Supplement dated July 8, l996, to Statement of Additional
Information of Gradison-McDonald Established Value Fund and
Gradison-McDonald Opportunity Value Fund dated September 1, l995.
COVER PAGE
OPPORTUNITY VALUE
FUND
GRADISON - McDONALD
[Graphic: Collage of children's things such as blocks, and baby
picture with title "Your future starts here"]
A COMMON STOCK FUND INVESTING IN SMALLER COMPANIES JUDGED TO BE
UNDERVALUED
INSIDE COVER
FAMILY OF MUTUAL FUNDS
OPPORTUNITY
VALUE
O V
INTERMEDIATE OHIO TAX-FREE
MUNICIPAL INCOME
INTERNATIONAL GOVERNMENT
INCOME
MONEY MARKET ESTABLISHED
VALUE
GROWTH
& INCOME
PAGE 1
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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.
Increasingly, MUTUAL FUNDS are the
PREFERRED VEHICLE for starting and building
an investment program.
And today, GRADISON - McDONALD is a
preferred name in mutual funds
for a GROWING number of investors.
1-800-869-5999 [Phone information graphic]
PAGE 2
OPPORTUNITY VALUE
FUND
GRADISON - McDONALD OPPORTUNITY VALUE
FUND SEEKS TO PROVIDE LONG-TERM CAPITAL
APPRECIATION THROUGH INVESTMENTS IN THE
STOCK OF SMALLER COMPANIES THAT OUR DISCI-
PLINED ANALYSIS JUDGES AS UNDERVALUED. THESE
SMALL CAP COMPANIES GENERALLY HAVE CAPITAL-
IZATIONS OF $500 MILLION OR LESS. THE FUND IS
PROFESSIONALLY MANAGED BY EXPERIENCED
GRADISON - McDONALD PORTFOLIO MANAGERS.
THE CASE FOR SMALL CAP STOCKS
Traditionally, smaller companies have been the birth-
place of many important new products, services and
technologies. While the stocks of smaller companies are
frequently considered by investment professionals to be more
volatile, they are also often viewed as more
CHART- WEALTH INDICES OF INVESTMENTS IN THE U. S. 1925-1995
[Line graph comparing the value of $1 invested in Small Company
Stocks, Large Company Stocks, and Inflation in 1925 through 1995.
Ending value of Small Company Stocks $3,822, Large Company Stocks
$1,119, and Inflation $9.]
Small company stocks are represented by the fifth capitalization
quintile of stocks on the New York Stock Exchange from 1926-1981
and the performance of the Dimensional Fund Advisors (DFA) Small
Company 9/10 Fund thereafter. Large company stocks are
represented by the Standard & Poor's 500 Stock Composite Index.
The indices and securities in the chart above do not reflect the
Fund's actual portfolio composition, performance, or the fees and
expenses associated with investing in the Fund. The chart is not
intended to imply future performance of any of these investments
or of the Fund. Performance figures of the Fund, which began
operations on 8/16/83 are available upon request from Gradison -
McDonald. The returns for small company common stocks and large
company stocks include the reinvestment of dividends and
interest. Source: "SBBI 1996 Yearbook" by Ibbotson Associates.
PAGE 3
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responsive to profit opportunities than their larger brethren.
VALUE INVESTING
Gradison - McDonald employs a value strategy in the management of
the Fund. As applied to the Gradison - McDonald Opportunity
Value Fund, this strategy involves a disciplined stock selection
process that requires that the companies selected for investment
meet a number of objectively measured criteria including rising
earnings, earnings growth rates, price-to-earnings ratios, and
other similar measures. Companies that meet these criteria are
then analyzed and ranked for the relative book value of their
shares. The final selection of investments is made from the list
of companies generated from this highly disciplined process.
Under normal circumstances, at least 70% of the Fund's assets
will be invested in common stocks while up to 30% may, at the
discretion of the adviser, be invested in short-term liquid
reserves to reduce fluctuations in the Fund's net asset value.
1-800-869-5999 [Phone information graphic]
PAGE 4
DISCIPLINED APPROACH
Gradison - McDonald Opportunity Value Fund portfolio managers
follow a strict set of objective criteria in selecting small cap
stocks. Consequently, stocks are purchased because of sound
fundamentals, not merely someone's intuition about the market or
rumors from Wall Street.
LOW MINIMUM INVESTMENT
The Gradison - McDonald Opportunity Value Fund has a low minimum
initial investment of $1,000. Additional investments can be made
for as little as $50.
EXCHANGES
You can move money from one Gradison - McDonald fund to another
at any time. The Gradison - McDonald funds currently include:
Established Value Fund
Growth & Income Fund
International Fund
Government Income Fund
U.S. Government Reserves
Ohio Tax-Free Income Fund
Intermediate Municipal Income Fund
ACCESS
You can redeem shares on any business day at their current net
asset value.
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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,
Northern Kentucky and Naples, Florida
1-800-869-5999 [Phone information graphic]
BACK COVER
[Graphic: Telephone and two envelopes]
To find out more about the
GRADISON - McDONALD
OPPORTUNITY VALUE FUND
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 many obtain a prospectus containing complete information
about the funds from a Gradison - McDonald Mutual Funds
representative or your Investment Consultant. Read it carefully
before investing. Upon redemption, the value of an investment in
the Fund may be worth more or less than its cost.
Gradison - McDonald, a division of McDonald & Company securities,
Inc. - Distributor.
