The Central Europe and Russia Fund, Inc.

LETTER TO THE SHAREHOLDERS

Dear Shareholder,

For the six months ended April 30, 2006, the Central Europe and Russia Fund's total return (based on its net asset value per share) was 46.26% in US dollar terms, while its total return based on share price was 27.15%. The fund's benchmark rose 53.28% during the same period.¹ (Past performance is no guarantee of future results. Please see page 3 for more complete performance information.)

During the first quarter of 2006, the Russian RTX index was among the top ten best performing markets in the world, boosted by soaring commodity prices, strong domestic liquidity, and inflows of foreign funds attracted by high oil prices and interest in Gazprom shares ahead of the implementation of the full liberalization of local shares. As the index continued to gain ground, concerns of an asset bubble began to increase. While the extensive IPO pipeline scheduled to come out of Russia over the next 12 to 18 months may provide new investment opportunities that could attract new global investors to the Russian market, some are concerned that there could be an excess supply of new shares flooding the market. As a result, stock selection will become increasingly important. Overall, the Fund's positioning in Russia contributed positively to performance as several holdings in the oil and gas sector posted strong gains, in-line with the Fund mana gement's view that higher commodity prices would persist through the first quarter of 2006. During the reporting period, the Fund initiated positions in natural gas company, Novatek, and cosmetics company Kalina while reducing its position in food retailer, Pyaterochka Holding.

In Turkey, strong fundamentals such as easing domestic interest rates, GNP growth, and rising corporate earnings have been supportive of equity markets. However, market performance continues to be affected by global liquidity concerns coupled with nervousness regarding Turkey's progress on negotiations with the EU and the IMF. Signs of rising foreign direct investment, spurred by the success in 2005 of several key privatizations after years of delay – notably Turk Telekom, Tupras, Petkim and Erdemir – could become a source of optimism for the market. Electricity distribution projects and state banks are on the privatization agenda, and almost all the banks that lack a major international partner are potential M&A targets. During the reporting period, Fund performance benefited from holdings in the Turkish financial sector, one of the Fund's main investment themes. Despite the existence of compelling valuations and investment th emes, the Turkish market continues to be subject to significant volatility related to political and macroeconomic developments. As a result, it will be important to monitor these developments closely.

The Czech equity market trades on an estimated P/E of 17.9x for 2005, and forecast P/Es of 19.2x for 2006, which not only places the Czech equity market on higher valuations than its Central European peers, Hungary and Poland, but also most Western European markets (though the limited number of stocks in the Czech benchmark means it is not necessarily representative of the broader market). Despite these rather lofty valuations, the market could still add to its total return figure over the balance of 2006 due to steady earnings growth and high dividends from a number of blue-chip stocks. Currently, the weighting of Czech stocks within the portfolio remains well below that of the Fund's benchmark, but the Fund may look to increase its exposure to Czech equities during periods of market turbulence. The good dividend yields offered by a few Czech stocks combined with the country's favorable macroeconomic environment and benign political situati on may allow some Czech equities to hold up better than other East European stocks in market downturns.

Hungarian blue-chips are reasonably valued, with some shares, if not overly attractive, offering good upside potential from either company-specific factors or from sector trends. However, due to growing concerns over the imbalances in the Hungarian economy, the Hungarian equity

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LETTER TO THE SHAREHOLDERS (continued)

market is likely to find the going tougher than other markets across the region.

The Polish equity market is causing a bit of debate due to the conflicting outlooks it presents from a top-down versus bottom-up perspective. The top-down story for Poland remains appealing and may even be improving. GDP estimates have been raised, interest rates have been reduced, and funds continue to flow into both pension and mutual funds. Counterbalancing these positives, though, are some more fundamental bottom-up negatives including lofty valuations, and modest earnings growth estimates.

However, there are signs that investor risk tolerance may be substantially declining, which could ultimately make Poland a more attractive market compared to higher beta markets such as Turkey and Russia. During the reporting period, the Fund initiated positions in two Polish banks – PKO Bank Polski and Bank PBK (Bank Prezemyslowo-Handlowy PBK).

The Fund's discount to net asset value averaged 4.25% during the six months ended April 30, 2006.

The sources, opinions and forecasts expressed herein are as of May 2006. There is no guarantee that the views, opinions and forecasts expressed in this report will come to pass. This information is subject to change at any time based on market and other conditions and should not be construed as a recommendation for any specific security. Past performance does not guarantee future results.

¹  A custom blend of 45% in Central Europe (CECE-Index), 45% Russia (RTX-Index) and 10% in Turkey (ISE National 30).The CECE is a regional capitalization-weighted index, including stocks from the Czech Republic, Hungary, Poland and Slovakia and is published daily by the Vienna Stock Exchange. The RTX is a capitalization-weighted index of Russian blue chip stocks and published daily by the Vienna Stock Exchange. The ISE National 30 is a capitalization-weighted index composed of National Market companies except investment trusts and will also be used for trading in the Derivatives Market. Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.

Sincerely,

Christian Strenger Chairman

 

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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ECONOMIC OUTLOOK

Czech Republic:

Economic activity appears to be at the top of the cycle, with GDP growth reported at 6.9% year-over-year (y-o-y) in the fourth quarter of 2005. The structure of GDP looked healthy, as exports remained the key driver. Most recent indicators on industrial output and retail sales have confirmed the positive trend in these data points into Q1 2006 and are likely to be sustained through the first half of the year. Currently many forecasters have the full-2006 pace of GDP growth penciled in at above 5% y-o-y, and expect a slight shift in the GDP structure away from exports towards private consumption and capital formation. Wage growth is set to stay moderate and unemployment is set to decline only marginally, leaving little scope for demand-led inflationary pressures. The CPI level was elevated by energy prices at the start of 2006. While some second-round impacts are to be expected in coming months, the core CPI will likely be little affected.

Hungary:

Exports supported by a weak Hungarian Forint (HUF) and stronger European Union (EU) demand together with a slight pick-up in household consumption should broadly counterbalance the possible sharp slowdown of investments (zero/slightly negative y-o-y investment growth) and keep GDP growth rate around 4.2% y-o-y in 2006. The current account is projected to deteriorate by about EUR 1 billion from the 2005 level, which would place it at 8.2% of GDP in 2006. The cashflow-based government budget deficit has reached 45% of the year-end target and will likely overshoot the HUF 1,500 billion target by around HUF 250 billion without any modification in the budget bill. A higher Q1 2006 CPI figure - up 3.5% over Q1 2005 - means that further monetary easing is unlikely over the near term. The potential increase in the discount VAT rate, a weaker HUF and slightly accelerating household demand all point to upside inflation risks.

Poland:

Growth prospects remain very favorable, and consensus GDP growth forecasts have been raised for 2006 from 4.5% to 5%. Industrial production grew by 9.6% year-on-year in January, 9.8% year-on-year in February and 10.2% year-on-year in March, driven by even higher manufacturing due to continuously strong export demand. Exports grew by 19.8% in March 2006, enabling the current account deficit to narrow to around 1.4% of GDP. This positive trend in exports is likely to continue as Western Europe's economy is gaining speed. Poland's economy is closely integrated into the German investment cycle and both capital goods industries and construction should benefit substantially from this year's investment-driven pick-up in Germany. So far, Polish growth has been mainly supported by external demand and investment. However, with employment growing at close to 2.5% plus wages growing at 2-3% in real terms, aggregate real household income is now rising by 5-6%. Therefore, private consumption growth should pick up, as reflected by nominal retail sales which show growth of 8.6% in January, 10.2% in February, and 9% in March.

Russia:

January through March was characterized by exceptionally cold weather conditions, which had a temporary impact on almost all economic performance indicators: investment growth turned into the red, industrial production growth fell at 1% y-o-y despite good momentum in business confidence indicators, and household consumption "slowed" to circa 10% y-o-y. The impact on fiscal and foreign trade balances was counter-balanced by higher-than-expected oil prices, as both the fiscal balance and the trade balance reached all-time high surpluses. However, the structure of GDP growth continues to deteriorate (i.e., more driven by household demand fuelled by a looser fiscal policy), resulting in potentially higher inflation (core YTD inflation is up 3.2% through April) and a worsening ex-oil trade balance. Key risks to the economy remain the lack of reforms, capacity constraints, inflation and a weak long-term political outlook, but with net debt to GDP negative, structural risks are likely to remain in the back seat for now.

Turkey:

GNP surprised on the upside in Q4, pushing the full-year growth to 7.6% compared to expectations of 6%. Private investment spending, up 42% y-o-y, remains strong, with corporates continuing to show confidence in the government's reform program, and the start of EU accession talks clearly playing their part. Private consumption spending rose 16.7% y-o-y in Q4, while the lack of growth in government spending provides some comfort and support in discussions with the IMF. As of April, CPI is up 8.2% year-on-year and will need to be monitored as EU negotiations progress. We expect a budget deficit below the 2% of GDP seen in 2005 and debt to GDP heading under the Maastricht target of 60% by the end of 2007. The current account (C/A) deficit remains a significant risk with a C/A deficit to GNP ratio of 7% possible this year. FDI covering at least 60% of this year's C/A deficit is expected, with potential to the upside (depending on M&A activit y). Foreign exchange reserves are close to six months of imported goods and services, above the Emerging Market average of around five months.

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FUND HISTORY AS OF APRIL 30, 2006

All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return 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.ceefund.com for the Fund's most recent performance.

TOTAL RETURNS:

				For the six months ended April 30,				For the years ended October 31,
				2006(c)				2005				2004				2003				2002				2001
Net Asset Value(a)					46.26	%(d)			48.74	%			35.20	%(b)			44.88	%			17.05	%			(14.31	)%
Market Value(a)					27.15	%			80.71	%			18.73	%			60.38	%			23.43	%			(7.79	)%
Benchmark					53.28	%(1)			37.81	%(1)			32.73	%(2)			40.65	%(3)			14.68	%(4)			(20.40	)%(5)

 

(a)  Total return based on net asset value reflects changes in the Fund's net asset value during the period. Total return based on market value reflects changes in market value. Each figure includes reinvestments of distributions. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund's shares trade during the period.

(b)  Return excludes the effect of the $2.15 per share dilution associated with the Fund's rights offering.

(c)  Total returns shown for the six month period are not annualized.

(d)  Return excludes the effect of the $3.25 per share dilution associated with the Fund's rights offering.

(1)  Represents an arithmetic composite consisting of 45% CECE*/45% RTX**/10% ISE National 30***.

(2)  Represents an arithmetic composite consisting of 70% CECE/30% RTX for the 5 months ended 3/31/04 and 45% CECE/45% RTX/10% ISE National 30 for the seven months ended 10/31/04. The Fund changed its benchmark from 70% CECE/30% RTX to 45% CECE/45% RTX/10% ISE National 30 on April 1, 2004.

(3)  Represents an arithmetic composite consisting of 85% CECE/15% RTX for the 9 months ended 7/31/03 and 70% CECE/30% RTX for the 3 months ended 10/31/03. The Fund changed its benchmark from 85% CECE/15% RTX to 70% CECE/30% RTX on August 1, 2003.

(4)  Represents the CECE Index.

(5)  Represents an arithmetic composite consisting of a customized MSCI index for the 2 months ended 12/31/00 and the CECE Index for the 10 months ended 10/31/01. The customized MSCI index consists of 35% Germany, 20% Poland, 15% Hungary, 10% Czech Republic, 10% Russia and 10% Austria. The Fund changed its benchmark from a customized MSCI Index to the CECE Index on January 1, 2001.

  *  The CECE is a regional capitalization-weighted index including stocks from the Czech Republic, Hungary and Poland and is published daily by the Vienna Stock Exchange.

  **  The RTX is a capitalization-weighted index of Russian blue chip stocks and published daily by the Vienna Stock Exchange.

  ***  The ISE National 30 is a capitalization-weighted index composed of National Market companies except investment trusts and will also be used for trading in the Derivatives Market.

Index returns assume reinvestment of 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 risks including the loss of principal.

This Fund is not diversified and may focus 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. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering, and once issued, shares of closed-end funds are sold in the open market through a stock exchange.

The Fund is complying with the German tax transparency rules for the current fiscal year that ends on October 31, 2006 and therefore qualifies as a transparent fund within the meaning of the German fund tax law (InvStG 2004).

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FUND HISTORY AS OF APRIL 30, 2006 (continued)

STATISTICS:

Net Assets				$	809,084,113
Shares Outstanding					14,002,505
NAV Per Share				$	57.78

 

DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:

Record Date				Payable Date				Ordinary Income				ST Capital Gains				LT Capital Gains				Total
12/20/05				12/30/05				$	0.33			$	0.215			$	2.507			$	3.05
12/22/04				12/31/04				$	0.17			$	—			$	—			$	0.17
12/22/03				12/31/03				$	0.22			$	—			$	—			$	0.22
11/19/01				11/29/01				$	0.10			$	0.13			$	—			$	0.23

 

OTHER INFORMATION:

NYSE Ticker Symbol					CEE
NASDAQ Symbol					XCEEX
Dividend Reinvestment Plan					Yes
Voluntary Cash Purchase Program					Yes
Annualized Expense Ratio (4/30/06)*					1.04	%

 

*  Represents expense ratio before custody credits. Please see "Financial Highlights" section of this report.

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10 LARGEST EQUITY HOLDINGS AS OF APRIL 30, 2006 (As a % of Portfolio's Market Value*)

	1.			Surgutneftegaz					11.3
	2.			Lukoil					10.7
	3.			OAO Gazprom					9.8
	4.			Unified Energy System					5.5
	5.			JSC MMC Norilsk Nickel					4.5
	6.			Polski Koncern Naftowy					4.4
	7.			Tatneft					3.9
	8.			Ceske Energeticke Zavody					3.2
	9.			Telekomunikacja Polska					3.1
	10.			Mol Magyar Olaj-ES Gazipari					2.5

 

*Percentage (%) of market value refers to all securities in the portfolio, except cash and equivalents.

GEOGRAPHICAL REPRESENTATION OF HOLDINGS BY COUNTRY

10 Largest Equity Holdings and Country Breakdown are subject to change and may not be indicative of future portfolio composition.

Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form will be available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330.

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INTERVIEW WITH THE LEAD PORTFOLIO MANAGER — Ralf Oberbannscheidt

Question: As this summer's G-8 summit approaches, the US has become increasingly critical of the Russian government. What are the reasons for this and what are the implications for the financial markets in Russia?

Answer: Russia's chairmanship of the G-8 got off to a rocky start this year when state-controlled Gazprom cut off the gas supply to Ukraine amidst a pricing dispute, causing some to question Russia's reliability as an energy supplier for Europe and accuse President Putin of using energy supply as a policy tool. The US has been critical of the advancement of democracy under President Putin for some time, but recent developments – including the Gazprom price increases and the Russian government's decision to ban imports of selected goods from Georgia, Moldova, and Ukraine – have raised questions about the government's role in the economy. Although President Bush is expected to attend the G-8 summit, there is speculation that he will give President Putin a lukewarm reception. Nonetheless, in an environment of sustained high energy and commodity price s, the incentive to invest in commodity-rich markets, such as Russia, is likely to outweigh the impact of any negative political sentiment, though some short-term volatility is possible. However, investors will be closely monitoring the government's involvement in company affairs and are likely to favor those companies that have a strong relationship with the government.

Question: Recent political, economic, and market developments in Turkey suggest that the stability of the past few years may be in question. Could you comment on the reasons for this and the prospects for a return to stability?

Answer: Due to a variety of factors, 2006 is turning out to be a relatively turbulent year for Turkey. The current account deficit continues to be the most significant issue on the macroeconomic front, as the government struggles to contain spending. Amidst reports of higher-than-expected inflation and concerns that the current account deficit will reach 7% of GDP this year (compared to initial forecasts for 6% of GDP), Turkey's currency has depreciated sharply. In addition, the government has faced political difficulty over a variety of issues, leading to speculation that early elections may be necessary. From an economic perspective, the currency depreciation should boost Turkish exports, and GDP growth is still expected to remain strong. However, the recent instability underscores the importance of the IMF program as well as eventual European Union ("EU" ) membership as a real possibility for Turkey to work toward.

Question: Lithuania's application to adopt the euro next year was recently rejected. Meanwhile, Latvia and Estonia have postponed their timeline for adopting the euro. How does this impact plans for euro adoption by the CE-3 countries?

Answer: The EU recently accepted Slovenia's bid to adopt the euro in 2007 while rejecting Lithuania's application for failure to meet all of the Maastricht criteria. In particular, Lithuania's inflation, at 3.5%, is higher than the target rate. Several of the fifteen original EU countries were given leniency on meeting the Maastricht criteria when the euro was introduced in 1999, but amidst growing political opposition to enlargement, the EU is clearly sending a signal that it will not provide any leniency to new EU members. Because the Czech Republic, Hungary, and Poland are not planning to adopt the euro until at least 2010, the rejection of Lithuania's application has no immediate impact on their plans to adopt the euro. However, it will be important to monitor whether the EU continues to strictly enforce the Maastricht criteria, which some argue are out dated and fail to take into account the fact that higher inflation is a by-product of the current macroeconomic environment of high growth rates in the new EU countries, coupled with high oil prices.

Ralf Oberbannscheidt, Lead Portfolio Manager of the Central Europe and Russia Fund, Inc.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
SCHEDULE OF INVESTMENTS — APRIL 30, 2006 (unaudited)

Shares				Description				Value
INVESTMENTS IN RUSSIAN SECURITIES – 58.0%
				COMMON STOCKS – 55.9%
				COMMERCIAL BANKS – 0.7%
	3,000			Sberbank				$	5,430,000
	1,000			Sberbank RF-(GDR) Reg S					178,849
									5,608,849
				DIVERSIFIED TELECOMMUNICATION SERVICES – 0.5%
	200,000			Rostelecom (ADR)††					4,260,000
				FOOD PRODUCTS – 1.0%
	116,319			Lebedyansky*					7,880,612
				METALS & MINING – 7.6%
	281,000			JSC MMC Norilsk Nickel (ADR)					37,092,000
	85,600			Mechel OAO-(GDR) Reg S					2,311,200
	416,000			Polyus Gold Co Zao (ADR)					17,971,200
	3,500			Vyksa Metallurgical Plant*					3,850,000
									61,224,400
				MULTI-UTILITIES – 5.4%
	568,000			Unified Energy Systems (GDR)					43,736,000
				OIL, GAS & CONSUMABLE FUELS – 38.7%
	1,400,000			Gazprom					15,960,000
	943,000			Lukoil (ADR)					85,435,800
	450,000			Novatek Oao-Spons (GDR)					19,125,000
	1,375,000			OAO Gazprom (ADR)					62,425,000
	1,040,000			Surgutneftegaz (ADR)††					90,480,000
	262,500			Tatneft (ADR)††					30,843,750
	1,143,800			Tnk-Bp					3,888,920
	500,000			Ufimskij Npz					1,350,000
	52,000			Vostok Nafta Investment (SDR)*					4,002,602
									313,511,072
				PERSONAL PRODUCTS – 1.0%
	181,000			Kalina					8,145,000
				WIRELESS TELECOMMUNICATION SERVICES – 1.0%
	140,000			Mobile Telesystems (GDR)					4,576,600
	50,000			Mobile Telesystems-SP (ADR)					1,634,500
	45,500			Vimpel Communications (ADR)*					2,119,845
									8,330,945
				Total Common Stocks (cost $186,560,404)					452,696,878

 

Shares				Description				Value
				PREFERRED – 2.1%
				OIL, GAS & CONSUMABLE FUELS – 2.1%
	7,750			Transneft Preferred (Cost $17,515,000)				$	16,662,500
				Total Investments in Russian Securities (cost $204,075,404)					469,359,378
INVESTMENTS IN POLISH COMMON STOCKS – 13.1%
				BUILDING PRODUCTS – 0.6%
	850,950			Cersanit-Krasnystaw SA					4,956,883
				COMMERCIAL BANKS – 3.0%
	81,746			Bank Pekao SA					5,480,060
	25,000			BK Prezemyslowo-Handlowy PBK					6,443,425
	1,000,000			Pko Bank Polski SA					12,561,424
									24,484,909
				CONSTRUCTION & ENGINEERING – 0.1%
	40,842			Budimex*					744,298
				DIVERSIFIED TELECOMMUNICATION SERVICES – 3.1%
	2,920,207			Telekomunikacja Polska					21,381,971
	490,000			Telekomunikacja Polska (GDR)†					3,650,500
									25,032,471
				MEDIA – 0.1%
	37,700			Tvn*					1,177,780
				METAL & MINING – 0.7%
	147,029			KGHM Polska Miedz					5,382,786
				OIL, GAS & CONSUMABLE FUELS – 4.3%
	1,036,102			Polski Koncern Naftowy					21,579,136
	149,500			Polski Koncern Naftowy (GDR)					6,092,125
	180,000			Polski Koncern Naftowy (GDR)†					7,335,000
									35,006,261
				REAL ESTATE – 1.2%
	109,018			Echo Investment*					9,472,422
				Total Investments in Polish Common Stocks (cost $50,091,954)					106,257,810

 

The accompanying notes are an integral part of the financial statements.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
SCHEDULE OF INVESTMENTS — APRIL 30, 2006 (unaudited) (continued)

Shares				Description				Value
INVESTMENTS IN HUNGARIAN COMMON STOCKS – 5.7%
				COMMERCIAL BANKS – 2.3%
	437,400			OTP Bank				$	16,941,328
	25,000			OTP Bank (GDR)					1,902,500
									18,843,828
				OIL, GAS & CONSUMABLE FUELS – 2.5%
	110,000			Mol Magyar Olaj-Es Gazipari					13,070,817
	61,000			Mol Magyar Olaj-Es Gazipari (GDR)					7,167,500
									20,238,317
				PHARMACEUTICALS – .9%
	30,000			Gedeon Richter					6,455,315
	4,300			Gedeon Richter (GDR)					918,050
									7,373,365
				Total Investments in Hungarian Common Stocks (cost $12,385,403)					46,455,510
INVESTMENTS IN CZECH REPUBLIC COMMON STOCKS – 3.9%
				COMMERCIAL BANKS – 0.7%
	4,500			Komercni Banka					709,038
	89,996			Komercni Banka (GDR)					4,724,790
									5,433,828
				MULTI-UTILITIES – 3.2%
	750,000			Ceske Energeticke Zavody					25,775,648
				Total Investments in Czech Republic Common Stocks (cost $3,984,713)					31,209,476
INVESTMENTS IN TURKISH COMMON STOCKS – 13.5%
				AUTOMOBILES – 0.6%
	1,500,000			Tofas Turk Oromobil Fabrika					4,821,835
				BUILDING PRODUCTS – 1.0%
	1,768,568			Trakya Cam Sanayii					7,910,956
				COMMERCIAL BANKS – 1.6%
	316,420			Denizbank*					2,806,758
	694,427			Finansbank*					3,632,709
	500,000			Turkiye Sinai Kalkinma Bank					1,971,190
	692,850			Turkiye Vakiflar Bankasi T-D*					4,386,124
									12,796,781

 

Shares				Description				Value
				CONSTRUCTION & ENGINEERING – 0.9%
	300,000			Enka Insaat Ve Sanayi As				$	4,662,623
	250,000			Izocam Ticaret Ve Sanayi As					2,331,312
									6,993,935
				CONSTRUCTION MATERIALS – 0.7%
	690,000			Akcansa Cimento					5,283,548
				DIVERSIFIED FINANCIAL SERVICES – 5.4%
	1,825,000			Akbank					15,219,864
	600,000			Haci Omer Sabanci Holding					2,843,063
	1,416,356			Turkiye Garanti Bankasi*					5,852,267
	2,000,000			Turkiye Is Bankasi					16,830,933
	1,386,550			Yapi Ve Kredi Bankasi*					3,258,760
									44,004,887
				FOOD & STAPLES RETAILING – 1.0%
	203,200			Bim Birlesik Magazalar*					7,933,889
				HOTELS RESTAURANTS & LEISURE – 0.4%
	2,000,000			Marmaris Marti Otel Isletmel					3,532,980
				INDUSTRIAL CONGLOMERATES – 0.4%
	600,000			Dogan Sirketler Grubu Holdings*					2,865,807
				INSURANCE – 0.5%
	875,000			Anadolu Hayat Emeklilik Ord					4,378,317
				OIL, GAS & CONSUMABLE FUELS – 0.5%
	200,000			Turpras Petrol Rafinerileri					4,245,641
				WIRELESS TELECOMMUNICATION SERVICES – 0.5%
	575,998			Turkcell Iletisim Hizmetleri					3,668,224
				Total Investments in Turkish Common Stocks (cost $63,355,659)					108,436,800
INVESTMENTS IN AUSTRIAN COMMON STOCKS – 2.1%
				COMMERCIAL BANKS – 2.1%
	246,740			Erste Bank Der Oester Spark					14,947,990
	39,128			Erste Bank Ord-Temp*					2,343,346
				Total Investments In Austrian Common Stocks (cost $10,620,045)					17,291,336

 

The accompanying notes are an integral part of the financial statements.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
SCHEDULE OF INVESTMENTS — APRIL 30, 2006 (unaudited) (continued)

Shares				Description				Value
INVESTMENTS IN DUTCH COMMON STOCKS – 0.9%
				BEVERAGES – 0.4%
	93,000			Efer Breweries International (GDR)				$	3,534,000
				FOOD & STAPLES RETAILING – 0.5%
	219,700			Pyaterochka Holding (GDR)					4,185,285
				Total Investments in Dutch Common Stocks (cost $5,871,109)					7,719,285
INVESTMENTS IN CYPRUS COMMON STOCKS – 0.6%
				OIL, GAS & CONSUMABLE FUELS – 0.6%
	700,000			Urals Energy Public Co Ltd (cost $3,204,250)					5,045,026
INVESTMENTS IN VIRGIN ISLANDS (BR) COMMON STOCKS – 1.0%
				MULTI-UTILITIES – 1.0%
	4,244,119			Renshares Utilities-Rengen (cost $6,750,017)					8,191,150
SECURITIES LENDING COLLATERAL – 11.4%
	92,065,200			Daily Assets Fund Institutional, 4.86%††† (cost $92,065,200)					92,065,200
				Total Investments – 110.2% (cost $452,403,754)					892,030,971
				Liabilities in excess of cash and other assets – (-10.2%)					(82,946,858	)
				NET ASSETS – 100.0%				$	809,084,113

 

*  Non-income producing security.

†  144A - Restricted to resale to institutional investors only.

††  All or a portion of these securities were on loan. The value of all securities loaned at April 30, 2006 amounted to $89,520,800, which is 11.1% of the net assets.

†††  Represents collateral held in connection with securities lending. Daily Assets Fund Institutional, an affiliated fund, is managed by Deutsche Asset Management, Inc. The rate shown is the annualized seven-day yield at period end.

Key

ADR  –  American Depository Receipt

GDR  –  Global Depository Receipt

SDR  –  Swedish Depository Receipt

The accompanying notes are an integral part of the financial statements.

10

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2006 (unaudited)

ASSETS
Investments, at value, (cost $360,338,554) — including $89,520,800 of securities loaned				$	799,965,771
Investment Daily Assets Fund Institutional (cost $92,065,200)*					92,065,200
Cash and foreign currency (cost $8,494,494)					8,862,926
Dividend receivable					902,393
Foreign withholding tax refund receivable					120,308
Interest receivable					24,985
Other assets					61,530
Total assets					902,003,113
LIABILITIES
Payable upon return of securities loaned					92,065,200
Management fee payable					337,417
Investment advisory fee payable					157,566
Payable for Directors' fees and expenses					11,622
Accrued expenses and accounts payable					347,195
Total liabilities					92,919,000
NET ASSETS				$	809,084,113
Net assets consist of:
Paid-in capital, $.001 par (Authorized 80,000,000 shares)				$	408,102,200
Cost of 5,476,217 shares held in treasury					(70,781,427	)
Distributions in excess of net investment income					(1,462,126	)
Accumulated net realized gain on investments and foreign currency transactions					33,229,817
Net unrealized appreciation on investments and foreign currency related transactions					439,995,649
Net assets				$	809,084,113
Net asset value per share ($809,084,113 ÷ 14,002,505) shares of common stock issued and outstanding)				$	57.78

 

*Represents collateral on securities loaned.

The accompanying notes are an integral part of the financial statements.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
STATEMENT OF OPERATIONS

				For the six months ended April 30, 2006 (unaudited)
NET INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $188,739)				$	3,026,286
Interest					29,971
Securities lending, including income from Daily Assets Fund Institutional, net of borrower rebates					120,378
Total investment income					3,176,635
Expenses:
Management fee					1,673,237
Investment advisory fee					787,312
Custodian and Transfer Agent's fees and expenses					333,062
Reports to shareholders					84,860
Directors' fees and expenses					90,810
Legal fee					63,352
Audit fee					43,260
NYSE Listing Fee					16,840
Insurance					6,372
Miscellaneous					58,609
Total expenses before custody credits					3,157,714
Less: custody credits*					(102,312	)
Net expenses					3,055,402
Net investment income (loss)					121,233
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments					34,218,936
Foreign currency transactions					(902,351	)
Net unrealized appreciation (depreciation) during the period on:
Investments					226,204,913
Translation of other assets and liabilities from foreign currency					362,374
Net gain on investments and foreign currency transactions					259,883,872
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS				$	260,005,105

 

*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.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS

				For the six months ended April 30, 2006 (unaudited)				For the year ended October 31, 2005
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss)				$	121,233			$	2,745,756
Net realized gain (loss) on:
Investments					34,218,936				31,314,982
Foreign currency transactions					(902,351	)			(198,744	)
Net unrealized appreciation (depreciation) on:
Investment transactions during the period					226,204,913				107,778,042
Translation of other assets and liabilities from foreign currency					362,374				(9,119	)
Net increase in net assets resulting from operations					260,005,105				141,630,917
Distributions to shareholders from:
Net investment income					(3,365,079	)			(1,733,526	)
Net realized gains					(27,756,803	)			—
Capital share transactions:
Net proceeds from rights offering of Fund shares (3,417,070 and 0 shares, respectively)					131,742,212				—
Net proceeds from reinvestment of dividends (388,226 and 0 shares, respectively)					16,484,086				—
Net increase (decrease) in net assets from capital share transactions					148,226,298				—
Total increase in net assets					377,109,521				139,897,391
NET ASSETS
Beginning of period					431,974,592				292,077,201
End of period (including distributions in excess of net investment income of $1,462,126 and undistributed net investment income of $1,781,720 as of April 30, 2006 and October 31, 2005, respectively)				$	809,084,113			$	431,974,592

 

The accompanying notes are an integral part of the financial statements.

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS — APRIL 30, 2006 (unaudited)

NOTE 1. ACCOUNTING POLICIES

The Central Europe and Russia Fund, Inc. is a non-diversified, closed-end management investment company incorporated in Maryland. The Fund commenced investment operations on March 6, 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 pr incipally 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.

Securities Lending: The Fund may lend securities to financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of liquid, unencumbered assets having a value at least equal to or greater than the "Margin Percentage" of the value of the securities loaned. "Margin Percentage" shall mean (i) for collateral which is denominated in the same currency as the loaned securities, 102%, and (ii) for collateral which is denominated in a currency different from that of the loaned securities, 105%. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. Deutsche Asset Management receives a management fee on the cash collateral invested in the affiliated money fund. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. The Fund is subject to all investment risks associated with the value of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments.

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 are translated into United States dollars at the 11:00 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.

Contingencies: In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS — APRIL 30, 2006 (unaudited) (continued)

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 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 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.

NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS

The Fund has a Management Agreement with Deutsche Investment Management Americas Inc. (the "Manager.") The Fund has 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. Accordingly, for the period ended April 30, 2006, the fee pursuant to the Management and Investment Advisory Agreements was equivalent to an annualized effective rate of .81% 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 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 to select brokers and dealers to execute portfolio transactions on behalf of the Fund.

NOTE 3. TRANSACTIONS WITH AFFILIATES

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 year ended April 30, 2006 were $219,594,549 and $102,395,427, respectively.

The cost of investments at April 30, 2006 was $361,940,761 for United States Federal income tax purposes. Accordingly, as of April 30, 2006, net unrealized appreciation of investments aggregated $438,025,010, of which $439,067,630 and $1,042,620 related to unrealized appreciation and depreciation, respectively.

NOTE 5. INVESTING IN FOREIGN MARKETS

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

15

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS — APRIL 30, 2006 (unaudited) (continued)

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.

NOTE 6. CAPITAL AND RIGHTS OFFERING

The Fund had no capital stock repurchase activity for the period ended April 30, 2006. During the six months ended April 30, 2006, the Fund reissued 388,226 shares held in treasury as part of the dividend reinvestment plan.

During January 2006, the Fund issued 3,417,070 shares of common stock in connection with a rights offering of the Fund's shares. Shareholders of record on December 19, 2005 were issued one transferable right for each share owned. The rights entitled the shareholders to purchase one new share of common stock for every three rights held. These shares were issued at a subscription price of $40.19. Net proceeds to the Fund were $131,742,212 after deducting the solicitation/dealer manager fees of $5,148,591 and expenses of $400,276. The net asset value per share of the Fund's common shareholders was reduced by approximately $3.25 per share as a result of the share issuance.

16

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
FINANCIAL HIGHLIGHTS

Selected data for a share of common stock outstanding throughout each of the periods indicated:

				For the six months ended April 30,				For the years ended October 31,
				2006 (unaudited)				2005				2004				2003				2002				2001
Per share operating performance:
Net asset value:
Beginning of period				$	42.36			$	28.64			$	23.08			$	15.93			$	13.83			$	16.14
Net investment income (loss)					.01				.27				.20				.21				(.07	)			.10
Net realized and unrealized gain (loss) on investments and foreign currency transactions					21.81				13.62				7.97				6.86				2.37				(2.70	)
Increase (decrease) from investment operations					21.82				13.89				8.17				7.07				2.30				(2.60	)
Increase resulting from share repurchases					—				—				.02				.08				.06				.29
Distributions from net investment income					(.33	)			(.17	)			(.22	)			—				(.10	)			—
Distributions from net realized gains on investment transactions					(2.72	)			—				—				—				(.13	)			—
Total distributions†					(3.05	)			(.17	)			(.22	)			—				(.23	)			—
Dilution from rights offering					(2.85	)			—				(2.15	)			—				—				—
Dealer manager fees and offering costs					(0.40	)			—				(0.25	)			—				—				—
Dilution in NAV from dividend reinvestment					(0.10	)			—				(.01	)			—				(.03	)			—
Net asset value:
End of period				$	57.78			$	42.36			$	28.64			$	23.08			$	15.93			$	13.83
Market value:
End of period				$	53.25			$	44.89			$	24.99			$	21.25			$	13.25			$	10.95
Total investment return for the period:††
Based upon market value					27.15	%****			80.71	%			18.73	%			60.38	%			23.43	%			(7.79	)%
Based upon net asset value					46.26	%*,****			48.74	%			35.20	%*			44.88	%			17.05	%			(14.31	)%
Ratio to average net assets:
Total expenses before custody credits**					1.04	%***			1.20	%			1.27	%			1.51	%			1.55	%			1.66	%
Net investment income (loss)					.02	%*****			.78	%			.81	%			1.00	%			(.44	)%			.63	%
Portfolio turnover					32.52	%***			30.16	%			45.29	%			43.88	%			57.77	%			57.83	%
Net assets at end of period (000's)				$	809,084			$	431,975			$	292,027			$	177,766			$	126,467			$	111,213

 

  †  For U.S. tax purposes, total distributions consisted of:

Ordinary income				$	(.545	)		$	(0.17	)		$	(0.22	)			—			$	(0.23	)			—
Long term capital gains				$	(2.507	)			—				—				—				—				—
				$	(3.052	)		$	(0.17	)		$	(0.22	)			—			$	(0.23	)			—

 

  ††  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 period. 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.

  *  Return excludes the effect of the $2.15 and $3.25 respectively, for 2004 and 2006 per share dilution associated with the Fund's rights offering.

  **  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 are 1.01%, 1.19%, 1.26%, 1.50%, 1.54% and 1.62% for 2006, 2005, 2004, 2003, 2002 and 2001, respectively.

  ***  Annualized

  ****  Not Annualized

  *****  Not Annualized. The ratio for the six months ended April 30, 2006 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.

17

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THE CENTRAL EUROPE AND RUSSIA FUND, INC.
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 related to its portfolio securities during the 12-month period ended June 30 is available on our Web site — www.ceefund.com or on the SEC's Web site — www.sec.gov. To obtain a written copy of the Fund's policies and procedures without charge, upon request, call us toll free at (800) 437-6269.

18

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EXECUTIVE OFFICES

345 Park Avenue, New York, NY 10154

MANAGER

Deutsche Investment Management Americas Inc.

INVESTMENT ADVISER

Deutsche Asset Management International GmbH

CUSTODIAN AND TRANSFER AGENT

Investors Bank & Trust Company

LEGAL COUNSEL

Sullivan & Cromwell LLP

INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

PricewaterhouseCoopers LLP

DIRECTORS AND OFFICERS

CHRISTIAN H. STRENGER

Chairman and Director

DETLEF BIERBAUM

Director

DR. KURT W. BOCK

Director

JOHN A. BULT

Director

RICHARD R. BURT

Director

JOHN H. CANNON

Director

DR. FRANK TRÖMEL

Director

ROBERT H. WADSWORTH

Director

WERNER WALBRÖL

Director

MICHAEL CLARK*

President and Chief Executive Officer

PAUL H. SCHUBERT

Chief Financial Officer and Treasurer

ELISA METZGER

Chief Legal Officer

PHILIP GALLO

Chief Compliance Officer

KATHLEEN SULLIVAN D'ERAMO

Assistant Treasurer

JOHN MILLETTE

Secretary

HONORARY DIRECTOR

OTTO WOLFF von AMERONGEN

44389 (6/06)

*  Effective June 15, 2006.

VOLUNTARY CASH PURCHASE PROGRAM
AND DIVIDEND REINVESTMENT PLAN

The Fund offers shareholders 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 Central Europe and Russia 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 lead portfolio manager 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, RTX and ISE National 30 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.

Copies of this report, monthly fact sheets and other information are available at:
www.ceefund.com

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.

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SUMMARY OF GENERAL INFORMATION

THE FUND

The Central Europe and Russia Fund, Inc. (the "Fund") is a non-diversified, actively-managed closed-end fund listed on the New York Stock Exchange with the symbol "CEE." The Fund seeks long term capital appreciation primarily through investment in equity and equity-linked securities of issuers domiciled in Central Europe and Russia. 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 617-443-691 8 (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 investing in European equities managed by wholly-owned subsidiaries of the Deutsche Bank Group:

•  The European Equity Fund, Inc.-investing primarily in equity or equity-linked securities of companies domiciled in European countries that utilize the Euro currency.

•  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).

•  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 focus their investments in certain geographical regions, thereby increasing their vulnerability to developments in those regions. Investing in foreign securities presents certain unique risks not associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks such as increased share price volatility, limited liquidity and lack of industry diversification.

The Central Europe and

Russia Fund, Inc.

Semi-Annual Report

April 30, 2006

20675

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