-----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, UUHK21w6v+QGvBWGwWeS/Cu0/YHkCxbGqwE//4SDMLP4gnOrfWpE0TJr/69Jgivt GtK/yT7YHpm9UQqxZzjjwQ== 0000950131-00-002320.txt : 20000403 0000950131-00-002320.hdr.sgml : 20000403 ACCESSION NUMBER: 0000950131-00-002320 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000331 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: 590277 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 GOVERNMENT FUND SEMI ANNUAL REPORT DATED 2/29/00 March 16, 2000 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 29, 2000. Assets of the Fund increased to $1,291.0 billion from $1,108.8 billion during the six months and $1,087.3 billion a year ago. The Fund now holds just over 80% of the money market assets held in accounts of Hilliard Lyons' customers. The average seven day yield ranged from a low of 4.62 % to a high of 5.28 % during the six months. Distributions of $.024882 were paid, equivalent to an annualized yield of 5.00 %. For those shareholders in the dividend reinvestment plan, this equates to a compound annual yield of 5.06 %. For the calendar year ended December 31, 1999, 100% of the dividends paid by the Fund were exempt from state income tax in all states. This makes the fifth consecutive year that all dividends paid were fully exempt. The percentage of dividends paid eligible for exemption can vary as it is dependent on the investments of the Fund. However, given the current investment strategy of the Fund which is to invest primarily in short term U.S. government agency obligations, we believe the dividends paid will be substantially exempt from state income tax under current tax laws. As shown on the following Schedule of Investments at February 29, 2000, the Fund was 100% invested in such securities. The Federal Reserve (the "Fed") has raised interest rates by raising the federal funds rate 1/4 of 1% four times since last June in an effort to keep the economy from overheating and in an attempt to control inflation. These were the first interest rate hikes since 1995. The federal funds rate is now at 5.75%. This rate is what member banks charge each other for overnight loans and is a determining factor for other rates from credit cards to mortgages. Commercial banks' prime lending rate is also up a full percentage point to 8.75%, its highest level in almost five years. This rate is a benchmark for business and consumer loans. The U.S. economy is now in its longest expansion ever. In its recently released survey of regional economic conditions, the Fed indicated the U.S. economy grew strongly at the start of 2000. The labor market has grown increasingly tight causing widespread labor shortages and increased wage pressures for various types of labor both skilled and entry level. Federal Reserve Chairman Alan Greenspan has publicly reiterated his desire to slow economic growth and thereby avoid a resurgence of inflation. His remarks seem to be a clear indication that he is prepared to continue to raise interest rates until economic growth slows to a more sustainable level. Stock and bond markets continue to be volatile. The first week in March, the Dow Jones Industrial Average (the "DJIA") had its largest one day drop of 375 points in over one year. But even as blue chip stocks fell, technology stocks kept the Nasdaq Index relatively strong with its first advent over 5000 even though it failed to close the day at that level. The DJIA is about 16% below its record close on January 14, 2000. A drop of 20% is widely thought to signal the beginning of a bear market. There has been some strength in the bond market in reaction to the volatility of the stock market. Short term Treasury securities have seen increased demand with some investors taking money out of stocks in a "flight to quality". The Fund is proud to introduce its newest director, Lindy Richardson. Ms. Richardson was appointed to the board on November 30, 1999. She has many years of business experience and we welcome the new ideas and knowledge she brings to the Fund. We would like to take this opportunity to emphasize to you some of the advantages HLGF offers its shareholders. As discussed above, the Fund invests primarily in short term securities issued by U.S. government agencies which allows the Fund to pay dividends that are substantially to fully free of state income tax. Even though HLGF is one of the few money market funds to follow such a high quality investment strategy, it offers a competitive yield. The Fund also offers completely free checkwriting with no minimum investment nor minimum check amount required. We are committed to offering a high quality money market fund that meets the needs of today's investor. We will offer new services as they become needed and/or available. /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 Treasurer HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 29, 2000
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--100.2% $15,000,000 Federal Home Loan Bank 5.649% 03/01/00 $15,000,000 6,430,000 Federal Home Loan Bank 5.816 03/01/00 6,430,000 22,038,000 Federal Home Loan Bank 5.717 03/02/00 22,034,621 17,000,000 Federal Home Loan Bank 5.786 03/03/00 16,994,702 11,000,000 Federal Home Loan Bank 5.642 03/06/00 10,991,674 20,000,000 Federal Home Loan Bank 5.666 03/07/00 19,981,733 12,000,000 Federal Home Loan Bank 5.765 03/08/00 11,986,957 10,000,000 Federal Home Loan Bank 5.883 03/08/00 9,988,897 14,000,000 Federal Home Loan Bank 5.650 03/09/00 13,983,013 25,000,000 Federal Home Loan Bank 5.786 03/10/00 24,964,938 19,000,000 Federal Home Loan Bank 5.662 03/13/00 18,965,357 18,000,000 Federal Home Loan Bank 5.663 03/14/00 17,964,445 19,000,000 Federal Home Loan Bank 5.710 03/15/00 18,959,213 14,000,000 Federal Home Loan Bank 5.684 03/16/00 13,967,975 15,000,000 Federal Home Loan Bank 5.723 03/17/00 14,963,000 10,000,000 Federal Home Loan Bank 5.937 03/17/00 9,974,356 23,000,000 Federal Home Loan Bank 5.726 03/20/00 22,932,872 18,000,000 Federal Home Loan Bank 5.763 03/21/00 17,944,300 8,000,000 Federal Home Loan Bank 5.858 03/22/00 7,973,447 9,000,000 Federal Home Loan Bank 5.959 03/22/00 8,969,655 17,000,000 Federal Home Loan Bank 5.883 03/23/00 16,940,783 28,000,000 Federal Home Loan Bank 5.720 03/24/00 27,901,253 15,000,000 Federal Home Loan Bank 5.732 03/27/00 14,939,875 20,000,000 Federal Farm Credit Bank 5.943 03/28/00 19,913,600 5,531,000 Federal Home Loan Bank 5.762 03/28/00 5,508,019 15,000,000 Federal Home Loan Bank 5.688 03/29/00 14,935,367 7,120,000 Federal Home Loan Bank 5.885 03/29/00 7,088,379 17,000,000 Federal Home Loan Bank 5.900 03/30/00 16,921,805 17,000,000 Federal Home Loan Bank 5.787 03/31/00 16,920,383 18,000,000 Federal Farm Credit Bank 5.773 04/03/00 17,907,930 14,000,000 Federal Farm Credit Bank 5.764 04/04/00 13,926,484 25,000,000 Federal Home Loan Bank 5.859 04/05/00 24,861,944 13,000,000 Federal Home Loan Bank 5.818 04/06/00 12,927,070 20,000,000 Federal Home Loan Bank 5.772 04/07/00 19,885,506 19,000,000 Federal Home Loan Bank 5.783 04/10/00 18,882,200 15,000,000 Federal Home Loan Bank 5.781 04/11/00 14,904,333 15,000,000 Federal Home Loan Bank 5.781 04/12/00 14,902,000 14,000,000 Federal Home Loan Bank 5.954 04/13/00 13,903,847 20,000,000 Federal Home Loan Bank 5.548 04/14/00 19,869,956 10,000,000 Federal Home Loan Bank 5.893 04/17/00 9,925,583 20,000,000 Federal Home Loan Bank 5.787 04/18/00 19,850,667 16,000,000 Federal Home Loan Bank 5.786 04/19/00 15,878,044 12,000,000 Federal Home Loan Bank 5.781 04/19/00 11,908,533 15,000,000 Federal Farm Credit Bank 5.830 04/20/00 14,883,125 20,000,000 Federal Home Loan Bank 5.831 04/24/00 19,830,500
See notes to financial statements. 2 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 29, 2000
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- -------------- $23,000,000 Federal Home Loan Bank 5.794% 04/25/00 $ 22,802,168 16,000,000 Federal Home Loan Bank 5.869 04/26/00 15,858,382 9,000,000 Federal Home Loan Bank 5.889 04/26/00 8,920,060 20,000,000 Federal Farm Credit Bank 5.880 04/27/00 19,819,500 15,000,000 Federal Home Loan Bank 5.911 04/28/00 14,862,492 6,000,000 Federal Home Loan Bank 5.880 05/01/00 5,942,050 9,000,000 Federal Home Loan Bank 5.942 05/01/00 8,912,160 18,000,000 Federal Farm Credit Bank 5.817 05/02/00 17,826,710 23,000,000 Federal Home Loan Bank 5.821 05/03/00 22,774,600 15,000,000 Federal Home Loan Bank 5.965 05/04/00 14,845,867 18,000,000 Federal Home Loan Bank 5.901 05/05/00 17,814,100 15,000,000 Federal Home Loan Bank 5.853 05/08/00 14,839,917 15,000,000 Federal Home Loan Bank 5.853 05/09/00 14,837,563 20,000,000 Federal Home Loan Bank 5.828 05/10/00 19,780,667 24,000,000 Federal Home Loan Bank 5.853 05/11/00 23,732,567 12,516,000 Federal Home Loan Bank 5.855 05/12/00 12,374,319 10,000,000 Federal Home Loan Bank 5.930 05/12/00 9,884,800 22,000,000 Federal Home Loan Bank 5.839 05/15/00 21,741,500 10,000,000 Federal Home Loan Bank 5.829 05/16/00 9,880,933 12,000,000 Federal Home Loan Bank 5.932 05/17/00 11,852,417 15,000,000 Federal Home Loan Bank 5.876 05/18/00 14,815,725 18,000,000 Federal Home Loan Bank 5.887 05/19/00 17,775,640 16,000,000 Federal Home Loan Bank 5.870 05/22/00 15,792,996 12,000,000 Federal Home Loan Bank 5.881 05/23/00 11,842,577 10,000,000 Federal Home Loan Bank 5.974 05/24/00 9,864,900 12,000,000 Federal Home Loan Bank 5.983 05/24/00 11,837,600 18,000,000 Federal Home Loan Bank 5.984 05/26/00 17,750,600 14,000,000 Federal Home Loan Bank 5.963 05/30/00 13,797,700 13,000,000 Federal Farm Credit Bank 6.001 06/05/00 12,800,320 21,000,000 Federal Home Loan Bank 5.975 06/06/00 20,674,080 19,000,000 Federal Farm Credit Bank 5.962 06/08/00 18,699,563 12,000,000 Federal Home Loan Bank 5.962 06/12/00 11,802,583 16,000,000 Federal Home Loan Bank 5.961 06/14/00 15,731,667 21,000,000 Federal Home Loan Bank 5.993 06/15/00 20,642,603 14,000,000 Federal Home Loan Bank 6.001 06/16/00 13,759,072 16,000,000 Federal Home Loan Bank 6.028 07/06/00 15,672,622 12,000,000 Federal Home Loan Bank 6.083 07/14/00 11,736,750 20,000,000 Federal Home Loan Bank 6.115 07/24/00 19,527,944 -------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (amortized cost--$1,294,116,052) 1,294,116,052 -------------- TOTAL INVESTMENTS (100.2%) (cost-- $1,294,116,052*) $1,294,116,052 ==============
*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 29, 2000 ASSETS Investments in money market instruments, at value: United States Government Agency Obligations, at value (amortized cost--$1,294,116,052)............................. $1,294,116,052 -------------- Total Investments............................................ 1,294,116,052 Cash........................................................... 1,989 Prepaid expenses............................................... 41,695 -------------- TOTAL ASSETS................................................. 1,294,159,736 -------------- LIABILITIES Dividends payable.............................................. 2,631,623 Due to J.J.B. Hilliard, W.L. Lyons, Inc.--Note B............... 307,795 Miscellaneous accrued expenses................................. 196,470 -------------- TOTAL LIABILITIES............................................ 3,135,888 -------------- NET ASSETS (equivalent to $1.00 per share; 1,500,000,000 shares authorized and 1,291,023,848 shares issued and outstanding)-- Note C........................................................ $1,291,023,848 ============== HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) For the six months ended February 29, 2000 INVESTMENT INCOME Interest income................................................ $ 33,532,850 EXPENSES Investment Advisory fee--Note B................................ 1,836,936 Shareholder servicing fees--Note B............................. 779,744 Transfer agent fees............................................ 45,656 Custodian fees................................................. 116,720 Printing and other expenses.................................... 63,700 Filing fees.................................................... 91,000 Insurance expense.............................................. 35,957 Legal and audit fees........................................... 32,320 Directors' fees................................................ 11,830 -------------- Total expenses................................................ 3,013,863 -------------- Net investment income......................................... 30,518,987 -------------- Net increase in net assets resulting from operations.......... $ 30,518,987 ==============
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 29 Year Ended 2000 August 31 (UNAUDITED) 1999 INCREASE IN NET ASSETS: -------------- -------------- FROM OPERATIONS Net investment income.......................... $ 30,518,987 $ 48,811,417 -------------- -------------- Net increase in net assets resulting from operations................................... 30,518,987 48,811,417 Dividends to shareholders ($.024882 and $.045545 per share, respectively)............. ( 30,518,987) ( 48,411,417) -------------- -------------- Undistributed net investment income............ 0 0 -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C................................ 182,206,892 163,851,133 NET ASSETS Beginning of period............................ 1,108,816,956 944,965,823 -------------- -------------- End of period.................................. $1,291,023,848 $1,108,816,956 ============== ==============
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 29, 2000 For the year ended August 31, (UNAUDITED) 1999 1998 1997 1996 1995 ------------ ---------- -------- -------- -------- -------- 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 .05 ---------- ---------- -------- -------- -------- -------- Total from investment operations............ .02 .05 .05 .05 .05 .05 Less distributions: Dividend distributions. (.02) (.05) (.05) (.05) (.05) (.05) ---------- ---------- -------- -------- -------- -------- Total distributions.... (.02) (.05) (.05) (.05) (.05) (.05) ---------- ---------- -------- -------- -------- -------- 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)........ 1,291,024 1,108,817 944,966 587,080 427,494 335,776 Total investment return. 2.51% 4.65% 5.11% 4.96% 4.96% 5.04% SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000's omitted)....... $1,291,024 $1,108,817 $944,966 $587,080 $427,494 $335,776 Operating expenses to average net assets.... .50%(a) .46% .51% .57% .61% .72% Net investment income to average net assets. 5.02%(a) 4.55% 4.99% 4.86% 4.84% 4.97%
(a) Annualized 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 policies 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 monitors deviations between net asset value per share as determined by using available market quotations and the amortized cost method of security valuation. 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 interest receivable. Normally, repurchase agreements are not subject to trading. Repurchase agreements are fully collateralized by U.S. Treasury and U.S. Government Agency obligations valued at bid prices plus accrued interest. U.S. Treasury and U.S. Government Agency obligations pledged as collateral for repurchase agreements are held by the Fund's custodian bank until maturity of the repurchase agreements. Provisions of the agreements provide that the market 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 legal proceedings. Federal Income Taxes: It is the policy of the Fund to continue to qualify under the Internal Revenue Code as a regulated investment company and to distribute 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 interest and accretion of original issue and market discounts earned and amortization of premiums, plus or minus any net realized gain or loss on portfolio securities, 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 "Adviser"), 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 expenses during the reporting period. Actual results could differ from those estimates. 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 purchase and sale of securities in accordance with the Fund's investment objectives, 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 expenses 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 29, 2000. The Fund contracted with the Adviser to provide shareholder accounting services. 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 committee meeting attended, and all expenses the Directors incur in attending meetings. 6 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (continued) (UNAUDITED) NOTE C--CAPITAL STOCK The Fund was incorporated in June 1980 under the laws of the state of Maryland. At February 29, 2000, there were 1,500,000,000 shares of $.01 par value Common Stock authorized, and capital paid in aggregated $1,278,113,610. Transactions in Fund shares at $1.00 per share were as follows:
Six months ended Year ended February 29, August 31, 2000 1999 -------------- -------------- Shares sold.................................... 2,420,485,526 3,681,335,182 Shares issued to shareholders in reinvestment of dividends.................................. 29,497,704 47,633,042 -------------- -------------- 1,745,348,326 3,728,968,224 Less shares repurchased........................ (2,267,776,338) (3,565,117,091) -------------- -------------- Net increase in capital shares................. 182,206,892 163,851,133 ============== ==============
7 HILLIARD-LYONS GOVERNMENT FUND, INC. Hilliard Lyons Center Louisville, Kentucky 40202 (502) 588-8400 Investment Adviser and Distributor J.J.B. Hilliard, W.L. Lyons, Inc. Hilliard Lyons Center Louisville, Kentucky 40202 (502) 588-8400 Distributor Provident Distributors, Inc. 3200 Horizon Drive King of Prussia, Pennsylvania 19406 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 400 West Market Street, 32nd Floor Louisville, Kentucky 40202 DIRECTORS AND OFFICERS BOARD OF DIRECTORS J. Henning Hilliard Donald F. Kohler Samuel G. Miller Lindy B. Richardson 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 29, 2000 [HILLARD LYONS LOGO APPEARS HERE] -----END PRIVACY-ENHANCED MESSAGE-----