[LOGO]
The Central European
Equity Fund, Inc.
Annual Report
October 31, 2001
[LOGO] The Central European
Equity Fund, Inc.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
December 7, 2001
Dear Shareholder,
In the aftermath of the events of September 11, the US economy has entered
its first recession since 1991 and has pulled the rest of the global economy
down with it. Global growth is expected to slip from 4.7% in 2000 to 2.2%--its
slowest growth since 1992. However, we expect Emerging Europe to weather the
economic slowdown better than other emerging regions, partly due to having only
indirect links to the US. Emerging Europe could benefit as the economic slowdown
increases the relocation of manufacturing jobs from Western Europe due to the
significantly lower labor costs in this region. This month DaimlerChrysler
announced that it was switching some production of heavy trucks from Germany to
Hungary. Further economic stimulus will come from increased government spending
and foreign direct investment prompted by ongoing preparation to join the
European Union. Economic fundamentals in Central Europe remain sound and should
register growth far above the global average. For 2002, economic growth for
Hungary, Poland, and the Czech Republic is expected to be 4.1%, 3.8% and 3.0%,
respectively. Global investors continue to gain confidence in the economic
policies of the region, as some of the local currencies have gained over 8%
relative to the US dollar.
During the fiscal year ended October 31, 2001, the Central European Equity
Fund's net asset value per share declined by 14.3%, while its share price
declined 7.8%. Both compare favorably to the Fund's benchmark, which fell 20.4%
during the year. Emerging European equities outperformed both US equities and
Continental European equities, as well as the equity markets of Asia and South
America. As mentioned in earlier reports, the Fund changed its benchmark from
the customized MSCI Index to the CECE Index on January 1, two months into the
Fund's fiscal year. Both country allocation and sector allocation contributed to
the Fund's 6.1% outperformance. Hungary, which currently makes up 33% of the
Fund's assets was one of the better performing markets, declining only 8.3%. The
Fund's underweight in the Czech Republic also contributed to the relative
outperformance. Croatia, a country that is not part of the Fund's benchmark, was
the best performer, rising over 14% in US dollar terms. In terms of stock
selection, the manager added value by overweighting two of the best performing
sectors: energy and banks. At the most recent Board of Directors' meeting, there
was an extensive discussion about Russia, at the conclusion of which the
Directors confirmed their earlier position that the Fund be allowed to invest
5-10% of its assets in this country.
We believe the Central European region continues to be an attractive
investment, due to the above average economic growth potential available.
Furthermore, equity valuations are at very attractive levels relative to the
other global equity markets, including the emerging markets of Asia and Latin
America. The Fund continued its share buyback program throughout the year. The
Fund's discount to its net asset value declined to an average of 21.4% during
the fiscal year.
Sincerely,
/s/ Christian Strenger /s/ Richard T. Hale
Christian Strenger Richard T. Hale
Chairman President
--------------------------------------------------------------------------------
For additional information about the Fund including performance, dividends,
presentations, press releases, daily NAV and shareholder reports, please visit:
www.ceefund.com
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1
FUND HISTORY AS OF OCTOBER 31, 2001
--------------------------------------------------------------------------------
STATISTICS:
Net Assets .................................................... $111,213,313
Shares Outstanding ............................................ 8,043,420
NAV Per Share ................................................. $13.83
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
Record Ordinary LT Capital
Date Income Gains Total
---------- -------- ---------- ---------
11/19/01............................. $0.23 -- $0.23
11/16/98............................. $0.14 -- $0.14
9/1/98............................... $0.01 $0.01 $0.02
11/17/97............................. $1.54 $5.01 $6.55
9/3/97............................... -- $0.02 $0.02
12/19/96............................. $0.11 $1.79 $1.90
TOTAL RETURNS:
For the year ended October 31,
----------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ---------- ---------- ----------- ----------
Net Asset Value ...... (14.31)% .94% 2.48% (26.09)% 22.41%
Market Value ......... (7.79)% (5.00)% (3.29)% (22.89)% 28.93%
Benchmark ............ (20.40)%(1) 2.05%(2) 19.31%(2) (24.68)%(2) 22.70%(3)
(1) Represents the customized MSCI Index for the 2 months ended 12/31/00 and
the CECE Index for the 10 months ended 10/31/01. The Fund changed its
benchmark from the customized MSCI Index to the CECE Index on January 1,
2001.
(2) Represents the MSCI Index.
(3) Represents the DAX Index.
OTHER INFORMATION:
NYSE Ticker Symbol .................................................... CEE
Nasdaq Symbol ......................................................... XCEEX
Dividend Reinvestment Plan ............................................ Yes
Voluntary Cash Purchase Program ....................................... Yes
Annual Expense Ratio .................................................. 1.66%
2
10 LARGEST EQUITY HOLDINGS AS OF OCTOBER 31, 2001
--------------------------------------------------------------------------------
% of % of
Portfolio Portfolio
--------- ---------
1. Telekomunikacja Polska 9.9 6. Bank Pekao 6.4
2. OTP Bank 9.6 7. Elektrim 5.0
3. Polski Koncern Naftowy 9.6 8. Gedeon Richter 4.4
4. Mol Magyar Olaj-ES Gazipari 8.9 9. Komercni Banka 4.3
5. Matav 8.0 10. Prokom Software 3.5
[GRAPHIC OMITTED]
----------------------------
% of
Country Portfolio
----------------------------
Poland 47.9
----------------------------
Hungary 34.6
----------------------------
Czech
Republic 11.4
----------------------------
Croatia 3.2
----------------------------
Russia 2.0
----------------------------
Austria 0.9
----------------------------
Total 100%
----------------------------
3
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
--------------------------------------------------------------------------------
Question: Why have you decided to invest in Russia?
Answer: At the moment, Russia appears to be one of the more attractive emerging
markets in which to invest. It has made huge gains in establishing political
stability, and with relatively high oil prices, it has achieved a high level of
economic stability. In addition, the Russian economy has become more diversified
and is therefore less dependent on oil and gas prices. Economic growth over the
next few years is expected to be very strong. This year, Russia's economy is
expected to grow by 5.0%. This is one of the strongest growth rates in the world
with the exception of China and India. However, Russian equities are much
cheaper than in those countries. According to Morgan Stanley, the Russian equity
market trades at the lowest price-earnings ratio (3.9x) than any other country.
China and India's equity markets trade at P/E ratios of 12.4 times and 11.3
times, respectively. The low valuation in Russia is largely due to the debt
default of 1998, which is still fresh in the minds of many investors. However,
with Russia recently paying off an international debt obligation for the very
first time, and improved government effectiveness since the arrival of Vladimir
Putin (where compliance in tax payments have risen sharply and the state budget
now running regular surpluses), a re-rating of Russia creditworthiness is over
due. We also believe that Russia will gain some additional economic benefits for
its strong support of the US in its fight against terrorism. There is growing
expectation of foreign debt restructuring over the coming months which will
reduce its debt service bill, and longer term, there is growing talk of Russia
joining the World Trade Organization. By joining the WTO, Russia would be open
for large amounts of foreign direct investment, and it would have to strengthen
its laws concerning shareholder rights. Both of these steps would increase the
attractiveness of the Russian equity market.
Question: How are Poland and Hungary's membership negotiations with the European
Union progressing?
Answer: The EU membership negotiations are making good progress. The Czech
Republic, Hungary, Poland, Slovakia, Slovenia, and the Baltic republics will
likely complete the negotiations by the end of 2002, with their actual
membership likely to begin on January 1, 2005. The accession negotiations are an
anchor for the candidate countries' economic and structural policies. Foreign
investors are increasingly realizing this, as fund flows, representing direct
investment and portfolio investments, have reached record levels in Poland,
Hungary and the Czech Republic. As economic ties with the EU are intensifying,
the candidate countries for EU accession benefit the most from an economic
upswing in the EU. However, it is our belief that these countries should be able
to realize higher growth rates than the EU itself, if they continue to implement
further structural reforms. It is this higher growth potential that makes these
countries very attractive to invest in.
Question: The US has been very aggressive in cutting interest rates in order to
stimulate growth. Did you see similar cuts in Central Europe?
Answer: Hungary, Poland and the Czech Republic have done a good job taming
inflation. This month, Hungary reported that inflation fell to 7.1%, bringing
the central bank's target of 7.0% well within reach. Poland and the Czech
Republic both have an inflation rate below 5%. Lower inflation has made it much
easier for the central banks to lower interest rates. Interest rates in Hungary
were trimmed by 50 basis points this month to 9.75%, its lowest in a decade and
the Czech Republic also lowered rates by 50 basis points this month to 4.75%.
The Polish Central Bank has been the most aggressive. Interest rates have been
lowered six times this year with a full 150 basis point reduction in early
December. Poland's official interest rate is now at 11.5%, which is 7.5% lower
than at the beginning of the year.
Hanspeter Ackermann, Chief Investment Officer of the Central European Equity
Fund
4
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
ECONOMIC OUTLOOK FOR THE CENTRAL EUROPEAN ECONOMIES
Poland
Signs of a prospective upturn in the world economy are beginning to emerge, and
we expect the global economy to recover in 2002, with global GDP growth rising
to 2.5% from 2.2% in 2001. Next year looks to be a better year for Poland as we
expect it to recover at a significantly faster pace than most other countries.
Economic growth is expected to slow this year to 2.5% from 4.2% last year.
However, the economy is expected to grow 3.8% next year, almost twice this
year's level. The main cause for the economic slowdown this year was excessively
high interest rates. The tight monetary policy the government has had in place
since last year has been highly successful in reducing inflation and shrinking
the current account deficit, but it also caused industrial production to
contract. After peaking at 11.6% last July, inflation has fallen to 4.3% in
September. Thus, there is the prospect of an inflation rate below 5% for the
year, which would be substantially below the government's year-end target of 6
to 8%. As a result of the lower inflation, the Polish central bank has lowered
interest rates by 7.5% year-to-date, which now stands at 11.5%. However, in our
view, interest rates are still too high, and with real interest rates (interest
rates minus inflation) of +6.5%, we believe the Polish Central Bank will be very
aggressive in easing next year. For comparison, the real official interest rate
in the US is currently -0.8%.
Hungary
Hungary's macroeconomic outlook remains very solid, and its expected economic
growth of 4.3% in 2001 is the second highest in all of Europe, exceeded only by
Russia. Like all other countries, Hungary's economic growth was slower than last
year, but the decline was relatively small, falling just 0.7% from last year's
growth rate of 5.0%. Economic growth in 2002 is expected to rise to 4.5%, more
than twice the global average of 2.2%. The slower growth was largely the result
of lower demand from Europe, as Hungary exports 73% of its total exports to the
EU. However, the main driving force of growth during the year was strong
domestic demand. Private consumption benefited from wage hikes in the public
sector and large-scale public investment projects. Many of these projects are
funded by the huge amounts of foreign capital that Hungary has attracted due to
its high growth potential. Of the countries expected to join the EU, Hungary is
widely considered to be the furthest along in the negotiation process. Already
its currency, the Hungarian forint (HUF), meets several qualifications required
before adopting the Euro; most of its foreign exchange restrictions were
abolished, and the intervention band for the HUF was widened to +/- 15% vs. the
Euro. In 2002, we expect a more expansionary fiscal policy. Under the so-called
Szechenyi plan, publicly funded infrastructure investment spending is to
increase by 10% each year to meet EU and NATO standards. Inflation should
decline to 9.6% by year-end, and to 6.0% by the end of 2002. The current account
deficit has stabilized at around 4% of GDP.
Czech Republic
The Czech Republic was one of the very few countries that actually had higher
economic growth in 2001 compared to last year. The Czech economy, which grew
2.9% in 2000, is expected to grow by 3.2% this year, and 3.5% in 2002. The
economic recovery in the Czech Republic has continued to improve on the back of
steady export growth. Inflation has remained very stable at 4.9%, partially due
to a strong currency. Over the past 13 months, the Czech koruna, has appreciated
15% relative to the US dollar. The Czech government has stepped up its
privatization program and has had tremendous international interest in acquiring
former state owned businesses. In December, the government is expected to
receive bids of up to $4 billion for its holdings in CEZ, the dominant electric
utility. Among the bidders are companies from France, Italy, the UK and Spain.
The country's long-term economic growth prospects are virtually guaranteed by
the EU accession process that is rapidly integrating the Czech Republic into the
European economic structure.
5
DIRECTORS OF THE CLOSED-END FUNDS*
--------------------------------------------------------------------------------
+ Mr. Detlef Bierbaum, Partner, Sal. Oppenheim & Cie.
+ Mr. John A. Bult, Chairman, PaineWebber International
Hon. Richard R. Burt, Chairman, IEP Advisers, LLP; former U.S. Ambassador to
Germany
Mr. John H. Cannon, former Vice President & Treasurer, Foot Locker, Inc.
Mr. Richard Goeltz, former Vice Chairman and Chief Financial Officer, American
Express Co.
Dr. Franz-Wilhelm Hopp, Member of the Management Board, ERGO
Versich-erungsgruppe AG
Mr. Ernst-Ulrich Matz, former Chief Financial Officer, IWKA AG
Mr. Edward Schmults, former General Counsel, GTE Corp.; former partner, White
& Case
Mr. Hans G. Storr, former CFO, Philip Morris Companies Inc.
+ Mr. Christian Strenger, Chairman of the Boards of Directors of the Closed-End
Funds, former CEO, DWS (Deutsche Bank's mutual fund group)
Dr. Juergen Strube, Chairman of the Management Board, BASF AG
Dr. Frank Tromel, former Chairman, Delton AG
Mr. Robert Wadsworth, President, Robert H.Wadsworth & Associates, Inc.
Mr. Werner Walbrol, President and CEO, German American Chamber of Commerce
Mr. Otto Wolff von Amerongen, Chairman, Otto Wolff AG
Mr. Peter Zuhlsdorff, Chairman of the Supervisory Board of GfK AG, TV Loonland
AG and Escada AG
On November 2nd, after their quarterly Board Meeting, the Directors of the
Closed-End Funds made a trip to "Ground Zero" in Lower Manhattan. They were
accompanied by a representative of the Mayor's Office and had the opportunity to
relive the events of September 11th and to see its ongoing aftermath. Directors
came from around the US as well as from numerous cities in Germany. It was a
particularly moving experience for all, but each felt the need to visit the site
and to express empathy with all who have been involved with the event.
* The Directors of the closed-end funds (Germany Fund, New Germany Fund and
Central European Equity Fund) meet together in combined board meetings
although they speak for their respective funds. Three Directors sit on all
three fund boards: Messrs. Bult, Strenger and Wadsworth. The following sit
only on the boards of the Germany Fund and the Central European Equity
Fund: Messrs. Bierbaum, Burt, Schmults, Storr, Strube, Walbroel and Wolff.
The following sit only on the board of the New Germany Fund: Messrs.
Cannon, Goeltz, Hopp, Matz, Troemel and Zuhlsdorff.
+ indicates an "interested director".
6
OFFICERS AND ADVISORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
Mr. Richard T. Hale, President and Chief Executive Officer of the Closed-End
Funds, Managing Director and Head of U.S. mutual fund administration group of
Deutsche Bank
Mr. Hanspeter Ackermann, Chief Investment Officer of the Closed-End Funds and
Managing Director of Deutsche Bank Securities Inc.
Mr. Robert Gambee, Chief Operating Officer and Secretary of the Closed-End
Funds, Director of Deutsche Bank Securities Inc.
Mr. Joseph Cheung, Chief Financial Officer and Treasurer of the Closed-End Funds
and Vice President of Deutsche Bank Securities Inc.
Ms. Isabella Chan, Funds Administrator, Deutsche Bank Securities Inc.
Mr. Thomas Gill, Vice President of Deutsche Bank Securities Inc.
Mr. Christophe Bernard, Senior Portfolio Manager, Deutsche Asset Management
International GmbH
Mr. Thomas Bucher, Portfolio Manager, Deutsche Asset Management International
GmbH
SHARES REPURCHASED AND ISSUED
--------------------------------------------------------------------------------
The Fund has been purchasing shares of its common stock in the open
market. Your Directors continue to believe the Fund represents excellent value.
Shares repurchased and shares issued for dividend reinvestment for the past five
years are as follows:
Fiscal year 1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Shares repurchased 722,257 2,680,954 1,270,800 1,106,500 686,975
Shares issued for
dividend reinvestment 592,008 2,082,693 66,019 -0- -0-
VOLUNTARY CASH PURCHASE PROGRAM
--------------------------------------------------------------------------------
The Fund has an attractive way to purchase additional shares at reduced
cost. This is the Voluntary Cash Purchase Program which is part of the Dividend
Reinvestment Plan. By enrolling in the Voluntary Cash Purchase Program, you may
make additional investments each month--as little as $100 in any month or as
much as $36,000 a year. Share purchases are combined to receive a beneficial
brokerage fee. Further information is contained at the end of this Annual
Report.
7
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--OCTOBER 31, 2001
--------------------------------------------------------------------------------
Shares Description Value
---------- ---------------- ----------
INVESTMENTS IN POLISH COMMON STOCKS--45.2%
BANKS--8.0%
31,231 Bank Rozwoju Eksportu ............................... $ 815,749
31,500 Bank Pekao* ......................................... 580,557
38,000 Bank Pekao (ADR)*+ .................................. 695,400
300,000 Bank Pekao (GDR)* ................................... 5,490,000
125,166 Bank Zachodni WBK* .................................. 1,295,506
-----------
8,877,212
-----------
COMPUTER & PERIPHERALS--2.7%
116,801 Computerland* ....................................... 2,965,288
-----------
CONSTRUCTION & ENGINEERING--2.9%
373,410 Budimex* ............................................ 2,324,412
588,805 Mostostal Zabrze* ................................... 905,522
-----------
3,229,934
-----------
DIVERSIFIED TELECOMMUNICATIONS
SERVICES--9.4%
148,241 Telekomunikacja Polska* ............................. 551,855
2,615,000 Telekomunikacja Polska (ADR)*+ ..................... 9,466,300
105,000 Telekomunikacja Polska (GDR)* ....................... 380,100
-----------
10,398,255
-----------
HOTEL RESTAURANTS & LEISURE--0.6%
148,802 Orbis* .............................................. 633,857
-----------
MEDIA--2.8%
165,000 Agora (GDR)*+ ....................................... 2,186,250
35,000 Agora (GDR)* ........................................ 463,750
33,464 Art Marketing Syndicate* ............................ 492,586
-----------
3,142,586
-----------
METALS & MINING--1.2%
250,000 KGHM Polska Miedz ................................... 714,024
115,000 KGHM Polska Miedz (GDR) ............................. 649,750
-----------
1,363,774
-----------
OIL & GAS--9.0%
794,462 Polski Koncern Naftowy .............................. 3,616,921
720,000 Polski Koncern Naftowy (GDR)+ ....................... 6,408,000
-----------
10,024,921
-----------
SOFTWARE--3.9%
54,000 Prokom Software* .................................... 1,370,926
180,000 Prokom Software (GDR)* .............................. 2,268,000
20,000 Softbank ............................................ 127,914
93,442 Softbank (GDR) ...................................... 593,358
-----------
4,360,198
-----------
TRADING COMPANIES & DISTRIBUTORS--4.7%
1,039,977 Elektrim* ........................................... 5,229,715
-----------
Total Investments in Polish Common Stocks
(cost $60,756,948) ................................ 50,225,740
-----------
INVESTMENTS IN HUNGARIAN COMMON STOCKS--32.7%
AUTOMOBILES--1.3%
240,000 Raba ................................................ 1,433,266
-----------
BANKS--9.1%
75,000 OTP Bank ............................................ 3,948,903
116,000 OTP Bank (GDR) ...................................... 6,148,000
-----------
10,096,903
-----------
CHEMICALS--0.5%
49,557 Pannonplast ......................................... 493,836
-----------
DIVERSIFIED TELECOMMUNICATIONS
SERVICES--7.5%
500,000 Matav ............................................... 1,563,659
438,000 Matav (ADR) ......................................... 6,810,900
-----------
8,374,559
-----------
OIL & GAS--8.4%
89,610 Mol Magyar Olaj-ES Gazipari ......................... 1,440,777
491,000 Mol Magyar Olaj-ES Gazipari (GDR) ................... 7,905,100
-----------
9,345,877
-----------
PHARMACEUTICALS--5.9%
49,713 Egis* ............................................... 1,984,199
29,918 Gedeon Richter ...................................... 1,626,518
55,000 Gedeon Richter (GDR) ................................ 2,975,500
-----------
6,586,217
-----------
Total Investments in Hungarian Common Stocks
(cost $37,012,553) ............................... 36,330,658
-----------
8
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--OCTOBER 31, 2001 (continued)
--------------------------------------------------------------------------------
Shares Description Value
---------- ---------------- ----------
INVESTMENTS IN CZECH REPUBLIC COMMON STOCKS--10.7%
BANKS--4.1%
96,000 Komercni Banka* ..................................... $ 2,497,586
234,996 Komercni Banka (GDR)* ............................... 2,020,966
------------
4,518,552
------------
CHEMICAL--1.3%
1,070,000 Unipetrol* .......................................... 1,462,196
------------
DIVERSIFIED TELECOMMUNICATIONS
SERVICES--3.2%
326,000 Cesky Telecom ....................................... 2,545,290
135,000 Cesky Telecom (GDR) ................................. 1,059,750
------------
3,605,040
------------
INDUSTRIAL CONGLOMERATES--1.0%
525,000 Ceske Energeticke Zavody ............................ 1,070,164
------------
MEDIA--1.1%
151,730 Ceske Radiokomunikace (GDR) ......................... 1,289,705
------------
Total Investments in Czech Republic Common Stocks
(cost $15,394,232) ................................ 11,945,657
------------
INVESTMENTS IN CROATIAN COMMON STOCKS--3.0%
BANKS--2.0%
97,000 Zagrebacka Banka (GDR) .............................. 2,182,500
------------
PHARMACEUTICALS--1.0%
140,000 Pliva D.D. (GDR) .................................... 1,169,000
------------
Total Investments in Croatian Common Stocks
(cost $2,645,238) ................................. 3,351,500
------------
INVESTMENTS IN RUSSIAN COMMON STOCKS--1.9%
OIL & GAS--1.9%
120,000 Surgutneftegaz (ADR) ................................ 1,557,620
10,000 Yukos (ADR) ......................................... 560,000
------------
Total Investments in Russian Common Stocks
(cost $2,549,222) ................................. 2,117,620
------------
INVESTMENT IN AUSTRIAN COMMON STOCK--0.9%
IT CONSULTING & SERVICES--0.9%
104,840 S&T System Integration
& Technology*
(cost $1,660,883) ................................. 968,653
------------
Total Investments--94.4%
(cost $120,019,076) ............................... 104,939,828
Cash and other assets in
excess of liabilities--5.6% ....................... 6,273,485
------------
NET ASSETS--100% .................................... $111,213,313
============
----------
* Non-income producing securities.
+ 144A. Restricted to resale to institutional investors only.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements.
9
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2001
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $120,019,076) ................................. $ 104,939,828
Cash and foreign currency (cost $5,620,086) ............................... 5,555,353
Receivable for securities sold ............................................ 769,370
Foreign withholding tax refund receivable ................................. 70,666
Dividend receivable ....................................................... 61,370
Interest receivable ....................................................... 16,218
Other assets .............................................................. 1,010
-------------
Total assets ........................................................... 111,413,815
-------------
LIABILITIES
Management fee payable .................................................... 56,898
Investment advisory fee payable ........................................... 30,508
Payable for shares repurchased ............................................ 18,796
Accrued expenses and accounts payable ..................................... 94,300
-------------
Total liabilities ...................................................... 200,502
-------------
NET ASSETS ................................................................ $ 111,213,313
=============
Net assets consist of:
Paid-in capital, $.001 par (Authorized
80,000,000 shares of common stock) ..................................... $ 226,321,803
Cost of 5,462,555 shares held in treasury ................................. (80,671,384)
Undistributed net investment income ....................................... 773,235
Accumulated net realized loss on investments
and foreign currency transactions ...................................... (20,061,661)
Net unrealized depreciation of investments
and foreign currency ................................................... (15,148,680)
-------------
Net assets ................................................................ $ 111,213,313
=============
Net asset value per share
($111,213,313 / 8,043,420 shares of common stock issued and outstanding) $13.83
======
See Notes to Financial Statements
10
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the year
ended
October 31,
2001
------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding taxes of $109,466) ........ $ 2,555,017
Interest ........................................................ 176,217
Securities lending, net ......................................... 20,230
------------
Total income ................................................. 2,751,464
------------
Expenses
Management fee .................................................. 775,596
Investment advisory fee ......................................... 407,237
Custodian and Transfer Agent's fees and expenses ................ 239,116
Reports to shareholders ......................................... 223,007
Directors' fees and expenses .................................... 157,849
Legal fee ....................................................... 64,396
Audit fee ....................................................... 55,000
NYSE listing fee ................................................ 35,000
Miscellaneous ................................................... 67,197
------------
Total expenses before custody credits* ....................... 2,024,398
Less: custody credits ........................................ (46,169)
------------
Net expenses ................................................. 1,978,229
------------
Net investment income .............................................. 773,235
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments ..................................................... (14,945,432)
Foreign currency transactions ................................... 1,047,369
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... (7,974,526)
Translation of other assets and liabilities from foreign currency (54,038)
------------
Net loss on investments and foreign currency transactions .......... (21,926,627)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................................ $(21,153,392)
============
----------
* The custody credits are attributable to interest earned on U.S. cash balances.
See Notes to Financial Statements.
11
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the year For the year
ended ended
October 31, October 31,
2001 2000
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) ...................................................... $ 773,235 $ (796,817)
Net realized gain (loss) on:
Investments ..................................................................... (14,945,432) 12,859,659
Foreign currency transactions ................................................... 1,047,369 (290,722)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................................... (7,974,526) (11,502,067)
Translation of other assets and liabilities from foreign currency ............... (54,038) (14,036)
------------- -------------
Net increase (decrease) in net assets resulting from operations ................... (21,153,392) 256,017
------------- -------------
Capital share transactions:
Cost of shares repurchased (686,975 and 1,106,500 shares, respectively) ........... (8,556,770) (16,597,292)
------------- -------------
Net decrease in net assets from capital share transactions ........................ (8,556,770) (16,597,292)
------------- -------------
Total decrease in net assets ......................................................... (29,710,162) (16,341,275)
NET ASSETS
Beginning of year .................................................................... 140,923,475 157,264,750
------------- -------------
End of year (including undistributed net investment income of $773,235 and $-0- as
of October 31, 2001 and 2000, respectively) ....................................... $ 111,213,313 $ 140,923,475
============= =============
See Notes to Financial Statements.
12
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2001
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The Central European Equity Fund, Inc. (formerly The Future Germany Fund, Inc.
or the "Fund") commenced investment operations on March 6, 1990 as a
non-diversified, closed-end management investment company incorporated in
Maryland. Pursuant to shareholder approvals, on June 29, 1995, the Fund changed
its name and investment objective to allow investment in Central European
countries, and on June 20, 1997, the Fund changed its investment policies to
permit increased flexibility in the geographic distribution of the Fund's
investments.
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,
or, if no sales price is available at that time, at the price established by the
exchange. Securities that are traded in an unregulated market are valued, if bid
and asked quotations are available, at the current bid price. If bid and asked
quotations are not available, then such securities will be valued as determined
in good faith by the Board of Directors of the Fund.
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.
Loans of Portfolio Securities: The Fund may lend portfolio securities while it
continues to earn dividends on such securities loaned. The market value of
government securities received as collateral is required to be at least equal to
105 percent of the market value of the securities loaned, which are
marked-to-market daily. Securities lending fees, net of rebates and agency fees,
are earned by the Fund and are identified separately in the Statement of
Operations.
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. In addition, certain
foreign markets may be substantially smaller, less developed, less liquid and
more volatile than the major markets of the United States.
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
substantially 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 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.
13
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2001 (continued)
--------------------------------------------------------------------------------
NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS
The Fund has a Management Agreement with 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, and .55% of such assets in excess of $100 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.
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 objective,
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 select brokers and dealers to execute portfolio transactions on
behalf of the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
For the year ended October 31, 2001, Deutsche Bank AG, the German parent of the
Manager and Investment Adviser, and its affiliates received $25,202 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Fund.
Certain officers of the Fund are also officers of either the Manager or Deutsche
Bank AG.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments, for the year ended October 31, 2001 were $67,041,284 and
$80,010,567, respectively.
The cost of investments at October 31, 2001 was $120,127,878 for United States
Federal income tax purposes. Accordingly, as of October 31, 2001, net unrealized
depreciation of investments aggregated $15,188,050, of which $9,311,752 and
$24,499,802 related to unrealized appreciation and depreciation, respectively.
For United States Federal income tax purposes, the Fund had a capital loss carry
forward at October 31, 2001 of approximately $21 million, of which $6 million
and $15 million will expire in 2006 and 2009, 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. PORTFOLIO SECURITIES LOANED
For the year ended October 31, 2001, the market value of securities loaned
averaged $1,376,741 and was $2,790,000 at October 31, 2001. The market value of
government securities received as collateral for such loans averaged $1,418,319
for the same period and was $2,658,083 at October 31, 2001. For the year ended
October 31, 2001, the Fund earned $20,230 as securities lending fees, net of
rebates and agency fees.
NOTE 6. CAPITAL
During the years ended October 31, 2001 and 2000, the Fund purchased 686,975 and
1,106,500 of its shares of common stock on the open market at a total cost of
$8,556,770 and $16,597,292, respectively. The weighted average discount of these
purchases comparing the purchase price to the net asset value at the time of
purchase was 22.2% and 25.7%, respectively. These shares are held in treasury.
NOTE 7. SUBSEQUENT EVENT
On November 2, 2001, the Board of Directors of the Fund declared a dividend of
$0.23 per share to stockholders of record on November 19, 2001, payable on
November 29, 2001.
14
THE CENTRAL EUROPEAN EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
years indicated:
For the year ended October 31,
------------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Per share operating performance:
Net asset value:
Beginning of year .................................... $ 16.14 $ 15.99 $ 15.74 $ 28.00 $ 24.56
-------- -------- -------- -------- --------
Net investment income (loss) ......................... .10 (.09) (.08) .13 .09
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ..... (2.70) (.38) .09 (6.18) 5.26
-------- -------- -------- -------- --------
Increase (decrease) from investment operations ....... (2.60) (.47) .01 (6.05) 5.35
-------- -------- -------- -------- --------
Increase resulting from share repurchases ............ .29 .62 .40 .82 .28
-------- -------- -------- -------- --------
Distributions from net investment income ............. -- -- (.13) (.01) (.11)
Distributions from net realized
foreign currency gains+ ........................... -- -- (.01) -- --
Distributions from net realized
short-term capital gains+ ......................... -- -- -- (1.54) --
Distributions from net realized
long-term capital gains ........................... -- -- -- (5.02) (1.81)
-------- -------- -------- -------- --------
Total distributions .................................. -- -- (.14) (6.57) (1.92)
-------- -------- -------- -------- --------
Dilution in NAV from dividend reinvestment ........... -- -- (.02) (.46) (.27)
-------- -------- -------- -------- --------
Net asset value:
End of year ....................................... $ 13.83 $ 16.14 $ 15.99 $ 15.74 $ 28.00
======== ======== ======== ======== ========
Market value:
End of year ....................................... $ 10.95 $ 11.875 $ 12.50 $13.0625 $ 23.125
Total investment return for the year:++
Based upon market value ........................... (7.79)% (5.00)% (3.29)% (22.89)% 28.93%
Based upon net asset value ........................ (14.31)% .94% 2.48% (26.09)% 22.41%
Ratio to average net assets:
Total expenses before custody credits* ............ 1.66% 1.37% 1.44% 1.20% 1.10%
Net investment income (loss) ...................... .63% (.44)% (.44)% .56% .32%
Portfolio turnover ................................... 57.83% 59.17% 60.35% 97.48% 68.20%
Net assets at end of year (000's omitted) ............ $111,213 $140,923 $157,265 $173,825 $325,972
--------
+ Characterized as ordinary income for tax purposes.
++ Total investment return 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 ratios of total expenses after custody credits to average
net assets would have been 1.62%, 1.35%, 1.43% and 1.17% for 2001, 2000,
1999 and 1998, respectively.
See Notes to Financial Statements.
15
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
The Central European Equity Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Central European Equity Fund,
Inc. (the "Fund") at October 31, 2001, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2001 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 7, 2001
REPORT OF STOCKHOLDERS' MEETING (unaudited)
--------------------------------------------------------------------------------
The Fund held its Annual Meeting of Stockholders on June 28, 2001.The one
matter voted upon by stockholders and its resulting votes were as follows:
Voting Results*
----------------------------
Against/
For Withheld Abstained
--- -------- ---------
1. Election of the following
Directors:
Detlef Bierbaum ............................ 6,373 300 --
Richard R. Burt ............................ 6,388 285 --
Edward C. Schmults ......................... 6,381 292 --
* In thousands of shares.
AMENDMENTS OF THE BYLAWS - SUMMARY (unaudited)
--------------------------------------------------------------------------------
The Board of Directors amended the Fund's Bylaws at its July 16, 2001
meeting. One amendment requires that a stockholder (which under the existing
Bylaws must be a stockholder of record) who nominates a director must include
relevant information about the nominee at the time of the stockholder's
proposal. The information must enable the Board of Directors to determine
whether the nominee satisfies the "Relevant Experience and Country Knowledge"
requirement and whether the nominee has a "Conflict of Interest", as each of
those terms is defined in the Bylaws. Another amendment clarifies that the
"financial or industrial business" referred to in the definitions of "Relevant
Experience and Country Knowledge" and "Conflict of Interest" may include a
business unit within a larger enterprise. The full text of the amendments has
been filed with the SEC.
U.S. TAX INFORMATION (unaudited)
--------------------------------------------------------------------------------
The Fund intends to make an election under Internal Revenue Code Section
853 to pass through foreign taxes paid by the Fund to its shareholders. The
total amount of foreign taxes that will be passed through to the shareholders
for the fiscal year ended October 31, 2001 is $109,466. The foreign source
income for information reporting purposes is $2,840,700. The Fund did not make
any capital gain distributions during the year.
This information is given to meet certain requirements of the Internal
Revenue Code. Shareholders should refer to their Form 1099-DIV to determine the
amounts includable on their respective tax returns for 2001.
16
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN (unaudited)
--------------------------------------------------------------------------------
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. A more complete description of the Plan is
provided in the Plan brochure available from the Fund or from Investors Bank &
Trust Company, the plan agent (the "Plan Agent"), Shareholder Services, P.O. Box
1537, Boston, Massachusetts 02205 (telephone 1-800-356-2754). A stockholder
should read the Plan brochure carefully before enrolling in the Plan.
Under the Plan, participating stockholders ("Plan Participants") appoint
the Plan Agent to receive or invest Fund distributions as described below under
"Reinvestment of Fund Shares." In addition, Plan Participants may make optional
cash purchases through the Plan Agent as often as once a month as described
below under "Voluntary Cash Purchases." There is no charge to Plan Participants
for participating in the Fund's Plan, although when shares are purchased under
the Plan by the Plan Agent on the New York Stock Exchange or otherwise on the
open market, each Plan Participant will pay a pro rata share of brokerage
commissions incurred in connection with such purchases, as described below under
"Reinvestment of Fund Shares" and "Voluntary Cash Purchases."
Reinvestment of Fund Shares. Whenever the Fund declares a dividend or capital
gains distribution payable either in cash or in Fund shares, or payable only in
cash, the Plan Agent automatically receives Fund shares for the account of each
Plan Participant except as provided in the following paragraph. The number of
shares to be credited to a Plan Participant's account shall be determined by
dividing the equivalent dollar amount of the dividend or distribution payable to
such Plan participant by the lower of the net asset value per share or the
market price per share of the Fund's common stock on the payable date, or if the
net asset value per share is less than 95% of the market price per share on such
date, then by 95% of the market price per share.
Whenever the Fund declares a dividend or capital gains distribution
payable only in cash and the net asset value per share of the Fund's common
stock exceeds the market value per share on the payable date, the Plan Agent
will apply the amount of such dividend or distribution payable to Plan
Participants of the Fund in Fund shares (less such Plan Participant's pro rata
share of brokerage commissions incurred with respect to open-market purchases in
connection with the reinvestment of such dividend or distribution) to the
purchase on the open market of Fund shares for such Plan Participant's account.
Such purchases will be made on or after the payable date for such dividend or
distribution, and in no event more than 30 days after such date except where
temporary curtailment or suspension of purchase is necessary to comply with
applicable provisions of federal securities laws. The Plan Agent may aggregate a
Plan Participant's purchases with the purchases of other Plan Participants, and
the average price (including brokerage commissions) of all shares purchased by
the Plan Agent shall be the price per share allocable to each Plan Participant.
For all purposes of the Plan, the market price of the Fund's common stock
on a payable date shall be the last sales price on the New York Stock Exchange
on that date, or, if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such stock on such
Exchange on such date. The net asset value per share of the Fund's common stock
on a valuation date shall be as determined by or on behalf of the Fund.
The Plan Agent may hold a Plan Participant's shares acquired pursuant to
the Plan, together with the shares of other Plan Participants acquired pursuant
to this Plan, in non-certificated form in the name of the Plan Agent or that of
a nominee. The Plan Agent will forward to each Plan Participant any proxy
solicitation material and will vote any shares so held for a Plan Participant
only in accordance with the proxy returned by a Plan Participant to the Fund.
Upon a Plan Participant's written request, the Plan Agent will deliver to a Plan
Participant, without charge, a certificate or certificates for the full shares
held by the Plan Agent.
Voluntary Cash Purchases. Plan Participants have the option of making
investments in Fund shares through the Plan Agent as often as once a month. Plan
Participants may invest as little as $100 in any month and may invest up to
$36,000 annually through the voluntary cash purchase feature of the Plan.
17
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN
(unaudited) (continued)
--------------------------------------------------------------------------------
The Plan Agent will purchase shares for Plan Participants on or about the
15th of each month. Cash payments received by the Plan Agent less than five
business days prior to a cash purchase investment date will be held by the Plan
Agent until the next month's investment date. Uninvested funds will not bear
interest. The Plan Agent will deduct a pro rata share of brokerage commissions
incurred in connection with voluntary cash purchases from the cash payments it
receives from Plan Participants on whose behalf the purchases were made. Plan
Participants may withdraw any voluntary cash payment by written notice received
by the Plan Agent not less than 48 hours before such payment is to be invested.
Enrollment and Withdrawal. In order to become a Plan Participant, stockholders
must complete and sign the authorization form included in the Plan brochure and
return it directly to the Plan Agent if shares are registered in their name.
Stockholders who hold Fund shares in the name of a brokerage firm, bank or other
nominee should contact such nominee to arrange for it to participate in the Plan
on such stockholder's behalf. Participation in the dividend reinvestment feature
of the Plan is effective with the next dividend or capital gains distribution
payable after the Plan Agent receives a stockholder's written authorization,
provided such authorization is received prior to the record date for such
dividend or distribution. A stockholder's written authorization must be received
by the Plan Agent at least five business days in advance of the next cash
purchase investment date (normally the 15th of every month) in order to make a
cash purchase in that month.
Plan Participants may withdraw from the Plan without charge by written
notice to the Plan Agent. Plan Participants who choose to withdraw may elect to
receive stock certificates representing all of the full shares held by the Plan
Agent on their behalf, or to instruct the Plan Agent to sell such full shares
and distribute the proceeds, net of brokerage commissions, to such withdrawing
Plan Participant. Withdrawing Plan Participants will receive a cash adjustment
for the market value of any fractional shares held on their behalf at the time
of termination. Withdrawal will be effective immediately with respect to
distributions with a record date not less than 10 days later than receipt of
such written notice by the Plan Agent.
Amendment and Termination of Plan. The Plan may only be amended or supplemented
by the Fund or by the Plan Agent by giving each Plan Participant written notice
at least 90 days prior to the effective date of such amendment or supplement,
except that such notice period may be shortened when necessary or appropriate in
order to comply with applicable law or the rules or policies of the Securities
and Exchange Commission or any other regulatory body.
The Plan may be terminated by the Fund or by the Plan Agent by written
notice mailed to each Plan Participant. Such termination will be effective with
respect to all distributions with a record date at least 90 days after the
mailing of such written notice to the Plan Participants.
Federal Income Tax Implications of Reinvestment of Fund Shares. Reinvestment of
Fund shares does not relieve Plan Participants from any income tax which may be
payable on dividends or distributions. For U.S. federal income tax purposes,
when the Fund issues shares representing an income dividend or a capital gains
dividend, a Participant will include in income the fair market value of the
shares received as of the payment date, which will be ordinary dividend income
or capital gains, as the case may be. The shares will have a tax basis equal to
such fair market value, and the holding period for the shares will begin on the
day after the date of distribution. If shares are purchased on the open market
by the Plan Agent, a participant will include in income the amount of the cash
payment made. The basis of such shares will be the purchase price of the shares,
and the holding period for the shares will begin on the day following the date
of purchase. State, local and foreign taxes may also be applicable.
18
EXECUTIVE OFFICES
31 West 52nd Street, New York, NY 10019
(For latest net asset value, schedule of the Fund's largest holdings, dividend
data and shareholder inquiries, please call 1-800-437-6269 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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
DIRECTORS AND OFFICERS
CHRISTIAN STRENGER
Chairman and Director
DETLEF BIERBAUM
Director
JOHN A. BULT
Director
+RICHARD R. BURT
Director
+EDWARD C. SCHMULTS
Director
+HANS G. STORR
Director
DR. JUERGEN F. STRUBE
Director
+ROBERT H. WADSWORTH
Director
+WERNER WALBROEL
Director
OTTO WOLFF von AMERONGEN
Director
RICHARD T. HALE
President and Chief Executive Officer
HANSPETER ACKERMANN
Chief Investment Officer
ROBERT R. GAMBEE
Chief Operating Officer and Secretary
JOSEPH M. CHEUNG
Chief Financial Officer and Treasurer
----------
+ Member of the Audit Committee.
All investment management decisions are made by a committee of United
States and German advisors.
--------------------------------------------------------------------------------
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. A brochure is available by writing or telephoning the
plan agent:
Investors Bank & Trust Company
Shareholder Services
P.O. Box 9130
Boston, MA 02117
Tel. 1-800-437-6269
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is transmitted to the
shareholders of The Central European Equity 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 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 CECE index 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.
--------------------------------------------------------------------------------
---------------------------
CEE
---------------------------
Listed
---------------------------
NYSE
THE NEW YORK STOCK EXCHANGE
---------------------------
Copies of this report and other information are available at:
www.ceefund.com
19
SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The Central European Equity Fund is a non-diversified, closed-end investment
company listed on the New York Stock Exchange with the symbol "CEE". The Fund
seeks capital appreciation primarily through investment in Central and Eastern
European 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 XCEEX). It is also available by calling: 1-800-437-6269 (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.ceefund.com.
--------------------------------------------------------------------------------
There are three closed-end funds for your selection:
o Germany Fund--investing primarily in equities of major German
corporations. It may also invest up to 35% in equities of other Western
European companies (with no more than 15% in any single country).
o New Germany Fund--investing primarily in the middle market German
companies including the Neuer Markt, and up to 20% elsewhere in Western
Europe (with no more than 10% in any single country).
o Central European Equity Fund--investing primarily in Central and Eastern
European companies.
Please consult your broker for advice on any of the above or call 1-800-437-6269
(in the U.S.) or 617-443-6918 (outside of the U.S.) for shareholder reports.
--------------------------------------------------------------------------------
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