<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
August 21, 1998
Dear Shareholder,
We are pleased to present to shareholders of The Emerging Germany Fund Inc.
the Fund's report for the six months ended June 30, 1998.
The positive outlook for EMU, falling interest rates, positive earnings
momentum and significant liquidity inflows helped the German stock market reach
new all-time highs in the first half of 1998. With inflation and interest rates
at historic lows, the European economy as a whole continued to gain momentum.
Strong stock selection in the automobile, telecommunications and technology
sectors helped propel the Fund to outperform its benchmarks during both the
first and second quarters of this year. During the second quarter, the Fund
purchased its first Eastern European company, Ceske Radiokomunikace AS, a
provider of wired and mobile telecommunication services.
A continuation of substantial capital inflows, positive earnings momentum, and
corporate activities such as stock repurchase plans and restructurings should
support the German stock market in the second half of the year. As the amount of
international exports decreases, consumer spending will likely have a greater
impact on economic expansion. Given the stable economic environment, our outlook
for the Germany equity market remains positive.
At June 30, 1998, the Fund had net assets of $244,661,835, or $17.47 per
share, compared with $213,460,523 or $15.24 per share at the end of the first
quarter. In the six months ended June 30, 1998, the Fund's net asset value and
market price returned 42.1% and 39.4%, respectively, compared with a rise in the
DAX100 Index of 36.4% in dollar terms. In the second quarter 1998, the Fund's
net asset value and market price rose by 17.4% and 17.8%, respectively, compared
with a rise in the DAX100 of 16.9% in dollar terms.
Pursuant to the Fund's distribution policy, the Board declared a quarterly
dividend of $0.41 per share paid on July 20, 1998 to shareholders of record on
July 10, 1998.
As the Board previously informed you in early April 1998, the Fund's Dividend
Reinvestment Plan has been revised so that the Fund's shareholders will
automatically be participants in the Plan unless they affirmatively "opt-out" by
sending a notice to the Plan Agent. The enclosed brochure contains complete
details of the revised Plan. We thank our shareholders for their continued
interest and support.
Sincerely,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Rolf Passow William S. Stack
Chairman President
</TABLE>
1
<PAGE>
ECONOMY
In the first quarter of 1998, the German economy gained momentum, and leading
indicators continued to point to a trend of economic improvement. In the second
quarter, however, the economy grew at a slower rate than in the first. While
nearly half of the 2.3% growth in 1997 came from exports, the growth in foreign
trade likely will be considerably lower this year. Private consumption is
proving to be a more important factor in growth this year.
As the economy started picking up, the labor market also started to improve
and the unemployment rate declined to 11% from 11.8% at the end of last year.
Germany's year-over-year inflation rate declined to 1% in June. This favorable
development in the inflation rate is partly due to the deflationary effects of
the Asian crisis, along with lower commodity prices. Additionally, there are no
signs of internal inflationary pressures as unit wage costs continue to fall in
Germany.
The backdrop for the launch of European Monetary Union is favorable as the
European economy gains momentum while inflation rates and interest rates are at
historic lows.
STOCK MARKET
The German equity market soared to all-time highs in the first half of 1998
and ended the first six months up 36.7% and the second quarter up 14.0%, as
measured in local currencies by the DAX100 Index. This positive trend continued
in July, but has retreated recently on Asian fears and the absence of news
during the summer holidays.
The European equity markets have been driven by a positive outlook for EMU,
falling interest rates, positive earnings momentum and significant liquidity
inflows. The German equity market has not only outperformed the average of
global equity markets, but also the MSCI Europe.
Large caps continued to outperform small and mid caps in the first half of
1998. The DAX Index, which represents the 30 largest companies in Germany, was
up 38.8% compared to the MDAX, which was only up 25.4% in the first half of the
year.
Automobiles, telecommunications, technology and retailers outperformed the
market while utilities, steel companies and banks underperformed. SAP,
Volkswagen, MLP, and Mannesmann were among the best-performing stocks in the
German market.
Despite broader concerns regarding Asia, the environment for Germany equities
remains positive given low bond yields, low inflation and positive earnings
momentum. Additionally, factors such as corporate restructurings, share buybacks
and merger and acquisition activity also should be supportive of the equity
markets.
PORTFOLIO STRATEGY AND REVIEW
During the second quarter of 1998, the Fund's total net asset value and market
price increased by 17.4% and 17.8%, respectively, compared with increases of
16.9% in the DAX100 and 17.0% in the MSCI Germany in dollar terms. In the first
half of the year, the total net asset value and the market price increased by
42.1% and 39.4%, respectively, outperforming the DAX100 by 300 basis points.
As in the first quarter of this year, the Fund's outperformance was once again
primarily due to strong performance in individual stocks rather than to sector
weightings. For example, Pfeiffer Vacuum, SAP, MLP, Sixt, Hugo Boss, and
Volkswagen significantly outperformed the market.
2
<PAGE>
After a strong share price performance, Dresdner RCM Global Investors LLC
("Dresdner RCM"), the Fund's investment manager, decreased the Fund's position
in Pfeiffer Vacuum and sold the Fund's position in Porsche and Rofin Sinar.
Furthermore, Dresdner RCM sold the Fund's position in the utility companies RWE
and Veba, and lowered the weighting in the Industrial Equipment sectors by
selling AGIV, Krupp Hoesch and KSB.
Dresdner RCM increased the Fund's weighting in the telecommunications sector
by acquiring a position in Mannesmann and increasing its MobilCom position. For
the first time a position in an Eastern European company, Ceske Radiokomunikace
AS, was acquired. Ceske Radio is a Czech provider of wired as well as mobile
telecommunications services with significant growth potential. Furthermore,
Dresdner RCM increased the Fund's position in Lufthansa and Bayer and acquired a
new position in Aixtron. Aixtron is the world market leader in machinery for the
production of compound semiconductors. These semiconductors are primarily used
for LEDs, cellular phones and solar cells for satellites.
Banking, Insurance, and Automobiles continue to represent the highest sector
weightings and Allianz represents the largest single position in the Fund's
portfolio.
Stocks of the following companies represented the Fund's ten largest positions
at June 30, 1998:
<TABLE>
<CAPTION>
MARKET VALUE PERCENT OF
COMPANY IN USD NET ASSETS
- -------------------------------------------------- ------------- ----------
<S> <C> <C>
Allianz AG Holding................................ $ 25,746,012 10.5%
Volkswagen AG..................................... 24,164,033 9.9%
SAP AG............................................ 21,252,703 8.7%
Bayer AG.......................................... 14,243,332 5.8%
Mobil Com......................................... 12,956,524 5.3%
Daimler Benz...................................... 11,811,678 4.8%
Deutsche Bank AG.................................. 11,424,056 4.7%
Munchener Ruckversicherungs-Gesellschaft AG....... 11,179,504 4.6%
Deutsche Pfandbrief- und Hypothekenbank AG........ 10,770,144 4.4%
Bayerische Vereinsbank AG......................... 10,605,557 4.3%
------------- ---
$ 154,153,543 63.0%
------------- ---
------------- ---
</TABLE>
PERCENT OF NET ASSETS BY INDUSTRY
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY CLASS NET ASSETS
- ----------------------------------------------------------------------------------------------------- -------------
<S> <C>
Automotive Related................................................................................... 14.7%
Banking.............................................................................................. 17.9%
Chemicals and Textiles............................................................................... 9.2%
Financial Services................................................................................... 2.0%
Household Related Non-Durables....................................................................... 6.3%
Industrial Equipment................................................................................. 5.9%
Insurance............................................................................................ 17.2%
Technology Services.................................................................................. 9.3%
Telecommunication.................................................................................... 9.8%
Transportation Services.............................................................................. 5.1%
---
97.4%
---
---
</TABLE>
3
<PAGE>
- -------------------------------------------------
THE EMERGING GERMANY FUND INC.
INVESTMENTS IN SECURITIES AND NET ASSETS
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SHARES EQUITY INVESTMENTS MARKET VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER DURABLES SECTOR - 14.7%
AUTOMOTIVE RELATED - 14.7%
120,000 Daimler Benz AG **.............................................................. $ 11,811,678
25,000 Volkswagen AG................................................................... 24,164,033
------------
35,975,711
------------
CONSUMER NON-DURABLES SECTOR - 6.3%
HOUSEHOLD RELATED NON-DURABLES - 6.3%
60,000 Adidas AG **.................................................................... 10,464,149
1,750 Hugo Boss AG Pfd................................................................ 3,862,363
21,000 Hawesko Holding Bearer *........................................................ 1,024,788
------------
15,351,300
------------
CYCLICAL/CAPITAL GOODS SECTOR - 24.0%
CHEMICALS AND TEXTILES - 9.2%
175,000 BASF AG......................................................................... 8,321,549
275,000 Bayer AG........................................................................ 14,243,332
------------
22,564,881
------------
INDUSTRIAL EQUIPMENT - 5.9%
27,400 Aixtron AG...................................................................... 4,603,893
14,500 Jenoptik AG *................................................................... 450,286
100,000 Pfeiffer Vacuum Technology AG (ADR) *........................................... 7,125,825
51,100 Winkler + Dunnebie ***.......................................................... 2,295,292
------------
14,475,296
------------
TRANSPORTATION SERVICES - 5.1%
200,000 Lufthansa AG **................................................................. 5,040,758
59,100 Sixt AG Pfd. *.................................................................. 7,390,368
------------
12,431,126
------------
INTEREST-SENSITIVE SECTOR - 37.1%
BANKING - 17.9%
125,000 Bayerische Vereinsbank AG....................................................... 10,605,557
150,000 BHF-Bank AG..................................................................... 5,714,523
503,000 Credito Italiano Sp.A *......................................................... 2,634,034
135,000 Deutsche Bank AG................................................................ 11,424,056
134,500 Deutsche Pfandbrief- und Hypothekenbank AG **................................... 10,770,144
7,500 UBS (Union Bank of Switzerland)................................................. 2,792,079
------------
43,940,393
------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
SHARES EQUITY INVESTMENTS MARKET VALUE
- ------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES - 2.0%
2,500 MLP (Marschollek, Lautenschlager und Partner) Pfd............................... $ 1,233,658
7,500 MLP (Marschollek, Lautenschl--ger und Partner).................................. 3,589,253
------------
4,822,911
------------
INSURANCE - 17.2%
75,000 Allianz AG Holding **........................................................... 25,016,636
2,205 Allianz AG (new shares) *....................................................... 729,376
45,000 Hannover Ruckversicherungs AG................................................... 5,190,484
22,500 Munchener Ruckversicherungs-Gesellschaft AG..................................... 11,179,503
------------
42,115,999
------------
TECHNOLOGY SECTOR - 15.3%
TECHNOLOGY SERVICES - 9.3%
41,500 BAAN Company NV *............................................................... 1,492,057
35,000 SAP AG.......................................................................... 21,252,703
------------
22,744,760
------------
TELECOMMUNICATION - 9.8%
49,700 Ceske Radiokomunikace *......................................................... 1,046,185
90,000 Mannesmann AG................................................................... 9,258,027
52,000 MobilCom AG..................................................................... 12,687,850
51,000 MobilCom AG Rights.............................................................. 268,674
10,000 Teles AG *...................................................................... 584,013
------------
23,844,749
------------
------------
Total Equity Investments
(Cost $171,701,167)-- 97.4%................................................... 238,267,126
Other Assets Less Liabilities--2.6%............................................. 6,394,709
------------
Net Assets--100.0%.............................................................. $244,661,835
------------
------------
</TABLE>
- ----------------
Percentages are of net assets.
* Non-income producing security.
** Part of this security is on loan (Note 1).
*** Part of this security is on loan and this is also a non-income producing
security.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
- -------------------------------------------------
THE EMERGING GERMANY FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
- --------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(cost $171,701,167) (Note 1)..... $ 238,267,126
Foreign currency, at value (cost
$4,259,859) (Note 1)............. 4,249,815
Cash............................... 101,441
Receivable for investments sold.... 10,708,638
Dividends and dividend reclaims
receivable....................... 304,632
Interest receivable................ 24,738
-------------
Total Assets................... 253,656,390
-------------
LIABILITIES:
Payable for investments
purchased........................ 8,380,578
Payable for:
Legal fees....................... 226,976
Investment advisory and
administrative fees (Note 6)... 172,468
Accrued expenses................. 75,345
Shareholder reporting expenses... 67,413
Directors' fees and expenses
(Note 7)....................... 31,031
Custodian fees................... 24,722
Audit fees....................... 16,022
-------------
Total Liabilities.............. 8,994,555
-------------
NET ASSETS......................... $ 244,661,835
-------------
-------------
NET ASSETS CONSIST OF:
Paid-in capital (Note 4)........... $ 142,013,476
Distributions in excess of net
investment income................ 743,258
Accumulated net realized gain on
investments and foreign currency
transactions..................... 35,370,243
Net unrealized appreciation on
investments and translation of
other assets and liabilities in
foreign currencies............... 66,534,858
-------------
NET ASSETS......................... $ 244,661,835
-------------
-------------
NET ASSET VALUE PER SHARE
($244,661,835 DIVIDED BY
14,008,334 shares outstanding)... $ 17.47
-------------
-------------
</TABLE>
- -------------------------------------------------
THE EMERGING GERMANY FUND INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
- --------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Income:
Dividends (net of foreign
withholding tax of $343,554).... $ 3,050,254
Interest.......................... 61,729
-----------
Total income...................... 3,111,983
-----------
Expenses:
Investment advisory and
administrative fees (Note 6).... 927,962
Legal fees........................ 221,815
Custodian fees.................... 75,899
Directors' fees and expenses (Note
7).............................. 56,038
Shareholder reporting expenses.... 37,057
Audit fees........................ 35,118
Proxy solicitation expenses....... 31,912
NYSE listing fees................. 12,048
Miscellaneous expenses............ 11,755
Transfer agent fees............... 10,621
Insurance expenses................ 7,711
-----------
Total expenses.................. 1,427,936
-----------
Net investment income............... 1,684,047
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain on investments.... 36,577,932
Net realized loss in foreign
currency transactions.............. (10,266)
-----------
Net realized gain................. 36,567,666
Net change in unrealized
appreciation on investments and
translation of other assets and
liabilities in foreign
currencies......................... 34,758,960
-----------
Net realized and unrealized gain
during the period............... 71,326,626
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS.................... $73,010,673
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
- -------------------------------------------------
THE EMERGING GERMANY FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------
<TABLE>
<CAPTION>
Six months
ended Year ended
June 30, 1998 December 31,
(Unaudited) 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income...... $ 1,684,047 $ 107,668
Net realized gain on
investments and foreign
currency transactions.... 36,567,666 33,117,116
Net change in unrealized
appreciation on
investments and
translation of other
assets and liabilities in
foreign currencies....... 34,758,960 4,816,868
-------------- --------------
Net increase in net assets
resulting from
operations............... 73,010,673 38,041,652
DISTRIBUTIONS TO
SHAREHOLDERS FROM: (NOTE
1 AND 2)
Net investment income...... (280,167) (840,501)
Capital gains.............. (4,482,667) (10,086,000)
-------------- --------------
TOTAL DISTRIBUTIONS........ (4,762,834) (10,926,501)
TOTAL INCREASE IN NET
ASSETS................... 68,247,839 27,115,151
NET ASSETS:
Beginning of period........ 176,413,996 149,298,845
-------------- --------------
End of period *............ $ 244,661,835 $ 176,413,996
-------------- --------------
-------------- --------------
- ----------------
*Includes undistributed net
investment income of:.... $ 743,258 $ (660,622)
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
- --------------------------------------------
THE EMERGING GERMANY FUND INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The Emerging Germany Fund Inc. (the "Fund") was incorporated in the State of
Maryland on February 2, 1990 as a non-diversified, closed-end management
investment company and registered under the Investment Company Act of 1940.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with United States generally accepted accounting
principles which require management to make estimates and assumptions that
affect the reported amount of assets and liabilities. Actual results may differ
from these estimates.
a. SECURITIES VALUATIONS: Investments for which market quotations are readily
available are valued at the closing price on the day of valuation. Securities
for which market quotations are not readily available will be valued in good
faith at fair value using methods determined by the Board of Directors. In
determining fair value, consideration is given to cost, operating and other
financial data.
Short-term debt securities that mature in less than 60 days are valued at
amortized cost.
b. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are recorded as of the date of purchase or sale. Realized gains and losses on
security transactions are determined on the identified cost basis for both
financial statement and federal income tax purposes. Interest income, foreign
taxes and expenses are accrued daily. Dividends are recorded on the ex-dividend
date, except certain dividends from foreign securities where the ex-dividend
date may have passed, are recorded as soon as the Fund is informed of the
ex-dividend date. Non-cash dividends included in dividend income, if any, are
recorded at the fair market value of the security received.
c. FOREIGN CURRENCY TRANSLATIONS: The books and records of the Fund are
maintained in U.S. dollars. The value of investments, assets and liabilities
denominated in currencies other than U.S. dollars are translated into U.S.
dollars based upon current foreign exchange rates. Purchases and sales of
foreign investments and income and expenses are converted into U.S. dollars
based on currency exchange rates prevailing on the respective dates of such
transactions. Net realized currency gain (loss) on foreign currency transactions
represent: (1) foreign exchange gains and losses from the sale and holdings of
foreign currencies; (2) gains and losses between trade date and settlement date
on investment securities transactions and forward foreign currency exchange
contracts; and (3) gains and losses from the difference between amounts of
interest and dividends recorded and the amounts actually received.
In addition, the Fund does not isolate that portion of the results of
operations resulting from changes in exchange rates from the fluctuations
resulting from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss on investments.
d. FEDERAL INCOME TAXES: It is the policy of the Fund to comply with the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). It is also the intention
of the Fund to make distributions sufficient to avoid imposition of any excise
tax under Section 4982 of the Code. Therefore, no provision has been made for
Federal or excise taxes on income and capital gains.
e. LOANS OF PORTFOLIO SECURITIES: The Fund may lend portfolio securities while
it continues to earn dividends on such securities loaned. At June 30, 1998,
stocks with an aggregate value of $16,417,112 were on loan to brokers. The loans
were collateralized by cash of $17,243,448, received by the Fund. For
international securities, cash collateral is received by the Fund against loaned
securities in an amount at least equal to 105% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained at
not less than 104.5% of the market value of the loaned securities during the
period
7
<PAGE>
of the loan. For the six months ended June 30, 1998, net securities lending
income was $28,668 and is included in interest income on the Statement of
Operations. As with other extensions of credit, the Fund may bear the risk of
delay in the recovery of the loaned securities or in the foreclosure on
collateral.
f. DISTRIBUTIONS: Distributions to shareholders are recorded by the Fund on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions, losses as a result of wash sales
and passive foreign investment companies.
NOTE 2. DISTRIBUTIONS
On April 20, 1998, a distribution of $0.34 per share, aggregating $4,762,834,
was paid from investment operations. This amount represented a distribution to
shareholders of 2.5% of the Fund's average weekly net assets for the 13-week
period from January 2, 1998 to March 27, 1998. The dividend was recorded on
April 7, 1998 to shareholders of record on April 10, 1998.
NOTE 3. INVESTMENT IN FOREIGN SECURITIES
Investing in foreign equity securities involves significant risks, some of which
are not typically associated with investments of domestic origin. The Fund's
investments in foreign markets subject the Fund to the risk of foreign currency
exchange rate fluctuations, perceived credit risk and adverse economic and
political developments. In addition, some foreign companies are not generally
subject to the same uniform accounting, auditing and financial rules as are
United States companies, and there may be less governmental supervision and
regulation. Foreign investments may also be subject to foreign taxes, dividend
collection fees and settlement delays. Since the Fund concentrates its
investments in German companies, it may be subject to greater risks and market
fluctuations than other more diversified portfolios.
NOTE 4. CAPITAL SHARES
At June 30, 1998, the Fund had one class of common stock, par value $0.001 per
share, of which 100,000,000 shares were authorized and 14,008,334 shares were
outstanding. There were no transactions in the Fund's capital stock for the six
months ended June 30, 1998.
NOTE 5. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 1998, purchases and sales proceeds of
investment securities by the Fund, other than U.S. government obligations and
short-term securities, aggregated $155,035,656 and $161,641,664, respectively.
There were no purchases or sales of U.S. government obligations during the
period. At June 30, 1998, the aggregate cost of investments for federal income
tax purposes was $171,909,429. Gross unrealized appreciation and depreciation of
investments aggregated $68,620,463 and $2,262,766, respectively, resulting in
net unrealized appreciation of $66,357,697 at June 30, 1998.
NOTE 6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Dresdner RCM Global Investors LLC manages the Fund's investments and provides
various administrative services, subject to the authority of the Board of
Directors. The Fund pays investment advisory and administrative fees monthly at
an annual rate of 1.00% of the average weekly net assets up to $100,000,000 and
at an annual rate of 0.80% of such assets in excess of $100,000,000. For the six
months ended June 30, 1998, the Fund recorded investment advisory and
administrative fees aggregating $927,962.
NOTE 7. DIRECTORS' FEES
The Fund pays each of its Directors who is not an interested person of the Fund
$7,500 annually plus $750 for each meeting of the Board or any committee thereof
attended by the Director.
8
<PAGE>
- --------------------------------------------------------------------------------
NOTE 8. FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF COMMON STOCK OUTSTANDING FOR THE SIX MONTHS
ENDED JUNE 30, 1998 AND DURING EACH OF THE SEVEN YEARS ENDED DECEMBER 31, 1997
AND THE PERIOD APRIL 5, 1990 TO DECEMBER 31, 1990
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1998 ---------------------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993 1992
----------- -------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................. $ 12.59 $ 10.66 $ 9.20 $ 9.20 $ 9.80 $ 7.45 $ 8.86
----------- -------- --------- --------- --------- ----------- ---------
Net investment income................ 0.12 0.01 0.03 0.07 0.03 0.03 0.07
Net realized and unrealized gain
(loss) on investments............... 5.10 2.70 1.45 (0.07) (0.51) 2.44 (1.37)
----------- -------- --------- --------- --------- ----------- ---------
Net increase (decrease) in net asset
value resulting from investment
operations.......................... 5.22 2.71 1.48 0.00 (0.48) 2.47 (1.30)
----------- -------- --------- --------- --------- ----------- ---------
Distributions:
Net investment income.............. (0.02) (0.06) (0.02) (0.00) (0.00) (0.00) (0.07)
Net realized gain on investments... (0.32) (0.72) (0.00) (0.00) (0.12) (0.00) (0.04)
In excess of realized gains and
foreign currency transactions.... (0.00) (0.00) (0.00) (0.00) (0.00) (0.12) (0.00)
----------- -------- --------- --------- --------- ----------- ---------
Total distributions.............. (0.34) (0.78) (0.02)(b) (0.00) (0.12)(b) (0.12)(b) (0.11)
----------- -------- --------- --------- --------- ----------- ---------
NET ASSET VALUE, END OF PERIOD....... $ 17.47 $ 12.59 $ 10.66 $ 9.20 $ 9.20 $ 9.80 $ 7.45
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
MARKET VALUE, END OF PERIOD(C)....... $ 15.31 $ 11.25 $ 8.13 $ 7.25 $ 7.38 $ 9.38 $ 6.38
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
TOTAL MARKET VALUE RETURN(D)......... 39.35% 48.04% 12.34% (1.69%) (20.07%) 49.09% (16.50%)
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................... $ 245 $ 176 $ 149 $ 129 $ 129 $ 137 $ 104
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
Ratio of expenses to average net
assets.............................. 1.38% 1.30% 1.42% 1.51% 1.40% 1.46% 1.49%
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
Ratio of net investment income to
average net assets.................. 1.63% 0.06% 0.33% 0.76% 0.34% 0.40% 0.76%
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
Portfolio turnover rate.............. 76% 85% 51% 40% 91% % 98 54%
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
Average commission per share (f)..... $0.1796 $ 0.1472 $ 0.1762 -- -- -- --
----------- -------- --------- --------- --------- ----------- ---------
----------- -------- --------- --------- --------- ----------- ---------
<CAPTION>
APRIL 5,
1990
TO
DEC. 31,
1991 1990
-------- -----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................. $ 9.40 $ 11.06(a)
-------- -----------
Net investment income................ 0.07 0.16
Net realized and unrealized gain
(loss) on investments............... (0.38) (1.62)
-------- -----------
Net increase (decrease) in net asset
value resulting from investment
operations.......................... (0.31) (1.46)
-------- -----------
Distributions:
Net investment income.............. (0.07) (0.16)
Net realized gain on investments... (0.16) (0.04)
In excess of realized gains and
foreign currency transactions.... (0.00) 0.00
-------- -----------
Total distributions.............. (0.23)(b) (0.20)
-------- -----------
NET ASSET VALUE, END OF PERIOD....... $ 8.86 $ 9.40
-------- -----------
-------- -----------
MARKET VALUE, END OF PERIOD(C)....... $ 7.75 $ 7.88
-------- -----------
-------- -----------
TOTAL MARKET VALUE RETURN(D)......... 1.10% (32.64%)
-------- -----------
-------- -----------
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................... $ 124 $ 132
-------- -----------
-------- -----------
Ratio of expenses to average net
assets.............................. 1.70% 1.51%(e)
-------- -----------
-------- -----------
Ratio of net investment income to
average net assets.................. 0.76% 3.62%(e)
-------- -----------
-------- -----------
Portfolio turnover rate.............. 52% % 13
-------- -----------
-------- -----------
Average commission per share (f)..... -- --
-------- -----------
-------- -----------
</TABLE>
- --------------
(a) Represents initial net asset value of $12.00, less underwriting
commission of $0.84 and offering expenses of $0.10.
(b) The ex-dividend date was after the end of the fiscal year.
(c) Closing price--New York Stock Exchange.
(d) The total market value return calculation includes reinvestment of
dividends in the year declared.
(e) Annualized.
(f) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for
security trades on which commissions are charged. This amount may
vary from period to period and fund to fund depending on the mix of
trades executed in various markets where trading practices and
commission rate structures may differ.
9
<PAGE>
THE EMERGING GERMANY FUND INC.
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
Rolf Passow, Chairman*
Robert J. Birnbaum
Carroll Brown
Theodore J. Coburn
James E. Dowd**
Alfred W. Fiore
George N. Fugelsang*
Siegfried A. Kessler**
Gottfried W. Perbix**
Jacob Saliba
* Interested person within the meaning of the Investment Company Act of 1940
** Member, Audit Committee
- --------------------------------------------------------------------------------
OFFICERS
William S. Stack, President
Barbel Lenz, Vice President
Robert J. Goldstein, Secretary
Karin L. Brotman, Assistant Secretary
Caroline M. Hirst, Treasurer and Assistant Secretary
Judith W. O'Connell, Assistant Treasurer
Jennie M. Wong, Assistant Treasurer
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND MANAGER
Dresdner RCM Global Investors LLC
Four Embarcadero Center
San Francisco, California 94111
- --------------------------------------------------------------------------------
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
DIVIDEND PAYING AGENT
TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
P.O. Box 8209
Boston, Massachusetts 02266-8209
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
One Post Office Square
Boston, Massachusetts 02109
LEGAL COUNSEL
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
<PAGE>
THE EMERGING GERMANY FUND INC.
SUMMARY OF GENERAL
INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York
Exchange Composite Transaction section of THE WALL STREET JOURNAL (designation
"EmergGerFd" under the letter "G"). The Fund's NYSE trading symbol is "FRG."
Weekly comparative net asset value (NAV) and market price information about the
Fund is published each Monday in THE WALL STREET JOURNAL, each Sunday in the NEW
YORK TIMES, as well as in BARRON'S and other newspapers in a table called
"Closed End Funds." Additional information about the Fund is available by
calling 1-800-356-6122 or visit the Fund's website at www.emerginggermany.com.
DIVIDEND REINVESTMENT PLAN
Through the Fund's Voluntary Dividend Reinvestment Plan (the "Plan"),
shareholders may elect to receive dividends and other distributions in the form
of additional shares of the Fund. As of November 29, 1998, shareholders who hold
Fund shares in their own name will automatically receive dividends and other
distributions in the form of additional shares of the Fund. Other shareholders
wishing to participate in the Plan should contact their brokerage firm, bank or
other nominee to see if it will participate on their behalf. A brochure
describing the Plan is available from the Plan Agent, State Street Bank and
Trust Company, by calling 1-800-426-5523.
This report, including the financial statements herein, is furnished
to shareholders of The Emerging Germany Fund Inc. for their information.
This is not a prospectus, circular or representation intended for use in
the purchase or sale of shares of the Fund or any securities mentioned
in this report.
All references in this report to "dollars" or "$" are to United States
dollars.
Comparisons between changes in the Fund's net asset value per share
and changes in the DAX100 Index should be considered in light of the
Fund's investment objective and policies, the characteristics and
quality of the Fund's investments, the size of the Fund and variations
in the Deutsche Mark/dollar exchange rate.
<PAGE>
[LOGO]
THE EMERGING
GERMANY FUND INC.
SEMI-ANNUAL REPORT
JUNE 30, 1998
