CARDINAL GROUP, N-30D, 1997-12-08

CARDINAL GROUP
N-30D, 1997-12-08

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<PAGE> 1

[Cardinal Group Logo]

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

[The Ohio Company Logo]
155 E. Broad St. Columbus, Ohio 43215

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

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

Message from the Chairman and the President
Page 1

Message from the Chief Investment Officer
Page 2

Portfolio Managers' Discussion of Fund Performance
Page 4

Independent Auditors' Report
Page 15

Statements of Assets and Liabilities
Page 16

Statements of Operations
Page 18

Statements of Changes in Net Assets
Page 20

Statements of Investments
Page 23

Notes to Financial Statements
Page 34

Financial Highlights
Page 43
<PAGE> 3

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

DEAR CARDINAL SHAREHOLDERS:

We are pleased to provide you with this Cardinal Group Annual Report for the
fiscal year ended September 30, 1997. Please take a moment to review the
portfolio managers' comments and related financial information.

The past twelve months were eventful for The Cardinal Group. We enjoyed a
vibrant stock market and strong bond prices thanks to declining interest rates
and low levels of inflation. The U.S. economy continued to expand as marked by
moderate growth in Gross Domestic Product (GDP) and rising corporate profits.
Against this backdrop, investment performance of The Cardinal Group was good and
has translated into higher rankings by various national rating services. Thanks
to a combination of strong investment performance and influx of new
shareholders, assets in The Cardinal Group finished the fiscal year above the $1
billion level! We are proud of these achievements and look forward to providing
you with quality investment management in the years ahead.

Earlier this year, we enhanced the attractiveness of the Cardinal money market
funds by making two significant improvements. First, we implemented a 'same-day'
settlement procedure. This means that upon meeting certain time deadlines,
monies can be more easily invested in or liquidated from Cardinal Government
Securities or Tax Exempt Money Market Funds. In addition, we eliminated the $250
minimum on Cardinal money market checks. Unlike most other money market funds,
Cardinal money market shareholders can now write checks for any dollar amount.
We hope you are taking advantage of these enhancements. If you are not, and
would like to do so, please contact your Investment Executive or us for more
details.

Finally, in August the Taxpayers Relief Act of 1997 was signed into law. This is
a major piece of legislation which could have an impact on mutual fund investors
due to provisions which can reduce capital gains taxes, repeal excess
accumulation/distribution taxes and provide new opportunities with Individual
Retirement Accounts. We urge you to consult with your financial advisor to
determine how the Act may impact you.

Thank you for your investment with The Cardinal Group. We appreciate your
continued support and confidence as we strive to help you reach your financial
goals.
Sincerely,

<TABLE>
<S> <C>
/s/ H. Keith Allen /s/ Frank W. Seigel
H. Keith Allen Frank W. Siegel, CFA
Chairman President
</TABLE>

1
<PAGE> 4

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

DEAR SHAREHOLDERS:

The fiscal year ended September 30, 1997 was another very good year for most
investors. The economic environment of moderate GDP growth, low inflation,
growing corporate profits, modestly declining interest rates and a
"disappearing" budget deficit created a foundation which allowed financial
assets to again achieve attractive returns. As an example, during the past
twelve months the Dow Jones Industrial Average provided a total return of 34.6%
while the S&P 500 returned 40.4% and the Russell 2000 index of smaller companies
returned 33.2%. Bonds too achieved attractive returns for their owners as the
benchmark 30-year US Treasury Bond returned 13.9% and the 10 year issue returned
10.5%.

INTEREST RATES, THE FED AND THE BOND MARKET

While the trend in bond prices (up) and interest rates (down) was quite positive
during the past twelve months these patterns were not smooth during that entire
period. Interest rates declined from September, 1996 through the end of the year
but then rose sharply between February and April of this year. The sharp rise
during the first half of 1997 was due to the fact that the economy appeared to
be growing very rapidly and thus the Fed took action to slow it by increasing
short-term interest rates by approximately one-quarter of one percent.

During the balance of the past twelve months evidence appeared quite clear that
the economy was indeed slowing, that inflation was benign and that liquidity was
not excessive. The Fed took additional action during the remainder of the year
and, as described above, interest rates declined rather significantly from their
April highs (rates on ten-year US Treasury Notes declined from approximately
6.85% to 6.10%).

INTEREST RATES, THE FED AND THE STOCK MARKET

Like the bond market, the trend in stock prices was decidedly up again during
the fiscal year ended September 30, 1997, but it too was not a smooth ride. For
example, between the beginning of the Cardinal Funds' fiscal year (October 1,
1996) and the end of February, 1997 the Standard & Poor's 500 index increased by
more than 16%, then as The Fed tightened and interest rates rose, the index
declined by roughly 7%. From its low in April however, the index rose again by
28% ending the fiscal year (September 30, 1997) up 40.4%.

The renewed strength at the end of the fiscal year was a result of interest
rates declining, inflation proving to be benign and investors regaining
confidence in the resiliency and continuity of the US economy. The performance
leaders in the stock market were large capitalization companies in general (GE,
Microsoft, Coca Cola) but more specifically companies involved in the
Technology, Interest Rate Sensitive and Healthcare industries specifically.

2
<PAGE> 5

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

THE FUTURE -- OUR EXPECTATIONS

From an economic scenario standpoint, our expectations for 1998 and the
foreseeable future are not a great deal different from our expectations for
1995, '96 and '97. Now, as then, we anticipate that the fundamentals of
continued economic and corporate profit growth (but at a somewhat slower rate),
low inflation, and declining interest rates will continue. All of these factors,
occurring in concert, are critical to maintaining stock valuations, which are
near historic highs. We anticipate that they will.

In general we continue to believe that the strong fundamentals described above,
combined with the "shrinkage" in the number of shares of stocks (and bonds)
available creates a very good environment for investors. While quite positive
about the rationale for owning stocks and bonds, we are not unrealistically
bullish because we realize that the road to continued success is never an easy
one as can be seen from the problems in Southeast Asia.

HAROLD C. ELLIOTT
SENIOR VICE PRESIDENT & CHIEF INVESTMENT OFFICER
THE OHIO COMPANY

3
<PAGE> 6

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

For the year ended September 30, 1997, Cardinal Government Securities Money
Market Fund earned a total return of 4.67%. The fund, which invests in
repurchase agreements and other short-term obligations of the U.S. Government
and its agencies, is designed to provide monthly income from a high quality and
liquid investment portfolio.

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

In spite of the Federal Reserve's move to increase the Federal Funds Rate in
March, money market rates were remarkably stable and traded in a narrow range
during the fund's fiscal year.

WHAT IS THE OUTLOOK FOR THE COMING YEAR?

The outlook for the coming year is for more of the same experience as the past
year. So unless inflation becomes a greater concern than it has been in recent
months, money market rates should continue to experience little volatility.

As portfolio manager of Cardinal Government Securities Money Market Fund, John
R. Carle, CFA, is responsible for the day-to-day management of the Fund's
portfolio. Mr. Carle has 30 years of investment experience and has been
portfolio manager for the Fund since January 1, 1996.

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

For the year ended September 30, 1997, Cardinal Tax Exempt Money Fund produced a
total return of 2.72%. The fund had a current average maturity of 41 days as of
September 30, 1997. Many of the bonds in the portfolio are credit enhanced,
meaning they are insured or backed by an irrevocable bank letter of credit.

Tax Exempt Money Market rates have been flat for the better part of the fiscal
year as all short term rates have held steady.

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

4
<PAGE> 7

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

The fiscal year ended September 30, 1997, found both the markets and The
Cardinal Fund, starting strong and continuing their upward momentum through most
of the twelve month period. Although not without the usual peaks and declines,
the market pursued its forward path, finishing our fiscal year at record high
levels. The most pronounced rise occurred during the May through August period,
while the two most notable pullbacks were during the March-April decline and the
mid August through mid September period.

HOW WOULD YOU ASSESS YOUR PERFORMANCE FOR THE YEAR?

We are pleased to report a double digit investment return in The Cardinal Fund
for the THIRD CONSECUTIVE YEAR. Our strategies, which resulted in a total
return, exclusive of the sales charge, of 39.17% enabled The Cardinal Fund to be
ranked in the upper 30% of comparable funds by the Lipper Analytical Services,
for the period ended September 30, 1997. This return was quite favorable from
both an absolute and relative basis. Our goal continues to be consistently
ranked above the majority of similar investment funds.

WHAT IS YOUR STRATEGY FOR STOCK SELECTION?

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

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

In viewing the portfolio one should note that The Cardinal Fund has significant
exposure in the TECHNOLOGY sector of the market. Companies such as Intel,
Microsoft, Compaq Computers, Gateway 2000 and Tellabs are but a few of the
companies that are participants in technological advancements and beneficiaries
of corporate productivity enhancements. This is an ongoing process in today's
global business environment. Also, the HEALTH CARE sector of the market we
believe will be of value to investors, as the demographics of our society move
toward a more mature age group and have a need for more health care products and
medication. Participation in companies such as Merck, Pfizer, Johnson & Johnson,
Medtronic and Boston Scientific are some of the issues we have invested in to
generate focus in this area of the market.

5
<PAGE> 8

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

Finally, the FINANCIAL SERVICES sector has been an area of primary focus for our
fund and one that has given above market performance for the year. Issues such
as Citicorp, Barnett Banks, American International Group and Banc One, are among
the many companies owned in this group, which have contributed to the Fund's
superior performance. The lower interest rate environment, which we have been
espousing, combined with further consolidation in the industry, has made for
attractive returns in this group with very moderate levels of risk.

WHAT IS YOUR OUTLOOK FOR THE FUND?

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

As of September 30, 1997, the fund's top five holdings were General Electric
(4.27%), Mobil (3.17%), Royal Dutch (3.07%), Intel (3.07%) and Textron (2.88%).

John Bevilacqua assumed the management of The Cardinal Fund on January 1, 1996.
He has in excess of 22 years of investment experience. He received his MBA from
Xavier University and Bachelors of Science from Franklin University.

6
<PAGE> 9

<TABLE>
<CAPTION>
Measurement Period The Cardinal Fund(R) S&P 500
(Fiscal Year Covered) Investor Shares Stock Index
<S> <C> <C>
9/87 9550 10000
9/88 9219 11,650
9/89 11251 15483
9/90 9,741 14,043
9/91 13008 18410
9/92 14965 20435
9/93 16010 23092
9/94 16551 23946
9/95 19007 31035
9/96 22421 37304
9/97 31203 52374

<CAPTION>
The Cardinal Fund
Investor Shares
Average Annual
Total Return as of 9/30/97*
<S> <C>

One Year 32.9%

Five Year 14.8%

Ten Year 12.1%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period The Cardinal Fund S&P 500
(Fiscal Year Covered) Institutional Shares Stock Index
<S> <C> <C>
1/97 10,000 10,000
9/97 12,977 12,960
</TABLE>
Total Return for the Period
Jan. 2, 1997 through Sept. 30, 1997
was 29.77%

The performance of The Cardinal Fund is measured against the S&P 500
Stock Index, an unmanaged index generally considered to be
representative of the U.S. stock market. The index does not reflect
the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's
performance reflects these value-added services. Past performance is
not predictive of future results.
- ---------------
* Reflects 4.50% sales charge.

7
<PAGE> 10

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------

For the year ended September 30, 1997, Cardinal Aggressive Growth Fund produced
a total return exclusive of the sales charge of 33.0%. As a basis of comparison,
the Russell 2000 index of smaller capitalization companies achieved a total
return of 31.4% and the median return for companies in the Lipper Analytical
Services universe of similar funds achieved a return of 27.5%.

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

As described above, the Fund has meaningfully outperformed its peers and it's
relevant benchmark during the past twelve months. This strong absolute and
relative performance can be attributed to several factors. First, the Fund has
had a large investment in the stocks of a broad array of technology companies
whose stocks have increased dramatically in price as the companies report rapid
revenue and earnings growth; secondly, the Fund capitalized on the trend toward
consolidation in several industries such as banking, brokerage and broadcasting
by owning shares of a number of companies in each industry; and lastly by having
a meaningful commitment to companies with smaller capitalizations. Stocks in
companies of this last group had been lagging in their investment performance
when compared to larger company stocks. This trend reversed itself during the
past quarter when investors began to broaden the diversity of their equity
portfolios.

While the stocks of Technology companies are historically more volatile than the
market as a whole, and thus add volatility to the Fund, we continue to believe
that these companies along with the stocks of Healthcare and Financial Service
companies offer excellent prospects for future above average appreciation.
Expectations for above average growth are based upon the knowledge that both
domestic and non-US businesses are spending large amounts of money on
productivity enhancing (technology) machinery, equipment and software to improve
productivity and the company's ability to maintain and/or improve market share.

Interest in Financial Service and Healthcare companies stem from the fact that
the largest and fastest growing segment of the U.S. population is the 35 to 55
year-old age group, which has the ability and need to save and invest. As we
have seen through the growth in mutual funds, these trends, which we expect to
continue, offer tremendous opportunities for new products and services to the
financial service industry. This same demographic group is and will continue to
demand more and better healthcare as they live longer and better.

The three themes, changing demographics, growth in the demand for technology and
industry consolidation will remain important elements of the Cardinal Aggressive
Growth Fund strategy.

8
<PAGE> 11

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

WHAT IS THE PHILOSOPHY AND STRATEGY EMPLOYED IN THE MANAGEMENT OF THE CARDINAL
AGGRESSIVE GROWTH FUND?

The objective of the Cardinal Aggressive Growth Fund is to achieve superior
relative and absolute investment returns through investment in a portfolio of
companies chosen for their participation in rapidly growing industries, for
their unique products or services, or because of industry consolidation.

Company selection is further refined by additional fundamental and growth
criteria used to identify characteristics of quality and consistency. These
criteria include an analysis of revenue and earnings growth, return on equity,
operating margins and the use of debt. Companies that meet the prescribed
hurdles are considered for investment with the idea of building a reasonably
diversified portfolio.

At the end of September the largest equity holdings in the portfolio were: Intel
Corp., EMC Corp., Texas Instruments, Microsoft Inc., and Applied Materials Corp.

WHAT IS THE OUTLOOK FOR THE U.S. ECONOMY AND THE FINANCIAL MARKETS?

We continue to forecast positive but moderate growth for the U.S. economy (GDP)
as 1997 ends and we enter a new year. As a result, we continue to expect that
corporate earnings will grow, that the federal deficit will "disappear" and that
inflation will remain benign. The combination of these factors should result in
a positive foundation on which to build a case for continued positive returns
from both stocks and bonds -- which we expect.

The factors that could cause a re-evaluation of this forecast would be further
turmoil in Southeast Asia and the eventual exportation of significant
disinflation from that region. That event could lead to a significant global
slowdown. At this time we anticipate that investors will hear further negative
news from that region of the world but that with patience and determination the
countries will grow out of their problems and not cause a financial crisis
throughout the world.

9
<PAGE> 12

<TABLE>
<CAPTION>
Measurement Period Cardinal Aggressive
(Fiscal Year Covered) Growth Fund(R) Investor Shares Russell 2000
<S> <C> <C>
6/93 9550 10000
9/93 9999 11,020
9/94 9525 11318
9/95 11844 13966
9/96 11710 15795
9/97 15568 21039

<CAPTION>
Cardinal Aggressive
Investor Shares
Growth Fund Average
Annual Total Return as of 9/30/97*
<S> <C>

One Year 27.0%

Since Inception
(6/24/93) 11.0%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Cardinal Aggressive
(Fiscal Year Covered) Growth Fund Institutional Shares Russell 2000
<S> <C> <C>
1/97 10,000 12,660
9/97 10,000 12,659
</TABLE>

Total Return for the Period
Jan. 2, 1997 through Sept. 30, 1997
was 26.59%

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

- ---------------
* Reflects 4.50% sales charge.

10
<PAGE> 13

THE CARDINAL GROUP
- --------------------------------------------------------------------------------
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------

For the year ended September 30, 1997, The Cardinal Balanced Fund produced a
total return of 24.7% versus the 24.0% return for the median return in the
Lipper Analytical Service Universe of 333 balanced mutual funds. Since October
1, 1996 The Cardinal Balanced Fund has been managed by Joseph A. Miner, C.F.A.
and David C. Will who have 15 and 25 years of investment management experience
respectively.

The returns generated by the Balanced Fund have improved dramatically when
compared to the Lipper Balanced Fund Universe. Your Fund has gone from
performing well below median to above median over the last twelve months. This
improvement is a result of our positive outlook for the stock market which led
to increased exposure to stocks and increased emphasis on the Capital Goods,
Healthcare, Financial Services and Technology groups. These are groups that for
the following reasons we expect will be strong performers through the end of the
decade.

1.) Demographic - aging of the population. The need for more healthcare and
financial services.

2.) World wide growth in the need for technology.

3.) Increased expenditures for improved productivity.

It is important to note that the managers of Cardinal Balanced Fund believe
that industry and company diversification are very important to the continued
success of your Fund.

WHAT IS THE PHILOSOPHY AND STRATEGY EMPLOYED IN THE MANAGEMENT OF CARDINAL
BALANCED FUND?

For purposes of compliance at least 25% of the portfolios will be invested in
senior fixed income securities. The balance of the portfolio will be in common
stock or preferred stocks convertible into common stock. By investing primarily
in common stocks, the Balanced Fund will pursue its objectives of long-term
growth of capital and income.

As previously mentioned, the fund will maintain a diversified portfolio and
major sector bets will be avoided. The strategy in the common stock portfolio
will be to invest in a core group of stocks that we believe will be able to
consistently increase their earnings and dividends. Examples would be - General
Electric, Merck, Monsanto, Gillette, Coca Cola, Proctor and Gamble, Citicorp and
Intel.

As a value added strategy we also invest in a modest amount of smaller companies
that we believe will be able to achieve consistent earnings and dividend growth.
Examples would be - Avery Dennison, Crane, Worldcom, Tribune, Cardinal Health,
Transocean Offshore, H.F. Ahmanson, Medtronic and HBO & Company.

WHAT IS THE OUTLOOK FOR THE U.S. ECONOMY AND THE FINANCIAL MARKETS?

11
<PAGE> 14

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

<TABLE>
<CAPTION>
Measurement Period Cardinal Balanced Fund(R) S&P 500 Lehman Brothers Govt/Corp.
(Fiscal Year Covered) Investor Shares Stock Index Bond Index
<S> <C> <C> <C>
6/24/93 9550 10000 10000
9/93 9684 10310 10330
9/94 9719 10691 9906
9/95 11737 13856 11333
9/96 12941 16655 11843
9/97 16070 23384 12980

<CAPTION>
Cardinal Balanced Fund
Investor Shares
Average Annual
Total Return as of 9/30/97*
<S> <C>

One Year 19.10%

Since Inception
(6/24/93) 11.3%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Cardinal Balanced Fund S&P 500 Lehman Brothers Govt/Corp.
(Fiscal Year Covered) Institutional Shares Stock Index Bond Index
<S> <C> <C> <C>
1/97 10,000 10,000 10,000
9/97 12,270 12,960 12,017
</TABLE>

Total Return for the Period
Jan. 2, 1997 through Sept. 30, 1997
was 20.17%

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

- ---------------
* Reflects 4.50% sales charge.

12
<PAGE> 15

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

For the year ended September 30, 1997, Cardinal Government Obligations Fund,
which invests in a portfolio of U.S. Government agency securities, earned a
total return, exclusive of the sales charge, of 9.28%.

The Fund is managed by John R. Carle, CFA, who has 30 years of securities
investment experience and has managed the Fund since its inception in February,
1986.

HOW WOULD YOU ASSESS THE FUND'S PERFORMANCE?

The Fund produced a total return for the past 12 months of 9.28% which on an
absolute basis is very good. However, that return trailed the return of the
Lipper universe of GNMA funds [mutual funds investing primarily in securities
issued by the Government National Mortgage Association (GNMA)] which was 9.40%.
Since our goal is to consistently rank in the top 50% of our peer group, we are
working constantly to attain that position.

WHAT WAS YOUR STRATEGY DURING THE PAST 12 MONTHS?

Our strategy during the past 12 months was moderately to extend the average life
of the Fund's portfolio to take advantage of the improving market environment
we've experienced during the second half of our fiscal year.

WHAT IS YOUR OUTLOOK FOR THE COMING YEAR?

We are expecting a moderate slow down in economic activity during the early
months of the new year and feel the steps we've taken to extend the life of the
Fund's portfolio should allow the portfolio to perform well in a continually
improving market.

13
<PAGE> 16

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

<TABLE>
<CAPTION>
Measurement Period Cardinal Government Obligations
(Fiscal Year Covered) Fund(R) Investor Shares Salomon Mortgage Index
<S> <C> <C>
9/87 9550 10000
9/88 10786 10880
9/89 11736 12077
9/90 12913 13272
9/91 14601 15436
9/92 15896 17165
9/93 16664 18349
9/94 16610 18165
9/95 18491 20618
9/96 19608 21834
9/97 21427 23974

<CAPTION>
Government Obligations Fund
Investor Shares
Average Annual
Total Return as of 9/30/97*
<S> <C>

One Year 4.4%

Five Year 5.2%

Ten Year 7.9%
</TABLE>

<TABLE>
<CAPTION>
Measurement Period Cardinal Government Obligations
(Fiscal Year Covered) Fund Institutional Shares Salomon Mortgage Index
<S> <C> <C>
1/97 10,000 10,000
9/97 10,686 10,680
</TABLE>

Total Return for the Period
Jan. 2, 1997 through Sept. 30, 1997
was 6.86%

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

- ---------------
* Reflects 4.50% sales charge.

<PAGE> 17

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

The Shareholders and Board of Trustees
The Cardinal Group:

We have audited the accompanying statements of assets and liabilities of The
Cardinal Group -- Cardinal Government Securities Money Market Fund, Cardinal Tax
Exempt Money Market Fund, The Cardinal Fund, Cardinal Aggressive Growth Fund,
Cardinal Balanced Fund, and Cardinal Government Obligations Fund, including the
statements of investments, as of September 30, 1997, and the related statements
of operations for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended and the financial
highlights for each of the periods indicated herein. These financial statements
and financial highlights are the responsibility of The Cardinal Group's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1997, by confirmation with the custodian and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The Cardinal Group at September 30, 1997,
the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated herein, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Columbus, Ohio
November 14, 1997

15
<PAGE> 18

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

SEPTEMBER 30, 1997

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

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

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

See accompanying notes to financial statements.

16
<PAGE> 19

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

See accompanying notes to financial statements.

17
<PAGE> 20

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

YEAR ENDED SEPTEMBER 30, 1997

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

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

See accompanying notes to financial statements.

18
<PAGE> 21

YEAR ENDED SEPTEMBER 30, 1997

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

See accompanying notes to financial statements.

19
<PAGE> 22

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

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

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

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

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

See accompanying notes to financial statements.

20
<PAGE> 23

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

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

See accompanying notes to financial statements.

21
<PAGE> 24

YEARS ENDED SEPTEMBER 30, 1997 AND 1996

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

See accompanying notes to financial statements.

22
<PAGE> 25

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

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

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

Percentages indicated are based on net assets.
Cost also represents cost for Federal income tax purposes.
* Rule 2a-7, of the Investment Company Act of 1940, defines maturity as the
longer of the period remaining until the next readjustment of the interest
rate or the period remaining until the principal amount can be recovered
through demand. The 2a-7 maturity for the indicated Bonds is October 7, 1997.

See accompanying notes to financial statements.

23
<PAGE> 26

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

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

SEPTEMBER 30, 1997

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

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

24
<PAGE> 27

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

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

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

* Non-income producing (continued)

25
<PAGE> 28

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

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

SEPTEMBER 30, 1997

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

* Non-income producing (continued)

26
<PAGE> 29

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

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

SEPTEMBER 30, 1997

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

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

Percentages indicated are based on net assets.

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

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

See accompanying notes to financial statements.

27
<PAGE> 30

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

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

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

* Non-income producing (continued)

28
<PAGE> 31

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

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

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

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

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

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

Percentages indicated are based on net assets.

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

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

* Non-income producing

See accompanying notes to financial statements.

29
<PAGE> 32

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

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

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

* Non-income producing (continued)

30
<PAGE> 33

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

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

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

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

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

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

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

</TABLE>

* Non-income producing (continued)

31
<PAGE> 34

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

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

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

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

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

Percentages indicated are based on net assets.

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

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

See accompanying notes to financial statements.

32
<PAGE> 35

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

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

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

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

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

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

See accompanying notes to financial statements.

33
<PAGE> 36

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

SEPTEMBER 30, 1997 (UNAUDITED)
1. ORGANIZATION

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

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

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

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

The Cardinal Fund Inc. was acquired by The Cardinal Fund

Cardinal Government Obligations Fund was acquired by Cardinal Government
Obligations Fund

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

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

2. SIGNIFICANT ACCOUNTING POLICIES

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

(continued)

34
<PAGE> 37

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

SEPTEMBER 30, 1997

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

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

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

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

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

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

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

(continued)

35
<PAGE> 38

SEPTEMBER 30, 1997

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

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

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

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

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

(continued)

36
<PAGE> 39

SEPTEMBER 30, 1997

3. PURCHASES AND SALES OF SECURITIES

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

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

4. TRANSACTIONS WITH AFFILIATES

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

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

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

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

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

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

(continued)

37
<PAGE> 40

SEPTEMBER 30, 1997

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

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

5. COMMITMENTS AND CONTINGENCIES

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

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

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

(continued)

38
<PAGE> 41

SEPTEMBER 30, 1997

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

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

6. FEDERAL INCOME TAXES

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

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

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

(continued)

39
<PAGE> 42

SEPTEMBER 30, 1997

7. CAPITAL SHARE TRANSACTIONS

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

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

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

(continued)

40
<PAGE> 43

SEPTEMBER 30, 1997

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

41
<PAGE> 44

SEPTEMBER 30, 1997

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

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

42
<PAGE> 45

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

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

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

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

See notes to financial statements.

43
<PAGE> 46

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

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

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

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

See notes to financial statements.

44
<PAGE> 47

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

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

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

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

* Commencement of operations.

See notes to financial statements.

45
<PAGE> 48

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

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

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

* Commencement of operations.

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

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

See notes to financial statements.

46
<PAGE> 49

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

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

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

* Commencement of operations.

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

See notes to financial statements.

47
<PAGE> 50

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

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

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

* Commencement of operations.

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

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

See notes to financial statements.

48
<PAGE> 51

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

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

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

* Commencement of operations.

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

See notes to financial statements.

49
<PAGE> 52

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

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

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

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

See notes to financial statements.

50
<PAGE> 53

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

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

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

* Commencement of operations.

See notes to financial statements.

51
<PAGE> 54

[THIS PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 55

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

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

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

CUSTODIAN
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263

LEGAL COUNSEL
Baker & Hostetler
65 East State Street
Columbus, Ohio 43215

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, Ohio 43215

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

This report has been prepared for the information of shareholders of The
Cardinal Group and is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective Prospectus.

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

- ---------------------------------------------------------
- ---------------------------------------------------------
[CARDINAL GROUP LOGO]
-------------------------
ANNUAL REPORT
-------------------------

SEPTEMBER 30, 1997

CARDINAL GOVERNMENT SECURITIES
MONEY MARKET FUND

CARDINAL TAX EXEMPT
MONEY MARKET FUND

THE CARDINAL FUND

CARDINAL AGGRESSIVE GROWTH FUND

CARDINAL BALANCED FUND

CARDINAL GOVERNMENT
OBLIGATIONS FUND

[THE OHIO COMPANY LOGO]

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