-----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, QGNr2/4vwNNHStXGYXCUfknGW96B24FHKr7xRfW6xR9aUIU912pkzVvJbGG+223J fLn8oPJEtMq8mHY7E3sm+w== 0000950131-01-500562.txt : 20010410 0000950131-01-500562.hdr.sgml : 20010410 ACCESSION NUMBER: 0000950131-01-500562 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010228 FILED AS OF DATE: 20010405 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: 1595859 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 dn30d.txt GOVERNMENT FUND SEMI ANNUAL REPORT DATED 2/28/01 March 23, 2001 Dear Shareholder: We are pleased to present this report on the Hilliard-Lyons Government Fund ("HLGF" or the "Fund") for the six months ended February 28, 2001. Net assets of the Fund continued to increase and were $1,795.8 million at February 28th compared to $1,366.4 million at the end of the year, an increase of 31.4%. The average seven day yield ranged from a low of 5.36% to a high of 6.12% during the six months. Distributions of $.029508 were paid to shareholders, equivalent to an annualized return of 5.95%. For those shareholders reinvesting their dividends, this equates to a compound annual return of 6.03%. The current yield as of the date of this letter is 5.00%. Dividends paid by the Fund in the calendar year ended December 31, 2000 were 100% exempt from state income tax in all states. This makes the sixth consecutive year that all dividends paid were fully exempt. The percentage of dividends paid eligible for exemption is dependent on the investments of the Fund. Given the current investment strategy of the Fund which is to invest primarily in short-term U.S. government agency obligations, we expect dividends paid to be substantially exempt from state income tax under current tax laws. 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 and the Student Loan Marketing Association. We believe these securities offer an attractive yield with a high degree of credit safety. The Federal Reserve (the "Fed") has lowered the federal funds rate, the rate banks charge one another for overnight loans, three times so far this year each by 1/2 of 1%. These rate decreases are a marked change from the summer of 1999 through 2000 when the Fed increased the federal funds rate six times in efforts to slow economic growth and thwart inflation. The amount and quickness of these cuts in interest rates are bold by current Fed standards. In less than three months they have cut most of the rate increases they took over a year to initiate. History has shown that it takes time for the effects of actions by the Fed to work their way through the economy. It can take up to nine months for the effects to be fully realized. This lag can cause people to underestimate the power of monetary policy. If the Fed's rate cuts have the same effect as they historically have, they will lead to increased business and consumer borrowing. It will be easier and cheaper for businesses to raise money and rates on consumer loans such as mortgages will be lower. The psychological effect of the Fed's actions is key to consumer confidence. Federal Reserve Chairman, Alan Greenspan has said that consumer confidence is the economy's last firewall against recession. Consumer confidence is declining if activity in equity markets is any indication. The Dow Jones Industrial Average, the "DJIA" is at a two year low. The week of March 12th saw the DJIA fall over 800 points, its worst weekly decline ever. If investors become convinced that an easier monetary policy can soften a recession, they should stop selling stocks. This in turn, could lead to an improvement in consumer confidence. Your Fund is largely unaffected by this market turmoil. We will continue to follow our same investment philosophy. We remain committed to offering our shareholders a money market fund offering both a competitive return and a high degree of credit safety. /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 28, 2001
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS--100.2% $10,015,000 Federal Home Loan Bank 5.303% 03/01/01 $10,015,000 15,610,000 Federal Home Loan Bank 6.535 03/01/01 15,610,000 22,000,000 Federal Farm Credit Bank 6.520 03/02/01 21,996,138 10,000,000 Federal Home Loan Bank 6.313 03/02/01 9,998,292 23,000,000 Federal Home Loan Bank 6.544 03/05/01 22,983,823 25,000,000 Federal Farm Credit Bank 6.522 03/06/01 24,978,090 22,000,000 Federal Home Loan Bank 6.544 03/07/01 21,976,827 18,000,000 Federal Home Loan Bank 6.483 03/08/01 17,977,985 21,000,000 Federal Farm Credit Bank 6.542 03/09/01 20,970,460 18,000,000 Federal Home Loan Bank 6.487 03/12/01 17,965,405 15,000,000 Federal Farm Credit Bank 6.214 03/13/01 14,969,750 22,000,000 Federal Home Loan Bank 6.592 03/14/01 21,949,791 32,000,000 Student Loan Marketing Association 6.543 03/15/01 31,921,600 20,000,000 Federal Home Loan Bank 6.565 03/16/01 19,947,333 14,000,000 Federal Farm Credit Bank 6.536 03/19/01 13,955,760 21,000,000 Federal Farm Credit Bank 6.522 03/20/01 20,930,064 10,000,000 Federal Home Loan Bank 6.270 03/20/01 9,967,858 20,000,000 Federal Home Loan Bank 6.313 03/21/01 19,931,889 26,000,000 Federal Home Loan Bank 6.534 03/21/01 25,909,000 15,000,000 Federal Farm Credit Bank 6.576 03/22/01 14,944,788 27,000,000 Federal Home Loan Bank 6.565 03/23/01 26,895,555 25,000,000 Federal Home Loan Bank 6.505 03/26/01 24,890,799 25,000,000 Federal Farm Credit Bank 6.223 03/27/01 24,890,944 16,000,000 Federal Home Loan Bank 6.567 03/28/01 15,923,920 20,000,000 Federal Home Loan Bank 6.555 03/29/01 19,902,000 21,000,000 Federal Home Loan Bank 6.486 03/30/01 20,893,933 33,000,000 Student Loan Marketing Association 6.344 04/02/01 32,819,893 23,000,000 Federal Home Loan Bank 5.394 04/03/01 22,888,891 29,000,000 Federal Home Loan Bank 6.548 04/04/01 28,827,724 10,000,000 Federal Home Loan Bank 5.491 04/06/01 9,946,200 16,000,000 Federal Home Loan Bank 6.555 04/06/01 15,899,040 10,000,000 Federal Farm Credit Bank 5.501 04/09/01 9,942,042 15,713,000 Federal Farm Credit Bank 5.477 04/10/01 15,619,944 15,000,000 Federal Home Loan Bank 6.139 04/11/01 14,898,354 3,849,000 Federal Home Loan Bank 6.158 04/11/01 3,822,830 15,639,000 Federal Home Loan Bank 6.350 04/12/01 15,527,155 20,000,000 Federal Home Loan Bank 5.428 04/16/01 19,865,067 12,000,000 Federal Farm Credit Bank 6.154 04/17/01 11,906,627 22,000,000 Federal Farm Credit Bank 6.375 04/18/01 21,819,600 20,000,000 Federal Farm Credit Bank 5.531 04/19/01 19,853,544 28,000,000 Federal Home Loan Bank 5.499 04/20/01 27,791,944 12,000,000 Federal Farm Credit Bank 5.378 04/23/01 11,907,427 35,000,000 Federal Home Loan Bank 5.509 04/25/01 34,713,389 20,000,000 Federal Home Loan Bank 5.287 04/27/01 19,836,600 12,000,000 Federal Home Loan Bank 6.394 04/27/01 11,882,960 17,000,000 Federal Home Loan Bank 6.329 04/30/01 16,827,450 9,000,000 Federal Home Loan Bank 5.216 05/02/01 8,921,260 21,000,000 Federal Home Loan Bank 5.259 05/02/01 20,814,827 25,000,000 Federal Home Loan Bank 5.238 05/04/01 24,773,333
See notes to financial statements. 2 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 28, 2001
Principal Purchase Maturity Amount Yield Date Value ----------- -------- -------- -------------- $23,000,000 Federal Home Loan Bank 5.267% 05/07/01 $ 22,780,408 25,000,000 Federal Home Loan Bank 5.280 05/09/01 24,753,708 10,281,000 Federal Farm Credit Bank 4.986 05/10/01 10,183,645 14,000,000 Federal Farm Credit Bank 5.186 05/10/01 13,862,256 20,000,000 Federal Home Loan Bank 5.298 05/11/01 19,796,467 20,000,000 Federal Home Loan Bank 6.053 05/11/01 19,769,644 30,000,000 Federal Home Loan Bank 5.238 05/14/01 29,685,500 20,000,000 Federal Home Loan Bank 5.184 05/15/01 19,789,583 25,000,000 Federal Home Loan Bank 5.292 05/16/01 24,728,194 25,000,000 Federal Home Loan Bank 5.186 05/17/01 24,729,965 18,000,000 Federal Home Loan Bank 6.322 05/18/01 17,763,270 20,000,000 Federal Home Loan Bank 5.484 05/21/01 19,761,050 27,000,000 Federal Home Loan Bank 5.384 05/22/01 26,678,970 27,000,000 Federal Home Loan Bank 5.153 05/23/01 26,688,128 25,000,000 Federal Home Loan Bank 5.171 05/24/01 24,706,583 9,000,000 Federal Home Loan Bank 5.059 05/25/01 8,895,238 17,000,000 Federal Home Loan Bank 5.182 05/25/01 16,797,700 27,000,000 Federal Home Loan Bank 5.170 05/29/01 26,664,248 10,000,000 Federal Home Loan Bank 5.062 05/30/01 9,876,750 10,000,000 Federal Home Loan Bank 5.459 05/30/01 9,868,250 28,000,000 Federal Home Loan Bank 5.182 05/31/01 27,643,280 38,000,000 Federal Farm Credit Bank 6.048 06/01/01 37,435,784 20,000,000 Federal Farm Credit Bank 5.288 06/04/01 19,729,778 27,000,000 Federal Home Loan Bank 5.092 06/05/01 26,644,320 26,000,000 Federal Home Loan Bank 5.092 06/06/01 25,653,926 14,235,000 Federal Home Loan Bank 6.256 06/08/01 14,000,514 16,000,000 Federal Farm Credit Bank 4.872 06/11/01 15,785,120 20,000,000 Federal Farm Credit Bank 5.307 06/12/01 19,706,450 15,000,000 Federal Home Loan Bank 5.481 06/13/01 14,771,200 10,000,000 Federal Home Loan Bank 4.905 06/15/01 9,851,600 20,000,000 Federal Home Loan Bank 6.043 06/18/01 19,648,778 30,000,000 Federal Home Loan Bank 5.338 06/19/01 29,527,917 10,000,000 Federal Home Loan Bank 5.217 06/20/01 9,844,908 25,000,000 Federal Home Loan Bank 5.521 06/22/01 24,583,313 20,000,000 Federal Home Loan Bank 5.944 06/27/01 19,626,333 17,000,000 Federal Home Loan Bank 5.298 06/28/01 16,712,846 25,000,000 Federal Home Loan Bank 5.257 06/29/01 24,578,333 25,000,000 Federal Home Loan Bank 5.263 07/06/01 24,553,736 25,000,000 Federal Home Loan Bank 5.338 07/11/01 24,529,750 26,000,000 Federal Home Loan Bank 4.841 07/13/01 25,546,112 19,000,000 Federal Farm Credit Bank 5.094 07/24/01 18,623,483 20,000,000 Federal Home Loan Bank 4.772 08/24/01 19,550,222 -------------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Amortized cost--$1,799,730,364) 1,799,730,364 -------------- TOTAL INVESTMENTS (100.2%) (cost--$1,799,730,364*) $1,799,730,364 ==============
*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, 2001 ASSETS Investments in money market instruments, at value: United States Government Agency Obligations, at value (amortized cost--$1,799,730,364)............................. $1,799,730,364 -------------- Total Investments............................................ 1,799,730,364 Cash........................................................... 4,646 Prepaid expenses............................................... 30,635 -------------- TOTAL ASSETS................................................. 1,799,765,645 -------------- LIABILITIES Dividends payable.............................................. 3,431,279 Due to J.J.B. Hilliard, W.L. Lyons, Inc.--Note B............... 384,857 Miscellaneous accrued expenses................................. 190,231 -------------- TOTAL LIABILITIES............................................ 4,006,367 -------------- NET ASSETS (equivalent to $1.00 per share; 2,000,000,000 shares authorized and 1,795,759,278 shares issued and outstanding)-- Note C........................................................ $1,795,759,278 ============== HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) For the six months ended February 28, 2001 INVESTMENT INCOME Interest income................................................ $ 48,491,424 EXPENSES Investment Advisory fee--Note B................................ 2,210,853 Shareholder servicing fees--Note B............................. 878,265 Transfer agent fees............................................ 42,535 Custodian fees................................................. 98,410 Printing and other expenses.................................... 53,396 Filing fees.................................................... 50,045 Insurance expense.............................................. 14,935 Legal and audit fees........................................... 19,961 Directors' fees................................................ 19,543 -------------- Total expenses................................................ 3,387,943 -------------- Net investment income......................................... 45,103,481 -------------- Net increase in net assets resulting from operations.......... $ 45,103,481 ==============
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 2001 August 31, (UNAUDITED) 2000 INCREASE IN NET ASSETS: -------------- -------------- FROM OPERATIONS Net investment income.......................... $ 45,103,481 $ 68,514,897 -------------- -------------- Net increase in net assets resulting from operations................................... 45,103,481 68,514,897 Dividends to shareholders ($.029508 and $.053838 per share, respectively)............. ( 45,103,481) ( 68,514,897) -------------- -------------- Undistributed net investment income............ 0 0 -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C................................ 429,337,154 257,605,168 NET ASSETS Beginning of period............................ 1,366,422,124 1,108,816,956 -------------- -------------- End of period.................................. $1,795,759,278 $1,366,422,124 ============== ==============
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, 2001 For the Year Ended August 31, (UNAUDITED) 2000 1999 1998 1997 1996 ------------ ---------- ---------- -------- -------- -------- Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ---------- ---------- ---------- -------- -------- -------- Net investment income... .03 .05 .05 .05 .05 .05 ---------- ---------- ---------- -------- -------- -------- Total from investment operations............ .03 .05 .05 .05 .05 .05 Less distributions: Dividend distributions. (.03) (.05) (.05) (.05) (.05) (.05) ---------- ---------- ---------- -------- -------- -------- Total distributions.... (.03) (.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)........ 1,795,759 1,366,422 1,108,817 944,966 587,080 427,494 Total investment return. 2.99% 5.52% 4.65% 5.11% 4.96% 4.96% SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000's omitted)....... $1,795,759 $1,366,422 $1,108,817 $944,966 $587,080 $427,494 Operating expenses to average net assets.... .45%(a) .48% .46% .51% .57% .61% Net investment income to average net assets. 5.93%(a) 5.41% 4.55% 4.99% 4.86% 4.84%
(a) Annualized See notes to financial statements 5 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 October 4, 2000, 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 28, 2001. 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 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. 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 28, 2001, there were 2,000,000,000 shares of $.01 par value Common Stock authorized, and capital paid in aggregated $1,777,801,686. Transactions in Fund shares at $1.00 per share were as follows:
Six months ended Year ended February 28, August 31, 2001 2000 -------------- -------------- Shares sold.................................... 2,759,826,014 5,027,027,063 Shares issued to shareholders in reinvestment of dividends.................................. 44,432,569 65,686,096 -------------- -------------- 2,804,258,583 5,092,713,159 Less shares repurchased........................ (2,374,921,429) (4,835,107,991) -------------- -------------- Net increase in capital shares................. 429,337,154 257,605,168 ============== ==============
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 Frost Brown Todd LLC 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 Hilliard-Lyons Government Fund, Inc. Semi-Annual Report February 28, 2001 [HILLIARD-LYONS LOGO] -----END PRIVACY-ENHANCED MESSAGE-----