<PAGE>
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:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] 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
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
-------------------------------------------------------------------------
(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
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
-------------------------------------------------------------------------
(5) Total fee paid:
N/A
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
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 vote upon a proposal to approve 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 this proposal is in
the best interest of all stockholders and ask you to vote FOR it. The proposal
has the full support of the Fund's Board of Directors.
PLEASE COMPLETE, SIGN, AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. We look
forward to receiving your proxy card so your shares may be voted at the
Meeting. A POSTAGE-PAID ENVELOPE IS ENCLOSED FOR THIS PURPOSE.
Sincerely yours,
/s/ Donald F. Kohler
DONALD F. KOHLER
Chairman of the Board
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING
AND RETURNING THE ENCLOSED PROXY CARD. 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 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
Statement.
PROPOSAL 2. To elect Messrs. Donald F. Kohler, Gilbert L. Pamplin,
William A. Blodgett, Jr., John C. Owens and Stewart E. Conner Directors of
the Fund's Board.
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 21, 1998
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
Hilliard Lyons Center
Louisville, Kentucky 40202
----------------
PROXY STATEMENT
----------------
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. 2,785,491.11 shares of the Fund were issued
and outstanding as of October 9, 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 21, 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. To elect Messrs. Donald F. Kohler, Gilbert L. Pamplin, William A.
Blodgett, Jr., John C. Owens and Stewart E. Conner Directors of
the Fund's Board.
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
<PAGE>
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. The
Distributor's address is Hilliard Lyons Center, P.O. Box 32760, Louisville,
Kentucky 40232-2760.
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.
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 and 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. Hilliard-Lyons' address is
Hilliard Lyons Center, Louisville, Kentucky 40202. 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.
2
<PAGE>
THE AGREEMENT AND PLAN OF MERGER
Under the terms of the Merger Agreement, 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-Lyons 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 share 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.
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 portions of the
annualized fees as of June 30, 1998; and (c) satisfaction of all necessary
regulatory requirements, including the approval of the Board
3
<PAGE>
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 15222-2707.
THE EXISTING INVESTMENT ADVISORY AGREEMENT
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. The address of all senior officers and directors
is 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 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 1940 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). 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.
4
<PAGE>
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 and
those expenses that were attributable to initial Federal and state securities
law compliance and those deemed to be sales or promotional expenses. The Fund
is responsible for 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, officers, 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 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
5
<PAGE>
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
immediately 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.
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 if the Fund's
Stockholders have not yet approved the New Agreement by that time. The New
Agreement, if implemented under those circumstances, provides 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, 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 the New Agreement 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 believes 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 21, 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.
6
<PAGE>
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
Section 15(f)(1)(B) 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 the Fund within the meaning of
Section 15(f)(1)(B) of the 1940 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 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
7
<PAGE>
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.
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 name, number of shares of the Fund beneficially owned on
September 18, 1998, and principal occupation(s) or employment during the past
five years and years served as a Director of the Fund.
<TABLE>
<CAPTION>
SHARES PERCENT OF PRINCIPAL OPERATION;
NAME OF NOMINEE AGE OWNED FUND SERVICE AS DIRECTOR
--------------- --- --------- ---------- --------------------------
<C> <C> <C> <C> <S>
Donald F. Kohler (1)(2)... 67 8,000.78 * Investment Consultant;
Hilliard Lyons Center Chairman of the Board of
Louisville, KY 40202 the Fund since inception;
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;
Hilliard Lyons Center Chairman of the Board of
Louisville, KY 40202 the Adviser from 1988 to
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
Brown-Forman Corporation General Counsel Brown-
850 Dixie Highway Forman Corporation since
Louisville, KY 40210 1994; Partner, Law Firm of
Woodward, Hobson & Fulton,
Louisville, Kentucky to
1994; Director of the Fund
since 1994.
John C. Owens............. 71 2,085.31 * Private Investor, formerly
116 Chinoe Road Managing Partner of Owens
Lexington, KY 40502 and Company, Certified
Public Accountants,
Lexington, Kentucky,
Director of the Fund since
1991.
Stewart E. Conner......... 56 501.17 * Managing Partner, Law Firm
Wyatt, Tarrant & Combs of Wyatt, Tarrant & Combs,
2800 Citizens Plaza Louisville, Kentucky since
Louisville, KY 40202 1988. Director of the Fund
since August 1998.
</TABLE>
8
<PAGE>
- --------
* Less than 1%.
(1) Deemed to be an "interested person" of the Fund for purposes of the 1940
Act by virtue of an affiliation with the Adviser.
(2) Director of Hilliard-Lyons Government Fund, Inc., an open-end money market
mutual fund, the investment adviser of which is J.J.B. Hilliard, W.L.
Lyons, Inc.
COMPENSATION OF DIRECTORS
No compensation is paid by the Fund to officers of the Fund and directors
who are affiliated with the Adviser. The Fund pays each unaffiliated director
an annual retainer of $5,000.00, a fee of $750.00 for each meeting of the
Board of Directors and of the Audit Committee attended and all expenses the
director incurs in attending meetings. Chairmen of the Audit Committee receive
an annual retainer of $500.00. 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 FROM FUND AND
AGGREGATE ACCRUED AS PART ESTIMATED FUND COMPLEX
COMPENSATION OF ANNUAL BENEFITS (CONSISTING OF TWO (2) FUNDS)
NAME OF PERSON FROM FUND FUND EXPENSES UPON RETIREMENT PAID 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 $8,500.00
</TABLE>
MEETINGS 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.
THE BOARD OF DIRECTORS OF THE FUND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
ALL NOMINEES.
9
<PAGE>
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
Hillard Lyons Center Vice President of the Adviser from
Louisville, KY 40202 1986 to 1996 and Director of
the Adviser from 1981 to 1996.
Samuel C. Harvey(1)..... 50 1991 President Executive Vice President and Director
Hillard Lyons Center of the Adviser since January 1993;
Louisville, KY 40202 Senior Vice President prior thereto.
Joseph C. Curry, Jr.(1) 53 1991 Vice President, Secretary Senior Vice President of the Adviser
Hillard Lyons Center and Treasurer since July 1994 and Vice President
Louisville, KY 40202 prior thereto.
Dianna P. Wengler(1).... 38 1991 Vice President Vice President of the Adviser since
Hillard Lyons Center December 1990 and employee,
Louisville, KY 40202 Investment Management Group,
prior thereto.
Thomas A. Corea(1)...... 38 1994 Vice President Vice President of the Adviser since
Hillard Lyons Center December 1991.
Louisville, KY 40202
</TABLE>
- --------
(1) An "interested person", as defined by the 1940 Act.
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
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
10
<PAGE>
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 includes 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 may be
obtained by contacting the Secretary of the Fund located at Hilliard Lyons
Center, Louisville, Kentucky 40202.
OTHER MATTERS
The Board of Directors know 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 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.
LOGO
Donald F. Kohler
Chairman of the Board
Louisville, Kentucky
October 21, 1998
11
<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.
WITNESSETH:
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 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/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.
A-1
<PAGE>
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 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
A-2
<PAGE>
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 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
A-3
<PAGE>
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 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.
A-4
<PAGE>
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
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: ______________________________
A-5
<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 21, 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
