<PAGE>
--------------------------------------------------------
[GRAPHIC OMITTED]
The Germany
Fund, Inc.
Semi-annual Report
June 30, 2000
--------------------------------------------------------
<PAGE>
[GRAPHIC OMITTED] The Germany
Fund, Inc.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
July 28, 2000
Dear Shareholder,
We are pleased to report that on July 14th sweeping tax reforms were
passed by the German parliament. As described in more detail in a special
section of this report, this will change Germany from being one of the highest
taxed countries in Europe, to one of the lowest. The tax cuts should also
significantly increase foreign direct investment and productivity in Germany.
Many of the Germany Fund's portfolio holdings should benefit from the
elimination of capital gains taxes on the sale of cross ownership holdings in
other companies. As a result of the continuing reforms in Germany and its strong
economic fundamentals, we remain positive on German equities.
During the second quarter, the Fund's net asset value per share declined,
along with its DAX 30 benchmark, by 11.3% and 9.1%, respectively. The correction
in technology stocks that took place during the second quarter, led by NASDAQ's
correction of more than 13%, was the main factor. The Fund had a 12% overweight
in the "new economy" sectors: telecommunications, media and technology. However,
we remain committed to our view that over time, technology stocks should
outperform "old economy" stocks. Another contributor was the Fund's investment
restriction to purchase Deutsche Bank shares, which outperformed the DAX Index
by 33%.
The tax reform legislation should give corporate Germany a substantial
boost to both international competitiveness as well as domestic economic growth.
The tax cut package is expected to save consumers and businesses $24 billion
over five years. In addition, it paves the way for the tax-free sales of more
than $94 billion of stakes accumulated in some of Germany's largest companies.
Businessmen, investors, and economists applauded the tax package as a big step
towards reforming Germany's economy. Economists estimate the tax plan will boost
growth by 1% as companies step up hiring and consumers are left with more money
to spend. Experience has shown that countries with lower tax rates do better
over the long term than those with higher tax rates.
The Germany Fund continued its open-market purchases of its shares, buying
309,300 shares during the first six months of the year. The Fund's discount to
its net asset value averaged 9.3% during the same period, compared to 10.6% for
the first six months of 1999. At the time of this writing, the Fund's discount
to its net asset value has declined to less than 5.0%.
Sincerely,
/s/ Christian Strenger /s/ Paul W. Higgins
Christian Strenger Paul W. Higgins
Chairman President and
Chief Executive Officer
1
<PAGE>
FUND HISTORY AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
STATISTICS:
Net Assets ................................................ $225,329,811
Shares Outstanding ........................................ 14,434,903
NAV Per Share ............................................. $15.61
TOTAL RETURNS:
Period NAV
------ ---
6 months ended 6/30/00 .................................... (7.80)%
1 year ended 12/31/99 ..................................... 18.08%
3 years ended 12/31/99* ................................... 21.28%
5 years ended 12/31/99* ................................... 20.42%
* Average annual return
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
Record Ordinary LT Capital
Date Income Gains Total
---- ------ ---------- -----
9/1/00 ................................. $0.21 $0.10 $0.31
11/19/99 ............................... $0.29 $0.90 $1.19
9/1/99 ................................. -- $0.56 $0.56
11/16/98 ............................... $1.46 $1.76 $3.22
9/1/98 ................................. $0.17 $0.45 $0.62
11/17/97 ............................... $0.62 $2.23 $2.85
9/3/97 ................................. $0.07 $0.24 $0.31
12/19/96 ............................... $0.34 $0.72 $1.06
OTHER INFORMATION:
NYSE Ticker Symbol ........................................ GER
NASDAQ Symbol ............................................. XGERX
Dividend Reinvestment Plan ................................ Yes
Voluntary Cash Purchase Program ........................... Yes
Annual Expense Ratio ...................................... 1.19%
PERFORMANCE
================================================================================
[GRAPHIC OMITTED]
[The following table was depicted as a bar chart in the printed material.]
Six months ended 6/30/00 Year ended 12/31/99
------------------------ -------------------
NET ASSET VALUE -7.80% 18.08%
MARKET VALUE -6.61% 23.83%
DAX -5.78% 19.98%
2
<PAGE>
PORTFOLIO BY MARKET SECTOR AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
Chemicals (6.9%)
Banks (11.1%)
Communications Equipment (2.5%)
Wireless Telecommunications Services (1.9%)
Industrial Conglomerates (11.5%)
Semiconductor Equipment & Products (3.9%)
Construction & Engineering (1.1%)
Insurance (18.1%)
IT Consulting & Services (3.2%)
Automobiles (5.9%)
Pharmaceuticals (2.7%)
Media (2.1%)
Diversified Telecommunication Services (16.3%)
Healthcare Providers & Services (2.4%)
Hotels, Restaurants & Leisure (1.1%)
Multi-line Retail (0.8%)
Software (7.4%)
Multi Utilities (1.1%)
10 LARGEST EQUITY HOLDINGS AS Of JUNE 30, 2000
--------------------------------------------------------------------------------
% of
Portfolio
---------
1. Deutsche Telekom 12.1
2. Siemens 11.5
3. Allianz 10.2
4. Munchener Ruckversicherungs 7.8
5. SAP 7.4
6. Commerzbank 4.9
7. BASF 4.3
8. Infineon Technologies 3.9
9. Dailmer-Chrysler 3.7
10. Dresdner Bank 3.4
3
<PAGE>
GERMAN TAX REFORM
--------------------------------------------------------------------------------
The tax reform package passed by the German parliament, has five key
elements, affecting both corporate and personal income taxes:
o Reduces the top personal marginal tax rate to 42% in 2005 from the
current level of 51%. This builds on the reduction in personal tax
already started by the Schroeder government in 1999, when the rate
was reduced from 53% to the current 51%.
o A reduction in the lowest personal marginal tax rate to 15% in 2005,
from 22.9% currently.
o The reduction in the corporate tax rate on retained earnings to 25%
from 45% currently, effective January 1, 2001.
o Elimination of tax on the sale of shares by corporations, effective
January 1, 2002.
o The reduction in the tax on dividend income to half the personal
income tax. Currently, dividend income is taxed at the full personal
income tax rate.
Once the tax reforms are implemented, Germany will be transformed from one
of the highest taxed countries to one of the lowest. The corporate tax changes
will lead to a significant boost in corporate earnings, foreign direct
investment, and benefit job creation.
Corporate tax rates
on retained earnings
----------------------
(includes state taxes)
Canada ............................................... 44.6%
Japan ................................................ 42.9
Italy ................................................ 41.3
U.S .................................................. 40.8
France ............................................... 40.0
Germany .............................................. 38.6
Netherlands .......................................... 35.5
U.K .................................................. 30.0
Top income bracket
tax rates
------------------
France ............................................... 62.0%
Netherlands .......................................... 60.0
Japan ................................................ 50.0
Spain ................................................ 48.0
Italy ................................................ 46.2
U.S .................................................. 45.8
Germany .............................................. 44.3
U.K .................................................. 40.0
The elimination of the 50% capital gains tax on asset sales by companies
would finally clear the path to unprecedented corporate restructuring within
Germany. It would allow companies to divest, free of tax, big equity stakes held
in other corporations. The practice of cross-shareholdings began after World War
II in an attempt to rebuild Germany, but has since become a roadblock in the
modernization of Germany's industry. Investors have long complained that the
cross-shareholdings have hampered returns and held back industry consolidation.
This new development is expected to improve Germany's competitiveness and to
boost its capital markets by increasing liquidity and allowing companies to make
better use of their cash currently tied up in long-term holdings. So far,
industrial companies have been able to get away with below average profit
margins because their majority owners protected them from hostile bids. Going
forward, this protection will be removed, leading to further industry
consolidation and increased profitability.
A perfect example of the extensive cross-shareholdings is Allianz,
Europe's second biggest insurance company. Allianz owns stakes in 17 of the 30
companies in the DAX Index and is the biggest shareholder in Dresdner Bank and
HypoVereinsbank. Allianz has always maintained that the high tax rate was the
main reason they have not sold direct investments, despite poor performance in
some cases. Going forward, the market value of companies in similar situations
should rise substantially. On the first day of the announcement, the share price
of financials such as Allianz were up more than 10%. More importantly, however,
the move is a further milestone in the process of restructuring corporate
Germany in order to become more competitive internationally.
4
<PAGE>
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
Outlook for the German Economy
Since the beginning of the year, economic growth in Germany has been
surging. The persistent weakness of the Euro, combined with robust global
economic growth, creates an ideal condition for the exporting countries in the
Euro-zone. Germany's rise in GDP growth of 3.5% in the first quarter was the
strongest since the first quarter of 1998, and it indicates that Germany has
overcome the period of low growth which followed the emerging markets crisis.
Driving this economic growth are exports, which grew at an annualized rate of
11.7% during the first quarter. Furthermore, the growth in exports has led to
strong increases in investment in machinery and equipment. In addition, all
indicators point to the expansion gaining momentum in the coming months. April's
factory orders climbed 14.9% from a year earlier, the biggest increase in 15
years. The German IFO business climate index has been setting new records each
month; order intake in German manufacturing has been steadily increasing; and
private consumption has remained strong due to higher disposable household
income. Investment in construction is set to increase further, due to a higher
order backlog and improved business expectation in the sector. In addition, the
reduction in unemployment from 10.2% to 9.6%, the lowest in 5 years, and the new
tax reform should give an added boost to consumption. But the biggest
contributor to growth in 2000 will continue to come from exports. Exports are
benefiting from the weak Euro, which makes German goods highly competitive. The
pickup in growth in Europe and emerging markets should also add to the momentum.
While the overall outlook for the global economy is strong, the continued
high oil price has raised inflationary fears. However, the inflationary forces
are much stronger in the U.S. than in Europe, largely due to the tight labor
market conditions in the U.S. market. In Europe, the interplay of strong
productivity growth, moderate wage growth, and stiff competition, amplified by
government deregulation measures, have kept inflation under control. Deutsche
Bank economist estimates that the inflation rate will remain below the 2.0%
target set by the European Central Bank for 2001 and 2002.
The Fund's Portfolio Strategy
The Fund plans to maintain its overweight position in the
telecommunications, media and technology sectors as we still find the most
attractive investment opportunities in selective "new economy" stocks.
Telecommunications spending continues to rise in most markets. This is
attributable to deeper network penetration, and new products (wireless and
internet). The Fund will also maintain its overweight position in insurance
companies and banks. The financial sector will be the main beneficiary of the
tax exemption of capital gains on corporate shareholdings. Many of the "old
economy" sectors have been kept underweighted as earning momentum in these
sectors is expected to significantly lag behind the "new economy" sectors over
the next few years. The Fund plans to remain underweight in the automotive
sector due to fierce pricing competition, production over-capacity, and falling
second-hand market prices. During the second half of the year, we may reduce the
large underweight we have had in the utilities sector. After declines of nearly
40% over the past 18 months, wholesale electricity prices have begun to
stabilize. Furthermore, ongoing cost cutting programs and the synergies of
recent merger activities are leading to a mild recovery in utilities' earnings
from 2000 onwards.
5
<PAGE>
PRINCIPAL BENEFITS OF CLOSED-END FUNDS
--------------------------------------------------------------------------------
1. You have a chance to buy at a discount.
Presently your Fund's shares trade at a discount to net asset value. No
one has been able to explain satisfactorily why discounts and premiums exist
other than to note they are a barometer of market sentiment just like
price/earnings ratios. We believe the Fund's current discount offers you the
opportunity to magnify your investment by buying a dollar's worth of assets for
less than a dollar.
2. You have the opportunity for better investment management from a stable
fund environment.
Your Fund's managers are able to focus on the investment process. They
concentrate on which securities to buy and sell and when to do so. They have the
flexibility to sell when prices rise and buy when they fall.
The managers do not have to be concerned with inflows of money or outflows
as do open-end mutual fund managers. They may remain more fully invested,
without having to keep a cash cushion to meet redemptions. They can ride out
market down-turns without having to sell securities they would prefer to keep.
In addition, a constant inflow of money can also make mutual funds victims
of their own success. The inflows must be invested by the portfolio manager at
times when good investment opportunities may not exist, which can create a drag
on the fund's performance.
3. The closed-end fund's focus is on current shareholders.
With a fixed amount of capital, a closed-end fund is not generally
involved in attracting additional funds, and shareholders are not required to
pay for the costs of attracting new investors. The open-end mutual fund
portfolio manager, however, has an incentive to attract new shareholders because
the amount of fees earned by the management company in no small part depends on
adding new money to the fund. In order to market the mutual fund to new
shareholders, current mutual fund shareholders are often charged marketing fees
which reduce the current shareholders' returns. In contrast, closed-end fund
investors are not burdened with these fees. Thus, the closed-end fund portfolio
manager is able to focus on returns for current shareholders, not attracting new
ones.
4. Expenses may be lower.
Unlike open-end mutual funds, the closed-end funds do not have recurring
marketing fees. There are no back-end load charges or 12b-1 marketing fees.
We are pleased that your Fund continues to enjoy one of the lowest expense
ratios of all of the European funds, whether they be open-end or closed-end,
according to Lipper Analytical. This lower cost is passed on to you, our
shareholder.
5. You can trade on an exchange.
Our Fund has been listed on the New York Stock Exchange since inception.
You can control the timing of your purchases and sales unlike mutual funds which
only take orders for execution at the end of the day and at a price you do not
know in advance. You may also place restrictions on your orders just like any
other exchange traded stock such as limit orders or stop orders.
You have the benefit of seeing the interday trading activity in your
Fund's shares, which can assist you in identifying the right times to buy or
sell and make limit order strategies more useful.
6
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND
--------------------------------------------------------------------------------
Since inception, your Board of Directors has consisted largely of
independent professionals having no business relationship with the manager or
adviser. There are several committees of the Board--including Audit, Advisory,
Securities Lending and Pricing--that consist solely of outside Directors. These
committees play an important role in overseeing the working of the Fund and its
compliance with the various securities regulations.
At its January 31, 2000 Board Meeting, the Board of Directors established
an Executive Committee consisting of five independent Directors plus the Fund's
Chairman. Also at the April 14, 2000 Board Meeting, the Directors adopted an
Audit Committee charter in keeping with new guidelines of the Securities and
Exchange Commission and the New York Stock Exchange.
There are five regularly-scheduled Board Meetings each year. These
meetings are combined for the three closed-end funds managed by the Deutsche
Bank Group: Germany Fund, New Germany Fund and Central European Equity Fund.
While each Fund's Board of Directors focuses on matters relating to such Fund,
the effect of having combined Boards of Directors meetings expands the
professional knowledge contributed at the meetings. In addition to the board
meetings, there are combined committee meetings (primarily Audit and Advisory)
during the year. All committees of the Board, with the exception of the
Nominating Committee and the newly-created Executive Committee of which the
Fund's Chairman is a member, consist exclusively of disinterested Directors who
are able to represent shareholders objectively.
The list of Directors of all three closed-end funds and their principal
occupations is published each year in the proxy statements. We summarize this
information on page 8.
7
<PAGE>
DIRECTORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
Mr. Detlef Bierbaum, Partner, Sal. Oppenheim & Cie., (private bank)
Mr. John A. Bult, Chairman, PaineWebber International
*Hon. Richard R. Burt, Chairman, IEP Advisers, LLP; former U.S. Ambassador to
Germany
*Mr. John H. Cannon, Vice President & Treasurer, Venator Group
*Mr. Richard Goeltz, former Vice Chairman and Chief Financial Officer, American
Express Co.
*Dr. Franz-Wilhelm Hopp, Chairman, ERGO Versich-erungsgruppe AG (insurance)
*Dr. Claus Koehler, Economist; former Member of the Directorate of the
Bundesbank (German Central Bank)
*Mr. Ernst-Ulrich Matz, Chief Financial Officer, IWKA AG (engineering)
*Mr. Edward Schmults, former General Counsel, GTE Corp.; former partner, White &
Case, former Deputy Attorney General of the United States
*Mr. Hans G. Storr, former CFO, Philip Morris Companies Inc.
Mr. Christian Strenger, Chairman of the Boards of Directors of the Closed-End
Funds, former CEO, DWS (Deutsche Bank's mutual fund group)
*Dr. Juergen Strube, Chairman, BASF AG (chemicals)
*Dr. Frank Tromel, Chairman, Delton AG (industrial holding company)
*Mr. Robert Wadsworth, President, Robert H.Wadsworth & Associates, Inc. (fund
administration)
*Mr. Werner Walbrol, President and CEO, German American Chamber of Commerce
*Mr. Otto Wolff von Amerongen, Chairman, Otto Wolff AG (industrial holding
company); former director, Exxon Company
*Mr. Peter Zuhlsdorff, Chairman, DIH-German Industrie Holding, former Chairman
of the Board, Wella AG (hair care products)
Note: The Directors of the three funds (the Germany Fund, the New Germany Fund
and the Central European Equity Fund) meet together in combined board meetings
although they speak for their respective funds. Three Directors sit on all three
fund boards: Messrs. Bult, Strenger and Wadsworth. The following sit only on the
boards of the Germany Fund and the Central European Equity Fund: Messrs.
Bierbaum, Burt, Koehler, Schmults, Storr, Strube, Walbroel and Wolff. The
following sit only on the board of the New Germany Fund: Messrs. Cannon, Goeltz,
Hopp, Matz, Troemel and Zuhlsdorff.
* indicates a "disinterested director"
8
<PAGE>
OFFICERS AND ADVISORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
Mr. Paul W. Higgins, President and Chief Executive Officer of the Closed-End
Funds, Managing Director and Head of Private Banking Americas of Deutsche
Bank
Mr. Hanspeter Ackermann, Chief Investment Officer of the Closed-End Funds and
Managing Director of Deutsche Bank Securities Inc.
Mr. Robert Gambee, Chief Operating Officer and Secretary of the Closed-End
Funds, Director of Deutsche Bank Securities Inc.
Mr. Joseph Cheung, Chief Financial Officer and Treasurer of the Closed-End Funds
and Vice President of Deutsche Bank Securities Inc.
Ms. Isabella Chan, Funds Administrator, Deutsche Bank Securities Inc.
Mr. Thomas Gill, Assistant Vice President of Deutsche Bank Securities Inc.
Mr. Christophe Bernard, Senior Portfolio Manager, Deutsche Asset Management
International GmbH
Mr. Thomas Bucher, Portfolio Manager, Deutsche Asset Management International
GmbH
Mr. John Bostelman, Partner, Sullivan & Cromwell, Counsel to the Funds
Mr. Frank P. Bruno, Partner of Brown & Wood, Counsel to the Independent
Directors
SHARES REPURCHASED
--------------------------------------------------------------------------------
The Fund has been purchasing shares of its common stock in the open
market. Your Directors continue to believe the Fund represents excellent value.
The shares repurchased for the past five years and the six months ended June 30,
2000 are as follows:
<TABLE>
<CAPTION>
Six months
Calendar year 1995 1996 1997 1998 1999 ended 6/30/00
------- ------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shares repurchased -0- 474,460 982,512 3,516,802 1,003,800 309,300
</TABLE>
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.
9
<PAGE>
THE GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2000 (unaudited)
--------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
INVESTMENTS IN GERMAN
SECURITIES--84.0% OF NET ASSETS
COMMON STOCKS--76.7%
AUTOMOBILES--5.8%
160,000 Bayerische Motoren Werke .................... $ 4,846,176
156,260 Daimler-Chrysler ............................ 8,230,148
--------------
13,076,324
--------------
BANKS--11.0%
96,000 Bayerische Hypothekenbank
und Vereinsbank ........................... 6,266,290
304,000 Commerzbank ................................. 10,868,623
183,820 Dresdner Bank ............................... 7,646,710
--------------
24,781,623
--------------
CHEMICALS--6.8%
235,500 BASF ........................................ 9,582,100
150,000 Bayer ....................................... 5,866,020
--------------
15,448,120
--------------
CONSTRUCTION & Engineering--1.1%
150,000 Thyssen Krupp* .............................. 2,415,420
--------------
DIVERSIFIED TELECOMMUNICATION
SERVICES--12.0%
473,000 Deutsche Telekom ............................ 27,020,882
--------------
HEALTHCARE PROVIDERS &
SERVICES--2.3%
65,000 Fresenius Medical Care ...................... 5,233,410
--------------
INDUSTRIAL CONGLOMERATES--11.4%
170,000 Siemens ..................................... 25,663,838
--------------
INSURANCE--17.8%
62,500 Allianz ..................................... 22,764,374
54,700 Munchener Ruckversicherungs ................. 17,432,958
--------------
40,197,332
--------------
MULTILINE RETAIL--0.8%
52,700 Metro ....................................... 1,858,877
--------------
MULTI UTILITIES--1.1%
50,000 E.ON ........................................ 2,463,345
--------------
PHARMACEUTICAL--2.7%
108,000 Schering .................................... 6,004,044
--------------
SEMICONDUCTOR EQUIPMENT &
PRODUCTS--3.9%
110,000 Infineon Technologies ....................... 8,751,105
--------------
Total Common Stocks
(cost $117,147,903) ....................... 172,914,320
--------------
PREFERRED STOCK--7.3%
SOFTWARE--7.3%
88,800 SAP
(cost $9,683,748) ......................... 16,469,714
--------------
Total Investments in
German Securities
(cost $126,831,651) ....................... 189,384,034
--------------
INVESTMENTS IN DUTCH
COMMON STOCKS--5.6%
DIVERSIFIED TELECOMMUNICATION
SERVICES--1.2%
70,000 Equant ...................................... 2,855,563
86,000 United Pan-Europe Communication ............. 2,257,785
--------------
5,113,348
--------------
IT CONSULTING
& SERVICES--1.2%
180,000 Getronics ................................... 2,786,360
--------------
MEDIA--2.1%
90,000 VNU ......................................... 4,666,937
--------------
Total Investments in
Dutch Common Stocks
(cost $20,546,107) ........................ 12,566,645
--------------
INVESTMENTS IN FRENCH
COMMON STOCKS--4.4%
COMMUNICATIONS EQUIPMENT--2.5%
85,000 Alcatel ..................................... 5,597,160
--------------
IT CONSULTING & Services--1.9%
24,000 Cap Gemini .................................. 4,244,238
--------------
Total Investments in
French Common Stocks
(cost $8,405,102) ......................... 9,841,398
--------------
* Non-income producing securities
See Notes to Financial Statements.
10
<PAGE>
THE GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2000 (unaudited) (continued)
--------------------------------------------------------------------------------
Shares Description Value
------ ----------- -----
INVESTMENT IN ITALIAN
COMMON STOCK--0.9%
DIVERSIFIED TELECOMMUNICATION
SERVICES--0.9%
200,000 Telecom Italia Mobile
(cost $1,953,330) .................... $ 2,056,940
--------------
INVESTMENTS IN SPANISH
COMMON STOCKS--2.1%
DIVERSIFIED TELECOMMUNICATION
SERVICES--1.0%
100,000 Telefonica de Espana ................... 2,156,625
--------------
HOTELS RESTAURANTS &
LEISURE--1.1%
220,000 Amadeus Global Travel .................. 2,519,897
--------------
Total Investments in Spanish
Common Stocks
(cost $3,880,076) .................... 4,676,522
--------------
INVESTMENT IN UNITED KINGDOM
COMMON STOCK--1.8%
WIRELESS TELECOMMUNICATION
SERVICES--1.8%
1,013,289 Vodafone Airtouch
(cost $5,508,502) .................... 4,098,805
--------------
Total Investments--98.8%
(cost $167,124,768) .................. 222,624,344
Cash and other assets in
excess of liabilities--1.2% .......... 2,705,467
--------------
NET ASSETS--100% $ 225,329,811
==============
See Notes to Financial Statements.
11
<PAGE>
THE GERMANY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $167,124,768) .............. $ 222,624,344
Cash and foreign currency
(cost of foreign currency $2,227,216) .............. 2,880,604
Dividend receivable .................................... 10,439
Interest receivable .................................... 37,086
Foreign withholding tax refund receivable .............. 78,271
Other assets ........................................... 10,844
-------------
Total assets ....................................... 225,641,588
-------------
LIABILITIES
Management fee payable ................................. 108,940
Investment advisory fee payable ........................ 55,887
Payable for Directors' fees and expenses ............... 30,000
Accrued expenses and accounts payable .................. 116,950
-------------
Total liabilities .................................. 311,777
-------------
NET ASSETS ............................................. $ 225,329,811
=============
Net assets consist of:
Paid-in capital, $.001 par
(Authorized 80,000,000 shares) ..................... $ 155,310,963
Cost of 1,101,154 shares held in treasury .............. (15,772,815)
Undistributed net investment income .................... 637,714
Undistributed net realized gain on investments
and foreign currency transactions .................. 29,606,919
Net unrealized appreciation of investments
and foreign currency ............................... 55,547,030
-------------
Net assets ............................................. $ 225,329,811
=============
Net asset value per share
($225,329,811 divided by 14,434,903 shares of
common stock issued and outstanding) ............... $15.61
======
See Notes to Financial Statements.
12
<PAGE>
THE GERMANY FUND, INC.
STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------
For the six
months ended
June 30, 2000
-------------
NET INVESTMENT INCOME
Income
Dividends (net of foreign withholding
taxes of $233,906) ................................. $ 1,931,963
Interest .............................................. 45,714
Securities lending .................................... 114,644
------------
Total income .............................................. 2,092,321
------------
Expenses
Management fee ........................................ 705,281
Investment advisory fee ............................... 359,247
Reports to shareholders ............................... 62,671
Custodian and Transfer Agent's
fees and expenses ................................ 92,708
Directors' fees and expenses .......................... 67,353
Legal fee ............................................. 53,385
Audit fee ............................................. 29,000
NYSE listing fee ...................................... 12,130
Miscellaneous ......................................... 78,469
------------
Total expenses before custody credits* ................ 1,460,244
Less: custody credits ................................. (5,637)
------------
Net expenses .......................................... 1,454,607
------------
Net investment income ..................................... 637,714
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments ........................................... 26,129,295
Foreign currency transactions ......................... (2,596)
Net change in unrealized appreciation/depreciation on:
Investments ........................................... (46,125,604)
Translation of other assets and
liabilities from foreign currency ................ 62,345
------------
Net loss on investments and
foreign currency transactions ......................... (19,936,560)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............................. $(19,298,846)
============
* The custody credits are attributable to interest earned on U.S. cash
balances.
See Notes to Financial Statements.
13
<PAGE>
THE GERMANY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six For the
months ended year ended
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income ................................................. $ 637,714 $ 870,028
Net realized gain (loss) on:
Investments ........................................................ 26,129,295 20,167,335
Foreign currency transactions ...................................... (2,596) (367,645)
Net change in unrealized appreciation/depreciation on:
Investments ........................................................ (46,125,604) 17,639,101
Translation of other assets and liabilities from foreign currency .. 62,345 (14,674)
------------- -------------
Net increase (decrease) in net assets resulting from operations ....... (19,298,846) 38,294,145
------------- -------------
Distributions to shareholders from:
Net investment income ................................................. -- (546,557)
Net realized short term capital gains* ................................ -- (3,530,855)
Net realized long term capital gains .................................. -- (20,446,494)
------------- -------------
-- (24,523,906)
------------- -------------
Capital share transactions:
Net proceeds from reinvestment of dividends
(0 and 1,252,699 shares, respectively) ............................. -- 16,568,036
Cost of shares repurchased (309,300 and 1,003,800 shares, respectively) (4,967,352) (13,697,631)
------------- -------------
Net increase (decrease) in net assets from capital share transactions . (4,967,352) 2,870,405
------------- -------------
Total increase (decrease) in net assets ................................... (24,266,198) 16,640,644
NET ASSETS
Beginning of period ....................................................... 249,596,009 232,955,365
------------- -------------
End of period (including undistributed net investment income of
$637,714 and $0, respectively) ........................................ $ 225,329,811 $ 249,596,009
============= =============
</TABLE>
----------
* Characterized as ordinary income for tax purposes.
See Notes to Financial Statements.
14
<PAGE>
THE GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- June 30, 2000 (unaudited)
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The Germany Fund, Inc. (the "Fund") was incorporated in Delaware on April 8,
1986 as a diversified, closed-end management investment company. Investment
operations commenced on July 23, 1986. Pursuant to shareholder approvals, the
Fund reincorporated in Maryland on August 29, 1990 and dissolved the charter of
incorporation in Delaware, and on October 16, 1996 the Fund changed from a
diversified to a non-diversified company.
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 generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation: Investments are stated at value. All securities for which
market quotations are readily available are valued at the last sales price on
the primary exchange on which they are traded prior to the time of valuation,
or, if no sales price is available at that time, at the price established by the
exchange. Securities that are traded in the unregulated market are valued, if
bid and asked quotations are available, at the current bid price. If bid and
asked quotations are not available, then such securities will be valued as
determined in good faith by the Board of Directors of the Fund.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Cost of securities sold is calculated using the
identified cost method. Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Such dividend income is
recorded net of unrecoverable foreign withholding tax.
Loans of Portfolio Securities: The Fund may lend portfolio securities while it
continues to earn dividends on such securities loaned. The market value of
government securities received as collateral is at least equal at all times to
105 percent of the market value of the securities loaned, which are
marked-to-market daily. Securities lending fee is earned by the Fund and is
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 ("EUR")
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 generally accepted accounting principles.
These differences, which could be temporary or permanent in nature, may result
in reclassification of distributions; however, net investment income, net
realized gains and net assets are not affected.
NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS
The Fund has entered into 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.
15
<PAGE>
THE GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS-- June 30, 2000 (unaudited) (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 $50 million, and .55% of such assets in excess of $50 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 will be 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,
will determine the suitable securities for investment by the Fund. The Manager
will also provide 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, will make 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, will
transmit 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 June 30, 2000, Deutsche Bank AG, the German parent of
the Manager and Investment Adviser, and its affiliates received $329,498 in
brokerage commissions as a result of executing agency transactions in portfolio
securities on behalf of the Fund.
Certain directors and officers of the Fund are also directors and officers of
either the Manager, the Investment Adviser or Deutsche Bank AG.
Certain directors of the Fund serve as directors of certain portfolio securities
held by the Fund.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the six months ended June 30, 2000 were $183,601,941 and $185,939,050,
respectively.
During the period November 1, 1999 to December 31, 1999, the Fund incurred
foreign currency losses of $251,305. This loss was deferred for federal income
tax purposes to January 1, 2000.
NOTE 5. PORTFOLIO SECURITIES LOANED
At June 30, 2000, the market values of the securities loaned and government
securities received as collateral for such loans were $5,015,476 and $5,493,886,
respectively. For the six months ended June 30, 2000, the Fund earned $114,644
as securities lending fee.
NOTE 6. CAPITAL
During the six months ended June 30, 2000 and the year ended December 31, 1999,
the Fund purchased 309,300 and 1,003,800 of its shares of common stock on the
open market at a total cost of $4,967,352 and $13,697,631, respectively. The
weighted average discount of these purchases comparing the purchase price to the
net asset value at the time of purchase was 10.6% and 11.3%, respectively. These
shares were held in treasury.
16
<PAGE>
THE GERMANY FUND, INC.
FINANCIAL HIGHLIGHTS (unaudited)
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
periods indicated:
<TABLE>
<CAPTION>
For the six
months ended
June 30, For the year ended December 31,
2000 1999 1998 1997 1996 1995
------------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value:
Beginning of period ............................. $ 16.93 $ 16.07 $ 16.23 $ 15.76 $ 13.52 $ 12.89
-------- -------- ------- -------- -------- --------
Net investment income ........................... .04 .06 .23 .09 .08 .12
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions................................. (1.40) 2.57 3.41 3.50 3.34 1.64
-------- -------- ------- -------- -------- --------
Increase (decrease) from investment operations .. (1.36) 2.63 3.64 3.59 3.42 1.76
-------- -------- ------- -------- -------- --------
Increase resulting from share repurchases ....... .04 .12 .54 .19 .10 --
-------- -------- ------- -------- -------- --------
Distributions from net investment income ........ -- (.04) (.23) -- -- (.12)
Distributions from net realized
foreign currency gains+ ..................... -- -- (.06) -- -- (.08)
Distributions from net realized
short-term capital gains+ ................... -- (.25) (1.35) (.69) (.34) (.15)
Distributions from net realized
long-term capital gains ..................... -- (1.46) (2.20) (2.47) (.85) (.71)
-------- -------- ------- -------- -------- --------
Total distributions ............................. -- (1.75) (3.84) (3.16) (1.19) (1.06)
-------- -------- ------- -------- -------- --------
Dilution in NAV from dividend reinvestment ...... -- (.14) (.50) (.15) (.09) (.07)
-------- -------- ------- -------- -------- --------
Net asset value:
End of period ............................... $ 15.61 $ 16.93 $ 16.07 $ 16.23 $ 15.76 $ 13.52
======== ======== ======= ======== ======== ========
Market value:
End of period ............................... $ 14.125 $ 15.125 $13.875 $ 14.25 $ 12.625 $ 11.375
Total investment return for the period:++
Based upon market value ..................... (6.61)% 23.83% 23.45% 38.3% 21.55% 15.72%
Based upon net asset value .................. (7.80)% 18.08% 22.66% 23.16% 25.47% 13.12%
Ratio to average net assets:
Total expenses before custody credits* ...... 1.19%** 1.26% 1.16% 1.19% 1.26% 1.23%
Net investment income ....................... .52%** .40% 1.20% .49% .56% .88%
Portfolio turnover .............................. 76.94% 71.52% 80.93% 81.2% 55.4% 41%
Net assets at end of period (000's omitted) ..... $225,330 $249,596 $32,955 $228,175 $223,800 $189,686
</TABLE>
----------
+ Characterized as ordinary income for tax purposes.
++ Total investment return is calculated assuming that shares of the Fund's
common stock were purchased at the closing market price as of the
beginning of the 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 1.19%, 1.25% and 1.15% for 2000, 1999 and 1998,
respectively.
** Annualized.
See Notes to Financial Statements.
17
<PAGE>
THE GERMANY FUND, INC.
REPORT OF STOCKHOLDERS' MEETING
(unaudited)
--------------------------------------------------------------------------------
The Fund held its Annual Meeting of Stockholders on June 30, 2000. The two
matters voted upon by stockholders and the resulting votes for each matter were
as follows:
Voting Results*
---------------
Against/
For Withheld Abstained
--- -------- ---------
1. Election of the following Directors:
Detlef Bierbaum .......................... 10,248 320 --
Richard R. Burt .......................... 10,292 276 --
Edward C. Schmults ....................... 10,305 262 --
Hans G. Storr ............................ 10,352 215 --
2. Selection of Independent Accountants ..... 10,415 92 61
----------
* In thousands of shares
EXECUTIVE OFFICES
31 West 52nd Street, New York, NY 10019
(For latest net asset value, schedule of the Fund's largest hold ings,
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
DIRECTORS AND OFFICERS
CHRISTIAN STRENGER
Chairman and Director
DETLEF BIERBAUM
Director
JOHN A. BULT
Director
RICHARD R. BURT
Director
PROF. DR. CLAUS KOEHLER
Director
EDWARD C. SCHMULTS
Director
HANS G. STORR
Director
DR. JUERGEN F. STRUBE
Director
ROBERT H. WADSWORTH
Director
WERNER WALBROEL
Director
OTTO WOLFF VON AMERONGEN
Director
PAUL W. HIGGINS
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.
18
<PAGE>
--------------------------------------------------------------------------------
VOLUNTARY CASH PURCHASE PROGRAM
AND DIVIDEND REINVESTMENT PLAN
The Fund offers stockholders a Voluntary Cash Purchase Program and Dividend
Reinvestment Plan ("Plan") which provides for optional cash purchases and for
the automatic reinvestment of dividends and distributions payable by the Fund in
additional Fund shares. A brochure is available by writing or telephoning the
plan agent:
Investors Bank & Trust Company
Shareholder Services
P.O. Box 9130
Boston, MA 02117
Tel. 1-800-437-6269
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is transmitted to the
shareholders of The 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 DAX 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.
--------------------------------------------------------------------------------
---------------------------
GER
Listed
[LOGO]
THE NEW YORK STOCK EXCHANGE
---------------------------
19
<PAGE>
SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The Germany Fund is a non-diversified, closed-end investment company listed on
the New York Stock Exchange with the symbol "GER". The Fund seeks long-term
capital appreciation primarily through investment in German equities. It is
managed by Deutsche Bank Securities Inc., using investment advice from the
Deutsche Asset Management International GmbH unit of Deutsche Bank AG, the
world's largest bank.
SHAREHOLDER INFORMATION
Daily prices for the Fund's shares are published 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 XGERX). 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.germanyfund.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
Europe.
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.
--------------------------------------------------------------------------------
103633
