<PAGE>
THE FRANCE GROWTH FUND, INC.
------------------------------------------------------------
Jean A. Arvis Chairman of the Board of Directors
Thomas C. Barry Director
Walter J.P. Curley Director
Pierre H.R. Daviron Director
Michel Longchampt Director
Gregory L. Melville Director
Michel A. Rapaccioli Director
Jacques Regniez Director
Moritz Sell Director
John W. Spurdle, Jr. Director
Bernard Chauvel President and Director
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.
51 West 52nd Street
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.
400 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
[INDOCAM INTERNATIONAL INVESTMENT SERVICES LOGO] [FRF LISTED NYSE LOGO]
[FRANCE GROWTH FUND LOGO]
THE
-----------------------------------------------------------
FRANCE
-----------------------------------------------------------
GROWTH
-----------------------------------------------------------
FUND, INC.
-----------------------------------------------------------
SEMI-ANNUAL REPORT FOR
THE SIX MONTHS ENDED
JUNE 30, 2000
[PHOTOGRAPH OF TELEVISION SET WITH FOOTBALL GAME; THOMSON MULTI MEDIA LOGO]
<PAGE>
Cover photo: Thomson Multimedia is one of The France Growth Fund's portfolio
investments and is listed on the Paris Bourse and the New York Stock Exchanges.
The Company engineers, manufactures and markets display components and consumer
products such as televisions, VCRs, audio systems, digital decoders, DVD players
and professional video equipment under the popular RCA and THOMSON brand names.
Thomson Multimedia is the parent company of the U.S. based Thomson Consumer
Electronics, Inc.
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The France Growth Fund, Inc. (the "Fund") is a diversified, closed-end
management investment company the shares of which trade on the New York Stock
Exchange ("NYSE"). The Fund's objective is long-term capital appreciation
through 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.
$145 billion at June 30, 2000.
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 closing daily net asset value is available over the NASDAQ Mutual Fund
Quotation Service. 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 tables 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. Please also visit the Fund's
website at www.FranceGrowthFund.com for additional information about the Fund.
ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on April 26, 2000.
Shareholders voted to: 1) re-elect Thomas C. Barry and Walter J.P. Curley and
elect Gregory L. Melville and Moritz Sell, as Directors; 2) ratify the
appointment of PricewaterhouseCoopers LLP as the Fund's independent accountants
for the fiscal year ending December 31, 2000; 3) approve a shareholder proposal
regarding expediting the process to ensure Fund shares can trade at net asset
value; and 4) approve a shareholder proposal regarding conducting a tender offer
for Fund shares.
<TABLE>
<S> <C> <C>
1. Election of Directors:
For Withheld Authority
----------- --------------------
John A. Bult........................................ 5,138,915 97,415
For Withheld Authority
----------- --------------------
Bernard Simon-Barboux............................... 5,140,054 96,276
</TABLE>
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For Withheld Authority
----------- --------------------
<S> <C> <C>
Thomas C. Barry..................................... 11,786,175 618,020
For Withheld Authority
----------- --------------------
Walter J.P. Curley.................................. 11,784,482 619,713
For Withheld Authority
----------- --------------------
Gregory L. Melville................................. 7,167,865 0
For Withheld Authority
----------- --------------------
Moritz Sell......................................... 7,167,865 0
</TABLE>
In addition to the elected Directors, Jean A. Arvis, Bernard Chauvel, Pierre
H.R. Daviron, Michel Longchampt, Michel A. Rapaccioli, Jacques Regniez and John
W. Spurdle, Jr. continue to serve as Directors of the Fund.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Fund's independent accountants:
<TABLE>
<S> <C> <C> <C>
For Against Abstain
---------- --------- ---------
11,450,880 186,616 766,698
</TABLE>
3. A recommendation that the Board expedite measures to ensure that Fund
shares trade at net asset value:
<TABLE>
<S> <C> <C> <C>
For Against Abstain
---------- --------- ---------
7,584,913 3,081,329 308,701
</TABLE>
4. A recommendation to conduct a limited tender offer for Fund shares:
<TABLE>
<S> <C> <C> <C>
For Against Abstain
---------- --------- ---------
7,501,170 3,165,908 307,866
</TABLE>
DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), shareholders
whose shares of Common Stock are registered in their names will have all
dividends and capital gain distributions (collectively referred to as
"distributions") automatically reinvested in additional shares of Common Stock
of the Fund by the agent for the Plan and dividend paying agent, PNC Bank, N.A.
(the "Dividend Agent"), unless such shareholders elect to receive distributions
in cash. Shareholders who elect to receive distributions in cash (other than
those distributions payable solely in Common Stock) will receive a check in U.S.
dollars mailed directly to such shareholders by the Dividend Agent on or about
the date declared by the Board of Directors as the payment date for each such
distribution. Shareholders who prefer not to have their distributions
automatically reinvested should notify the Fund
2
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
GENERAL INFORMATION (continued)
--------------------------------------------------------------------------------
in writing c/o PNC Bank, N.A., Dividend Agent for the Fund, P.O. Box 8905,
Wilmington, Delaware 19809.
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% per annum 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, 2000, the Fund repurchased 60,000 shares of its Common
Stock. Since commencement of the repurchase program on November 22, 1999 through
June 30, 2000, the Fund has repurchased 125,333 shares of its Common Stock.
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
determined as of the end of the prior calendar year. To the extent possible, the
distribution will be funded by the realization 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.
AMENDMENT TO BY-LAWS
In June, the Board of Directors adopted several amendments to the Fund's
By-Laws to reflect recent changes in Maryland law. The advance notice provisions
in the By-Laws have been changed so that shareholders are now required to notify
the Fund in writing of any proposal which they intend to present at an annual
meeting of shareholders, including any nominations for director, between 90 and
120 days prior to the first anniversary of the mailing date of the notice from
the prior year's annual meeting of shareholders. The notification must be in the
form prescribed by the By-Laws. The advance notice provisions were amended to
provide the Fund and its directors with the opportunity to thoughtfully consider
and address the matters proposed before the Fund prepares and mails its proxy
3
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
GENERAL INFORMATION (concluded)
--------------------------------------------------------------------------------
statement to shareholders. Other amendments set forth the procedures which must
be followed in order for a shareholder to call a special meeting of
shareholders, increase the percentage of votes required to call a special
meeting and enhance the Board's ability to fill vacancies on the Board of
Directors. Please contact the Secretary of the Fund for additional information
about the advance notice requirements or the other amendments to the By-Laws.
OTHER INFORMATION
Since December 31, 1999, 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 persons
primarily responsible for the day-to-day management of the Fund.
4
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Shareholder:
From the commencement of investment operations of the France Growth Fund, Inc.
(the "Fund") on May 18, 1990 through June 30, 2000, the Fund recorded a return
(including dividends) of 339.39% 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 215.64%. Thus, since the beginning of investment
operations, the Fund has outperformed the SBF 120 Index by approximately
123.75%.
On a US dollar basis, the Fund reported a net asset value return of 255.08%
(including dividends) from the commencement of investment operations through
June 30, 2000. For the same period, the SBF 120 Index recorded a return
(excluding dividends) of approximately 155.07%. Thus, in US dollar terms, the
Fund has outperformed the SBF 120 Index by approximately 100.01% since the
beginning of operations.
For the six months ended June 30, 2000, the Fund reported a net asset value
return of 4.59% on a euro basis (-1.00% in US dollar terms) underperforming the
SBF 120 Index by 2.79% on a euro basis (2.64% in US dollar terms).
The euro's weakness against the dollar has significantly reduced the overall
increase in the Fund's net asset value, as the Fund returned a mixed performance
relative to the French stock market during the first half of 2000. Excellent
absolute and relative performances were posted for the first quarter of 2000
before the Fund lost slightly more than these gains during the second quarter.
The Fund's investment strategy has been based on market increases so the
consolidation that began during the two first weeks of March 2000 was
unanticipated.
The sector rotation that occurred during mid-March 2000 began in a market that
had turned less liquid proving to be very difficult to work with and quite
listless. From this point of view, the sale of L'Oreal shares at the beginning
of 2000 has, for the time being, proven to be quite expensive.
The Fund's overweighted services sector was a major disappointment during the
first half of 2000. The most notable disappointments were in information
technology services companies, web agencies and video game companies. Reasons
for pronounced declines by ATOS SA, Cap Gemini SA, UBI Soft Entertainment SA and
Infogrammes are now well known and include order-taking delays related to the
Year 2000 changeover as well as other technological transitions, all of which
contributed to mediocre earnings. In our opinion, many of these factors have now
been priced into the market and the work we have performed in terms of meeting
management teams in the sector has helped us to review our analyses and adjust
our positions. As a result, we should be able to create value during the second
half of 2000.
At June 30, 2000 the net asset value per share of the Fund was US $16.86 down
from US $18.13 at December 31, 1999. Under the Tax-Advantaged Managed
Distribution Plan, the Fund makes quarterly
5
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
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 fiscal year.
The market price at June 30, 2000 of US $15.00 was also down from the market
price of the Fund of US $15.3125 at December 31, 1999. The discount to net asset
value was 11.0% at June 30, 2000 and ranged between 9.6% and 19.8% during the
first half of 2000.
ECONOMIC AND FINANCIAL OVERVIEW
French economic data has provided a steady flow of excellent economic news:
While the household and business confidence indicators are at all-time highs,
nothing in recently released data suggests that this trend is drawing near its
end. The origin of this fantastic surge lies in the impressive improvement in
the labor market. Wage employment during the last twelve months grew by 500,000
jobs. The increase in employment contributed to an acceleration in the declining
unemployment rate. With the goal of a 10% unemployment rate having been met and
surpassed during the spring, France is now aiming towards an unemployment rate
of less than 9.5% by the end of 2000.
[LINE GRAPH]- UNEMPLOYMENT RATE AND HOUSEHOLD CONFIDENCE
French Household French Unemployment Rate
Confidence Indicator
12/15/90 -26 8.9
01/15/91 -29 8.9
02/15/91 -28 9
03/15/91 -18 9.1
04/15/91 -22 9.2
05/15/91 -21 9.3
06/15/91 -24 9.4
07/15/91 -27 9.6
08/15/91 -27 9.6
09/15/91 -26 9.7
10/15/91 -30 9.8
11/15/91 -31 9.9
12/15/91 -33 9.9
01/15/92 -30 10
02/15/92 -28 10.1
03/15/92 -25 10.1
04/15/92 -24 10.2
05/15/92 -22 10.3
06/15/92 -25 10.4
07/15/92 -29 10.4
08/15/92 -28 10.5
09/15/92 -27 10.5
10/15/92 -28 10.6
11/15/92 -30 10.8
12/15/92 -33 10.9
01/15/93 -33 11
02/15/93 -31 11.1
03/15/93 -29 11.3
04/15/93 -24 11.4
05/15/93 -31 11.5
06/15/93 -31 11.7
07/15/93 -36 11.9
08/15/93 -34 11.9
09/15/93 -33 12
10/15/93 -36 12.2
11/15/93 -34 12.3
12/15/93 -33 12.4
01/15/94 -29 12.4
02/15/94 -28 12.4
03/15/94 -25 12.5
04/15/94 -22 12.5
05/15/94 -17 12.5
06/15/94 -18 12.4
07/15/94 -20 12.3
08/15/94 -18 12.2
09/15/94 -15 12.1
10/15/94 -19 12
11/15/94 -22 11.9
12/15/94 -20 11.9
01/15/95 -21 11.8
02/15/95 -21 11.8
03/15/95 -20 11.8
04/15/95 -18 11.6
05/15/95 -13 11.6
06/15/95 -11 11.5
07/15/95 -16 11.4
08/15/95 -21 11.4
09/15/95 -26 11.5
10/15/95 -33 11.5
11/15/95 -37 11.6
12/15/95 -42 11.7
01/15/96 -36 11.9
02/15/96 -35 12.1
03/15/96 -32 12.3
04/15/96 -33 12.3
05/15/96 -32 12.3
06/15/96 -33 12.4
07/15/96 -35 12.4
08/15/96 -35 12.4
09/15/96 -35 12.5
10/15/96 -37 12.5
11/15/96 -38 12.5
12/15/96 -35 12.5
01/15/97 -32 12.5
02/15/97 -30 12.5
03/15/97 -31 12.5
04/15/97 -29 12.5
05/15/97 -28 12.5
06/15/97 -19 12.6
07/15/97 -21 12.5
08/15/97 -20 12.5
09/15/97 -18 12.5
10/15/97 -22 12.5
11/15/97 -25 12.4
12/15/97 -24 12.3
01/15/98 -27 12.2
02/15/98 -24 12.1
03/15/98 -17 12
04/15/98 -18 11.9
05/15/98 -12 11.9
06/15/98 -12 11.8
07/15/98 -7 11.7
08/15/98 -7 11.9
09/15/98 -7 11.8
10/15/98 -11 11.7
11/15/98 -14 11.7
12/15/98 -15 11.6
01/15/99 -10 11.5
02/15/99 -9 11.5
03/15/99 -9 11.4
04/15/99 -11 11.4
05/15/99 -9 11.4
06/15/99 -7 11.3
07/15/99 -5 11.2
08/15/99 -4 11.3
09/15/99 -3 11.1
10/15/99 -4 11
11/15/99 -3 10.9
12/15/99 -6 10.6
01/15/00 -4 10.5
02/15/00 -4 10.2
03/15/00 -2 10
04/15/00 1 9.9
05/15/00 2 9.8
06/15/00 4 9.6
6
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
Currently, the services sector has been creating the most jobs; however, very
recently, recovery in the construction sector has also started leading to new
jobs. The implementation of the 35-hour work week has provided an opportunity to
improve productivity in many cases. Nevertheless, agreements signed between
unions and employers are beginning to create new jobs as well. The improvement
in the labor market is a huge support for household consumption with its
indicator soaring to all-time highs. Household spending has primarily focused on
durable goods, new cars and household appliances.
Exports have surged since the beginning of 2000, up 9% in volume terms. External
demand has been very stable in the United States and in Asian emerging countries
and is increasing in continental Europe (Germany and Italy). The euro's weakness
against the dollar in 1999 and 2000 has stimulated European competitiveness. The
trade surplus remains at a high level, approximately 100 billion euros per year.
The euro's competitiveness has significantly fueled the recovery in industrial
production.
[LINE GRAPH- HOUSEHOLD CONSUMPTION AS A MAIN DRIVER OF FRENCH GROWTH]
French Household Consumption French Industrial Production
Expenditure (in millions of (100=January 1990)
euros)
Q4 90 157478 97.3
Q1 91 157740 96.9
Q2 91 157787 97.2
Q3 91 158354 96.7
Q4 91 159237 97.8
Q1 92 159045 97.8
Q2 92 158723 97
Q3 92 159700 96.1
Q4 92 159810 95.1
Q1 93 158130 94.3
Q2 93 159429 93.3
Q3 93 158287 93.2
Q4 93 159792 93.9
Q1 94 159060 94.8
Q2 94 159361 96.9
Q3 94 160802 98.5
Q4 94 160139 99.8
Q1 95 161357 99.9
Q2 95 163289 100.3
Q3 95 162435 100.6
Q4 95 162350 99.1
Q1 96 165104 99.8
Q2 96 163945 100.4
Q3 96 165409 100.5
Q4 96 163225 100.9
Q1 97 163391 100.8
Q2 97 163626 103.1
Q3 97 164521 105
Q4 97 166587 106.5
Q1 98 167913 107.8
Q2 98 170015 108.9
Q3 98 170998 108.8
Q4 98 172014 109
Q1 99 172522 109.4
Q2 99 173297 110.3
Q3 99 174891 111.9
Q4 99 175926 113.4
Q1 00 177437 114.3
Q2 00
7
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
[LINE GRAPH- WEAK EURO BOOSTING CORPORATE COMPETITIVENESS AND MARGINS]
The Euro Currency Versus the US Dollar
Dec-97 1.0909 Jan-99 1.1715 Jan-00 1.0266
Jan-98 1.0909 Jan-99 1.182 Jan-00 1.0312
Jan-98 1.0863 Jan-99 1.1768 Jan-00 1.0318
Jan-98 1.0738 Jan-99 1.161 Jan-00 1.0325
Jan-98 1.0699 Jan-99 1.1715 Jan-00 1.0292
Jan-98 1.0731 Jan-99 1.1578 Jan-00 1.0259
Jan-98 1.0764 Jan-99 1.1499 Jan-00 1.0331
Jan-98 1.0751 Jan-99 1.1565 Jan-00 1.0312
Jan-98 1.0751 Jan-99 1.1663 Jan-00 1.0259
Jan-98 1.0764 Jan-99 1.1702 Jan-00 1.0141
Jan-98 1.0751 Jan-99 1.1565 Jan-00 1.0115
Jan-98 1.0692 Jan-99 1.1597 Jan-00 1.0135
Jan-98 1.0686 Jan-99 1.1604 Jan-00 1.0128
Jan-98 1.0672 Jan-99 1.1565 Jan-00 1.0174
Jan-98 1.0653 Jan-99 1.1597 Jan-00 1.0082
Jan-98 1.0764 Jan-99 1.1591 Jan-00 1.0095
Jan-98 1.085 Jan-99 1.1551 Jan-00 1.001
Jan-98 1.102 Jan-99 1.1558 Jan-00 1.0016
Jan-98 1.0915 Jan-99 1.144 Jan-00 0.9885
Jan-98 1.0968 Jan-99 1.1414 Jan-00 0.9754
Jan-98 1.0797 Jan-99 1.1361 Jan-00 0.9702
Jan-98 1.0712 Feb-99 1.1302 Feb-00 0.9715
Jan-98 1.0692 Feb-99 1.1341 Feb-00 0.9767
Feb-98 1.0758 Feb-99 1.1302 Feb-00 0.9905
Feb-98 1.0804 Feb-99 1.1335 Feb-00 0.9826
Feb-98 1.0863 Feb-99 1.1263 Feb-00 0.9807
Feb-98 1.0954 Feb-99 1.1328 Feb-00 0.9866
Feb-98 1.083 Feb-99 1.1302 Feb-00 0.9931
Feb-98 1.0777 Feb-99 1.1328 Feb-00 0.9846
2/98 1.0823 Feb-99 1.123 Feb-00 0.9866
Feb-98 1.0764 Feb-99 1.1289 Feb-00 0.9793
Feb-98 1.0817 Feb-99 1.1289 Feb-00 0.9813
Feb-98 1.0764 Feb-99 1.1204 Feb-00 0.9866
Feb-98 1.0764 Feb-99 1.125 Feb-00 0.9885
Feb-98 1.0718 Feb-99 1.1197 Feb-00 0.9852
Feb-98 1.0745 Feb-99 1.1066 Feb-00 0.9852
Feb-98 1.0777 Feb-99 1.1033 Feb-00 1.003
Feb-98 1.0745 Feb-99 1.1007 Feb-00 1.003
Feb-98 1.0902 Feb-99 1.1 Feb-00 0.9931
Feb-98 1.0889 Feb-99 1.104 Feb-00 0.9741
Feb-98 1.0764 Feb-99 1.1027 Feb-00 0.9721
Feb-98 1.0784 Mar-99 1.0895 Feb-00 0.9656
Feb-98 1.0771 Mar-99 1.0935 Mar-00 0.9728
Mar-98 1.0784 Mar-99 1.0889 Mar-00 0.9649
3/98 1.0804 Mar-99 1.081 Mar-00 0.961
3/98 1.0751 Mar-99 1.083 Mar-00 0.959
3/98 1.0672 Mar-99 1.0882 Mar-00 0.9597
3/98 1.0672 Mar-99 1.0889 Mar-00 0.961
3/98 1.0705 Mar-99 1.0948 Mar-00 0.9662
Mar-98 1.0692 Mar-99 1.1033 Mar-00 0.9636
Mar-98 1.0666 Mar-99 1.0915 Mar-00 0.9649
Mar-98 1.0705 Mar-99 1.0935 Mar-00 0.9675
3/98 1.0764 Mar-99 1.0994 Mar-00 0.9682
3/98 1.0758 Mar-99 1.0994 Mar-00 0.9715
3/98 1.0758 Mar-99 1.0974 Mar-00 0.9721
3/98 1.0718 Mar-99 1.0895 Mar-00 0.9728
3/98 1.0705 Mar-99 1.0909 Mar-00 0.9643
3/98 1.0692 Mar-99 1.0915 Mar-00 0.961
3/98 1.0718 Mar-99 1.0882 Mar-00 0.9715
3/98 1.0705 Mar-99 1.0836 Mar-00 0.9774
3/98 1.0712 Mar-99 1.0771 Mar-00 0.9669
3/98 1.0751 Mar-99 1.0735 Mar-00 0.9603
3/98 1.0712 Mar-99 1.0718 Mar-00 0.9518
3/98 1.06 Mar-99 1.077 Mar-00 0.9609
3/98 1.0587 Apr-99 1.079 Mar-00 0.9557
Apr-98 1.0561 Apr-99 1.0784 Apr-00 0.957
Apr-98 1.0554 Apr-99 1.0712 Apr-00 0.9623
Apr-98 1.0594 Apr-99 1.085 Apr-00 0.9649
Apr-98 1.0633 Apr-99 1.0777 Apr-00 0.9584
Apr-98 1.0646 Apr-99 1.0751 Apr-00 0.9544
Apr-98 1.0784 Apr-99 1.0797 Apr-00 0.9623
Apr-98 1.0731 Apr-99 1.081 Apr-00 0.959
Apr-98 1.0731 Apr-99 1.0777 Apr-00 0.9584
Apr-98 1.0731 Apr-99 1.0804 Apr-00 0.9544
Apr-98 1.0863 Apr-99 1.0705 Apr-00 0.961
Apr-98 1.0869 Apr-99 1.0699 Apr-00 0.9524
Apr-98 1.0843 Apr-99 1.0666 Apr-00 0.9475
Apr-98 1.0823 Apr-99 1.0633 Apr-00 0.9406
Apr-98 1.0863 Apr-99 1.0607 Apr-00 0.9375
Apr-98 1.0961 Apr-99 1.064 Apr-00 0.938
Apr-98 1.0909 Apr-99 1.0613 Apr-00 0.9374
Apr-98 1.0909 Apr-99 1.0587 Apr-00 0.9216
Apr-98 1.0922 Apr-99 1.0666 Apr-00 0.9236
Apr-98 1.0941 Apr-99 1.064 Apr-00 0.9098
Apr-98 1.0909 Apr-99 1.0594 Apr-00 0.9118
Apr-98 1.0895 Apr-99 1.0581 May-00 0.9157
Apr-98 1.0895 May-99 1.0574 May-00 0.9085
May-98 1.0974 May-99 1.0627 May-00 0.8954
May-98 1.0994 May-99 1.0758 May-00 0.8901
May-98 1.1066 May-99 1.0804 May-00 0.8973
May-98 1.1027 May-99 1.0764 May-00 0.898
May-98 1.1066 May-99 1.0784 May-00 0.9078
May-98 1.1053 May-99 1.0718 May-00 0.9065
May-98 1.1007 May-99 1.0653 May-00 0.9013
May-98 1.102 May-99 1.0666 May-00 0.919
May-98 1.0994 May-99 1.0666 May-00 0.9118
May-98 1.0994 May-99 1.0672 May-00 0.9006
May-98 1.0961 May-99 1.0679 May-00 0.8947
May-98 1.0954 May-99 1.0659 May-00 0.8941
May-98 1.0968 May-99 1.0627 May-00 0.8993
May-98 1.1046 May-99 1.0579 May-00 0.9033
May-98 1.1132 May-99 1.06 May-00 0.9065
May-98 1.1125 May-99 1.0613 May-00 0.9059
May-98 1.1125 May-99 1.0456 May-00 0.9124
May-98 1.1046 May-99 1.0436 May-00 0.9315
May-98 1.0974 May-99 1.0423 May-00 0.9315
May-98 1.0987 May-99 1.0423 May-00 0.9301
May-98 1.0948 Jun-99 1.0449 May-00 0.9378
Jun-98 1.1 Jun-99 1.0358 Jun-00 0.9321
Jun-98 1.0987 Jun-99 1.0325 Jun-00 0.9439
Jun-98 1.1053 Jun-99 1.0377 Jun-00 0.9485
Jun-98 1.1079 Jun-99 1.0292 Jun-00 0.9538
Jun-98 1.1027 Jun-99 1.0463 Jun-00 0.9623
Jun-98 1.0994 Jun-99 1.0476 Jun-00 0.9564
Jun-98 1.0987 Jun-99 1.0482 Jun-00 0.9531
Jun-98 1.0895 Jun-99 1.0528 Jun-00 0.9531
Jun-98 1.0817 Jun-99 1.0423 Jun-00 0.961
Jun-98 1.0836 Jun-99 1.043 Jun-00 0.9577
Jun-98 1.081 Jun-99 1.0305 Jun-00 0.9538
Jun-98 1.0876 Jun-99 1.0338 Jun-00 0.9649
Jun-98 1.0948 Jun-99 1.039 Jun-00 0.961
Jun-98 1.0902 Jun-99 1.0351 Jun-00 0.9557
Jun-98 1.0941 Jun-99 1.0325 Jun-00 0.9459
Jun-98 1.0909 Jun-99 1.0331 Jun-00 0.9406
Jun-98 1.0856 Jun-99 1.0417 Jun-00 0.9367
Jun-98 1.085 Jun-99 1.043 Jun-00 0.9387
Jun-98 1.0882 Jun-99 1.0351 Jun-00 0.9446
Jun-98 1.081 Jun-99 1.0331 Jun-00 0.9446
Jun-98 1.081 Jun-99 1.0344 Jun-00 0.9511
Jun-98 1.0817 Jul-99 1.0233 Jun-00 0.9544
Jul-98 1.0764 Jul-99 1.0239 Jul-00 0.9524
Jul-98 1.0745 Jul-99 1.0239 Jul-00 0.9505
Jul-98 1.0745 Jul-99 1.0239 Jul-00 0.9544
Jul-98 1.0797 Jul-99 1.022 Jul-00 0.9531
Jul-98 1.079 Jul-99 1.022 Jul-00 0.9472
Jul-98 1.0764 Jul-99 1.018 Jul-00 0.9524
Jul-98 1.0699 Jul-99 1.0148 Jul-00 0.9498
Jul-98 1.0771 Jul-99 1.0174 Jul-00 0.94
Jul-98 1.0869 Jul-99 1.0207 Jul-00 0.9347
Jul-98 1.0843 Jul-99 1.0194 Jul-00 0.9374
Jul-98 1.0876 Jul-99 1.02 Jul-00 0.9347
Jul-98 1.0954 Jul-99 1.0299 Jul-00 0.9328
Jul-98 1.0994 Jul-99 1.041 Jul-00 0.9236
Jul-98 1.0981 Jul-99 1.0535 Jul-00 0.9295
Jul-98 1.0948 Jul-99 1.0515 Jul-00 0.9374
Jul-98 1.0961 Jul-99 1.0502 Jul-00 0.9321
Jul-98 1.0954 Jul-99 1.0653 Jul-00 0.9387
Jul-98 1.0994 Jul-99 1.0624 Jul-00 0.9413
Jul-98 1.0941 Jul-99 1.0666 Jul-00 0.9334
Jul-98 1.1046 Jul-99 1.0725 Jul-00 0.9236
Jul-98 1.104 Jul-99 1.0712 Jul-00 0.9275
Jul-98 1.0987 Aug-99 1.0699 Aug-00 0.9157
Jul-98 1.1014 Aug-99 1.0679 Aug-00 0.9137
Aug-98 1.0968 Aug-99 1.0777 Aug-00 0.9137
Aug-98 1.104 Aug-99 1.0758
Aug-98 1.1053 Aug-99 1.0758
Aug-98 1.104 Aug-99 1.0718
Aug-98 1.0994 Aug-99 1.0712
Aug-98 1.1014 Aug-99 1.0653
Aug-98 1.0981 Aug-99 1.0666
Aug-98 1.0954 Aug-99 1.0567
Aug-98 1.0961 Aug-99 1.0574
Aug-98 1.0863 Aug-99 1.0515
Aug-98 1.0909 Aug-99 1.0522
Aug-98 1.0863 Aug-99 1.064
Aug-98 1.0882 Aug-99 1.0672
Aug-98 1.0876 Aug-99 1.0495
Aug-98 1.0882 Aug-99 1.0541
Aug-98 1.0902 Aug-99 1.0417
Aug-98 1.0869 Aug-99 1.0449
Aug-98 1.0869 Aug-99 1.0463
Aug-98 1.0889 Aug-99 1.0493
Aug-98 1.1125 Aug-99 1.0574
Aug-98 1.1164 Sep-99 1.0581
Sep-98 1.1171 Sep-99 1.0692
Sep-98 1.1184 Sep-99 1.0613
Sep-98 1.1315 Sep-99 1.0613
Sep-98 1.1302 Sep-99 1.0587
Sep-98 1.1302 Sep-99 1.06
Sep-98 1.1322 Sep-99 1.0541
Sep-98 1.1368 Sep-99 1.0371
Sep-98 1.161 Sep-99 1.0423
Sep-98 1.1551 Sep-99 1.0351
Sep-98 1.1525 Sep-99 1.041
Sep-98 1.1565 Sep-99 1.0364
Sep-98 1.1545 Sep-99 1.0417
Sep-98 1.1525 Sep-99 1.0358
Sep-98 1.1538 Sep-99 1.0495
Sep-98 1.1571 Sep-99 1.0443
Sep-98 1.1624 Sep-99 1.0502
Sep-98 1.1656 Sep-99 1.0449
Sep-98 1.1683 Sep-99 1.0463
Sep-98 1.165 Sep-99 1.0528
Sep-98 1.1676 Sep-99 1.0646
Sep-98 1.1689 Sep-99 1.0692
Sep-98 1.1722 Oct-99 1.0725
Oct-98 1.1873 Oct-99 1.0738
Oct-98 1.1873 Oct-99 1.0738
Oct-98 1.1965 Oct-99 1.0686
Oct-98 1.2011 Oct-99 1.0712
Oct-98 1.2102 Oct-99 1.0627
Oct-98 1.1971 Oct-99 1.0627
Oct-98 1.1945 Oct-99 1.0764
Oct-98 1.184 Oct-99 1.081
10/98 1.1978 Oct-99 1.0777
10/98 1.1932 Oct-99 1.0895
10/98 1.2096 Oct-99 1.0823
10/98 1.2089 Oct-99 1.083
10/98 1.1997 Oct-99 1.0745
10/98 1.1938 Oct-99 1.0804
10/98 1.1847 Oct-99 1.0692
10/98 1.1952 Oct-99 1.0672
10/98 1.1945 Oct-99 1.0594
10/98 1.1768 Oct-99 1.0508
10/98 1.1827 Oct-99 1.0515
10/98 1.182 Oct-99 1.0548
10/98 1.1833 Nov-99 1.0516
10/98 1.1827 Nov-99 1.0522
Nov-98 1.1827 Nov-99 1.0482
Nov-98 1.1794 Nov-99 1.0377
Nov-98 1.1729 Nov-99 1.0417
Nov-98 1.1781 Nov-99 1.039
Nov-98 1.1689 Nov-99 1.0403
Nov-98 1.1591 Nov-99 1.0449
Nov-98 1.1624 Nov-99 1.0403
Nov-98 1.1663 Nov-99 1.0318
Nov-98 1.161 Nov-99 1.0331
11/98 1.161 Nov-99 1.0318
11/98 1.1722 Nov-99 1.041
11/98 1.1715 Nov-99 1.0299
11/98 1.1676 Nov-99 1.0305
11/98 1.1604 Nov-99 1.0318
11/98 1.1558 Nov-99 1.0279
11/98 1.1486 Nov-99 1.0187
11/98 1.1479 Nov-99 1.0187
11/98 1.1486 Nov-99 1.0154
11/98 1.1486 Nov-99 1.0102
11/98 1.142 Nov-99 1.0089
11/98 1.1551 Dec-99 1.0082
Dec-98 1.1617 Dec-99 1.0016
Dec-98 1.1702 Dec-99 1.0023
Dec-98 1.1715 Dec-99 1.0226
Dec-98 1.1669 Dec-99 1.0253
Dec-98 1.1637 Dec-99 1.0279
Dec-98 1.1735 Dec-99 1.0207
Dec-98 1.1722 Dec-99 1.0128
Dec-98 1.184 Dec-99 1.0141
12/98 1.1866 Dec-99 1.0043
12/98 1.1788 Dec-99 1.0062
12/98 1.1689 Dec-99 1.0167
12/98 1.1729 Dec-99 1.0089
12/98 1.1748 Dec-99 1.0141
12/98 1.1709 Dec-99 1.0102
12/98 1.1702 Dec-99 1.0095
12/98 1.1683 Dec-99 1.0154
12/98 1.163 Dec-99 1.0154
12/98 1.1669 Dec-99 1.0135
12/98 1.1696 Dec-99 1.0069
12/98 1.165 Dec-99 1.0049
Dec-99 1.0075
Dec-99 1.0069
Business investment, up 7.7% in 1999, will continue to grow robustly this year.
Relentless competition and technical progress are resulting in a constant
modernization of capital goods primarily in the information technology and
communications sectors. Although France, like Europe as a whole, admittedly lags
behind the United States with regard to the development of the information and
communications sectors (i.e., telecommunications, information technology,
communications and electronics), there has been a marked acceleration under way
for more than two years. Since early 2000, more than one new company out of
twenty has emerged from one of these sectors. In France, there are now
approximately 6 million internet users with 23% of households owning a computer.
This trend stems primarily from the internet phenomenon as well as from the
introduction of new, attractive, high technology goods (mobile telephones,
micro-computers, digital television and DVD players).
Telecommunications industries have also benefited from the red-hot growth in
mobile telephones. The number of French mobile phone subscribers has lifted the
ownership rate of equipment to 35% with an annual growth rate at a still
impressive 12%.
8
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
In summary, the prospect of the French gross domestic product ("GDP") growing
3.7% this year is turning out to be a very realistic estimate.
The government budget deficit is benefiting from the above factors so tax
receipts are surprisingly good. Thus, the government now enjoys more room for
budgetary maneuvers. During the first half of 2000, the government decided to
cut taxes by an additional 40 billion french francs, in addition to a
39 billion french franc tax cut already decided in September 1999. Undoubtedly,
the recent implementation of tax reforms in Germany will trigger a positive
discussion in the budget debate for fiscal year 2001 in France.
[BAR GRAPH- EXTERNAL DEMAND HAS REBOUNDED SINCE THE ASIAN CRISIS]
Q4 91 -1527.7 Q4 91 56173
Q1 92 -468 Q1 92 57702
Q2 92 604 Q2 92 58400
Q3 92 -161.9 Q3 92 57362
Q4 92 -229.4 Q4 92 55610
Q1 93 931.3 Q1 93 57320
Q2 93 2109.3 Q2 93 55690
Q3 93 2691.9 Q3 93 57017
Q4 93 2450.5 Q4 93 58904
Q1 94 963.3 Q1 94 58309
Q2 94 1828.6 Q2 94 61046
Q3 94 1825 Q3 94 62383
Q4 94 2067.8 Q4 94 65345
Q1 95 2283.7 Q1 95 66664
Q2 95 2698 Q2 95 67342
Q3 95 1408.5 Q3 95 66375
Q4 95 1897.4 Q4 95 66016
Q1 96 2564.3 Q1 96 67924
Q2 96 2148.9 Q2 96 67592
Q3 96 3383.6 Q3 96 68757
Q4 96 3093.5 Q4 96 70373
Q1 97 4856.1 Q1 97 72887
Q2 97 6605.3 Q2 97 75873
Q3 97 6303.9 Q3 97 78299
Q4 97 6018.2 Q4 97 80689
Q1 98 5847.2 Q1 98 82428
Q2 98 5641.5 Q2 98 83261
Q3 98 5586.3 Q3 98 83528
Q4 98 4619.1 Q4 98 82337
Q1 99 4370.1 Q1 99 82156
Q2 99 4200.7 Q2 99 84373
Q3 99 5448.1 Q3 99 88142
Q4 99 2945.3 Q4 99 59512
Q1 00 2080.3 Q1 00 91833
Q2 00 Q2 00
THE EQUITY MARKET
The first half of the year was marked by extremely abrupt market swings causing
significant volatility in securities. In early 2000, the markets surged although
the rise was concentrated exclusively on technology, media and telecom stocks.
The rest of the market was virtually ignored which was in part reflected by a
sharp fall in prices of cyclical and financial stocks. Seldom has the market
posted such a highly concentrated increase with only 15% of listed stocks
profiting from the bull run.
9
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
Due to the lack of depth in the market, not only was the concentration extreme
but levels of volatility also rose significantly.
[LINE GRAPH- FRENCH EQUITY MARKET PERFORMANCE OF LARGE-CAPS]
Large-Cap Large-Cap
Traditional Traditional
Stocks on Stocks on
SBF 120 SBF 120
Index Index
12/31/99 100 4/3/00 102.2
1/3/00 99.57 4/4/00 103.51
1/4/00 95.57 4/5/00 100.45
1/5/00 92.38 4/6/00 103.85
1/6/00 91.99 4/7/00 105.21
1/7/00 93.62 4/10/00 106.1
1/10/00 95.59 4/11/00 104.36
1/11/00 95.04 4/12/00 103.97
1/12/00 94.37 4/13/00 104.22
1/13/00 95.24 4/14/00 100.88
1/14/00 97.68 4/17/00 100.56
1/17/00 98.59 4/18/00 102
1/18/00 95.89 4/19/00 102.38
1/19/00 95.48 4/20/00 103.53
1/20/00 96.43 4/21/00 103.53
1/21/00 95.9 4/24/00 103.53
1/24/00 95.86 4/25/00 104.72
1/25/00 94.54 4/26/00 106.1
1/26/00 95.44 4/27/00 103.95
1/27/00 96.1 4/28/00 106.73
1/28/00 96.71 5/1/00 106.73
1/31/00 95.45 5/2/00 109.07
2/1/00 97.09 5/3/00 107.16
2/2/00 99.86 5/4/00 108.13
2/3/00 102.97 5/5/00 109.09
2/4/00 104.82 5/8/00 108.69
2/7/00 103.71 5/9/00 106.41
2/8/00 105.2 5/10/00 104.72
2/9/00 104.84 5/11/00 106.49
2/10/00 103.84 5/12/00 107.69
2/11/00 105.24 5/15/00 106.79
2/14/00 105.02 5/16/00 109.39
2/15/00 102.34 5/17/00 107.77
2/16/00 101.67 5/18/00 107.6
2/17/00 103.31 5/19/00 103.41
2/18/00 101.76 5/22/00 101.38
2/21/00 100.06 5/23/00 102.15
2/22/00 99.98 5/24/00 99.91
2/23/00 101.28 5/25/00 102.01
2/24/00 102.18 5/26/00 101.93
2/25/00 104.02 5/29/00 103.19
2/28/00 102.77 5/30/00 105.13
2/29/00 104.19 5/31/00 106.78
3/1/00 105.67 6/1/00 109.49
3/2/00 109.04 6/2/00 110.68
3/3/00 109.57 6/5/00 110.44
3/6/00 110.4 6/6/00 109.44
3/7/00 108.63 6/7/00 108.07
3/8/00 106.96 6/8/00 108.61
3/9/00 108.28 6/9/00 109.02
3/10/00 109.65 6/12/00 109.02
3/13/00 106.62 6/13/00 108.65
3/14/00 106.77 6/14/00 109.94
3/15/00 104.02 6/15/00 108.35
3/16/00 104.62 6/16/00 107.72
3/17/00 105.74 6/19/00 100.51
3/20/00 106.75 6/20/00 109.24
3/21/00 105.85 6/21/00 108.18
3/22/00 105.19 6/22/00 107.89
3/23/00 104.72 6/23/00 108.85
3/24/00 106.24 6/26/00 109.55
3/27/00 108.07 6/27/00 109.31
3/28/00 109.33 6/28/00 109.76
3/29/00 108.75 6/29/00 106.44
3/30/00 105.28 6/30/00 107.38
3/31/00 105.12
At the end of the first quarter of 2000, valuations were very tight. The first
signs of weakness in the Nasdaq combined with the mediocre success met by the
initial public offerings ("IPOs") for World On Line and Lycos confirmed the
impression that uncertainty was on the rise in the markets.
The market then suddenly switched out of new-economy stocks and into old-economy
stocks. Thus, since their high on March 6, 2000, new-economy stocks have been
hit with three successive correction waves. The first began just before the end
of the first quarter and was based on the fact that valuations had become too
speculative. The second occurred after a dramatic rebound in April when certain
companies, which were operating in markets enjoying robust growth, began
experiencing deteriorating profit margins. The third stemmed from concerns
regarding possible interest rate hikes, seen as likely to dampen growth and
therefore undermine profitability scenarios based on expectations that were
deemed too optimistic at that time.
10
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
[LINE GRAPH- FRENCH EQUITY MARKET PERFORMANCE MID AND SMALL-CAPS]
Mid-Cap Mid-Cap
Technology Technology
Stocks on Stocks on
Nouveau Marche Nouveau Marche
Index Index
12/31/99 100 4/3/00 163.38
1/3/00 104.4 4/4/00 150.8
1/4/00 102.74 4/5/00 134.96
1/5/00 94.18 4/6/00 159.49
1/6/00 95.92 4/7/00 169.32
1/7/00 98.82 4/10/00 171.92
1/10/00 105.13 4/11/00 158.49
1/11/00 105.38 4/12/00 158.71
1/12/00 103.7 4/13/00 153.8
1/13/00 103.91 4/14/00 152.17
1/14/00 106.8 4/17/00 144.81
1/17/00 112.28 4/18/00 142.79
1/18/00 115.12 4/19/00 144.39
1/19/00 118.29 4/20/00 144.55
1/20/00 123.48 4/21/00 144.55
1/21/00 124.29 4/24/00 144.55
1/24/00 129.23 4/25/00 142.9
1/25/00 129.87 4/26/00 145.47
1/26/00 139.29 4/27/00 138.74
1/27/00 139.6 4/28/00 142.65
1/28/00 140.15 5/1/00 142.65
1/31/00 135.55 5/2/00 149.19
2/1/00 135.03 5/3/00 148.44
2/2/00 136.77 5/4/00 150.34
2/3/00 141.31 5/5/00 152.07
2/4/00 149.78 5/8/00 152.07
2/7/00 157.94 5/9/00 152.87
2/8/00 163.8 5/10/00 150.62
2/9/00 168.61 5/11/00 149.62
2/10/00 166.77 5/12/00 153.33
2/11/00 176.25 5/15/00 153.1
2/14/00 185.96 5/16/00 156.55
2/15/00 194.63 5/17/00 156.16
2/16/00 183.83 5/18/00 153.3
2/17/00 181.69 5/19/00 143.73
2/18/00 189.86 5/22/00 132.99
2/21/00 183.54 5/23/00 132.75
2/22/00 181.19 5/24/00 123.64
2/23/00 187.76 5/25/00 127.33
2/24/00 201.13 5/26/00 124.34
2/25/00 205.64 5/29/00 126.61
2/28/00 199.99 5/30/00 127.52
2/29/00 201.69 5/31/00 131.22
3/1/00 211.71 6/1/00 134.2
3/2/00 224.11 6/2/00 141.71
3/3/00 240.2 6/5/00 142.39
3/6/00 251.46 6/6/00 140.22
3/7/00 246.9 6/7/00 136.96
3/8/00 243.8 6/8/00 139.19
3/9/00 249.84 6/9/00 140.35
3/10/00 251.5 6/12/00 140.35
3/13/00 237.91 6/13/00 137.68
3/14/00 236.59 6/14/00 138.72
3/15/00 213.39 6/15/00 135.89
3/16/00 202.48 6/16/00 136.4
3/17/00 213.63 6/19/00 134.36
3/20/00 220.38 6/20/00 133.62
3/21/00 201.38 6/21/00 130.96
3/22/00 193.34 6/22/00 130.01
3/23/00 182.29 6/23/00 127.97
3/24/00 191.3 6/26/00 128.24
3/27/00 201.92 6/27/00 128.91
3/28/00 208.46 6/28/00 128.15
3/29/00 205.29 6/29/00 125.85
3/30/00 180.53 6/30/00 125.75
3/31/00 180.93
The magnitude of the consolidation currently underway has been proportional to
the speculative frenzy that preceded it. Recent news can justify some of the
concerns: a slowdown in mobile telephone growth, doubts voiced by companies as
to the profitability of UMTS licenses, and postponements of IPOs and meltdowns
of certain flagship stocks in the Nouveau Marche.
In summary, the energy, consumer goods, banking and insurance sectors have been
the winners in this highly turbulent period.
11
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
[BAR GRAPH- SBF 250 INDEX, PERFORMANCE BY SECTOR DURING THE FIRST HALF OF 2000]
Energy 21.80%
Basic Products -19.70%
Construction -11.00%
Capital Goods 15.00%
Automobiles/Autopart Suppliers -8.70%
Consumer Goods 19.10%
Food & Beverage 4.00%
Retail -15.70%
Services 5.30%
Real Estate -0.50%
Financial Services 11.80%
Diversified Holdings 5.00%
INVESTMENT STRATEGY
As early as the beginning of January 2000, we launched a process aimed at
widening our investment horizon to smaller capitalization stocks. We found some
of these stocks to be highly attractive. The small-cap segment offers investment
opportunities both on currently undervalued securities sensitive to domestic
activity as well as on young companies posting robust growth which also have
exposure to the new technologies sector.
We have selected for the Fund primarily a group of stocks recording very healthy
growth, holding significant competitive advantages and boosted by top-quality
management teams. Most of the new stocks acquired were in the capital goods
sector (Thomson Multimedia and A Novo) and the services sector (Ipsos, Consodata
SA and Ilog SA).
To finance these acquisitions, we initially reduced the weighting in the
financial services sector, most notably AXA SA and Societe Generale. Pressures
on interest rates built up during early 2000 and the sector as a whole was
affected by the potential marketing growth of all types of financial products
over
12
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
the internet. Note also that L'Oreal is currently valued at 45 times current
year's earnings with earnings growth approximately 12%. With the improvement in
the economic situation, this type of growth is no longer a rare phenomenon and
the current premium granted by the market could be undermined.
Trends in the markets during the second quarter of 2000 required an adjustment
in our investment strategy as the Fund's portfolio had been excessively exposed
to the consolidation of technology, media and telecom stocks. Thus, according to
market opportunities, we have reduced our positions in the media and telecom
stocks including Vivendi SA, Canal Plus, Television Francaise 1, Equant and
Bouygues.
Following the sharp increase recorded on the Nouveau Marche since our first
purchases, our overall exposure level was reviewed and reduced. We sold some
holdings, like Europstat, Integra and Wavecom, as their valuations seemed tight
as well as Titus Interactive following a surprise profit warning. The weighting
of other stocks like A Novo and Avenir Telecom, was simply reduced.
[BAR GRAPH- MAIN SHIFTS BY SECTOR DURING THE FIRST HALF OF 2000]
Energy 1.30%
Basic Products 0.70%
Construction -1.40%
Capital Goods -2.20%
Consumer Goods -1.50%
Food & Beverage -1.30%
Retail 2.80%
Services 1.80%
Diversified Holdings 0.50%
13
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
Our next purchases then switched to the retail sector. Casino Guichard Perrachon
et Cie as well as Carrefour Supermarche, both less cyclical than the market
average, should subsequently benefit from their status as safe-haven securities.
Similarly, we selected and reinforced our holdings in a few major defensive
stocks: Sanofi Synthelabo in pharmaceuticals, Essilor International in consumer
goods, Sodexho Alliance SA in services companies as well as Air Liquide.
Additionally, we moved back into AXA SA and Societe Generale.
We also added to our positions in the oil sector by increasing the weight of
Total Fina SA in our portfolio. Oil stocks are benefiting from a noticeably
bouyant environment given high oil prices coupled with the dollar's sharp rise
against the euro. A smaller company, Geophysique, was acquired in anticipation
of the announcement of a recovery in oil exploration investments.
[BAR GRAPH- OVER/UNDER ALLOCATION VS. BENCHMARK (SBF 120 INDEX)]
Consumer Goods -3.70%
Food & Beverage -3.00%
Construction -1.20%
Basic Products -0.90%
Diversified Holdings -0.80%
Financial Services -0.70%
Real Estate -0.40%
Automobile/Autopart Suppliers 0.10%
Capital Goods 0.70%
Energy 1.70%
Retail 3.90%
Services 4.40%
14
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
TOP 10 HOLDINGS IN THE PORTFOLIO AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
SECURITIES ACTIVITY
--------------------------------------------------------------------------------
TOTAL FINA SA ENERGY
FRANCE TELECOM SA CAPITAL GOODS
ALCATEL CAPITAL GOODS
AVENTIS SA CONSUMER GOODS
AXA SA FINANCIAL SERVICES
CARREFOUR SUPERMARCHE RETAIL
VIVENDI SA SERVICES
STMICROELECTRONICS CAPITAL GOODS
BANQUE NATIONALE DE PARIS FINANCIAL SERVICES
SUEZ-LYONNAISE DES EAUX SA SERVICES
15
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
MARKET OUTLOOK
[TRENDS IN ANALYSTS' EARNINGS GROWTH FORECASTS
FOR 2000-2001 SBF 120 INDEX COMPANIES]
Trend of Expected 2000 EPS Trend of Expected 2001 EPS
Jan-99 14.8
Feb-99 15.4
Mar-99 15.9
Apr-99 16.4
May-99 16.2
Jun-99 17
Jul-99 17.3
Aug-99 17.3
Sep-99 18
Oct-99 17.7
Nov-99 17.6
Dec-99 19.2
Jan-00 19.3 15.8
Feb-00 20 15.4
Mar-00 18.9 16.3
Apr-00 19.2 16.5
May-00 19.6 16.7
Jun-00 20.2 16.7
Jul-00 20.6 16.8
Aug-00
Sep-00
Oct-00
Expected earnings growth in France remains exceptionally vigorous. Among all
major European indices, the French market shows the highest proportion of upward
revisions of earnings estimates, as companies benefit from the vibrant domestic
cyclical upturn combined with the ongoing improvement in external demand and the
dollar's very high level. In France, all sectors are contributing positively to
earnings growth including oil, construction, advertising, automobile and
financial services.
However, the stock market has already priced in a lot of this good news and
although current earnings reports confirm expectations, they are not giving rise
to a fresh impetus. In fact, in quite a few cases, excellent earnings have lead
to profit-taking because of the belief that earnings have peaked and future
increases are becoming more uncertain.
16
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
Still under the shock of the first half of 2000 which posted far lower
performance than had been hoped for at the beginning of the year, investors are
becoming very reluctant to take risks. The market's very negative reaction to
the announcement of the Vivendi-Seagram merger illustrates this point. One of
the dominant characteristics of this financial operation is to lower future
expectations of Vivendi's earnings prospects, which is exactly the opposite of
what the market is looking for at the moment. This risk aversion is also seen in
the persistent trouble encountered by new-economy companies in terms of
developing investor interest in increases in capital or new IPOs.
In other words, we believe the market will remain turbulent and volatile during
the third quarter and that during the fourth quarter of this year, 2001
prospects will be decided in terms of price trends. Right now, there is every
reason to turn bullish again with regard to how the French market will perform.
[PIE CHART- PORTFOLIO BREAKDOWN AT JUNE 30, 2000
(AS A PERCENTAGE OF NET ASSETS)]
Capital Goods 25.0% 25.00%
Automobiles/Autopart Suppliers 2.0% 2.00%
Consumer Goods 8.0% 8.00%
Food & Beverage 2.0% 2.00%
Retail 11.0% 11.00%
Services 19.0% 19.00%
Diversified Holdings 1.0% 1%
Financial Services 12.0% 12%
Other Assets Less Liabilities 7.0% 7.00%
Energy 10.0% 10.00%
Basic Products 1.0% 1.00%
Construction 2.0% 2.00%
17
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS (continued)
--------------------------------------------------------------------------------
FRENCH MARKET RATIOS
--------------------
Current Level
Based on Consensus
SBF 120 INDEX Estimates
---------------------------------------------------------------------
Price Earning Ratio - 2000 (Estimate) 27.20x
---------------------------------------------------------------------
Price Earning Ratio - 2001 (Estimate) 23.20x
---------------------------------------------------------------------
Price/Book Value - 2000 3.77%
---------------------------------------------------------------------
Global Yield - 2000 1.80%
---------------------------------------------------------------------
10 Year Bond Yield 5.37%
---------------------------------------------------------------------
Short-Term Rate (3 Months) 4.38%
---------------------------------------------------------------------
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 Chairman of the Board
The France Growth Fund, Inc. The France Growth Fund, Inc.
August 11, 2000
18
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
FRENCH EQUITIES -- 93.32%
------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ------------
<S> <C> <C>
AUTOMOBILES/AUTOPART SUPPLIERS -- 2.34%
14,920 Peugeot SA............................................. $ 2,987,529
47,270 Renault SA............................................. 2,143,400
16,280 Valeo.................................................. 868,466
------------
5,999,395
------------
<CAPTION>
BASIC PRODUCTS -- 0.76%
<S> <C> <C>
9,020 Air Liquide............................................ 1,173,729
45,680 Rhodia SA.............................................. 765,860
------------
1,939,589
------------
<CAPTION>
CAPITAL GOODS -- 25.45%
<S> <C> <C>
6,553 A Novo (b)............................................. 1,610,536
238,495 Alcatel (a)............................................ 15,607,976
10,400 Avenir Telecom (b)..................................... 2,080,478
35,174 Equant (b)............................................. 1,426,047
159,877 France Telecom SA...................................... 22,296,549
14,157 Legrand................................................ 3,169,200
2,550 Sagem SA............................................... 2,982,972
28,255 Schneider Electric SA.................................. 1,964,847
143,005 STMicroelectronics (b)................................. 8,990,953
80,570 Thomson Multimedia (b)................................. 5,203,717
------------
65,333,275
------------
<CAPTION>
CONSTRUCTION -- 2.53%
<S> <C> <C>
5,970 Bouygues............................................... 3,980,915
7,507 Compagnie de Saint-Gobain (a).......................... 1,012,605
12,497 Lafarge SA............................................. 969,038
2,776 Lafarge SA Warrants expiring 03/20/01 (b).............. 9,255
10,575 Lapeyre................................................ 533,908
------------
6,505,721
------------
<CAPTION>
CONSUMER GOODS -- 7.94%
<S> <C> <C>
154,088 Aventis SA (a)......................................... 11,221,654
18,895 Clarins................................................ 1,942,133
7,475 Essilor International.................................. 2,137,630
8,200 Hermes International................................... 1,105,302
42,470 Neopost SA (b)......................................... 1,373,512
54,875 Sanofi Synthelabo...................................... 2,608,469
------------
20,388,700
------------
<CAPTION>
Shares Value
--------- ------------
DIVERSIFIED HOLDINGS -- 0.53%
<S> <C> <C>
18,010 Lagardere SCA.......................................... $ 1,372,506
------------
<CAPTION>
ENERGY -- 9.60%
<S> <C> <C>
15,094 Geophysique Cie Generale (b)........................... 1,026,628
154,389 Total Fina SA (a)...................................... 23,619,596
------------
24,646,224
------------
<CAPTION>
FINANCIAL SERVICES -- 11.99%
<S> <C> <C>
67,165 AXA SA (a)............................................. 10,556,928
75,257 Banque Nationale de Paris.............................. 7,226,334
103,427 Credit Lyonnais SA..................................... 4,906,523
26,995 Dexia.................................................. 3,973,035
9,501 Dexia Strip VVPR....................................... 453
50,000 Fimatex (b)............................................ 739,218
56,240 Societe Generale....................................... 3,375,176
------------
30,777,667
------------
<CAPTION>
FOOD & BEVERAGE -- 2.24%
<S> <C> <C>
13,959 LVMH (a)............................................... 5,743,123
------------
<CAPTION>
RETAIL -- 10.85%
<S> <C> <C>
150,248 Carrefour Supermarche (a).............................. 10,247,839
69,345 Casino Guichard Perrachon et Cie....................... 6,407,631
8,090 Castorama Dubois Investisment.......................... 1,995,992
30,855 Pinault Printemps
Redoute SA........................................... 6,839,628
30,660 Rexel SA............................................... 2,351,141
------------
27,842,231
------------
</TABLE>
19
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (concluded)
June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
FRENCH EQUITIES -- (concluded)
------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
--------- ------------
SERVICES -- 19.09%
<S> <C>
35,555 Accor.................................................. $ 1,454,026
6,050 Altran Technologies SA................................. 1,182,038
23,138 Canal Plus............................................. 3,879,262
30,454 Cap Gemini SA.......................................... 5,352,434
14,580 Club Mediterranee...................................... 1,970,836
40,000 Consodata SA (b)....................................... 1,379,365
35,135 Dassault Systemes SA................................... 3,269,980
32,800 FI Systems (b)......................................... 1,315,426
39,300 Ilog SA (b)............................................ 1,583,593
79,611 Infogrames Entertainment (b)........................... 2,024,860
14,505 Ipsos (b).............................................. 1,519,921
43,150 Television Francaise 1 (TF1)........................... 3,000,642
14,150 Sodexho Alliance SA.................................... 2,561,065
40,130 Suez-Lyonnaise des Eaux SA............................. 7,014,808
47,560 UBI Soft Entertainment SA (b).......................... 1,816,757
865 UBI Soft Entertainment SA Warrants expiring
11/02/02 (b)......................................... 30,900
109,402 Vivendi SA (a)......................................... 9,634,801
------------
48,990,714
------------
TOTAL FRENCH EQUITIES
(cost -- $182,001,755).......................................... 239,539,145
------------
<CAPTION>
TIME DEPOSIT -- 0.06%
------------------------------------------------------
Principal
Amount Value
--------- ------------
<S> <C>
$145,000 Brown Brothers Harriman & Co.
Grand Cayman, 5.50% (c)
(cost -- $145,000)................................... $ 145,000
------------
TOTAL INVESTMENTS
(cost -- $182,146,755) -- 93.38%................................ 239,684,145
OTHER ASSETS LESS LIABILITIES -- 6.62%............................ 16,987,019
------------
NET ASSETS (applicable to 15,220,000 shares; equivalent to $16.86
per share) -- 100.00%.......................................... $256,671,164
============
</TABLE>
------------
(a) Portion of security has been segregated to collateralize securities index
futures contracts. Value of segregated securities totaled $26,233,101 at
June 30, 2000.
(b) Non-income producing security.
(c) Variable rate account -- rate resets on a monthly basis; amount available
upon 48 hours' notice. The rate shown is the rate in effect on June 30,
2000.
See accompanying notes to financial statements.
20
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (cost--$182,146,755)...... $239,684,145
Cash (including euros at affiliates of $17,175,933 with a cost
of $17,182,927).............................................. 17,178,409
Receivable for investments sold............................... 2,046,706
Receivable for avoir fiscal................................... 1,125,926
Dividends receivable.......................................... 162,007
Prepaid expenses and other assets............................. 235,228
------------
Total assets.............................................. 260,432,421
------------
LIABILITIES:
Payable for investments purchased............................. 3,028,744
Payable for variation margin on futures contracts............. 163,922
Advisory fee payable.......................................... 157,378
Administration fee payable.................................... 21,997
Accrued expenses.............................................. 389,216
------------
Total liabilities......................................... 3,761,257
------------
NET ASSETS:
Common stock, $0.01 par value; 15,345,333 shares issued and
15,220,000 shares outstanding (100,000,000 shares
authorized).................................................. 152,200
Additional paid-in capital.................................... 161,433,097
Accumulated net investment loss............................... (29,641)
Accumulated net realized gain................................. 37,790,939
Net unrealized appreciation of investments, futures contracts
and other assets and liabilities denominated in euros........ 57,324,569
------------
Net assets applicable to shares outstanding............... $256,671,164
============
NET ASSET VALUE PER SHARE......................................... $16.86
======
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends, including $721,543 of avoir fiscal (net
of French withholding taxes of $395,891).......... $2,180,394
Interest........................................... 17,256 $ 2,197,650
---------- -----------
EXPENSES:
Advisory fees...................................... 1,132,187
Custodian and accounting fees...................... 235,596
Audit and legal fees............................... 153,068
Administration fees................................ 138,082
Directors' fees and expenses....................... 114,660
Reports to shareholders............................ 65,606
Shareholder meetings and relations expense......... 39,993
Insurance expense.................................. 17,770
Transfer agent fees................................ 14,583
New York Stock Exchange listing fee................ 12,130
Other expenses..................................... 8,838
----------
Total expenses..................................... 1,932,513
Less: fees waived by Investment Adviser............ (161,422)
----------
Net expenses....................................... 1,771,091
-----------
Net investment income.............................. 426,559
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on:
Investments...................................... 40,584,356
Futures contracts................................ 284,749
Foreign currency transactions.................... 800,296
Net change in unrealized appreciation/depreciation
of:
Investments...................................... (44,738,932)
Futures contracts................................ (207,425)
Other assets and liabilities denominated in
euros........................................... (14,982)
-----------
Net realized and unrealized loss on investments,
futures contracts and foreign currency
transactions...................................... (3,291,938)
-----------
NET DECREASE IN NET ASSETS FROM INVESTMENT
OPERATIONS........................................... $(2,865,379)
===========
</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, 2000 ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income.............. $ 426,559 $ 177,483
Net realized gain on investments,
futures contracts and foreign
currency transactions............ 41,669,401 58,920,578
Net change in unrealized
appreciation/depreciation of
investments, futures contracts
and other assets and liabilities
denominated in euros............. (44,961,339) 25,284,930
------------ -------------
Total income (loss) from investment
operations....................... (2,865,379) 84,382,991
------------ -------------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income......... -- (38,784)
From net realized gain on
investments...................... (16,621,584) (58,225,331)
------------ -------------
Total dividends and
distributions.................... (16,621,584) (58,264,115)
------------ -------------
CAPITAL STOCK TRANSACTIONS:
Cost of shares repurchased......... (866,275) (970,167)
------------ -------------
Net increase (decrease) in net
assets........................... (20,353,238) 25,148,709
NET ASSETS:
Beginning of period................ 277,024,402 251,875,693
------------ -------------
End of period...................... $256,671,164 $ 277,024,402
============ =============
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (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, 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, 2000. 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.
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
24
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
recover a credit ("avoir fiscal") for French taxes paid by a French company with
respect to such dividend, equal to 34% of the dividend amount (40% 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.
Net foreign currency gain (loss) from valuing euro denominated assets and
liabilities at the period end 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.
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.
25
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
During the six months ended June 30, 2000, the Fund entered into securities
index futures contracts with Carr Futures SNC, an affiliate of the Investment
Adviser. At June 30, 2000, the Fund had the following open securities index
futures contracts which were collateralized by segregated securities valued at
$26,233,101:
<TABLE>
<CAPTION>
EUR
COST ON U.S.$
NUMBER OF EXPIRATION ORIGINATION EUR VALUE VALUE UNREALIZED
CONTRACTS TYPE DATE DATE 6/30/00 6/30/00 DEPRECIATION
--------------- ------------ ---------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Long positions:
218 CAC 40 Index 7/31/00 EUR 14,272,319 EUR 14,100,240 $13,431,358 $ (163,922)
============
</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 and the losses realized could be unlimited. 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. The Fund did not
purchase nor write any options during the six months ended June 30, 2000.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-date. Dividends and distributions from net investment income
and net realized capital gain are determined in accordance with federal income
tax regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are considered either temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income or net realized capital gain
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gain. To the extent they exceed net
26
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
investment income or net realized capital gain for tax purposes, they are
reported as distributions of additional paid-in capital.
On June 29, 2000, the Board of Directors declared a long-term capital gain
distribution of $1.0878 per share. The distribution was paid on July 14, 2000,
to shareholders of record on July 10, 2000.
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, 2000, the Investment Adviser voluntarily waived $161,422 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, subject to minimum fee of
$150,000.
TRANSACTIONS WITH AFFILIATES
For the six months ended June 30, 2000, certain direct and indirect subsidiaries
of the Credit Agricole Group--Cheuvreux de Virieu and Carr Futures SNC--received
$33,439 and $805, 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 $28,844 in its capacity as subcustodian for the Fund of which
approximately $13,466 was unpaid at June 30, 2000. At June 30, 2000, the Fund
had $16,087,018 and $1,088,915 at Credit Agricole Indosuez and Carr Futures SNC
(on deposit for open futures contracts), respectively.
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
2000 was substantially the same as the cost for financial statement purposes.
Accordingly, net unrealized appreciation of investments of $57,537,390 was
composed of gross appreciation of $64,893,717 for those investments having an
excess of value over cost and gross depreciation of $7,356,327 for those
investments having an excess of cost over value.
27
<PAGE>
THE FRANCE GROWTH FUND, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
--------------------------------------------------------------------------------
For the six months ended June 30, 2000, aggregate purchases and sales of
portfolio securities (excluding short-term securities) were $121,083,473 and
$150,674,836, respectively.
CAPITAL STOCK
There were 15,280,000 shares of $0.01 par value capital stock outstanding as of
December 31, 1999. For the six months ended June 30, 2000, the Fund repurchased
60,000 shares of its common stock on the open market at a total cost of $866,275
including brokerage commissions. These shares were repurchased at an average
market price per share of $14.38 (before commissions) and a weighted average
discount from net asset value of 13.88%.
For the period November 22, 1999 (commencement of repurchase program) through
June 30, 2000, the Fund repurchased 125,333 shares of its common stock on the
open market at a total cost of $1,836,442 including brokerage commissions. These
shares were repurchased at an average market price per share of $14.59 (before
commissions) and a weighted average discount from net asset value of 15.01%.
These shares were repurchased pursuant to the Fund's stock repurchase program
approved by the Fund's Board of Directors authorizing the Fund to purchase up to
an aggregate of 10% of the outstanding shares of its common stock.
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, 2000 -----------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period....... $18.13 $16.41 $13.12 $13.37 $11.60 $10.97
--------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.03 0.01 0.06 0.09 0.11 0.37
Net realized and unrealized gain (loss) on
investments, futures contracts and
foreign currency transactions............ (0.22) 5.50 5.26 1.49 2.53 1.06
--------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations............................. (0.19) 5.51 5.32 1.58 2.64 1.43
--------- -------- -------- -------- -------- --------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. -- (0.00)(a) -- (0.02) (0.08) (0.40)
In excess of net investment income......... -- -- -- (0.03) (0.00)(b) (0.01)
From net realized gain on investments...... (1.09) (3.80) (2.03) (1.78) (0.79) (0.39)
--------- -------- -------- -------- -------- --------
Total dividends and distributions...... (1.09) (3.80) (2.03) (1.83) (0.87) (0.80)
--------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Anti-dilutive effect of shares
repurchased.............................. 0.01 0.01 -- -- -- --
--------- -------- -------- -------- -------- --------
Net asset value, end of period............. $16.86 $18.13 $16.41 $13.12 $13.37 $11.60
========= ======== ======== ======== ======== ========
Market value, end of period................ $15.00 $15.31 $13.63 $10.50 $10.38 $9.88
========= ======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN: (c) .............. 5.56% 45.93% 48.20% 19.33% 13.91% 16.62%
========= ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted).... $256,671 $277,024 $251,876 $201,277 $205,123 $178,080
Ratio of expenses to average net assets.... 1.31%(d)(e) 1.33%(d) 1.38%(d) 1.48% 1.54% 1.58%
Ratio of net investment income to average
net assets............................... 0.32%(d)(e) 0.07%(d) 0.38%(d) 0.64% 0.84% 3.07%
Portfolio turnover......................... 46% 48% 47% 80% 83% 49%
</TABLE>
------------------
(a) Dividend equal to $0.0025 per share.
(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 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, 2000 and for the years ended December 31, 1999 and December
31, 1998. If such waiver had not been made, the ratio of expenses to average
net assets would have been 1.43%, 1.46% and 1.46%, respectively, and the
ratio of net investment income (loss) to average net assets would have been
0.20%, (0.06)% and 0.30%, respectively.
(e) Annualized.
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.
