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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HILLIARD LYONS GROWTH FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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Hilliard Lyons Growth Fund, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
DEAR STOCKHOLDER:
You are cordially invited to attend a special meeting of stockholders
(the "Meeting") of Hilliard Lyons Growth Fund, Inc. to be held on November
19, 1998 at 10:00 a.m. at the Holiday Inn Lakeview, Clarksville, Indiana.
At the Meeting, stockholders will be asked to elect the Fund's Board of
Directors and to approve or disapprove the new Investment Advisory
Agreement between Hilliard Lyons Growth Fund, Inc. and Hilliard Lyons
Investment Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.( the
"Adviser"), in anticipation of the acquisition of the parent company of the
Adviser, Hilliard-Lyons, Inc., by PNC Bank Corp. I strongly believe these
proposals are in the best interest of all stockholders and ask you to vote
FOR them. All proposals have the full support of the Fund's Board of
Directors.
PLEASE COMPLETE, SIGN, AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY.
We look forward to receiving your proxy card(s) so your shares may be voted
at the Meeting. A POSTAGE-PAID ENVELOPE IS ENCLOSED FOR THIS PURPOSE
Sincerely yours,
DONALD F. KOHLER
Chairman of the Board
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE.
<PAGE>
Hilliard Lyons Growth Fund, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 19, 1998
A special meeting of stockholders ("Meeting") of Hilliard Lyons Growth
Fund, Inc. (the "Fund"), will be held on November 19, 1998 at 10:00 a.m. at the
Holiday Inn Lakeview, Clarksville, Indiana, to vote on the following proposals:
PROPOSAL 1. A proposal to approve or disapprove the new Investment Advisory
Agreement between the Fund and Hilliard Lyons Investment Advisors, a division of
J.J.B. Hilliard, W.L. Lyons, Inc., as described in the attached Proxy.
PROPOSAL 2. A proposal to elect the Fund's Board of Directors.
PROPOSAL 3. Any other matters that may properly come before the Meeting.
(The Board of Directors of the Fund does not know of any other matter that will
come before the Meeting.)
Only stockholders of record at the close of business on Friday, October 9,
1998 are entitled to vote at the Meeting and any adjournments thereof.
JOSEPH C. CURRY, JR.
Secretary
October , 1998
<PAGE>
Hilliard Lyons Growth Fund, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
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PROXY STATEMENT
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SPECIAL MEETING OF STOCKHOLDERS
NOVEMBER 19, 1998
----------------
INTRODUCTION
This Proxy Statement ("Proxy Statement") is being furnished to stockholders
of Hilliard Lyons Growth Fund, Inc. (the "Fund") in connection with the
solicitation of proxies by the Board of Directors of the Fund for use at the
Special Meeting of Stockholders (including any adjournments or postponements
thereof) to be held on November 19, 1998 (such meeting and any adjournments and
postponements thereof are hereinafter referred to as the "Meeting") for the
purposes set forth in the accompanying Notice of the Special Meeting of
Stockholders.
Stockholders of the Fund of record at the close of business on October 9,
1998 (the "Record Date") are the only stockholders (the "Stockholders") entitled
to vote at the Meeting. shares of the Fund were issued and outstanding as
of , 1998. Each share is entitled to one vote and each
fractional share is entitled to a proportionate fractional vote on each matter
to be acted upon at the Meeting by the Stockholders.
This Proxy Statement and Notice of Special Meeting of Stockholders with
accompanying proxy card ("Proxy") are being mailed to Stockholders on or about
October , 1998.
THE MEETING
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, holders of shares of common stock of the Fund will consider
and vote upon:
PROPOSAL 1. A proposal to approve the new Investment Advisory Agreement between
the Fund and Hilliard Lyons Investment Advisors, a division of
J.J.B. Hilliard, W.L. Lyons, Inc.
PROPOSAL 2. A proposal to elect the Fund's Board of Directors.
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PROPOSAL 3. Any other matters that may properly come before the Meeting. (The
Board of Directors of the Fund does not know of any other matter
that will come before the Meeting.)
In addition to the solicitation of Proxies by mail, officers and employees
of J.J.B. Hilliard, W.L. Lyons, Inc., the Fund's distributor (the
"Distributor"), may solicit proxies in person or by telephone. The Distributor
may hire outside solicitation firms to assist in the solicitation process.
Employees of the Distributor will not be paid for their solicitation activities.
The cost of solicitation will be borne by the Adviser.
Shares represented by duly executed Proxies will be voted in accordance
with the instructions given. If no instructions are given, Proxies will be voted
FOR the specific Proposals set forth in the Proxies and, in accordance with the
best judgment of the persons named in the Proxies, on such other business that
may properly come before the Meeting. A Proxy may be revoked at any time by a
Stockholder before it is exercised by (i) sending a written revocation to Donald
F. Kohler, Chairman, at Hilliard Lyons Center, Louisville, Kentucky 40202, (ii)
by properly executing a later dated Proxy and providing it to the Fund prior to
the Meeting, or (iii) by attending the Meeting and specifically revoking such
Proxy or Proxies and voting in person.
THOSE STOCKHOLDERS WHO WISH TO VOTE FOR OR AGAINST ALL OF THE NOMINEES FOR THE
BOARD OF DIRECTORS MAY CHECK A SINGLE BOX ON THE PROXY CARD, OR MAY VOTE FOR OR
AGAINST THE NOMINEES INDIVIDUALLY.
REQUIRED VOTE FOR NEW INVESTMENT ADVISORY AGREEMENT
Approval of the new Investment Advisory Agreement of the Fund requires the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. As defined in the Investment Company Act of 1940, as amended (the "1940
Act"), a "majority of the outstanding voting securities" means the vote of (i)
67% or more of the Fund's outstanding voting securities present at a meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) more than 50% of the Fund's
outstanding voting securities, whichever is less.
REQUIRED VOTE FOR THE ELECTION OF DIRECTORS
If a quorum is present in person or by Proxy, the favorable vote of a
majority of shares represented at the Meeting is required to elect Directors.
The presence at the Meeting of the holders of one-third of the outstanding
shares of the Fund as of the Record Date, either in person or by Proxy,
constitutes a quorum. If any nominee is not approved by the Stockholders, the
Board will consider alternative nominations.
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1. APPROVAL OR DISAPPROVAL OF THE NEW INVESTMENT ADVISORY AGREEMENT
BACKGROUND
On August 20, 1998, PNC Bank Corp. ("PNC") entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Hilliard-Lyons, Inc. ("Hilliard-
Lyons") pursuant to which Hilliard-Lyons, the parent of the Adviser, will
merge (the "Merger") into PNC Hilliard-Lyons'. PNC will become the owner of all
outstanding capital stock of the Adviser. The Board of Directors is recommending
that Stockholders of the Fund approve the new Investment Advisory Agreement (the
"New Agreement") between the Fund and the Adviser. Approval of the New Agreement
is being sought because the Merger will result in an "assignment" (as defined in
the 1940 Act) of the existing Investment Advisory Agreement between the Fund and
the Adviser (the "Existing Agreement"), resulting in its automatic termination.
The New Agreement, if approved by Stockholders of the Fund, will replace the
Existing Agreement. The Board of Directors has approved the New Agreement,
subject to approval by the Stockholders of the Fund, to become effective upon
the consummation of the Merger.
THE AGREEMENT AND PLAN OF MERGER ("THE MERGER AGREEMENT")
Under the terms of the Merger, Hilliard-Lyons, Inc. will be merged with and
into PNC and will cease to exist as a separate entity. (The surviving entity in
the Merger, together with its direct and indirect subsidiaries, are referred to
in this Proxy Statement as the "Surviving Entity").
On the Effective Date, each outstanding share of Hilliard-Lyons Common
Stock (other than shares held by dissenting shareholders) will be converted into
a combination of shares of PNC Common Stock and cash. The total of the aggregate
stock consideration and cash consideration provided in the Merger will be $275
million, or based on the number of shares of Hilliard-Lyons Common Stock issued
and outstanding on August 20, 1998, $76.79 per share. Subject to the possible
adjustment described in the next succeeding paragraph, this amount is expected
to consist of approximately 70% stock and 30% cash. The holder of each share of
Hilliard-Common Stock will receive (i) the number of shares of PNC Common Stock
equal to $192.5 million divided by the product of the Average Closing Price (as
hereinafter defined) and the number of shares of Hilliard-Lyons Common Stock
issued and outstanding immediately prior to the Effective Date ("Stock
Consideration"); and (ii) cash in the amount of $82.5 million divided by the
number of shares of Hilliard-Lyons Common Stock issued and outstanding
immediately prior to the Effective Date ("Cash Consideration," and collectively
with the Stock Consideration, "Merger Consideration"). The "Average closing
Price" is defined in the Merger Agreement as the average of the closing prices
per shares of PNC common Stock on the NYSE-Composite Transactions List (as
reported by the Wall Street Journal or other authoritative source) for the five
NYSE trading days immediately prior to the Effective Date.
If the Average Closing Price is below $52.00 a share, PNC may reduce the
Stock Consideration and increase the Cash Consideration (provided the aggregate
Merger Consideration remains $275 million) so that no more than 3.7 million
shares of PNC Common Stock are issued. In certain circumstances, the Cash
Consideration may be reduced, and the Stock consideration may be increased
beyond 3.7 million shares.
On the Effective Date, PNC will establish a retention pool (the "Retention
Pool") to be used to retain certain officers and brokers of Hilliard-Lyons, Inc.
and its subsidiaries. Payments from the Retention Pool established for brokers
will be paid to the brokers over a three-year period. Payments from the
Retention Pool established for officers will be paid to the officers over a
five-year period. An officer or broker whose employment with the Surviving
Entity is terminated before he receives all of the payments from the Retention
Pool to which he is entitled (unless that person's employment is terminated by
reason of death or disability or by the Surviving Entity without cause or unless
that person leaves for "good reason", as defined in his employment contract)
will forfeit any such amount not yet paid at the time of the termination. In
addition, certain senior officers of the Adviser are expected to enter into
employment agreements with the Surviving Entity.
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The following officers and employees of the Adviser who are also officers
or directors of the Fund will receive a portion of the purchase price in the
Merger: Donald F. Kohler, Joseph C. Curry, Jr., Gilbert L. Pamplin, Samuel C.
Harvey, Thomas A. Corea and Dianna P. Wengler.
It is presently anticipated that the transaction will close on or before
November 30, 1998, subject to satisfaction of conditions to closing, which
include (a) approval of the New Agreement between the Fund and the Advisor; (b)
consents of clients of the Fund accounting for specified fee revenues of the
annualized fees as of June 30, 1998; and (c) approval of all necessary
regulatory requirements, including the approval of the Board of Governors of the
Federal Reserve System. The Federal Reserve may require satisfaction of certain
conditions as part of its approval, which could affect the terms of the Merger
or the services the Adviser can provide to the Fund.
PNC
PNC is a bank holding company registered under the Bank Holding Company Act
of 1956, as amended. Through its network of subsidiaries, PNC provides banking
and other financial services throughout the United States and in selected
international markets to consumers and business customers, including
corporations, governments, and other institutions. As a global financial
intermediary, PNC provides capital-raising services, trade finance, cash
management, investment banking, capital markets and credit products, and
financial advisory services to large public and private sector institutions that
are part of the global economy. PNC's address is One PNC Plaza, 249 Fifth Avenue
Pittsburgh, Pennsylvania 15222-02707.
THE EXISTING INVESTMENT ADVISORY AGREEMENT
The business and affairs of the Fund are managed under the direction of its
Board of Directors. The business and affairs of the Fund are managed under the
direction of its Board of Directors. The Adviser has been retained by the Fund
as its investment adviser under the Existing Agreement dated January 2, 1992.
The senior officers and directors of the Adviser are: Brian M. Boor, Senior Vice
President and Director; James W. Stuckert, Chairman and Chief Executive Officer;
Joseph L. Heintzman, Jr., Senior Vice President and Chief Financial Officer;
Kenneth L. Wagner, Senior Vice President and Secretary; James R. Allen,
Executive Vice President and Director; Samuel C. Harvey, Executive Vice
President and Director; Frank James Walker, Executive Vice President and
Director; James M. Rogers, Executive Vice President and Director; Peter Mahurin,
Senior Vice President and Director; and Ronald G. Hollander, Senior Vice
President and Director. All senior officers and directors are located at
Hilliard Lyons Center, P.O. Box 32760, Louisville, Kentucky 40232-2707.
The Existing Agreement was approved by the Board of Directors, including a
majority of the directors who are not interested persons of the Adviser, and by
the initial stockholders of the Fund, prior to the initial public offering of
the Fund's shares. The Existing Agreement was re-approved for one year on
February 19, 1998, by the Board of Directors, including a majority of the
Directors who are not interested persons of the Adviser. The Existing Agreement
provides that it will continue in effect from year to year, provided that such
continuance is approved at least annually (a) by a majority
4
<PAGE>
of the Fund's directors who are not interested persons of the Adviser and (b) by
either the Fund's Board of Directors or by the vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act).
The Existing Agreement requires the Adviser at its own expense to furnish
office space to the Fund and all necessary office facilities, equipment, and
personnel for managing the assets of the Fund. The Adviser pays all other
expenses incurred by it in connection with managing the assets of the Fund,
including, but not limited to, the cost and expense of research, analysis and
supervision of the investment portfolio. The Adviser pays the expense of
determining the daily price of shares of the Fund and the related bookkeeping
expenses (other than for such services as are provided by the Fund's Custodian)
and one-half of the fees of any trade association of which the Fund may be a
member. The Fund paid all costs and expenses incurred in connection with the
Fund's organization, the initial registration for offer and sale of the Fund's
shares under the Securities Act of 1933 and under applicable state securities
laws and the initial registration of the Fund under the 1940 Act, including
legal, accounting and printing expenses.
Under the Existing Agreement, the Fund pays all charges of depositories,
custodians, and other agencies for the safekeeping and servicing of its cash,
securities, and other property, and of its transfer, shareholder recordkeeping,
dividend disbursing, and redemption agents. The Fund pays all charges of legal
counsel and of independent auditors. The Fund is responsible for all interest
expense. The expense of notices, proxy solicitation material, reports to its
stockholders and of all prospectuses furnished from time to time to existing
shareholders or used for regulatory purposes are the Fund's responsibility.
Provided however, the Adviser has agreed to pay all expenses incurred for this
Meeting. The Fund pays for any bond and insurance coverage required by law, all
brokers' commissions and other normal charges incident to the purchase and sale
of portfolio securities. The Fund pays all taxes and corporate fees payable to
Federal, state, or other governmental agencies and all stamp or other transfer
taxes. The Fund bears all expenses of complying with Federal, state, and other
laws regulating the issue or sale of shares except for those expenses that were
attributable to initial Federal and state securities law compliance and those
deemed to be sales or promotional expenses. All of the Fund's extraordinary
expenses as may arise including expenses incurred in connection with litigation,
proceedings and claims and expenses incurred in connection with the legal
obligation of the Fund to indemnify its directors, employees, shareholders and
agents with respect to any claims or litigation. In general, the Fund bears all
expenses incidental to its operations not assumed by the Adviser, with the
exception of sales and promotional expenses which are borne by the Adviser.
For the services the Adviser renders, and the facilities it furnishes
pursuant to the Existing Agreement, the Fund is obligated to pay the Adviser a
fee, accrued daily and payable quarterly, equal to 0.80% per annum of the Fund's
average daily net assets. This fee is higher than the investment advisory fee
paid by most investment companies. For the year ended December 31, 1998, the
Adviser voluntarily agreed to reduce the fees payable to it under the Existing
Agreement and, if necessary, reimburse the Company on a quarterly basis, by the
amount by which the Fund's total annual operating expenses attributable to Class
A Shares for such year exceed 1.30% of average net assets
5
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attributable to the Class A Shares and by which the Fund's total annual
operating expenses attributable to the Class B Shares for such year exceed 2.05%
of the average daily net assets attributable to the Class B Shares. The Adviser
also agreed to limit fees payable to it under the Existing Agreement during
previous years. For the year ended December 31, 1997, the advisory fees totaled
$365,543, of which $40,862 was waived. For the year ended December 31, 1996,
the advisory fees totaled $255,228, of which $19,678 was waived. For the year
ended December 31, 1995, the advisory fees totaled $193,004, of which $24,783
was waived.
The Existing Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard for its obligations
thereunder, the Adviser will not be liable for any act or omission in the
course of or in connection with its rendering of services thereunder.
The Adviser has reserved the right to grant its name to other mutual funds
and if the Existing Agreement is terminated to withdraw its consent to the
continuing use of its name by the Fund.
THE NEW INVESTMENT ADVISORY AGREEMENT
The Existing Agreement will by its terms terminate upon the consummation of
the Merger, since the Merger will constitute a change of control of the Fund for
purposes of the 1940 Act. As a result, the Board of Directors is recommending
that Stockholders of the Fund approve the New Agreement to be effective
immediately upon consummation of the Merger. The New Agreement is substantially
identical to the Existing Agreement it replaces, other than its effective and
termination dates. The New Agreement provides that, subject to the supervision
and direction of the Board of Directors, the Adviser will render investment
advice and investment management services with respect to the Fund's assets,
consistent with the Fund's investment objective and policies; make investment
decisions for the Fund; and place all orders for the purchase and sale of the
Fund's investments with broker-dealers. There are no existing plans to alter the
investment personnel and those responsible for the investment policies of the
Fund will continue to direct the policies following the Merger.
The New Agreement provides that it will continue for a two-year period
following the date it becomes effective and will continue automatically from
year to year thereafter only so long as such Agreement is approved at least
annually by (i) the vote, cast in person at a meeting called for such purpose,
of a majority of the Directors who are not "interested persons" (as defined in
the 1940 Act) of the Adviser and (ii) the Board of Directors or the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund in question. It is intended that the New Agreement will take effect
upon consummation of the Merger, with its continuing effectiveness subject to
the receipt of Stockholder approval, as described below.
It is possible that Stockholders will not have acted on the New Agreement
prior to the consummation of the Merger. The Fund and the Adviser have filed
with the Securities and Exchange Commission an application for an exemption from
relevant provisions of the 1940 Act permitting the Fund to enter into a New
Agreement following the consummation of the Merger, even
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if the Fund's Stockholders have not yet approved the New Agreement by that time.
Any New Agreement implemented under those circumstances will provide that the
fees payable by the Fund under the New Agreement prior to Stockholder approval
of the New Agreement will be held in an interest-bearing escrow account to be
paid to the Adviser, as the case may be, only upon Stockholder approval of
the New Agreement, or, if Stockholders do not approve the New Agreement within
the 60 days following consummation of the Merger, to the Fund.
If the New Agreement is not approved by the Fund's Stockholders, the
Existing Agreement will continue in effect in accordance with its terms. In that
event, the Fund understands that the parties to the Merger could nevertheless
agree to proceed with the transaction and, if the Merger occurs, the Existing
Agreement would be deemed to terminate automatically upon the consummation of
the Merger. If such a termination were to occur, the Board of Directors of the
Fund would then make arrangements for the management of the Fund's investments
as they believed appropriate and in the best interests of the Stockholders. A
vote to approve a New Agreement with respect to the Fund will include a vote in
favor of this provision and in favor of the release to Hilliard-Lyons, as the
case may be, upon receipt of Stockholder approval of the New Agreement, of any
amounts held in the escrow account. A copy of the form of the New Agreement is
attached to this proxy statement as Exhibit A.
The Board of Directors of the Fund believe that the terms of the New
Agreement are fair to, and in the best interest of, the Fund and the
Stockholders. The Board of Directors, including all of the disinterested
Directors, recommend that the Stockholders of the Fund approve the New Agreement
between the Fund and the Adviser.
On September 17, 1998, the Board of Directors of the Fund met with
representatives of the Adviser to review the terms of the Merger and to consider
the possible effects of the Merger on the Fund. Both Thomas K. Whitford, Chief
Executive Officer, of PNC Private Bank, by conference call and James W.
Stuckert, President and Chief Executive Officer, of Hilliard-Lyons, Inc., in
person participated in the meeting and discussed the terms of the Merger and its
effect on the Adviser. At the meeting, the Board of Directors voted to approve
the New Agreement and recommend the New Agreement to Stockholders of the Fund
for their approval.
In evaluating the New Agreement, the Board of Directors reviewed materials
furnished by the Adviser and PNC. Those materials included information regarding
the Adviser, PNC, their respective affiliates and their personnel, operations
and financial condition and the terms of the Merger and the possible effects on
the Fund and the stockholders of the Fund as a result of the Merger.
Representatives of the Adviser discussed the anticipated effects on the Fund
and, indicated their belief that as a consequence of the Merger, the operations
of the Board and the capability of the Adviser to provide services to the Fund
would not be adversely affected and could be enhanced from the resources of PNC,
although there could be no assurance as to any particular benefits that would
result.
SPECIAL LEGAL REQUIREMENTS FOR THE MERGER
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Section 15(f) of the 1940 Act provides that, when a change in control of an
investment adviser occurs, the investment adviser and its affiliated persons may
receive any amount or benefit as long as two conditions are satisfied. First,
no "unfair burden" may be imposed on the investment company as a result of the
transaction relating to the change of control, or as a result of any express or
implied terms, conditions or understandings. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement during the two-year period
after the change in control whereby the investment adviser (or predecessor or
successor adviser), or any interested person of any such adviser, may directly
or indirectly receive anything of value from the investment company or its
Stockholders (other than fees for bona fide investment advisory or other
services) or from any person as part of a securities or property transaction
with the investment company (other than fees for bona fide principal
underwriting services). PNC has agreed contractually not to engage in or cause
to occur and will use all commercially reasonably efforts to prevent any of its
affiliates from engaging in or causing any act, practice, arrangement, thing or
matter that imposes, results in, or gives rise to, an unfair burden on any
Investment Companies within the meaning of Section 15(f) of the Investment
Company Act.
The second condition is that, during the three-year period immediately
following consummation of the transaction, at least 75% of the investment
company's board of directors must not be "interested persons" of the investment
adviser or predecessor investment adviser within the meaning of the 1940 Act.
The Fund and the Adviser have filed with the Securities and Exchange Commission
an application for an exemption from Section 15(f)(1)(A). Stewart E. Conner, a
nominee for director of the Fund, has submitted his resignation to become
effective on the Effective Date in the event the application is not approved
prior to the consummation of the Merger. Pursuant to applicable federal banking
laws, either Mr. Kohler or Mr. Pamplin, Directors of the Fund who are employees
of the Adviser will be required to resign as Directors of the Fund upon
consummation of the Merger. It has not yet been determined which one of these
directors will resign.
The Board of Directors of the Fund recommends that the Stockholders vote FOR
approval of the new Investment Advisory Agreement.
2. ELECTION OF BOARD OF DIRECTORS
The Stockholders will also vote upon the election of five nominees to the
Board of Directors at the Meeting. Because the Fund does not regularly hold
annual stockholder meetings, each nominee, if elected, will hold office until
his successor is elected and qualified or until his earlier death, resignation
or removal. The nominees for election as Directors are listed below. The persons
named in the accompanying Proxy intend, in the absence of contrary instructions,
to vote all Proxies in favor of the election of such nominees. A Stockholder
using the Proxy can vote for or against any or all of the nominees. If no voting
instructions are given, but an executed Proxy is returned, the shares
represented by the Proxy will be voted for all nominees named herein for
Director. Should any of the nominees become unable or unwilling to accept
nomination or election prior to the Meeting, the persons named in the Proxy will
exercise their voting power to vote for such substitute person or persons as the
management of the Fund may recommend. All of the nominees have consented to
being named in this Proxy Statement and to serve if elected. However, as
indicated above, either Mr.
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Kohler or Mr. Pamplin, Directors who are employees of the Adviser will resign as
of the Effective Date. In addition, Stewart E. Conner will resign if the Fund is
unable to obtain an exemption from Section 15(f)(1)(A) of the 1940 Act. The Fund
knows of no reason why any other nominee would be unable or unwilling to serve
if elected.
INFORMATION REGARDING NOMINEES FOR THE BOARD OF DIRECTORS
The following information is provided for each of the five nominees. It
includes his or her name, number of shares of the Fund beneficially owned on
September 18, 1998, and principal occupation(s) or employment during the past
five years.
<TABLE>
<CAPTION>
Shares Percent of Principal Operation;
Name of Nominee Age Owned Fund Service as Director
<S> <C> <C> <C> <C>
Donald F. Kohler (1)(2) 67 8,000.78 * Investment Consultant; Chairman of the
Hilliard Lyons Center Board of the Fund since inception;
Louisville, KY 40202 Executive Vice President of the Adviser
from 1986 to 1996 and Director of the
Adviser from 1981 to 1996.
Gilbert L. Pamplin (1)(2) 68 26,941.31 1.0% Investment Consultant; Chairman of
Hilliard Lyons Center the Board of the Adviser from 1988 to
Louisville, KY 40204 1995; Chief Executive Officer of the
Adviser from 1982 to 1995 and President
from 1982 to 1988; Director of the Fund
since inception.
William A. Blodgett, Jr. 52 1,922.73 * Vice President, Deputy General Counsel
Brown-Forman Corporation Brown-Forman Corporation since 1994;
850 Dixie Highway Partner, Law Firm of Woodward, Hobson &
Louisville, KY 40210 Fulton, Louisville, Kentucky to 1994;
Director of the Fund since 1994.
John C. Owens 71 2,085.31 * Private Investor, formerly Managing Partner
116 Chinoe Road of Owens and Company, Certified Public
Lexington, KY 40502 Accountants, Lexington, Kentucky, Director
of the Fund since 1991.
Stewart E. Conner 56 501.17 * Managing Partner, Law Firm of Wyatt,
Wyatt, Tarrant & Combs Tarrant and Combs, Louisville, Kentucky
2800 Citizens Plaza since 1988.
Louisville, KY 40202
</TABLE>
- -----------------
*Less than 1%.
(1) Deemed to be an "interested person" of the Fund for purposes of the
Investment Company Act by virtue of an affiliation with the Adviser.
(2) Director of Hilliard-Lyons Government Fund, Inc., an open-end mutual fund,
the investment adviser of which Hilliard Lyons Investment Advisors, a
division of J.J.B. Hilliard, W.L. Lyons, Inc.
9
<PAGE>
COMPENSATION OF DIRECTORS
No compensation is paid by the Fund to officers of the Fund and directors
who are affiliated with Hilliard Lyons. The Fund pays each unaffiliated director
an annual retainer of $5,000.00, a fee of $750.00 for each meeting of the Board
of Directors and of the Audit Committee attended and all expenses the directors
incur in attending meetings. For the year ended December 31, 1997, unaffiliated
directors received, in the aggregate, $22,000.00 from the Fund, excluding
reimbursed expenses.
The following table sets forth information concerning compensation received
by directors of the Fund during the year ended December 31, 1997.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
BENEFITS ESTIMATED FROM FUND AND FUND
AGGREGATE ACCRUED AS PART ANNUAL BENEFITS COMPLEX (CONSISTING
COMPENSATION OF UPON OF TWO (2) FUNDS) PAID
NAME OF PERSON FROM FUND FUND EXPENSES RETIREMENT TO DIRECTORS
<S> <C> <C> <C> <C>
Donald F. Kohler $0.00 0 0 $0.00
Gilbert L. Pamplin $0.00 0 0 $0.00
William A. Blodgett, Jr. $8,000.00 0 0 $8,000.00
John C. Owens $8,000.00 0 0 $8,000.00
Dillman A. Rash $6,000.00 0 0
</TABLE>
MEETING OF BOARD OF DIRECTORS
The current Board of Directors met five times during the fiscal year ended
December 31, 1997. All of the Directors attended each such meeting except for
Mr. Rash who attended one meeting. The current Audit Committee, which consists
of all of the Fund's independent Directors, met once during the fiscal year
ended December 31, 1997. All members of the Audit Committee attended the
meeting. The function of the Audit Committee is to advise the Board of Directors
with regard to the appointment of the Fund's independent accountants, review and
approve audit and non-audit services of the Fund's independent accountants, and
meet with the Fund's financial officers to review the conduct of accounting and
internal controls. The Board has no compensation or nominating committees.
10
<PAGE>
The Board of Directors of the Fund recommends that the Stockholders vote FOR all
nominees.
ADDITIONAL INFORMATION
EXECUTIVE OFFICERS
Information about the Fund's principal executive officers, including their
names, addresses, ages, positions with the Fund, length of such positions and
principal occupation or employment during the past five years, is set forth
below.
<TABLE>
<CAPTION>
Positions(s) held
Officer with Principal Occupation
Name and Address Age since the Fund during last five years
<S> <C> <C> <C> <C>
Donald F. Kohler(1) 67 1980 Chairman of the Board Investment Consultant; Executive Vice
President of the Adviser from 1986 to
1996 and Director of Hilliard-Lyons from
1981 to 1996.
Samuel C. Harvey 50 1991 President Executive Vice President and Director of
the Adviser since January 1993; Senior
Vice President prior thereto.
Joseph C. Curry, Jr.(1) 53 1991 Vice President, Senior Vice President of the Adviser
Secretary and Treasurer since July 1994 and Vice President prior thereto.
Dianna P. Wengler 38 1991 Vice President Vice President of the Adviser since
December 1990 and employee, Investment
Management Group, prior thereto.
Thomas A. Corea 38 1994 Vice President Vice President of the Adviser since
December 1991.
</TABLE>
- -------------------
(1) Director of Hilliard-Lyons Government Fund, Inc., an open-end money market
mutual fund, the investment adviser of which is Hilliard Lyons Investment
Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.
The officers of the Fund do not receive any compensation from the Fund.
As of September 18, 1998, the executive officers and Directors of the Fund
beneficially owned in the aggregate 39,833.40 shares of the Fund (1.4% of the
shares outstanding).
GENERAL INFORMATION ABOUT THE FUND AND OTHER MATTERS
5% SHAREHOLDERS
11
<PAGE>
To the knowledge of the Fund, no person beneficially owned 5% or more of
the Fund's outstanding shares as of September 18, 1998.
VOTING INFORMATION; ADJOURNMENT
The presence at the Meeting of the holders of one-third of the outstanding
shares of the Fund as of the Record Date, either in person or by Proxy,
constitutes a quorum. Abstentions and "broker non-votes" will not be counted for
or against the Proposal to which they relate, but will be counted for purposes
of determining whether a quorum is present. Abstentions and broker non-votes
will be counted as votes present for purposes of determining a "majority of the
outstanding voting securities" present at the Meeting and a majority of shares
represented at the Meeting at which a quorum is present, and will, therefore,
have the effect of counting against the Proposal to which they relate.
In the event that sufficient votes in favor of either Proposal set forth in
the Notice of the Special Meeting of Stockholders are not received by the time
scheduled for the Meeting, the persons named as proxies may propose one or more
adjournments of the Meeting for a period or periods of not more than 120 days to
permit further solicitation of Proxies with respect to such Proposal. Any such
adjournment will require the affirmative vote of a majority of the votes cast on
the question in person or by Proxy at the session of the Meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those Proxies which they are entitled to vote in favor of such Proposal. They
will vote against any such adjournment those Proxies required to be voted
against such Proposal.
STOCKHOLDER PROPOSALS
The Fund does not hold annual stockholder meetings. Stockholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent meeting
should send their written proposals to the Secretary of the Fund located at
Hilliard Lyons Center, Louisville, Kentucky 40202.
REPORTS TO STOCKHOLDERS
The Fund sends reports to Stockholders quarterly. Each of these incudes a
schedule of portfolio securities. In addition, the semi-annual report contains
unaudited financial statements and the annual report contains audited financial
statements. A copy of the Fund's most recent Annual Report is being included
with this Proxy Statement.
OTHER MATTERS
The Directors now of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
Directors' intention that proxies which do not contain specific restrictions to
the contrary will be voted on such matters in accordance with the judgment
12
<PAGE>
of the persons named in the enclosed form of Proxy.
PLEASE FILL IN, SIGN, AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Directors,
Hilliard Lyons Growth Fund, Inc.
Donald F. Kohler
Chairman of the Board
Louisville, Kentucky
October , 1998
13
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
HILLIARD LYONS CENTER
LOUISVILLE, KENTUCKY 40202
PROXY--SPECIAL MEETING OF STOCKHOLDERS
The undersigned, a stockholder of Hilliard Lyons Growth Fund, Inc., a
Maryland corporation (the "Fund"), hereby appoints DONALD F. KOHLER, GILBERT L.
PAMPLIN and JOSEPH C. CURRY, JR. and each of them, with full power to act alone,
as true and lawful attorneys in fact and proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
all of the shares of Common Stock of the Fund which the undersigned would be
entitled to vote if personally present at the Special Meeting of Stockholders to
be held November 19, 1998 at 10:00 a.m. at the Holiday Inn Lakeview,
Clarksville, Indiana and at any adjournment thereof
The undersigned hereby instructs said proxies and their substitutes:
1. PROPOSAL TO APPROVE THE NEW INVESTMENT ADVISORY AGREEMENT
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
Donald F. Kohler, Gilbert L. Pamplin, William A. Blodgett, Jr.,
John C. Owens, and Stewart E. Conner
[ ] Vote FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except those listed below) to vote for all nominees listed
above
INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominee's name in the space below.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy is continued on the reverse side. Please sign on the reverse side and
return promptly.
<PAGE>
- --------------------------------------------------------------------------------
This Proxy, when properly executed, will be voted in accordance with any
directions given. Unless otherwise specified, the Proxy will be voted FOR
Proposals 1 and 2.
3. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect
to all other matters which may properly come before the Meeting.
The undersigned hereby revokes all proxies heretofore given and ratifies
and confirms all that the proxies appointed hereby, or any of them, or
their substitutes, may lawfully do or cause to be done by virtue thereof.
The undersigned hereby acknowledges receipt of a copy of each of the Notice
of Special Meeting and Proxy Statement, both dated October , 1998.
Please sign exactly as shares are
registered. If shares are held by joint
tenants, all parties in the joint tenancy
must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please indicate the capacity in
which signing. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership or limited liability company,
please sign in partnership or limited
liability company name by authorized
person.
______________________________________
Signature Date
______________________________________
Signature, if held jointly Date
<PAGE>
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
-----------------------------
THIS AGREEMENT dated as of ________, 199_,/1/ between HILLIARD LYONS GROWTH
FUND, INC., a Maryland corporation ("Fund"), and HILLIARD LYONS INVESTMENT
ADVISORS ("Adviser"), a division of J.J.B. Hilliard, W.L. Lyons, Inc., a
Kentucky corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Fund desires to retain the Adviser to render certain specified
investment advisory services to the Fund and the Adviser is willing to render
such services.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the parties agree as follows:
1. Services of Adviser.
1.1 The Adviser will regularly provide the Fund with investment
research, advice and supervision and will furnish continuously an investment
program for the Fund consistent with the investment objectives and policies of
the Fund. The Adviser will determine from time to time what securities shall be
purchased for the Fund and what securities shall be held or sold by the Fund,
subject to the provisions of the Fund's Articles of Incorporation and Bylaws and
of the Investment Company Act of 1940 (the "1940 Act"), and to the investment
objectives, policies and restrictions of the Fund, as each of the same shall be
from time to time in effect, and subject, further, to such policies and
instructions as the Board of Directors of the Fund may from time to time
establish and convey.
1.2 Subject to the general supervision of the Board of Directors of
the Fund, the Adviser will provide certain administrative services to the Fund.
In this regard, the Adviser will, to the extent not required to be provided by
others pursuant to the Fund's custodian agreement or transfer agent agreement,
(i) provide supervision of all aspects of the Fund's operations not incorporated
in section 1.1 above; (ii) provide the Fund with personnel to perform such
executive, administrative and clerical services as are reasonably necessary to
provide effective administration of the Fund; (iii) arrange for, at the Fund's
expense, (A) the preparation for the Fund of all required tax returns, (B) the
preparation and submission of reports to existing stockholders, and (C) the
periodic updating of the Fund's prospectus and statement of additional
information and the preparation of reports filed with the Securities and
Exchange Commission and other regulatory authorities; and (iv) provide the Fund
with adequate office space and all necessary office equipment and services
including
- ----------------
/1/The Agreement will be executed and become effective upon the later of
(a) the closing of the transactions contemplated by the Agreement and Plan of
Merger by and between Hilliard-Lyons, Inc. and PNC Bank Corp, or (b) approval by
the shareholders of the Fund.
1
<PAGE>
telephone service, heat, utilities, stationery and office supplies.
1.3 The Adviser will maintain all books and records with respect to
the Fund's securities transactions required by sub-paragraphs (b)(5), (6), (9)
and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act (other than those
records being maintained by the Fund's custodian or transfer agent) and preserve
such records for the periods prescribed therefor by Rule 31a-2 under the 1940
Act.
1.4 The Adviser will keep the Fund informed of developments materially
affecting the Fund's portfolio and, in addition to providing the Fund with
statistical or other information the Fund may reasonably request with respect to
its investments.
2. Fees and Expenses.
2.1 The Fund will pay the Adviser an investment advisory fee of 0.80%
per annum of the Fund's average daily net assets. This fee shall be accrued
daily and paid on the first business day of each January, April, July and
October for services performed the preceding quarter. Upon any termination of
this Agreement before the end of a quarter, the fee for such part of that
quarter shall be calculated through the date of termination and shall be payable
upon the date of termination of this Agreement. For the purpose of determining
fees payable to the Adviser, the value of the Fund's net assets shall be
computed at the times and in the manner specified in the Fund's prospectus and
statement of additional information.
2.2 The Adviser shall bear all expenses of its employees and overhead
incurred by it in connection with its duties under this Agreement. The Adviser
will also pay all salaries and fees of the Fund's directors and officers who are
interested persons (as such term is defined in the 1940 Act) of the Adviser.
2.3 The Fund assumes and shall pay all expenses of the Fund not set
forth in Section 2.2 including, without limitation: (i) the reimbursements
payable to the Distributor under the Distribution Plan for expenses incurred in
connection with the offering and sale of shares of the Fund, (ii) the salaries
and fees of the Fund's directors who are not interested persons and of officers
and employees who are not affiliated with the Adviser, (iii) the fees and
expenses of the Fund's custodian and transfer agent, (iv) the fees and expenses
of the Fund's legal counsel and independent auditors, (v) brokerage and
commission expenses, (vi) all federal, state, local and foreign taxes and
corporate fees payable by the Fund to governmental agencies, including any issue
or transfer taxes chargeable to the Fund in connection with its securities
transactions, (vii) the dues, fees and other charges of any trade association of
which the Fund is a member, (viii) the cost of fidelity and liability insurance,
(ix) reimbursement of the organization expenses of the Fund and the fees and
expenses involved in registering and maintaining registration of the Fund and of
its shares with the Securities and Exchange Commission and registering the Fund
as a broker or dealer and qualifying its shares under state securities laws,
including the preparation and printing of the Fund's registration statement and
prospectus for such purposes, (x) costs incurred in having the Fund's net asset
value computed at the
2
<PAGE>
times and in the manner specified in the Fund's prospectus and statement of
additional information, (xi) all expenses of stockholders' and directors'
meetings and preparing, printing and mailing prospectuses, statements of
additional information, reports and proxy materials to existing stockholders,
and (xii) such non-recurring or extraordinary expenses as may arise outside the
ordinary course of the Fund's business, including litigation affecting the Fund
and the legal obligation the Fund may have to indemnify its officers and
directors and, in certain situations, the Distributor, with respect thereto. The
Fund shall not be required to pay expenses of activities which are primarily
intended to result in sales of shares of the Fund other than as provided for in
any Rule 12b-1 Distribution Plan adopted by the Fund.
2.4 If, in any fiscal year, the sum of the Fund's operating expenses
(including the investment advisory fee payable pursuant to section 2.1 hereof,
but excluding taxes, interest, brokerage commissions relating to the purchase or
sale of portfolio securities and extraordinary expenses such as for litigation)
exceeds the expense limitations, if any, applicable to the Fund imposed by state
securities administrators, as such limitations may be modified from time to
time, the Adviser shall reimburse the Fund in the amount of such excess to the
extent required by such expense limitations, provided that the amount of such
reimbursement shall not exceed the amount of the Adviser's investment advisory
fee during such fiscal year.
2.5 In addition to the foregoing, the Adviser may from time to time
agree not to impose all or a portion of its fee otherwise payable hereunder
and/or undertake to reimburse the Fund for a portion of its operating expenses
not otherwise required to be borne or reimbursed by the Adviser. Any such fee
reduction or undertaking may be discontinued or modified by the Adviser at any
time.
2.6 [TO BE INCLUDED IF THIS AGREEMENT IS IMPLEMENTED PRIOR TO ITS
APPROVAL BY THE FUND'S SHAREHOLDERS--Any fees payable by the Fund under this
Agreement during the period commencing on the effective date of this Agreement
and ending on the date of the initial approval of this Agreement by a majority
of the outstanding voting securities of the Fund shall be paid into an interest-
bearing escrow account with an unaffiliated financial institution, as the Fund
and the Adviser may establish, to be released to the Adviser only upon such
initial approval of this Agreement, or, if such approval shall not occur within
the 60 days following consummation of the merger, to the Fund.]
3. Liability.
3.1 Neither the Adviser nor any of its officers, directors or
employees shall be liable for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except (i) that the Adviser shall be under a fiduciary duty with
respect to receipt of compensation for services pursuant to Section 36 of the
1940 Act, and shall therefore be liable for a loss resulting from a breach of
such fiduciary duty (in which case any award of damages shall be limited to the
period and the amount set forth in Section 36(b)(3) of the 1940 Act), or (ii)
for a loss resulting from willful misfeasance, bad faith or gross negligence on
its or
3
<PAGE>
their part in the performance of, or from reckless disregard by it or them of,
its or their obligations and duties under this Agreement.
3.2 Any person, even though also employed by the Adviser, who may be
or become an employee of and paid by the Fund shall be deemed, when acting
within the scope of employment by the Fund, to be acting in such employment
solely for the Fund and not as an employee or agent of the Adviser.
4. Services Not Exclusive. It is understood that the services of the
Adviser are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Adviser or any of its affiliates from providing similar services to
other investment companies and other clients (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities. When other clients of the Adviser desire to purchase or sell a
security at the same time such security is purchased or sold for the Fund, such
purchases and sales will, to the extent feasible, be allocated among the Fund
and such clients in a manner believed by the Adviser to be equitable to such
clients and the Fund. However, it cannot be expected that all of the Adviser's
clients, including the Fund, will receive equal treatment at all times.
5. Brokerage. The Adviser shall employ securities brokers that, in its
judgment, will implement the policy of the Fund to seek the best execution of
its portfolio transactions at reasonable expenses. For purposes of this
Agreement, "best execution" shall mean prompt, efficient and reliable execution
at the most favorable price obtainable. In making this determination, the
Adviser shall take into consideration a number of factors including, but not
limited to, the overall net economic result to the Fund (involving both price
paid or received and any commissions and other costs paid), the efficiency with
which the specific transaction is effected, the ability to effect the
transaction at all where a large block is involved, the known practices of
brokers and their availability to execute possibly difficult transactions in the
future and the financial strength and stability of the broker. Under such
conditions as may be specified by the Fund's Board of Directors in the interest
of its stockholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) subject to the restrictions of the 1940 Act,
place orders for the purchase and sale of portfolio securities for the Fund's
account with J.J.B. Hilliard, W.L. Lyons, Inc.; and (b) pay commissions to
brokers other than J.J.B. Hilliard, W.L. Lyons, Inc. that are higher than might
be charged by another qualified broker to obtain brokerage and/or research
services considered by the Adviser to be useful or desirable in the performance
of the Adviser's duties hereunder and for the investment management of other
advisory accounts over which the Adviser or the Adviser's affiliates exercise
investment discretion.
6. Name of Fund. The Fund may use any name including or derived from the
name "J.J.B. Hilliard, W.L. Lyons, Inc." in connection with the Fund only for so
long as this Agreement or any extension, renewal or amendment hereof remains in
effect. The Fund agrees that any name including or derived from the name "J.J.B.
Hilliard, W.L. Lyons, Inc." may freely be used by the Adviser for any purpose
including other investment companies, entities, products or services. Upon the
termination of this Agreement, the Fund shall promptly take all necessary and
appropriate action
4
<PAGE>
to change its name to one that does not include and is not derived from the name
J.J.B. Hilliard, W.L. Lyons, Inc.; provided, however, that the Fund may continue
to use such name if the Adviser consents in writing to such use.
7. Miscellaneous.
7.1 This Agreement shall become effective on the date hereof. It
shall continue in effect until two years from the date on which this Agreement
is executed, and thereafter from year to year only so long as such continuance
is specifically approved at least annually by (i) the Fund's directors or (ii) a
vote of a majority of the Fund's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the directors who
are not interested persons of any party thereto, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days written notice, by the Fund's directors
or by vote of holders of a majority of the Fund's outstanding voting securities,
or upon 60 days written notice by the Adviser. This Agreement will also
terminate automatically in the event of its assignment.
7.2 As used herein, the terms "interested person" and "majority of
the outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act and the rules and regulations under the 1940
Act, subject to any exemption that may be granted to the Fund under the 1940 Act
by the Securities and Exchange Commission.
7.3 This Agreement shall be construed in accordance with the laws of
the Commonwealth of Kentucky.
7.4 The captions in this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
7.5 If any provisions of this Agreement shall be held or made
invalid, in whole or in part, the other provisions of this Agreement shall
remain in force. Invalid provisions shall, in accordance with the intent and
purpose of this Agreement, be replaced by mutual consent of the parties with
such valid provisions which in their economic effect come as close as legally
possible to such invalid provisions.
7.6 The Adviser shall be entitled to rely on any notice or other
communication believed by it to be genuine and correct and to have been sent to
it by or on behalf of the Fund.
7.7 This Agreement may be amended by the parties only if such
amendment is specifically approved by (i) the Board of Directors of the Fund,
and (ii) the vote of a majority of those directors of the Fund who are not
interested persons of the Adviser cast in person at a meeting called for the
purpose of voting on such approval.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be
5
<PAGE>
executed by its duly authorized officer as of the day and year first above
written.
HILLIARD LYONS GROWTH FUND, INC.
By: _________________________________
Title: ______________________________
HILLIARD LYONS INVESTMENT ADVISORS
By: _________________________________
Title: ______________________________
6
