SCHEDULE 14A
(Rule 14a-101)
INFORMATION INCLUDED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The New Germany Fund, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing
1) Amount previously paid:
---------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------
3) Filing Party:
---------------------------------------------------
4) Date Filed:
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<PAGE>
THE NEW GERMANY FUND, INC.
31 West 52nd Street
New York, New York 10019
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 30, 1998
--------------------
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of The New
Germany Fund, Inc. (the "Fund") will be held at 2:00 P.M., New York time, on
June 30, 1998 at the offices of Deutsche Bank Securities Inc. (formerly Deutsche
Morgan Grenfell Inc.), 31 West 52nd Street, 5th Floor, New York, New York for
the following purposes:
1. To elect three Directors.
2. To ratify the selection by the Board of Directors of Price Waterhouse
LLP as independent accountants for the fiscal year ending December 31,
1998.
3. To act upon, if presented, certain stockholder proposals.
4. To transact such other business as may come before the meeting or any
adjournment thereof.
Only holders of record of Common Stock at the close of business on May 25,
1998 are entitled to notice of and to vote at this meeting or any adjournment
thereof.
If you have any questions or need further information, please contact
Morrow & Co., Inc., the Fund's proxy solicitors, at 909 Third Avenue, New York,
New York 10022, or 1-800-662-5200.
Robert R. Gambee
Chief Operating Officer
and Secretary
Dated: May 26, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE ENCLOSED PROXY
AND PROMPTLY RETURN IT TO THE FUND. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO
THE FUND OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN YOUR
PROXY PROMPTLY.
<PAGE>
THE NEW GERMANY FUND, INC.
31 West 52nd Street
New York, New York 10019
Annual Meeting of Stockholders
June 30, 1998
--------------------
PROXY STATEMENT
--------------------
This proxy statement is furnished by the Board of Directors of The New
Germany Fund, Inc. (the "Fund") in connection with the solicitation of proxies
for use at the Annual Meeting of Stockholders (the "Meeting") to be held at 2:00
P.M., New York time, on June 30, 1998 at the offices of Deutsche Bank Securities
Inc., 31 West 52nd Street, 5th Floor, New York, New York. The purpose of the
Meeting and the matters to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Stockholders.
If the accompanying form of Proxy is executed properly and returned,
shares represented by it will be voted at the Meeting in accordance with the
instructions on the Proxy. However, if no instructions are specified, shares
will be voted FOR the election of Directors, FOR the ratification of the
selection of independent accountants and AGAINST each of the stockholder
proposals. A Proxy may be revoked at any time prior to the time it is voted by
written notice to the Secretary of the Fund or a subsequently executed proxy, or
by attendance at the Meeting and voting in person.
The close of business on May 25, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had 30,322,240 shares of Common Stock
outstanding and entitled to vote. Each share will be entitled to one vote on
each matter that comes before the Meeting. It is expected that the Notice of
Annual Meeting, Proxy Statement and form of Proxy will first be mailed to
stockholders on or about May 26, 1998.
The Board of Directors of the Fund has nominated three Directors for
election at the Meeting (Proposal 1) and approved the selection of Price
Waterhouse LLP as independent accountants to the Fund for the fiscal year ending
December 31, 1998, for ratification by the stockholders at the Meeting (Proposal
2). In addition, there are two shareholder proposals that, if presented, will be
acted on at the Meeting (Proposals 3 and 4).
The Fund intends to treat properly executed proxies that are marked
"abstain" and broker non-votes (defined below) as present for the purposes of
determining whether a quorum has been achieved at the Meeting. Under Maryland
law, abstentions do not constitute a vote "for" or "against" a matter and will
be disregarded in determining the "votes cast" on an issue. If a proxy is
properly executed and returned accompanied by instructions to withhold authority
to vote, it represents a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the broker or nominee does not have discretionary power).
The shares represented by broker non-votes or proxies marked with an abstention
will be considered to be present at the Meeting for purposes of determining the
existence of a quorum for the transaction of business.
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Fund's By-Laws provide that the Board of Directors be divided into
three classes of Directors serving staggered three-year terms. The term of
office for Directors in Class I expires at the 1998 annual meeting, Class II at
the next succeeding annual meeting and Class III at the following succeeding
annual meeting. Three Class I nominees are proposed in this Proxy Statement for
election.
Should any vacancy occur on the Board of Directors for reasons other than
an increase in the number of Directors, the remaining Directors, though less
than a quorum, would be able to fill such vacancy by the vote of a majority of
their number, as at present. Should any vacancy occur on the Board of Directors
as a result of an increase in the number of Directors, a majority of the entire
Board of Directors would be able to fill such vacancy. Any Director elected by
the Board to fill a vacancy would hold office until the next annual meeting of
shareholders. If the size of the Board is increased, the additional Directors
will be apportioned among the three classes to make all classes as nearly equal
as possible.
Unless authority is withheld, it is the intention of the persons named in
the form of proxy to vote each proxy for the election of the nominees listed
below. Each nominee has indicated he will serve if elected, but if any nominee
should be unable to serve, proxies will be voted for any other person determined
by the persons named in the form of proxy in accordance with their judgment.
Each of the nominees is currently a member of the Board of Directors.
Information Regarding Directors and Officers
The following table shows certain information about the Directors,
including beneficial ownership of Common Stock of the Fund. Each has served as a
Director of the Fund since the Fund's inception in 1990, except for Mr.
Wadsworth, Dr. Hopp, Mr. Matz, Mr. Zuhlsdorff and Mr. Dobson, who were elected
to the Board on June 19, 1992, June 18, 1993, April 24, 1995, October 21, 1996
and April 30, 1998, respectively.
The following Directors have been nominated for election at the 1998
Annual Meeting:
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned,
Directly or Indirectly,
Name Age Position with Fund Principal Occupations During Past Five Years at May 25, 1998(1)
----- --- ------------------ -------------------------------------------- -----------------
<S> <C> <C> <C> <C>
Michael W.R. 46 Chairman and Member of the Board of Managing --
Dobson(2)(3) Director Directors of Deutsche Bank AG,
Class I Chairman of Deutsche Group Plc,
Deutsche Bank deBary N.V., Deutsche
Fonds Holding GmbH, Deutsche
Gesellschaft fur Fondverwaltung mbH,
DWS Deutsche Gesellschaft fur
Wertpapiersparen mbH, Morgan Grenfell
Asset Management Ltd, Morgan Grenfell
Capital Ltd., Morgan Grenfell
Development Capital Holdings Ltd.,
Morgan Grenfell Strategic Investments Ltd.
and Phoenix Travel Ltd. Director
of Anglo & Overseas Trust, Deutsche
Asset Management GmbH and Morgan
Grenfell Investments Holdings Ltd.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned,
Directly or Indirectly,
Name Age Position with Fund Principal Occupations During Past Five Years at May 25, 1998(1)
----- --- ------------------ -------------------------------------------- -----------------
<S> <C> <C> <C> <C>
and Phoenix Travel Ltd. Director
of Anglo & Overseas Trust, Deutsche
Asset Management GmbH and Morgan
Grenfell Investments Holdings Ltd.
Richard Karl 55 Director Vice Chairman and Chief Financial 4,535
Goeltz Officer of American Express Co.,
Class I Group Chief Financial Officer and
Member of the Board of Directors of
National Westminster Bank Plc.
(1991-1996). Director and Executive
Vice President-Finance of Joseph E.
Seagram & Sons, Inc. (1976-1991).
Executive Vice President-Finance of
The Seagram Company Ltd. (1976-1991).
Christian H. 54 Director Managing Director of DWS- --
Strenger(2)(3)(4)(5) Deutsche Gesellschaft fur
Class I Wertpapiersparen mbH (since
1991). Managing Director of Deutsche
Bank Securities Corporation
(1986-1991).
The following are Directors whose terms continue:
John A. Bult(2)(3) 61 Director Chairman of PaineWebber 1,655
Class II International, Director of
PaineWebber Group, Inc., Director of
The France Growth Fund, Inc. and The
Greater China Fund, Inc.
John H. Cannon 56 Director Vice President and Treasurer of the 136
Class II Woolworth Corporation. Director
of the German American Chamber of
Commerce, Inc.
Robert H. 58 Director President of The Wadsworth Group, 1,763
Wadsworth(2)(5) First Fund Distributors, Inc. and
Class II Guinness Flight Investment Funds, Inc.,
Vice President of Professionally
Managed Portfolios and Advisors
Series Trust.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned,
Directly or Indirectly,
Name Age Position with Fund Principal Occupations During Past Five Years at May 25, 1998(1)
----- --- ------------------ -------------------------------------------- -----------------
<S> <C> <C> <C> <C>
Dr. Franz Wilhelm 55 Director Member of the Board of Directors --
Hopp of ERGO Versicherungsgruppe AG,
Class III Victoria Lebensversicherung AG
and Victoria Versicherung AG.
Chairman of the Board of Vorsorge
Lebensversicherung AG. Chairman of
the Supervisory Board of Victoria
Kapitalanlagegesell-shaft mbH. Former
Member of the Board of Directors of
Victoria Holding AG, Chairman of the
Board of Wurttembergische
Lebensversicherung AG, Member of the
Board of Wurttembergische AG
Versicherungs-Beteiligungsgesellschaft
and Wurttembergische Versicherung AG
(1990-1995). Deputy Chairman of the
Supervisory Board of Leonberger
Bausparkasse AG. Member of the
Supervisory Board of Bankhaus
Ellwanger & Geiger.
Ernst-Ulrich 64 Director Chief Financial Officer and --
Matz member of the Board of Directors
Class III of IWKA Aktiengesellschaft.
Member of the Board of Directors of
KUKA Welding Systems + Robot Corp.
Member of the Supervisory Boards of
Bopp & Reuther AG, Ex Cell-O Holding
AG, Rotring International GmbH & Co.
KG, ARO S.A. (Chauteau-du-Loir).
Member of the District Advisory Boards
of Deutsche Bank AG (Mannheim) and
Gerling-Konzern. Chairman of the
Rumanian Group in the German East-West
Trade Committee.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned,
Directly or Indirectly,
Name Age Position with Fund Principal Occupations During Past Five Years at May 25, 1998(1)
----- --- ------------------ -------------------------------------------- -----------------
<S> <C> <C> <C> <C>
Dr. Frank Tromel 62 Director Chairman of the Board of --
Class III Managing Directors of Delton AG
(since 1990). Chairman of
the Supervisory Board of
Ceag AG (since 1981).
Chairman of the Board of
Managing Directors of
Altana AG (1987-1990).
Member of the Board of
Managing Directors of
Altana AG (1977-1987).
Peter Zuhlsdorff 58 Director Chairman, DIH-German Industrie --
Class II Holding. Chairman of the
Supervisory Board of GFK
AG. Member of the
Supervisory Boards of
Deutsche Hypothekenbank AG,
Deutz AG, Triangle Venture
Capital, Merck KGaA and
Escada AG. Member of the
District Advisory Boards of
Melitta Unternehmensgruppe
Bentz KG, Diebels GmbH &
Co. KG and Deutsche Bank
AG. Member of the Board
Escada (USA) Inc. Chairman
of the Board of Wella AG
(1991-1995).
</TABLE>
- ----------
(1) As of May 25, 1998, all Directors and officers as a group owned less than 1%
of the outstanding Common Stock of the Fund.
(2) Indicates that Messrs. Bult, Dobson, Strenger and Wadsworth each also serves
as a Director of The Central European Equity Fund, Inc. and The Germany
Fund, Inc., the two other closed-end registered investment companies for
which Deutsche Bank Securities Inc. acts as manager.
(3) Indicates "interested" Director, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"). Mr. Dobson is an "interested" Director
because of his affiliation with Deutsche Bank AG ("Deutsche Bank"), of which
Deutsche Bank Securities Inc. is an indirect wholly-owned subsidiary; Mr.
Bult is an "interested" Director because of his affiliation with PaineWebber
Incorporated, a registered broker-dealer; and Mr. Strenger is an
"interested" Director because of his affiliation with DWS-Deutsche
Gesellschaft fur Wertpapiersparen ("DWS"), a majority-owned subsidiary of
Deutsche Bank.
(4) Indicates that Mr. Strenger owns shares of Deutsche Bank, of which Deutsche
Asset Management GmbH ("DBAM") and Deutsche Bank Securities Inc. are
wholly-owned subsidiaries. As of May 25, 1998, Mr. Strenger owned less than
1% of the outstanding shares of Deutsche Bank.
(5) Indicates that Messrs. Strenger and Wadsworth each also serves as a Trustee
of Deutsche Portfolios, an open-end registered investment company for which
Deutsche Bank Securities Inc. acts as sub-adviser of two portfolios and an
affiliate of Deutsche Bank Securities Inc. acts as investment manager.
5
<PAGE>
The Board of Directors presently has an Audit Committee composed of
Messrs. Cannon, Wadsworth and Goeltz. The Audit Committee makes recommendations
to the full Board with respect to the engagement of independent accountants and
reviews with the independent accountants the plan and results of the audit
engagement and matters having a material effect upon the Fund's financial
operations. The Audit Committee met five times during the fiscal year ended
December 31, 1997. In addition, the Board has an Advisory Committee composed of
Messrs. Cannon, Wadsworth and Goeltz. The Advisory Committee makes
recommendations to the full Board with respect to the Management Agreement,
dated as of January 31, 1990 (the "Management Agreement"), between the Fund and
Deutsche Bank Securities Inc. and the Investment Advisory Agreement, dated as of
January 31, 1990 (the "Investment Advisory Agreement"), between the Fund and
DBAM. The Advisory Committee met once during the past fiscal year. The Board has
a Nominating Committee composed of Messrs. Cannon and Dobson and Dr. Tromel. The
Nominating Committee makes recommendations to the full Board with respect to the
selection of candidates to fill vacancies on the Board of Directors intended to
be filled by persons not affiliated with Deutsche Bank Securities Inc. or DBAM.
The Nominating Committee will consider suggestions from stockholders submitted
in writing to the Secretary of the Fund. The Nominating Committee met once
during the past fiscal year.
During the past fiscal year, the Board of Directors had four regular
meetings and one special meeting, and each incumbent Director, with the
exception of Mr. Zuhlsdorff, attended at least 75% of the aggregate number of
meetings of the Board and meetings of Board Committees on which that Director
served. Each incumbent Director attended at least 75% of the number of regular
meetings of the Board.
The Fund pays each of its Directors who is not an interested person of the
Fund, the Investment Adviser or the Manager an annual fee of $7,500 plus $750
for each meeting attended. Each such Director who is also a Director of The
Germany Fund, Inc. or The Central European Equity Fund, Inc. also receives the
same annual and per-meeting fees for services as a Director of each such fund.
Each of the Fund, The Germany Fund, Inc. and The Central European Equity Fund,
Inc. reimburses the Directors (except for those employed by the Deutsche Bank
Group) for travel expenses in connection with Board meetings. The following
table sets forth the aggregate compensation from the Fund for the fiscal year
ended December 31, 1997, and from the Fund and such other two funds for the year
ended December 31, 1997, for each Director who is not an interested person of
the Fund, and for all such Directors as a group:
Aggregate Compensation Total Compensation From
Name of Director From Fund Fund Complex
--------------- ---------------------- -----------------------
John H. Cannon $17,250 $ 17,250
Richard Karl Goeltz 15,750 15,750
Dr. Franz Wilhelm Hopp 10,500 10,500
Ernst-Ulrich Matz 11,250 11,250
Dr. Frank Tromel 11,250 11,250
Robert H. Wadsworth 15,750 48,750
Peter Zuhlsdorff 9,750 9,750
------- --------
Total $91,500 $124,500
======= ========
No compensation is paid by the Fund to Directors or officers who are
interested persons of the Fund, Deutsche Bank Securities Inc. or DBAM.
6
<PAGE>
The officers of the Fund other than as shown above are:
<TABLE>
<CAPTION>
Name Age Position with Fund Principal Occupations During Past Five Years
----- --- ---------------- ---------------------------------------------
<S> <C> <C> <C>
Kenneth J. Tarr 53 President and Chief Executive Vice President, Deutsche Bank
Executive Officer AG, New York Branch. Chairman,
Deutsche Bank Trust Co. and Deutsche Morgan
Grenfell Investment Management, Inc. (since
1997). Principal, Weiss, Peck & Greer, LLC.
(1994-1997).
Robert R. Gambee 55 Chief Operating Officer Director of Deutsche Bank Securities Inc.
and Secretary (since 1992). First Vice President of
Deutsche Morgan Grenfell Inc. (1987-1991).
Secretary of Deutsche Funds, Inc. (since 1997).
Joseph Cheung 39 Chief Financial Officer Vice President (since 1996), Assistant Vice
and Treasurer President (1994-1996) and Associate
(1991-1994) of Deutsche Bank
Securities Inc. Treasurer of Deutsche Funds,
Inc. (since 1997).
Laura Weber 26 Assistant Secretary and Associate of Deutsche Bank Securities Inc.
Assistant Treasurer (since 1997). Assistant Treasurer of
Deutsche Funds, Inc. (since 1997).
Manager of Raymond James Financial
(1996-1997). Portfolio Accountant of
Oppenheimer Capital (1995-1996). Supervisor
(1994-1995) and Mutual Fund Accountant
(1993-1994) of Alliance Capital Management.
</TABLE>
The officers of the Fund are elected annually by the Board of Directors at
their meeting following the Annual Meeting of Stockholders.
The Board unanimously recommends a vote FOR Proposal 1.
---
Required Vote. The affirmative vote of the holders of a plurality of the
shares represented at the Meeting is required for the election of each Director.
PROPOSAL 2: SELECTION OF INDEPENDENT ACCOUNTANTS
A majority of members of the Board of Directors, including a majority of
the members of the Board of Directors who are not "interested" Directors (as
defined in the 1940 Act) of the Fund, have selected Price Waterhouse LLP as
independent accountants for the Fund for the fiscal year ending December 31,
1998. The ratification of the selection of independent accountants is to be
voted upon at the Meeting and it is intended that the persons named in the
accompanying Proxy will vote for Price Waterhouse LLP. A representative of Price
Waterhouse LLP will be present at the Meeting and will have the opportunity to
make a statement and is expected to be available to answer appropriate questions
concerning the Fund's financial statements.
The Board unanimously recommends a vote FOR Proposal 2.
---
Required Vote. The affirmative vote of the holders of majority of the
shares represented at the Meeting is required for the ratification of the
selection by the Board of Directors of Price Waterhouse LLP as independent
accountants for the fiscal year ending December 31, 1998.
7
<PAGE>
- --------------------------------------------------------------------------------
EXPLANATION OF CLOSED-END VS. OPEN-END FUNDS.
The following background information may be useful for investors in their
consideration of the stockholder proposals discussed later.
A closed-end fund like your Fund does not issue new shares or redeem
shares each day. Instead its shares trade freely on the New York Stock Exchange
like those of any public company. The market prices of your Fund's shares are
influenced by supply and demand forces and other factors and can trade at levels
above their net asset value (called "market premium") or below their net asset
value (called "market discount"), just as an industrial company's shares can
trade above or below book value.
In contrast, an open-end fund's shares are not traded on any stock
exchange. Shareholders obtain liquidity by selling their shares back to the
open-end fund at their net asset value (called "redemption"). By law, an
open-end fund must stand ready to redeem shares on any day with no advance
notice. The open-end fund must continuously offer and sell new shares to offset
these redemptions, or else it will become too small to invest in an adequately
diversified portfolio and its fixed expenses will become a serious drag on
investment returns.
Each of the closed-end and open-end fund formats has its own advantages.
The open-end format works well when presented as part of a broad family of
open-end funds having a variety of investment objectives, investing in highly
liquid securities, offered with shareholder services such as exchange privileges
and sold through an established broker or direct-mail distribution network.
The closed-end format is especially well-suited for specialty investing,
such as the stocks of a particular foreign country or region. As some of those
securities are less liquid, the closed-end format frees the portfolio manager to
concentrate on investments, rather than holding part of the assets in
easier-to-sell securities. The managers of foreign country funds have strong
local country investing expertise. For these situations the closed-end format
works very well.
- --------------------------------------------------------------------------------
8
<PAGE>
PROPOSAL 3: STOCKHOLDER PROPOSAL
A beneficial owner (the "proponent") of Common Stock of the Fund has
informed the Fund that he intends to present a proposal for action at the
Meeting. The proponent's name and address and the number of shares owned by him
will be furnished by the Secretary of the Fund upon request. This proposal is
advisory in nature and does not involve any required minimum number of votes.
SHAREHOLDER PROPOSAL TO CONVERT THE NEW
GERMANY FUND, INC. FROM CLOSED-END TO OPEN END
RESOLVED: That the shareholders of The New Germany Fund, Inc. recommend
that the Board of Directors expedite the process to ensure the Fund's shares can
be purchased and or sold at Net Asset Value. Suggested alternatives include: (1)
conversion to an open-end investment company; or (2) a merger of the Fund with
an existing open-end investment company.
SUPPORTING STATEMENT
Shares of The New Germany Fund, Inc. have consistently been trading at a
significant discount to Net Asset Value (NAV). In my view, this is unacceptable.
As a long term owner of the shares, I believe that shareholder loyalty and
patience have not been rewarded. It is my belief that the closed-end structure
has not benefitted shareholders the way an open-end structure would. I strongly
believe that shareholders would benefit significantly by changing the Fund from
a closed-end investment company to an open-end investment company. I believe the
one time conversion cost would be inconsequential in relation to the greater
price appreciation that could immediately benefit shareholders.
Recent conversion of closed-end funds to open-end funds, and in a number
of cases supported by their Board of Directors, have been amply rewarding to
shareholders. Funds that have recently moved to an open-end structure are
Pilgrim American Bank and Thrift Fund and New Age Media Fund.
Management has not been successful in an effort to address the discount
problem over the years. The Board of Directors has a fiduciary duty to the
shareholders. I believe they must be urged to consider the value enhancing
options in this proposal. It is both timely and proper. Most importantly, it
could be beneficial to shareholders' net worth.
I URGE YOUR SUPPORT. VOTE FOR THIS PROPOSAL.
OPPOSING STATEMENT OF YOUR BOARD OF DIRECTORS
For the reasons discussed below, your Board of Directors unanimously
recommends that you vote AGAINST this stockholder proposal.
-------
Executive Summary. You should vote against this proposal because:
o Open-ending will burden your Fund's long-term investors with heavy
taxes, higher expenses and likely lower performance.
o Your Fund's performance has been quite good with its existing
closed-end format.
o Your Fund has been successful in reducing the discount, providing a
further boost to stockholder returns.
9
<PAGE>
The Closed-End Format Promotes Full Investment. Your Board of Directors
believes your Fund's closed-end format is one of its essential features. Not
having to worry about raising cash on a moment's notice allows the Fund's
investment manager to keep the Fund fully invested and to search out the medium-
and smaller-sized German companies that are the Fund's mandate. In contrast,
open-end funds must be prepared to liquidate securities regardless of market
conditions in order to satisfy stockholder redemption requests. Your Fund is
currently over 80% invested in companies in the MDAX, which comprises companies
having market capitalizations below the 30 largest in the DAX index. The market
for MDAX companies is less liquid than those in the DAX; consequently, divesting
quickly the holdings of your Fund will likely depress prices.
This freedom to focus on investing has led to good results for the
investor:
o Your Fund's total return was 8.5% in 1997, 21.7% in 1996 and 7.9% in
1995 (i.e., the increase in net asset value assuming reinvestment of
dividends). In 1997 this performance exceeded by 170 basis points
your Fund's benchmark index of German mid-cap stocks (the MDAX),
even though the index is unmanaged and not reduced by expenses. Your
Fund's performance also exceeded the MDAX on 3- and 5-year bases.
o Your Fund is ranked Four Stars by Morningstar on 1-, 3- and 5-year
bases.
o Your Fund's expense ratio has for many years been the lowest of
closed-end country funds. Open-end funds typically have higher
expense ratios because of their need to provide additional
shareholder services and to make distribution (12b-1) payments.
Market Discount and Premium. Your Fund's shares have traded at a discount
to their net asset value in recent years. Your Board of Directors believes there
may be some misunderstandings about the market discount of your Fund and other
closed-end funds. Market discounts (and premiums) are an inherent consequence of
the closed-end format. They are affected by supply and demand factors for Fund
shares, but their exact cause has not been adequately explained by financial
analysts or academic studies. In any event, discounts can vary widely over time.
Recognizing that some stockholders nevertheless are troubled when the
discount appears to be "too high," your Board of Directors has for a number of
years conducted a share repurchase program aimed at reducing the discount.
During the past two years, that discount has narrowed somewhat, from 22.2% at
the beginning of 1996 to 17.4% at the end of 1997. As of May 20, 1998, the
discount had declined further to 14.79%. This repurchase program continues,
along with efforts to increase market awareness of your Fund.
Because of the changing discount, the market price return of your Fund's
shares differs from its net asset value return. While net asset value return is
the more appropriate way to measure the investment manager's performance against
the benchmark index, the market price return is what Fund stockholders actually
experience.
In recent years, the narrowing of the discount has provided a significant
"boost" to returns:
o During 1997, your Fund's market price return was 18.3% (vs. a net
asset value return of 8.5%, in both cases including reinvestment of
dividends).
o It was 27.1% (vs. 21.7%) in 1996.
While this effect can work the other way also, it provides an additional
investment opportunity for closed-end fund investors that is not available to an
open-end fund.
10
<PAGE>
Conclusion. Your Board of Directors strongly recommends that you vote
against this proposal that your Fund abandon its closed-end structure and
convert to the open-end format. A recent research report by Morgan Stanley Dean
Witter included the following conclusions from a report entitled "Misconceptions
about Open-Ending Closed-End Funds":
o Open-ending may solve the "problem" posed by a fund's discount, but
it may be counter-productive to the long-term performance of the
fund. ...
o Long-term investors in closed-end funds that convert to open-end
status can have a big tax hit. ...
o A fund's expense ratio generally increases when it converts to
open-end status. ...
o NAV performance may also be hampered by a conversion to open-end.
...*
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST
THIS STOCKHOLDER PROPOSAL.
- ------------
* Quoted with permission from Morgan Stanley Dean Witter, Closed-End Country
Fund Research, March 25, 1998.
Information About the Investment Adviser
Pursuant to the Investment Advisory Agreement, DBAM, in accordance with
the Fund's stated investment objectives, policies and restrictions, makes
recommendations to the Fund's Manager, Deutsche Bank Securities Inc., with
respect to the Fund's investments and, upon instructions given by Deutsche Bank
Securities Inc. as to suitable securities for investment by the Fund, transmits
purchase and sale orders and selects brokers and dealers to execute portfolio
transactions on behalf of the Fund. The Investment Advisory Agreement was last
submitted to a vote of the Fund's stockholders for approval on June 21, 1991.
The Board of Directors, at its meeting on April 30, 1998, resolved to continue
the Investment Advisory Agreement.
DBAM, a corporation organized under the laws of the Federal Republic of
Germany ("Germany"), was established as a direct wholly-owned subsidiary of
Deutsche Bank in 1983. It provides international portfolio management services
to major institutional investors worldwide, including, besides the Fund, The
Germany Fund, Inc. and The Central European Equity Fund, Inc., closed-end
registered investment companies whose shares are traded on the New York Stock
Exchange ("NYSE"). Each of The Germany Fund, Inc. and The Central European
Equity Fund, Inc. pays DBAM an annual advisory fee of .35% of its average weekly
net assets up to $100,000,000 and .25% of such assets over $100,000,000. As of
April 30, 1998, The Germany Fund, Inc.'s net assets were $256.1 million, and The
Central European Equity Fund, Inc.'s net assets were $296.2 million. As of
December 31, 1997, funds worth approximately $8.3 billion were managed by DBAM
for institutional and ERISA accounts in more than ten countries, including the
United States. The Fund, The Germany Fund, Inc. and The Central European Equity
Fund, Inc. together represent the entire fund complex advised by DBAM.
With total assets of approximately $580 billion, Deutsche Bank is the
largest bank in Germany and ranked among the world's largest banks in terms of
total assets as of December 31, 1997. Its principal corporate offices are
located at Taunusanlage 12, 60325 Frankfurt am Main, Germany. Deutsche Bank and
certain of its affiliates are engaged in the management of client funds as well
as investment advisory activities. The total amount of funds under management by
Deutsche Bank and its affiliates was approximately $280 billion as of December
31, 1997.
11
<PAGE>
DBAM is fully independent and autonomous in making its investment
decisions and in rendering investment advice, but has access to the extensive
research and other resources of the Deutsche Bank group. The members of DBAM's
Investment Strategy Committee are not directors, officers or employees of
Deutsche Bank. DBAM's personnel do not discuss their investment decisions or
positions with personnel of Deutsche Bank who are managing the investment
portfolios of Deutsche Bank. The commercial banking division of Deutsche Bank
may have deposit, loan and other commercial banking relationships with issuers
of securities purchased by the Fund, including outstanding loans to such issuers
which may be repaid in whole or in part with proceeds of the securities
purchased by the Fund in primary public offerings. The Fund does not purchase
securities in any primary public offering where to the knowledge of DBAM the
proceeds will be used to retire indebtedness to Deutsche Bank. The Fund and
Deutsche Bank do not act jointly to cause the Fund to make investments which are
designed to benefit other commercial interests of Deutsche Bank. DBAM has
advised the Fund that, in making its investment recommendations, the investment
personnel of DBAM do not obtain or use material inside information in the
possession of Deutsche Bank and that its personnel do not disclose to Deutsche
Bank any material inside information in their possession.
Information About the Manager
Deutsche Bank Securities Inc. is a wholly-owned subsidiary of DB US
Financial Markets Holding Corporation ("DBUSH"), a corporation with corporate
offices at 31 West 52nd Street, New York, New York 10019. DBUSH is a
wholly-owned subsidiary of Deutsche Bank North America Holding Corp. ("DBNA"), a
corporation with corporate offices at 31 West 52nd Street, New York, New York
10019. DBNA is a direct wholly-owned subsidiary of Deutsche Bank. Deutsche Bank
Securities Inc. is engaged in the securities underwriting, investment advisory
and securities brokerage business. It is a member of NYSE and other principal
United States stock exchanges.
Pursuant to the Management Agreement, Deutsche Bank Securities Inc. is the
corporate manager and administrator of the Fund and, subject to the supervision
of the Board of Directors and pursuant to recommendations made by DBAM,
determines suitable securities for investment by the Fund. It (i) handles the
Fund's relationships with its shareholders, including shareholder inquiries
relating to the Fund, (ii) is responsible for, arranges and monitors compliance
with regulatory requirements and NYSE listing requirements and (iii) negotiates
contractual arrangements with third-party service providers, including, but not
limited to, custodians, transfer agents, auditors and printers. Deutsche Bank
Securities Inc. provides office facilities and personnel to carry out these
services, together with clerical and bookkeeping services which are not being
furnished by the Fund's Custodian or Transfer and Dividend-Paying Agent. In
addition, Deutsche Bank Securities Inc. (i) determines and publishes the Fund's
net asset value in accordance with its policy as adopted from time to time by
the Board of Directors, (ii) establishes the Fund's operating expense budgets
and authorizes the payment of actual operating expenses incurred, (iii)
calculates the amounts of dividends and distributions to be declared and paid to
the Fund's shareholders, (iv) provides the Board of Directors with financial
analyses and reports necessary for the Board to fulfill its fiduciary
responsibilities, (v) maintains the books and records of the Fund required under
Rule 31a-1(b) under the 1940 Act (other than those being maintained by the
Fund's Custodian and Transfer and Dividend-Paying Agent and Registrar, as to
which Deutsche Bank Securities Inc. oversees such maintenance), (vi) prepares
the Fund's United States federal, state and local income tax returns, (vii)
prepares financial information for the Fund's proxy statements and quarterly and
annual reports to shareholders and (viii) prepares the Fund's reports to the
United States Securities and Exchange Commission ("SEC"). The Management
Agreement was last submitted to a vote of the Fund's stockholders for approval
on June 21, 1991. The Board of Directors, at its meeting on April 30, 1998,
resolved to continue the Management Agreement.
12
<PAGE>
Besides its role as manager of the Fund, Deutsche Bank Securities Inc.
acts as manager of The Germany Fund, Inc. and Central European Equity Fund, Inc.
The Germany Fund, Inc. pays Deutsche Bank Securities Inc. an annual management
fee of .65% of its average weekly net assets up to $50,000,000 and .55% of such
assets over $50,000,000. The Central European Equity Fund, Inc. pays Deutsche
Bank Securities Inc. an annual management fee of .65% of its average weekly net
assets up to $100,000,000 and .55% of such assets over $100,000,000. The Fund,
The Germany Fund, Inc. and The Central European Equity Fund, Inc. together
represent the entire fund complex managed by Deutsche Bank Securities Inc.
Certain information regarding the principal executive officers of DBAM is
set forth below. DBAM does not have a (supervisory) board of directors.
Name and Address Principal Occupation
------------------------------------ -------------------------------
Hannes-Jorg Baumann Deputy Managing Director,
Mainzer Landstrasse 16 DBAM
60325 Frankfurt am Main
Federal Republic of Germany
Ernst-Ludwig Dray(beta) ManagingDirector, DBAM
Mainzer Landstrasse 16
60325 Frankfurt am Main
Federal Republic of Germany
Peter Grafunder Managing Director, DBAM
Mainzer Landstrasse 16
60325 Frankfurt am Main
Federal Republic of Germany
Herbert Michel Managing Director, DBAM
Mainzer Landstrasse 16
60325 Frankfurt am Main
Federal Republic of Germany
Dr. Klaus Mossle Deputy Managing Director,
Mainzer Landstrasse 16 DBAM
60325 Frankfurt am Main
Federal Republic of Germany
Patrik Roeder Managing Director, DBAM
Mainzer Landstrasse 16
60325 Frankfurt am Main
Federal Republic of Germany
Patrick N. C. Walker Managing Director, DBAM
Mainzer Landstrasse 16
60325 Frankfurt am Main
Federal Republic of Germany
13
<PAGE>
Certain information regarding the directors of Deutsche Bank Securities
Inc. is set forth below.
Name and Address Principal Occupation
- ------------------------------------ -----------------------------------
Robert B. Allardice, III Executive Vice President,
31 West 52nd Street Deutsche Bank AG,
New York, New York 10019 New York Branch
C. Edward Carter Managing Director,
31 West 52nd Street Deutsche Bank Securities Inc.
New York, New York 10019
James F. Miller Managing Director,
31 West 52nd Street Deutsche Bank Securities Inc.
New York, New York 10019
Grant Kvalheim Managing Director,
31 West 52nd Street Deutsche Bank Securities Inc.
New York, New York 10019
As described in more detail under Proposal 1 on page 7 above, each of the
following officers of the Fund is also Director, officer or employee, as the
case may be, of Deutsche Bank Securities Inc.: Robert R. Gambee, Joseph Cheung
and Laura Weber. Directors or officers of the Fund may hold equity interests in
Deutsche Bank, but, as of May 25, 1998, no such person had any material direct
or indirect interest in Deutsche Bank.
Investment Advisory Agreement, Management Agreement and Fees
The Investment Advisory Agreement and Management Agreement (copies of
which are attached hereto as Exhibits I and II, respectively) set forth the
services provided by DBAM and Deutsche Bank Securities Inc., respectively, as
described above. The Fund pays DBAM an advisory fee at an annual rate of 0.35%
of the Fund's average weekly net assets up to $100 million and 0.25% of such
assets in excess of $100 million, computed on the basis of net asset value at
the end of each week and payable at the end of each calendar month. The Fund
pays Deutsche Bank Securities Inc. a management fee at an annual rate of 0.65%
of the Fund's average weekly net assets up to $100 million, 0.55% of such assets
in excess of $100 million and up to $500 million and 0.50% of such assets in
excess of $500 million, computed in each case on the basis of net asset value at
the end of each week and payable at the end of each calendar month.
During the fiscal year ended December 31, 1997, the Fund paid aggregate
amounts of $1,629,918 and $3,410,241 to DBAM and Deutsche Bank Securities Inc.,
respectively, in respect of fees. In addition, during such period, the Fund paid
an aggregate amount of $1,131,316 in brokerage commissions to Deutsche Bank.
Neither DBAM nor Deutsche Bank Securities Inc. is liable for any error of
judgment or for any loss suffered by the Fund in connection with the matters to
which the Investment Advisory Agreement or the Management Agreement,
respectively, relates, except for any loss resulting from willful misfeasance,
bad faith or gross negligence in the performance of, or from reckless disregard
of, its obligations and duties under the Investment Advisory Agreement or the
Management Agreement, respectively, or a loss resulting from a breach of
fiduciary duty with respect to receipt of compensation for services (in which
case any award of damages shall be limited to the period and the amount set
forth in Section 36(b)(3) of the 1940 Act).
14
<PAGE>
The Investment Advisory Agreement and the Management Agreement provide
that DBAM and Deutsche Bank Securities Inc., respectively, each bears all
expenses of all employees and overhead incurred by it in connection with its
duties thereunder. Deutsche Bank Securities Inc. pays all salaries and fees of
the Fund's directors and officers who are "interested persons (as such term is
defined in the 1940 Act) of Deutsche Bank Securities Inc. The Fund bears all of
its own expenses, including, but not limited to, the following: expenses of
organizing the Fund, fees and out-of-pocket travel expenses of the Fund's
directors who are not "interested persons" (as such term is defined in the 1940
Act) of any other party and other expenses incurred by the Fund in connection
with directors' meeting, interest expense, taxes and governmental fees,
brokerage commissions incurred in acquiring or disposing of the Fund's portfolio
securities, membership dues to professional organizations, premiums allocable to
fidelity bond insurance coverage, expenses of preparing stock certificates,
expenses of registering and qualifying the Fund's shares for sale with the SEC
and in various states and foreign jurisdictions, charges and expenses of the
Fund's legal counsel and independent accountants, Custodian and Transfer and
Dividend-Paying Agent, expenses of obtaining and maintaining stock exchange
listings of the Fund's shares, and the expenses of shareholders' meetings and
preparing and distributing proxies and reports to shareholders.
The services of DBAM and Deutsche Bank Securities Inc. under the
Investment Advisory Agreement and Management Agreement, respectively, are not
deemed to be exclusive, and nothing in the Investment Advisory Agreement or the
Management Agreement prevents any party, or any affiliate thereof, from
providing similar services to other investment companies and other clients
(whether or not their investment objectives and policies are similar to those of
the Fund) or from engaging in other activities. When other clients of DBAM or
Deutsche Bank Securities Inc. desire to purchase or sell a security at the same
time the security is purchased for or sold by the Fund, such purchases and sales
will, to the extent feasible, be allocated among such clients and the Fund in a
manner believed by DBAM or Deutsche Bank Securities Inc., respectively, to be
equitable to such clients. The allocation of securities may adversely affect the
price and quantity of purchases and sales of securities by the Fund.
PROPOSAL 4: STOCKHOLDER PROPOSAL
A beneficial owner (the "proponent") of Common Stock of the Fund has
informed the Fund that it intends to present a proposal for action at the
Meeting. The proponent's name and address and the number of shares owned by it
will be furnished by the Secretary of the Fund upon request. Adoption of this
proposal requires the affirmative vote of the holders of a majority of the
outstanding shares of the Fund which, as defined by the 1940 Act, means the vote
of (1) 67% or more of the shares present at the Meeting, if the holders of more
than 50% of the outstanding shares are present or represented by proxy, or (2)
more than 50% of the outstanding shares of the Fund, whichever is less.
RESOLVED: The investment advisory agreement between Deutsche Bank
Securities Inc. and the Fund shall be terminated.
SUPPORTING STATEMENT
The surest way to enable all stockholders of the Fund to realize net asset
value ("NAV") for their shares is to convert the Fund to an open-end fund (or to
merge it into an existing open-end fund). If the Fund is open-ended, every
shareholder will benefit. If the Fund is open-ended, every shareholder will
benefit. For example, based upon the NAV of $21.49 and market price of $17.75
reported as of the close of business on May 12, 1998, 1,000 shares of the Fund
would be worth $3,740 more if it open-ends than if it remains a closed-end fund.
15
<PAGE>
We believe that the current investment advisor, Deutsche Bank Securities
Inc., is the main impediment to open-ending because of its fear that its
management fees may decline if we are able to redeem our shares at NAV. We need
to remove this impediment. While passage of this proposal would not result in
the immediate open-ending of the Fund, we believe that removing Deutsche Bank
Securities Inc. as the advisor would encourage the board to find a new advisor
who is more committed than Deutsche Bank Securities Inc. to increasing the value
of our shares.
The meager measures that Deutsche Bank Securities Inc. has recommended to
narrow the Fund's persistent discount have been undermined by the issuance of
millions of new shares at prices well below NAV. Issuance of these shares
increased Deutsche Bank Securities Inc.'s own fees while diluting the Fund's
NAV. We deserve an investment advisor who is more concerned with increasing
shareholder value than its own fees. Once the existing advisory agreement is
terminated, the Board of Directors can quickly hire a new investment advisor who
is committed to do whatever is necessary to enhance shareholder value even if
that means diminished fees.
OPPOSING STATEMENT OF YOUR BOARD OF DIRECTORS
For the reasons discussed below, your Board of Directors unanimously
recommends that you vote AGAINST this stockholder proposal.
-------
Your Board of Directors believes this proposal is misleading. The "main
impediment" to open-ending the Fund is not its investment adviser. That decision
rests entirely with your independent directors, subject to ratification by
662/3% of the stockholders. By law, your independent Directors must apply their
business judgment to look solely after your interests as stockholders. Your
Directors believe the Fund is most effectively continued in its original,
closed-end format. It is improper to suggest the investment manager controls the
decision. We urge you to keep this important fact in mind in considering our
reasons for voting against the proposal below.
Wrong Means to the End. This proposal wrongly states that terminating the
manager will lead to open-ending the Fund. It will not do that, but it could
harm your investment. Here are the facts.
If approved by stockholders, this proposal would directly terminate the
investment management agreement with your Fund's manager. A new agreement would
require another stockholder approval. Your Fund's investment process would
therefore be disrupted.
The firm behind this proposal is seeking to make use of a stockholder
right under the Investment Company Act of 1940 -- the right to terminate
investment management agreements -- to achieve the completely unrelated goal of
open-ending your Fund for short-term gain at the expense of remaining
stockholders. In fact, the investment manager's performance has been quite good.
Your Fund had a 21.7% total return in 1996 and an 8.5% total return in 1997,
based on increases in net asset value assuming reinvestment of dividends. The
1997 figure beat the benchmark MDAX index of German mid-cap stocks by 170 basis
points. Your Fund is also rated Four Stars by Morningstar.
This proposal is the wrong means to the end. It will not cause
open-ending, but it will disrupt your Fund's investment program.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THIS
STOCKHOLDER PROPOSAL. -------
16
<PAGE>
ADDRESS OF INVESTMENT ADVISER AND MANAGER
The principal office of the Investment Adviser is located at Mainzer
Landstrasse 16, 60325 Frankfurt am Main, Federal Republic of Germany. The
corporate office of the Manager is located at 31 West 52nd Street, New York, New
York 10019.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 25, 1998, no person, to the knowledge of management, owned of
record or beneficially more than 5% of the outstanding Common Stock of the Fund,
other than as set forth below:
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Outstanding Common Stock
------------------- ----------------------- -------------------------
<S> <C> <C>
President and Fellows of Harvard College(1) ...... 1,922,054 5.8
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
FMR Corp.(1)(2) .................................. 2,951,700 9.24
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ----------
(1) This information is based exclusively on information provided by such
persons on Schedules 13G filed with respect to the Fund on February 14, 1998
and February 11, 1998, respectively. To the knowledge of management, no
other Schedules 13D or 13G had been filed with respect to the Fund as of May
25, 1998.
(2) Such person reported that its beneficial ownership resulted from ownership
of shares of Common Stock of the Fund by various investment companies which
are advised by such person.
OTHER MATTERS
No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of stockholders arise,
including any question as to an adjournment of the Meeting, the persons named in
the enclosed Proxy will vote thereon according to their best judgment in the
interests of the Fund.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Fund's Annual
Meeting of Stockholders in 1999 must be received by the Fund on or before
January 25, 1999, in order to be included in the Fund's proxy statement and form
of proxy relating to that meeting.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, assembling and mailing material in connection with
this solicitation will be borne by the Fund. In addition to the use of mails,
proxies may be solicited personally by regular employees of the Fund or the
Manager or by telephone or telegraph. Brokerage houses, banks and other
fiduciaries may be requested to forward proxy solicitation materials to their
principals to obtain authorization for the execution of proxies, and they will
be reimbursed by the Fund for out-of-pocket expenses incurred in this
connection. The Fund has also made arrangements with Morrow & Co., Inc. to
assist in the solicitation of proxies, if called upon by the Fund, at an
estimated fee of $7,500 plus reimbursement of normal expenses.
17
<PAGE>
ANNUAL REPORT DELIVERY
The Fund will furnish, without charge, a copy of its annual report for the
fiscal year ended December 31, 1997 to any stockholder upon request. Such
requests should be directed by mail to The New Germany Fund, Inc., 31 West 52nd
Street, New York, New York 10019 or by telephone to 1-800-437-6269.
Robert R. Gambee
Chief Operating Officer
and Secretary
Dated: May 26, 1998
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT TO THE FUND.
18
<PAGE>
EXHIBIT I
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of January 31, 1990, between The New Germany Fund,
Inc., a Maryland corporation ("Fund"), and DB Capital Management International
GmbH, a West German corporation ("CMI").(1)
WHEREAS, the Fund is a non-diversified closed-end management company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act");
WHEREAS, the Fund desires to retain CMI to render certain specified
investment advisory services to the Fund; and
WHEREAS, CMI is willing to render such services if and so long as a
certain Management Agreement, dated as of January 31, 1990, between the Fund and
Deutsche Bank Capital Corporation ("DBCC") is entered into and not terminated;
NOW, THEREFORE, the parties agree as follows:
1. Investment Adviser. CMI, in accordance with the Fund's stated
investment objectives, policies and limitations, will make recommendations with
respect to the Fund's investments and, upon instructions given by DBCC as to
suitable securities for investment by the Fund, will transmit purchase and sale
orders and select brokers and dealers to execute portfolio transactions on
behalf of the Fund.
2. Fees and Expenses.
2.1 The Fund will pay CMI an annual advisory fee hereunder of 0.35% of the
Fund's average weekly net assets to U.S. $100 million and 0.25% of such assets
in excess of U.S. $100 million, computed by DBCC on the basis of net asset value
at the end of each week and payable at the end of each calendar month.
2.2 CMI shall bear all expenses of its employees and overhead incurred by
it in connection with its duties under this Agreement. The Fund will indemnify
CMI for all taxes (other than income taxes), duties, charges, fees and expenses
(including, without limitation, broker fees, dealer fees, clearing bank fees and
legal fees) CMI incurs in connection with the services provided under this
Agreement. The obligations contained in this clause shall survive the
termination of this Agreement.
2.3 Payments to CMI shall be made in U.S. Dollars to its account with
Deutsche Bank AG, New York branch.
3. Liability.
3.1 Neither CMI nor any of its officers, directors or employees shall be
liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (i) that CMI
shall be under a fiduciary duty with respect to receipt of compensation for
services pursuant to Section 36 of the 1940 Act, and shall therefore be liable
for a loss resulting from a breach of such fiduciary
- ------------
(1) CMI was the predecessor of DBAM as Investment Adviser to the Fund.
<PAGE>
duty (in which case any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the Investment Company Act), or (ii) a
loss resulting from willful misfeasance, bad faith or gross negligence on its or
their part in the performance of, or from reckless disregard by it or them of
its or their obligations and duties under, this Agreement.
3.2 CMI does not assume responsibility for the acts or omissions of any
other person.
3.3 CMI shall not be liable for any losses caused by disturbances of its
operations by virtue of force majeure, riot, or damage caused by nature or due
to other events for which it is not responsible (e.g., strike, lock-out or acts
of domestic or foreign authorities).
4. Services Not Exclusive. It is understood that the services of CMI are
not deemed to be exclusive, and nothing in this Agreement shall prevent CMI or
any of its affiliates from providing similar services to other investment
companies and other clients (whether or not their investment objectives and
policies are similar to those of the Fund) or from engaging in other activities.
When other clients of CMI desire to purchase or sell a security at the same time
such security is purchased or sold for the Fund, such purchases and sales will,
to the extent feasible, be allocated among the Fund and such clients in a manner
believed by CMI to be equitable to such clients.
5. Notice. Any notice or other communication required to be given pursuant
to this Agreement shall be in writing or by telex and shall be effective upon
receipt. Notices and communications shall be given (1) to the Fund at 31 West
52nd Street, New York, New York 10019, Attention: Secretary; and (2) to CMI at
Taunusanlage 12, D-6000 Frankfurt am Main 1, Attention: Managing Director,
Investment Policy Committee.
6. Miscellaneous.
6.1 This Agreement is effective January 31, 1990, and shall continue in
effect until the earlier of January 30, 1992 or the first annual meeting of the
Fund's stockholders after the effective date of the Fund's Registration
Statement on Form N-2 filed with the Securities and Exchange Commission. If
approved at such meeting, and unless sooner terminated, this Agreement shall
continue in effect for successive periods of twelve months after such date,
provided that each such continuance shall be approved as required by the
Investment Company Act. The annual approva1 of the continuance of this Agreement
shall be confirmed to CMI by the Fund in writing. Notwithstanding the foregoing,
this Agreement may be terminated by the Fund in the manner prescribed by the
Investment Company Act, without the payment of any penalty, at any time upon not
1ess than sixty days' prior written notice to CMI, or by CMI upon not less than
sixty days' written notice to the Fund.
This Agreement shall automatically terminate (i) in the event of its
assignment (as defined in the Investment Company Act) by either party, or (ii)
upon termination of the Management Agreement dated as of January 31, 1990,
between the Fund and DBCC.
6.2 This Agreement shall be construed in accordance with the laws of the
Federal Republic of Germany.
6.3 The captions in this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
I-2
<PAGE>
6.4 If any provisions of this Agreement shall be held or made invalid, in
whole or in part, the other provisions of this Agreement shall remain in force.
Invalid provisions shall, in accordance with the intent and purpose of this
Agreement, be replaced by such valid provisions which in their economic effect
come as close as legally possible to such invalid provisions.
6.5 Nothing herein shall be construed as constituting CMI an agent of the
Fund.
6.6 CMI shall be entitled to rely on any notice or other communication
believed by it to be genuine and correct and to have been sent to it by or on
behalf of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW GERMANY FUND, INC.
By: /s/ ROBERT GAMBEE
---------------------------------
Name: Robert Gambee
Title: VP, Secy, Treasurer
DB CAPITAL MANAGEMENT
INTERNATIONAL GmbH
By: /s/ HANNES-JOERG BAUMANN
---------------------------------
Name: Hannes-Joerg Baumann
Title: Deputy Managing Director
By: /s/ WILLIAM RONALD RICHARDS
---------------------------------
Name: William Ronald Richards
Title: Managing Director
I-3
<PAGE>
EXHIBIT II
MANAGEMENT AGREEMENT
AGREEMENT dated as of January 31, 1990, between The New Germany Fund,
Inc., a Maryland corporation (the "Fund"), and Deutsche Bank Capital
Corporation, a New York corporation ("Deutsche Bank Capital").(1)
WHEREAS, the Fund is a non-diversified closed-end management company
registered under the Investment Company Act of Investment Company, as amended
(the "Investment Company Act");
WHEREAS, the Fund desires to retain Deutsche Bank Capital to render
certain specified management services to the Fund; and
WHEREAS, Deutsche Bank Capital is willing to render such services if and
so long as the Investment Advisory Agreement, dated as of January 31, 1990,
between the Fund and DB Capital Management International GmbH ("CMI") is entered
into and not terminated;
NOW, THEREFORE, the parties agree as follows:
1. Manager. Deutsche Bank Capital shall be the corporate manager and
administrator of the Fund and, subject to the supervision of the Board of
Directors of the Fund and pursuant to recommendations made by CMI, will
determine suitable securities for investment by the Fund. It will handle the
Fund's relationships with its shareholders including responding to shareholder
inquiries relating to the Fund, be responsible for, arrange and monitor
compliance with regulatory requirements and compliance with New York Stock
Exchange listing requirements and negotiate contractual arrangements with
third-party service providers, including but not limited to, custodians,
transfer agents, auditors and printers. Deutsche Bank Capital will also provide
office facilities and personnel adequate to perform these services, together
with those ordinary clerical and bookkeeping services which are not being
furnished by the Fund's custodian or transfer and dividend paying agent.
Deutsche Bank Capital will also determine and publish the Fund's net asset value
in accordance with the Fund's policy as adopted from time to time by the Board
of Directors; establish the Fund's operating expense budgets and authorize the
payment of actual operating expenses incurred; calculate the amount of dividends
and distributions to be declared and paid to the Fund's shareholders; provide to
the Board of Directors those financial analyses and reports necessary for the
Board to fulfill their fiduciary responsibilities; maintain the books and
records of the Fund required under Rule 31a-1 under the Investment Company Act
(other than those being maintained by the Fund's custodians and transfer and
dividend paying agent, as to which Deutsche Bank Capital will oversee such
maintenance); prepare the Fund's U.S. Federal, state and local income tax
returns; prepare financial information for the Fund's proxy statement quarterly
and annual reports to shareholders; and prepare the Fund's reports to the
Securities and Exchange Commission.
2. Fees. The Fund will pay Deutsche Bank Capital an annual management fee
hereunder of .65% of the Fund's average weekly net assets up to U.S. $100
million, .55% of such assets in excess of U.S. $100 million up to $500 million
and .50% of such assets in excess of $500 million, computed in each case on the
basis of net asset value at the end of each week and payable at the end of each
calendar month.
- -------------
(1) Deutsche Bank Capital was the predecessor of Deutsche Bank Securities
Inc. as Manager of the Fund.
<PAGE>
3. Expenses. Deutsche Bank Capital shall bear all expenses of its
employees and overhead incurred in connection with its duties under this
Agreement and shall pay all salaries and fees of the Fund's directors and
officers who are interested persons (as defined in the Investment Company Act)
of Deutsche Bank Capital. The Fund will bear all of its own expenses, including
expenses of organizing the Fund; fees of the Fund's directors who are not
interested persons (as defined in the Investment Company Act) of any other
party; out-of-pocket travel expenses for all directors who are not interested
persons (as defined in the Investment Company Act) of any other party and other
expenses incurred by the Fund in connection with meetings of directors; interest
expense; taxes and governmental fees; brokerage commissions and other expenses
incurred in acquiring or disposing of the Fund's portfolio securities; expenses
of preparing stock certificates; expenses of registering and qualifying the
Fund's shares for sale with the Securities and Exchange Commission and in
various states and foreign jurisdictions; charges and expenses of the Fund's
lega1 counsel and independent auditors; custodian, dividend paying and transfer
agent expenses; expenses of obtaining and maintaining stock exchange listings of
the Fund's shares; and the expenses of shareholders' meetings and of the
preparation and distribution of proxies and reports to shareholders.
4. Liability.
4.1 Neither Deutsche Bank Capital nor any of its officers, directors or
employees shall be liable for any error of judgment or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(i) that Deutsche Bank Capital shall be under a fiduciary duty with respect to
receipt of compensation for services pursuant to Section 36 of the Investment
Company Act and shall therefore be liable for a loss resulting from a breach of
such fiduciary duty (in which case any award of damages shall be limited to the
period and the amount set forth in Section 36(b)(3) of the Investment Company
Act) or (ii) a loss resulting from willful misfeasance, bad faith or gross
negligence on its or their part in the performance of, or from reckless
disregard by it or them of its or their obligations and duties under, this
Agreement.
4.2 Deutsche Bank Capital does not assume responsibility for the acts or
omissions of any other person.
5. Services Not Exclusive. It is understood that the services of Deutsche
Bank Capital are not deemed to be exclusive, and nothing in this Agreement shall
prevent Deutsche Bank Capital, or any of its affiliates from providing similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities. When other clients of Deutsche Bank Capital desire
to purchase or sell a security at the same time such security is purchased or
sold for the Fund, such purchases and sales will, to the extent feasible, be
allocated among the Fund and such clients in a manner believed by Deutsche Bank
Capital to be equitable to such clients.
6. Notice. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to Deutsche Bank Capital at 31 West 52nd
Street, New York, New York 10019, Attention: Office of Funds Administration; and
(2) to the Fund at 31 West 52nd Street, New York, New York 10019, Attention:
Secretary.
7. Miscellaneous.
7.1 This Agreement is effective January 31, 1990, and shall continue in
effect until the earlier of January 30, 1992 or the first annual meeting of
Fund's stockholders after the effective date of the Fund's Registration
Statement on Form N-2 filed with the Securities and Exchange Commission. If
approved at such meeting, and unless sooner terminated, this Agreement shall
continue in effect for successive periods of twelve
II-2
<PAGE>
months after such date, provided that each such continuance shall be approved as
required by the Investment Company Act. The annual approval of the continuance
of this Agreement shall be confirmed to Deutsche Bank Capital by the Fund in
writing. Notwithstanding the foregoing, this Agreement may be terminated by the
Fund in the manner prescribed by the Investment Company Act, without the payment
of any penalty, at any time upon not less than sixty days' prior written notice
to Deutsche Bank Capital, or by Deutsche Bank Capital upon not less than sixty
days' written notice to the Fund. This Agreement shall automatically terminate
(i) in the event of its assignment (as defined in the Investment Company Act) by
either party, or (ii) upon termination of the Investment Advisory Agreement,
dated as of January 31, 1990, between the Fund and CMI.
7.2 This Agreement shall be construed in accordance with the laws of the
State of New York.
7.3 The captions in this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
7.4 If any provisions of this Agreement shall be held or made invalid in
whole or in part, the other provisions of this Agreement shall remain in force.
Invalid provisions shall, in accordance with the intent and purpose of this
Agreement, be replaced by such valid provisions which in their economic effect
come as close as legally possible to such invalid provisions.
7.5 Nothing herein shall be construed as constituting Deutsche Bank
Capital an agent of the Fund.
7.6 Deutsche Bank Capital shall be entitled to rely on any notice or
communication believed by it to be genuine and correct and to have been sent to
it by or on behalf of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW GERMANY FUND, INC.
By: /s/ ROBERT GAMBEE
-----------------------------
Name: Robert Gambee
Title: VP, Secy, Treasurer
DEUTSCHE BANK CAPITAL
CORPORATION
By: /s/ CHRISTIAN H. STRENGER
-----------------------------
Name:
Title: Managing Director
II-3
<PAGE>
PROXY THE NEW GERMANY FUND, INC.
31 West 52nd Street
New York, New York 10019
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert R. Gambee and Joseph Cheung as
Proxies, each with the power of substitution, and hereby authorizes each of them
to represent and to vote, as designated below, all the shares of common stock of
The New Germany Fund, Inc. (the "Fund") held of record by the undersigned on May
25, 1998 at an Annual Meeting of Stockholders to be held on June 30, 1998 or any
adjournment thereof.
1. ELECTION OF |_| FOR all nominees |_| WITHHOLDING AUTHORITY
DIRECTORS. listed below to vote for all
(except as marked nominees listed below
to the contrary below)
(Instruction: To withhold authority for any individual nominee strike
a line through the nominee's name in the list below.)
CLASS I
(to serve until the 2001
Annual Meeting of Stockholders)
Michael W. R. Dobson
Richard Karl Goeltz
Christian H. Strenger
2. TO RATIFY THE SELECTION BY THE BOARD OF DIRECTORS OF PRICE WATERHOUSE
LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
|_| APPROVE |_| DISAPPROVE |_| ABSTAIN
<PAGE>
3.STOCKHOLDER PROPOSAL RECOMMENDING OPEN-ENDING.
|_| APPROVE |_| DISAPPROVE |_| ABSTAIN
4.STOCKHOLDER PROPOSAL TO TERMINATE INVESTMENT ADVISORY AGREEMENT.
|_| APPROVE |_| DISAPPROVE |_| ABSTAIN
5.TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Proposal 1, to APPROVE Proposal 2 and to DISAPPROVE Proposals 3 and
4.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please provide the full name
of the corporation and the signature of the authorized officer signing on its
behalf.
____________________________________
Name (please print)
____________________________________
Name of Corporation (if applicable)
(By)______________(Date)______ 1998
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
<PAGE>
[Stylized images of a telephone and a hand typing a number on a phone keypad]
PLEASE TAKE A MINUTE! VOTE BY PHONE!
THE NEW GERMANY FUND, INC. BOARD OF DIRECTORS URGES YOU TO EXERCISE YOUR RIGHT
TO VOTE AT THIS ANNUAL MEETING. A GREAT WAY TO HAVE YOUR SHARES REPRESENTED AT
THE MEETING IS IF YOU VOTE NOW BY TELEPHONE.
YOU CAN VOTE YOUR PROXY BY TELEPHONE AND RECEIVE IMMEDIATE CONFIRMATION. JUST
FOLLOW THE 3 EASY STEPS BELOW.
To vote by phone:
1) Call the toll free number located on the left side of your proxy voting form
above the Directors.
2) Once you have been connected, enter the CONTROL NUMBER located on the left
side of your proxy voting form above the Directors. The control number can
also be found to the right of the voting boxes, above the return address.
3) Follow the easy instructions the vote will provide you.
THANK YOU FOR YOUR IMMEDIATE ATTENTION TO THIS IMPORTANT MATTER.
[Four stylized images of a phone handset]
