SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The Central European Equity Fund is a non-diversified, actively-managed
Exchange-Traded Closed-End Fund 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 EXCHANGE-TRADED CLOSED-END FUNDS INVESTING INEUROPEAN EQUITIES
MANAGED BY THEDEUTSCHE BANK GROUP:
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.
02-1340
[GRAPHIC OMITTED]
LOGO
THE CENTRAL EUROPEAN
EQUITY FUND, INC.
SEMI-ANNUAL REPORT
APRIL 30, 2002
[GRAPHIC OMITTED]
LOGO
THE CENTRAL EUROPEAN
EQUITY FUND,INC.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
May 22, 2002
Dear Shareholder,
We are pleased to report that for the first half of its fiscal year ended
April 30, 2002, the Central European Equity Fund's net asset value per share
rose 25.7% in US dollar terms, while its share price increased even stronger,
rising 36.4%. The Fund's benchmark, the CECE Index rose 23.1% during the same
period. Although all sectors from the Fund's portfolio performed well, banking
and energy stocks were the star performers. As a group, the Fund's bank and
energy stocks rose over 60% and 47%, respectively. Central European banks
performed very well, reporting strong earnings growth and benefiting from an
expanding mortgage loan market. Furthermore, the banks are capturing the higher
end of the fast growing, and highly profitable retail market. In addition,
energy stocks continue to perform well due to higher margins from higher oil
prices and improved technology that enables oil companies to extract oil more
cheaply. Country allocation also had a positive impact, especially the Fund's
overweight in Russia. During the six-month period, the Russian equity market
rose over 89% in local terms.
The outlook for the emerging countries in Europe remains positive as the EU
accession process continues to anchor these nations. Neither the global economic
slowdown nor the Argentine crisis has had much impact on the region's economies.
The Czech Republic, Hungary and Poland remain on track for closing all accession
negotiations chapters by the end of this year. Hungary continues to provide the
best fundamentals in the region. Economic growth is expected to rise 4.0% this
year and inflation has declined significantly. Also, in recent government
elections, Hungarians voted into power a pro-business party that plans to remove
price caps on electricity, natural gas and pharmaceutical products, abolish
capital gains tax and speed up the EU membership process. The Hungarian market
is currently priced at 11.8 times 2002 earnings with average earnings growth
expected to be 72% this year. In Poland, inflation fell to a new post-Communist
low of 3.0% from 3.3% in March. This leaves real interest rates at 6.5%, an
unusually high level. As a result, we expect more interest rate cuts over the
summer. Further rate cuts and continuous cash inflows from pension payments
should support the equity market this year. In the Czech Republic, the koruna
has strengthened over 9% in the past six months as the country is receiving
larger amounts of foreign direct investment. In the past year, the Czech
Republic has adopted more investment-friendly policies, and has seen its equity
market appreciate more than 40% since last September.
We believe the Central European Equity Fund continues to be an attractive
investment opportunity. Economic growth outpaces other European markets while
valuations remain inexpensive. The Fund continued its buyback program during the
first six months, buying 139,700 shares. The Fund's discount to net asset value
averaged 17.3% during the first half of the fiscal year, compared with 23.0% for
the same period last year. At the time of this writing, the discount to net
asset value had declined to 13.8%.
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
1
FUND HISTORY AS OF APRIL 30, 2002
--------------------------------------------------------------------------------
STATISTICS:
Net Assets ....................................................... $136,809,225
Shares Outstanding ............................................... 8,000,363
NAV Per Share .................................................... $17.10
DIVIDEND AND CAPITALGAIN 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 SIX FOR THE YEARS ENDED OCTOBER 31,
MONTHS ENDED ---------------------------------------------------------
APRIL 30, 2002 2001 2000 1999 1998 1997
-------------- -------- ------- -------- ------- ------
Net Asset Value ............................. 25.65% (14.31)% .94% 2.48% (26.09)% 22.41%
Market Value ................................ 36.38% (7.79)% (5.00)% (3.29)% (22.89)% 28.93%
Benchmark ................................... 23.12%(1) (20.40)%(2) 2.05%(3) 19.31%(3) (24.68)%(3) 22.70%(4)
------------
(1) Represents the CECE Index.
(2) 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.
(3) Represents the MSCI Index.
(4) 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 ............................................... 1.57%
2
10 LARGEST EQUITY HOLDINGS AS OF APRIL 30, 2002
--------------------------------------------------------------------------------
% of
Portfolio
---------
1. OTP Bank 11.9
2. Bank Pekao 7.9
3. Mol Magyar Olaj-ES Gazipari 7.5
4. Telekomunikace Polska 7.4
5. Yukos 6.8
% of
Portfolio
---------
6. Komercni Banka 6.6
7. Polski Koncern Naftowy 5.1
8. Matav 5.0
9. Gedeon Richter 4.2
10. Cesky Telecom 3.5
[GRAPHIC OMITTED]
MAP
% of
Country Portfolio
------- ---------
Poland 36.9
Hungary 31.7
Russia 18.5
Czech
Republic 12.1
Austria 0.8
Total 100.0%
3
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
--------------------------------------------------------------------------------
QUESTION: Why have the equity markets of Central Europe been performing so
well this year?
ANSWER: During the six-month period ending April 30, 2002, Hungary's equity
market rose 28.1%, Poland rose 6.9%, the Czech Republic rose 20.0%, and Russia
rose 89.2%, all in local terms. These returns are significantly better than the
returns in the US and Western Europe. Investors are just beginning to realize
the strong growth potential this region offers over the next few years. Economic
growth for the region is expected to average 3.2% this year and 4.2% next year.
There are essentially two main growth drivers. First, the region has been
receiving large amounts of foreign direct investment. Central Europe is very
attractive to companies seeking to expand into untapped markets and to those
looking to take advantage of relatively cheap labor. Second, interest rates have
been gradually converging to the levels of Western Europe. Lower interest rates
make investment projects more attractive and stimulate economic activity. Also,
anchoring their economic future to developed Europe significantly lowers the
risk of investing in this region. The Lehman Brothers Eurasia Group Stability
index (Legsi) releases on a monthly basis an index of 20 indicators measuring a
country's capacity to withstand shocks and crises. The highest rated emerging
market is Hungary, with Poland in third place. At the bottom of the ranking are
the countries of South America and Asia. Another interesting fact is that
Austria, the traditional gateway to Eastern Europe going back to the days of the
Austro-Hungarian empire, has strongly outperformed its fellow EU members in
terms of its equity market this year. By the end of May, the Austrian equity
market has risen almost 16%, by far the best performer in the EU. Stock markets
in France and Germany have fallen over 7%, and the UK has fallen 3.6% in local
terms. One of the reasons for the divergence of the Austrian equity market is
the strong economic link between Austria and Eastern Europe. There are more
flights to Eastern Europe from Vienna than from any other airport in the world.
The best performing companies in Austria this year have been those which have
been expanding aggressively into Central and Eastern Europe to take advantage of
the strong growth potential the region offers.
QUESTION: You have been discussing the "Convergence" theme for some time
now. Specifically, what are the results of the drive towards EU membership?
ANSWER: The economic achievements of many of the Central and Eastern
European countries have been remarkable. Inflation is a good example. In Poland,
inflation was 10.6% in 1999. Last year it was 7.3%, and we expect it to fall to
4.3% next year. Hungary's inflation is only 1.4% this year. These are extremely
low figures for emerging markets. In terms of fiscal balance, budget deficits
are already close to the 3% deficit level the EU has set in place for their own
economies: 4.0% in the Czech Republic, 3.5% in Hungary, and 2.7% in Poland. In
terms of interest rates, the convergence effect has also been remarkable. In
1998, Hungary's interest rate on 10 year government bonds was 14% above
comparable German bonds. Poland's interest rates were 12% higher and in the
Czech Republic, interest rates were 8% higher. One year ago, they were on
average 4.4% higher. Today, however, Hungary is 1.8% higher, the Czech Republic
is 1.6% higher and Poland is only 1% higher than German's 10 year bonds.
Economically these are excellent achievements and should provide increased
confidence to investors.
QUESTION: How are Poland and Hungary's membership negotiations with the
European Union progressing?
ANSWER: The EU membership negotiations are making good progress. There are
30 "chapters" that must be completed in order to become a member of the EU. They
cover a wide range of topics covering areas such as the free movement of goods
and people, legal issues, agriculture, taxation, environment and many more
issues. Out of the 30 chapters, Hungary and the Czech Republic each has
completed 24, Poland has completed 20. These three countries as well as a few
smaller countries are slated to join together by the end of 2004. The accession
negotiations are a strong 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. It is our belief that these countries
should be able to realize even 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.
HANSPETER ACKERMANN, Chief Investment Officer of the Central European Equity
Fund
4
ECONOMIC OUTLOOK FOR THE CENTRAL EUROPEAN ECONOMIES
--------------------------------------------------------------------------------
POLAND
There is little doubt that the excessive tightening by the Polish Central
Bank was the main factor in reducing Poland's economic growth from the 4-5%
range of recent years to 1.1% last year. Fortunately, the Central Bank has taken
steps to reverse the tight monetary policy. Since December 2000, the official
interest rate has been cut by 900 basis points. However, in our view, interest
rates are still too high, and with real interest rates (interest rates minus
inflation) of +6.0%, we believe the Polish Central Bank will continue to
aggressively ease interest rates this year. For comparison, the real official
interest rate in the US is currently -0.3%. More importantly, the Polish economy
is showing definite signs of bottoming out during the fourth quarter of last
year. Industrial production and new orders have picked up. In addition, the
leading economic indicators rose in the first two months of this year. Deutsche
Bank forecasts that Poland's economy will grow 2.0% this year, almost twice last
year's level, and to double that rate in 2003 to 4.0%. To return the economy to
the high growth rates it enjoyed for most of the past 5 years, the Polish
government recently approved the 4-year "Belka Plan". Its goals include:
returning to 5% GDP growth within two years, and 5.5-6% thereafter; increase
employment; the reform of public finances, and the efficient absorption of
financial air from the EU. To achieve these goals, the program envisions a $45
billion investment in infrastructure, incentive for housing construction, easing
labor codes and reducing bureaucratic obstacles to businesses. The program was
strongly welcomed by Poland's business community.
HUNGARY
Hungary has become the most dynamic and economically, the best-performing
country in Central and Eastern Europe. Its economy is expected to grow 4.0% in
2002, the highest in all of emerging Europe, including Russia. Moreover, it
ranks high overall in the world in terms of innovation and development of
knowledge-intensive industries, productivity growth and spending on information
technology. Economic growth in 2003 is expected to rise to 4.5%, more than twice
the global average of 2.2%. The main driving force of growth during the year was
strong domestic demand and construction. Private consumption benefited from wage
hikes in the public sector and large-scale public investment projects. Many of
these large public projects are being funded by the substantial amounts of
foreign capital that Hungary has attracted due to its high growth potential.
RUSSIA
The strong performance of the Russian economy during the past two years has
been impressive considering the global economic slowdown. This strong expansion
was due to the strength of oil prices and the devaluation of the rouble after
the 1998 financial crises. These two factors were also responsible for the
buildup of large current account and budget surpluses. Russia's improvement in
its macroeconomic performance was also due to progress in structural reforms,
including a major tax reform, as well as greater stability under President
Putin. 2002 looks to be another strong year for Russia. Annual growth in
industrial output rose from 3.7% in March to 4.4% in April, while retail
spending picked up from 9.0% to 9.6%. Household income is looking very healthy
with real income up 12.6% in April while unemployment fell to 8.3% in April from
8.6% the previous month. For 2002, we project GDP growth of 4.2%.
CZECH REPUBLIC
The Czech Republic was one of the very few countries that actually had
higher economic growth in 2001 compared to the previous year. The Czech economy
is expected to grow 3.2% this year, and 3.8% in 2003. The economic recovery in
the Czech Republic has continued to improve on the back of steady export growth.
Inflation has remained very stable at 3.5%, partially due to a strong currency.
The Central Bank reduced interest rates by 1% this year to 4.25%, the lowest
levels on record. An easier monetary policy together with an expanding fiscal
policy ahead of upcoming parliamentary elections is likely to ensure strong
economic growth over the next two years.
5
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
and the six months ended April 30, 2002 are as follows:
Six months
ended
Fiscal year 1997 1998 1999 2000 2001 4/30/02
------- --------- --------- --------- ------- ----------
Shares repurchased 722,257 2,680,954 1,270,800 1,106,500 686,975 139,700
Shares issued for
dividend reinvestment 592,008 2,082,693 66,019 -- -- 96,643
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.
PRIVACY POLICY AND PRACTICES
--------------------------------------------------------------------------------
The Fund collects nonpublic personal information about its customers
(stockholders) with respect to their transactions in shares of the Fund but only
for those stockholders whose shares are registered in their names. We do not
have knowledge of or collect personal information about stockholders who hold
Fund shares in "street name" such as brokers or banks.
We do not disclose any nonpublic personal information about our
stockholders or former stockholders to anyone, except as permitted by law.
We restrict access to nonpublic personal information about our stockholders
to those employees who need to know that information to provide services to our
stockholders. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard our stockholders' nonpublic personal
information.
6
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--APRIL 30, 2002 (unaudited)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
------ ----------- -----
INVESTMENTS IN POLISH
COMMON STOCKS--34.8%
BANKS--9.8%
31,500 Bank Pekao ..................... $ 867,595
38,000 Bank Pekao (ADR)+ .............. 1,046,900
300,000 Bank Pekao (GDR) ............... 8,265,000
31,231 Bank Rozwoju Eksportu .......... 946,204
125,166 Bank Zachodni WBK .............. 2,272,156
-------------
13,397,855
-------------
COMPUTER & PERIPHERALS--2.6%
115,401 Computerland* .................. 3,539,642
-------------
CONSTRUCTION & ENGINEERING--2.4%
343,410 Budimex* ....................... 2,820,334
416,993 Mostostal Zabrze* .............. 438,522
-------------
3,258,856
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES--6.9%
98,241 Telekomunikacja Polska* ........ 329,618
2,615,000 Telekomunikacja Polska (ADR)*+ . 8,812,550
105,000 Telekomunikacja Polska (GDR)* .. 353,850
-------------
9,496,018
-------------
HOTEL RESTAURANTS & LEISURE--0.2%
42,423 Orbis .......................... 258,120
-------------
MEDIA--2.3%
6,315 Agora* ......................... 98,034
10,000 Agora (GDR)* ................... 155,000
165,000 Agora (GDR)*+ .................. 2,557,500
33,464 Art Marketing Syndicate* ....... 382,920
-------------
3,193,454
-------------
METAL & MINING--2.5%
708,081 KGHM Polska Miedz .............. 2,295,971
40,000 KGHM Polska Miedz (GDR) ........ 270,000
115,000 KGHM Polska Miedz (GDR)+ ....... 776,250
-------------
3,342,221
-------------
SHARES DESCRIPTION VALUE
------ ----------- -----
OIL & GAS--4.8%
720,000 Polski Koncern Naftowy (GDR)+ .. $ 6,595,200
-------------
SOFTWARE--3.3%
48,277 Prokom Software* ............... 1,746,714
122,000 Prokom Software (GDR)* ......... 2,165,500
20,000 Softbank* ...................... 119,685
78,442 Softbank (GDR)* ................ 469,419
-------------
4,501,318
-------------
Total Investments in Polish
Common Stocks
(cost $47,854,168) ........... 47,582,684
-------------
INVESTMENTS IN HUNGARIAN
COMMON STOCKS--29.9%
AUTOMOBILES--0.8%
173,168 Raba ........................... 1,073,222
-------------
BANKS--11.2%
570,000 OTP Bank* ...................... 5,066,244
580,000 OTP Bank (GDR)* ................ 10,248,600
-------------
15,314,844
-------------
CHEMICALS--0.1%
23,979 Pannonplast .................... 226,032
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES--4.7%
338,000 Matav (ADR) .................... 6,388,200
-------------
OIL & GAS--7.1%
466,000 Mol Magyar Olaj-ES
Gazipari (GDR) ............... 9,669,500
-------------
PHARMACEUTICALS--6.0%
49,713 Egis ........................... 2,803,344
29,918 Gedeon Richter ................. 1,906,931
55,000 Gedeon Richter (GDR) ........... 3,511,750
-------------
8,222,025
-------------
Total Investments in
Hungarian Common Stocks
(cost $28,640,542) ........... 40,893,823
-------------
-------------
* Non-income producing security.
+ 144A -- Restricted to resale to institutional investors only.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements.
7
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS -- APRIL 30, 2002 (unaudited) (continued)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
------ ----------- -----
INVESTMENTS IN RUSSIAN
SECURITIES--17.4%
INVESTMENT FUND--0.9%
DIVERSIFIED FINANCIAL--0.9%
50,000 Fleming Russia Securities Fund*
(cost $937,500) .............. $ 1,125,000
-------------
COMMON STOCKS--16.1%
ELECTRIC UTILITIES--1.1%
105,000 Unified Energy Systems (GDR) ... 1,558,200
-------------
METAL & MINING--1.4%
80,000 JSC MMC Norilsk Nickel (ADR)* .. 1,896,000
-------------
OIL & GAS--11.5%
27,500 Lukoil (ADR) ................... 1,981,650
194,500 Surgutneftegaz (ADR) ........... 3,738,508
71,000 Tatneft (ADR) .................. 1,142,390
60,000 Yukos (ADR) .................... 8,820,000
-------------
15,682,548
-------------
WIRELESS TELECOMMUNICATION SERVICES--2.2%
48,500 Mobile Telesystems (ADR) ....... 1,520,475
60,000 Vimpel Communications (ADR)* ... 1,422,000
-------------
2,942,475
-------------
Total Common Stocks
(cost $16,606,217) ........... 22,079,223
-------------
PREFERRED STOCK--0.4%
ELECTRIC UTILITIES--0.4%
50,000 Unified Energy Systems (ADR)
(cost $655,809) .............. 630,000
-------------
Total Investments in
Russian Securities
(cost $18,199,526) ........... 23,834,223
-------------
INVESTMENTS IN CZECH REPUBLIC
COMMON STOCKS--11.4%
BANKS--6.2%
86,000 Komercni Banka* ................ 4,422,350
234,996 Komercni Banka (GDR)* .......... 4,030,181
-------------
8,452,531
-------------
SHARES DESCRIPTION VALUE
------ ----------- -----
CHEMICALS--0.6%
920,000 Unipetrol* ..................... $ 797,523
-------------
DIVERSIFIED
TELECOMMUNICATION SERVICES--3.2%
381,000 Cesky Telecom .................. 3,639,806
85,000 Cesky Telecom (GDR) ............ 816,000
-------------
4,455,806
-------------
INDUSTRIAL
CONGLOMERATES--0.6%
325,000 Ceske Energeticke Zavody ....... 786,267
-------------
MEDIA--0.8%
101,730 Ceske Radiokomunikace (GDR) .... 1,174,982
-------------
Total Investments in Czech
Republic Common Stocks
(cost $12,481,512) ........... 15,667,109
-------------
INVESTMENT IN AUSTRIAN
COMMON STOCK--0.8%
IT CONSULTING
& SERVICES--0.8%
104,840 S & T System Integration
& Technology*
(cost $1,660,883) ............ 1,064,336
-------------
Total Investments--94.3%
(cost $108,836,631) .......... 129,042,175
Cash and other assets in
excess of liabilities--5.7% .. 7,767,050
-------------
NET ASSETS--100.0% ............. $ 136,809,225
=============
-----------
* Non-income producing security.
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
See Notes to Financial Statements.
8
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2002 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $108,836,631) .................................... $ 129,042,175
Cash and foreign currency (cost $5,232,074) .................................. 5,297,007
Receivable for securities sold ............................................... 3,798,788
Dividend receivable .......................................................... 282,965
Foreign withholding tax refund receivable .................................... 71,298
Other assets ................................................................. 20,637
-------------
Total assets .............................................................. 138,512,870
-------------
LIABILITIES
Payable for securities purchased ............................................. 1,476,379
Management fee payable ....................................................... 68,248
Investment advisory fee payable .............................................. 35,517
Payable for Directors' fees and expenses ..................................... 37,000
Accrued expenses and accounts payable ........................................ 86,501
-------------
Total liabilities ......................................................... 1,703,645
-------------
NET ASSETS ................................................................... $ 136,809,225
=============
Net assets consist of:
Paid-in capital, $.001 par (Authorized 80,000,000 shares) .................... $ 226,183,034
Cost of 5,505,612 shares held in treasury .................................... (81,197,264)
Accumulated net investment loss .............................................. (347,800)
Accumulated net realized loss on investments and foreign currency transactions (28,102,530)
Net unrealized appreciation of investments and foreign currency .............. 20,273,785
-------------
Net assets ................................................................... $ 136,809,225
=============
Net asset value per share ($136,809,225 (DIVIDE) 8,000,363 shares of common
stock issued and outstanding) ............................................. $17.10
======
See Notes to Financial Statements.
9
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENTOFOPERATIONS
APRIL 30, 2002 (unaudited)
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED
APRIL 30, 2002
----------------
NET INVESTMENTLOSS
Investment income
Dividends (net of foreign withholding taxes of $95,213) ......... $ 561,330
Interest ........................................................ 18,837
Securities lending, net ......................................... 3,916
------------
Total investment income ............................................ 584,083
------------
Expenses
Management fee .................................................. 385,056
Investment advisory fee ......................................... 202,148
Custodian and Transfer Agent's fees and expenses ................ 123,500
Directors' fees and expenses .................................... 75,387
Reports to shareholders ......................................... 46,121
Legal fee ....................................................... 32,732
Audit fee ....................................................... 27,500
NYSE listing fee ................................................ 17,500
Miscellaneous ................................................... 25,915
------------
Total expenses before custody credits* .......................... 935,859
Less: custody credits ........................................... (3,976)
------------
Net expenses .................................................... 931,883
------------
Net investment loss ................................................ (347,800)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized loss on:
Investments ..................................................... (6,782,842)
Foreign currency transactions ................................... (210,658)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... 35,284,792
Translation of other assets and liabilities from foreign currency 137,673
------------
Net gain on investments and foreign currency transactions .......... 28,428,965
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... $ 28,081,165
============
----------
* The custody credits are attributable to interest earned on U.S. cash balances.
See Notes to Financial Statements.
10
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
--------------------------------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2002 OCTOBER 31, 2001
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) .................................................. $ (347,800) $ 773,235
Net realized gain (loss) on:
Investments ................................................................. (6,782,842) (14,945,432)
Foreign currency transactions ............................................... (210,658) 1,047,369
Net change in unrealized appreciation/depreciation on:
Investments ................................................................. 35,284,792 (7,974,526)
Translation of other assets and liabilities from foreign currency ........... 137,673 (54,038)
------------- -------------
Net increase (decrease) in net assets resulting from operations ............... 28,081,165 (21,153,392)
------------- -------------
Distributions to shareholders from:
Net investment income ......................................................... (773,235) --
Net realized foreign currency gains ........................................... (1,075,073) --
------------- -------------
Total distributions to shareholders (a) ....................................... (1,848,308) --
------------- -------------
Capital share transactions:
Net proceeds from reinvestment of dividends (96,643 and 0 shares, respectively) 1,107,536 --
Cost of shares repurchased (139,700 and 686,975 shares, respectively) ......... (1,744,481) (8,556,770)
------------- -------------
Net decrease in net assets from capital share transactions .................... (636,945) (8,556,770)
------------- -------------
Total increase (decrease) in net assets .......................................... 25,595,912 (29,710,162)
NET ASSETS
Beginning of period .............................................................. 111,213,313 140,923,475
------------- -------------
Endof period (including accumulated net investment loss of $347,800 and
undistributed net investment income of $773,235 as of April 30, 2002
and October 31, 2001, respectively) ........................................... $ 136,809,225 $ 111,213,313
============= =============
----------
(a) For U.S. tax purposes, total distributions to shareholders consisted
entirely of Ordinary income.
See Notes to Financial Statements.
11
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--APRIL 30, 2002 (unaudited)
--------------------------------------------------------------------------------
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. 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.
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.
During the six months ended April 30, 2002, the Fund reclassified permanent book
and tax differences as follows:
INCREASE
(DECREASE)
----------
Undistributed net realized gain on investments
and foreign currency transactions ............ $ 27,704
Paid-in capital ................................ (27,704)
12
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--APRIL 30, 2002 (unaudited) (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 six months ended April 30, 2002, Deutsche Bank AG, the German parent of
the Manager and Investment Adviser, and its affiliates received $11,910 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 six months ended April 30, 2002 were $25,646,656 and $30,046,259,
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
No securities were on loan at April 30, 2002. For the six months ended April 30,
2002, the Fund earned $3,916 as securities lending fees, net of rebates and
agency fees.
NOTE 6. CAPITAL
During the six months ended April 30, 2002 and the year ended October 31, 2001,
the Fund purchased 139,700 and 686,975 of its shares of common stock on the open
market at a total cost of $1,744,481 and $8,556,770, respectively. The weighted
average discount of these purchases comparing the purchase price to the net
asset value at the time of purchase was 17.1% and 22.2%, respectively. These
shares are held in treasury.
13
THE CENTRAL EUROPEAN EQUITY FUND, INC.
FINANCIALHIGHLIGHTS (unaudited)
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
periods indicated:
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------------
2002 2001 2000 1999 1998 1997
------- ------- ------- ------- ------- -------
Beginning of period $ 13.83 $ 16.14 $ 15.99 $ 15.74 $ 28.00 $ 24.56
Per share operating performance:
Net asset value:
------- ------- ------- ------- ------- -------
Net investment income (loss) (.04) .10 (.09) (.08) .13 .09
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.53 (2.70) (.38) .09 (6.18) 5.26
------- ------- ------- ------- ------- -------
Increase (decrease) from investment operations 3.49 (2.60) (.47) .01 (6.05) 5.35
------- ------- ------- ------- ------- -------
Increase resulting from share repurchases .04 .29 .62 .40 .82 .28
------- ------- ------- ------- ------- -------
Distributions from net investment income (.10) -- -- (.13) (.01) (.11)
Distributions from net realized
foreign currency gains (.13) -- -- (.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+ (.23) -- -- (.14) (6.57) (1.92)
------- ------- ------- ------- ------- -------
Dilution in NAV from dividend reinvestment (.03) -- -- (.02) (.46) (.27)
------- ------- ------- ------- ------- -------
Net asset value:
End of period $ 17.10 $ 13.83 $ 16.14 $ 15.99 $ 15.74 $ 28.00
======= ======= ======= ======= ======= =======
Market value:
End of period $ 14.64 $ 10.95 $ 11.875 $ 12.50 $ 13.0625 $ 23.125
Total investment return for the period:++
Based upon market value 36.38% (7.79)% (5.00)% (3.29)% (22.89)% 28.93%
Based upon net asset value 25.65% (14.31)% .94% 2.48% (26.09)% 22.41%
Ratio to average net assets:
Total expenses before custody credits* 1.57%** 1.66% 1.37% 1.44% 1.20% 1.10%
Net investment income (loss) (.37)%** .63% (.44)% (.44)% .56% .32%
Portfolio turnover 21.70% 57.83% 59.17% 60.35% 97.48% 68.20%
Net assets at end of period (000's omitted) $136,809 $111,213 $140,923 $157,265 $173,825 $325,972
---------
+ For U.S. tax purposes, total distributions
consisted of:
Ordinary income $0.23 -- -- $0.14 $1.55 $0.11
Long term capital gains -- -- -- -- 5.02 1.81
----- ----- ----- ----- ----- -----
$0.23 -- -- $0.14 $6.57 $1.92
----- ----- ----- ----- ----- -----
++ 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 period, 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.
* 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 1.56%, 1.62%, 1.35%, 1.43%, 1.17% and 1.10% for 2002,
2001, 2000, 1999, 1998 and 1997, respectively.
** Annualized.
See Notes to Financial Statements.
14
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
DIRECTORS AND OFFICERS
CHRISTIAN STRENGER
CHAIRMAN AND DIRECTOR
DETLEF BIERBAUM
DIRECTOR
JOHN A. BULT
DIRECTOR
RICHARD R.BURT
DIRECTOR
EDWARD C. SCHMULTS
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
---------
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. Plan participants may invest as little as $100 in any
month and may invest up to $36,000 annually. Share purchases are combined to
receive a beneficial brokerage fee. A brochure is available on the Fund's
website or 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.
[GRAPHIC OMITTED]
CEE
LISTED
NYSE
COPIES OF THIS REPORT AND OTHER INFORMATION ARE
AVAILABLE AT:WWW.CEEFUND.COM