Company Name: France Growth Fund, Inc. (Advantage Partners)
Public Availability Date: April 6, 2001Document Sections: LETTER OF INQUIRY 1
APPENDIX
LETTER OF INQUIRY 2
LETTER OF INQUIRY 3
LETTER OF INQUIRY 4
STAFF REPLY LETTER [LETTER OF INQUIRY 1]
January 15, 2001 VIA FEDERAL EXPRESS Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: Office of Chief Counsel Division of Corporation Finance Re: Shareholder Proposal Submitted to The France Growth Fund, Inc. by Advantage Partners, LP Dear Ladies and Gentlemen: This letter is submitted on behalf of our client, The France Growth Fund, Inc.,
a Maryland corporation (the "Company"), pursuant to Rule 14a-8(j) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
hereby gives notice of its intention to omit from its proxy statement and form
of proxy (the "Proxy Materials") the proposal and statement of support (the
"Proposal") submitted by Advantage Partners, LP (the "Proponent") by letter
dated November 15, 2000. The Company has advised us that the Proxy Materials are
tentatively scheduled to be filed pursuant to Rule 14a-6 on or about April 5,
2001. Pursuant to the provisions of Rule 14a-8(j) under the Exchange Act,
enclosed for filing are six copies of each of this letter and the Proposal. For
a copy of the Proposal, please see Exhibit A. Also, pursuant to the provisions
of Rule 14a-8(j), we are sending a copy of this letter and the Exhibits to the
Proponent. The Company respectfully requests the concurrence of the Staff of the Division
of Corporate Finance (the "Staff") that no enforcement action will be
recommended to the Commission if the Company omits the proposal from the Proxy
Materials. For ease of reference, the text of the Proposal, exactly as received, is set
forth below. Stockholder Proposal RESOLVED, that all amendments to the By-Laws adopted by the Board of Directors
in June 2000 are hereby repealed since the vast majority, if not all, changes
are believed to disenfranchise shareholders in a number of ways, and
additionally, are inconsistent with the voting preferences expressed by
shareholders at the April 2000 annual meeting. Furthermore, notwithstanding
anything to the contrary in the "unspoiled" By-Laws in effect prior to June
2000, future changes to these affected sections of the By-Laws may not be
amended, altered or repealed except by the vote of shareholders. It is our opinion that this Proposal may be omitted from the Proxy Materials
based on Rule 14a-8(i)(1), (2), (6) and (3). Rule 14a-8(i)(1) (Improper Under State Law) The Proposal seeks to repeal "all amendments to the By-Laws adopted by the Board
of Directors in June, 2000...." According to Rule 14a-8(i)(1), a stockholder
proposal is excludable from proxy materials if it is not a proper subject for
action by stockholders under the company's state of organization. The Proposal
is excludable from the Proxy Materials under Rule 14a-8(i)(1) because the repeal
of "all" of the amendments (the "Amendments") to the Amended and Restated Bylaws
(the "Bylaws") adopted on June 13, 2000 is not a proper subject for action by
stockholders under Maryland law for the following reasons, each of which is more
fully discussed below: First, the Bylaws include various provisions of Title 3,
Subtitle 8 ("Subtitle 8") of the Maryland General Corporation Law (the "MGCL")
to which the Company elected to be subject in June, 2000. Under the MGCL, these
Bylaw provisions may not be amended by the stockholders. Second, the Amendments
also include provisions that were added to conform to Maryland law. Third, the
stockholders may not repeal the Board's power to amend the Bylaws. Fourth, the
Proponent failed to satisfy the notice requirements of Article II, Section 13 of
the Bylaws. Finally, the Proposal is too vague to be considered by the
stockholders. For ease of reference, please see attached Exhibit B, which are
the Bylaws currently in effect for the Company, and Exhibit C, which are the
unamended Bylaws, marked to show the amendments adopted on June 13, 2000. The Proposal Is Not a Proper Matter under State Law Because Stockholders of the
Company Do Not Have the Power to Amend Certain Provisions of the Bylaws. In 1999, Subtitle 8 was enacted to permit a Maryland corporation with at least
three independent directors and a class of securities registered under the
Exchange Act, by resolution of the board of directors and without stockholder
approval, to, among other things, (1) provide for a classified board, (2)
increase the vote requirement for director removal and (3) vest in the board of
directors the exclusive power to set the number of directorships and to fill
board vacancies. Such a corporation may elect to be subject to any or all of the
provisions of Subtitle 8. The stockholders of the corporation are also permitted
to elect for the corporation to become subject to any or all of the provisions
of Subtitle 8. If the Subtitle 8 election is accomplished by board resolution,
articles supplementary, describing the provisions of Subtitle 8 to which the
corporation has elected to be subject, must be filed with the State Department
of Assessments and Taxation of Maryland (the "SDAT"). The filing of articles
supplementary does not require stockholder or board approval. Subtitle 8
specifically provides that a corporation may elect to be subject to a provision
notwithstanding a contrary provision in its charter or bylaws. Pursuant to Sections 3-802 through 3-805 of Subtitle 8, on June 13, 2000, the
Board of Directors of the Company (the "Board") elected on behalf of the Company
to be subject to various provisions of Subtitle 8. Articles Supplementary,
describing the Subtitle 8 provisions to which the Company became subject, were
filed by the Company and accepted for record by the SDAT, thus making those
provisions a part of the charter of the Company (the "Charter"). See Exhibit D.
The Bylaws were then amended to reflect the various provisions of Subtitle 8 now
governing the Company. These Amendments covered (a) special stockholders
meetings (Article II, Section 3), (b) the election, tenure and removal of
directors (Article III, Sections 2, 3 and 4) and (c) board vacancies (Article
III, Section 6). Pursuant to Section 3-802(b)(3) of Subtitle 8, a corporation may opt out of any
provision of Subtitle 8 to which it has previously elected to become subject if
the corporation opts out of the provision in the same manner in which it elected
to become subject to the provision. Because the Company became subject to the
provisions of Subtitle 8 by Board action, only the Board may approve the
Company's withdrawal from those provisions. Therefore, to allow the stockholders
to unilaterally amend these provisions of the Bylaws would be an improper
subject for stockholder action under Maryland law. Reflective of the Board's
responsiveness to stockholder concerns, the Board has resolved to opt out of one
of the Subtitle 8 provisions, Section 3-805, effective at the 2002 Annual
Meeting of stockholders. The Board has also resolved to amend Article II,
Section 3 of the Bylaws to reduce the threshold required to call a stockholder
requested special meeting from a majority to not less than 40% of all the votes
entitled to be cast at such meeting. This amendment will not become effective
until the Company opts out of Section 3-805 as of the 2002 Annual Meeting. Additionally, the limitation on stockholder power to amend these Bylaws exists
notwithstanding Article XII of the Bylaws, which permits either the Board or the
stockholders to amend the Bylaws, because Subtitle 8 provides that the election
is effective notwithstanding contrary charter and bylaw provisions. The Proposal Is Not a Proper Matter Under State Law Because Certain Amendments
Were Adopted to Conform to the MGCL. There are other provisions of the Bylaws, the repeal of which would be improper
under Maryland law. For example, prior to the Amendments, Article II, Section 8
of the Bylaws would have precluded a stockholder from authorizing a proxy by
electronic means. However, Section 2-507 of the MGCL authorizes electronic proxy
authorization. The Amendments merely conform the Bylaws to the MGCL by allowing
electronic proxy authorization. Repealing this provision and reinstating the
former provision would result in an impermissible and ineffective Bylaw
provision under the MGCL. Because the stockholders do not have the power to amend certain provisions of
the Bylaws and because repealing other Amendments would result in inconsistency
with the MGCL, the Proposal is a not a proper subject for action by the
stockholders of the Company and should be excluded from the Proxy Materials
pursuant to Rule 14a-8(i)(1). The Stockholders May Not Limit the Board's Power to Amend the Bylaws. The Proposal seeks to divest the Board of its power to amend the "affected
section of the By-Laws." Section 2-109 of the MGCL provides that "the power to
adopt, alter and repeal the bylaws of the corporation is vested in the
stockholders except to the extent that the charter or the bylaws vest it in the
board of directors." Pursuant to this provision, Article VI, Section (3)(a) of
the Charter provides that the Board is "expressly authorized...to adopt, amend
or repeal the By-Laws of the Corporation except to the extent that the By-Laws
otherwise provide." In other words, as permitted by the MGCL, the Charter
devolved the complete power to amend the Bylaws on the Board. On May 1, 1990, at
the organizational meeting of the Company, the Board, in adopting the original
Bylaws, granted to the stockholders the concurrent power to amend the Bylaws.
Because the Charter delegates to the Board the power to amend the Bylaws,
subject to any sub-delegation by the Board, and because the Board has delegated
to the stockholders the concurrent power to amend the Bylaws, the stockholders
may not unilaterally divest the Board of its retained concurrent power to amend
the Bylaws. Thus, the Proposal would be an improper subject for consideration by
the stockholders under Maryland law and should be excluded from the Proxy
Materials under Rule 14a-8(i)(1). The Stockholder's Notice to the Company of the Proposal Fails to Comply with the
Company's Advance Notice Bylaws. Section 2-504(e) of the MGCL expressly authorizes a Maryland corporation to
adopt bylaws that require any stockholder proposing a matter for consideration
at a meeting of the stockholders to provide minimum advance notice of the
proposal to the corporation, inter alia, of not more than 90 days before the
first anniversary of the mailing date of the notice of the preceding year's
annual meeting. Pursuant to Section 2-504, the Company adopted Article II,
Section 13 of the Bylaws, which requires, in the case of an annual meeting, a
stockholder to give notice of a proposal to the Company not later than the 90th
day nor earlier than the 120th day prior to the first anniversary of the date of
mailing of the notice of the preceding year's annual meeting. Article II, Section 13(a)(2) of the Bylaws requires that a stockholder's notice,
to be proper, must set forth (1) a description of the business desired to be
brought before the meeting, (2) the reasons for conducting such business at the
meeting and (3) any material interest in such business of such stockholder
(including any anticipated benefit therefrom) and of each beneficial owner, if
any, on whose behalf the proposal is made. The notice must be submitted by a
record holder although the record holder may submit a notice on behalf of a
beneficial owner. The name and address of the record holder must be provided as
they appear on the Company's stock ledger. If the proposal is being submitted on
behalf of a beneficial owner, the name and address of the beneficial owner must
also be included in the notice. Additionally, the class and number of shares of
the record holder and, if applicable, beneficial owner must be included in the
notice. The Proponent has failed to comply with Article II, Section 13 of the Bylaws.
According to the transfer agent of the Company, PNC Bank, the Proponent does not
appear on the stock records of the Company. Therefore, the Proponent is not a
record holder. As stated above, Article II, Section 13 of the Bylaws requires a
record holder to submit the notice to the Company. In addition, the notice, even
if submitted on behalf of the Proponent by a record holder, fails to state the
class and number of shares held by the Proponent. Because the notice of the
Proposal fails to comply with Article II, Section 13 of the Bylaws, the Proposal
should be excluded from the Proxy Materials pursuant to Rule 14a-8(i)(1). It
should be noted that the Proponent requested a copy of the Bylaws and was sent a
copy of the Bylaws on September 14, 2000. The Proponent did include a statement in the notice of the Proposal that it "has
owned shares of company stock with a market value of at least $2,000
continuously for the preceding year and intends to maintain such required
ownership through the date of the next shareholders' meeting." Because the
Proponent is not a record holder, Rule 14a-8(b) requires the Proponent to submit
documentary evidence of beneficial ownership. The Proponent has failed to
provide such documentary support. The Company did not notify the Proponent of
the Rule 14a-8(b) deficiencies in eligibility because the Proponent did not
deliver its Proposal until the 121st day before the date the Company's proxy
statement was released to the stockholders for the previous year's annual
meeting. Even if the Company had notified the Proponent of the eligibility
defect, the Proponent could not possibly have provided the required documentary
support for eligibility by the Rule 14a-8(e) deadline. In addition, even if the
Company had notified the Proponent of its failure to certify eligibility, the
Proponent's notice still fails to comply with Article II, Section 13 of the
Bylaws. There is no requirement under Maryland law or the Company's Bylaws that
the Company contact a person who has submitted a proposal that fails to comply
with Article II, Section 13 of the Bylaws. The Proposal Is Too Vaque For Stockholder Action. In proposing to repeal "all" of the Amendments, the Proponent ignored that (1)
the repeal of some of the Amendments would not be a proper action for
stockholders under Maryland law and, in some instances, as described below,
would violate the MGCL and (2) certain of the Amendments were adopted to conform
the Bylaws with Maryland law. As indicated above, the Proposal states that "the
vast majority, if not all, changes are believed to disenfranchise shareholders
in a number of ways, and additionally, are inconsistent with the voting
preferences expressed by shareholders at the April 2000 annual meeting." If the
Company were to attempt to accommodate the Proposal, it would be impossible for
the Company to determine which of the provisions of the Bylaws that are subject
to stockholder amendment the Proponent would wish to repeal. For example, would
the Proponent wish to repeal Article I, Section 1 of the Bylaws, which simply
states the official name of the Company? Would the Proponent wish to repeal
Article I, Section 3 of the Bylaws, which governs the use of the corporate seal?
Would the Proponent seek to repeal Article VI, Section 1 of the Bylaws, which
allows the Company to issue uncertificated stock unless a certificate is
requested by a stockholder? These provisions are representative of a broad array
of changes, none of which has anything to do with the alleged disenfranchisement
of stockholders or any of the proposals on which the stockholders voted in
April, 2000, as described in the second full paragraph on the next page. In
light of the foregoing, the Proposal is too vague for stockholders to understand
what action they would be taking and, thus, is not really a proposal at all.
Therefore, the Proposal is not a proper subject for stockholder consideration
under Maryland law and should be excluded under Rule 14a-8(i)(1). Rule 14a-8(i)(2) (Violation of Law) As stated above, the Proposal seeks to repeal "all amendments to the By-Laws
adopted by the Board of Directors in June, 2000...." According to Rule
14a-8(i)(2), a stockholder proposal is excludable from proxy materials if it
would cause the company to violate a state, federal or foreign law to which it
is subject. The Proposal is excludable from the Proxy Materials under Rule
14a-8(i)(2) because the repeal by the stockholders of Amendments adopted
pursuant to the Subtitle 8 election is a direct violation of Section 3-802(b)(3)
of Subtitle 8, which specifically provides that the only manner by which a
Maryland corporation may opt out of any provision of Subtitle 8 is the same
manner in which it elected to be subject to that provision. Because the Subtitle
8 election was accomplished by Board action, the stockholders may not reverse
that action, and the Proposal should be excluded from the Proxy Materials under
Rule 14a-8(i)(2). Rule 14a-8(i)(6) (Absence of Power/Authority) Rule 14a-8(i)(6) provides that a stockholder proposal may be excluded from a
company's proxy materials if the company would lack the power or authority to
implement the proposals. Section 2-103(17) of the MGCL, which sets forth the
powers of a Maryland corporation, provides that a Maryland corporation may do an
act "not inconsistent with law." The obvious negative implication of this
provision is that a corporation lacks the power to perform an act that is
inconsistent with law. Because repealing the Amendments adopted pursuant to the
Subtitle 8 election would cause the Company to violate Section 3-802(b)(3) of
the MGCL, the Company would not have the power to take such action under Section
2-103(17) of the MGCL. Thus, the Proposal should be excluded from the Proxy
Materials under Rule 14a-8(i)(6). Rule 14a-8(i)(3) (Violation of Proxy Rules) Rule 14a-8(i)(3) provides that a stockholder proposal is excludable from a
company's proxy materials if the proposal or supporting statement is contrary to
any of the Commission's proxy rules, including Rule 14a-9, which prohibits
materially false or misleading statements in proxy soliciting materials. The
Proposal states that "the vast majority, if not all, changes are believed to
disenfranchise shareholders in a number of ways, and additionally, are
inconsistent with the voting preferences expressed by shareholders at the April
2000 annual meeting." It is not true that "the vast majority, if not all" the Amendments
"disenfranchise shareholders." The Amendments cover a variety of topics,
including the most mundane corporate functions. For example, the amendment to
Article I, Section 2 repealed a provision establishing Baltimore City as the
principal office of the Company in Maryland and inserted a provision allowing
the Board to determine by resolution the location of the principal office of the
Company in Maryland. As discussed above, Article I, Section 3 governs the use of
the corporate seal. The amendments to Article II, Section 1 establish that the
location of the annual meeting of stockholders shall be at the principal
executive offices of the Company or at such other place as determined by the
Board. Article II, Section 3 establishes important procedures for
stockholder-requested special meetings on which stockholders may rely. Article
II, Section 4 was amended to allow the Company to send electronic notices for
stockholders meetings. The Amendments added a new Article II, Section 10 to
provide procedures to conform to Section 2-508 of the MGCL for the voting of
stock of the Company held by certain persons. The amendments to Article II,
Section 12 provide that the reports of the inspectors of election must be in
writing. Article III, Section 9 was updated to recognize developments in
technology that allow directors to be notified of directors meetings by
telephone, e-mail and fax. These provisions are merely representative of the
wide variety of amendments that were adopted on June 13, 2000 and cannot by any
reasonable interpretation be said to "disenfranchise shareholders." The Amendments also have nothing to do with the voting preferences at the annual
meeting of stockholders in 2000. Those proposals included a recommendation to
the Board that it: (a) expedite the process to ensure Fund shares can trade at net asset value
(NAV) daily. Suggested alternatives include (1) conversion to an open-end
investment company; or (2) merger with another open-end fund; and (b) promptly conduct a tender offer for at least 5% of its outstanding shares at
or close to net asset value ("NAV"). In fact, on December 18, 2000, the Company announced that the Board has
authorized the Company to conduct a tender offer during the first quarter of
2001 for up to 20% of the Company's outstanding shares of stock at a price equal
to 98% of the net asset value per share as of the close of regular trading on
the New York Stock Exchange on the business day following the expiration of the
offer. In addition to the consideration of the stockholder proposals, two
stockholder-nominated directors were elected at the 2000 annual meeting of
stockholders. The Amendments do nothing to affect the tenure or possible
re-election of those directors. In fact, on December 18, 2000, the Company
announced that Bernard Chauvel tendered his resignation from the Board,
effective spring 2001. The Company announced its intention to accept a nominee
of Bankgesellschaft Berlin AG ("Bankgesellschaft"), the stockholder that
nominated the two directors elected at the 2000 stockholders meeting, to fill
the vacancy that will be created by Mr. Chauvel's resignation. The Company also
announced its intention to include in its slate of nominees for directors to be
considered for election at the 2001 annual meeting of stockholders a nominee
suggested by Bankgesellschaft. The Amendments have done nothing to impede these
actions. Therefore, they are not inconsistent with the "voting preferences
expressed by shareholders at the April 2000 annual meeting." Because of these false and misleading statements, the Proposal should be
excluded pursuant to Rule 14a-8(i)(3). Based on the foregoing, the Company intends to exclude the Proposal from the
Proxy Materials. Please direct any correspondence regarding this matter to the undersigned. Very truly yours, BALLARD SPAHR ANDREWS & INGERSOLL, LLP By: James J. Hanks, Jr. By: Teresa B. Carnell HALE and DORR LLP By: Ernest V. Klein By: Charles F. McCain II Enclosures cc: Steven M. Cancro, Esquire Frederick J. Schmidt (The France Growth Fund, Inc.) [APPENDIX]
Shareholder Resolution and Supporting Statement for The France Growth Fund Submitted by Advantage Partners, LP, November 15, 2000 RESOLVED, that all amendments to the By-Laws adopted by the Board of Directors
in June 2000 are hereby repealed since the vast majority, if not all, changes
are believed to disenfranchise shareholders in a number of ways, and
additionally, are inconsistent with the voting preferences expressed by
shareholders at the April 2000 annual meeting. Furthermore, notwithstanding
anything to the contrary in the "unspoiled" By-Laws in effect prior to June
2000, future changes to these affected sections of the By-Laws may not be
amended, altered or repealed except by the vote of shareholders. SUPPORTING STATEMENT Shareholders should retaliate against heavy-handedness. The By-Law amendments
shareholders should vote to repeal were fabricated in June 2000 to make it
increasingly difficult, if not close to impossible, for shareholder democracy to
determine the future direction of the Fund. While conveniently timed changes in
Maryland law opened the door for the Fund to pursue these shareholder-unfriendly
amendments, none were required by law to be pursued. Policies in place for over
a decade, however, were abruptly changed after the votes of shareholders69.1%
of those voting, and 49.6% of outstanding sharessignated a landslide of support
to eliminate the discount to NAV at which Fund shares trade in the open market.
"Establishment" directors had been ousted in favor of dissident shareholders,
and a tender offer proposal was also passed, both by wide margins, yet the Board
moved to entrench the status quo anyway with its By-Law amendments. Rather than responding to the will of the shareholders, the Board increased its
reliance on legal tactics to fend off the owners of the company, the
constituency whose interests, ironically, the Board has a fiduciary duty to
represent. The Board's concerted effort to ignore the shareholder vote and take
no constructive action in response can be described as either poor corporate
governance, or "Nothing Ado About Much," as one commentator aptly characterized
the lack of follow up action to the April 2000 voting outcomes. Most offensive to shareholder interests, in our view, were Board tactics to
amend the By-Laws to allow for the number of Board seats to be increased, yet
filling these newly created seats without seeking a shareholder vote to confirm
appointees for up to three years! The practical result was the reinstatement of
a director, John Bult, who had been ousted by a wide margin barely four months
earlier by shareholder-sponsored directors whose platform was to "more
aggressively pursue measures intended to enhance shareholder value." It does not
seem a reach to conclude that Mr. Bult was reinstated, along with the
appointment of another new, hand-picked director, to mitigate the results from a
proxy contest in which continuation of the status quo was handily rejected by
shareholders. An appropriate remedy to these entrenchment tactics is to rescind the By-Law
amendments that allowed for such disgraceful actions to be perpetuated. A vote
FOR this shareholder proposal is a vote to prevent a recurrence of inappropriate
corporate governance. [LETTER OF INQUIRY 2]
January 18, 2001 Mr. Barry D. Miller, Associate Director for Legal & Disclosure Mr. Frank J. Donaty, Jr., Assistant DirectorDivision of Investment Management
Mr. Richard Pfordte, Branch ChiefDivision of Investment Management Division of Investment Management Securities and Exchange Commission Mail Stops 5-6 and 5-5 450 Fifth Street N.W. Washington, DC 20549 Re: Response to SEC Regarding the Intent of The France Growth Fund, Inc to Omit
the Shareholder Resolution Submitted by Advantage Partners, LP Dear Mssrs. Miller, Donaty, Pfordte, and other members of the Commission: This letter serves to express our view that The France Growth Fund, Inc. ("the
Fund") is misguided in its January 15, 2001, letter to the Commission in stating
that it can properly omit the shareholder proposal submitted by Advantage
Partners, LP, pursuant to rule 14a-8. Our intent in the following pages is to
highlight for the Commission the glaring weaknesses, if not outright
misrepresentations, in the Fund's letter seeking such omission, in ensure that
our proposal will, as intended, be able to be voted upon by shareholders in
either its current form, or if the Commission requires, an amended form suitable
for inclusion in the Fund's proxy statement for the upcoming annual meeting of
shareholders. We believe that our fair treatment of factual matters should
expose the tenuousness of the Fund's rigid position that our proposal be
withheld from shareholder consideration. Rather than allowing the Fund's letter
to be taken alone as "truth" when viewed in its own vacuum, we hope the
Commission will appreciate an airing of the hidden truth in the following pages
that was conveniently sidestepped in the Fund's January 15 analysis letter. I suppose it comes as little or no surprise to the Commission that yet another
Closed-End Fund is expending shareholder assets in an attempt to omit a
reasonable shareholder proposal, rather than welcoming input from its
shareholders, which a vote would accomplish. Since no Closed-End Fund
shareholder can act unilaterally to redeem assets from any fund as the ultimate
statement of dissatisfaction with the investment (a problem open-end fund owners
do not face), the rights of Closed-End shareholders to vote are paramount to the
protection of Closed-End investors. What is equally troubling in conjunction with the desire of the Fund to omit our
shareholder proposal, is the degree to which the Fund is seemingly willing to
distort both the facts and the law in its attempt to achieve its desired result.
If Boards of Directors of Investment Company Act of 1940 ("ICA") companies have
a fiduciary duty to represent shareholders, why would the Fund try so hard to
silence any input from its shareholders rather than welcoming a fairly contested
vote? The premise for the ICA, as laid out in Section 1 of the statute clearly
acknowledges the existence of conflicts of interest in investment companies, and
states that each and every provision of the ICA "shall be interpreted...to
mitigate and, so far as is feasible, to eliminate...[the possibility of]
investment companies [being] managed in the interest of directors, officers [or]
investment advisers...." From a philosophical standpoint, no Fund should be
allowed to omit a worthy rule 14a-8 proposal if the "national public interest
and the interest of investors" is to be preserved. The remainder of our comments
will largely focus on the factual and legal premises that match the
philosophical basis that the Fund's intent to omit a worthy rule 14a-8 proposal
should not be met with the no-action relief sought from the SEC. If the
Commission does not have the authority to censure the Fund for its less than
forthright presentation of the issues, at the very least, we hope the Commission
will see the merit in allowing the shareholder proposal to be included in some
format, such that its spirit remains intact, even if the precise letter of our
proposal requires revision in order to be includable by the Fund in its Proxy
Statement for the upcoming annual meeting in April. In an attempt to improve the efficiency of our words, we will attack the
"pyramid" of arguments spelled out by the Fund in its January 15 letter by
presenting our view that the base of this pyramid is faulty, such that
additional arguments made by the Fund that rely on the stability of the base,
will crumble if the base falls apart beneath them. It is our contention that the
Fund makes several fundamental mistakes that make its effort to omit our
proposal disingenuous. The Fund does so in its liberal interpretations of: 1) its own Bylaws; 2) the applicability of Maryland General Corporation Law ("MGCL") to its own
Bylaws; 3) the impact of its December 18, 2000, signed agreement with the Fund's largest
shareholder, Bank Gesellschaft Berlin ("the Bank"), as presented in the Bank's
recent SC 13D/A filing on December 20 on the applicability of MGCL to the Fund's
position; and, and as a result of the foregoing three items, 4) its highly suspect conclusion that the Fund can properly omit our proposal
from shareholder consideration in its Proxy Statement. Misrepresentation of its own Bylaws and Applicability of MGCL to the Bylaws We are pleased the Fund had the courtesy to provide the Commission with copies
of its Bylaws. We only wish they had properly characterized the rights of
shareholders as laid out in the Bylaws, both in its "unspoiled" state and since
revision by the Fund's Board. In reality, the Bylaws stipulate in Article XII
that all Bylawswhether adopted by the Board or the stockholderscan be amended,
altered, or repealed by either the shareholders or the Board, unless such power
within the Bylaws is solely preserved for the stockholders. In effect,
shareholders appear to be granted the most power by the Bylaws, yet the Fund
attempts to paint a picture in which the Board has the power to amend these
Bylaws and prevent shareholders from then moving to amend, alter, or repeal
changes sought by the Board. This cannot be true with the existence of Article
XII. The arguments the Fund makes ignores the rights of shareholders as
preserved in the Fund's Bylaws. If the Fund's position were true, it would
obviate the Bylaws practical value, and hence it cannot hold up to scrutiny. It
is difficult to accept the Fund's position as an honest mistake by the Fund in
presenting the salient facts. It appears to us that the Fund attempts to slide a
misrepresentation of its own Bylaws under the Commission's nose. The Fund is trying to create a one-way door for the Board to increase it's
power, while pretending it can magically wipe away the bilateral power of the
shareholders as provided in the Fund's Bylaws. The Fund may have some validity
that once shareholders repeal these Bylaws, the shareholders may not be able to
assert further changes to some or all sections of the Bylaws in the future only
by the shareholders, although Article XII would seem to indicate that our
position in that regard might actually be the correct interpretation. On that
nuance, we are not entirely clear, except that Section 2 of Article XII says,
"By stockholders only. No amendment of any section of these Bylaws shall be made
except by the stockholders of the Corporation, if the Bylaws provide that such
section may not be amended, altered or repealed by the stockholders." This would
seem to provide stockholders with the power to effect the final part of our
proposal, that any future changes be only by a stockholder vote. We will
respectfully accept the Commission's decision regarding the later point, knowing
full well that the Fund cannot be correct in the two diametrically opposed
positions about the rights of shareholders that it asks the Commission to
acceptconsistently they try to focus on the Board's power while ignoring the
rights of the shareholders to hold concurrent power. How the Fund can suggest
that shareholders have "concurrent power to amend the Bylaws," yet suggest it
doesn't apply to repealing the Bylaws put in place without shareholder input, is
lost on us. The Fund contends that modifications to MGCL in 1999 provides this latitude, and
they acknowledge on page 3 of the January 15 letter that Subtitle 8 (the section
of MGCL under which the major Bylaw changes were derived) "specifically provides
that a corporation may elect to be subject to a provision notwithstanding a
contrary provision in its charter or bylaws." Well, there were contrary
provisions in the Bylaws, that if amended to remove the concurrent power of the
stockholders would be in conflict with Article XII of the Bylaws which was not
removed at the same time. To allow the Fund to omit our proposal with its
inaccurate interpretation of the validity to its own Bylaws would not seem
tenable to us. The state of Maryland was clearly trying to provide an avenue for
taking rights from shareholders, even declaring that some of its changes did not
provide any rights to shareholders to change them and attempting to provide for
a one-way street, yet the Fund's Bylaws previously contained a protection for
shareholders that opting into the Subtitle 8 cannot piercepreventing the Fund
from imposing this type of oneway street on its shareholders after the fact.
While the Fund may have elected to be subject to all sorts of things in June
2000, Article XII of the Fund's Bylaws was not changed in any material waywhy?
because it could not be changed without a shareholder vote. The fact that
Article XII was not amended, except to adjust the title number in its header is
the strongest measure I can point to that this Article XII is sanctimonious and
not subject to alteration except by the shareholders, just as the wording of
Article XII indicates. The Fund contends that repeal of the "filthy" Bylaws amendments made by the
Board in June 13, 2000 would cause the Fund to violate Maryland law. The
"unspoiled" Bylaws that existed before the June 13, 2000 amendments by the Board
were not at the time (and wouldn't be today) in violation of MGCL, were not
illegal in any way, despite the availability of Subtitle 8 since 1999. Subtitle
8 was not, and is not, required by all Maryland corporations, but was offered as
something that could be opted into, if it was indeed allowable for each
particular corporation. Therefore, Subtitle 8 of MGCL may provide that the
applicable Bylaws would not be able to be amended by stockholders of
corporations whose Bylaws did not prevent their inclusion, but that is not the
case with the Fund. The most compelling evidence we can point to is the
agreement signed only one month ago between the Fund and its largest
shareholder, Bank Gesellschaft Berlin ("the Bank"), as disclosed in the Bank's
SC13D/A, filed on December 20, 2000. The Fund shows its absolute disregard for
its position on MGCL as regards our shareholder proposal in agreeing to opt out
of the Section 3-805 of Subtitle 8 regarding the voting threshold for special
meeting, yet believing it could opt out on its own terms, by agreeing to a
voting threshold not specified in the statute, and then by agreeing that any
future changes to this Bylaw could only be made by the shareholders. Clearly the
Fund feels it can make the changes it wants to make without being in violation
of MGCL, so it is disingenuous that it feels the repeal of the "filthy" Bylaws
by the shareholders would be a violation of MGCL, yet its own action would not
raise the same concerns. We hope the Commission agrees that the Fund's
application of the argument for relying MGCL appears arbitrary. If the Fund did not act with such disregard to its shareholders, it would be
easier to believe it got something of importance correct in its analysis. Even
so, the Fund seems correct that our encompassing wording to repeal "all" Bylaw
amendments from June 2000 forward would cause some innocuous provisions that do
not weaken the rights of shareholders to be unwound. We have no special desire
for these non-threatening and non-entrenchment motivated amendments (such as the
many examples the Fund provides, including authorizing a proxy by electronic
means, or including the Fund's corporate seal in the Bylaws) to be impacted by
our shareholder proposal. We do not think these superfluous issues would bother
other shareholders either, but we certainly think it would be ludicrous to
bounce our proposal because its wording mistakenly would encompass the fate of
the corporate seal in the Bylaws. A slight change in wording to our proposal
could correct that matter and make a few paragraphs of the Fund's letter merely
a distraction from the real issue at hand in our proposalBylaw changes designed
to disenfranchise shareholders. Please take a few moments and review our
supporting statement, which lays out the factual context in which the Fund has
sought to distance itself from an open-ending proposal passed by 69% of voting
participants by using Bylaw amendments to attempt entrenchment of management and
Board positions. The Fund even went so far as to reinstate a Director of its
Board who was overwhelmingly defeated in a proxy contest at last year's meeting,
barely six weeks before the Bylaws in question were enacted by an obviously
self-motivated, but nonetheless shameless Board. Our shareholder proposal merely
seeks to undo some of the injustices implemented by the Board at the expense of
the Fund's shareholders. An additional distraction in its current format is the Fund's one page
misconception from page 5 to page 6 that we have failed to provide the required
advance notice requirements for our rule 14a-8 proposal to be includable. Such a
contention by the Fund is absurd both on its face and upon detailed scrutiny,
and it shows they again have failed to properly read and implement their own
Bylaws. The Fund even goes so far as to suggest that it provided us with a copy
of the Bylaws on September 14, leaving us to wonder if they might have delivered
their only copy! In fact, for all the blather the Fund spews about the advance
notice requirements in Article II, Section 13 of the Fund's Bylaws (often
mischaracterized in the amended Bylaws as Section 12, one of their honest
mistakes we accept as such), the Fund conveniently fails to mention the only
subpart of Section 13 pertinent to shareholders proposals submitted under rule
14a-8, the final paragraph of Section 13, Section 13(c)(3). All the previous
paragraphs on Section 13 apply to proposals submitted outside of Rule 14a-8. The
applicable Section 13(c)(3) acknowledges that "Nothing in this Section 12 (sic:
they really mean 13) shall be deemed to affect any right of a Stockholder to
request inclusion of a proposal in, nor the right of the Corporation to omit a
proposal...pursuant to Rule 14a-8...." I don't know if the Commission is offended when a Fund misrepresents its own
documents they pertain specifically to Rule 14a-8 proposals, and then have the
gall to ask the Commission to grant it no-action relief regarding a 14a-8
proposal, but personally speaking, I am outraged by such actions! As is always
the case, Federal law supersedes state law, and the Fund cannot create a Bylaw
that would trump the shareholder proposal rules. With that basic legal tenet in
mind, we are mystified at why the Fund would go off on this tangent unless some,
or all, of its strategy in this no-action request is to obfuscate the true
issues and steer the Commission off the otherwise likely path of suggesting
minor modifications of a few words here or there to make the proposal
unassailable from an inclusion/omission standpoint. We hope the Commission sees
through the smoke and mirror of the Fund's tactics, even on something so
surprising as a full reading of Section 13 in their own Bylaws! Were that not
enough, the Fund digs an even deeper hole for itself by showing its lack of
understanding regarding the documentary support requirements for 14a-8 proposals
and a fictitious deadline they have created in their own minds that does not
coincide with the guidelines for rule 14a-8 proposals (the burden for obtaining
documentary support falls on the Fund within 14 days of the proponent not
providing such information with his 14a-8 proposal submission and the proponent
is allowed 14 days to respond thereafter)and the rule is now written in Plain
English, so what could the Fund's plausible excuse be for not understanding the
rule? With the Fund's catch all plea that the proposal is "too vague for stockholder
action," we again suggest that a simple remedy for the Commission to resolve
this predicament, if indeed feels any remedy is required, is to clarify that the
proposal pertains to repealing "all amendments to the Bylaws that strip rights
from shareholders, and whose repeal would not violate any law" is a workable
remedy. Further Misrepresentation of the Impact of the Fund's Agreement with its Largest
Shareholder As mentioned earlier, on page 4, one month ago, the Fund struck an agreement
with its largest shareholder, the Bank, presumably to fend off another proxy
contest this year. At the April 2000 annual meeting, this shareholder group, won
two Board seats in a landslide, at the same time separate open-ending and tender
offer proposals were also passed by more than 2/3 of shareholders voting, and
about 50% of outstanding shares. The Fund in its recent agreement with the Bank,
reached a decision to opt out of one of the MGCL Section 8 statute regarding
special meetings of shareholders. It is important to note that the effectiveness
of that portion of the agreement with the Bank is "to take effect immediately
following the 2001 Annual Meeting." Yet, in arguing its position on this Bylaw
issue to the Commission, the Fund states in its January 15 letter on page 4 that
"this amendment will not become effective until the Company opts out of Section
3-805 as of the 2002 Annual Meeting." We do not believe this glaring
misrepresentation was anything but an attempt to distort the facts on this
issue. We have further confidence that our view is correct, as we are aware that
another shareholder proposal exists that centers specifically on the special
meeting Bylaw affected by this language, and the proponent of that proposal told
us that this mischaracterization of the effective date is repeated ad nauseam in
the Fund's letter attempting to omit that proposal. The correct information is
in the signed agreement, not the Fund's no-action request letter. Were there
some sort of stiff penalty for presenting false and misleading information to
the Commission, surely the Fund would be a prime candidate based on all the data
available in just the January 15 letter. Other Issues The Fund is disingenuous in declaring that the Bylaw amendments adopted in June
2000 had "nothing to do with the voting preferences at the annual meeting of
stockholders in 2000." True, the structural/innocuous amendments did not come as
a result of anything in particular, but the Bylaws amendments that stripped
rights from the shareholders who had just voted for massive change at the Fund,
were precisely the aim of amending the Bylaws. Funds do not choose to take
action after 69% of a vote calls for a rebuke of the status quo, and think
anyone will accept that these actions had "nothing to do" with the outcome of
the annual meeting only six weeks beforehand. In suggesting our supporting
statement is false and misleading, the Fund is making an important concession
that it accept that modification of our proposal is a likely outcome of this
process with the Commission. The history of the shareholder proposal no-action
process has established ample precedent for shareholders to be given seven days
to provide corrective language to remedy the objectionable "false and
misleading" language. Naturally, with the rule 14a-8 deadline on November 17, it
is not tenable that a shareholder would be expected to anticipate a Fund
announcement in the future on December 18 that a tender offer for 20% of the
shares would be conducted in the first quarter of 2001, before the next annual
meeting in April 2001. To claim that our proposal is false and misleading in
this regard is tantamount to suggesting the shareholder proposal should be
updated to reflect the current state of affairs of the Fund. The Fund did not
want to come out and request that directly, even if it is the likely outcome,
since it is hopeful the Commission will be willing to overlook its many
improprieties in this process and allow it to completely omit our proposal,
despite everything. We ask the Commission to stop the madness the Fund has willfully created in the
matter of this shareholder proposal. Let the shareholders vote, that is all we
ask. In all my years of investing in Closed-End Funds and submitting shareholder
proposals, I have rarely if ever seen the wide number of blatant distortions on
a single proposal as seen here. Since the Fund can't seem to figure out when to
stop pushing the envelope of conveying the truth, we have appreciated the
opportunity to convey to the Commission the hidden truth the Fund hoped would
never come to the surface. We remain hopeful the Commission will see the value
in allowing the shareholders to express their preference in a fair vote and by
refusing to grant the Fund the no-action relief it seeks in its quest to omit
our proposal. Chairman Levitt in his final address to the public earlier this
week encouraged investors to remain vigilant in their pursuit of investors
rights. We did not need any convincing, but want to acknowledge that we hear you
loud and clear Mr. Chairman. Sincerely, Adam G. Shapiro General Partner, Advantage Partners, LP [LETTER OF INQUIRY 3]
March 16, 2001 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: Mr. Richard Pfordte, Branch Chief Mr. Eric Purple, Staff Attorney Division of Investment Management Re: Shareholder Proposal Submitted to The France Growth Fund, Inc. by Advantage
Partners, L.P. Dear Messrs. Pfordte and Purple: This letter is submitted on behalf of our client, The France Growth Fund, Inc.,
a Maryland corporation (the "Company"), to respond to the letter, dated January
18, 2001, from Mr. Adam G. Shapiro on behalf of Advantage Partners, L.P. (the
"Proponent") to the Securities and Exchange Commission (the "Commission"). The
Proponent's letter refers to the proposal and statement of support (the
"Proposal") submitted by the Proponent for inclusion in the proxy materials (the
"Proxy Materials") for the Company's 2001 Annual Meeting of Stockholders (the
"2001 Annual Meeting") and the Company's request, dated January 15, 2001,
pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), for the concurrence of the Staff of the Division of
Investment Management that no enforcement action will be recommended to the
Commission if the Company omits the proposal from the Proxy Materials (the
"Request Letter"). We regret that we did not have the opportunity to respond to the Proponent's
letter sooner. The Company was not provided with a copy of the Proponent's
letter as required by Rule 14a-8(k) when the Proponent submitted its letter to
the Commission on or about January 18, 2001. The Company only learned from Mr.
Purple of the staff of the Commission that the Proponent had responded to the
Request Letter, at which time I called the Proponent to request a copy of its
letter. The Company received a copy of Proponent's letter on March 5, 2001. I shall attempt in this letter only to respond to the Proponent's allegations
that we have misrepresented to the staff of the Commission certain facts in our
Request Letter. After reviewing the Proponent's letter, we feel our Request
Letter continues to clearly set forth the reasons why we believe the Proposal
may be omitted from the Proxy Materials and that a restatement of those same
reasons again herenamely, that that Proposal is excludable pursuant to Rules
14a-8(i)(1), (2), (3) and (6)would not be productive. The Company's Agreement with its Largest Stockholder The Proponent suggests that the Request Letter is inaccurate because it states
that Article II, Section 3 ("Section 3") of the Amended and Restated Bylaws of
the Company (the "Bylaws") is not subject to amendment by the stockholders until
the 2002 Annual Meeting of the Stockholders (the "2002 Annual Meeting") by
virtue of the Company's election to be subject to Section 3-805 of the Maryland
General Corporation Law (the "MGCL"). The Proponent cites the Agreement signed
by the Company and Bankgesellschaft Berlin A.G. ("Bankgesellschaft"), dated as
of December 20, 2000 (the "December Agreement"), as evidence that Section 3 is
actually subject to amendment immediately after the 2001 Annual Meeting. Our Request Letter is accurate. The Board of Directors of the Company (the
"Board") has not opted out and will not opt out of Section 3-805 until the
conclusion of the 2002 Annual Meeting. In addition, under Section 3-802(b)(3) of
the MGCL, the opt-out is not effective until the Company files articles
supplementary with the State Department of Assessments and Taxation of Maryland
("SDAT"). At the direction of the Board, articles supplementary have not been
filed with the SDAT and articles supplementary will not be filed until the
conclusion of the 2002 Annual Meeting. The Company has entered into an amended
agreement with Bankgesellschaft to reflect that fact. The December Agreement
cited by the Proponent was amended specifically because it did not accurately
reflect the Board's intentions with respect to opting out of Section 3-805.
Please see The Amended and Restated Summary of Terms of Agreement Between
Bankgesellschaft Berlin AG and The France Growth Fund, Inc., filed as Exhibit
99.(D) to the Tender Offer Statement of the Company, dated as of January 31,
2001, and attached hereto as Appendix A. The Company's Advance Notice Bylaw Provisions The Proponent also suggests that we have misstated the effect of Article II,
Section 13 of the Bylaws, arguing that all of Article II, Section 13, except for
Section 13(c)(3), is concerned only with proposals submitted outside of Rule
14a-8. We disagree. Article II, Section 13(a)(1)(iii) provides that a proposal
of business to be considered by the Stockholders may be made at an annual
meeting: "by any Stockholder of the Corporation who was a Stockholder of record both at
the time of giving of notice provided for in this Section [13](a) and at the
time of the annual meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section [13](a)." Article II, Section 13(c)(2) provides that "only such business shall be
conducted at a meeting of Stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section [13]." Read
together, these provisions require a stockholder to comply with Article II,
Section 13 for any proposal that is presented for consideration at a meeting of
the stockholders. These advance notice provisions are typical of hundreds,
probably thousands, of companies subject to Regulation 14A under the Exchange
Act. The second sentence of Article II, Section 13(c) provides: "Nothing in this Section [13] shall be deemed to affect any right of a
Stockholder to request inclusion of a proposal in, nor the right of the
Corporation to omit a proposal from, the Corporation's proxy statement pursuant
to Rule 14a-8 (or any successor provision) under the Exchange Act." It is clear that the foregoing means that the existence of Article II, Section
13 in itself does not preclude either a stockholder from requesting inclusion of
a proposal in the Company's proxy statement or the Company from excluding a
requested proposal from the Company's proxy statement. Article II, Section 13
merely recognizes that federal law, specifically Rule 14a-8, will govern the
grounds for inclusion or exclusion of a proposal in the proxy statement. Rule
14a-8(i)(1) specifically refers back to the laws of a company's state of
organization as a basis for excluding a proposal. Specifically, Rule 14a-8(i)(1)
states that a proposal may be excluded if "it is not a proper matter for action
by the shareholders under the laws of the jurisdiction of the company's
organization." Section 2-504(e) of the MGCL expressly authorizes a Maryland corporation to
adopt bylaws that require any stockholder proposing a matter for consideration
at a meeting of the stockholders to provide minimum advance notice of the
proposal to the corporation, inter alia, of not more than 90 days before the
first anniversary of the mailing date of the notice of the preceding year's
annual meeting. Section 1-101(t) of the MGCL defines "stockholder" as a "person
who is a record holder of shares of stock in a corporation and includes a member
of a corporation organized without stock." (Emphasis added.) As explained in the Request Letter, according to the transfer agent of the
Company, PNC Bank, the Proponent does not appear on the stock records of the
Company. Therefore, the Proponent is not a record holder of shares of stock of
the Company. As stated above, Article II, Section 13 of the Bylaws requires a
record holder to submit the notice to the Company. In addition, the notice, even
if submitted on behalf of the Proponent by a record holder, fails to state the
class and number of shares held by the Proponent. Moreover, it should be noted
that, as of today's date, the Company has not received any evidence of the
Proponent's beneficial ownership of the Company's shares. **** If you have any questions or need any additional information regarding the
above, please do not hesitate to call me (collect) at the number listed above.
Very truly yours, Charles F. McCain Enclosure cc: Steven M. Cancro, Esq. Mr. Frederick J. Schmidt (The France Growth Fund, Inc.) James J. Hanks Jr., Esq. Teresa B. Carnell, Esq. (Ballard Spar Andrews & Ingersoll, LLP) Mr. Adam G. Shapiro (Advantage Partners, L.P.) [LETTER OF INQUIRY 4]
March 23, 2001 Mr. Barry D. Miller, Associate Director for Legal & Disclosure Mr. Richard Pfordte, Branch ChiefDivision of Investment Management Mr. Eric Purple, Staff AttorneyDivision of Investment Management Securities and Exchange Commission Mail Stops 5-6 and 5-5 450 Fifth Street N.W. Washington, DC 20549 Re: The France Growth Fund, Inc. Dear Mssrs. Miller, Pfordte, Purple, and other members of the Commission: Earlier this week we received the second letter drafted by the France Growth
Fund regarding our shareholder proposal. I thought the Commission would
appreciate knowing we continue to find the Fund's position unconvincing. The
Fund's latest letter serves as a reminder that:
the Fund has rested its position on a number of half-truths, including its
reliance on Maryland law for many of its arguments, yet adjusting application of
that body of code to suit its particular purpose, i.e. the Fund believes it can
put off opting out of Section 3-805 of the MGCL, yet at a whim, immediately
modify certain voting requirements stipulated in the same section of code. A
reading of the code points out the Fund's inconsistent position, further
underscoring our contention that the Commission is not receiving a fair
presentation of the issues from the Fund;
the Fund represents that the Amended Bylaws our proposal seeks to repeal
should be allowed to dictate whether our proposal is an appropriate matter for a
shareholder vote, analogous to cutting off a shareholder's leg, then stipulating
that to have rights one must possess two legs. In any case, we think their two letters have been short on real substance
regarding our ability, as protected under Federal law, to place a reasonable
proposal to a vote of shareholders of the Fund. Hopefully, the Commission will
not accept the Fund's obfuscation of the salient issues, many of which were
brought out in our earlier correspondence. Sincerely, Adam G. Shapiro General Partner, Advantage Partners, LP THE VICTOR BUILDING SUITE 110 326 WEST LANCASTER AVENUE ARDMORE, PA 19003 PHONE: 610.896.3967 FAX: 610.896.3968
[STAFF REPLY LETTER]
April 6, 2001 Ernest V. Klein Charles F. McCain II Hale & Dorr LLP 60 State Street Boston, MA 02109 James J. Hanks Jr. Teresa B. Carnell Ballard Spahr Andrews & Ingersoll LLP 300 East Lombard Street, 19th Floor Baltimore, MD 21202-3268 Re: France Growth Fund Inc. ("Fund") File No. 811-5994 Shareholder Proposal of Advantage Partners, LP. Dear Messrs. Klein, McCain, Hanks, and Ms. Carnell: In a letter dated January 15, 2001, you notified the staff of the Securities and
Exchange Commission that the Fund proposes to omit from its proxy materials for
its 2001 annual meeting a shareholder proposal (the "Proposal") submitted by
Advantage Partners, LP ("Proponent"). The Proposal provides: RESOLVED, that all amendments to the By-Laws adopted by the Board of Directors
in June 2000 are hereby repealed since the vast majority, if not all, changes
are believed to disenfranchise shareholders in a number of ways, and
additionally, are inconsistent with the voting preferences expressed by
shareholders at the April 2000 annual meeting. Furthermore, notwithstanding
anything to the contrary in the "unspoiled" By-Laws in effect prior to June
2000, future changes to these affected sections of the By-Laws may not be
amended altered or repealed except by the vote of shareholders. You request our assurance that we would not recommend enforcement action if the
Fund omits the Proposal in reliance on subparagraphs (i)(1), (i)(2), (i)(3),
and/or (i)(6) of Rule 14a-8 under the Securities Exchange Act of 1934.1 Omission of Proposal Pursuant to Rule 14a-8(i)(1) You assert that the Proposal may be omitted under Rule 14a-8(i)(1), which allows
a company to exclude a shareholder proposal from its proxy materials if the
proposal "is not a proper subject for action under the laws of the jurisdiction
of the company's organization." You argue that the Proposal would require the improper repeal of Article II,
Section 3 of the Fund's bylaws, which was adopted to incorporate various
anti-takeover measures allowed under Maryland law into the Fund's by-laws.2 You
argue that the repeal of these measures by a shareholder proposal is not a
"proper subject for action" under the laws of Maryland. In support of this
argument you cite Section 3-802(b)(3) of the Maryland General Corporate Laws
("MGCL"), which provides that, once a company elects to be covered by the
anti-takeover measures, an election can only be revoked if the company does so
"in the same manner in which it elected to become subject" to the provisions in
the first place. There appears to be some basis for your position that the Fund may exclude the
Proposal and its supporting statement pursuant to this rule. You state that the
Fund's election to be covered by the anti-takeover measures was authorized by
board vote without shareholder approval, as permitted by section 3-802(d) of the
MGCL. You argue that, because the Fund elected to be subject to the
anti-takeover measures solely by board action, the only way the Fund can elect
not to be covered by these provisions is exclusively through another board
action. Because it appears that the Fund may only be able to revoke this
election by board action, it is questionable whether a shareholder proposal to
revoke the bylaws is proper under Maryland law. While the Fund may be able to omit the Proposal from its proxy materials under
Rule 14a-8(i), we have stated in the past that shareholder proposals that might
otherwise be excludable under Rule 14a-8(i)(1) may be cured if mandatory
language is changed to a recommendation or a request addressed to a fund's board
of directors. Consequently, we would not recommend enforcement action to the
Commission if the Fund omits the Proposal, provided the Proponent has not
resubmitted such a revised proposal to the Fund within seven days of the receipt
of this letter. Omission of Proposal Based on Rule 14a-8(i)(1) Due to a Failure to Meet Advanced
Notice Requirements You state that the Proponent failed to comply with the Fund's advance notice
provisions contained in Article II, Section 13(a)(2) of the Fund's bylaws. You
argue that, because the Proposal was not properly submitted under the
requirements of the Fund's bylaws, it is not a proper subject for action by
shareholders. Accordingly, you argue that it may be omitted under Rule
14a-8(i)(1). We disagree. We believe that Rule 14a-8(i)(1) allows a fund to omit a proposal
if the subject matter of the proposal is not proper for shareholder action under
state law. In arguing that it may omit the Proposal under 14a-8(i)(1) based upon
an alleged failure to comply with its advanced notice provisions, the Fund is
not arguing that the substance of the Proposal is improper under state law, but
rather that the Proponent has not complied with proper procedure. As a result,
we believe the Fund fails to establish the grounds under which it may omit the
Proposal under Rule 14a-8(i)(1). Moreover, it appears that the Proponent complied with the deadline for making
submissions under 14a-8. The deadline for submitting a proposal pursuant to Rule
14a-8 is 120 days before the one-year anniversary of the release of the
company's proxy materials for the previous year's annual meeting.3 The rule
states that the Fund must publish the deadline in its previous year's proxy
statement. The Fund's definitive proxy statement for its 2000 annual meeting
stated that the deadline for filing shareholder proposals for the Fund's next
annual meeting was November 17, 2000.4 You do not allege that the Proponent's
letter dated November 15, 2000 was received after the November 17, 2000
deadline.5 Accordingly, we cannot give any assurance that we would not recommend
enforcement action to the Commission if the Fund omits the Proposal under
14a-8(i)(1), based upon the Proponent's alleged failure to meet an advance
notice deadline outside of the requirements of Rule 14a-8(e). Ineligibility To Submit a Proposal Under 14a-8(b) Your letter raises an important procedural issue under Rule 14a-8(b). You state
that the Proponent does not appear on the stock records of the Fund as an owner
of record. Furthermore, the Proponent has not submitted documentary evidence of
its beneficial ownership in the Fund as required by Rule 14a-8(b). Rule 14a-8(f)
allows a fund to exclude a proposal if a proponent fails to comply with the
eligibility requirements of 14a-8(b). The rule requires a fund to provide a
proponent with written notice of any eligibility or procedural deficiencies. If
a proponent fails to respond in fourteen days, the company may exclude the
proposal. Although there may be some merit in your belief that the Proponent may be
ineligible to submit the Proposal, the Fund has not sent the written notice
required by Rule 14a-8(f), and the Proponent has not had the opportunity to
respond and cure the defect. If the Fund provides the Proponent with the written notice of deficiency
required by Rule 14a-8(f) within a reasonable time after the receipt of this
letter, and the Proponent is unable to provide the Fund with the proof of
beneficial ownership required by 14a-8(b) within 14 days of the receipt of the
written notice, the staff would not recommend enforcement action if the Fund
omitted the shareholder proposal from its proxy materials. Omission of Proposal Pursuant to 14a-8(i)(3) You assert that the Proposal may be omitted under Rule 14a-8(i)(3), which allows
a company to omit a shareholder proposal from its proxy materials if "the
proposal or supporting statement is contrary to any of the Commission's proxy
rules, including Rule 14a-9, which prohibits materially false or misleading
statements in proxy solicitation materials." The Proposal states "the vast
majority, if not all, changes are believed to disenfranchise shareholders in a
number of ways, and additionally, are inconsistent with the voting preferences
expressed by the shareholders at the April 2000 annual meeting." You maintain
that this sentence is misleading because it suggests that the "vast majority, if
not all, changes are believed to disenfranchise shareholders," when in your
opinion a number of the Fund's bylaw amendments were innocuous housekeeping
matters. In addition, the you believe that the amendments have "nothing to do
with the voting preferences" of the Fund's April 2000 annual meeting, and that
it is misleading to state otherwise. The staff does not express any views at this time as to whether it believes the
Proposal may omitted pursuant to Rule 14a-8(i)(3). As discussed above, the
Proponent may revise the Proposal and its supporting statement. Because this
revision may include the deletion, or rewording, of the language to which the
Fund objects, we believe that a discussion of whether this language may, or may
not, be false or misleading would not be ripe at this time. See Templeton Global
Income Fund, Inc. (pub. avail. Dec. 19, 1996). Please note that in reaching our positions we have not found it necessary to
address the Fund's alternative bases for arguing for omission that you raised in
your letter. Attached is a description of the informal procedures the Division follows in
responding to shareholder proposals. If you have any questions or comments
regarding this matter, please contact the undersigned at (202) 942-0573. Sincerely, Eric S. Purple Senior Counsel ATTACHMENT cc: Advantage Capital Management c/o Adam G. Shapiro The Victor Building, Suite 110 326 West Lancaster Avenue Ardmore, PA 19003 -----FOOTNOTES----- 1 In connection with this request, we also considered letters submitted to the
staff by Advantage Partners, LP dated January 18, 2001 and March 23, 2001, as
well as a response from the Fund dated March 16, 2001. 2 The anti-takeover measures are codified in sections 3-802 through 3-805 of the
MGCL. 3 See Rule 14a-8(e)(2). If, however, the date of the next annual meeting is
changed by more than 30 days from the date of the previous meeting, or if there
was no annual meeting the previous year, the deadline is a reasonable time prior
to the company's printing and mailing its proxy materials. 4 See Definitive Proxy Statement of the France Growth Fund Inc. filed with the
Commission on March 17, 2000 5 To the contrary, the Fund states that the Proposal was delivered on the "121st
day before the date the Company's proxy statement was released to the
stockholders for the previous year's annual meeting."
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