Securities and Exchange Commission
Washington, D.C. 20549
-------------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
France Growth Fund, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
35177K4108
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(CUSIP Number)
Ralph W. Bradshaw
c/o Deep Discount Advisors, Inc.
One West Pack Square, Suite 777
Asheville, NC 28801
(828) 255-4833
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 29, 1998
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(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
<PAGE>
CUSIP No.: 35177K108 13D Page 2
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. ID NO. OF ABOVE PERSON
Deep Discount Advisors, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [ ]
OF A GROUP (b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS OO
===========================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
One West Pack Square, Suite 777 Asheville, NC 28801
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NUMBER OF | | SOLE VOTING POWER
SHARES | 7 | 315,705
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BENEFICIALLY | | SHARED VOTING POWER 0
OWNED | 8 |
============================================================================
BY EACH | | SOLE DISPOSITIVE POWER 315,705
REPORTING | 9 |
============================================================================
PERSON | | SHARED DISPOSITIVE POWER 0
WITH | 10 |
============================================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 315,705
=======================================================================
12 CHECK IF THE AGGREGATE AMOUNT IN ROW [ ]
(11) EXCLUDES CERTAIN SHARES
=======================================================================
13 PERCENT OF CLASS REPRESENTED BY
AMOUNT IN ROW (11) 2.1%
=======================================================================
14 TYPE OF REPORTING PERSON IA
======================================================================
<PAGE>
CUSIP No.: 35177K108 13D Page 3
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===============================================================================
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. ID NO. OF ABOVE PERSON
Ron Olin Investment Management Company
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2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) [ ]
OF A GROUP (b) [ ]
========================================================================
3 SEC USE ONLY
======================================================================
4 SOURCE OF FUNDS OO
======================================================================
5 CHECK BOX IF DISCLOSURE OF LEGAL [ ]
PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e)
======================================================================
6 CITIZENSHIP OR PLACE OF ORGANIZATION
One West Pack Square, Suite 777 Asheville, NC 28801
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NUMBER OF | | SOLE VOTING POWER
SHARES | 7 | 1,627
=====================================================================
BENEFICIALLY | | SHARED VOTING POWER 0
OWNED | 8 |
====================================================================
BY EACH | | SOLE DISPOSITIVE POWER 1,627
REPORTING | 9 |
=====================================================================
PERSON | | SHARED DISPOSITIVE POWER 0
WITH | 10 |
======================================================================
11 AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 1,627
=====================================================================
12 CHECK IF THE AGGREGATE AMOUNT IN ROW [ ]
(11) EXCLUDES CERTAIN SHARES
=========================================================================
13 PERCENT OF CLASS REPRESENTED BY
AMOUNT IN ROW (11) 0.0%
=======================================================================
14 TYPE OF REPORTING PERSON IA
=========================================================================
<PAGE>
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to the shares of Common Stock of
France Growth Fund, Inc (the "Issuer"). The principal executive
offices of the Fund are located at 1285 Avenue of the Americas, New York,
NY 10019
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c) This Schedule 13D is being filed by Deep Discount Advisors, Inc.
and Ron Olin Investment Management Company (the "Reporting Persons"),
who are Registered Investment Advisors, One West Pack Square, Suite 777,
Asheville, NC 28801. Further information is attached in Exhibit A.
(d) None
(e) None
(f) USA
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
Investment funds
ITEM 4. PURPOSE OF TRANSACTION
The acquisition of the securities of the issuer was made for the purpose of
investment. The reporting persons may acquire additional securities, or dispose
of the securities of the issuer from time to time.
The reporting persons are in favor of actions by the issuer which would have the
effect of increasing the investment value of the issuer's shares, and will
support or may initiate actions which, in the sole discretion of the reporting
persons, may result in an increase in the market value of the issuer's shares.
On October 29, 1998, Ronald G. Olin, a control person associated with the
reporting persons and also an individual shareholder of the issuer, sent the
secretary of the France Growth Fund, Inc. (the issuer) a letter requesting a
meeting with the Board of Directors and suggesting actions which might be taken
to reduce or eliminate the discount at which the shares of the Fund have traded.
These actions include (1) perpetual share buybacks to enhance Net Asset Value
(NAV) and reduce discounts and (2) splitting the Fund to allow shareholders the
option to remain in a closed-end fund or alternatively receive NAV for their
shares. The letter also included a shareholder proposal intended for inclusion
in the issuer's next shareholder meeting. This proposal requested that the
shareholders vote on the mandatory termination of the investment advisory
contract and further recommended that the Board of the issuer solicit
competitive proposals for a new investment advisor. A copy of the letter sent
by Mr. Olin is attached as an exhibit to this filing.
It is possible that the reporting persons may directly solicit support for
Olin's proposal with shareholders of the Fund to the degree permitted under
applicable law. It is also possible that the reporting persons may solicit
proxies in support of various other proposals and Director nominees in
opposition to the existing Board. To the extent that Olin is influencing how
the reporting persons' shares are voted, at present it is anticipated that such
shares would be voted in support of Olin's proposal, although no final
determination will be made until the Fund's final proxy is available. This
Schedule D filing, in lieu of the reporting persons' normal filing of Schedule
G, is occasioned by Mr. Olin's position as a control person of the reporting
persons, by the possible solicitation of proxies by the reporting persons
which may take place as a result, and by the change in share positions of the
reporting persons since its last filing. The securities of the issuer acquired
and held by the reporting persons were acquired in the ordinary course of
business and were not acquired for the purpose of and, except as described
herein, do not have the effect of changing or influencing the control of the
issuer of such securities and were not acquired in connection with or as a
participant in any transaction having such purposes or effect.
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) The Fund's proxy statement, dated February 26,1998,
states that, as of the close of business on February 10, 1998, there were
15,345,333 shares of Common Stock outstanding. The percentage set forth
in this Item 5(a) was derived using such number.
The Reporting Persons are the beneficial owners of 317,332
shares of Common Stock, which constitute approximately 2.1% of the outstanding
shares of Common Stock.
(b) Power to vote and to dispose of the securities resides
with the Advisors.
(c) During the last sixty days, the following shares
of Common Stock were traded:
Date Number of Shares Sold Price Per Share
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9/8/98 14000 13.5446
9/8/98 1958 13.5
9/9/98 3000 13.75
9/11/98 5000 13.25
9/15/98 4000 13.75
10/9/98 2139 11.0607
10/9/98 1467 11.25
10/16/98 7500 12.6833
10/16/98 8000 12.6875
10/27/98 400 13.1875
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
None
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The letter from Mr. Olin to the Issuer, which precipitates this filing,
is attached as Exhibit 1.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Date: November 5,1998 Deep Discount Advisors, Inc.
By: /s/ Ralph W. Bradshaw
----------------------------
Name: Ralph W. Bradshaw
Title: Secretary
<PAGE>
EXHIBIT A
The business address for all individuals listed
in this Exhibit A is One West Pack Square, Suite 777,
Asheville, NC 28801.
DIRECTORS AND/OR GENERAL PARTNERS
Name and Address Principal Occupation
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Ronald G. Olin Investment Advisor
Sandra D. Olin Director
Gary A. Bentz Investment Advisor
Ralph W. Bradshaw Investment Advisor
William A. Clark Investment Advisor
Ralph D. McBride Attorney
<PAGE>
EXECUTIVE OFFICERS
Name and Address Principal Occupation
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Ronald G. Olin Investment Advisor
Gary A. Bentz Investment Advisor
Ralph W. Bradshaw Investment Advisor
William A. Clark Investment Advisor
SHAREHOLDERS WHO MAY BE DEEMED TO CONTROL THE ADVISORS.
The following shareholders and/or partners may be deemed to
control the Advisors:
Ronald G. Olin
EXHIBIT 1
RONALD G. OLIN
One West Pack Square, Suite 777, Asheville, NC 28801
828-274-1863 Fax: 828-255-4834 E-mail: [email protected]
Steven M. Cancro, Secretary Ph: 212-278-2810 Fax: 212-278-2828
The Board of Directors, The France Growth Fund, Inc.
Credit Agricole Indo-Suez, 8th Floor
1211 Avenue of the Americas
New York, NY 10036
(via both Fax and Federal Express) October 29, 1998
To the Board of Directors of The France Growth Fund:
My clients and I currently own 317,332 shares of the France Growth Fund Inc. and
have held most of the shares for a long time. We are disappointed by the long-
term investment return to shareholders and the persistent discount at which the
Fund's shares have traded.
We feel that there is no need to tolerate such a discount, as adequate remedies
exist that are beneficial to all shareholders and are far more effective than
those actions taken by the Fund so far. The purpose of this letter is to
suggest two specific remedies, to request a meeting with the Board of Directors
to discuss these matters, and to submit a shareholder proposal for the next
meeting of the Fund's shareholders.
The shareholder proposal to terminate the management contract with Indosuez may
seem extreme, but it represents the only effective and inexpensive means the
shareholders have to indicate their displeasure if the Board and Advisor fail to
respond to their wishes.
AN UNIMPRESSIVE LONG-TERM INVESTMENT
All of the shareholder reports since the inception of the Fund are the basis of
the following synopsis of the "out of pocket" investment results of the Fund's
owners:
FRANCE GROWTH FUND SHAREHOLDER RESULTS
(Values in Thousands - Source: Data from Regular Shareholder Reports)
All Total Total Distr. Monthly
Period Shares Offer Share Mgmt. Director Oper. Paid Index Index
Ending Issued Fees Cost Fees Costs Expense Out Value Units
-------------------------------------------------------------------------------
5/18/90 11,509 10,498 138,100 1,431 +96.5
12/31/90 703 79 1,697 6,008 1,163 -5.2
12/31/91 1,061 111 2,554 2,746 1,378 -2.0
12/31/92 1,135 126 2,275 483 1,425 -0.3
12/31/93 1,177 133 2,302 1,733
3/25/94 3,836 36,813 38,843 1,688 +23.0
12/31/94 1,508 187 2,878 8,900 1,651 -5.4
12/31/95 1,569 226 2,905 12,230 1,895 -6.5
12/31/96 1,647 189 2,986 13,323 2,309 -5.8
12/31/97 1,802 254 3,151 28,056 2,595 -10.8
10/02/98 (est. based on 6/30/98) 1,410 156 2,456 8,245 3,016 -2.7
TOTALS 15,345 12,528 176,943 12,011 1,463 23,205 79,991 80.9
MSCI France Total 10/2/98 Per Total Results Fund Index
Return Index (US$)** Values Share Value Comparison Shares Units
- ------------------------ ---------------------- ----------------------------
Index Units from Market
Same Cash Flow 80.9 Price: 11.69 179,349 Market Value 179,349 243,933
Times 9/28/98 Net Asset + Payouts 79,991 79,991
Index Value 3,016 Value: 14.02 215,142 - Share Cost 176,943 176,943
Shareholder Value Discount
w/ Index Units 243,933 Loss: 2.33 35,793 Net Gain: 82,397 146,981
WHO GOT WHAT IN THE FRANCE GROWTH FUND?
(May 1009 - September 1998)
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Net Gain to Shareholders $ 82 Mil. xxxxxxxxxxxxxxxxxxxxxxx
Total Fees & Expenses $ 36 Mil. xxxxxxxxxx
Shareholder Loss to Discount $ 36 Mil. xxxxxxxxxx
Gain to the France Index** $147 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
**Note: The MSCI France Total Return Index is a standard measure of the returns
of capitalization weighted French equities. Index results may be affected
because the index is not subject to the same investment policies and
restrictions as the Fund. Also, the index is computed on a month-end basis
only, so applying the Fund cash flows during each fiscal year to year-end and
month-end index values is only an approximation of alternative results.
SYNOPSIS OF SHAREHOLDER INVESTMENT RESULTS
This has been an unimpressive long-term investment. Since inception more than
eight years ago, the Fund's shareholders have paid $177 million to buy new
shares, received $80 million in distributions, and had an investment with a
market value of $179 million as of 10/2/98.
The shareholders paid out $36 million in advisory fees, director fees,
underwriting fees, and other expenses while making only about $82 million on
their investment. As of 10/2/98, the discount was costing each and every
shareholder another $36 million ($2.33 a share) or a +20% extra return above its
market value. An identical, hypothetical investment in the unmanaged Morgan
Stanley France total return index would have resulted in $147 million in profits
rather than $82 million.
REMEDIES TO REDUCE THE DISCOUNT & ENHANCE SHAREHOLDER RETURNS
The discount represents an opportunity to markedly improve shareholder
investment results with this Fund. All that is required is that Indosuez and
the Board take the actions necessary to enhance shareholder wealth through the
reduction and eventual elimination of the discount. Remedies are available
which would enhance the Net Asset Value (NAV) of the Fund's shares,
reduce/eliminate the discount, and allow shareholders a choice between a closed-
end structure and receiving NAV for all their shares. The only significant
impact of such actions would be a reduction in the advisory fee income paid to
Indosuez due to those shareholders who choose to cash out entirely.
Transactions can be structured so that there will be no resulting tax impact on
those shareholders choosing to remain in the closed-end structure.
REMEDY #1 - PERPETUAL SHARE BUYBACKS TO ENHANCE NAV & REDUCE DISCOUNTS
Share buybacks have been viewed by the industry as a failure because, even
though they have always enhanced NAV, they have never permanently fixed the
discount. This is not surprising because all repurchase plans have been limited
in size and duration. You don't get a permanent fix with a temporary band-aid.
Instead, if a fund unequivocally committed to perpetual, sizable buybacks
whenever a discount existed, there would always be a buyer for the Fund's
shares. Potential sellers would learn to be patient and would lower the
discount at which they were willing to sell. Every share that the Fund bought
at a discount would enhance NAV and the performance of the Fund. This would
attract other buyers and serve to rebalance the demand/supply equation at a
lower discount level. Logic says that eventually the price would stabilize in a
range somewhere near NAV.
The value of such a program to existing shareholders is significant. For
example, suppose repurchases began at a 17% discount (similar to that of The
France Growth Fund), suppose it took one half of the Fund's assets and one year
to reduce the discount to 0%, suppose the average purchase price were at a 9%
discount, and further suppose that the Fund's portfolio securities appreciated
10% during the same year net of expenses. In this case, those shareholders
sticking with the Fund would see their investment increase by about +39% (+20%
from discount elimination, +9% from NAV enhancement, +10% from the portfolio
increase).
Repurchasing shares at a discount is equivalent to buying the fund's own
carefully chosen portfolio at prices cheaper than those available in the market.
The turnover of the France Growth Fund has ranged from 49% to 83% in recent
years. What could be a better investment for the Fund?
Seventy per cent of the Fund's yearly expenses are advisory and administrative
fees which are proportional to the size of the Fund. A reduction in Fund size
by one half might increase the Fund's expense ratio from about 1.5% to about
1.9%. Most shareholders would gladly make this tradeoff to eliminate the
discount and enhance their wealth.
REMEDY #2 - SPLITTING UP THE FUND TO SATISFY ALL SHAREHOLDERS
Many shareholders feel that they should be entitled to receive full NAV for
their shares right away and should not have to wait for perpetual share buybacks
or other techniques to slowly eliminate the discount. They desire that the Fund
be open-ended. Fund Advisors and Boards often object that this is not fair to
shareholders who like the closed-end structure. They argue that open-ending
will create tax consequences and costs due to massive redemptions when other
shareholders cash out.
There is a solution which should satisfy all shareholders. The Fund could do a
self-tender offer for its shares in exchange for an in-kind distribution of its
portfolio. Those wishing to remain in the closed-end fund would not have any
tax consequences as a result.
The tendering shareholders could be given a further option to exchange their
portfolio proceeds for shares of a newly formed open-end fund created for that
purpose or alternatively a liquidating trust which would sell them out. The
entire series of transactions could be structured so that all expenses and tax
impacts would be borne only by the those shareholders who chose to tender. A
somewhat similar action has already been approved and completed by another
closed-end fund organization for their European equity closed-end fund.
A further advantage of this approach is that it would remove from the market the
large number of the Fund's shareholders who are currently willing to sell their
shares at less than NAV, and leave only those shareholders who truly desire the
closed-end format in the remaining closed-end fund.
The optimal solution for the France Growth Fund might be a combination of the
two remedies: First, allowing those who wished NAV to exit to an open-end
counterpart, and then instituting a perpetual buyback program in the remaining
closed-end fund to keep the discount from reappearing.
A REQUESTED MEETING WITH THE BOARD
I would like to request a meeting with the Fund's Board to discuss these
potential remedies and other issues relating to the investment performance of
the Fund and the discount. The managed distribution policy and advisory fee
reduction recently announced have not worked so far, and I believe such minor
actions will never work adequately. They will likely have at best a temporary
and relatively small impact on the discount. There is a growing intolerance of
the status quo among the shareholders and a level of impatience that will not be
satisfied by a "wait and see" response.
THE SHAREHOLDER PROPOSAL TO TERMINATE INDOSUEZ
On May 8, 1998 the SEC overruled the objections of eight fund management
companies and their Boards of Directors and determined that the shareholders of
closed-end funds could fire their investment advisor without Board approval.
Short of expensive proxy fights, this is the only practical tool the
shareholders have if their Board and their Advisor are not responsive to
shareholder wishes. The decision to submit this shareholder proposal is
occasioned by the filing deadline and the possibility that Indosuez and the
Board will not take meaningful steps which result in eliminating the discount.
It would be preferable if the Board would take actions prior to the next meeting
of shareholders which would eliminate the need for shareholders to vote in
support of this proposal.
I own 200 shares of The France Growth Fund Inc. in my IRA and intend to continue
to own these shares until the Fund's next annual meeting. (I am enclosing
independent certification from my broker demonstrating continuous beneficial
ownership of Fund shares in the required amounts for the required period of
time). Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, I am
hereby submitting the following proposal and supporting statement for inclusion
in the Fund's proxy material for its 1999 annual meeting of stockholders or any
earlier special meeting. The notice of annual meeting for 1998 specifies
October 31, 1998 as the deadline for such submissions. It should be noted for
the record that I am not interested in competing for the Fund's advisory
contract and would not accept it if offered.
SUBMITTED SHAREHOLDER PROPOSAL:
RESOLVED: The Fund's investment advisory agreement with its investment advisor,
Indosuez International Investment Services (Indosuez), shall be terminated and
the shareholders recommend that the board solicit competitive proposals for a
new investment advisor.
SUPPORTING STATEMENT:
I believe Indosuez's advisory contract should be terminated because shareholder
results with the Fund have been unimpressive, and because management fees are
apparently so lucrative to Indosuez that effective steps to enhance shareholder
value are not taken.
Since inception on 5/18/90, the Fund's shareholders have paid $177 million to
buy new shares, received $80 million in distributions, and had an investment
with a market value of $179 million as of 10/2/98. The resulting gain of only
$82 million dollars spread over more than 8 years brings into question the value
of this manager and this entire economic endeavor. The Net Asset Value (NAV)
return of the Fund is somewhat better, but it fails to reflect the devastating
impact of the discount on shareholder investment results.
The shareholders paid out $36 million in advisory fees, director fees,
underwriting fees, and other expenses while making only about $82 million on
their investment. As of 10/2/98, the discount was costing each and every
shareholder an additional $36 million ($2.33 a share) or a +20% extra return
over and above the market value of the Fund's shares.
After 25 years as a private investor and 10 additional years as an investment
professional managing up to $240 million in closed-end fund shares, I am
convinced that the biggest problem in fixing discounts and adding market value
is the investment advisor. Fees are so lucrative that the fund manager will
rarely recommend more than token steps (such as a 12% distribution policy or a
small reduction in his fees) to enhance shareholder value. I believe the
Directors owe their positions to Indosuez and therefore will not take effective
actions such as committing to perpetual share buy-backs, tender offers, open-
endings, or other means to deliver Net Asset Value to shareholders. Such steps
would reduce the Fund size and result in a major reduction in advisory fees.
Instead, this Fund conducted a rights offering and sold new shares at a
discount, which diluted the asset value, added to the supply of shares, and
increased the advisory fees paid to Indosuez.
It is very expensive and time consuming for shareholders to wage successful
proxy fights to replace staggered Boards of Directors hand picked by the
investment advisor. Fortunately, the law gives shareholders one practical tool
to fix this problem. A majority can vote to "fire" the investment manager.
Qualified advisors are available that will work with a motivated Board to
enhance shareholder value.
We have a chance to send a loud and clear message to the Board that we want the
Fund run exclusively for the benefit of the Fund's owners. Vote for this
shareholder sponsored resolution.
***End of supporting statement***
CONCLUSION
I am sure the Board would agree that the discount represents both a wasteful
loss of shareholder wealth, and an issue of contention between the Fund's owners
and its fiduciaries. The shareholders and the Board should work together to
resolve this problem expeditiously. Getting rid of the discount would eliminate
the need for disruptive activities such as proxy fights, opposing director
candidates, and shareholder proposals like the one above.
I remain available at any time for discussions with Indosuez or members of the
Board concerning any issues related to the France Growth Fund, suggestions to
remedy the discount, the submitted shareholder proposal, and other ideas to
enhance shareholder value. I am looking forward to your response.
Very truly yours,
Ronald G. Olin
