UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04632
THE NEW GERMANY FUND, INC.
(Exact name of registrant as specified in charter)
345 PARK AVENUE, NEW YORK, NY 10154
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (800) 443-6918
----------------
Bruce A. Rosenblum
Deutsche Bank Securities, Inc.
60 WALL STREET, NEW YORK, NY 10005
(Address of principal executive offices) (Zip code)
Date of fiscal year end: 12/31
Date of reporting period: 4/30/2004
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The New Germany Fund, Inc. is a non-diversified, actively-managed
Exchange-Traded Closed-End Fund listed on the New York Stock Exchange with the
symbol "GF". The Fund seeks long-term capital appreciation primarily through
investment in middle-market German equities. It is managed and advised by
wholly-owned subsidiaries of the Deutsche Bank Group.
SHAREHOLDER INFORMATION
Prices for the Fund's shares are published daily in the New York Stock Exchange
Composite Transactions section of newspapers. Net asset value and market price
information are published each Monday in THE WALL STREET JOURNAL and THE NEW
YORK TIMES, and each Saturday in BARRON'S and other newspapers in a table called
"Closed End Funds". Daily information on the Fund's net asset value is available
from NASDAQ (symbol XGFNX). It is also available by calling: 1-800-GERMANY (in
the U.S.) or 617-443-6918 (outside of the U.S.). In addition, a schedule of the
Fund's largest holdings, dividend data and general shareholder information may
be obtained by calling these numbers.
The foregoing information is also available on our Web site:
www.newgermanyfund.com.
THERE ARE THREE CLOSED-END FUNDS INVESTING IN EUROPEAN EQUITIES MANAGED BY
WHOLLY OWNED SUBSIDIARIES OF THE DEUTSCHE BANK GROUP:
o The Germany Fund, Inc.--investing primarily in equities of major German
corporations. It may also invest up to 20% in equities of other Western
European companies (with no more than 15% in any single country).
o The New Germany Fund, Inc.--investing primarily in the middle market German
companies and up to 20% elsewhere in Western Europe (with no more than 10%
in any single country).
o The Central Europe and Russia Fund, Inc.--investing primarily in Central
European and Russian companies.
Please consult your broker for advice on any of the above or call 1-800-GERMANY
(in the U.S.) or 617-443-6918 (outside of the U.S.) for shareholder reports.
These funds are not diversified and focuses their investments in certain
geographical regions, thereby increasing their vulnerability to developments in
that region. Investing in foreign securities presents certain unique risks not
associated with domestic investments, such as currency fluctuation and political
and economic changes and market risks. This may result in greater share price
volatility.
12853
[GRAPHIC
OMITTED]
THE NEW GERMANY
FUND,INC.
SEMI-ANNUAL REPORT
JUNE 30, 2004
[GRAPHIC
OMITTED]
THE NEW GERMANY
FUND,INC.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
July 28, 2004
Dear Shareholder,
So far in 2004, the German equity market has been one of the beneficiaries of
global economic growth, which gave a boost to German exports; exports rose by
more than 4% in the first quarter of 2004. The current global upswing is
characterized by strong demand for capital goods, which make up a much larger
share of German exports than those of the country's surrounding Euroland
neighbors. Furthermore, German companies have considerably increased their
competitiveness due to a moderate wage policy and cutbacks in employment over
the last few years. However, strong export growth has not yet led to higher
employment and higher domestic demand. But large German companies are
increasingly less dependent on the domestic economy. Even classic domestic plays
such as retail and utilities generate an increasing proportion of their revenues
abroad. Year to date, the German economy made modest progress in its gradual
recovery. In the second quarter of 2004, German gross domestic product (GDP)
rose 2% on an annualized basis, despite disappointing domestic growth. In June,
investor confidence rose for the first time in six months and the International
Monetary Fund (IMF) raised its forecast for Germany's economic growth in 2004 to
1.8% from 1.6%.* It also revised its forecast of Germany's GDP to about 2% in
2005.*
After a weak first quarter, the German markets held up well in the second
quarter, with the German Mid Cap Market Index increasing in strength relative to
its peers. Unlike in the rest of Europe, where the outperformance of the smaller
caps leveled off in the second quarter, the smaller caps in Germany, at least
those from the classic sectors, continued their run. The German Mid Cap Market
Index continued to perform strongly, significantly outperforming German large
caps during the first half of the year.
For the six months ended June 30, 2004, the net asset value per share of the
New Germany Fund increased 9.1%, and its share price increased 9.9%, while the
fund's benchmark, the Midcap Market Performance Index, increased by 8.2% in US
dollar terms during the same period. Past performance is no guarantee of future
results. Please see page 2 for the fund's standardized performance as of June
30, 2004.
As in previous quarters, stock selection and company-specific news flow drove
performance of The New Germany Fund. During the second quarter, the fund sold
its entire holding in Stada Arzneimittel after the company issued a profit
warning. We reduced our overweighted stance in the construction sector by
trimming our positions in Bilfinger Berger and HeidelbergerCement. Despite a
continuous poor retail environment in the second quarter, the sector contributed
positively to the fund's overall performance because of our long-term holding in
Puma, which performed strongly in the first half of 2004. The company released
strong first-quarter results, again beating market expectations. Over the course
of the quarter, we initiated a position in Suedzucker, which is the biggest
sugar producer in Europe, and also has the largest market share in Eastern
Europe. We slightly increased our underweight in the machinery and industrial
sector by selling our position in Salzgitter to realize profits and by reducing
our underweight position in European Aeronautic Defense, which had negatively
affected the fund's performance. Despite the negative performance contribution
of our technology stocks, Suess MicroTec, IDS Scheer and Kontron, we increased
the fund's software and technology sector weighting by adding to our existing
position in United Internet, which contributed positively to the fund's
performance in the second quarter. Additionally, we initiated a position in
Freenet, one of Europe's largest Internet service providers.
The New Germany Fund continued its open-market purchases of its shares,
buying 1,003,000 shares during the first six months of 2004. The fund's discount
to its net asset value averaged 18.31% during this period.
At its April 23, 2004 Board Meeting, the Board of Directors elected Sandra M.
Schaufler as new Chief Investment Officer of your Fund. Located in New York, Ms.
Schaufler will be working closely with the Fund's investment adviser, Deutsche
Asset Management International GmbH in Frankfurt. At its July 12, 2004 Board
Meeting, the Board of Directors elected Julian Sluyters as the new President and
Chief Executive Officer of your Fund.
*Source: IMF June 2004. The IMF is optimistic that strong external demand will
lead to higher investments and employment and will eventually stimulate domestic
consumption.
Sincerely,
/S/ CHRISTIAN STRENGER
Christian Strenger
Chairman
/S/ JULIAN SLUYTERS
Julian Sluyters
President
FOR ADDITIONAL INFORMATION ABOUT THE FUND INCLUDING
PERFORMANCE, DIVIDENDS, PRESENTATIONS, PRESS
RELEASES, DAILY NAV AND SHAREHOLDER REPORTS,
PLEASE VISIT WWW.NEWGERMANYFUND.COM
1
FUND HISTORY AS OF JUNE 30, 2004
--------------------------------------------------------------------------------
Performance is historical, assumes reinvestment of all dividends and capital
gains, and does not guarantee future results. Investment returns and principal
value fluctuate with changing market conditions so that, when sold, shares may
be worth more or less than their original cost. Current performance may be lower
or higher than the performance data quoted. Please visit www.newgermanyfund.com
for the product's most recent month-end performance.
TOTAL RETURNS:
FOR THE SIX FOR THE YEARS ENDED DECEMBER 31,
MONTHS ENDED ----------------------------------------------------------
JUNE 30, 2004 2003 2002 2001 2000 1999
------------- ------- -------- -------- -------- -------
Net Asset Value(a) 9.05% 93.07% (39.60)% (35.68)% (11.46)% (2.22)%
Market Value 9.88% 102.42% (39.52)% (33.86)% (14.35)% 3.64%
Benchmark 8.19%1 78.56%2 (37.58)%3 (33.46)%4 (16.13)%4 (9.79)%5
(a) Total investment returns reflect changes in net asset value per share during
each period and assume that dividend and capital gains distributions, if any,
were reinvested. These percentages are not an indication of the performance of a
shareholder's investment in the Fund based on market price.
----------
(1) Represents the MCAPM Index.
(2) Represents an arithmetic composite consisting of 75% MDAX*/25% NEMAX 50**
from 1/1/03-3/31/03 and 100% MCAPM*** from 4/1/03-12/31/03. At the February
3, 2003 Board Meeting, the Board of Directors approved a change to the
Fund's benchmark. Effective April 1, 2003, the Fund's new benchmark became
the MCAPM (Midcap Market Performance Index). The index is composed of 50
MDAX and 30 TecDAX**** issues. The previous benchmark (75% MDAX and 25%
NEMAX 50) is no longer viable long-term as the Deutsche Boerse has
announced plans to discontinue the NEMAX 50.
(3) Represents 60% MDAX/40% NEMAX 50 for 1/1/02-8/31/02 and 75% MDAX/25% NEMAX
50 for 9/1/02-12/31/02.
(4) Represents 60% MDAX/40% NEMAX 50.
(5) Represents the MDAX Index.
* MDAX is a total rate of return index of 50 mid-cap issues that rank below
the DAX. DAX is the total rate of return index of 30 selected German blue
chips stocks traded on the Frankfurt stock exchange.
** NEMAX 50 is comprised of the 50 largest technology issues from the Prime
Segment that are ranked below the DAX.
*** MCAPM is a total return index that is composed of various MDAX and TecDAX
issues, reflecting the performance of the mid-caps across all sectors of
the Prime Segment.
**** TecDax is a total return index that tracks the 30 largest and most liquid
issues from the various technology sectors of the Prime Segment beneath the
DAX.
Index returns assume reinvested dividends and, unlike Fund returns, do not
reflect any fees or expenses. It is not possible to invest directly in an index.
Investments in funds involve risk including the loss of principal.
This Fund is not diversified and focuses its investments in certain geographical
regions, thereby increasing its vulnerability to developments in that region.
Investing in foreign securities presents certain unique risks not associated
with domestic investments, such as currency fluctuation and political and
economic changes and market risks. This may result in greater share price
volatility.
Shares of closed-end funds frequently trade at a discount to net asset value.
The price of the Fund's shares is determined by a number of factors, several of
which are beyond the control of the Fund. Therefore, the Fund cannot predict
whether its shares will trade at, below or above net asset value.
2
FUND HISTORY AS OF JUNE 30, 2003 (CONTINUED)
--------------------------------------------------------------------------------
STATISTICS:
Net Assets ....................................................... $240,929,205
Shares Outstanding ............................................... 25,522,725
NAV Per Share .................................................... $9.44
DIVIDEND AND CAPITALGAIN DISTRIBUTIONS:
RECORD PAYABLE ORDINARY LT CAPITAL
DATE DATE INCOME GAINS TOTAL
------- -------- -------- ---------- ------
5/6/04 5/14/04 ....................................... $0.05 $ -- $0.05
12/22/03 12/31/03 ...................................... $0.022 $ -- $0.022
7/24/03 7/30/03 ....................................... $0.003 $ -- $0.003
11/20/00 11/29/00 ...................................... $0.01 $1.30 $1.31
9/1/00 9/15/00 ....................................... $0.07 $0.35 $0.42
11/19/99 11/29/99 ...................................... $0.05 $1.02 $1.07
OTHER INFORMATION:
NYSE Ticker Symbol ............................................................................................. GF
NASDAQ Symbol .................................................................................................. XGFNX
Dividend Reinvestment Plan ..................................................................................... Yes
Voluntary Cash Purchase Program ................................................................................ Yes
Annualized Expense Ratio (6/30/04) ............................................................................. 1.19%
3
--------------------------------------------------------------------------------
PORTFOLIO BY MARKET SECTOR AS OF JUNE 30, 2004 (AS % OF PORTFOLIO)
[GRAPHIC OMITTED]
Services-Information Retrieval Services 3.6%
Pharmaceutical Preparations 4.6%
Cement 4.3%
Accident & Health Insurance 3.0%
Guided Missiles & Space Vehicles 8.8%
Rubber & Plastic Footwear 8.0%
Special industry Machinery 2.5%
National Commercial Banks 7.6%
Electromedical & Electrotherapeutic 3.1%
Life Insurance 2.5% Electronic
Capacitors 2.2%
Electronic Computers 2.3%
Wholesale Computers & Peripheral Equipment & Software 2.2%
Others 35.2%
Wholesale-Drugs Proprietaries & Druggists Sundries 3.7%
Mortgage Bankers 6.4%
--------------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS AS OF JUNE 30, 2004
% of
Portfolio
--------
1 European Aeronautic Defense 8.8
2. Puma 8.0
3. Hypo Real Estate Holding 6.4
4. Depfa Bank Plc 6.2
5. HeidelbergCement 4.3
% of
Portfolio
--------
6. Merck KGaA 4.0
7. Celesio 3.7
8. T-Online International 3.6
9. Fresenius 3.1
10. Hannover Rueckversicherungs 3.0
Portfolio by Market Sector and 10 Largest Equity Holdings are subject to change.
Information concerning portfolio holdings of the Fund as of a month end is
available upon request on the 16th of the following month.
4
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
--------------------------------------------------------------------------------
QUESTION: In 2002, the capital gains tax exemption for corporate
shareholdings went into effect, but it has gained momentum only over the last
year. Will you give us an update on the recent restructuring activity and its
impact on the German equity market?
ANSWER: The capital gains tax exemption for corporate shareholdings proposed
in December 1999, approved in July 2000, and effective since 1 January 2002, was
expected to significantly reduce corporate shareholdings in Germany.
Unfortunately, the decline in equity markets until early 2003 resulted in little
demand for any placements of shares on the equity market. The depressed market
also significantly reduced unrealized capital gains and thereby the incentive to
sell. The disposal process therefore proceeded slowly until mid-2003. Following
the start of the equity market rebound in March 2003, investors first had to
digest several rights issues aimed at balance-sheet repair. As share prices
rose, the readiness of stake owners to sell their holdings also increased. In
late 2003 and early 2004, with the equity market more positive, there finally
was scope for the placement of corporate stakes. The latest example is that of
RWE disposing of its stakes in Hochtief and HeidelbergCement. Among financials,
the disentanglement of the closely meshed web of corporate shareholdings
continued. German corporations have made progress in unwinding cross
shareholdings over the past three to four years.
QUESTION: Germany has shown strong export growth figures during the last few
quarters. However, this rise did not translate into higher employment or a
strengthening of domestic demand. Is strong export growth less of a stimulus for
the domestic economy than it was in earlier cycles?
ANSWER: Germany was the largest exporter worldwide in 2003 (in USD terms),
followed by the United States, Japan and China. While much of the increase is
due to the euro appreciation, it shows as well that German companies can hold
their own in international competition. In contrast to earlier cycles, however,
strong export growth has not yet led to higher employment and higher domestic
demand. This raises the question of whether the lack of the traditional positive
spillover effect of increased exports (then boosting the economy) is due to
permanent structural changes or whether it is a temporary phenomenon. German
products' strong competitiveness abroad is at least in part due to outsourcing
abroad. Since 2000, direct investment worth 114 billion euro has gone abroad.
The proportion destined for Central and Eastern Europe rose to more than 20% in
2003. This means that part of the German value-creation chain was outsourced
abroad in order to maintain and increase international competitiveness by
cutting labor costs.
QUESTION: At the beginning of July, two events took place that were intended
to positively influence the German economy but angered German labor unions. Will
you discuss these developments?
ANSWER: First, at the beginning of July, Germany's upper house of parliament
passed a law reducing long-term jobless benefits, which will take effect in
January 2005. This marks the first reduction in benefits since World War II,
saving the government an estimated 2.5 billion euro per year. Under the new
rules for long-term employment benefits, claimants will have to draw on private
wealth, retirement savings and property owned by a spouse before becoming
eligible for state benefits. With more than 2.5 million long-term unemployed
people currently in Germany, the government's welfare rolls have become bloated.
According to the German Economics and Labor minister, Wolfgang Clement, this
reform will help to move jobless people more efficiently and swiftly into
employment. Second, Siemens and IG Metall, the metalworkers' trade union, agreed
recently to reintroduce the 40-hour work week (from 35 hours) in two Siemens
plants without extra pay. Industry media suggests that if this agreement had not
been reached, Siemens would probably have moved many of the jobs to Hungary. The
longer work hours at Siemens are actually equivalent to a 12.5% cut in hourly
wages for the employees, which shows the extent to which the trade unions'
negotiating power has eroded. Trade unions lack the means to prevent companies
from moving jobs abroad, and fears of unemployment have weakened union members'
willingness to fight. German companies are trying to slash labor costs or
increase output per employee in order to weather strong international
competition. Overall, the longer working hours without extra pay as well as the
reduction in welfare benefits are a favorable development for Germany.
Sandra M. Schaufler, Chief Investment Officer of the New Germany Fund.
5
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
ECONOMIC OUTLOOK
Thus far in 2004, the German economy made modest progress in its gradual
recovery. Second quarter real gross domestic product, or GDP, expanded at an
annualized rate of 2%. This was the strongest rate of growth in three years and
was exclusively driven by net exports. As world trade picked up considerably
over the last few quarters, demand for German exports increased. In particular,
the share of German exports to Eastern Europe amounted to almost 14% of total
exports--a significant component of global demand. Additionally, strong
worldwide demand for capital goods also benefited German exports. According to
countless industry studies referenced recently in the media, German companies
significantly increased their imports of intermediate goods used for exports in
order to keep a lid on wage costs. Thus, the link between German exports and
domestic demand has become weaker than in previous years.
The fiscal situation looks set to remain difficult. In fact, in our opinion
the German budget deficit is likely to stay above 3% of GDP both this year and
next, so Germany could violate the Stability and Growth Pact for the fourth year
in a row in 2005. While the structural deficit will probably be reduced, in our
view, the growth environment could remain too weak for a significant increase in
tax revenues. As a result, the government might have to cut subsidies further to
rescue the budget deficit in the next few years, as Germany has agreed to reduce
its deficit to below 3% of GDP by 2005 at the latest. High oil prices and the
increase in indirect taxes led to a pronounced acceleration in German inflation
in the last few months to 1.8%. However, the domestically driven price trend is
still subdued. In 2005, the significant output gap, moderate wage increases and
a strong euro could, in our opinion, lead to a reduction in the German Consumer
price Index . After having toyed with the idea of lowering rates earlier this
year, the European Central Bank is now taking a strictly neutral stance due to
the clearer signs that recovery is under way.
6
THE NEW GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
------ ----------- -----
INVESTMENTS IN GERMAN SECURITIES--81.7%
COMMON STOCKS--73.2%
ACCIDENT & HEALTH
INSURANCE--2.9%
211,800 Hannover Rueckversicherungs .... $ 7,077,926
-------------
BEET SUGAR--1.9%
230,000 Suedzucker ..................... 4,525,375
-------------
BUSINESS SERVICES--0.8%
75,000 Techem* ........................ 1,937,097
-------------
CEMENT--4.2%
205,235 HeidelbergCement ............... 10,239,048
-------------
COMMUNICATIONS SERVICES--2.0%
170,000 United Internet ................ 4,753,197
-------------
COMPUTER RELATED SERVICES--0.5%
80,000 Bechtle ........................ 1,325,510
-------------
ELECTRONIC
CAPACITATORS--2.2%
250,000 Epcos* ......................... 5,229,553
-------------
ELECTRONIC COMPUTERS--2.3%
542,720 Kontron* ....................... 4,509,355
18,700 Leoni .......................... 965,966
18,700 Leoni Rights* .................. 54,677
-------------
5,529,998
-------------
FINANCIAL SERVICES--1.7%
119,000 AWD Holding .................... 4,044,878
-------------
GENERAL INDUSTRIAL
MACHINERY & EQUIPMENT--2.8%
525,000 MG Technologies* ............... 6,639,126
-------------
HEAVY CONSTRUCTION--2.4%
167,200 Bilfinger Berger ............... 5,785,073
-------------
INFORMATION RETRIEVAL
SERVICES--1.2%
35,000 Freenet* ....................... 3,006,155
-------------
INSURANCE AGENTS, BROKERS &
SERVICES--1.5%
240,000 MLP ............................ 3,546,715
-------------
LIFE INSURANCE--2.5%
80,420 AMB Generali Holding ........... 6,071,553
-------------
SHARES DESCRIPTION VALUE
------ ----------- -----
MORTGAGE BANKERS--6.3%
520,000 Hypo Real Estate Holding* ...... $ 15,274,072
-------------
MOTOR VEHICLE PARTS &
ACCESSORIES--0.8%
15,000 ElringKlinger .................. 1,821,054
-------------
NATIONAL COMMERCIAL
BANKS--1.4%
140,000 IKB Deutsche Industriebank ..... 3,308,904
-------------
PHARMACEUTICAL
PREPARATIONS--4.6%
159,000 Merck KGaA ..................... 9,588,630
50,000 Schwarz Pharma 1,538,104
-------------
11,126,734
-------------
PRINTING TRADES MACHINERY &
EQUIPMENT--1.1%
79,000 Heidelberger Druckmaschinen* ... 2,612,108
-------------
PUMP AND PUMPING EQUIPMENT--1.1%
65,234 Pfeiffer Vacuum Technology ..... 2,675,114
-------------
RADIOTELEPHONE
COMMUNICATIONS--1.2%
80,000 Funkwerk ....................... 2,979,474
-------------
RETAIL-MISCELLANEOUS
RETAIL STORES--1.7%
144,625 Douglas Holding ................ 4,144,145
-------------
RUBBER & PLASTIC
FOOTWEAR--7.9%
75,000 Puma ........................... 19,084,974
-------------
SERVICES-COMMERCIAL PHYSICAL &
BIOLOGICAL RESEARCH--1.0%
160,000 GPC Biotech* ................... 2,339,136
-------------
SERVICES-COMPUTER PROGRAMMING
SERVICES--1.1%
130,000 IDS Scheer ..................... 2,565,740
-------------
SERVICES-COMPUTER RENTAL &
LEASING--1.2%
71,689 Grenkeleasing .................. 2,869,077
-------------
SERVICES-INFORMATION
RETRIEVAL SERVICES--3.5%
749,200 T-Online International* ........ 8,552,471
-------------
--------
*Non-income producing security.
The accompanying notes are an integral part of the financial statements.
7
THE NEW GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2004 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
------ ----------- -----
SERVICES-NONPHYSICAL
RESEARCH--1.3%
91,600 GFK ............................ $ 3,202,813
-----------
SPECIAL INDUSTRY
MACHINERY--2.5%
138,100 Singulus Technologies* ......... 2,777,762
341,900 Suess MicroTec* ................ 3,140,687
-------------
5,918,449
-------------
WHOLESALE-COMPUTER & PERIPHERAL
EQUIPMENT & SOFTWARE--2.2%
131,500 Medion ......................... 5,309,242
-------------
WHOLESALE-DRUGS PROPRIETARIES &
DRUGGISTS SUNDRIES--3.7%
149,000 Celesio ........................ 8,912,961
-------------
WHOLESALE-MEDICAL DENTAL &
HOSPITAL EQUIPMENT--1.6%
33,161 Beiersdorf ..................... 3,880,424
-------------
Total Common Stocks
(cost $128,669,744) .......... 176,288,096
-------------
PREFERRED STOCKS--8.5%
CARBURETORS, PISTONS, PISTON
RINGS--2.0%
116,709 Rheinmetall .................... 4,763,250
-------------
ELECTOMEDICAL &
ELECTROTHERAPEUTIC--3.0%
96,354 Fresenius ...................... 7,322,668
-------------
MEN'S AND BOYS SUITS AND
COATS--0.7%
80,000 Hugo Boss ...................... 1,811,856
-------------
RETAIL-THEATRICAL
PRODUCTIONS--1.8%
238,400 Prosieben Sat.1 Media .......... 4,313,075
-------------
SCALES AND BALANCES, EX LAB--1.0%
159,800 Sartorius ...................... 2,312,850
-------------
Total Preferred Stocks
(cost $10,672,266) ........... 20,523,699
-------------
Total Investments in German
Securities
(cost $139,342,010) .......... 196,811,795
-------------
SHARES DESCRIPTION VALUE
------ ----------- -----
INVESTMENTS IN DUTCH
COMMON STOCKS--9.7%
GUIDED MISSILES & SPACE
VEHICLES--8.7%
750,000 European Aeronautic Defense .... $ 21,024,812
-------------
SURGICAL & MEDICAL INSTRUMENTS
AND APPARATUS--1.0%
209,150 Qiagen* ........................ 2,469,084
-------------
Total Investments in Dutch Common Stocks
(cost $9,290,008) ............ 23,493,896
-------------
INVESTMENTS IN IRISH
COMMON STOCK--6.2%
NATIONAL COMMERCIAL BANKS--6.2%
1,020,000 Depfa Bank Plc*
(Cost $7,024,804) ............ 14,837,432
-------------
INVESTMENTS IN SWISS
COMMON STOCK--2.0%
SEMICONDUCTORS & RELATED DEVICES--2.0%
105,000 Micronas Semiconductor Holding*
(Cost $2,057,463) ............ 4,778,448
-------------
Total Investments--99.6%
(cost $157,714,285) .......... $ 239,921,571
Cash and other assets in excess
of liabilities--0.4% ......... 1,007,634
-------------
NET ASSETS--100.0% ............. $ 240,929,205
=============
-----------
*Non-income producing security.
The accompanying notes are an integral part of the financial statements.
8
THE NEW GERMANY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $157,714,285) ................................................................ $239,921,571
Cash and foreign currency (cost $940,384) ................................................................ 940,384
Foreign withholding tax refund receivable ................................................................ 300,286
Receivable for securities sold ........................................................................... 403,290
Interest receivable ...................................................................................... 1,287
Other receivables ........................................................................................ 11,372
------------
Total assets .......................................................................................... 241,578,190
------------
LIABILITIES
Payable for securities purchased ......................................................................... 309,048
Payable for shares repurchased ........................................................................... 53,732
Management fee payable ................................................................................... 114,638
Investment advisory fee payable .......................................................................... 56,604
Accrued expenses and accounts payable .................................................................... 114,963
------------
Total liabilities ..................................................................................... 648,985
------------
NET ASSETS ............................................................................................... $240,929,205
============
Net assets consist of:
Paid-in capital, $.001 par (Authorized 80,000,000 shares) ................................................ $432,298,307
Cost of 9,226,616 shares held in treasury ................................................................ (88,559,870)
Undistributed net investment income ...................................................................... 188,667
Accumulated net realized loss on investments and foreign currency transactions ........................... (185,224,766)
Net unrealized appreciation of investments and foreign currency related transactions ..................... 82,226,867
------------
Net assets ............................................................................................... $240,929,205
============
Net asset value per share ($240,929,205 / 25,522,725 shares of common stock issued and outstanding) ...... $9.44
=====
The accompanying notes are an integral part of the financial statements.
9
THE NEW GERMANY FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED
JUNE 30, 2004
-------------
NET INVESTMENTINCOME
Investment income
Dividends (net of foreign withholding taxes of $439,107) .......................... $ 2,626,479
Interest .......................................................................... 13,651
-----------
Total investment income .............................................................. 2,640,130
-----------
Expenses
Management fee .................................................................... 706,370
Investment advisory fee ........................................................... 348,350
Reports to shareholders ........................................................... 37,736
Custodian and Transfer Agent's fees and expenses .................................. 105,647
Directors' fees and expenses ...................................................... 74,796
Legal fee ......................................................................... 61,834
Audit fee ......................................................................... 27,038
NYSE listing fee .................................................................. 15,370
Miscellaneous ..................................................................... 33,042
-----------
Total expenses before custody credits* ............................................ 1,410,183
Less: custody credits ............................................................. (1,748)
-----------
Net expenses ...................................................................... 1,408,435
-----------
Net investment income ................................................................ 1,231,695
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments ....................................................................... 12,338,925
Foreign currency transactions ..................................................... (70,443)
Net unrealized appreciation (depreciation) during the period on:
Investments ....................................................................... 5,309,161
Translation of other assets and liabilities from foreign currency ................. (24,978)
-----------
Net gain on investments and foreign currency transactions ............................ 17,552,665
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. $18,784,360
===========
---------
* The custody credits are attributable to interest earned on U.S. cash balances
held on deposit at custodian.
The accompanying notes are an integral part of the financial statements.
10
THE NEW GERMANY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
JUNE 30, 2004 ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) ................................................... $ 1,231,695 $ 84,327
Net realized gain (loss) on:
Investments .................................................................. 12,338,925 6,515,137
Foreign currency transactions ................................................ (70,443) 762,211
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................................. 5,309,161 105,341,593
Translation of other assets and liabilities from foreign currency ............ (24,978) (17,467)
------------ ------------
Net increase (decrease) in net assets resulting from operations ................ 18,784,360 112,685,801
------------ ------------
Distributions to shareholders from:
Net investment income .......................................................... (1,280,338) (663,763)
------------ ------------
Total distributions to shareholders(a) ......................................... (1,280,338) (663,763)
------------ ------------
Capital share transactions:
Net proceeds from shares issued in connection with the reinvestment of
dividends (81,662 and 35,920 shares, respectively) ........................... 556,116 257,191
Cost of shares repurchased (1,003,000 and 1,079,300 shares, respectively) ...... (7,718,153) (6,196,319)
------------ ------------
Net decrease in net assets from capital share transactions ..................... (7,162,037) (5,939,128)
------------ ------------
Total increase (decrease) in net assets ........................................... 10,341,985 106,082,910
NET ASSETS
Beginning of period ............................................................... 230,587,220 124,504,310
------------ ------------
End of period (including undistributed net investment income of $188,667 and
$237,310 as of June 30, 2004 and December 31, 2003, respectively) .............. $240,929,205 $230,587,220
============ ============
---------
(a) For U.S. tax purposes, total distributions to shareholders consisted
entirely of ordinary income.
The accompanying notes are an integral part of the financial statements.
11
THE NEW GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2004 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The New Germany Fund, Inc. (the "Fund") was incorporated in Maryland on January
16, 1990 as a non-diversified, closed-end management investment company. The
Fund commenced investment operations on January 30, 1990.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
SECURITY VALUATION: Investments are stated at value. All securities for which
market quotations are readily available are valued at the last sales price on
the primary exchange on which they are traded prior to the time of valuation. If
no sales price is available at that time, and both bid and ask prices are
available, the securities are valued at the mean between the last current bid
and ask prices; if no quoted asked prices are available, they are valued at the
last quoted bid price. All securities for which market quotations are not
readily available will be valued as determined in good faith by the Board of
Directors of the Fund. The Fund calculates its net asset value per share at
11:30 A.M., New York time, in order to minimize the possibility that events
occurring after the close of the securities exchanges on which the Fund's
portfolio securities principally trade would require adjustment to the closing
market prices in order to reflect fair value.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Cost of securities sold is calculated using the
identified cost method. Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Such dividend income is
recorded net of unrecoverable foreign withholding tax.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in United States dollars.
Assets and liabilities denominated in euros and other foreign currency amounts
are translated into United States dollars at the 10:00 A.M. mid-point of the
buying and selling spot rates quoted by the Federal Reserve Bank of New York.
Purchases and sales of investment securities, income and expenses are reported
at the rate of exchange prevailing on the respective dates of such transactions.
The resultant gains and losses arising from exchange rate fluctuations are
identified separately in the Statement of Operations, except for such amounts
attributable to investments which are included in net realized and unrealized
gains and losses on investments.
Foreign investments may involve certain considerations and risks not typically
associated with those of domestic origin as a result of, among others, the
possibility of political and economic developments and the level of governmental
supervision and regulation of foreign securities markets.
CONTINGENCIES: In the normal course of business, the Fund may enter into
contracts that contain a variety of representations which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, based on experience, the Fund expects the
risk of loss to be remote.
TAXES: No provision has been made for United States Federal income tax because
the Fund intends to meet the requirements of the United States Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends and
distributions to its shareholders on the ex-dividend date. Income and capital
gain distributions are determined in accordance with United States Federal
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences, which could be
temporary or permanent in nature, may result in reclassification of
distributions; however, net investment income, net realized gains and net assets
are not affected.
At December 31, 2003, the Fund's components of distributable earnings
(accumulated losses) on a tax-basis were as follows:
Undistributed ordinary income* ............... $ 1,210,857
Capital loss carryforward .................... $(196,226,000)
Net unrealized appreciation .................. $ 74,657,745
*For tax purposes short-term capital gains are considered ordinary income.
During the year ended December 31, 2003, the Fund reclassified permanent book
and tax differences as follows:
INCREASE
(DECREASE)
----------
Undistributed net investment income ........... $ 152,983
Undistributed net realized gain on investments
and foreign currency transactions ........... (152,983)
12
THE NEW GERMANY FUND, INC.
NOTES TO FINANCIAL--JUNE 30, 2004 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE 2. MANAGEMENT ANDINVESTMENT
ADVISORY AGREEMENTS
The Fund has a Management Agreement with and related undertaking by
(collectively, the "Management Agreement") Deutsche Bank Securities Inc. (the
"Manager"), and an Investment Advisory Agreement with Deutsche Asset Management
International GmbH (the "Investment Adviser"). The Manager and the Investment
Adviser are affiliated companies.
The Management Agreement provides the Manager with a fee, computed weekly and
payable monthly, at the annual rates of .65% of the Fund's average weekly net
assets up to $100 million, .55% of such assets in excess of $100 million and up
to $500 million, and .50% of such assets in excess of $500 million. The
Investment Advisory Agreement provides the Investment Adviser with a fee,
computed weekly and payable monthly, at the annual rates of .35% of the Fund's
average weekly net assets up to $100 million and .25% of such assets in excess
of $100 million. Accordingly, for the period ended June 30, 2004, the fee
pursuant to the Management and Investment Advisory Agreements was equivalent to
an annualized effective rate of .89% of the Fund's average net assets.
Pursuant to the Management Agreement, the Manager is the corporate manager and
administrator of the Fund and, subject to the supervision of the Board of
Directors and pursuant to recommendations made by the Fund's Investment Adviser,
determines the suitable securities for investment by the Fund. The Manager also
provides office facilities and certain administrative, clerical and bookkeeping
services for the Fund. Pursuant to the Investment Advisory Agreement, the
Investment Adviser, in accordance with the Fund's stated investment objectives,
policies and restrictions, makes recommendations to the Manager with respect to
the Fund's investments and, upon instructions given by the Manager as to
suitable securities for investment by the Fund, transmits purchase and sale
orders and selects brokers and dealers to execute portfolio transactions on
behalf of the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
For the period ended June 30, 2004, Deutsche Bank AG, the German parent of the
Manager and Investment Adviser, and its affiliates received $33,449 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Fund, that the board determined were effected in compliance
with the Fund's Rule 17e-1 procedures.
Certain officers of the Fund are also officers of either the Manager or Deutsche
Bank AG.
The Fund pays each Director not affiliated with the Manager retainer fees plus
specified amounts for attended board and committee meetings.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the period ended June 30, 2004, were $71,179,149 and $78,452,425,
respectively.
The cost of investments at December 31, 2003 was $154,899,016 for United States
Federal income tax purposes. Accordingly, as of December 31, 2003, net
unrealized appreciation of investments aggregated $74,657,745, of which
$76,675,581 and $2,017,836 related to unrealized appreciation and depreciation,
respectively.
For United States Federal income tax purposes, the Fund had a capital loss carry
forward at December 31, 2003 of approximately $196,226,000, of which
$107,987,000 and $88,239,000 will expire in 2009 and 2010, respectively. No
capital gains distribution is expected to be paid to shareholders until future
net gains have been realized in excess of such carry forward.
NOTE 5. CAPITAL
During the period ended June 30, 2004 and the year ended December 31, 2003, the
Fund purchased 1,003,000 and 1,079,300 of its shares of common stock on the open
market at a total cost of $7,718,153 and $6,196,319, respectively. The weighted
average discount of these purchased shares comparing the purchased price to the
net asset value at the time of purchase was 17.2% and 17.7%, respectively. These
shares are held in treasury. In addition, during the period ended June 30, 2004
the Fund reissued 81,662 shares held in treasury as part of the dividend
reinvestment plan.
13
THE NEW GERMANY FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
periods indicated:
FOR THE SIX MONTHS FOR THE YEARS ENDED DECEMBER 31,
ENDED JUNE 30, ---------------------------------------------------
2004 (UNAUDITED) 2003 2002 2001 2000 1999
---------------- ---- ---- ---- ---- ----
Per share operating performance:
Net asset value:
Beginning of period ................................. $ 8.72 $ 4.53 $ 7.50 $ 11.66 $ 15.07 $ 16.54
-------- -------- -------- -------- -------- --------
Net investment income (loss) ..................... .05(a) .00 (.03) (.01) (.06) .06
Net realized and unrealized gain (loss) on
investments and foreign currency transactions .... .66 4.17 (2.97) (4.22) (1.60) (.60)
-------- -------- -------- -------- -------- --------
Increase (decrease) from investment operations ...... .71 4.17 (3.00) (4.23) (1.66) (.54)
-------- -------- -------- -------- -------- --------
Increase resulting from share repurchases ........... .06 .05 .03 .07 .25 .32
-------- -------- -------- -------- -------- --------
Distributions from net investment income ............ (.05) (.03) -- -- -- --
Distributions from net realized short-term capital
gains ............................................ -- -- -- -- (.08) (.05)
Distributions from net realized long-term capital
gains ............................................ -- -- -- -- (1.65) (1.02)
-------- -------- -------- -------- -------- --------
Total distributions+ ................................ (.05) (.03) -- -- (1.73) (1.07)
-------- -------- -------- -------- -------- --------
Dilution in NAV from dividend reinvestment .......... .00(b) .00(b) -- -- (.27) (.18)
-------- -------- -------- -------- -------- --------
Net asset value:
End of period .................................... $ 9.44 $ 8.72 $ 4.53 $ 7.50 $ 11.66 $ 15.07
-------- -------- -------- -------- -------- --------
Market value:
End of period .................................... $ 7.81 $ 7.16 $ 3.55 $ 5.87 $ 8.875 $ 12.25
Total investment return for the period:++
Based upon market value .......................... 9.88%*** 102.42% (39.52)% (33.86)% (14.35)% 3.64%
Based upon net asset value ....................... 9.05%*** 93.07% (39.60)% (35.68)% (11.46)% (2.22)%
Ratio to average net assets:
Total expenses before custody credits* ........... 1.19%** 1.40% 1.48% 1.25% 1.09% 1.08%
Net investment income (loss) ..................... .52%**** .05% (.46)% (.06)% (.40)% .40%
Portfolio turnover ............................... 60.24%** 86.07% 98.55% 86.65% 69.61% 31.70%
Net assets at end of period (000's omitted) ......... $240,929 $230,587 $124,504 $212,650 $345,589 $432,864
----------
(a) Based on average shares outstanding during the
period.
(b) Amount is less than $.005 per share.
+ For U.S. tax purposes, total distributions
consisted of:
Ordinary income $(.05) $(.03) -- -- $ (.08) $ (.05)
Long term capital gains -- -- -- -- (1.65) (1.02)
----- ----- ---- ---- ------ ------
$(.05) $(.03) -- -- $(1.73) $(1.07)
----- ----- ---- ---- ------ ------
++ Total investment return based on market value is calculated assuming that
shares of the Fund's common stock were purchased at the closing market
price as of the beginning of the year, dividends, capital gains and other
distributions were reinvested as provided for in the Fund's dividend
reinvestment plan and then sold at the closing market price per share on
the last day of the year. The computation does not reflect any sales
commission investors may incur in purchasing or selling shares of the Fund.
The total investment return based on the net asset value is similarly
computed except that the Fund's net asset value is substituted for the
closing market value.
* The custody credits are attributable to interest earned on U.S. cash
balances. The ratio of total expenses after custody credits to average net
assets are 1.19%, 1.39%, 1.47%, 1.25%, 1.08% and 1.07% for 2004, 2003,
2002, 2001, 2000 and 1999, respectively.
** Annualized.
*** Not Annualized.
**** Not Annualized. The ratio for six months ended June 30, 2004 has not been
annualized since the Fund believes it would not be appropriate because the
Fund's dividend income is not earned ratably throughout the fiscal year.
14
THE NEW GERMANY FUND, INC.
REPORT OF STOCKHOLDERS' MEETING (UNAUDITED)
--------------------------------------------------------------------------------
The Annual Meeting of Stockholders of The New Germany Fund, Inc. was held on
June 22, 2004. At the Meeting, the following matters were voted upon by the
stockholders (the resulting votes are presented below):
1. To elect five Directors, four to serve for a term of three years and one to
serve for a term of one year and until their successors are elected and
qualify.
NUMBER OF VOTES
---------------
FOR WITHHELD
---------- ---------
Richard R. Burt 18,046,615 4,644,333
Richard Karl Goeltz 19,547,904 3,143,044
Christian H. Strenger 19,450,194 3,240,754
Robert H. Wadsworth 18,129,984 4,560,964
Werner Walbrol * 19,497,333 3,193,615
-----------
*To serve one-year term.
2. To ratify the appointment by the Audit Committee and the Board of Directors
of PricewaterhouseCoopers LLP as independent registered public accounting
firm for the fiscal year ending December 31, 2004.
NUMBER OF VOTES
---------------
FOR AGAINST ABSTAIN
---------- ------- -------
21,165,631 789,060 736,259
3. To approve a stockholder proposal to terminate the investment advisory
agreement between the Fund and Deutsche Asset Management International GmbH.
NUMBER OF VOTES
---------------
FOR AGAINST ABSTAIN
---------- --------- -------
4,050,381 7,260,439 329,211
4. To approve a stockholder proposal to request that the Board of Directors
promptly take the steps necessary to open end the Fund or otherwise enable
stockholders to realize net asset value for their shares.
NUMBER OF VOTES
---------------
FOR AGAINST ABSTAIN
---------- --------- -------
6,948,617 4,451,528 239,889
PROXY VOTING
--------------------------------------------------------------------------------
A description of the Fund's policies and procedures for voting proxies for
portfolio securities and information about how the Fund voted proxies relating
to its portfolio securities during the 12 month period ended June 30 is
available on our web site -- www.newgermanyfund.com -- (click on the "proxy
voting record" link in the left hand tool bar) or on the SEC's web site at
www.sec.gov. To obtain a written copy of the Fund's policies and procedures
without charge, upon request, call us toll free at 1-800-437-6269.
15
[THIS PAGE INTENTIONALLY LEFT BLANK.]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
EXECUTIVE OFFICES
345 PARK AVENUE, NEW YORK, NY 10154
(FOR LATEST NET ASSET VALUE, SCHEDULE OF THE FUND'S LARGEST HOLDINGS, DIVIDEND
DATA AND SHAREHOLDER INQUIRIES, PLEASE CALL 1-800-GERMANY IN THE U.S. OR
617-443-6918 OUTSIDE OF THE U.S.)
MANAGER
DEUTSCHE BANK SECURITIES INC.
INVESTMENT ADVISER
DEUTSCHE ASSET MANAGEMENT INTERNATIONAL GMBH
CUSTODIAN AND TRANSFER AGENT
INVESTORS BANK & TRUST COMPANY
LEGAL COUNSEL
SULLIVAN & CROMWELL LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
DIRECTORS AND OFFICERS
CHRISTIAN H. STRENGER
CHAIRMAN AND DIRECTOR
JOHN A. BULT
DIRECTOR
RICHARD R. BURT
DIRECTOR
JOHN H. CANNON
DIRECTOR
RICHARD KARLGOELTZ
DIRECTOR
DR. FRANZ WILHELM HOPP
DIRECTOR
ERNST-ULRICH MATZ
DIRECTOR
DR. FRANK TROMEL
DIRECTOR
ROBERT H. WADSWORTH
DIRECTOR
WERNER WALBROL
DIRECTOR
PETER ZUHLSDORFF
DIRECTOR
JULIAN SLUYTERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SANDRA M. SCHAUFLER
CHIEF INVESTMENT OFFICER
VINCENT J. ESPOSITO
VICE PRESIDENT
BRUCE A. ROSENBLUM
SECRETARY
CHARLES A. RIZZO
CHIEF FINANCIAL OFFICER AND TREASURER
KATHLEEN SULLIVAN D'ERAMO
ASSISTANT TREASURER
------------------
32306 (8/04)
VOLUNTARY CASH PURCHASE PROGRAM
AND DIVIDEND REINVESTMENT PLAN
The Fund offers stockholders a Voluntary Cash Purchase Program and Dividend
Reinvestment Plan ("Plan") which provides for optional cash purchases and for
the automatic reinvestment of dividends and distributions payable by the Fund in
additional Fund shares. Plan participants may invest as little as $100 in any
month and may invest up to $36,000 annually. The Plan has been amended to allow
current shareholders, who are not already participants in the Plan, and first
time investors to enroll in the Plan by making an initial cash deposit of at
least $250 with the plan agent. Share purchases are combined to receive a
beneficial brokerage fee. A brochure is available by writing or telephoning the
plan agent:
Investors Bank & Trust Company
Shareholder Services
P.O. Box 642, OPS 22
Boston, MA 02117-0642
Tel. 1-800-437-6269
This report, including the financial statements herein, is transmitted to the
shareholders of The New Germany Fund, Inc. for their information. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. The information
contained in the letter to the shareholders, the interview with the chief
investment officer and the report from the investment adviser and manager in
this report is derived from carefully selected sources believed reasonable. We
do not guarantee its accuracy or completeness, and nothing in this report shall
be construed to be a representation of such guarantee. Any opinions expressed
reflect the current judgment of the author, and do not necessarily reflect the
opinion of Deutsche Bank AG or any of its subsidiaries and affiliates.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market. Comparisons between changes
in the Fund's net asset value per share and changes in the MDAX, NEMAX 50 and
MCAPM indices should be considered in light of the Fund's investment policy and
objectives, the characteristics and quality of the Fund's investments, the size
of the Fund and variations in the foreign currency/dollar exchange rate.
Fund shares are not FDIC-insured and are not deposits or other obligations of,
or guaranteed by, any bank. Fund shares involve investment risk, including
possible loss of principal.
GRAPHIC
OMITTED
GF
LISTED
NYSE
Copies of this report, monthly fact sheets and
other information are available at:
www.newgermanyfund.com
19
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS Not applicable at this time.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d)
Total Number of Average Price Paid Total Number of Maximum Number of
Period Shares Purchased* per Share Shares Purchased as Shares that May Yet Be
Part of Publicly Announced Purchased Under the
Plans or Programs Plans or Programs
------------------------------------------------------------------------------------------------------------------------------------
January 1 through January 31 186,500 $7.8487 n/a n/a
February 1 through February 29 230,000 $8.1017 n/a n/a
March 1 through March 31 274,400 $7.6104 n/a n/a
April 1 through April 30 139,900 $7.5584 n/a n/a
May 1 through May 31 96,700 $7.0827 n/a n/a
June 1 through June 30 75,500 $7.4220 n/a n/a
------------------------------------------------------------------------------------------------------------------------------------
Total 1,003,000 $7.6951 n/a n/a
------------------------------------------------------------------------------------------------------------------------------------
* All shares were purchased in open market transactions.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Nominating Committee will consider nominee candidates properly submitted by
stockholders in accordance with applicable law, the Fund's Articles of
Incorporation or By-laws, resolutions of the Board and the qualifications and
procedures set forth in the Nominating Committee Charter and this proxy
statement. A stockholder or group of stockholders seeking to submit a nominee
candidate (i) must have beneficially owned at least 5% of the Fund's common
stock for at least two years, (ii) may submit only one nominee candidate for any
particular meeting of stockholders, and (iii) may submit a nominee candidate for
only an annual meeting or other meeting of stockholders at which directors will
be elected. The stockholder or group of stockholders must provide notice of the
proposed nominee pursuant to the requirements found in the Fund's By-laws.
Generally, this notice must be received not less than 90 days nor more than 120
days prior to the first anniversary of the date of mailing of the notice for the
preceding year's annual meeting. Such notice shall include the specific
information required by the Fund's By-laws. The Nominating Committee will
evaluate nominee candidates properly submitted by stockholders on the same basis
as it considers and evaluates candidates recommended by other sources.
ITEM 10. CONTROLS AND PROCEDURES.
a) The Chief Executive and Financial Officers concluded that the Registrant's
Disclosure Controls and Procedures are effective based on the evaluation of the
Disclosure Controls and Procedures as of a date within 90 days of the filing
date of this report.
(b) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: The New Germany Fund
By: /s/Julian Sluyters
Julian Sluyters
Chief Executive Officer
Date: August 23, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: The New Germany Fund
By: /s/Julian Sluyters
Julian Sluyters
Chief Executive Officer
Date: August 23, 2004
By: /s/Charles A. Rizzo
Charles A. Rizzo
Chief Financial Officer
Date: August 23, 2004