-----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, SULM2ySm4Wdu4B8w7k5wjEFQbsonxPWs7GCZ1iEtpJ2I/WVgRTJCixWfJWS5zFKJ YZ5ti9Ts8xOdO1Zwmva9JA== 0001193125-04-070847.txt : 20040427 0001193125-04-070847.hdr.sgml : 20040427 20040427153701 ACCESSION NUMBER: 0001193125-04-070847 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040229 FILED AS OF DATE: 20040427 EFFECTIVENESS DATE: 20040427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HILLIARD LYONS GOVERNMENT FUND INC CENTRAL INDEX KEY: 0000317872 IRS NUMBER: 610978881 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03070 FILM NUMBER: 04756970 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-CSRS 1 dncsrs.txt HILLIARD LYONS GOVERNMENT FUND, INC. SEMI-ANNUAL ============================== OMB APPROVAL ============================== OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ============================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-3070 -------- Hilliard-Lyons Government Fund, Inc. -------------------------------------------------------------- (Exact name of registrant as specified in charter) P. O. Box 32760 , Louisville, Kentucky 40232-2760 ------------------------------------------------------ (Address of principal executive offices) (Zip code) Joseph C. Curry, Jr. William G. Strench Hilliard-Lyons Government Fund, Inc. Frost Brown Todd LLC P. O. Box 32760 400 West Market Street, 32/nd/ Floor Louisville, Kentucky 40232-2760 Louisville, Kentucky 40202-3363
(Name and address of agents for service) Registrant's telephone number, including area code: (502) 588-8602 -------------- Date of fiscal year end: August 31 --------- Date of reporting period: February 29, 2004 ----------------- ITEM 1. REPORTS TO STOCKHOLDERS. The Semi-Annual Report to Stockholders follows. March 22, 2004 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, 2004. Record low interest rates continue to put pressure on money market fund assets. 2003 marked the second consecutive year of asset declines for taxable money market funds. Prior to 2002, total money market fund assets had experienced seven straight years of double-digit growth. Banks continue to compete with money market funds for investor dollars. Money market funds pay dividends earned from their investments while bank products can pay any rate set by the bank. Assets of the Fund declined only modestly during the six months. Net assets declined $71 million to $1.5 billion at February 29, 2004. This compares to a decrease of $60 million in the year ended August 31, 2003. At the most recent meeting of the policymaking Federal Open Market Committee held March 16, 2004, the Federal Reserve (the "Fed") left interest rates unchanged which is what most if not all economists had expected. Markets react to the language used in the Fed's statements as much as to actions taken by the Fed. The Fed indicated it wouldn't change its policy in the near term. Some economists had anticipated the Fed would give a more encouraging outlook on job growth and the economy but the Fed changed its statement only slightly and reinforced its stance on an accommodative monetary policy. The statement appeared to offer a slightly more cautious view of the economic recovery. Most economists now believe a rate increase won't occur any time soon and is highly unlikely to occur before the presidential election. Interest rates impact equity markets as well because of the effect on the cost of corporate borrowing which in turn affects corporate profits. A rate increase would increase the cost of corporate borrowing which would mean lower corporate profits. Lower corporate profits generally mean lower equity prices. Higher rates also make newly issued corporate debt in the form of bonds more attractive and will cause some investors to switch out of stocks and into bonds. Despite a seemingly mixed view of the economy overall, the major equity markets, including the Dow Jones Industrial Average and the NASDAQ, have attained positive returns so far in 2004. With short term interest rates at a 45 year low, the Fund's investment adviser, J.J.B. Hilliard, W.L. Lyons Inc. recognizes that these are difficult times for shareholders. In light of these historically low rates, the Adviser voluntarily agreed to waive a portion of its advisory fee beginning April 1, 2003. For the period covered in this report, the six months from September 1, 2003 through February 29, 2004, the Adviser waived $1.7 million of fees. The Fund's expense ratio for the six months ended February 29, 2004 was .56% with the fee waiver while it would have been .78% without the waiver. The full amount of the fee waiver is passed on to shareholders in the dividends paid by the Fund. The Adviser may discontinue or modify this voluntary waiver in the future at its discretion. In this time of historically low interest rates and economic uncertainty, the Fund continues to offer its shareholders both a high degree of credit safety and and the highest possible current income consistent with the preservation of capital. The Fund also offers convenient features such as unlimited, free check-writing. As shown on the Schedule of Investments that follows, at February 29, 2004 the Fund was fully invested in high quality, short term U.S. government agency securities. These securities offer a high degree of credit safety with the added benefit of income that flows through to shareholders as exempt from state income tax. Information on dividends paid by the Fund for the calendar year 2003 was included with the Form 1099-Div sent by Hilliard Lyons to all shareholders in January 2004. The full amount of dividends paid by HLGF in calendar year 2003 were exempt from state income tax in all states. We appreciate your investment in the Hilliard-Lyons Government Fund, Inc. and we will continue to do our best to manage the Fund for the benefit of our shareholders. /s/ Joseph C. Curry, Jr. /s/ Dianna P. Wengler JOSEPH C. CURRY, JR. DIANNA P. WENGLER President Vice President and Treasurer HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 29, 2004
Principal Purchase Maturity Amount Yield Date Value ------ -------- -------- -------------- U.S. GOVERNMENT AGENCY OBLIGATIONS*--100.1% $23,508,000 Federal Home Loan Bank Discount Note 0.923% 03/01/04 $ 23,508,000 25,000,000 Federal Home Loan Bank Discount Note 0.954 03/01/04 25,000,000 25,000,000 Federal Home Loan Bank Discount Note 0.954 03/02/04 24,999,347 29,000,000 Federal Home Loan Bank Discount Note 1.067 03/03/04 28,998,308 19,500,000 Federal Home Loan Bank Discount Note 1.098 03/04/04 19,498,253 35,000,000 Federal Home Loan Bank Discount Note 1.088 03/05/04 34,995,858 33,000,000 Federal Home Loan Bank Discount Note 0.964 03/08/04 32,993,904 30,000,000 Federal Home Loan Bank Discount Note 0.964 03/09/04 29,993,667 23,000,000 Federal Home Loan Bank Discount Note 1.059 03/10/04 22,994,020 15,000,000 Federal Home Loan Bank Discount Note 1.083 03/12/04 14,995,142 15,000,000 Federal Home Loan Bank Discount Note 1.083 03/12/04 14,995,142 25,000,000 Federal Home Loan Bank Discount Note 0.996 03/15/04 24,990,472 30,000,000 Federal Home Loan Bank Discount Note 0.990 03/16/04 29,987,750 34,000,000 Federal Home Loan Bank Discount Note 1.093 03/17/04 33,983,831 35,000,000 Federal Home Loan Bank Discount Note 0.996 03/18/04 34,983,803 17,000,000 Federal Home Loan Bank Discount Note 1.098 03/19/04 11,993,760 12,000,000 Federal Home Loan Bank Discount Note 1.057 03/19/04 16,990,863 28,000,000 Federal Home Loan Bank Discount Note 1.008 03/22/04 27,983,830 37,000,000 Federal Home Loan Bank Discount Note 1.092 03/24/04 36,974,706 10,000,000 Federal Home Loan Bank Discount Note 0.996 03/26/04 9,993,194 20,312,000 Federal Home Loan Bank Discount Note 1.073 03/26/04 20,297,189 27,000,000 Federal Home Loan Bank Discount Note 1.070 03/31/04 26,976,375 22,000,000 Federal Home Loan Bank Discount Note 1.078 03/31/04 21,980,658 40,000,000 Federal Home Loan Bank Discount Note 0.988 04/01/04 39,966,589 4,000,000 Federal Home Loan Bank Discount Note 1.083 04/02/04 3,996,231 32,000,000 Federal Home Loan Bank Discount Note 1.024 04/02/04 31,971,413 20,000,000 Federal Home Loan Bank Discount Note 1.004 04/05/04 19,980,847 40,000,000 Federal Home Loan Bank Discount Note 1.134 04/07/04 39,954,367 25,000,000 Federal Home Loan Bank Discount Note 0.998 04/08/04 24,974,139 40,000,000 Federal Home Loan Bank Discount Note 1.134 04/12/04 39,948,200 30,000,000 Federal Home Loan Bank Discount Note 1.150 04/14/04 29,958,750 22,000,000 Federal Home Loan Bank Discount Note 1.017 04/15/04 21,972,500 19,261,000 Federal Home Loan Bank Discount Note 1.145 04/16/04 19,233,337 30,000,000 Federal Home Loan Bank Discount Note 1.032 04/20/04 29,957,792 5,388,000 Federal Home Loan Bank Discount Note 1.113 04/21/04 5,379,680 19,000,000 Federal Home Loan Bank Discount Note 1.011 04/21/04 18,973,218 8,000,000 Federal Home Loan Bank Discount Note 1.113 04/23/04 7,987,162 34,000,000 Federal Home Loan Bank Discount Note 1.149 04/23/04 33,943,688 25,000,000 Federal Home Loan Bank Discount Note 1.154 04/28/04 24,954,526 30,000,000 Federal Home Loan Bank Discount Note 1.034 04/30/04 29,949,250 38,000,000 Federal Home Loan Bank Discount Note 1.029 05/05/04 37,930,703 36,000,000 Federal Home Loan Bank Discount Note 1.032 05/07/04 35,931,995 44,000,000 Federal Home Loan Bank Discount Note 1.017 05/12/04 43,912,176 20,000,000 Federal Home Loan Bank Discount Note 1.016 05/14/04 19,958,889
2 HILLIARD-LYONS GOVERNMENT FUND, INC. SCHEDULE OF INVESTMENTS (UNAUDITED) February 29, 2004
Principal Purchase Maturity Amount Yield Date Value ------ -------- -------- -------------- $40,000,000 Federal Home Loan Bank Discount Note 1.009% 05/19/04 $ 39,913,100 30,000,000 Federal Home Loan Bank Discount Note 1.009 05/21/04 29,933,175 25,000,000 Federal Home Loan Bank Discount Note 1.009 05/26/04 24,940,875 24,285,000 Federal Home Loan Bank Discount Note 1.035 06/07/04 24,217,899 35,000,000 Federal Home Loan Bank Discount Note 1.049 06/09/04 34,899,861 22,000,000 Federal Home Loan Bank Discount Note 1.047 06/17/04 21,932,284 31,000,000 Federal Home Loan Bank Discount Note 1.062 07/07/04 30,885,369 34,000,000 Federal Home Loan Bank Discount Note 1.067 07/09/04 33,871,697 39,000,000 Federal Home Loan Bank Discount Note 1.028 07/14/04 38,852,288 38,244,000 Federal Home Loan Bank Discount Note 1.041 07/16/04 38,095,550 21,568,000 Federal Home Loan Bank Discount Note 1.041 07/23/04 21,480,003 23,000,000 Federal Home Loan Bank Discount Note 1.052 08/04/04 22,897,343 16,000,000 Federal Home Loan Bank Discount Note 1.052 08/11/04 15,925,382 28,000,000 Federal Home Loan Bank Discount Note 1.070 08/18/04 27,861,167 -------------- TOTAL U. S. GOVERNMENT AGENCY OBLIGATIONS (at amortized cost--$1,536,649,517) 1,536,649,517 -------------- TOTAL INVESTMENTS (100.1%) (cost--$1,536,649,517**) $1,536,649,517 ==============
* Obligations of U.S. Government sponsored entities are not issued nor guaranteed by the United States Treasury. ** 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. 3 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) February 29, 2004 ASSETS Investments, at value (at amortized cost--$1,536,649,517).. $1,536,649,517 Cash....................................................... 1,175 Prepaid expenses........................................... 116,292 -------------- TOTAL ASSETS.......................................... 1,536,766,984 -------------- LIABILITIES Dividends payable.......................................... 297,704 Due to affiliates--Note B Investment advisory fee.................................. 78,467 Shareholder servicing fee................................ 308,903 Administrative fee....................................... 222,410 Accrued directors fees..................................... 12,495 Accrued expenses........................................... 78,981 -------------- TOTAL LIABILITIES..................................... 998,960 -------------- NET ASSETS.................................................. $1,535,768,024 ============== Shares of beneficial interest outstanding.................. 1,535,768,024 ============== Net asset value per share (net assets / shares of beneficial interest outstanding)......................... $1.00 =====
HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF OPERATIONS (UNAUDITED) For the six months ended February 29, 2004 INVESTMENT INCOME Interest income............................................ $ 8,434,537 ------------ EXPENSES Investment advisory fee--Note B............................ 2,295,188 Shareholder servicing fee--Note B.......................... 1,983,825 Administrative fee--Note B................................. 1,428,354 Printing and other expenses................................ 126,186 Insurance expense.......................................... 93,789 Custodian fees............................................. 92,630 Filing fees................................................ 95,000 Legal and audit fees....................................... 47,404 Transfer agent fees........................................ 20,905 Directors fees............................................. 14,230 ------------ Total expenses........................................... 6,197,511 Waiver of investment advisory fee--Note B.................. (1,739,530) Total net expenses....................................... 4,457,981 ------------ Net investment income .................................. 3,976,556 ------------ Net increase in net assets resulting from operations.... $ 3,976,556 ============
See notes to financial statements. 4 HILLIARD-LYONS GOVERNMENT FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended For the February 29, Year Ended 2004 August 31, (UNAUDITED) 2003 -------------- -------------- FROM OPERATIONS Net investment income....................................... $3,976,556 $ 10,635,655 -------------- -------------- Net increase in net assets resulting from operations...... 3,976,556 10,635,655 DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income....................................... (3,976,556) (10,635,655) -------------- -------------- Total distributions......................................... (3,976,556) (10,635,655) -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS Net capital share transactions (at $1.00 per share)--Note C. (71,466,380) (60,010,826) -------------- -------------- NET ASSETS Beginning of period......................................... 1,607,234,404 1,667,245,230 -------------- -------------- End of period............................................... $1,535,768,024 $1,607,234,404 ============== ==============
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. The total returns in the table represent the rate that an investor would have earned on an investment in the Fund (assuming reinvestment of all dividends and distributions). The 2003 and 2002 information has been audited by Deloitte and Touche LLP. Information for the prior years was audited by another independent auditor, whose report expressed an unqualified opinion. It should be read in conjunction with the financial statements and notes thereto.
For the Six Months Ended February 29, 2004 For the year ended August 31, (UNAUDITED) 2003 2002 2001 2000 ------------ ---------- ---------- ---------- ---------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ----------- ---------- ---------- ---------- ---------- Net investment income............... -- (a) .01 .01 .05 .05 ----------- ---------- ---------- ---------- ---------- Total from investment operations.. -- (a) .01 .01 .05 .05 ----------- ---------- ---------- ---------- ---------- Less distributions: From net investment income........ -- (a) (.01) (.01) (.05) (.05) ----------- ---------- ---------- ---------- ---------- Total distributions................. -- (a) (.01) (.01) (.05) (.05) ----------- ---------- ---------- ---------- ---------- Net asset value, end of period...... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 =========== ========== ========== ========== ========== Total investment return............. .24% .63% 1.44% 5.14% 5.52% SUPPLEMENTAL DATA Net assets, end of period (000's omitted).................. $1,535,768 $1,607,234 $1,667,245 $1,930,645 $1,366,422 RATIOS TO AVERAGE NET ASSETS Operating expenses................ .56%(b)(c) .69%(c) .65% .44% .48% Net investment income............. .50%(b)(c) .65%(c) 1.53% 4.92% 5.41%
(a)Amount less than $.005 (b)Annualized (c)Net of voluntary investment advisory fee waiver by the Adviser. If the Fund had paid the full investment advisory fee, the annualized ratios of expenses and net investment income to average net assets would have been .78% and .28%, respectively, for the six months ended February 29, 2004 and would have been .77% and .57%, respectively, for the year ended August 31, 2003. See notes to financial statements. 5 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) February 29, 2004 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 (the "1940 Act"), as amended. The Fund was incorporated in June 1980 under the laws of the state of Maryland. The primary investment objective of the Fund is to provide investors with liquidity and the highest possible level of current income consistent with the preservation of capital. 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 in accordance with Rule 2a-7 of the 1940 Act. The Board of Directors (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. Repurchase Agreements: Repurchase agreements are fully collateralized by U.S. Treasury and U.S. Government Agency obligations. It is the policy of the Fund to take possession of collateral. 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 daily and is paid monthly. The tax character of distributions paid during 2003 and 2002 was as follows:
For the year ended August 31, 2003 2002 ----------- ----------- Distributions paid from ordinary income....... $10,635,655 $28,105,327 ----------- ----------- Total Distributions.... $10,635,655 $28,105,327 =========== ===========
Investment Transactions: Investment transactions are accounted for on the date the securities are bought or sold. Income is accrued daily. Discounts on securities purchased are amortized over the lives of the respective securities. Net realized gains and losses on sales of investments, if any, are determined on the basis of identified cost. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 8, 2003, the Fund renewed its investment advisory agreement with J.J.B Hilliard W.L. Lyons, Inc. (the "Adviser"). Under the investment advisory agreement, the Adviser supervises investment 6 HILLIARD-LYONS GOVERNMENT FUND, INC. NOTES TO FINANCIAL STATEMENTS (continued) (UNAUDITED) February 29, 2004 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. For the services the Adviser renders, the Fund has agreed to pay the Adviser an annual advisory fee of 1/2 of 1% of the first $200 million of average daily net assets, 3/8 of 1% of the next $100 million of average daily net assets, and 1/4 of 1% of the average daily net assets in excess of $300 million. Such fee is accrued daily and paid monthly. The Adviser has agreed to reimburse the Fund if total operating expenses of the Fund, excluding taxes, interest and extraordinary expenses (as defined), exceed on an annual basis 1 1/2% of the first $30 million of average daily net assets and 1% of average daily net assets over $30 million. There was no reimbursement required for the six months ended February 29, 2004. The Adviser voluntarily agreed to waive a portion of its advisory fee beginning April 1, 2003. The Adviser may discontinue or modify any such voluntary waiver at its discretion. The Adviser waived $1,739,530 for the six months ended February 29, 2004. The Fund has entered into a separate shareholder and administration services agreement (the "Administration Agreement") with the Adviser. Under the Administration Agreement, the Adviser provides certain shareholder and administrative functions for the Fund, including but not limited to: (i) preparing and mailing monthly statements to shareholders; (ii) forwarding shareholder communications from the Fund; (iii) responding to inquiries from shareholders concerning their investments in the Fund; (iv) maintaining account information relating to shareholders that invest in the fund; and (v) processing purchase, exchange and redemption requests from shareholders and placing orders and appropriate documentation with the Fund or its service providers. For its services to the Fund under the Administration Agreement, the Adviser receives a monthly fee from the Fund at the annual rate of .25% of the Fund's average daily net assets for shareholder services and .18% of the Fund's average daily net assets for administration services. 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 and the audit committee chairman an annual retainer of $3,000, a fee of $1,000 for each board or committee meeting attended, and all expenses the directors incur in attending meetings. Total fees paid to directors for the six months ended February 29, 2004 were $18,000. Transfer agent fees are paid to State Street Bank & Trust Co. NOTE C--CAPITAL STOCK At February 29, 2004, there were 2,500,000,000 shares of $.01 par value Common Stock authorized. Each transaction in Fund shares was at the net asset value of $1.00 per share. The dollar amount represented is the same as the shares shown below for such transactions.
For the Six For the Months ended Year ended February 29, August 31, 2004 2003 -------------- -------------- Shares sold..... 2,849,968,024 5,290,394,643 Shares issued to shareholders in reinvestment of dividends...... 3,930,877 10,741,531 Less shares repurchased.... (2,925,365,280) (5,640,503,196) -------------- -------------- Net decrease in capital shares......... (71,466,379) (60,010,826) ============== ==============
7 HILLIARD-LYONS GOVERNMENT FUND, INC. Hilliard Lyons Center Louisville, Kentucky 40202 (502) 588-8400 Investment Adviser, Administrator 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 Independent Public Accountants Deloitte & Touche LLP 200 Berkeley Street Boston, Massachusetts 02116 DIRECTORS AND OFFICERS BOARD OF DIRECTORS Samuel G. Miller J. Robert Shine Lindy B. Street OFFICERS Joseph C. Curry, Jr.--President Dianna P. Wengler--Vice President and Treasurer Stephanie J. Ferree--Secretary Hilliard-Lyons Government Fund, Inc. Semi-Annual Report February 29, 2004 [GRAPHIC] Bear & Bull ITEM 2. CODE OF ETHICS. Not applicable to semi-annual reports. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable to semi-annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable to semi-annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to open-end investment companies. ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable for periods ending before July 9, 2004. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to open-end investment companies. ITEM 8 PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASES. Not applicable to open-end investment companies. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant does not currently have procedures by which shareholders may recommend nominees to the registrant's board of directors. The registrant's directors, all of whom are independent, serve as its nominating committee. ITEM 10. CONTROLS AND PROCEDURES. (a) Within the 90-day period prior to the filing of this report, the registrant's management carried out an evaluation, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940). Based on their evaluation, the Chief Executive Officer and Chief Financial Officer believe that the registrant's disclosure controls and procedures are effectively designed to ensure that information required to be disclosed by the registrant in the Report is recorded, processed, summarized and reported by the filing date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the registrant's management, including the registrant's Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. (b) There have been no changes in the registrant's internal control over financial reporting (as defined in rule 30a-3(a)) under the Investment Company Act of 1940 or in other factors that occurred during the registrant's most recent fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(1) Any code of ethics or amendment thereto. Not applicable. (b)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940. Filed herewith. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940. Furnished herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) HILLIARD-LYONS GOVERNMENT FUND, INC. By (Signature and Title) /s/: Joseph C. Curry, Jr. ------------------------- Joseph C. Curry Jr. President Date: April 26, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/: Dianna P. Wengler ---------------------- Dianna P. Wengler Vice President and Treasurer Date: April 26, 2004 By (Signature and Title) /s/: Joseph C. Curry, Jr. ------------------------- Joseph C. Curry Jr. President Date: April 26, 2004 EX-99.CERT 2 dex99cert.txt CERTIFICATIONS PURSUANT TO SECTION 302 Exhibit (b)(2) EX 99.CERT Certifications I, Dianna P. Wengler, certify that: 1. I have reviewed this report on Form N-CSR of Hilliard-Lyons Government Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 26, 2004 /s/: Dianna P. Wengler ---------------------- Dianna P. Wengler Vice President and Treasurer (Principal Financial Officer) Exhibit (b)(2) EX 99.CERT Certifications I, Joseph C. Curry Jr., certify that: 1. I have reviewed this report on Form N-CSR of Hilliard-Lyons Government Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statement and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act) for the registrant and have: a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 26, 2004 /s/: Joseph C. Curry, Jr. ------------------------- Joseph C. Curry, Jr. President (Principal Executive Officer) EX-99.906CERT 3 dex99906cert.txt CERTIFICATIONS PURSUANT TO SECTION 906 EX.99.906 CERT Exhibit (b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Pursuant to 18 U.S.C. Section 1350, the undersigned officer of the Hilliard-Lyons Government Fund, Inc. (the "Company") does hereby certify, to such officer's knowledge, that the Company's report on Form N-CSR for the period ended February 29, 2004 (the "Report") fully complies with the requirements of Section 13(a) and 15(d), as applicable of the Securities Exchange Act of 1934, as amended and that the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company. Date: April 26, 2004 /s/: Joseph C. Curry, Jr. -------------------------------------- Joseph C. Curry, Jr. President (Principal Executive Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification shall not be deemed as filed by the Company for purposes of the Securities Exchange Act of 1934. EX.99.906 CERT Exhibit (b) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT Pursuant to 18 U.S.C. Section 1350, the undersigned officer of the Hilliard-Lyons Government Fund, Inc. (the "Company") does hereby certify, to such officer's knowledge, that the Company's report on Form N-CSR for the period ended February 29, 2004 (the "Report") fully complies with the requirements of Section 13(a) and 15(d), as applicable of the Securities Exchange Act of 1934, as amended and that the information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the Company. Date: April 26, 2004 /s/: Dianna P. Wengler -------------------------------------- Dianna P. Wengler Vice President and Treasurer (Principal Financial Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. This certification shall not be deemed as filed by the Company for purposes of the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----