<PAGE>
February 14, 2000
Hilliard Lyons Growth Fund
Dear Shareholder:
The Hilliard Lyons Growth Fund rose 4.1% in the 4th quarter of 1999 badly
trailing the S & P 500 Index which rose 14.9%. The same was true for the year
with the Hilliard Lyons Growth Fund rising 3.2% and the S & P 500 Index
increasing 21.0%. With the Fund having compounded its assets at 26% in the
prior four years, we are not surprised that our stocks took a year off. This
is especially true in light of the sharply higher interest rates of 1999. That
we would trail the market to the extent we did is stunning to us. We think it
is a function of both the extraordinary markets of 1999 and our investment
style. These matters are discussed more fully below.
The Fund ended the year with $101,189,323 of assets up slightly from
$98,448,954 at the beginning of the year. We continue to feel that the Fund
offers investors a distinctive choice in today's markets. We remained
disciplined investors who believe price is an integral part of the decision to
buy a stock. As we look at trading in certain sectors of the market, we cannot
help but think of Warren Buffett's letter to his partners written in another
wild market environment in 1967. "We live in an investment world populated not
by those who must be logically persuaded to believe, but by the hopeful,
credulous and greedy, grasping for an excuse to believe." The price of
discipline this past year was the poor relative result we achieved. We
appreciate the patience of our shareholders and hope they understand that our
resistance to peer pressure to behave in a reckless way may be a significant
positive at some point in the future.
1999
Each year at this time we review the prior year's performance and explain
what caused the variances between our result and that of the Standard & Poor's
500 Index. The analysis this year is uncomplicated. We had almost no
representation in "high technology" electronic and telecommunication
companies. Various sources have reported that without its high tech component,
the S & P 500 Index either dropped by 1% for the year or gained as much as 4%.
In addition to our lack of tech stocks, we also own a number of interest rate
sensitive companies which were hurt by rising interest rates. This explains
our modest gain of 3.2%. We would like to make sure our shareholders
understand how we could end up so out of step with prevailing market trends.
Perhaps the most distinctive characteristic of our style is our view that
owning a stock is very much like becoming a partner in a business. We work
hard to know our companies, and when we purchase them we do so as a long-term
commitment to their businesses and to their managements. If we believe that a
company's value will double every 4 1/2 to 5 years, we will stay with it even
if market fashion and cyclical forces appear likely to temporarily derail
stock price progress. We feel that there are relatively few great long-term
businesses, and when we are able to get in on satisfactory terms we will stay
put unless the long-term outlook deteriorates or the stock price becomes
grotesquely inflated.
A number of our companies faced difficult short-term circumstances in 1999.
Rising interest rates have a significant impact on companies with well-defined
outlooks like the ones we own. Also, we had some industry-specific problems.
An example might be helpful. We have a substantial position in Cincinnati
Financial. It is an insurance company that has a unique investment philosophy
that has produced outstanding returns for holders of its stock. During the
period of our ownership we have come to know the management of the company
very well. We also believe we understand the nature of its business operations
well. It has a nearly impossible to duplicate relationship with the best
insurance agencies in moderately sized towns throughout the United States. But
it doesn't write insurance on the coasts--that's where the big losses are.
Instead of investing its insurance float in bonds and real estate, which have
often produced poor returns for insurance companies, it has been committed for
some time to purchasing high quality common stocks. This has resulted in
ownership of 20% of Fifth Third Bank, the country's best performing bank, as
well as positions in such companies as Merck, Procter & Gamble, and a number
of other top-flight growth companies. Early on, it was clear that 1999 was
going to produce very poor results for the insurance industry as a whole, and
that the stocks were unlikely to be stellar performers until the cycle turned.
Rising interest rates also hurt the price. We did not sell our Cincinnati
Financial, because we believe that it is quite likely that its long-term
growth in book value will be at a mid-teens rate. For most of the year, the
company has traded at its book value, historically a bargain basement price
for the company. So long as we believe that such growth is highly likely,
believe in the management, and see the stock at a bargain price, we will stay
with it. We faced a variety of such situations in the portfolio in 1999. The
most important point is that we feel the portfolio is well positioned to
double its value over the next 4 1/2 to 5 years. This is due to intact, strong
businesses which took a breather in 1999 and are at very reasonable prices.
A word on high tech stocks. We have spoken of this group in prior letters so
I would only repeat that we are committed to establishing positions in
technology companies. It was a mistake not to focus on them several years ago,
but we do not intend to compound our error by jumping in when there is a
frenzy of buying that has left stocks at prices we believe to be quite
extravagant and in many instances absurd. We are well prepared to take
advantage of any setbacks in the group.
<PAGE>
Outlook
In last quarter's letter, we discussed Fed Chairman Alan Greenspan's concern
about over-zealous consumer behavior. The problem is straightforward. Because
of the booming stock market (mostly technology companies), consumers' paper
wealth is increasing much faster than the economy's ability to produce more of
the goods that they want. Chairman Greenspan's worry is that inevitably this
will cause inflation. Indeed, his worries are coming closer to reality as
consumer spending over Christmas and in the first part of this year has been
frenetic. The Fed's only weapon to slow things down is higher interest rates.
The higher rates have caused the majority of stocks to perform poorly over the
past year but the techs have gone the other way--big time! How far will
Greenspan go to get at the technology stocks? How far will he need to go?
These are crucial questions for investors today.
We are particularly appreciative of our current shareholders and their
patience in today's market climate. Even though we are out of phase for now,
we feel a deep conviction that our approach is both rational and offers a
realistic chance of reaching our goal of doubling your money every five years.
Sincerely,
DONALD F. KOHLER
Chairman SAMUEL C. HARVEY
President
[LINE CHART]
Hillard S&P Hillard S&P
Lyons Growth 500 Lyons Growth 500
Fund (Investor A) 92-99 Fund (Investor B) 98-99
----------------- ----- ----------------- -----
1991 $ 9,525 $10,000
1992(1) $10,185 $10,966
1993 $10,606 $12,071
1994 $10,882 $12,230
1995 $14,269 $16,826
1996 $17,125 $20,692
1997 $24,046 $27,598
1998 $27,312 $35,488 $10,007 $10,000
1999 $28,195 $42,955 $10,363 $13,523
2
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1999
COMMON STOCKS -- 89.4%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------- ------- ---- ------
BASIC INDUSTRY -- 6.0%
---------------------------------------------------------------------
<C> <S> <C> <C>
68,200 Ecolab Inc. ................................ $ 2,267,355 $ 2,668,325
115,000 Sigma-Aldrich Corp. ........................ 4,033,686 3,457,187
----------- -----------
6,301,041 6,125,512
CAPITAL GOODS -- 12.7%
---------------------------------------------------------------------
154,000 Dover Corp. ................................ 3,606,293 6,987,750
17,000 General Electric Co. ....................... 330,929 2,630,750
99,500 Teleflex Inc. .............................. 3,697,584 3,115,594
----------- -----------
7,634,806 12,734,094
CONSUMER DURABLE -- 6.6%
---------------------------------------------------------------------
73,000 Donaldson Inc. ............................. 958,858 1,756,562
76,000 Harley Davidson Inc. ....................... 1,856,697 4,868,750
----------- -----------
2,815,555 6,625,312
CONSUMER NON-DURABLE -- 7.9%
---------------------------------------------------------------------
103,100 Gillette Co. ............................... 3,859,856 4,246,431
74,000 Estee Lauder Cos............................ 1,880,879 3,732,375
----------- -----------
5,740,735 7,978,806
FINANCIAL -- 29.9%
---------------------------------------------------------------------
68,125 American International Group Inc. .......... 2,007,422 7,366,016
100* Berkshire Hathaway Inc. .................... 5,349,280 5,610,000
238,000 Cincinnati Financial Corp. ................. 5,478,503 7,422,625
72,500 Federal Home Loan Mortgage Corp. ........... 1,603,279 3,412,031
24,000 Fifth Third Bancorp ........................ 642,500 1,761,000
225,112 Synovus Financial Corp. .................... 3,454,790 4,474,101
----------- -----------
18,535,774 30,045,773
HEALTH CARE -- 9.4%
---------------------------------------------------------------------
75,000 Abbott Laboratories......................... 3,079,500 2,723,438
53,000 Allergan Inc. .............................. 596,668 2,636,750
44,000 Johnson & Johnson........................... 1,360,355 4,097,500
----------- -----------
5,036,523 9,457,688
</TABLE>
See notes to financial statements.
3
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
SCHEDULE OF INVESTMENTS--continued
December 31, 1999
<TABLE>
<CAPTION>
Market
Shares Company Cost Value
------- ------- ---- ------
RETAIL & SERVICES -- 16.9%
---------------------------------------------------------------------
<C> <S> <C> <C>
126,400 Brady WH Co. CL A............................ $ 2,857,125 $ 4,289,700
75,000 CVS Corp..................................... 2,556,375 2,995,312
59,000 Gannett Inc. ................................ 2,760,857 4,812,188
89,000 G & K Services Inc. CL A..................... 2,997,720 2,881,375
68,000 Walgreen Co. ................................ 281,335 1,989,000
----------- -----------
11,453,412 16,967,575
----------- -----------
Total Common Stocks.......................... $57,517,846 $89,934,760
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 11.0%
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Purchase Maturity
Amount Description Yield Date Market Value
----------- ----------- -------- -------- ------------
<C> <S> <C> <C> <C>
$11,070,000 Federal Home Loan Bank .......... 1.521% 01/03/00 $ 11,069,077
------------
Total U. S. Government Agency
Obligations (Cost --$11,069,077). 11,069,077
------------
TOTAL INVESTMENTS (Cost --
$68,586,923) (100.4%)........... $101,003,837
============
</TABLE>
The percentage shown for each investment category is the total value of that
category as a percentage of the total net assets for the Fund.
*Non-income producing security.
See notes to financial statements.
4
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
Common stocks (cost $57,517,846)................................ $ 89,934,760
U.S. Government Agency Obligations at value (amortized cost
$11,069,077)................................................... 11,069,077
------------
Total investments.............................................. 101,003,837
Cash............................................................. 1,620
Receivables:
Dividends....................................................... 114,066
Capital shares sold............................................. 66,962
Prepaid expenses................................................. 2,838
------------
Total Assets................................................... $101,189,323
============
LIABILITIES:
Dividends payable............................................... $ 12,451
Due to adviser -- Note C........................................ 192,574
Capital shares redeemed......................................... 206,122
Accrued expenses................................................ 142,541
------------
Total Liabilities.............................................. 553,688
------------
NET ASSETS:
Common stock ($.001 par value; 150,000,000 shares authorized and
2,989,534 shares issued and outstanding)........................ 2,990
Paid-in surplus.................................................. 68,223,065
Accumulated undistributed net realized gain on investments....... (687)
Net unrealized appreciation on investments....................... 32,416,914
Distributions in excess of net investment income -- Note B....... (6,647)
------------
Total Capital (Net Assets)..................................... $100,635,635
============
Net assets
Investor A shares.............................................. $ 87,292,503
Investor B shares.............................................. 13,343,132
------------
$100,635,635
============
Shares of capital stock
Investor A shares.............................................. 2,589,834
Investor B shares.............................................. 399,700
------------
2,989,534
Net asset value
Investor A shares -- redemption price per share................ $ 33.71
============
Investor B shares -- offering price per share*................. $ 33.38
============
Maximum sales charge (Investor A)................................ 4.75%
Maximum offering price per share (100%/(100%-maximum sales charge
of net asset value adjusted to nearest cent) (Investor A)....... $ 35.39
============
</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
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends......................................................... $ 923,383
Interest.......................................................... 744,503
----------
Total investment income......................................... 1,667,886
EXPENSES:
Management fees -- Note C......................................... 836,525
12b-1 expenses (Investor A) -- Note C............................. 143,367
12b-1 expenses (Investor B) -- Note C............................. 106,106
Transfer agent fees (Investor A).................................. 71,100
Transfer agent fees (Investor B).................................. 60,415
Custodian fees.................................................... 57,800
Shareholder reports............................................... 47,100
Audit fees........................................................ 39,840
Directors' fees................................................... 30,560
Legal fees........................................................ 27,160
Filing fees....................................................... 21,315
Insurance expense................................................. 20,066
Trade association................................................. 3,662
----------
1,465,016
----------
Waiver of management fees by Adviser -- Note C...................... (22,257)
Total expenses.................................................. 1,442,759
----------
Net investment income......................................... 225,127
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments -- Note B........................ 842,228
Change in unrealized appreciation on investments.................. 2,216,048
----------
Net gain on investments......................................... 3,058,276
----------
Net increase in net assets resulting from operations.......... $3,283,403
==========
</TABLE>
See notes to financial statements.
6
<PAGE>
HILLIARD LYONS GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year ended
December 31,
1999 1998
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income............................. $ 225,127 $ 484,708
Net realized gain on investments.................. 842,228 2,054,232
Net change in unrealized appreciation on
investments...................................... 2,216,048 7,796,808
------------ ------------
Net increase in net assets from operations...... 3,283,403 10,335,748
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS FROM:
Net investment income............................. (230,061) (449,910)
Net realized gain on investments.................. (2,082,601) (1,803,844)
------------ ------------
Total distributions............................. (2,312,662) (2,253,754)
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS FROM:
Net investment income and in excess of net
investment income................................ (0) (37,291)
Net realized gain on investments.................. (290,695) (193,153)
------------ ------------
Total distributions............................. (290,695) (230,444)
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from 74,783 and 74,534 shares issued in
reinvestment of dividends, respectively.......... 2,556,418 2,422,891
Proceeds from 533,912 and 1,360,496 shares sold,
respectively..................................... 18,039,663 42,878,738
Cost of 550,163 and 432,675 shares repurchased,
respectively .................................... (18,742,224) (13,467,505)
------------ ------------
Net increase in net assets from capital share
transactions................................... 1,853,857 31,834,124
------------ ------------
Total increase in net assets................... 2,533,903 39,685,674
NET ASSETS:
Beginning of period............................... 98,101,732 58,416,058
------------ ------------
End of period (includes distribution in excess of
net investment income of $6,647 and $1,713,
respectively).................................... $100,635,635 $ 98,101,732
============ ============
</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,
1999 exceed 1.30% of average daily net assets for Class A share investors and
2.05% for Class B share investors. For the year ended December 31, 1999, the
waiver of the management fee amounted to $8,327 for the Class A share
investors and $13,930 for Class B 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 $1,361,363 during the year ended December 31, 1999. The
Hilliard Lyons Profit Sharing Plan, as directed by each participant, owns
473,286 shares of the Fund as of December 31, 1999.
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
9
<PAGE>
$750 for each Board or Committee meeting attended and certain expenses the
directors incur in attending meetings.
NOTE D -- PORTFOLIO TRANSACTIONS
For the year ended December 31, 1999, purchases and proceeds from sale of
investment securities (excluding short-term securities) were $26,052,410 and
$21,927,944, respectively.
The cost of investments for Federal income tax purposes and financial
reporting is the same. At December 31, 1999, the gross unrealized appreciation
and depreciation on investments was $34,047,810 and $1,630,896, respectively,
resulting in net unrealized appreciation of $32,416,914.
10
<PAGE>
NOTE E -- CAPITAL TRANSACTIONS
<TABLE>
<CAPTION>
For the year ended
December 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued...................... $ 12,771,731 $ 33,687,452
Dividends reinvested............................. 2,268,953 2,196,708
Shares redeemed.................................. (16,965,804) (13,188,919)
------------ ------------
Change in net assets from Investor A share
transactions.................................... $ (1,925,120) $ 22,695,241
============ ============
Investor B shares:
Proceeds from shares issued...................... $ 5,267,932 $ 9,191,286
Dividends reinvested............................. 287,465 226,183
Shares redeemed.................................. (1,776,420) (278,586)
------------ ------------
Change in net assets from Investor B share
transactions.................................... $ 3,778,977 $ 9,138,883
============ ============
SHARE TRANSACTIONS:
Investor A shares:
Issued........................................... 377,611 1,070,524
Reinvested....................................... 66,329 67,549
Redeemed......................................... (496,929) (423,897)
------------ ------------
Change in Investor A shares...................... (52,989) 714,176
============ ============
Investor B shares:
Issued........................................... 156,301 289,972
Reinvested....................................... 8,454 6,985
Redeemed......................................... (53,234) (8,778)
------------ ------------
Change in Investor B shares........................ 111,521 288,179
============ ============
</TABLE>
11
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share of capital stock
outstanding throughout each period and other performance information derived
from the financial statements. It should be read in conjunction with the
financial statements and notes thereto.
<TABLE>
<CAPTION>
Investor B Investor A
------------------------------- -------------------------------------------------------
For the year Period from
Ended April 20, 1998* For the Year Ended December 31,
December 31, To December 31, -------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
------------- --------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value:
Beginning of period..... $ 33.33 $32.63 $ 33.49 $ 30.29 $ 22.95 $ 20.20 $ 15.98
------- ------ ------- ------- ------- ------- -------
Net investment income.... (0.14) (0.02) 0.11 0.20 0.12 0.11 0.15
Net realized and
unrealized gain on
investments............. 0.97 1.57 0.98 3.89 9.13 3.92 4.82
------- ------ ------- ------- ------- ------- -------
Total from investment
operations.............. 0.83 1.55 1.09 4.09 9.25 4.03 4.97
------- ------ ------- ------- ------- ------- -------
Less dividends from:
Net investment income... (0.00) (0.00) (0.09) (0.18) (0.12) (0.11) (0.15)
Realized gains.......... (0.78) (0.71) (0.78) (0.71) (1.79) (1.17) (0.60)
In excess of net
investment income...... (0.00) (0.14) (0.00) (0.00) (0.00) (0.00) (0.00)
Total distributions...... (0.78) (0.85) (0.87) (0.89) (1.91) (1.28) (0.75)
------- ------ ------- ------- ------- ------- -------
Net asset value:
End of period........... $ 33.38 $33.33 $ 33.71 $ 33.49 $ 30.29 $ 22.95 $ 20.20
======= ====== ======= ======= ======= ======= =======
Total Investment Return
(Excludes sales charge). 2.44% 4.82%*** 3.23% 13.58% 40.41% 19.98% 31.10%
SIGNIFICANT RATIOS
AND SUPPLEMENTAL DATA
Ratio of operating
expenses to average net
assets.................. 2.04%(e) 2.05%(d)** 1.29%(e) 1.25%(d) 1.30%(c) 1.58%(b) 1.75%(a)
Ratio of net investment
income to average net
assets.................. (.44%)(e) (.23)%(d)** .30%(e) .64%(d) .49%(c) .52%(b) .82%(a)
Portfolio turnover rate
(f)..................... 24.60% 18.15% 24.60% 18.15% 22.20% 18.79% 27.50%
Net assets, end of period
(000s omitted).......... $13,343 $9,604 $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.
12
<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 Adviser 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) Portfolio turnover rate is calculated on the basis of the portfolio as a
whole without distinguishing between the classes of shares issued.
*Commencement of B shares
**Annualized
***Not annualized
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Hilliard Lyons Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Hilliard Lyons Growth Fund, Inc. as
of December 31, 1999, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of December 31, 1999, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Hilliard Lyons Growth Fund, Inc. as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years then ended and the financial highlights for each of the periods
indicated therein, in conformity with accounting principles generally accepted
in the United States.
[LOGO SIGNATURE]
Louisville, Kentucky
January 25, 2000
14
<PAGE>
[LOGO OF HILLIARD LYONS GROWTH FUND]
Annual Report
December 31, 1999
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
Samuel C. Harvey -- President
Joseph C. Curry, Jr. -- Treasurer and Secretary
Dianna P. Wengler -- Asst. Secretary
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, Pennsylvania
19428-2961
(610) 260-6533
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.
ANNUAL REPORT
December 31, 1999
600186
