THE FOLLOWING SUPPLEMENTS THE STATEMENT OF ADDITIONAL INFORMATION
OF THE GRADISON-MCDONALD U.S. GOVERNMENT RESERVES FUND DATED
JANUARY 29, 1996. THE DATE OF THIS SUPPLEMENT IS SEPTEMBER 11,
1996.
GRADISON McDONALD
U. S.
Government
Reserves
March 31, 1996
U. S. Government Reserves is a money market mutual fund designed to
provide investors with current money market yields by investing
exclusively in securities issued by the U. S. Government or its
agencies or instrumentalities, and in repurchase agreements for
such securities.
The Fund is used by individuals, institutions and corporations as a
short-term investment with convenient daily liquidity. Investors
and retirement plan participants make use of the Fund as a
temporary depository for assets between longer-term investment
decisions.
U. S. Government Reserves offers high levels of service including
checkwriting, wire transfers, daily sweeps with brokerage accounts,
monthly statements that include check payee names, and telephone
redemption privileges. Additional services, including a debit card
with ATM access, are available for an additional fee through the
optional "Relationship Account".
Symbol: GMUXX
[Graphic: United States Passport,
Postage Stamps]
PERFORMANCE RESULTS SINCE INCEPTION
Bar Chart stating "Annual Return of U. S. Government Reserves" with
these plot points 1976 - 5.26%*; 1977 - 5.00%; 1978 - 6.88%; 1979 -
10.18%; 1980 - 11.60%; 1981 - 16.95%; 1982 - 12.32%; 1983 - 8.54%;
1984 - 10.09%; 1985 - 7.78%; 1986 - 6.28%; 1987 - 6.03%; 1988 -
7.07%; 1989 - 8.78%; 1890 - 7.64%; 1991 - 5.48%; 1992 - 3.33%; 1993
- - 2.49%; 1994 - 3.46%; 1995 - 5.26%; 3/31/96* - 4.93%.
Line Chart stating "Annual Percent of Change in the Consumer Price
Index" with these plot points 1976 - 6.12%; 1977 - 6.38%; 1978 -
6.48%; 1979 - 10.22%; 1980 - 14.69%; 1981 - 10.55%; 1982 - 6.79%;
1983 - 3.64%; 1984 - 4.74%; 1985 - 3.74%; 1986 - 2.26%; 1987 -
3.03%; 1988 - 3.90%; 1989 - 4.97%; 1989 - 4.97%; 1990 - 5.25%;
1991 - 4.89%; 1992 - 3.19%; 1993 - 3.09%; 1994 - 2.51%; 1995 -
2.85%; March 31, 1996 - 2.80%.
Total return includes reinvestment of all distributions.
*Annualized return. Actual return for the full 1996 year will
change.
AVERAGE ANNUAL TOTAL RETURN
PERIODS Quarter* 1 Year 3 Years 5 Years 10 Years
ENDED +1.21% +5.16% +3.92% +3.93% +5.50%
3/31/96
*Not annualized
Returns prior to September 27, 1993, are those of Gradison Cash
Reserves, a predecessor money market fund which invested in non-
government obligations, the yields of which generally exceed the
yield of government obligations. Performance presented above
represents past performance; future returns will fluctuate.
An investment in the Fund is neither insured nor guaranteed by the
U. S. Government and there can be no assurance that it will be able
to maintain a stable net asset value of $1.00 per share.
NET ASSETS AND WHERE THE FUND IS INVESTED
The information below is as of March 31, 1996, and is subject to
change in the future.
$ 1,404 Billion [Graphic: Pie Chart
Net Assets as of 3/31/96 Student Loan Marketing Association 3%
U. S. Treasuries 4%
Tennessee Valley Authority 9%
Federal Home Loan Banks 46%
Federal Farm Credit Bank 38% ]
PORTFOLIO MANAGER PROFILES
[Graphic:Photo C. Stephen Wesselkamper]
C. Stephen Wesselkamper
First Vice President/Portfolio Manager
Gradison McDonald Asset Management
With more than eighteen years financial analysis and
portfolio management experience, the last thirteen with
Gradison McDonald, Stephen Wesselkamper bears primary
responsibility for both strategy and day to day portfolio
management of U. S. Government Reserves. Steve also
provides his fixed income expertise to management of the
Gradison McDonald Government Income Fund. A magna cum
laude B.S. graduate of the University of Cincinnati,
Steve holds an MBA from Xavier University.
Paul J. Weston [Graphic: Photo of Paul J. Weston]
Executive Vice President
Gradison McDonald Asset Management
With more than 25 years of investment
experience with Gradison McDonald, Paul Weston
has been involved with both the portfolio
management and administration of Gradison McDonald
U. S. Government Reserves for more than 15 years.
Paul has, for a number of years, served on several
industry wide committees. His educational back-
ground includes Bowdoin College, Western Reserve
University, and the Wharton School of Finance and
Commerce.
PROFILE OF GRADISON McDONALD FAMILY OF FUNDS
Grid from less potential risk, less potential reward to more
potential risk, more potential reward from left to right; Money
market funds, Government Income Fund, Government Income Fund,
Intermediate Municipal Income Fund, Ohio Tax-Free Income Fund,
Established Value Fund, Growth & Income Fund, Opportunity Value
Fund and International Fund.
Gradison McDonald Asset Management combines the extensive
investment experience of Gradison & Company, founded in 1925, with
McDonald & Company which was founded in 1924. The two firms merged
in 1991. As registered investment advisers since 1974 and mutual
fund advisers since 1976, Gradison McDonald currently manages in
excess of $3 billion in mutual fund and individually managed
assets.
A prospectus for the U. S. Government Reserves or any other
Gradison McDonald Fund may be obtained by calling (513) 579-5700 or
(800) 869-5999. The prospectus contains more complete information.
Read it carefully before you invest.
McDonald & Company Securities, Inc. Distributor
