<PAGE>
May 26, 2000
Hilliard Lyons Growth Fund
Dear Shareholders:
Speculation is a natural market force. During periods of normal economic
growth this force is not only manageable, but also healthy for the continual
advancement of capitalism. History tells us that speculation becomes more
noticeable and dangerous, however, during extended periods of economic
prosperity. In the 1630's, Holland experienced the oft-cited tulip mania soon
after Amsterdam ascended to the top of Europe's economic pyramid. In the early
twentieth century, the U.S. experienced a stock market boom once it passed
Britain as the world's leading industrial force. Modern day observers of
financial markets watched Japan's stock market, real estate and global
financial strength soar during the 1980's when that country's economy effected
over 10% of the world's trade.
Today, as the world enters its twenty-first century, the United States is
again ruler of the global economic kingdom. America's resurgence has been led
by the rapid development of our technology companies. Microsoft produced the
operating system and software that allowed the personal computer to function
simply. Intel produced the microprocessors to make computers faster and more
capable. Cisco Systems produced the routers that allowed computers to be
networked so they could talk to each other. Then came the Internet.
The Internet spawned a new industry of companies that promised unrivaled
growth of revenues and profits. The proliferation of the Internet provided
easy access to an endless amount of information and made stock trading as easy
as turning on a computer. The impressive returns of stocks over the last
several years inflated investor's net worth and encouraged many to take more
portfolio risk in exchange for the hope of high returns.
Stock speculators fell in love with these Internet companies and expressed
their admiration by abandoning rational valuation techniques and bidding share
prices to unimaginable levels. Like all manias, the higher the price soared,
the more investors wanted to buy.
But if something can end it probably will. By the end of the first quarter
most Internet stocks finished significantly lower than their peak valuations.
A quick scan of the USA Today e-commerce 50 shows that few of last year's
internet darlings were spared, and many stocks fell more than 60% from their
peaks.
The swift and severe drop in Internet companies' valuations has helped
investors who apply more traditional stock valuation techniques to their stock
selection process. The Fund made an impressive recovery from its February lows
to finish the quarter down 2.3% compared to a 2.3% gain posted by the S&P 500
Index. We are encouraged by the Fund's strong performance in March and April
as indicated by its 1.31% year-to-date return through April versus -.79% for
the S&P 500.
The speculation may have ended. It is our opinion that a more sober and
reflective mood will be given to the equity markets for a time, though the
unwinding of excesses is most likely still taking place. As this regression
progresses we shall attempt to ferret out value and invest accordingly.
Continued . . . . .
1
<PAGE>
In February the Fund was assigned a new portfolio manager, Shawn Ridley. He is
young, yet experienced and should contribute to the results. His philosophy is
expressed here:
. Invest in companies with a strong market leadership position and
excellent management capabilities with an owner orientation.
. Buy stocks selling at what we believe to be a discount to their
underlying economic value.
. Apply our judgment independently of that originating from Wall Street.
. Run a focused portfolio so that our best ideas have a meaningful impact
on performance.
. Invest for the long-term to keep portfolio turnover and taxes
significantly below industry norms.
The most meaningful change in philosophy will be the Fund's increased exposure
to technology and communications companies. We intend to apply the same
rigorous standards and valuation criteria we have always followed when
purchasing such companies. We believe that the technology and communications
industries will continue to experience significant growth and contribute
meaningfully to our economic prosperity.
In closing we offer a quote written in 1923.
"Nowhere does history indulge in repetitions so often or so uniformly as in
Wall Street. When you read contemporary accounts of booms or panics the one
thing that strikes you most forcibly is how little either stock speculation or
stock speculators today differ from yesterday. The game does not change and
neither does human nature."
Edwin Lefevre "Reminiscences of a Stock Operation"
We have more confidence in the underlying value of common stocks than we do in
the emotional stability of their holders.
Sincerely,
/s/ Donald F. Kohler
Donald F. Kohler /s/ Shawn J. Ridley
Chairman of the Board and President Shawn J. Ridley
Portfolio Manager
QUARTER RETURNS ARE AS OF 3/31/00. YEAR-TO-DATE RETURNS ARE AS OF 4/30/00.
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.
STATEMENT OF NET ASSETS
(UNAUDITED)
March 31, 2000
<TABLE>
<CAPTION>
Market
Shares Company Value
--------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 96.9%
-------------------------------------------------------------------------------
BASIC INDUSTRY -- 3.5%
---------------------------------------------------------------------
83,200 Ecolab Inc.............................................. $3,052,400
----------
3,052,400
CAPITAL GOODS -- 12.0%
---------------------------------------------------------------------
154,000 Dover Corp.............................................. 7,372,750
17,000 General Electric Co..................................... 2,638,187
10,000 Teleflex Inc............................................ 355,000
----------
10,365,937
CONSUMER DURABLE -- 7.9%
---------------------------------------------------------------------
63,000 Donaldson Inc........................................... 1,421,438
68,000 Harley-Davidson Inc..................................... 5,397,500
----------
6,818,938
CONSUMER NON-DURABLE -- 7.8%
---------------------------------------------------------------------
93,100 Gillette Co............................................. 3,508,706
64,000 Lauder Estee Cos. Inc. CL A............................. 3,204,000
----------
6,712,706
FINANCIAL -- 33.5%
---------------------------------------------------------------------
68,125 American International Group Inc........................ 7,459,687
100** Berkshire Hathaway Inc.................................. 5,720,000
180,000 Cincinnati Financial Corp............................... 6,772,500
72,500 Federal Home Loan Mortgage Corp......................... 3,203,594
24,000 Fifth Third Bancorp..................................... 1,512,000
225,112 Synovus Financial Corp.................................. 4,248,989
----------
28,916,770
HEALTH CARE -- 10.2%
---------------------------------------------------------------------
65,000 Abbott Labs............................................. 2,287,188
53,000 Allergan Inc............................................ 2,650,000
44,000 Johnson & Johnson....................................... 3,082,750
20,000 Pfizer Inc.............................................. 731,250
----------
8,751,188
RETAIL & SERVICES -- 14.7%
---------------------------------------------------------------------
117,400 Brady WH Co. CL A....................................... 3,661,413
75,000 CVS Corp. 2,817,187
59,000 Gannett Inc............................................. 4,152,125
14,000 G & K Services Inc. CL A................................ 273,656
68,000 Walgreen Co............................................. 1,751,000
----------
12,655,381
</TABLE>
<TABLE>
<CAPTION>
Market
Shares Company Value
--------------------------------------------------------------------------------
<C> <S> <C>
TECHNOLOGY -- 6.0%
--------------------------------------------------------------------
30,000 Lucent Technologies Inc................................ 1,822,500
9,000** Oracle Corp............................................ 702,563
65,000** Solectron Corp......................................... 2,604,062
----------
5,129,125
UTILITY -- 1.3%
--------------------------------------------------------------------
25,000** MCI Worldcom Inc....................................... 1,132,813
----------
1,132,813
Total Common Stocks -- (Cost -- $51,286,104) 83,535,258
----------
</TABLE>
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 3.9%
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Description
---------- -----------
<C> <S> <C>
$3,395,000 Federal Home Loan
Bank
Purchase Yield
6.154%, due
04/03/00........... 3,393,859
-----------
Total U.S. Govern-
ment Agency Obliga-
tions (Amortized
Cost --
$3,393,859)........ 3,393,859
-----------
OTHER ASSETS LESS LIABILI-
TIES --
(-0.8%)........................ (689,741)
-----------
TOTAL NET ASSETS............... $86,239,376
===========
Net assets
Investor A shares.. $74,470,462
Investor B shares.. 11,768,914
-----------
$86,239,376
Shares of capital stock
Investor A shares.. 2,262,345
Investor B shares.. 361,687
-----------
2,624,032
Net asset value
Investor A shares--
redemption price
per share.......... $ 32.92
-----------
Investor B shares--
offering price per
share*............. $ 32.54
-----------
</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.
3
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----------------------------------
[HILLIARD LYONS LOGO]
First Quarter Report
March 31, 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
Provident Distributors, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
(610) 239-4590
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.
FIRST QUARTER REPORT
March 31, 2000
