-----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, G/GPQ7SSUHtNwlvawmyHhIvebmL1gO/b2QGRQEY2n4BBK8V2WTlYuDLC/we82cyu /RYLGV4bVd6kGgDvbsiW5Q== /in/edgar/work/0000950131-00-005694/0000950131-00-005694.txt : 20001016 0000950131-00-005694.hdr.sgml : 20001016 ACCESSION NUMBER: 0000950131-00-005694 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001013 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: 739838 BUSINESS ADDRESS: STREET 1: HILLIARD LYONS CTR STREET 2: PO BOX 32760 CITY: LOUISVILLE STATE: KY ZIP: 40232 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 0001.txt ANNUAL REPORT - HILLIARD LYONS GOV'T FUND September 19, 2000 Dear Shareholder: We are pleased to present this report on the Hilliard-Lyons Government Fund ("HLGF" or the "Fund") for the year ended August 31, 2000. Net assets of the Fund continued to increase and were $1,366.4 billion at year end compared to $1,108.8 billion last year, an increase of 23.2%. The average seven day yield ranged from a low of 4.62% to a high of 6.12% during the year. Distributions of $.053838 were paid to shareholders, equivalent to an annualized return of 5.38%. For those shareholders reinvesting their dividends, this equates to a compound annual return of 5.52%. The current yield is 6.10%. As shown in the Schedule of Investments beginning on the next page, the Fund continued to invest exclusively in short-term discount notes issued by the Federal Home Loan and Federal Farm Credit Banks. We believe these securities offer an attractive yield with a high degree of credit safety. Investments in these securities have the added benefit of allowing the Fund to pay dividends that pass through to our shareholders as income and this income is free of state income taxes in all states under current tax laws. The Fund's expense ratio of 0.48% is its second lowest in the past ten years and is significantly lower than the average for similar money market funds. Dividends paid to shareholders are derived from the Fund's income net of expenses, so this lower than average expense ratio directly benefits our shareholders. The larger asset size of the Fund has had a significant impact on the expenses of the Fund. In the past five years, assets of the Fund have increased more than $1 billion, a greater than 300% increase while the number of shareholder accounts more than quadrupled. The increase in fees for shareholder services has been offset by the lower management fee paid on assets over $300 million. At its current size, the Fund would pay an investment advisory fee of approximately 0.30%. The calculation of the amount of the investment advisory fee is detailed in the Notes to Financial Statements on page six of this report. The higher dividends paid by the Fund this year are a reflection of actions taken by the Federal Reserve (the "Fed") to boost interest rates in an effort to slow economic growth enough to ward off inflation. The Fed has raised interest rates by raising the federal funds rate, the rate banks charge one another for overnight loans. The latest rate increase of 1/2 of 1% in May 2000 was the largest in the past five years and followed five 1/4 of 1% rate increases since June 1999. However, not all interest rates that affect consumers have kept up with the Fed increases. The prime rate has moved in tandem with the Fed action taking with it certain rates tied to it such as rates on home equity loans. Others such as 30 year mortgage rates are barely higher than they were one year ago. The Fed has left rates unchanged at its last two meetings, leading some economists to believe that Fed officials believe the economy has slowed enough to ward off inflation. Others believe that while there is no doubt that the economy has slowed, it remains to be seen whether it is only a temporary pause. The rise in interest rates is a contributing factor to a lackluster year so far for equity markets. Stock prices had picked up somewhat in response to the Fed's halt in raising rates but have since been affected by the very same reason for the Fed's inaction--slower economic growth. Questions about the impact of slower economic growth on corporate profits are weighing on equity markets. Any hint that a company will not meet its earnings projections quickly ignites selling, sending prices down. The upcoming November elections are gradually being discounted by the equity markets. Amid this uncertainty some investors are developing a wait and see attitude. HLGF remains the number one choice for temporary client funds at Hilliard Lyons. We are committed to delivering a high quality money market fund which meets the needs and expectations of our customers. DONALD F. KOHLER JOSEPH C. CURRY, JR. DIANNA P. WENGLER Chairman President Vice President and Treasurer HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS August 31, 2000
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--100.3% $15,000,000 Federal Home Loan Bank 6.629% 09/01/00 $15,000,000 15,000,000 Federal Home Loan Bank 6.386 09/01/00 15,000,000 9,690,000 Federal Home Loan Bank 6.620 09/01/00 9,690,000 24,000,000 Federal Home Loan Bank 6.639 09/05/00 23,982,880 20,000,000 Federal Home Loan Bank 6.635 09/06/00 19,982,167 14,796,000 Federal Home Loan Bank 6.617 09/07/00 14,780,218 10,166,000 Federal Home Loan Bank 6.419 09/08/00 10,153,863 12,000,000 Federal Home Loan Bank 6.656 09/08/00 11,984,973 27,000,000 Federal Home Loan Bank 6.600 09/11/00 26,952,150 15,000,000 Federal Home Loan Bank 6.620 09/12/00 14,970,667 18,000,000 Federal Home Loan Bank 6.656 09/13/00 17,961,360 9,000,000 Federal Home Loan Bank 6.633 09/13/00 8,980,680 17,000,000 Federal Home Loan Bank 6.748 09/14/00 16,960,097 15,000,000 Federal Home Loan Bank 6.666 09/15/00 14,962,375 15,000,000 Federal Home Loan Bank 6.680 09/15/00 14,962,258 14,000,000 Federal Home Loan Bank 6.752 09/18/00 13,957,028 30,000,000 Federal Home Loan Bank 6.633 09/19/00 29,903,850 16,000,000 Federal Home Loan Bank 6.677 09/20/00 15,945,449 12,000,000 Federal Home Loan Bank 6.688 09/20/00 11,958,960 15,000,000 Federal Home Loan Bank 6.612 09/21/00 14,946,750 25,000,000 Federal Home Loan Bank 6.687 09/22/00 24,905,646 25,000,000 Federal Home Loan Bank 6.622 09/25/00 24,893,333 25,000,000 Federal Farm Credit Bank 6.547 09/26/00 24,889,410 30,000,000 Federal Home Loan Bank 6.713 09/27/00 29,859,275 17,000,000 Federal Farm Credit Bank 6.540 09/28/00 16,919,038 18,000,000 Federal Home Loan Bank 6.656 09/29/00 17,909,840 15,000,000 Federal Farm Credit Bank 6.573 10/02/00 14,917,592 22,000,000 Federal Farm Credit Bank 6.564 10/03/00 21,875,236 18,000,000 Federal Home Loan Bank 6.621 10/04/00 17,894,565 23,000,000 Federal Home Loan Bank 6.610 10/06/00 22,856,889 10,000,000 Federal Farm Credit Bank 6.694 10/10/00 9,930,017 28,000,000 Federal Home Loan Bank 6.603 10/11/00 27,801,200 18,000,000 Federal Farm Credit Bank 6.578 10/12/00 17,869,210 20,000,000 Federal Home Loan Bank 6.614 10/13/00 19,850,667 24,000,000 Federal Home Loan Bank 6.518 10/16/00 23,809,800 13,000,000 Federal Farm Credit Bank 6.534 10/17/00 12,894,519 34,000,000 Federal Home Loan Bank 6.645 10/18/00 33,714,579 10,000,000 Federal Farm Credit Bank 6.531 10/19/00 9,915,200 24,000,000 Federal Home Loan Bank 6.635 10/20/00 23,790,280 18,000,000 Federal Home Loan Bank 6.582 10/23/00 17,834,380 18,000,000 Federal Home Loan Bank 6.613 10/25/00 17,827,470 25,000,000 Federal Home Loan Bank 6.852 10/27/00 24,745,667 29,000,000 Federal Farm Credit Bank 6.560 10/30/00 28,696,773 19,000,000 Federal Home Loan Bank 6.650 11/01/00 18,792,829 27,000,000 Federal Home Loan Bank 6.739 11/02/00 26,698,913
See notes to financial statements. 2 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS August 31, 2000
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- -------------- $20,000,000 Federal Home Loan Bank 6.614% 11/03/00 $ 19,776,000 24,000,000 Federal Home Loan Bank 6.716 11/06/00 23,716,200 18,000,000 Federal Farm Credit Bank 6.567 11/07/00 17,786,605 25,000,000 Federal Home Loan Bank 6.582 11/08/00 24,699,194 18,000,000 Federal Home Loan Bank 6.582 11/10/00 17,777,050 22,000,000 Federal Farm Credit Bank 6.583 11/13/00 21,714,935 20,000,000 Federal Home Loan Bank 6.603 11/15/00 19,733,750 21,000,000 Federal Farm Credit Bank 6.578 11/16/00 20,717,153 16,000,000 Federal Home Loan Bank 6.603 11/17/00 15,781,320 30,000,000 Federal Home Loan Bank 6.712 11/20/00 29,570,667 15,000,000 Federal Home Loan Bank 6.557 11/21/00 14,786,025 24,000,000 Federal Home Loan Bank 6.603 11/22/00 23,650,680 29,000,000 Federal Home Loan Bank 6.582 11/24/00 28,568,963 16,000,000 Federal Farm Credit Bank 6.586 11/28/00 15,751,644 23,000,000 Federal Home Loan Bank 6.624 11/29/00 22,635,520 15,000,000 Federal Farm Credit Bank 6.587 12/04/00 14,750,900 12,000,000 Federal Farm Credit Bank 6.656 12/08/00 11,791,260 20,000,000 Federal Home Loan Bank 6.632 12/11/00 19,643,694 10,000,000 Federal Home Loan Bank 6.668 12/12/00 9,818,950 11,000,000 Federal Home Loan Bank 6.690 12/12/00 10,800,533 10,000,000 Federal Home Loan Bank 6.699 01/02/01 9,782,017 8,000,000 Federal Home Loan Bank 6.735 01/03/01 7,822,542 10,000,000 Federal Home Loan Bank 6.798 01/03/01 9,777,144 24,415,000 Federal Home Loan Bank 6.737 01/05/01 23,864,686 20,000,000 Federal Home Loan Bank 6.674 01/12/01 19,527,850 15,000,000 Federal Home Loan Bank 6.666 01/16/01 14,635,808 26,000,000 Federal Home Loan Bank 6.709 01/24/01 25,329,778 23,000,000 Federal Home Loan Bank 6.749 01/26/01 22,396,115 -------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (amortized cost--$1,370,735,036) 1,370,735,036 -------------- TOTAL INVESTMENTS (100.3%) (cost-- $1,370,735,036*) $1,370,735,036 ==============
*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 August 31, 2000 ASSETS Investments in money market instruments, at value: United States Government Agency Obligations, at value (amortized cost--$1,370,735,036)............................. $1,370,735,036 -------------- Total Investments............................................ 1,370,735,036 Cash........................................................... 2,961 Prepaid expenses............................................... 5,027 -------------- TOTAL ASSETS................................................. 1,370,743,024 -------------- LIABILITIES Dividends payable.............................................. 3,685,797 Due to J.J.B. Hilliard, W.L. Lyons, Inc.--Note B............... 343,600 Miscellaneous accrued expenses................................. 291,503 -------------- TOTAL LIABILITIES............................................ 4,320,900 -------------- NET ASSETS (equivalent to $1.00 per share; 1,500,000,000 shares authorized and 1,366,422,124 shares issued and outstanding)-- Note C........................................................ $1,366,422,124 ============== HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS For the year ended August 31, 2000 INVESTMENT INCOME Interest income................................................ $ 74,648,995 EXPENSES Investment Advisory fee--Note B................................ 3,804,254 Shareholder servicing fees--Note B............................. 1,608,934 Transfer agent fees............................................ 94,066 Custodian fees................................................. 213,390 Printing and other expenses.................................... 156,477 Filing fees.................................................... 127,700 Insurance expense.............................................. 30,467 Legal and audit fees........................................... 71,880 Directors' fees................................................ 26,930 -------------- Total expenses................................................ 6,134,098 -------------- Net investment income......................................... 68,514,897 -------------- Net increase in net assets resulting from operations.......... $ 68,514,897 ==============
See notes to financial statements. 4 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
For the year ended August 31, ------------------------------ 2000 1999 INCREASE IN NET ASSETS: -------------- -------------- FROM OPERATIONS Net investment income.......................... $ 68,514,897 $ 48,811,417 -------------- -------------- Net increase in net assets resulting from operations................................... 68,514,897 48,811,417 Dividends to shareholders ($.053838 and $.045545 per share, respectively)............. ( 68,514,897) ( 48,811,417) -------------- -------------- Undistributed net investment income............ 0 0 -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C................................ 257,605,168 163,851,133 NET ASSETS Beginning of year.............................. 1,108,816,956 944,965,823 -------------- -------------- End of year.................................... $1,366,422,124 $1,108,816,956 ============== ==============
FINANCIAL HIGHLIGHTS The following table includes selected data for a share of capital stock outstanding throughout each year and other performance information derived from the financial statements. It should be read in conjunction with the financial statements and notes thereto.
For the year ended August 31, ---------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- -------- -------- -------- Net asset value, beginning of year....... $1.00 $1.00 $1.00 $1.00 $1.00 ---------- ---------- -------- -------- -------- Net investment income.... .05 .05 .05 .05 .05 ---------- ---------- -------- -------- -------- Total from investment operations............. .05 .05 .05 .05 .05 Less distributions: Dividend distributions.. (.05) (.05) (.05) (.05) (.05) ---------- ---------- -------- -------- -------- Total distributions..... (.05) (.05) (.05) (.05) (.05) ---------- ---------- -------- -------- -------- Net asset value, end of year.................... $1.00 $1.00 $1.00 $1.00 $1.00 ========== ========== ======== ======== ======== Number of shares outstanding (000's omitted)................ 1,366,422 1,108,817 944,966 587,080 427,494 Total investment return.. 5.52% 4.65% 5.11% 4.96% 4.96% SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA Net assets, end of year (000's omitted)........ $1,366,422 $1,108,817 $944,966 $587,080 $427,494 Operating expenses to average net assets..... .48% .46% .51% .57% .61% Net investment income to average net assets..... 5.41% 4.55% 4.99% 4.86% 4.84%
See notes to financial statements 5 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2000 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 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 year ended August 31, 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 $5,000, a fee of $1,000 for each Board of Directors or committee meeting attended, and all expenses the Directors incur in attending meetings. NOTE C--CAPITAL STOCK The Fund was incorporated in June 1980 under the laws of the state of Maryland. At August 31, 2000, there were 1,500,000,000 shares of $.01 par value Common Stock authorized, and capital paid in aggregated $1,352,757,903. Transactions in Fund shares at $1.00 per share were as follows:
For the year ended August 31, ------------------------------ 2000 1999 -------------- -------------- Shares sold.................................... 5,027,027,063 3,681,335,182 Shares issued to shareholders in reinvestment of dividends.................................. 65,686,096 47,633,042 -------------- -------------- 5,092,713,159 3,728,968,224 Less shares repurchased........................ (4,835,107,991) (3,565,117,091) -------------- -------------- Net increase in capital shares................. 257,605,168 163,851,133 ============== ==============
6 Report of Independent Auditors The Board of Directors and Shareholders Hilliard-Lyons Government Fund, Inc. We have audited the accompanying statement of assets and liabilities, including the schedule of portfolio investments, of the Hilliard-Lyons Government Fund, Inc. (the Fund) as of August 31, 2000, and the related statement of operations for the year then ended, statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2000, by correspondence with the custodian. 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 Fund as of August 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. [SIGNATURE LOGO FOR ERNST & YOUNG] September 26, 2000 Louisville, Kentucky 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 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. Annual Report August 31, 2000 -----END PRIVACY-ENHANCED MESSAGE-----