<PAGE>
November 20, 2000
Dear Shareholder:
Hilliard Lyons Growth Fund's results for the 3rd quarter and for the first 9
months of 2000 are shown below with comparable results for the Standard &
Poor's 500 Index and the Dow Jones Industrial Average:
<TABLE>
<CAPTION>
Hilliard Lyons Standard & Dow Jones
Growth Fund Poor's 500 Industrial Average
-------------- ---------- ------------------
<S> <C> <C> <C>
3rd Quarter 2000................... 2.38% -0.97% 2.35%
Calendar year-to-date, 2000........ 1.90% -1.39% -6.29%
</TABLE>
The Fund performed somewhat better than the broad market as represented by the
S&P 500 and the Dow Jones Industrial Average. This mildly better performance
is credited to an under-representation of highly priced and highly volatile
growth companies. While we have written recently in our quarterly letter about
our intention to invest in more companies that serve the technology industry,
we have been patient in our pursuit given the generally high valuations and
slowing growth prospects for such companies.
On the heels of a year when the NASDAQ returned 85% to investors, we marvel at
the speed at which the market extracts such excesses as evidenced by the 42%
decline in the tech heavy index since early March. A year ago investment
bankers and investors were in a frenzy to underwrite or invest in internet-
based businesses regardless of the size of their revenue, the extent of their
losses, or the inexperience of their management. In the second half of 1999
alone, there were 10 initial public stock offerings of Internet companies
whose share price increased by more than 1000% by January 2000. Today the
valuations offered to many of these young companies have been slashed by
investors who now realize that profitability matters. In fact, the NASDAQ
Composite Index is lower today than it was one year ago.
As we write this letter, there is plenty of uncertainty. Our Presidential
election is too close to call and each side appears to be suiting up for a
long, divisive legal battle that is certain to strain the patience of the
American people and financial markets. We do not believe the Presidential
election outcome is material to the long-term outlook, though in the short-
term it has created uncertainty, always an enemy of the market place. Much
more important are the fundamentals of sales, earnings, dividends and interest
rates. Our current thinking is that after an 18 year "party" in the stock
market, some regression is in order.
Domestic and foreign economies are also creating nervousness. Global economies
have slowed as central bankers around the world have tightened their belts
through 145 interest rate increases over the last 16 months. Consumers are
less optimistic and spending less, as a larger percentage of their financial
assets are invested in a stock market that looks tired after eighteen years of
impressive returns. Layoff announcements are accelerating as companies see
slowing growth and bloated infrastructures. Tensions are high in the Middle
East as both the Israelis and the Palestinians see differences too great to
negotiate peace. Undoubtedly, the clouds have darkened over the financial
landscape the past several months.
An investor with a short-term horizon may look at this economic and political
uncertainty as a reason to convert stocks to cash and let the storm pass by.
We view this period a little differently given our investment horizon is
measured in years, not months. There is a growing list of leading
Continued . . . . .
1
<PAGE>
companies with sustainable growth prospects selling for much more reasonable
valuations today than a few months ago. Our team of analysts is focused on
finding such companies for the opportunity to achieve competitive returns for
our investors.
In keeping with these thoughts we are slowly but definitely adjusting the
portfolio to reflect a healthier viewpoint. We shall continue to invest in
promising growth situations. The goal has not changed, but we do not intend to
follow the "crowd" into areas whose growth depends more on hope than reason.
Sincerely,
Shawn J. Ridley
Portfolio Manager
Donald F. Kohler
Chairman of the Board and President
2
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Company Value
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 97.6%
-------------------------------------------------------------------------------
BASIC INDUSTRY -- 1.4%
---------------------------------------------------------------------
30,000 Ecolab Inc............................................. $ 1,081,875
-----------
1,081,875
CAPITAL GOODS -- 12.1%
---------------------------------------------------------------------
154,000 Dover Corp............................................. 7,228,375
39,000 General Electric Co.................................... 2,249,813
-----------
9,478,188
COMMUNICATION SERVICES -- 7.8%
---------------------------------------------------------------------
200,000** MCI Worldcom Inc....................................... 6,075,000
-----------
6,075,000
CONSUMER DURABLE -- 7.8%
---------------------------------------------------------------------
60,000 Donaldson Inc.......................................... 1,320,000
100,000 Harley-Davidson Inc.................................... 4,787,500
-----------
6,107,500
CONSUMER NON-DURABLE -- 3.0%
---------------------------------------------------------------------
64,000 Lauder Estee Cos. Inc. CL A............................ 2,344,000
-----------
2,344,000
FINANCIAL -- 29.1%
---------------------------------------------------------------------
75,000 American International Group Inc....................... 7,176,563
50** Berkshire Hathaway Inc................................. 3,220,000
80,000 Cincinnati Financial Corp.............................. 2,840,000
72,500 Federal Home Loan Mortgage Corp........................ 3,919,531
36,000 Fifth Third Bancorp.................................... 1,939,500
175,112 Synovus Financial Corp................................. 3,710,186
-----------
22,805,780
HEALTH CARE -- 10.7%
---------------------------------------------------------------------
40,000 Allergan Inc........................................... 3,377,500
44,000 Johnson & Johnson...................................... 4,133,250
20,000 Pfizer Inc............................................. 898,750
-----------
8,409,500
RETAIL & SERVICES -- 12.0%
---------------------------------------------------------------------
70,000 Brady WH Co. CL A...................................... 2,117,500
40,000 CVS Corp............................................... 1,852,500
54,000 Gannett Inc............................................ 2,862,000
68,000 Walgreen Co............................................ 2,579,750
-----------
9,411,750
</TABLE>
<TABLE>
<CAPTION>
Market
Shares Company Value
--------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 13.7%
---------------------------------------------------------------------
35,000** Applied Materials Inc................................... 2,075,937
75,000 Lucent Technologies Inc................................. 2,292,187
25,000 Nokia Corp.............................................. 995,312
9,000** Oracle Corp............................................. 708,750
100,000** Solectron Corp.......................................... 4,612,500
----------
10,684,686
Total Common Stocks -- (Cost -- $44,787,717)..................... 76,398,279
----------
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 2.9%
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description
---------- -----------
<C> <S> <C>
$2,295,000 Federal Home Loan
Bank
Purchase Yield
6.388%, due
10/02/00........... 2,294,560
-----------
Total U.S. Govern-
ment Agency Obliga-
tions (Amortized
Cost-- $2,294,560). 2,294,560
-----------
OTHER ASSETS LESS LIABILI-
TIES -- (0.5%)................. (404,195)
-----------
TOTAL NET ASSETS............... $78,288,644
===========
Net assets
Investor A shares.. $67,448,878
Investor B shares.. 10,839,766
-----------
$78,288,644
Shares of capital stock
Investor A shares.. 1,963,693
Investor B shares.. 320,410
-----------
2,284,103
Net asset value
Investor A shares--
redemption price
per share.......... $ 34.35
-----------
Investor B shares--
offering price per
share*............. $ 33.83
-----------
</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.
* Redemption price of Investor B shares varies based on length of time shares
are held.
** Non-income producing security.
HILLIARD LYONS GROWTH FUND, INC.
STATEMENT OF NET ASSETS
(UNAUDITED)
September 30, 2000
3
<PAGE>
----------------------------------
Third Quarter Report
September 30, 2000
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.
Donald F. Kohler
Stewart E. Conner
John C. Owens
OFFICERS
Donald F. Kohler -- Chairman and President
Joseph C. Curry, Jr. -- Treasurer and Secretary
Dianna P. Wengler -- Asst. Secretary
DISTRIBUTOR
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40232-2760
(502) 588-8400
(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.
THIRD QUARTER REPORT
September 30, 2000
