0000950131-01-503813.txt : 20011026
0000950131-01-503813.hdr.sgml : 20011026
ACCESSION NUMBER: 0000950131-01-503813
CONFORMED SUBMISSION TYPE: N-30D
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010831
FILED AS OF DATE: 20011018
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: 1940 Act
SEC FILE NUMBER: 811-03070
FILM NUMBER: 1761790
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
HILLIARD LYONS GOV'T FUND ANNUAL REPORT
October 10, 2001
Dear Shareholder:
A WORD FROM OUR CHAIRMAN. . .
Mr. Donald Kohler, Chairman of the Fund, was for a great many years Chairman
of the Investment Management Group and Hilliard Lyons Trust Company. On
September 20, 2001 he composed a letter to his own clients right after the
terrorist attacks on New York and Washington and we wish to share it with you
herein.
Dear Client:
It is very difficult to measure public or market psychology at a time like
this. I cannot add much to all the opinions expressed in the press, TV or in
business gatherings everywhere.
America is strong; its people are resolute and its leadership, I think, is the
best in decades. I am impressed with the unity in Congress on this issue. I
know Don Rumsfeld from college and assure you that he is a top-flight leader
with plenty of both public and private sector experience. I also feel that the
rest of the Administration is of high quality and very dedicated. I think the
President is handling himself well and has instilled confidence to the extent
he could. We have sustained a terrible tragedy.
As far as the investment scene is concerned, it is very volatile and
uncertain. As I have said for two years, the twenty-year party is over. We
must get used to a lower level of growth, some dislocations and economic
slowdowns, and a more historical valuation on stocks. The terrorist attack
just enhanced this uncertainty and concern and both of these are enemies of
the market.
Remember we are no longer in Oz--we are in Kansas--and the storm, which
carried us to the Emerald City, has now brought us back to the real world.
Unfortunately and sadly this "tornado" struck us where we were vulnerable--our
homeland. We will survive this as we have others in the past. But we shall pay
a price, certainly in economic terms and, I hope, only a small one in human
terms.
Consumer and capital activity will lessen. These had begun to decline before
September 11. The government will become much more involved--less with
hardware, more with intelligence. The depth and breadth of our undertaking are
incalculable at this point. It may be a long process. It definitely will be
difficult; and it will be expensive.
It is hard to provide advice at a time like this without appearing arrogant.
All of us have seen the value of our investments decline. I am "staying the
course" with some reserves, and suggest you do the same. Dividends and
interest seem secure even as prices decline.
We know how important your financial security is to you and we hope by now you
know how important it is to us. What is even more important, however, is the
security of our citizens and our nation. The purple mountain majesties and the
amber waves of grain are ours, and, the financial system supporting them is
sound and will not be denied.
I close this letter as I did the last one with St. Paul's definition of
FAITH--"the substance of things hoped for, the evidence of which is not seen."
HIGHLIGHTS FROM THE YEAR. . .
Net assets of the Fund increased substantially during the year from $1,366.4
million to $1,930.6 million at August 31, 2001, a 41% increase. The average
seven day yield ranged from a low of 3.19% to a high of 6.12% during the year.
Distributions of $.05022 were paid to shareholders, equivalent to an
annualized return of 5.02%. For those shareholders reinvesting their
dividends, this equates to a compound annual return of 5.14%. The current
yield is 2.86%.
As shown on the following Schedule of Investments, 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 both a
high degree of credit safety and a competitive yield.
HENNING HILLIARD'S DEATH. . .
We lost a dear friend and fellow director Henning Hilliard, who passed away on
September 22, 2001. Henning had been a director since the inception of the
Fund in 1980 and a mentor to us all. At the October 10, 2001 meeting of the
Board, Henning was posthumously elected SENIOR DIRECTOR EMERITUS. He will be
missed.
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, 2001
Principal Purchase Maturity
Amount Yield Date Value
----------- -------- -------- --------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--100.2%
$17,320,000 Federal Home Loan Bank 3.631% 09/04/01 $ 17,314,833
30,000,000 Federal Home Loan Bank 4.123 09/04/01 29,989,975
27,000,000 Federal Home Loan Bank 3.966 09/05/01 26,988,420
24,000,000 Federal Home Loan Bank 3.880 09/06/01 23,987,400
10,000,000 Federal Home Loan Bank 3.641 09/07/01 9,994,050
19,494,000 Federal Home Loan Bank 3.879 09/07/01 19,481,719
18,000,000 Federal Farm Credit Bank 3.856 09/10/01 17,983,080
21,000,000 Federal Home Loan Bank 3.897 09/10/01 20,980,050
26,000,000 Federal Farm Credit Bank 3.800 09/11/01 25,973,206
20,000,000 Federal Home Loan Bank 3.766 09/12/01 19,977,511
25,000,000 Federal Farm Credit Bank 3.802 09/13/01 24,969,083
19,000,000 Federal Home Loan Bank 3.704 09/14/01 18,975,163
10,000,000 Federal Home Loan Bank 3.704 09/14/01 9,986,928
30,000,000 Federal Farm Credit Bank 3.867 09/17/01 29,949,733
23,000,000 Federal Home Loan Bank 3.632 09/18/01 22,961,443
25,000,000 Federal Home Loan Bank 3.581 09/19/01 24,956,250
5,000,000 Federal Home Loan Bank 3.610 09/19/01 4,991,150
25,000,000 Federal Home Loan Bank 3.581 09/20/01 24,953,819
16,000,000 Federal Home Loan Bank 3.529 09/21/01 15,969,333
7,000,000 Federal Home Loan Bank 3.591 09/21/01 6,986,350
15,718,000 Federal Home Loan Bank 3.529 09/24/01 15,683,355
15,000,000 Federal Home Loan Bank 3.585 09/24/01 14,966,363
30,000,000 Federal Home Loan Bank 3.518 09/25/01 29,931,200
38,000,000 Federal Home Loan Bank 3.580 09/26/01 37,907,639
13,242,000 Federal Farm Credit Bank 3.916 09/27/01 13,205,562
15,000,000 Federal Home Loan Bank 3.586 09/27/01 14,961,975
20,000,000 Federal Home Loan Bank 3.724 09/28/01 19,945,400
12,000,000 Federal Home Loan Bank 3.724 09/28/01 11,967,240
24,000,000 Federal Home Loan Bank 3.744 10/01/01 23,927,000
24,000,000 Federal Home Loan Bank 3.734 10/02/01 23,924,773
15,000,000 Federal Home Loan Bank 3.704 10/03/01 14,951,733
15,000,000 Federal Home Loan Bank 4.126 10/03/01 14,946,667
9,000,000 Federal Home Loan Bank 3.559 10/04/01 8,971,208
19,000,000 Federal Home Loan Bank 3.584 10/04/01 18,938,867
20,000,000 Federal Farm Credit Bank 3.799 10/05/01 19,930,111
15,000,000 Federal Home Loan Bank 3.682 10/05/01 14,949,000
20,000,000 Federal Home Loan Bank 3.707 10/09/01 19,923,578
23,415,000 Federal Home Loan Bank 3.790 10/10/01 23,321,399
37,000,000 Federal Home Loan Bank 3.624 10/11/01 36,854,467
33,000,000 Federal Home Loan Bank 4.143 10/12/01 32,849,291
15,000,000 Federal Farm Credit Bank 3.709 10/15/01 14,933,633
15,000,000 Federal Home Loan Bank 3.708 10/15/01 14,933,633
34,000,000 Federal Home Loan Bank 3.601 10/16/01 33,850,400
27,000,000 Federal Farm Credit Bank 3.634 10/17/01 26,877,525
16,000,000 Federal Farm Credit Bank 3.624 10/18/01 15,926,053
20,000,000 Federal Farm Credit Bank 3.569 10/19/01 19,907,200
12,000,000 Federal Home Loan Bank 3.394 10/19/01 11,946,720
15,000,000 Federal Farm Credit Bank 3.538 10/22/01 14,926,688
15,000,000 Federal Farm Credit Bank 3.630 10/22/01 14,924,563
17,000,000 Federal Farm Credit Bank 3.581 10/23/01 16,914,301
10,000,000 Federal Home Loan Bank 3.570 10/23/01 9,949,589
See notes to financial statements.
2
HILLIARD-LYONS GOVERNMENT FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2001
Principal Purchase Maturity
Amount Yield Date Value
----------- -------- -------- --------------
$10,510,000 Federal Farm Credit Bank 3.670% 10/24/01 $ 10,454,606
17,035,000 Federal Home Loan Bank 3.901 10/24/01 16,940,200
20,000,000 Federal Farm Credit Bank 3.538 10/25/01 19,896,500
11,000,000 Federal Home Loan Bank 3.334 10/25/01 10,946,045
21,500,000 Federal Home Loan Bank 3.918 10/26/01 21,375,181
24,000,000 Federal Farm Credit Bank 3.574 10/29/01 23,865,053
16,000,000 Federal Home Loan Bank 3.462 10/30/01 15,911,107
10,000,000 Federal Home Loan Bank 3.594 10/30/01 9,942,475
10,000,000 Federal Home Loan Bank 3.670 10/31/01 9,940,500
10,000,000 Federal Home Loan Bank 3.852 10/31/01 9,937,667
31,000,000 Federal Farm Credit Bank 3.550 11/01/01 30,817,729
15,000,000 Federal Home Loan Bank 3.569 11/02/01 14,909,842
10,976,000 Federal Home Loan Bank 3.755 11/02/01 10,907,004
22,093,000 Federal Farm Credit Bank 3.542 11/05/01 21,954,980
33,000,000 Federal Home Loan Bank 3.564 11/06/01 32,789,460
15,000,000 Federal Home Loan Bank 3.446 11/07/01 14,905,921
21,000,000 Federal Home Loan Bank 3.575 11/07/01 20,863,599
23,000,000 Federal Home Loan Bank 3.478 11/08/01 22,852,289
25,000,000 Federal Home Loan Bank 3.565 11/09/01 24,833,250
34,000,000 Federal Home Loan Bank 3.448 11/13/01 33,767,657
16,000,000 Federal Farm Credit Bank 3.544 11/14/01 15,886,204
19,885,000 Federal Home Loan Bank 3.416 11/14/01 19,748,478
25,000,000 Federal Farm Credit Bank 3.523 11/15/01 24,820,833
23,061,000 Federal Farm Credit Bank 3.554 11/16/01 22,892,065
25,000,000 Federal Home Loan Bank 3.397 11/19/01 24,817,861
25,000,000 Federal Home Loan Bank 3.376 11/20/01 24,816,667
22,000,000 Federal Home Loan Bank 3.397 11/21/01 21,835,660
28,000,000 Federal Home Loan Bank 3.624 11/23/01 27,772,119
24,386,000 Federal Home Loan Bank 3.346 11/26/01 24,195,505
16,000,000 Federal Farm Credit Bank 3.386 11/27/01 15,872,013
23,000,000 Federal Home Loan Bank 3.628 11/28/01 22,801,536
33,000,000 Federal Farm Credit Bank 3.395 11/29/01 32,729,143
20,000,000 Federal Home Loan Bank 3.799 11/30/01 19,816,000
27,000,000 Federal Farm Credit Bank 3.366 12/04/01 26,768,760
35,000,000 Federal Farm Credit Bank 3.398 12/06/01 34,690,133
20,250,000 Federal Home Loan Bank 3.748 12/07/01 20,051,938
33,000,000 Federal Home Loan Bank 3.662 12/10/01 32,673,667
29,000,000 Federal Farm Credit Bank 3.399 12/11/01 28,729,881
15,000,000 Federal Farm Credit Bank 3.368 12/17/01 14,853,321
25,000,000 Federal Home Loan Bank 3.404 12/21/01 24,744,083
33,000,000 Federal Home Loan Bank 3.389 01/09/02 32,606,750
25,000,000 Federal Home Loan Bank 3.443 01/11/02 24,692,917
14,197,000 Federal Home Loan Bank 3.414 01/18/02 14,015,010
--------------
TOTAL U. S. GOVERNMENT AGENCY OBLIGATIONS
(amortized cost--$1,934,158,238) 1,934,158,238
--------------
TOTAL INVESTMENTS (100.2%) (cost--
$1,934,158,238*) $1,934,158,238
==============
* 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, 2001
ASSETS
Investments in money market instruments, at value:
United States Government Agency Obligations, at value
(amortized cost--$1,934,158,238)............................. $1,934,158,238
--------------
Total Investments............................................ 1,934,158,238
Cash........................................................... 1,692
Prepaid expenses............................................... 3,721
--------------
TOTAL ASSETS................................................. 1,934,163,651
--------------
LIABILITIES
Dividends payable.............................................. 2,739,085
Due to J. J. B. Hilliard, W. L. Lyons, Inc.--Note B............ 464,171
Miscellaneous accrued expenses................................. 315,285
--------------
TOTAL LIABILITIES............................................ 3,518,541
--------------
NET ASSETS (equivalent to $1.00 per share; 2,500,000,000 shares
authorized and 1,930,645,110 shares issued and outstanding)--
Note C........................................................ $1,930,645,110
==============
HILLIARD-LYONS GOVERNMENT FUND, INC.
STATEMENT OF OPERATIONS
For the year ended August 31, 2001
INVESTMENT INCOME
Interest income................................................ $ 91,120,761
EXPENSES
Investment Advisory fee--Note B................................ 4,878,826
Shareholder servicing fees--Note B............................. 1,896,058
Transfer agent fees............................................ 88,722
Custodian fees................................................. 228,590
Printing and other expenses.................................... 71,640
Filing fees.................................................... 174,245
Insurance expense.............................................. 54,700
Legal and audit fees........................................... 45,537
Directors' fees................................................ 46,591
--------------
Total expenses................................................ 7,484,909
--------------
Net investment income......................................... 83,635,852
--------------
Net increase in net assets resulting from operations.......... $ 83,635,852
==============
See notes to financial statements.
4
HILLIARD-LYONS GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the year ended August 31,
------------------------------
2001 2000
-------------- --------------
INCREASE IN NET ASSETS:
FROM OPERATIONS
Net investment income.......................... $ 83,635,852 $ 68,514,897
-------------- --------------
Net increase in net assets resulting from
operations................................... 83,635,852 68,514,897
Distributions to shareholders from net
investment income............................. ( 83,635,852) ( 68,514,897)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Net capital share transaction (at $1.00 per
share)--Note C................................ 564,222,986 257,605,168
-------------- --------------
Net increase in net assets..................... 564,222,986 257,605,168
NET ASSETS
Beginning of year.............................. 1,366,422,124 1,108,816,956
-------------- --------------
End of year.................................... $1,930,645,110 $1,366,422,124
============== ==============
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,
------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ---------- -------- --------
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:
From net investment
income................ (.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)............... 1,930,645 1,366,422 1,108,817 944,966 587,080
Total investment return. 5.14% 5.52% 4.65% 5.11% 4.96%
SIGNIFICANT RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of year
(000's omitted)....... $1,930,645 $1,366,422 $1,108,817 $944,966 $587,080
Operating expenses to
average net assets.... .44% .48% .46% .51% .57%
Net investment income
to average net assets. 4.92% 5.41% 4.55% 4.99% 4.86%
See notes to financial statements.
5
HILLIARD-LYONS GOVERNMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2001
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 proceeding 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.
In November 2000, the American Institute of Certified Public Accountants
(AICPA) issued a revised version of the AICPA Audit and Accounting Guide for
Investment Companies (the "Guide"). The Guide is effective for fiscal years
beginning after December 15, 2000. Management of the Hilliard-Lyons Government
Fund, Inc. does not anticipate that the adoption of the Guide will have a
significant effect on the financial statements.
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, 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 C--CAPITAL STOCK
The Fund was incorporated in June 1980 under the laws of the state of
Maryland. At August 31, 2001, there were 2,500,000,000 shares of $.01 par
value Common Stock authorized, and capital paid in aggregated $1,911,338,659.
Transactions in Fund shares at $1.00 per share were as follows:
For the year ended August 31,
------------------------------
2001 2000
-------------- --------------
Shares sold.................................... 5,569,914,084 5,027,027,063
Shares issued to shareholders in reinvestment
of dividends.................................. 82,931,674 65,686,096
-------------- --------------
5,652,845,758 5,092,713,159
Less shares repurchased........................ (5,088,622,772) (4,835,107,991)
-------------- --------------
Net increase in capital shares................. 564,222,986 257,605,168
============== ==============
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 of the
Hilliard-Lyons Government Fund, Inc., including the schedule of portfolio
investments, as of August 31, 2001, and the related statement of operations
for the year then ended, the statements 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, 2001, 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
Hilliard-Lyons Government Fund, Inc. as of August 31, 2001, 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 the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young
October 2, 2001
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
Frost, Brown, & Todd LLC
400 West Market Street, 32nd Floor
Louisville, Kentucky 40202
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
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.
Annual Report
August 31, 2001