SCUDDER
New Europe
Fund, Inc.
Semiannual Report
April 30, 1995
A closed-end investment company seeking long-term capital appreciation through
investment primarily in equity securities of companies traded on smaller or
emerging European markets and companies that are viewed as likely to benefit
from changes and developments throughout Europe.
<PAGE>
Scudder New Europe Fund, Inc.
- --------------------------------------------------------------------------------
Investment objectives and policies
o long-term capital appreciation through investment primarily in equity
securities of companies traded on smaller or emerging European markets and
companies that are viewed as likely to benefit from changes and developments
throughout Europe
Investment characteristics
o emphasis on "Specialized Investments," including equity securities of (i)
privately-held European companies, (ii) European companies that have recently
made initial public offerings of their shares, (iii) government-owned or
controlled European companies that are being privatized, (iv) smaller
publicly-held European companies, and (v) companies and joint ventures based
in Eastern Europe
o closed-end investment company
o a convenient vehicle for participation in opportunities available in smaller
and emerging European markets and that result from the dynamic changes
affecting Europe
Contents
- --------------------------------------------------------------------------------
Letter to Shareholders 3
Investment Summary 5
Portfolio Summary 6
Investment Portfolio 7
Financial Statements 13
Financial Highlights 16
Notes to Financial Statements 17
Report of Independent Accountants 21
Investment Manager 22
Dividend Reinvestment and
Cash Purchase Plan 22
Directors and Officers 23
General Information
- --------------------------------------------------------------------------------
Executive offices
Scudder New Europe Fund, Inc.
345 Park Avenue
New York, NY 10154
For Fund information: 1-800-349-4281
Transfer agent, registrar and dividend reinvestment plan agent The First
National Bank of Boston
Telephone: 617-575-2900
Custodian
Brown Brothers Harriman & Co.
Independent Accountants
Coopers & Lybrand L.L.P.
New York Stock Exchange Symbol--NEF
This report is sent to the shareholders of Scudder New Europe Fund, Inc. for
their information. It is not a prospectus, circular, or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in the report.
2
<PAGE>
Scudder New Europe Fund, Inc.
Letter to Shareholders
- --------------------------------------------------------------------------------
Dear Shareholders:
The net asset value of the Scudder New Europe Fund rose 3.88% from $11.61 to
$12.06 over the six month period ended April 30, 1995. The Fund's share price on
the New York Stock Exchange decreased from $9.75 to $9.63 over the same period,
which represents a 20% discount to the underlying net asset value. The Fund's
investment performance history is provided on page 5 entitled "Investment
Summary."
The Market Environment
Early in the period, currency turmoil mixed with political and electoral
uncertainties overshadowed the more positive investment background taking shape
in Europe. Investors were haunted by the 1994 rise in interest rates which
accompanied a sudden and surprisingly robust European economic recovery. As the
prospects of slower, more solidly based economic growth and contained inflation
allowed an easing of interest rates by the German Bundesbank in late March,
markets rallied across Europe. Corporate earnings strength added to the
brightening picture. Challenged by the difficulties of Europe's worst postwar
recession and the onslaught of ever more intense global competition, many
European companies have restructured and refocused on core businesses and are
now positioned to enjoy substantial earnings gains in a more benign environment.
Developments in Eastern Europe are also encouraging. Poland endured the pain
of its shock economic therapy early in the decade and is well advanced in a
successful transformation to a market economy. Today Poland boasts one of the
fastest economic growth rates in Europe. After the Polish equity market boom in
late 1993 and subsequent collapse in 1994, values have emerged again and the
market now offers more choice. And in Hungary, where progress has lagged, a more
serious privatization effort and long needed austerity measures are movements in
the right direction.
The Portfolio
Several of the portfolio's long-standing positions posted strong returns this
quarter. SAP, the German software manufacturer and the Fund's largest holding,
soared 57% this quarter having quintupled since its initial purchase several
years ago. The recent addition by SAP of an ADR issue together with better
coverage by the U.S. brokerage community has resulted in greater share
visibility. The stock has traded thinly in the past and increased market
interest has provided us with a more liquid opportunity to realize some of the
substantial profits accrued. We remain impressed with the company's superb
market position and earnings growth opportunities and the company continues as
an important Fund holding. Other vintage holdings which contributed to
performance this quarter included Hornbach, the German supermarket chain (27%
stock price appreciation during the quarter ended April 30), Gewiss, the Italian
manufacturer of electrical components (14%), and Saga, the Norwegian oil and gas
explorer and producer (25%).
Some very recent additions to the portfolio also stood out this quarter.
Ericsson of Sweden, the cellular telecommunications manufacturer, rose 24% as
investors appreciated their premier position in the booming cellular market and
Essilor, the French eyeglass producer moved ahead by 34%.
We continue to add to the portfolio small companies with unique profiles.
Societe Generale d'Affichage occupies a niche position in billboard advertising
in Switzerland. By successfully cultivating close working relationships with
Swiss government authorities, Affichage controls over 77% of billboard
advertising. The company has achieved a quasi monopoly in the market by signing
long-term contracts with the major Swiss cities for poster advertising in public
3
<PAGE>
spaces. Headcount has been reduced by 15% since 1991 while the introduction of
new computer systems has resulted in increased productivity. Having experienced
a recent slowdown in sales due to recessionary conditions, Affichage is
currently geared to a pick up in demand. In our opinion, the stock was modestly
valued at our purchase price and had the bonus of a comfortable 4.8% dividend
yield. Uralita, another recent addition, is a Spanish manufacturer and
distributor of building materials with a 50% market share in Spain. A well
developed product range and an extensive distribution network serve as an
effective barrier to entry. The company has undertaken one of the most stringent
cost-cutting programs in Spain selling off non-strategic businesses to reduce
debt and making dramatic cuts in personnel. Uralita is highly geared to the
residential housing market which is undergoing a strong recovery at the present
time.
New opportunities are opening up for the Fund in the markets of Eastern
Europe. We added two new Polish companies this quarter, Debica and Polifarb.
Debica was privatized last August and just listed on the Warsaw Stock Exchange
in November. It is the dominant Polish tire producer, well positioned via its
expanding domestic distribution network to benefit in the replacement market
from fast growing car ownership in Poland. The original equipment market ("OEM")
and export market also afford growth potential. Aided by a low labor cost,
Debica is enjoying considerable success in international export markets with a
product competitive both in quality and price. Poland's strategic advantages as
an auto production site have attracted a growing number of international auto
manufacturers including Fiat, Daewoo, and General Motors. Debica is the only
domestic supplier to the OEM market.
Polifarb-Cieszyn is Poland's largest paint producer, claiming a 27% market
share in a market which is quite underdeveloped by international standards. The
company's strategic alliance with international leader PPG bolsters its
technological advantage and its established and expanding retail distribution
network further cement its market leadership position.
Dividend Reinvestment Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan offers you a
convenient way to have your dividends and capital gain distributions reinvested
in shares of the Fund. Its features are more fully described on page 22.
Other Information
The Fund's NAV is published every Monday in The Wall Street Journal under the
heading "Closed End Funds." The Fund's NAV is also published in The New York
Times and Barron's.
As a service to overseas shareholders, the Fund's NAV is listed daily in The
Financial Times ("FT"). For your information the NAV of the Fund and other
Scudder managed closed-end funds can be found in the "FT Managed Funds Service"
section under the heading "other off-shore funds" below the Scudder, Stevens &
Clark banner.
We are pleased that you are an investor in Scudder New Europe Fund. We would
be happy to receive any questions or comments. You can reach us at
1-800-349-4281.
Respectfully,
/s/Nicholas Bratt /s/Daniel Pierce
Nicholas Bratt Daniel Pierce
President Chairman of the Board
April 1995
4
<PAGE>
Scudder New Europe Fund, Inc.
Investment Summary as of April 30, 1995
- --------------------------------------------------------------------------------
Historical
Information
Life of Fund
Total Return (%)
--------------------------------------------------
Market Value Net Asset Value(a)
------------------- -------------------
Average Average
Cumulative Annual Cumulative Annual
------------------- -------------------
Current Quarter 6.94 -- 11.05 --
Fiscal Year to Date -1.28 -- 3.88 --
One Year -12.50 -12.50 2.64 2.64
Three Years 11.95 3.83 24.99 7.72
Life of Fund* -11.56 -2.33 19.93 3.56
- --------------------------------------------------------------------------------
Per Share Information and Returns (a)
Yearly periods ended April 30
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1990* 1991 1992 1993 1994 1995
-----------------------------------------------
Net Asset Value... $11.60 $10.26 $ 9.96 $ 9.90 $11.75 $12.06
Income Dividends.. $ -- $ .47 $ .15 $ .08 $ -- $ --
Capital Gains
Distributions $ -- $ .20 $ .15 $ .18 $ -- $ --
Total Return (%).. 0.43 -4.98 0.55 2.60 18.69 2.64
</TABLE>
(a) Total return based on per share net asset value reflects the
effects of changes in net asset value on the performance of the Fund
during each period, and assumes dividends and capital gains distributions,
if any, were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the
net asset value of the Fund during each period.
* The Fund commenced operations on February 16, 1990.
Past results are not necessarily indicative of future performance of the Fund.
5
<PAGE>
Scudder New Europe Fund, Inc.
Portfolio Summary as of April 30, 1995
- -----------------------------------------------------------------------------
Geographical
- -----------------------------------------------------------------------------
Geographical breakdown of the Fund's equity securities
Germany 20%
France 16%
United Kingdom 10%
Netherlands 9%
Sweden 8%
Spain 8%
Italy 6%
Other 23%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -----------------------------------------------------------------------------
Sectors
- -----------------------------------------------------------------------------
Sector breakdown of the Fund's equity securities
Manufacturing 14%
Durables 11%
Financial 10%
Consumer Staples 9%
Technology 9%
Energy 8%
Consumer Discretionary 7%
Construction 7%
Service Industry 6%
Other 19%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. SAP AG
German computer software manufacturer
2. Getronics NV
Dutch computer and software distributor
3. Astra AB
Swedish pharmaceutical company
4. Marschollek Lautenschlaeger und Partner AG
Leading German independent life insurance company
5. Wolters Kluwer CVA
Dutch publisher
6. Jeronimo Martins
Portuguese food producer and retailer
7. Mannesmann AG
German diversified construction and technology company
8. Nokia AB Oy
Leading manufacturer of cellular telephones in Finland
9. Valeo SA
French automobile and truck components manufacturer
10. Brown, Boveri & Cie. AG
Manufacturer of electrical equipment in Switzerland
6
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
INVESTMENT PORTFOLIO AS OF APRIL 30, 1995
<TABLE>
==================================================================================================================
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT 2.7%
UNITED STATES
5,199,000 Repurchase Agreement with Salomon Brothers dated
4/28/95 at 5.92%, to be repurchased at $5,201,565
on 5/1/95, collateralized by a $5,169,000
U.S. Treasury Note, 5.875%, 5/15/95 (Cost $5,199,000)..... 5,199,000
-----------
==================================================================================================================
PREFERRED STOCKS 10.5%
Shares
------
FRANCE 0.3%
5,000 Essilor International (Manufacturer of various types of
lenses, eyeglasses, contact lenses and optical measuring
instruments).............................................. 617,447
-----------
GERMANY 9.4%
1,500 Hornbach Holding AG (Super-market chain specializing in
building materials and gardening products)................ 1,797,554
8,400 Marschollek Lautenschlaeger und Partner AG (Leading
independent life insurance company)....................... 4,908,914
9,820 SAP AG (Computer software manufacturer)......................... 9,706,288
6,000 Spar Handels AG (Food and beverage wholesaler and retailer)..... 1,549,728
-----------
17,962,484
-----------
ITALY 0.8%
600,000 Fiat SpA* (Multi-industry, automobiles)......................... 1,545,571
-----------
Total Preferred Stocks (Cost $7,183,046)........................ 20,125,502
-----------
==================================================================================================================
COMMON STOCKS 86.8%
AUSTRIA 2.1%
24,000 Mayr-Melnhof Karton AG* (Leading carton producer)............... 1,387,978
15,000 VA Technologie AG* (Engineering and construction company)....... 1,654,991
11,000 VAE Eisenbahnsysteme AG (Manufacturer of electronic
control systems for use in rail transportation technology)...... 989,201
-----------
4,032,170
-----------
BELGIUM 0.7%
1,800 Bekaert SA Group NV (Steel wire products)....................... 1,405,340
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Investment Portfolio (continued)
<TABLE>
=================================================================================================================
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CZECH REPUBLIC 0.4%
59,600 Central European Media Enterprises Ltd. "A"* (Owner and
operator of national and regional private commercial
television stations in central Europe and Germany).......... 730,100
-----------
DENMARK 1.1%
47,000 Unidanmark A/S "A" (Bank holding company)..................... 2,150,094
-----------
FINLAND 4.5%
620,000 Diamond Cruise Ltd.* (Cruise ship operator) (b)............... 290,653
45,000 Metsa-Serla Oy "B" (Tissue paper producer).................... 1,961,905
70,000 Nokia AB Oy "A" (Leading manufacturer of cellular telephones). 2,854,958
100,000 Outokumpu Oy "A" (Metals and minerals)........................ 1,786,107
218,400 Rautaruukki Oy* (Steel producer).............................. 1,740,540
-----------
8,634,163
-----------
FRANCE 15.4%
7,396 Castorama-Dubois Investissements (Retailer, wholesaler and
distributor)................................................ 1,222,777
17,000 Christian Dior (Leading fashion house)........................ 1,517,173
16,500 Credit Local de France (Bank)................................. 1,404,184
13,500 ECIA - Equipements et Composants pour l'Industrie
Automobile (Manufacturer of automobile parts and
accessories)................................................ 1,990,657
7,000 Essilor International (Manufacturer of various types of lenses,
eyeglasses, contact lenses and optical measuring
instruments)................................................ 1,251,142
28,000 La Brosse et Du Pont (Toiletries manufacturer)................ 1,877,282
58,000 Michelin "B"* (Leading tire manufacturer)..................... 2,597,542
11,275 Primagaz (Liquefied petroleum gas distributor)................ 2,111,415
20,502 S.A.G.A. (Major freight forwarding, logistics and cargo
handling operator).......................................... 1,103,489
4,700 Salomon S.A. (Manufacturer of sports equipment)............... 1,851,935
25,600 Sligos SA (Electrical payment and computing engineering
services company)........................................... 2,209,810
22,303 Societe Nationale Elf Aquitaine (Petroleum company)........... 1,778,895
18,500 Television Francaise (Television broadcasting)................ 1,687,113
36,505 Total SA "B" (International oil and gas exploration,
development and production)................................. 2,277,716
19,000 Union des Assurances Federales SA (Insurance group)........... 1,937,240
49,291 Valeo SA (Automobile and truck components manufacturer)....... 2,803,185
-----------
29,621,555
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
==================================================================================================================
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMANY 9.5%
5,050 Deutsche Bank AG (Bank)....................................... 2,476,815
1,312 Hornbach Baumarkt AG (Do-it-yourself home
improvement retailer)..................................... 829,200
3,000 Kampa-Haus AG (Designing and construction of
prefabricated houses and sub-assemblies).................. 1,688,251
13,500 Mannesmann AG (Bearer) (Diversified construction and
technology company)....................................... 3,662,206
3,000 Plettac AG (Scaffolding manufacturer)......................... 1,861,405
4,300 Siemens AG (Bearer) (Manufacturer of electrical and
electronic equipment)..................................... 2,087,876
6,000 VEBA AG (Electric utility, distributor of oil and chemicals).. 2,233,686
4,200 Viag AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics
and glass)................................................ 1,552,974
6,800 Volkswagen AG (Leading automobile manufacturer)............... 1,896,180
-----------
18,288,593
-----------
GREECE 0.4%
39,930 Delta Dairy SA (Food producer and distributor)................. 752,025
-----------
HUNGARY 0.8%
280,000 Fotex (Conglomerate: photographic and optical supplies)........ 489,660
22,500 Pharmavit (GDS)* (Pharmaceutical company)...................... 219,375
13,600 Pick Szeged (GDS) (Sausage maker).............................. 795,600
-----------
1,504,635
-----------
IRELAND 1.9%
3,400,000 Aran Energy PLC* (Oil and natural gas exploration)............ 2,428,100
1,300,000 Waterford Wedgewood PLC (Manufacturer of fine crystal
and china) (c)............................................ 1,145,900
-----------
3,574,000
-----------
ITALY 5.2%
100,000 Gewiss SpA (Manufacturer of electrical components)............ 1,540,812
2,000,000 Istituto Nazionale delle Assicurazione (Insurance company).... 2,688,984
435,000 La Rinascente SpA di Risparmio (Department store chain)....... 1,242,168
50,000 Luxottica Group SpA (ADR) (Manufacturer and marketer of
eyeglasses)............................................... 1,737,500
650,000 Societa Finanziaria Telefonica Torino SpA (Telephone
utility and telecommunication equipment manufacturer)..... 1,848,379
350,000 Telecom Italia SpA* (Telecommunication services).............. 931,775
-----------
9,989,618
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Investment Portfolio (continued)
<TABLE>
=================================================================================================================
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NETHERLANDS 8.9%
131,601 Getronics NV (Computer and software distributor).............. 5,383,383
19,625 Heineken Holdings NV "A" (Brewery)............................ 2,566,422
12,500 Otra NV (Electrical products distributor)..................... 2,524,468
70,000 Philips N.V. (Leading manufacturer of electrical equipment)... 2,669,575
47,565 Wolters Kluwer CVA (Publisher)................................ 3,870,020
-----------
17,013,868
-----------
NORWAY 1.1%
150,555 Saga Petroleum AS "A" (Oil and gas exploration and
production)............................................... 2,186,202
-----------
POLAND 2.5%
13,900 Bank Slaski SA* (Bank)........................................ 906,732
77,000 Debica "B"* (Tire manufacturer)............................... 884,291
202,000 Polifarb-Cieszyn SA* (Producer of synthetic resins, dyes,
varnishes and other chemicals)............................ 1,117,271
96,772 Swarzedzkie Fabryk Mebli S.A.* (Furniture manufacturer)....... 1,148,132
17,500 Vistula SA* (Clothing producer)............................... 101,227
9,400 Zaklady Piwowarskie w Zywcu S.A.* (Brewery)................... 714,391
-----------
4,872,044
-----------
PORTUGAL 2.8%
81,633 Conduril SA* (Construction Company) (b)....................... 1,050,675
72,500 Jeronimo Martins (Food producer and retailer) (b)............. 3,697,945
49,999 Publico Comunicacao Social SA* (Newspaper publisher) (b)...... 578,830
-----------
5,327,450
-----------
SPAIN 7.2%
20,900 Acerinox, S.A. (Stainless steel producer)..................... 2,393,329
30,000 Banco Santander, S.A. (Leading regional bank)................. 1,095,186
10,000 Banco Santander, S.A. (New)................................... 360,595
54,000 Compania Telefonica Nacional de Espana SA (ADR)
(Telecommunication services).............................. 1,984,500
55,000 Cortefiel, S.A. (Operator of retail clothing stores and
clothing manufacturer).................................... 1,654,961
25,000 Empresa Nacional de Electricidad SA (Electric utility)........ 1,181,680
19,727 Fomento de Obras y Construcciones SA (Construction and
waste management company)................................. 1,810,408
67,000 Repsol SA (Integrated oil company)............................ 2,133,034
110,000 Uralita, SA* (Processor of concrete pipes and cement
for the construction industry)............................ 1,201,578
-----------
13,815,271
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
==================================================================================================================
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SWEDEN 8.0%
80,000 Arjo AB (Producer of health care equipment for elderly
and disabled patients).................................... 1,242,903
171,200 Astra AB "A" (Free) (Pharmaceutical company).................. 4,990,089
35,000 Autoliv AB (Free) (Manufacturer of safety airbags
for automobiles).......................................... 1,583,188
27,000 L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment)............. 1,810,687
46,000 Mooch Domsjo AB "B"* (Free) (Manufacturer of newsprint,
paperboard, and various sawn timber products)............. 2,561,424
90,000 S.K.F. AB "A" (Free) (Manufacturer of roller bearings)........ 1,800,421
75,000 Volvo AB "B" (Free) (Automobile manufacturer)................. 1,407,546
-----------
15,396,258
-----------
SWITZERLAND 4.4%
2,741 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of electrical
equipment)................................................ 2,704,533
1,800 Ciba-Geigy AG* (Bearer) (Pharmaceutical company).............. 1,228,004
200 Ciba-Geigy AG* (Registered)................................... 136,794
1,000 Ciba-Geigy AG (Registered) Warrants* (expire 6/6/95).......... 1,527
3,700 Phoenix Mecano AG (Bearer) (Manufacturer of housings and
components for computers)................................. 1,363,795
5,000 SIKA Finanz AG "B" (Bearer) (International manufacturer of
specialty construction materials)......................... 1,470,011
4,500 Societe Generale d'Affichage (Billboard operator)............. 1,491,821
-----------
8,396,485
-----------
TURKEY 0.3%
240,000 Migros Turkey (Retailer)...................................... 620,447
-----------
UNITED KINGDOM 9.6%
243,000 Brake Brothers PLC (Specialist supplier of frozen foods
to the catering industry)................................. 2,140,320
330,000 Cobham PLC (Manufacturer of aerospace components)............. 1,672,295
725 Creditanstalt Central Europe Fund* (Investment company) (b)... 864,969
300,000 David Lloyd Leisure PLC (Operator of sports centers and
leisure facilities)....................................... 1,187,257
560,000 Hardy Oil & Gas PLC (Oil and gas exploration and development). 1,554,052
600,000 Photo-Me International PLC (Manufacturer and operator
of automatic photo studios)................................... 2,393,819
105,000 PowerGen PLC (ADR)* (Electric utility in United Kingdom)...... 1,338,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Investment Portfolio (continued)
<TABLE>
================================================================================================
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
500,000 QS Holdings PLC (Retailer).................................... 916,987
120,000 RTZ Corp. PLC (Mining and finance company).................... 1,527,025
475,000 Serco Group PLC (Facilities management company)............... 1,879,823
200,000 Spirax-Sarco Engineering PLC (Manufacturer of products
for control and management of steam and other industrial
fluids)................................................... 1,595,879
70,000 Tibbett and Britten Group PLC (Transportation services
for manufacturing and retail industries).................. 752,251
170,000 Waste Management International PLC* (Waste collection
and disposal services).................................... 694,658
-----------
18,518,085
-----------
Total Common Stocks (Cost $145,308,866)....................... 166,828,403
-----------
================================================================================================
Total Investment Portfolio - 100.0% (Cost $157,690,912) (a) 192,152,905
===========
</TABLE>
(a) The cost for federal income tax purposes was $157,700,804. At April 30,
1995, net unrealized appreciation for all securities based on tax cost was
$34,452,101. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $44,365,177 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$9,913,076.
(b) Securities valued in good faith by the Valuation Committee of the Board
of Directors. The cost of these securities at April 30, 1995 aggregated
$6,313,115. See Note A of the Notes to Financial Statements.
(c) Security trades in units; however, equivalent shares are represented
in the investment portfolio.
* Non-income producing security.
Sector breakdown of the Fund's equity securities is noted on page 6.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Statements
<TABLE>
===============================================================================================================
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $157,690,912) (Note A)............. $192,152,905
Cash....................................................................... 800
Foreign currency holdings, at market (identified cost $872,949) (Note A)... 872,125
Forward foreign currency exchange contract to buy, at market (contract
cost $1,797,006) (Notes A and D)........................................ 1,810,920
Receivable on forward foreign currency exchange contracts to sell..........
(Notes A and D) 2,136,150
Other receivables:
Investments sold........................................................ 2,158,272
Dividends and interest.................................................. 492,859
Foreign taxes recoverable............................................... 736,846
------------
Total assets......................................................... 200,360,877
LIABILITIES
Payables:
Investments purchased................................................... $ 2,634,886
Accrued management fee (Note C)......................................... 169,946
Other accrued expenses (Note C)......................................... 160,160
Forward foreign currency exchange contract to buy (Notes A and D)....... 1,797,006
Forward foreign currency exchange contracts to sell, at market..........
(contract cost $2,136,150) (Notes A and D)........................... 2,150,331
-----------
Total liabilities............................................... 6,912,329
------------
Net assets, at market value................................................ $193,448,548
============
NET ASSETS
Net assets consist of:
Accumulated net investment loss......................................... $ (447,055)
Accumulated net realized loss........................................... (20,408,920)
Unrealized appreciation on:
Investments.......................................................... 34,461,993
Foreign currency related transactions................................ 97,137
Common stock............................................................ 160,450
Additional paid-in capital.............................................. 179,584,943
------------
Net assets, at market value................................................ $193,448,548
============
NET ASSET VALUE per share ($193,448,548 -:- 16,044,970 shares of
common stock issued and outstanding, $.01 par value,
100,000,000 shares authorized).......................................... $12.06
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[LOGO] Scudder New Europe Fund, Inc
Financial Statements (continued)
<TABLE>
===============================================================================================================
<CAPTION>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Income:
Dividends (net of foreign taxes withheld of $145,414)................. $ 780,479
Interest.............................................................. 223,251
------------
1,003,730
Expenses:
Management fee (Note C)............................................... $ 1,056,936
Directors' fees and expenses (Note C)................................. 63,440
Custodian fees........................................................ 186,906
Auditing.............................................................. 37,971
Services to shareholders.............................................. 32,913
Reports to shareholders............................................... 25,498
Legal................................................................. 15,854
Amortization of organization expenses (Note A)........................ 6,284
Other................................................................. 24,578 1,450,380
----------- ------------
Net investment loss..................................................... (446,650)
------------
Net realized and unrealized gain (loss) on investment transactions
Net realized gain (loss) from:
Investments.......................................................... 5,270,156
Foreign currency related transactions................................ (35,925) 5,234,231
-----------
Net unrealized appreciation during the period on:
Investments.......................................................... 2,403,186
Foreign currency related transactions................................ 31,280 2,434,466
----------- ------------
Net gain on investment transactions..................................... 7,668,697
------------
Net increase in net assets resulting from operations....................... $ 7,222,047
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
===============================================================================================================
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) .......................................... $ (446,650) $ 370,440
Net realized gain from investment transactions......................... 5,234,231 3,757,031
Net unrealized appreciation on investment transactions
during the period .................................................. 2,434,466 10,022,898
------------ ------------
Net increase in net assets resulting from operations...................... 7,222,047 14,150,369
------------ ------------
INCREASE IN NET ASSETS.................................................... 7,222,047 14,150,369
Net assets at beginning of period......................................... 186,226,501 172,076,132
------------ ------------
NET ASSETS AT END OF PERIOD (including accumulated net investment
loss and accumulated distributions in excess of net investment
income of $447,055 and $405, respectively)............................. $193,448,548 $186,226,501
============ ============
OTHER INFORMATION
INCREASE IN FUND SHARES
Shares outstanding at beginning and end of period......................... 16,044,970 16,044,970
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Highlights
<TABLE>
=====================================================================================================================
The following table includes selected data for a share outstanding throughout
each period (b) and other performance information derived from the financial
statements and market price data.
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
SIX MONTHS FOR THE
ENDED YEARS ENDED OCTOBER 31, PERIOD
APRIL 30, ----------------------------------- FEBRUARY 16, 1990 (A)
1995 1994 1993 1992 1991 TO OCTOBER 31, 1990
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period...... $ 11.61 $ 10.72 $ 9.12 $10.12 $ 11.01 $ 11.55(c)
------- ------- ------- ------ ------- -------
Income from investment operations:
Net investment income (loss)........... (.03) 0.02 .03 .07 .19 .42
Net realized and unrealized gain
(loss) on investment transactions.... .48 0.87 1.83 (.77) (.41) (.96)
------- ------- ------- ------ ------- -------
Total from investment operations.......... .45 0.89 1.86 (.70) (.22) (.54)
------- ------- ------- ------ ------- -------
Less distributions from:
Net investment income.................. -- -- (.08) (.15) (.47) --
Net realized gains on investment
transactions......................... -- -- (.18) (.13) (.20) --
Additional paid-in capital............. -- -- -- (.02) -- --
------- ------- ------- ------ ------- -------
Total distributions....................... -- -- (.26) (.30) (.67) --
------- ------- ------- ------ ------- -------
Net asset value, end of period............ $ 12.06 $ 11.61 $ 10.72 $ 9.12 $ 10.12 $ 11.01
======= ======= ======= ====== ======= =======
Market value, end of period............... $ 9.63 $ 9.75 $ 10.25 $ 8.25 $ 9.00 $ 9.00
======= ======= ======= ====== ======= =======
Total Return
Per share market value (%)................ (1.28)** (4.88) 28.25 (5.05) 7.43 (28.00)**
Per share net asset value (%) (d)......... 3.88** 8.30 21.33 (6.65) (1.26) (4.68)**
Ratios and Supplemental Data
Net assets, end of period ($ millions).... 193 186 172 146 162 176
Ratio of operating expenses to average
net assets (%)......................... 1.61* 1.67 1.72 1.76 1.85 1.84*
Ratio of net investment income (loss) to
average net assets (%)................. (.50)* .20 .33 .78 1.74 5.07*
Portfolio turnover rate (%)............... 36.7* 43.2 32.7 25.7 31.7 104.5*
</TABLE>
(a) Commencement of operations
(b) Based on monthly average shares outstanding during the period.
(c) Beginning per share amount reflects $12.50 initial public offering price
net of underwriting discount and offering expenses ($.95 per share).
(d) Total return based on per share net asset value reflects the effects of
changes in net asset value on the performance of the Fund during each
period, and assumes dividends and capital gains distributions, if any,
were reinvested. These percentages are not an indication of the
performance of a shareholder's investment in the Fund based on market
value due to differences between the market price of the stock and the net
asset value of the Fund during each period.
* Annualized
** Not annualized
16
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Notes to Financial Statements
================================================================================
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder New Europe Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, closed-end management
investment company. The policies described below are followed consistently
by the Fund in the preparation of its financial statements in conformity with
generally accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Directors. Securities valued in good
faith by the Valuation Committee of the Board of Directors at fair value
amounted to $6,483,072 (3.35% of net assets) and have been noted in the
investment portfolio as of April 30, 1995.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and domestic or foreign broker/dealers whereby the Fund, through
its custodian, receives delivery of the underlying securities, the amount of
which at the time of purchase and each subsequent business day is required to be
maintained at such a level that the market value, depending on the maturity of
the repurchase agreement and the underlying collateral, is equal to at least
100.5% of the resale price.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily rates of exchange prevailing
on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in the foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains and losses from investments.
17
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Notes to Financial Statements (continued)
================================================================================
Net realized gain (loss) from foreign currency related transactions includes
gains and losses between trade and settlement dates on securities transactions,
gains and losses arising from the sales of foreign currency, and gains and
losses between the ex and payment dates on dividends, interest, and foreign
withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Realized and unrealized
gains and losses arising from such transactions are included in net realized and
unrealized gain from foreign currency related transactions.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies, and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes, and no federal income tax
provision was required.
At October 31, 1994, the Fund had a net tax basis capital loss carryforward of
approximately $25,642,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2000 ($8,817,000), and October 31, 2001 ($16,825,000) the respective expiration
dates, whichever occurs first.
DISTRIBUTION OF INCOME AND GAINS. Distribution of net investment income is made
annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences primarily relate to investments in forward contracts and passive
foreign investment companies. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and have been amortized on a straight-line basis
over a five-year period.
OTHER. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
During the six months ended April 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $31,658,484 and
$33,774,582, respectively.
18
<PAGE>
================================================================================
C. RELATED PARTIES
Under the Fund's Investment Advisory, Management and Administration Agreement
(the "Management Agreement") with Scudder, Stevens & Clark, Inc. (the
"Manager"), the Manager directs the investments of the Fund in accordance with
the Fund's investment objectives, policies, and restrictions and under the
direction and control of the Fund's Board of Directors. In addition to portfolio
management services, the Manager provides certain administrative services in
accordance with the Management Agreement. The Fund pays to the Manager a monthly
fee at an annualized rate of 1.25% of the Fund's average weekly net assets up to
and including $75 million, 1.15% of such net assets on the next $125 million,
and 1.10% of such net assets in excess of $200 million, computed and accrued
daily and payable monthly. For the six months ended April 30, 1995, the fee
pursuant to such Management Agreement amounted to $1,056,936 which was
equivalent to an annual effective rate of 1.17% of the Fund's average weekly net
assets.
The Fund pays each Director not affiliated with the Manager $6,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1995, Directors' fees and expenses aggregated $63,440, of
which $21,500 was unpaid at April 30, 1995.
D. COMMITMENTS
As of April 30, 1995, the Fund had entered into the following forward foreign
currency exchange contracts resulting in net unrealized depreciation of $267.
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION
SETTLEMENT (DEPRECIATION)
CONTRACTS TO DELIVER IN EXCHANGE FOR DATE (U.S.$)
- ------------------------------- ----------------------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
U.S. Dollars 309,727 Danish Krone 1,669,150 5/1/95 (3,068)
U.S. Dollars 195,407 British Pounds 121,598 5/4/95 213
U.S. Dollars 800,958 British Pounds 500,483 5/9/95 4,193
U.S. Dollars 490,914 Italian Lire 846,331,600 5/31/95 12,576
British Pounds 410,427 U.S. Dollars 654,630 5/9/95 (5,643)
British Pounds 450,323 U.S. Dollars 728,712 5/12/95 4,256
Italian Lire 1,286,924,000 U.S. Dollars 752,808 5/31/95 (12,794)
-------
(267)
=======
</TABLE>
19
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Notes to Financial Statements (continued)
<TABLE>
==============================================================================================
E. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (000 OMITTED)
Net Increase
(Decrease)
Net Gain (Loss) in Net Assets
Quarter Investment Net Investment on Investment Resulting
Ended Income* Income (Loss) Transactions from Operations
- ----------- -------------- --------------- ---------------- -----------------
Per Per Per Per
1995 Total Share Total Share Total Share Total Share
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, $ 231 $ .01 $ (527) $ (.03) $ (11,508) $ (.72) $ (12,035) $ (.75)
April 30, 773 .05 80 -- 19,177 1.20 19,257 1.20
------- ----- ------ ------ --------- ------ --------- ------
Totals $ 1,004 $ .06 $ (447) $ (.03) $ 7,669 $ .48 $ 7,222 $ .45
======= ===== ====== ====== ========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
Per Per Per Per
1995 Total Share Total Share Total Share Total Share
- ---- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31, $ 284 $ .02 $ (498) $ (.03) $ 17,777 $ 1.11 $ 17,279 $ 1.08
April 30, 692 .04 (31) -- (858) (.05) (889) (.05)
July 31, 2,133 .13 1,347 .08 (4,672) (.29) (3,324) (.21)
October 31, 302 .02 (448) (.03) 1,533 .10 1,084 .07
------- ----- ------ ------ --------- ------ --------- ------
Totals $ 3,411 $ .21 $ 370 $ .02 $ 13,780 $ .87 $ 14,150 $ .89
======= ===== ====== ====== ========= ====== ========= ======
</TABLE>
* Net of foreign taxes withheld
20
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Report of Independent Accountants
================================================================================
To the Board of Directors and Shareholders of Scudder New Europe Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Scudder
New Europe Fund, Inc., including the investment portfolio as of April 30, 1995
and the related statement of operations for the six months then ended, the
statements of changes in net assets for the six months then ended and for the
year ended October 31, 1994, and the financial highlights for the six months
ended April 30, 1995, for each of the four years in the period ended October 31,
1994, and for the period February 16, 1990 (commencement of operations) to
October 31, 1990. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder New Europe Fund, Inc. as of April 30, 1995, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and for the year ended October 31, 1994, and the financial
highlights for the six months ended April 30, 1995, for each of the four years
in the period ended October 31, 1994, and for the period February 16, 1990
(commencement of operations) to October 31, 1990 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 20, 1995
21
Investment Manager
- --------------------------------------------------------------------------------
The investment manager of Scudder New Europe Fund, Inc. (the "Fund") is
Scudder, Stevens & Clark, Inc., one of the most experienced investment
management and investment counsel firms in the United States. Established in
1919, the firm provides investment counsel for individuals, investment companies
and institutions. Scudder has offices throughout the United States and
subsidiaries in London and Tokyo.
Scudder has been a leader in international investment management for over 40
years. It manages Scudder International Fund, which was initially incorporated
in Canada in 1953 as the first foreign investment company registered with the
United States Securities and Exchange Commission. Scudder's investment company
clients include nine other open-end investment companies which invest primarily
in foreign securities.
In addition to the Fund, Scudder also manages the assets of seven other
closed-end investment companies which invest in foreign securities. The
Argentina Fund, Inc. (investing primarily in equity securities of Argentine
issuers), The Brazil Fund, Inc. (investing in securities, primarily equity
securities, of Brazilian issuers), The Korea Fund, Inc. (investing in a broad
spectrum of Korean companies), The Latin America Dollar Income Fund, Inc.
(investing principally in Latin American debt instruments), Scudder World Income
Opportunities Fund, Inc. (investing in global income and, to a limited extent,
equity securities), and Scudder New Asia Fund, Inc. (investing in a broad
spectrum of Asian companies) and are traded on the New York Stock Exchange. The
First Iberian Fund, Inc. (investing primarily in Spanish and Portuguese
securities) is traded on the American Stock Exchange.
Dividend Reinvestment and Cash Purchase Plan
- --------------------------------------------------------------------------------
The Fund intends to distribute to shareholders, at least annually,
substantially all of its net investment income, and expects to distribute at
least annually any net realized capital gains. These distributions will
generally be made at or shortly after the end of the Fund's fiscal year, which
is October 31.
The Fund's Dividend Reinvestment and Cash Purchase Plan offers you an
automatic way to reinvest your dividends and capital gain distributions in
shares of the Fund. The Plan also allows participants to make optional cash
investments in Fund shares of $100 to $3,000 semiannually through The First
National Bank of Boston, the Plan Agent. For information about the Plan and an
enrollment form contact:
Plan Agent (Scudder New Europe Fund) c/o The First National Bank of Boston
Shareholder Services--Customer Service
Mail Stop 45-01-06
P.O. Box 1681, Boston, MA 02105
Phone: (617) 575-2900
If you own shares in your own name, you can participate directly in the Plan.
If you own shares that are held in the name of a brokerage firm, bank or other
nominee, you should contact your nominee to arrange for it to participate on
your behalf.
22
<PAGE>
Directors and Officers
- --------------------------------------------------------------------------------
DANIEL PIERCE*
Chairman of the Board and Director
NICHOLAS BRATT*
President and Director
PAUL BANCROFT III
Director
MARY JOHNSTON EVANS
Director
RICHARD M. HUNT
Director
WILLIAM H. LUERS
Director
WILSON NOLEN
Director
JURIS PADEGS*
Vice President and Director
LADISLAS O. RICE
Director
PAUL J. ELMLINGER*
Vice President and Assistant Secretary
CAROL L. FRANKLIN*
Vice President
JERARD K. HARTMAN*
Vice President
WILLIAM E. HOLZER*
Vice President
DAVID S. LEE*
Vice President
EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
THOMAS F. McDONOUGH*
Secretary
PAMELA A. McGRATH*
Treasurer
COLEEN DOWNS DINNEEN*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
23
