<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
Michel Longchampt Director
Michel A. Rapaccioli Director
Jacques Regniez Director
Bernard Simon-Barboux 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
THE
-----------------------------------------------------------
FRANCE
-----------------------------------------------------------
GROWTH
-----------------------------------------------------------
FUND, INC.
-----------------------------------------------------------
[LOGO]
SEMI-ANNUAL REPORT FOR
THE SIX MONTHS ENDED
JUNE 30, 1999
[GRAPHIC]
[LOGO]
INDOCAM INTERNATIONAL
INVESTMENT SERVICES
Asset Management
FRF
Listed
NYSE
<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
investments 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.
THE INVESTMENT ADVISER
Indocam 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.
$XX billion at June 30, 1999.
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,
National Association (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, National Association, 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, 1999, 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 29, 1999.
Shareholders voted to: 1) overwhelmingly re-elect Michel Longchampt and Michel
A. Rapaccioli and elect Bernard L. Chavel, President of the Fund, as Directors;
2) ratify the appointment of PricewaterhouseCoopers LLP as the Fund's
independent accountants for the fiscal year ending December 31, 1999;
3) approve a shareholder proposal requesting that shareholders be afforded an
opportunity to realize net asset value on their investment as soon as possible;
4) overwhelmingly, reject a shareholder proposal to terminate the investment
advisory agreement between the Fund and its investment adviser; 5) approve a
shareholder proposal with respect to realizing full net asset value within
60 days of the 1999 annual meeting; 6) reject a shareholder proposal requesting
the resignation of all directors not standing for election at the 1999 annual
meeting who oppose providing all shareholders with the opportunity to realize
full net asset value within 60 days of the 1999 annual meeting; and 7) approve a
shareholder proposal recommending that the Fund reimburse soliciting
shareholders for fees and expenses associated with its proxy communication to
shareholders.
<TABLE>
<S> <C> <C>
1. Election of Directors:
Bernard L. Chauvel................. For: 6,900,280
Withheld Authority: 110,569
Michel Longchampt.................. For: 6,901,330
Withheld Authority: 109,519
Michel A. Rapaccioli............... For: 6,909,034
Withheld Authority: 101,815
Gary A. Bentz...................... For: 365,837
Withheld Authority: 1,480,788
Ralph W. Bradshaw.................. For: 365,837
Withheld Authority: 1,480,788
Ronald G. Olin..................... For: 365,837
Withheld Authority: 1,480,788
</TABLE>
In addition to the elected Directors, Jean A. Arvis, Thomas C. Barry, John A.
Bult, Walter J.P. Curley, Pierre H.R. Daviron, Jacques Regniez, Bernard
Simon-Barboux, and John W. Spurdle, Jr. 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:
For Against Abstain
--------- --------- ---------
8,608,232 33,888 215,353
3. A recommendation that shareholders be afforded the opportunity to
realize net asset value for their investment as soon as possible:
For Against Abstain
--------- --------- ---------
4,312,820 3,200,015 101,628
4. Termination of the investment advisory agreement between the Fund and
its investment adviser:
For Against Abstain
--------- --------- ---------
652,380 6,675,619 222,158
5. A recommendation that the Board take the necessary steps to provide all
shareholders the option of receiving full net asset value within 60 days of the
1999 annual meeting:
For Against Abstain
--------- --------- ---------
1,957,257 2,000 3,388
6. A recommendation that all directors not standing for election at the
1999 annual meeting who oppose the option of shareholders to receive full net
asset value within 60 days of the 1999 annual meeting:
For Against Abstain
--------- --------- ---------
359,937 1,599,320 3,388
7. A recommendation to reimburse the soliciting stockholders for reasonable
fees and expenses associated with its proxy communication:
For Against Abstain
--------- --------- ---------
325,391 158,466 1,478,788
3
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
OTHER INFORMATION
Since December 31, 1998, there have been no (i) material changes in the Fund's
investment objectives or policies, (ii) material changes in the principal risk
factors associated with investment in the Fund, and (iii) change in the person
primarily responsible for the day-to-day management of the Fund.
The Fund amended its by-laws for two purposes:
(1) to institute a mandatory retirement policy for all Directors.
(2) to adopt a fifteen day advance notice provision governing the
introduction of shareholder proposals or nominees for election to
the Board at any annual meeting of shareholders.
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. In
adverse market conditions, a distribution could constitute a return of capital.
The Distribution Plan will remain in effect until at least the year 2001,
subject to reconsideration by the Board only in the event of a major market
decline.
Voluntary Advisory Fee Waiver
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. The advisory
fee will not be increased to the extent the Fund's shares trade at a premium to
net asset value.
4
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
- --------------------------------------------------------------------------------
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.
Companies in which the Fund invests could be adversely affected by the Year 2000
issue, but the Fund cannot predict the consequential effect on its investment
return. To the extent the impact on a portfolio holding is negative, the Fund's
investment return could be adversely affected.
5
<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, 1999, the Fund recorded a return
(including dividends) of 212.58% on a euro basis. For the same period, the
Societe de Bourse Francaise 120 Index (the "SBF 120 Index") posted a return
(excluding dividends) of 121.72%. Thus, since the beginning of investment
operations, the Fund has outperformed the SBF 120 Index by approximately 90.86%.
On a US dollar basis, the Fund reported a return of 173.29% (including
dividends) from the commencement of investment operations through June 30, 1999.
For the same period, the SBF 120 Index recorded a return (excluding dividends)
of approximately 93.85%. Thus, in US dollar terms, the Fund has outperformed the
SBF 120 Index by approximately 79.44% since the beginning of operations.
For the six months ended June 30, 1999, the Fund reported a net asset value
return of 18.85% on a euro basis (4.33% in US dollar terms) outperforming the
SBF 120 by 2.75% on a euro basis (2.41% in US dollar terms).
During the first half of 1999, our performance analysis shows that both the
stock selection and the sector allocation has added value to the portfolio.
* The positive contribution of stock selection stems from our substantial
exposure to Banque Nationale de Paris ("BNP") and Paribas which
contributed strongly to the performance of the French market during the
first quarter of 1999. Other stock picks which also proved to be
extremely rewarding during the first six months of 1999 include Equant
(+59.36%), Sidel (+63.18%), LVMH (+85.23%) and ST Microelectronics
(+92.55%).
* A positive contribution brought about by our sector allocation resulting
from our return to the energy sector during the last months of 1998 as
discussed in the Fund's most recent annual report. Stocks in this sector
showed strong performance, particularly in the month of March 1999.
At June 30, 1999 the net asset value per share of the Fund was US $16.32 down
from US $16.41 at December 31, 1998. This may be in part a reflection of the
adoption of the Tax-Advantaged Managed Distribution Plan (the "Distribution
Plan"), whereby the Fund makes quarterly distributions from realized long-term
capital gains in 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.
The market price at June 30, 1999 of US $13.75 was higher than the market price
of the Fund of US $13.625 at December 31, 1998. The discount to net asset value
was 15.75% at June 30, 1999 and has ranged between 14.6% and 19.2% during fiscal
1999.
6
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
ECONOMIC AND FINANCIAL OVERVIEW
Consumer spending remained one of the driving forces of economic growth in
France during the first half of 1999. Factors behind this household confidence
include:
* Interest rates reaching historic low levels;
* A steady decline of the unemployment rate decreasing by a full percentage
point during the past year; and
* An increase in household purchasing power.
During the first half of 1999, the property sector bounced back strongly.
Housing starts were up 16.1% and building permits rose 26.3% during the twelve
month period ended May 31, 1999. These figures are sustained by attractively low
interest rates and tax incentives. In June, activity forecasts in construction
remained very satisfactory with order intakes at all-time highs, representing
4.7 months of activity.
The recovery of the construction sector helped to sustain household spending on
consumer durables, which rose 2.3% during May 1999. Over the past twelve months,
consumption of manufactured products jumped 4.7%, which is far greater than in
any of France's neighboring countries and represents a strong reflection of the
domestic vigor of the French economy.
THE RECOVERY OF ACTIVITY IN THE CONSTRUCTION SECTOR
[CHART]
French Housing Starts
Q4 `90 791.86
Q1 `91 742.41
Q2 `91 778.86
Q3 `91 734.28
Q4 `91 774.57
Q1 `92 819.16
Q2 `92 652.88
Q3 `92 580.76
Q4 `92 716.94
Q1 `93 690.4
Q2 `93 558.7
Q3 `93 604.71
Q4 `93 713.94
Q1 `94 818.07
Q2 `94 717.12
Q3 `94 677.55
Q4 `94 808.42
Q1 `95 811.67
Q2 `95 708.96
Q3 `95 654.04
Q4 `95 684.09
Q1 `96 736.47
Q2 `96 662.16
Q3 `96 654.63
Q4 `96 683.5
Q1 `97 679.14
Q2 `97 716.29
Q3 `97 626.29
Q4 `97 694.16
Q1 `98 724.81
Q2 `98 697.19
Q3 `98 700.08
Q4 `98 819.19
7
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
In light of the latest surveys, the prospects for industry are undergoing a
trend reversal. In June, the Institut National des la Statistique et des Etudes
Economiques ("INSEE") confirmed incipient signs of a recovery first noted in the
spring of 1999, recording a marked improvement in business confidence in
virtually all Economic Monetary Unit ("EMU") countries. In France, the increase
in surveyed business leaders' production prospects is evident, both with regard
to their own companies and to the overall outlook for the French economy.
SURVEY: FRENCH INDUSTRIAL PRODUCTION
(BALANCE OF OPINION)
[CHART]
French Business Survey: Confidence on Industrial Production
Dec-90 -26
Jan-91 -40
Feb-91 -53
Mar-91 -24
Apr-91 -30
May-91 -34
Jun-91 -30
Jul-91 -30
Aug-91 -26
Sep-91 -18
Oct-91 -29
Nov-91 -25
Dec-91 -26
Jan-92 -20
Feb-92 -17
Mar-92 -12
Apr-92 -16
May-92 -15
Jun-92 -17
Jul-92 -15
Aug-92 -27
Sep-92 -35
Oct-92 -39
Nov-92 -40
Dec-92 -45
Jan-93 -50
Feb-93 -52
Mar-93 -58
Apr-93 -46
May-93 -49
Jun-93 -58
Jul-93 -49
Aug-93 -42
Sep-93 -33
Oct-93 -31
Nov-93 -19
Dec-93 -8
Jan-94 -4
Feb-94 2
Mar-94 10
Apr-94 14
May-94 22
Jun-94 27
Jul-94 24
Aug-94 29
Sep-94 35
Oct-94 43
Nov-94 41
Dec-94 38
Jan-95 37
Feb-95 33
Mar-95 24
Apr-95 19
May-95 14
Jun-95 12
Jul-95 10
Aug-95 4
Sep-95 -2
Oct-95 -12
Nov-95 -19
Dec-95 -34
Jan-96 -34
Feb-96 -31
Mar-96 -25
Apr-96 -23
May-96 -25
Jun-96 -26
Jul-96 -28
Aug-96 -29
Sep-96 -29
Oct-96 -22
Nov-96 -18
Dec-96 -12
Jan-97 -2
Feb-97 6
Mar-97 -1
Apr-97 -2
May-97 -4
Jun-97 -10
Jul-97 3
Aug-97 8
Sep-97 14
Oct-97 27
Nov-97 20
Dec-97 22
Jan-98 22
Feb-98 21
Mar-98 23
Apr-98 25
May-98 25
Jun-98 25
Jul-98 33
Aug-99 24
Sep-99 16
Oct-98 6
Nov-98 -4
Dec-98 -7
Jan-99 -11
Feb-99 -16
Mar-99 -22
Apr-99 -23
May-99 -18
Jun-99 -10
Jul-99 13
This improvement in business sentiment is found in all sectors, stemming from
more buoyant domestic orders and an incipient rebound in export orders. Since
January 1, 1999, the euro has depreciated 11% against the dollar and nearly 8%
against the pound and the yen.
8
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
A WEAK EURO THROUGHOUT THE FIRST HALF OF 1999
[CHART]
The Euro Currency Versus US Dollar
Dec-97 1.0909
Jan-98 1.0909
Jan-98 1.0863
Jan-98 1.0738
Jan-98 1.0699
Jan-98 1.0731
Jan-98 1.0764
Jan-98 1.0751
Jan-98 1.0751
Jan-98 1.0764
Jan-98 1.0751
Jan-98 1.0692
Jan-98 1.0686
Jan-98 1.0672
Jan-98 1.0653
Jan-98 1.0764
Jan-98 1.085
Jan-98 1.102
Jan-98 1.0915
Jan-98 1.0968
Jan-98 1.0797
Jan-98 1.0712
Jan-98 1.0692
Feb-98 1.0758
Feb-98 1.0804
Feb-98 1.0863
Feb-98 1.0954
Feb-98 1.083
Feb-98 1.0777
2/98 1.0823
Feb-98 1.0764
Feb-98 1.0817
Feb-98 1.0764
Feb-98 1.0764
Feb-98 1.0718
Feb-98 1.0745
Feb-98 1.0777
Feb-98 1.0745
Feb-98 1.0902
Feb-98 1.0889
Feb-98 1.0764
Feb-98 1.0784
Feb-98 1.0771
Mar-98 1.0784
3/98 1.0804
3/98 1.0751
3/98 1.0672
3/98 1.0672
3/98 1.0705
Mar-98 1.0692
Mar-98 1.0666
Mar-98 1.0705
3/98 1.0764
3/98 1.0758
3/98 1.0758
3/98 1.0718
3/98 1.0705
3/98 1.0692
3/98 1.0718
3/98 1.0705
3/98 1.0712
3/98 1.0751
3/98 1.0712
3/98 1.06
3/98 1.0587
Apr-98 1.0561
Apr-98 1.0554
Apr-98 1.0594
Apr-98 1.0633
Apr-98 1.0646
Apr-98 1.0784
Apr-98 1.0731
Apr-98 1.0731
Apr-98 1.0731
Apr-98 1.0863
Apr-98 1.0869
Apr-98 1.0843
Apr-98 1.0823
Apr-98 1.0863
Apr-98 1.0961
Apr-98 1.0909
Apr-98 1.0909
Apr-98 1.0922
Apr-98 1.0941
Apr-98 1.0909
Apr-98 1.0895
Apr-98 1.0895
May-98 1.0974
May-98 1.0994
May-98 1.1066
May-98 1.1027
May-98 1.1066
May-98 1.1053
May-98 1.1007
May-98 1.102
May-98 1.0994
May-98 1.0994
May-98 1.0961
May-98 1.0954
May-98 1.0968
May-98 1.1046
May-98 1.1132
May-98 1.1125
May-98 1.1125
May-98 1.1046
May-98 1.0974
May-98 1.0987
May-98 1.0948
Jun-98 1.1
Jun-98 1.0987
Jun-98 1.1053
Jun-98 1.1079
Jun-98 1.1027
Jun-98 1.0994
Jun-98 1.0987
Jun-98 1.0895
Jun-98 1.0817
Jun-98 1.0836
Jun-98 1.081
Jun-98 1.0876
Jun-98 1.0948
Jun-98 1.0902
Jun-98 1.0941
Jun-98 1.0909
Jun-98 1.0856
Jun-98 1.085
Jun-98 1.0882
Jun-98 1.081
Jun-98 1.081
Jun-98 1.0817
Jul-98 1.0764
Jul-98 1.0745
Jul-98 1.0745
Jul-98 1.0797
Jul-98 1.079
Jul-98 1.0764
Jul-98 1.0699
Jul-98 1.0771
Jul-98 1.0869
Jul-98 1.0843
Jul-98 1.0876
Jul-98 1.0954
Jul-98 1.0994
Jul-98 1.0981
Jul-98 1.0948
Jul-98 1.0961
Jul-98 1.0954
Jul-98 1.0994
Jul-98 1.0941
Jul-98 1.1046
Jul-98 1.104
Jul-98 1.0987
Jul-98 1.1014
Aug-98 1.0968
Aug-98 1.104
Aug-98 1.1053
Aug-98 1.104
Aug-98 1.0994
Aug-98 1.1014
Aug-98 1.0981
Aug-98 1.0954
Aug-98 1.0961
Aug-98 1.0863
Aug-98 1.0909
Aug-98 1.0863
Aug-98 1.0882
Aug-98 1.0876
Aug-98 1.0882
Aug-98 1.0902
Aug-98 1.0869
Aug-98 1.0869
Aug-98 1.0889
Aug-98 1.1125
Aug-98 1.1164
Sep-98 1.1171
Sep-98 1.1184
Sep-98 1.1315
Sep-98 1.1302
Sep-98 1.1302
Sep-98 1.1322
Sep-98 1.1368
Sep-98 1.161
Sep-98 1.1551
Sep-98 1.1525
Sep-98 1.1565
Sep-98 1.1545
Sep-98 1.1525
Sep-98 1.1538
Sep-98 1.1571
Sep-98 1.1624
Sep-98 1.1656
Sep-98 1.1683
Sep-98 1.165
Sep-98 1.1676
Sep-98 1.1689
Sep-98 1.1722
Oct-98 1.1873
Oct-98 1.1873
Oct-98 1.1965
Oct-98 1.2011
Oct-98 1.2102
Oct-98 1.1971
Oct-98 1.1945
Oct-98 1.184
10/98 1.1978
10/98 1.1932
10/98 1.2096
10/98 1.2089
10/98 1.1997
10/98 1.1938
10/98 1.1847
10/98 1.1952
10/98 1.1945
10/98 1.1768
10/98 1.1827
10/98 1.182
10/98 1.1833
10/98 1.1827
Nov-98 1.1827
Nov-98 1.1794
Nov-98 1.1729
Nov-98 1.1781
Nov-98 1.1689
Nov-98 1.1591
Nov-98 1.1624
Nov-98 1.1663
Nov-98 1.161
11/98 1.161
11/98 1.1722
11/98 1.1715
11/98 1.1676
11/98 1.1604
11/98 1.1558
11/98 1.1486
11/98 1.1479
11/98 1.1486
11/98 1.1486
11/98 1.142
11/98 1.1551
Dec-98 1.1617
Dec-98 1.1702
Dec-98 1.1715
Dec-98 1.1669
Dec-98 1.1637
Dec-98 1.1735
Dec-98 1.1722
Dec-98 1.184
12/98 1.1866
12/98 1.1788
12/98 1.1689
12/98 1.1729
12/98 1.1748
12/98 1.1709
12/98 1.1702
12/98 1.1683
12/98 1.163
12/98 1.1669
12/98 1.1696
12/98 1.165
Jan-99 1.1715
Jan-99 1.182
Jan-99 1.1768
Jan-99 1.161
Jan-99 1.1715
Jan-99 1.1578
Jan-99 1.1499
Jan-99 1.1565
Jan-99 1.1663
Jan-99 1.1702
Jan-99 1.1565
Jan-99 1.1597
Jan-99 1.1604
Jan-99 1.1565
Jan-99 1.1597
Jan-99 1.1591
Jan-99 1.1551
Jan-99 1.1558
Jan-99 1.144
Jan-99 1.1414
Jan-99 1.1361
Feb-99 1.1302
Feb-99 1.1341
Feb-99 1.1302
Feb-99 1.1335
Feb-99 1.1263
Feb-99 1.1328
Feb-99 1.1302
Feb-99 1.1328
Feb-99 1.123
Feb-99 1.1289
Feb-99 1.1289
Feb-99 1.1204
Feb-99 1.125
Feb-99 1.1197
Feb-99 1.1066
Feb-99 1.1033
Feb-99 1.1007
Feb-99 1.1
Feb-99 1.104
Feb-99 1.1027
Mar-99 1.0895
Mar-99 1.0935
Mar-99 1.0889
Mar-99 1.081
Mar-99 1.083
Mar-99 1.0882
Mar-99 1.0889
Mar-99 1.0948
Mar-99 1.1033
Mar-99 1.0915
Mar-99 1.0935
Mar-99 1.0994
Mar-99 1.0994
Mar-99 1.0974
Mar-99 1.0895
Mar-99 1.0909
Mar-99 1.0915
Mar-99 1.0882
Mar-99 1.0836
Mar-99 1.0771
Mar-99 1.0735
Mar-99 1.0718
Mar-99 1.077
Apr-99 1.079
Apr-99 1.0784
Apr-99 1.0712
Apr-99 1.085
Apr-99 1.0777
Apr-99 1.0751
Apr-99 1.0797
Apr-99 1.081
Apr-99 1.0777
Apr-99 1.0804
Apr-99 1.0705
Apr-99 1.0699
Apr-99 1.0666
Apr-99 1.0633
Apr-99 1.0607
Apr-99 1.064
Apr-99 1.0613
Apr-99 1.0587
Apr-99 1.0666
Apr-99 1.064
Apr-99 1.0594
Apr-99 1.0581
May-99 1.0574
May-99 1.0627
May-99 1.0758
May-99 1.0804
May-99 1.0764
May-99 1.0784
May-99 1.0718
May-99 1.0653
May-99 1.0666
May-99 1.0666
May-99 1.0672
May-99 1.0679
May-99 1.0659
May-99 1.0627
May-99 1.0579
May-99 1.06
May-99 1.0613
May-99 1.0456
May-99 1.0436
May-99 1.0423
May-99 1.0423
Jun-99 1.0449
Jun-99 1.0358
Jun-99 1.0325
Jun-99 1.0377
Jun-99 1.0292
Jun-99 1.0463
Jun-99 1.0476
Jun-99 1.0482
Jun-99 1.0528
Jun-99 1.0423
Jun-99 1.043
Jun-99 1.0305
Jun-99 1.0338
Jun-99 1.039
Jun-99 1.0351
Jun-99 1.0325
Jun-99 1.0331
Jun-99 1.0417
Jun-99 1.043
Jun-99 1.0351
Jun-99 1.0331
Jun-99 1.0344
Jul-99 1.0233
Jul-99 1.0239
Jul-99 1.0239
Jul-99 1.0239
Jul-99 1.022
Jul-99 1.022
Jul-99 1.018
Jul-99 1.0148
Jul-99 1.0174
Jul-99 1.0207
Jul-99 1.0194
Jul-99 1.02
Jul-99 1.0299
Jul-99 1.041
Jul-99 1.0535
Jul-99 1.0515
Jul-99 1.0502
Jul-99 1.0653
Jul-99 1.0624
Jul-99 1.0666
Jul-99 1.0725
Jul-99 1.0712
Aug-99 1.0699
Aug-99 1.0679
Aug-99 1.0777
Aug-99 1.0758
Aug-99 1.0758
Aug-99 1.0718
Aug-99 1.0712
This decline in the euro has helped European exporters who are now well situated
to take advantage of the expected rebound in international demand in the months
ahead. For example, leading economic indicators of export recovery zones,
notably Asia, are rising significantly.
9
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
UPTURN IN FRENCH EXPORTS TO ASIA
[CHART]
Thailand Taiwan Korea Singapore
Jan-97 -0.118 0.1596 -0.1396 0.0805
Feb-97 -0.0952 0.1121 -0.1345 0.0535
Mar-97 -0.001 0.1365 -0.1021 0.0923
Apr-97 -0.0445 0.0459 0.0377 0.1457
May-97 -0.0427 0.0357 0.1145 0.1515
Jun-97 -0.0122 -0.0576 0.1587 0.1353
Jul-97 -0.0217 -0.074 0.3184 0.1328
Aug-97 -0.0106 -0.1103 0.4458 0.1088
Sep-97 -0.0202 -0.2067 0.4756 0.1138
Oct-97 -0.0288 -0.2047 0.4947 0.0673
Nov-97 0.055 -0.2342 0.4893 0.0025
Dec-97 0.0086 -0.2635 0.4342 -0.0527
Jan-98 0.082 -0.3021 0.4212 -0.0706
Feb-98 0.0296 -0.3412 0.4559 -0.0543
Mar-98 -0.1156 -0.3715 0.4088 -0.0882
Apr-98 -0.1316 -0.3739 0.1272 -0.1302
May-98 -0.197 -0.3965 0.0294 -0.2043
Jun-98 -0.2846 -0.3955 -0.0221 -0.189
Jul-98 -0.3003 -0.4108 -0.0175 -0.2157
Aug-98 -0.3453 -0.4266 -0.1602 -0.2198
Sep-98 -0.3563 -0.4377 -0.2084 -0.242
Oct-98 -0.3742 -0.4599 -0.2426 -0.2519
Nov-98 -0.4905 -0.429 -0.229 -0.1208
Dec-98 -0.4675 -0.3609 -0.2211 -0.0663
Jan-99 -0.4229 -0.339 -0.2158 -0.0549
Feb-99 -0.3478 -0.2762 -0.3016 -0.0476
Mar-99 -0.227 -0.2475 -0.2849 -0.0657
Apr-99 -0.1576 -0.1972 -0.198 -0.0356
May-99 0.0191 -0.1303 -0.1417 0.0583
French Exports to Asia
Year-on-Year (% in volume)
Another positive factor is that business leaders have determined that their
inventories are lower than normal, anticipating an upturn in production.
In summary, the recovery in European economies reflected by the stock markets is
taking shape and no longer being seriously questioned. The month of June 1999
fully confirmed this development and corrected the markets' excessively
pessimistic vision. The latest developments in the bond markets also
demonstrated this change in psychology.
THE EQUITY MARKET
During the first half of 1999, the French stock market performed well in local
currency both in absolute terms, +16.10%, as well as relative to other European
markets which rose by a modest +10.27%. This strong performance is illustrated
by a better macro-economic outlook as compared to other European economies as
well as strong merger and acquisition activity. Unfortunately, for a non-hedged
US based investor, the weakness of the euro against the US dollar (-11.7%) has
eroded a substantial portion of that gain.
10
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
THE FRENCH EQUITY MARKETY PERFORMANCE VS. EUROPEAN PEERS
[CHART]
French Equity European Equity
Market Market
(SBF 120 Index) (MSCI Europe Index)
12/31/98 100 100
100 100
104.69 103.05
105.91 104.3
108.29 106.69
106.77 105.38
107.11 106.03
106.14 104.49
103.85 103.04
100.44 98.99
101.17 99.22
102.66 100.89
104.92 103.12
103.96 102.72
105.39 103.68
104.61 102.59
101.61 99.93
102.3 100.34
102.71 100.39
103.44 100.81
1/28/99 105.83 102.03
107.22 102.61
108.42 104.21
107.09 103.52
105.81 102.36
105.25 102.42
104.65 101.98
104.98 101.27
102.35 99.2
101.39 98.49
102.96 99.87
102.8 100.78
102.77 101.35
102.69 101.92
101.16 100.94
102.25 101.18
104.16 101.69
105.27 102.97
106.2 104.32
106.38 105.39
2/25/99 105.07 103.6
103.56 103.31
102.14 101.97
102.56 102.44
101.61 101.71
103.39 102.74
105.6 104.83
105.48 104.17
105.18 104.48
105.24 104.31
105.76 105.97
105.63 106.06
105.79 105.48
105.83 105.85
105.32 105.01
104.88 104.62
106.31 105.84
105.88 105.27
103.15 103.4
102.52 102.59
3/25/99 104.58 104.16
104.27 104.02
105.2 105.59
104.95 105.18
106.31 106.06
106.99 106.1
106.99 106.14
106.99 106.27
108.62 107.47
108.96 108.01
109.38 108.31
110.27 108.92
110.09 108.47
110.49 109.69
110.25 109.32
109.36 108.63
109.08 108.39
110.83 110.19
107.89 107.5
108.72 108.09
4/22/99 108.8 109.22
108.2 108.94
108.89 109.85
111.59 111.67
111.3 111.4
111.2 110.73
112.23 111.32
113.2 111.91
113.13 111.76
111.38 110.02
110.78 109.52
109.82 108.99
110.95 108.97
111.13 109.24
111.23 108.85
112.74 109.83
110.78 107.79
108.92 105.83
110.38 106.82
111.82 108.04
5/20/99 113.03 109.2
112.55 109.12
112.55 108.48
111.93 107.28
111.9 107.58
110.85 106.46
110.55 106.76
111.4 107.36
110.57 107.16
110.57 108.15
111.48 108.97
111.39 109.8
112.88 110.83
113.13 110.56
113.53 110.88
112.53 109.56
112.61 110.7
112.31 110.28
113.31 110.47
114.62 111.69
6/17/99 115.26 112.03
116.07 112.32
116.59 113.63
116.16 113.11
114.87 111.86
113.84 110.76
113.49 110.22
114.5 110.46
115.38 110.41
116.1 110.27
117.95 112.75
118.3 113.35
120.08 115.13
119.88 114.78
119.22 114.04
118.64 113.79
119.11 113.87
119.37 114.18
117.64 112.43
117.64 112.9
7/15/99 119.3 114.06
119.18 113.76
118.43 113.42
116.86 111.01
115.63 109.58
115.4 108.93
114.17 107.71
113.11 106.38
113.66 107.23
113.74 107.55
110.93 105.17
112.73 107.08
112.44 107.24
112.13 106.84
111.7 106.38
109.67 103.98
109.33 104.19
110.9 105.17
109.65 103.48
110.11 103.98
Performance Base 100
As economic indicators suggest, the economic recovery should gain strength
during the second half of 1999 and the global companies whose valuations have
been battered by the slowdown in world economic growth should come back into
favor. This has prompted investors to move back into cyclical sectors including
industrial stocks, construction, oil and cyclical consumption companies.
Conversely, with the economic environment considerably less depressed than the
financial markets were expecting, growth stocks underperformed significantly--a
major change from the trend observed during 1998. These interest rate sensitive
sectors have been underperforming noticeably and include such sub-sectors as
utilities, insurance and conglomerates.
Finally, the French banking sector remained turbulent during the first half of
1999 illustrated by the bidding among Paribas, BNP and Societe Generale as well
as various other consolidation efforts in the French financial services
industry.
11
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
SBF 120 INDEX, PERFORMANCE BY SECTOR DURING THE FIRST HALF OF 1999
[CHART]
Energy 44.60%
Basic Products 15.62%
Construction 25.77%
Capital Goods 21.80%
Automobiles/Autopart\rSuppliers 15.63%
Consumer Goods 5.40%
Food & Beverage 31.88%
Retail 13.29%
Services 9.16%
Real Estate 5.32%
Insurance -4.66%
Banking 14.63%
Holdings 3.97%
INVESTMENT STRATEGY
Looking back to November 1998, we decided to increase the weight of the energy
sector on the back of excessively low valuations. Indeed, the first sign of a
strategic change in the portfolio composition reflected the need for a
rebalancing in favor of some cyclical stocks that had become very attractive
after a fairly pronounced shift in the psychology of the market.
Having committed to this strategy in 1999, the first signs of stabilization of
the situation in the Asian countries have encouraged us to carry on investing in
global companies.
12
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
THE FRANCE GROWTH FUND: OVER/UNDER ALLOCATION VS SBF 120 INDEX
[CHART]
Defensive\Stocks -3.34%
Growth\Stocks 1.10%
Cyclical\Stocks 3.46%
Interest Rate-\Sensitive Stocks -1.22%
During the first months of 1999, we strengthened our position in some
Asia-sensitive stocks: ST Microelectronics, LVMH, Sidel and Alstom. The
surprising economic figures emerging from the United States have also been used
to move into stocks that benefit most from US dollar appreciation. These include
Michelin, Valeo, Lafarge SA and Compagnie de Saint-Gobain.
At the same time, we became more cautious about growth stocks that would be hit
by increases in interest rates and reduced our exposure at the start of 1999 to
information technology ("IT") services companies (Cap Gemini SA, ATOS SA),
pharmaceuticals (Sanofi Synthelabo) and the services sectors. These stocks rose
strongly, and we realized a portion of our gain in Canal Plus, NRJ,
Suez-Lyonnaise des Eaux, Vivendi and Havas Advertising.
13
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
STRATEGIC SHIFTS BY SECTOR SINCE DECEMBER 1998
[CHART]
Energy -1.11%
Construction 1.37%
Automobiles/Autopart Suppliers 1.88%
Food & Beverage -0.84%
Retail 0.73%
Services -3.55%
Banking 1.17%
Stock market battles raged during the first half of 1999 and gave rise to a
number of opportunities. First, in the telecommunications industry, the Deutsche
Telecom bid for Telecom-Italia in response to the hostile bid by Olivetti was
not to France Telecom's advantage, and we decided to sell some of the France
Telecom stock that we held.
In the banking sector, the bids and counter-bids for Paribas gave us excellent
exit opportunities. Conversely, we bought Credit Commerciale de France stock
again as that bank appears the target of an acquisition.
14
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
OVER/UNDER SECTOR ALLOCATION VS BENCHMARK (SBF 120)
[CHART]
Services 3.22%
Automobiles/Autopart Suppliers 1.79%
Banking 1.59%
Construction 1.03%
Capital Goods 0.77%
Retail 0.47%
Energy -0.45%
Real Estate -0.61%
Consumer Goods -1.00%
Holdings -1.09%
Insurance -1.25%
Basic Products -2.95%
Food & Beverage -1.54%
The opportunities described above allowed us to increase the Fund's positions in
the retailing sector which was also in turmoil. The announcement of Wal-Mart's
entry into the German market followed by its counter-bid for the Asda
"hypermarket" chain in Great Britain should lead to renewed speculation in this
sector. We reinforced our holdings in Casino Guichard Perrachon et Cie, Promodes
and Carrefour Supermarche during the first half of 1999.
After Sidel's stellar performance during the month of June 1999, we took profits
on the stock and reinvested it in the IT sector. ATOS SA and then Cap Gemini SA
stocks were bought back after their mediocre performance in early 1999. Growth
prospects remain very robust and valuation levels are more reasonable while
fears related to the postponement of orders because of the Year 2000 ("Y2K")
issue have been reflected in the price of many securities.
15
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AT JUNE 30, 1999
(AS A PERCENTAGE OF NET ASSETS)
[CHART]
Basic Products 1.2%
Energy 9.0%
Other Assets Less Liabilities 4.0%
Banking 5.3%
Insurance 5.2%
Services 18.3%
Construction 5.8%
Capital Goods 20.9%
Automobiles/Autopart Suppliers 5.4%
consumer Goods 11.0%
Food & Beverage 3.5%
Retail 10.4%
MARKET OUTLOOK
The recovery of European economies is no longer being seriously questioned, and
for the first time in a long while the consensus view is that global growth
forecasts should be raised.
European interest rate markets have adjusted dramatically from a
formerlypessimistic vision of European prospects. Monetary conditions have
become expansionary and will become less and less so in the months ahead
suggesting the euro's depreciation will come to an end.
For the stock market, this means that we are back in a more familiar environment
in which the anticipation of deflation has definitively been put to rest. Low
interest rates should no longer drive the market and earnings prospects should
take over as a major factor determining stock prices.
As shown in the following graph, the improving environment combined with a
competitive currency, is starting to feed through into analysts' estimates.
16
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
EVOLUTION OF RESEARCH ANALYSTS EARNINGS GROWTH FORECAST FOR 1999
SBF 120 INDEX COMPANIES
As of August 5, 1999
[CHART]
Trend of Expected 1999 EPS
Jan-98 14.4
Feb-98 14.6
Mar-98 14.1
Apr-98 14.7
May-98 14.4
Jun-98 14.7
Jul-98 15.7
Aug-98 16
Sep-98 14.8
Oct-98 14.5
Nov-98 14
Dec-98 13.7
Jan-99 13.8
Feb-99 14.3
Mar-99 14.4
Apr-99 14.9
May-99 15
Jun-99 14.7
Jul-99 15.1
Aug-99 15.5
Median Earnings Growth in %
Even though part of this improvement in profits has in fact already been
reflected by market prices, the French market should generate leading positive
earnings momentum versus its European peers.
Concerning the Y2K issue, investors could certainly find grounds for concern at
some point during the second half of 1999. Having survived the switch to the
euro, French corporates are confident that they will be ready to meet the Y2K
challenges. This is good news for blue chip Euroland. Liquidity should flow to
countries and sectors that are seen to be Y2K compliant as well as to strong
companies which have the resources to address the problem adequately.
In sum, we believe that investor focus should move back to Europe and the French
market could benefit.
17
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
- --------------------------------------------------------------------------------
FRENCH MARKET RATIOS
[CHART]
Current Level
Based on Consensus
Median Estimates
SBF 120 INDEX as of August 5, 1999
Price Earnings Ratio - 1999 (Estimate) 24.30x
Price/Book Value - 1999 2.70%
Global Yield - 1999 2.24%
10 Year Bond Yield 5.12%
Short-Term rate (3 Months) 2.45%
We appreciate your continued interest and investment in the French economy,
market place and the France Growth Fund.
Sincerely,
/s/ Bernard Chauvel /s/ Jean A. Arvis
- ----------------------------- -----------------------------
Bernard Chauvel Jean A. Arvis
President and Director Chairman of the Board
The France Growth Fund, Inc. The France Growth Fund, Inc.
August 12, 1999
18
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
FRENCH EQUITIES -- 96.03%
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
<S> <C>
AUTOMOBILES/AUTOPART SUPPLIERS -- 5.37%
46,066 Michelin............................................... $ 1,883,449
14,930 Peugeot SA............................................. 2,354,303
119,762 Renault SA............................................. 5,208,860
48,415 Valeo.................................................. 3,991,914
------------
13,438,526
------------
BASIC PRODUCTS -- 1.19%
102,230 Rhodia SA.............................................. 1,938,686
70,300 Usinor................................................. 1,046,970
------------
2,985,656
------------
CAPITAL GOODS -- 20.86%
63,881 Aerospatiale (b)....................................... 1,471,501
68,898 Alcatel (a)............................................ 9,692,827
117,840 Alstom................................................. 3,704,280
41,988 Equant (b)............................................. 3,868,779
259,117 France Telecom SA...................................... 19,562,067
29,375 Lagardere S.C.A........................................ 1,092,940
12,337 Legrand................................................ 2,509,966
1,820 Sagem.................................................. 1,215,507
44,730 Schneider SA........................................... 2,510,198
9,390 Sidel.................................................. 1,141,013
60,230 ST Microelectronics (b)................................ 4,010,113
41,634 Thomson CSF............................................ 1,446,070
------------
52,225,261
------------
CONSTRUCTION -- 5.79%
11,150 Bouygues............................................... 2,945,335
11,150 Bouygues--Rights....................................... 29,649
6,124 Colas.................................................. 1,136,106
20,057 Compagnie de
Saint-Gobain (a)..................................... 3,193,785
14,500 Groupe GTM............................................. 1,554,220
4,670 Imetal................................................. 693,091
28,813 Lafarge SA............................................. 2,737,982
30,335 Lapeyre................................................ 2,216,672
------------
14,506,840
------------
CONSUMER GOODS -- 11.04%
3,260 Essilor International.................................. 1,018,391
18,951 L'Oreal (a)............................................ 12,803,126
140,498 Rhone Poulenc SA (a)................................... 6,416,277
174,421 Sanofi Synthelabo...................................... 7,397,412
------------
27,635,206
------------
<CAPTION>
Shares Value
- --------- ------------
ENERGY -- 9.00%
74,685 Elf Aquitaine SA (a)................................... $ 10,953,414
89,790 Total SA (a)........................................... 11,577,012
------------
22,530,426
------------
FINANCIAL SERVICES -- 10.50%
106,422 AXA SA (a)............................................. 12,975,598
59,772 Banque Nationale de Paris.............................. 4,977,604
20,680 Credit Commerciale
de France............................................ 2,233,691
11,320 Dexia France........................................... 1,514,371
26,053 Societe Generale (a)................................... 4,588,926
------------
26,290,190
------------
FOOD & BEVERAGE -- 3.51%
8,290 Groupe Danone (a)...................................... 2,136,022
20,690 LVMH (a)............................................... 6,053,926
20,690 LVMH--Rights (a)....................................... 604,540
------------
8,794,488
------------
RETAIL -- 10.44%
66,205 Carrefour Supermarche (a).............................. 9,723,371
34,700 Casino Guichard Perrachon
et Cie............................................... 3,039,902
41,090 Pinault Printemps
Redoute SA........................................... 7,046,942
5,444 Promodes............................................... 3,571,311
35,500 Rexel SA............................................... 2,749,594
------------
26,131,120
------------
</TABLE>
19
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (concluded)
June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
FRENCH EQUITIES -- (concluded)
- ------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
- --------- ------------
SERVICES -- 18.33%
<S> <C>
7,488 Accor.................................................. $ 1,879,213
25,910 ATOS SA................................................ 2,643,710
9,310 Canal Plus............................................. 2,610,895
27,283 Cap Gemini SA.......................................... 4,285,370
4,700 Club Mediterranee (b).................................. 498,453
49,400 Dassault Systemes SA................................... 1,631,797
12,517 Havas Advertising...................................... 2,694,945
9,492 Havas Advertising--Warrants expiring 5/13/01 (b)....... 25,338
3,650 Publicis SA............................................ 771,184
2,274 Sodexho Alliance SA.................................... 391,398
54,020 Suez-Lyonnaise des Eaux................................ 9,737,682
6,855 Television Francaise 1................................. 1,596,714
23,265 Ubi Soft Entertainment SA (b).......................... 2,853,391
176,476 Vivendi (a)............................................ 14,287,066
------------
45,907,156
------------
TOTAL FRENCH EQUITIES
(cost -- $181,387,970).......................................... 240,444,869
------------
<CAPTION>
TIME DEPOSIT -- 0.02%
- ------------------------------------------------------
Principal
Amount Value
- --------- ------------
<S> <C>
$44,000 Brown Brothers Harriman & Co.
Grand Cayman, 4.00% (c)
(cost -- $44,000)...................................... $ 44,000
------------
TOTAL INVESTMENTS
(cost -- $181,431,970) -- 96.05%................................ 240,488,869
OTHER ASSETS LESS LIABILITIES -- 3.95%............................ 9,887,469
------------
NET ASSETS (applicable to 15,345,333 shares; equivalent to $16.32
per share) -- 100.00%..........................................
$250,376,338
------------
------------
</TABLE>
- ------------
(a) Portion of security has been segregated to collateralize securities index
futures contracts. Value of segregated securities totaled $27,185,842 at
June 30, 1999.
(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.
20
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost--$181,431,970)...... $240,488,869
Cash (including euros at affiliates of $2,415,617 with a cost
of $2,459,150)............................................... 2,416,165
Receivable for investments sold............................... 10,332,851
Receivable for avoir fiscal................................... 938,954
Dividends and interest receivable............................. 370,247
Receivable for variation margin on futures contracts.......... 117,591
Prepaid expenses and other assets............................. 394,819
------------
Total assets.............................................. 255,059,496
------------
LIABILITIES:
Payable for investments purchased............................. 4,202,311
Advisory fee payable.......................................... 140,667
Administration fee payable.................................... 21,028
Accrued expenses.............................................. 319,152
------------
Total liabilities......................................... 4,683,158
------------
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.................................... 162,792,189
Accumulated net investment income............................. 144,937
Accumulated net realized gain................................. 28,225,182
Net unrealized appreciation of investments, futures contracts
and other assets
and liabilities denominated in euros........................ 59,060,577
------------
Net assets applicable to shares outstanding............... $250,376,338
------------
------------
NET ASSET VALUE PER SHARE......................................... $16.32
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends, including $1,080,271 of avoir fiscal
(net of French withholding taxes
of $522,131)..................................... $2,913,019
Interest........................................... 32,023 $ 2,945,042
---------- -----------
EXPENSES:
Advisory fees...................................... 1,036,680
Reports to shareholders............................ 159,028
Custodian and accounting fees...................... 153,456
Administration fees................................ 128,462
Audit and legal fees............................... 109,898
Directors' fees and expenses....................... 109,143
Shareholder relations expense...................... 24,726
Transfer agent fees................................ 13,756
Insurance expense.................................. 12,106
New York Stock Exchange listing fee................ 8,430
Other expenses..................................... 66,027
----------
Total expenses..................................... 1,821,712
Less: fees waived by Investment Adviser............ (160,299)
----------
Net expenses....................................... 1,661,413
-----------
Net investment income.............................. 1,283,629
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on:
Investments...................................... 25,416,560
Futures contracts................................ 2,076,010
Foreign currency transactions.................... (192,391)
Net change in unrealized appreciation/depreciation
of:
Investments...................................... (17,567,945)
Futures contracts................................ (35,508)
Other assets and liabilities denominated in
euros........................................... (336,948)
-----------
Net realized and unrealized gain on investments,
futures contracts and foreign currency
transactions...................................... 9,359,778
-----------
NET INCREASE IN NET ASSETS FROM INVESTMENT
OPERATIONS........................................... $10,643,407
-----------
-----------
</TABLE>
See accompanying notes to financial statements.
22
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
JUNE 30, 1999 ENDED
(UNAUDITED) DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.............. $ 1,283,629 $ 934,650
Net realized gain on investments,
futures contracts and foreign
currency
transactions..................... 27,300,179 34,268,465
Net change in unrealized
appreciation/depreciation of
investments, futures
contracts and other assets and
liabilities denominated in
euros............................ (17,940,401) 46,462,274
------------- -------------
Total from investment operations... 10,643,407 81,665,389
------------- -------------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income......... (1,229,161) --
From net realized gain on
investments...................... (10,913,601) (31,066,627)
------------- -------------
Total dividends and
distributions.................... (12,142,762) (31,066,627)
------------- -------------
Net increase (decrease) in net
assets........................... (1,499,355) 50,598,762
NET ASSETS:
Beginning of period................ 251,875,693 201,276,931
------------- -------------
End of period...................... $250,376,338 $ 251,875,693
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 (unaudited)
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The France Growth Fund, Inc. (the "Fund") was incorporated in the State of
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 accounting 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, 1999. 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 euros are translated into U.S. dollars at the noon buying rate in
New York for cable transfers payable in euros (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.
24
<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 38.25% of the dividend amount (45% 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 euros 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 euro 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 euro 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 euros. Net realized gain (loss) on foreign currency
transactions is treated as ordinary income (loss) for income tax reporting
purposes.
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.
25
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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, 1999, the Fund entered into securities
index futures contracts with Carr Futures SNC, an affiliate of the Investment
Adviser. At June 30, 1999, the Fund had the following open securities index
futures contracts which were collateralized by segregated securities valued at
$27,185,842:
<TABLE>
<CAPTION>
COST ON U.S.$
NUMBER OF EXPIRATION ORIGINATION EUR VALUE VALUE UNREALIZED
CONTRACTS TYPE DATE DATE 6/30/99 6/30/99 APPRECIATION
- --------------- ------------ ---------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Long positions:
102 CAC 40 Index 7/31/99 EUR 4,573,822 EUR 4,635,390 $4,777,275 $ 63,456
92 CAC 40 Index 7/31/99 4,037,525 4,090,050 4,215,243 54,135
------------
$ 117,591
------------
------------
</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 decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
written option. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as a realized gain. If a written
call option is exercised, the premium received is added to the proceeds from the
sale of the underlying security in determining whether the Fund has realized a
gain or loss. If a written put option is exercised, the premium received reduces
the cost basis of the underlying security in determining whether the Fund has
realized a gain or loss. In writing an option, the Fund bears the market risk of
an unfavorable change in the price of the security or currency underlying the
written option. Exercise of an option written by the Fund could result in the
Fund 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
26
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 30, 1999, the Board of Directors declared a long-term capital gain
distribution of $0.6564 per share. The distribution was paid on July 16, 1999,
to shareholders of record on July 12, 1999.
INVESTMENT ADVISER AND ADMINISTRATOR
Indocam International Investment Services, the Investment Adviser, has an
Investment Advisory and Management Agreement ("Advisory Agreement") with the
Fund. In accordance with the Advisory Agreement, the Investment Adviser provides
investment advisory services, makes investment decisions and supervises the
acquisition and disposition of securities and other investments held by the Fund
and provides other portfolio management services. 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. During the six months
ended June 30, 1999, the Investment Adviser voluntarily waived $160,299 of its
fees.
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 0.12% of the value of the Fund's average weekly net assets
up to $100 million, 0.10% on the next $100 million of such net assets, and 0.08%
on such net assets in excess of $200 million.
TRANSACTIONS WITH AFFILIATES
For the six months ended June 30, 1999, certain direct and indirect subsidiaries
of the Credit Agricole Group--Cheuvreux de Virieu, Banque CPR and Carr Futures
SNC received $42,874, $8,290 and $5,541, 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 approximately $27,011 in its capacity as subcustodian for the
Fund of which approximately $13,880 was unpaid at June 30, 1999. For the year
ended June 30, 1999, the Fund earned $21,201 in interest income from call
account deposits held with Credit Agricole Indosuez. At June 30, 1999, the Fund
had $1,042,870 and $1,372,747 at Credit Agricole Indosuez and Carr Futures SNC
(on deposit for open futures contracts), respectively.
27
<PAGE>
THE FRANCE GROWTH FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
1999 was substantially the same as the cost for financial statement purposes.
Accordingly, net unrealized appreciation of investments of $59,056,899 was
composed of gross appreciation of $60,984,101 for those investments having an
excess of value over cost and gross depreciation of $1,927,202 for those
investments having an excess of cost over value.
For the six months ended June 30, 1999, aggregate purchases and sales of
portfolio securities (excluding short-term securities) were $68,081,383 and
$85,391,934, 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.
28
<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 YEARS ENDED DECEMBER 31,
JUNE 30, 1999 -----------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $16.41 $13.12 $13.37 $11.60 $10.97 $12.94
--------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.09 0.06 0.09 0.11 0.37 0.01 (a)
Net realized and unrealized gain (loss) on
investments, futures contracts and
foreign currency transactions............ 0.61 5.26 1.49 2.53 1.06 (0.68)(a)
--------- -------- -------- -------- -------- --------
Total from investment operations....... 0.70 5.32 1.58 2.64 1.43 (0.67)
--------- -------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. (0.08) -- (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...... (0.71) (2.03) (1.78) (0.79) (0.39) (0.55)
--------- -------- -------- -------- -------- --------
Total dividends and distributions...... (0.79) (2.03) (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............. $16.32 $16.41 $13.12 $13.37 $11.60 $10.97
--------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- --------
Market value, end of period................ $13.75 $13.63 $10.50 $10.38 $9.88 $9.13
--------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN (c)................ 7.00% 48.20% 19.33% 13.91% 16.62% (27.05)%
--------- -------- -------- -------- -------- --------
--------- -------- -------- -------- -------- --------
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted).... $ 250,376 $251,876 $201,277 $205,123 $178,080 $168,366
Ratio of expenses to average net assets.... 1.35%(d) 1.38%(d) 1.48% 1.54% 1.58% 1.63%
Ratio of net investment income to average
net assets............................... 1.04%(d) 0.38%(d) 0.64% 0.84% 3.07% 0.19%
Portfolio turnover......................... 28% 47% 80% 83% 49% 52%
</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. Total investment return for a period of less than one year is
not annualized.
(d) The Investment Adviser waived a portion of its fees during the six months
ended June 30, 1999 and the year ended December 31, 1998. If such waiver had
not been made, the ratio of expenses to average net assets would have been
1.48% and 1.46%, respectively, and the ratio of net investment income to
average net assets would have been 0.91% and 0.30%, respectively.
29
<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 euro/U.S. dollar
exchange rate.
