<PAGE>
February 5, 1997
Hilliard Lyons Growth Fund
Dear Shareholder:
We are pleased to report that 1996 was a year of substantial growth for the
Hilliard Lyons Growth Fund. The Fund's net asset value appreciated by 20% in
1996 and has increased by more than 50% over the past two calendar years. One
of our goals is to achieve annualized growth of 15% or more over the long
term. These results will certainly help us in the pursuit of this objective.
We fell short of achieving a second objective, which is to have performance
which exceeds the Standard & Poor's 500 Index. It advanced by 22.96% for the
year. Surpassing the Standard & Poor's 500 Index has proven to be a formidable
challenge which most money managers have failed to meet. In today's market
climate there are some very good reasons for this which we will discuss below.
Nevertheless, markets change and this objective remains a fundamental one for
us. We believe it is achievable in a full cycle of up and down markets.
There were important developments in 1996 which we believe will be quite
helpful to our long-term performance. In April, shareholders voted to change
the Fund from a diversified investment company to one that is non-diversified.
This will allow us to concentrate our capital in our best ideas. At the third
quarter Board of Directors meeting it was announced that Fund expenses would
be capped at 1.30% each year, a reduction from 1.75%. The benefits from this
change are clear and immediate. Lastly, our research team, which produces
ideas for the Fund, is deeper than ever before. We expect this to translate
directly into decision making that will help us reach our goals.
1996
As mentioned above, most funds had a difficult time matching the performance
of the Standard & Poor's 500 Index in 1996. In our view, special
characteristics of today's climate help explain much of this shortfall. The
past two years have seen continuous and substantial inflows of cash into
common stock mutual funds. One result has been stock prices rising at a rate
far above what may be expected over the long run. An index, such as the
Standard & Poor's 500, is by definition 100% invested. For reasons such as
timing differences on sales and purchases or inflows of new money, mutual
funds almost always carry uninvested cash which is placed in money market
instruments at low interest rates. This cash is a drag in a bull market. In
1996, big companies, such as those in the Standard & Poor's 500, meaningfully
outperformed medium sized and smaller companies. Undoubtedly, the huge flows
of money into equity mutual funds, $222 billion for the year, place size
restrictions on those companies which can be considered for investment. This
may well explain the outperformance by the biggest companies. This phenomenon
may also lead to a situation where such companies are more richly priced than
the market as a whole. In addition to these factors, an index incurs no
expenses whereas managed funds do.
The various factors just mentioned explain the gap between the Standard &
Poor's 500 performance and that of the Hilliard Lyons Growth Fund. In fact,
measuring the stocks alone, our companies outperformed the index by more than
1%. Three Fund holdings substantially outperformed--Synovus, Dover, and
Walgreen. On the other hand, in keeping with the character of the market this
year, the Fund's medium size and smaller companies moved modestly higher but
did not keep up with the market in general. Performance competition has
reached an intensity level greater than we can recall. There is pressure on
fund managers to keep up with the averages and each other, and many are
hounded into taking actions driven by short term considerations. There is much
of what is called "momentum" investing in which managers focus on companies
whose short term earnings prospects are the brightest. The reinforcing nature
of investing and the competition has led to inordinate popularity in fairly
narrow sectors of the market. Valuations in these sectors have become quite
rich. Our investment style includes paying careful attention to price, and we
have stayed out of some of the market's hottest areas. We are pleased to have
achieved strong progress in the Fund while maintaining a discipline which will
be crucial when the market climate is not so fair.
OUTLOOK
There are many market observers who fret that stock prices are simply too
high and that we are due a fall. While we are well aware of the rich
evaluations, we are not especially daunted by today's price levels. The
greatest risk to the sock market, in our view, is not its price level. The
unheralded but best friend to stock prices has been the predictable
<PAGE>
way in which the important economic variables have behaved. The inflation
rate, interest rates, and demand for goods and services for several years have
been favorable and, more to the point, have predictably fluctuated in narrow
ranges. Consider this. It can take as long as four years from start to finish
to get a greenfield paper mill up and running. How does one budget debt cost,
the inflation rate, or product demand four years out? Likewise, the success of
a major acquisition is quite dependent on forecasting key variables accurately
for extended periods. John Wooden, perhaps the greatest college basketball
coach ever, once said "Do not let what you cannot do interfere with what you
can do." Companies have been free to concentrate on what they know instead of
grappling with big picture economics that serve only as a distraction. It is
hard to overestimate how much the benign macroeconomic climate has aided
businesses in performing accurate long range planning and taking bold actions
to improve their profits. Watch the key economic variables for wider swings.
Risk in the market lies there, not in whether today's prices are too high.
We are grateful for your continued support. We are major shareholders
ourselves, and we are committed to executing strategies which provide you with
superior returns.
Sincerely,
/s/ DONALD F. KOHLER /s/ SAMUEL C. HARVEY
DONALD F. KOHLER SAMUEL C. HARVEY
Chairman President
Comparison of Change in Value of $10,000 Investment in
HILLIARD LYONS GROWTH FUND, INC. AND THE S&P 500
February 1, 1992 through December 31, 1996
----------------------------------
AVERAGE ANNUAL TOTAL RETURN*
----------------------------------
1 Year Since Inception
----------------------------------
14.31% 11.36%
----------------------------------
* Returns have been reduced by the maximum sales charge of 4.75%.
[PERFORMANCE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
Past performance is not predictive of future performance.
* Annualized for the period 2-1-92 through 12-31-92.
2
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
COMMON STOCKS -- 90.3%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------ ------- ---- ------
CAPITAL GOODS -- 18.3%
----------------------------------------------------------------------
<C> <S> <C> <C>
33,000 Dover Corp. ................................... $ 928,470 $1,658,250
14,000 General Electric Co. .......................... 565,278 1,384,250
16,800 Hubbell Inc. CL B ............................. 408,960 726,600
38,000* Lydall Inc. ................................... 883,730 855,000
30,000 Nordson Corp. ................................. 1,596,313 1,912,500
---------- ----------
4,382,751 6,536,600
CONSUMER DURABLE -- 4.7%
----------------------------------------------------------------------
49,500 Donaldson Inc. ................................ 1,290,682 1,658,250
---------- ----------
1,290,682 1,658,250
CONSUMER NON-DURABLE -- 10.8%
----------------------------------------------------------------------
32,500* Bush Boake Allen Inc. ......................... 875,824 865,313
5,500 CPC International Inc. ........................ 230,542 426,250
14,000 International Flavors & Fragrances ............ 477,681 630,000
48,000 PepsiCo Inc. .................................. 886,525 1,404,000
5,000 Procter & Gamble Co. .......................... 241,409 537,500
---------- ----------
2,711,981 3,863,063
FINANCIAL -- 34.8%
----------------------------------------------------------------------
18,000 American International Group Inc. ............. 869,512 1,948,500
23* Berkshire Hathaway Inc. ....................... 208,980 784,300
76,000 Cincinnati Financial Corp. .................... 4,205,899 4,930,500
12,000 Federal Home Loan Mortgage Corp. .............. 554,652 1,321,500
11,000 Fifth Third Bancorp ........................... 374,000 690,938
67,250 Synovus Financial Corp. ....................... 853,711 2,160,406
10,000 Wachovia Corp. ................................ 364,350 565,000
---------- ----------
7,431,104 12,401,144
</TABLE>
See notes to financial statements.
3
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------ ------- ---- ------
HEALTH CARE -- 8.7%
----------------------------------------------------------------------
<C> <S> <C> <C>
38,500 Allergan Inc. ................................. 926,295 1,371,562
35,000 Johnson & Johnson.............................. 721,314 1,741,250
----------- ----------
1,647,609 3,112,812
RETAIL & SERVICES -- 10.3%
----------------------------------------------------------------------
26,500 Brady WH Co. CL A.............................. 484,125 652,562
12,000 Gannett Inc. .................................. 654,720 898,500
3,000 May Department Stores Co. ..................... 74,260 140,250
49,000 Walgreen Co. .................................. 880,347 1,960,000
----------- ----------
2,093,452 3,651,312
UTILITY -- 2.7%
----------------------------------------------------------------------
30,500 Century Telephone Enterprises ................. 967,268 941,688
----------- ----------
967,268 941,688
TOTAL COMMON STOCKS............................ $20,524,847 32,164,869
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 9.6%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Purchase Maturity Market
Amount Description Yield Date Value
---------- ----------- -------- -------- -----------
<C> <S> <C> <C> <C>
$3,410,000 Federal Home Loan Bank ............ 5.324% 01/02/97 3,409,503
-----------
TOTAL U. S. GOVERNMENT AGENCY
OBLIGATIONS (COST -- $3,409,503)... 3,409,503
-----------
TOTAL INVESTMENTS (COST --
$23,934,350) (99.9%).............. $35,574,372
===========
</TABLE>
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.
*Non-income producing security.
See notes to financial statements.
4
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $20,524,847)................................ $32,164,869
U.S. Government Agency Obligations at value (amortized cost
$3,409,503).................................................... 3,409,503
------------
Total investments.............................................. 35,574,372
Cash............................................................. 3,325
Receivables:
Dividends....................................................... 73,490
Shares sold..................................................... 81,659
Deferred organizational expenses -- Note A....................... 384
Prepaid expenses................................................. 1,439
------------
Total Assets................................................... $35,734,669
============
LIABILITIES:
Payables:
Dividends payable............................................... $ 32,560
Shares redeemed................................................. 21,623
Organizational expenses -- Note A............................... 384
Accrued expenses................................................. 52,575
------------
Total Liabilities.............................................. 107,142
------------
CAPITAL:
Common stock ($.001 par value; 150,000,000 shares authorized and
1,552,338 shares issued and outstanding)........................ 1,553
Paid-in surplus.................................................. 23,987,528
Net unrealized appreciation on investments....................... 11,640,022
Distributions in excess of net investment income -- Note A....... ( 1,576)
------------
Total Capital (Net Assets) (equivalent to $22.95 per share).... 35,627,527
------------
Total Liabilities and Capital.................................. $35,734,669
============
</TABLE>
See notes to financial statements.
5
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends........................................................ $ 454,512
Interest......................................................... 212,293
----------
Total investment income........................................ 666,805
EXPENSES:
Management fees -- Note B........................................ 255,228
Custodian fees................................................... 48,480
12b-1 expenses -- Note B......................................... 42,436
Audit fees....................................................... 36,755
Transfer Agent fees.............................................. 27,770
Directors' fees.................................................. 24,390
Organizational expenses -- Note A................................ 23,307
Shareholder reports.............................................. 19,405
Legal fees....................................................... 17,390
Insurance expense................................................ 15,171
Filing fees...................................................... 10,080
Trade Association................................................ 1,759
----------
522,171
Waiver of management fee by Adviser -- Note B.................... ( 19,678)
----------
Total expenses................................................. 502,493
----------
Net investment income........................................ 164,312
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments -- Note A....................... 1,724,517
Change in unrealized appreciation on investments................. 3,972,253
----------
Net gain on investments........................................ 5,696,770
----------
Net increase in net assets resulting from operations......... $5,861,082
==========
</TABLE>
See notes to financial statements.
6
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year ended
December 31,
1996 1995
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income.............................. $ 164,312 $ 197,087
Net realized gain on investments................... 1,724,517 919,975
Net change in unrealized appreciation on
investments....................................... 3,972,253 5,335,064
----------- -----------
Net increase in net assets from operations....... 5,861,082 6,452,126
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................. (164,559) (196,792)
Realized gain from investment transactions......... (1,724,524) (811,088)
----------- -----------
Total distributions.............................. (1,889,083) (1,007,880)
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 81,426 and 49,498 shares issued in
reinvestment of dividends, respectively........... 1,856,523 991,935
Proceeds from 186,661 and 446,320 shares sold,
respectively...................................... 4,059,750 8,924,169
Cost of 115,031 and 377,902 shares repurchased,
respectively...................................... (2,519,966) (7,576,898)
----------- -----------
Net increase in net assets from capital share
transactions.................................... 3,396,307 2,339,206
----------- -----------
Total increase in net assets.................... 7,368,306 7,783,452
NET ASSETS:
Beginning of year.................................. 28,259,221 20,475,769
----------- -----------
End of year (includes distributions in excess of
net investment income of ($1,576) and ($1,325),
respectively)..................................... $35,627,527 $28,259,221
=========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ACCOUNTING POLICIES
Hilliard Lyons Growth Fund, Inc. (the "Fund") is a non-diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended. The Fund was incorporated under the laws of the state of
Maryland and commenced operations on January 6, 1992. The following is a
summary of significant accounting policies followed by the Fund in preparation
of its financial statements.
SECURITY VALUATION: Securities traded on a national securities exchange or
traded over-the-counter and quoted on the NASDAQ System are valued at last
sales prices. Securities so traded for which there were no sales and other
securities are valued at the mean of the most recent bid-asked quotations
except that bonds not traded on a securities exchange nor quoted on the NASDAQ
System will be valued at prices provided by a recognized pricing service unless
the Adviser believes that such price does not represent a fair value. Each
money market instrument having a maturity of 60 days or less from the valuation
date is valued on an amortized cost basis. Other securities and assets will be
valued at fair value, as determined in good faith by the Adviser under
procedures established by, and under the supervision and responsibility of, the
Fund's Board of Directors.
Normally, repurchase agreements are not subject to trading. U.S. Government
obligations pledged as collateral for repurchase agreements are held by the
Fund's custodian bank until maturity of the repurchase agreement. Provisions of
the agreement provide that the market value of the collateral is sufficient in
the event of default; however, in the event of default or bankruptcy by the
other party to the agreement, realization and/or retention of the collateral
may be subject to legal proceedings.
FEDERAL INCOME TAXES: It is the policy of the Fund 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. The Fund intends to utilize provisions of Federal income
tax laws which allow a realized capital loss to be carried forward for eight
years following the year of loss and offset such losses against any future
realized gains. At December 31, 1996, the Fund did not have a tax-basis capital
loss carryforward. In addition, from November 1, 1996 through December 31,
1996, the Fund did not incur any net realized capital losses. If the Fund had
incurred net capital losses during this period, as permitted by tax
regulations, the Fund would elect to defer these losses and treat them as
arising in the fiscal year ended December 31, 1997.
DIVIDEND POLICY: It is the policy of the Fund to make distributions annually of
its net investment income and its net realized capital gains, if any, at the
end of the year in which earned or at the beginning of the next year. Dividends
and capital gain distributions will normally be reinvested in additional shares
at net asset value without a sales charge, unless otherwise elected at
purchase.
DEFERRED ORGANIZATIONAL EXPENSES: Deferred organizational expenses included on
the statement of assets and liabilities include organizational costs incurred
during the start up of the Fund that J. J. B. Hilliard, W. L. Lyons, Inc.,
("Hilliard Lyons") the Distributor, had paid for the Fund. It is the policy of
the Fund that the Fund will reimburse these organizational expenses. These
expenses are being amortized using the straight-line method over sixty (60)
months.
The Distributor has agreed that in the event that any of the initial 34,990
shares that it purchased are redeemed during the period of amortization of the
Fund's organizational and start-up expenses, the redemption proceeds will be
reduced by any such unamortized organizational expenses in the same proportion
as the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
8
<PAGE>
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.
OTHER: The accounts of the Fund are kept on the accrual basis of accounting.
Security transactions are recorded on the trade date. Realized gains or losses
from sales of securities are determined on the specific identified cost basis.
Dividend income is recognized on the ex-dividend date.
NOTE B -- INVESTMENT ADVISORY AGREEMENT
The investment adviser, Hilliard Lyons Investment Advisors (the "Adviser") is a
division of J. J. B. Hilliard,W. L. Lyons, Inc. which owns 39,190 shares of the
Fund. Under the Investment Advisory Agreement, the Adviser receives a fee,
accrued daily and paid quarterly, at an annual rate of .80% of the Fund's
average daily net assets. The Adviser voluntarily agreed to reduce the fee
payable to it under the Advisory Agreement and, if necessary, reimburse the
Fund on a quarterly basis, by the amount by which the Fund's total annualized
operating expenses (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses but including the Adviser's compensation) for the period
January 1, 1996 to October 14, 1996 exceeded 1.75% of average daily net assets
and for the period October 15, 1996 to December 31, 1996 exceeded 1.30% of
average daily net assets. For the year ended December 31, 1996, there was no
reimbursement necessary from the Adviser and the waiver of the management fee
amounted to $19,678.
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "Plan"). Under the Plan, the
Fund reimburses the Distributor quarterly at an annualized rate of up to .25%
of the Fund's average daily net assets for distribution expenses actually
incurred provided the expenses for which reimbursement is made are primarily
intended to result in the sale of Fund shares and are approved by the Fund's
Board of Directors. Expenses for which the Distributor may be reimbursed under
the Plan include, but are not limited to, payments to investment brokers of the
Distributor and to authorized dealers for distribution of shares of the Fund
and for promotion of the maintenance of holdings by established stockholders
and stockholder servicing.
J. J. B. Hilliard, W. L. Lyons, Inc., the Distributor, received sales charges
of approximately $101,176. The Hilliard Lyons Profit Sharing Plan, as directed
by each participant, owns 387,598 shares of the Fund as of December 31, 1996.
No compensation is paid by the Fund to officers and directors of the Fund who
are affiliated with the Adviser or Hilliard Lyons. The Fund pays each
unaffiliated director an annual retainer of $5,000 and a fee of $500 for each
Board or Committee meeting attended and certain expenses the directors incur in
attending meetings.
NOTE C -- PORTFOLIO TRANSACTIONS
For the year ended December 31, 1996, purchases and proceeds from sale of
investment securities (excluding short-term securities) were $7,809,257 and
$5,224,033, respectively.
The cost of investments for Federal income tax purposes and financial reporting
is the same. At December 31, 1996, the gross unrealized appreciation and
depreciation on investments was $11,704,844 and $64,822, respectively,
resulting in net unrealized appreciation of $11,640,022.
9
<PAGE>
NOTE D -- RESULTS OF SHAREHOLDER MEETING
On April 19, 1996 (the "Company") held a Special Meeting of Shareholders for
the following purposes: to consider and vote on the approval of a proposal to
convert the Fund from a diversified fund to a non-diversified fund; the
election of five nominees to the Company's Board of Directors until their
successors are elected and qualified.
With respect to the approval to convert the Fund from a diversified fund to a
non-diversified fund:
<TABLE>
<CAPTION>
Votes For Votes Against Abstain
--------- ------------- -------
<S> <C> <C>
859,021 19,600 23,698
</TABLE>
With respect to the election of Directors, the results were as follows:
<TABLE>
<CAPTION>
Votes For Votes Withheld
--------- --------------
<S> <C> <C>
Donald F. Kohler................................. 892,715 9,604
Gilbert L. Pamplin............................... 892,715 9,604
William A. Blodgett, Jr.......................... 889,299 13,019
John C. Owens.................................... 892,574 9,744
Dillman A. Rash.................................. 890,308 12,011
</TABLE>
10
<PAGE>
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.
<TABLE>
<CAPTION>
Period from
January 6,
1992* to
For the year ended December 31, December 31,
1996 1995 1994 1993 1992
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.... $20.20 $15.98 $15.69 $15.19 $14.29
--------- --------- --------- --------- ---------
Net investment income... 0.11 0.15 0.12 0.13 0.10
Net realized and change
in unrealized gain on
investments............ 3.92 4.82 0.29 0.50 0.90
--------- --------- --------- --------- ---------
Total from investment
operations............. 4.03 4.97 0.41 0.63 1.00
--------- --------- --------- --------- ---------
Less dividends from net
investment income...... ( 0.11) ( 0.15) ( 0.12) ( 0.13) ( 0.10)
Less dividends from net
realized capital gains. ( 1.17) ( 0.60) ( 0.00) ( 0.00) ( 0.00)
--------- --------- --------- --------- ---------
Total distributions..... ( 1.28) ( 0.75) ( 0.12) ( 0.13) ( 0.10)
--------- --------- --------- --------- ---------
Net asset value:
End of period.......... $22.95 $20.20 $15.98 $15.69 $15.19
========= ========= ========= ========= =========
Total Investment
Return(1).............. 19.98% 31.10% 2.60% 4.13% 7.09%**
SIGNIFICANT RATIOS AND
SUPPLEMENTAL DATA
Operating expenses to
average net assets..... 1.58%(d) 1.75%(c) 1.75%(b) 1.75% 1.71%**(a)
Net investment income to
average net assets..... .52%(d) .82%(c) .68%(b) .75% 1.07%**(a)
Portfolio turnover rate. 18.79% 27.50% 20.10% 59.64% 19.63%
Average commission rate
paid per share......... $ .0600 $ 0.0604 $ 0.0609 $ 0.0705 $ 0.0706
Net assets, end of
period (000s omitted).. $ 35,628 $ 28,259 $ 20,476 $ 23,758 $ 22,404
</TABLE>
(a) Net of voluntary expense reimbursement and management fee waiver by the
Adviser. If the Fund had borne all expenses that were assumed by the
Adviser and paid the full management fee, the annualized ratios of expenses
and net investment income to average net assets would have been 2.76% and
0.02%, respectively, for the period January 6, 1992 through December 31,
1992.
(b) Net of voluntary management fee waiver by the Adviser. If the Fund had paid
the full management fee, the annualized ratios of expenses and net
investment income to average net assets would have been 1.94% and 0.50%,
respectively, for the year ended December 31, 1994.
(c) Net of voluntary management fee waiver by the Adviser. If the Fund had paid
the full management fee, the annualized ratios of expenses and net
investment income to average net assets would have been 1.85% and 0.71%,
respectively, for the year ended December 31, 1995.
(d) Net of voluntary management fee waiver by the Adviser. If the Fund had paid
the full management fee, the annualized ratios of expenses and net
investment income to average net assets would have been 1.64% and .45%,
respectively, for the year ended December 31, 1996.
(1) Excludes maximum sales charge of 4.75%.
* Commencement of operations
** Annualized
11
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS
William A. Blodgett, Jr. Gilbert L. Pamplin
Donald F. Kohler Dillman A. Rash
John C. Owens
OFFICERS
Donald F. Kohler -- Chairman
Samuel C. Harvey -- President
Thomas A. Corea -- Vice President
Joseph C. Curry, Jr. -- Vice President, Treasurer and Secretary
Dianna P. Wengler -- Vice President
DISTRIBUTOR
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
P.O. Box 32760
Louisville, Kentucky 40232-2760
(502) 588-9145
(800) 444-1854
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02266
AUDITORS
Ernst & Young LLP
400 West Market Street
Louisville, Kentucky 40202
LEGAL COUNSEL
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202
This report is intended for the information of shareholders of the Hilliard
Lyons Growth Fund, Inc., but it may also be used as sales literature when pre-
ceded or accompanied by the current prospectus, which gives details about
charges, expenses, investment objectives and operating policies of the Fund.
ANNUAL REPORT
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
================================================================================
LOGO
HILLIARD LYONS
GROWTH FUND
ANNUAL REPORT
DECEMBER 31, 1996
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
(502) 588-8400
(800) 444-1854
================================================================================
