<PAGE> 1
As filed with the Securities and Exchange Commission on January __, 1996
1933 Act Registration No. 2-55297
1940 Act File No. 811-2618
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 ( )
Pre-Effective Amendment No. ( )
Post-Effective Amendment No. 38 (X)
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 ( )
Amendment No. 21 (X)
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G R A D I S O N - M c D O N A L D C A S H R E S E R V E S T R U S T
(Exact Name of Registrant as Specified in Declaration of Trust)
580 Walnut Street, Cincinnati, Ohio 45202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (513) 579-5700
Copy to:
BRADLEY E. TURNER ROBERT J. ZUTZ
Gradison-McDonald Cash Reserves Trust Kirkpatrick & Lockhart
580 Walnut Street 1800 M St., N.W.
Cincinnati, Ohio 45202 Washington, D.C. 20036
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / immediately upon filing pursuant to paragraph (b)
/X/ on January 29, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on ______________ pursuant to paragraph (a) of
Rule 485
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Registrant has heretofore registered an indefinite number of shares of
beneficial interest, par value $.01 per share, pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended. Registrant's Rule 24f-2
Notice was filed on November 14, 1995.
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<PAGE> 2
GRADISON-McDONALD CASH RESERVES TRUST Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A
Item Number Location in Prospectus
- ----------- ----------------------
<S> <C>
1. Cover Page . . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . . Expense Summary
3. Condensed Financial Information . . Financial History Summary
Yield and Effective Yield
Caculations
4. General Description of Registrant . How the Fund Invests; General
Information; Further Information
About How the Fund Invests
5. Management of Fund . . . . . . . . . Management of the Fund, Cover
6. Capital Stock and Other Securities . Dividends and Taxes
7. Purchase of Securities Being Offered Purchases and Redemptions
8. Redemption or Repurchase . . . . . . Purchases and Redemptions
9. Pending Legal Proceedings . . . . . . . . . . . . *
</TABLE>
<TABLE>
<CAPTION>
Location in Statement
of Additional Information
-------------------------
<S> <C>
10. Cover Page . . . . . . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . . . . . . . Contents
12. General Information and History . . . . . . . Description of the Trust
13. Investment Objectives and Policies . . . . . . Investment Restrictions;
Portfolio Transactions
14. Management of the Fund . . . . . . . . . . . . Trustees and Officers of
the Trust
15. Control Persons and Principal
Holders of Securities . . . . . . . . . . . Trustees and Officers of
the Trust
16. Investment Advisory and Other Services . . . Investment Adviser
17. Brokerage Allocation and Other Practices . . Portfolio Transactions
18. Capital Stock and Other Securities . . . . . . Description of the Trust
19. Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . Purchase of shares
Redemption of Shares;
Exchange Privilege;
Signature Guarantees;
Net Asset Value
20. Tax Status . . . . . . . . . . . . . . . . . . Taxes
21. Underwriters . . . . . . . . . . . . . . . . . Investment Adviser
22. Calculation of Yield Quotations of Money
Market Funds . . . . . . . . . . . . . . . . . Yield Information
23. Financial Statements . . . . . . . . . . . . . Financial Statements and
Accountants
</TABLE>
<PAGE> 3
GRADISON-MCDONALD
U.S. GOVERNMENT RESERVES
PROSPECTUS DATED JANUARY 29, 1996
Gradison-McDonald U.S. Government Reserves (the "Fund") is a diversified series
of the Gradison-McDonald Cash Reserves Trust, an open-end management investment
company. McDonald & Company Securities, Inc. ("McDonald"), through its Gradison
Division ("Gradison"), is the investment adviser for the Fund (the "Adviser")
and the Fund's distributor (the "Distributor"). The Fund is a money market fund
investing in U.S. Government securities.
This Prospectus is designed to provide you with information that you should
know before investing and should be retained for future reference. A Statement
of Additional Information for the Fund, dated January 29, 1996, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. This Statement is available upon request without charge from the
Fund at 580 Walnut Street, Cincinnati, Ohio 45202 or by calling the phone
numbers provided below.
For all information (including purchases, redemptions, and most recent yield),
call 579-5700 from Cincinnati, Ohio or 1-800-869-5999 toll free.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Fund will be able to maintain a
stable net asset value of $1.00 per share.
EXPENSE SUMMARY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES Example: You would pay the following
(as a percentage of average net assets) expenses on a $1,000 investment
assuming a 5% annual return* and
Management Fees .46% redemption at the end of each
12b-1 Fees .10% period:
Other Expenses .22%
---- ----------------------------------
TOTAL FUND OPERATING EXPENSES .78% 1 Year 3 Years 5 Years 10 Years
==== ----------------------------------
$8 $25 $43 $97
----------------------------------
</TABLE>
* The 5% annual return is a standardized rate prescribed for use by all mutual
funds for the purpose of this example and does not represent the past or future
return of the Fund.
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly and
indirectly. (For more information about Fund expenses, see "Purchases and
Redemptions," "Distribution Service Plan," and "Management of the Fund.")
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
MF0500020196
<PAGE> 4
FINANCIAL HIGHLIGHTS
The table below presents the financial highlights of the most recent ten years
of the Fund's operations. (Prior to September 27, 1993, the financial results
are the results of Gradison Cash Reserves, the assets and liabilities of which
were acquired by the Fund effective September 27, 1993.) The information is
expressed in terms of a single share outstanding throughout each year. The
financial highlights for the years ended on September 30, 1993 and thereafter
have been audited by Arthur Andersen LLP, independent public accountants, whose
unqualified report appears in the Statement of Additional Information. The
financial highlights for periods ended prior to September 30, 1993 were audited
by other accountants.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value at beginning
of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment income .050 .029 .025 .037 .059 .076 .084 .066 .055 .066
Dividends from net
investment income (.050) (.029) (.025) (.037) (.059) (.076) (.084) (.066) (.055) (.066)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value at end of year $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total return 5.10% 2.97% 2.55% 3.83% 6.12% 7.87% 8.74% 6.77% 5.67% 6.85%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Ratios/Supplemental data:
Net assets at end of year
(in millions) $1,224.1 $1,001.2 $ 979.8 $ 575.9 $ 638.7 $ 659.8 $ 613.4 $ 435.2 $ 398.2 $ 426.1
Ratio of expenses to
average net assets (1) 78% .80% .81% .75% .75% .76% .79% .86% .88% .83%
Ratio of net investment income
to average net assets (1) 5.00% 2.90% 2.53% 3.77% 5.95% 7.57% 8.41% 6.56% 5.52% 6.63%
</TABLE>
On October 4, 1991, McDonald & Company Securities, Inc. became investment
adviser of the Fund as a result of a merger with Gradison & Company
Incorporated.
(1) During the year ended September 30, 1994, the Adviser absorbed expenses of
the Fund through waiver of a portion of the investment advisory fee. Assuming
no waiver of expenses, the ratio of expenses to average net assets was .81% and
the ratio of net investment income to average net assets was 2.89%.
HOW THE FUND INVESTS
The Fund's investment objective is to maximize current income to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The Fund's investment objective cannot be changed without approval by the
holders of a majority of the Fund's outstanding voting shares (as defined in
the Investment Company Act of 1940 (the "Act")). There can be no assurance that
the Fund's investment objective will be achieved. To achieve its investment
objective, the Fund invests in securities issued or guaranteed as to principal
and interest by the U.S. Government or its agencies or instrumentalities, and
repurchase agreements in respect of these securities. Securities in which the
Fund invests may not earn as high a level of current income as long-term or
lower quality securities
2
<PAGE> 5
which generally have less liquidity, greater market risk and more fluctuation
in market value. THE FUND INTENDS TO MAXIMIZE, TO THE EXTENT POSSIBLE, THE
PORTION OF ITS DIVIDENDS THAT ARE NOT SUBJECT TO STATE AND LOCAL TAXATION.
The Fund seeks to maintain a net asset value of $1.00 per share for purchases
and redemptions. To do so, the Fund uses the amortized cost method of valuing
its securities pursuant to Rule 2a-7 under the Act, certain requirements of
which are summarized as follows. In accordance with Rule 2a-7, the Fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less and
purchase only U.S. dollar denominated instruments having remaining maturities
of 13 months or less as defined in that Rule. There can be no assurance that
the Fund will be able to maintain a stable net asset value of $1.00 per share.
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which differ only in their
interest rates, maturities and times of issuance. Treasury bills have initial
maturities of one year or less; Treasury notes have initial maturities of one
to ten years; and Treasury Bonds generally have initial maturities of greater
than ten years. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities in which the Fund may invest, for example,
Government National Mortgage Association pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of the Federal Home Loan Banks, by the right of the issuer to borrow from
the Treasury; others, such as those issued by the Federal National Mortgage
Association, by discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of the
agency or instrumentality. While the U.S. Government may provide financial
support to such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not so obligated
by law. The Fund will invest in such securities only when it is satisfied that
the credit risk with respect to the issuer is minimal.
The Fund invests in securities which bear fixed, floating or variable rates of
interest. Interest derived from floating rate or variable rate securities may
fluctuate based on generally recognized reference rates or the relationship of
rates. The Fund may purchase floating and variable rate securities, including
securities the maturity of which exceeds one year if, under conditions that can
reasonably be foreseen, the Adviser believes that interest rate adjustments
will result in the market value of such securities returning to at least
approximately par. However, there can be no assurance that the market value of
such securities will always be at least approximately par.
The Fund also may invest in repurchase agreements secured by government
securities. For additional information about repurchase agreements and the
Fund's investment policies and restrictions, see "Further Information About How
the Fund Invests."
PURCHASES AND REDEMPTIONS
The following procedures and services apply to shareholders investing directly
with the Fund. Shareholders who invest in the Fund through a McDonald or
Gradison Brokerage Account should refer to the additional information available
through that account.
HOW TO PURCHASE SHARES
You may purchase shares of the Fund, without sales charge, by personally
delivering, mailing, or wiring funds to Gradison or McDonald. A completed
Account Information Form must accompany or precede the initial purchase. The
minimum investment required to open an account is $1,000 and additional
investments must be at least $50. These minimums may, however, be waived for
certain group purchases.
3
<PAGE> 6
Purchases by check will be credited to your account (and begin earning
dividends) when the Fund receives Federal funds for your check which normally
will be on the next business day after receipt of the check. Purchase checks
should be made payable (or properly endorsed) to the order of
"Gradison-McDonald U.S. Government Reserves" and should be accompanied by your
account name and account number (if the number has been assigned).
Purchases by bank wire will be credited to your account (and begin earning
dividends) on the same business day that the wire is received by the Fund's
custodian bank, Gradison, or McDonald. However, Gradison or McDonald must be
advised by you of the exact amount of your wire prior to 12:00 noon, Eastern
time.
HOW TO REDEEM SHARES
You may redeem shares of the Fund without charge or penalty on any day that the
Fund is open for business. A redemption request (identifying the account name,
account number and the amount of your redemption) may be made in writing or by
telephone call to the Fund. If your request is received by the Fund by 12:00
noon, Eastern time, a check for the amount of your redemption will normally be
mailed the same business day, or if you prefer, you may arrange to pick up your
redemption check at the Fund's offices after 3:00 p.m. the same business day.
The free checkwriting feature permits you to write your own redemption checks
in amounts of $100 or more. Checks also may be written in amounts of less than
$100, in which case you will be charged a fee of $.30 per check, which
reimburses the Fund for expenses associated with clearing such checks. Shares
continue to earn daily dividends until these checks are presented for payment.
Shareholders choosing the checkwriting feature must return one signature card
to the Fund signed by all owners of the account. The names of payees of checks
and the date checks are cashed appear on monthly transaction statements.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchase and redemption information and authorizations should be mailed or
delivered to any Gradison or McDonald office or to Gradison-McDonald Mutual
Funds, 580 Walnut Street, Cincinnati, Ohio 45202.
Purchases and redemptions are made at the next net asset value per share
calculated after receipt of Federal funds or a valid redemption request. The
Fund may, upon 30 days' written notice, impose reasonable service charges for
what it deems to be excessive use of checkwriting or bank wire redemption.
Share certificates are not issued. Account transactions are reported on
periodic statements.
In the case of shares purchased through McDonald and Gradison brokerage
accounts, credit balances arising on the settlement date of a securities sale
will generally be transferred to the Fund by McDonald in the form of Federal
funds on the day after settlement.
Normally, the Fund makes payment for redeemed shares within one business day
(but in no event more than seven days) after receipt of a properly executed
redemption request. However, the Fund may delay payment for the redemption of
shares in those cases where the shares were purchased by check (or any method
of payment subject to collection) until the purchase payment has cleared,
currently considered to be no more than 15 days from the date of receipt by the
Fund. If you need more immediate access to your investment, you should consider
purchasing shares by wire or other immediately available funds. The Fund may,
at its discretion, redeem all shares in any account if the value of that
account falls below $500. However, shareholders will be given notice and 60
days to increase the value of the account to the required $500. The Fund
reserves the right to limit or reject any purchase order. The Fund may
4
<PAGE> 7
modify these and other purchase or redemption procedures to facilitate purchase
and redemption of shares through Gradison and McDonald brokerage accounts.
Under extraordinary circumstances, such as periods of drastic economic or
market changes, it is possible that you might not be able to reach the Fund by
telephone to effect a redemption. If such an occasion were ever to occur, you
can redeem your shares by using the checkwriting feature or you can make a
redemption request in writing (by mail or personally delivered) to the Fund's
offices. Shareholders who have brokerage accounts with Gradison or McDonald can
request that their Investment Consultants arrange the redemption. The telephone
redemption feature may be terminated or modified upon 30 days' notice to
shareholders.
The Fund, its Adviser, Distributor, and their officers and employees will not
be liable for following instructions communicated by telephone that are
reasonably believed to be genuine. The Fund will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and if it
does not, it may be liable for any losses resulting from unauthorized
instructions. Telephone transactions are available to all shareholders as a
standard service.
Certain optional services are available to shareholders. See "Optional
Shareholder Services" in the Statement of Additional Information and in
information provided in connection with McDonald or Gradison brokerage
accounts.
EXCHANGES
Shares may be exchanged, without administrative fees, for shares of any
Gradison-McDonald mutual fund and for shares of certain other Federal and
Federal/Ohio tax-free or municipal income money market funds.
You may request exchanges of your shares by telephoning or writing the Fund.
Before making an exchange, you should read the prospectus of the fund in which
you desire to invest, each of which is available upon request. The terms of the
exchange feature are subject to change and the exchange feature is subject to
termination, both upon 60 days' notice, except that no notice shall be required
under circumstances provided for by the rules of the Securities and Exchange
Commission. Certain of the Gradison-McDonald funds are sold subject to initial
sales charges. Exchanges of Fund shares for shares of such funds will be
subject to the fund's sales charge except to the extent that a sales charge has
previously been paid in connection with the shares.
DIVIDENDS AND TAXES
The Fund's net income is paid to shareholders daily as dividends. Share
purchases effective before 12:00 noon, Eastern time, earn the dividend that
day. Redemption requests received before 12:00 noon will not receive that day's
dividend. (See "Purchases and Redemptions.") Dividends may be received monthly
or reinvested in additional shares of the Fund.
If your account is not a tax-deferred retirement account or exempt from
taxation, the dividends you receive will be subject to Federal taxation as
ordinary income. The Fund's dividends will not qualify for the dividends
received deduction for corporations. Each shareholder will receive, on an
annual basis, a statement of the Federal income tax consequences of all
distributions. The Fund distributes substantially all of its net investment
income and capital gains, if any, to shareholders each year.
The Fund is required to withhold 31% of all dividends payable to any individual
and certain other noncorporate shareholders who do not provide the Fund with a
correct taxpayer identification number or who otherwise are subject to backup
withholding.
5
<PAGE> 8
Under the laws of most state and local jurisdictions, the portion of the Fund's
dividends derived from direct investments in certain U.S. Government securities
(not including repurchase agreements) will not be subject to state or local
income taxation, while the remaining portion will be. Each year, shareholders
will be provided with information as to the percentage of income dividends
derived from U.S. Government securities which is generally not taxable by state
and local jurisdictions.
NET ASSET VALUE
The net asset value of the Fund's shares is generally calculated as of 12:00
noon and 4:00 p.m. Eastern time on each day when the New York Stock Exchange is
open for business. The net asset value per share, which is the price at which
shares are purchased and redeemed, is computed by dividing the value of the
Fund's net assets (assets minus liabilities) by the number of shares
outstanding. The Fund intends to maintain a constant net asset value of $1.00
per share, although there is no assurance that it will be able to do so.
GENERAL INFORMATION
The Fund is a series of the Gradison-McDonald Cash Reserves Trust (the
"Trust"), which is a business trust organized under the laws of the State of
Massachusetts by a Declaration of Trust dated October 20, 1981. The Trust
succeeded to the business of Gradison Cash Reserves, Inc. which began its
operations on April 26, 1976. Each share of the Fund has one vote and
represents an equal pro rata interest in the Fund. Shareholder inquiries should
be directed to the phone number or address of the Fund listed on the first page
of this Prospectus.
MANAGEMENT OF THE FUND
The Trust's Board of Trustees is responsible for the direction and supervision
of the Fund's operations. Subject to the authority of the Board of Trustees,
McDonald, through Gradison, manages the investment and reinvestment of the
assets of the Fund, and provides its employees to act as the officers of the
Fund who are responsible for the overall management of the Fund. McDonald, a
wholly owned subsidiary of McDonald & Company Investments, Inc., McDonald
Investment Center, 800 Superior Avenue, Cleveland, Ohio 44114, is an investment
adviser and a securities broker-dealer. McDonald, through Gradison, also serves
as the investment adviser to other investment companies and to individuals,
employee benefit plans, and other accounts requiring investment management.
For acting as investment adviser, the Fund pays the Adviser an annual fee of
.50% of the first $400 million of average daily net assets, .45% of the next
$600 million of average daily net assets, .40% of the next $1 billion of
average daily net assets and .35% of amounts in excess of $2 billion of average
daily net assets. Gradison acts as the Fund's transfer agent, dividend
disbursing agent, and accounting services provider. For providing such
services, Gradison receives an annual fee of $23.50 per shareholder non-zero
balance account plus out of pocket costs for acting as transfer agent and
dividend disbursing agent and an accounting services fee of .0150% of the first
$400 million of average daily net assets, .0125% of the next $300 million of
average daily net assets, .0100% of the next $300 million of average daily net
assets, and .0075% of average daily net assets in excess of $1 billion, with a
minimum fee of $25,000 per year. Gradison's address is 580 Walnut Street,
Cincinnati, Ohio 45202.
6
<PAGE> 9
INDIVIDUAL RETIREMENT ACCOUNTS
Shares of the Fund may be purchased in conjunction with an Individual
Retirement Account ("IRA") which permits exchange privileges with other
Gradison-McDonald funds (see "Exchanges") and which may also be used with a
self-directed brokerage account. Contact Gradison or McDonald for details.
DISTRIBUTION SERVICE PLAN
Under the terms of a distribution service plan (the "Plan") adopted pursuant to
Rule 12b-1 under the Act, the Fund pays to McDonald as Distributor a service
fee at the annual rate of .10% of the average daily net assets of the Fund.
(The maximum annual fee permitted by the Plan is .20% of the average daily net
assets of the Fund.) Such fee is calculated on a daily basis and paid to the
Distributor monthly. The service fee is paid as compensation to the Distributor
for providing personal services to shareholders of the Fund, including
responding to shareholder inquiries and providing information to shareholders
about their Fund account. In addition to the service fee, the Distributor may
also expend funds provided by the Plan for advertising and printing
prospectuses, annual reports, and other promotional material for prospective
investors, and for other distribution activities.
FURTHER INFORMATION ABOUT HOW THE FUND INVESTS
The Fund may engage in repurchase agreement transactions in which it buys a
security at one price and simultaneously agrees to sell the same security back
to the original owner ("seller") at a higher price, usually within seven days
of the initial purchase. The Fund engages in repurchase agreement transactions
only with selected domestic banks and securities dealers which the Adviser
believes present minimal credit risk. In all cases, the security subject to
resale is held by the Fund's custodian and the Fund ensures on a daily basis
that the value of the security, including accrued interest, is maintained at no
less than the price at which the seller is required to repurchase the security.
Should a seller fail to repurchase the security, the Fund could incur costs to
sell the security to another party and possibly a loss if the sale price is
less than the repurchase price. Under certain limited circumstances the Fund
could also be delayed or otherwise limited in disposing of the security, which
could result in a decline in its value and loss of interest.
The Fund may not borrow money, except from banks as a temporary measure or for
extraordinary or emergency purposes, and then only in amounts not exceeding 15%
of the Fund's total assets at the time of borrowing. While any borrowing of
greater than 5% of the assets occurs, the Fund will not purchase additional
portfolio securities. The foregoing policy may not be changed without
shareholder approval. The Fund may not, in an aggregate amount exceeding 10% of
the value of the Fund's total assets, (a) enter into repurchase agreements
maturing in more than seven days, (b) purchase illiquid securities, and (c)
purchase securities for which there are no readily available market quotations.
The Fund may invest in "stripped" securities (both interest-only and
principal-only) issued by the U.S. Treasury and recorded in the Federal Reserve
book-entry record-keeping system. "Stripped" U.S. Treasury securities include
zero coupon obligations that are normally issued at a discount to their "face
value", and may exhibit greater price volatility than ordinary debt securities.
The Fund may purchase securities on a when-issued or forward delivery basis,
for payment and delivery at a later date. The price and yield are generally
fixed on the date of commitment to purchase. During the period between purchase
and settlement, no interest accrues to the Fund. At the time of settlement, the
market value of the security may be more or less than the purchase price.
7
<PAGE> 10
The Statement of Additional Information contains additional information
regarding Fund investment restrictions and policies.
YIELD AND EFFECTIVE YIELD CALCULATIONS
From time to time the Fund may advertise its "yield" and "effective yield."
Both yield figures are based on historical earnings and are not intended to
indicate future performance. The yield of the Fund refers to the income
generated by an investment in the Fund over a 7-day period. This income is then
annualized. That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield of the Fund is
calculated similarly but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C> <C> <C>
Expense Summary 1 Net Asset Value 6
Financial Highlights 2 General Information 6
How the Fund Invests 2 Management of the Fund 6
Purchases and Redemptions 3 Individual Retirement Accounts 7
Additional Purchase and Distribution Service Plan 7
Redemption Information 4
Further Information About
Exchanges 5 How the Fund Invests 7
Dividends and Taxes 5 Yield and Effective
Yield Calculations 8
</TABLE>
580 Walnut Street, Cincinnati, Ohio 45202
(513) 579-5000 (800) 869-5999
<PAGE> 11
GRADISON-McDONALD U.S. GOVERNMENT RESERVES
Gradison-McDonald Cash Reserves Trust
McDonald & Company Securities, Inc. ("McDonald"), through its Gradison Division
("Gradison"), is the investment adviser of the Fund ("Adviser").
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL
INFORMATION
- -------------------------------------------------------------------------------
For information (including most recent yield), call: 579-5700
from Cincinnati, Ohio
Toll free (800) 869-5999 outside Cincinnati
Information may also be obtained from the Fund at:
580 Walnut Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of the Fund, dated January 29, 1996, which
has been filed with the Securities and Exchange Commission. The Prospectus is
available upon request without charge from the Fund at the above address or by
calling the phone numbers provided above.
The date of this Statement of Additional Information is January 29, 1996.
- ------------------------------------------------------------------------------
<PAGE> 12
CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page Location in Prospectus
<S> <C> <C>
INVESTMENT RESTRICTIONS AND POLICIES . . . 4 How the Fund Invests; Further
Information About How the
Fund Invests
PURCHASE OF SHARES . . . . . . . . . . . . 6 Purchases and Redemptions;
Additional Purchase and
Redemption Information
REDEMPTION OF SHARES . . . . . . . . . . . 6 Purchases and Redemptions;
Additional Purchase and
Redemption Information
EXCHANGE PRIVILEGE . . . . . . . . . . . . 7 Exchanges
Telephone Exchanges . . . . . . . . . 7
Written Exchanges . . . . . . . . . . 7
General Exchange Information . . . . 8
SIGNATURE GUARANTEES . . . . . . . . . . . 8
INCOME AND DIVIDENDS . . . . . . . . . . . 8 Dividends and Taxes
TAXES . . . . . . . . . . . . . . . . . . 9 Dividends and Taxes
YIELD INFORMATION . . . . . . . . . . . . 10 Yield and Effective Yield
Calculation
NET ASSET VALUE . . . . . . . . . . . . . 11 Net Asset Value
PORTFOLIO TRANSACTIONS . . . . . . . . . . 12
INVESTMENT ADVISER . . . . . . . . . . . . 13 Management of the Fund
Advisory Agreement . . . . . . . . . 13
Distribution Service Plan . . . . . . 15
Transfer Agency, Accounting Services,
and Administrative Services
Agreement . . . . . . . . . . . 16
TRUSTEES AND OFFICERS OF THE TRUST . . . . 17
DESCRIPTION OF THE TRUST . . . . . . . . . 20 General Information
</TABLE>
2
<PAGE> 13
<TABLE>
<S> <C> <C>
CUSTODIAN . . . . . . . . . . . . . . . . . . . 22
ACCOUNTANTS . . . . . . . . . . . . . . . . . . 22
LEGAL COUNSEL . . . . . . . . . . . . . . . . . 22
OPTIONAL SHAREHOLDER SERVICES . . . . . . . . . 17
SALES BROCHURE INFORMATION. . . . . . . . . . . 24
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT PUBLIC ACCOUNTANT . . Following page 33 Financial Highlights
</TABLE>
3
<PAGE> 14
INVESTMENT RESTRICTIONS AND POLICIES
In addition to the investment restrictions described in the Prospectus,
the Fund has adopted the following investment restrictions and limitations,
which may not be changed without the approval of the holders of a majority of
the outstanding voting securities of the Fund as defined in the Investment
Company Act of 1940 (the "Act"). (See "Description of the Trust".) The Fund
will not:
(1) Borrow money, except from banks as a temporary measure or for
extraordinary or emergency purposes such as to enable the Fund to
satisfy redemption requests where liquidation of portfolio securities is
considered disadvantageous, and not for leverage purposes, and then only
in amounts not exceeding 15% of the total assets of the Fund at the time
of the borrowing. While any borrowing of greater than 5% of the assets
is outstanding, the Fund will not purchase additional portfolio
securities;
(2) Make loans, except that the purchase of debt securities as allowed by
the Fund's investment objective and other Investment Restrictions,
entering into repurchase agreements, and the lending of portfolio
securities in an amount not to exceed 30% of the value of its total
assets with the collateral value of loaned securities marked-to-market
daily and in accordance with applicable regulations or guidelines
established by the Securities and Exchange Commission shall not be
prohibited by this restriction;
(3) Purchase or sell real estate. The purchase of securities secured by
real estate which are otherwise allowed by the Fund's investment
objective and other Investment Restrictions shall not be prohibited by
this restriction;
(4) Underwrite the securities of other issuers, except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of
1933 in connection with the disposition of portfolio securities;
(5) Purchase or sell commodities or commodity contracts or interests in oil,
gas or other mineral exploration or development programs or leases
except the purchase or sale of financial futures contracts or options on
financial futures contracts;
(6) Issue senior securities as defined in the Act, except to the extent that
such issuance might be involved with respect to borrowings
4
<PAGE> 15
subject to item (1) above or with respect to transactions involving
futures contracts or the writing of options and provided that the Trust
may issue shares of additional series or classes that the Trustees may
establish.
(7) Invest more than 25% of its total assets in the securities of issuers in
any single industry, provided that there shall be no limitation on
investments in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.
The limitations and policies set forth in the reminder of this
section are not fundamental and may be changed without shareholder
approval: (1) The Fund will not purchase securities of other investment
companies except in connection with a reorganization, merger, or consolidation
with another open-end investment company; (2) The Fund will not make short
sales of securities, or purchase securities on margin, except for short-term
credit as is necessary for the clearance of transactions; (3) The Fund will not
purchase or retain in its portfolio any securities issued by an issuer, if to
the Fund's knowledge, those Trustees and officers of the Trust or of the
Fund's investment adviser, who individually own beneficially more than 1/2 of
1% of the outstanding securities of such issuer, together own beneficially more
than 5% of such outstanding securities. This limitation shall not apply to
U.S. Government securities; (4) The Fund will not mortgage, pledge or
hypothecate securities except in connection with permitted borrowings. The
Fund has no current intention of engaging in the lending of portfolio
securities.
Government Securities are frequently offered on a "when-issued" or
"forward delivery" basis. When so offered, the price, which is generally
expressed in yield terms, is fixed at the time the commitment to purchase is
made, but delivery and payment for the when-issued or forward delivery
securities take place at a later date. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund. To the extent that assets of the Fund are not invested
prior to the settlement of a purchase of securities, the Fund will earn no
income; however, it is intended that the Fund will be fully invested to the
extent practicable and subject to the policies stated herein. When-issued or
forward delivery purchases are negotiated directly with the other party and are
not traded on an exchange.
While when-issued or forward delivery securities may be sold prior to the
settlement date, it is intended that the Fund will purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the
5
<PAGE> 16
commitment to purchase securities on a when-issued or forward delivery basis,
it will record the transaction and reflect the value of the security in
determining its net asset value. The Fund does not believe that its net asset
value or income will be adversely affected by its purchase of securities on a
when-issued or forward delivery basis. The Fund will establish a segregated
account in which it will maintain cash, U.S. Government securities, or other
high-grade debt obligations equal in value to commitments for when-issued or
forward delivery securities. Such segregated securities either will mature or,
if necessary, be sold on or before the settlement date. The Fund will not
enter into such transactions for leverage purposes.
If a percentage restriction set forth above is met at the time of
investment, a later movement above the restriction level resulting from a
change in the value of securities held by the Fund will not be considered a
violation of the investment restriction.
PURCHASE OF SHARES
Purchase orders become effective when the Fund receives the
necessary information regarding an investor's account and Federal funds are
available to the Fund for investment. (See "Net Asset Value".) Federal funds
are normally available to the Fund on the next bank business day following
receipt by the Fund of an investor's check or other payment including credit
balances arising on the settlement date of a sale of securities or receipt of a
dividend or interest payment transferred from a brokerage account maintained by
Gradison or McDonald. The Fund reserves the right to impose a charge of $15
for any purchase check returned to the Fund as uncollectible and to collect
such fee by redeeming shares of the Fund from such shareholder's account.
On Fund share purchases through McDonald, prior to the time that an
investor's funds become Federal Funds and become invested in the Fund, McDonald
may receive the "float" benefit from those funds.
REDEMPTION OF SHARES
The Fund may suspend the right of redemption or may delay payment (a)
during any period when the New York Stock Exchange is closed other than for
customary weekend and holiday closings, (b) when trading in markets normally
utilized by the Fund is restricted, or an emergency exists (determined in
accordance with the rules and regulations of the Securities and Exchange
Commission) so that disposal of the Fund's portfolio
6
<PAGE> 17
securities or determination of the Fund's net asset value is not reasonably
practicable, or (c) for such other periods as the Securities and Exchange
Commission by order may permit for the protection of the Fund's shareholders.
The check writing privilege is subject to the Fund custodian's (Star Bank,
N.A.) rules and regulations concerning checking accounts, including those
relating to the right of Star Bank to refuse to honor checks in amounts
exceeding the value of the account at the time the check is presented for
payment. The Fund reserves the right to impose a charge of $15 for any
redemption check written against an insufficient Fund balance and to collect
such fee by redeeming shares of the Fund from such shareholder's account.
On Fund redemptions effected by the drawing of a McDonald check, McDonald
will receive the "float" benefit from the funds redeemed until the check is
presented for payment. Free domestic wire redemptions (in a minimum amount of
$l,000) are available to shareholders holding shares directly with the Fund.
The Fund transmits redemption proceeds only to shareholder names and
addresses on its records or which it has otherwise verified, provides written
confirmation of all transactions initiated by telephone either immediately or
by monthly statement, depending on the circumstances, requires identification
from individuals picking up checks at its offices, and may take other
additional steps to verify the identity of persons giving telephone
instructions.
EXCHANGE PRIVILEGE
If a new account is established by an exchange, the dollar amount of
the exchange from the Fund must at least be equal to the minimum initial
investment of the Fund into which the exchange is being made; if an exchange is
made into an existing account, the minimum additional investment requirement
must be met.
TELEPHONE EXCHANGES
Telephone exchanges may be made only when the registration of the two
accounts are identical.
WRITTEN EXCHANGES
You may also exchange your shares of the Fund by written request directed
to:
7
<PAGE> 18
Gradison-McDonald Mutual Funds
580 Walnut Street
Cincinnati, Ohio 45202
Such written request should include your name and account number and the
number of shares or dollar amount to be exchanged.
GENERAL EXCHANGE INFORMATION
An exchange involves a redemption of the Fund shares being exchanged and
the investment of the redemption proceeds into shares of the fund being
purchased. Both the redemption and investment will occur at the respective net
asset value per share next determined after receipt by the Fund of a proper
exchange request. For Federal income tax purposes, an exchange of shares is
considered to be a sale. Unless otherwise indicated, a new account established
by written exchange will have the same registration and selected options as
your present account.
The funds into which exchanges are made, and the Fund's distributor (with
respect to any other fund) each reserve the right to reject any exchange
request. In the case of excessive use of the exchange privilege, the Fund or
Gradison, upon 60 days' written notice, may make reasonable service charges (as
specified in the notice) by redeeming shares from such shareholder's account.
The terms of the exchange feature are subject to change and the exchange
feature is subject to termination, both upon at least 60 days notice, except
that no notice shall be required under circumstances provided for by the rules
of the Securities and Exchange Commission.
SIGNATURE GUARANTEES
Signatures guaranteed by a domestic commercial bank or trust company,
credit union, savings and loan association, or a member firm of a national
securities exchange or other eligible guarantee institution may be required for
certain transactions. Shareholders may contact the Fund's transfer agent for
additional information about signature guarantee requirements.
INCOME AND DIVIDENDS
Net income of the Fund, for the purpose of declaring dividends,
consists of accrued interest income, plus or minus amortized purchase
discount or premium, plus or minus realized gains or losses, less accrued
8
<PAGE> 19
expenses. To the extent the Fund's portfolio securities are valued at
amortized cost (see "Net Asset Value"), there will be no unrealized gains or
losses on portfolio securities. However, should net asset value, calculated by
using available market quotations, deviate significantly from $1.00 per share,
the Trustees could decide to value portfolio securities by using available
market quotations, which could result in unrealized gains or losses being
considered in the determination of net income of the Fund.
Dividends are automatically paid in additional shares of the Fund at their
net asset value as of 4:00 p.m., Eastern time, that day. In the event that the
Fund incurs or anticipates any unusual expense, loss or depreciation which
would adversely affect its net income for a particular period, the Board of
Trustees may at that time consider whether to adhere to this dividend policy or
to revise it in light of then prevailing circumstances. Such expenses, losses
or depreciation could result in a shareholder receiving no dividends during
such period or in a shareholder receiving, upon redemption, a price per share
lower than the cost per share.
TAXES
The Fund has qualified and intends to continue to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended. As
such it will not be taxed on net income distributed to shareholders. In order
to continue to qualify for treatment as a regulated investment company, the
Fund must distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of taxable net
investment income plus net short-term capital gain, if any), and must meet
several additional requirements. These requirements include the following:
(1) the Fund must derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of securities and certain other income; (2) the
Fund must derive less than 30% of its gross income each taxable year from the
sale or other disposition of securities held for less than three months; (3) at
the close of each quarter of the Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. government
securities and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets; and (4) at the close of each quarter of the Fund's
taxable year, not more than 25% of the value of its total assets may be
invested in securities (other than U.S. government securities) of any one
issuer.
9
<PAGE> 20
The Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and any capital gain net income for the one-year
period ending on October 31 of that year, plus certain other amounts.
The Federal income tax matters summarized above and in the Prospectus are
subject to change by legislation, administrative action and judicial decision.
In addition, shareholders of the Fund may be subject to state and local taxes
with respect to their ownership of shares or dividends paid by the Fund. Each
shareholder should consult his or her tax adviser as to his or her personal tax
situation.
YIELD INFORMATION
The current yield of the Fund for any seven-day period is calculated by
determining the net change exclusive of capital changes in the value of a
hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by (365/7). For purposes of this
calculation, the net change reflects dividends declared on the original share
and dividends declared on any shares purchased with dividends on that share.
Capital changes that are excluded from the net change are realized gains and
losses as well as unrealized appreciation and depreciation with respect to the
Fund's portfolio. The yield of the Fund for the seven day period ended
September 30, 1995 was 5.06%.
The effective or compounded yield of the Fund is calculated by compounding
the unannualized base period return by adding one (1) to the base period
return, raising the sum to a power equal to 365 divided by 7, and subtracting
one (1) from the result. The effective yield of the Fund for the seven day
period ended September 30, 1995 was 5.19%.
Yield information may be useful to investors in reviewing the Fund's
performance. However, yield normally fluctuates on a daily basis and the yield
for any given past period is not an indication or representation by
10
<PAGE> 21
the Fund of future yields or rates of return on its shares. The Fund's yield is
affected by prevailing market interest rates, investment portfolio quality and
maturity, type of instruments held and operating expenses. When comparing the
Fund's yield with that of other alternatives, investors should understand that
certain other investments, such as money market instruments or bank accounts,
may provide fixed yields, that other investments and other investment companies
may use a different method of calculating yield, and that bank accounts may be
insured. Investors should also consider that bank accounts may sometimes offer
temporarily high "promotional" rates and may, under certain circumstances,
subject accounts to service charges which reduce their effective yield.
NET ASSET VALUE
The net asset value of the Fund's shares is calculated daily, as of
12:00 noon and 4:00 p.m., Eastern time, on each day when the New York
Stock Exchange is open for business, provided however that the Fund does not
calculate its net asset value on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, Christmas Day, Columbus Day, Martin Luther King, Jr. Day, and
Veterans' Day.
The Fund values its portfolio instruments on the basis of the amortized
cost valuation method, which involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the
instrument. During such periods, the yield to shareholders of the Fund may
differ somewhat from that obtained in a similar fund with identical investments
which uses market values for all its portfolio securities. For example, if the
use of amortized cost resulted in a lower aggregate portfolio value on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from investment in such a similar fund
and existing shareholders of the Fund would receive less investment income.
The converse would apply in a period of rising interest rates.
11
<PAGE> 22
The valuation of the Fund's portfolio instruments based upon their
amortized cost and the maintenance of the Fund's per share net asset value of
$1.00 is permitted based on the Fund's adherence to certain conditions.
The Fund will maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of 397 days or
less (as calculated in accordance with Rule 2a-7 under the Act) and invest only
in securities determined by the Board of Trustees or, pursuant to delegated
authority, the Adviser, to be of high quality with minimal credit risks. The
Board also has established procedures designed to stabilize, to the extent
reasonably possible, the Fund's price per share, as computed for the purpose of
sales and redemptions, at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Board, at such intervals as it may deem appropriate,
to determine whether the Fund's net asset value, calculated by using available
market quotations, and estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics pursuant to
procedures approved by the Board of Trustees deviates from $1.00 per share and,
if so, whether such deviation may result in material dilution or is otherwise
unfair to existing shareholders. In the event the Board determines that such a
deviation exists, it has agreed to take such corrective action as it deems
necessary or appropriate, including, for example, the sale of portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity, withholding dividends, redemptions of shares in
kind, establishing a net asset value per share by using available market
quotations, and effecting a reverse split of shares.
Assets other than portfolio securities are valued at their fair
value as determined in good faith by the Board. The Board reviews these
valuation methods at least annually and from time to time may, in its absolute
discretion, establish other methods which it considers appropriate for
determining net asset value.
PORTFOLIO TRANSACTIONS
Most of the Fund's purchases and sales of portfolio securities will be
direct transactions with issuers, underwriters or major dealers in U.S.
Government securities. Accordingly, the Fund will incur little or no
brokerage cost. Purchases of portfolio securities from underwriters, however,
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and ask prices.
12
<PAGE> 23
The Fund's policy of investing in short-term debt securities, coupled with
its active portfolio management, may result in high portfolio turnover.
However, high turnover is not expected to adversely affect net asset value or
yields, since there are usually no brokerage commissions paid by the Fund in
connection with the purchase or sale of U.S. Government securities.
The Adviser will make investment decisions for the Fund, arrange for
placement of buy and sell orders and initiate portfolio transactions, subject
to general supervision by the Trust's Board of Trustees. No portfolio
transactions are currently executed with the Adviser or any securities dealer
affiliated with the Adviser. When initiating a portfolio transaction, the
Adviser seeks the prompt execution of its order in an effective manner at the
most favorable price.
The Adviser also serves as the investment adviser for other investment
companies. Although investment decisions for the Fund will be made
independently from those for such investment companies, purchases and sales of
particular securities may be effected simultaneously by such entities and the
Fund. In such instances, the transactions will be allocated among the entities
and the Fund in a manner the Adviser considers equitable to each. In some
cases, this procedure could have a detrimental effect upon the price or amount
of the securities purchased or sold by the Fund. On the other hand, in some
cases the ability of the Fund to participate in volume transactions may produce
better executions for the Fund. It is the opinion of the Board of Trustees
that the benefits available to the Fund from retaining the Adviser outweigh any
disadvantages which may arise from exposure to simultaneous transactions.
INVESTMENT ADVISER
ADVISORY AGREEMENT
The Agreement provides that the Adviser will manage the investments of the
Fund, subject to review by the Board of Trustees. The Adviser also bears the
cost of salaries and related expenses of executive officers of the Trust who
are necessary for the management and operation of the Fund and compensates the
Trustees who are affiliated with the Adviser. The Fund reimburses the Adviser
its cost, including salary and fringe benefits, of personnel who perform legal
services for the Fund.
As compensation for its services under the Agreement, the Adviser receives
from the Fund a monthly fee at an annual rate of .50% of the first
13
<PAGE> 24
$400 million of average daily net assets, .45% of the next $600 million of
average daily net assets, .40% of the next $1 billion of average daily net
assets, and .35% of average daily net assets in excess of $2 billion.
The Agreement further provides that in the absence of willful misfeasance,
bad faith or gross negligence in the performance of its duties thereunder, or
reckless disregard of its obligations thereunder, the Adviser is not liable to
the Fund or any of its shareholders for any act or omission by the Adviser.
The Agreement does not restrict the Adviser from acting as an investment
manager or adviser for others.
The Agreement grants to the Trust the right to use the names "Gradison"
and "McDonald" as a part of its name and the name(s) of its Fund(s), without
charge, subject to withdrawal of such right by the Adviser upon not less than
30 days' written notice to the Trust and subject to the automatic termination
of such right within 30 days after the termination of the Agreement for any
reason. The Agreement does not impair the right of the Adviser to use the name
Gradison or McDonald in the name and the name(s) of its Fund(s) without charge
in connection with any other business enterprise with which it is or may become
associated.
The Agreement continues in effect from year to year if such continuance is
specifically approved at least annually by the vote of the holders of a
majority of the outstanding voting securities of the Fund or by the vote of a
majority of the Trust's Board of Trustees, and in either event by the vote cast
in person of a majority of the Trustees who are not "interested persons" of any
party to the Agreement.
The Agreement may be terminated at any time without penalty upon 60 days'
written notice by (i) the Board of Trustees, (ii) the vote of the holders of a
majority of the outstanding voting securities of the Fund, or (iii) the
Adviser. The Agreement will terminate automatically in the event of its
assignment by the Adviser. The Agreement may be amended at any time by the
mutual consent of the parties thereto, provided that such consent on the part
of the Fund shall have been approved by the vote of the holders of a majority
of its outstanding voting securities and by the vote of a majority of the Board
of Trustees, including the vote cast in person by a majority of the Trustees
who are not "interested persons" of any party to the Agreement.
14
<PAGE> 25
Gradison & Company Incorporated merged with McDonald in October of 1991.
Prior to that time Gradison & Company was the largest independent brokerage
firm/investment adviser in Cincinnati. Gradison has managed money market funds
for more than 19 years and manages in excess of $2 billion of assets in money
market funds, equity and bond mutual funds, and individually managed accounts.
McDonald is a regional investment banking, brokerage and investment advisory
firm with over 30 offices in nine states.
For the year ended September 30, 1995, the Fund paid McDonald advisory
fees totaling $5,129,384. For the fiscal years ending September 30, 1994, and
September 30, 1993, the Fund and its predecessor, Gradison Cash Reserves Trust,
paid McDonald $4,644,387 ($4,751,078 prior to the fee waiver then in effect)
and $2,562,348 respectively.
DISTRIBUTION SERVICE PLAN
The Fund has in effect a Distribution Service Plan (the "Plan") under Rule
12b-1 of the Act. Rule 12b-1 permits an investment company to finance,
directly or indirectly, activities primarily intended to result in the sale of
its shares only if it does so in accordance with the provisions of such Rule.
The purpose of the Plan is to increase sales of shares of the Fund to enable it
to acquire and retain a sufficient level of assets to enable it to operate more
efficiently and to provide service to Fund shareholders. Higher levels of
assets tend to result in operating efficiencies with respect to the Fund's
fixed costs and portfolio management.
The Plan permits the Fund to incur expenses related to the distribution of
its shares, but only as specifically contemplated by the Plan. Under the Plan,
the Fund may incur expenses in an amount that does not exceed an annual rate of
.20 of 1% of its average daily net assets. Expenses that may be incurred by
the Fund under the Plan within the limitation described above are limited to
service fee payments to broker-dealers (including the Distributor) or other
persons, expenditures to broker-dealers or other persons for their assistance
with respect to distribution of shares of the Fund with respect to any activity
primarily intended to result in sales or maintenance of Fund shares, and
expenditures by the Distributor for advertising, prospectuses, annual and
semi-annual reports, and other promotional material for prospective investors.
In approving the Plan, the Board of Trustees concluded that there was a
reasonable likelihood that the Plan would benefit the Fund and its
15
<PAGE> 26
shareholders. The Plan (together with any agreements relating to implementation
of the Plan) continues in effect for a period of more than one year only so
long as such continuance is specifically approved at least annually by the vote
of a majority of the Board of Trustees, including the vote of a majority of the
Independent Trustees, cast in person at a meeting called for such purpose. The
Plan may not be amended to materially increase the amount of distribution
expenses incurred by the Fund without the approval of a majority of the
Independent Trustees by vote cast in person at a meeting called for the purpose
of voting on such amendment and without the approval of a majority of the
outstanding voting securities of the Fund. The Plan may be terminated at any
time by a vote of a majority of the Independent Trustees or by a vote of the
majority of the outstanding voting securities of the Fund. Any agreement
implementing the Plan may be terminated at any time, without the payment of any
penalty, by a vote of a majority of the Independent Trustees or by a vote of a
majority of the outstanding voting securities of the Fund, on not more than
sixty days' written notice to the other party to the agreement, and any related
agreement will terminate automatically in the event of its assignment. The
Plan requires that the Board of Trustees receive at least quarterly written
reports as to the amounts expended during each quarter pursuant to the Plan and
the purposes for which such amounts were expended. While the Plan is in
effect, the selection and nomination of those Trustees who are not "interested
persons" (as defined in the Act) of the Trust shall be committed to the
discretion of the Independent Trustees then in office.
Pursuant to the Plan the Fund has entered into an agreement with McDonald
pursuant to which the Fund pays McDonald an annual service fee in the amount of
.10 of 1% of the average assets annually as payment for McDonald's provision of
personal services to Fund shareholders. For the fiscal years ended September
30, 1995, 1994, and 1993, the Fund or GCR paid McDonald respectively
$1,100,769, $1,008,515, and $388,515, as distribution fees.
TRANSFER AGENCY, ACCOUNTING SERVICES, AND ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to the Transfer Agency, Accounting Services, and Administrative
Services Agreement, Gradison provides transfer agent, dividend disbursing,
accounting services, and administrative services to the Fund. Gradison
responds to inquiries from shareholders, processes purchase and redemption
requests, maintains shareholder account records, provides statements and
confirmations to shareholders, maintains the Fund's books and accounting
records, and prepares and files registration statements and other reports, with
the Securities and Exchange Commission and other regulatory authorities.
Pursuant to this Agreement, McDonald
16
<PAGE> 27
receives a fee of $23.50 per year per shareholder account for transfer agency
and administrative services. In addition to this fee, the Fund pays out of
pocket costs including the cost of statement paper, statement envelopes, reply
envelopes, and reply postage. For accounting services, the Fund pays McDonald
an annual fee in the amount of .015% of the first $400 million of average daily
net assets, .0125% of the next $300 million, .01% of the next $300 million, and
.0075% of assets in excess of $1 billion, with a minimum fee of $25,000 per
year. For the fiscal years ending September 30, 1995, 1994, and 1993 the Fund
or GCR paid McDonald respectively $2,000,226, $1,854,479, and $825,365,
pursuant to this Agreement or other prior arrangements.
OTHER COMPENSATION PAID/REIMBURSEMENT MADE TO THE ADVISER
In addition to the advisory fee, transfer agent fee, and distribution fees
paid by the Fund to the Adviser, for the fiscal year ended September 30, 1995,
the Fund reimbursed the Adviser, on a cost basis, for costs allocable to
services performed by the Adviser's employees, including salaries and office
space, $3,531.
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and officers of the Trust, together with information as to
their principal occupations during the past five years and positions currently
held with the Gradison Growth Trust ("GGT"), the Gradison-McDonald Custodian
Trust ("GCT"), and the Gradison-McDonald Municipal Custodian Trust ("GMMT"),
and the Adviser, are listed below. All principal occupations have been held
for at least five years unless otherwise specified. Positions held with
Gradison were previously held with Gradison & Company Incorporated. The
mailing address for all trustees and officers of the Trust is c/o
Gradison-McDonald Funds, 580 Walnut Street, Cincinnati, Ohio 45202.
*DONALD E. WESTON. Trustee and Chairman of the Board; Chairman of
Gradison and Director of McDonald & Company Investments Inc. (since
October 1991); Trustee and Chairman of the Board of GGT, GCT, and GMMT.;
Director of Cincinnati Milacron Commercial Corporation (financing subsidiary of
Cincinnati Milacron Corporation (manufacturer of machine tools).
THEODORE H. EMMERICH. Trustee. Retired; Until 1986, managing partner
(Cincinnati office) Ernst & Young LLP (independent public accountants);
Director of Carillon Fund, Inc. (investment company), American Financial Group,
Inc. (insurance) , Citicasters, Inc. (broadcasting), and Cincinnati
17
<PAGE> 28
Milacron Commercial Corp.; Trustee of Summit Investment Trust and Carillon
Investment Trust (investment companies); Trustee of GGT, GCT, and GMMT.
RICHARD A. RANKIN. Trustee. Partner, Rankin and Rankin (independent
public accountants); Trustee of GGT, GCT, and GMMT.
JEROME E. SCHNEE. Trustee. Professor of Management, College of
Business Administration, University of Cincinnati, Director of National
Sanitary Supply Co. and Rotor Rooter, Inc.; Trustee of GGT, GCT, and GMMT.
JOHN F. STEELE. Trustee; Chairman of the Board of Hilltop Basic
Resources, Inc. (concrete and non-metallic minerals).
PAUL J. WESTON. Executive Vice President; Executive Vice President of
Gradison; Senior Vice President of GGT, GCT, and GMMT. Mr. Weston is
the brother of Donald E. Weston.
DANIEL J. CASTELLINI. Trustee; Senior Vice President/Finance and
Administration of the E. W. Scripps Company (communications); Trustee of GGT,
GCT, and GMMT.
BRADLEY E. TURNER. President. Managing Director of McDonald; President of GGT,
GCT, and GMMT.
PATRICIA J. JAMIESON. Treasurer. Treasurer and Chief Accounting
Officer of McDonald; Treasurer of GGT, GCT, and GMMT.
MARK A. FRIETCH. Assistant Treasurer. Assistant Treasurer of GGT, GCT, and
GMMT (since May 1995); Controller of Gradison-McDonald mutual funds (since
August 1992); prior to that Financial Consultant and Assistant Controller of
Union Central Life Insurance Company.
RICHARD M. WACHTERMAN. Secretary. Senior Vice President and General
Counsel of Gradison; Secretary of GGT, GCT, and GMMT.
C. STEPHEN WESSELKAMPER. Vice President and Portfolio Manager; Vice
President of Gradison.
* Trustee who is an interested and affiliated person as defined by the
Investment Company Act of 1940, of the Trust and the Adviser by virtue of stock
ownership of the parent of the Adviser and employment by the Adviser.
18
<PAGE> 29
Trustees and officers of the Trust who are affiliated with the Adviser
receive no remuneration from the Trust. Trustees who are not affiliated with
the Adviser receive fees as determined by the Board of Trustees. For the year
ended September 30, 1995, the fees paid to the Trustees by the Trust aggregated
$48,061. Individuals with asterisks preceding their names are affiliated and
interested persons of the Trust as defined by the Act.
Compensation Table
------------------
<TABLE>
<CAPTION>
Name of Trustee Aggregate Total Compensation
Compensation From Fund and fund
From Fund complex (3 additional
for fiscal Trusts) paid to
year ended trustee for calendar
9/30/95 year ended 12/31/95
------- ---------------------
<S> <C> <C>
Theodore H. Emmerich $8,000 $21,500
Richard A. Rankin $7,500 $20,250
Jerome E. Schnee $8,000 $21,500
John F. Steele $10,000 $10,000
Daniel J. Castellini $7,000 $25,000
</TABLE>
The Trust maintains a deferred compensation plan which allows trustees to defer
receipt of trustee fees otherwise payable to them until a future date.
Deferred amounts are credited with interest at a rate equal to the yield of the
Gradison-McDonald U.S. Government Reserves Fund. The Trust does not maintain
any other pension or retirement plans. There are currently no amounts owing to
any current trustee pursuant to the deferred compensation plan. As of
September 30, 1995, the amount of $14,405 was payable by the Trust to the
beneficiary of a former trustee who is deceased and as of December 31, 1995,
the amount of $45,076 was payable to that beneficiary by the fund complex.
19
<PAGE> 30
DESCRIPTION OF THE TRUST
The Trust is a diversified, open-end investment company organized under
the laws of the Commonwealth of Massachusetts by an Amended and Restated
Declaration of Trust dated October 25, 1993. The Trust was formed for the
specific purpose of succeeding to the business and acquiring all of the assets
of Gradison Cash Reserves, Inc. in a reorganization effected on December 28,
1981. The Gradison-McDonald U.S. Government Reserves series of the Trust was
formed for the purpose of consolidating the following mutual funds: the
Gradison Cash Reserves series of the Trust, Gradison U.S. Government Trust,
McDonald Money Market Fund, Inc., and McDonald U.S. Government Money Market
Fund, Inc. At the time of this consolidation, on September 27, 1993 the assets
of the Fund were approximately $1 billion. The shareholders of each of the
funds approved the consolidation. The Declaration of Trust provides for an
unlimited number of full and fractional shares of beneficial interest, $.01 par
value, of any series authorized by the Board of Trustees. The Board of
Trustees has authorized the issuance of shares of one series, representing the
Fund. Any additional series of shares must be issued in compliance with the
Act and must not constitute a security that is senior to the shares offered
pursuant to the Prospectus. All shares are of the same class and are freely
transferable. Upon issuance and sale in accordance with the terms of the
offering, each share will be fully paid and nonassessable. Shares have no
preemptive, subscription or conversion rights and are redeemable as set forth
under "Redemption of Shares."
Holders of shares of the Fund are entitled to one vote per share. Voting
rights are not cumulative, which means that the holders of more than 50% of the
shares voting in any election of Trustees can elect all of the Trustees of the
Trust if they choose to do so, in which event the holders of the remaining
shares will be unable to elect a Trustee. Under the Declaration of Trust,
meetings of shareholders are not required to elect Trustees, unless less than a
majority of Trustees holding office have been elected by the shareholders and a
Trustee may be removed for cause by the vote of at least two thirds of the
remaining Trustees. Shareholders' meetings will be held only when required
pursuant to the Declaration of Trust or the Investment Company Act of 1940, and
when called by the Fund or shareholders pursuant to the Declaration of Trust.
The Trustees are required to call a meeting of shareholders when requested in
writing to do so by shareholders of record of not less than 10 percent of the
Trust's outstanding shares. Pursuant to Section 16(c) of the Act, shareholders
have the right to remove trustees upon the vote of two-thirds of the
outstanding
20
<PAGE> 31
shares of the Trust, access shareholder lists under certain circumstances, and,
as noted above, instruct the trustees to call a shareholders' meeting.
Whenever the approval of a majority of the outstanding shares of a series
of the Trust is required in connection with shareholder approval of the
Investment Advisory Agreement or the Distribution Service Plan, or changes in
the investment objective or the investment restrictions, a "majority" shall
mean the vote of (i) 67% or more of the outstanding shares of the Fund present
at a meeting, if the holders of more than 50% of the outstanding shares of the
Fund are present in person or by proxy, or (ii) more than 50% of the
outstanding shares of the Fund, whichever is the lesser.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts, obligations or affairs of the
Trust and requires that notice of such disclaimer be given in every written
obligation, contract, instrument, certificate, share of beneficial interest,
other security of the Trust or undertaking made or issued by the Trustees or by
any officers, employees or agents of the Trust. The Declaration of Trust
provides for indemnification out of Trust property of any shareholder held
personally liable for the obligations of the Trust. The Declaration of Trust
also provides that the Trust shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Trust and
satisfy any judgment thereon. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations. Management
believes that, in view of the above, there is no realistic risk of personal
liability.
The Declaration of Trust provides that no Trustee, officer or agent of the
Trust shall be personally liable to any person for any action or failure to act
except (1) for his own bad faith, willful misfeasance, gross negligence, or
reckless disregard of his duties, (2) with respect to any matter as to which he
did not act in good faith and in a manner he reasonably believed to be in, and
not opposed to, the best interests of the Trust, or (3) in the case of any
criminal proceeding, with respect to any conduct which he had reasonable cause
to believe was unlawful.
21
<PAGE> 32
CUSTODIAN
Star Bank, N.A., Star Bank Center, Cincinnati, Ohio 45202, acts as the
custodian of the portfolio securities and other assets of the Fund. Star Bank
has no part in determining the investment policies of the Fund or the
securities which are to be purchased, held or sold by the Fund. The Fund may
enter into repurchase agreements with Star Bank and may purchase or sell
securities from or to Star Bank.
ACCOUNTANTS
Arthur Andersen LLP, 425 Walnut Street, Cincinnati, Ohio, is the
independent public accountant for the Fund.
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP acts as counsel to the Trust.
OPTIONAL SHAREHOLDER SERVICES
Shareholders may receive cash payment of the dividends that their account
has earned during the month or have such dividends reinvested in additional
shares of the Fund. If such election is made, dividends will be mailed to the
shareholder or any other person designated by the shareholder. This option may
be changed or terminated by written notice to the Fund.
Shareholders may arrange for a fixed amount of money to be transferred on
a regular automatic basis from a bank or other depository account to their Fund
account. For additional information shareholders should contact the Fund or
their sales representative.
If an account has a value of at least $5,000 shareholders may elect to
have monthly or quarterly payments of a specified amount (but not less than
$50) mailed to themselves or another specified person. This option may be
changed or terminated at any time by written notice to the Fund. Because the
Fund cannot guarantee that payments will be made on the date specified,
22
<PAGE> 33
such payments should not be used when receipt of the payment is time-sensitive.
These services may not be available as to Fund shares not held directly
with the Fund.
23
<PAGE> 34
Gradison-McDonald
U. S. Government Reserves
TOTAL RETURN FOR PERIODS ENDED SEPTEMBER 30, 1995
Average Annual Total Return
<TABLE>
<CAPTION>
5 Years 3 Years 1 Year Quarter*
<S> <C> <C> <C> <C>
U. S. Government Reserves +4.11% +3.53% +5.10% +1.28%
Consumer Price Index +2.93% +2.76% +2.54% +0.83%
</TABLE>
<TABLE>
<CAPTION>
U. S. Government Consumer Price
Year Cash Reserves Index
<S> <C> <C>
1994 + 3.46% + 2.70%
1993 + 2.49% + 2.70%
1992 + 3.33% + 2.90%
1991 + 5.48% + 3.10%
1990 + 7.64% + 6.10%
1989 + 8.78% + 4.60%
1988 + 7.07% + 4.40%
1987 + 6.03% + 4.40%
</TABLE>
The table above is intended to compare the total return results of the U.S.
Government Reserves with the Consumer Price Index which is widely considered as
a measure of inflation. Total returns reflect the reinvestment and compounding
of actual daily dividends and distributions for each period noted above. The
performance quoted above represents past performance. Future returns will
fluctuate. Past performance does not insure future results.
Gradison-McDonald U. S. Government Reserves acquired all of the
outstanding shares of Gradison Cash Reserves (GCR), Gradison U. S.
Government Trust, McDonald Money Market Fund, Inc., and McDonald U. S.
Government Money Market Fund, Inc. on September 27, 1993. Returns prior to
that date are those of GCR. In 1993 and 1994 certain fees were waived by the
Advisor, which increased returns.
24
<PAGE> 35
An investment in the Fund is neither insured nor guaranteed by the U. S.
Government and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
All income earned in 1995 was received from U. S. Government obligations that
are exempt from state and local taxes. In some of the periods noted above, GCR
invested in commercial paper and other securities that generally have a higher
yield than U. S. Government Obligations.
For a copy of the prospectus please call your Investment Consultant at
(513) 579-5000 or (800) 869-5666. The prospectus contains more complete
information. Read it carefully before you invest.
*Not annualized
Gradison Division of McDonald & Company Securities, Inc. - Distributor
GRADISON-McDONALD
Mutual Funds
25
<PAGE> 36
COVER PAGE
MONEY MARKET
FUNDS
GRADISON McDONALD
[Graphic: collage of camera, passport, stamps, map, compass, postcards
and "Your Future Starts Today."]
U.S. GOVERNMENT RESERVES
MUNICIPAL CASH SERIES
OHIO MUNICIPAL CASH TRUST
26
<PAGE> 37
FAMILY OF MUTUAL FUNDS
MONEY MARKET
INTERMEDIATE OHIO TAX FREE
MUNICIPAL INCOME
INTERNATIONAL ESTABLISHED VALUE
GOVERNMENT OPPORTUNITY
INCOME VALUE
GROWTH
& INCOME
27
<PAGE> 38
PAGE 1
- ------
[Graphic; collage of passport, stamps, map, and camera]
Whatever your goals or ASPIRATIONS.
Whatever your objective. One thing is certain.
An INVESTMENT made today brings
you that much closer to meeting that OBJECTIVE
and reaching that GOAL ...
whether it's buying a house, starting a family,
SAVING for a college education,
or planning for retirement. Hesitate and
time will pass you by.
Today, opening a MONEY MARKET account
is a FUNDAMENTAL step in starting a
savings and investment program.
And for a growing number of TODAY'S INVESTORS,
GRADISON-McDONALD is a preferred name among money market funds.
1-800-869-5999 [Graphic of call for information logo.]
28
<PAGE> 39
PAGE 2
- ------
MONEY MARKET
FUND
GRADISON-McDONALD, RECOGNIZING THE BENEFITS
THAT MONEY MARKET FUNDS OFFERED THEIR
CLIENTS, BEGAN MANAGING ITS MONEY MARKET
FUND IN 1976. MONEY MARKET MUTUAL FUNDS
WERE ORIGINALLY VIEWED AS A CONVENIENT, TEM-
PORARY LOCATION FOR CASH WHILE LONG-TERM
INVESTMENTS WERE CONSIDERED. THEY QUICKLY
BECAME A POPULAR VEHICLE FOR SAVINGS AND
CHECKING ASSETS AS PASSBOOK SAVING RATES
DECLINED AND THE COST OF MAINTAINING A
CHECKING ACCOUNT ROSE. TODAY, MONEY MAR-
KET FUNDS--WITH THEIR COMPETITIVE CURRENT
YIELDS AND HIGH LEVEL OF SERVICE--ARE A FUN-
DAMENTAL ASPECT OF PERSONAL FINANCE AND
BUSINESS MANAGEMENT.
CHOOSE FROM THREE FUNDS
- -----------------------
U.S. GOVERNMENT RESERVES invests solely in U.S. Government and agency
securities. The Fund is managed by experienced Gradison-McDonald
portfolio managers.
MUNICIPAL CASH SERIES provides current income exempt from Federal regular
income tax.FN1 and is managed by Federated Advisers and available through
Gradison-McDonald.
OHIO MUNICIPAL CASH TRUST (CASH II SHARES) is a double tax-free money
market mutual fund for Ohio investors. The Fund seeks to provide money market
income exempt from both Federal regular FN1 and Ohio taxation and is also
managed by Federated Advisers and available through Gradison-McDonald.
29
<PAGE> 40
PAGE 3
- ------
[Graphic: Collage: Compass, postcards.]
Unlike checking and passbook accounts, an investment in the Funds is
neither insured nor guaranteed by the U.S. Government. There can be no
assurance that the Funds will maintain a stable net asset value of $1.00 per
share.
LIQUIDITY
- ---------
Money market fund assets are as easily accessible as making a phone call or
writing a check. ATM access is also available for an additional fee through
the McDonald Relationship Account.
LOW MINIMUM INVESTMENT
- ----------------------
There is no minimum size account or minimum additional investment for
money market fund accounts maintained together with a Gradison-McDonald active
brokerage account.
Money market fund accounts maintained separately from an active brokerage
account must have an initial investment of $1,000 and minimum additional
investments of at least $50.
FN 1 A portion of the income will be subject to Alternative Minimum
Taxation for Taxpayers subject to such tax.
1-800-869-5999 [Graphic of call for information logo.]
30
<PAGE> 41
PAGE 4
- ------
FREE CHECK WRITING
- ------------------
Money market fund accounts offer free check writing for any check of $100 or
more. Checks of less than $100 are processed for a minimal fee of 30 cents per
check.
DAILY DIVIDENDS
- ---------------
Dividends are declared daily. You may also choose to have each month's
dividends paid to you.
EXCHANGES
- ---------
You can move money from the money market funds to any of the following
Gradison-McDonald funds at any time. The Gradison-McDonald funds currently
include
Opportunity Value Fund
Established Value Fund
Government Income Fund
Ohio Tax-Free Income Fund
Intermediate Municipal Income Fund
Gradison-McDonald funds planned for 1995 and sold by prospectus only include:
Growth & Income Fund
International Fund
ACCESS
- ------
You can redeem money market fund shares on any business day.
[Graphic: Passport and stamps.]
31
<PAGE> 42
INSIDE BACK COVER
- -----------------
A TRUSTED NAME
Gradison-McDonald
is headquartered in Cincinnati and has
managed mutual funds since 1976.
The parent company, McDonald & Company
Investments, was founded in 1924
and has been listed on the
New York Stock Exchange since 1983.
It operates a leading regional
investment advisory, investment banking,
and investment brokerage firm
with offices throughout
Ohio, Michigan and Indiana,
and in Atlanta, Boston, Dallas, Chicago,
Los Angeles, the New York City area
and Naples, Florida
1-800-869-5999 [Graphic of call for information logo.]
32
<PAGE> 43
Back Cover
- ----------
[Graphic: Portable phone and envelopes]
To find out more about the
GRADISON-McDONALD
MONEY MARKET FUNDS
OR OTHER FUNDS IN THE FAMILY
CALL
1-800-869-5999
OR WRITE
Gradison-McDonald Mutual Funds
580 Walnut Street
Cincinnati, Ohio 45202
GRADISON-McDONALD
You may obtain a prospectus containing complete information about the money
market funds from a Gradison-McDonald Mutual Funds representative or your
Investment Consultant. Read it carefully before investing.
Federated Securities Corp. is the principal distributor for the shares of
Municipal Cash Series and Ohio Municipal Cash Trust (Cash II Shares). McDonald
& Company Securities, Inc. is the principal distributor for the shares of the
Gradison-McDonald U.S. Government Reserves.
McDonald & Company Securities Inc., acts as agent for clients investing in
Municipal Cash Series and Ohio Municipal Cash Trust (Cash II Shares) and does
not act as investment adviser for the those funds. Checking redemptions for
these funds is provided by Gradison-McDonald through Star Bank, N.A.
33
<PAGE> 44
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
INTEREST PRINCIPAL INTEREST PRINCIPAL
MATURITY (1) RATE (2) AMOUNT VALUE MATURITY (1) RATE (2) AMOUNT VALUE
FEDERAL FARM CREDIT BANKS, DISCOUNT NOTES - 17.57% FEDERAL HOME LOAN BANKS, DISCOUNT NOTES - 44.76%
<S> <C> <C> <C> <C> <C> <C> <C>
10/03/95 5.78% $10,000,000 $ 9,996,789 10/02/95 6.30% $ 75,000,000 $ 74,986,875
10/04/95 5.69 10,000,000 9,995,258 10/11/95 5.65 15,000,000 14,976,458
10/10/95 5.67 10,000,000 9,985,825 10/13/95 5.53 20,000,000 19,963,100
10/11/95 5.70 4,000,000 3,994,300 10/16/95 5.64 18,500,000 18,456,525
10/18/95 5.59 15,700,000 15,660,227 10/17/95 5.58 5,000,000 4,987,600
10/18/95 5.61 20,000,000 19,947,017 10/18/95 5.59 10,000,000 9,973,603
10/19/95 5.70 21,020,000 20,963,422 10/19/95 5.70 8,000,000 7,977,200
10/24/95 5.61 10,000,000 9,964,158 10/20/95 5.63 15,000,000 14,955,429
10/31/95 5.74 10,000,000 9,952,208 10/23/95 5.58 20,000,000 19,931,739
11/01/95 5.70 20,000,000 19,901,833 10/27/95 5.58 10,000,000 9,959,700
11/02/95 5.57 10,050,000 10,000,241 10/30/95 5.63 25,000,000 24,886,618
11/06/95 5.77 10,000,000 9,942,300 11/06/95 5.80 10,000,000 9,942,000
11/13/95 5.58 10,000,000 9,933,350 11/10/95 5.64 25,000,000 24,843,889
11/15/95 5.56 10,000,000 9,930,500 11/13/95 5.54 29,705,000 29,507,719
11/22/95 5.57 18,000,000 17,855,180 11/20/95 5.57 15,000,000 14,883,958
11/30/95 5.59 14,580,000 14,444,163 11/21/95 5.57 40,000,000 39,684,012
12/05/95 5.60 9,500,000 9,403,944 11/27/95 5.70 20,000,000 19,821,717
12/07/95 5.50 10,000,000 9,897,639 11/30/95 5.54 10,000,000 9,907,667
----------- 12/06/95 5.57 19,565,000 19,364,809
221,768,354 12/11/95 5.82 20,000,000 19,768,461
----------- 12/28/95 5.58 10,000,000 9,863,600
FEDERAL FARM CREDIT BANKS, FLOATING RATE NOTES - 11.88% 1/02/96 5.50 10,000,000 9,857,917
3/21/96 6.20 50,000,000 49,996,357 1/08/96 6.58 10,000,000 9,848,475
6/07/96 5.94 50,000,000 49,983,371 1/12/96 5.53 15,000,000 14,762,671
8/12/96 5.77 50,000,000 49,991,464 1/18/96 5.51 10,000,000 9,833,169
----------- 1/24/96 5.52 10,000,000 9,822,708
149,971,192 1/25/96 5.52 10,000,000 9,822,133
----------- 1/31/96 5.48 10,000,000 9,814,289
FEDERAL FARM CREDIT BANKS, 2/05/96 5.51 20,000,000 19,611,239
FLOATING RATE MASTER NOTE - 5.95% 2/06/96 5.50 14,455,000 14,172,324
10/16/95 6.00 75,100,000 75,100,000 2/12/96 5.59 10,000,000 9,791,928
----------- 2/22/96 5.56 7,735,000 7,562,974
2/28/96 5.50 11,850,000 11,578,438
3/25/96 5.55 10,000,000 9,728,667
-----------
564,849,611
-----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 45
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
INTEREST PRINCIPAL INTEREST PRINCIPAL
MATURITY (1) RATE (2) AMOUNT VALUE MATURITY (1) RATE (2) AMOUNT VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
FEDERAL HOME LOAN BANK BONDS, 3.96% STUDENT LOAN MARKETING ASSOCIATION,
1/19/96 7.31% $10,000,000 $ 9,998,493 FLOATING RATE NOTES - 7.97%
5/23/96 6.09 20,000,000 20,023,333 10/12/95 5.37% $25,000,000 $ 24,998,072
8/02/96 6.00 10,000,000 10,000,000 12/14/95 5.51 25,000,000 25,000,000
9/05/96 6.10 10,000,000 9,997,770 3/20/96 5.64 10,500,000 10,509,619
------------- 10/30/97 5.64 20,000,000 20,074,163
50,019,596 11/24/97 5.46 20,000,000 20,000,000
------------- -------------
FEDERAL HOME LOAN BANKS, FLOATING RATE NOTES - 5.55% 100,581,854
12/15/95 5.75 45,000,000 44,993,946 -------------
5/22/96 6.02 25,000,000 24,992,081 TENNESSEE VALLEY AUTHORITY, DISCOUNT NOTES - 1.74%
------------- 10/19/95 5.64 10,000,000 9,971,800
69,986,027 11/09/95 5.60 12,000,000 11,927,200
------------- -------------
21,899,000
-------------
U.S. TREASURY PRINCIPAL STRIPS - 0.62%
2/15/96 5.75 8,000,000 7,833,520
-------------
TOTAL INVESTMENTS, AT VALUE
(COST $1,262,009,154) $1,262,009,154
==============
<FN>
(1) For regulatory purposes, the maturity date of floating rate securities with
market prices that approximate par is considered to be the date upon which the
next readjustment of the interest rate can occur.
(2) The interest rates disclosed in the portfolio of investments are as
follows:
. U.S. Government Agency discount notes - the discount rate at the
time of purchase;
. U.S. Government Agency bonds - the yield to maturity at
time of purchase;
. U.S. Government Agency floating rate notes - the current
coupon rate;
. U.S. Treasury Strips - the yield to maturity at time of purchase.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 46
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
<S> <C>
ASSETS
Investments in securities, at value (Note 1) (Cost $1,262,009,154) $1,262,009,154
Cash 23,508
Receivable for securities sold 50,002,930
Interest receivable 3,613,384
Prepaid expenses and other assets 81,830
-------------
TOTAL ASSETS 1,315,730,806
-------------
LIABILITIES
Payable for securities purchased 90,617,948
Accrued investment advisory fees (Note 2) 468,262
Other accrued expenses payable to adviser (Note 2) 274,438
Payable for Fund shares redeemed 125,011
Other accrued expenses and liabilities 115,686
-------------
TOTAL LIABILITIES 91,601,345
-------------
NET ASSETS
Equivalent to $1.00 per share on 1,224,129,461 outstanding shares (Note 1)
($0.01 par value - unlimited number of shares authorized) $1,224,129,461
=============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 47
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1995
<S> <C> <C>
INTEREST INCOME $64,012,077
EXPENSES
Investment advisory fees (Note 2) $5,129,384
Transfer agency fees (Note 2) 1,864,658
Distribution (Note 2) 1,100,769
Accounting services fees (Note 2) 135,568
Registration fees 116,705
Printing 94,535
Professional fees 45,931
ICI dues 50,718
Trustees' fees (Note 2) 48,061
Insurance 29,103
Other 67,249
----------
TOTAL EXPENSES 8,682,681
-----------
NET INVESTMENT INCOME $55,329,396
===========
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 48
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------
1995 1994
<S> <C> <C>
Net investment income $ 55,329,396 $ 29,396,262
--------------- ---------------
Dividends to shareholders 55,329,396 (29,396,262)
--------------- ---------------
Utilization of capital loss carryforward (Note 3) - 6,487
--------------- ---------------
FROM TRUST SHARE TRANSACTIONS:
(at a constant net asset value of $1.00 per share)
Proceeds from shares sold 5,412,404,275 4,251,168,366
Net asset value of shares issued
in reinvestment of dividends 55,329,396 29,396,262
Payments for shares redeemed (5,244,837,425) (4,259,130,431)
--------------- ---------------
Increase in net assets from Trust
share transactions 222,896,246 21,434,197
--------------- ---------------
Total increase in net assets 222,896,246 21,440,684
NET ASSETS:
Beginning of period 1,001,233,215 979,792,531
--------------- ---------------
End of period $ 1,224,129,461 $ 1,001,233,215
=============== ===============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 49
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Gradison-McDonald Cash Reserves Trust (the Trust) is a no-load, diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended. Effective with the start of business on September 27,
1993 (the Reorganization Date) all of the outstanding shares of the Gradison
Cash Reserves (GCR) series of the Trust, Gradison U.S. Government Trust,
McDonald Money Market Fund, Inc., and McDonald U.S. Government Money Market
Fund, Inc. (collectively, the Acquired Funds) were acquired by a new series of
the Trust, Gradison-McDonald U.S. Government Reserves (GMU or the Fund). See
Note 3 for a more detailed discussion of the merger.
The following is a summary of the Trust's significant accounting policies:
SECURITIES VALUATION -- Investments are valued using the amortized cost method
which approximates market value. This involves initially valuing a security at
its original cost and thereafter assuming a constant amortization to maturity
of any discount or premium. This method of valuation is expected to enable the
Trust to maintain a constant net asset value per share.
SECURITIES TRANSACTIONS AND INTEREST INCOME -- Securities transactions are
accounted for on the trade date (the date the order to buy or sell is
executed). Interest income is accrued as earned and includes any immaterial
gains or losses realized from securities transactions during the year.
TRUST SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS -- Trust shares are sold
and redeemed on a continuing basis at the net asset value. The net asset value
per share is computed by dividing the net asset value of the Trust (total
assets less total liabilities) by the number of shares outstanding. All of the
net investment income of the Trust is declared as a dividend and paid in
additional shares once daily. Net investment income consists of all interest
income accrued on the portfolio securities of the Trust, plus or minus
amortized purchase discount or premium, less accrued expenses. Share purchases
effective before 12:00 noon (Eastern time) earn dividends that day. Redemption
requests received before 12:00 noon will not receive that day's dividend.
TAXES -- It is the Trust's policy to comply with the provisions of the Internal
Revenue Code available to regulated investment companies. As provided therein,
in any fiscal year in which the Trust so qualifies, and distributes at least
90% of its taxable net income, the Trust will be relieved of federal income tax
on the income distributed. Accordingly, no provision for income taxes has been
made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Trust's intention to declare as dividends
in each calendar year, at least 98% of its net investment income (earned during
the calendar year) and 98% of its net realized capital gains, if any (earned
during the twelve months ended October 31) plus undistributed amounts from
prior years.
The tax basis of investments is equal to the amortized cost as shown on the
Portfolio of Investments.
NOTE 2 -- TRANSACTIONS WITH AFFILIATES
The Trust's investments are managed, subject to the general supervision and
control of the Trust's Board of Trustees, by McDonald & Company Securities,
Inc. (McDonald), a registered investment adviser and securities dealer,
pursuant to the terms of an Investment Advisory Agreement (the Agreement).
Under the terms of the Agreement, the Trust pays McDonald a fee computed and
accrued daily and paid monthly based upon the Trust's average daily net assets
at the annual rate of .50% on the first $400 million, .45% on the next $600
million, .40% on the next $1 billion and .35% on any amounts in excess of $2
billion.
9
<PAGE> 50
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995
Under the terms of the Agreement, McDonald bears the costs of salaries and
related expenses of executive officers of the Trust who are necessary for the
management and operations of the Trust. In addition, McDonald bears the costs
of preparing, printing and mailing sales literature and other advertising
materials, and compensates the Trust's trustees who are affiliated with
McDonald.
During the year ended September 30, 1994, McDonald waived advisory fees of
$106,691 in order to limit the Fund's annualized ratio of expenses to average
net assets to .80%.
Under the terms of a Transfer Agency, Accounting Services and Administrative
Services Agreement, McDonald provides transfer agent, dividend disbursing,
accounting services and administrative services to the Trust. The Trust pays
McDonald a monthly fee for transfer agency and administrative services at an
annual rate of $23.50 per shareholder account, plus out-of-pocket costs for
statement paper, statement and reply envelopes and reply postage. The Trust
pays McDonald a monthly fee for accounting services based on the Trust's
average daily net assets at an annual rate of .015% on the first $400 million,
.0125% on the next $300 million, .01% on the next $300 million and .0075% on
any amount in excess of $1 billion, with a minimum annual fee of $25,000.
Under the terms of a Distribution Service Plan (the Plan) adopted under Rule
12b-1 of the Investment Company Act of 1940, the Trust has entered into an
agreement with McDonald pursuant to which the Trust pays McDonald a service fee
in the annual amount of .10% of the Trust's average daily net assets.
The officers of the Trust are also officers of McDonald.
Each trustee of the Trust who is not affiliated with McDonald receives fees
from the Trust for services as a trustee. The amounts of such fees for each
trustee are as follows: (a) an annual fee of $6,000 payable in quarterly
installments for service during each fiscal quarter, (b) $500 for each Board of
Trustees meeting attended and (c) $300 for each committee meeting attended.
Each trustee not serving on other Gradison-McDonald Mutual Fund Boards of
Trustees receives an additional $500 for each meeting attended.
NOTE 3 -- BUSINESS COMBINATION
On the Reorganization Date, GMU acquired substantially all of the assets and
liabilities of the Acquired Funds through a tax-free exchange of assets in
which each shareholder of the Acquired Funds received a number of full and
fractional shares of GMU having a total net asset value equal to the net asset
value of the shares held in their former fund as of that date. GMU, which was
organized for the sole purpose of acquiring the assets and liabilities of the
Acquired Funds, had no assets, liabilities, or shareholders and did not
commence operations until the Reorganization Date.
As of the close of business on the Reorganization Date, the Acquired Funds,
excluding GCR, collectively had net assets of $499,941,413 and shares
outstanding of $499,947,900 and had no undistributed net investment income or
unrealized appreciation/depreciation on investments. The Acquired Funds
collectively had accumulated net realized losses of $6,487, which were used to
offset gains realized by GMU during the year ended September 30, 1994.
For financial reporting purposes, GMU is considered the successor to GCR;
therefore, financial information for all periods prior to the Reorganization
Date is that of GCR.
10
<PAGE> 51
ARTHUR ANDERSEN & CO, SC
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of the
Gradison-McDonald U.S. Government Reserves series
of the Gradison-McDonald Cash Reserves Trust:
We have audited the accompanying statement of assets and liabilities of the
Gradison-McDonald U.S. Government Reserves, a series of the Gradison-McDonald
Cash Reserves Trust (a Massachusetts business trust), including the portfolio
of investments, as of September 30, 1995, the related statement of operations
for the year then ended, and the statements of changes in net assets for the
periods indicated thereon, and the financial highlights for each of the three
periods in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for each of the two years in the
period ended September 30, 1992, of the Gradison-McDonald U.S. Government
Reserves series of the Gradison-McDonald Cash Reserves Trust, were audited by
other auditors whose report dated October 22, 1992, expressed an unqualified
opinion on these financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Gradison-McDonald U.S. Government Reserves series of the Gradison-McDonald Cash
Reserves Trust as of September 30, 1995, the results of its operations for the
period then ended, the changes in its net assets for the periods indicated
thereon, and the financial highlights for each of the three periods in the
period then ended in conformity with generally accepted accounting principles.
Cincinnati, Ohio,
November 1, 1995
/s/ Arthur Andersen LLP
11
<PAGE> 52
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a)(1) Financial Statements (included in the Prospectus):
Financial Highlights
(a)(2) Financial Statements (included in the Statement of Additional
Information):
Report of Independent Accountant
Portfolio of Investments at September 30, 1995
Statements of Assets and Liabilities at September 30, 1995
Statement of Operations for the year ended September 30, 1995
Statement of Changes in Net Assets for the two years ended
September 30, 1994 and September 30, 1995
Notes to Financial Statements
(b) Exhibits
(1) Registrant's Declaration of Trust, as amended October 25,
1993. +
(2)(a) Registrant's By-Laws. *
(b) Amendment to Registrant's By-Laws (Amending Section
3.1).**
(3) None.
(4) None.
(5) Investment Advisory Agreement dated September 24, 1993.+
(6) See Exhibit 15 (b).
(7) Deferred compensation agreement.+
(8) Custodian Agreement.+
(9) Transfer Agency, Accounting Services, and Administrative
Services Agreement dated September 24, 1993.+
(10) Opinion of Counsel is filed yearly with Registrant's
Rule 24f-2 Notice and was most recently filed on
November 14, 1995.
(11) Consent of Arthur Andersen LLP (included herein).
(12) None.
(13) Letter of Investment Intent +
(14) Individual Retirement Account Plan Booklet.+
(15)(a) Distribution Service Plan dated September 24, 1993.+
(b) Distribution Agreement between Trust and Adviser dated
September 24, 1993.+
(16) Schedule of Yield Computation.+
C-1
<PAGE> 53
(18)(a) Powers of Attorney of Theodore Emmerich, Richard Rankin,
Jerome Schnee, Jacob O. Kamm, Paul Weston, Donald Weston,
John Steele, Gordon Price.+
(18)(b) Powers of Attorney of Bradley E. Turner and Daniel J.
Castellini . ***
(18)(c) Power of Attorney of Patricia Jamieson (included herein).
___________________________________________________
+ Incorporated by reference to Exhibits 1, 5, 7, 8, 9, 13, 14,
15(a), 15(b), 16, and 18(a) to Registrant's Registration Statement
No. 2-55297 previously filed with the Securities and Exchange
Commission on January 25, 1994.
* Incorporated by reference to Exhibit 2(a), to Registrant's
Registration Statement No. 2-55297 previously filed with the
Securities and Exchange Commission on November 26, 1986.
** Incorporated by reference to Exhibit 2(b), to Registrant's
Registration Statement No. 2-55297 previously filed with the
Securities and Exchange Commission on November 29, 1991.
*** Incorporated by reference to Exhibit 18(b), to Registrant's
Registration Statement No. 2-55297 previously filed with the
Securities and Exchange Commission on January 26, 1995.
Item 26. Number of Holders of Securities
<TABLE>
<Cation>
Number of Record Holders
Title of Class as of January 3, 1996
-------------- ------------------------
<S> <C>
Shares of beneficial interest, par value
$.01 per share, of the Registrant:
</TABLE>
Gradison-McDonald U.S. Government Cash Reserves 83,769
Item 27. Indemnification
Reference is made to Article V of the Declaration of trust of the
Registrant, filed as Exhibit 1 to this Registration Statement. Officers
and Trustees of Registrant are insured against liability by reasons of
acts, errors, or omissions in such capacities.
Item 28. Business and Other Connections of Investment Adviser
Reference is made to the captions "Management of the Fund" in the
Prospectus that is Part A of this Registration Statement and "Trustees and
Officers of the Trust" in the Statement of Additional Information that is
C-2
<PAGE> 54
Part B of this Registration Statement and to Item 29(b) of this Part C of
the Registration Statement.
Item 29. Principal Underwriters
(a) The principal underwriter of the Registrant is McDonald &
Company Securities, Inc., which also serves as the principal
underwriter and investment adviser for Gradison U.S. Government
Trust, Gradison Growth Trust, Gradison Custodian Trust, and the
Gradison-McDonald Municipal Custodian Trust.
(b) Information pertaining to its directors and officers is
contained in the following table.
<TABLE>
<CAPTION>
Positions
Positions Business With
Name With Underwriter Address Registrant
- ---- ---------------- -------- ----------
<S> <C> <C> <C>
Daniel F. Austin Director, Vice 800 Superior Avenue None
Chairman Cleveland, Ohio 44114
Jack N. Aydin Director, Managing One Evertrust Plaza None
Director Jersey City, NJ 07302
Eugene H. Bosart, Director, Managing 260 East Brown Street None
III Director Birmingham, MI 48009
Thomas G. Clevidence Director, Managing 800 Superior Avenue None
Director Cleveland, OH 44114
Robert Clutterbuck Director, President, 800 Superior Avenue None
Chief Operating, Cleveland, OH 44114
Officer, Chief
Financial Officer
Dennis J. Donnelly Director, Senior 800 Superior Avenue None
Managing Director Cleveland, OH 44114
David W. Ellis, III Director, and Sr. 580 Walnut Street None
Vice President Cincinnati, OH 45202
(Gradison Division)
David W. Knall Director, Managing One American Square None
Director Indianapolis, IN 46282
Thomas M. McDonald Director, Managing 800 Superior Avenue None
Director, Cleveland, OH 44114
</TABLE>
C-3
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
John F. O'Brien Director, Senior 800 Superior Avenue None
Managing Director Cleveland, OH 44114
Thomas M. O'Donnell Director 800 Superior Avenue None
Cleveland, OH 44114
Lawrence T. Oakar Director and 800 Superior Avenue None
Sr. Vice President Cleveland, OH 44114
James C. Redinger Director, Senior 800 Superior Avenue None
Managing Director Cleveland, OH 44114
William Summers, Jr. Director, Chairman 800 Superior Avenue None
Chief Executive Cleveland, OH 44114
Officer
David D. Sutcliffe Director, Sr. Vice 800 Superior Avenue None
President Cleveland, OH 44114
Francis S. Tobias Director, Managing 800 Superior Avenue None
Director Cleveland, OH 44114
</TABLE>
Item 30. Location of Accounts and Records
Registrant undertakes to provide without cost a copy of its most recent annual
report upon request.
All accounts, books and documents required to be maintained by the Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31(a) thereunder are maintained at the offices of the Registrant,
580 Walnut Street, Cincinnati, Ohio 45202, except as indicated below opposite
the applicable reference the aforesaid Rules.
<TABLE>
<CAPTION>
Rules In Possession of:
----- -----------------
<S> <C>
31a-1(b)(1), 31a-1(b)(2)(i)(a)-(f), Star Bank, N.A.
31a-1(b)(2)(ii), 31a-1(b)(5) and Star Bank Center
31a-1(b)(8) Cincinnati,
Ohio 45202
</TABLE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
C-4
<PAGE> 56
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction, the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
C-5
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati and
State of Ohio on the 24th day of January, 1996.
GRADISON-McDONALD CASH RESERVES TRUST
By BRADLEY E. TURNER*
------------------
Bradley E. Turner, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Registrant hereby certifies that this Amendment to Registration
Statement meets all of the requirements for effectiveness pursuant to
paragraph (b) of Rule 485.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*DONALD E. WESTON Chairman of the Board January 24, 1996
(Principal Executive
Officer and Trustee)
*DANIEL J. CASTELLINI Trustee "
*THEODORE EMMERICH Trustee "
*RICHARD RANKIN Trustee "
*JEROME SCHNEE Trustee "
*JOHN STEELE Trustee "
*BRADLEY E. TURNER President "
*PATRICIA JAMIESON Treasurer "
(Principal Financial and
Accounting Officer)
*By RICHARD M. WACHTERMAN
---------------------
Richard M. Wachterman, Attorney-in-fact
</TABLE>
S-1
<PAGE> 58
Exhibit List
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
11 Consent of Arthur Andersen LLP
18(a) Power of Attorney of Patricia J. Jamieson
</TABLE>
<PAGE> 1
Exhibit 11
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the use in this
Post Effective Amendment No. 38 of our report dated November 1, 1995 and
to all references to our Firm included in or made a part of Post-Effective
Amendment.
/S/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
January 23, 1996
<PAGE> 1
(Exhibit 18(a))
GRADISON-McDONALD CASH RESERVES TRUST
Power of Attorney of Trustees and Officers
------------------------------------------
The undersigned, an officer or Trustee, or both an officer and Trustee, of
Gradison-McDonald Cash Reserves Trust, a Massachussetts business trust (the
"Trust"), which has filed with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933, as amended, and the provisions of the
Investment Company Act of 1940, as amended, a Registration Statement on Form
N-1 or N-1A (which together with any and all subsequent amendments, including
post-effective amendments, thereto is hereinafter called the "Registration
Statement") for the principal purpose of registering the public offering by the
Trust of shares of beneficial interest without par value of its series, hereby
constitutes and appoints Paul J. Weston, Donald E. Weston, Bradley E. Turner,
Richard M. Wachterman and Robert Zutz, and each of them, with full power of
substitution or resubstitution, the attorney or attorneys to execute and file
on behalf of the undersigned in his capacity as an officer and/or trustee of
the Trust, the Registration Statement as aforesaid, and any and all exhibits,
applications and other documents to be filed with the Securities and Exchange
Commission pertaining thereto, with full power and authority to do and perform
any and all acts and things whatsoever required or necessary to be done in the
premises, as fully to all intents and purposes as he could do if personally
present, hereby ratifying and approving the acts of said attorneys or any of
them and any such substitute.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 23rd day
of May, 1995.
/S/ Patricia Jamieson
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000042895
<NAME> GRADISON-MCDONALD CASH RESERVES TRUST
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 1,262,009,154
<INVESTMENTS-AT-VALUE> 1,262,009,154
<RECEIVABLES> 53,616,314
<ASSETS-OTHER> 105,338
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,315,730,806
<PAYABLE-FOR-SECURITIES> 90,617,948
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 983,397
<TOTAL-LIABILITIES> 91,601,345
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,224,129,461
<SHARES-COMMON-STOCK> 1,224,129,461
<SHARES-COMMON-PRIOR> 1,001,233,215
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,224,129,461
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 64,012,077
<OTHER-INCOME> 0
<EXPENSES-NET> 8,682,681
<NET-INVESTMENT-INCOME> 55,329,396
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 55,329,396
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 55,329,396
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,412,404,275
<NUMBER-OF-SHARES-REDEEMED> 5,244,837,425
<SHARES-REINVESTED> 55,329,396
<NET-CHANGE-IN-ASSETS> 228,896,246
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,129,384
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,682,681
<AVERAGE-NET-ASSETS> 1,107,346
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
