[LOGO OMITTED]
THE NEW GERMANY
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2001
[LOGO OMITTED]
THE NEW GERMANY
FUND, INC.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
February 8, 2002
Dear Shareholder,
After a difficult 2001, signs of an upturn in world economic growth are
beginning to emerge. The fourth quarter looks increasingly as the low point in
the global economic slowdown. The industrial sector is stabilizing and consumer
spending has remained strong. The consumer in Germany has remained remarkably
resilient, helped by low interest rates and real income growth. Manufacturing
orders rose for the first time in three months in December, led by demand from
customers overseas. Furthermore, confidence among executives and consumers has
improved. Most importantly, however, corporate earnings have begun to improve,
and many companies have surpassed earnings expectations. German companies are
expected to register the highest earnings growth (+30.7%) in Europe in 2002,
according to IBES. The estimated average earnings growth for 2002 is 16.2% in
Europe and 13.5% in the US. An export-driven economy, Germany benefits more than
most countries during periods of economic upswings as global demand increases.
After recording economic growth of 0.6% in 2001, Deutsche Bank estimates that
the German economy will grow 1.0% during 2002.
For the year ended December 31, 2001, the net asset value per share of the New
Germany Fund declined 35.7% in US dollar terms while its share price declined
33.9%. The Fund's composite index (60% MDAX and 40% NEMAX 50) declined 33.5%
during the same period. The Fund's slight underperformance occurred during the
last quarter of the year as technology stocks rallied strongly after
underperforming the market during the last two years. Not being fully invested
in the NEUER MARKT relative to its 40% benchmark weight reversed the 2.7%
outperformance the Fund had at the end of the third quarter. The combination of
active additions to NEUER MARKT positions and the rally of existing holdings
lifted the Fund's exposure in that market segment from 27% to 38% during the
last quarter. We expect the outlook for the NEUER MARKT in 2002 to be much
better than this past year. The index trades at a price-to-earnings ratio of 17
times based on 2003 earnings with estimated average earnings growth of 35%. The
stocks are thus more attractively valued than the DAX 30 or MDAX peers,
resulting in a better risk/reward ratio. In selecting stocks from the NEUER
MARKT, we remain focused on companies with strong business models supported by
positive free cash-flow generation and visible earnings growth. Based on the
attractive valuation and the strong earnings momentum, the Fund plans to
increase its position in the NEUER MARKT in 2002.
The New Germany Fund continued its open-market purchases of its shares, buying
1,276,000 shares during the year. The Fund's discount to its net asset value
declined to an average of 18.2% during the year, compared with 21.1% for 2000.
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.NEWGERMANYFUND.COM
--------------------------------------------------------------------------------
1
FUND HISTORY AS OF DECEMBER 31, 2001
--------------------------------------------------------------------------------
STATISTICS:
Net Assets ........................................................$212,650,331
Shares Outstanding ................................................ 28,357,943
NAV Per Share ..................................................... $7.50
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
RECORD ORDINARY LT CAPITAL
DATE INCOME GAINS TOTAL
------ -------- ---------- ------
11/20/00 .................................. $0.01 $1.30 $1.31
9/1/00 .................................... $0.07 $0.35 $0.42
11/19/99 .................................. $0.05 $1.02 $1.07
11/16/98 .................................. $1.00 $2.66 $3.66
11/17/97 .................................. $1.06 $0.92 $1.98
9/3/97 .................................... $0.21 $0.13 $0.34
TOTAL RETURNS:
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Net Asset Value ......(35.68)% (11.46)% (2.22)% 23.85% 8.48%
Market Value .........(33.86)% (14.35)% 3.64% 21.58% 18.36%
Benchmark* ...........(33.46)% (16.13)% (9.79)% 14.62% 6.84%
----------------
* Represents 60% MDAX/40% NEMAX 50 for 2000 and 2001, and 100% MDAX for 1997 to
1999.
OTHER INFORMATION:
NYSE Ticker Symbol ................................................. GF
NASDAQ Symbol ...................................................... XGFNX
Dividend Reinvestment Plan ......................................... Yes
Voluntary Cash Purchase Program .................................... Yes
Annual Expense Ratio ............................................... 1.25%
2
PORTFOLIO BY MARKET SECTOR AS OF DECEMBER 31, 2001 (AS % OF PORTFOLIO)
--------------------------------------------------------------------------------
Machinery (6.4%)
Building Products (2.0%)
IT Consulting & Services (6.1%)
Media (2.5%)
Communications Equipment (1.6%)
Biotechnology (9.3%)
Software (5.3%)
Commercial Services & Supplies (2.2%)
Insurance (6.3%)
Multiline Retail (1.2%)
Diversified Financial (13.5%)
Electronic Equipment & Instruments (1.1%)
Textiles & Apparel (1.9%)
Semiconductor Equipment & Products (5.1%)
Distributors (6.6%)
Auto Components (1.3%)
Healthcare Providers & Services (4.7%)
Healthcare Equipment & Supplies (9.5%)
Computers & Peripherals (1.0%)
Pharmaceuticals (10.9%)
Construction & Engineering (1.5%)
10 LARGEST EQUITY HOLDINGS AS OF DECEMBER 31, 2001
--------------------------------------------------------------------------------
% of
Portfolio
---------
1. Fresenius 9.5
2. Altana 8.8
3. Qiagen 7.7
4. Medion 6.6
5. AMB Generali Holding 6.3
% of
Portfolio
---------
6. Thiel Logistik 5.3
7. Deutsche Boerse 5.2
8. Rhoen-Klinikum 4.7
9. Heidelberger Druckmaschinen 3.7
10. Software 3.0
3
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
--------------------------------------------------------------------------------
QUESTION: Do you still believe international equities offer more potential
than U.S. equities, especially in light of the past decade of US outperformance?
ANSWER: While it is true that over the past decade U.S. stocks outperformed
most other regions, it is important to consider that many times in the past,
investors have drawn similar conclusions and assumed that recent trends would
continue forever. During the eighties, while the US equity market was stagnant,
Japan was in a decade-long bull market. At the end of 1989, Japan accounted for
51% of global equity market capitalization. Everyone spoke of the decline of US
competitiveness and the emergence of the "new" global economic power -- Japan.
Today, Japan accounts for just 9% of the global equity market capitalization,
while the US accounts for 52% of the total. Investors now talk about the decline
of Japan and focus on how no one can compete with the US. The point of this
analogy is that most investors always assume that trends will continue, when in
fact they rarely do. Another trend that investors assume will continue is the
strength of the US dollar, which has been remarkably strong over the past 10
years. However, we do not believe that this trend can continue indefinitely,
especially as a strong US dollar renders the US economy less competitive. Based
on many valuation models, the euro is significantly undervalued relative to the
US dollar, and it has been declining ever since it was introduced three years
ago. We believe that market sentiment will change in favor of the euro and a new
long-term trend may emerge. At this point, investors who are well diversified in
European equities will benefit.
QUESTION: What sectors do you see as the winners and losers in 2002?
ANSWER: From the NEUER MARKT, the Fund has recently increased its overweight
position in the machinery and industrial sector, which should gain from an
anticipated recovery in the second half of this year. We see Suess Microtech and
Singulus Technologies being the main beneficiary from this sector. The Fund
plans to overweight the biotechnology sector. Valuations have come down over the
past year to attractive levels as investors realized it will take longer that
expected for successes in genomic research to translate into positive cash flows
for the industry. However, given the increased necessity for developed
pharmaceutical companies to license drugs from the biotech sector, we remain
positive in the long-term prospects of the sector. From the MDAX segment, we
favor the healthcare companies, Altana and Fresenius, and expect them to
maintain their double-digit earnings momentum. We have increased our weighting
in the consumer and retail sector by initiating a position in Puma. Puma should
turn out to be a successful restructuring story, evidenced by strong
order-intake and earnings recovery during 2001.
QUESTION: Since you are planning to increase your weight in the NEUER MARKT,
what are some of your favorite stocks from this segment?
ANSWER: To give you an idea of the attractiveness of the NEUER MARKT, we will
highlight three companies that we have recently increased our position in.
Singulus Technologies is the world's leading manufacturer of CD and DVD
replication equipment. The company was one of the first players to enter the
market for re-writable discs. As the world leader, with more than a 50% market
share, the company generates the highest operating margin within the industry
and has a solid financial situation. Teleplan is a world leader in IT hardware
repair and sales services with an estimated market share of 15%. Its strong
client base includes the world's nine largest PC manufacturers that represent
60% of the global PC market. GPC Biotech uses genomics and proteomics research
to develop rugs in the fields of oncology, infectious diseases and immunology.
In addition, it has a very strong alliance network with established
pharmaceutical companies. Having already established co-developing agreements on
two drugs, Altana recently acquired a stake in GPC Biotech. Altana's long-term
commitment, combined with an evolving product pipeline makes GPC Biotech a very
attractive investment.
HANSPETER ACKERMANN, Chief Investment Officer of the New Germany Fund
#4
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
OUTLOOK FOR THE GERMAN ECONOMY
Recent economic evidence suggests that the German economy reached its trough
during the fourth quarter of last year and that a recovery is taking hold.
Economic activity is likely to rebound in 2002 as many of the factors that had
been responsible for the slump are reversing. Most notably, the slowdown in the
US appears to have reached bottom. Also, the excesses of the late-1990's boom
are beginning to dissipate, namely the excessive spending in Information
Technology. Higher energy prices that precipitated the slowdown have reversed
and fiscal policy has turned stimulative, with tax cuts and spending hikes
coming on stream. During 2001 the European Central Bank cut interest rates four
times, and the effect of those should begin to be felt this year. Furthermore,
the inventory cycle is turning. Efforts by firms to pare inventories added
considerably to the economy's weakness, but stockpiles have quickly run down and
a pick up in manufacturing is now necessary. This was confirmed this month when
figures showed that German industrial orders rose a surprisingly strong 5.0% in
December, with both foreign and domestic orders being strong. The increase
followed a 0.6% increase in November and indicates that Germany has turned the
corner and that an economic recovery is under way. The data fits in with other
positive indicators, namely the purchasing manager indices and a survey of
German business sentiment which indicated confidence among executives is on the
rise. The inflation outlook for Germany is also positive, mainly due to the
dramatic fall in energy prices. Today, the price of a barrel of WTI oil is
$19.80 compared to $30 a year ago. The annual inflation rate could reach a low
of 0.8% in mid-2002 with an annual average of 1.3%, compared with 2.5% in 2001.
5
DIRECTORS OF THE FUND
--------------------------------------------------------------------------------
NAME, AGE, CLASS PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------------------------------
John A. Bult, 65(1)(2) Chairman of PaineWebber International (1985
Class II to present). Director of The France Growth
Fund, Inc. and The Greater China Fund, Inc.
John H. Cannon, 60 Vice President and Treasurer of Footlocker Inc.
Class II
Richard Karl Goeltz, 59 Consultant. Vice Chairman and Chief Financial
Class I Officer of American Express Co. (1996-2000);
Group Chief Financial Officer and Member of
the Board of Directors of National
Westminster Bank Plc. (1992-1996).
Dr. Franz Wilhelm Hopp, 59 Member of the Boards of Management of ERGO
Class III Versicherungsgruppe AG, ERGO Europa
Beteiligungsgesellschaft AG and ERGO
International AG. Chairman of the
Supervisory Boards of VORSORGE
Lebensversicherung AG and Mediastream AG.
Member of the Supervisory Boards of MEAG
Munich ERGO Kapitalanlagegesellschaft mbH,
FSB FondsServiceBank GmbH, VICTORIA
Pensionskasse AG, Internationales
Immobilieninstitute GmbH, TMW Immobilien AG,
Bankhaus Ellwanger & Geiger and Jenoptik AG.
Former Member of the Boards of Management of
VICTORIA Holding, VICTORIA
Lebensversicherung AG, VICTORIA Versicherung
AG, VICTORIA International, VICTORIA
Ruckversicherung AG and D.A.S.
Versicherungs-AG.
Ernst-Ulrich Matz, 68 Consultant. Chief Financial Officer and
Class III member of the Board of Directors of IWKA
Aktiengesellschaft (until 2000). Member of
the Supervisory Boards of Bopp & Reuther AG.
(until 2001). Member of the District
Advisory Board of Gerlingonzern. Chairman of
the Rumanian Group in the German East-West
Trade Committee. Member of Advisory Council
of Peters Associates AG.
Christian H. Strenger, 58(1)(2) Director of DWS Investment GmbH (since
Class I 1999). Managing Director of DWS--Deutsche
Gesellschaft fur Wertpapiersparen mbH
(1991-1999). Chairman of Deutsche Fund
Management, Inc. (1997-2000).
6
DIRECTORS OF THE FUND (CONTINUED)
--------------------------------------------------------------------------------
NAME, AGE, CLASS PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
---------------- --------------------------------------------
Dr. Frank Tromel, 66 Consultant. Deputy Chairman of the Supervisory
Class III Board of DELTON AG (until 2000). Chairman of
the Board of Managing Directors of DELTON AG
(1990-1999). Chairman of the Board of
Managing Directors of ALTANA AG (1987-1990).
Member of the Board of ALTANA AG
(1977-1987).
Robert H. Wadsworth, 62(1)(3) President, Robert H. Wadsworth Associates,
Class II Inc. (1982 to present), President and
Trustee, Trust for Investment Managers (1999
to present), Formerly President, Investment
Company Administration, LLC (1992-2001) and
President, Treasurer and Director, First
Fund Distributors, Inc. (1990-2002).
Peter Zuhlsdorff, 62 Chairman of the Supervisory Board of GfK AG,
Class II TV Loonland AG and Escada AG.
Member of the Supervisory Board of Merck
KGaA, Deutz AG, Triangle GmbH & Co. KG,
Kaisers Kaffee AG. and Quelle AG.
-------------
Each has served as a Director of the Fund since the Fund's inception in 1990
except for Mr. Wadsworth, Dr. Hopp, Mr. Matz and Mr. Zuhlsdorff, who were
elected to the Board on June 19, 1992, June 18, 1993, June 29, 1995 and June 20,
1997, respectively. The term of office for Directors in Class II expires at the
2002 Annual Meeting, Class III at the next succeeding Annual Meeting and Class I
at the following succeeding Annual Meeting.
(1) Indicates that Messrs. Bult, Strenger and Wadsworth each also serve as a
Director of The Germany Fund, Inc. and The Central European Equity Fund,
Inc., two other closed-end registered investment companies for which
Deutsche Bank Securities Inc. acts as manager.
(2) Indicates "interested" Director, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). Mr. Bult is an "interested" Director
because of his affiliation with U.B.S. PaineWebber Incorporated, a
registered broker-dealer; and Mr. Strenger is an "interested" Director
because of his ownership of Deutsche Bank shares.
(3) Indicates that Mr. Wadsworth also serves as a Director of the Deutsche
Investors Portfolios Trust and Deutsche Investors Funds, Inc., both open-end
investment companies advised by Investment Company Capital Corp. Mr.
Wadsworth also serves as a Director for the Deutsche Banc Alex. Brown Cash
Reserve Fund, Inc.; Flag Investors Communication Fund, Inc.; Flag Investors
Series Funds, Inc.; Emerging Growth Fund, Inc.; Short-Intermediate Income
Fund, Inc.; Flag Investors Value Builder Fund, Inc.; Real Estate Securities
Fund, Inc.; and Flag Investors Equity Partners Fund, Inc. These funds are
open-end investment companies advised by Investment Company Capital Corp.,
which is an indirect wholly-owned subsidiary of Deutsche Bank AG.
--------------------------------------------------------------------------------
7
OFFICERS OF THE FUND
--------------------------------------------------------------------------------
NAME, AGE PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
--------- --------------------------------------------
Richard T. Hale, 56 Trustee and/or President of each of the
President and Chief investment companies advised by Deutsche
Asset Management, Inc. or its affiliates;
Managing Director, Deutsche Asset Executive
Officer Management; Managing Director,
Deutsche Banc Alex. Brown Inc.; Director and
President, Investment Company Capital Corp.
Hanspeter Ackermann, 45 President of Deutsche Bank Investment
Chief Investment Officer Management Inc., Managing Director of
Deutsche Bank Securities Inc., Senior
International Equity Portfolio Manager of
Bankers Trust Co., President and Managing
Partner of Eiger Asset Management
(1993-1996), Managing Director and CIO of
SBC Portfolio Management International
(1983-1993).
Robert R. Gambee, 59 Director (since 1992), First Vice President
Chief Operating Officer (1987-1991) and Vice President (1978-1986)
and Secretary of Deutsche Bank Securities Inc., Director,
Deutsche Bank AG, Director, Bankers Trust
Co. Secretary of Flag Investors Funds, Inc.
and Deutsche Bank Investment Management,
Inc. (1997-2000).
Joseph Cheung, 43 Vice President (since 1996), Assistant Vice
Chief Financial Officer President (1994-1996) and Associate
and Treasurer (1991-1994) of Deutsche Bank Securities Inc.
--------------
Each also serves as an Officer of The Germany Fund, Inc. and The Central
European Equity Fund, Inc., two other closed-end registered investment companies
for which Deutsche Bank Securities Inc. acts as manager.
--------------------------------------------------------------------------------
8
THE NEW GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2001
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
-------- ----------- ---------
INVESTMENTS IN GERMAN
SECURITIES--81.9% OF NET ASSETS
COMMON STOCKS--68.1%
AUTO COMPONENTS--1.3%
200,000 Continental ..................... $ 2,646,567
------------
BIOTECHNOLOGY--1.2%
235,000 GPC Biotech* .................... 2,502,432
------------
BUILDINGPRODUCTS--1.9%
150,000 Buderus ......................... 4,130,249
------------
COMMERCIAL SERVICES &
SUPPLIES--2.1%
250,000 GFK ............................. 4,542,382
------------
COMMUNICATIONS
EQUIPMENT--1.5%
412,041 Comroad* ........................ 3,242,109
------------
CONSTRUCTION &
ENGINEERING--1.4%
137,200 Bilfinger & Berger .............. 3,056,473
------------
DISTRIBUTORS--6.5%
340,000 Medion .......................... 13,751,990
------------
DIVERSIFIED FINANCIAL--13.2%
195,000 AWD ............................. 4,691,642
380,000 Comdirect* ...................... 3,690,936
280,000 Deutsche Boerse ................. 10,781,241
289,400 Direkt Anlage Bank .............. 3,259,658
134,489 Grenkeleasing* .................. 2,330,949
115,000 Tecis ........................... 3,279,248
------------
28,033,674
------------
HEALTHCARE EQUIPMENT &
SUPPLIES--1.0%
30,000 Fresenius ....................... 2,165,373
------------
INSURANCE--6.1%
124,000 AMB Generali Holding ............ 13,026,421
------------
IT CONSULTING & SERVICES--5.9%
447,265 D. Logistics* ................... 3,587,021
153,230 GFT Technology* ................. 682,716
110,000 SAP Systems Integration* ........ 2,234,879
160,000 Software ........................ 6,130,768
------------
12,635,384
------------
SHARES DESCRIPTION VALUE
-------- ----------- ---------
MACHINERY--6.2%
201,000 Heidelberger Druckmaschinen ..... $ 7,603,266
200,000 Singulus Technologies* .......... 5,613,930
------------
13,217,196
------------
MEDIA--2.1%
161,949 Constantin Film* ................ 583,024
77,500 Springer (Axel) ................. 3,798,314
------------
4,381,338
------------
MULTI-LINE RETAIL--1.2%
89,725 Douglas ......................... 2,478,572
------------
PHARMACEUTICALS--10.6%
365,000 Altana .......................... 18,214,084
59,500 Merck KGaA ...................... 2,199,818
85,000 Schwarz Pharma .................. 2,204,136
------------
22,618,038
------------
SEMICONDUCTOR EQUIPMENT
&PRODUCTS--5.0%
149,000 Aixtron ......................... 3,379,096
426,400 Kontron Embedded Computers* ..... 4,977,542
82,700 Suess MicroTec* ................. 2,248,403
------------
10,605,041
------------
TEXTILES & APPAREL--0.9%
60,000 Puma ............................ 1,820,517
------------
Total Common Stocks
(cost $169,079,675) ........... 144,853,756
------------
PREFERRED STOCKS--13.8%
HEALTHCARE EQUIPMENT &
SUPPLIES--8.2%
214,800 Fresenius ....................... 17,475,576
------------
HEALTHCARE PROVIDERS &
SERVICES--4.6%
188,200 Rhoen-Klinikum .................. 9,701,735
------------
TEXTILES &APPAREL--1.0%
95,705 Hugo Boss ....................... 2,041,668
------------
Total Preferred Stocks
(cost $25,514,528) ............ 29,218,979
------------
Total Investments in
German Securities
(cost $194,594,203) ........... 174,072,735
------------
-----------
*Non-income producing security.
See Notes to Financial Statements.
9
THE NEW GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2001 (CONTINUED)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
-------- ----------- ---------
INVESTMENTS IN DUTCH
COMMON STOCKS--8.9%
BIOTECHNOLOGY--7.9%
172,940 Crucell* ....................... $ 955,462
846,500 Qiagen* ........................ 15,840,639
------------
16,796,101
------------
COMPUTERS &PERIPHERALS--1.0%
140,000 Teleplan International* ........ 2,087,134
------------
Total Investments in Dutch
Common Stocks
(cost $12,846,445) ........... 18,883,235
------------
INVESTMENTS IN FRENCH
COMMON STOCKS--1.0%
ELECTRONIC EQUIPMENT &
INSTRUMENTS--1.0%
273,200 Oberthur Card Systems*
(cost $3,829,050) ............ 2,178,864
------------
SHARES DESCRIPTION VALUE
-------- ----------- ---------
INVESTMENTS IN LUXEMBOURG
COMMON STOCKS--5.1%
SOFTWARE--5.1%
555,000 Thiel Logistik*
(cost $8,648,812) ............ $ 10,929,787
------------
INVESTMENTS IN SWISS
COMMON STOCKS--0.4%
MEDIA--0.4%
268,000 Highlight Communications*
(cost $2,543,632) ............ 823,911
------------
Total Investments--97.3%
(cost $222,462,142) .......... 206,888,532
Cash and other assets in
excess of liabilities--2.7% .. 5,761,799
------------
NET ASSETS--100% ............... $212,650,331
============
----------------
*Non-income producing security.
See Notes to Financial Statements.
10
THE NEW GERMANY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $222,462,142) ...$ 206,888,532
Cash and foreign currency
(cost $4,937,184) ........................ 4,975,069
Receivable for securities sold .............. 1,263,089
Foreign withholding tax refund receivable ... 729,399
Interest receivable ......................... 6,598
-------------
Total assets ............................. 213,862,687
-------------
LIABILITIES
Payable for securities purchased ............ 922,838
Management fee payable ...................... 107,877
Investment advisory fee payable ............. 53,680
Payable for shares repurchased .............. 34,710
Accrued expenses and accounts payable ....... 93,251
-------------
Total liabilities ........................ 1,212,356
-------------
NET ASSETS ..................................$ 212,650,331
=============
Net assets consist of:
Paid-in capital, $.001 par
(Authorized 80,000,000 shares) ...........$ 432,874,599
Cost of 6,391,398 shares held in treasury ... (72,268,976)
Accumulated net realized loss
on investments and foreign currency
transactions ............................. (132,408,545)
Net unrealized depreciation of investments
and foreign currency ..................... (15,546,747)
-------------
Net assets ..................................$ 212,650,331
=============
Net asset value per share
($212,650,331 / 28,357,943 shares of
common stock issued and outstanding) ..... $7.50
=====
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
FOR THE
YEAR ENDED
DECEMBER 31, 2001
-----------------
NET INVESTMENT LOSS
Investment income
Dividends (net of foreign withholding
taxes of $262,708) .....................$ 2,664,794
Interest ................................. 302,301
-------------
Total investment income ..................... 2,967,095
-------------
Expenses
Management fee ........................... 1,484,722
Investment advisory fee .................. 729,572
Reports to shareholders .................. 255,708
Custodian and Transfer Agent's fees
and expenses ........................... 250,058
Directors' fees and expenses ............. 152,464
Legal fee ................................ 148,056
Audit fee ................................ 47,500
NYSE listing fee ......................... 35,000
Miscellaneous ............................ 35,764
-------------
Total expenses before custody credits* ... 3,138,844
Less: custody credits .................... (18,345)
-------------
Net expenses ............................. 3,120,499
-------------
Net investment loss ......................... (153,404)
-------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized loss on:
Investments .............................. (108,838,494)
Foreign currency transactions ............ (316,605)
Net change in unrealized appreciation/
depreciation on:
Investments .............................. (12,969,070)
Translation of other assets and
liabilities from foreign currency ...... (382,857)
-------------
Net loss on investments and foreign
currency transactions .................... (122,507,026)
-------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................$(122,660,430)
=============
--------------------------------------------------------------------------------
* The custody credits are attributable to interest earned on U.S. cash balances.
See Notes to Financial Statements.
11
THE NEW GERMANY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 2001 DECEMBER 31, 2000
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss ............................................................ $ (153,404) $ (1,827,438)
Net realized gain (loss) on:
Investments .................................................................. (108,838,494) 19,437,052
Foreign currency transactions ................................................ (316,605) (1,925,801)
Net change in unrealized appreciation/depreciation on:
Investments .................................................................. (12,969,070) (58,939,923)
Translation of other assets and liabilities from foreign currency ............ (382,857) 439,997
------------- ------------
Net decrease in net assets resulting from operations ........................... (122,660,430) (42,816,113)
------------- ------------
Distributions to shareholders from:
Net realized short term capital gains .......................................... -- (2,064,118)
Net realized long term capital gains ........................................... -- (45,841,402)
------------- ------------
Total distributions to shareholders (a) ........................................ -- (47,905,520)
------------- ------------
Capital share transactions:
Net proceeds from reinvestment of dividends
(0 and 3,197,345 shares, respectively) ....................................... -- 31,096,057
Cost of shares repurchased (1,276,000 and 2,285,900 shares, respectively) ...... (10,278,616) (27,648,857)
------------- ------------
Net increase (decrease) in net assets from capital share transactions .......... (10,278,616) 3,447,200
------------- ------------
Total decrease in net assets ...................................................... (132,939,046) (87,274,433)
NET ASSETS
Beginning of year ................................................................. 345,589,377 432,863,810
------------- ------------
End of year (including undistributed net investment income of $0
as of December 31, 2001 and 2000) .............................................. $ 212,650,331 $345,589,377
============= ============
--------------
(a) For U.S. tax purposes, total distributions to shareholders consisted of:
Ordinary income -- $ 2,064,118
Long term capital gains -- 45,841,402
------------- ------------
-- $ 47,905,520
------------- ------------
See Notes to Financial Statements.
12
THE NEW GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The New Germany Fund, Inc. (the "Fund") was incorporated in Maryland on January
16, 1990 as a non-diversified, closed-end management investment company. The
Fund commenced investment operations on January 30, 1990.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
SECURITY VALUATION: Investments are stated at value. All securities for which
market quotations are readily available are valued at the last sales price on
the primary exchange on which they are traded prior to the time of valuation. If
no sales price is available at that time, and both bid and ask prices are
available, the securities are valued at the mean between the last current bid
and ask prices; if no quoted asked prices are available, they are valued at the
last quoted bid price. All securities for which market quotations are not
readily available will be valued as determined in good faith by the Board of
Directors of the Fund.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Cost of securities sold is calculated using the
identified cost method. Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Such dividend income is
recorded net of unrecoverable foreign withholding tax.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in United States dollars.
Assets and liabilities denominated in euros and other foreign currency amounts
are translated into United States dollars at the 10:00 A.M. mid-point of the
buying and selling spot rates quoted by the Federal Reserve Bank of New York.
Purchases and sales of investment securities, income and expenses are reported
at the rate of exchange prevailing on the respective dates of such transactions.
The resultant gains and losses arising from exchange rate fluctuations are
identified separately in the Statement of Operations, except for such amounts
attributable to investments which are included in net realized and unrealized
gains and losses on investments.
Foreign investments may involve certain considerations and risks not typically
associated with those of domestic origin as a result of, among others, the
possibility of political and economic developments and the level of governmental
supervision and regulation of foreign securities markets.
TAXES: No provision has been made for United States Federal income tax because
the Fund intends to meet the requirements of the United States Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends and
distributions to its shareholders on the ex-dividend date. Income and capital
gain distributions are determined in accordance with 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 year ended December 31, 2001, the Fund reclassified permanent book
and tax differences as follows:
INCREASE
(DECREASE)
----------
Undistributed net investment income ............... $ 153,404
Undistributed net realized gain on investments
and foreign currency transactions .............. 281,043
Paid-in capital ................................... (434,447)
NOTE 2. MANAGEMENT AND INVESTMENT
ADVISORY AGREEMENTS
The Fund has a Management Agreement with and rela ted undertaking by
(collectively, the "Management Agreement") Deutsc he 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.
13
THE NEW GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 (CONTINUED)
--------------------------------------------------------------------------------
The Management Agreement provides the Manager with a fee, computed weekly and
payable monthly, at the annual rates of .65% of the Fund's average weekly net
assets up to $100 million, .55% of such assets in excess of $100 million and up
to $500 million, and .50% of such assets in excess of $500 million. The
Investment Advisory Agreement provides the Investment Adviser with a fee,
computed weekly and payable monthly, at the annual rates of .35% of the Fund's
average weekly net assets up to $100 million and .25% of such assets in excess
of $100 million.
Pursuant to the Management Agreement, the Manager is the corporate manager and
administrator of the Fund and, subject to the supervision of the Board of
Directors and pursuant to recommendations made by the Fund's Investment Adviser,
determines the suitable securities for investment by the Fund. The Manager also
provides office facilities and certain administrative, clerical and bookkeeping
services for the Fund. Pursuant to the Investment Advisory Agreement, the
Investment Adviser, in accordance with the Fund's stated investment objectives,
policies and restrictions, makes recommendations to the Manager with respect to
the Fund's investments and, upon instructions given by the Manager as to
suitable securities for investment by the Fund, transmits purchase and sale
orders and selects brokers and dealers to execute portfolio transactions on
behalf of the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
For the year ended December 31, 2001, Deutsche Bank AG, the German parent of the
Manager and Investment Adviser, and its affiliates received $460,881 in
brokerage commissions as a result of executing agency transactions in portfolio
securities on behalf of the Fund.
Certain officers of the Fund are also officers of either the Manager or Deutsche
Bank AG.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the year ended December 31, 2001, were $212,441,494 and $213,003,772,
respectively.
The cost of investments at December 31, 2001 was $223,726,064 for United States
Federal income tax purposes. Accordingly, as of December 31, 2001, net
unrealized depreciation of investments aggregated $16,837,532, of which
$35,049,943 and $51,887,475 related to unrealized appreciation and depreciation,
respectively.
During the period November 1, 2001 to December 31, 2001, the Fund incurred
capital losses and foreign currency losses of $19,920,341 and $203,190,
respectively. These losses were deferred for federal income tax purposes to
January 1, 2002.
For United States Federal income tax purposes, the Fund had a capital loss carry
forward at December 31, 2001 of approximately $111.0 million which will expire
in 2009. No capital gains distribution is expected to be paid to shareholders
until future net gains have been realized in excess of such carry forward.
NOTE 5. CAPITAL
During the years ended December 31, 2001 and 2000, the Fund purchased 1,276,000
and 2,285,900 of its shares of common stock on the open market at a total cost
of $10,278,616 and $27,648,857, 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 20.8%, respectively. These shares are held in
treasury.
14
THE NEW GERMANY FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
years indicated:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
2001 2000 1999 1998 1997
--------- -------- -------- -------- -------
Per share operating performance:
Net asset value:
Beginning of year ......................................... $ 11.66 $ 15.07 $ 16.54 $ 16.35 $ 17.20
------- ------- ------- ------- -------
Net investment income (loss) .............................. (.01) (.06) .06 .06 .08
Net realized and unrealized gain (loss) on
investments and foreign currency transactions .......... (4.22) (1.60) (.60) 3.54 1.46
------- ------- ------- ------- -------
Increase (decrease) from investment operations ............ (4.23) (1.66) (.54) 3.60 1.54
------- ------- ------- ------- -------
Increase resulting from share repurchases ................. .07 .25 .32 .73 .15
------- ------- ------- ------- -------
Distributions from net investment income .................. -- -- -- (.06) (.03)
Distributions from net realized foreign
currency gains .......................................... -- -- -- (.02) --
Distributions from net realized short-term
capital gains ........................................... -- (.08) (.05) (.92) (1.24)
Distributions from net realized long-term
capital gains ........................................... -- (1.65) (1.02) (2.66) (1.05)
------- ------- ------- ------- -------
Total distributions+ ...................................... -- (1.73) (1.07) (3.66) (2.32)
------- ------- ------- ------- -------
Dilution in NAV from dividend reinvestment ................ -- (.27) (.18) (.48) (.22)
------- ------- ------- ------- -------
Net asset value:
End of year ............................................ $ 7.50 $ 11.66 $ 15.07 $ 16.54 $ 16.35
======= ======= ======= ======= =======
Market value:
End of year ............................................ $ 5.87 $ 8.875 $ 12.25 $12.9375 $ 13.50
Total investment return for the year:++
Based upon market value ................................ (33.86)% (14.35)% 3.64% 21.58% 18.36%
Based upon net asset value ............................. (35.68)% (11.46)% (2.22)% 23.85% 8.48%
Ratio to average net assets:
Total expenses before custody credits* ................. 1.25% 1.09% 1.08% .98% .99%
Net investment income (loss) ........................... (.06)% (.40)% .40% .25% .41%
Portfolio turnover ........................................ 86.65% 69.61% 31.70% 63.27% 75.97%
Net assets at end of year (000's omitted) ................. $212,650 345,589 $432,864 $505,058 $531,098
---------------
+For U.S. tax purposes, total distributions consisted of:
Ordinary income -- $ .08 $ .05 $1.00 $1.27
Long term capital gains -- 1.65 1.02 2.66 1.05
---- ----- ----- ----- -----
-- $1.73 $1.07 $3.66 $2.32
---- ----- ----- ----- -----
++Total investment return is calculated assuming that shares of the Fund's
common stock were purchased at the closing market price as of the beginning
of the year, dividends, capital gains and other distributions were
reinvested as provided for in the Fund's dividend reinvestment plan and
then sold at the closing market price per share on the last day of the
year. The computation does not reflect any sales commission investors may
incur in purchasing or selling shares of the Fund. The total investment
return based on the net asset value is similarly computed except that the
Fund's net asset value is substituted for the closing market price.
*The custody credits are attributable to interest earned on U.S. cash
balances. The ratio of total expenses after custody credits to average net
assets would have been 1.08% and 1.07% for 2000 and 1999, respectively.
See Notes to Financial Statements.
15
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
The New Germany Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The New Germany Fund, Inc. (the
"Fund") at December 31, 2001, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2001 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 8, 2002
16
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN
(UNAUDITED)
--------------------------------------------------------------------------------
The Fund offers stockholders a Voluntary Cash Purchase Program and Dividend
Reinvestment Plan ("Plan") which provides for optional cash purchases and for
the automatic reinvestment of dividends and distributions payable by the Fund in
additional Fund shares. A more complete description of the Plan is provided in
the Plan brochure available from the Fund or from Investors Bank & Trust
Company, the plan agent (the "Plan Agent"), Shareholder Services, P.O. Box 1537,
Boston, Massachusetts 02205 (telephone 1-800-356-2754). A stockholder should
read the Plan brochure carefully before enrolling in the Plan.
Under the Plan, participating stockholders ("Plan Participants") appoint the
Plan Agent to receive or invest Fund distributions as described below under
"Reinvestment of Fund Shares." In addition, Plan Participants may make optional
cash purchases through the Plan Agent as often as once a month as described
below under "Voluntary Cash Purchases." There is no charge to Plan Participants
for participating in the Fund's Plan, although when shares are purchased under
the Plan by the Plan Agent on the New York Stock Exchange or otherwise on the
open market, each Plan Participant will pay a pro rata share of brokerage
commissions incurred in connection with such purchases, as described below under
"Reinvestment of Fund Shares" and "Voluntary Cash Purchases."
REINVESTMENT OF FUND SHARES. Whenever the Fund declares a dividend or capital
gains distribution payable either in cash or in Fund shares, or payable only in
cash, the Plan Agent automatically receives Fund shares for the account of each
Plan Participant except as provided in the following paragraph. The number of
shares to be credited to a Plan Participant's account shall be determined by
dividing the equivalent dollar amount of the dividend or distribution payable to
such Plan participant by the lower of the net asset value per share or the
market price per share of the Fund's common stock on the payable date, or if the
net asset value per share is less than 95% of the market price per share on such
date, then by 95% of the market price per share.
Whenever the Fund declares a dividend or capital gains distribution payable
only in cash and the net asset value per share of the Fund's common stock
exceeds the market value per share on the payable date, the Plan Agent will
apply the amount of such dividend or distribution payable to Plan Participants
of the Fund in Fund shares (less such Plan Participant's pro rata share of
brokerage commissions incurred with respect to open-market purchases in
connection with the reinvestment of such dividend or distribution) to the
purchase on the open market of Fund shares for such Plan Participant's account.
Such purchases will be made on or after the payable date for such dividend or
distribution, and in no event more than 30 days after such date except where
temporary curtailment or suspension of purchase is necessary to comply with
applicable provisions of federal securities laws. The Plan Agent may aggregate a
Plan Participant's purchases with the purchases of other Plan Participants, and
the average price (including brokerage commissions) of all shares purchased by
the Plan Agent shall be the price per share allocable to each Plan Participant.
For all purposes of the Plan, the market price of the Fund's common stock on
a payable date shall be the last sales price on the New York Stock Exchange on
that date, or, if there is no sale on such Exchange on that date, then the mean
between the closing bid and asked quotations for such stock on such Exchange on
such date. The net asset value per share of the Fund's common stock on a
valuation date shall be as determined by or on behalf of the Fund.
The Plan Agent may hold a Plan Participant's shares acquired pursuant to the
Plan, together with the shares of other Plan Participants acquired pursuant to
this Plan, in non-certificated form in the name of the Plan Agent or that of a
nominee. The Plan Agent will forward to each Plan Participant any proxy
solicitation material and will vote any shares so held for a Plan Participant
only in accordance with the proxy returned by a Plan Participant to the Fund.
Upon a Plan Participant's written request, the Plan Agent will deliver to a Plan
Participant, without charge, a certificate or certificates for the full shares
held by the Plan Agent.
VOLUNTARY CASH PURCHASES. Plan Participants have the option of making
investments in Fund shares through the Plan Agent as often as once a month. Plan
Participants may invest as little as $100 in any month and may invest up to
$36,000 annually through the voluntary cash purchase feature of the Plan.
17
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN
(UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
The Plan Agent will purchase shares for Plan Participants on or about the
15th of each month. Cash payments received by the Plan Agent less than five
business days prior to a cash purchase investment date will be held by the Plan
Agent until the next month's investment date. Uninvested funds will not bear
interest. The Plan Agent will deduct a pro rata share of brokerage commissions
incurred in connection with voluntary cash purchases from the cash payments it
receives from Plan Participants on whose behalf the purchases were made. Plan
Participants may withdraw any voluntary cash payment by written notice received
by the Plan Agent not less than 48 hours before such payment is to be invested.
ENROLLMENT AND WITHDRAWAL. In order to become a Plan Participant, stockholders
must complete and sign the authorization form included in the Plan brochure and
return it directly to the Plan Agent if shares are registered in their name.
Stockholders who hold Fund shares in the name of a brokerage firm, bank or other
nominee should contact such nominee to arrange for it to participate in the Plan
on such stockholder's behalf. Participation in the dividend reinvestment feature
of the Plan is effective with the next dividend or capital gains distribution
payable after the Plan Agent receives a stockholder's written authorization,
provided such authorization is received prior to the record date for such
dividend or distribution. A stockholder's written authorization must be received
by the Plan Agent at least five business days in advance of the next cash
purchase investment date (normally the 15th of every month) in order to make a
cash purchase in that month.
Plan Participants may withdraw from the Plan without charge by written notice
to the Plan Agent. Plan Participants who choose to withdraw may elect to receive
stock certificates representing all of the full shares held by the Plan Agent on
their behalf, or to instruct the Plan Agent to sell such full shares and
distribute the proceeds, net of brokerage commissions, to such withdrawing Plan
Participant. Withdrawing Plan Participants will receive a cash adjustment for
the market value of any fractional shares held on their behalf at the time of
termination. Withdrawal will be effective immediately with respect to
distributions with a record date not less than 10 days later than receipt of
such written notice by the Plan Agent.
AMENDMENT AND TERMINATION OF PLAN. The Plan may only be amended or supplemented
by the Fund or by the Plan Agent by giving each Plan Participant written notice
at least 90 days prior to the effective date of such amendment or supplement,
except that such notice period may be shortened when necessary or appropriate in
order to comply with applicable law or the rules or policies of the Securities
and Exchange Commission or any other regulatory body.
The Plan may be terminated by the Fund or by the Plan Agent by written notice
mailed to each Plan Participant. Such termination will be effective with respect
to all distributions with a record date at least 90 days after the mailing of
such written notice to the Plan Participants.
FEDERAL INCOME TAX IMPLICATIONS OF REINVESTMENT OF FUND SHARES. Reinvestment of
Fund shares does not relieve Plan Participants from any income tax which may be
payable on dividends or distributions. For U.S. federal income tax purposes,
when the Fund issues shares representing an income dividend or a capital gains
dividend, a Participant will include in income the fair market value of the
shares received as of the payment date, which will be ordinary dividend income
or capital gains, as the case may be. The shares will have a tax basis equal to
such fair market value, and the holding period for the shares will begin on the
day after the date of distribution. If shares are purchased on the open market
by the Plan Agent, a participant will include in income the amount of the cash
payment made. The basis of such shares will be the purchase price of the shares,
and the holding period for the shares will begin on the day following the date
of purchase. State, local and foreign taxes may also be applicable.
18
EXECUTIVE OFFICES
31 WEST 52ND STREET, NEW YORK, NY 10019
(FOR LATEST NET ASSET VALUE, SCHEDULE OF THE FUND'S LARGEST HOLDINGS,
DIVIDEND DATA AND SHAREHOLDER INQUIRIES, PLEASE CALL 1-800-GERMANY IN THE U.S.
OR 617-443-6918 OUTSIDE OF THE U.S.)
MANAGER
DEUTSCHE BANK SECURITIES INC.
INVESTMENT ADVISER
DEUTSCHE ASSET MANAGEMENT INTERNATIONAL GMBH
CUSTODIAN AND TRANSFER AGENT
INVESTORS BANK & TRUST COMPANY
LEGAL COUNSEL
SULLIVAN & CROMWELL
INDEPENDENT ACCOUNTANTS
PRICEWATERHOUSECOOPERS LLP
DIRECTORS AND OFFICERS
CHRISTIAN STRENGER
CHAIRMAN AND DIRECTOR
JOHN A. BULT
DIRECTOR
+ JOHN H. CANNON
DIRECTOR
+ RICHARD KARL GOELTZ
DIRECTOR
DR. FRANZ WILHELM HOPP
DIRECTOR
ERNST-ULRICH MATZ
DIRECTOR
DR. FRANK TROMEL
DIRECTOR
+ ROBERT H. WADSWORTH
DIRECTOR
PETER ZUHLSDORFF
DIRECTOR
RICHARD T. HALE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HANSPETER ACKERMANN
CHIEF INVESTMENT OFFICER
ROBERT R. GAMBEE
CHIEF OPERATING OFFICER AND SECRETARY
JOSEPH M. CHEUNG
CHIEF FINANCIAL OFFICER AND TREASURER
-----------------
+Member of the Audit Committee
All investment management decisions are made by a committee of United States and
German advisors.
VOLUNTARY CASH PURCHASE PROGRAM
AND DIVIDEND REINVESTMENT PLAN
The Fund offers stockholders a Voluntary Cash Purchase Program and Dividend
Reinvestment Plan ("Plan") which provides for optional cash purchases and for
the automatic reinvestment of dividends and distributions payable by the Fund in
additional Fund shares. 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 New Germany Fund, Inc. for their information. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. The information
contained in the letter to shareholders, the German tax reform and the report
from the investment adviser and manager in this report is derived from carefully
selected sources believed reasonable. We do not guarantee its accuracy or
completeness, and nothing in this report shall be construed to be a
representation of such guarantee. Any opinions expressed reflect the current
judgment of the author, and do not necessarily reflect the opinion of Deutsche
Bank AG or any of its subsidiaries and affiliates. Notice is hereby given in
accordance with Section 23(c) of the Investment Company Act of 1940 that the
Fund may purchase at market prices from time to time shares of its common stock
in the open market.
Comparisons between changes in the Fund's net asset value per share and changes
in the MDAX and NEMAX 50 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.
[LOGO OMITTED]
GF LISTED NYSE
THE NEW YORK STOCK EXCHANGE
Copies of this report and other information are
available at:www.newgermanyfund.com
19
SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The New Germany Fund, Inc. is a non-diversified, closed-end investment company
listed on the New York Stock Exchange with the symbol "GF". The Fund seeks
capital appreciation primarily through investment in middle- market German
equities. It is managed and advised by wholly-owned subsidiaries of the Deutsche
Bank Group.
SHAREHOLDER INFORMATION
Prices for the Fund's shares are published daily in
the New York Stock Exchange Composite Transactions section of newspapers. Net
asset value and market price information are published each Monday in THE WALL
STREET JOURNAL and THE NEW YORK TIMES, and each Saturday in BARRON'S and other
newspapers in a table called "Closed End Funds". Daily information on the Fund's
net asset value is available from NASDAQ (symbol XGFNX). It is also available by
calling: 1-800-GERMANY (in the U.S.) or 617-443-6918 (outside of the U.S.). In
addition, a schedule of the Fund's largest holdings, dividend data and general
shareholder information may be obtained by calling these numbers.
The foregoing information is also available on our Web site:
www.newgermanyfund.com.
THERE ARE THREE CLOSED-END FUNDS FOR YOUR SELECTION:
o Germany Fund--investing primarily in equities of major German corporations.
It may also invest up to 35% in equities of other Western European
companies (with no more than 15% in any single country).
o New Germany Fund--investing primarily in the middle- market German
companies including the NEUER MARKT, and up to 20% elsewhere in Western
Europe (with no more than 10% in any single country).
o Central European Equity Fund--investing primarily in Central and Eastern
European companies.
Please consult your broker for advice on any of the above or call 1-800-GERMANY
(in the U.S.) or 617-443-6918 (outside of the U.S.) for shareholder reports.
01-2386