-----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, IskkqgPfUZGbfpiL8NPI8Guva3hMY/drCtugTHRicJa/ksUJttqBTfYL08Lygfm6 p5iqZRJ9dU4ozJDAVT9p3w== 0000950131-96-001501.txt : 19960409 0000950131-96-001501.hdr.sgml : 19960409 ACCESSION NUMBER: 0000950131-96-001501 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960408 SROS: NONE 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: 96545066 BUSINESS ADDRESS: STREET 1: HILLIARD LYONS CTR 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 HILLIARD-LYONS GOVERNMENT FUND, INC. SAR March 28, 1996 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, 1996. Net assets grew $118 million during the six months and $210 million during the year ended February 29, 1996. Net assets have since increased to a new record high of $462 million on March 27, 1996. This compares to net assets of $244 million one year ago. The average seven day yield ranged from 4.72% to 5.06% during the six months. Distributions of $.024817 were paid, equivalent to an annualized yield of 4.98%. For those shareholders in the dividend reinvestment plan, the distributions paid equate to a compound annual yield of 5.03%. As of the date of this letter, the seven day yield was 4.62%. For the calendar year ended December 31, 1995, 100% of the dividends paid by the Fund were exempt from state income tax in all states. This is the first year in the history of the Fund that all the dividends paid in a year were fully exempt. While the percentage of dividends eligible for exemption will vary from year to year, the dividends paid by HLGF would be partially exempt from state income tax under current tax laws. According to IBC/Donoghue Inc., the total return for the average taxable money market fund decreased 62 basis points from February 1995 to February 1996 including a 23 basis point drop in January alone. Interest rates fell in response to three quarter point rate cuts by the Federal Reserve ("Fed") during that time, the last in January 1996. During this same time period, total assets of taxable money market funds increased 30% to $687 billion while HLGF's assets increased 86%. We feel investor concern for investment safety has contributed to HLGF's above average increase in assets. Headlines such as the Orange County, California bankruptcy brought the issue of credit safety into public view. In the past year, several money market funds have had to scramble to maintain their net asset value of $1.00 per share because of losses both realized and unrealized from owning troubled securities. While memories of particular incidents such as Orange County are fading, investors are wise to remember that all money market funds do not invest in the same types of securities. As shown on the enclosed Schedule of Investments, on February 29, 1996 HLGF was fully invested in U.S. government agency discount note obligations with maturity dates of less than three months. The Fund has followed the same investment strategy as outlined in our letter last year. Investments are concentrated in discount notes with short maturities issued by the Federal Home Loan Banks, Federal Farm Credit Banks and the Student Loan Marketing Association. This investment strategy has allowed HLGF to provide its shareholders a competitive return coupled with a high degree of credit safety and income that is partially and in 1995, fully exempt from state income tax in all states. 1995 was an eventful year for financial markets. The Dow Jones Industrial Average ("DJIA") rose 33% in 1995 and reached several new highs. Before 1995, a DJIA of 4000 seemed improbable to many but that level was reached and then surpassed by the end of the first quarter. 1996 started out where 1995 left off. With its fifth largest one day point gain on March 18, 1996, the DJIA closed at a record level of 5683. After over a year of advance we would expect considerable volatility in both stock and bond markets as they struggle to reflect investor hopes and fears for the months ahead. We have lowered our expectations for 1996 (compared to 1995). It seems sensible to do so. What happens next? The strength and direction of the economy are not clear despite certain indicators such as February's strong employment numbers. Further rate cuts that had once seemed certain are for now less likely. The Federal Reserve took no action at its most recent meeting. If the Fed does remain on the sidelines, short term interest rates may rise slightly. Good health and luck to you all. /s/ DONALD F. KOHLER /s/ JOSEPH C. CURRY, JR. DONALD F. KOHLER JOSEPH C. CURRY, JR. Chairman President /s/ DIANNA P. WENGLER DIANNA P. WENGLER Vice President and Treasurer 1 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) FEBRUARY 29, 1996
PRINCIPAL PURCHASE MATURITY AMOUNT YIELD DATE VALUE ----------- -------- -------- ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS -- 100.1% $ 8,500,000 Federal Home Loan Bank 5.644% 03/01/96 $ 8,500,000 10,570,000 Federal Home Loan Bank 5.440 03/01/96 10,570,000 8,000,000 Federal Home Loan Bank 5.684 03/04/96 7,996,340 11,000,000 Federal Home Loan Bank 5.639 03/05/96 10,993,314 10,000,000 Federal Farm Credit Bank 5.448 03/06/96 9,992,625 10,500,000 Federal Farm Credit Bank 5.598 03/07/96 10,490,480 14,000,000 Federal Farm Credit Bank 5.467 03/08/96 13,985,491 8,000,000 Federal Farm Credit Bank 5.479 03/11/96 7,988,133 4,500,000 Federal Home Loan Bank 5.256 03/11/96 4,493,563 8,000,000 Federal Farm Credit Bank 5.465 03/13/96 7,985,787 12,000,000 Federal Home Loan Bank 5.607 03/14/96 11,976,427 8,000,000 Federal Farm Credit Bank 5.389 03/15/96 7,983,636 10,000,000 Federal Home Loan Bank 5.636 03/18/96 9,974,264 5,170,000 Federal Home Loan Bank 5.193 03/19/96 5,156,868 9,500,000 Federal Home Loan Bank 5.211 03/20/96 9,474,429 9,000,000 Federal Farm Credit Bank 5.190 03/21/96 8,974,650 12,000,000 Federal Home Loan Bank 5.498 03/22/96 11,962,620 7,500,000 Federal Farm Credit Bank 5.354 03/25/96 7,473,900 14,000,000 Federal Farm Credit Bank 5.341 03/26/96 13,949,347 8,000,000 Federal Home Loan Bank 5.466 03/27/96 7,969,320 Student Loan Marketing 15,500,000 Association 5.204 03/29/96 15,438,758 5,000,000 Federal Home Loan Bank 5.424 04/01/96 4,977,310 13,500,000 Federal Home Loan Bank 5.210 04/02/96 13,439,040 7,500,000 Federal Home Loan Bank 5.408 04/03/96 7,463,906 8,000,000 Federal Farm Credit Bank 5.192 04/04/96 7,961,618 9,000,000 Federal Home Loan Bank 5.389 04/05/96 8,954,150 10,000,000 Federal Farm Credit Bank 5.204 04/08/96 9,946,378 6,555,000 Federal Farm Credit Bank 5.190 04/09/96 6,519,068 14,500,000 Federal Farm Credit Bank 5.195 04/11/96 14,416,275 9,000,000 Federal Farm Credit Bank 5.197 04/12/96 8,946,660 10,000,000 Federal Farm Credit Bank 5.240 04/16/96 9,934,578 9,000,000 Federal Home Loan Bank 5.388 04/17/96 8,938,548 4,000,000 Federal Home Loan Bank 5.387 04/17/96 3,972,688 5,000,000 Federal Farm Credit Bank 5.390 04/18/96 4,965,133 10,000,000 Federal Home Loan Bank 5.164 04/22/96 9,927,344 10,000,000 Federal Home Loan Bank 5.335 04/24/96 9,922,300 8,365,000 Federal Home Loan Bank 5.343 04/24/96 8,299,878 5,500,000 Federal Farm Credit Bank 5.181 04/26/96 5,456,794 5,000,000 Federal Farm Credit Bank 5.198 04/29/96 4,958,454 10,000,000 Federal Home Loan Bank 5.081 05/01/96 9,916,294 10,000,000 Federal Farm Credit Bank 5.129 05/02/96 9,914,061 9,500,000 Federal Home Loan Bank 5.104 05/03/96 9,417,540 7,040,000 Federal Home Loan Bank 5.114 05/06/96 6,975,854 6,500,000 Federal Home Loan Bank 5.113 05/07/96 6,439,877 8,500,000 Federal Home Loan Bank 5.106 05/08/96 8,420,364 17,000,000 Federal Home Loan Bank 5.114 05/17/96 16,819,285 6,000,000 Federal Home Loan Bank 5.137 05/22/96 5,931,803 8,000,000 Federal Home Loan Bank 5.134 05/22/96 7,909,071 11,500,000 Federal Home Loan Bank 5.096 05/23/96 11,368,756 9,000,000 Federal Home Loan Bank 5.242 05/28/96 8,888,460 ------------ TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (amortized cost -- $454,331,439) 454,331,439 ------------ TOTAL INVESTMENTS (100.1%) (cost -- $454,331,439*) $454,331,439 ============
- ------- *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. 2 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) FEBRUARY 29, 1996 ASSETS Investments in money market instruments, at value: United States Government Agency Obligations, at value (amortized cost--$454,331,439)............................................ $454,331,439 ------------ Total Investments.............................................. 454,331,439 Cash............................................................. 597,550 Prepaid expenses................................................. 23,143 ------------ TOTAL ASSETS................................................... 454,952,132 LIABILITIES Dividends payable................................................ 817,682 Due to J.J.B. Hilliard, W.L. Lyons, Inc.--Note B................. 137,256 Miscellaneous accrued expenses................................... 6,201 ------------ TOTAL LIABILITIES.............................................. 961,139 ------------ NET ASSETS (equivalent to $1.00 per share; 500,000,000 shares authorized and 453,990,993 shares issued and outstanding)--Note C............................................................... $453,990,993 ============ HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996 INVESTMENT INCOME Interest income.................................................. $ 10,673,391 EXPENSES Investment Advisory fee--Note B.................................. 788,239 Transfer agent fees.............................................. 268,905 Filing fees...................................................... 49,140 Custodian fees................................................... 40,950 Insurance expense................................................ 16,674 Legal and Audit fees............................................. 15,834 Printing and other expenses...................................... 12,986 Directors' fees.................................................. 6,734 ------------ Total expenses.................................................. 1,199,462 ------------ Net investment income........................................... 9,473,929 ------------ Net increase in net assets resulting from operations............ $ 9,473,929 ============
See notes to financial statements. 3 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED FOR THE YEAR FEBRUARY ENDED 29, 1996 AUGUST 31, INCREASE IN NET ASSETS: (UNAUDITED) 1995 ------------- ------------- FROM OPERATIONS Net investment income............................ $ 9,473,929 $ 13,049,588 ------------- ------------- Net increase in net assets resulting from operations..................................... 9,473,929 13,049,588 Dividends to shareholders ($.024817 and $.049286 per share, respectively)........................ ( 9,473,929) ( 13,049,588) ------------- ------------- Undistributed net investment income.............. 0 0 ------------- ------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C.................................. 118,214,516 125,124,834 NET ASSETS Beginning of period.............................. 335,776,477 210,651,643 ------------- ------------- End of period.................................... $453,990,993 $335,776,477 ============= =============
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.
SIX MONTHS ENDED FEBRUARY 29, 1996 YEAR ENDED AUGUST 31, (UNAUDITED) 1995 1994 1993 1992 1991 ----------- -------- -------- -------- -------- -------- Net asset value, Beginning of Period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 -------- -------- -------- -------- -------- -------- Net Investment income... .03 .05 .03 .03 .04 .06 -------- -------- -------- -------- -------- -------- Total From Investment Operations............ .03 .05 .03 .03 .04 .06 Less Distributions: Dividend Distributions. ( .03) ( .05) ( .03) ( .03) ( .04) ( .06) -------- -------- -------- -------- -------- -------- Total Distributions.... ( .03) ( .05) ( .03) ( .03) ( .04) ( .06) -------- -------- -------- -------- -------- -------- 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)............... 453,991 335,776 210,652 221,050 234,600 232,660 Total Investment Return. 5.03%(a) 5.04% 2.85% 2.54% 3.87% 6.19% SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA Net assets, End of Period (000's omitted).............. $453,991 $335,776 $210,652 $221,050 $234,600 $232,660 Operating expenses to average net assets.... .63%(a) .72% .75% .71% .68% .70% Net investment income to average net assets. 4.97%(a) 4.97% 2.80% 2.51% 3.80% 6.01%
(a) Annualized See notes to financial statements. 4 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE A--ACCOUNTING POLICIES Hilliard-Lyons Government Fund, Inc. (the "Fund") is a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended. The following is a summary of significant accounting poli- cies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION: The Fund employs the amortized cost method of security valuation for U.S. Government securities which, in the opinion of the Board of Directors, represents fair value of the particular security. The Board moni- tors deviations between net asset value per share as determined by using available market quotations and the amortized cost method of security valua- tion. If the deviation in the ag- gregate is significant, the Board considers what action, if any, should be initiated to provide fair valuation. The Fund values repurchase agreements at cost and accrues interest into inter- est receivable. Normally, repurchase agreements are not subject to trading. Repurchase agreements are fully collateralized by U.S. Treasury and U.S. Gov- ernment Agency obligations valued at bid prices plus accrued interest. U.S. Treasury and U.S. Government Agency obligations pledged as collateral for re- purchase agree- ments are held by the Fund's custodian bank until maturity of the repurchase agreements. Provisions of the agreements provide that the mar- ket value of the collateral plus accrued interest on the collateral is greater than or equal to the repurchase price plus accrued interest at all times. In the event of default or bankruptcy by the other party to the agreements, the Fund maintains the right to sell the underlying securities at market value; however, realization and/or retention of the collateral may be subject to le- gal proceedings. FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify un- der the Internal Revenue Code as a regulated investment company and to dis- tribute all of its taxable income to shareholders, thereby relieving the Fund of federal income tax liability. DIVIDENDS TO SHAREHOLDERS: The net investment income of the Fund is determined on each business day and is declared as a dividend payable to shareholders of record immediately prior to the time of determination of net asset value on each such day. Dividends declared since the preceding dividend payment date are distributed monthly. The Fund's net investment income for dividend purposes includes accrued inter- est and accretion of original issue and market discounts earned and amortiza- tion of premiums, plus or minus any net realized gain or loss on portfolio se- curities, if any, occurring since the previous dividend declaration, less the accrued expenses of the Fund for such period. INVESTMENT TRANSACTIONS: Investment transactions are accounted for on the date the securities are bought or sold. Net realized gains and losses on sales of investments, if any, are determined on the basis of identified cost. The Fund may enter into repurchase agreements with financial institutions, deemed to be credit worthy by J.J.B. Hilliard, W.L. Lyons, Inc. (the "Advis- er"), subject to the seller's agreement to repurchase and the Fund's agreement to sell such security at a mutually agreed upon date and price. NOTE B--INVESTMENT ADVISORY AGREEMENT On September 21, 1995, the Fund renewed its investment advisory agreement with the Adviser. Under the investment advisory agreement, the Adviser supervises investment operations of the Fund and the composition of its portfolio, and furnishes advice and recommendations with respect to investments and the pur- chase and sale of securities in accordance with the Fund's investment objec- tives, policies and restrictions; subject, however, to the general supervision and control of the Fund's Board of Directors. For the services the Adviser renders, the Fund has agreed to pay the Adviser an annual advisory fee of 1/2 of 1% of the first $200 million of average daily net assets, 3/8 of 1% of the next $100 million of average daily net assets, and 1/4 of 1% of the average daily net assets in excess of $300 million. Such fee is accrued daily and paid monthly. The Adviser has agreed to reimburse the Fund if total operating ex- penses of the Fund, excluding taxes, interest and extraordinary expenses (as defined), exceed on an annual basis 1 1/2% of the first $30 million of average daily net assets and 1% of average daily net assets over $30 million. There was no reimbursement required for the six months ended February 29, 1996. 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 $2,000, a fee of $500 for each Board of Directors or com- mittee 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 Mary- land. At February 29, 1996, there were 500,000,000 shares of $.01 par value Common Stock authorized, and capital paid in aggregated $453,990,993. Transac- tions in Fund shares at $1.00 per share were as follows:
SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, AUGUST 31, 1996 1995 ------------ -------------- Shares sold 692,136,559 1,027,556,685 Shares issued to shareholders in reinvestment of dividends 9,235,782 12,403,090 ------------ -------------- 701,372,341 1,039,959,775 Less shares repurchased (583,157,825) ( 914,834,941) ------------ -------------- Net increase in capital shares 118,214,516 125,124,834 ============ ==============
5 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 Greenebaum Doll & McDonald 3300 First National Tower Louisville, Kentucky 40202 DIRECTORS AND OFFICERS BOARD OF DIRECTORS Joseph C. Curry, Jr. J. Henning Hilliard Donald F. Kohler Samuel G. Miller Gilbert L. Pamplin Dillman A. Rash J. Robert Shine OFFICERS Donald F. Kohler Chairman Joseph C. Curry, Jr. President Gilbert L. Pamplin Vice President Dianna P. Wengler Vice President and Treasurer Michael L. Howard Secretary HILLIARD-LYONS GOVERNMENT FUND, INC. SEMI-ANNUAL REPORT FEBRUARY 29, 1996 LOGO -----END PRIVACY-ENHANCED MESSAGE-----