THE FOLLOWING SUPPLEMENT, DATED MAY 16, 1996, SUPPLEMENTS THE STATEMENT OF
ADDITIONAL INFORMATION DATED MAY 1, 1996 OF THE GRADISON-MCDONALD
GOVERNMENT INCOME FUND.
GRADISON MCDONALD [Graphic: Man and Lady's Wedding Rings]
GOVERNMENT
INCOME
FUND
March 31, 1996
Gradison McDonald Government Income Fund is designed for investors seeking
high current income from a portfolio of U. S. Government Securities. It is
the Fund's current policy to invest only in those Government securities
that are guaranteed as to principal and interest by the full faith and
credit of the United States Government and repurchase agreements
collateralized by full faith and credit obligations.
While one of the Fund's objectives is to produce monthly income, the Fund
is managed with an emphasis on total return, that is, the combined effect
of both income and principal value. Although the securities in the Fund's
portfolio are guaranteed as to principal and interest by the U.S.
Government, the market value of its shares will fluctuate with changes in
interest rates and market conditions.
Symbol: GGIFX
[Graphic: Value of $1,000 Since Inception
The Value of a $1,000 Investment made
in the Fund at Inception
9/16/87
Inception
Date
Graph: X axis shows years as indicated below with plot points as indicated
below:
With All Dividend and Capital Gain
Distributions Reinvested
December 31,
9/16/87 1987 1988 1989 1990 1991 1992 1993 1994 1995 l996 (3/31)]
1,000 1,050 1,125 1,268 1,379 1,574 1,673 1,800 1,733 2,032 2,010
With All Dividend and Capital Gain Distributions
Paid Out
December 31,
9/16/87 1987 1988 1989 1990 1991 1992 1993 1994 1995 l996 (3/31)]
1,000 1,034 1,010 1,041 1,033 1,082 1,065 1,068 960 1,055 1,029
The performance quoted above does not include the effect of the maximum 2%
sales charge which would reduce the performance shown. The performance
quoted above and below represents past performance. The investment return
and principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost. Total return includes changes in share value and
reinvestment of all distributions. Past performance does not ensure future
results.
Average Annual Total Return
Periods Ended 3/31/96
For 401(k) Retirement Plans
And Reinvested Dividends +10.16% +5.15% +7.33% +8.51%
Purchased at Net Asset
Value
For Shares Purchased at
Full 2% Sales Charge +7.99% +4.44% +6.91% +8.25%
1 Year 3 Years 5 Years Since
Inception
(8/16/87)
COMPOSITION AND WEIGHTED AVERAGE MATURITY
[Graphic: Pie Chart
Cash Equivalents 1%
U. S. Treasuries 37%
GNMA's 62%]
[Graphic: Graph showing 6 Years Weighted Average Maturity]
The portfolio composition and maturity of the Fund's portfolio are as of
March 31, 1996, and are subject to change.
<PAGE>
PORTFOLIO MANAGER PROFILES
[Graphic: Photo of Michael J. Link]
Michael J. Link
Senior Vice President/Portfolio Manager
Gradison McDonald Asset Management
With more than 25 years of experience in investments with Gradison
McDonald, Michael Link has carried the portfolio management
responsibilities for the Government Income Fund since its inception in
1987. Mike also manages the fixed income portion of various individual
client portfolios managed by Gradison McDonald Asset Management. A
frequent seminar speaker and natural teacher, Mike earned his B.S. degree
in Civil Engineering from Manhattan College and an M.S. degree in Applied
Mechanics from Lehigh University.
C. Stephen Wesselkamper [Graphic: Photo of Wesselkamper]
First Vice President
Gradison McDonald Asset Management
With more than eighteen years financial analysis and portfolio management
experience, the last thirteen with Gradison McDonald, Stephen Wesselkamper
carries primary responsibility for short term fixed income management on
the Gradison McDonald Asset Management team. In addition to his
responsibilities on the Government Income Fund, Steve is portfolio manager
of Gradison McDonald U. S. Government Reserves money market fund. A magna
cum laude B.S. graduate of the University of Cincinnati, Steve holds an MBA
from Xavier University.
[Graphic:
PROFILE OF GRADISON MCDONALD FAMILY OF FUNDS
Less Potential Risk [Graphic: Double Arrow] More Potential Risk
Less Potential Reward More Potential Reward
Funds with
less risk and
less reward]
Money Government Intermediate Ohio Established
Market Income Municipal Tax Free Value
Funds Fund Income Fund Income Fund Fund
Growth Opportunity International
& Income Value Fund
Fund Fund
Funds with more risk
and more potential
reward.]
GRADISON MCDONALD ASSET MANAGEMENT COMBINES THE EXTENSIVE INVESTMENT
EXPERIENCE OF GRADISON & COMPANY, FOUNDED IN 1925, WITH MCDONALD & COMPANY
WHICH WAS FOUNDED IN 1924. THE TWO FIRMS MERGED IN 1991. AS REGISTERED
INVESTMENT ADVISERS SINCE 1974 AND MUTUAL FUND ADVISERS IN 19765, GRADISON
MCDONALD CURRENTLY MANAGES IN EXCESS OF $3 BILLION IN MUTUAL FUNDS AND
INDIVIDUALLY MANAGED ACCOUNTS.
A prospectus for the Government Income fund or any other Gradison McDonald
Fund may be obtained by calling (513) 579-5700 or (800) 869-5999. The
prospectus contains more complete information. Read it carefully before
you invest.
McDonald & Company Securities, Inc. - Distributor
