<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
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THE CARDINAL GROUP
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TABLE OF CONTENTS
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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
Statements of Assets and Liabilities
Page 10
Statements of Operations
Page 12
Statements of Changes in Net Assets
Page 14
Statements of Investments
Page 17
Notes to Financial Statements
Page 28
Financial Highlights
Page 37
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THE CARDINAL GROUP
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MESSAGE FROM THE CHAIRMAN AND THE PRESIDENT
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DEAR CARDINAL SHAREHOLDERS,
We are pleased to present you with The Cardinal Group Semi-Annual Report for the
period ended March 31, 1998. During the past six months, The Cardinal Group has
welcomed several new investors to its family of shareholders while increasing
assets by approximately $53 million. The Group ended the period with total net
assets of $1.07 billion.
We are also proud of the Group's investment performance which is highlighted on
the following pages. Please take a moment to review the Portfolio Managers
comments and related financial information.
Over the last six months, there have been a number of significant events we
would like to highlight. On December 22, 1997, The Ohio Company entered into an
agreement to be acquired by Fifth Third Bancorp. Following regulatory approval,
this important event is expected to be consummated in the second quarter of this
year. As you know, Cardinal Management Corp., the Investment Advisor for The
Cardinal Group, is a wholly-owned subsidiary of The Ohio Company.
On March 12, 1998 the Cardinal Group's Board of Trustees unanimously approved an
Agreement and Plan of Reorganization and Liquidation regarding a proposed
reorganization of each series of The Cardinal Group with the Fountain Square
Funds, a $3.4 billion fund family managed by Fifth Third Bank. In the coming
weeks, you will receive a combined prospectus/proxy statement regarding this
proposal. We encourage you to read the materials carefully and cast your vote.
Subject to approval by Cardinal shareholders, the six funds of The Cardinal
Group will be reorganized into corresponding Fountain Square funds on July 11,
1998.
Finally, on March 20, 1998 shareholders of The Cardinal Group approved an
investment advisory agreement with Cardinal Management Corp. to continue
managing The Cardinal Group portfolios for the period following the acquisition
of The Ohio Company by Fifth Third Bancorp until the reorganization of the six
funds of The Cardinal Group with Fountain Square Funds.
We thank you for your investment in The Cardinal Group and appreciate your
support. We consider it a privilege to serve your investment needs.
Sincerely,
<TABLE>
<S> <C>
/s/ H. Keith Allen /s/ Frank W. Seigel
H. Keith Allen Frank W. Siegel, CFA
Chairman President
</TABLE>
1
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THE CARDINAL GROUP
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MESSAGE FROM THE CHIEF INVESTMENT OFFICER
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DEAR SHAREHOLDER:
The first six months of The Cardinal Group fiscal year was again a positive
period but not one without some anxieties. The very positive economic
environment to which we have become accustomed remained intact, but
uncertainties created by the economic and social turmoil that began to unfold in
Southeast Asia caused financial market volatility to increase.
During this six month period US economic activity (GDP) continued to grow at a
moderate pace, inflation remained at a remarkably low rate of less than 2% on an
annualized basis, and interest rates declined on 10 and 30 year maturity US
treasury bonds. In addition, corporate profits grew and evidence of a federal
budget surplus, rather than a deficit, became apparent even to administration
officials. The troubles in Southeast Asia, which actually began long before the
third calendar quarter of 1997 and which resulted from overbuilding, cheap
credit and dreams of continued double digit economic growth, manifested
themselves in a currency and financial market "meltdown" in late October of last
year. While the combination of these positive (US) and negative (Southeast Asia)
factors increased financial market volatility, the markets provided positive
returns to investors during this six month period. During the first half of the
fiscal year the indexes of larger capitalization stocks, the Dow Jones
Industrial and the Standard & Poor's 500, provided returns of 11.74% and 17.21%
respectively, while the Russell 2000 Index of smaller capitalization stocks
returned 5.92%. Bonds too achieved positive returns as the benchmark 30-year US
Treasury Bond returned 9.66%.
INTEREST RATES, THE FED AND THE BOND MARKET
Despite record low unemployment and continued economic growth, the trend in bond
prices (up) and interest rates (down) remained stable. Fed watchers believed
that the Fed might need to "ease the brakes on the economy" to forestall a
pick-up in inflation as a result of the factors described above and evidence
that wage cost pressures were rising, but any desire on the Fed's part to do so
was quickly quashed by events in Asia. With uncertainties in Asia causing
international investors to take their capital and flee to safe havens, the value
of the dollar increased and US yields fell as the demand for both "greenbacks"
and US government securities grew.
THE ECONOMY, INTEREST RATES, ASIAN "FLU" AND THE STOCK MARKET
Like the bond market, stock prices rose during these past six months despite the
uncertainties brought on by Asian turmoil. As events in the Pacific region began
to unfold, concerned investors sold stocks and the Dow fell from its near record
high at the end of September of 7922 to a low of 6926 on October 31. Investors
were initially concerned about the negative effect on domestic corporate profits
if the recession in Asia was exported to the US. As cooler heads prevailed and
the realization that Asia represented only a small part of US economic activity
and that the decline in currencies in that region would have a positive effect
on US inflation, US equity markets rebounded and actually ended March higher
than they began the period in September (7922 on 9/30/97 vs. 8799 on 3/31/98).
2
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THE CARDINAL GROUP
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MESSAGE FROM THE CHIEF INVESTMENT OFFICER (CONTINUED)
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Surprisingly strong fourth quarter economic activity and corporate profits
combined with continued large cash flows into equity mutual funds reinforced to
investors the resiliency of the US economy and the equity markets. Since the Fed
chose not to increase interest rates, fearing a further slowing in Asia and
decline in Asian currency markets, this lack of action gave further support to
equity prices. Large capitalization equities, especially those representing
Healthcare and Financial Service companies, were the performance leaders during
this period. In the calendar quarter ending December 31, 1997 Technology stocks
were "hurt" because it was feared that pricing competition from the Pacific
region would intensify further as demand slackened, but as the first quarter of
1998 ended the stocks of these companies again began to perform well and help
lead the indexes to new highs.
THE FUTURE
In the short-run it is always difficult to predict with any degree of accuracy
the direction and magnitude of equity and bond price movements and returns.
However, as we look out over the next 18 to 36 months and longer we anticipate
that the very positive environment for financial assets that we have been
experiencing will continue. As we have suggested in several of these reports
during the past several years, we believe that while corporate profits may slow
somewhat (an inevitable reaction after eight years of economic expansion) we do
not anticipate that they will turn negative. If indeed they remain positive,
inflation and interest rates remain low (less than three and six percent
respectively) and the economy continues to grow, albeit slowly, then the
environment for stocks and bonds should be quite good.
These good economic factors when combined with the positive effects of the
supply/demand relationship being created by changing demographics (an older
generation of people earning and saving more) and the "shrinkage" in the number
of shares of stocks and bonds available should lead to higher equity markets and
lower bond yields.
While quite positive in our expectations, we do not expect this "tree to grow to
the sky" unabated. Markets have always experienced volatility, periods of
negative returns caused by uncertainty, and the magnification of both good and
bad news. As an investor one must expect those happenings. However, long-term
fundamentals remain quite strong and we suggest remaining fully invested in a
diversified portfolio of high quality stocks and bonds so that you can take
advantage of the positive secular trends.
HAROLD C. ELLIOTT
SENIOR VICE PRESIDENT & CHIEF INVESTMENT OFFICER
3
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THE CARDINAL GROUP
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CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
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For the six months ended March 31, 1998, Cardinal Government Securities Money
Market Fund produced an annualized total return of 4.60%. The seven day yield as
of that date was 4.53%. 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 6 MONTHS?
Since the Federal Reserve last altered its credit stance in March, 1997, the
credit markets in which money market funds participate have moved in a narrow
trading range awaiting economic developments. The Federal Reserve has been able
to stay on the sidelines as strength in the U.S. economy has been largely offset
by Asian economic difficulties.
WHAT IS THE OUTLOOK FOR THE COMING MONTHS?
Our economic outlook calls for the Federal Reserve to remain on hold as the
Asian economic flu continues to unfold. The weakness being exported by the Asian
countries should moderate the growth of the world economy and continue to keep
price increases in check. Credit markets should continue to enjoy the stability
of the past year.
As 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.
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CARDINAL TAX EXEMPT MONEY MARKET FUND
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For the six months ended March 31, 1998, the Cardinal Tax Exempt Money Market
Fund produced a total annualized return of 2.99%. The fund had a current average
maturity of 76 days as of March 31, 1998. Many of the bonds held in the
portfolio are credit enhanced, meaning they are insured or backed by an
irrevocable bank letter of credit.
The investment strategy undertaken in the fund over the last six months has been
to increase maturity to preserve yields in an anticipation of declining interest
rates. The fund has also endeavored to purchase those issues that provide an
optimal tax advantage to the shareholders.
On October 1, 1997, Jeffrey L. Alton assumed portfolio management responsibility
for the fund. Jeff is a Chartered Financial Analyst and holds a bachelor's
degree in business administration from The University of Notre Dame. He has 5
years of portfolio management experience.
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THE CARDINAL GROUP
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THE CARDINAL FUND
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Through the first six months ending March 31, 1998, the stock market continued
to exhibit the strength which has lifted most large capitalization indices to
record highs. Also, both mid-cap and smaller capitalization indices have been
elevated to record levels as well. The Dow Jones and the S&P 500 have made
tremendous moves during this time period, with the Dow Index nearing 9000, and
the broader S&P crossing the 1100 barrier. As we have commented several times in
the past, the upward momentum continues to be in place although not without the
short periods of volatility that one can expect in these markets.
ASSESSING PERFORMANCE...
We are pleased to report to our shareholders, that The Cardinal Fund has
continued to perform quite well in the current market environment. The total
return for the six months ended March 31, 1998 was 13.5%, which compares
favorably to both the Dow Jones and S&P indices. Our return, when benchmarked
against comparable funds in the Lipper Analytical Service, continues to meet our
goal of consistently ranking in the upper half of funds with similar investment
objectives.
WHAT IS THE CURRENT STRATEGY FOR PORTFOLIO MANAGEMENT?
The Fund's investment strategy continues to be one of consistency. The Cardinal
Fund remains fully invested at most times, selecting issues primarily of large
capitalization companies, which exhibit strong management capabilities, and long
track records of consistent earnings growth. General Electric, Coca Cola, and
Procter and Gamble are examples of the types of issues the Fund owns, and are
consistent with our investment philosophy and methodology.
WHAT AREAS OF THE FUND PERFORMED WELL, AND WHERE DO YOU SEE VALUE?
In viewing the Fund, investors will note that we currently maintain slight
overweightings in the sectors of Technology, Healthcare, Financial Institutions,
and Energy. These four primary sectors represent, in our view, the best places
to weight a portfolio. Issues such as Microsoft, Intel, Merck, Pfizer, Johnson &
Johnson, and Royal Dutch Petroleum are representative of the positions we have
built in the portfolio during the past several months.
WHAT IS YOUR OUTLOOK FOR THE MARKET AND THE CARDINAL FUND?
For the market, we expect a continuation of the current upward trend, in
particular the larger capitalization issues of corporate America. We expect that
inflation will remain in check and that interest rates will stabilize at current
levels. The lower inflationary environment provides a great opportunity for
investors in financial assets. To capitalize on this opportunity, we shall
continue to remain at or near a full investment posture, broadly diversifying
the portfolio among several industry sectors and many issues within these
sectors.
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THE CARDINAL GROUP
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THE CARDINAL FUND (CONTINUED)
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As of March 31, 1998, the Fund's largest five holdings were: General Electric,
Microsoft, Cincinnati Financial, Mobil and Royal Dutch.
John Bevilacqua assumed management of The Cardinal Fund on January 1, 1996. He
has in excess of 23 years of investment experience. He received his MBA from
Xavier University, and Bachelors of Science from Franklin University.
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CARDINAL AGGRESSIVE GROWTH FUND
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For the first half of the Cardinal Aggressive Fund's fiscal year (ending March
31st, 1998) the Fund produced a total return exclusive of sales charge of
- -2.04%. As a basis of comparison the Russell 2000 index of smaller
capitalization companies achieved a total return of 5.92%.
The Cardinal Aggressive Growth Fund is managed by Harold C. Elliott.
As described in the earlier comments (by The Chief Investment Officer) the
performance of the equity markets during the first half of the Fund's fiscal
year was a positive yet rather volatile period. During the first three months
the uncertainties created by the economic and social unrest in Southeast Asia
and the anticipated effects had a particularly negative impact on the stocks of
higher multiple technology companies which represent a large percentage of this
fund. As previously described the stocks of Technology companies are
historically more volatile than the market as a whole, and thus can add
volatility to the Fund at any time, and during this period certainly did. As
indications of a slow down in the rapid economic growth in this part of the
world became apparent investors sold stocks of companies (many technology) which
had been benefiting from that growth.
While the first quarter of the fiscal year was decidedly negative, the period
from December 31, 1997 to the end of March was just the opposite. During this
quarter the Cardinal Aggressive Fund provided a total return of 12.1%. This
compares to the returns for the Russell 2000 of 9.99%. During this period the
market shrugged off an influx of negative earnings pre-announcements and
economic indicators that initial signaled the possibility of an interest rate
hike. That rate hike never materialized and the markets climbed to new highs,
led by Technology, Communications and Healthcare companies.
Despite the uncertainties described above, we continue to believe that the
environment for financial assets remains quite positive. The prospects for
continued moderate domestic economic growth; expansion of corporate profits, low
inflation and declining interest is the "fuel" that propels the value of stock
and bond prices. Under this scenario the fund will continue to focus on those
companies such as Technology, Healthcare and Financial Services that will
benefit from the long-term, meaningful effects of changing demographics.
6
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THE CARDINAL GROUP
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CARDINAL AGGRESSIVE GROWTH FUND (CONTINUED)
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PHILOSOPHY AND STRATEGY
The objective of the Cardinal Aggressive Growth Fund is to achieve superior
relative and absolute investment returns through investment in a portfolio of
small, moderate and larger companies chosen for their participation in rapidly
growing industries, because of prospects for above average growth and from their
unique products or services, or because of industry consolidation.
Company selection is further refined by additional fundamental and growth
criteria is used to identify characteristics of quality and growth. These
criteria include an analysis of revenue and earnings growth, return on equity,
operating margins and prudent use of debt.
At the end of March the funds largest equity holdings included Airtouch
Communications, WorldCom, Computer Sciences, Microsoft, Tellabs and Chancellor
Media.
7
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THE CARDINAL GROUP
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CARDINAL BALANCED FUND
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The activity in the financial markets for the six months ending March 31, 1998
could be characterized as having a Jekyll and Hyde complex. During the fourth
quarter of 1997 the Asian crisis had a negative impact on stock markets and a
positive impact on the bond market. Stocks flat to down, interest rates down,
bond prices up. As we moved into the first quarter of 1998 it became apparent
that the Asian crisis was not going to have a near term negative impact on the
U.S. economy and that domestic economic strength would continue. As a result the
stock market reacted positively and interest rates remained unchanged. The net
of it all was the six month period ending March 31, 1998 was a good one for
financial assets. The Standard & Poor's 500 was up 17.2%, the Dow Jones
Industrial Average was up 11.7% and interest rates as measured by 10 year U.S.
Treasury Notes declined in yield from 6.2% to 5.7%.
ASSESSING PERFORMANCE
Cardinal Balanced Fund's performances continued to be quite strong during the
last six months. For the quarter ending December 31, 1997, your fund ranked 48th
out of 383 balanced mutual funds in the Lipper Analytic Balanced fund universe
or in the top 13%. For the quarter ending March 31, 1998, your fund ranked 70th
out of 396 funds or in the top 18%. For the twelve month period ending March 31,
1998, the fund ranked 49th out of 367 funds or in the top 13% of Balanced Mutual
funds.
WHAT SECTIONS OF THE PORTFOLIO PERFORMED PARTICULARLY WELL?
Over the last six months, Capital Goods, Communications, Services, Consumer
Cyclicals, Financial Services, Healthcare and Technology have all outperformed
their respective sectors. Energy, as a result of declining oil prices, had the
weakest returns.
THE STRATEGY FOR THE CARDINAL BALANCED FUND
As long as our outlook for the economy continues to be one of strong economic
growth, low inflation, low to declining interest rates we will keep the fund
fully invested with about 65% in common stocks and the balance in bonds.
WHERE HAS EMPHASIS BEEN PLACED IN THE COMMON STOCK PORTFOLIO?
Emphasis has been and continues to be on Financial Services (H.F. Ahmanson, Bank
of New York, T. Rowe Price), Capital Goods (Textron, General Electric, Tyco),
Health Care (Merck, Pfizer, Tenet Healthcare) and Technology (Compaq, Lucent,
Cisco).
8
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THE CARDINAL GROUP
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CARDINAL GOVERNMENT OBLIGATIONS FUND
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For the three months ended March 31, 1998, the Cardinal Government Obligations
Fund, which invests in a portfolio of U.S. Government agency securities, earned
a total return of 1.35% (exclusive of sales charges). For the trailing 12 months
that return was 9.71%.
HOW WOULD YOU ASSESS THE FUND'S PERFORMANCE?
The fund has continued to post solid returns during the first half of the
current fiscal year. For the trailing 12 months ending March 31, 1998, the fund
earned a total return (exclusive of sales charges) of 9.71%. The Lipper universe
of 51 Ginnie Mae funds [mutual funds investing primarily in securities issued by
the Government National Mortgage Association (GNMA)] produced an average return
of 10.70% during this period. The shorter average life of our portfolio caused
this performance lag. Since our goal is to consistently rank in the top 50% of
our peer group, we are taking steps to improve our relative position.
WHAT WAS YOUR STRATEGY DURING THE PAST SIX MONTHS?
Our strategy over the past six months has been to increase the fund's holdings
of current production GNMA single-family pools in an effort to construct a
portfolio of slightly longer duration, as well as one that will be more
responsive to market price movements.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
We continue to expect a slowing of economic activity in the U.S. as the effects
of the Asian economic difficulties continue to develop. This should cause
interest rates to decline from present levels, and the steps we have taken to
extend the life of the fund's portfolio should reward the fund's shareholders
with competitive returns.
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.
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THE CARDINAL GROUP
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STATEMENTS OF ASSETS AND LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
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MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at amortized cost................. $410,004 $59,820
Repurchase agreements, at cost.............................. 153,002 0
-------- -------
Total investments............................... 563,006 59,820
Cash........................................................ 289 669
Interest receivable......................................... 3,718 690
Receivable for securities sold.............................. 0 1,500
Receivable for Fund shares sold............................. 33 17
Other assets (note 5)....................................... 395 70
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Total assets.................................... 567,441 62,766
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LIABILITIES:
Payable for investment securities purchased................. 40,000 2,030
Payable for shareholder distributions....................... 0 10
Accrued investment management and transfer agent fees (note
4)........................................................ 330 30
Other accrued expenses...................................... 103 19
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Total liabilities............................... 40,433 2,089
-------- -------
Commitments and contingencies (note 5)
NET ASSETS:
Paid in capital............................................. 527,026 60,679
Accumulated net realized loss on investments................ (402) (2)
Undistributed net investment income......................... 384 0
-------- -------
Total net assets................................ $527,008 $60,677
======== =======
Outstanding shares of beneficial interest................... 527,008 60,677
======== =======
NET ASSET VALUE PER SHARE................................... $1.00 $1.00
======== =======
</TABLE>
See accompanying notes to financial statements.
10
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THE CARDINAL GROUP
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STATEMENTS OF ASSETS AND LIABILITIES (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
DATA)
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MARCH 31, 1998 (UNAUDITED)
<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
$148,184, $8,888, $14,125, and $110,450)..... $300,464 $13,506 $18,672 $112,828
Repurchase agreements, at cost................. 27,555 81 488 5,540
-------- ------- ------- --------
Total investments..................... 326,019 13,587 19,160 118,368
-------- ------- ------- --------
Dividends and interest receivable.............. 378 7 59 744
Receivable for investment securities sold...... 0 310 0 17,857
Receivable for Fund shares sold................ 1,153 41 188 217
Other assets (note 5).......................... 113 1 1 16
Deferred organizational cost................... 42 3 3 27
-------- ------- ------- --------
Total assets.......................... 329,705 13,949 19,411 137,229
-------- ------- ------- --------
LIABILITIES:
Payable for investment securities purchased.... 0 318 0 14,680
Payable for Fund shares redeemed............... 1,230 45 174 218
Payable for shareholder distributions.......... 0 0 0 697
Accrued investment management and transfer
agent fees (note 4).......................... 194 9 12 68
Other accrued expenses......................... 163 18 29 74
-------- ------- ------- --------
Total liabilities..................... 1,587 390 215 15,737
-------- ------- ------- --------
Commitments and contingencies (note 5)
NET ASSETS:
Paid in capital................................ 168,498 9,438 14,116 137,618
Accumulated net realized gain (loss) on
investments.................................. 7,346 (312) 44 (18,496)
Undistributed net investment income (loss)..... (6) (52) 1 (8)
Unrealized gain on investments................. 152,280 4,485 5,035 2,379
-------- ------- ------- --------
Total net assets...................... $328,118 $13,559 $19,196 $121,493
======== ======= ======= ========
NET ASSETS:
Investor shares................................ $296,184 $ 9,665 $17,088 $115,467
Institutional shares........................... 31,934 3,694 2,108 6,026
-------- ------- ------- --------
Total................................. $328,118 $13,559 $19,196 $121,493
======== ======= ======= ========
OUTSTANDING SHARES OF BENEFICIAL INTEREST
Investor shares................................ 16,905 671 1,244 14,047
Institutional shares........................... 1,822 270 153 732
-------- ------- ------- --------
Total................................. 18,727 941 1,397 14,779
======== ======= ======= ========
NET ASSET VALUE
Investor shares................................ $ 17.52 $ 14.40 $ 13.73 $ 8.22
Institutional shares........................... $ 17.53 $ 14.40 $ 13.74 $ 8.23
======== ======= ======= ========
</TABLE>
See accompanying notes to financial statements.
11
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THE CARDINAL GROUP
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STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
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SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................ $14,233 $1,107
------- ------
EXPENSES:
Investment management fees (note 4)................. 1,355 155
Transfer agent fees and expenses (note 4)........... 666 40
------- ------
Total affiliated expenses................. 2,021 195
------- ------
Custodian fees...................................... 13 2
Accounting fees..................................... 34 10
Professional fees................................... 50 12
Reports to shareholders............................. 76 9
Trustees' fees...................................... 27 1
Registration fees................................... 27 6
Other expenses...................................... 59 2
Amortization of deferred organizational cost........ 17 3
------- ------
Total non-affiliated expenses............. 303 45
------- ------
Total expenses............................ 2,324 240
------- ------
Net investment income..................... 11,909 867
------- ------
Net realized loss from security
transactions............................ 2 (2)
------- ------
Net increase in net assets from
operations.............................. $11,911 $ 865
======= ======
</TABLE>
See accompanying notes to financial statements.
12
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THE CARDINAL GROUP
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STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS)
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SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CARDINAL CARDINAL
AGGRESSIVE CARDINAL GOVERNMENT
THE CARDINAL GROWTH BALANCED OBLIGATIONS
FUND FUND FUND FUND
------------ ---------- -------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................... $ 1,928 $ 27 $ 61 $ 0
Interest.................................... 794 18 191 4,810
------- ----- ------ ------
Total income...................... 2,722 45 252 4,810
------- ----- ------ ------
EXPENSES:
Investment management fees (note 4)......... 898 47 66 311
Distribution fees (note 4).................. 149 1 11 48
Administrative service fees (note 4)........ 0 1 1 1
Transfer agent fees and expenses (note 4)... 107 9 12 64
------- ----- ------ ------
Total affiliated expenses......... 1,154 56 90 424
------- ----- ------ ------
Custodian fees.............................. 9 4 4 14
Accounting fees............................. 25 10 10 18
Professional fees........................... 32 6 4 16
Reports to shareholders..................... 25 7 4 11
Trustees' fees.............................. 10 1 1 5
Registration fees........................... 18 4 3 11
Other expenses.............................. 28 2 2 6
Amortization of deferred organizational
cost...................................... 7 5 5 4
------- ----- ------ ------
Total non-affiliated expenses..... 154 39 33 85
------- ----- ------ ------
Total expenses.................... 1,308 97 123 509
------- ----- ------ ------
Net investment income (loss)...... 1,414 (52) 129 4,301
------- ----- ------ ------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from security
transactions.............................. 7,316 528 86 754
Increase in unrealized gain (loss) on
investments............................... 30,930 (706) 1,875 (601)
------- ----- ------ ------
Net realized gain (loss) and
increase in unrealized gain on
investments..................... 38,246 (178) 1,961 153
------- ----- ------ ------
Net increase in net assets from
operations...................... $39,660 $(230) $2,090 $4,454
======= ===== ====== ======
</TABLE>
See accompanying notes to financial statements.
13
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THE CARDINAL GROUP
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STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
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SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CARDINAL
GOVERNMENT CARDINAL
SECURITIES TAX EXEMPT
MONEY MARKET MONEY MARKET
FUND FUND
------------------------------ -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 1997 MARCH 31, 1998 1997
---------------- ----------- ---------------- ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income................. $ 11,909 $ 23,173 $ 867 $ 1,783
Net realized gain (loss) from security
transactions........................ 2 (92) (2) 0
--------- ----------- -------- ---------
Net increase in net assets
from operations........... 11,911 23,081 865 1,783
--------- ----------- -------- ---------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Total distributions to shareholders... (11,911) (23,099) (865) (1,783)
--------- ----------- -------- ---------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
Proceeds from sale of fund shares..... 747,207 1,330,914 83,671 155,053
Reinvestment of distributions to
shareholders........................ 11,395 22,599 858 1,668
Cost of fund shares redeemed.......... (735,858) (1,327,106) (84,136) (156,352)
--------- ----------- -------- ---------
Increase (decrease) in net assets
from capital share
transactions................... 22,744 26,407 393 369
--------- ----------- -------- ---------
Net increase (decrease) in net
assets......................... 22,744 26,389 393 369
NET ASSETS -- beginning of period..... 504,264 477,875 60,284 59,915
--------- ----------- -------- ---------
NET ASSETS -- end of period........... $ 527,008 $ 504,264 $ 60,677 $ 60,284
========= =========== ======== =========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 17
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE
THE CARDINAL FUND GROWTH FUND
----------------------------- -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 1997 MARCH 31, 1998 1997
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss)....................... $ 1,414 $ 2,539 $ (52) $ (174)
Net realized gain (loss) from security
transactions..................................... 7,316 19,070 528 (809)
Increase (decrease) in unrealized gain on
investments...................................... 30,930 63,545 (706) 4,242
-------- -------- ------- -------
Net increase (decrease) in net assets from
operations..................................... 39,660 85,154 (230) 3,259
-------- -------- ------- -------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income -- Investor
shares........................................... (1,446) (2,179) 0 0
Distributions of net investment income --
Institutional shares............................. (160) (174) 0 0
Tax return of capital distribution................. 0 0 0 (192)
Distribution of net realized gains from security
transactions..................................... (19,677) (19,080) 0 (31)
-------- -------- ------- -------
Total distributions to shareholders.............. (21,183) (21,433) 0 (223)
-------- -------- ------- -------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
INVESTOR SHARES:
Proceeds from sale of fund shares.................. 8,257 12,835 328 1,736
Reinvestment of distributions to shareholders...... 17,895 19,793 0 218
Cost of fund shares redeemed....................... (14,968) (51,330) (284) (4,087)
-------- -------- ------- -------
Increase (decrease) in net assets from Investor
share transactions............................. 11,584 (18,702) 44 (2,133)
-------- -------- ------- -------
INSTITUTIONAL SHARES:
Proceeds from sale of fund shares.................. 3,184 24,912 361 3,720
Reinvestment of distributions to shareholders...... 2,092 174 0 0
Cost of fund shares redeemed....................... (2,008) (4,358) (470) (438)
-------- -------- ------- -------
Increase in net assets from Institutional share
transactions..................................... 3,268 20,728 (109) 3,282
-------- -------- ------- -------
Net increase (decrease) in net assets............ 33,329 65,747 (295) 4,185
NET ASSETS -- beginning of period.................. 294,789 229,042 13,854 9,669
-------- -------- ------- -------
NET ASSETS -- end of period........................ $328,118 $294,789 $13,559 $13,854
======== ======== ======= =======
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 18
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CARDINAL CARDINAL GOVERNMENT
BALANCED FUND OBLIGATIONS FUND
----------------------------- -----------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 1997 MARCH 31, 1998 1997
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income.............................. $ 129 $ 340 $ 4,301 $ 9,220
Net realized gain (loss) from security
transactions..................................... 86 1,440 754 (155)
Increase (decrease) in unrealized gain on
investments...................................... 1,875 1,687 (601) 2,682
------- ------- -------- --------
Net increase in net assets from operations....... 2,090 3,467 4,454 11,747
------- ------- -------- --------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Distributions of net investment income -- Investor
shares........................................... (155) (274) (4,173) (8,849)
Distributions of net investment income --
Institutional shares............................. (18) (20) (205) (301)
Distribution of net realized gains from security
transactions..................................... (1,101) (1,235) 0 0
------- ------- -------- --------
Total distributions to shareholders.............. (1,274) (1,529) (4,378) (9,150)
------- ------- -------- --------
FROM CAPITAL SHARE TRANSACTIONS (NOTE 7):
INVESTOR SHARES:
Proceeds from sale of fund shares.................. 858 1,191 2,352 8,628
Reinvestment of distributions to shareholders...... 1,050 1,413 2,288 4,918
Cost of fund shares redeemed....................... (1,165) (3,029) (9,017) (28,973)
------- ------- -------- --------
Decrease in net assets from Investor share
transactions................................... 749 (425) (4,377) (15,427)
------- ------- -------- --------
INSTITUTIONAL SHARES:
Proceeds from sale of fund shares.................. 347 2,004 680 6,374
Reinvestment of distributions to shareholders...... 130 20 201 301
Cost of fund shares redeemed....................... (170) (558) (682) (998)
------- ------- -------- --------
Increase in net assets from Institutional share
transactions..................................... 307 1,466 199 5,677
------- ------- -------- --------
Net increase (decrease) in net assets............ 1,872 2,979 (4,652) (7,153)
NET ASSETS -- beginning of period.................. 17,324 14,345 126,145 133,298
------- ------- -------- --------
NET ASSETS -- end of period........................ $19,196 $17,324 $121,493 $126,145
======= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 19
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
-------- ------ ---------
<S> <C> <C> <C>
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY
OBLIGATIONS 73%
Federal Farm Credit Bank
Note 5.90%............... 06-02-98 $ 10,000 $ 10,006
Federal Farm Credit Bank
Note 5.47%............... 04-01-98 5,000 5,000
Federal Farm Credit Bank
Note 5.65%............... 07-01-98 30,000 30,000
Federal Farm Credit Bank
Note 5.35%............... 05-01-98 5,000 5,000
Federal Farm Credit Bank
Note 5.37%............... 08-03-98 30,000 30,000
Federal Farm Credit Bank
Note 5.50%............... 06-02-98 10,000 10,000
Federal Farm Credit Bank
Note 5.43%............... 09-01-98 20,000 20,000
Federal Farm Credit Bank
Note 5.46%............... 07-01-98 25,000 25,000
Federal Farm Credit Bank
Note 5.46%............... 10-01-98 5,000 5,000
Student Loan Marketing
Association Note 5.56%... 01-27-99 5,000 5,000
Student Loan Marketing
Association Note 5.63%... 03-12-99 5,000 5,000
Student Loan Marketing
Association Note 5.53%... 03-04-99 10,000 9,997
Student Loan Marketing
Association Note 5.54%... 04-16-98 5,000 5,000
Student Loan Marketing
Association Note 5.58%... 05-21-98 30,000 30,000
Student Loan Marketing
Association Note 5.63%... 06-18-98 30,000 30,000
Student Loan Marketing
Association Note 5.54%... 07-16-98 30,000 30,000
Student Loan Marketing
Association Note 5.49%... 08-20-98 35,000 35,000
Student Loan Marketing
Association Note 5.49%... 09-17-98 25,000 25,000
Federal Home Loan Bank Note
5.58%.................... 03-02-99 10,000 10,000
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 9,997
Federal Home Loan Bank Note
5.80%.................... 09-18-98 15,000 15,005
Federal Home Loan Bank Note
5.53%.................... 02-26-99 5,000 5,000
Federal Home Loan Bank Note
5.65%.................... 03-30-99 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED
MATURITY FACE COST
DATE AMOUNT (NOTE 2)
-------- ------ ---------
<S> <C> <C> <C>
U.S. GOVERNMENT-SPONSORED ENTERPRISES AND FEDERAL AGENCY OBLI-
GATIONS 73% (CONTINUED)
Federal Home Loan Bank Note
5.61%.................... 03-02-99 $ 5,000 $ 5,000
Federal Home Loan Bank Note
5.58%.................... 03-11-99 5,000 5,000
Federal Home Loan Bank Note
5.63%.................... 02-26-99 5,000 5,000
Federal Home Loan Bank Note
5.70%.................... 03-17-99 15,000 15,000
Federal Home Loan Bank Note
5.70%.................... 04-15-98 10,000 10,000
--------
TOTAL U.S. GOVERNMENT-
SPONSORED ENTERPRISES AND
FEDERAL AGENCY
OBLIGATIONS.............. 410,004
--------
REPURCHASE AGREEMENTS 27%
Fifth Third Bank 5.88%
(collateralized by U.S.
Government Obligations,
$4,082,000).............. 04-01-98 4,002 4,002
Merrill Lynch Gov't.
Securities Inc. 5.90%
(collateralized by U.S.
Government Obligations,
$15,300,000)............. 04-01-98 15,000 15,000
Paine Webber Inc. 5.92%
(collateralized by U.S.
Government Obligations,
$14,280,000)............. 04-01-98 14,000 14,000
Paine Webber Inc. 5.58%
(collateralized by U.S.
Government Obligations,
$40,800,000)............. 04-06-98 40,000 40,000
Prudential 5.56%
(collateralized by U.S.
Government Obligations,
$35,700,000)............. 04-02-98 35,000 35,000
Smith Barney Shearson 5.53%
(collateralized by U.S.
Government Obligations,
$45,900,000.............. 04-07-98 45,000 45,000
--------
TOTAL REPURCHASE
AGREEMENTS............... 153,002
--------
TOTAL INVESTMENTS AT
AMORTIZED COST 100%...... $563,006
========
</TABLE>
- ---------------
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
17
<PAGE> 20
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (AMOUNTS IN THOUSANDS) --
CARDINAL TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FINAL FACE
2a-7* MATURITY AMOUNT/ AMORTIZED
MATURITY DATE SHARES COST
-------- -------- ------- ---------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS 24%
Dade County Florida, 5.00%................................. 10-01-98 10-01-98 $1,475 $ 1,484
Burke County Georgia currently 3.75%....................... 04-01-98 07-01-24 900 900
Chicago, Illinois currently 3.60%.......................... 12-04-98 01-01-06 1,000 1,000
Chicago, Illinois currently 3.55%.......................... 02-04-99 01-31-00 1,000 1,000
Indiana Health Facilities, 5.00%........................... 11-01-98 11-01-98 1,000 1,006
Indiana Health Facilities currently 3.70%.................. 04-07-98 01-01-22 2,000 2,000
Michigan Hospital currently 3.75%.......................... 04-07-98 12-01-23 2,000 2,000
Allen County Ohio currently 3.20%.......................... 04-07-98 02-01-18 1,000 1,000
Hamilton County Ohio currently 3.65%....................... 04-07-98 01-01-18 1,920 1,920
Ohio School Districts, currently 3.70%..................... 04-07-98 12-29-98 2,000 2,000
-------
14,310
-------
GENERAL OBLIGATION BONDS 21%
Columbus, Ohio currently 3.55%............................. 04-07-98 12-01-17 1,600 1,600
District of Columbia, 7.70%................................ 06-01-98 06-01-04 1,000 1,026
Michigan State, 4.50%...................................... 09-30-98 09-30-98 2,000 2,009
Ohio School District Cash Flow Borrowing Program, 4.47%.... 06-30-98 06-30-98 2,000 2,003
Ohio State Building Authority, 5.00%....................... 10-01-98 10-01-98 1,850 1,862
Ohio State Building Authority, 5.00%....................... 10-01-98 10-01-98 1,750 1,761
Ohio State Public Facilities, 7.00%........................ 06-01-98 06-01-00 1,000 1,025
Summit County, Ohio Bond Anticipation, 4.50%............... 06-04-98 06-04-98 1,000 1,001
-------
12,287
-------
REVENUE BONDS 55%
Ashtabula County, Ohio Industrial Development currently
3.85%.................................................... 04-07-98 12-01-16 2,400 2,400
Clackamas County, Oregon Hospital Facilities Authority
currently 3.75%.......................................... 04-01-98 04-01-14 1,100 1,100
Clark County, Kentucky Pollution Control, 3.75%............ 10-15-98 10-15-14 2,230 2,230
Cornell Township, Michigan Economic Development currently
3.40%.................................................... 06-08-98 03-01-15 2,000 2,000
Grand Rapids, Michigan Water, 3.60%........................ 04-07-98 01-01-20 2,000 2,000
Kansas City, Missouri currently 3.90%...................... 04-01-98 10-15-14 300 300
Kentucky Development Financial Authority currently 3.70%... 04-07-98 12-01-15 900 900
Lakewood, Ohio, 3.60%...................................... 12-01-98 12-01-98 1,025 1,025
Michigan Strategic Fund currently 3.05%.................... 04-07-98 09-01-25 1,500 1,500
Michigan Health currently 3.75%............................ 04-07-98 12-01-23 1,000 1,000
New York City Revenue Anticipation A, 4.50%................ 06-30-98 06-30-97 2,000 2,004
Ohio State Building Authority, 7.75%....................... 10-01-98 06-01-00 500 520
Ohio State Education currently 3.65%....................... 04-07-98 12-01-06 1,025 1,025
Ohio State Public Facilities, 5.00%........................ 06-01-98 06-01-98 1,000 1,002
Ohio State Public Facilities Commission Series II B,
4.50%.................................................... 11-01-98 11-01-98 1,000 1,005
Ohio State Water Development, 7.50%........................ 06-01-98 12-01-08 1,610 1,653
Plain, Ohio Local School District, 4.00%................... 04-15-98 04-15-98 2,000 2,000
Washington Health currently 3.85%.......................... 04-01-98 10-01-05 1,300 1,300
Washington Health currently 3.85%.......................... 12-31-98 10-01-05 1,000 1,000
West Lafayette, Indiana, 4.07%............................. 12-01-98 12-31-98 1,000 1,002
Wood County Ohio, 7.875%................................... 04-15-98 12-01-13 500 523
Worthington, Ohio currently 3.90%.......................... 08-15-98 04-15-98 2,000 2,000
York County, South Carolina currently 3.64%................ 08-15-98 08-15-14 980 980
York County, South Carolina currently 3.64%................ 04-01-98 08-15-14 1,955 1,955
Uinta County, Wyoming Pollution Control, 3.85%............. 04-01-98 08-15-20 800 800
-------
33,223
-------
TOTAL INVESTMENTS AT AMORTIZED COST........................ $59,820
=======
</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.
Cost also represents cost for Federal income tax purposes.
See accompanying notes to financial statements.
18
<PAGE> 21
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --
THE CARDINAL FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK 92%
BASIC MATERIALS 3%
Aluminum Company of America.... 10,000 $ 688
Dow Chemical Co................ 20,000 1,945
Dupont de Nemours and Co....... 51,400 3,495
International Paper............ 20,000 936
Monsanto Company............... 25,000 1,300
Potash Corp. Saskatchewan...... 10,000 909
Willamete Industries........... 20,000 751
Worthington Industries......... 30,000 544
--------
10,568
--------
CAPITAL GOODS 9%
Asea Brown Brovari ADR......... 10,000 1,393
Boeing Company................. 20,000 1,043
Caterpillar, Inc............... 30,000 1,652
Deere & Company................ 25,000 1,548
General Electric Company....... 140,000 12,066
Johnson Controls Inc........... 25,000 1,517
Minnesota Mining &
Manufacturing Co............. 25,000 2,280
Textron, Incorporated.......... 80,000 6,160
Tyco International Ltd......... 24,000 1,311
U.S. Filter Corporation........ 35,000 1,229
--------
30,199
--------
COMMUNICATIONS 5%
GTE Corp....................... 100,000 5,988
LCI International, Inc......... 50,000 1,925
MCI Communications, Corp....... 51,000 2,525
Pacific Gateway Exchange....... 15,000 859
Sprint Corporation............. 40,000 2,708
WorldCom, Inc.................. 70,000 3,014
--------
17,018
--------
CONSUMER CYCLICALS 6%
Consolidated Stores Corp....... 25,000 1,073
Dun & Bradstreet............... 30,000 1,026
Gannett Co., Inc............... 60,000 4,313
Kohl's Corp.................... 20,000 1,635
Limited Inc.................... 50,000 1,434
Lowe's Companies............... 35,000 2,457
New York Times Co. Cl 'A'...... 40,000 2,800
Nike Incorporated.............. 15,000 664
Pier One Imports............... 30,000 814
Service Corporation
International................ 30,000 1,273
Tribune Company................ 40,000 2,820
--------
20,308
--------
</TABLE>
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
CONSUMER STAPLES 12%
Anheuser Busch Cos., Inc....... 50,000 $ 2,316
Bergen Brunswig Corp........... 20,000 853
Cardinal Health Inc............ 15,000 1,323
Clear Channel Comm............. 10,000 980
Clorox Co...................... 10,000 857
Coca Cola Company.............. 100,000 7,744
The Walt Disney Company........ 25,000 2,669
Gillette Company............... 25,000 2,967
Imax Inc....................... 20,000 568
Jacor Communications........... 20,000 1,180
Kimberly-Clark Corp............ 30,000 1,504
McDonald's Corporation......... 30,000 1,800
PepsiCo Incorporated........... 50,000 2,134
Philip Morris Companies,
Inc.......................... 150,000 6,253
Playtex Incorporated........... 75,000 1,106
Proctor & Gamble Company....... 70,000 5,906
Robert Mondavi, Class A........ 15,000 619
--------
40,778
--------
ENERGY 10%
British Petroleum Company...... 10,000 861
Exxon Corp..................... 40,000 2,705
Global Marine.................. 50,000 1,238
Mobil Corp..................... 116,000 8,889
Royal Dutch Petroleum.......... 150,000 8,522
Schlumberger Ltd............... 40,000 3,030
Texaco, Incorporated........... 100,000 6,025
Transocean Offshore, Inc....... 20,000 1,029
--------
32,297
--------
FINANCIAL SERVICES 17%
American International Group,
Inc.......................... 30,000 3,778
AmSouth Bancorporation......... 20,000 1,181
Banc One Corporation........... 110,000 6,958
Bank of New York Co. Inc....... 7,000 440
Bankers Trust NY............... 7,000 842
Beneficial Corporation......... 25,000 3,108
Charter One Financial Corp..... 110,250 7,380
Cincinnati Financial Corp...... 75,000 9,394
Consolidated Capital........... 30,000 754
Federal National Mortgage...... 30,000 1,898
Huntington Bancshares.......... 60,000 2,186
Key Corp....................... 200,000 7,563
</TABLE>
19
<PAGE> 22
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --
THE CARDINAL FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Marsh & McLennan, Inc.......... 90,000 $ 7,858
T. Rowe Price Associates
Inc.......................... 15,000 1,056
--------
54,394
--------
HEALTHCARE 12%
American Home Products......... 80,000 7,630
Amgen, Incorporated............ 15,000 913
Biomet, Inc.................... 60,000 1,800
Boston Scientific.............. 20,000 1,350
HEALTHSOUTH Corporation........ 50,000 1,403
Johnson & Johnson.............. 80,000 5,865
Medtronic, Inc................. 70,000 3,631
Merck & Company, Inc........... 50,000 6,419
Pfizer, Inc.................... 70,000 6,978
Tenet Healthcare Corporation... 40,000 1,453
Warner Lambert Inc............. 10,000 1,703
--------
39,145
--------
TECHNOLOGY 15%
3Com Corp...................... 20,000 719
Applied Materials.............. 40,000 1,413
Aspen Technology............... 10,000 413
Cisco Systems.................. 37,500 2,564
Compaq Computer Corp........... 150,000 3,881
Computer Associates
International Inc............ 15,000 866
Computer Sciences Corp......... 30,000 1,650
Dell Computer Corp............. 26,000 1,762
HBO & Company.................. 15,000 906
Hewlett Packard................ 40,000 2,535
Intel Corp..................... 90,000 7,026
International Business Machines
Corp......................... 30,000 3,116
</TABLE>
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
KLA - Tencor Corp.............. 10,000 $ 383
Lucent Technologies............ 40,000 5,115
Microsoft Corp................. 110,000 9,845
Motorola Inc................... 40,000 2,425
PRI Automation................. 20,000 524
Tektronix, Incorporated........ 25,000 1,116
Tellabs, Incorporated.......... 30,000 2,014
Texas Instruments, Inc......... 20,000 1,083
--------
49,352
--------
UTILITIES 2%
Western Resources.............. 60,000 2,565
Williams Companies, Inc........ 120,000 3,840
--------
6,405
--------
TOTAL COMMON STOCK............. 300,464
--------
(cost $148,183,994)
REPURCHASE AGREEMENTS 8%
Fifth Third Bank 5.88% due
4/01/98 (collateralized by
$1,230,000 U.S. Government
Obligations)................. 1,205,179 1,205
Paine Webber Inc. 5.92% 4/01/98
(collateralized by
$26,877,000 U.S. Government
Obligations)................. 26,350,000 26,350
--------
TOTAL REPURCHASE AGREEMENTS.. 27,555
--------
(cost $27,555,179)
TOTAL INVESTMENTS 100%....... $328,019
========
(cost $175,739,173)
</TABLE>
- ---------------
(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)....................................... $153,277
Unrealized depreciation..................................... (997)
--------
Net unrealized appreciation................................. $152,280
========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 23
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/ MARKET
PAR VALUE
------- ------
<S> <C> <C>
COMMON STOCK
BASIC MATERIALS
Buckeye Technologies.............. 4,000 $ 85
-------
CAPITAL GOODS
Lancer Corp....................... 10,000 138
Littel Fuse....................... 5,000 130
U.S. Filter....................... 3,000 105
Aavid Thermal Tech................ 4,000 124
-------
496
-------
COMMUNICATIONS
AirTouch Communications........... 7,000 343
MCI Communications Corp........... 6,000 297
Pacific Gateway Exchange.......... 2,000 115
WorldCom Inc...................... 7,000 301
-------
1,056
-------
CONSUMER CYCLICALS
Cort Business Services............ 4,000 190
Cendant Corp...................... 3,604 143
Gartner Group A................... 3,000 112
Kohl's............................ 2,000 164
New York Times Co. CIA............ 3,000 210
Personal Group of America......... 8,000 182
Pierce Leahy...................... 6,000 152
Team America...................... 9,000 124
-------
1,277
-------
CONSUMER STAPLES
Chancellor Media Corp. 'A'........ 6,000 275
Bergen Brunswig Corp.............. 3,000 128
CBS Corporation................... 3,000 102
Emmis Broadcasting 'A'............ 2,000 106
Imax, Inc......................... 6,000 170
Pixar............................. 4,000 140
Heftel Broadcasting............... 2,500 112
-------
1,032
-------
ENERGY
Global Marine..................... 5,000 124
-------
FINANCIAL
Edwards (A.G.) Inc................ 5,000 219
AmSouth Bancorp................... 2,500 148
Bear Stearns Cos.................. 2,550 131
Consolidated Capital.............. 7,000 176
</TABLE>
<TABLE>
<CAPTION>
SHARES/ MARKET
PAR VALUE
------- ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
FINANCIAL (CONTINUED)
Corestates Financial.............. 1,000 $ 90
Crestar Financial................. 2,500 148
CMAC Investment................... 3,000 200
Friedman Billings Ramsey.......... 7,000 117
Fleet Financial Group............. 3,000 255
First Tennessee National.......... 6,000 193
Legg Mason Inc.................... 3,033 180
McDonald & Co. Invest............. 6,000 179
Mellon Bank Corp.................. 3,000 191
Merrill Lynch & Co., Inc.......... 2,000 166
Nationwide Finl Svcs. 'A'......... 5,000 217
Paine Webber Group................ 3,750 150
PNC Bank Corp..................... 4,000 240
Raymond James Financial........... 3,500 152
Summit Bancorp.................... 3,500 175
Traveler's Group, Inc............. 3,390 203
Union BanCal Corp................. 1,500 150
Union Planters.................... 2,000 124
Hambrecht & Quist Group........... 3,000 105
Lehman Brothers Holdings.......... 2,000 150
-------
4,059
-------
HEALTHCARE
Alkermes Inc...................... 5,000 124
Bioanalytical Systems Inc......... 12,000 104
Biomet, Inc....................... 10,000 300
Cygnus Inc........................ 5,000 83
Genzyme Corp...................... 3,000 96
Teva Pharmaceuticals ADR.......... 4,000 171
Conmed Corporation................ 4,000 96
Dentsply International............ 4,000 125
Vertex Pharmaceuticals Inc........ 5,000 160
-------
1,258
-------
TECHNOLOGY
Analog Devices.................... 8,666 288
Applied Materials................. 4,500 159
Asyst Technologies................ 5,000 116
CFM Technologies.................. 7,000 105
CHS Electronics................... 4,500 84
Cisco Systems..................... 2,000 137
Computer Science.................. 8,000 440
Cymer Inc......................... 4,000 81
Dell Computer Corp................ 4,000 271
</TABLE>
- ---------------
* Non-income producing (continued)
21
<PAGE> 24
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --
CARDINAL AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/ MARKET
PAR VALUE
------- ------
<S> <C> <C>
COMMON STOCK (CONTINUED)
TECHNOLOGY (CONTINUED)
EMC Corp.......................... 6,000 $ 227
GenRad, Inc....................... 8,000 249
Intel Corp........................ 4,100 320
KLA-Tencor Corp................... 3,000 115
Kulicke & Soffa Corp.............. 2,500 54
Lattice Semiconductor............. 3,000 154
Microsoft Corp.................... 5,000 448
Power Integrations Int............ 7,000 93
PRI Automation.................... 5,000 131
Secure Computing Corp............. 5,000 67
Tellabs, Inc...................... 5,500 369
-------
3,907
-------
TOTAL COMMON STOCK.............. 13,293
-------
(cost $8,888,474)
</TABLE>
<TABLE>
<CAPTION>
SHARES/ MARKET
PAR VALUE
------- ------
<S> <C> <C>
INDEX OPTIONS
Russell 2000 June 1998 Calls @
460............................. 60 $ 213
-------
TOTAL INDEX OPTIONS............. 213
-------
(cost $132,180)
REPURCHASE AGREEMENT
Fifth Third Bank 5.88% due 04/01/98
(collateralized by $1,230,000 U.S.
Government Obligations)........... 80,955 81
-------
TOTAL INVESTMENTS............... $13,587
=======
(cost $9,101,609)
</TABLE>
- ---------------
(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..................................... $ 4,804
Unrealized depreciation (including unrealized depreciation
on options written)....................................... (319)
----------
Net unrealized appreciation................................. $ 4,485
==========
</TABLE>
* Non-income producing
See accompanying notes to financial statements.
22
<PAGE> 25
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (MARKET VALUE IN THOUSANDS) --
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCK 72%
BASIC MATERIALS 2%
DuPont de Nemours and Co.......... 2,000 $ 136
Monsanto Co....................... 4,500 234
-------
370
-------
CAPITAL GOODS 9%
Avery Dennison Corp............... 4,500 240
Crane Co.......................... 4,500 239
Deere & Co........................ 3,000 186
Emerson Electric Co............... 3,000 196
General Electric Co............... 4,000 345
Textron, Inc...................... 2,400 185
Tyco Int'l Ltd.................... 5,000 273
-------
1,663
-------
COMMUNICATIONS SERVICES 3%
MCI Communications Corp........... 5,100 252
Worldcom, Inc..................... 7,000 301
-------
554
-------
CONSUMER CYCLICALS 6%
Consolidated Stores Inc........... 4,000 172
Kohls............................. 3,000 245
New York Times Class A............ 3,500 245
Service Corp. International....... 4,500 191
Tribune Co........................ 4,000 282
Meredith Corporation.............. 2,000 84
-------
1,219
-------
</TABLE>
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
CONSUMER STAPLES 10%
Bergen Brunswig Corp.............. 3,000 $ 128
Cardinal Health Inc............... 2,000 176
Colgate-Palmolive................. 3,000 260
The Walt Disney Co................ 1,900 203
Gillette Co....................... 2,500 297
Coca Cola Corp.................... 3,000 232
Robert Mondavi, Class A........... 4,500 186
Pepsico, Inc...................... 4,000 171
Proctor & Gamble Co............... 2,000 169
Jacor Communications.............. 2,000 118
-------
1,939
-------
ENERGY 4%
Mobil Corp........................ 2,000 153
TransOcean Offshore, Inc.......... 4,000 206
Schlumberger Ltd.................. 2,000 152
Exxon Corp........................ 3,000 203
Global Marine..................... 5,000 124
-------
837
-------
FINANCIAL SERVICES 15%
Ahmanson H. F..................... 4,000 310
American International Group...... 1,500 189
AmSouth Bancorporation............ 3,300 195
American Express.................. 2,000 184
Franklin Resources................ 4,600 244
Golden State Bank................. 3,000 275
Bank of New York.................. 3,500 220
Bank of Boston.................... 2,000 221
Citicorp.......................... 1,000 142
Federal National Mortgage
Association..................... 2,500 158
Mellon Bank Corp.................. 3,000 191
T. Rowe Price Associates.......... 3,500 246
Traveler's Group, Inc............. 4,000 240
-------
2,813
-------
</TABLE>
(continued)
23
<PAGE> 26
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --
CARDINAL BALANCED FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
HEALTHCARE 9%
American General Hospital......... 4,000 $ 111
Amgen, Inc........................ 2,000 122
HealthSouth Corp.................. 9,000 253
Johnson & Johnson................. 3,000 220
Medtronic, Inc.................... 5,000 259
Merck & Co........................ 2,000 257
Pfizer Inc........................ 2,000 199
Quorum Health Group*.............. 4,500 151
Tenet Healthcare Corp............. 4,000 145
-------
1,717
-------
TECHNOLOGY 11%
Applied Materials................. 5,000 177
Cisco Systems..................... 3,000 205
Compaq Computer Corp.............. 6,000 155
Computer Sciences Corp............ 4,000 220
HBO & Co.......................... 4,000 242
Hewlett Packard................... 3,000 190
Intel Corp........................ 2,600 203
Lucent Technology................. 2,500 320
Microsoft Corp.................... 4,000 358
-------
2,069
-------
TRANSPORTATION 2%
Burlington North/Santa Fe......... 1,500 156
Federal Express................... 2,500 178
-------
334
-------
UTILITIES 1%
Williams Companies, Inc........... 6,000 192
-------
TOTAL COMMON STOCK.............. 13,707
-------
(Cost $8,959,720)
</TABLE>
<TABLE>
<CAPTION>
FACE/ MARKET
SHARES VALUE
------ ------
<S> <C> <C>
U.S. GOVERNMENT AND
AGENCY BONDS 13%
US Treasury Strip 11.250%,
02/15/09........................ 1,000,000 $ 530
US Treasury Note 5.875%,
02/15/04........................ 500,000 505
FNMA 6.99%, 07/09/02.............. 250,000 259
FNMA 6.94%, 03/14/11.............. 500,000 502
FNMA 7.50%, 11/15/06.............. 250,000 256
FNMA 6.24%, 01/14/08.............. 250,000 249
FNMA 6.43%, 01/11/08.............. 250,000 247
-------
TOTAL U.S. GOVERNMENT AND AGENCY
BONDS......................... 2,547
-------
(Cost $2,451,381)
CORPORATE BONDS 13%
Dole Foods 7.00%, 05/15/03........ 200,000 205
Anheuser Busch 7.00%, 09/01/05.... 250,000 257
US Filter 4.50%, 12/15/01......... 150,000 166
American Airlines 10.18%,
01/02/13........................ 250,000 313
CSX Transportation 6.72%,
06/01/06........................ 250,000 257
Virginia Electric 6.75%,
02/01/07........................ 250,000 255
Limited, Inc. 7.50%, 03/15/23..... 250,000 248
Nordstrom 6.70%, 07/01/05......... 250,000 255
GMAC 7.00%, 09/15/02.............. 200,000 206
Kemper Co. 6.875%, 09/15/03....... 250,000 257
-------
TOTAL CORPORATE BONDS........... 2,417
-------
(Cost $2,227,162)
REPURCHASE AGREEMENT 3%
Fifth Third Bank 5.88%, 04/01/98
(collateralized by $500,000 U.S.
Government and Agency
Obligations).................... 488,298 488
-------
TOTAL INVESTMENTS 100%.......... $19,160
=======
(Cost $14,124,561)
</TABLE>
- ---------------
(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..................................... $ 5,106
Unrealized depreciation..................................... (71)
----------
Net unrealized appreciation................................. $ 5,035
==========
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 27
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (PRINCIPAL AMOUNTS AND MARKET VALUE IN THOUSANDS) --
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS 95%
GNMA Note, 7.00%, stated maturity
01-15-28........................ $ 2,015 $ 2,034
GNMA Note, 7.00%, stated maturity
01-15-28........................ 4,032 4,071
GNMA Note, 7.00%, stated maturity
02-15-28........................ 3,993 4,031
GNMA Note, 7.00%, stated maturity
01-15-28........................ 9,881 9,977
GNMA Note, 7.35% stated maturity
07-15-98........................ 2,242 2,301
GNMA Note, 7.38%, stated maturity
10-15-98........................ 165 176
GNMA Note, 7.50%, stated maturity
02-15-27........................ 931 957
GNMA Note, 7.50%, stated maturity
11-15-27........................ 5,865 6,026
GNMA Note, 7.50%, stated maturity
12-15-26........................ 933 959
GNMA Note, 7.50%, stated maturity
10-15-25........................ 1,783 1,832
GNMA Note, 7.50%, stated maturity
11-15-26........................ 1,833 1,883
GNMA Note, 7.50%, stated maturity
12-15-26........................ 969 995
GNMA Note, 7.50%, stated maturity
02-15-27........................ 1,707 1,754
GNMA Note, 7.50%, stated maturity
05-15-23........................ 1,045 1,073
GNMA Note, 7.50%, stated maturity
09-15-22........................ 2,046 2,102
GNMA Note, 7.63%, stated maturity
05-15-99........................ 5,857 6,175
GNMA Note, 7.75%, stated maturity
07-15-97........................ 371 375
GNMA Note, 7.75%, stated maturity
05-15-32........................ 1,968 2,020
GNMA Note, 7.75%, stated maturity
11-15-26........................ 1,826 1,876
GNMA Note, 8,00%, stated maturity
10-15-98........................ 2,470 2,655
GNMA Note, 8.00%, stated maturity
12-15-98........................ 143 147
GNMA Note, 8.00%, stated maturity
08-15-35........................ 3,266 3,470
GNMA Note, 8.00%, stated maturity
04-15-37........................ 1,022 1,084
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA Note, 8.00%, stated maturity
06-15-19........................ $ 2,319 $ 2,409
GNMA Note, 8.00%, stated maturity
08-15-31........................ 1,195 1,285
GNMA Note, 8.00%, stated maturity
05-15-21........................ 3,328 3,443
GNMA Note, 8.12%, stated maturity
05-15-99........................ 3,448 3,653
GNMA Note, 8.13%, stated maturity
05-15-99........................ 354 375
GNMA Note, 8.25%, stated maturity
07-15-27........................ 2,758 2,820
GNMA Note, 8.25%, stated maturity
03-15-22........................ 916 943
GNMA Note, 8.25%, stated maturity
11-15-34........................ 1,977 2,145
GNMA Note, 8.25%, stated maturity
10-15-36........................ 2,420 2,668
GNMA Note, 8.50%, stated maturity
06-15-16........................ 183 196
GNMA Note, 8.50%, stated maturity
09-15-16........................ 386 413
GNMA Note, 8.50%, stated maturity
07-15-16........................ 764 818
GNMA Note, 8.50%, stated maturity
09-15-29........................ 2,143 2,341
GNMA Note, 8.50%, stated maturity
05-15-16........................ 36 39
GNMA Note, 8.50%, stated maturity
09-15-16........................ 275 295
GNMA Note, 8.50%, stated maturity
05-15-17........................ 145 155
GNMA Note, 8.50%, stated maturity
06-15-16........................ 177 190
GNMA Note, 8.50%, stated maturity
06-15-16........................ 168 180
GNMA Note, 8.50%, stated maturity
06-15-17........................ 294 315
GNMA Note, 8.50%, stated maturity
03-15-30........................ 1,755 1,891
GNMA Note, 8.50%, stated maturity
11-15-16........................ 313 335
GNMA Note, 8.50%, stated maturity
01-15-17........................ 193 207
GNMA Note, 8.50%, stated maturity
02-15-17........................ 556 596
</TABLE>
(continued)
25
<PAGE> 28
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA Note, 8.50%, stated maturity
06-15-17........................ $ 232 $ 249
GNMA Note, 8.50%, stated maturity
02-15-17........................ 123 132
GNMA Note, 8.50%, stated maturity
06-15-17........................ 215 230
GNMA Note, 8.50%, stated maturity
06-15-17........................ 413 443
GNMA Note, 8.50%, stated maturity
01-15-17........................ 312 334
GNMA Note, 8.50%, stated maturity
01-15-17........................ 119 127
GNMA Note, 8.50%, stated maturity
01-18-18........................ 263 281
GNMA Note, 8.50%, stated maturity
01-15-17........................ 343 368
GNMA Note, 8.50%, stated maturity
02-15-17........................ 66 70
GNMA Note, 8.50%, stated maturity
05-15-17........................ 103 110
GNMA Note, 8.50%, stated maturity
02-15-17........................ 227 243
GNMA Note, 8.50%, stated maturity
02-15-17........................ 126 135
GNMA Note, 8.50%, stated maturity
01-15-23........................ 5,209 5,482
GNMA Note, 8.50%, stated maturity
07-15-17........................ 414 443
GNMA Note, 8.50%, stated maturity
01-15-17........................ 232 249
GNMA Note, 8.50%, stated maturity
01-15-17........................ 187 200
GNMA Note, 8.50%, stated maturity
06-15-22........................ 923 948
GNMA Note, 9.00%, stated maturity
05-15-17........................ 10 11
GNMA Note, 9.00%, stated maturity
08-15-24........................ 1,468 1,580
GNMA Note, 9.00%, stated maturity
08-15-24........................ 985 1,060
GNMA Note, 9.00%, stated maturity
09-15-16........................ 87 94
GNMA Note, 9.00%, stated maturity
12-15-19........................ 131 143
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA Note, 9.00%, stated maturity
05-15-18........................ $ 69 $ 75
GNMA Note, 9.00%, stated maturity
01-15-17........................ 139 151
GNMA Note, 9.00%, stated maturity
10-15-21........................ 1,748 1,788
GNMA Note, 9.00%, stated maturity
05-15-18........................ 81 88
GNMA Note, 9.00%, stated maturity
10-15-16........................ 44 48
GNMA Note, 9.00%, stated maturity
11-15-18........................ 184 200
GNMA Note, 9.00%, stated maturity
04-15-18........................ 34 37
GNMA Note, 9.00%, stated maturity
08-15-18........................ 141 153
GNMA Note, 9.00%, stated maturity
05-15-18........................ 103 112
GNMA Note, 9.00%, stated maturity
06-15-25........................ 523 563
GNMA Note, 9.00%, stated maturity
07-15-18........................ 60 65
GNMA Note, 9.00%, stated maturity
03-15-33........................ 774 855
GNMA Note, 9.00%, stated maturity
10-15-19........................ 141 153
GNMA Note, 9.00%, stated maturity
04-15-21........................ 225 245
GNMA Note, 9.00%, stated maturity
12-15-19........................ 241 262
GNMA Note, 9.00%, stated maturity
03-15-33........................ 753 832
GNMA Note, 9.25%, stated maturity
05-15-33........................ 831 920
GNMA Note, 9.25%, stated maturity
03-15-30........................ 812 900
GNMA Note, 9.50%, stated maturity
01-15-19........................ 184 189
GNMA Note, 9.50%, stated maturity
04-15-17........................ 213 228
GNMA Note, 9.50%, stated maturity
02-15-23........................ 613 625
</TABLE>
(continued)
26
<PAGE> 29
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) --
CARDINAL GOVERNMENT OBLIGATIONS FUND
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
--------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
GNMA Note, 10.20%, stated maturity
12-15-22........................ $ 1,614 $ 1,711
GNMA Note, 10.50%, stated maturity
07-15-14........................ 988 1,034
GNMA Note, 7.00%, stated maturity
12-01-27........................ 2,942 2,975
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATION (COST
-------- --------
$110,449,813)............... 108,112 112,828
-------- --------
</TABLE>
<TABLE>
<CAPTION>
MARKET
PRINCIPAL VALUE
AMOUNT (NOTE 2)
-------- --------
<S> <C> <C>
U. S. GOVERNMENT AGENCY OBLIGATIONS
(CONTINUED)
REPURCHASE AGREEMENT
Fifth Third Bank 5.88%, Due 04-01-98
(collateralized by $5,650,000 U.S.
Government Obligation) $ 5,539 $ 5,539
--------
TOTAL INVESTMENTS (COST
$115,989,047) (a)........... $118,367
========
</TABLE>
- ---------------
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..................................... $2,662
Unrealized depreciation..................................... (283)
------
Net unrealized appreciation................................. $2,379
======
</TABLE>
See accompanying notes to financial statements.
27
<PAGE> 30
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MARCH 31, 1998 (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.
The Group has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of April 27,1998 (the "Plan"), with Fountain Square Funds,
a Massachusetts business trust ("Fountain Square"). Pursuant to the Plan, the
following series of Fountain Square (collectively, the "Acquiring Funds") would
acquire all of the assets of the series of The Group (collectively, the
"Acquired Funds"), in exchange for the assumption of all of the corresponding
Acquired Funds' liabilities and a number of full and fractional shares of the
corresponding Acquiring Fund having an aggregate net asset value equal to the
Acquired Fund's net assets (the "Reorganization"):
<TABLE>
<CAPTION>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
<S> <C>
Cardinal Government Securities Money Fountain Square Government Cash
Market Fund Reserve Fund
Cardinal Tax Exempt Money Market Fund Fountain Square Tax Exempt Money
Market Fund
The Cardinal Fund Fountain Square Cardinal Fund
Cardinal Aggressive Growth Fund Fountain Square Mid Cap Fund
Cardinal Balanced Fund Fountain Square Balanced Fund
Cardinal Government Obligations Fund Fountain Square Bond Fund For Income
</TABLE>
Pursuant to the terms of the Plan, holders of shares of an Acquired Fund would
receive either Investment A Shares or Institutional Shares of the corresponding
Acquiring Fund, as may be appropriate.
The Reorganization is subject to certain regulatory approvals and to approval by
the shareholders of the Acquired Funds at a Special Shareholders Meeting
currently expected to be held in July 1998. If the shareholders approve the
Reorganization, it is expected that the Reorganization will be effective on or
about July 13, 1998; however, the Reorganization may be effected on such earlier
or later date as the Group and Fountain Square may determine. There can be no
assurance that the Reorganization will take place when or as currently proposed.
(continued)
28
<PAGE> 31
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
On Friday, March 20, 1998, shareholders of each Acquired Fund approved a new
Investment Advisory and Management Agreement between the Group and CMC (the "New
Advisory Agreement"). The New Advisory Agreement, which will become effective as
of the effective date of Fifth Third Bancorp's acquisition of TOC, is identical
in all material respects to the Group's current Investment Advisory and
Management Agreement with CMC. Such acquisition is expected to be effective
during June, 1998. In addition, the Board of Trustees of the Group has approved
a new Distribution Agreement with BISYS Fund Services Limited Partnership, 3435
Stelzer Road, Columbus, Ohio 43219. Such Distribution Agreement, which will also
be effective as of the date of The Ohio Company's acquisition, is identical in
all material respects to the Group's current Distribution Agreement with The
Ohio Company, except with respect to the identity of the distributor.
The New Advisory Agreement was approved by the following votes:
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES ABSTAIN
----------- ------------- -------------
<S> <C> <C> <C>
Cardinal Government Securities Money Market Fund 245,424,068 3,415,985 12,520,792
Cardinal Tax Exempt Money Market Fund 31,023,753 429,630 1,303,183
The Cardinal Fund 228,659,723 2,026,595 5,132,189
Cardinal Aggressive Growth Fund 11,453,742 47,629 185,007
Cardinal Balanced Fund 15,609,093 90,901 463,266
Cardinal Government Obligations Fund 77,122,877 627,595 1,787,191
</TABLE>
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 March 31, 1998 and the income and expenses
reported for the period. Actual results could differ significantly from those
estimates.
SECURITIES VALUATION Investments in Cardinal Government Securities Money Market
Fund and Cardinal Tax Exempt Money Market Fund (the "money market funds") are
valued at amortized cost, which approximates the market value. Any premiums and
discounts are amortized on a straight-line method to the maturity of the
particular security. The use of the amortized cost method requires that the
money 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.
(continued)
29
<PAGE> 32
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
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 investment income, if
any, quarterly. Realized capital gains, if any, are declared and paid annually
by each Fund. 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.
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
(continued)
30
<PAGE> 33
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
written. Premiums received from options written that expire unexercised are
recognized as realized gains by the portfolio on the expiration date. The
difference, if any, between the premium received and the amount paid in a
closing transaction is also treated as a realized gain or loss. If a written
option is exercised, the premium received is added to proceeds from sales of the
underlying securities for call options written or deducted from the cost basis
of securities purchased for put options written. The portfolios making use of
option writing bear the market risk of an unfavorable change in the price of any
security/index underlying the written option.
EXPENSE ALLOCATION Expenses directly related to one of the Group's portfolios
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.
3. PURCHASES AND SALES OF SECURITIES
The purchases and sales of investment securities (excluding short-term
securities) for the six months ended March 31, 1998 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
--------- -------
<S> <C> <C>
The Cardinal Fund.......................................... $18,949 $22,141
Cardinal Aggressive Growth Fund............................ 4,365 4,247
Cardinal Balanced Fund..................................... 2,761 2,283
Cardinal Government Obligations Fund....................... 111,550 61,941
</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 March 31, 1998:
<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>
(continued)
31
<PAGE> 34
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
TOC serves as the Group's distributor. TOC receives fees from each of the
non-money market Funds 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.
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 six months ended March 31, 1998:
<TABLE>
<S> <C>
The Cardinal Fund --Investor Shares......................... $167,520
Cardinal Aggressive Growth Fund --Investor Shares........... 24,772
Cardinal Balanced Fund --Investor Shares.................... 38,153
Cardinal Government Obligations Fund --Investor Shares...... 119,643
</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 March 31, 1998. 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)
32
<PAGE> 35
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
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 ADDITIONAL
DEPOSITS OF 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 March 31, 1998 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.
At March 31, 1998, 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)
33
<PAGE> 36
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
7. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the Group for the six months ended March 31,
1998 and the year ended September 30, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
CARDINAL GOVERNMENT CARDINAL TAX EXEMPT
SECURITIES MONEY MARKET FUND MONEY MARKET FUND
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPT. 30, 1997 MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 504,282 477,875 60,284 59,915
---------- ---------- -------- --------
Share Transactions:
Issued........................... 747,207 1,330,914 83,671 155,053
Reinvested....................... 11,377 22,599 858 1,668
Redeemed......................... (735,858) (1,327,106) (84,136) (156,352)
---------- ---------- -------- --------
Net change in shares............. 22,726 26,407 393 369
---------- ---------- -------- --------
End of period.................... 527,008 504,282 60,677 60,284
========== ========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THE CARDINAL FUND CARDINAL AGGRESSIVE GROWTH FUND
INVESTOR SHARES INVESTOR SHARES
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPT. 30, 1997 MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 16,094 17,438 666 855
---------- ---------- -------- --------
Share Transactions:
Issued........................... 483 989 23 140
Reinvested....................... 1,204 1,512 0 19
Redeemed......................... (876) (3,845) (18) (348)
---------- ---------- -------- --------
Net change in shares............. 811 1,344 5 (189)
---------- ---------- -------- --------
End of period.................... 16,905 16,094 671 666
========== ========== ======== ========
</TABLE>
(continued)
34
<PAGE> 37
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CARDINAL GOVERNMENT
CARDINAL BALANCED FUND OBLIGATIONS FUND
INVESTOR SHARES INVESTOR SHARES
--------------------------------- ---------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPT. 30, 1997 MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period.............. 1,180 1,210 14,679 16,557
---------- ---------- -------- --------
Share Transactions:
Issued........................... 64 105 280 1,050
Reinvested....................... 86 126 180 606
Redeemed......................... (86) (261) (1,098) (3,534)
---------- ---------- -------- --------
Net change in shares............. 64 (30) (632) (1,878)
---------- ---------- -------- --------
End of period.................... 1,244 1,180 14,047 14,679
========== ========== ======== ========
</TABLE>
(continued)
35
<PAGE> 38
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
CARDINAL AGGRESSIVE
THE CARDINAL FUND GROWTH FUND
INSTITUTIONAL SHARES INSTITUTIONAL SHARES
------------------------------------------ ------------------------------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
SIX MONTHS ENDED JANUARY 2, 1997 THROUGH SIX MONTHS ENDED JANUARY 2, 1997 THROUGH
MARCH 31, 1998 SEPT. 30, 1997 MARCH 31, 1998 SEPT. 30, 1997
---------------- ----------------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period......... 1,615 0 276 0
------ ------ ------ ------
Share Transactions:
Issued...................... 186 1,894 25 308
Reinvested.................. 138 12 0 0
Redeemed.................... (117) (291) (31) (32)
------ ------ ------ ------
Net change in shares........ 207 1,615 (6) 276
------ ------ ------ ------
End of period............... 1,822 1,615 270 276
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CARDINAL BALANCED FUND CARDINAL GOVERNMENT OBLIGATIONS
INSTITUTIONAL SHARES FUND INSTITUTIONAL SHARES
------------------------------------------ ------------------------------------------
FOR THE PERIOD FROM FOR THE PERIOD FROM
SIX MONTHS ENDED JANUARY 2, 1997 THROUGH SIX MONTHS ENDED JANUARY 2, 1997 THROUGH
MARCH 31, 1998 SEPT. 30, 1997 MARCH 31, 1998 SEPT. 30, 1997
---------------- ----------------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
Shares outstanding:
Beginning of period......... 129 0 708 0
------ ------ ------ ------
Share Transactions:
Issued...................... 26 172 83 793
Reinvested.................. 11 2 24 37
Redeemed.................... (13) (45) (83) (122)
------ ------ ------ ------
Net change in shares........ 24 129 24 708
------ ------ ------ ------
End of period............... 153 129 732 708
====== ====== ====== ======
</TABLE>
36
<PAGE> 39
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT SECURITIES MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED --------------------------------------------
MARCH 31, 1998 1997 1996 1995 1994
---------------- -------- -------- -------- --------
<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................ 0.02 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
Total from Investment
Activities.................... 0.02 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income........... (0.02) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- --------
Total Distributions.............. (0.02) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total return......................... 4.60% 4.67% 4.70% 4.98% 2.84%*
Net Assets at end of period (000).... $527,008 $504,264 $477,875 $445,374 $367,516
Ratio of expenses to average net
assets............................. 0.90% 0.88% 0.81% 0.81% 0.85%
Ratio of net investment income to
average
net assets......................... 4.64% 4.57% 4.74% 4.92% 2.94%
</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%.
See notes to financial statements.
37
<PAGE> 40
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------------
MARCH 31, 1998 1997 1996 1995 1994
---------------- ------- ------- ------- -------
<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.................... 0.01 0.03 0.03 0.03 0.02
------- ------- ------- ------- -------
Total from Investment Activities..... 0.01 0.03 0.03 0.03 0.02
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income............... (0.01) (0.03) (0.03) (0.03) (0.02)
------- ------- ------- ------- -------
Total Distributions.................. (0.01) (0.03) (0.03) (0.03) (0.02)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING.................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return............................. 2.94% 2.72% 2.67% 3.02% 1.78%
Net Assets at end of period (000)........ $60,677 $60,284 $59,915 $64,780 $80,531
Ratio of expenses to average net
assets................................. 0.80% 0.80% 0.89% 0.81% 0.76%
Ratio of net investment income to average
net assets............................. 2.87% 2.79% 2.66% 2.99% 1.78%
</TABLE>
See notes to financial statements.
38
<PAGE> 41
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
THE CARDINAL FUND INVESTOR SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, --------------------------------------------
1998 1997 1996 1995 1994
---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING............... $ 16.65 $ 13.13 $ 13.23 $ 12.73 $ 12.91
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income.................. 0.09 0.14 0.25 0.36 0.31
Net realized and unrealized gain on
investments.......................... 1.99 4.64 1.95 1.32 0.12
-------- -------- -------- -------- --------
Total from Investment Activities..... 2.08 4.78 2.20 1.68 0.43
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income............. (0.09) (0.13) (0.26) (0.35) (0.33)
From net realized gains................ (1.12) (1.13) (2.04) (0.83) (0.28)
-------- -------- -------- -------- --------
Total Distributions.................. (1.21) (1.26) (2.30) (1.18) (0.61)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING.................. $ 17.52 $ 16.65 $ 13.13 $ 13.23 $ 12.73
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)...... 13.46% 39.17% 17.96% 14.84% 3.38%
Net Assets at end of period (000)...... $296,184 $267,908 $229,042 $226,181 $246,581
Ratio of expenses to average net
assets............................... 0.96% 1.06% 0.75% 0.70% 0.72%
Ratio of net investment income after
expenses to average net assets....... 1.02% 0.97% 1.90% 2.89% 2.40%
Ratio of incurred expenses to average
net assets (a)....................... 0.96% 1.12% 0.85% 0.70% 0.72%
Ratio of net investment income after
incurred expenses to average net
assets (a)........................... 1.02% 0.91% 1.80% 2.89% 2.40%
Portfolio turnover rate................ 10.65% 12.73% 57.93% 19.78% 23.20%
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.
39
<PAGE> 42
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
THE CARDINAL FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD FROM
ENDED JANUARY 2, 1997*
MARCH 31, THROUGH
1998 SEPT. 30, 1997
---------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING.................................. $ 16.64 $ 12.92
INVESTMENT ACTIVITIES:
Net investment income..................................... 0.09 0.12
Net realized and unrealized gain on investments........... 2.01 3.70
------- -------
Total from Investment Activities........................ 2.10 3.82
------- -------
DISTRIBUTIONS:
From net investment income................................ (0.09) (0.10)
From net realized gains................................... (1.12) 0
------- -------
Total Distributions..................................... (1.21) (0.10)
------- -------
NET ASSET VALUE, ENDING..................................... $ 17.53 $ 16.64
======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return.............................................. 13.51% 29.77%
Net Assets at end of period (000)......................... $21,934 $26,881
------- -------
Ratio of expenses to average net assets................... 0.88% 1.00%
Ratio of net investment income after expenses to average
net assets.............................................. 1.12% 1.04%
Portfolio turnover rate................................... 10.65% 12.73%
Average commission rate paid (a).......................... $ 0.08 $ 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.
40
<PAGE> 43
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL AGGRESSIVE GROWTH FUND INVESTOR SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ------------------------------------
MARCH 31, 1998 1997 1996 1995 1994
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING........................ $14.70 $11.31 $12.37 $ 9.94 $10.47
------ ------ ------ ------ ------
INVESTMENT ACTIVITIES:
Net investment loss............................. (0.08) (0.20) (0.17) (0.10) (0.13)
Net realized and unrealized gain (loss)
on investments................................ (0.22) 3.86 0.01 2.53 (0.36)
------ ------ ------ ------ ------
Total from Investment Activities............ (0.30) 3.66 (0.16) 2.43 (0.49)
------ ------ ------ ------ ------
DISTRIBUTIONS:
From net realized gains......................... 0.00 (0.27) (0.90) 0.00 (0.04)
------ ------ ------ ------ ------
Total Distributions......................... 0.00 (0.27) (0.90) 0.00 (0.04)
------ ------ ------ ------ ------
NET ASSET VALUE, ENDING........................... $14.40 $14.70 $11.31 $12.37 $ 9.94
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)............... (2.04)% 32.95% (1.13)% 24.35% (4.74)%
Net Assets at end of period (000)............... $9,665 $9,792 $9,669 $10,434 $9,460
Ratio of expenses to average net assets......... 2.12% 1.86% 1.95% 2.24% 2.51%
Ratio of net investment loss after
expenses to average net assets................ (1.14)% (1.50)% (1.52)% (0.92)% (1.50)%
Ratio of incurred expenses to average net assets
(a)........................................... 2.12% 1.93% 2.17% 2.25% 2.51%
Ratio of net investment loss after incurred
expenses to average net assets (a)............ (1.14)% (1.57)% (1.75)% (0.93)% (1.50)%
Portfolio turnover rate......................... 24.64% 34.43% 48.60% 80.35% 95.70%
Average commission rate paid (b)................ $ 0.08 $ 0.07 $ 0.07 $ 0.07 $ 0.09
</TABLE>
- ---------------
(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.
41
<PAGE> 44
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL AGGRESSIVE GROWTH FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
SIX MONTHS ENDED THROUGH
MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING.................................. $ 14.71 $11.62
------- ------
INVESTMENT ACTIVITIES:
Net investment loss....................................... (0.08) (0.15)
Net realized and unrealized gain (loss)
on investments.......................................... (0.23) 3.24
------- ------
Total from Investment Activities...................... (0.31) 3.09
------- ------
DISTRIBUTIONS:
From net realized gains................................... 0.00 0.00
------- ------
Total Distributions................................... 0.00 0.00
------- ------
NET ASSET VALUE, ENDING..................................... $ 14.40 $14.71
======= ======
RATIOS/SUPPLEMENTAL DATA:
Total Return.............................................. (2.04)% 26.59%
Net Assets at end of period (000)......................... $ 3,694 $4,062
Ratio of expenses to average net assets................... 2.12% 2.11%
Ratio of net investment loss after
expenses to average net assets.......................... (1.14)% (1.71)%
Portfolio turnover rate................................... 24.64% 34.43%
Average commission rate paid (a).......................... $ 0.08 $ 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.
42
<PAGE> 45
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL BALANCED FUND INVESTOR SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED ----------------------------------------
MARCH 31,1998 1997 1996 1995 1994
---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING.......................... $ 13.23 $ 11.86 $ 11.52 $ 9.90 $ 10.13
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income............................. 0.11 0.27 0.41 0.34 0.23
Net realized and unrealized gain (loss) on
investments..................................... 1.37 2.40 0.73 1.67 (0.20)
------- ------- ------- ------- -------
Total from Investment Activities.............. 1.48 2.67 1.14 2.01 0.03
------- ------- ------- ------- -------
DISTRIBUTIONS:
From net investment income........................ (0.13) (0.24) (0.41) (0.35) (0.23)
From net realized gains........................... (0.85) (1.06) (0.39) (0.04) (0.03)
------- ------- ------- ------- -------
Total Distributions........................... (0.98) (1.30) (0.80) (0.39) (0.26)
------- ------- ------- ------- -------
NET ASSET VALUE, ENDING............................. $ 13.73 $ 13.23 $ 11.86 $ 11.52 $ 9.90
======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load)................. 11.91% 24.71% 10.26% 20.76% 0.37%
Net Assets at end of period (000)................. $17,088 $15,616 $14,345 $14,535 $13,973
Ratio of expenses to average net assets........... 1.54% 1.44% 1.64% 1.94% 2.07%
Ratio of net investment income after expenses to
average net assets.............................. 1.61% 2.23% 3.54% 3.24% 2.44%
Ratio of incurred expenses to average net assets
(a)............................................. 1.54% 1.50% 1.86% 1.95% 2.07%
Ratio of net investment income after incurred
expenses to average net assets (a).............. 1.61% 2.17% 3.32% 3.23% 2.44%
Portfolio turnover rate........................... 23.74% 61.23% 18.34% 37.62% 59.09%
Average commission rate paid (b).................. $ 0.09 $ 0.09 $ 0.09 $ 0.09 $ 0.10
</TABLE>
- ---------------
(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.
43
<PAGE> 46
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL BALANCED FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
SIX MONTHS ENDED THROUGH
MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING.................................. $ 13.23 $ 11.16
INVESTMENT ACTIVITIES:
Net investment income..................................... 0.11 0.16
Net realized and unrealized gain (loss) on investments.... 1.38 2.08
------- -------
Total from Investment Activities...................... 1.49 2.24
------- -------
DISTRIBUTIONS:
From net investment income................................ (0.13) (0.17)
From net realized gains................................... (0.85) (0.00)
------- -------
Total Distributions................................... (0.98) (0.17)
------- -------
NET ASSET VALUE, ENDING..................................... $ 13.74 $ 13.23
======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return.............................................. 11.91% 20.17%
Net Assets at end of period (000)......................... $ 2,108 $ 1,708
Ratio of expenses to average net assets................... 1.54% 1.51%
Ratio of net investment income after expenses to average
net assets.............................................. 1.61% 1.99%
Portfolio turnover rate................................... 23.74% 61.23%
Average commission rate paid (a).......................... $ 0.09 $ 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.
44
<PAGE> 47
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT OBLIGATIONS FUND INVESTOR SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
SIX MONTHS ENDED --------------------------------------------
MARCH 31, 1998 1997 1996 1995 1994
---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING............. $ 8.20 $ 8.05 $ 8.18 $ 7.96 $ 8.63
INVESTMENT ACTIVITIES:
Net investment income................ 0.28 0.61 0.60 0.64 0.66
Net realized and unrealized gain
(loss) on investments.............. 0.02 0.11 (0.12) 0.22 (0.68)
-------- -------- -------- -------- --------
Total from Investment Activities... 0.30 0.72 0.48 0.86 (0.02)
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income........... (0.28) (0.57) (0.60) (0.64) (0.65)
Tax return of capital................ 0.00 0.00 (0.01) 0.00 0.00
-------- -------- -------- -------- --------
Total Distributions................ (0.28) (0.57) (0.61) (0.64) (0.65)
-------- -------- -------- -------- --------
NET ASSET VALUE, ENDING................ $ 8.22 $ 8.20 $ 8.05 $ 8.18 $ 7.96
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Total Return (without sales load).... 3.73% 9.28% 6.04% 11.27% (0.27)%
Net Assets at end of period (000).... $115,467 $120,342 $133,298 $151,711 $169,529
Ratio of expenses to average net
assets............................. 0.82% 1.01% 0.78% 0.76% 0.75%
Ratio of net investment income after
charged expenses to average net
assets............................. 6.91% 7.06% 7.39% 7.93% 7.88%
Ratio of incurred expenses to average
net assets......................... 0.82% 1.08%(a) 0.88%(a) 0.76% 0.75%
Ratio of net investment income after
incurred expenses to average net
assets............................. 6.91% 6.99%(a) 7.29%(a) 7.93% 7.88%
Portfolio turnover rate.............. 29.60% 34.53% 33.58% 36.71% 21.95%
</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.
45
<PAGE> 48
THE CARDINAL GROUP
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS --
CARDINAL GOVERNMENT OBLIGATIONS FUND INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 2, 1997*
SIX MONTHS ENDED THROUGH
MARCH 31, 1998 SEPT. 30, 1997
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING.................................. $ 8.20 $ 8.09
INVESTMENT ACTIVITIES:
Net investment income..................................... 0.28 0.42
Net realized and unrealized gain (loss) on investments.... 0.03 0.12
------- -------
Total from Investment Activities........................ 0.31 0.54
------- -------
DISTRIBUTIONS: (0.28) 0.43
From net investment income................................ 0.00 0.00
------- -------
Total Distributions..................................... (0.28) 0.43
------- -------
NET ASSET VALUE, ENDING..................................... $ 8.23 $ 8.20
======= =======
RATIOS/SUPPLEMENTAL DATA:
Total Return.............................................. 3.73% 6.86%
Net Assets at end of period (000)......................... $ 6,026 $ 5,803
Ratio of expenses to average net assets................... 0.82% 0.93%
Ratio of net investment income after charged expenses to
average net assets...................................... 6.91% 7.00%
Portfolio turnover rate................................... 29.60% 34.53%
</TABLE>
- ---------------
* Commencement of operations.
See notes to financial statements.
46
<PAGE> 49
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<PAGE> 50
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<PAGE> 51
- ----------------------------------------------------------
- ---------------------------------------------------------
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 LLP
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]
----------------------------------
SEMI-ANNUAL REPORT
----------------------------------
MARCH 31, 1998
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]
- ---------------------------------------------------------
- ----------------------------------------------------------
