Company Name: France Growth Fund, Inc. (Strome Hedgecap Fund)
Public Availability Date: April 6, 2001Document Sections: LETTER OF INQUIRY 1
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 Strome Hedgecap Fund, L.P. 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 Strome Hedgecap Fund, L.P. (the "Proponent") by letter
dated November 16, 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, Section 3 of the By-Laws shall be amended to reflect that stockholders
entitled to cast not less than 5% of all the votes entitled to be cast at such
meeting may request a Special Meeting of stockholders and that hereafter, this
amendment of the By-Laws may not be further amended, altered or repealed except
by a vote of the stockholders. It is our opinion that this Proposal may be omitted from the Proxy Materials
based on Rule 14a-8(i)(1), (6) and (3). Rule 14a-8(i)(1) (Improper Under State Law) The Proposal seeks to amend certain provisions of Article II, Section 3
("Section 3") of the Amended and Restated Bylaws of the Company (the "Bylaws").
The Proposal is excludable from the Proxy Materials under Rule 14a-8(i)(1)
because the amendment of Article II is not a proper subject for action by
stockholders under Maryland law for the following reasons: (1) the Proposal, if
approved by the stockholders, would be effective at the 2001 Annual Meeting of
Stockholders (the "2001 Annual Meeting") while Section 3 is not subject to
amendment by the stockholders until the 2002 Annual Meeting of Stockholders (the
"2002 Annual Meeting"), and (2) the Proponent failed to satisfy the advance
notice requirements of Article II, Section 13 of the Bylaws. A Proposal to Amend Section 3 by the Stockholders Would Not Be Effective Until
the 2002 Annual Meeting of Stockholders. In 1999, Title 3, Subtitle 8 of the Maryland General Corporation Law (the "MGCL")
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 B.
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. 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, at the 2002 Annual Meeting. The
Board has also resolved to amend Section 3 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. The Proponent's letter states that the Proposal is submitted for presentation at
the "next scheduled annual or special meeting of stockholders." The Proposal
itself states that "Section 3 be amended...." Insofar as the Proponent seeks to
present the Proposal and amend Section 3 at the 2001 Annual Meeting, the
Proposal would be effective upon the vote of the stockholders. Because Section 3
is not subject to amendment until the 2002 Annual Meeting and the Proposal, if
approved by the stockholders, would be effective upon such approval at the 2001
Annual Meeting, the Proposal would not be a proper matter for the stockholders
to consider at the 2001 Annual Meeting. Thus, the Proposal would not be a proper
matter for the stockholders to consider at the 2001 Annual Meeting. 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. (In any event, it should be noted that on Thursday, January 4, 2001, undersigned
Charles F. McCain contacted Jeffrey S. Lambert, Chief Operating Officer of SSCO,
Inc., the general partner of Strome Investment Management, L.P., which is the
general partner of the Proponent, to suggest that the Proponent redraft the
Proposal as a recommendation to the Board to opt out of Section 3-805 of
Subtitle 8 before the 2002 Annual Meeting and amend Section 3 accordingly. On
Tuesday, January 9, 2001, Mr. Lambert responded that the Proponent was unwilling
to redraft the Proposal as a recommendation to the Board.) 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). 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 120th 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. 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 amending Section 3 before the 2002 Annual Meeting
would cause the Company to violate Section 3-802(b)(3) of the MGCL, the Company
does not have the power to take such action under Section 2-103(17) of the MGCL.
Also, because the presentation of the Proposal would violate Article II, Section
13 of the Bylaws, the Company does 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 Fund has failed to implement numerous proposals passed
by its stockholders at the last two annual meetings in 1999 and 2000." It is not true that "The Fund has failed to implement numerous proposals passed
by its stockholders at the last two annual meetings in 1999 and 2000." The
proposals of the 2000 Annual Meeting 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. Because the Company has taken action to substantially respond to the proposals
presented by the stockholders at the last two annual meetings, portions of the
Supporting Statements are false and misleading and 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
2000 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.) [LETTER OF INQUIRY 2]
February 20, 2001 Mr. Richard Pfordte, Branch Chief Mr. Eric Purple, Staff Attorney Division of Investment Management Securities and Exchange Commission Mail Stop 5-5 450 Fifth Street N.W. Washington, DC 20549 The matter of The France Growth Fund, Inc. and the Validity of the Shareholder
Proposal of Strome Hedgecap Fund, L.P. Dear Members of the Commission: We received a copy of the France Growth Fund's second letter to the Commission
(dated February 13, 2001), and determined a brief response was warranted such
that the Commission understands we do not agree with the Fund's handling of the
matter. We previously responded on January 22, 2001 to the Fund's January 15,
2001 letter seeking no action assurance if the Fund omits from its proxy
materials our Rule 14a-8 proposal to amend Section 3 of the By-Laws (regarding
Special Meetings of stockholders). We continue to believe the Fund should present our proposal and supporting
statement for a shareholder vote. The Fund's second letter appears to us to be
nothing more than an attempt to rehabilitate its position by muddying the waters
for the Commission to wade through. After presenting several arguments (yet no
apologies for misleading the Commission in its January 15 correspondence), the
Fund concedes that the proposal, if restated as a non-binding proposal, "would
be an appropriate matter for stockholder consideration." While we did not find
either the Fund's first or second set of arguments accurate, let alone
persuasive, in relation to omitting our proposal, we are hopeful the Commission
will draw the same conclusion and preserve the rights of stockholders to vote on
a matter of importance to their investment. Sincerely, Strome Hedgecap Fund, L.P. By: Strome Investment Management, L.P., General Partner By its general partner, SSCO, Inc. By: Jeffrey S. Lambert Chief Operating Officer [LETTER OF INQUIRY 3]
February 13, 2001 VIA FEDERAL EXPRESS Securities and Exchange Commission Mail Stop 0505 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 Strome Hedgecap Fund, L.P. Ladies and Gentlemen: 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 as of
January 22, 2001, from Mr. Jeffrey S. Lambert on behalf of Strome Hedgecap Fund,
L.P. (the "Proponent") to the Securities and Exchange Commission (the
"Commission") with respect to the proposal (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 as of 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"). Rule 14a-8(i)(1) (Improper Under State Law) 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 of
Stockholders (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 amended articles
supplementary with the State Department of Assessments and Taxation of Maryland
("SDAT"). At the direction of the Board, no amended articles supplementary have
been filed with the SDAT and no amended articles supplementary will 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 as Appendix A. The Proponent also suggests that counsel misstates the effect of Article II,
Section 13 of the Bylaws, arguing that Article II, Section 13 is concerned only
with proposals submitted outside of Rule 14a-8. 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
hundredsprobably thousandsof companies subject to Regulation 14A under the
Exchange Act. To further support its argument that Article II, Section 13 governs proposals
outside of Rule 14a-8, the Proponent provides the following quote from the
second sentence of Section 13(c), deleting language that directly contradicts
its position: Nothing in this Section [13] shall be deemed to affect any right of a
Stockholder to request inclusion of a proposal in...the Corporation's proxy
statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange
Act." The second sentence of Section 13(c), in its entirety, 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. (Emphasis added.) Based on a complete reading of the second sentence of Article
II, Section 13(c), it is clear that it means that the existence of the 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. 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. 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, as of
today's date, the Company has not received any evidence of the Proponent's
beneficial ownership of the Company's shares. Rule 14a-(8)(6) (Absence of Power/Authority) The Proponent argues that when a proposal is voted upon, it becomes effective as
soon as allowable. As explained above, any amendment to Section 3 would not be
effective, if approved, until after the 2002 Annual Meetingan entire year after
any approval by the stockholders. As explained in the Request Letter, 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. As explained in the Request Letter, because amending Section 3 before the
2002 Annual Meeting would cause the Company to violate Section 3-802(b)(3) of
the MGCL, the Company does not have the power to take such action under Section
2-103(17) of the MGCL. Also, because the presentation of the Proposal would
violate Article II, Section 13 of the Bylaws, the Company does 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). As we previously advised the Proponent, we believe that the Proposal, if recast
as a recommendation, would be an appropriate matter for stockholder
consideration at the 2001 Annual Meeting. Accordingly, the Company continues to
be willing to include the Proponent's Proposal if revised in that manner. This
would afford stockholders the opportunity to vote on the Proposal while
alleviating the Maryland law concerns noted above. Rule 14a-8(i)(3) (Violation of Proxy Rules) We restate our position that certain statements of the Proponent are inaccurate.
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 Fund has failed to implement numerous proposals passed
by its stockholders at the last two annual meetings in 1999 and 2000." This is not true. The proposals of the 2000 Annual Meeting 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"). There were also several stockholder proposals relating to the realization of NAV
submitted at the 1999 Annual Meeting of Stockholders. The Company believes that it has taken numerous steps in an effort to seek to
realize NAV for its stockholders: (1) On January 31, 2001, the Company filed a Tender Offer Statement under
Section 13(e)(4) of the Exchange Act to purchase 20% of the Company's
outstanding shares of common stock, par value $.01 per share, for cash at a
price equal to 98% of the net asset value per share determined as of the close
of the regular trading session of the New York Stock Exchange on the business
day the offer expires. (2) On September 13, 1999, the Company initiated an open-market share repurchase
program whereby the Company is directed to purchase up to 10% of the Company's
outstanding shares when the discount exceeds a certain threshold level. (3) On July 1, 1999, the Company commenced daily pricing of its shares rather
than the weekly pricing used by many other closed-end investment companies. (4) Prior to 1999, the Company had instituted a Tax-advantaged Managed
Distribution Plan pursuant to which the Company distributes, on a quarterly
basis, a dividend equal to at least 3% of the Company's net assets as of the end
of the previous year (i.e., at least 12% annually). The Company's year 2000
distributions represented 21.54% of the Company's NAV as of December 31, 1999.
(5) Beginning July, 1998, the Company's investment adviser has agreed to waive a
percentage of its investment advisory fee equal to the size of the discount from
NAV at which Company shares trade. The Company believes that the cumulative effect of these actions has contributed
to a reduction in the discount from a high of 18.82% during 1999 to a low of
8.48% during 2000. The discount from NAV was 7.85% on February 7, 2001. Because portions of the supporting statements are false and misleading, 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
2001 Proxy Materials. As noted above, the Company would be willing to include
the Proposal if the Proposal is revised in the form of a recommendation. 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.) [LETTER OF INQUIRY 4]
January 22, 2001 VIA FEDEX Mr. Richard Pfordte, Branch Chief Mr. Eric Purple, Staff Attorney Division of Investment Management Securities and Exchange Commission Mail Stop 5-5 450 Fifth Street N.W. Washington, DC 20549 The matter of The France Growth Fund, Inc. and the Validity of the Shareholder
Proposal of Strome Hedgecap Fund, L.P. Dear Members of the Commission: We received a copy of the January 15, 2001, letter from counsel to The France
Growth Fund, Inc. ("the Fund") to the SEC seeking no action assurance if the
Fund omits from its proxy materials our Rule 14a-8 proposal to amend Section 3
of the By-Laws (regarding Special Meetings of stockholders). We write to the
Commission today to dispute the Fund's contention that its position is correct.
The Fund suggests three parts of the proxy rules, 14a-8(i)(1), (6), and (3) for
its conclusions. We will address each of these areas head-on in the order
presented by the Fund, as we believe the Fund's bases for omitting our proposal
are inaccurate I. Rule 14a-8(i)(1) (Improper Under State Law) The Fund's counsel lists two reasons, both of which appear maccurate. On the
first issue, they make a grave error by suggesting numerous times throughout the
January 15 correspondence that Section 3 of the By-Laws "is not subject to
amendment by the stockholders until the 2002 Annual Meeting of Stockholders."
This misstates an Agreement signed by the Fund and a shareholder group,
Bankgeselischaft Berlin A.G., last month. The Agreement in question is listed as
Exhibit 1 in a Schedule 13D filing made by the shareholder group on December 20,
2000 (see Exhibit 1 of this letter), and also referenced in the Fund's press
release on December 18, 2000 (see Exhibit 2 of this letter). With the facts now corrected, the Fund's argument ceases to be. Even if the Fund
were able to renegotiate that agreement at a later date to encompass the
effective date they desire, our proposal should not be omitted since the Fund
has already reached an agreement in writing that this Section 3 would be
amendable only by the shareholders. Our 5% threshold proposal, therefore, could
become effective once shareholder amendment is again permissible. Since it
becomes permissible immediately following the 2001 Annual Meeting, if the
shareholders approve our proposal, it can become effective immediately. The second condition the Fund raises is that we have failed to comply with the
Fund's advance notice requirements in Article II, Section 13 of the By-Laws. The
Fund's requirement for a Rule 14a-8 proposal to be submitted was set in the 2000
proxy materials to be 120 days or more prior to the anniversary of the mailing
date for the preceding year's annual meeting. Article II, Section 13 appears to
be concerned with proposals submitted outside of Rule 14a-8 for two reasons: 1)
the company's advance notice requirements only allow for a window of 90-120 days
prior to the anniversary of the mailing date for the preceding year's annual
meeting, leaving no practical overlap with the Rule 14a-8 proposal requirement
to be submitted at least 120 days before the same measuring point, and 2)
probably more importantly, the final paragraph, Section 13(c)(3), says that
stockholder submitting proposals should also comply with the applicable
requirements of the Exchange Act of 1934 and that "nothing in this Section 12
[13 is the correct number] shall be deemed to affect any right of a Stockholder
to request inclusion of a proposal in...the Corporation's proxy statement
pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act."
Based on a complete reading of Section 13, rather than the selective disclosure
the Fund has previously provided to the Commission, the Fund's argument ceases
to be. II. Rule 14a-8(i)(6) (Absence of Power/Authority) When a proposal is voted upon, it becomes effective as soon as allowable. The
Fund's position that a vote must be effective instantaneously or not be allowed
when it does become allowable is highly subject to scrutiny. In any case, as we
described above, the Fund has a signed agreement that our proposal could be
implemented immediately following the 2001 meeting; and the Fund's misstatement
of a date in 2002 has no relevance to our proposal. Were it to have relevance,
our proposal, if it were passed by the shareholder would become effective as
soon as allowable. III. Rule 14a-8(i)(6) (Violation of Proxy Rules) The Fund suggests that our supporting statement contains false and misleading
statements. This angle for exclusion is insupportable by the Fund's argument.
Firstly, the Commission ordinarily provides proponents with an opportunity to
remedy any language deemed potentially false and misleading before striking the
language from presentation in a company's proxy material, but in any event, this
would not likely lead to the excludability of the entire shareholder proposal.
Secondly, three shareholder proposals were passed by the stockholders at the
annual meetings in 1999 and 2000. The two open-ending proposals have not been
implemented; the tender offer proposal called for PROMPT action, which also did
not occur. One month after our proposal was submitted in November 2000 (and long
after the shareholders voted for prompt action), the Fund did announce a tender
offer for a modest portion of its shares, but we do not believe that action
makes our proposal as written inaccurate in any way. If the Fund wants to argue
in its proxy materials that it "has taken action to substantially respond to the
proposals presented by the stockholders at the last two annual meetings," we are
convinced that is the appropriate place for that argument, not to the Commission
in the context of our shareholder proposal and our supporting statement that
"The Fund has failed to implement numerous proposals passed by its
stockholders." To date, the Fund has failed to implement numerous proposals
passed by stockholders at the 1999 and 2000 meetings. Based on all of our foregoing comments, we respectfully believe the Commission
should refrain from providing the no action assurances the Fund seeks regarding
our shareholder proposal. Sincerely, Strome Hedgecap Fund, L.P. By: Strome Investment Management, L.P., General Partner By its general partner, SSCO, Inc. By: Jeffrey S. Lambert Chief Operating Officer
[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. File No. 811-5994 Shareholder Proposal of Strome Hedgecap Fund, L.P. 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 France Growth Fund, Inc. ("Fund") proposes to omit
from its proxy materials for its 2001 annual meeting a shareholder proposal (the
"Proposal") submitted by Strome Hedgecap, L.P. ("Proponent"). The Proposal
provides: RESOLVED, Section 3 of the By-Laws shall be amended to reflect that stockholders
entitled to cast not less than 5% of all the votes entitled to be cast at such a
meeting may request a Special Meeting of stockholders, and that hereafter, this
amendment of the By-Laws may not be further amended, altered or repealed except
by the vote of stockholders. You request our assurance that we would not recommend enforcement action if the
Fund omits the Proposal in reliance on subparagraphs (i)(1), (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 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 16, 2000 was received after the November 17 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 Rule 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, you state that 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, a company may
exclude a 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's supporting statement
states "[t]he Fund has failed to implement numerous proposals passed by its
stockholders at the last two annual meetings in 1999 and 2000." You state your
belief that this is materially false or misleading because one of two proposals
at the 2000 annual meeting recommended that the board "promptly conduct a tender
offer for at least 5% of its outstanding shares at or close to net asset value."
You believe that the Proponent's supporting statement is misleading because the
Fund's board has authorized a tender offer of up to 20% of the Fund's
outstanding stock at a price up to 98% of the Fund's net asset value. 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: Strome Investment Management, LP c/o Jeffrey S. Lambert 100 Wilshire Boulevard, Suite 1500 Santa Monica, CA 90401 -----FOOTNOTES----- 1 In connection with this request, we also considered letters from the Proponent
dated January 22, 2001, and February 20, 2001, as well as an additional letter
from the Fund dated February 13, 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 "120th
day before the date the Company's proxy statement was released to the
stockholders for the previous year's annual meeting." |
