<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
Bernard Chauvel President
Frederick J. Schmidt Vice President and Treasurer
Steven M. Cancro Vice President and Secretary
INVESTMENT ADVISER
- ------------------------------------------------------------
Indocam International Investment Services
90, boulevard Pasteur
75015 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
Credit Agricole Indosuez
9, Quai du President Paul Doumer
92400 Courbevoie, France
SHAREHOLDER SERVICING AGENT
- ------------------------------------------------------------
PNC Bank, N.A.
103 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
- ------------------------------------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
COUNSEL
- ------------------------------------------------------------
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
[LOGO] THE
---------------------------------------
FRANCE
---------------------------------------
GROWTH
---------------------------------------
FUND, INC.
---------------------------------------
SEMI-ANNUAL REPORT FOR
THE SIX MONTHS ENDED
JUNE 30, 1998
<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 whose shares trade on the New York Stock Exchange
('NYSE'). The Fund's objective is long-term capital appreciation through
investment primarily in French equity securities. Under normal market
conditions, 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
Indocam International Investment Services (formerly Indosuez International
Investment Services) ('IIIS' or the 'Investment Adviser') is the Fund's
investment adviser and manager. IIIS is a French company registered as a U.S.
investment adviser under the Investment Advisers Act of 1940 and is managed by
the Indocam Asset Management Group, an indirect wholly-owned subsidiary of the
Credit Agricole Group. Indocam Asset Management, through its subsidiaries, had
assets under management of approximately U.S. $135 billion at June 30, 1998.
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 is 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' or 'Closed-End Funds'. Inquiries regarding registered shareholder
accounts may be directed to the Fund's transfer agent, dividend paying agent and
registrar, PNC Bank, N.A. 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 Stock
of the Fund by the agent for the Plan and dividend paying agent, PNC Bank, N.A.
(the 'Dividend Agent'), unless such shareholders elect to receive distributions
in cash. Shareholders who elect to receive distributions in cash (other than
those distributions payable solely in Common Stock) will receive a 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, N.A.
Dividend Agent for the Fund, at P.O. Box 8905, Wilmington, Delaware 19809.
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
STOCK REPURCHASE PROGRAM
The Board of Directors has adopted a stock repurchase program pursuant to which
the Fund may purchase from time to time in the open market up to an aggregate of
10% of the outstanding shares of its Common Stock, as long as the Common Stock
is trading at a discount from net asset value. During the six months ended June
30, 1998, 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 8, 1998.
Shareholders voted to:
1) re-elect Jean A. Arvis, Pierre H.R. Daviron, Jacques Regniez and John W.
Spurdle Jr. as Directors rather than Rajeev Das, Phillip Goldstein, George W.
Karpus, and Steven Samuels; 2) ratify the appointment of PricewaterhouseCoopers
LLP (successor firm to Price Waterhouse LLP) as the Fund's independent
accountants for the fiscal year ending December 31, 1998; 3) not convert the
Fund to an open-end investment company; and 4) not terminate the investment
advisory agreement between the Fund and its investment adviser. The resulting
vote count for each proposal is indicated below:
<TABLE>
<S> <C> <C>
1. Election of Directors:
Jean A. Arvis....................................... For: 10,028,807
Withheld Authority: 953,599
Pierre H.R. Daviron................................. For: 10,027,988
Withheld Authority: 954,418
Jacques Regniez..................................... For: 10,027,648
Withheld Authority: 954,758
John W. Spurdle, Jr................................. For: 10,026,988
Withheld Authority: 955,418
Rajeev Das.......................................... For: 813,176
Withheld Authority: 10,169,230
Phillip Goldstein................................... For: 813,176
Withheld Authority: 10,169,230
George W. Karpus.................................... For: 813,176
Withheld Authority: 10,169,230
Steven Samuels...................................... For: 813,176
Withheld Authority: 10,169,230
</TABLE>
In addition to the re-elected Directors, Thomas C. Barry, John A. Bult, Walter
J.P. Curley, Marc de F. de Logeres, Michel Longchampt, Michel A. Rapaccioli,
Bernard Simon-Barboux and Michel Somnolet continue to serve as Directors of the
Fund.
2
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Fund's independent accountants:
<TABLE>
<S> <C> <C>
For: 9,108,317
Against: 97,973
Abstain: 1,776,116
</TABLE>
3. To recommend the conversion of the Fund to an open-end investment
company:
<TABLE>
<S> <C> <C>
For: 813,176
Against: 10,169,230
</TABLE>
4. Termination of the investment advisory agreement between the Fund and
its investment adviser:
<TABLE>
<S> <C> <C>
For: 813,176
Against: 10,169,230
</TABLE>
OTHER INFORMATION
The Tax-Advantaged Managed Distribution Plan
The Board of Directors of the Fund has adopted a tax-advantaged managed
distribution plan (the 'Distribution Plan') designed to address the discount of
the Fund's share price to its net asset value.
This innovative Distribution Plan takes into account the Fund's current
significant unrealized long-term capital gains by distributing an amount equal
to at least 3% per quarter (at least 12% annually) of the Fund's net assets as
of the end of the prior calendar year. To the extent possible, the distribution
will be funded by the realization of a portion of long-term capital gains. This
quarterly distribution policy, which requires SEC approval, is expected to
commence no later than the fourth quarter of 1998. In adverse market conditions,
a distribution could constitute a return of capital. The Distribution Plan will
remain in effect for a minimum of three years subject to reconsideration by the
Board only in the event of a major market decline.
In addition, the Investment Adviser, to more closely align its interests with
those of shareholders, has agreed to a voluntary policy, which it can
discontinue at its discretion, whereby a portion of its fee will be waived to
reflect the discounted market price of its shares. The advisory fee will be
reduced by the same percentage, if any, as the shares are trading at a discount.
3
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
Adoption of a Single European Currency
Economic Monetary Union ('EMU') is scheduled to occur on January 1, 1999, when
11 European countries, including France, adopt a single currency--the euro. For
participating countries, EMU will mean sharing a single currency and single
official interest rate and adhering to agreed upon limits on government
borrowing. Budgetary decisions will remain in the hands of each participating
country, but will be subject to each country's commitment to avoid 'excessive
deficits' and other more specific budgetary criteria. A European Central Bank
will be responsible for setting the official interest rate to maintain price
stability within the euro zone.
EMU is driven by the expectation of a number of economic benefits, including
lower transaction costs, reduced exchange risk, greater competition, and a
broadening and deepening of European financial markets. However, there are a
number of significant risks associated with EMU. Monetary and economic union on
this scale has never been attempted before. There is a significant degree of
uncertainty as to whether participating countries will remain committed to EMU
in the face of changing economic conditions. This uncertainty may increase the
volatility of European markets.
The Year 2000 Processing Issue
The management services provided to the Fund by the Investment Adviser and
services performed by others, including the custodian and transfer agent, depend
upon the smooth operation of their computer systems. The Fund, like all other
mutual funds and organizations engaged in financial services, would be adversely
affected if the Investment Adviser and other major service providers are not
able to properly calculate data from and after January 1, 2000. This is commonly
referred to as the 'Year 2000 Problem'. The Investment Adviser has made
compliance with the Year 2000 Problem a high priority and is taking steps with
their computer systems that they believe are reasonably designed to address this
issue. The Fund is also seeking assurances that its other major service
providers are taking reasonable measures to address Year 2000 issues. Although
the Fund does not expect the Year 2000 Problem to adversely impact it, the Fund
can not guarantee that the Investment Adviser's or the Fund's other service
providers' efforts will be successful.
4
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
From the commencement of investment operations of The France Growth Fund, Inc.
(the 'Fund') on May 18, 1990, through June 30, 1998, the Fund recorded a return
(including dividends) of 185.05% 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 104.98%. Thus, since the beginning of investment
operations, the Fund has outperformed the SBF 120 Index by 80.07%.
On a US dollar basis, the Fund reported a return of 162.31% (including
dividends) from the commencement of investment operations through June 30, 1998.
For the same period, the SBF 120 Index recorded a return of 88.62%. Thus, in US
dollar terms, the Fund has outperformed the SBF 120 Index by 73.69% since the
beginning of operations. For the six months ended June 30, 1998, the Fund
reported a net asset value return of 41.73% on a French franc basis (41.06% in
US dollar terms) outperforming the SBF 120 Index by 2.77% on a French franc
basis and 2.74% in US dollar terms.
Despite concerns fueled by the Asian crisis and Russia's difficulties, the Paris
Bourse recorded strong performance, reflecting the solid fundamentals enjoyed by
continental Europe. In this context, the Fund's performance during the six
months ended June 30, 1998 is primarily attributable to strong gains from
companies sensitive to the European economic recovery. In the automobile sector,
Renault rose 101%, in the banking sector, BNP increased 55%, in retail, Pinault
Printemps was up 57.6% and in software services, leader Cap Gemini increased an
outstanding 97.4%. In addition, our strategy to overweight restructuring
companies has proven rewarding. For instance, ATOS in the software services
sector has risen 80%, Accor (hotel chain), Vivendi and Suez Lyonnaise (service
companies) are all up in excess of 50% since the beginning of the year. Finally,
we should mention the strong performance from one of our small cap companies,
Ubi-Soft Entertainment (education and video game software producer) which
increased in value 64.7%.
At June 30, 1998, the Fund's net asset value per share was US $17.96, up from US
$13.12 at December 31, 1997. The market price at June 30, 1998 of US $15.0625
was also higher than the market price of the Fund of US $10.50 at December 31,
1997. The discount to net asset value stood at 16.13% at June 30, 1998 and
ranged between 15.97% to 20.21% during the six month period ended June 30, 1998.
ECONOMIC AND FINANCIAL OVERVIEW
The general macro-economic picture for the French economy in the last months of
1997 and first half of 1998 has progressively moved from export-driven growth to
a domestic demand recovery. Indeed, domestic demand has improved noticeably
during the past six months. The trend of manufacturing output has continued to
strengthen with growth of 7.5% year-on-year. This growth has been fueled
primarily by consumer goods (7.4% year-on-year) and the automobile sector (15%
year-on-year).
5
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
DOMESTIC TAKES OVER FOREIGN DEMAND
French French
industrial industrial
survey: survey:
level of level of
domestic foreign
order book order book
& demand & demand
12/31/87 -1 -7
01/29/88 0 -5
02/29/88 7 -7
03/31/88 2 -3
04/29/88 6 4
05/31/88 3 3
06/30/88 5 4
07/29/88 9 7
08/31/88 10 8
09/30/88 13 9
10/31/88 13 11
11/30/88 21 16
12/30/88 27 18
01/31/89 21 16
02/28/89 18 16
03/31/89 16 14
04/28/89 13 11
05/31/89 15 11
06/30/89 13 12
07/31/89 17 15
08/31/89 10 13
09/29/89 4 12
10/31/89 3 9
11/30/89 3 9
12/29/89 3 8
01/31/90 6 6
02/28/90 5 5
03/30/90 -1 -1
04/30/90 -2 -3
05/31/90 -5 -4
06/29/90 -10 -5
07/31/90 -14 -7
08/31/90 -17 -12
09/28/90 -19 -16
10/31/90 -20 -17
11/30/90 -28 -22
12/31/90 -32 -28
01/31/91 -34 -31
02/28/91 -43 -32
03/29/91 -33 -30
04/30/91 -32 -30
05/31/91 -45 -38
06/28/91 -35 -33
07/31/91 -39 -37
08/30/91 -36 -37
09/30/91 -39 -36
10/31/91 -31 -33
11/29/91 -33 -36
12/31/91 -36 -38
01/31/92 -37 -37
02/28/92 -22 -33
03/31/92 -30 -36
04/30/92 -39 -38
05/29/92 -29 -35
06/30/92 -28 -37
07/31/92 -28 -39
08/31/92 -31 -39
09/30/92 -33 -39
10/30/92 -40 -46
11/30/92 -42 -46
12/31/92 -47 -48
01/29/93 -52 -47
02/26/93 -58 -55
03/31/93 -57 -56
04/30/93 -63 -59
05/31/93 -65 -61
06/30/93 -64 -64
07/30/93 -58 -58
08/31/93 -58 -59
09/30/93 -58 -61
10/29/93 -50 -55
11/30/93 -51 -53
12/31/93 -44 -45
01/31/94 -38 -46
02/28/94 -39 -44
03/31/94 -24 -27
04/29/94 -17 -22
05/31/94 -10 -14
06/30/94 -7 -11
07/29/94 -5 -12
08/31/94 -2 -7
09/30/94 -1 -2
10/31/94 0 -1
11/30/94 -1 -2
12/30/94 6 1
01/31/95 16 1
02/28/95 10 -1
03/31/95 2 -8
04/28/95 4 -5
05/31/95 2 -7
06/30/95 -5 -8
07/31/95 -14 -11
08/31/95 -13 -18
09/29/95 -14 -25
10/31/95 -17 -29
11/30/95 -20 -24
12/29/95 -23 -34
01/31/96 -27 -32
02/29/96 -32 -35
03/29/96 -31 -36
04/30/96 -27 -34
05/31/96 -30 -36
06/28/96 -39 -38
07/31/96 -23 -35
08/30/96 -20 -33
09/30/96 -19 -30
10/31/96 -14 -25
11/29/96 -8 -23
12/31/96 -6 -24
01/31/97 -4 -24
02/28/97 2 -20
03/31/97 0 -21
04/30/97 -4 -25
05/30/97 5 -19
06/30/97 12 -15
07/31/97 10 -11
08/29/97 17 -5
09/30/97 22 1
10/31/97 22 0
11/28/97 26 5
12/31/97 28 13
01/30/98 26 4
02/27/98 22 5
03/31/98 26 13
04/30/98 12 8
05/29/98 11 9
06/30/98 15 10
07/31/98 14 9
The outlook for investment in industry has also significantly improved.
According to a recent Institut National des la Statistique et des Etudes
Economiques ('INSEE') survey, companies intend to raise their capital spending
10% in real terms in 1998 after planning increases of only 2% in 1997. The
capital goods sector stands out for its much improved prospects. Growth
forecasts have been revised up to 15% from 10% in the January 1998 survey. The
combined effects of short rates holding at historically low levels, an improved
level of business confidence, and the lifting of uncertainties with respect to
adherence to the Euro has led to a gradual recovery.
6
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
RECOVERY IN CAPITAL EXPENDITURES
INSEE Forecast
1990 15
1991 -4
1992 -10
1993 -15
1994 -4
1995 9
1996 1
1997 1
1998 10
Continued disinflation as well as the recovery in employment has made for real
increases in purchasing power which has consequently boosted household
consumption. Household consumption of manufactured goods jumped 6.3%
year-on-year, triggered primarily by the automobile and textile/leather sectors.
This solid performance should continue as we anticipate ongoing improvement in
household confidence.
7
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
STRONG RISE IN FRENCH CONSUMPTION
French
Household
Survey: French
Household Private
Confidence Consumption
Indicator Expenditure
Q4 '88 -16 2.84%
Q1 '89 -16 3.36%
Q2 '89 -17 3.14%
Q3 '89 -16 3.03%
Q4 '89 -13 2.70%
Q1 '90 -14 3.42%
Q2 '90 -14 3.48%
Q3 '90 -26 1.94%
Q4 '90 -23 2.00%
Q1 '91 -20 1.04%
Q2 '91 -26 0.96%
Q3 '91 -27 1.51%
Q4 '91 -29 1.88%
Q1 '92 -26 1.98%
Q2 '92 -27 0.99%
Q3 '92 -28 1.30%
Q4 '92 -30 1.16%
Q1 '93 -30 -0.48%
Q2 '93 -34 0.91%
Q3 '93 -34 0.13%
Q4 '93 -30 0.13%
Q1 '94 -26 0.68%
Q2 '94 -21 1.25%
Q3 '94 -16 1.96%
Q4 '94 -18 1.62%
Q1 '95 -21 1.89%
Q2 '95 -15 2.37%
Q3 '95 -28 1.64%
Q4 '95 -39 0.75%
Q1 '96 -33 3.51%
Q2 '96 -37 0.90%
Q3 '96 -37 1.79%
Q4 '96 -32 1.76%
Q1 '97 -32 -0.57%
Q2 '97 -23 0.70%
Q3 '97 -20 0.92%
Q4 '97 -21 2.55%
Q1 '98 -18 3.13%
Recent monthly industry surveys confirm that even the building sector appears to
be gradually pulling out of its rut. Increases in lending demand, notably home
loans, is tied to the very low interest rate environment.
8
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
OPINIONS ON CONSTRUCTION PROSPECTS
Q4 '87 -11.33
Q1 '88 -7
Q2 '88 -8.67
Q3 '88 2
Q4 '88 -1.33
Q1 '89 -2
Q2 '89 0
Q3 '89 -5.67
Q4 '89 -7
Q1 '90 -3.33
Q2 '90 -4.33
Q3 '90 -8
Q4 '90 -8
Q1 '91 -7
Q2 '91 -17
Q3 '91 -19.33
Q4 '91 -23.33
Q1 '92 -29
Q2 '92 -42
Q3 '92 -46
Q4 '92 -55
Q1 '93 -60
Q2 '93 -56
Q3 '93 -58
Q4 '93 -58
Q1 '94 -46.33
Q2 '94 -41
Q3 '94 -36
Q4 '94 -29.33
Q1 '95 -33.67
Q2 '95 -34.33
Q3 '95 -36.67
Q4 '95 -39.67
Q1 '96 -51
Q2 '96 -53.67
Q3 '96 -55.67
Q4 '96 -53.33
Q1 '97 -49
Q2 '97 -42.33
Q3 '97 -39.67
Q4 '97 -34.33
Q1 '98 -26.33
Q2 '98 -20.33
All in all, our estimate for 3% growth in gross domestic product for calendar
1998 appears well within reach.
9
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
THE EQUITY MARKET
PARIS BOURSE-- 1998 +38.96% IN FRENCH FRANCS
(SBF 120 INDEX)
1997 Performance: +26.82%
Performance since the Fund's annual report
(December 31, 1997): +38.96%
12/29/95 100
01/02/96 101.56
01/03/96 103.23
01/04/96 103.01
01/05/96 102.47
01/08/96 102.59
01/09/96 102.73
01/10/96 102.31
01/11/96 101.69
01/12/96 102.32
01/15/96 103.08
01/16/96 104.28
01/17/96 104.98
01/18/96 104.79
01/19/96 105.15
01/22/96 104.78
01/23/96 103.85
01/24/96 104.38
01/25/96 104.72
01/26/96 105.45
01/29/96 105.98
01/30/96 107.2
01/31/96 108.3
02/01/96 108.37
02/02/96 108.3
02/05/96 106.67
02/06/96 106.95
02/07/96 106.96
02/08/96 105.79
02/09/96 106.05
02/12/96 106.38
02/13/96 107.13
02/14/96 106.1
02/15/96 106.51
02/16/96 106.2
02/19/96 105.54
02/20/96 105.24
02/21/96 105.33
02/22/96 106.17
02/23/96 107.67
02/26/96 107.06
02/27/96 107.7
02/28/96 108.91
02/29/96 108.75
03/01/96 110.12
03/04/96 110.12
03/05/96 109.49
03/06/96 109.64
03/07/96 109.75
03/08/96 108.23
03/11/96 106.95
03/12/96 106.35
03/13/96 106.95
03/14/96 107.71
03/15/96 107.28
03/18/96 107.91
03/19/96 107.85
03/20/96 107.72
03/21/96 108.05
03/22/96 107.94
03/25/96 109.49
03/26/96 109.52
03/27/96 110.69
03/28/96 110.33
03/29/96 111.55
04/01/96 112.25
04/02/96 112.8
04/03/96 112.62
04/04/96 113.07
04/09/96 113.26
04/10/96 113.99
04/11/96 112.95
04/12/96 112.87
04/15/96 113.26
04/16/96 114.01
04/17/96 113.13
04/18/96 113.68
04/19/96 114.12
04/22/96 115.28
04/23/96 115.12
04/24/96 115.75
04/25/96 115.47
04/26/96 116.57
04/29/96 116.26
04/30/96 116.94
05/02/96 116.66
05/03/96 115.5
05/06/96 114.42
05/07/96 114.18
05/09/96 114.17
05/10/96 115.31
05/13/96 114.89
05/14/96 115.71
05/15/96 115.93
05/17/96 116.53
05/20/96 115.89
05/21/96 116.46
05/22/96 115.29
05/23/96 115.68
05/24/96 116.06
05/28/96 116.76
05/29/96 116.13
05/30/96 115.63
05/31/96 115.76
06/03/96 116.23
06/04/96 116.01
06/05/96 116.21
06/06/96 116.98
06/07/96 115.64
06/10/96 116.42
06/11/96 116.81
06/12/96 116.82
06/13/96 116.32
06/14/96 115.74
06/17/96 115.86
06/18/96 115.62
06/19/96 115.32
06/20/96 114.23
06/21/96 114.32
06/24/96 115.15
06/25/96 116.13
06/26/96 115.91
06/27/96 115.96
06/28/96 116.56
07/01/96 116.33
07/02/96 116.04
07/03/96 116.16
07/04/96 116.72
07/05/96 115.53
07/08/96 114.43
07/09/96 114.31
07/10/96 114.58
07/11/96 114.13
07/12/96 112.82
07/15/96 111.77
07/16/96 109.52
07/17/96 109.92
07/18/96 110.5
07/19/96 110
07/22/96 108.46
07/23/96 109.35
07/24/96 107.93
07/25/96 109.05
07/26/96 108.52
07/29/96 108.4
07/30/96 108.72
07/31/96 109.82
08/01/96 110.52
08/02/96 111.31
08/05/96 110.82
08/06/96 110.15
08/07/96 109.93
08/08/96 110.12
08/09/96 109.77
08/12/96 109.23
08/13/96 109.39
08/14/96 109.28
08/19/96 109.46
08/20/96 110.9
08/21/96 109.92
08/22/96 110.66
08/23/96 110.9
08/26/96 110.88
08/27/96 110.78
08/28/96 110.34
08/29/96 109.11
08/30/96 108.81
09/02/96 109.17
09/03/96 108.78
09/04/96 109.53
09/05/96 110.14
09/06/96 110.59
09/09/96 111.21
09/10/96 112.15
09/11/96 112.01
09/12/96 113.2
09/13/96 113.89
09/16/96 114.15
09/17/96 113.87
09/18/96 113.53
09/19/96 113.76
09/20/96 113.54
09/23/96 112.83
09/24/96 113.64
09/25/96 114.77
09/26/96 114.71
09/27/96 114.76
09/30/96 115.91
10/01/96 115.57
10/02/96 116.48
10/03/96 116.26
10/04/96 116.85
10/07/96 116.81
10/08/96 117.33
10/09/96 116.8
10/10/96 116.27
10/11/96 116.86
10/14/96 116.77
10/15/96 118.16
10/16/96 117.77
10/17/96 118.13
10/18/96 119.1
10/21/96 118.87
10/22/96 118.55
10/23/96 117.26
10/24/96 117.42
10/25/96 117.91
10/28/96 117.57
10/29/96 116.39
10/30/96 116.34
10/31/96 117.05
11/04/96 117.3
11/05/96 119.28
11/06/96 120.4
11/07/96 120.44
11/08/96 120.3
11/12/96 121.35
11/13/96 120.85
11/14/96 120.38
11/15/96 121.86
11/18/96 121.35
11/19/96 121.89
11/20/96 121.71
11/21/96 121.85
11/22/96 122.63
11/25/96 123.83
11/26/96 123.7
11/27/96 123.44
11/28/96 124.34
11/29/96 125.55
12/02/96 125.76
12/03/96 127.27
12/04/96 125.39
12/05/96 124.81
12/06/96 122.11
12/09/96 122.94
12/10/96 122.87
12/11/96 121.04
12/12/96 121.04
12/13/96 120.64
12/16/96 121.64
12/17/96 120.34
12/18/96 121.32
12/19/96 122.79
12/20/96 124.28
12/23/96 124.36
12/24/96 124.6
12/26/96 125.26
12/27/96 125.47
12/30/96 126.07
12/31/96 126.05
01/02/97 123.47
01/03/97 124.73
01/06/97 126.05
01/07/97 125.96
01/08/97 127.33
01/09/97 128.11
01/10/97 127.2
01/13/97 128.79
01/14/97 130.77
01/15/97 130.3
01/16/97 131.36
01/17/97 132.13
01/20/97 131.28
01/21/97 131.19
01/22/97 132.86
01/23/97 133.85
01/24/97 132.41
01/27/97 132.89
01/28/97 135.07
01/29/97 134.26
01/30/97 135.81
01/31/97 136.5
02/03/97 136.31
02/04/97 135.96
02/05/97 137.82
02/06/97 138.45
02/07/97 140.36
02/10/97 140.37
02/11/97 139.99
02/12/97 141.15
02/13/97 142.46
02/14/97 142.33
02/17/97 142.71
02/18/97 141.98
02/19/97 140.91
02/20/97 139.97
02/21/97 139.41
02/24/97 139.86
02/25/97 141.87
02/26/97 141.64
02/27/97 142.96
02/28/97 142.16
03/03/97 141.78
03/04/97 144.14
03/05/97 144.83
03/06/97 146.46
03/07/97 146.75
03/10/97 146.94
03/11/97 146.07
03/12/97 143.83
03/13/97 143.17
03/14/97 143.72
03/17/97 141.22
03/18/97 140.29
03/18/97 141.19
03/20/97 139.11
03/21/97 140.83
03/24/97 140.42
03/25/97 142.39
03/26/97 143.57
03/27/97 144.1
04/01/97 140.32
04/02/97 137.95
04/03/97 137.15
04/04/97 137.37
04/07/97 139.9
04/08/97 140.35
04/09/97 142.12
04/10/97 141.79
04/11/97 140.45
04/14/97 139.9
04/15/97 142.5
04/16/97 142.66
04/17/97 142.24
04/18/97 138.89
04/21/97 137.56
04/22/97 137.15
04/23/97 138.1
04/24/97 138.6
04/25/97 138.41
04/28/97 139.09
04/29/97 141.4
04/30/97 142.98
05/02/97 143.85
05/05/97 144.61
05/06/97 143.67
05/07/97 143.25
05/09/97 142.78
05/12/97 145.26
05/13/97 146.54
05/14/97 148.8
05/15/97 148.74
05/16/97 149.14
05/20/97 147.49
05/21/97 149.08
05/22/97 147
05/23/97 147.96
05/26/97 142.4
05/27/97 143.71
05/28/97 139.15
05/29/97 139.09
05/30/97 139.1
06/02/97 139.8
06/03/97 141.16
06/04/97 141.8
06/05/97 144.62
06/06/97 145.79
06/09/97 144.36
06/10/97 143.18
06/11/97 144.48
06/12/97 147.22
06/13/97 149.32
06/16/97 148.87
06/17/97 147.33
06/18/97 146.83
06/19/97 146.27
06/20/97 147.03
06/23/97 147.32
06/24/97 148.54
06/25/97 152.5
06/26/97 153.69
06/27/97 153.63
06/30/97 152.27
07/01/97 156
07/02/97 154.49
07/03/97 155.75
07/04/97 155.97
07/07/97 156.68
07/08/97 155.96
07/09/97 156.97
07/10/97 155.94
07/11/97 156.48
07/15/97 157
07/16/97 158.89
07/17/97 157.47
07/18/97 153.77
07/21/97 153.38
07/22/97 155.59
07/23/97 159.36
07/24/97 158.07
07/25/97 160.49
07/28/97 160.41
07/29/97 160.5
07/30/97 162.78
07/31/97 163.41
08/01/97 162.19
08/04/97 159.66
08/05/97 159.18
08/06/97 161.33
08/07/97 162.17
08/08/97 159.49
08/11/97 158.65
08/12/97 159.29
08/13/97 155.87
08/14/97 155.93
08/18/97 153.26
08/19/97 156.55
08/20/97 158.72
08/21/97 157.74
08/22/97 154.99
08/25/97 154.78
08/26/97 153.35
08/27/97 153.42
08/28/97 151.44
08/29/97 149.01
09/01/97 150.52
09/02/97 155.73
09/03/97 155.57
09/04/97 155.81
09/05/97 155.65
09/08/97 156.2
09/09/97 155.14
09/10/97 153.17
09/11/97 151.34
09/12/97 150.86
09/15/97 153.61
09/16/97 155.38
09/17/97 155.89
09/18/97 157.7
09/19/97 157.71
09/22/97 159.58
09/23/97 158.69
09/24/97 160.01
09/25/97 159.14
09/26/97 158.37
09/29/97 158.42
09/30/97 159.59
10/01/97 161.64
10/02/97 161.4
10/03/97 163.17
10/06/97 162.44
10/07/97 161.85
10/08/97 160.15
10/09/97 157.08
10/10/97 156.78
10/13/97 159.12
10/14/97 159.4
10/15/97 158.68
10/16/97 158.47
10/17/97 156.68
10/20/97 155.97
10/21/97 157.84
10/22/97 156.42
10/23/97 151.35
10/24/97 151.05
10/27/97 146.98
10/28/97 140.6
10/29/97 149.21
10/30/97 145.41
10/31/97 145.48
11/03/97 147.89
11/04/97 147.56
11/05/97 149.7
11/06/97 148.01
11/07/97 144.41
11/12/97 144.08
11/13/97 144.16
11/14/97 144
11/17/97 147.42
11/18/97 147.94
11/19/97 148.16
11/20/97 149.53
11/21/97 151.47
11/24/97 148.76
11/25/97 148.29
11/26/97 149.68
11/27/97 150.8
11/28/97 152.23
12/01/97 154.9
12/02/97 154.84
12/03/97 154.67
12/04/97 155.53
12/05/97 155.48
12/08/97 156.53
12/09/97 157.74
12/10/97 156.64
12/11/97 151.75
12/12/97 151.81
12/15/97 151.96
12/16/97 155.03
12/17/97 154.19
12/18/97 154.24
12/19/97 151.13
12/22/97 153.18
12/23/97 152.75
12/24/97 153.62
12/26/97 153.68
12/29/97 156.89
12/30/97 158.66
12/31/97 159.85
01/02/98 161.84
01/05/98 163.38
01/06/98 161.9
01/07/98 160.57
01/08/98 158.39
01/09/98 156.7
01/12/98 153.33
01/13/98 155.72
01/14/98 156.68
01/15/98 157.27
01/16/98 159.38
01/19/98 159.91
01/20/98 160.94
01/21/98 160.34
01/22/98 159.91
01/23/98 158.83
01/26/98 160.53
01/27/98 162.83
01/28/98 164.53
01/29/98 166.51
01/30/98 168.4
02/02/98 169.17
02/03/98 169.32
02/04/98 168.28
02/05/98 169.43
02/06/98 170.67
02/09/98 170.98
02/10/98 171.75
02/11/98 171.98
02/12/98 169.29
02/13/98 169.67
02/16/98 171.42
02/17/98 173.98
02/18/98 174.2
02/19/98 172.79
02/20/98 173.27
02/23/98 174.25
02/24/98 173.78
02/25/98 177.93
02/26/98 180.42
02/27/98 181.76
03/02/98 182.98
03/03/98 181.69
03/04/98 180.2
03/05/98 180.8
03/06/98 185.17
03/09/98 187.27
03/10/98 187.02
03/11/98 188.07
03/12/98 187.78
03/13/98 188.66
03/16/98 191.47
03/17/98 194.53
03/18/98 194.02
03/19/98 195.82
03/20/98 195.69
03/23/98 195.1
03/24/98 197.88
03/25/98 201.88
03/26/98 200.06
03/27/98 201.42
03/30/98 200.96
03/31/98 204.42
04/01/98 204.93
04/02/98 207.48
04/03/98 207.39
04/06/98 210.02
04/07/98 206.2
04/08/98 204.76
04/09/98 205.88
04/14/98 204.91
04/15/98 205.69
04/16/98 204.01
04/17/98 204.64
04/20/98 205.81
04/21/98 204.78
04/22/98 203.71
04/23/98 203.05
04/24/98 201.48
04/27/98 196.47
04/28/98 200.45
04/29/98 198.67
04/30/98 205.5
05/04/98 210.5
05/05/98 209.32
05/06/98 209.75
05/07/98 207.63
05/11/98 212.78
05/12/98 211.45
05/13/98 212.84
05/14/98 212.65
05/15/98 211.76
05/18/98 209.68
05/19/98 211.19
05/20/98 214.35
05/22/98 214.54
05/25/98 217.73
05/26/98 218.24
05/27/98 213.67
05/28/98 213.83
05/29/98 215.38
06/02/98 217.95
06/03/98 221.03
06/04/98 219.59
06/05/98 222.55
06/08/98 223.54
06/09/98 223.6
06/10/98 229.52
06/11/98 220.28
06/12/98 215.7
06/15/98 213.26
06/16/98 213.47
06/17/98 217.63
06/18/98 215.8
06/19/98 214.65
06/22/98 213.97
06/23/98 215.68
06/24/98 218.61
06/25/98 222.14
06/26/98 222.51
06/29/98 224.17
06/30/98 222.14
07/01/98 224.94
07/02/98 224.54
07/03/98 226.95
07/06/98 227.1
07/07/98 228
07/08/98 228.29
07/09/98 227.45
07/10/98 224.21
07/15/98 228.38
07/16/98 229.02
07/17/98 230.32
07/20/98 229.48
07/21/98 227.23
07/22/98 222.42
07/23/98 223
07/24/98 221.23
07/27/98 217.97
07/28/98 217.27
07/29/98 217.92
07/30/98 220.58
07/31/98 219.93
08/03/98 215.78
08/04/98 213.28
08/05/98 209.47
08/06/98 208.98
08/07/98 212.81
The Asian markets has not undermined the optimism of the Paris Bourse, which
reached new highs during the first half of 1998. Paradoxically, the triple shock
of the Japanese recession, the Asian crisis and spectacular falls in crude oil
and commodity prices has had a very positive impact on share prices:
- -- Strong imported disinflation has triggered a rally in the western bond
markets, leading to an unprecedented fall in long rates;
- -- But for the slowdown in world trade, an increase in short rates within the
Euro-zone which would have been in the cards, is no longer the case.
10
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
Furthermore, the current bull market rests on the following fundamentals which
were barely affected by the financial turmoil in Asia:
- -- The confirmation of strong economic performance in France and in Europe,
generally;
- -- The positive earnings growth momentum still enjoyed by French companies;
- -- Continued restructuring, opening up prospects for an improvement in
return-on-capital invested;
- -- Abundant liquidity and the gradual development of a shareholder culture;
- -- The continuing high level of the US dollar.
SBF 120 INDEX: 1998 MONTHLY PERFORMANCE
January '98 5.34%
February '98 7.94%
March '98 12.46%
April '98 0.53%
May '98 4.81%
June '98 3.14%
11
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
With respect to sector performance, it is noteworthy that investor interest has
focused on sectors with the most pronounced European profile and the smallest
exposure to world prices and international trade (construction, services,
automobile). This phenomenon is also perceptible within each sector, such as
where domestic auto-producers (Renault +103.13%, Peugeot +71.2%) have
outperformed international tire manufacturers (Michelin +15.18%).
Retailers fall in the same pattern with excellent performance from pure French
exposed plays (Pinault-Printemps +57.6%) and lackluster results from largely
diversified companies (Carrefour +21.81%). The superior performance of capital
goods stems primarily from the incredible re-rating of France Telecom (+91.02%),
following its privatization last fall, as well as the strong rise of Alcatel
Alsthom (+60.91%). The banking sector recorded excellent 1998 first quarter
earnings. On the other hand, French banks' significant exposure to the Asian
risks made it clear that additional provisions were required by the end of June
1998.
Among poor performers, the consumer goods sector was hurt by cosmetic and luxury
goods companies as well as the household appliances sub-sector whose earnings
were affected by their large international exposure.
SBF 120 INDEX--CHANGE IN STOCK PRICES BY SECTOR
JANUARY 1, 1998 - June 30, 1998
(CAC 40 Index: +40.17%
SBF Second Market Index: +32.31%
SBF 120 Index: +38.96%
Energy 20.45%
Basic Products 13.92%
Construction 44.20%
Capital Goods 62.16%
Automobiles/Autopart Suppliers 58.47%
Consumer Goods 27.68%
Food & Beverage 34.53%
Retail 32.30%
Services 49.51%
Real Estate 29.79%
Insurance 32.78%
Banking 37.92%
Holdings 37.02%
12
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
INVESTMENT STRATEGY
Over the course of the quarter, the logic underpinning stock selection since
last November has been reinforced. The first leg of our strategy favored
companies highly exposed to European fundamentals which should strongly benefit
from the ongoing European recovery. Therefore, among the most cyclical sectors
we have focused on auto producers (Renault, Peugeot) and construction companies
(Saint-Gobain, Lafarge).
Among growth stocks, we favored specialized retailers such as Castorama in the
do-it-yourself market and Rexel for its sensitivity to capital spending.
Companies linked to the economic recovery were also found in the services
sector. During the past six months, we increased our weighting in media stocks
(Havas Advertising, TF1 and NRJ). In addition, the Fund has significant
positions in the software services and leisure sub-sectors.
STRATEGIC SHIFTS BY SECTOR SINCE DECEMBER 1997
Energy -1.79%
Construction 0.85%
Capital Goods 1.69%
Automobiles/Autopart Suppliers 2.32%
Retail -1.41%
Services -0.89%
13
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
The second leg of our investment strategy relied on restructuring companies. In
the context of the Euro, ongoing deregulation in Europe has caused restructuring
stories to drive the market up. During the past six months, the portfolio has
been enriched by increased positions in Danone, Alcatel Alsthom, Rhone Poulenc
and Vivendi (previously known as Generale des Eaux). In this light, we were
active in the initial public offering market, subscribing to the Rhodia issue,
which we considered attractive in light of their new management style.
In the defense industry, we added Lagardere to our portfolio and increased our
position in Thompson-CSF. Restructuring at the European level seems poised to
accelerate and we want to be involved. In the banking sector, we took advantage
of the market's hesitancy to add to our position in BNP, as improvement in its
domestic environment will procure benefits far outweighing international risks.
In capital goods, our primary move related to France Telecom. We took advantage
of a substantial setback of the stock linked to disappointing 1997 earnings to
increase our weighting. Sales concerns in the oil sector were first and
foremost. We took advantage of technical recoveries in share prices to reduce
our position in Elf Aquitaine and Total.
PROTFOLIO BREAKDOWN AT JUNE 30, 1998
(as a percentage of net assets)
Automobiles/Autopart Suppliers 7.30%
Basic Products 2.02%
Capital Goods 17.87%
Construction 6.21%
Consumer Goods 12.79%
Energy 7.24%
Financial Services 12.84%
Food & Beverage 4.67%
Retail 10.32%
Services 16.91%
CAC 40 Futures 1.40%
Other Assets less Liabilities 0.50%
14
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
OVER/UNDER SECTOR ALLOCATION VS BENCHMARK
(SBF 120 INDEX)
Energy 4.52%
Basic Products 0.63%
Construction 0.78%
Capital Goods -0.25%
Automobiles/Autopart Suppliers 2.21%
Consumer Goods 0.09%
Food & Beverage -1.31%
Retail 1.20%
Services 3.82%
Real Estate -0.54%
Insurance -2.26%
Banking -0.24%
Holdings -1.13%
MARKET OUTLOOK
The continued strong performance of French stocks relies to an extent on
confirmation of further earnings upgrades. Estimates for 1998 have been revised
upward to +15.3% for the full year, followed by earnings forecasts of +14.8% for
1999 for companies comprising the CAC 40 index. These solid prospects justify
higher than average earnings multiples, with median multiples of 25.3 times
earnings for 1998 and 21.5 times earnings for 1999, which we do not consider
excessive compared with those of neighboring European markets. Therefore, even
though the spectacular rally enjoyed by the Paris Bourse has obviously led to
some excess, we remain confident the current environment is still quite positive
for French equities.
15
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
CAC 40 INDEX COMPANIES
EVOLUTION OF EARNINGS GROWTH FORECASTS FOR 1998-1999
1998 Earnings 1999 Earnings
Growth Consensus: +15.3% Growth Consensus: +14.8%
01/22/97
02/26/97 1330.00%
03/26/97 1250.00%
04/23/97 1340.00%
05/01/97 1310.00%
06/26/97 1320.00%
07/01/97 1310.00%
08/28/97 1410.00%
09/01/97 1320.00%
10/01/97 1330.00%
11/30/97 1390.00%
12/31/97 1400.00%
01/28/98 1320.00% 13
02/25/98 1420.00% 14.2
03/31/98 1385.00% 13.87
04/30/98 1440.00% 13.89
05/31/98 1517.00% 13.98
06/30/98 1557.00% 14.56
07/23/98 1528.00% 14.82
16
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (concluded)
- --------------------------------------------------------------------------------
FRENCH MARKET RATIOS
Current Level
Based on Consensus
CAC 40 INDEX COMPANIES Median Estimates
- -------------------------------------------------------------------
Price Earning Ratio
1998 (estimate) 25.3x
1999 (estimate) 21.5x
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Price/Cash Flow 1998 10.6
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Long Term Rate/Dividend Yield--1998 2.33
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Global Yield--1998 2.05%
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Price/Book Value--1998 2.80
- -------------------------------------------------------------------
(Source: Jacques Chahine Finances)
We appreciate your continued interest and investment in the French economy,
market place and The France Growth Fund.
Sincerely,
/s/ Bernard Chauvel /s/ A. Arvis
Bernard Chauvel Jean A. Arvis
President Chairman of the Board
The France Growth Fund, Inc. The France Growth Fund, Inc.
August 4, 1998
17
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
FRENCH EQUITIES--98.17%
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
<S> <C> <C>
AUTOMOBILES/AUTOPART SUPPLIERS--7.30%
28,965 Peugeot SA............................................. $ 6,226,972
132,435 Renault SA............................................. 7,531,734
25,800 Sommer-Allibert........................................ 1,340,559
49,068 Valeo.................................................. 5,014,722
------------
20,113,987
------------
<CAPTION>
BASIC PRODUCTS--2.02%
<S> <C> <C>
29,810 Air Liquide (a)........................................ 4,929,717
22,590 Rhodia SA (b).......................................... 629,845
------------
5,559,562
------------
<CAPTION>
CAPITAL GOODS--17.87%
<S> <C> <C>
62,518 Alcatel Alsthom (a).................................... 12,726,916
300,959 France Telecom SA...................................... 20,754,077
41,000 Lagardere.............................................. 1,706,582
13,510 Legrand................................................ 3,574,665
65,382 Schneider SA........................................... 5,212,612
18,950 ST Microelectronics (b)................................ 1,342,827
60,815 Thomson CSF............................................ 2,313,122
5,915 Zodiac SA.............................................. 1,623,764
------------
49,254,565
------------
<CAPTION>
CONSTRUCTION--6.21%
<S> <C> <C>
14,377 Colas.................................................. 2,807,878
5,910 Groupe GTM............................................. 613,772
56,578 Lafarge Coppee SA...................................... 5,847,734
42,357 Saint-Gobain (a)....................................... 7,852,191
------------
17,121,575
------------
<CAPTION>
CONSUMER GOODS--12.79%
<S> <C> <C>
16,140 BIC.................................................... 1,147,710
3,260 Essilor International.................................. 1,378,505
9,120 Hachette Filipacchi Medias SA.......................... 2,639,325
22,636 L'Oreal (a)............................................ 12,588,865
167,088 Rhone Poulenc SA (a)................................... 9,422,360
34,180 Synthelabo............................................. 5,765,437
15,270 Ubi Soft Entertainment SA (b).......................... 2,310,575
------------
35,252,777
------------
<CAPTION>
Shares Value
- --------- ------------
ENERGY--7.24%
<S> <C> <C>
58,510 Elf Aquitaine (a)...................................... $ 8,224,491
90,265 Total SA (a)........................................... 11,732,808
------------
19,957,299
------------
<CAPTION>
FINANCIAL SERVICES--12.84%
<S> <C> <C>
111,817 AXA SA (a)............................................. 12,574,096
95,011 Banque Nationale de Paris.............................. 7,761,772
79,791 Banque Paribas, A shares............................... 8,537,254
31,278 Societe Generale (a)................................... 6,501,810
------------
35,374,932
------------
<CAPTION>
FOOD & BEVERAGE--4.67%
<S> <C> <C>
14,240 Eridania Beghin Say SA................................. 3,143,774
18,760 Groupe Danone (a)...................................... 5,171,642
22,770 LVMH (a)............................................... 4,556,259
------------
12,871,675
------------
<CAPTION>
RETAIL--10.32%
<S> <C> <C>
10,730 Carrefour (a).......................................... 6,787,209
31,330 Castorama Dubois....................................... 5,512,671
3,663 Comptoirs Modernes..................................... 1,908,128
9,535 Pinault Printemps...................................... 7,978,684
1,670 Promodes............................................... 925,170
9,305 Rexel SA............................................... 3,966,974
8,600 Ste. Guilbert SA....................................... 1,359,616
------------
28,438,452
------------
</TABLE>
18
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (concluded)
June 30, 1998
- --------------------------------------------------------------------------------
FRENCH EQUITIES--(concluded) TIME DEPOSIT--0.02%
- ------------------------------------------------------
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
SERVICES--16.91%
<S> <C> <C>
22,693 Accor.................................................. $ 6,349,687
16,730 ATOS SA................................................ 4,011,659
12,433 Cap Gemini Sogeti SA................................... 1,953,258
17,780 Club Mediterranee (b).................................. 1,534,837
2,950 Club Mediterranee--Warrants, expiring 3/31/03 (b)...... 95,130
9,492 Havas Advertising...................................... 1,918,178
9,492 Havas Advertising--Warrants, expiring 5/13/01 (b)...... 53,370
12,400 NRJ SA................................................. 1,976,782
7,804 Sodexho................................................ 1,475,107
59,765 Suez-Lyonnaise des Eaux................................ 9,833,996
16,905 TF 1................................................... 2,619,478
68,763 Vivendi (a)............................................ 14,680,508
58,942 Vivendi--Warrants, expiring 5/2/01 (b)................. 115,993
------------
46,617,983
<CAPTION>
------------
<S> <C> <C>
TOTAL FRENCH EQUITIES
(cost--$174,513,221)............................................ 270,562,807
------------
<CAPTION>
Principal
Amount Value
- --------- ------------
<S> <C> <C>
$63,000 Brown Brothers Harriman & Co.
Grand Cayman, 4.25% (c)
(cost--$63,000)........................................ $ 63,000
------------
TOTAL INVESTMENTS
(cost--$174,576,221)--98.19%.................................... 270,625,807
OTHER ASSETS LESS LIABILITIES--1.81%.............................. 4,990,338
------------
NET ASSETS (applicable to 15,345,333 shares; equivalent to $17.96
per share)--100.00%............................................. $275,616,145
------------
------------
</TABLE>
- ------------
(a) Portion of security has been segregated to collateralize securities index
futures contracts. Value of segregated securities totaled $25,539,774 at
June 30, 1998.
(b) Non-income producing security.
(c) Variable rate account--rate resets on a monthly basis; amount available
upon 48 hours' notice.
See accompanying notes to financial statements.
19
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost--$174,576,221)...... $270,625,807
Cash (including French francs at affiliates of $9,799,847
with a cost of $9,775,852)................................... 9,797,272
Receivable for avoir fiscal................................... 2,611,803
Dividends and interest receivable............................. 721,755
Receivable for investments sold............................... 714,334
Prepaid expenses and other assets............................. 192,123
------------
Total assets.............................................. 284,663,094
------------
LIABILITIES:
Distribution payable.......................................... 8,245,047
Advisory fee payable.......................................... 381,562
Administration fee payable.................................... 38,149
Payable for variation margin on futures contracts............. 1,345
Accrued expenses.............................................. 380,846
------------
Total liabilities......................................... 9,046,949
------------
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........................... 1,772,471
Accumulated net realized gain................................. 13,959,595
Net unrealized appreciation of investments, futures contracts
and other assets and liabilities denominated in French
francs....................................................... 95,945,956
------------
Net assets applicable to shares outstanding............... $275,616,145
------------
------------
NET ASSET VALUE PER SHARE......................................... $17.96
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends, including $1,513,161 of avoir fiscal
(net of French withholding taxes of $680,922)...... $3,840,765
Interest........................................... 127,275 $ 3,968,040
---------- -----------
EXPENSES:
Advisory fees...................................... 1,006,798
Administration fees................................ 201,359
Custodian and accounting fees...................... 139,480
Audit and legal fees............................... 134,750
Directors' fees and expenses....................... 105,277
Reports to shareholders............................ 40,565
Shareholder relations expense...................... 24,726
Transfer agent fees................................ 13,756
New York Stock Exchange listing fee................ 12,030
Insurance expense.................................. 11,089
Other expenses..................................... 14,720 1,704,550
---------- -----------
Net investment income.............................. 2,263,490
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Investments...................................... 12,125,053
Futures contracts................................ 3,146,119
Foreign currency transactions.................... (357,653)
Net change in unrealized appreciation/depreciation
of:
Investments...................................... 65,566,362
Futures contracts................................ (187,672)
Other assets and liabilities denominated in
French francs..................................... 28,562
-----------
Net realized and unrealized gain on investments,
futures contracts
and foreign currency transactions................ 80,320,771
-----------
NET INCREASE IN NET ASSETS FROM INVESTMENT
OPERATIONS........................................... $82,584,261
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1998 ENDED
(UNAUDITED) DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............. $ 2,263,490 $ 1,351,140
Net realized gain on investments,
futures contracts and foreign
currency transactions............ 14,913,519 29,971,323
Net change in unrealized
appreciation/depreciation of
investments, futures
contracts and other assets and
liabilities denominated in French
francs........................... 65,407,252 (7,112,049)
------------- -----------------
Total from investment operations... 82,584,261 24,210,414
------------- -----------------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income......... -- (191,110)
In excess of net investment
income........................... -- (491,019)
From net realized gain on
investments...................... (8,245,047) (27,374,204)
------------- -----------------
Total dividends and
distributions.................... (8,245,047) (28,056,333)
------------- -----------------
Net increase (decrease) in net
assets........................... 74,339,214 (3,845,919)
NET ASSETS:
Beginning of period................ 201,276,931 205,122,850
------------- -----------------
End of period...................... $275,616,145 $ 201,276,931
------------- -----------------
------------- -----------------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (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 (currently
known as Credit Agricole Indosuez, an affiliate of the Investment Adviser of the
Fund, as well as the subcustodian for the Fund's assets 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 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 sales
of open futures contracts 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 by, or
under the direction of, 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, 1998. Short-term investments having a maturity of 60 days or less are valued
at amortized cost, or by amortizing their value 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 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 of 1986, as amended, applicable to regulated investment companies.
Accordingly, no provision for U.S. federal income taxes is required. In
addition, by distributing substantially all of its ordinary income and long-term
capital gains, if any, during each calendar year, the Fund intends not to be
subject to U.S. federal excise tax.
23
<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%. 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,
using reasonable diligence, 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 denominated in French francs are translated at
the prevailing rates of exchange on the valuation date; and (2) purchases and
sales of investments, income and expenses are translated at the rate of exchange
prevailing on the respective dates of such transactions. The resulting net
foreign currency gain or loss is included in the Statement of Operations.
The Fund does not generally isolate that portion of the results of operations
arising as a result of changes in foreign currency exchange rates from
fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) is included in net realized and
unrealized gain (loss) on investments. 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 gain (loss) from valuing French franc denominated assets
and liabilities at the period exchange rate is reflected as a component of net
unrealized appreciation of investments, futures contracts and other assets and
liabilities denominated in French francs. Net realized gain (loss) on foreign
currency transactions is treated as ordinary income (loss) for income tax
reporting purposes.
24
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Futures Contracts--The Fund may seek to hedge all or a portion of its
investments or to maintain a fully invested position 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. On the expiration date, payments are
made or received by the Fund reflecting the aggregate change in the value of the
contract. Upon the closing of a contract, 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, 1998, the Fund entered into securities
index futures contracts with Carr Futures SNC, an affiliate of the Investment
Adviser. At June 30, 1998, the Fund had the following open securities index
futures contracts which were collateralized by segregated securities valued at
$25,539,774:
<TABLE>
<CAPTION>
U.S.$
COST ON VALUE
NUMBER OF EXPIRATION ORIGINATION VALUE JUNE 30, UNREALIZED
CONTRACTS TYPE DATE DATE JUNE 30, 1998 1998 DEPRECIATION
- --------------- ------------ ---------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Long positions:
20 CAC 40 Index 7/31/98 FRF 16,880,321 FRF 16,880,000 $2,791,467 $ 53
7 CAC 40 Index 7/31/98 5,915,812 5,908,000 977,013 1,292
------------
$ 1,345
------------
------------
</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 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 deceased 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
25
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 buying or selling 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. 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 considered either 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 or net realized capital gain
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gain. To the extent they exceed net investment income or net
realized capital gain for tax purposes, they are reported as distributions of
additional paid-in capital.
On June 16, 1998, the Board of Directors declared a long-term capital gain
dividend aggregating $0.5373 per share. The dividend was paid on July 10, 1998,
to shareholders of record on June 26, 1998.
INVESTMENT ADVISER AND ADMINISTRATOR
Indocam International Investment Services (formerly Indosuez International
Investment Services) 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.
As compensation for its services, the Investment Adviser is paid a monthly fee
at an 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 net assets in excess of $100 million.
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. As compensation for its services, the Administrator is paid a monthly fee
at an 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, subject
to a minimum annual fee of $150,000.
26
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
TRANSACTIONS WITH AFFILIATES
For the six months ended June 30, 1998, certain direct and indirect subsidiaries
of the Credit Agricole Group--Cheuvreux de Virieu, Dynabourse SA, Hayaux du
Tilly et Cie and Carr Futures SNC received $36,087, $7,625, $3,331 and $25,590,
respectively, in brokerage commissions as a result of executing agency
transactions on investment securities and futures contracts on behalf of the
Fund. In addition, Credit Agricole Indosuez earned fees of $27,156 in its
capacity as subcustodian for the Fund of which $12,262 was unpaid at June 30,
1998. For the six months ended June 30, 1998, the Fund earned $64,333 in
interest income from call account deposits held with Credit Agricole Indosuez.
At June 30, 1998, the Fund had $7,401,117 and $2,398,730 of French francs at
Credit Agricole Indosuez and Indosuez Carr Futures (on deposit for open futures
contracts), respectively.
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
1998 was substantially the same as the cost for financial statement purposes.
Accordingly, net unrealized appreciation of investments of $96,049,586 was
composed of gross appreciation of $97,417,840 for those investments having an
excess of value over cost and gross depreciation of $1,368,254 for those
investments having an excess of cost over value.
For the six months ended June 30, 1998, aggregate purchases and sales of
portfolio securities (excluding short-term securities) were $60,617,537 and
$61,236,971, 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 other factors,
future political and economic developments and the level of French governmental
supervision and regulation of the 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.
27
<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, 1998 --------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $13.12 $13.37 $11.60 $10.97 $12.94 $10.53
------------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income........................... 0.15 0.09 0.11 0.37 0.01(a) 0.03
Net realized and unrealized gain (loss) on
investments, futures contracts
and foreign currency transactions............. 5.23 1.49 2.53 1.06 (0.68)(a) 2.38
------------- -------- -------- -------- -------- --------
Total from investment operations............ 5.38 1.58 2.64 1.43 (0.67) 2.41
------------- -------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income...................... -- (0.02) (0.08) (0.40) (0.03) --
In excess of net investment income.............. -- (0.03) (0.00)(b) (0.01) -- --
From net realized gain on investments........... (0.54) (1.78) (0.79) (0.39) (0.55) --
------------- -------- -------- -------- -------- --------
Total dividends and distributions......... (0.54) (1.83) (0.87) (0.80) (0.58) --
------------- -------- -------- -------- -------- --------
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.................. $17.96 $13.12 $13.37 $11.60 $10.97 $12.94
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
Market value, end of period..................... $15.06 $10.50 $10.38 $9.88 $9.13 $13.63
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (c)(d).................. 48.57% 19.33% 13.91% 16.62% (27.05)% 47.30%
------------- -------- -------- -------- -------- --------
------------- -------- -------- -------- -------- --------
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted)......... $ 275,616 $201,277 $205,123 $178,080 $168,366 $148,922
Ratio of expenses to average net assets......... 1.42%(e) 1.48% 1.54% 1.58% 1.63% 1.71%
Ratio of net investment income to average net
assets........................................ 1.89%(e) 0.64% 0.84% 3.07% 0.19% 0.23%
Portfolio turnover.............................. 26% 80% 83% 49% 52% 57%
</TABLE>
- ------------------
(a) Based on average shares outstanding.
(b) Dividend equal to $0.0039 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.
28
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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.
