-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WRclGQI4YAVNVvaEXsJBoMWmeCda5fxMBwN83Mi6Ml93HCUVAbMuCXfL5sc/jHkQ 5bEUhGa8E4OeILBIRGVkjQ== 0000950131-99-002159.txt : 19990409 0000950131-99-002159.hdr.sgml : 19990409 ACCESSION NUMBER: 0000950131-99-002159 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLIARD LYONS GOVERNMENT FUND INC CENTRAL INDEX KEY: 0000317872 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 610978881 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03070 FILM NUMBER: 99589376 BUSINESS ADDRESS: STREET 1: HILLIARD LYONS CTR CITY: LOUISVILLE STATE: KY ZIP: 40202 BUSINESS PHONE: 5025888832 MAIL ADDRESS: STREET 1: PO BOX 32760 CITY: LOUISVILLE STATE: KY ZIP: 40232 FORMER COMPANY: FORMER CONFORMED NAME: HILLIARD LYONS CASH MANAGEMENT INC DATE OF NAME CHANGE: 19830125 N-30D 1 HILLIARD-LYONS GOVERNMENT FUND, INC. SAR March 25, 1999 Dear Shareholder: We are pleased to present this report on the Hilliard-Lyons Government Fund, Inc. ("HLGF" or the "Fund") for the six months ended February 28, 1999. The Fund reached a new milestone on November 17, 1998 with net assets reaching the $1 billion mark for the first time. Net assets on February 28, 1999 were $1.087 billion versus net assets of $945 million six months ago and $811 million one year ago. The average seven day yield ranged from a low of 4.41% to a high of 4.98% during the six months. Distributions of $.023083 were paid, equivalent to an annualized yield of 4.65%. For those shareholders in the dividend reinvestment plan, this equates to a compound annual yield of 4.70%. Money market fund assets reached a record level of $1.4 trillion at the end of January with the largest single month increase ever of $68.5 billion. The increase in assets in HLGF has greatly surpassed that of the industry which has seen assets double in the last three years and triple in the last ten years. The Federal Reserve (the "Fed") cut the federal funds rate by 1/4% on September 29, 1998 and quickly followed with another 1/4% cut on October 15, 1998. This was the first action by the Fed since March 1997. The federal funds rate is what member banks charge each other for overnight loans and is a determining factor for other rates from credit cards to mortgages. Federal Reserve Chairman Alan Greenspan indicated he believed the U.S. economy was feeling the effects of the financial turmoil in Asia and Latin America and said he would use Fed control over interest rates to strengthen the world economy. Opinions appear mixed on what will happen at the next meeting of the Federal Reserve scheduled for March 30, 1999. Most believe that recent economic data suggest little or no inflationary pressures and that the Fed will leave interest rates unchanged for now. The Dow Jones Industrial Average ("DJIA" or the "Dow") has also entered record territory. The Dow surpassed the 10000, milestone hitting an intraday high of 10085.31 on March 19, 1999 but has yet to close at or above the 10000 level. Intraday crossings of round number milestones such as 3000 and 4000 took place several months before the Dow actually closed above those levels. Closings above 7000, 8000 and 9000 were each quickly followed by several months of market decline. As shown on the attached Schedule of Investments, the Fund was 100% invested in U.S. government agency obligations on February 28, 1999. These discount notes of the Federal Home Loan and Federal Farm Credit Banks, while offering a high degree of credit safety, have allowed the Funds to offer a competitive yield and an added advantage of income which is exempt from state income tax. This is the fourth year in a row that all dividends paid by the Fund were fully exempt from state income tax in all states. The percentage of dividends eligible for exemption will vary as it is dependent on the investments of the Fund, but given the current investment strategy, we believe the dividends paid will be substantially exempt from state income tax under current tax laws. This is the second year that dividend information from the Fund was included on your Form 1099-Div from J.J.B. Hilliard, W.L. Lyons, Inc. The merger between Hilliard-Lyons, Inc. and PNC Bank Corp. became effective on December 1, 1998. The process of integrating the two entities is just beginning but is not expected to have any adverse effects on the Fund. The merger constituted an assignment of the Investment Advisory Agreement (the "Agreement") and shareholders approved a new Agreement at a Special Shareholders Meeting held November 23, 1998. Directors were also elected at a Special Shareholders Meeting held November 6, 1998. As a result of the merger, it became necessary for the Fund to observe certain banking laws, one of which mandates that 75% of its directors be "unaffiliated". This required a reorganization of the Board and as a consequence Gilbert L. Pamplin and Joseph C. Curry, Jr. (both of whom are employees of Hilliard Lyons) resigned as directors. Mr. Curry remains as President. Mrs. Marianne R. Rowe also resigned. Mr. Kohler remains Chairman and Messrs. Hilliard, Shine and Miller remain directors. The Board now is in compliance with the law affecting bank affiliated funds. /s/ Donald F. Kohler /s/ Joseph C. Curry, Jr. /s/ Dianna P. Wengler DONALD F. KOHLER JOSEPH C. CURRY, JR. DIANNA P. WENGLER Chairman President Vice President and HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 28, 1999
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--100.2% $13,240,000 Federal Home Loan Bank 4.747% 3/01/99 $13,240,000 15,000,000 Federal Home Loan Bank 5.020 3/01/99 15,000,000 11,280,000 Federal Home Loan Bank 5.068 3/02/99 11,278,452 24,000,000 Federal Home Loan Bank 5.092 3/03/99 23,993,387 15,000,000 Federal Home Loan Bank 5.026 3/04/99 14,993,875 20,000,000 Federal Home Loan Bank 5.082 3/05/99 19,989,000 9,000,000 Federal Home Loan Bank 5.072 3/08/99 8,991,355 9,000,000 Federal Home Loan Bank 4.767 3/09/99 8,990,640 24,000,000 Federal Home Loan Bank 5.062 3/10/99 23,970,420 16,000,000 Federal Farm Credit Bank 4.825 3/11/99 15,979,022 9,000,000 Federal Home Loan Bank 5.062 3/12/99 8,986,443 27,000,000 Federal Home Loan Bank 5.030 3/15/99 26,948,550 22,000,000 Federal Farm Credit Bank 5.029 3/16/99 21,955,083 24,000,000 Federal Home Loan Bank 5.062 3/17/99 23,947,413 20,000,000 Federal Farm Credit Bank 4.914 3/18/99 19,954,950 15,000,000 Federal Home Loan Bank 5.072 3/19/99 14,962,950 19,000,000 Federal Home Loan Bank 5.024 3/22/99 18,945,803 16,000,000 Federal Home Loan Bank 5.036 3/23/99 15,951,991 18,000,000 Federal Home Loan Bank 5.062 3/24/99 17,943,305 17,000,000 Federal Farm Credit Bank 4.988 3/25/99 16,945,147 20,000,000 Federal Home Loan Bank 5.091 3/26/99 19,931,111 13,000,000 Federal Home Loan Bank 5.056 3/29/99 12,950,253 17,000,000 Federal Home Loan Bank 4.725 3/30/99 16,936,732 16,000,000 Federal Home Loan Bank 5.074 3/31/99 15,934,533 11,000,000 Federal Home Loan Bank 4.814 4/01/99 10,955,481 13,000,000 Federal Home Loan Bank 4.812 4/05/99 12,940,724 14,000,000 Federal Home Loan Bank 4.988 4/06/99 13,932,520 17,000,000 Federal Home Loan Bank 4.875 4/07/99 16,917,007 21,000,000 Federal Home Loan Bank 4.812 4/08/99 20,896,038 11,892,000 Federal Home Loan Bank 5.017 4/09/99 11,829,517 11,000,000 Federal Home Loan Bank 4.760 4/12/99 10,940,325 6,000,000 Federal Home Loan Bank 4.678 4/14/99 5,966,927 13,000,000 Federal Home Loan Bank 4.836 4/14/99 12,924,846 10,421,000 Federal Farm Credit Bank 4.908 4/15/99 10,359,125 12,000,000 Federal Home Loan Bank 4.802 4/16/99 11,928,240 15,000,000 Federal Home Loan Bank 4.783 4/19/99 14,904,654 10,000,000 Federal Farm Credit Bank 4.831 4/20/99 9,934,306 18,000,000 Federal Home Loan Bank 4.791 4/21/99 17,880,915 12,000,000 Federal Home Loan Bank 4.771 4/22/99 11,919,400 12,302,000 Federal Farm Credit Bank 4.978 4/23/99 12,214,704 25,000,000 Federal Home Loan Bank 4.749 4/26/99 24,819,944 25,000,000 Federal Farm Credit Bank 4.965 4/27/99 24,809,208 25,000,000 Federal Home Loan Bank 4.791 4/28/99 24,811,903 14,500,000 Federal Home Loan Bank 4.888 4/29/99 14,387,834
See notes to financial statements. 2 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (continued) (UNAUDITED) February 28,1999
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- -------------- $20,000,000 Federal Home Loan Bank 04.890% 4/30/99 $ 19,842,667 12,000,000 Federal Farm Credit Bank 04.758 5/03/99 11,902,770 20,000,000 Federal Home Loan Bank 04.787 5/04/99 19,833,956 11,000,000 Federal Farm Credit Bank 04.763 5/05/99 10,907,844 17,000,000 Federal Farm Credit Bank 04.831 5/06/99 16,853,828 16,000,000 Federal Home Loan Bank 04.833 5/07/99 15,859,747 11,000,000 Federal Farm Credit Bank 04.774 5/11/99 10,899,121 10,914,000 Federal Farm Credit Bank 04.767 5/12/99 10,812,936 14,000,000 Federal Home Loan Bank 04.565 5/14/99 13,863,593 8,000,000 Federal Farm Credit Bank 04.825 5/17/99 7,919,578 20,000,000 Federal Home Loan Bank 04.823 5/18/99 19,796,333 22,000,000 Federal Home Loan Bank 04.854 5/19/99 21,771,646 19,000,000 Federal Home Loan Bank 04.843 5/21/99 18,798,220 15,000,000 Federal Home Loan Bank 04.852 5/24/99 14,834,450 19,000,000 Federal Home Loan Bank 04.921 5/26/99 18,784,403 14,000,000 Federal Home Loan Bank 04.895 5/28/99 13,836,760 19,000,000 Federal Home Loan Bank 04.777 6/02/99 18,772,253 21,000,000 Federal Home Loan Bank 04.843 6/04/99 20,738,988 15,762,000 Federal Farm Credit Bank 04.809 6/07/99 15,561,621 16,000,000 Federal Home Loan Bank 04.852 6/15/99 15,777,871 15,000,000 Federal Home Loan Bank 04.858 6/16/99 14,789,567 1,000,000 Federal Home Loan Bank 04.770 6/23/99 985,433 14,000,000 Federal Home Loan Bank 04.767 6/23/99 13,796,067 14,000,000 Federal Home Loan Bank 04.820 6/30/99 13,781,192 13,000,000 Federal Home Loan Bank 04.731 7/07/99 12,788,764 12,245,000 Federal Farm Credit Bank 04.771 7/29/99 12,010,304 -------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (amortized cost -- $1,089,513,945) 1,089,513,945 -------------- TOTAL INVESTMENTS (100.2%) (cost -- $1,089,513,945*) $1,089,513,945 ==============
* Also represents cost for federal income tax purposes. The percentage shown for each investment category is the total value of that category as a percentage of the total net assets of the Fund. See notes to financial statements. 3 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) February 28, 1999 ASSETS Investments in money market instruments, at value: United States Government Agency Obligations, at value (amortized cost--$1,089,513,945)............................. $1,089,513,945 -------------- Total Investments............................................ 1,089,513,945 Cash........................................................... 4,439 Prepaid expenses............................................... 39,119 -------------- TOTAL ASSETS................................................. 1,089,557,503 -------------- LIABILITIES Dividends payable.............................................. 1,724,782 Due to J.J.B. Hilliard, W.L. Lyons, Inc.--Note B............... 257,433 Miscellaneous accrued expenses................................. 250,794 -------------- TOTAL LIABILITIES............................................ 2,233,009 -------------- NET ASSETS (equivalent to $1.00 per share; 1,500,000,000 shares authorized and 1,087,324,494 shares issued and outstanding)-- Note C........................................................ $1,087,324,494 ============== HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) For the six months ended February 28, 1999 INVESTMENT INCOME Interest income................................................ $ 26,023,309 EXPENSES Investment Advisory fee--Note B................................ 1,575,602 Shareholder servicing fees--Note B............................. 537,791 Transfer agent fees............................................ 56,009 Custodian fees................................................. 80,250 Printing and other expenses.................................... 46,635 Filing fees.................................................... 141,300 Insurance expense.............................................. 32,664 Legal and audit fees........................................... 24,435 Directors' fees................................................ 12,550 -------------- Total expenses................................................ 2,507,236 -------------- Net investment income......................................... 23,516,073 -------------- Net increase in net assets resulting from operations.......... $ 23,516,073 ==============
See notes to financial statements. 4 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended For the February 28, Year Ended 1999 August 31 (UNAUDITED) 1998 INCREASE IN NET ASSETS: -------------- ------------- FROM OPERATIONS Net investment income........................... $ 23,516,073 $ 38,414,949 -------------- ------------- Net increase in net assets resulting from operations.................................... 23,516,073 38,414,949 Dividends to shareholders ($.023083 and $.049903 per share, respectively)....................... ( 23,516,073) ( 38,414,949) -------------- ------------- Undistributed net investment income............. 0 0 -------------- ------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C................................. 142,358,671 357,885,980 NET ASSETS Beginning of period............................. 944,965,823 587,079,843 -------------- ------------- End of period................................... $1,087,324,494 $944,965,823 ============== =============
FINANCIAL HIGHLIGHTS The following table includes selected data for a share of capital stock outstanding throughout each period and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.
For the Six Months Ended February 28, 1999 For the Year Ended August 31, (UNAUDITED) 1998 1997 1996 1995 1994 ----------- -------- -------- -------- -------- -------- Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ---------- -------- -------- -------- -------- -------- Net investment income... .02 .05 .05 .05 .05 .03 ---------- -------- -------- -------- -------- -------- Total from investment operations............ .02 .05 .05 .05 .05 .03 Less distributions: Dividend distributions. ( .02) ( .05) ( .05) ( .05) ( .05) ( .03) ---------- -------- -------- -------- -------- -------- Total distributions.... ( .02) ( .05) ( .05) ( .05) ( .05) ( .03) ---------- -------- -------- -------- -------- -------- Net asset value, end of period................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ========== ======== ======== ======== ======== ======== Number of shares outstanding (000's omitted)............... 1,087,324 944,966 587,080 427,494 335,776 210,652 Total investment return. 2.31% 5.11% 4.96% 4.96% 5.04% 2.85% SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000's omitted).............. $1,087,324 $944,966 $587,080 $427,494 $335,776 $210,652 Operating expenses to average net assets.... .50% .51% .57% .61% .72% .75% Net investment income to average net assets. 4.65% 4.99% 4.86% 4.84% 4.97% 2.80%
See notes to financial statements 5 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE A--ACCOUNTING POLICIES Hilliard-Lyons Government Fund, Inc. (the "Fund") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended. The following is a summary of significant accounting poli- cies followed by the Fund in the preparation of its financial statements. Security Valuation: The Fund employs the amortized cost method of security valuation for U.S. Government securities which, in the opinion of the Board of Directors, represents fair value of the particular security. The Board moni- tors deviations between net asset value per share as determined by using available market quotations and the amortized cost method of security valua- tion. If the deviation in the aggregate is significant, the Board considers what action, if any, should be initiated to provide fair valuation. The Fund values repurchase agreements at cost and accrues interest into inter- est receivable. Normally, repurchase agreements are not subject to trading. Repurchase agreements are fully collateralized by U.S. Treasury and U.S. Gov- ernment Agency obligations valued at bid prices plus accrued interest. U.S. Treasury and U.S. Government Agency obligations pledged as collateral for re- purchase agreements are held by the Fund's custodian bank until maturity of the repurchase agreements. Provisions of the agreements provide that the mar- ket value of the collateral plus accrued interest on the collateral is greater than or equal to the repurchase price plus accrued interest at all times. In the event of default or bankruptcy by the other party to the agreements, the Fund maintains the right to sell the underlying securities at market value; however, realization and/or retention of the collateral may be subject to le- gal proceedings. Federal Income Taxes: It is the policy of the Fund to continue to qualify un- der the Internal Revenue Code as a regulated investment company and to dis- tribute all of its taxable income to shareholders, thereby relieving the Fund of federal income tax liability. Dividends to Shareholders: The net investment income of the Fund is determined on each business day and is declared as a dividend payable to shareholders of record immediately prior to the time of determination of net asset value on each such day. Dividends declared since the preceding dividend payment date are distributed monthly. The Fund's net investment income for dividend purposes includes accrued inter- est and accretion of original issue and market discounts earned and amortiza- tion of premiums, plus or minus any net realized gain or loss on portfolio se- curities, if any, occurring since the previous dividend declaration, less the accrued expenses of the Fund for such period. Investment Transactions: Investment transactions are accounted for on the date the securities are bought or sold. Net realized gains and losses on sales of investments, if any, are determined on the basis of identified cost. The Fund may enter into repurchase agreements with financial institutions, deemed to be credit worthy by J.J.B. Hilliard, W.L. Lyons, Inc. (the "Advis- er"), subject to the seller's agreement to repurchase and the Fund's agreement to sell such security at a mutually agreed upon date and price. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and ex- penses during the reporting period. Actual results could differ from those es- timates. NOTE B--INVESTMENT ADVISORY FEES & OTHER TRANSACTIONS WITH AFFILIATES On November 23, 1998, the Fund renewed its investment advisory agreement with the Adviser. Under the investment advisory agreement, the Adviser supervises investment operations of the Fund and the composition of its portfolio, and furnishes advice and recommendations with respect to investments and the pur- chase and sale of securities in accordance with the Fund's investment objec- tives, policies and restrictions; subject, however, to the general supervision and control of the Fund's Board of Directors. For the services the Adviser renders, the Fund has agreed to pay the Adviser an annual advisory fee of 1/2 of 1% of the first $200 million of average daily net assets, 3/8 of 1% of the next $100 million of average daily net assets, and 1/4 of 1% of the average daily net assets in excess of $300 million. Such fee is accrued daily and paid monthly. The Adviser has agreed to reimburse the Fund if total operating ex- penses of the Fund, excluding taxes, interest and extraordinary expenses (as defined), exceed on an annual basis 1 1/2% of the first $30 million of average daily net assets and 1% of average daily net assets over $30 million. There was no reimbursement required for the six months ended February 28, 1999. On August 20, 1998, PNC Bank Corp. entered into an Agreement and Plan of Merger with Hilliard-Lyons, Inc. (the "Merger") pursuant to which the Adviser will become a subsidiary of PNC Bank Corp. The Merger became effective on December 1, 1998. This Merger constitutes an assignment of the Investment Advisory Agreement (the "Agreement") as defined in the Investment Company Act of 1940. Shareholders approved a new Agreement at a Special Shareholders Meeting held November 23, 1998. The following are the results of the voting at the Meeting:
New Investment Advisory Agreement - --------------------------------- For................................................................. 481,431,634 Against............................................................. 7,234,652 Abstain............................................................. 17,359,505
Shareholders elected directors at a Special Shareholders Meeting held November 6, 1998. The following are the results of the voting at the Meeting:
Election of Directors For Against Abstain - --------------------- ----------- ------- --------- Donald F. Kohler.................................. 392,961,150 0 4,737,019 Gilbert L. Pamplin................................ 392,971,993 0 4,726,176 Joseph C. Curry, Jr............................... 392,853,378 0 4,844,791 J. Henning Hilliard............................... 391,205,410 0 6,492,759 J. Robert Shine................................... 391,853,850 0 5,844,319 Samuel G. Miller.................................. 392,576,258 0 5,121,911 Marianne R. Rowe.................................. 390,687,888 0 7,010,281
6 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (continued) (UNAUDITED) The Fund contracted with the Adviser to provide shareholder accounting servic- es. The Adviser is paid a fee of $1.00 per open account each month. No compensation is paid by the Fund to officers of the Fund and Directors who are affiliated with the Adviser. The Fund pays each unaffiliated director an annual retainer of $3,000, a fee of $750 for each Board of Directors or commit- tee meeting attended, and all expenses the Directors incur in attending meet- ings. NOTE C--CAPITAL STOCK The Fund was incorporated in June 1980 under the laws of the state of Maryland. At February 28, 1999, there were 1,500,000,000 shares of $.01 par value Common Stock authorized, and capital paid in aggregated $1,076,451,249. Transactions in Fund shares at $1.00 per share were as follows:
Six months ended Year ended February 28, August 31, 1999 1998 -------------- -------------- Shares sold.................................... 1,721,986,392 2,979,565,610 Shares issued to shareholders in reinvestment of dividends.................................. 23,361,934 36,974,418 -------------- -------------- 1,745,348,326 3,016,540,028 Less shares repurchased........................ (1,602,989,655) (2,658,654,048) -------------- -------------- Net increase in capital shares................. 142,358,671 357,885,980 ============== ==============
7 HILLIARD-LYONS GOVERNMENT FUND, INC. Hilliard Lyons Center Louisville, Kentucky 40202 (502) 588-8400 Investment Adviser J.J.B. Hilliard, W.L. Lyons, Inc. Hilliard Lyons Center Louisville, Kentucky 40202 (502) 588-8400 Distributor Provident Distributors, Inc. Four Falls Corporate Center, 6th Floor West Conshohocken, Pennsylvania 19428-2961 Custodian and Transfer Agent State Street Bank and Trust Company 225 Franklin Street P.O. Box 1912 Boston, Massachusetts 02105 Legal Counsel Brown, Todd & Heyburn PLLC 3200 Providian Center Louisville, Kentucky 40202 DIRECTORS AND OFFICERS BOARD OF DIRECTORS J. Henning Hilliard Donald F. Kohler Samuel G. Miller J. Robert Shine OFFICERS Donald F. Kohler - Chairman Joseph C. Curry, Jr. - President Dianna P. Wengler - Vice President and Treasurer Penny L. Wellinghurst - Secretary Hilliard-Lyons Government Fund, Inc. Semi-Annual Report February 28, 1999 [LOGO APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----