<PAGE>
August 18, 1998
Dear Shareholders,
The Hilliard Lyons Growth Fund had disappointing results for the first half
of 1998. The Fund was up only 3.9%, significantly lagging the Standard &
Poor's 500 which rose by 17.8%. A modest portion of this lag was likely in
light of spectacular fourth quarter results in 1997, which left several key
fund holdings, particularly Cincinnati Financial, quite extended in price.
Most of the shortfall, however, is the result of the consistent application of
the Fund's investment strategy to purchase and hold the best values it can
find among high quality companies. The first half was tough on the price
sensitive investor. More on performance in a moment.
There were two significant organizational developments for the Hilliard
Lyons Growth Fund in the past two months. First, Stewart E. Conner was invited
to join the Board of Directors of the Fund and we are very pleased that he
accepted. Mr. Conner is the managing partner of the firm of Wyatt Tarrant and
Combs, a large and highly reputable law firm in Kentucky.
Second, Tom Corea has been appointed Co-Portfolio Manager with Sam Harvey.
Tom has delivered an outstanding performance record in managing institutional
equity accounts. He is very disciplined and focused in his portfolio
management style, a valuable attribute for our non-diversified fund format.
Tom has 11 years of experience in the investment business, all of which have
been devoted to applying our investment philosophy in the management of
accounts for various Hilliard Lyons' clients. We believe this change
significantly strengthens the management of the Fund and assures continuity of
advice, which is critical for long term success.
First Half Performance and Outlook
The Growth Fund's performance difficulties in the first half of 1998 arose
from an unwillingness to pay what seemed to us to be rich prices for the high
quality, large capitalization companies which dominate the Standard & Poor's
500. We have instead established and added to positions in medium sized
companies which we believe to be high quality but which may operate in fewer
lines of business, and which are in some cases more difficult to buy because
of fewer shares outstanding. Graphically illustrating the difference in
performance between these two categories of stocks is the gap which existed in
mid-August between the Standard & Poor's 500 and the Russell 2000 Index. The
Standard & Poor's 500, whose performance is dominated big companies, is up 14%
for the year. The Russell 2000, which includes 2000 smaller companies, is down
5% for the year. Clearly, our move away from the dominant index stocks has
been wrong so far.
This market condition has become even more exaggerated in the first six
weeks of the third quarter. The economic outlook domestically has become far
more uncertain as weakness from the Asian economies increasingly influences
business here. Many companies are experiencing substantial earnings shortfalls
because of reduced demand from that area of the world. More troublesome is the
deflationary effect that excess supply from Asia and fall-out from an
exceptionally strong dollar have cast upon virtually all businesses in
America. While we are all acutely aware of the difficulties of operating in an
inflationary climate, few of us can appreciate the profit problems when price
increases are so very difficult to come by.
Continued . . . . .
1
<PAGE>
Investor response to these circumstances has been to seek out safe havens
where demand is reliable and pricing satisfactory. Fewer and fewer companies
are able to satisfy these requirements. The stock maket shows it. On July 30,
The Wall Street Journal reported interesting statistics in an article titled
"For Thousands of Stocks, Bear Market is Here." For example, at the end of
July the average New York Stock Exchange stock was down 24% from its 52-week
high. Worse conditions existed in the NASDAQ Stock Market where the average
stock had declined 35% from its highs. 30% of New York Stock Exchange stocks
and 51% of NASDAQ stocks were down 30% or more from their 52-week highs.
Perhaps most startling, even within the S&P 500 performance was remarkably
disproportionate. Just 78 stocks provided all this year's return for the S&P
500, the gainers in the remaining 422 stocks just offseting the losers. Only 5
stocks--Microsoft, Lucent Technologies, General Electric, Wal-Mart and
Pfizer--provided a quarter of the index's return. These dominant stocks are
among the most expensive in the market place. Our search for good values with
a margin of safety has, to our near-term detriment, led us away from these
companies.
Ironically, we are feeling much better about our prospects for finding
opportunities to create good returns for our shareholders. We see many high
quality securities moving into price ranges where we believe positions can be
established which will produce good profits. When they will bear fruit is, of
course, unknown, but we feel there is a good probability of success. This is a
far cry from our unease earlier this year when prices seemed to be rising
mindlessly in the face of deteriorating economic conditions.
As always, we appreciate and value your continued support. It provides a
positive contribution to our investment results.
LOGO
DONALD F. KOHLER
Chairman
LOGO
SAMUEL C. HARVEY
President
2
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JUNE 30, 1998
COMMON STOCKS -- 79.4%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------- ------- ---- ------
BASIC INDUSTRY -- 3.8%
----------------------------------------------------------------------
<C> <S> <C> <C>
95,000 Sigma -- Aldrich ........................... $ 3,547,124 $ 3,336,875
----------- -----------
3,547,124 3,336,875
CAPITAL GOODS -- 13.0%
----------------------------------------------------------------------
97,000 Dover Corp. ................................ 2,055,280 3,322,250
21,000 General Electric Co. ....................... 415,030 1,911,000
16,800 Hubbell Inc. CL B .......................... 408,960 699,300
51,000 Nordson Corp. .............................. 2,642,438 2,397,000
101,000 Raychem Corp. .............................. 4,091,334 2,985,813
----------- -----------
9,613,042 11,315,363
CONSUMER DURABLE -- 5.4%
----------------------------------------------------------------------
106,000 Donaldson Inc. ............................. 1,452,977 2,504,250
58,000 Harley-Davidson Inc. ....................... 1,281,186 2,247,500
----------- -----------
2,734,163 4,751,750
CONSUMER NON-DURABLE -- 5.8%
----------------------------------------------------------------------
81,900* Bush Boake Allen Inc. ...................... 2,294,883 2,400,694
35,000 Nike, Inc. ................................. 1,635,100 1,704,062
23,000 PepsiCo Inc. ............................... 371,161 947,313
----------- -----------
4,301,144 5,052,069
FINANCIAL -- 25.7%
----------------------------------------------------------------------
35,000 American International Group Inc. .......... 1,874,555 5,110,000
23* Berkshire Hathaway Inc. .................... 208,980 1,801,015
195,000 Cincinnati Financial Corp. ................. 4,022,565 7,483,125
60,500 Federal Home Loan Mortgage Corp. ........... 1,115,559 2,847,281
18,000 Fifth Third Bancorp ........................ 272,000 1,134,000
52,312 Synovus Financial Corp. .................... 294,615 1,242,410
34,000 Wachovia Corp. ............................. 2,312,933 2,873,000
----------- -----------
10,101,207 22,490,831
</TABLE>
See notes to financial statements.
3
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------ ------- ---- ------
HEALTH CARE -- 8.1%
----------------------------------------------------------------------
<C> <S> <C> <C>
38,500 Allergan Inc. ................................ $ 926,295 $ 1,785,438
44,000 Johnson & Johnson ............................ 1,360,354 3,245,000
65,550 Life Technologies Inc. ....................... 1,946,795 2,056,631
----------- -----------
4,233,444 7,087,069
RETAIL & SERVICES -- 16.4%
----------------------------------------------------------------------
98,000 Brady WH Co. CL A ............................ 2,509,500 2,725,625
44,000 Gannett Inc. ................................. 1,936,701 3,126,750
82,000 G & K Services Inc. CL A ..................... 2,658,220 3,577,250
69,000 Walgreen Co. ................................. 602,837 2,850,562
86,000 Wallace Computer Services Inc. ............... 2,934,750 2,042,500
----------- -----------
10,642,008 14,322,687
UTILITY -- 1.2%
----------------------------------------------------------------------
22,500 Century Telephone Enterprises ................ 473,400 1,032,187
----------- -----------
473,400 1,032,187
TOTAL COMMON STOCKS........................... $45,645,532 $69,388,831
</TABLE>
REPURCHASE AGREEMENTS -- 20.6%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Purchase Maturity Market
Amount Description Yield Date Value
----------- ----------- -------- -------- -----------
<C> <S> <C> <C> <C>
$18,010,000 State Street Bank & Trust Co.,
dated 6/30/98, with respect to
$17,965,000 U.S. Treasury Notes, 6
1/4%, due 6/30/02 (Market Value --
$18,394,476)..................... 5.50% 07/01/98 18,010,000
-----------
TOTAL REPURCHASE AGREEMENTS
(COST -- $18,010,000)............. 18,010,000
-----------
TOTAL INVESTMENTS (COST --
$63,655,532) (100%).............. $87,398,831
===========
</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
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $45,645,532)................................. $69,388,831
Repurchase Agreements at value (amortized cost $18,010,000)...... 18,010,000
-----------
Total investments............................................... 87,398,831
Cash.............................................................. 2,331
Receivables:
Interest......................................................... 2,752
Dividends........................................................ 56,884
Shares sold...................................................... 415,750
Due from Adviser -- Investor B Shares............................ 9,192
Prepaid expenses.................................................. 9,503
-----------
Total Assets.................................................... $87,895,243
===========
LIABILITIES:
Payables:
Investments...................................................... $ 347,287
Due to advisor -- Note C......................................... 163,537
Shares redeemed.................................................. 30,520
Accrued expenses................................................. 44,815
-----------
Total Liabilities............................................... 586,159
-----------
NET ASSETS:
Common stock ($.001 par value; 150,000,000 shares authorized and
2,774,761 shares issued and outstanding)......................... 2,775
Paid-in surplus................................................... 61,100,073
Accumulated undistributed net realized gain on investments........ 2,152,102
Net unrealized appreciation on investments........................ 23,743,299
Accumulated undistributed net investment income -- Note B......... 310,835
-----------
Total Capital (Net Assets)...................................... 87,309,084
-----------
Total Liabilities and Capital................................... $87,895,243
===========
Net assets
Investor A shares................................................ $82,290,088
Investor B shares................................................ 5,018,996
-----------
$87,309,084
Shares of capital stock
Investor A shares................................................ 2,615,039
Investor B shares................................................ 159,722
-----------
2,774,761
Net asset value
Investor A shares -- redemption price per share.................. $ 31.47
Investor B shares -- offering price per share*................... $ 31.42
===========
Maximum sales charge (Investor A)................................. 4.75%
Maximum offering price per share (100%/(100%-maximum sales charge)
of net asset value adjusted to nearest cent) (Investor A)........ $ 33.04
===========
</TABLE>
*Redemption price of Investor B shares varies based on length of time shares
are held.
See notes to financial statements.
5
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 313,158
Interest.......................................................... 472,582
----------
Total investment income......................................... 785,740
EXPENSES:
Management fees -- Note B......................................... 305,570
12b-1 expenses (Investor A) -- Note C............................. 68,708
12b-1 expenses (Investor B) -- Note C............................. 5,126
Custodian fees.................................................... 25,725
Audit fees........................................................ 18,870
Transfer Agent fees (Investor A).................................. 16,305
Transfer Agent fees (Investor B).................................. 10,650
Legal fees........................................................ 12,245
Directors' fees................................................... 11,305
Insurance expense................................................. 8,779
Shareholder reports............................................... 7,135
Filing fees....................................................... 4,320
Trade Association................................................. 1,041
----------
495,779
----------
Waiver of management fee by Advisor -- Note C..................... ( 10,908)
Reimbursement of expenses by Advisor -- Class B Shares--Note C.... ( 9,192)
----------
Total expenses.................................................. 475,679
----------
Net investment income......................................... 310,061
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments -- Note B........................ 678,956
Change in unrealized appreciation on investments.................. 1,339,241
----------
Net gain on investments......................................... 2,018,197
----------
Net increase in net assets resulting from operations.......... $2,328,258
==========
</TABLE>
See notes to financial statements.
6
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the six
months
ended For the year
June 30, ended
1998 December 31,
(UNAUDITED) 1997
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income.............................. $ 310,061 $ 216,588
Net realized gain on investments................... 678,956 4,695,525
Net change in unrealized appreciation on
investments....................................... 1,339,241 10,764,036
----------- -----------
Net increase in net assets from operations....... 2,328,258 15,676,149
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS FROM:
Net investment income.............................. 0 ( 214,232)
Net realized gain from investment transactions .... 0 ( 3,222,379)
----------- -----------
Total distributions.............................. 0 ( 3,436,611)
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS FROM:
Net investment income.............................. 0 N/A
Realized gain from investment transaction.......... 0 N/A
----------- -----------
Total distribution............................... 0 N/A
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 0 and 113,607 shares issued in
reinvestment of dividends, respectively........... 0 3,394,590
Proceeds from 988,722 and 357,550 shares sold,
respectively...................................... 31,051,985 9,612,901
Cost of 142,607 and 94,849 shares repurchased,
respectively ..................................... ( 4,487,217) ( 2,458,498)
----------- -----------
Net increase in net assets from capital share
transactions.................................... 26,564,768 10,548,993
----------- -----------
Total increase in net assets................... 28,893,026 22,788,531
NET ASSETS:
Beginning of period................................ 58,416,058 35,627,527
----------- -----------
End of period (includes undistributed net
investment income of $310,835 and distributions in
excess of net investment income of $780,
respectively)..................................... $87,309,084 $58,416,058
=========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A -- ORGANIZATION
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.
The Fund issues two classes of shares. Investment A shares and Investment B
shares. The Investment A shares are subject to an initial sales charge imposed
at the time of purchase, in accordance with the Funds' prospectus. Redemptions
of Investment B shares made within 5 years of purchase are subject to a
contingent deferred sales charge in accordance with the Funds' prospectus.
Each Investment Class A and Class B share of the Fund represents identical
interests in the investment portfolio of such Fund and has the same rights,
except that (i) Class B shares bear the expense of higher distribution fees,
which is expected to cause Class B shares too have a higher expense ratio and
to pay lower dividends than Class A shares (ii) certain other class specific
expenses will be borne solely by the class which such expenses are
attributable and (iii) each class has exclusive voting rights with respect to
its own distribution arrangements.
NOTE B -- ACCOUNTING POLICIES
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.
SHARE VALUATION: The net asset value per share of each class of shares of the
Fund is calculated daily by dividing the total value of the Fund's assets
attributable to that class less liabilities attributable to that class, by the
number of shares of that class outstanding. The maximum offering price per
share of Class A shares is equal to the net asset value per share plus a sales
load equal to 4.99% of the net asset value (or 4.75% of the offering price).
The offering price of Class B shares is equal to the net asset value per
share.
The redemption price per share of the Fund, including each class of shares, is
equal to the net asset value per share. However, Class B shares are subject to
a contingent deferred sales charge in accordance with the Fund's prospectus if
redeemed within five years from the date of purchase.
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
8
<PAGE>
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, 1997, the Fund did not have a tax-basis capital loss
carryforward. In addition, from November 1, 1997 through December 31, 1997,
the Fund incurred net realized capital gains. As permitted by tax regulations,
the Fund intends to elect to defer these gains and treat them as arising in
the fiscal year ended December 31, 1998.
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.
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 income and expenses
during the reporting period. Actual results could differ from those estimates.
ALLOCATIONS BETWEEN CLASSES: Investment income earned, realized capital gains
and losses and unrealized appreciation and depreciation for the Fund are
allocated daily to each Class of shares based upon its proportionate share of
total net assets of the Fund. Class specific expenses are charged daily to the
Class incurring the expense. Common expenses which are not attributable to a
specific class are allocated daily to each Class of shares based upon its
proportionate share of total net assets of the Fund.
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 C -- 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 41,694 Class A
shares and 31 Class B 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 has
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 fiscal year ending December 31,
1998 exceed 1.30% of average daily net assets for Class A share investors and
2.05% for Class B share investors. For the six months ended June 30, 1998, the
reimbursement from the Adviser amounted to $9,192 (for Class B share
investors) and the waiver of the management fee amounted to $10,108.
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%
for Class A share investors and 1.00% for Class B share investors 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.
9
<PAGE>
J.J.B. Hilliard, W. L. Lyons, Inc., the Distributor, received sales charges of
approximately $ 1,136,897. The Hilliard Lyons Profit Sharing Plan, as directed
by each participant, owns 536,639 shares of the Fund as of June 30, 1998.
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 D -- PORTFOLIO TRANSACTIONS
For the six months ended June 30, 1998, purchases and proceeds from sale of
investment securities (excluding short-term securities) were $ 21,729,867 and
$ 1,003,127, respectively.
The cost of investments for Federal income tax purposes and financial
reporting is the same. At June 30, 1998, the gross unrealized appreciation and
depreciation on investments was $26,196,757 and $2,453,458, respectively,
resulting in net unrealized appreciation of $23,743,299.
NOTE E -- CAPITAL TRANSACTIONS
<TABLE>
<CAPTION>
For the six
months For the year
ended June ended
30, 1998 December 31,
(UNAUDITED) 1997
----------- ------------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from share issued................... $25,920,023 $ 9,612,901
Dividends reinvested......................... 0 3,394,590
Shares redeemed.............................. ( 4,422,783) ( 2,458,498)
----------- -----------
Change in net assets from Investor A share
transactions................................ $21,497,240 $10,548,993
=========== ===========
*Investor B shares:
Proceeds from shares issued.................. $ 5,131,962 --
Dividends reinvested......................... 0 --
Shares redeemed.............................. ( 64,434) --
----------- -----------
Change in net assets from Investor B share
transactions................................ $ 5,067,528 --
=========== ===========
SHARE TRANSACTIONS:
Investor A shares:
Issued....................................... 826,925 357,550
Reinvested................................... 0 113,607
Redeemed..................................... ( 140,533) ( 94,849)
----------- -----------
Change in Investor A shares.................. 686,392 376,308
=========== ===========
*Investor B shares:
Issued....................................... 161,796 --
Reinvested................................... 0 --
Redeemed..................................... ( 2,074) --
----------- -----------
Change in Investor B shares.................... 159,722 --
=========== ===========
</TABLE>
*For the period April 20, 1998 (commencement of Class B shares) through June
30, 1998
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>
Investor B Investor A
----------- ------------------------------------------------------------------
Period from
April 20, For the six
1998* to Months
June 30, ended June
1998 30, 1998 For the Year Ended December 31,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.................... $32.63 $30.29 $22.95 $20.20 $15.98 $15.69 $15.19
-------- ------- ------- ------- ------- ------- -------
Net investment income................... 0.01 0.12 0.12 0.11 0.15 0.12 0.13
Net realized and unrealized gain on
investments............................ ( 1.22) 1.06 9.13 3.92 4.82 0.29 0.50
-------- ------- ------- ------- ------- ------- -------
Total from investment operations........ ( 1.21) 1.18 9.25 4.03 4.97 0.41 0.63
-------- ------- ------- ------- ------- ------- -------
Less dividends from net investment
income................................. ( 0.00) ( 0.00) ( 0.12) ( 0.11) ( 0.15) ( 0.12) ( 0.13)
Less dividends from net realized gain on
investments............................ ( 0.00) ( 0.00) ( 1.79) ( 1.17) ( 0.60) ( 0.00) ( 0.00)
-------- ------- ------- ------- ------- ------- -------
Total distributions..................... ( 0.00) ( 0.00) ( 1.91) ( 1.28) ( 0.75) ( 0.12) ( 0.13)
-------- ------- ------- ------- ------- ------- -------
Net asset value:
End of period.......................... $31.42 $31.47 $30.29 $22.95 $20.20 $15.98 $15.69
======== ======= ======= ======= ======= ======= =======
Total Investment Return (1)............. ( 3.71)% 3.90% 40.41% 19.98% 31.10% 2.60% 4.13%
SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA
Ratio of operating expenses to average
net assets............................. 2.05%(e)** 1.24%(e)** 1.30%(d) 1.58%(c) 1.75%(b) 1.75%(a) 1.75%
Ratio of net investment income to
average net assets..................... .34%(e)** .83%(e)** .49%(d) .52%(c) .82%(b) .68%(a) .75%
Portfolio turnover
rate (f)............................... 1.71% 1.71% 22.20% 18.79% 27.50% 20.10% 59.64%
Net assets, end of period (000s
omitted)............................... $ 5,019 $82,290 $58,416 $35,628 $28,259 $20,476 $23,758
</TABLE>
11
<PAGE>
(a) 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.
(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 1.85% and 0.71%,
respectively, for the year ended December 31, 1995.
(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 1.64% and 0.45%,
respectively, for the year ended December 31, 1996.
(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 1.40% and 0.39%,
respectively, for the year ended December 31, 1997.
(e) Net of voluntary expense reimbursement and management fee waiver by the
Adviser for B share investors and net of voluntary management fee waiver
by A share investors. If the Fund had borne all expenses that were assumed
by the Adviser and had paid the full management fee, the annualized ratios
of expenses and net investment income to average net assets would have
been 1.26% and .81% for A shares and 4.31% and 0.00% for B shares,
respectively. The B share are for the period April 20, 1998 through June
30, 1998.
(f) Portfolio turnover rate is calculated on the basis of the portfolios as a
whole without distinguishing between the classes of shares issued.
(1) Excludes maximum sales charge of 4.75%.
* Commencement of B shares
** Annualized
12
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LOGO
SEMI-ANNUAL REPORT
JUNE 30, 1998
J.J.B. HILLIARD, W.L. LYONS, INC.
HILLIARD LYONS CENTER
LOUISVILLE, KENTUCKY 40202
(502) 588-8400
(800) 444-1854
----------------------------------
DIRECTORS
William A. Blodgett, Jr.
Gilbert L. Pamplin
Donald F. KohlerDillman 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.
SEMI-ANNUAL REPORT
JUNE 30, 1998
HL-SAR-98
