SCUDDER
New Europe
Fund, Inc.
Annual Report
October 31, 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
================================================================================
In Brief .................................... 3
Letter to Shareholders ...................... 3
Investment Summary .......................... 7
Portfolio Summary ........................... 8
Investment Portfolio ........................ 9
Financial Statements ........................ 16
Financial Highlights ........................ 19
Notes to Financial Statements ............... 20
Report of Independent Accountants ........... 24
Tax Information ............................. 25
Shareholder Meeting Results ................. 26
Investment Manager .......................... 27
Dividend Reinvestment and
Cash Purchase Plan ....................... 28
Directors and Officers ...................... 30
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) 575-3120
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.
In Brief
================================================================================
o Scudder New Europe Fund's net asset value increased 14.04% for the fiscal
year ended October 31, 1995, from $11.61 to $13.24. The Fund's share price
increased 5.13% over the same period, from $9.75 to $10.25.
o We believe European markets are attractively valued and the outlook for
earnings and dividend growth remains constructive.
o The Fund is invested in companies we believe are poised to benefit from
expanding European markets as well as those with a domestic focus. The
portfolio includes small companies with unique profiles, such as French
sporting goods manufacturer Salomon; and beneficiaries of the evolving
Eastern European economic arena, such as the Czech broadcaster Central
European Media.
Letter to Shareholders
================================================================================
Dear Shareholders:
We are pleased to report the net asset value of Scudder New Europe Fund
increased 14.04% for the fiscal year ended October 31, 1995, from $11.61 to
$13.24. The Fund's share price increased a more modest 5.13% over the same
period, from $9.75 to $10.25, and now reflects a 23% discount to the underlying
net asset value. The Fund's full investment performance history is provided on
page 7 under "Investment Summary."
The Market Environment
Early in the Fund's fiscal year, global markets were shaken by a series of
events, including rising interest rates, peso devaluation in Mexico, and a
devastating earthquake in Japan. These setbacks exacerbated anxiety over
European political and economic divergence, and currency volatility drove
investors to the safety of the German deutschemark. In March, pessimism was
replaced by optimism as interest rates eased globally. European markets powered
ahead driven by expectations for economic recovery and the perception that the
Bundesbank was pursuing a less restrictive interest rate policy. However,
political will has been in some cases at odds with the fiscal austerity measures
required by economic integration. Until agendas are clearer, this tension will
be played out in the marketplace. Moreover, in recent weeks, concerns about the
viability of European Monetary Union have emerged, and European equities have
retraced some of their gains as investors once again focus on exchange rates.
Most European markets displayed positive performance over the past 12 months.
The Nordic markets ranked among the top performers with Sweden and Finland
rising 26.3% and 15.6% in local terms, respectively. Two of the Fund's holdings,
Ericsson and Nokia, global players in cellular telecommunications, contributed
to the strong performance of these indices. The U.K. market returned 12.5% in
local terms, buoyed by a torrid Wall Street, a more favorable interest rate
environment, and continued industry consolidation. News that PowerGen (a holding
in the portfolio) and Midlands Electric were in bid talks was one of the many
factors leading to a surge in the British market. Although France had positive
returns for the period, performance lagged that of other markets, as the
proposed 1996 budget called into question the government's commitment to fiscal
rectitude in the face of domestic opposition to cuts in social spending
programs. Poland's evolving market had poor returns in late 1994, but surged in
1995 as foreign investors were attracted by positive macroeconomic fundamentals
and strong corporate earnings.
3
<PAGE>
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In Western Europe, growth is moderate, inflation is low, and labor costs are
under control. Fiscal concerns, however, currently preoccupy the markets as the
timetable for economic integration draws nearer. Investors are fearful that
economic activity may be weakened and market sentiment dampened by budgetary
tightening and currency volatility. On the positive side, slower growth and
moderate inflation create a favorable backdrop for further policy easing by the
Bundesbank. In addition, European markets appear attractively valued and the
outlook for earnings and dividend growth remains constructive. Though political
uncertainty will persist, resulting in currency volatility, our view is that
such episodes will present buying opportunities, particularly if the result is
easier monetary policy as may be the case in France. In Eastern Europe,
accelerating growth and lower inflation have rewarded Polish and Czech
government policies, while Hungary has reduced problematic fiscal and current
account deficits. Reform has paved the way for a healthier stock market in
Poland; markets in Hungary and the Czech Republic are expected to develop over
time.
There are concerns that upcoming privatizations may be a threat to market
performance in Europe. We believe that well-managed privatization programs do
not pose a significant risk. This has been illustrated recently in the U.K.,
where far-reaching deregulation over time has correlated with high equity
returns. A major feature of the German market in 1996 will be the $11 billion
privatization of Deutsche Telekom, which we believe will sow the seeds for
broader participation in German equities. In Eastern Europe, privatizations are
boosting liquidity, increasing the size of markets and creating new
opportunities for investors.
The Portfolio
A number of portfolio holdings have turned in outstanding returns this year.
Performance continues to be enhanced by positions in emerging European global
competitors such as the fast-growing German software manufacturer SAP and Nordic
telecommunication companies Nokia and Ericsson. The portfolio is also positioned
in technology stocks with a domestic focus. Getronics, a long-standing Fund
holding, is second in the Netherlands after IBM in the field of information
technology and telecommunications. Company management has an excellent track
record of anticipating change and has positioned itself in higher-growth
value-added services such as systems integration, service maintenance, and
software. The company has achieved steady earnings growth of over 30% for each
of the past five years and has strong cash flow.
Smaller companies with unique profiles and excellent managements have further
driven the Fund's performance over the past 12 months. Salomon is a French
company specializing in both winter (skiing) and summer (golf, hiking) sports
equipment. Sales in the golf division are growing at a rate of over 100% due to
the launch of the "Burner Bubble" line of golf clubs, which afford golfers
greater accuracy and a faster swing. Though ski equipment is a mature business,
Salomon continues to launch technically innovative products and is
subcontracting production to Italy and Romania where labor costs are lower.
Phoenix Mecano, domiciled in Switzerland, manufactures casings for automobiles,
machine tools, and other goods. The company has dramatically reduced its cost
base by outsourcing production from Switzerland and Germany to Hungary. Phoenix
Mecano is one of the few growth stories trading on the Swiss stock exchange and
is more accommodating to shareholders than most Swiss companies.
4
<PAGE>
================================================================================
One of the top-performing stocks in the Fund has been Gewiss, a dynamic small
company based in Northern Italy. Gewiss manufactures electrical components for
the housing market and the lighting sector, and is poised to gain market share
at home while simultaneously making rapid inroads into other European markets.
The company boasts a very efficient distribution network, a high-quality and
comprehensive product range, and strong marketing capabilities. Another strong
performer was Brake Brothers, a U.K. company that distributes frozen foods to
the catering industry and controls approximately 25% of an otherwise very
fragmented domestic market. Quality and reliability have been keys to the
company's success. Financially and operationally strong, the company has
recently extended its activity to France with the goal of creating a foodservice
business comparable to that in the U.K. Profit growth of roughly 20% annually is
anticipated over the next two years -- an impressive record in an environment
where inflation is low and the consumer weak.
We have identified some promising investment opportunities in Eastern Europe
this year. Central European Media operates the only private TV station in the
Czech Republic. The company also operates two television stations in Germany and
is starting up stations in several Eastern European markets. The Czech station
has been a tremendous success, boasting a 70% share of television viewers. TV
advertising is in its infancy in Eastern Europe, a factor that should lead to
high profit margins for Central European Media.
In Poland, Debica, a leading tire manufacturer, stands to benefit from the
expanding role of Poland as an automotive production base for GM, Fiat, VW,
Ford, Daewoo, and others. In addition to Debica's role of original equipment
provider to these leading companies, it commands a dominant position in the
domestic replacement market, which will grow rapidly as incomes rise and auto
ownership increases in Poland.
The Fund continually searches for opportunities in smaller companies with
strong prospects and favorable valuations, hoping to profit from their emergence
and full development over a number of years. Sometimes, recognition of their
value by the market comes very quickly. Two holdings purchased early in 1995
were recently the objects of corporate acquisitions at substantial premiums to
the Fund's purchase price. Aran Energy, the Irish oil exploration and production
company, sold out to Statoil, the Norwegian company, after first attracting a
bid from Atlantic Richfield. David Lloyd Leisure, a U.K. sports and fitness
chain expanding a new and lucrative franchise in an underdeveloped market, was
acquired by Whitbred.
The changing European arena that constitutes the Fund's investment universe
offers a wide and growing range of opportunities. New issues and privatizations
are expanding the alternatives in Eastern European markets at a time when their
underlying economies are taking off. And in Western Europe, we see an increasing
number of smaller companies turning to the equity market for the first time to
support their plans for growth, as well as established companies positioned to
benefit from the new face of Europe. We believe Scudder New Europe Fund remains
an excellent vehicle for long-term investors seeking to benefit from these
developments.
Dividend Reinvestment and Cash Purchase Plan
We are pleased to advise you of an optional plan for the automatic
reinvestment of your dividends and capital gains distributions in shares of the
Fund. We recommend that you consider enrolling in the Dividend Reinvestment and
Cash Purchase Plan (the "Plan") to build your investment. For more information
on the Plan please call (617) 575-3120. The Plan's features are more fully
described on page 28.
5
<PAGE>
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Annual Meeting Results
At the July 12, 1995 Annual Meeting, the shareholders elected three
Directors, listed in your proxy statement. The selection of Coopers & Lybrand
L.L.P. as the Fund's independent accountants for the fiscal year ended October
31, 1995, was ratified. Shareholders also approved the continuance of the
Investment Advisory, Management and Administration Agreement between the Fund
and Scudder, Stevens & Clark, Inc. Please see the table entitled "Shareholder
Meeting Results" on page 26 for more information.
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"). 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.
A Team Approach to Investing
Scudder New Europe Fund, Inc. is managed by a team of Scudder investment
professionals who each play an important role in the portfolio's management
process. Team members work together to develop investment strategies and select
securities for the portfolio. They are supported by Scudder's large staff of
economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Carol Franklin, Lead Portfolio Manager, sets Fund investment strategy and
oversees its daily operation. Carol has worked on international equity investing
as a portfolio manager at Scudder since 1981. Nicholas Bratt, Portfolio Manager,
helps set the Fund's general investment strategies. Nick has over 20 years of
experience in worldwide investing and has been at Scudder since 1976. Joan
Gregory, Portfolio Manager, focuses on stock selection, a role she has played
since she joined Scudder in 1992. Joan has been involved with investment in
global and international stocks as an assistant portfolio manager since 1989.
We are pleased that you are an investor in Scudder New Europe Fund, Inc. 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
October 1995
6
<PAGE>
Scudder New Europe Fund, Inc.
Investment Summary as of October 31, 1995
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HISTORICAL INFORMATION
LIFE OF FUND
TOTAL RETURN (%)
------------------------------------------------------------
MARKET VALUE NET ASSET VALUE (a) INDEX (b)
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------ ------------------ ------------------
CURRENT QUARTER -5.75 -- -1.93 -- -1.43 --
ONE YEAR 5.13 5.13 14.04 14.04 13.21 13.21
THREE YEARS 28.25 8.65 49.86 14.44 58.26 16.53
FIVE YEARS 30.82 5.52 38.13 6.67 66.07 10.67
LIFE OF FUND* -5.81 -1.04 31.67 4.94 -- --
- -----------------------------------------------------------------------------
PER SHARE INFORMATION AND RETURNS (a)
YEARLY PERIODS ENDED OCTOBER 31
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.
1990* 1991 1992 1993 1994 1995
----------------------------------------------
NET ASSET VALUE... $11.01 $10.12 $ 9.12 $10.72 $11.61 $13.24
INCOME DIVIDENDS.. $ -- $ .47 $ .15 $ .08 $ -- $ --
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS..... $ -- $ .20 $ .15 $ .18 $ -- $ --
TOTAL RETURN (%).. -4.68 -1.26 -6.65 21.33 8.30 14.04
(a) Total investment returns reflect changes in net asset value per share
during each period and assumes that 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.
(b) MSCI Europe Index (14)
* The Fund commenced operations on February 16, 1990.
PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE OF
THE FUND.
7
<PAGE>
Scudder New Europe Fund, Inc.
Portfolio Summary as of October 31, 1995
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GEOGRAPHICAL
Geographical breakdown of the Fund's equity securities
Germany 17%
France 13%
Italy 10%
Netherlands 10%
United Kingdom 10%
Sweden 8%
Spain 7%
Other 25%
----
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 15%
Financial 11%
Durables 10%
Consumer Staples 10%
Technology 9%
Consumer Discretionary 7%
Construction 7%
Energy 7%
Service Industries 6%
Other 18%
----
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. MANNESMANN AG
German diversified construction and technology company
6. NOKIA AB OY
Leading manufacturer of cellular telephones in Finland
7. JERONIMO MARTINS
Portuguese food producer and retailer
8. L.M. ERICSSON TELEPHONE CO.
Leading manufacturer of cellular telephone equipment in Sweden
9. HEINEKEN HOLDINGS N.V.
Brewery in the Netherlands
10. BROWN, BOVERI & CIE. AG
Manufacturer of electrical equipment in Switzerland
8
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
INVESTMENT PORTFOLIO AS OF OCTOBER 31, 1995
===============================================================================
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT 6.9%
<S> <C> <C> <C>
UNITED STATES
14,437,000 Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 10/31/95 at 5.875% to be repurchased
at $14,439,356 on 11/1/95, collateralized by a $9,768,000
U.S. Treasury Bond, 10.625%, 8/15/15 (Cost $14,437,000) ..... 14,437,000
----------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 9.5%
Shares
--------
<S> <C> <C> <C>
FRANCE 0.3%
5,000 Essilor International (Manufacturer of various types of
lenses, eyeglasses, contact lenses and optical measuring
instruments) ................................................ 643,018
----------
GERMANY 8.6%
1,500 Hornbach Holding AG (Super-market chain specializing in
building materials and gardening products) .................. 1,508,582
8,400 Marschollek Lautenschlaeger und Partner AG (Leading
independent life insurance company) ......................... 5,641,992
62,000 SAP AG (Computer software manufacturer) ........................... 9,518,462
6,000 Spar Handels AG (Food and beverage wholesaler and retailer) ....... 1,296,421
----------
17,965,457
----------
ITALY 0.6%
600,000 Fiat SpA (Multi-industry, automobiles) ............................ 1,186,557
----------
TOTAL PREFERRED STOCKS (Cost $6,582,800) .......................... 19,795,032
----------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COMMON STOCKS 83.6%
<S> <C> <C> <C>
Austria 2.6%
22,000 Flughafen Wien AG (Operator of terminals and facilities
at Vienna International Airport) ............................ 1,413,182
24,000 Mayr-Melnhof Karton AG (Leading carton producer) .................. 1,401,062
15,000 VA Technologie AG (Engineering and construction company) .......... 1,739,208
11,000 VAE Eisenbahnsysteme AG (Manufacturer of electronic
control systems for use in rail transportation technology) .. 984,339
----------
5,537,791
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CZECH REPUBLIC 0.7%
59,600 Central European Media Enterprises Ltd. "A"* (Owner and
operator of national and regional private commercial
television stations in central Europe and Germany) .......... 1,370,800
----------
DENMARK 1.0%
47,000 Unidanmark A/S "A" (Bank holding company) ........................ 2,160,030
----------
FINLAND 3.6%
620,000 Diamond Cruise Ltd.* (Cruise ship operator) (b) .................. 292,173
45,000 Metsa-Serla Oy "B" (Tissue paper producer) ....................... 1,675,281
70,000 Nokia AB Oy "A" (Leading manufacturer of cellular
telephones) ................................................. 4,007,950
100,000 Outokumpu Oy "A" (Metals and minerals) ........................... 1,590,456
----------
7,565,860
----------
FRANCE 12.2%
24,000 BIS SA* (Operator of temporary employment agencies
in France and Switzerland) .................................. 2,247,393
3,181 Castorama#Dubois Investissements (Retailer,
wholesaler and distributor) ................................. 515,750
17,000 Christian Dior (Leading fashion house) ........................... 1,668,370
17,043 Credit Local de France (Bank) .................................... 1,348,875
13,500 ECIA-Equipements et Composants pour l'Industrie
Automobile (Manufacturer of automobile
parts and accessories) ...................................... 1,642,302
7,000 Essilor International (Manufacturer of various types of
lenses, eyeglasses, contact lenses and optical
measuring instruments) ...................................... 1,295,236
28,000 La Brosse et Du Pont (Toiletries manufacturer) ................... 1,763,239
46,000 Michelin "B" (Leading tire manufacturer) ......................... 1,857,493
37,207 Primagaz (Liquified petroleum gas distributor) ................... 2,889,229
3,382 Primagaz Warrants* .............................................. 26,967
2,700 Salomon S.A. (Manufacturer of sports equipment) .................. 1,557,841
25,600 Sligos SA (Electrical payment and computing
engineering services company) ............................... 2,214,026
37,559 Total SA "B" (International oil and gas exploration,
development and production) .................................. 2,320,656
19,000 Union des Assurances Federales SA (Insurance group) ............... 2,020,037
49,726 Valeo SA (Automobile and truck components manufacturer) ........... 2,245,854
----------
25,613,268
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMANY 7.4%
2,600 AVA Allgemeine Handelsgesellschaft der Verbraucher AG
(Owner of retail and wholesale shopping centers and malls) ... 986,815
5,600 Bankgesellschaft Berlin AG (Commercial bank) ..................... 1,651,800
13,120 Hornbach Baumarkt AG (Do-it-yourself-home
improvement retailer) ........................................ 662,085
31,485 Kampa-Haus AG (Designing and construction of
prefabricated houses and sub-assemblies) ..................... 1,250,941
13,500 Mannesmann AG (Bearer) (Diversified construction and
technology company) .......................................... 4,445,467
4,300 Siemens AG (Bearer) (Manufacturer of electrical and
electronic equipment) ........................................ 2,255,517
60,000 VEBA AG (Electric utility, distributor of oil and chemicals) ..... 2,464,480
4,200 Viag AG (Provider of electrical power and natural gas
services, aluminum products, chemicals, ceramics and glass) .. 1,706,031
----------
15,423,136
----------
GREECE 0.4%
39,930 Delta Dairy SA (Food producer and distributor) ................... 852,191
HUNGARY 0.5%
9,000 EGIS (EDR) (Pharmaceutical company) .............................. 219,330
22,500 Pharmavit* (GDS) (Pharmaceutical company) ........................ 191,250
13,600 Pick Szeged* (GDS) (Sausage maker) ............................... 632,400
----------
1,042,980
----------
IRELAND 0.6%
1,300,000 Waterford Wedgewood PLC (Manufacturer of fine
crystal and china) (c) ....................................... 1,178,915
----------
ITALY 9.0%
140,000 Avir Finanziaria SpA* (Manufacturer and marketer of
drinking glasses, bottles and other glass containers
for the food industry) ....................................... 1,037,139
300,000 Bulgari SpA* (Manufacturer and retailer of fine jewelry,
luxury watches and perfumes) ................................. 2,608,543
190,000 Cia. Assicuratrice Unipol SpA (Life and casualty
insurance company) ........................................... 852,877
200,000 Gewiss SpA (Manufacturer of electrical components) ............... 2,509,977
30,600 Gucci Group* (New York registered Shares) (Designer and
producer of personal luxury accessories and apparel) ......... 918,000
2,000,000 Istituto Nazionale delle Assicurazione (Insurance company) ....... 2,630,516
</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> <C>
435,000 La Rinascente SpA di Risparmio (Department store chain) ....... 1,220,742
50,000 Luxottica Group SpA (ADR) (Manufacturer and
marketer of eyeglasses) ................................... 2,437,500
50,000 Saes Getters SpA (Manufacturer of getters, refined
chemicals used to make cathode-ray tubes) ................. 954,268
1,890,000 Telecom Italia Mobile SpA* (Cellular telecommunication
services) ................................................. 3,174,041
350,000 Telecom Italia SpA (Telecommunication services) ............... 531,754
----------
18,875,357
----------
NETHERLANDS 9.1%
133,565 Getronics N.V. (Computer and software distributor) ............ 6,376,169
19,625 Heineken Holdings N.V. "A" (Brewery) .......................... 3,247,300
40,000 IHC Caland N.V. (Dredging and offshore services) .............. 1,138,619
43,000 Koninklijke PTT Nederland (Telecommunication services) ........ 1,512,982
12,500 Otra NV (Electrical products distributor) ..................... 2,575,524
47,000 Philips Electronics N.V. (Leading manufacturer of
electrical equipment) ..................................... 1,817,607
25,565 Wolters Kluwer CVA (Publisher) ................................ 2,327,408
----------
18,995,609
----------
NORWAY 0.9%
150,555 Saga Petroleum AS "A" (Oil and gas exploration and
production) ............................................... 1,886,670
----------
POLAND 2.2%
36,000 Bank Rozwoju Ekxportu SA (Export bank) ........................ 560,620
13,900 Bank Slaski SA (Bank) ......................................... 753,649
10,000 Bygdoska Fabruka Kabli SA (Manufacturer of cables,
wires, and insulating materials) .......................... 142,275
77,000 Debica SA "A" (Tire manufacturer) ............................. 1,064,126
25,000 Gorazdze Cement SA* (Cement producer) ......................... 473,911
202,000 Polifarb-Cieszyn SA (Producer of synthetic resins,
dyes, varnishes and other chemicals) ...................... 745,251
20,000 Stomil Olsztyn SA (Tire manufacturer) ......................... 157,358
17,500 Vistula SA (Clothing producer) ................................ 57,786
9,400 Zaklady Piwowarskie w Zywcu S.A. (Brewery) .................... 747,248
----------
4,702,224
----------
PORTUGAL 4.3%
81,633 Conduril SA (Construction Company) ............................ 891,069
72,500 Jeronimo Martins (Food producer and retailer) ................. 3,859,186
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
===============================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
110,300 Portugal Telecom SA* (Telecommunication services) ............ 2,088,394
49,999 Publico Comunicacao Social SA* (Newspaper publisher) ......... 539,029
162,500 Semapa Cement (Cement producer) .............................. 1,560,267
----------
8,937,945
----------
SPAIN 6.5%
20,900 Acerinox, S.A (Stainless steel producer) ..................... 2,202,175
2,090 Acerinox, S.A. Rights* (b) ................................... 198,196
20,000 Banco Pastor SA (Registered) (Bank) .......................... 975,774
40,000 Banco Santander, S.A. (Leading regional bank) ................ 1,744,914
54,000 Compania Telefonica Nacional de Espana SA (ADR)
(Telecommunication services) ............................... 2,031,750
55,000 Cortefiel, S.A. (Operator of retail clothing stores and
clothing manufacturer) ..................................... 1,623,557
67,000 Repsol SA (Integrated oil company) ........................... 2,002,510
110,000 Uralita, SA (Processor of concrete pipes and cement for the
construction industry) ..................................... 1,109,431
16,500 Zardoya-Otis SA (Manufacturer and installer of elevator
equipment) ................................................. 1,612,734
----------
13,501,041
----------
SWEDEN 7.7%
171,200 Astra AB "A" (Free) (Pharmaceutical company) ................. 6,292,322
35,000 Autoliv AB (Free) (Manufacturer of safety airbags
for automobiles) ........................................... 2,008,678
180,400 L.M. Ericsson Telephone Co. "B" (ADR) (Leading
manufacturer of cellular telephone equipment) .............. 3,853,231
46,000 Mooch Domsjo AB "B" (Free) (Manufacturer of newsprint,
paperboard, and various sawn timber products) .............. 2,342,027
90,000 S.K.F. AB "A" (Free) (Manufacturer of roller bearings) ....... 1,674,275
----------
16,170,533
----------
SWITZERLAND 5.5%
500 Baloise Holding Ltd. (Registered) (Provider of private,
commercial and corporate insurance, life insurance,
international reinsurance) ................................. 1,026,070
2,741 Brown, Boveri & Cie. AG (Bearer) (Manufacturer of
electrical equipment) ...................................... 3,179,407
1,800 Ciba-Geigy AG (Bearer) (Pharmaceutical company) .............. 1,553,637
271 Ciba-Geigy AG (Registered) ................................... 234,625
4,900 Phoenix Mecano AG (Bearer) (Manufacturer of housings
and components for computers) .............................. 2,373,613
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
INVESTMENT PORTFOLIO (CONTINUED)
===============================================================================
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5,000 SIKA Finanz AG "B" (Bearer) (International manufacturer
of specialty construction materials) ....................... 1,285,890
4,500 Societe Generale d'Affichage (Billboard operator) ............. 1,934,120
-----------
11,587,362
-----------
TURKEY 0.5%
885,000 Migros Turkey (Retailer) ...................................... 1,017,340
-----------
UNITED KINGDOM 8.9%
243,000 Brake Brothers PLC (Specialist supplier of frozen foods to
the catering industry) ..................................... 2,650,695
330,000 Cobham PLC (Manufacturer of aerospace components) ............. 2,060,703
725 Creditanstalt Central Europe Fund (Investment company) (b) .... 850,725
560,000 Hardy Oil & Gas PLC (Oil and gas exploration and
development) ............................................... 1,628,960
365,000 Photo-Me International (Manufacturer and operator of
automatic photo studios) ................................... 975,178
105,000 PowerGen PLC (ADR) (Electric utility) ......................... 1,745,625
500,000 QS Holdings PLC (Retailer) .................................... 513,793
475,000 Serco Group PLC (Facilities management company) ............... 2,778,432
200,000 Spirax-Sarco Engineering PLC (Manufacturer of products
for control and management of steam and other
industrial fluids) ......................................... 1,919,213
400,000 TLG PLC (Manufacturer and supplier of lighting equipment
and systems) ............................................... 1,075,012
310,000 Takare PLC (Owner and operator of nursing homes) .............. 1,004,662
70,000 Tibbett and Britten Group PLC (Transportation services
for manufacturing and retail industries) ................... 481,384
170,000 Waste Management International PLC* (Waste collection and
disposal services) ......................................... 862,697
-----------
18,547,079
-----------
TOTAL COMMON STOCKS (Cost $140,960,056) ....................... 174,966,131
-----------
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $161,979,856) (a) ... 209,198,163
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
===============================================================================
- -------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $161,989,747. At October 31,
1995, net unrealized appreciation for all securities based on tax cost
was $47,208,416. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $57,216,009 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $10,007,593.
(b) Securities valued in good faith by the Valuation Committee of the Board
of Directors. The cost of these securities at October 31, 1995 aggregated
$3,468,350. 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 8.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
FINANCIAL STATEMENTS
===============================================================================
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $161,979,856) (Note A) ............... $ 209,198,163
Cash ......................................................................... 398
Foreign currency holdings, at market (identified cost $45,381) (Note A) ...... 47,444
Receivables:
Investments sold ........................................................... 3,240,990
Dividends and interest ..................................................... 134,440
Foreign taxes recoverable .................................................. 543,601
-------------
Total assets ............................................................. 213,165,036
LIABILITIES
Payables:
Investments purchased ...................................................... $ 301,496
Accrued management fee (Note C) ............................................ 210,908
Other accrued expenses (Note C) ............................................ 139,590
-----------
Total liabilities ........................................................ 651,994
-------------
Net assets, at market value .................................................. $ 212,513,042
=============
NET ASSETS
Net assets consist of:
Undistributed net investment income ........................................ $ 756,512
Accumulated net realized loss .............................................. (15,240,282)
Unrealized appreciation on:
Investments .............................................................. 47,218,307
Foreign currency related transactions .................................... 33,111
Common stock ............................................................... 160,450
Additional paid-in capital ................................................. 179,584,944
-------------
Net assets, at market value .................................................. $ 212,513,042
=============
NET ASSET VALUE per share ($212,513,042 [divide by] 16,044,970 shares of
common stock issued and outstanding, $.01 par value,
100,000,000 shares authorized) ............................................. $13.24
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
16
<PAGE>
===============================================================================
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment income
Income:
Dividends (net of foreign taxes withheld of $447,305) ................. $ 3,522,531
Interest .............................................................. 372,678
------------
3,895,209
Expenses:
Management fee (Note C) ............................................... $ 2,305,596
Directors' fees and expenses (Note C) ................................. 132,920
Custodian fees ........................................................ 393,170
Reports to shareholders ............................................... 90,844
Auditing .............................................................. 82,566
Services to shareholders .............................................. 51,367
Legal ................................................................. 32,601
Amortization of organization expenses (Note A) ........................ 6,285
Other ................................................................. 48,575 3,143,924
------------ ------------
Net investment income ................................................... 751,285
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
Net realized gain from:
Investments ........................................................... 10,402,067
Foreign currency related transactions ................................. 6,435 10,408,502
------------
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................... 15,159,500
Foreign currency related transactions ................................. (32,746) 15,126,754
------------ ------------
Net gain on investment transactions ..................................... 25,535,256
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $ 26,286,541
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- -------------------------------------------------------------------------------
17
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
- -------------------------------------------------------------------------------
<TABLE>
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
<S> <C> <C>
Operations:
Net investment income .......................................... $ 751,285 $ 370,440
Net realized gain from investment transactions ................. 10,408,502 3,757,031
Net unrealized appreciation on investment transactions
during the period ............................................ 15,126,754 10,022,898
------------ ------------
Net increase in net assets resulting from operations ............. 26,286,541 14,150,369
------------ ------------
INCREASE IN NET ASSETS ........................................... 26,286,541 14,150,369
Net assets at beginning of period ................................ 186,226,501 172,076,132
------------ ------------
NET ASSETS AT END OF PERIOD (including undistributed net investment
income of $756,512 and accumulated distributions in excess of
net investment income of $405) ................................. $212,513,042 $186,226,501
============ ============
OTHER INFORMATION
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.
- -------------------------------------------------------------------------------
18
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Highlights
===============================================================================
- -------------------------------------------------------------------------------
<TABLE>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (A) AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS AND MARKET PRICE DATA.
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED OCTOBER 31,
1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <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
------- ------- ------- ------- -------
Income from investment operations:
Net investment income ............................ .05 .02 .03 .07 .19
Net realized and unrealized gain (loss)
on investment transactions ..................... 1.58 0.87 1.83 (.77) (.41)
------- ------- ------- ------- -------
Total from investment operations ................... 1.63 0.89 1.86 (.70) (.22)
------- ------- ------- ------- -------
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 ..................... $ 13.24 $ 11.61 $ 10.72 $ 9.12 $ 10.12
======= ======= ======= ======= =======
Market value, end of period ........................ $ 10.25 $ 9.75 $ 10.25 $ 8.25 $ 9.00
======= ======= ======= ======= =======
TOTAL RETURN
Per share market value (%) ......................... 5.13 (4.88) 28.25 (5.05) 7.43
Per share net asset value (%) (b) .................. 14.04 8.30 21.33 (6.65) (1.26)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ............. 213 186 172 146 162
Ratio of operating expenses to average
net assets (%) ................................... 1.62 1.67 1.72 1.76 1.85
Ratio of net investment income to
average net assets (%) ........................... .39 .20 .33 .78 1.74
Portfolio turnover rate (%) ........................ 32.4 43.2 32.7 25.7 31.7
<FN>
(a) Based on monthly average shares outstanding during the period.
(b) Total investment returns reflect changes in net asset value per share during each period and assumes
that 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.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
19
<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 $1,341,094 (0.63% of net assets) and have been noted in the
investment portfolio as of October 31, 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.
20
<PAGE>
================================================================================
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. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the
period, the Fund utilized forward contracts as a hedge in connection with
portfolio purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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, 1995, the Fund had a net tax basis capital loss carryforward of
approximately $15,240,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2001, the expiration date.
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, passive
foreign investment companies, and foreign denominated investments. 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 were deferred and amortized on a straight-line basis over a
five-year period.
21
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
===============================================================================
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 year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $60,360,771 and
$72,773,069, respectively.
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 year ended October 31,
1995, the fee pursuant to such Management Agreement amounted to $2,305,596
which was equivalent to an annual effective rate of 1.18% 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 year
ended October 31, 1995, Directors' fees and expenses aggregated $132,920, of
which $12,131 was unpaid at October 31, 1995.
22
<PAGE>
================================================================================
<TABLE>
<CAPTION>
D. 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) TRANSACTION 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
July 31, 2,741 .17 1,909 .12 21,196 1.32 23,105 1.44
October 31, 150 .01 (711) (.04) (3,330) (.22) (4,041) (.26)
------- ----- ------ ------ --------- ------ --------- ------
Totals $ 3,895 $ .24 $ 751 $ .05 $ 25,535 $ 1.58 $ 26,286 $ 1.63
======= ===== ====== ====== ========= ====== ========= ======
<CAPTION>
PER PER PER PER
1994 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
======= ===== ====== ====== ========= ====== ========= ======
<FN>
* Net of foreign taxes withheld
</FN>
</TABLE>
23
<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 October 31,
1995 and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the
period then ended. 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 October 31, 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 October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 12, 1995
24
<PAGE>
[LOGO] SCUDDER NEW EUROPE FUND, INC.
TAX INFORMATION
===============================================================================
For its fiscal year ended October 31, 1995, the total amount of income received
by the Fund from sources within foreign countries and possessions of the United
States was $.07 per share (representing a total of $1,105,317). The total
amount of taxes paid by the Fund to such countries was $.03 per share
(representing a total of $447,305).
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder New Europe Fund account, please call a Service
Representative at 1-617-575-2900.
25
<PAGE>
Shareholder Meeting Results
================================================================================
The Annual Meeting of Shareholders of Scudder New Europe Fund, Inc. was held on
Wednesday, July 12, 1995, at the offices of Scudder, Stevens & Clark, Inc., 25th
Floor, 345 Park Avenue, New York, New York. The three matters voted upon by
Shareholders and the resulting votes for each matter are presented below.
1. The election of three Directors of the Fund to hold office for a term of
three years or until their respective successors shall have been duly
elected and qualified.
Director: Number of Votes:
--------- ---------------
For Withheld
--- --------
Nicholas Bratt 13,187,779 299,161
Mary Johnston Evans 13,143,767 343,173
William H. Luers 13,134,122 352,817
2. Ratification or rejection of the action taken by the Board of Directors in
selecting Coopers & Lybrand L.L.P. as independent accountants for the
fiscal year ending October 31, 1995.
Number of Votes:
---------------
For Against Abstain Broker Non-Votes*
--- ------- ------- ----------------
13,251,621 100,210 135,108 0
3. Approval or disapproval of the continuance of the Investment Advisory,
Management and Administration Agreement between the Fund and Scudder,
Stevens & Clark, Inc.
Number of Votes:
---------------
For Against Abstain Broker Non-Votes*
--- ------- ------- ----------------
13,001,024 260,933 224,983 0
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
26
<PAGE>
Investment Manager
================================================================================
The investment manager of Scudder New Europe Fund, Inc. 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., The Brazil Fund, Inc., The Korea Fund, Inc., The Latin
America Dollar Income Fund, Inc., Scudder World Income Opportunities Fund, Inc.,
Scudder New Asia Fund, Inc., and The First Iberian Fund, Inc.
27
<PAGE>
Dividend Reinvestment and Cash Purchase Plan
================================================================================
The Plan
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") offers
you an automatic way to reinvest your dividends and capital gains distributions
in shares of the Fund. The Plan also provides for cash investments in Fund
shares of $100 to $3,000 semiannually through The First National Bank of Boston,
the Plan Agent.
Participation in the Plan
If you own shares in your own name, you can participate directly in the Plan.
If you choose to participate in the Plan, your dividends and capital gains
distributions will be promptly invested for you, automatically increasing your
holdings in the Fund. If the Fund declares a dividend or capital gains
distribution payable either in cash or in stock of the Fund, you will
automatically receive stock. If your shares are held in the name of a brokerage
firm, bank, or other nominee as the shareholder of record, please consult your
nominee (or any successor nominee) to determine whether it is participating in
the Plan on your behalf. Many nominees are generally authorized to receive cash
dividends unless they are specifically instructed by a client to reinvest. If
you would like your nominee to participate in the Plan on your behalf, you
should give your nominee instructions to that effect as soon as possible.
Pricing of Dividends and Distributions
If the market price per share on the payment date for the dividend or
distribution (the "Valuation Date") equals or exceeds net asset value per share
on that date, the Fund will issue new shares to participants at the greater of
the following on the Valuation Date: (a) net asset value, or (b) 95% of the
market price. The Valuation Date will be the dividend or distribution payment
date or, if that date is not a New York Stock Exchange trading date, the next
preceding trading date. If the net asset value exceeds the market price of Fund
shares at such time, participants in the Plan are considered to have elected to
receive shares of stock from the Fund, valued at market price, on the Valuation
Date. In either case, for Federal income tax purposes, the shareholder receives
a distribution equal to the market value on Valuation Date of new shares issued.
State and local taxes may also apply. If the Fund should declare an income
dividend or net capital gains distribution payable only in cash, the Plan Agent
will, as agent for the participants, buy Fund shares in the open market, on the
New York Stock Exchange or elsewhere, for the participants' account on, or
shortly after, the payment date.
Voluntary Cash Purchases
Participants in the Plan have the option of making additional cash payments
to the Plan Agent, semiannually, in any amount from $100 to $3,000, for
investment in the Fund's shares. The Plan Agent will use all such monies
received from participants to purchase Fund shares in the open market on or
about February 15 and August 15. Any voluntary cash payments received more than
30 days prior to these dates will be returned by the Plan Agent, and interest
will not be paid on any uninvested cash payments. To avoid unnecessary cash
accumulations, and also to allow ample time for receipt and processing by the
Plan Agent, it is suggested that participants send in voluntary cash payments to
be received by the Plan Agent approximately ten days before February 15, or
August 15, as the case may be. A participant may withdraw a voluntary cash
payment by written notice, if the notice is received by the Plan Agent not less
than 48 hours before such payment is to be invested.
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Participant Plan Accounts
The Plan Agent maintains all participant accounts in the Plan and furnishes
written confirmation of all transactions in the account, including information
needed by participants for personal and tax records. Shares in the account of
each plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each participant will be able to vote those
shares purchased pursuant to the Plan at a shareholder meeting or by proxy.
No Service Fee to Reinvest
There is no service fee charged to participants for reinvesting dividends or
distributions from net realized capital gains. The Plan Agent's fees for the
handling of the reinvestment of dividends and capital gains distributions will
be paid by the Fund. There will be no brokerage commissions with respect to
shares issued directly by the Fund as a result of dividends or capital gains
distributions payable either in stock or in cash. However, participants will pay
a pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of any
dividends or capital gains distributions payable only in cash.
Costs for Cash Purchases
With respect to purchases of Fund shares from voluntary cash payments, the
Plan Agent will charge $1.00 for each such purchase for a participant. Each
participant will pay a pro rata share of brokerage commissions incurred with
respect to the Plan Agent's open market purchases of Fund shares in connection
with voluntary cash payments made by the participant.
Brokerage charges for purchasing small amounts of stock for individual
accounts through the Plan are expected to be less than the usual brokerage
charges for such transactions, because the Plan Agent will be purchasing stock
for all participants in blocks and pro-rating the lower commission thus
attainable.
Amendment or Termination
The Fund and the Plan Agent each reserve the right to terminate the Plan.
Notice of the termination will be sent to the participants of the Plan at least
30 days before the record date for a dividend or distribution. The Plan also may
be amended by the Fund or the Plan Agent, but (except when necessary or
appropriate to comply with applicable law, rules or policies of a regulatory
authority) only by giving at least 30 days' written notice to participants in
the Plan.
A participant may terminate his account under the Plan by written notice to
the Plan Agent. If the written notice is received 10 days before the record day
of any distribution, it will be effective immediately. If received after that
date, it will be effective as soon as possible after the reinvestment of the
dividend or distribution.
If a participant elects to sell his shares before the Plan is terminated, the
Plan Agent will deduct a $3.50 fee plus brokerage commissions from the sale
transaction.
Plan Agent Address and Telephone Number
You may obtain more detailed information by requesting a copy of the Plan
from the Plan Agent. All correspondence (including notifications) should be
directed to: Scudder New Europe Fund Dividend Reinvestment and Cash Purchase
Plan, c/o First National Bank of Boston, P.O. Box 1681, Boston, MA 02105, (617)
575-3120.
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Directors and Officers
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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
DR. 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.
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