SCUDDER
New Europe
Fund, Inc.
Semiannual Report
April 30, 1997
A non-diversified 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.
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Investment objective 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 a non-diversified 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
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In Brief 3
Letter to Shareholders 3
Investment Summary 7
Portfolio Summary 8
Investment Portfolio 9
Financial Statements 15
Financial Highlights 18
Notes to Financial Statements 19
Report of Independent Accountants 22
Other Information 23
Dividend Reinvestment and
Cash Purchase Plan 25
Directors and Officers 27
General Information
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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
Boston Equiserve L.P.
Investor Relations Department
P.O. Box 8200
Boston, MA 02266-8200
Telephone: 1-800-426-5523
Custodian
Brown Brothers Harriman & Co.
Legal Counsel
Willkie Farr & Gallagher
Independent Accountants
Coopers & Lybrand L.L.P.
New York Stock Exchange Symbol--NEF
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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.
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2
<PAGE>
Scudder New Europe Fund, Inc.
In Brief
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o For the six months ended April 30, 1997, Scudder New Europe Fund posted a
total return based on net asset value of 10.32%, while the Fund's NYSE share
price ended the period at $15.00, contributing to a total return of 7.57% for
the semiannual period.
o While European fiscal policy remains tight in advance of the Maastricht
deadline for European Monetary Union (EMU), falling interest rates and weaker
currencies are lending support to a pick up in economic growth. At the
company level, ongoing corporate restructuring is propelling stock prices.
o Fund strategy remains focused on identifying companies in Europe poised for
growth on the basis of effective positioning in new or growing markets, as
well as those companies whose global competitiveness will increase as they
reap the benefits of restructuring.
Letter to Shareholders
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Dear Shareholders:
Most European equity markets posted positive returns for the six-month period
ended April 30, 1997, with several registering record highs. However, in the
last three months, a strengthening of the dollar versus Continental European
currencies eroded returns for U.S. investors. Scudder New Europe Fund posted a
total return based on net asset value for the six months ended April 30 of
10.32%, versus the unmanaged MSCI Europe Index return of 11.77% over the
comparable period. For the twelve-month period ended April 30, the Fund's 20.56%
return was roughly in keeping with the MSCI Europe Index return of 20.96%. The
Fund's NYSE share price ended the period at $15.00, contributing to total
returns of 7.57% for the semiannual period and 22.94% for the trailing twelve
months.
Review of European Markets
Both cyclical and structural developments fueled stock prices in Continental
Europe over the period. While European fiscal policy remains tight in advance of
the Maastricht deadline for European Monetary Union (EMU), falling interest
rates and weaker currencies are lending support to a pick up in economic growth.
Smaller European markets fared best, led by Finland, where equities were driven
up by falling interest rates and excellent performance from Nokia, a portfolio
holding and substantial part of that country's market. Spain and Portugal also
sparkled as favorable economic news and hopes for inclusion in the first round
of EMU took hold. Both countries also enjoyed further success in their
privatizations of leading companies. Spain showed particular progress in
developing a broader investor base, as domestic retail investors
enthusiastically participated in the privatizations as well as in several
initial public offerings of smaller service-oriented companies.
The United Kingdom market, Europe's largest, provided returns that were slightly
above the regional average over the period. Britain stands out from the European
continent in a number of ways. First, the country's economic cycle is ahead of
the rest of Europe, and activity is vibrant. Solid real wage gains and
employment growth, a strong property market, and a stimulative monetary policy
underpin consumer confidence. Britain's currency, the pound sterling, has
strengthened appreciably, a concern for British exporters but a boon to
consumers. In contrast to the rest of Europe, rising inflation and interest rate
increases are a risk. On the political front, the long anticipated election on
May 1 swept out the Conservative government after 18 years in power, as Tony
3
<PAGE>
Blair, the new Prime Minister, pulled together a victory of historic proportions
for the Labor Party. While the country and the markets await policy direction
from the new government, Mr. Blair has transformed Labor into a more centrist
party which appears to be supportive of a free market economy. His initial step
of granting operational independence to the Bank of England is a most
encouraging sign for capital markets.
Portfolio Focus on Beneficiaries of Expanding Markets, Restructuring
Fund strategy remains focused on identifying companies in Europe poised for
growth on the basis of effective positioning in new or growing markets, as well
as those companies whose global competitiveness will increase as they reap the
benefits of restructuring.
TelePizza, a small, recently listed company in Spain, was added to the portfolio
and is illustrative of a company positioned to capitalize on a rapidly expanding
market opportunity. Started in 1988, the company has already captured a dominant
market share of more than 50% in the nascent market for pizza restaurants and
home delivery service in Spain. The fast food market in Spain is growing at a
rate of over 30% per annum and the home delivery segment -- which accounts for
two-thirds of TelePizza's sales -- is growing even faster. TelePizza has high
national consumer brand awareness and actively markets on the local and regional
levels as well. The company has shown an ability to increase sales per outlet,
driven by a motivated employee base. It has an efficient cost structure,
benefiting from the centralization of the chain's purchases as well as from a
flexible workforce. Given the undeveloped state of the Spanish fast food market,
the country seems able to absorb easily the company's aggressive expansion
plans, which call for a 30% increase in stores over each of the next several
years. TelePizza's strong cash flow should enable it comfortably to finance this
expansion and we expect earnings growth to outstrip sales growth.
A second recently listed company, UK-based Avis Europe, was added to the
portfolio over the period. A leading player in the European car rental market
with a 16.5% market share, the company has an exclusive long term license to
conduct vehicle rental operations throughout Europe, Africa and the Middle East
under the Avis name. As the largest private purchaser of cars in Europe, Avis
has been able to optimize fleet costs by obtaining significant discounts on auto
purchases, helping to cover entry costs in high volume markets such as airports.
Market dominance has also given management the ability to promote growth through
partnerships with airlines and travel agencies. Avis is expected to benefit from
an underpenetrated rental market in Europe, new opportunities in emerging
markets, and ongoing consolidation in the industry.
Compass, another UK addition, gives the Fund further exposure to the trend
towards outsourcing on the part of corporate managements. Compass is the largest
contract caterer in the world, operating directly in more than 40 countries with
access to more than 130 markets worldwide through strategic alliances. In an
industry where size is a critical component, the company has been able to
negotiate favorable global purchasing deals and customer service contracts,
factors driving margin improvement. While North America and the UK are key
markets for Compass, the greatest potential for growth is in Continental
4
<PAGE>
Europe where the company is the market leader in Germany and Spain and has an
important presence in Holland and France. The potential for growth in Germany is
particularly strong given the underdeveloped status of the market and a broad
corporate focus on restructuring and productivity issues. The contract catering
industry should experience sustainable above-average growth driven by the
efficiency gains corporations can realize through outsourcing.
Performance has been richly rewarded by positions taken early in the Fund's life
and held over time in MLP (Germany), now the Fund's largest holding. MLP is a
leading independent financial services company offering a complete range of
insurance coverage in addition to financing, investment, and corporate
consultancy services with products tailored to individual needs. Company
strategy is to focus on college graduates and retain them as clients as they
move into higher income brackets. Since its foundation 26 years ago, MLP has
grown into a business with a corporate philosophy and customer structure that is
unique in the German market. With three quarters of the customer base under the
age of 35, the company stands to benefit from a reduction in state-supported
pension schemes and the natural aging of this group. The company is benefiting
from market deregulation as competitors incur the expenses of setting up new
networks and the fact that smaller brokers are finding it difficult to survive.
A strong earnings profile makes MLP one of the few growth stocks trading in the
German market. MLP's share price rose more than 45% in U.S.
dollar terms over the six-month period.
Over the last six months we have sold a number of positions which seemed fully
valued including, Thistle Hotels (UK), Waterford Wedgewood (Ireland), and IHC
Caland (Holland). We also exited the disappointing holding Watmoughs in the UK.
Outlook: Structural Changes Hold Promise
Despite recent market returns that have been rewarding, this is a challenging
time for investors in Europe. Uncertainties over the EMU process, political
change in the UK, electoral volatility in France and Germany, and longstanding
weak growth and high unemployment are among the litany of investor concerns. We
nevertheless remain heartened by the significant changes sweeping Europe and the
conviction behind the moves to deregulate, restructure, develop equity markets,
and recognize shareholder interests. Short-term setbacks may lie ahead for the
markets as well as for individual companies and stocks, but we believe investors
in Europe will be able to reap substantial rewards over time as the quality and
scope of investment opportunities continues to expand.
Finally, as noted in prior reports, the Directors regularly review the discount
to net asset value at which the Fund trades on the NYSE. The Directors continue
to be pleased with the performance of the Fund, and believe that the Fund's
investment objective is best served by remaining closed-end, especially in view
of the many smaller and relatively illiquid investments in the portfolio. Also,
special efforts are continually being undertaken to convey this performance to
the brokerage community and analysts who follow closed-end funds.
5
<PAGE>
Scudder New Europe Fund remains an appropriate vehicle for investors seeking
exposure to the potential for long-term capital appreciation offered by European
equities. We thank you for your continued interest in the Fund.
Respectfully,
/s/Nicholas Bratt /s/Daniel Pierce
Nicholas Bratt Daniel Pierce
President Chairman of the Board
6
<PAGE>
SCUDDER NEW EUROPE FUND, INC.
INVESTMENT SUMMARY AS OF APRIL 30, 1997
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HISTORICAL
INFORMATION TOTAL RETURN (%)
LIFE OF FUND ---------------------------------------------------------------
MARKET VALUE NET ASSET VALUE (a) INDEX (b)
------------------- -------------------- -------------------
AVERAGE AVERAGE AVERAGE
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
------------------- -------------------- -------------------
CURRENT QUARTER 4.35 -- 1.16 -- 4.07 --
ONE YEAR 22.94 22.94 20.56 20.56 20.96 20.96
THREE YEARS 37.50 11.20 56.53 16.11 53.23 15.27
FIVE YEARS 75.92 11.96 90.62 13.77 89.50 13.63
LIFE OF FUND* 38.98 4.68 82.91 8.74 116.33 11.36
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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 (%) with the exact
data points listed in the table below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1990* 1991 1992 1993 1994 1995 1996 1997
----------------------------------------------------------------
NET ASSET VALUE... $11.60 $10.26 $ 9.96 $ 9.90 $11.75 $12.06 $15.19 $18.24
INCOME DIVIDENDS.. $ -- $ .47 $ .15 $ .08 $ -- $ -- $ .05 $ .06
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS..... $ -- $ .20 $ .15 $ .18 $ -- $ -- $ -- $ --
TOTAL RETURN (%).. 0.43 -4.98 0.55 2.60 18.69 2.64 26.50 20.56
</TABLE>
(a) Total investment return reflects changes in net asset value per share
during each period and assume 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 price.
(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 APRIL 30, 1997
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GEOGRAPHICAL
Geographical breakdown of the Fund's equity securities
Germany 15%
France 13%
United Kingdom 13%
Poland 10%
Italy 9%
Portugal 8%
Netherlands 7%
Other 25%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
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SECTORS
Sector breakdown of the Fund's equity securities
Financial 14%
Manufacturing 13%
Consumer Discretionary 10%
Durables 10%
Consumer Staples 9%
Technology 9%
Service Industries 8%
Communications 6%
Construction 6%
Other 15%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the
above table.
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TEN LARGEST EQUITY HOLDINGS
1. MARSCHOLLEK LAUTENSCHLAEGER UND PARTNER AG
Leading German independent life insurance company
2. GETRONICS N.V.
Dutch computer and software distributor
3. JERONIMO MARTINS S.A.
Portuguese food producer and retailer
4. TELECOM ITALIA MOBILE SPA
Cellular telecommunication services in Italy
5. MANNESMANN AG
German diversified construction and technology company
6. SERCO GROUP PLC
Facilities utility in the United Kingdom
7. POWERGEN PLC
Electric utility in the United Kingdom
8. NOKIA AB OY
Leading manufacturer of telecommunications equipment and cellular
telephones in Finland
9. AVIS EUROPE PLC
Car rental services in the United Kingdom
10. COMPANIA TELEFONICA NACIONAL DE ESPANA S.A
Telecommunication services in Spain
8
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Investment Portfolio as of April 30, 1997
<TABLE>
<CAPTION>
============================================================================================================
Principal Market
Amount ($) Value ($)
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<S> <C> <C>
REPURCHASE AGREEMENTS 5.4%
United States
15,824,000 Repurchase Agreement with Donaldson, Lufkin & Jenrette
dated 4/30/97 at 5.375% to be repurchased at $15,826,363
on 5/1/97, collateralized by a $15,906,000 U.S. Treasury
Note, 6.5%, 8/31/01 (Cost $15,824,000) .................... 15,824,000
------------
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PREFERRED STOCKS 0.0%
Shares
--------
Finland
620,000 Diamond Cruise Ltd. "G" * (Cruise ship operator) (b)
(Cost $1,842,496) .......................................... --
------------
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COMMON STOCKS 94.6%
Austria 2.6%
55,800 Flughafen Wien AG (Operator of terminals and facilities at
Vienna International Airport) ............................... 2,311,744
15,000 VA Technologie AG (Engineering and construction company) ...... 2,329,587
30,100 VAE Eisenbahnsysteme AG (Manufacturer of electronic
railroad control systems) ................................... 2,911,350
------------
7,552,681
------------
Czech Republic 1.0%
99,600 Central European Media Enterprises Ltd. "A" * (Owner and
operator of national and regional private commercial
television stations in central Europe and Germany) .......... 2,826,150
------------
Finland 2.7%
70,000 Nokia AB Oy "A" (Leading manufacturer of
telecommunications equipment and cellular telephones) ....... 4,364,950
76,000 Pohjola Insurance Co., Ltd. "B" (Insurance company) ........... 2,162,100
17,700 TT Tieto Oy "B" (Manufacturer of computer software) ........... 1,343,912
------------
7,870,962
------------
France 12%
10,200 Altran Technologies, S.A. (Engineering and consulting
services for aerospace, telecommunications and
electronics fields) ......................................... 3,546,763
57,200 Assurances Generales de France * (Health, life, fire, accident
and special risk insurance) ................................. 1,860,617
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Investment Portfolio (continued)
<TABLE>
<CAPTION>
============================================================================================================
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
20,600 Christian Dior (Leading fashion house) ........................ 3,052,244
17,043 Credit Local de France (Bank) ................................. 1,576,434
31,500 Dassault Systemes S.A.* (Computer aided design, manufacturing
and engineering software products) .......................... 1,933,813
12,000 Essilor International* (Manufacturer of various types of
lenses, eyeglasses, contact lenses and optical measuring
instruments) .................................................. 3,305,242
30,720 Groupe Axime S.A.* (Developer of financial databases,
communication networks and trading computer systems
for financial applications) ................................. 3,693,977
10,700 Le Carbone-Lorraine (Manufacturer of industrial and
technological systems and components) ....................... 2,538,455
57,581 Michelin "B" * (Leading tire manufacturer) .................... 3,216,369
53,000 Salomon S.A. (Manufacturer of ski and golf equipment) ......... 3,736,691
38,552 Total S.A. "B" (International oil and gas exploration,
development and production) ................................. 3,196,158
50,171 Valeo S.A. (Automobile and truck components manufacturer) ..... 3,093,792
------------
34,750,555
------------
Germany 14%
34,130 Adidas AG* (Manufacturer of sport shoes, clothing and
equipment) .................................................. 3,556,337
63,550 B.U.S. Berzelius Umwelt-Service AG* (Reprocessing of
high-zinc dust, aluminum-bearing salt slag) ................. 761,243
83,000 BHW Holding AG* (Mortgage banking, insurance and real estate
investment) ................................................. 1,379,939
15,000 Fresenius AG (Developer, manufacturer and distributor of
pharmaceuticals) ............................................ 3,143,311
15,000 Fresenius AG Rights* .......................................... 58,017
13,500 Mannesmann AG (Bearer)* (Diversified construction and
technology company) ......................................... 5,307,259
77,500 Marschollek Lautenschlaeger und Partner AG (pfd)
(Leading independent life insurance company) ................ 15,658,825
39,400 Moebel Walther AG (pfd.) (Furniture retailer) ................. 1,819,599
130,000 Pfeifer Vacuum Technology AG (ADR)* (Manufacturer of various
pumps and vacuum systems) ................................... 3,022,500
15,000 SAP AG (pfd.) (Computer software manufacturer) ................ 2,761,437
60,000 VEBA AG* (Electric utility, distributor of oil and chemicals).. 3,089,623
------------
40,558,090
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hungary 3.4%
60,000 Danubius Hotel & Spa* (Hotel operator) ........................ 1,905,440
34,550 EGIS Rt* (Pharmaceutical company) ............................. 2,194,432
9,000 EGIS Rt* (EDR) ................................................ 571,500
82,100 Graboplast Rt* (Producer of home improvement materials,
artificial leather and book bindings) ....................... 3,762,570
30,000 Pannonplast Rt (Manufacturer of plastic products from PVC
polypropylene, polyethylene and other raw materials) ........ 1,494,785
------------
9,928,727
------------
Italy 8.3%
163,000 Bulgari SpA* (Manufacturer and retailer of fine jewelry,
luxury watches and perfumes) ................................ 2,944,565
200,000 Gewiss SpA* (Manufacturer of electrical components) ........... 2,684,916
45,600 Gucci Group (New York Shares) (Designer and producer
of personal luxury accessories and apparel) ................. 3,163,500
50,000 Luxottica Group SpA* (ADR) (Manufacturer and marketer
of eyeglasses) .............................................. 3,018,750
220,000 Mediolanum SpA* (Life insurance company) ...................... 2,105,908
78,500 Saes Getters SpA* (Manufacturer of getters, refined chemicals
used in cathode ray tubes and other monitors) ............... 1,113,394
55,000 Saes Getters SpA di Risparmio* ................................ 497,585
600,000 Saipem SpA (International contractor in oil and gas exploration
and drilling, construction of refineries and pipelines) ..... 2,831,419
1,890,000 Telecom Italia Mobile SpA (Cellular telecommunication
services) ................................................... 5,940,465
------------
24,300,502
------------
Netherlands 6.9%
364,348 Getronics NV (Provider of computer installation and
maintenance services) ....................................... 11,028,953
19,625 Heineken Holdings NV "A" (Brewery) ............................ 2,879,662
90,000 Qiagen NV* (Biopharmaceutical company) ........................ 3,127,500
25,565 Wolters Kluwer CVA (Publisher) ................................ 3,028,556
------------
20,064,671
------------
Norway 0.9%
150,555 Saga Petroleum AS "A" * (Oil and gas exploration and
production) ................................................. 2,631,120
------------
Poland 9.1%
74,000 Agros Holdings S.A. "C" * (Fruit and vegetable processing) .... 2,105,596
</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>
124,200 Bank Rozwoju Eksportu S.A. (Export bank) ...................... 2,984,255
13,900 Bank Slaski S.A.* (Bank) ...................................... 1,151,375
200,000 Budimex S.A.* (Construction of apartment houses and
sewage treatment facilities) ................................ 2,181,473
320,000 Bydgoska Fabryka Kabli S.A.* (Manufacturer of cables, wires and
insulating materials) ....................................... 2,428,075
102,900 Computerland Poland S.A.* (Provider of computer services
and systems) ................................................ 2,992,981
93,400 Debica S.A. "A" * (Tire manufacturer) ......................... 2,332,785
240,000 Elektrim Spolka Akcyjna S.A. (Manufacturer of power equipment,
electrical machinery and apparatus) ......................... 2,147,328
47,000 Gorazdze Cement S.A.* (Cement producer) ....................... 1,560,228
10,524 ITI Group S.A.* (Telecommunication services) (b) .............. 2,052,180
107,900 Krosno S.A. (Manufacturer of wide range of glassware) ......... 1,671,546
23,700 Kutnowskie Zaklady Farmaceutyczne Polfa S.A. "A" * (Producer
of pharmaceuticals, veterinary medicines, food components) .. 921,625
88,000 Zaklady Metali Lekkich Kety (Manufacturer of aluminum
casting alloys and products) ................................ 1,919,696
------------
26,449,143
------------
Portugal 7.7%
150,000 Cimentos de Portugal S.A.* (Manufacturer of cement, ready
mix concrete and aggregates) ................................ 3,225,436
144,999 Jeronimo Martins S.A. (Food producer and retailer) ............ 8,670,095
110,300 Portugal Telecom S.A. (Telecommunication services) ............ 4,061,815
49,999 Publico Comunicacao Social S.A.* (Newspaper publisher) (b) .... 574,932
110,000 Seguros Tranquilidade S.A. (Insurance company) ................ 2,338,757
162,500 Semapa S.A. (Cement producer) ................................. 3,475,536
------------
22,346,571
------------
Spain 3.6%
22,990 Acerinox, S.A. (Stainless steel producer) ..................... 3,358,752
24,000 Catalana Occidenta S.A.* (Insurance company) .................. 1,260,696
30,000 Compania Telefonica Nacional de Espana S.A ....................
(Telecommunication services) ................................ 768,442
54,000 Compania Telefonica Nacional de Espana S.A. (ADR) ............. 4,158,000
22,334 Tele Pizza, S.A.* (Operator of fast-food pizza restaurants
in Spain, Portugal, Poland, Mexico and Chile) ............... 1,023,479
------------
10,569,369
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sweden 2.5%
70,000 Autoliv AB (Manufacturer of automobile safety bags) ........... 2,547,077
108,400 L.M. Ericsson Telephone Co. "B" (ADR)
(Leading manufacturer of cellular telephone equipment) ...... 3,644,950
16,600 WM-Data AB* (Data consulting and systems for
large Nordic companies) ..................................... 1,205,926
------------
7,397,953
------------
Switzerland 6.0%
2,741 ABB AG (Bearer) (Manufacturer of electrical equipment) ........ 3,320,451
11,200 Adecco S.A. (Bearer)* (Personnel and temporary employment
company) .................................................... 3,739,667
500 Baloise Holdings Ltd. (Registered)* (Provider of private,
commercial and corporate insurance, life insurance,
international reinsurance) .................................. 1,055,310
16,078 Ciba Specialty Chemical* (Registered) (Manufacturer of
chemical products for plastics, coatings, fibers and fabrics). 1,385,752
4,994 Clariant AG (Registered)* (Manufacturer of color chemicals) ... 2,860,493
1,920 Novartis AG (Bearer) (Pharmaceutical company) ................. 2,530,465
289 Novartis AG (Registered) ...................................... 380,888
4,900 Phoenix Mecano AG (Bearer)* (Manufacturer of housings
and components for computers) ............................... 2,244,656
------------
17,517,682
------------
Turkey 0.6%
1,593,000 Migros Turkey* (Retailer) ..................................... 1,615,559
------------
United Kingdom 12.7%
1,980,000 Avis Europe PLC* (Car rental services) ........................ 4,330,526
243,000 Brake Brothers PLC (Specialist supplier of frozen foods to the
catering industry) .......................................... 1,976,295
396,000 Cobham PLC (Manufacturer of aerospace components) ............. 4,048,240
270,000 Compass Group PLC (International catering group) .............. 2,957,006
725 Creditanstalt Central Europe Fund* (Investment company) (b) ... 1,387,942
560,000 Hardy Oil & Gas PLC (Oil and gas exploration and
development) ................................................ 2,821,565
485,000 N Brown Group PLC (Home shopping catalogue retailer) .......... 3,241,212
105,000 PowerGen PLC (ADR) (Electric utility in the United Kingdom) ... 4,488,750
400,214 Provident Financial PLC (Personal finance group) .............. 3,721,739
475,000 Serco Group PLC (Facilities management company) ............... 5,155,967
</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>
205,494 Spirax-Sarco Engineering PLC (Manufacturer of products
for control and management of steam and other
industrial fluids) .......................................... 2,347,089
355,195 TLG PLC (Manufacturer and supplier of lighting equipment
and systems) ................................................ 632,998
------------
37,109,329
------------
United States 0.6%
120,000 Rofin-Sinar Technologies Inc.* (Manufacturer of laser products
use for cutting and welding) ............................... 1,785,000
------------
Total Common Stocks (Cost $164,746,850) ....................... 275,274,064
------------
- ------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -100.0% (Cost $182,413,346) (a) .... 291,098,064
============
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $182,413,346 At April 30,
1997, net unrealized appreciation for all securities based on tax cost was
$108,684,718. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $114,700,760 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$6,016,042.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $4,015,054 (1.4% of net assets). These
values have been estimated by the Valuation Committee in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at April 30, 1997 aggregated $5,997,811. These securities
may also have certain restrictions as to resale.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Statements
================================================================================
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
April 30, 1997
- --------------------------------------------------------------------------------
ASSETS
Investments, at market (identified
cost $182,413,346) ............................... $ 291,098,064
Cash ............................................... 450
Receivables:
Investments sold ................................ 1,332,436
Dividends and interest .......................... 412,847
Foreign taxes recoverable ....................... 319,210
Other ........................................... 5,005
-------------
Total assets ................................... 293,168,012
LIABILITIES
Payables:
Accrued management fee .......................... $279,383
Other payables and accrued expenses ............. 175,314
--------
Total liabilities .............................. 454,697
-------------
Net assets, at market value ........................ $ 292,713,315
=============
NET ASSETS
Net assets consist of:
Accumulated distributions in excess of net
investment income ............................. $ (813,665)
Unrealized appreciation on:
Investments .................................... 108,684,718
Foreign currency related transactions .......... (28,384)
Accumulated net realized gain ................... 5,070,084
Paid-in capital ................................. 179,800,562
-------------
Net assets, at market value ........................ $ 292,713,315
=============
Net asset value per share ($292,713,315 / 16,049,224
shares of common stock issued and outstanding,
$.01 par value, 100,000,000 shares authorized)... $18.24
======
The accompanying notes are an integral part of the financial statements
- --------------------------------------------------------------------------------
15
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Statements (continued)
================================================================================
- --------------------------------------------------------------------------------
Statement of Operations
Six Months Ended April 30, 1997
- --------------------------------------------------------------------------------
Investment income
Income:
Dividends (net of foreign taxes withheld
of $186,226) .................................. $ 1,310,044
Interest ........................................ 364,175
-----------
1,674,219
-----------
Expenses:
Management fee .................................. $1,650,639
Custodian and accounting fees ................... 275,607
Directors' fees and expenses .................... 71,151
Reports to shareholders ......................... 49,827
Auditing ........................................ 38,857
Services to shareholders ........................ 20,018
Legal ........................................... 2,795
Other ........................................... 21,187 2,130,081
---------- -----------
Net investment loss .............................. (455,862)
-----------
Net realized and unrealized gain (loss) on
investment transactions
Net realized gain (loss) from:
Investments ..................................... 9,835,151
Foreign currency related transactions ........... 19,268 9,854,419
----------
Net unrealized appreciation (depreciation) during
the period on:
Investments ..................................... 17,874,457
Foreign currency related transactions ........... (41,638) 17,832,819
---------- -----------
Net gain on investment transactions .............. 27,687,238
-----------
Net increase in net assets resulting from operations. $27,231,376
===========
The accompanying notes are an integral part of the financial statements
- --------------------------------------------------------------------------------
16
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Six Months
Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets 1997 1996
- --------------------------------------------------------------------------------
Operations:
Net investment income (loss) ................ $ (455,862) $ 743,364
Net realized gain from investment
transactions .............................. 9,854,419 10,363,364
Net unrealized appreciation on investment
transactions during the period ............ 17,832,819 43,572,097
------------ ------------
Net increase in net assets resulting from
operations ................................ 27,231,376 54,678,825
------------ ------------
Distributions to shareholders from net
investment income ......................... (962,847) (802,249)
------------ ------------
Net asset value of shares issued to shareholders
in reinvestment of distributions .......... 26,056 29,112
------------ ------------
Increase in net assets ......................... 26,294,585 53,905,688
Net assets at beginning of period .............. 266,418,730 212,513,042
------------ ------------
Net assets at end of period (including
accumulated distributions in excess of
net investment income of $813,665 and
undistributed net investment income of
$605,044, respectively) ...................... $292,713,315 $266,418,730
============ ============
Other Information
Increase in Fund Shares
Shares outstanding at beginning of period ...... 16,047,487 16,044,970
Shares issued to shareholders in reinvestment
of distributions ............................. 1,737 2,517
------------ ------------
Shares outstanding at end of period ............ 16,049,224 16,047,487
============ ============
The accompanying notes are an integral part of the financial statements
- --------------------------------------------------------------------------------
17
<PAGE>
[LOGO] Scudder New Europe Fund, Inc.
Financial Highlights
================================================================================
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended Years Ended October 31,
April 30, ---------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of
period .............................. $16.60 $13.24 $11.61 $10.72 $ 9.12 $10.12
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (loss)(a) ..... (.03) .05 .05 .02 .03 .07
Net realized and unrealized
gain (loss) on investment
transactions ...................... 1.73 3.36 1.58 0.87 1.83 (.77)
------ ------ ------ ------ ------ ------
Total from investment
operations .......................... 1.70 3.41 1.63 0.89 1.86 (.70)
------ ------ ------ ------ ------ ------
Less distributions from: .............. (.06) (.05) -- -- (.08) (.15)
Net investment income
Net realized gains on
investment transactions............. -- -- -- -- (.18) (.13)
Additional paid-in capital ........... -- -- -- -- -- (.02)
------ ------ ------ ------ ------ ------
Total distributions ................... (.06) (.05) -- -- (.26) (.30)
------ ------ ------ ------ ------ ------
Net asset value, end of period ........ $18.24 $16.60 $13.24 $11.61 $10.72 $ 9.12
====== ====== ====== ====== ====== ======
Market value, end of period ........... $15.00 $14.00 $10.25 $ 9.75 $10.25 $ 8.25
====== ====== ====== ====== ====== ======
Total Return
Per share market value (%) ............ 7.57** 37.18 5.13 (4.88) 28.25 (5.05)
Per share net asset value (%)(b) ...... 10.32** 25.92 14.04 8.30 21.33 (6.65)
Ratios and Supplemental Data
Net assets, end of period
($ millions) ........................ 293 266 213 186 172 146
Ratio of operating expenses to
average net assets (%) .............. 1.51* 1.51 1.62 1.67 1.72 1.76
Ratio of net investment income
(loss) to average net assets (%) .... (.32)* .31 .39 .20 .33 .78
Portfolio turnover rate (%) ........... 41.76* 35.3 32.4 43.2 32.7 25.7
Average commission rate paid (c) ...... $.0389 $.0463 -- -- -- --
</TABLE>
(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 assume 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 price.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after October 31, 1996.
* Annualized
** Not Annualized
- --------------------------------------------------------------------------------
18
<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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
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 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.
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 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.
19
<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. 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. 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, 1996, the Fund had a net tax basis capital loss carryforward of
approximately $4,784,000 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, whichever occurs first.
Distribution of Income and Gains. Distribution of net investment income is made.
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. 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.
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
For the six months ended April 30, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $56,211,573 and
$56,797,665, respectively.
20
<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, 1997, the fee
pursuant to such Management Agreement amounted to $1,650,639 which was
equivalent to an annual effective rate of 1.17% of the Fund's average weekly net
assets.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1997, the amount charged to the Fund by SFAC aggregated $84,981
of which $14,308 is unpaid at April 30, 1997.
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, 1997, Directors' fees and expenses aggregated $71,151.
21
<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, 1997,
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, 1996, and the financial highlights for the six months
ended April 30, 1997 and for each of the five years in the period ended October
31, 1996. 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, 1997 by correspondence with the custodian. 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, 1997, 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, 1996, and the financial
highlights for the six months ended April 30, 1997 and for each of the five
years in the period ended October 31, 1996 in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
June 13, 1997
22
<PAGE>
Other Information
- --------------------------------------------------------------------------------
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.
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. The Plan's features
are more fully described on page 26.
Net Asset Value
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.
23
<PAGE>
This Page
intentionally
left blank.
24
<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.
25
<PAGE>
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 8209, Boston, MA 02266-8209,
1-800-426-5523.
26
<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
LADISLAS O. RICE
Director
PAUL J. ELMLINGER*
Director, Vice President and
Assistant Secretary
CAROL L. FRANKLIN*
Vice President
JOAN R. GREGORY*
Vice President
JERARD K. HARTMAN*
Vice President
DAVID S. LEE*
Vice President
THOMAS F. McDONOUGH*
Vice President and Secretary
PAMELA A. McGRATH*
Vice President and Treasurer
EDWARD J. O'CONNELL*
Vice President and Assistant Treasurer
KATHRYN L. QUIRK*
Vice President and Assistant Secretary
*Scudder, Stevens & Clark, Inc.
27
