<PAGE>
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]
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
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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
<PAGE>
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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
<PAGE>
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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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
- --------------------------------------------------------------------------------
[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
<PAGE>
- --------------------------------------------------------------------------------
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
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
FRENCH COMMON STOCKS--96.93%
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
<S> <C> <C>
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
</TABLE>
14
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FRENCH COMMON STOCKS--(concluded) TIME DEPOSIT--0.13%
- ------------------------------------------------------
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
OTHER CONSUMER GOODS--(continued)
<S> <C> <C>
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
------------
<CAPTION>
OTHER SERVICES--16.03%
<S> <C> <C>
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
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C> <C>
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
------------
------------
</TABLE>
- ------------
<TABLE>
<CAPTION>
* Restricted security at June 30, 1996.
<S> <C>
** Non-income producing security.
+ Variable rate account--rate resets on a monthly
basis; amount available upon 48 hours' notice.
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
------------
------------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
-------------- --------------
<S> <C> <C>
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
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
COST ON
NUMBER OF EXPIRATION ORIGINATION UNREALIZED
CONTRACTS TYPE DATE DATE CURRENT VALUE DEPRECIATION
- ---------------- ------------ ---------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
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
--------------
--------------
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each
period is presented below:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
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 -- -- -- -- --
</TABLE>
- ------------------
(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
<PAGE>
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.
