (0.01)
  Capital gain distribution.............................       (0.39)           (0.04)          (0.03)            0
                                                           ----------      ----------      ----------      ---------
Total distributions.....................................       (0.60)           (0.39)          (0.26)        (0.01)
                                                           ----------      ----------      ----------      ---------
Net Asset Value, ending.................................    $  11.60        $   11.52       $    9.90       $ 10.13
                                                           =========          =======         =======      ========
Ratios/Supplemental Data:
Total return (aggregate return for period)**............        6.02%           20.76%           0.37%         1.40%
                                                           =========          =======         =======      ========
Net assets, ending (000)................................    $ 14,681        $  14,535       $  13,973       $10,811
                                                           =========          =======         =======      ========
Ratio of expenses to average net assets**...............        1.63%            1.94%           2.07%         0.70%
                                                           =========          =======         =======      ========
Ratio of net investment income to average net
  assets**..............................................        3.50%            3.24%           2.44%         0.35%
                                                           =========          =======         =======      ========
Portfolio turnover rate.................................       10.61%           37.62%          59.09%        60.67%
                                                           =========          =======         =======      ========
<FN> 
 *Commencement of operations
 
**Effective September 15, 1995, The Ohio Company began waiving payments under
  the Distribution and Shareholder Service Plan. Had the payments been charged,
  total return, the ratio of expenses to average net assets, and the ratio of
  net investment income to average net assets would have been 5.90%, 1.78%, and
  3.38%, respectively.
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                             11
<PAGE>   27
                               [CARDINAL LOGO]
 
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 
    New Accounts and                               Toll-free Lines
    General Information:                           In Ohio 800-282-9446
    (614) 464-5511                                 Outside Ohio 800-848-7734
<PAGE>   28
 
- ---------------------------------------------------------
- ---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
 
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of Cardinal
Tax Exempt Money Trust and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective Prospectus.
 
- ---------------------------------------------------------
- ---------------------------------------------------------
 
 
                                    [LOGO]
                                CARDINAL FUNDS

                                   CARDINAL
                                  TAX EXEMPT
                                    MONEY
                                    TRUST
                      ----------------------------------
                              SEMI-ANNUAL REPORT
                      ----------------------------------
                                      
                                MARCH 31, 1996
                                      
                               THE OHIO COMPANY


- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE>   29
 
MESSAGE TO CARDINAL TAX EXEMPT MONEY TRUST SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of the Cardinal Tax Exempt
Money Trust for the six month period ending March 31, 1996. The complete
financial statements, and portfolio of investments, can be found on the
following pages along with a message from the Trust's portfolio manager. We
encourage you to read this information.
 
We are also pleased to report that Cardinal Tax Exempt Money Trust continued to
achieve asset growth and finished the fiscal year with $67.9 million in assets.
 
The pursuit of current income exempt from Federal income tax while preserving
capital and maintaining liquidity continues to attract investors to Cardinal Tax
Exempt Money Trust. We remain committed to achieving this goal and providing you
with superior service.
 
If you would like more information about Cardinal Tax Exempt Money Trust, please
contact your Account Executive or call us direct at our toll-free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,

              /s/ H. Keith Allen          /s/ Frank W. Siegel, CFA
                H. Keith Allen              Frank W. Siegel, CFA
                  Chairman                        President
 
                                                                               1
<PAGE>   30
 
- --------------------------------------------------------------------------------
 
                   MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of the Cardinal Tax Exempt Money Trust Trustees and Officers, we are
pleased to present our March 31, 1996 Semi-Annual Report.
 
During the last six months of 1995 and into early 1996 both short and long-term
interest rates were declining due to weak economic conditions, low inflation and
a Federal Reserve Bank that was on a program to push short-term interest rates
down in order to stimulate economic growth in 1996 and 1997.
 
This decline in rates came to a halt in late February, as it became apparent
that economic conditions were stronger than earlier perceived. Seven-day AAA
tax-exempt money market rates were around 3 1/2% as of the beginning of October
1995. There was a gradual decline to the 3% level at the end of February 1996,
at which time an ascent to the current level of 3 1/2% began. Due to stable
economic conditions, we do not expect much in the way of interest rate changes
over the balance of the year. If anything, the direction could be gradually
downward.
 
Currently, we believe the levels of interest rates relative to inflation are
attractive, and therefore, have been extending portfolio maturities to lock in
higher rates as they become available.
 
Your relationship with The Cardinal Group and The Ohio Company are highly valued
and we are very appreciative of your support.
 


 /s/ H. Keith Allen       /s/ Frank W. Siegel       /s/ Hannaibal L. Godwin
    H. Keith Allen          Frank W. Siegel           Hannibal L. Godwin
    Chairman                President                 Vice President


2
<PAGE>   31
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                  2A-7*       FINAL     PRINCIPAL    VALUE
SECURITIES                                                                      MATURITY    MATURITY     AMOUNT     (NOTE 1)
- ----------                                                                      ---------   ---------   ---------   --------
<S>                                                                             <C>         <C>         <C>         <C>
MUNICIPAL SECURITIES 98.95%
Alaska Industrial Development Authority, IRB, currently 3.30%.................    4/05/96     6/01/10    $ 2,200    $ 2,200
Albuquerque New Mexico Hospital Revenue, RB, currently 3.35%..................    4/05/96     5/15/22      2,500      2,500
Ashtabula County, Ohio Brighton Manor Project, VRN, currently 3.65%...........    4/05/96    12/01/16      2,200      2,200
Clackamas County, Oregon Kaiser Permanent, VRN, currently 3.40%...............   10/01/96     4/01/14      2,175      2,175
Connecticut Development (Light & Power Co.), VRN, currently 3.30%.............    4/05/96     9/01/28      3,400      3,400
Cornell Township, Michigan, Economic Development, IRB, currently 3.15%........    5/07/96     3/01/15      3,100      3,100
Erie County, Ohio, Brighton Manor Project, VRN, currently 3.65%...............    4/05/96    11/01/16        600        600
Grand Prairie, Texas Housing Finance Authority, VRN, currently 3.30%..........    4/05/96     6/01/10      1,800      1,800
Greater East Texas Higher Education, VRN, currently 3.35%.....................    4/05/96     9/01/02      2,300      2,300
Hockley County, Texas, PCRB, currently 4.50%..................................    9/01/96     3/01/14      1,750      1,750
Houston, Texas TAN, currently 4.50%...........................................    6/27/96     6/27/96      1,000      1,000
Indiana Secondary Educational Loans, currently 3.50%..........................    4/05/96    12/01/14      1,000      1,000
Lincoln County, Wyoming, PCRB, currently 3.80%................................    4/01/96    11/01/14      3,000      3,000
Lisle, Illinois, VRN, currently 3.30%.........................................    4/05/96    12/15/25      2,500      2,500
Louisiana Public Facilities Authority (Kenner Hotels), IRB, currently 3.85%...    4/01/96    12/01/15      2,000      2,000
Louisiana Public Facilities Authority, VRN, currently 3.30%...................    4/05/96    10/01/22      1,000      1,000
Marion County, West Virginia Waste Disposal, RB, currently 3.50%..............    4/05/96    10/01/17      1,000      1,000
Marion County, West Virginia Waste Disposal, RB, currently 3.50%..............    4/05/96    10/01/17      2,200      2,200
Muldrow, Oklahoma Public Wks. Authority, IRB, currently 3.55%.................    4/05/96     2/01/15      3,000      3,000
New York City Municipal Water Finance Agency, VRN, currently 3.80%............    4/01/96     6/15/23      1,100      1,100
New York City Municipal Water Finance Agency, VRN, currently 3.70%............    4/01/96     6/15/24        900        900
New York State Energy Research & Development Authority, VRN, currently
  3.15%.......................................................................    4/05/96     6/01/27      3,000      3,000
North Carolina Medical Care Commission, VRN, currently 3.85%..................    4/05/96     5/01/21      2,600      2,600
Ohio Air Quality Development Authority, USX Corporation, PCRB, currently
  3.30%.......................................................................    5/01/96    11/01/15      1,010      1,010
Ohio, Higher Education, RB, currently 3.50%...................................    4/05/96    12/01/06      1,200      1,200
Palm Beach, Florida TAN currently 4.50%.......................................    9/27/96     9/27/96      2,000      2,013
Pennsylvania TAN (State of) currently 4.50%...................................    6/28/96     6/28/96      1,500      1,500
Platte County, Wyoming Series 84B, PCR, currently 3.85%.......................    4/01/96     7/01/14      1,800      1,800
Port of Anacortes, Washington, IRB, currently 3.15%...........................    4/10/96     6/15/19      3,000      3,000
Richmond, Virginia Revenue Series A, RAN, currently 4.00%.....................    6/28/96     6/28/96      1,000      1,001
Sandusky County, Ohio, Brighton Manor, VRN, currently 3.65%...................    4/05/96    12/01/16        500        500
Springfield, Illinois, Second and Adams Project, RB, currently 4.45%..........    4/05/96    12/01/15      1,140      1,140
Texas State RFDG-Veterans Housing Assistance, VRN, currently 3.30%............    4/05/96    12/01/16      3,000      3,000
Washington State Fin. Commiss. Rev., RB, currently 3.35%......................    4/05/96     1/01/10      4,000      4,000
West Feliciana, Louisiana, VRN, currently 3.80%...............................    4/01/96    12/01/15        500        500
York County, South Carolina PCR, currently 3.25%..............................    9/15/96     9/15/14      2,000      2,000
                                                                                                        --------    -------  
  TOTAL INVESTMENTS AT AMORTIZED COST 98.95%..................................                           $69,942    $67,935  
                                                                                                        ========    =======  
<FN>
 
RAN -- Revenue Anticipation Note
TAN -- Tax Anticipation Notes
VRN -- Variable Rate Notes
IRB -- Variable Rate Industrial Revenue Bonds
RB -- Variable Rate Revenue Bonds
PCRB -- Variable Rate Pollution Control Revenue Bonds
* Rule 2a-7, of the Investment Company Act of 1940, defines maturity as the
  longer of the period remaining until the next readjustment of the interest
  rate or the period remaining until the principal amount can be recovered
  through demand.

</TABLE>
 
Cost also represents cost for Federal income tax purposes.
 
See accompanying notes to financial statements.
 
                                                                               3
<PAGE>   32
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                              <C>
ASSETS
Investments in securities at amortized cost......................................      $67,935
Interest receivable..............................................................          325
Receivable for investments sold..................................................        2,030
Other assets.....................................................................           56
                                                                                       -------
          Total assets...........................................................       70,346
                                                                                       -------
LIABILITIES                                                                                   
Payable for Trust shares redeemed................................................          221
Payable for investment securities purchased......................................        2,175
Accrued investment management, accounting and transfer agent fees (note 2).......           36
Other accrued expenses...........................................................           39
                                                                                       -------
          Total liabilities......................................................        2,471
                                                                                       -------
COMMITMENTS AND CONTINGENCIES (NOTE 3)                                                        
NET ASSETS -- applicable to 67,874,714 outstanding $.10 par value shares of                   
  beneficial interest (unlimited number of shares authorized)....................      $67,875
                                                                                       =======
NET ASSET VALUE PER SHARE........................................................      $  1.00
                                                                                       =======
</TABLE>
 
See accompanying notes to financial statements.
 
4
<PAGE>   33
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                     <C>
INVESTMENT INCOME:
Interest.................................................................               $1,247
                                                                                        ------
EXPENSES:
Investment management fees (note 2)......................................                  173
Transfer agent fees and expenses (note 2)................................                   32
Accounting fees (note 2).................................................                    9
                                                                                        ------
          Total affiliated expenses......................................                  214
                                                                                        ------
Custodian fees...........................................................                    7
Professional fees........................................................                   22
Reports to shareholders..................................................                   15
Trustees' fees...........................................................                   10
Registration fees........................................................                   15
Other expenses...........................................................                   10
                                                                                        ------
          Total non-affiliated expenses..................................                   79
                                                                                        ------
          Total expenses.................................................                  293
                                                                                        ------
          Net increase in net assets from operations.....................               $  954
                                                                                        ======
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                               5
<PAGE>   34
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                      SIX MONTHS
                                                                        ENDED       YEAR ENDED
                                                                      MARCH 31,    SEPTEMBER 30,
                                                                         1996          1995
                                                                      ----------   -------------
<S>                                                                   <C>          <C>
FROM OPERATIONS:
Net increase in net assets from operations..........................   $    954      $   2,043
                                                                      ----------   -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders.................................       (954)        (2,043)
                                                                      ----------   -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares........................................     87,125        154,643
Reinvestment of distributions to shareholders.......................        901          1,917
Cost of shares redeemed.............................................    (84,931)      (172,311)
                                                                      ----------   -------------
  Increase (decrease) in net assets derived from capital share
     transactions...................................................      3,095        (15,751)
                                                                      ----------   -------------
  Net increase (decrease) in net assets.............................      3,095        (15,751)
NET ASSETS -- beginning of period...................................     64,780         80,531
                                                                      ----------   -------------
NET ASSETS -- end of period.........................................   $ 67,875      $  64,780
                                                                      ==========   ==============
</TABLE>
 
See accompanying notes to financial statements.
 
6
<PAGE>   35
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cardinal Tax Exempt Money Trust (the Trust) is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated January 13, 1983 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
 
Security Valuation--Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.
 
Variable Rate Demand Municipal Securities--Variable and adjustable rate demand
municipal securities are tax-exempt obligations that provide for a periodic
adjustment in the interest rate paid on the securities and permit the holder to
demand payment of the unpaid principal balance, plus accrued interest, at
redemption dates provided by contract upon a specified number of days notice
either from the issuer or by drawing on a bank letter of credit or comparable
guarantee issued with respect to such security. The interest rates shown for
variable rate securities are the rates in effect on March 31, 1996.
 
Security Transactions and Investment Income--Security transactions are recorded
on the trade date. Interest income is recorded on the accrual basis.
 
Federal Income Taxes--No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.
 
Dividends to Shareholders--Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.
 
(2) -- TRANSACTIONS WITH AFFILIATES
 
As investment manager for the Trust, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Trust. CMC has agreed that if the aggregate expenses of the Trust,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Trust, CMC will refund to the Trust, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the six months ended March 31, 1996.
 
CMC also serves as the Trust's transfer agent and fund accountant. Transfer
agent service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the six months ended March 31, 1996 the Trust paid
or accrued $26,500 and $8,510 for transfer agent and fund accounting services,
respectively.
                                                                     (continued)
 
                                                                               7
<PAGE>   36
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the six months ended March 31, 1996 the Trust
incurred no expenses relating to the distribution of its shares.
 
(3) -- COMMITMENTS AND CONTINGENCIES
 
The Trust has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
 
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $13,291 for the initial capital of ICI
Mutual. The Trust is also committed to provide $39,873 should ICI Mutual
experience the need for additional capital contributions.
 
Included in other assets is a $27,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.
 
(4) -- CAPITAL STOCK
 
Transactions in capital stock were as follows:
 
<TABLE>
<CAPTION>
                                                                       SIX MONTHS
                                                                          ENDED       YEAR ENDED
                                                                        MARCH 31,    SEPTEMBER 30,
                                                                          1996           1995
                                                                       -----------   -------------
<S>                                                                    <C>           <C>
Shares sold..........................................................   87,125,329     154,643,119
Shares issued in connection with reinvestment of distributions to
  shareholders.......................................................      900,507       1,916,504
                                                                       -----------   -------------
                                                                        88,025,836     156,559,623
Shares repurchased...................................................  (84,930,950)   (172,310,841)
                                                                       -----------   -------------
Net increase (decrease)..............................................    3,094,886     (15,751,218)
Shares outstanding:
Beginning of period..................................................   64,779,828      80,531,046
                                                                       -----------   -------------
End of period........................................................   67,874,714      64,779,828
                                                                       ===========   =============
</TABLE>
 
(5) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
 
8
<PAGE>   37
 
CARDINAL TAX EXEMPT MONEY TRUST
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
 
On March 29, 1996, a special meeting of shareholders of the Trust was held for
the purpose of voting on the following matters:
 
          1. Approve Agreement and Plan of Reorganization.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
 51,825,017       911,680           1,833,398
</TABLE>
 
          2. Fix number of Trustees of the Trust at ten.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
 53,162,113       534,965             873,017
</TABLE>
 
          3. To elect ten Trustees of the Trust.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
       TRUSTEES            VOTES FOR      VOTES ABSTAINED
- -----------------------    ----------     ---------------
<S>                        <C>            <C>
H. Keith Allen             54,024,717         545,378
Frank W. Siegel            54,024,717         545,378
Gordon B. Carson           53,597,453         972,642
John B. Gerlach, Jr.       54,024,717         545,378
Michael J. Knilans         53,661,510         908,585
James I. Luck              53,637,327         932,768
David L. Nelson            53,998,055         572,040
C. A. Peterson             54,015,022         555,093
Lawrence H. Rogers, II     53,651,511         918,584
Joseph H. Stegmayer        53,837,256         732,839
</TABLE>
 
          4. To ratify the selection of KPMG Peat Marwick LLP as independent
             auditors for the Fund for the fiscal year ending September 30,
             1996.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
 52,969,519       307,791           1,292,785
</TABLE>
 
                                                                               9
<PAGE>   38
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                                 SIX
                                               MONTHS
                                                ENDED                    YEARS ENDED SEPTEMBER 30,
                                              MARCH 31,     ---------------------------------------------------
                                                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
                                              ---------     ---------     ---------     ---------     ---------
Income from investment operations:
  Net investment income...................        0.01          0.03          0.02          0.02          0.03
Less distributions:
  Dividends...............................       (0.01)        (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..............................        2.73%         3.02%         1.78%         1.81%         2.62%
                                              ==========    ==========    ==========    ==========    ==========
Net assets, ending (000)..................     $67,875       $64,780       $80,531       $91,159       $70,054
                                              ==========    ==========    ==========    ==========    ==========
Ratio of expenses to average net assets...        0.84%         0.83%         0.76%         0.77%         0.76%
                                              ==========    ==========    ==========    ==========    ==========
Ratio of net investment income to average
  net assets..............................        2.75%         2.99%         1.78%         1.80%         2.59%
                                              ==========    ==========    ==========    ==========    ==========
</TABLE>
 
See accompanying notes to financial statements.
 
                                       10
<PAGE>   39
                                    [LOGO]
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 

New Accounts and                                     Toll-free Lines
General Information:                                 In Ohio 800-282-9446
(614) 464-5511                                       Outside Ohio 800-848-7734
<PAGE>   40
 
========================================================================
 
INVESTMENT ADVISER AND DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of The
Cardinal Fund Inc. and is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective Prospectus.
 
========================================================================
 
 
                            [CARDINAL FUNDS LOGO]

                         C A R D I N A L   F U N D S
                                      
                                     THE
                                   CARDINAL
                                  FUND INC.





                       ----------------------------------
                               SEMI-ANNUAL REPORT
                       ----------------------------------
 
                                MARCH 31, 1996
 
                               THE OHIO COMPANY
 
========================================================================
<PAGE>   41
 
MESSAGE TO THE CARDINAL FUND INC. SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of The Cardinal Fund Inc. for
the six month period ending March 31, 1996. The complete financial statements,
and portfolio of investments, can be found on the following pages along with a
message from the Fund's portfolio manager. We encourage you to read this
information.
 
We are also pleased to report that The Cardinal Fund Inc. achieved solid
investment results and continued asset growth over the past six months. The Fund
finished with $233.9 million in assets and a net asset value of $13.40 per
share.
 
Since the fiscal year-end, two important changes have taken place within the
operation of The Cardinal Fund Inc.:
 
     - On December 22, 1995, John Bevilacqua assumed responsibility for the
       day-to-day management of The Cardinal Fund Inc., portfolio. John brings
       over twenty years of investment experience to this position. We are
       confident in John's abilities to guide the Cardinal portfolio and respond
       to the market's challenges and opportunities.
 
     - Earlier this year, you were asked to consider and vote on a Plan of
       Reorganization aimed at improving operating efficiencies and attracting
       additional assets. We are happy to report that this Plan was approved and
       is now being implemented.
 
The pursuit of long-term growth of capital and income continues to attract
investors to The Cardinal Fund Inc. We remain committed to achieving this goal
and providing you with superior service.
 
If you would like more information about The Cardinal Fund Inc., please contact
your Account Executive or call us direct at our toll-free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,

/s/ H. Keith Allen                /s/ Frank W. Siegel 
H. Keith Allen                    Frank W. Siegel, CFA
Chairman                          President

 
                                      1
<PAGE>   42
 
- --------------------------------------------------------------------------------
 
                  MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of The Cardinal Fund Inc. Directors and Officers, we are
pleased to present the March 31, 1996 Semi-Annual Report.
 
Spurred by declining interest rates in 1995's final quarter, a continuing large
flow of investment dollars into mutual funds, the assumption that an
environment of positive economic growth, low inflation and flat to declining
interest rates will continue, the equity markets have continued to move ahead
strongly.
 
During the past six months, The Cardinal Fund Inc. provided a total return
of 11.1%, which was modestly behind the total return of the Standard & Poor's
500, but which exceeds the median return of the Lipper Growth Income Index of
10.6%. We continue to believe that the environment for ownership of financial
assets is a positive one and that the returns generated by The Cardinal Fund
Inc. will be rewarding.
 
While The Cardinal Fund Inc. remains quite well diversified, it has a somewhat
higher concentration in the Technology, Financial Services and Energy sector of
the market, and the Fund strategy continues to focus on the ownership of high
quality consistent growth companies.
 
Significant additions to the portfolio during the past six months include
Hewlett Packard, American International Group, Atmel Corp., Coca Cola, Intel,
Novell, Texas Instruments, Charter One Financial and DSC Communications.
 
The table below provides a simple comparison of certain characteristics of The
Cardinal Fund Inc. and The Standard & Poor's 500 Index.
 
<TABLE>
<CAPTION>
                                                          CARDINAL FUND    S & P 500
                                                          -------------    ---------
        <S>                                               <C>              <C>
        5 Year Historical Earnings Growth                      15.0%          15.0%
        P/E Trailing 12 Months                                 15.9           17.3
        Dividend Yield                                          2.4%           2.1%
</TABLE>
 
We remain intensely committed in our efforts to provide superior results to our
shareholders. We appreciate your confidence and continued investment in The
Cardinal Fund Inc.
 
        
 /s/ H. Keith Allen         /s/ Frank W. Siegel        /s/ John Bevilacqua
                             
     H. Keith Allen             Frank W. Siegel            John Bevilacqua
     Chairman                   President                  Vice President



                                       2
<PAGE>   43
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS)
- --------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
                                                                              FACE/        MARKET
                                                                             SHARES        VALUE
                                                                             -------      --------
<S>                                                                          <C>          <C>
COMMON STOCK 95.68%
AEROSPACE/DEFENSE 3.74%
Harris Corporation........................................................    75,200      $  4,653
Raytheon Company..........................................................    80,000         4,100
                                                                                          --------
                                                                                             8,753
                                                                                          --------
AUTOMOTIVE PARTS 1.10%
Cooper Tire & Rubber Company..............................................   100,200         2,580
                                                                                          --------
BEVERAGES 2.13%
Anheuser-Busch Companies Incorporated.....................................    25,000         1,684
Coca Cola Company.........................................................    40,000         3,305
                                                                                          --------
                                                                                             4,989
                                                                                          --------
CENTRAL STATES BANKS 9.21%
Banc One Corporation......................................................   143,550         5,114
Charter One Financial.....................................................   100,000         3,375
Huntington Bancshares Incorporated........................................   190,747         4,554
KeyCorp...................................................................   220,000         8,498
                                                                                          --------
                                                                                            21,541
                                                                                          --------
COMMODITY CHEMICALS 2.74%
ARCO Chemical Company.....................................................    40,000         2,075
Dow Chemical Company......................................................    50,000         4,344
                                                                                          --------
                                                                                             6,419
                                                                                          --------
COMMUNICATIONS 1.15%
DSC Communications........................................................   100,000         2,700
                                                                                          --------
COMPUTERS 3.67%
Compaq Computer Corporation*..............................................    70,000         2,704
Hewlett Packard...........................................................    35,000         3,290
Tektronix Incorporated....................................................    80,000         2,600
                                                                                          --------
                                                                                             8,594
                                                                                          --------
 
                                                                                        (continued)
</TABLE>
 
                                       3
<PAGE>   44
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
                                                                              FACE/        MARKET
                                                                             SHARES        VALUE
                                                                             -------      --------
<S>                                                                          <C>          <C>
COMMON STOCK (CONTINUED)
CONGLOMERATES 9.35%
Johnson Controls, Incorporated............................................   100,000      $  7,463
Tenneco, Incorporated.....................................................   150,500         8,409
Textron, Incorporated.....................................................    75,000         6,000
                                                                                          --------
                                                                                            21,872
                                                                                          --------
CONSUMER SERVICES 1.54%
H&R Block Incorporated....................................................   100,000         3,613
                                                                                          --------
DIVERSIFIED FINANCIAL SERVICES 2.59%
Beneficial Corp...........................................................   105,000         6,051
                                                                                          --------
DIVERSIFIED INDUSTRIALS 1.94%
Minnesota Mining & Manufacturing Company..................................    70,000         4,541
                                                                                          --------
DIVERSIFIED TECHNOLOGY 2.18%
Texas Instruments.........................................................   100,000         5,088
                                                                                          --------
ELECTRICAL COMPONENTS 7.51%
Asea Brown-Boveri, Incorporated...........................................    45,000         4,646
General Electric Company..................................................   120,400         9,376
Kent Electric.............................................................   100,000         3,538
                                                                                          --------
                                                                                            17,560
                                                                                          --------
 
*Non-income producing                                                                  (continued)
</TABLE>
 
                                       4
<PAGE>   45
<TABLE>
<CAPTION>
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
                                                                              FACE/        MARKET
                                                                             SHARES        VALUE
                                                                             -------      --------
<S>                                                                          <C>          <C>
COMMON STOCK (CONTINUED)
FOOD 0.01%
Earthgrain................................................................     1,000      $     30
                                                                                          --------
GAS 1.29%
Williams Companies Incorporated...........................................    60,000         3,023
                                                                                          --------
HEALTHCARE PROVIDERS 1.18%
U.S. HealthCare, Incorporated.............................................    60,000         2,753
                                                                                          --------
INDUSTRIAL SERVICES 0.64%
New England Business Services, Incorporated...............................    90,000         1,508
                                                                                          --------
INSURANCE 2.99%
American International Group..............................................    30,000         2,809
Marsh & McLennan Companies Incorporated...................................    45,000         4,179
                                                                                          --------
                                                                                             6,988
                                                                                          --------
INTEGRATED OILS 10.71%
Mobil Corporation.........................................................    75,000         8,691
Royal Dutch Petroleum Company.............................................    55,000         7,769
Texaco Incorporated.......................................................   100,000         8,600
                                                                                          --------
                                                                                            25,059
                                                                                          --------
MEDICAL SUPPLIES 0.57%
Fisher Scientific International, Incorporated.............................    35,000         1,339
                                                                                          --------
OTHER NONFERROUS METALS 2.34%
Worthington Industries, Incorporated......................................   275,776         5,481
                                                                                          --------
PAPER 1.62%
Boise Cascade.............................................................    90,000         3,780
                                                                                          --------
PHARMACEUTICALS 2.62%
American Home Products Corporation........................................    40,000         4,335
Mylan Laboratories, Incorporated..........................................    85,000         1,785
                                                                                          --------
                                                                                             6,120
                                                                                          --------
 
                                                                                       (continued)
</TABLE>
 
                                       5
<PAGE>   46
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
                                                                              FACE/        MARKET
                                                                             SHARES        VALUE
                                                                             -------      --------
<S>                                                                          <C>          <C>
COMMON STOCK (CONTINUED)
PROPERTY/CASUALTY INSURERS 4.29%
Cincinnati Financial Corporation..........................................   158,288      $ 10,031
                                                                                          --------
PUBLISHING 1.64%
Dun and Bradstreet Corporation............................................    30,000         1,819
Gannett Company Incorporated..............................................    30,000         2,018
                                                                                          --------
                                                                                             3,836
                                                                                          --------
SEMICODUCTOR & RELATED 4.50%
Atmel Corporation.........................................................    90,000         2,295
Intel Corporation.........................................................    75,000         4,266
Motorola..................................................................    75,000         3,975
                                                                                          --------
                                                                                            10,536
                                                                                          --------
SOFTWARE AND PROCESSING 3.35%
Microsoft Incorporated....................................................    50,000         5,156
Novell....................................................................   200,000         2,675
                                                                                          --------
                                                                                             7,831
                                                                                          --------
SPECIALTY/RETAILERS 0.88%
The Limited, Incorporated.................................................   108,780         2,067
                                                                                          --------
TELEPHONE 5.36%
GTE Corporation...........................................................   160,000         7,020
Sprint Corporation........................................................   120,000         4,560
360 Communications Company................................................    40,000           955
                                                                                          --------
                                                                                            12,535
                                                                                          --------
TOBACCO 2.81%
Philip Morris Companies, Incorporated.....................................    75,000         6,581
                                                                                          --------
     TOTAL COMMON STOCK (COST $157,117,639)...............................                 223,796
                                                                                          --------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S.
  GOVERNMENT OBLIGATIONS 4.06%
Paine Webber, 5.50%, dated 3/29/96, due 4/01/96...........................                   9,500
                                                                                          --------
     TOTAL REPURCHASE AGREEMENTS (COST $9,500,000)........................                   9,500
                                                                                          --------
     TOTAL INVESTMENTS (COST $166,617,639) 99.74%.........................                $233,296
                                                                                          ======== 
</TABLE>
 
See accompanying notes to financial statements.
 
                                        6
<PAGE>   47
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- -------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
ASSETS
 
<S>                                                                                      <C>
Investments in securities, at value (cost $166,618)...................................   $233,296
Cash..................................................................................        539
Receivable for investment securities sold.............................................         24
Dividends and interest receivable.....................................................        525
Receivable for Fund shares sold.......................................................         13
Other assets..........................................................................        111
                                                                                         --------
          Total assets................................................................    234,508
                                                                                         --------
LIABILITIES
Payable for Fund shares redeemed......................................................        210
Payable for investment securities purchased...........................................         24
Accrued investment management and transfer agent fees (note 3)........................        307
Other accrued expenses................................................................         72
                                                                                         --------
          Total liabilities...........................................................        613
                                                                                         --------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS -- applicable to 17,451,068 outstanding no par value shares of beneficial
  interest (authorized 30,000,000)....................................................   $233,895
                                                                                         ========
NET ASSET VALUE PER SHARE.............................................................   $  13.40
                                                                                         ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                        7
<PAGE>   48
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- -------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<S>                                                                                          <C>       
INVESTMENT INCOME:                                                                                     
Dividends..............................................................................      $ 2,699   
Interest...............................................................................          483   
                                                                                             -------   
          Total income.................................................................        3,182   
                                                                                             -------   
EXPENSES:                                                                                              
Investment management fees (note 3)....................................................          574   
Transfer agent fees and expenses (note 3)..............................................          111   
                                                                                             -------   
          Total affiliated expenses....................................................          685   
                                                                                             -------   
Custodian fees.........................................................................           13   
Professional fees......................................................................           34   
Reports to shareholders................................................................           21   
Directors' fees........................................................................           10   
Registration fees......................................................................            8   
Other expenses.........................................................................           22   
                                                                                             -------   
          Total non-affiliated expenses................................................          108   
                                                                                             -------   
          Total expenses...............................................................          793   
                                                                                             -------   
          Net investment income........................................................        2,389   
                                                                                             -------   
REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 2):                                                  
Net realized gain from security transactions...........................................       14,422   
Increase in unrealized gain on investments.............................................        7,775   
                                                                                             -------   
          Net realized gain and increase in unrealized gain on investments.............       22,197   
                                                                                             -------   
          Net increase in net assets from operations...................................      $24,586   
                                                                                             =======   
</TABLE>
 
See accompanying notes to financial statements.
 
                                        8
<PAGE>   49
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- ------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------
 
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
                                                                      SIX MONTHS                      
                                                                        ENDED         YEAR ENDED      
                                                                      MARCH 31,      SEPTEMBER 30,    
                                                                         1996            1995         
                                                                      ----------     -------------    
<S>                                                                   <C>            <C>              
FROM OPERATIONS:                                                                                      
Net investment income...........................................       $  2,389        $   6,723      
Net realized gain from security transactions....................         14,422           17,719      
Increase in unrealized gain on investments......................          7,775            8,122      
                                                                      ---------        ---------      
  Net increase in net assets from operations....................         24,586           32,564      
                                                                      ---------        ---------      
FROM DISTRIBUTIONS TO SHAREHOLDERS:                                                                   
Distributions of net investment income ($.15 and $.35 per share,                                      
  respectively).................................................         (2,548)          (6,566)     
Distribution of net realized gains from security transactions                                         
  ($1.08 and $.83 per share, respectively)......................        (18,120)         (15,750)     
                                                                      ---------        ---------      
  Total distributions to shareholders...........................        (20,668)         (22,316)     
                                                                      ---------        ---------      
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):                                                             
Proceeds from sale of Fund shares...............................          4,348            8,266      
Net asset value of Fund shares issued in connection with                                              
  reinvestment of distributions to shareholders.................         19,158           20,894      
                                                                      ---------        ---------      
                                                                         23,506           29,160      
Cost of Fund shares redeemed....................................        (19,710)         (59,809)     
                                                                      ---------        ---------      
  Increase (decrease) in net assets derived from capital share                                        
     transactions...............................................          3,796          (30,649)     
                                                                      ---------        ---------      
  Net increase (decrease) in net assets.........................          7,714          (20,401)     
NET ASSETS -- beginning of period...............................        226,181          246,582      
                                                                      ---------        ---------      
NET ASSETS -- end of period (undistributed net investment income                                      
  of $17 and $176, respectively)................................       $233,895        $ 226,181      
                                                                      =========        =========      
</TABLE>
 
See accompanying notes to financial statements.
 
                                        9
<PAGE>   50
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The Cardinal Fund Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as a diversified, open-end management investment company. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles for investment companies.
 
Security Valuation--Investments listed or traded on a national securities
exchange are valued at the last sale price or, if there has been no recent sale,
at the last bid price. Investments traded in the over-the-counter market are
valued at the last sale price. If no quotations are available, portfolio
securities are valued in good faith by the Board of Directors to reflect their
fair value.
 
Security Transactions and Investment Income--Security transactions are accounted
for on the trade date and dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. In determining the net
realized gain or loss on securities sold, the cost of the securities has been
determined on the first-in, first-out (FIFO) cost basis. It is the Fund's policy
for its Custodian, or a third-party bank, to take possession of all securities
pledged as collateral for repurchase agreements and monitor the market value of
the collateral to ensure that it remains sufficient to cover the repurchase
agreements.
 
Distributions to Shareholders--Distributions and dividends are recorded by the
Fund on the record date. Income dividends are declared quarterly and any capital
gain distribution is declared annually.
 
Federal Income Taxes--No provision has been made for Federal taxes on the Fund's
income, since it is the policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to make
sufficient distributions of taxable income and capital gains within the required
time to relieve it from all, or substantially all, Federal income taxes.
 
(2) -- PURCHASES AND SALES OF SECURITIES
 
The cost of purchases and proceeds from sales of investment securities
(excluding short-term obligations) during the six months ended March 31, 1996
aggregated $66,192,225 and $71,056,133, respectively.
 
During the six months ended March 31, 1996 the Fund realized on a FIFO cost
basis a net capital gain of $14,421,742 and $14,438,096 for book and tax
purposes, respectively.
 
At March 31, 1996, the book cost of investment securities was $166,617,639 and
the tax cost was $166,598,146. The difference between book and tax cost is
attributable to securities acquired in the 1975 acquisition of the Ohio Capital
Fund, Inc. and remaining in the Fund's portfolio with a book cost of $56,857 and
a tax cost of $37,364.
 
As of March 31, 1996, for tax purposes, gross unrealized gains and gross
unrealized losses on investment securities were $68,069,424 and $1,390,684
respectively; resulting in a net unrealized gain of $66,678,740.
 
(3) -- TRANSACTIONS WITH AFFILIATES
 
As investment manager for the Fund, The Ohio Company (the Adviser), with whom
certain officers and directors of the Fund are affiliated is allowed an annual
fee of 0.5% of the average daily net assets of the Fund. For the six months
ended the Fund paid or accrued $574,213 for investment management services. The
Adviser has agreed that if the aggregate expenses of the Fund, as defined, for
any fiscal year exceed
 
                                                                     (continued)
 
                                      10
<PAGE>   51
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
the expense limitation of any state having jurisdiction over the Fund, the
Adviser will refund to the Fund, or otherwise bear, such excess. This limitation
did not affect the calculation of the management fee during the six months ended
March 31, 1996. In addition to providing management and advisory services, The
Ohio Company pays the compensation of all officers and employees of the Fund and
provides office space and certain related facilities required by the Fund.
 
The Ohio Company, acting as the General Distributor and Dealer, reported to the
Fund that it received commissions after discounts to dealers from the sale of
shares of the Fund of $80,028 for the six months ended March 31, 1996. Cardinal
Management Corp., a wholly-owned subsidiary of The Ohio Company, provides
transfer agent services to the Fund. Transfer agent service fees are based on a
monthly charge per shareholder account plus out-of-pocket expenses. For the six
months ended March 31, 1996 the Fund paid or accrued $105,862 for transfer agent
services provided by Cardinal Management Corp.
 
(4) -- COMMITMENTS AND CONTINGENCIES
 
The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
 
Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and directors has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $28,588, for the initial capital of ICI
Mutual. The Fund is also committed to provide $85,764 should ICI Mutual
experience the need for additional capital contributions.
 
Included in other assets is a $56,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.
 
(5) -- CAPITAL STOCK
 
At March 31, 1996, there were 30,000,000 shares of no par value capital stock
authorized and the capital amounts were as follows:
 
<TABLE>
<S>                                                                                    <C>
Paid in capital....................................................................    $151,616,367
Accumulated net realized gains on investments......................................      15,583,064
Unrealized gain on investments.....................................................      66,678,740
Undistributed net investment income................................................          16,648
                                                                                       ------------
Net assets.........................................................................    $233,894,819
                                                                                       ============
 
                                                                                        (continued)
</TABLE>
 
                                       11
<PAGE>   52
<TABLE>
<CAPTION>
 
THE CARDINAL FUND INC.
- ---------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
Transactions in capital stock were as follows:
 
                                                                       SIX MONTHS
                                                                         ENDED           YEAR ENDED
                                                                       MARCH 31,        SEPTEMBER 30,
                                                                          1996              1995
                                                                       ----------       -------------
<S>                                                                    <C>            <C>
Shares sold........................................................       330,681           677,512
Shares issued in connection with reinvestment of distributions
  to shareholders..................................................     1,493,286         1,830,954
Shares repurchased.................................................    (1,471,915)       (4,782,671)
                                                                       ----------      ------------
Net decrease.......................................................       352,052        (2,274,205)
Shares outstanding:
  Beginning of period..............................................    17,099,016        19,373,221
                                                                       ----------      ------------
  End of period....................................................    17,451,068        17,099,016
                                                                       ==========      ============
</TABLE>
 
(6) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each period:
 
                                                                 SIX MONTHS
                                                                   ENDED                YEARS ENDED SEPTEMBER 30,
                                                                 MARCH 31,   ------------------------------------------------
                                                                    1996       1995      1994      1993      1992      1991
                                                                 ----------  --------  --------  --------  --------  --------
<S>                                                              <C>         <C>       <C>       <C>       <C>       <C>
Net Asset Value, beginning....................................    $  13.23   $  12.73  $  12.91  $  12.95  $  11.88  $   9.28
                                                                 ---------   --------  --------  --------  --------  --------
Income from investment operations:
  Net investment income.......................................        0.14       0.36      0.31      0.32      0.35      0.35
  Net realized and unrealized gains (losses) on investments...        1.26       1.32      0.12      0.55      1.37      2.70
                                                                 ---------   --------  --------  --------  --------  --------
Total from investment operations..............................        1.40       1.68      0.43      0.87      1.72      3.05
                                                                 ---------   --------  --------  --------  --------  --------
Less distributions:
  Dividends...................................................       (0.15)     (0.35)    (0.33)    (0.29)    (0.36)    (0.38)
  Capital gain distribution...................................       (1.08)     (0.83)    (0.28)    (0.62)    (0.29)    (0.07)
                                                                 ---------   --------  --------  --------  --------  --------
Total distributions...........................................       (1.23)     (1.18)    (0.61)    (0.91)    (0.65)    (0.45)
                                                                 ---------   --------  --------  --------  --------  --------
Net Asset Value, ending.......................................    $  13.40   $  13.23  $  12.73  $  12.91  $  12.95  $  11.88
                                                                 =========   ========  ========  ========  ========  ======== 
Ratios/Supplemental Data:
Total return..................................................       11.07%     14.84%     3.38%     6.98%    15.05%    33.54%
                                                                 =========   ========  ========  ========  ========  ======== 
Net assets, ending (000)......................................    $233,895   $226,181  $246,581  $282,125  $261,392  $221,428
                                                                 =========   ========  ========  ========  ========  ======== 
Ratio of expenses to average net assets.......................        0.69%      0.70%     0.72%     0.68%     0.67%     0.67%
                                                                 =========   ========  ========  ========  ========  ======== 
Ratio of net investment income to average net assets..........        2.08%      2.89%     2.40%     2.46%     2.83%     3.15%
                                                                 =========   ========  ========  ========  ========  ======== 
Portfolio turnover rate.......................................       28.74%     19.78%    23.20%    11.11%     6.22%    33.27%
                                                                 =========   ========  ========  ========  ========  ======== 
</TABLE>
 
See accompanying notes to financial statements.
 
                                       12
<PAGE>   53
 
THE CARDINAL FUND INC.
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
 
On March 29, 1996, a special meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
 
        1. Approve Agreement and Plan of Reorganization.
 
           The results were as follows:

<TABLE>
<CAPTION> 
                VOTES FOR     VOTES AGAINST     VOTES ABSTAINED   
                ----------    -------------     ---------------   
                <S>           <C>               <C>               
                9,770,051        543,680            455,813       
</TABLE>
 
        2. Amend Fundamental policy regarding related party transactions.
 
           The results were as follows:
 
        <TABLE>
        <CAPTION>
                VOTES FOR     VOTES AGAINST     VOTES ABSTAINED  
                ----------    -------------     ---------------  
                <S>           <C>               <C>              
                9,544,644        516,368            698,531      
        </TABLE>
 
        3. Fix number of directors of the Fund at ten.
 
           The results were as follows:
 
        <TABLE>
        <CAPTION>
                VOTES FOR     VOTES AGAINST     VOTES ABSTAINED   
                ----------    -------------     ---------------   
                <S>           <C>               <C>               
                10,207,862       208,884            352,797       
        </TABLE>
 
        4. To elect ten Directors of the Fund:
 
           The results were as follows:
 
        <TABLE>
        <CAPTION>
                       DIRECTORS            VOTES FOR     VOTES ABSTAINED      
                -----------------------    -----------    ---------------      
                <S>                        <C>            <C>                  
                H. Keith Allen             10,495,469         274,074          
                Frank W. Siegel            10,493,063         276,480          
                Gordon B. Carson           10,463,347         306,196          
                John B. Gerlach, Jr.       10,496,839         272,704          
                Michael J. Knilans         10,483,588         285,955          
                James I. Luck              10,494,135         275,408          
                David L. Nelson            10,491,548         277,995          
                C. A. Peterson             10,464,459         305,084          
                Lawrence H. Rogers, II     10,486,273         283,270          
                Joseph H. Stegmayer        10,495,646         273,897          
</TABLE>
 
        5. To ratify the selection of KPMG Peat Marwick LLP as independent
           auditors for the Fund for the fiscal year ending September 30, 1996.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
                 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED   
                -----------    -------------     ---------------   
                <S>            <C>               <C>               
                10,271,550        152,274            345,720       
</TABLE>
 
                                       13
<PAGE>   54
<TABLE>
<CAPTION>
 
- --------------------------------------------------------------------------------------------------
TEN-YEAR DISTRIBUTION HISTORY
- --------------------------------------------------------------------------------------------------
 
                                                                          PER SHARE DISTRIBUTION
                                                          NET ASSET      -------------------------
  PERIOD                                                  VALUE PER       FROM       FROM REALIZED
  ENDING                                                    SHARE        INCOME      CAPITAL GAINS
- -----------------------------------------------------     ---------      ------      -------------
<S>                                                       <C>            <C>         <C>
3/31/96..............................................      $ 13.40       $0.15          $ 1.084
9/30/95..............................................        13.23        0.35             0.83
9/30/94..............................................        12.73        0.33             0.28
9/30/93..............................................        12.91        0.29             0.62
9/30/92..............................................        12.95        0.36             0.29
9/30/91..............................................        11.88        0.38             0.07
9/30/90..............................................         9.28        0.53             0.49
9/30/89..............................................        11.75        0.39             0.38
9/30/88..............................................        10.38        0.47             0.43
9/30/87..............................................        11.73        0.28             0.72
9/30/86..............................................        10.35        0.23             0.56
</TABLE>
 
                                       14
<PAGE>   55








                           [THE CARDINAL FUNDS LOGO]



 
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 
            New Accounts and                       Toll-free Lines
            General Information:                   In Ohio 800-282-9446
            (614) 464-5511                         Outside Ohio 800-848-7734
<PAGE>   56
 
- ----------------------------------------------------------
 
- ---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
 
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of Cardinal
Government Obligations Fund and is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective Prospectus.
 
- ---------------------------------------------------------
- ----------------------------------------------------------
 
         [CARDINAL LOGO] 
             CARDINAL
            GOVERNMENT
           OBLIGATIONS
               FUND
- ----------------------------------
        SEMI-ANNUAL REPORT
- ----------------------------------

          MARCH 31, 1996

         The Ohio Company 
- ---------------------------------------------------------
- ----------------------------------------------------------
<PAGE>   57
 
MESSAGE TO CARDINAL GOVERNMENT OBLIGATIONS FUND SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of Cardinal Government
Obligations Fund for the six month period ending March 31, 1996. The complete
financial statements, and portfolio of investments, can be found on the
following pages along with a message from the Fund's portfolio manager. We
encourage you to read this information.
 
We are also pleased to report that Cardinal Government Obligations Fund achieved
positive investment results over the past six months. The Fund finished the six
month period with $144.4 million in assets and a net asset value of $8.14 per
share.
 
Earlier this year, you were asked to consider and vote on a Plan of
Reorganization aimed at improving operating efficiencies and attracting
additional assets. We are happy to report that this Plan was approved and is now
being implemented.
 
The pursuit of safety of capital with the highest available current income from
government securities continues to attract investors to Cardinal Government
Obligations Fund. We remain committed to achieving this goal and providing you
with superior service.
 
If you would like more information about Cardinal Government Obligations Fund,
please contact your Account Executive or call us direct at our toll free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,

/s/ H. Keith Allen                /s/ Frank W. Siegel, CFA 
H. Keith Allen                    Frank W. Siegel, CFA
Chairman                          President
 
                                                                            1
<PAGE>   58
 
- --------------------------------------------------------------------------------
 
                   MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of the Cardinal Government Obligations Fund Trustees and Officers, we
are pleased to present our March 31, 1996 Semi-Annual Report.
 
The market for mortgage-backed securities suffered a dramatic reversal during
the first six months of Cardinal Government Obligations Fund's current fiscal
year. Prices for these securities rallied into December with yields on GNMA
pass-throughs falling below 7%. After remaining near their lows during December
and January, yields reversed and climbed to as high as 7.50% on current pools
near the end of March. This price drop was quite quick and dramatic as current
GNMA pool prices fell as much as 3.9% from their highs of mid-January to the
closing levels on March 29, 1996.
 
The Fund, with its intermediate term average-life, produced a return of 3.33%
for the first six months of this fiscal year, while distributing income at an
annual rate of $0.62 per share. This performance allowed the Fund to earn the
NUMBER ONE RANKING IN THE LIPPER UNIVERSE OF 58 GNMA FUNDS during the first
three months of 1996.
 
Looking forward six months, we expect the market to offer its usual stiff
challenges. The market forces that produced the steep declines in the
fixed-income markets are difficult to rationalize, but are ever present.
Inflation rates measured over the entire economy remain docile; however, some
commodity prices, specifically food grains and oil, are up sharply. Economic
activity, while subdued, is maintaining its steady move forward and this could
ultimately cause labor costs to rise. News of this kind could have a chilling
effect on the fixed-income market. These potential problems, along with those
that are certain to arise, will provide plenty of challenges and opportunities
in the coming months.
 
These opportunities could provide higher interest rates for the mortgage-backed
securities in which your Fund invests. The one strategy planned for the
portfolio, calls for exploring any reasonably priced offerings to increase
refunding protection in the portfolio through greater use of GNMA project loans.
We are reviewing these opportunities carefully as they arise.
 
We thank you for past support and look forward to assisting you in meeting the
opportunities the future will bring.
 
/s/ Keith Allen         /s/ Frank W. Siegel     /s/ John R. Carle
H. Keith Allen          Frank W. Siegel         John R. Carle
Chairman                President               Executive Vice President
                

2
<PAGE>   59
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                PRINCIPAL      VALUE
SECURITIES                                                                       AMOUNT      (NOTE 1)
- ----------------------------------------------------------------------------    --------     ---------
<S>                                                                             <C>          <C>
DIRECT U.S. GOVERNMENT OBLIGATIONS .70%
U.S. Treasury Notes, 6.50% maturing 8/15/05.................................    $  1,000     $  1,007
                                                                                --------     ---------
      TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS..............................       1,000        1,007
                                                                                --------     ---------
U.S. GOVERNMENT AGENCY OBLIGATIONS 101.16%
GNMA I PL Notes, 7.375% maturing 1/15/98....................................       2,613        2,604
GNMA I PL Notes, 7.75% maturing 4/15/97.....................................       1,264        1,283
GNMA I PL Notes, 8.00% maturing 11/15/97 through 8/15/35....................       7,660        7,832
GNMA I PL Notes, 8.15% maturing 1/15/24.....................................       2,325        2,413
GNMA I PL Notes, 8.25% maturing 3/15/97 through 11/15/34....................       8,077        8,331
GNMA I PL Notes, 8.50% maturing 6/15/22 through 12/15/30....................       8,837        9,202
GNMA I PL Notes, 8.75% maturing 8/15/24.....................................       1,927        2,019
GNMA I PL Notes, 9.00% maturing 10/15/21 through 12/15/34...................       7,980        8,324
GNMA I PL Notes, 9.25% maturing 3/15/30 through 2/15/33.....................       1,655        1,747
GNMA I PL Notes, 9.50% maturing 1/15/19 through 8/15/22.....................       1,303        1,370
GNMA I PL Notes, 10.25% maturing 12/15/22...................................       1,638        1,731
GNMA I PL Notes, 10.50% maturing 7/15/14....................................       1,030        1,095
GNMA I Notes, 8.00% maturing 5/15/22 through 5/15/25........................       6,517        6,659
GNMA I Notes, 8.50% maturing 5/15/16 through 8/15/17........................      10,302       10,823
GNMA I Notes, 8.75% maturing 12/15/16 through 1/15/25.......................       1,754        1,853
GNMA I Notes, 9.00% maturing 5/15/16 through 4/15/21........................      21,129       22,607
GNMA I Notes, 11.00% maturing 1/15/10 through 6/15/20.......................       5,701        6,415
GNMA II Notes, 8.00% maturing 5/20/22 through 12/20/25......................       2,894       12,942
GNMA II Notes, 9.00% maturing 10/20/15 through 10/20/19.....................       9,723       10,330
GNMA II Notes, 9.50% maturing 7/20/16 through 12/20/22......................       4,742        5,098
GNMA II Notes, 10.00% maturing 9/20/13 through 9/20/19......................      10,065       10,782
Fed Home Loan Mtg. Corp., 7.00% maturing 7/01/10 through 3/01/11............      15,793       15,783
Fed Home Loan Mtg. Corp., 7.50% maturing 5/01/09 through 6/01/10............       4,755        4,831
                                                                                --------     ---------
      TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS..............................     139,684      146,076
                                                                                --------     ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT OBLIGATIONS 1.39%
Fifth Third Bank, 5.25%, dated 3/29/96, due 4/01/96.........................       2,000        2,000
                                                                                --------     ---------
      TOTAL REPURCHASE AGREEMENTS...........................................       2,000        2,000
                                                                                --------     ---------
      TOTAL INVESTMENTS (COST $148,106) 103.24%.............................    $142,684     $149,083
                                                                                ========     =========
</TABLE>
 
GNMA -- Government National Mortgage Association
PL -- Project Loan
Cost also represents cost for Federal income tax purposes.
 
See accompanying notes to financial statements.
 
                                                                              3
<PAGE>   60
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                               <C>
ASSETS
Investments in securities, at value (cost $148,106)...........................    $ 149,083
Cash..........................................................................          491
Interest receivable...........................................................          999
Receivable for Fund shares sold...............................................           13
Other assets..................................................................          110
                                                                                  ---------
          Total assets........................................................      150,696
                                                                                  ---------
LIABILITIES
Payable for investment securities purchased...................................        5,449
Dividends payable.............................................................          388
Payable for Fund shares redeemed..............................................          312
Accrued investment management, accounting and transfer agent fees (note 3)....           79
Other accrued expenses........................................................           62
                                                                                  ---------
          Total liabilities...................................................        6,290
                                                                                  ---------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
NET ASSETS--applicable to 17,730,206 outstanding no par value shares of
  beneficial interest (unlimited number of shares authorized).................    $ 144,406
                                                                                  =========
NET ASSET VALUE PER SHARE.....................................................    $    8.14
                                                                                  =========
</TABLE>
 
See accompanying notes to financial statements.
 

4
<PAGE>   61
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
INVESTMENT INCOME:
Interest.........................................................................    $ 6,055
                                                                                     -------
EXPENSES:
Investment management fees (note 3)..............................................        370
Transfer agent fees and expenses (note 3)........................................         76
Accounting fees (note 3).........................................................         20
                                                                                     -------
            Total affiliated expenses............................................        466
                                                                                     -------
Custodian fees...................................................................         21
Professional fees................................................................         28
Reports to shareholders..........................................................         17
Directors' fees..................................................................         11
Registration fees................................................................          9
Other expenses...................................................................         17
                                                                                     -------
            Total non-affiliated expenses........................................        103
                                                                                     -------
            Total expenses.......................................................        569
                                                                                     -------
            Net investment income................................................      5,486
                                                                                     -------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS (NOTE 2):
Net realized loss from security transactions.....................................       (251)
Decrease in unrealized gain on investments.......................................       (148)
                                                                                     -------
            Net realized loss and decrease in unrealized gain on investments.....       (399)
                                                                                     -------
            Net increase in net assets from operations...........................    $ 5,087
                                                                                     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                              5
<PAGE>   62
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                       SIX MONTHS
                                                                         ENDED       YEAR ENDED
                                                                       MARCH 31,    SEPTEMBER 30,
                                                                          1996          1995
                                                                       ----------   -------------
<S>                                                                    <C>          <C>
FROM OPERATIONS:
Net investment income................................................   $   5,486     $    12,473
Net realized loss from security transactions.........................        (251)         (4,514)
Increase (decrease) in unrealized gain on investments................        (148)          8,934
                                                                       ----------   -------------
     Net increase (decrease) in net assets from operations...........       5,087          16,893
                                                                       ----------   -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income ($.62 per share)..............      (5,606)        (12,572)
                                                                       ----------   -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from sale of Fund shares....................................       2,954           5,355
Net asset value of Fund shares issued in connection with reinvestment
  of distributions to shareholders...................................       3,213           7,272
                                                                       ----------   -------------
                                                                            6,167          12,627
Cost of Fund shares redeemed.........................................     (12,953)        (34,766)
                                                                       ----------   -------------
     Decrease in net assets derived from capital share
      transactions...................................................      (6,786)        (22,139)
                                                                       ----------   -------------
     Net decrease in net assets......................................      (7,305)        (17,818)
NET ASSETS--beginning of period......................................     151,711         169,529
                                                                       ----------   -------------
NET ASSETS--end of period (overdistributed net investment income of
  $220 and $100, respectively).......................................   $ 144,406     $   151,711
                                                                       ==========   ==============
</TABLE>
 
See accompanying notes to financial statements.
 
6
<PAGE>   63
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cardinal Government Obligations Fund (the "Fund") is a diversified, open-end
investment company created under the laws of Ohio by a Declaration of Trust
dated November 15, 1985 and is registered under the Investment Company Act of
1940. The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
 
Security Valuation -- Portfolio securities for which over-the-counter market
quotations are readily available are valued at the bid price. If no quotations
are available, portfolio securities are valued in good faith by the Board of
Trustees of the Fund to reflect their fair value.
 
Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis.
Premiums and discounts are recognized as realized gains or losses from security
transactions as securities are sold or as principal reductions are received. In
determining the net realized gain or loss on securities sold, the cost of the
securities has been determined on first-in, first-out (FIFO) cost basis.
 
Federal Income Taxes -- No provision has been made for Federal taxes on the
Fund's income, since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
make sufficient distributions of taxable income and capital gains within the
required time to relieve it from all, or substantially all, Federal income
taxes.
 
Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly, at net asset value, in additional shares of the Fund.
 
(2) -- PURCHASES AND SALES OF SECURITIES
 
Purchases and sales of U.S. government agency obligations (excluding short-term
obligations) during the six months ended March 31, 1996 aggregated $29,027,039
and $20,444,083, respectively.
 
As of March 31, 1996, gross unrealized gains and gross unrealized losses on
investment securities were $1,406,165 and $429,352, respectively; resulting in a
net unrealized gain of $976,813 on investment securities with a cost basis of
$148,106,461.
 
                                                                     (continued)
 
                                                                               7
<PAGE>   64
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(3) -- TRANSACTIONS WITH AFFILIATES
 
As investment manager for the Fund, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Fund. CMC has agreed that if the aggregate expenses of the Fund,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Fund, CMC will refund to the Fund, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the six months ended March 31, 1996.
 
CMC also serves the Fund as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Fund. For the six months ended March 31, 1996 the Fund paid or
accrued $67,578 and $19,702 for transfer agent and fund accounting services,
respectively.
 
The Ohio Company, sole shareholder of CMC, acting as distributor for the Fund,
reported that it received commissions after discounts to dealers from the sale
of shares of the Fund of $76,661 for the six months ended March 31, 1996.
 
(4) -- COMMITMENTS AND CONTINGENCIES
 
The Fund has an available $5,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Fund. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
 
Fidelity Bond and Errors and Omissions insurance coverage for the Fund and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Fund is a deposit of $30,644, for the initial capital of ICI
Mutual. The Fund is also committed to provide $91,932 should ICI Mutual
experience the need for additional capital contributions.
 
Included in other assets is a $61,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Fund's
participation in ICI Mutual. This amount is not available for investment.
 
8
<PAGE>   65
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(5) -- CAPITAL STOCK
 
At March 31, 1996, there were an unlimited number of shares of no par value
capital stock authorized and the capital amounts were as follows:
 
<TABLE>
<S>                                                                                    <C>
Paid in capital....................................................................    $ 169,089,436
Accumulated net realized loss on investments.......................................      (25,439,643)
Unrealized gain on investments.....................................................          976,813
Overdistributed net investment income..............................................         (220,404)
                                                                                       -------------
Net assets.........................................................................    $ 144,406,202
                                                                                       =============
</TABLE>
 
For tax purposes, the accumulated net realized loss on investments (capital loss
carryforwards) of approximately $22,800,000 expire throughout the next eight
years. Approximately $980,364 of capital loss carryforwards expired during the
six months ended March 31, 1996. The Fund will not declare any capital gain
distributions until the carryforwards have been offset or expired.
 
(6) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
 
                                                                               9
<PAGE>   66
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
 
On March 29, 1996, a special meeting of shareholders of the Fund was held for
the purpose of voting on the following matters:
 
          1. Approve Agreement and Plan of Reorganization
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
  9,699,689       365,693             543,944
</TABLE>
 
          2. To elect ten Directors of the Fund:
 
           The Results were as follows:
 
<TABLE>
<CAPTION>
       DIRECTORS           VOTES FOR      VOTES ABSTAINED
- -----------------------    ----------     ---------------
<S>                        <C>            <C>
H. Keith Allen             10,395,548         213,778
Frank W. Siegel            10,383,614         225,712
Gordon B. Carson           10,346,761         262,565
John B. Gerlach, Jr.       10,350,972         258,354
Michael J. Knilans         10,389,815         219,511
James I. Luck              10,392,211         217,115
David L. Nelson            10,387,385         221,941
C. A. Peterson             10,380,990         228,336
Lawrence H. Rogers, II     10,381,066         228,260
Joseph H. Stegmayer        10,389,969         219,357
</TABLE>
 
          3. To ratify the selection of KPMG Peat Marwick LLP as independent
     auditors for the Fund for the fiscal year ending September 30, 1996.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
 10,164,713        61,015             383,598
</TABLE>
 
10
<PAGE>   67
 
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
Transactions in capital stock were as follows:
 
<TABLE>
<CAPTION>
                                                                       SIX MONTHS
                                                                         ENDED       YEAR ENDED
                                                                       MARCH 31,    SEPTEMBER 30,
                                                                          1996          1995
                                                                       ----------   -------------
<S>                                                                    <C>          <C>
Shares sold..........................................................     360,416        669,572
Shares issued in connection with reinvestment of distributions to
  shareholders.......................................................     391,965        908,617
                                                                       ----------   -------------
                                                                          752,381      1,578,189
Shares repurchased...................................................  (1,565,795)    (4,320,495)
                                                                       ----------   -------------
Net decrease.........................................................    (813,414)    (2,742,306)
Shares outstanding:
Beginning of period..................................................  18,543,620     21,285,926
                                                                       ----------   -------------
End of period........................................................  17,730,206     18,543,620
                                                                       ==========   ==============
</TABLE>
 
                                                                              11
<PAGE>   68
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                              SIX
                                             MONTHS
                                             ENDED
                                             MARCH                  YEARS ENDED SEPTEMBER 30,
                                              31,        -----------------------------------------------
                                              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
                                            --------     --------     --------     --------     --------
Income from investment operations:
  Net investment income.................         .31         0.64         0.66         0.74         0.80
  Net realized and unrealized gains
     (losses) on securities.............        (.02)        0.22        (0.68)       (0.32)       (0.04)
                                            --------     --------     --------     --------     --------
Total from investment operations........         .29         0.86        (0.02)        0.42         0.76
                                            --------     --------     --------     --------     --------
Less distributions:
  Dividends.............................        (.33)       (0.64)       (0.65)       (0.74)       (0.80)
                                            --------     --------     --------     --------     --------
Net Asset Value, ending.................    $   8.14     $   8.18     $   7.96     $   8.63     $   8.95
                                            =========    =========    =========    =========    =========
Ratios/Supplemental Data:
Total return............................        3.33%       11.27%       (0.27%)       4.83%        8.87%
                                            =========    =========    =========    =========    =========
Net assets, ending (000)................    $144,406     $151,711     $169,529     $208,883     $172,139
                                            =========    =========    =========    =========    =========
Ratio of expenses to average net
  assets................................         .77%        0.76%        0.75%        0.73%        0.76%
                                            =========    =========    =========    =========    =========
Ratio of net investment income to
  average net assets....................        7.39%        7.93%        7.88%        8.32%        8.89%
                                            =========    =========    =========    =========    =========
Portfolio turnover rate.................       13.78%       36.71%       21.95%       24.94%       17.15%
                                            =========    =========    =========    =========    =========
</TABLE>
 
See accompanying notes to financial statements.
 
12
<PAGE>   69
 
                      [THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE>   70
                                [CARDINAL LOGO]
 
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 
       New Accounts and                              Toll-free Lines
       General Information:                          In Ohio 800-282-9446
       (614) 464-5511                                Outside Ohio 800-848-7734
<PAGE>   71
 
- ----------------------------------------------------------
- ---------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Cardinal Management Corp.
155 East Broad Street
Columbus, Ohio 43215
 
DISTRIBUTOR
The Ohio Company
155 East Broad Street
Columbus, Ohio 43215
 
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Cardinal Management Corp.
215 East Capital Street
Columbus, Ohio 43215
 
CUSTODIAN
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
 
LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
 
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215
 
                            ------------------------
 
This report has been prepared for the information of shareholders of Cardinal
Government Securities Trust and is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective Prospectus.

          ----------------------------------------------------------
          ----------------------------------------------------------
 
                                    [LOGO]
                                CARDINAL FUNDS

                                   CARDINAL
                                  GOVERNMENT
                                  SECURITIES
                                    TRUST
                      ----------------------------------
                              SEMI-ANNUAL REPORT
                      ----------------------------------
                                      
                                MARCH 31, 1996
                                      

                               THE OHIO COMPANY

          ---------------------------------------------------------
          ----------------------------------------------------------
<PAGE>   72
 
MESSAGE TO CARDINAL GOVERNMENT SECURITIES TRUST SHAREHOLDERS
 
- --------------------------------------------------------------------------------
 
We are pleased to report to you on the activities of Cardinal Government
Securities Trust for the six month period ending March 31, 1996. The complete
financial statements, and portfolio of investments, can be found on the
following pages along with a message from the Trust's portfolio manager. We
encourage you to read this information.
 
We are also pleased to report that the Trust achieved continued asset growth and
finished the period with $487.4 million in assets which is an increase of $42
million since its fiscal year-end on September 30, 1995.
 
The pursuit of current income while preserving capital and maintaining liquidity
continues to attract investors to the Cardinal Government Securities Trust. We
remain committed to achieving this goal and providing you with superior service.
 
If you would like more information about Cardinal Government Securities Trust,
please contact your Account Executive or call us direct at our toll-free number,
1-800-282-9446. We appreciate your continued support and confidence.
 
Sincerely,
 
/s/ H. Keith Allen                /s/ Frank W. Siegel
H. Keith Allen                    Frank W. Siegel, CFA
  Chairman                            President
 
                                                                               1
<PAGE>   73
 
- --------------------------------------------------------------------------------
 
                   MESSAGE FROM THE FUND'S PORTFOLIO MANAGER
 
On behalf of the Cardinal Government Securities Trust Trustees and Officers, we
are pleased to present our March 31, 1996, Semi-Annual Report.
 
The money markets, like all fixed-income markets, experienced a reversal of
fortunes during the first six months of the Cardinal Government Securities
Trust's current fiscal year. Retracing the history of interest rates of the one
year U.S. Treasury bill shows that they averaged approximately 5.40% in early
October, 1995, declined to a low of 4.83% by mid-February, 1996, and closed at
5.23% at the end of March, 1996. This rebound in rates came in spite of the
Federal Reserve Banks lowering their discount rate to 5.25% in early February, a
drop of 1/2% in this rate during the first half of our fiscal year.
 
With inflation rates holding steady at low levels, and with reduced fiscal
restraints, many economic prognosticators have been calling for the Federal
Reserve to lower rates further to promote economic growth. The bank has resisted
pressure thus far, and we look for a cautiously steady course for U.S. monetary
policy. Thus, short-term interest rates should remain at their recent levels
during the near term. At the end of March, the seven-day effective yield for the
Fund was 4.75%.
 
During the coming months, the focus of the Trust will continue to be the safety
and quality of U.S. Treasury and government agency securities. Presently, the
portfolio is composed of approximately 35% U.S. Treasury and agency securities
and approximately 65% Repurchase Agreements, fully collateralized by the same
kind of securities. The average maturity is in the 30-40 day range due to the
relatively flat yield curve in the short end of the money market and no
significant near term changes in the maturity schedule are anticipated.
 
We value your confidence and support, and look forward to serving you in the
future.
 

  /s/ H. Keith Allen         /s/ Frank W. Siegel        /s/ John R. Carle
  H. Keith Allen             Frank W. Siegel            John R. Carle
  Chairman                   President                  Executive Vice President


2
<PAGE>   74
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                           MATURITY      PRINCIPAL       VALUE
SECURITIES                                                                   DATE         AMOUNT       (NOTE 1)
- ----------                                                                 ---------     ---------     ---------
<S>                                                                        <C>           <C>           <C>
DIRECT U.S. GOVERNMENT OBLIGATIONS 15.26%
U.S. Treasury Bills....................................................     04/04/96     $  20,000     $  19,991
U.S. Treasury Bills....................................................     04/18/96        20,000        19,950
U.S. Treasury Bills....................................................     05/30/96        35,000        34,703
                                                                                         ---------     ---------
      TOTAL DIRECT U.S. GOVERNMENT OBLIGATIONS.........................                     75,000        74,644
                                                                                         ---------     ---------
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY OBLIGATIONS
  15.33%
Federal Farm Credit Notes, 5.125%......................................     06/03/96        20,000        20,000
Federal Farm Credit Notes, 5.26%.......................................     07/01/96        20,000        20,000
Student Loan Marketing Association Floating Rate Note, 5.32%...........     08/08/96        10,000        10,000
Student Loan Marketing Association Floating Rate Note, 5.27%...........     09/12/96        25,000        25,000
                                                                                         ---------     ---------
      TOTAL U.S. GOVERNMENT-SPONSORED ENTERPRISES AND
         FEDERAL AGENCY OBLIGATIONS....................................                     75,000        75,000
                                                                                         ---------     ---------
REPURCHASE AGREEMENTS, FULLY COLLATERALIZED BY U.S. GOVERNMENT AND
  FEDERAL AGENCY OBLIGATIONS 73.99%
Smith Barney Shearson, 5.28%, dated 3/26/96............................     04/02/96        84,000        84,000
Paine Webber Inc., 5.55%, dated 3/29/96................................     04/01/96        74,000        74,000
Merrill Lynch Securities, 5.44%, dated 3/27/96.........................     04/03/96        58,000        58,000
Fifth Third Bank, 5.25%, dated 3/29/96.................................     04/01/96         5,000         5,000
Daiwa Securities, 5.45%, dated 3/28/96.................................     04/04/96        58,000        58,000
Nikko Securities, 5.43%, dated 3/25/96.................................     04/01/96        83,000        83,000
                                                                                         ---------     ---------
      TOTAL REPURCHASE AGREEMENTS......................................                    362,000       362,000
                                                                                         ---------     ---------
      TOTAL INVESTMENTS AT AMORTIZED COST 104.58%......................                  $ 512,000     $ 511,644
                                                                                          ========      ========
</TABLE>
 
Cost also represents cost for Federal income tax purposes.
 
See accompanying notes to financial statements.
 
                                                                               3
<PAGE>   75
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
ASSETS
Investments in securities at amortized cost......................................    $ 511,644
Cash.............................................................................          114
Interest receivable..............................................................          508
Other assets.....................................................................          310
                                                                                     ---------
            Total assets.........................................................      512,576
                                                                                     ---------
LIABILITIES
Payable for Trust shares redeemed................................................        2,955
Payable for investment securities purchased......................................       20,000
Accrued investment management, accounting and transfer agent fees (note 2).......          247
Other accrued expenses...........................................................          116
                                                                                     ---------
            Total liabilities....................................................       23,318
                                                                                     ---------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
NET ASSETS -- applicable to 489,257,858 outstanding $.01 par value shares of
  beneficial interest (unlimited number of shares authorized)....................    $ 489,258
                                                                                     =========
NET ASSET VALUE PER SHARE........................................................        $1.00
                                                                                     =========
</TABLE>
 
See accompanying notes to financial statements.
 
4
<PAGE>   76
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
 
<TABLE>
<S>                                                                                  <C>
INVESTMENT INCOME:
Interest.............................................................                $ 13,196
                                                                                     --------
EXPENSES:
Investment management fees (note 2)..................................                   1,175
Transfer agent fees and expenses (note 2)............................                     413
Accounting fees (note 2).............................................                      30
                                                                                     --------
          Total affiliated expenses..................................                   1,618
                                                                                     --------
Custodian fees.......................................................                      16
Professional fees....................................................                      47
Reports to shareholders..............................................                      33
Trustees' fees.......................................................                      10
Registration fees....................................................                      20
Other expenses.......................................................                      46
                                                                                     --------
          Total non-affiliated expenses..............................                     172
                                                                                     --------
          Total expenses.............................................                   1,790
                                                                                     --------
          Net increase in net assets from operations.................                $ 11,406
                                                                                     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                                                               5
<PAGE>   77
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
 
FOR THE SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 1995
 
<TABLE>
<CAPTION>
                                                                    SIX MONTHS
                                                                      ENDED         YEAR ENDED
                                                                    MARCH 31,      SEPTEMBER 30,
                                                                       1996            1995
                                                                    ----------     -------------
<S>                                                                 <C>            <C>
FROM OPERATIONS:
Net investment income...........................................    $  11,406       $    20,010
                                                                    ----------     -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders.............................      (11,406 )         (20,010)
                                                                    ----------     -------------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares....................................      642,907         1,052,266
Reinvestment of distributions to shareholders...................       11,186            19,567
Cost of shares redeemed.........................................     (610,209 )        (993,975)
                                                                    ----------     -------------
     Increase (decrease) in net assets derived from capital
       share transactions.......................................       43,884            77,858
                                                                    ----------     -------------
     Net increase (decrease) in net assets......................       43,884            77,858
NET ASSETS -- beginning of period...............................      445,374           367,516
                                                                    ----------     -------------
NET ASSETS -- end of period.....................................    $ 489,258       $   445,374
                                                                    ==========     ==============
</TABLE>
 
See accompanying notes to financial statements.
 
6
<PAGE>   78
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
(1) -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Cardinal Government Securities Trust (the Trust) is a diversified, open-end
investment company created under the laws of Pennsylvania by a Declaration of
Trust dated March 21, 1980 and is registered under the Investment Company Act of
1940. According to the terms of the Declaration of Trust, Trust investments must
be obligations (or collateralized by obligations) of the U.S. Government or
agencies thereof. The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
 
Security Valuation -- Securities are valued at amortized cost which approximates
fair value (premiums and discounts are amortized on a straight-line basis). The
use of this method requires the Trust to maintain a dollar-weighted average
portfolio maturity of 90 days or less and purchase only securities having a
remaining maturity of thirteen months or less.
 
Security Transactions and Investment Income -- Security transactions are
recorded on the trade date. Interest income is recorded on the accrual basis. It
is the Trust's policy for its Custodian or a third-party bank to take possession
of all securities pledged as collateral for repurchase agreements and monitor
the market value of the collateral to ensure that it remains sufficient to cover
the repurchase agreements.
 
Federal Income Taxes -- No provision has been made for Federal taxes on the
Trust's income, since it is the policy of the Trust to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income and capital
gains within the required time to relieve it from all, or substantially all,
Federal income taxes.
 
Dividends to Shareholders -- Dividends are declared and accrued daily and (for
those shareholders not electing cash distribution of dividends) automatically
reinvested monthly in additional shares from the sum of net investment income
and net realized short-term gains.
 
(2) -- TRANSACTIONS WITH AFFILIATES
 
As investment manager for the Trust, Cardinal Management Corp. (CMC), an
affiliated company, is allowed an annual fee of 0.5% of the average daily net
assets of the Trust. CMC has agreed that if the aggregate expenses of the Trust,
as defined, for any fiscal year exceed the expense limitation of any state
having jurisdiction over the Trust, CMC will refund to the Trust, or otherwise
bear, such excess. This limitation did not affect the calculation of the
management fee during the six months ended March 31, 1996.
 
CMC also serves the Trust as transfer agent and fund accountant. Transfer agent
service fees are based on a monthly charge per shareholder account plus
out-of-pocket expenses. Accounting service fees are based on the monthly average
net assets of the Trust. For the six months ended March 31, 1996 the Trust paid
or accrued $325,216 and $30,047 for transfer agent and fund accounting services,
respectively.
                                                                     (continued)
 
                                                                               7
<PAGE>   79
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
The Ohio Company, sole shareholder of CMC, serves as the Trust's distributor
and, in connection therewith receives purchase orders and redemption requests
relating to Trust shares. During the six months ended March 31, 1996 the Trust
incurred no expenses related to the distribution of its shares.
 
(3) -- COMMITMENTS AND CONTINGENCIES
 
The Trust has an available $6,000,000 line of credit with its custodian, Fifth
Third Bank, which was unused at March 31, 1996. When used, borrowings under this
arrangement are secured by portfolio securities and can be used only for short
term needs of the Trust. No compensating balances are required and the
arrangement bears an interest rate of 106% of the custodian's prime lending
rate.
 
Fidelity Bond and Errors and Omissions insurance coverage for the Trust and its
officers and trustees has been obtained through ICI Mutual Insurance Company
(ICI Mutual), an industry-sponsored mutual insurance company. Included in other
assets of the Trust is a deposit of $87,459 for the initial capital of ICI
Mutual. The Trust is also committed to provide $262,377 should ICI Mutual
experience the need for additional capital contributions.
 
Included in other assets is a $175,000 certificate of deposit which
collateralizes a standby letter of credit in connection with the Trust's
participation in ICI Mutual. This amount is not available for investment.
 
(4) -- CAPITAL STOCK
 
At March 31, 1996, there were an unlimited number of $.01 par value shares of
capital stock and the capital amounts were as follows:
 
<TABLE>
<S>                                                                                  <C>
Paid in capital..................................................................    $490,409,044
Accumulated net realized loss on investments.....................................      (1,463,438)
Undistributed net investment income..............................................         312,252
                                                                                     ------------
Net assets.......................................................................    $489,257,858
                                                                                     =============
</TABLE>
 
                                                                     (continued)
 
8
<PAGE>   80
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
 
MARCH 31, 1996 (UNAUDITED)
 
Transactions in capital stock were as follows:
 
<TABLE>
<CAPTION>
                                                                     SIX MONTHS
                                                                        ENDED           YEAR ENDED
                                                                     MARCH, 31,       SEPTEMBER 30,
                                                                        1996               1995
                                                                    -------------     --------------
<S>                                                                 <C>               <C>
Shares sold.....................................................      642,906,701      1,052,265,662
Shares issued in connection with reinvestment of distributions
  to shareholders...............................................       11,186,120         19,567,048
                                                                    -------------     --------------
                                                                      654,092,821      1,071,832,710
Shares repurchased..............................................     (610,208,530)      (993,975,623)
                                                                    -------------     --------------
Net increase....................................................       43,884,291         77,857,087
Shares outstanding:
Beginning of period.............................................      445,373,567        367,516,480
                                                                    -------------     --------------
End of period...................................................      489,257,858        445,373,567
                                                                    =============     ==============
</TABLE>
 
(5) -- SUBSEQUENT EVENT
 
On March 29, 1996 shareholders approved an Agreement and Plan of Reorganization
between the Group and The Cardinal Fund Inc., Cardinal Government Securities
Trust, Cardinal Tax Exempt Money Trust, and Cardinal Government Obligations Fund
(collectively the "Old Funds"). With shareholder approval of this plan, the
transfer of all assets and liabilities of the Old Funds to the newly created
Group was made on May 1, 1996.
 
                                                                               9
<PAGE>   81
 
CARDINAL GOVERNMENT SECURITIES TRUST
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
 
On March 29, 1996, a special meeting of shareholders of the Trust was held for
the purpose of voting on the following matters:
 
          1. Approve Agreement and Plan of Reorganization.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR      VOTES AGAINST     VOTES ABSTAINED
- ------------    -------------     ---------------
<S>             <C>               <C>
325,780,359      5,864,935         9,784,886
</TABLE>
 
          2. To elect ten Trustees of the Trust.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
       TRUSTEES             VOTES FOR      VOTES ABSTAINED
- -----------------------    -----------     ---------------
<S>                        <C>             <C>
H. Keith Allen             335,680,362      5,749,818
Frank W. Siegel            335,287,638      6,142,542
Gordon B. Carson           334,390,628      7,039,552
John B. Gerlach, Jr.       334,840,206      6,589,974
Michael J. Knilans         335,749,686      5,680,494
James I. Luck              335,492,477      5,937,703
David L. Nelson            335,740,666      5,689,514
C. A. Peterson             335,751,977      5,678,203
Lawrence H. Rogers, II     335,097,444      6,332,736
Joseph H. Stegmayer        335,793,858      5,636,322
</TABLE>
 
          3. To ratify the selection of KPMG Peat Marwick LLP as independent
             auditors for the Fund for the fiscal year ending September 30,
             1996.
 
           The results were as follows:
 
<TABLE>
<CAPTION>
 VOTES FOR     VOTES AGAINST     VOTES ABSTAINED
- -----------    -------------     ---------------
<S>            <C>               <C>
331,887,368     1,925,537           7,617,275
</TABLE>
 
                                       10
<PAGE>   82
 
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
 
Selected data for each share of capital stock outstanding throughout each
period:
 
<TABLE>
<CAPTION>
                                             SIX MONTHS
                                               ENDED                        YEARS ENDED SEPTEMBER 30,
                                             MARCH 31,    --------------------------------------------------------------
                                                1996         1995         1994         1993         1992         1991
                                             ----------   ----------   ----------   ----------   ----------   ----------
<S>                                          <C>          <C>          <C>          <C>          <C>          <C>
Net Asset Value, beginning.................   $   1.00     $    1.00    $    1.00    $    1.00    $    1.00    $    1.00
                                             ----------   ----------   ----------   ----------   ----------   ----------
Income from investment operations:
  Net investment income....................       0.02          0.05         0.03         0.02         0.04         0.06
Less distributions:
  Dividends................................      (0.02)        (0.05)       (0.03)       (0.02)       (0.04)       (0.06)
                                             ----------   ----------   ----------   ----------   ----------   ----------
Net Asset Value, ending....................   $   1.00     $    1.00    $    1.00    $    1.00    $    1.00    $    1.00
                                             =========      ========     ========     ========     ========     ========
Ratios/Supplemental Data:
Total return...............................       4.94%         4.98%        2.84%        2.41%        3.58%        6.20%
                                             =========      ========     ========     ========     ========     ========
Net assets, ending (000)...................   $489,258     $ 445,374    $ 367,516    $ 402,758    $ 472,521    $ 567,841
                                             =========      ========     ========     ========     ========     ========
Ratio of expenses to average net assets....       0.76%         0.81%        0.85%        0.79%        0.76%        0.72%
                                             =========      ========     ========     ========     ========     ========
Ratio of net investment income to average
  net assets...............................       4.83%         4.92%        2.94%        2.38%        3.52%        6.03%
                                             =========      ========     ========     ========     ========     ========
</TABLE>
 
See accompanying notes to financial statements.
 
                                       11
<PAGE>   83

                                    [LOGO]

 
                             THE CARDINAL FUND INC.
                      CARDINAL GOVERNMENT SECURITIES TRUST
                        CARDINAL TAX EXEMPT MONEY TRUST
                      CARDINAL GOVERNMENT OBLIGATIONS FUND
                             CARDINAL BALANCED FUND
                        CARDINAL AGGRESSIVE GROWTH FUND
 
                    155 E. Broad St.    Columbus, Ohio 43215
 

New Accounts and                                     Toll-free Lines
General Information:                                 In Ohio 800-282-9446
(614) 464-5511                                       Outside Ohio 800-848-7734


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