-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NNUel///y3S0n/U7j4Bzkue5MknyO2CkXt4nYi7zrv7AL+KXrj2lZ6zW7tsTiEQt i4YaTAmutS7LgQFnAkQ+DQ== 0000889812-96-001225.txt : 19960904 0000889812-96-001225.hdr.sgml : 19960904 ACCESSION NUMBER: 0000889812-96-001225 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960903 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANCE GROWTH FUND INC CENTRAL INDEX KEY: 0000860743 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05994 FILM NUMBER: 96624929 BUSINESS ADDRESS: STREET 1: 1285 AVENUE OF THE AMERICAS STREET 2: C/O MITCHELL HUTCHINS ASSET MANAGEMENT CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127134046 MAIL ADDRESS: STREET 1: 1285 AVE OF THE AME STREET 2: C/O MITCHELL HUTCHINS ASSET MANAGEMENT CITY: NEW YORK STATE: NY ZIP: 10019 N-30D 1 SEMI-ANNUAL REPORT THE FRANCE GROWTH FUND, INC. - ------------------------------------------------------------------ Jean A. Arvis Chairman of the Board of Directors Thomas C. Barry Director John A. Bult Director Walter J.P. Curley Director Pierre H.R. Daviron Director Marc de F. de Logeres Director Michel Longchampt Director Michel A. Rapaccioli Director Jacques Regniez Director Bernard Simon-Barboux Director Michel Somnolet Director John W. Spurdle, Jr. Director Gerard Jeannin President Frederick J. Schmidt Vice President and Treasurer Steven M. Cancro Vice President and Secretary INVESTMENT ADVISER - ------------------------------------------------------------------ Indosuez International Investment Services 44 rue de Courcelles 75008 Paris, France ADMINISTRATOR - ------------------------------------------------------------------ Mitchell Hutchins Asset Management Inc. 1285 Avenue of the Americas New York, New York 10019 CUSTODIANS - ------------------------------------------------------------------ Brown Brothers Harriman & Co. 40 Water Street Boston, Massachusetts 02109 Banque Indosuez 96 boulevard Haussmann 75008 Paris, France SHAREHOLDER SERVICING AGENT - ------------------------------------------------------------------ PNC Bank, National Association 103 Bellevue Parkway Wilmington, Delaware 19809 INDEPENDENT ACCOUNTANTS - ------------------------------------------------------------------ Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 COUNSEL - ------------------------------------------------------------------ Hale and Dorr 60 State Street Boston, Massachusetts 02109 THE ---------------------------------------------- FRANCE ---------------------------------------------- GROWTH ---------------------------------------------- FUND, INC. ---------------------------------------------- SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1996 [PHOTO] THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- GENERAL INFORMATION - -------------------------------------------------------------------------------- THE FUND The France Growth Fund, Inc. (the 'Fund') is a diversified, closed-end management investment company, the shares of which trade on the New York Stock Exchange ('NYSE'). The Fund's objective is long-term capital appreciation through investment primarily in French equity securities. In normal circumstances, at least 65% of the Fund's total assets will be invested in French equity securities listed on one or more of the seven securities exchanges in France, including those listed on the French over-the-counter market of such exchanges. Other investments may include listed French debt securities, unlisted French equity and debt securities and certain publicly traded equity and debt securities issued by non-French Western European issuers and denominated in currencies other than the French franc. THE INVESTMENT ADVISER Indosuez International Investment Services ('IIIS') is the Fund's investment adviser and manager. IIIS, a French company registered as a U.S. investment adviser under the Investment Advisers Act of 1940, is part of the Indosuez Asset Management International group of Banque Indosuez, a leading French financial institution. Indosuez Asset Management International, through its subsidiaries, had assets under management of approximately U.S. $17 billion as of June 30, 1996. SHAREHOLDER INFORMATION Daily market prices for the Fund's shares are published in the NYSE Composite Transactions section of major newspapers under the designation 'France.' The Fund's NYSE trading symbol is 'FRF'. Net asset value and market price information about the Fund's shares are published each Monday in The Wall Street Journal, each Sunday in The New York Times, and each Saturday in Barron's, as well as in other newspapers in a table captioned 'Publicly Traded Funds'. All inquiries regarding shareholder accounts may be directed to the Fund's transfer agent, dividend paying agent and registrar, PNC Bank, National Association, at (800) 852-4750. DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN Pursuant to the Fund's Dividend Reinvestment Plan (the 'Plan'), shareholders whose shares of Common Stock are registered in their names will have all dividends and capital gain distributions (collectively referred to as 'distributions') automatically reinvested in additional shares of Common THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- GENERAL INFORMATION (CONTINUED) - -------------------------------------------------------------------------------- Stock of the Fund by the agent for the Plan and dividend paying agent, PNC Bank, National Association (the 'Dividend Agent'), unless such shareholders elect to receive dividends in cash. Shareholders who elect to receive dividends in cash will receive all distributions (other than those payable solely in Common Stock) in cash paid by check in U.S. dollars mailed directly to such shareholders by the Dividend Agent on or about the date declared by the Board of Directors as the payment date for each such distribution. Shareholders who prefer not to have their distributions automatically reinvested should notify the Fund in writing c/o PNC Bank, National Association as Dividend Agent for the Fund, at P.O. Box 8905, Wilmington, Delaware 19899. STOCK REPURCHASE PROGRAM The Board of Directors has adopted a stock repurchase program pursuant to which the Fund may purchase in the open market from time to time up to an aggregate of 10% of the outstanding shares of its Common Stock at market prices, as long as the Common Stock is trading at a discount from net asset value. During the six months ended June 30, 1996, the Fund did not repurchase any shares of its Common Stock. ANNUAL SHAREHOLDERS' MEETING The Fund's annual meeting of shareholders was held on April 24, 1996. Shareholders voted to re-elect Marc de F. de Logeres, Michel Longchampt, Michel A. Rapaccioli and Michel Somnolet as Directors and ratify the appointment of Price Waterhouse LLP as the Fund's independent accountant for the fiscal year ending December 31, 1996. The resulting vote count for each proposal is listed below: 1. Election of Directors: Marc de F. de Logeres............. For: 10,486,985 Withheld Authority: 112,523 Michel Longchampt................. For: 10,504,729 Withheld Authority: 94,779 Michel A. Rapaccioli.............. For: 10,527,494 Withheld Authority: 72,014 Michel Somnolet................... For: 10,490,490 Withheld Authority: 109,018 2 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- GENERAL INFORMATION (CONCLUDED) - -------------------------------------------------------------------------------- 2. Ratification of the appointment of Price Waterhouse LLP as the Fund's independent accountant: For: 10,558,939 Against: 17,827 Abstain: 22,742 In addition to Messrs. de Logeres, Longchampt, Rapaccioli and Somnolet, the following persons continue to serve as Directors of the Fund: Mr. Jean A. Arvis, Mr. Thomas C. Barry, Mr. John A. Bult, Mr. Walter J.P. Curley, Mr. Pierre H.R. Daviron, Mr. Jacques Regniez, Mr. Bernard Simon-Barboux and Mr. John W. Spurdle, Jr. SPECIAL SHAREHOLDERS' MEETING At a special meeting of shareholders held on June 28, 1996, shareholders voted to approve a new Investment Advisory Agreement relating to the purchase of controlling interest in Banque Indosuez, an affiliate of the Fund's investment adviser, by Credit Agricole. No change in the management or investment approach of the Investment Adviser or the Fund is expected to result from such change in control. The terms of the new Advisory Agreement, including the fee, are identical to those of the prior agreement. Approval of new Investment Advisory Agreement: For: 10,172,638 Against: 90,506 Abstain: 88,725 MONTHLY UPDATE Commencing with the month ending September 30, 1996, a monthly Fund update will be made available, upon request, by calling the Fund's transfer agent, PNC Bank, National Association at (800) 852-4750. 3 - -------------------------------------------------------------------------------- Dear Shareholders: From the commencement of investment operations of The France Growth Fund, Inc. (the 'Fund') on May 18, 1990, through June 30, 1996, the Fund recorded a return (including dividends) of 41.64% on a French franc basis. For the same period, the Societe de Bourse Francaise 120 Index (the 'SBF 120 Index') posted a return (excluding dividends) of 7.55%. Thus, since the beginning of investment operations, the Fund has substantially outperformed the SBF 120 Index. On a US dollar basis, the Fund recorded a return (including dividends) of 53.22% from the commencement of investment operations to June 30, 1996. For the same period, the SBF 120 Index recorded a return of approximately 16.34%. Thus, in US dollar terms, the Fund has outperformed the SBF 120 Index by approximately 36.88% since the beginning of investment operations. For the six months ended June 30, 1996, the Fund recorded a return (including dividends) of 19.50% on a French franc basis (13.77% in US dollar terms), outperforming the SBF 120 Index by 2.94% on a French franc basis and 2.80% in US dollar terms. We believe this outperformance is primarily attributable to our stock selection. The stocks in the consumer goods, services, and distribution sectors have proven to be very successful and have significantly contributed to the solid outperformance of the portfolio versus its benchmark. In these sectors, strong bets have paid off (SEB, Pinault Printemps, BIC, Ecco, Cap Gemini Sogeti, Salomon, Sodexho, Docks de France). In addition, the Fund benefited from strong performance of the small and medium cap stocks that we had purchased during the first quarter of 1996 (Altran Technologies, Cipe France, Primagaz, Infogrammes Entertainment, Gaumont, Seita). As of June 30, 1996, the net asset value per share of the Fund was US$12.98, up from US$11.60 at December 31, 1995. The market price at June 30, 1996 of US$10.25 was also higher than the market price of the Fund of US$9.875 at December 31, 1995. The discount to net asset value was 21.03% at June 30, 1996 and ranged between 11.63%--21.03% during the six months ended June 30, 1996. 4 - -------------------------------------------------------------------------------- ECONOMIC AND FINANCIAL OVERVIEW French economic growth indicators have contradicted one another since the start of the year. France's gross domestic product ('GDP') grew 1.2% during the first quarter of 1996, with household consumption leading the way (up 2.4%). A portion of this growth (0.5%) can be attributed to 1996 being a leap year. The largest negative contribution (-0.8%) came from stocks as de-stocking accelerated. The 0.7% rise in manufacturing output was due mainly to favorable movements in non-durable consumer goods and business capital goods. In addition to these specifics, GDP growth is likely to be down 0.3% in the second quarter. FRANCE: CHANGES IN THE 'BANQUE DE FRANCE' RATES AROUND 70 BASIS POINTS AT THE SHORT END [GRAPH] The 'Banque de France' has started an expansionist monetary policy. The potential exists for short rates to fall further, with an objective of 3.0% for the intervention rate. Repo Rate Call Money Intervention Rate 12/31/92 10 10 9.1 01/07/93 10 12.125 9.1 01/14/93 10 12.5 9.1 01/21/93 10 12.0625 9.1 01/28/93 10 12.0312 9.1 02/04/93 12 11.8125 9.1 02/11/93 12 11.4375 9.1 02/18/93 12 11.3125 9.1 02/25/93 12 11.25 9.1 03/04/93 12 11.25 9.1 03/11/93 12 10.9375 9.1 03/18/93 12 10.9375 9.1 3/25/93 12 10.9375 9.1 04/01/93 12 10.625 9.1 4/8/93 12 10.0625 9.1 4/15/93 10 9.4375 9.1 4/22/93 9.75 9.25 8.75 4/29/93 9.25 8.625 8.25 5/6/93 9 8.25 8 5/13/93 8.75 8.125 7.75 5/20/93 8.75 8.125 7.75 05/19/93 8.5 7.9375 7.5 6/3/93 8.5 7.9375 7.5 6/10/93 8.5 7.75 7.5 6/17/93 8.25 7.625 7.25 6/24/93 8 7.5 7 7/1/93 8 7.5 7 7/8/93 7.75 7.375 6.75 7/15/93 7.75 7.25 6.75 7/22/93 7.75 7.625 6.75 7/29/93 10 10.0938 6.75 8/5/93 10 10.2188 6.75 8/12/93 10 9.3125 6.75 08/11/93 10 8.2813 6.75 8/26/93 10 7.5 6.75 9/2/93 10 7.5 6.75 9/09/93 10 7.5 6.75 9/16/93 7.75 7.25 6.75 9/23/93 7.75 7.25 6.75 9/30/93 7.75 7.125 6.75 10/7/93 7.75 7.125 6.75 10/14/93 7.75 7 6.75 10/21/93 7.75 6.9375 6.75 10/28/93 7.25 6.875 6.45 11/4/93 7.25 6.875 6.45 11/11/93 7.25 6.875 6.45 11/18/93 7.25 6.8125 6.45 11/25/93 7.25 6.8125 6.45 12/09/93 7 6.625 6.2 12/16/93 7 7.25 6.8125 12/23/93 7 6.5 6.2 12/30/93 7 6.5 6.2 1/6/94 7 6.5 6.2 1/6/94 7 6.5 6.2 1/13/94 7 6.5 6.2 1/20/94 7 6.5 6.2 1/27/94 7 6.4375 6.2 2/3/94 7 6.4375 6.2 2/10/94 7 6.375 6.2 2/17/94 7 6.375 6.2 2/24/94 7 6.375 6.1 03/03/94 7 6.375 6.1 3/10/94 7 6.375 6.1 3/17/94 7 6.25 6.1 3/24/94 7 6.25 6 3/31/94 7 6.125 5.9 4/7/94 7 6.125 5.9 4/14/94 7 6.125 5.9 4/21/94 6.75 6.0625 5.8 4/28/94 6.75 5.9375 5.7 5/5/94 6.75 5.9375 5.6 5/12/94 6.75 5.8125 5.5 5/19/94 6.4 5.6875 5.4 05/26/94 6.4 5.625 5.4 6/2/94 6.4 5.5 5.3 6/9/94 6.4 5.5 5.3 6/16/94 6.4 5.375 5.2 6/23/94 6.4 5.375 5.2 6/30/94 6.4 5.4063 5.1 7/7/94 6.4 5.375 5.1 7/14/94 6.4 5.375 5.1 7/21/94 6.4 5.375 5.1 7/28/94 6.4 5.3125 5 8/4/94 6.4 5.3125 5 8/11/94 6.4 5.3125 5 08/18/94 6.4 5.3125 5 8/25/94 6.4 5.3125 5 9/1/94 6.4 5.3125 5 9/8/94 6.4 5.3125 5 9/15/94 6.4 5.3125 5 9/22/94 6.4 5.3125 5 9/29/94 6.4 5.3125 5 10/6/94 6.4 5.3125 5 10/13/94 6.4 5.3125 5 10/20/94 6.4 5.3125 5 10/27/94 6.4 5.3125 5 11/03/94 6.4 5.3125 5 11/10/94 6.4 5.3125 5 11/17/94 6.4 5.3125 5 11/24/94 6.4 5.3125 5 12/1/94 6.4 5.3125 5 12/8/94 6.4 5.3125 5 12/15/94 6.4 5.3125 5 12/22/94 6.4 5.3125 5 12/29/94 6.4 5.3125 5 1/5/95 6.4 5.3125 5 1/12/95 6.4 5.3125 5 1/19/95 6.4 5.3437 5 1/26/95 6.4 5.3437 5 2/2/95 6.4 5.3437 5 2/9/95 6.4 5.3125 5 2/16/95 6.4 5.3125 5 2/23/95 6.4 5.3125 5 3/2/95 6.4 5.8125 5 3/9/95 6.4 7.75 5 3/16/95 6.4 8 5 3/23/95 6.4 7.9062 5 3/30/95 6.4 7.875 5 4/6/95 6.4 7.5625 5 4/13/95 6.4 7.625 5 4/20/95 6.4 7.75 5 04/27/95 6.4 7.7187 5 5/4/95 6.4 7.75 5 5/11/95 6.4 7.6875 5 5/18/95 6.4 7.5625 5 5/25/95 6.4 7.625 5 6/1/95 6.4 7.5625 5 6/8/95 6.4 7.5 5 6/15/95 6.4 7.375 5 6/22/95 7.5 7.25 5 6/29/95 7.5 7.0625 5 7/6/95 7.25 7 5 7/13/95 7.25 6.8125 5 07/20/95 7 6.6875 5 7/27/95 7 6.5 5 8/3/95 6.5 6.3125 5 8/10/95 6.5 6.1875 5 8/17/95 6.5 6.0625 5 8/24/95 6.5 5.875 5 8/31/95 6.15 5.75 5 9/7/95 6.15 5.6875 5 9/14/95 6.15 5.5625 5 9/21/95 6.15 5.625 5 9/28/95 6.15 5.5625 5 10/05/95 6.15 5.5625 5 10/12/95 6.15 6.125 5 10/19/95 6.15 6.75 5 10/26/95 6.15 7.0937 5 11/2/95 6.15 6.1875 5 11/9/95 6.35 5.875 5 11/16/95 6.1 5.5 4.8 11/23/95 6.1 5.375 4.8 11/30/95 6.1 5.375 4.8 12/7/95 6.1 5.25 4.7 12/14/95 6.1 5.1562 4.7 12/21/95 5.85 4.875 4.45 12/28/95 5.85 4.975 4.45 1/4/96 5.85 4.6875 4.45 1/11/96 5.85 4.5625 4.45 1/18/96 5.6 4.4375 4.2 1/25/96 5.6 4.375 4.2 2/1/96 5.6 4.25 4.05 2/8/96 5.6 4.1875 3.9 2/15/96 5.6 4.1875 3.9 2/22/96 5.6 4.1875 3.9 02/29/96 5.6 4.125 3.9 3/7/96 5.5 4.0625 3.8 03/14/96 5.5 4.0625 3.8 3/21/96 5.5 4 3.8 03/28/96 5.5 4 3.8 4/4/96 5.5 3.9375 3.8 4/11/96 5.5 3.9375 3.7 04/18/96 5.5 3.875 3.7 04/25/96 4.9 3.8125 3.7 5/2/96 4.9 3.75 3.7 5/9/96 4.9 3.75 3.7 05/16/96 4.9 3.75 3.7 05/23/96 4.9 3.75 3.7 05/30/96 4.9 3.75 3.7 6/6/96 4.9 3.75 3.6 6/13/96 4.9 3.7188 3.6 06/20/96 4.9 3.75 3.6 06/27/96 4.9 3.75 3.6 7/4/96 4.9 3.6875 3.55 7/11/96 4.9 3.625 3.55 5 - -------------------------------------------------------------------------------- Household consumption of manufactured goods was down 1.4% in April and 0.1% in May after rising 1.3% in March. Consumer behavior is thus back in phase with the change in sentiment measured by the Institut National de la Statistique des etudes Economique survey. After holding steady for three months, the balance of opinions among households dropped in April and May, reverting close to its level of December 1995. The first quarter increase in industrial production is largely attributable to the automotive sector. As revealed by businessmen's personal opinions in the May survey, their sentiments seem to have deteriorated. With demand indicators stagnating at low levels, investment projects may be delayed or put on hold, although according to the second quarter survey on industrial investment, capital spending was projected to rise by 7% in volume terms in 1996. The trade balance shows a surplus of FRF 34 billion over the first four months of the year. The surplus results from exports growing faster than imports. The balance with Germany is still slightly positive despite higher growth in imports from France's main trading partner. The price index advanced by 2.4% year-over-year, reflecting the 0.6% jump in March and the value added tax increase during the third quarter of 1995. On a year-on-year basis, we expect inflation to come back down to below 2%. FRENCH ECONOMY -- KEY FIGURES, 1994-1996 1996 1995 1994 Forecast ------------------------ GDP Growth 1.1% 2.4% 2.2% Inflation 1.9% 1.9% 1.7% Export Growth 2.0% 6.1% 5.8% Import Growth 2.3% 4.2% 6.8% Balance of Trade Surplus (% of GDP) 1.2% 1.3% 1.2% Corporate Investment Growth 6.0% 4.0% 1.0% Unemployment 12.5% 11.5% 12.5% Household Consumption Growth 1.2% 1.7% 1.5% 6 - -------------------------------------------------------------------------------- THE EQUITY MARKET The French market started the year on a high note, the SBF 120 Index rose 16.94% during the first four months. Encouraged by a risk premium at peak level at the end of 1995, reductions in interest rates, a strong French franc versus the Deutsche mark and a rise in the U.S. dollar, French equities performed particularly well. These factors along with declining returns on short-term instruments prompted a reallocation of savings in favor of riskier assets. [GRAPH] 1995-1996 PERFORMANCE: SFB 120 INDEX SFB 120 Index Performance 1996 (as of June 30, 1996): Performance in base 100 (as of December 30,1994) -------- 30-Dec-94 1287.03 100 3-Jan-95 1289.95 100.23 4-Jan-95 1298.26 100.87 5-Jan-95 1280.76 99.51 6-Jan-95 1288.61 100.12 9-Jan-95 1276.53 99.18 10-Jan-95 1271.85 98.82 11-Jan-95 1266.19 98.38 12-Jan-95 1264.1 98.22 13-Jan-95 1266.61 98.41 16-Jan-95 1277.06 99.23 17-Jan-95 1267.68 98.50 18-Jan-95 1267.6 98.49 19-Jan-95 1254.59 97.48 20-Jan-95 1238.67 96.24 23-Jan-95 1212.51 94.21 24-Jan-95 1216 94.48 25-Jan-95 1229.44 95.53 26-Jan-95 1243.16 96.59 27-Jan-95 1238.56 96.23 30-Jan-95 1238.08 96.20 31-Jan-95 1227.19 95.35 1-Feb-95 1245.49 96.77 2-Feb-95 1239.5 96.31 3-Feb-95 1255.49 97.55 6-Feb-95 1274.75 99.05 7-Feb-95 1274.53 99.03 8-Feb-95 1264.23 98.23 9-Feb-95 1278.95 99.37 10-Feb-95 1277.75 99.28 13-Feb-95 1266.29 98.39 14-Feb-95 1267.31 98.47 15-Feb-95 1272.11 98.84 16-Feb-95 1255.87 97.58 17-Feb-95 1248.33 96.99 20-Feb-95 1234.7 95.93 21-Feb-95 1235.26 95.98 22-Feb-95 1235.27 95.98 23-Feb-95 1248.73 97.02 24-Feb-95 1238.16 96.20 27-Feb-95 1234.1 95.89 28-Feb-95 1220.75 94.85 2-Mar-95 1237.22 96.13 2-Mar-95 1237.63 96.16 3-Mar-95 1230.87 95.64 6-Mar-95 1218.1 94.64 7-Mar-95 1203.58 93.52 8-Mar-95 1206.76 93.76 9-Mar-95 1191.4 92.57 10-Mar-95 1199.71 93.22 13-Mar-95 1187.74 92.29 14-Mar-95 1213.17 94.26 15-Mar-95 1197.35 93.03 16-Mar-95 1220.32 94.82 17-Mar-95 1223.63 95.07 20-Mar-95 1237.22 96.13 21-Mar-95 1238.89 96.26 22-Mar-95 1238.71 96.25 23-Mar-95 1226.71 95.31 24-Mar-95 1238.44 96.22 27-Mar-95 1251.98 97.28 28-Mar-95 1251.99 97.28 29-Mar-95 1258.86 97.81 30-Mar-95 1282.81 99.67 31-Mar-95 1266.02 98.37 3-Apr-95 1268.68 98.57 4-Apr-95 1281.5 99.57 5-Apr-95 1277.79 99.28 6-Apr-95 1287.19 100.01 7-Apr-95 1293.98 100.54 10-Apr-95 1283.27 99.71 11-Apr-95 1277.76 99.28 12-Apr-95 1277.73 99.28 13-Apr-95 1282.27 99.63 18-Apr-95 1268.39 98.55 19-Apr-95 1277.43 99.25 20-Apr-95 1281.33 99.56 21-Apr-95 1308.43 101.66 24-Apr-95 1304.04 101.32 25-Apr-95 1322.27 102.74 26-Apr-95 1321.46 102.68 27-Apr-95 1314.63 102.14 28-Apr-95 1307.71 101.61 2-May-95 1319.02 102.49 3-May-95 1339.43 104.07 4-May-95 1325.83 103.01 5-May-95 1315.65 102.22 9-May-95 1353.52 105.17 10-May-95 1362.4 105.86 11-May-95 1365.97 106.13 12-May-95 1374.52 106.80 15-May-95 1359.77 105.65 16-May-95 1363.7 105.96 17-May-95 1366.32 106.16 18-May-95 1367.31 106.24 19-May-95 1344.17 104.44 22-May-95 1352.07 105.05 23-May-95 1347.06 104.66 24-May-95 1346.44 104.62 26-May-95 1323.8 102.86 29-May-95 1327.65 103.16 30-May-95 1326.86 103.09 31-May-95 1337.83 103.95 1-Jun-95 1345.63 104.55 2-Jun-95 1350.86 104.96 6-Jun-95 1349.81 104.88 7-Jun-95 1355.66 105.33 8-Jun-95 1340.93 104.19 9-Jun-95 1310.93 101.86 12-Jun-95 1313.58 102.06 13-Jun-95 1320.79 102.62 14-Jun-95 1305.71 101.45 15-Jun-95 1322.85 102.78 16-Jun-95 1310.41 101.82 19-Jun-95 1316.59 102.30 20-Jun-95 1301.38 101.11 21-Jun-95 1303.91 101.31 22-Jun-95 1315.8 102.24 23-Jun-95 1299.14 100.94 26-Jun-95 1303.68 101.29 27-Jun-95 1289.97 100.23 28-Jun-95 1281.59 99.58 29-Jun-95 1280.25 99.47 30-Jun-95 1278.82 99.36 3-Jul-95 1289.71 100.21 4-Jul-95 1296.09 100.70 5-Jul-95 1307.22 101.57 6-Jul-95 1296.7 100.75 7-Jul-95 1331.87 103.48 10-Jul-95 1331.11 103.42 11-Jul-95 1338.59 104.01 12-Jul-95 1338.66 104.01 13-Jul-95 1330.22 103.36 17-Jul-95 1331.05 103.42 18-Jul-95 1318.43 102.44 19-Jul-95 1318.28 102.43 20-Jul-95 1303.38 101.27 21-Jul-95 1304.21 101.33 24-Jul-95 1314.49 102.13 25-Jul-95 1322.88 102.79 26-Jul-95 1322.63 102.77 27-Jul-95 1324.96 102.95 28-Jul-95 1318.43 102.44 31-Jul-95 1311.9 101.93 1-Aug-95 1311.01 101.86 2-Aug-95 1334.69 103.70 3-Aug-95 1328.83 103.25 4-Aug-95 1332.99 103.57 7-Aug-95 1329.46 103.30 8-Aug-95 1333.13 103.58 9-Aug-95 1326.74 103.09 10-Aug-95 1329.35 103.29 11-Aug-95 1327.96 103.18 16-Aug-95 1340.13 104.13 17-Aug-95 1337.38 103.91 18-Aug-95 1339.39 104.07 21-Aug-95 1345.84 104.57 22-Aug-95 1334.86 103.72 23-Aug-95 1330.28 103.36 24-Aug-95 1320.16 102.57 27-Aug-95 1321.44 102.67 28-Aug-95 1293.75 100.52 29-Aug-95 1298.49 100.89 30-Aug-95 1310.34 101.81 31-Aug-95 1290.41 100.26 1-Sep-95 1292.19 100.40 4-Sep-95 1302.9 101.23 5-Sep-95 1303.53 101.28 6-Sep-95 1293.99 100.54 7-Sep-95 1279.33 99.40 8-Sep-95 1273.27 98.93 11-Sep-95 1280.69 99.51 12-Sep-95 1283.31 99.71 13-Sep-95 1298.54 100.89 14-Sep-95 1297.06 100.78 15-Sep-95 1291.27 100.33 18-Sep-95 1285.72 99.90 19-Sep-95 1289.9 100.22 20-Sep-95 1277.88 99.29 21-Sep-95 1271.72 98.81 22-Sep-95 1234.61 95.93 25-Sep-95 1238.73 96.25 26-Sep-95 1249.15 97.06 27-Sep-95 1234.42 95.91 28-Sep-95 1220.36 94.82 29-Sep-95 1233.3 95.83 2-Oct-95 1250.51 97.16 3-Oct-95 1243.42 96.61 4-Oct-95 1246.04 96.82 5-Oct-95 1243.45 96.61 6-Oct-95 1246.48 96.85 9-Oct-95 1232.37 95.75 10-Oct-95 1227.93 95.41 11-Oct-95 1236.1 96.04 12-Oct-95 1243.17 96.59 13-Oct-95 1250.03 97.13 16-Oct-95 1234.62 95.93 17-Oct-95 1228.7 95.47 18-Oct-95 1224.81 95.17 19-Oct-95 1215.85 94.47 20-Oct-95 1207.33 93.81 23-Oct-95 1192.46 92.65 24-Oct-95 1193.99 92.77 25-Oct-95 1217.89 94.63 26-Oct-95 1212.89 94.24 27-Oct-95 1205.13 93.64 30-Oct-95 1235.79 96.02 31-Oct-95 1247.15 96.90 2-Nov-95 1256.34 97.62 3-Nov-95 1258.23 97.76 6-Nov-95 1252.45 97.31 7-Nov-95 1272.92 98.90 8-Nov-95 1278.61 99.35 9-Nov-95 1270.36 98.70 10-Nov-95 1261.93 98.05 13-Nov-95 1260.59 97.95 14-Nov-95 1260.97 97.98 15-Nov-95 1281.24 99.55 16-Nov-95 1302.46 101.20 17-Nov-95 1295.4 100.65 20-Nov-95 1290.46 100.27 21-Nov-95 1283.89 99.76 22-Nov-95 1284.6 99.81 23-Nov-95 1280.85 99.52 24-Nov-95 1296.68 100.75 27-Nov-95 1294.94 100.61 28-Nov-95 1284.16 99.78 29-Nov-95 1276.43 99.18 30-Nov-95 1259.11 97.83 1-Dec-95 1255.58 97.56 4-Dec-95 1226.16 95.27 5-Dec-95 1249.7 97.10 6-Dec-95 1261.74 98.04 7-Dec-95 1268.23 98.54 8-Dec-95 1275.87 99.13 11-Dec-95 1269.59 98.64 12-Dec-95 1268.95 98.60 13-Dec-95 1257.25 97.69 14-Dec-95 1283.73 99.74 15-Dec-95 1274.69 99.04 18-Dec-95 1250.37 97.15 19-Dec-95 1242.64 96.55 20-Dec-95 1253.71 97.41 21-Dec-95 1254.08 97.44 22-Dec-95 1278.91 99.37 26-Dec-95 1276.25 99.16 27-Dec-95 1282.65 99.66 28-Dec-95 1284.69 99.82 29-Dec-95 1283.5 99.73 2-Jan-96 1303.55 101.28 3-Jan-96 1325 102.95 4-Jan-96 1322.07 102.72 5-Jan-96 1315.21 102.19 8-Jan-96 1316.79 102.31 9-Jan-96 1318.9 102.45 10-Jan-96 1313.18 102.03 11-Jan-96 1305.24 101.41 12-Jan-96 1313.28 102.04 15-Jan-96 1323.05 102.8 16-Jan-96 1338.48 104 17-Jan-96 1347.4 104.7 18-Jan-96 1344.9 104.5 19-Jan-96 1349.6 104.86 22-Jan-96 1344.85 104.49 23-Jan-96 1332.86 103.56 24-Jan-96 1339.72 104.09 25-Jan-96 1344.04 104.43 26-Jan-96 1353.4 105.16 29-Jan-96 1360.28 105.69 30-Jan-96 1375.9 106.91 31-Jan-96 1389.99 108 1-Feb-96 1390.9 108.07 2-Feb-96 1390.08 108.01 5-Feb-96 1369.14 106.38 6-Feb-96 1372.68 106.65 7-Feb-96 1372.8 106.66 8-Feb-96 1357.8 105.5 9-Feb-96 1361.21 105.76 12-Feb-96 1365.4 106.09 13-Feb-96 1375.04 106.84 14-Feb-96 1361.78 105.81 15-Feb-96 1367 106.22 16-Feb-96 1363.04 105.91 19-Feb-96 1354.6 105.25 20-Feb-96 1350.7 104.95 21-Feb-96 1351.9 105.04 22-Feb-96 1362.7 105.88 23-Feb-96 1381.9 107.38 26-Feb-96 1374.02 106.76 27-Feb-96 1382.32 107.4 28-Feb-96 1397.82 108.61 29-Feb-96 1395.84 108.45 1-Mar-96 1413.35 109.81 4-Mar-96 1413.42 109.82 5-Mar-96 1405.31 109.19 6-Mar-96 1407.22 109.34 7-Mar-96 1408 109.45 8-Mar-96 1389.15 107.93 11-Mar-96 1372.66 106.65 12-Mar-96 1365 106.06 13-Mar-96 1372.68 106.65 14-Mar-96 1382.41 107.41 15-Mar-96 1376.91 106.98 18-Mar-96 1385.02 107.62 19-Mar-96 1384.3 107.56 20-Mar-96 1382.61 107.43 21-Mar-96 1386.79 107.75 22-Mar-96 1385.45 107.65 25-Mar-96 1405.28 109.19 26-Mar-96 1405.72 109.22 27-Mar-96 1420.75 110.39 28-Mar-96 1416.12 110.03 29-Mar-96 1431.8 111.25 1-Apr-96 1440.72 111.94 2-Apr-96 1447.79 112.49 3-Apr-96 1445.43 112.31 4-Apr-96 1451.29 112.76 9-Apr-96 1453.63 112.94 10-Apr-96 1463 113.67 11-Apr-96 1449.71 112.64 12-Apr-96 1449.95 112.66 15-Apr-96 1453.67 112.95 16-Apr-96 1463.29 113.7 17-Apr-96 1451.96 112.81 18-Apr-96 1459.14 113.37 19-Apr-96 1464.7 113.8 22-Apr-96 1479.61 114.96 23-Apr-96 1477.57 114.8 24-Apr-96 1485.62 115.43 25-Apr-96 1482.02 115.15 26-Apr-96 1496.19 116.25 29-Apr-96 1492.16 115.94 30-Apr-96 1500.88 116.62 2-May-96 1497.35 116.34 3-May-96 1482.49 115.19 6-May-96 1468.61 114.11 7-May-96 1465.3 113.87 9-May-96 1465.32 113.85 10-May-96 1479.98 114.99 13-May-96 1474.59 114.57 14-May-96 1485.08 115.39 15-May-96 1487.93 115.61 17-May-96 1495.71 116.21 20-May-96 1487.5 115.58 21-May-96 1494.76 116.14 22-May-96 1479.8 114.98 23-May-96 1484.75 115.36 24-May-96 1489.6 115.74 28-May-96 1498.66 116.44 29-May-96 1490.53 115.81 30-May-96 1484.1 115.31 31-May-96 1485.81 115.44 3-Jun-96 1491.77 115.91 4-Jun-96 1488.98 115.69 5-Jun-96 1491.6 115.89 6-Jun-96 1501.4 116.66 7-Jun-96 1484.2 115.32 10-Jun-96 1494.19 116.1 11-Jun-96 1499.2 116.49 12-Jun-96 1499.36 116.5 13-Jun-96 1493 116 14-Jun-96 1485.4 115.42 17-Jun-96 1487.1 115.55 18-Jun-96 1483.94 115.3 19-Jun-96 1480.09 115 20-Jun-96 1466.1 113.92 21-Jun-96 1467.3 114.01 24-Jun-96 1477.9 114.83 25-Jun-96 1490.5 115.81 26-Jun-96 1487.7 115.6 27-Jun-96 1488.39 115.65 28-Jun-96 1496 116.24 In the second quarter, the market's technical situation became gradually less supportive. First, the supply of equities increased sharply as the number of initial public offerings in the Second Market and the New Market multiplied and such companies as Guilbert, Sodexho and Castorama Dubois tapped the markets. Second, ballooning multiples undeniably made investors somewhat cautious. On the other hand, there was a fresh outbreak of mergers and de-mergers and this played a large role in pushing up the revaluation of the market as a whole. 7 - -------------------------------------------------------------------------------- The market's rally belonged first and foremost to the growth stocks, led by the outstanding performance of the retail and consumer goods sectors. Retail stocks were spurred on by the restructuring of the entire sector and in particular, speculative rumors regarding Casino and Auchan's takeover bid for Docks de France. Consumer goods stocks were buoyed by the visibility on profit growth (Salomon, Clarins, SEB, Pinault Printemps) which in many cases saw their exporting businesses boosted by the revaluation of the dollar and weak European currencies. Having fallen out of favor during the second half of 1995, cyclical stocks began the year on a very strong note. However, aside from the energy sector strengthened due to a favorable economic environment, the appreciation of the dollar and the rise in crude oil prices, the second quarter has been less bullish for stocks overall. [GRAPH] SBF 120 INDEX - CHANGE IN PRICE BY STOCK TYPE FROM DECEMBER 31, 1995 TO JUNE 30, 1996 SFB 120 INDEX: +16.56% Defensive Stocks 16.16% Growth Stocks 34.74% Cyclical Stocks 20.67% 16.56% Interest Rate Sensitive Stocks -3.07% CAC 40 Index: +13.45% 8 - -------------------------------------------------------------------------------- Holding companies did extremely well over the six month period, led by the market performance of their holdings, as well as the increasing force of the shareholder value theme (de-mergers). Companies in the financial sector, on the other hand, are no longer benefiting from the bond market. Recent tensions on long rates and uncertainty over 1996 provisions for property losses continued to weigh on the sector. Lastly, the automobile sector was affected by the significant underperformance recorded by car manufacturers, which were hit by the phasing out of the Juppe incentive program aimed at boosting new car sales and by the plunge in new vehicle registrations. [GRAPH] SFB 120 INDEX - CHANGE IN STOCK PRICES BY SECTOR FROM DECEMBER 31, 1995 TO JUNE 30, 1996 SFB 120 Index: +16.56% Energy 9.88% 16.56% Basic Products 18.77% Construction 19.21% Capital Goods 24.33% Automobile 12.92% Other Consumer Goods 38.67% Food & Beverage 11.38% Distribution 49.81% Other Services 26.01% Real Estate 3.55% Financial Services -3.83% Holdings 31.23% CAC 40 Index: +13.45% 9 - -------------------------------------------------------------------------------- INVESTMENT STRATEGY Our management strategy calls for selectivity in the stock selection process. Our favorite themes have been earnings growth, the need to restructure and maximizing shareholder value. Accordingly, we have significantly increased our overall weighting in growth stocks. In particular, our selection criteria are as follows: -- presence in a single business; total mastery of a concept, -- a leadership position, -- an ability to export the concept outside France, -- earnings growth that will remain above or equal to 15% per annum. [GRAPH] THE FRANCE GROWTH FUND: OVER/UNDER TYPE ALLOCATION VS. SBF 120 INDEX As of June 30, 1996 Defensive Stocks -0.15% Growth Stocks 5.76% Cyclical Stocks -3.77% Interest Rate-Sensitive Stocks -1.85% 10 - -------------------------------------------------------------------------------- Second, the prospect of the single market (the European Monetary Unit, 'EMU') has accelerated an already very real trend. French companies are continuing to restructure. This restructuring of the French corporate sector has already taken various forms. For example, concentration has occurred in the retail, car parts and temporary employment sectors, while groups in a massive divestment phase have unwound cross-shareholdings. This overall theme holds our attention and prompts us to concentrate on certain companies, e.g. Schneider, Valeo, Ecco, Docks de France, Sanofi and Total. Third, maximizing shareholder value is becoming an interesting theme. Therefore, we have been looking for companies that could be candidates for a de-merger along the lines of Chargeurs, Rhone Poulenc and Lagardere Groupe, as well as companies that committed to improving their return on capital employed, e.g. Generale des Eaux, Accor, Pinault Printemps and Club Mediterranee. On the other hand, the strong run of cyclical stocks in the first quarter has prompted us to take some profits, especially since the outlook for stocks sensitive to the economic cycle does not seem to have improved much at this point in time. The published interim results will give financial analysts an opportunity to revise downwards their earnings growth estimates. Lastly, our interest in the financial sector was concentrated on banks. The sector will have to undergo a remodeling along the lines of the recent acquisition of Banque Indosuez by Credit Agricole. Moreover, the low valuations, the scope of the French yield curve and the strong activity in the financial markets could cause these currently very depressed stocks to bounce back in the second half of 1996. [GRAPH] THE FRANCE GROWTH FUND: OVER/UNDER SECTOR ALLOCATION VS. SBF 120 INDEX At June 30, 1996 Energy -0.89% Basic Products 0.04% Construction -1.59% Capital Goods -0.32% Automobile -1.81% Other Consumer Goods 3.22% Food & Beverage 1.30% Retail -1.19% Other Services 2.38% Real Estate -0.04% Financial Services -1.82% Holdings 0.78% 11 - -------------------------------------------------------------------------------- [GRAPH] THE FRANCE GROWTH FUND - CAPITALIZATION BREAKDOWN Small Capitalization Stocks 4% Medium Capitalization Stocks 45% Large Capitalization Stocks 51% - --------------- Small Capitalization: < 3.6 billion FRF Medium Capitalization: > 3.6 billion FRF < 32.2 billion FRF Large Capitalization: > 32.2 billion FRF MARKET OUTLOOK The French market should continue to benefit from a supportive environment, due to the prospect of a continued downward trend in interest rates, expectations of an improvement in economic activity and the appreciation of exchange rates of countries with very competitive currencies. These anticipations are starting to give rise to asset switching in favor of the equity market. Indeed, foreign investors are present while French institutional investors and private individuals seem to be returning to the stock market. We expect short-term rates to continue to evolve to the benefit of long-term assets, the equity market in particular. The theme of industrial and financial restructurings within the general framework of the single market, EMU, is buoyant. IN SUMMARY, DESPITE A VERY LIMITED IMPROVEMENT IN THE LEVEL OF ECONOMIC ACTIVITY AND PROFITS, THE FRENCH MARKET SHOULD CONTINUE TO PERFORM BETTER THAN LAST YEAR. 12 - -------------------------------------------------------------------------------- BREAKDOWN OF SAVINGS INVESTED SHORT-TERM INSTRUMENTS (in billions $) Banking Deposits 230 Money Market Funds 228 Time Deposits 136 Treasury Bills 154 Savings Accounts ("Livret A") 125 Commercial Paper 33 Total 906 TOTAL CAPITALIZATION OF PARIS BOURSE: US$485 billion FRENCH MARKET RATIOS Current Level Based on Consensus Median Estimates 10 Year Average ---------------- --------------- PRICE EARNING RATIO 1996 16.3X 17.9X 1997 13.3X Price/Cash Flow 1996 5.9 6.1 Dividend Yield/Bond Yield 0.49 0.374 Global Yield 3.02% 3.20% Price/Book Value 1.5 1.7 We appreciate your continued interest and investment in the French economy, market place and The France Growth Fund, Inc. Sincerely, /s/ GERARD JEANNIN /s/ JEAN A. ARVIS GERARD JEANNIN JEAN A. ARVIS President Chairman of the Board The France Growth Fund, Inc. The France Growth Fund, Inc. July 22, 1996 13 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) - -------------------------------------------------------------------------------- FRENCH COMMON STOCKS--96.93% - ------------------------------------------------------
Shares Value - --------- ------------ AUTOMOBILE--3.48% 8,300 Bertrand Faure SA ex EBF...... $ 274,300 199 Bertrand Faure SA ex EBF*..... 6,577 27,900 Michelin 'B'.................. 1,364,627 27,485 Peugeot SA.................... 3,681,408 29,390 Valeo......................... 1,574,056 310 Valeo**....................... 16,603 ------------ 6,917,571 ------------ BASIC PRODUCTS--6.47% 31,199 Air Liquide................... 5,513,198 4,668 Carbone Lorraine.............. 703,285 24,390 Eramet........................ 1,642,911 179,505 Rhone Poulenc SA.............. 4,721,428 4,809 Rhone Poulenc SA*............. 126,489 3,800 Vallourec Usin Tub............ 172,862 ------------ 12,880,173 ------------ CAPITAL GOODS--6.51% 25,418 Alcatel Alsthom............... 2,218,640 7,537 GFI Industries................ 940,660 12,700 Legrand....................... 2,271,384 2,375 Sagem Applic. Gen. Electr..... 1,426,662 1,206 SAT SA de Telecommunication... 417,317 102,220 Schneider SA.................. 5,365,358 1,264 Zodiac SA..................... 316,983 ------------ 12,957,004 ------------ CONSTRUCTION--4.72% 13,156 Imetal........................ 1,867,006 23,990 Lafarge Coppee................ 1,452,738 45,370 Saint-Gobain.................. 6,076,969 ------------ 9,396,713 ------------ DISTRIBUTION--10.34% 16,585 Carrefour..................... 9,298,433 6,870 Castorama Dubois.............. 1,354,234 246 Castorama Dubois*............. 48,492 3,989 Comptoirs Modernes............ 1,800,633 5,480 Docks de France............... 1,161,198 16,655 Pinault Printemps............. 5,831,193 9,900 Primagaz...................... 1,098,931 ------------ 20,593,114 ------------ Shares Value - --------- ------------ ENERGY--7.08% 74,550 Elf Aquitaine................. $ 5,486,903 112,650 Total SA...................... 8,361,153 3,335 Total SA*..................... 247,532 ------------ 14,095,588 ------------ FINANCIAL SERVICES--14.53% 77,825 AXA SA........................ 4,260,404 1,659 AXA SA*....................... 90,819 79,522 Banque National de Paris...... 2,793,473 18,615 Cetelem....................... 4,186,928 11,550 Cie Bancaire SA............... 1,302,294 68,587 Cie Financiere de Paribas..... 4,053,353 51,174 Credit Commercial de France................... 2,373,662 18,686 Credit Local.................. 1,522,052 15,500 Simco Union Habit Regd........ 1,431,279 60,729 Societe Generale.............. 6,682,079 2,150 Societe Generale*............. 236,567 ------------ 28,932,910 ------------ FOOD & BEVERAGE--10.00% 15,650 Eridania Beghin Say........... 2,452,158 30,466 Groupe Danone................. 4,613,728 764 Groupe Danone*................ 115,699 37,690 LVMH.......................... 8,946,246 58,870 Pernod Ricard................. 3,776,652 ------------ 19,904,483 ------------ HOLDINGS--2.33% 2,860 CGIP.......................... 658,289 6,060 Chargeurs..................... 1,696,423 54,100 Lagardere Groupe Ord.......... 1,395,620 10,820 Marine Wendel SA.............. 896,058 ------------ 4,646,390 ------------ OTHER CONSUMER GOODS--15.44% 15,925 BIC........................... 2,263,059 12,230 Clarins....................... 1,880,624 3,380 Filipacchi Medias SA.......... 683,359 50 Filipacchi Medias SA*......... 10,109 5,400 Hermes International.......... 1,427,683 27,260 L'Oreal....................... 9,056,637 42,160 Moulinex**.................... 806,482 6,665 Reynolds SA**................. 544,187 16,670 Roussel Uclaf................. 4,002,226
14 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FRENCH COMMON STOCKS--(concluded) TIME DEPOSIT--0.13% - ------------------------------------------------------ - ------------------------------------------------------
Shares Value - --------- ------------ OTHER CONSUMER GOODS--(continued) 1,380 Salomon SA.................... $ 1,262,228 43,763 Sanofi........................ 3,282,225 16,847 SEB........................... 2,934,470 225 SEB*.......................... 39,191 37,850 Seita......................... 1,736,509 9,720 Synthelabo.................... 821,967 ------------ 30,750,956 ------------ OTHER SERVICES--16.03% 24,011 Accor......................... 3,360,793 6,700 Altran Technologies SA........ 2,074,864 58,000 Cap Gemini Sogeti**........... 2,255,054 15,030 Cipe France SA................ 1,417,098 16,825 Club Mediterranee**........... 1,507,839 4,000 Ecco.......................... 1,006,998 7,633 Gaumont....................... 571,288 67,610 Generale des Eaux............. 7,557,494 26,247 Havas......................... 2,526,158 4,160 Infogrammes Entertainment**... 809,518 4,872 Infogrammes Entertainment (new shares)**.............. 948,070 28,913 Lyonnaise des Eaux Dumez...... 2,763,148 4,130 Sodexho....................... 1,833,771 3,391 Sogeparc (Financiere)......... 439,696 12,009 Spir Communication............ 1,183,624 18,130 Technip SA.................... 1,670,610 ------------ 31,926,023 ------------ TOTAL FRENCH COMMON STOCKS (cost--$162,395,614)................... 193,000,925 ------------
Principal Amount Value - --------- ------------ US$255,000 Brown Brothers Harriman & Co. Grand Cayman, 4.25%+ (cost--$255,000)............ $ 255,000 ------------ TOTAL INVESTMENTS (cost--$162,650,614)--97.06%........... 193,255,925 OTHER ASSETS LESS LIABILITIES--2.94%..... 5,858,063 ------------ NET ASSETS (applicable to 15,345,333 shares; equivalent to $12.98 per share)--100.00%........................ $199,113,988 ------------ ------------
- ------------
* Restricted security at June 30, 1996. ** Non-income producing security. + Variable rate account--rate resets on a monthly basis; amount available upon 48 hours' notice.
See accompanying notes to financial statements. 15 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited) - -------------------------------------------------------------------------------- ASSETS: Investments in securities, at value (cost-$162,650,614)... $193,255,925 Cash (including French francs at affiliate of $2,289,447 with a cost of $2,313,310)............................... 2,292,716 Receivable for French taxes withheld and avoir fiscal..... 4,460,555 Receivable for investment securities sold................. 1,451,818 Dividends and interest receivable......................... 607,497 Prepaid expenses and other assets......................... 244,529 ------------ Total assets.......................................... 202,313,040 ------------ LIABILITIES: Payable for investment securities purchased............... 2,436,757 Advisory fee payable...................................... 274,030 Administration fee payable................................ 54,806 Payable for variation margin on futures contracts......... 23,150 Accrued expenses.......................................... 410,309 ------------ Total liabilities..................................... 3,199,052 ------------ NET ASSETS: Common stock, $0.01 par value; 15,345,333 shares issued and outstanding (100,000,000 shares authorized)......................... 153,453 Additional paid-in capital................................ 163,784,670 Undistributed net investment income....................... 1,861,455 Accumulated net realized gain............................. 2,682,574 Net unrealized appreciation of investments, futures contracts and other assets and liabilities denominated in French francs............ 30,631,836 ------------ Net assets applicable to shares outstanding........... $199,113,988 ------------ ------------ NET ASSET VALUE PER SHARE..................................... $12.98 ------------ ------------
See accompanying notes to financial statements. 16 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1996 (unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends, including $722,237 of avoir fiscal (net of foreign withholding taxes)............. $3,459,358 Interest........................................ 37,106 $ 3,496,464 ---------- ----------- EXPENSES: Advisory fees................................... 796,572 Administration fees............................. 159,314 Custodian and accounting fees................... 148,710 Legal and auditing fees......................... 92,770 Directors' fees and expenses.................... 80,480 Reports to shareholders......................... 53,790 Shareholder relations expense................... 24,863 Insurance expense............................... 13,915 Transfer agent fees............................. 13,650 New York Stock Exchange listing fee............. 10,988 Other expenses.................................. 13,379 1,408,431 ---------- ----------- Net investment income........................... 2,088,033 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain (loss) on: Investments................................... 1,961,632 Futures contracts............................. 1,145,798 Foreign currency transactions................. (193,772) Net change in unrealized appreciation/depreciation of: Investments................................... 19,709,513 Futures contracts............................. (205,258) Other assets and liabilities denominated in French francs................................ (353,800) ----------- Net realized and unrealized gain on investments, futures contracts and foreign currency transactions............. 22,064,113 ----------- NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS........................................ $24,152,146 ----------- -----------
See accompanying notes to financial statements. 17 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE YEAR ENDED ENDED JUNE 30, 1996 DECEMBER 31, (UNAUDITED) 1995 -------------- -------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income.................... $ 2,088,033 $ 5,619,748 Net realized gain on investments and options, futures contracts and foreign currency transactions...... 2,913,658 7,564,645 Net change in unrealized appreciation/depreciation of investments, futures contracts and other assets and liabilities denominated in French francs.......................... 19,150,455 8,759,469 -------------- -------------- Total from investment operations......... 24,152,146 21,943,862 -------------- -------------- DIVIDENDS AND DISTRIBUTIONS: From net investment income............... (32,225) (6,129,459) In excess of net investment income....... -- (194,353) From net realized gain on investments.... (3,085,947) (5,906,418) -------------- -------------- Total dividends and distributions........ (3,118,172) (12,230,230) -------------- -------------- Net increase in net assets............... 21,033,974 9,713,632 NET ASSETS Beginning of period...................... 178,080,014 168,366,382 -------------- -------------- End of period............................ $199,113,988 $178,080,014 -------------- -------------- -------------- --------------
See accompanying notes to financial statements. 18 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The France Growth Fund, Inc. (the 'Fund') was incorporated in Maryland on February 20, 1990 as a diversified, closed-end management investment company. Prior to commencing investment operations on May 18, 1990, the Fund had no activities other than the sale on May 4, 1990 to Banque Indosuez (an affiliate of the investment adviser of the Fund, as well as the subcustodian for assets of the Fund located in France) of 9,000 shares of common stock for $100,440. The preparation of the financial statements in accordance with generally accepted accounting principles requires Fund management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant policies followed by the Fund. Valuation of Investments--All securities for which market quotations are readily available are valued at the last sales price prior to the time of determination on the principal exchange on which they are traded or, if no sales price is available at that time, at the last quoted bid price for such securities (however, if bid and asked quotations are available, at the mean between the last current bid and asked prices, rather than the last quoted bid price). Options are valued in a like manner, as are futures contracts, except that open futures contracts sales are valued using the closing settlement price or, in the absence of such price, the most recently quoted asked price. Forward foreign currency exchange contracts are valued at the current cost of covering or offsetting the contracts. Securities and assets for which market quotations are not readily available (including unlisted securities and securities that are not readily marketable) are valued at fair value as determined in good faith in the manner prescribed by the Fund's Board of Directors. There were no securities held by the Fund for which market quotations were not readily available at June 30, 1996. Short-term investments that mature in 60 days or less are valued at amortized cost, or by amortizing their values on the 61st day prior to maturity, if their term to maturity from date of purchase is greater than 60 days, unless the Board of Directors of the Fund determines that such values do not represent the fair value of such investments. Assets and liabilities initially expressed in French francs are translated into U.S. dollars at the noon buying rate in New York for cable transfers payable in French francs (the 'Federal Reserve Exchange Rate'), as certified for customs purposes by the Federal Reserve Bank of New York as quoted on the day of such translation, or if no such rate is quoted on such date, the previously quoted Federal Reserve Exchange Rate, or at such other appropriate rate as may be determined by the Board of Directors. U.S. Federal Tax Status--The Fund intends to distribute all of its taxable income and to comply with the other requirements of the U.S. Internal Revenue Code applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required. In addition, by distributing during each calendar year substantially all of its ordinary income and long-term capital gains, if any, the Fund intends not to be subject to U.S. federal excise tax. 19 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- French Withholding Tax--Dividend income from French companies is subject to French withholding tax at a rate of 15 percent. Pursuant to the income tax treaty between the U.S. and France, the Fund is entitled to recover a credit (avoir fiscal) for French taxes paid by a French company with respect to such dividend, equal to 42.5% of the dividend amount (50% tax rate less 15% withholding on such tax). The Fund makes such claims for the refunds to the extent it qualifies for the benefit under the income tax treaty. Interest income and gains on the sale or exchange of stock in French companies realized by the Fund are not subject to French withholding tax. Investment Transactions and Investment Income--Investment transactions are recorded on the trade date (the date on which the order to buy or sell is executed). Realized gains and losses from investments and foreign currency transactions are calculated on the identified cost basis. Interest income is recorded on an accrual basis. Dividend income and other distributions are recorded on the ex-dividend date ('ex-date') except for certain dividends from French securities which are recorded as soon after the ex-date as the Fund becomes aware of such dividends. Foreign Currency Translation--The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investments and other assets and liabilities stated in French francs are translated at the exchange rates prevailing on the valuation date; and (2) purchases, sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting foreign currency gains and losses are included in the Statement of Operations. The Fund does not generally isolate the effect of fluctuations in foreign currency rates from the effect of fluctuations in the market prices of securities. However, the Fund does isolate the effect of fluctuations in foreign currency rates when determining the gain or loss upon the sale or maturity of French franc-denominated debt obligations pursuant to U.S. federal income tax regulations; such amount is categorized as foreign currency gain or loss for both financial reporting and income tax reporting purposes. Net foreign currency gains (losses) from valuing French franc denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation of investments, futures contracts and other assets and liabilities denominated in French francs. Forward Foreign Currency Contracts--The Fund may enter into forward foreign currency exchange contracts ('forward contracts') in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in French francs. The Fund may not position a hedge with respect to French francs or another currency to an extent greater than the aggregate market value (at the time of making such sale) of the securities held in its portfolio denominated or generally quoted in or currently convertible into French francs or such other currency. If the Fund enters into a currency hedging transaction, the Fund's custodian will place cash or U.S. government or other high quality short-term debt obligations or a combination thereof, in a 20 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- segregated account of the Fund in an amount equal to the value of the Fund's total assets committed to the consummation of the forward contract, which value will be adjusted on a daily basis. If the value of the securities placed in the segregated account declines, additional cash or securities will be placed in the account so that the value of the account will equal the amount of the Fund's commitment with respect to the contract. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of the French franc relative to the U.S. dollar. Fluctuations in the value of open forward contracts are recorded for book purposes as an unrealized gain or loss by the Fund. Realized gains and losses include net gains or losses recognized by the Fund on forward contracts that the Fund has terminated by entering into offsetting commitments. Futures Contracts--The Fund may seek to hedge all or a portion of its investments through the use of securities index and financial futures contracts. Upon entering into a futures contract, the Fund is required to deposit an amount ('initial margin') equal to a certain percentage of the contract value. Subsequent payments ('variation margin') are made or received by the Fund each day, reflecting the daily change in the value of the contract and are recorded as an unrealized gain or loss. When the contract is closed, the Fund will recognize a realized gain or loss. Futures contracts are subject to the risk associated with the imperfect correlation between movements in the price of the future and the price of the securities being hedged. The risk of imperfect correlation increases with respect to securities index futures as the composition of the Fund's portfolio diverges from the composition of the index underlying such futures. In addition, there is no assurance that a liquid secondary market will exist at the time the Fund elects to close out a futures position. During the six months ended June 30, 1996, the Fund entered into securities index futures with Indosuez Carr Futures, an affiliate of the investment adviser. At June 30, 1996, the Fund had the following open securities index futures contracts which were collateralized by FRF 7,013,777 ($1,363,487) held in a segregated cash account:
COST ON NUMBER OF EXPIRATION ORIGINATION UNREALIZED CONTRACTS TYPE DATE DATE CURRENT VALUE DEPRECIATION - ---------------- ------------ ---------- -------------- -------------- -------------- Long positions: 36 CAC 40 Index 7/31/96 FRF 15,229,126 FRF 15,170,400 $ 11,416 37 CAC 40 Index 7/31/96 15,652,157 15,591,800 11,734 -------------- $ 23,150 -------------- --------------
Option Transactions--For hedging purposes, the Fund may purchase and write (sell) put and call options on French securities and security indices. The risk associated with purchasing an option is that the Fund pays a premium whether or not the option is exercised. Additionally, the Fund bears the risk of 21 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid. When the Fund writes an option, the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the written option. Premiums received from writing options which expire unexercised are recorded by the Fund on the expiration date as a realized gain. If a written call option is exercised, the premium received is added to the proceeds from the sale of the underlying security in determining whether the Fund has realized a gain or loss. If a written put option is exercised, the premium received reduces the cost basis of the underlying security in determining whether the Fund has realized a gain or loss. In writing an option, the Fund bears the market risk of an unfavorable change in the price of the security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a security or currency at a price different from the current market value. Dividends and Distributions--Dividends and distributions to shareholders are recorded on the ex-date. The amount of dividends and distributions from net investment income and net realized capital gain are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These 'book/tax' differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gain for financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income and distributions in excess of net realized capital gain. To the extent they exceed net investment income and net realized capital gain for tax purposes, they are reported as distributions of additional paid-in capital. On March 12, 1996, the Fund's Board of Directors declared a dividend of $0.2032 per share, which was paid on April 12, 1996, to shareholders of record as of March 22, 1996. The dividend was paid from net investment income and net long-term capital gains. INVESTMENT ADVISER AND ADMINISTRATOR Indosuez International Investment Services (the 'Investment Adviser') has an Investment Advisory and Management Agreement ('Advisory Agreement') with the Fund. In accordance with the Advisory Agreement, the Investment Adviser provides investment advisory services, makes investment decisions and supervises the acquisition and disposition of securities and other investments held by the Fund and provides other portfolio management services for a monthly fee at the annual rate of 0.90% of the value of the Fund's average weekly net assets up to $100 million and 0.80% of such assets in excess of $100 million. 22 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONCLUDED) - -------------------------------------------------------------------------------- Mitchell Hutchins Asset Management Inc. (the 'Administrator') has an Administration Agreement with the Fund. Under the terms of the Administration Agreement, the Administrator provides certain administrative services to the Fund. Fees for these services are determined monthly at the annual rate of 0.18% of the value of the Fund's average weekly net assets up to $100 million and 0.16% of such assets in excess of $100 million, with a minimum annual fee of $150,000. TRANSACTIONS WITH AFFILIATES For the six months ended June 30, 1996, certain direct and indirect subsidiaries of Banque Indosuez, CPR Actions, Cheuvreux de Virieu and Indosuez Carr Futures received $6,851, $60,432 and $27,894, respectively, in brokerage commissions as a result of executing agency transactions on portfolio securities on behalf of the Fund. In addition, Banque Indosuez earned fees of approximately $26,200 in its capacity as subcustodian for the Fund of which approximately $14,400 was unpaid at June 30, 1996. For the six months ended June 30, 1996, the Fund earned approximately $16,314 in interest income from call account deposits held with Banque Indosuez. The Fund had $2,289,447 of such deposits at June 30, 1996. Of the 15,345,333 shares outstanding at June 30, 1996, Banque Indosuez owned 3,241 shares. INVESTMENTS IN SECURITIES For U.S. federal income tax purposes, the cost of securities owned at June 30, 1996 was substantially the same as the cost for financial statement purposes. Net unrealized appreciation of investments of $30,605,311 was composed of gross appreciation of $32,863,530 for those investments having an excess of value over cost and gross depreciation of $2,258,219 for those investments having an excess of cost over value. For the six months ended June 30, 1996, aggregate purchases and sales of portfolio securities (excluding short-term securities) were $75,697,810 and $72,137,808, respectively. CONCENTRATION OF RISK Investments in France may involve certain considerations and risks not typically associated with investments in the U.S. as a result of, among others, the possibility of future political and economic developments and the level of French governmental supervision and regulation of foreign securities markets. The ability of the issuers of the debt securities held by the Fund to meet their obligations may be affected by economic and political developments in a specific industry or region. 23 THE FRANCE GROWTH FUND, INC. - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of common stock outstanding throughout each period is presented below:
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED DECEMBER 31, JUNE 30, 1996 ------------------------------------------------------------ (UNAUDITED) 1995 1994 1993 1992 1991 ------------- -------- -------- -------- -------- -------- Net asset value, beginning of period........ $11.60 $10.97 $12.94 $10.53 $10.75 $10.33 ------------- -------- -------- -------- -------- -------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income....................... 0.14 0.37 0.01(a) 0.03 0.03 0.15 Net realized and unrealized gain (loss) on investments and options, futures contracts and foreign currency transactions......... 1.44 1.06 (0.68)(a) 2.38 (0.21) 0.51 ------------- -------- -------- -------- -------- -------- Total from investment operations........ 1.58 1.43 (0.67) 2.41 (0.18) 0.66 ------------- -------- -------- -------- -------- -------- DIVIDENDS AND DISTRIBUTIONS: From net investment income.................. 0.00(b) (0.40) (0.03) -- (0.02) (0.14) In excess of net investment income.......... -- (0.01) -- -- -- -- From net realized gain on investments....... (0.20) (0.39) (0.55) -- (0.02) (0.10) ------------- -------- -------- -------- -------- -------- Total dividends and distributions....... (0.20) (0.80) (0.58) -- (0.04) (0.24) ------------- -------- -------- -------- -------- -------- CAPITAL SHARE TRANSACTIONS: Dilutive effect of rights offering.......... -- -- (0.67) -- -- -- Offering costs charged to additional paid-in capital................................... -- -- (0.05) -- -- -- ------------- -------- -------- -------- -------- -------- Total capital share transactions........ -- -- (0.72) -- -- -- ------------- -------- -------- -------- -------- -------- Net asset value, end of period.............. $12.98 $11.60 $10.97 $12.94 $10.53 $10.75 ------------- -------- -------- -------- -------- -------- ------------- -------- -------- -------- -------- -------- Market value, end of period................. $10.25 $9.88 $9.13 $13.63 $9.25 $8.88 ------------- -------- -------- -------- -------- -------- ------------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN (c)(d).............. 5.87% 16.62% (27.05)% 47.30% 4.70% 5.76% ------------- -------- -------- -------- -------- -------- ------------- -------- -------- -------- -------- -------- RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000 omitted)..... $199,114 $178,080 $168,366 $148,922 $121,229 $123,757 Ratio of expenses to average net assets..... 1.51%(e) 1.58% 1.63% 1.71% 1.76% 2.14% Ratio of net investment income to average net assets................................ 2.24%(e) 3.07% 0.19% 0.23% 1.23% 1.46% Portfolio turnover.......................... 39% 49% 52% 57% 40% 75% Average commission rate paid per share of common stock investments purchased/sold (f)........................ $0.1645 -- -- -- -- --
- ------------------ (a) Based on average shares outstanding. (b) Dividend is equal to $0.0021 per share. (c) Total investment return is calculated assuming a purchase of common stock at the current market price on the first day, the purchase of common stock pursuant to any rights offering occurring in the period and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Total investment return does not reflect sales charges or brokerage commissions. (d) Total investment return for a period of less than one year is not annualized. (e) Annualized. (f) Disclosure effective for fiscal years beginning on or after September 1, 1995. 24 Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase shares of its common stock in the open market. This report, including the financial statements herein, is sent to the shareholders of the Fund for their information. The financial information included herein is taken from the records of the Fund without audit by independent accountants who do not express an opinion thereon. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. Comparisons between changes in the Fund's net asset value per share and changes in the SBF Index should be considered in light of the Fund's investment policies and objective, the characteristics and quality of the Fund's investments, the size of the Fund and variations in the French franc/U.S. dollar exchange rate. -----END PRIVACY-ENHANCED MESSAGE-----