<PAGE>
July 30, 2000
Hilliard Lyons Growth Fund
Dear Shareholder:
The total return of the Fund during the quarter ending June 30, 2000 was
1.9%, which compared favorably to the -2.7%, return posted by the S&P 500. The
volatility of the stock market increased significantly during the quarter due
to concerns over higher inflation, higher interest rates and a slowing
economy. This volatility allowed us to continue building positions in leading
growth companies.
Investing in the public equity markets, similar to other defined
environments, is an evolving process that challenges our emotions and mental
processes in increasing ways. The notion of valuation, based on historical
measurements such as price to earnings, price to book value and price to
enterprise value, has caused a major upward move in stocks of the big, fast-
growing companies highly desired by investors. The table below shows the
tremendous growth in valuation premiums placed on Cisco Systems, EMC, Nortel
Networks and Sun Microsystems over the last 3 years.
<TABLE>
<CAPTION>
Price to Average Price
Forward P/E Average P/E Book Value to Book Value
Today 1997 Today 1997
----------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Cisco Systems............ 118x 30x 28x 10x
EMC...................... 139x 22x 33x 5x
Nortel Networks.......... 122x 24x 16x 4x
Sun Microsystems......... 109x 15x 27x 6x
S&P 500.................. 27x 22x 5x 3x
</TABLE>
Looking through the rearview mirror, we wish we had owned these world-class
companies the last several years. Looking ahead, however, we do not believe
these highly valued companies will provide the returns investors expect. We
like to assess business conditions which not only impact the investments in
the Fund today, but 2 to 4 years from now. Given this longer view, history
shows that conditions for hyper growth cannot, and will not, stay ideal for
these companies forever. A company growing sales and earnings today at 50%,
but selling at 100 or more times earnings, is likely to provide disappointing
returns for investors. If such growth rates slow to 40% or 30%, then the
stock's valuation will decline disproportionately to its lower growth rate.
Such a case is Qualcom, which was priced for perfection earlier this year at
$200 per share, or 190x future earnings. After a downward revision of future
earnings growth, the stock fell to $54 per share, or 50x next 12 month's
earning estimates.
We believe that dramatic short-term volatility in premier growth companies
provides exciting opportunities for long-term investors. The Fund continues to
evolve and adapt to current day markets by embracing a connected world, yet is
unwilling to participate without regard to market valuation. Instead, we like
to maneuver the Fund's investments in a contrary and bold manner in an attempt
to produce excellent returns. The manner in which we expect to differentiate
ourselves going forward is as follows:
1. Invest in industry leaders with embedded competitive advantages,
superior sales and earning growth, and high barriers to entry.
2. Invest in such companies when the visibility of long-term earnings
growth is high, yet popular market sentiment is weak.
Continued . . . . .
1
<PAGE>
3. Concentrate investments in such a manner that each successful investment
has a meaningful impact on the performance of the Fund.
Simply said, we expect the Fund to concentrate its efforts in fewer holdings
in powerful companies purchased below their long-term intrinsic value. The
goals of this stated philosophy are also simple:
1. To outpace the S&P 500 by 2 percentage points per year over any rolling
3 year period.
2. To provide an absolute annual total return to shareholders of 12%.
3. To outpace the Consumer Price Index annually by 3 percentage points.
Despite the unrealistic expectations of most investors today, the challenge
of these goals cannot be understated when looking at historical figures. To
illustrate, a large majority of mutual fund managers have failed to outperform
the S&P 500 over any 3-year period. Moreover, the 72-year annualized total
return for large cap domestic equities, despite the unsustainable high returns
achieved over the last 20 years, was only 12%.
In this day of instantaneous information flow, focus on short-term returns
and reliance on momentum, we sense that fewer and fewer investors really
understand, or care, that wealth is built in small amounts over a long period
of time. When we scan the list of the wealthiest Americans published each year
in popular business magazines, we are not surprised by the overwhelming
percentage who built their wealth by owning a small number of businesses for a
long time.
We are attempting to differentiate the Fund from a long list of other Funds
available. Time will tell!
/s/ DONALD F. KOHLER /s/ SHAWN J. RIDLEY
DONALD F. KOHLER SHAWN J. RIDLEY
Chairman of the Board and President Portfolio Manager
QUARTER RETURNS ARE AS OF 6/30/00. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS. THE FUND MAY HAVE INVESTED IN STOCKS THAT HAVE EXPERIENCED SIGNIFICANT
GAINS; THERE IS NO GUARANTEE THAT THESE GAINS WILL CONTINUE. AS A NON-
DIVERSIFIED FUND, A GREATER PERCENTAGE OF THE FUND'S PORTFOLIO MAY BE INVESTED
IN ONE COMPANY'S SECURITIES THAN THE PORTFOLIO OF A DIVERSIFIED FUND. BECAUSE
OF THIS, THE FUND MAY EXPERIENCE GREATER VOLATILITY IN INVESTMENT PERFORMANCE.
STOCK PRICES OF PORTFOLIO COMPANIES WILL FLUCTUATE SO SHARES, WHEN REDEEMED,
MAY BE WORTH LESS THAN ORIGINAL COST. THE RETURNS CITED DO NOT INCLUDE A
MAXIMUM SALES CHARGE OF 4.75% FOR CLASS A SHARES. DIFFERENT CLASSES OF SHARES
ARE OFFERED AND THEIR PERFORMANCE WILL VARY BECAUSE OF DIFFERENCES IN LOADS AND
FEES PAID. SHARE PRICE AND RETURN WILL VARY AND YOU MAY HAVE A GAIN OR
LOSS WHEN YOU SELL YOUR SHARES.
2
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
(UNAUDITED)
June 30, 2000
COMMON STOCKS -- 100.0%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------- ------- ---- ------
BASIC INDUSTRY -- 3.8%
----------------------------------------------------------------------
<C> <S> <C> <C>
80,000 Ecolab Inc.................................. $ 2,658,612 $ 3,125,000
----------- -----------
2,658,612 3,125,000
CAPITAL GOODS -- 10.2%
----------------------------------------------------------------------
154,000 Dover Corp. ................................ 3,606,292 6,246,625
39,000 General Electric Co. ....................... 248,577 2,067,000
----------- -----------
3,854,869 8,313,625
CONSUMER DURABLE -- 6.3%
----------------------------------------------------------------------
63,000 Donaldson Inc. ............................. 812,740 1,244,250
100,000 Harley-Davidson Inc. ....................... 1,082,613 3,850,000
----------- -----------
1,895,353 5,094,250
CONSUMER NON-DURABLE -- 6.5%
----------------------------------------------------------------------
60,000 Gillette Co. ............................... 2,129,382 2,096,250
64,000 Estee Lauder Cos. Inc. CL A ................ 1,619,189 3,164,000
----------- -----------
3,748,571 5,260,250
FINANCIAL -- 30.0%
----------------------------------------------------------------------
58,000 American International Group Inc. .......... 1,330,635 6,815,000
100* Berkshire Hathaway Inc. .................... 5,349,280 5,380,000
140,000 Cincinnati Financial Corp. ................. 2,522,474 4,401,250
72,500 Federal Home Loan Mortgage Corp. ........... 1,603,279 2,936,250
24,000 Fifth Third Bancorp ........................ 642,500 1,518,000
195,112 Synovus Financial Corp. .................... 2,884,154 3,438,849
----------- -----------
14,332,322 24,489,349
HEALTH CARE -- 14.0%
----------------------------------------------------------------------
45,000 Abbott Labs................................. 1,836,450 2,005,313
53,000 Allergan Inc. .............................. 596,667 3,948,500
44,000 Johnson & Johnson........................... 1,360,355 4,482,500
20,000 Pfizer Inc.................................. 649,950 960,000
----------- -----------
4,443,422 11,396,313
</TABLE>
See notes to financial statements.
3
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
(UNAUDITED)
June 30, 2000
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------- ------- ---- ------
RETAIL & SERVICES -- 14.4%
----------------------------------------------------------------------
<C> <S> <C> <C>
100,000 Brady WH Co. CL A .......................... 2,079,913 3,250,000
70,000 CVS Corp ................................... 2,372,325 2,800,000
59,000 Gannett Inc. ............................... 2,760,857 3,528,937
68,000 Walgreen Co. ............................... 281,335 2,188,750
----------- -----------
7,494,430 11,767,687
TECHNOLOGY -- 9.7%
----------------------------------------------------------------------
50,000 Lucent Technologies Inc .................... 3,093,938 2,962,500
9,000 Oracle Corp ................................ 735,103 756,563
100,000* Solectron Corp ............................. 3,740,441 4,187,500
----------- -----------
7,569,482 7,906,563
UTILITY -- 5.1%
----------------------------------------------------------------------
90,000* MCI Worldcom Inc ........................... 3,796,875 4,128,750
----------- -----------
3,796,875 4,128,750
Total Common Stocks......................... $49,793,936 $81,481,787
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- .3%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Purchase Maturity Market
Amount Description Yield Date Value
--------- ----------- -------- -------- -----------
<C> <S> <C> <C> <C>
$230,000 Federal Home Loan Bank.............. 6.683% 07/03/00 $ 229,916
-----------
Total U.S. Government Agency
Obligations
(Cost -- $230,000).................. 229,916
-----------
TOTAL INVESTMENTS (Cost --
$50,023,852) (100.3%).............. $81,711,703
===========
</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, 2000
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $49,793,936)................................. $81,481,787
U.S Government Agency Obligations at value (amortized cost
$229,916)....................................................... 229,916
-----------
Total investments............................................... 81,711,703
Cash.............................................................. 1,908
Receivables:
Dividends........................................................ 79,732
Capital shares sold.............................................. 84,175
Prepaid expenses.................................................. 10,926
-----------
Total Assets.................................................... $81,888,444
===========
LIABILITIES:
Due to advisor -- Note C......................................... 156,446
Capital shares redeemed.......................................... 183,439
Accrued expenses................................................. 59,388
-----------
Total Liabilities............................................... 399,273
-----------
NET ASSETS:
Common stock ($.001 par value; 150,000,000 shares authorized and
2,432,980 shares issued and outstanding)......................... 2,433
Paid-in surplus................................................... 50,487,230
Accumulated undistributed net realized loss on investments........ (637,963)
Net unrealized appreciation on investments........................ 31,687,850
Accumulated undistributed net investment income -- Note B......... (50,379)
-----------
Total Capital (Net Assets)...................................... $81,489,171
===========
Net assets
Investor A shares................................................ $70,369,802
Investor B shares................................................ 11,119,369
-----------
$81,489,171
===========
Shares of capital stock
Investor A shares................................................ 2,097,166
Investor B shares................................................ 335,814
-----------
2,432,980
Net asset value
Investor A shares -- redemption price per share.................. $ 33.55
Investor B shares -- offering price per share*................... $ 34.76
===========
Maximum sales charge (Investor A).................................
Maximum offering price per share (100%/(100%-maximum sales charge
of net asset
value adjusted to nearest cent) (Investor A)..................... $ 35.22
===========
</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, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends....................................................... $ 418,725
Interest........................................................ 137,073
-----------
Total investment income....................................... 555,798
EXPENSES:
Management fees -- Note C....................................... 346,769
12b-1 expenses (Investor A) -- Note C........................... 59,963
12b-1 expenses (Investor B) -- Note C........................... 52,822
Transfer agent fees (Investor A)................................ 34,200
Custodian fees.................................................. 27,300
Transfer agent fees (Investor B)................................ 25,510
Audit fees...................................................... 20,020
Directors' fees................................................. 16,850
Filing fees..................................................... 10,010
Insurance expense............................................... 9,835
Shareholder reports............................................. 9,100
Legal fees...................................................... 8,190
Trade association............................................... 1,849
-----------
622,418
-----------
Waiver of management fees by Adviser -- Note C.................... (21,834)
Total expenses................................................ 600,584
-----------
Net investment income....................................... (44,786)
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments -- Note B...................... (637,963)
Change in unrealized appreciation on investments................ (729,064)
-----------
Net loss on investments....................................... (1,367,027)
-----------
Net decrease in net assets resulting from operations........ $(1,411,813)
===========
</TABLE>
See notes to financial statements.
6
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
For the year
For the six ended
months ended December 31,
June 30, 2000 1999
------------- ------------
<S> <C> <C>
DECREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $ (44,786) $ 225,127
Net realized loss on investments................. (637,963) 842,228
Net change in unrealized appreciation on
investments .................................... (729,064) 2,216,048
------------ ------------
Net decrease in net assets from operations .... (1,411,813) 3,283,403
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS FROM:
Net investment income ........................... (-0-) (230,061)
Net realized gain on investments................. (-0-) (2,082,601)
------------ ------------
Total distributions ........................... (-0-) (2,312,662)
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS FROM:
Net investment income ........................... (-0-) (-0-)
Net realized gain on investments................. (-0-) (290,695)
------------ ------------
Total distributions ........................... (-0-) (290,695)
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 0 and 74,783 shares issued in
reinvestment of dividends, respectively......... -0- 2,556,418
Proceeds from 133,662 and 533,912 shares sold,
respectively.................................... 4,239,300 18,039,663
Cost of 690,216 and 550,163 shares repurchased,
respectively ................................... (21,973,951) (18,742,224)
------------ ------------
Net decrease in net assets from capital share
transactions ................................. (17,734,651) 1,853,857
------------ ------------
Total decrease in net assets ................ (19,146,464) 2,533,903
NET ASSETS:
Beginning of period.............................. 100,635,635 98,101,732
------------ ------------
End of period (includes distribution in excess of
net investment income of $5,594 and
undistributed net investment loss of ($44,786),
respectively.................................... $ 81,489,171 $100,635,635
============ ============
</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. Investor A shares and Investor B
shares. The Investor A shares are subject to an initial sales charge imposed
at the time of purchase, in accordance with the Fund's prospectus. Redemptions
of Investor B shares made within 5 years of purchase are subject to a
contingent deferred sales charge in accordance with the Fund's prospectus.
Each Investor 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 to 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 to 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.
8
<PAGE>
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 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 43,922 Class A
shares and 32 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,
2000 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, 2000, the
waiver of the management fee amounted to $21,834 for Class B share investors
and $2,877 for Class A share investors.
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.
J.J.B. Hilliard, W.L. Lyons, Inc., the Distributor, received sales charges of
approximately $72,133 during the six months ended June 30, 2000. The Hilliard
Lyons Profit Sharing Plan, as directed by each participant, owns 338,850
shares of the Fund as of June 30, 2000.
No compensation is paid by the Fund to officers and directors of the Fund who
are affiliated with the Adviser or Hilliard-Lyons, Inc. The Fund pays each
unaffiliated director an annual retainer of $5,000 and a fee of $1,000 for
each Board or Committee meeting attended and certain expenses the directors
incur in attending meetings.
9
<PAGE>
NOTE D -- PORTFOLIO TRANSACTIONS
For the six months ended June 30, 2000, purchases and proceeds from sale of
investment securities (excluding short-term securities) were $12,514,956 and
$19,600,902, respectively.
The cost of investments for Federal income tax purposes and financial
reporting is the same. At June 30, 2000, the gross unrealized appreciation and
depreciation on investments was $31,852,421 and $164,571, respectively,
resulting in net unrealized appreciation of $31,687,850.
NOTE E -- CAPITAL TRANSACTIONS
<TABLE>
<CAPTION>
For the six For the year
months ended ended
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued................ $ 3,683,903 $ 12,771,731
Dividends reinvested....................... -0- 2,268,953
Shares redeemed............................ (19,401,212) (16,965,804)
------------ ------------
Change in net assets from Investor A share
transactions.............................. $(15,717,309) $( 1,925,120)
============ ============
Investor B shares:
Proceeds from shares issued................ $ 555,397 $ 5,267,932
Dividends reinvested....................... -0- 287,465
Shares redeemed............................ ( 2,572,739) ( 1,776,420)
------------ ------------
Change in net assets from Investor B share
transactions.............................. $( 2,017,342) $ 3,778,977
============ ============
SHARE TRANSACTIONS:
Investor A shares:
Issued..................................... 116,025 377,611
Reinvested................................. -0- 66,329
Redeemed................................... ( 608,740) ( 496,929)
------------ ------------
Change in Investor A shares................ ( 492,715) ( 52,989)
============ ============
Investor B shares:
Issued..................................... 17,637 156,301
Reinvested................................. -0- 8,454
Redeemed................................... ( 81,476) ( 53,234)
------------ ------------
Change in Investor B shares................ ( 63,839) 111,521
============ ============
</TABLE>
10
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share of capital stock
outstanding throughout each period and other performance information derived
from the financial statements. It should be read in conjunction with the
financial statements and notes thereto.
<TABLE>
<CAPTION>
Investor B
---------------------------------------------
For the
Six Months Period from For the
Ended For the April 20, Six Months
June 30, Year Ended 1998* to Ended
2000 December 31, December 31, June 30, 2000
(UNAUDITED) 1999 1998 (UNAUDITED)
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net asset value:
Beginning of period.. $33.38 $33.33 $32.63 $33.71
------- ------- ------ -------
Net investment income. (0.13) (0.14) (0.02) 0.00
Net realized
and unrealized
gain/loss on
investments.......... (0.14) 0.97 1.57 (.16)
------- ------- ------ -------
Total from investment
operations........... (0.27) 0.83 1.55 (.16)
------- ------- ------ -------
Less dividends from:
Net investment
income.............. (0.00) (0.00) (0.00) (0.00)
Realized gains........ (0.00) (0.78) (0.71) (0.00)
In excess of net
investment income.... (0.00) (0.00) (0.14) (0.00)
Total distributions... (0.00) (0.78) (0.85) (0.00)
------- ------- ------ -------
Net asset value:
End of period........ $33.11 $33.38 $33.33 $33.55
======= ======= ====== =======
Total Investment
Return (Excludes
sales charge)........ (0.81%) 2.44% 4.82%*** (0.47%)
SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA
Ratio of operation
expenses to average
net assets........... 2.05%(f)** 2.04%(e) 2.05%(d)** 1.29%(f)**
Ratio of net
investment income to
average net assets... (.77%)(f)** (.44%)(e) (0.23%)(d)** .00%(f)**
Portfolio turnover
rate (g)............. 15.24% 24.60% 18.15% 15.24%
Net assets, end of
period (000s
omitted)............. $11,119 $13,343 $9,604 $70,370
<CAPTION>
Investor A
-----------------------------------------------------------
For the Year Ended December 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period.. $33.49 $30.29 $22.95 $20.20 $15.98
----------- ----------- ----------- ----------- -----------
Net investment income. 0.11 0.20 0.12 0.11 0.15
Net realized
and unrealized
gain/loss on
investments.......... 0.98 3.89 9.13 3.92 4.82
----------- ----------- ----------- ----------- -----------
Total from investment
operations........... 1.09 4.09 9.25 4.03 4.97
----------- ----------- ----------- ----------- -----------
Less dividends from:
Net investment
income.............. (0.09) (0.18) (0.12) (0.11) (0.15)
Realized gains........ (0.78) (0.71) (1.79) (1.17) (0.60)
In excess of net
investment income.... (0.00) (0.00) (0.00) (0.00) (0.00)
Total distributions... (0.87) (0.89) (1.91) (1.28) (0.75)
----------- ----------- ----------- ----------- -----------
Net asset value:
End of period........ $33.71 $33.49 $30.29 $22.95 $20.20
=========== =========== =========== =========== ===========
Total Investment
Return (Excludes
sales charge)........ 3.23% 13.58% 40.41% 19.98% 31.10%
SIGNIFICANT RATIOS AND SUPPLEMENTAL DATA
Ratio of operation
expenses to average
net assets........... 1.29%(e) 1.25%(d) 1.30%(c) 1.58%(b) 1.75%(a)
Ratio of net
investment income to
average net assets... .30%(e) .64%(d) .49%(c) .52%(b) .82%(a)
Portfolio turnover
rate (g)............. 24.60% 18.15% 22.20% 18.79% 27.50%
Net assets, end of
period (000s
omitted)............. $87,293 $88,498 $58,416 $35,628 $28,259
</TABLE>
(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 1.85% and 0.71%,
respectively, for the year ended December 31, 1995.
(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 1.64% and 0.45%,
respectively, for the year ended December 31, 1996.
11
<PAGE>
(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 1.40% and 0.39%,
respectively, for the year ended December 31, 1997.
(d) Net of voluntary expense reimbursement and management fee waiver by the
Adviser for B shares 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 1.27% and .62% for A shares and 3.09% and (1.27%) for B shares,
respectively, for the year ended December 31, 1998.
(e) Net of voluntary management fee waiver by the Advisor for A and B share
investors. 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 1.32% and 0.28% for A shares and 2.34% and (0.74%) for B Shares,
respectively, for the year ended December 31, 1999.
(f) Net of voluntary management fee waiver by the Advisor for A and B share
investors. 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 1.29% and (.01%), for A shares and 2.37% and (1.09%) for B
shares, respectively, for the six (6) months ended June 30, 2000.
(g) Portfolio turnover rate is calculated on the basis of the portfolios as a
whole without distinguishing between the classes of shares issued.
*Commencement of B shares
**Annualized
***Not Annualized
12
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
--------------------------------------------------------------------------------
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.
SEMI-ANNUAL REPORT
June 30, 2000
--------------------------------------------------------------------------------
================================================================================
[HILLIARD LYONS GROWTH FUND LOGO]
Semi-Annual Report
June 30, 2000
J.J.B. Hilliard, W.L. Lyons, Inc.
Hilliard Lyons Center
Louisville, Kentucky 40202
(502) 588-8400
(800) 444-1854
================================================================================
