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 Central European Equity 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:
---------------------------------------------------
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
31 West 52nd Street
New York, New York 10019
---------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 20, 1997
---------------------------
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of The
Central European Equity Fund, Inc. (the "Fund") will be held at 2:00 P.M., New
York time, on June 20, 1997 at the offices of Deutsche Morgan Grenfell Inc., 31
West 52nd Street, 5th Floor, New York, New York for the following purposes:
1. To amend the Fund's investment policies to permit increased
flexibility in the geographic distribution of the Fund's investments
by, among other things, adding the remainder of Europe to the list of
countries in which the Fund may invest, removing the 50% minimum
investment in German and Austrian companies and removing the 10%
maximum investment in other countries.
2. To elect six Directors.
3. To ratify the selection by the Board of Directors of Price Waterhouse
LLP as independent accountants for the fiscal year ending October 31,
1997.
4. To consider and act upon any 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 5,
1997 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
Secretary
Dated: May 5, 1997
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 CENTRAL EUROPEAN EQUITY FUND, INC.
31 West 52nd Street
New York, New York 10019
Annual Meeting of Stockholders
June 20, 1997
---------------
PROXY STATEMENT
---------------
This proxy statement is furnished by the Board of Directors of The Central
European Equity 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 20, 1997 at the offices of Deutsche Morgan
Grenfell 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 amendment of the Fund's investment policies, FOR the
election of Directors and FOR the ratification of the selection of independent
accountants. 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 5, 1997 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 12,051,551 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 9, 1997.
Approval of the amendment of the Fund's investment policies (Proposal 1)
requires approval of a majority of the Fund's outstanding voting securities,
which is defined in the Investment Company Act of 1940, as amended (the "1940
Act"), as the lesser of (1) 67% of the Fund's shares present at a meeting of its
shareholders if the owners of more than 50% of the shares of the Fund then
outstanding are present in person or by proxy or (2) more than 50% of the Fund's
outstanding shares (a "Majority Vote"). The Board of Directors of the Fund has
also nominated six Directors for election at the Meeting (Proposal 2) and
approved the selection of Price Waterhouse LLP as independent accountants to the
Fund for the fiscal year ending October 31, 1997, for ratification by the
stockholders at the Meeting (Proposal 3). The election of Directors (Proposal 2)
requires the affirmative vote of a plurality of the shares represented at the
Meeting. Ratification of the selection of Price Waterhouse LLP (Proposal 3)
requires the affirmative vote of a simple majority of the shares represented at
the Meeting.
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
<PAGE>
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. Because of the affirmative votes required for Proposal
1, abstentions and broker non-votes will have the same effect as votes "against"
such Proposal. The Fund does not anticipate receiving any broker non-votes with
respect to Proposals 2 and 3.
PROPOSAL 1: TO APPROVE A CHANGE IN THE FUND'S
INVESTMENT POLICIES
Summary of Proposal. The Board of Directors of the Fund has considered and
approved, subject to stockholder approval, a number of changes to the Fund's
fundamental investment policies intended to permit increased flexibility in the
geographic distribution of the Fund's investments in keeping with the Fund's
mandate. These changes would eliminate the required focus of the Fund's
investments in Germany and Austria and permit the Fund to invest in Western and
Southern Europe and Scandinavia. Specifically, the changes would:
o eliminate the 50% minimum investment in Germany and Austria;
o eliminate the 10% maximum investment in any other single country;
o combine the countries included in the terms Central Europe and Eastern
Europe into the single term Central Europe, also adding Switzerland,
Moldova, Montenegro and Serbia but excluding Russia;
o maintain a fundamental policy to invest at least 65% of the Fund's
total assets in Central Europe (as redefined), and add a
non-fundamental policy to invest at least 80% in Central Europe;
o permit investment in the remainder of Europe (including Western
Europe, Scandinavia, Greece, and Turkey) as well as Russia.
The Fund currently expects that its investment in Germany (64.5% of total
assets at March 31, 1997) will remain significant, although there will be no
prescribed limit on geographic asset distribution within Europe and, from time
to time, a significant portion of the Fund's assets may be invested in companies
domiciled in as few as three countries. The Board of Directors has adopted a
non-fundamental policy that for the time being the Fund will not invest more
than 15% of its total assets in any one country other than Germany or Austria
and that, for the time being, investments in Germany and Austria will be at
least 35% of the Fund's total assets. The Board of Directors has also adopted a
non-fundamental policy that for the time being, the Fund will invest at least
80% of its total assets in equity and equity-linked securities of issuers
domiciled in Central Europe (as redefined), and reserves the right to make this
policy a fundamental policy without further stockholder action at such time in
the future as the Board may deem such change to be in the best interests of the
Fund and its stockholders. Although the proposed change in the Fund's investment
policies would not require any rebalancing of the Fund's portfolio, some
rebalancing is likely to occur as a result of this change.
Current Investment Objective and Policies. The Fund's investment objective
is to seek long-term capital appreciation through investment primarily in equity
and equity-linked securities of issuers domiciled in Central Europe. In 1995,
the Fund amended its fundamental investment objectives and policies to focus
investments in Central Europe rather than Germany. At that time, the Fund
defined "Central Europe" as the Republic of Austria, the Czech Republic, the
Federal Republic of Germany, the Republic of Hungary, the Republic of
2
<PAGE>
Poland and the Slovak Republic. The effect of this definition was to include in
"Central Europe", which was the core of the Fund's investment focus, those
countries whose economies were thought to offer the greatest potential for near
to medium-term growth at that time.
As a matter of fundamental policy, at least 65% of the value of the Fund's
total assets must under normal market conditions be invested in the securities
of issuers domiciled in Central Europe, and at least 50% of the value of its
total assets invested in the securities of issuers domiciled in the Federal
Republic of Germany and the Republic of Austria.
Also in 1995, as part of the expansion of the Fund's scope of investment,
the Fund permitted up to 35% of the value of its total assets to be invested in
a broader group of mostly Central European countries that for convenience were
referred to as "Eastern Europe". At that time, the Fund defined "Eastern Europe"
as the Republic of Albania, the Republic of Bosnia and Herzegovina, the Republic
of Belarus, the Republic of Bulgaria, the Republic of Croatia, the Republic of
Estonia, the Republic of Latvia, the Republic of Lithuania, the Former Yugoslav
Republic of Macedonia, Romania, the Russian Federation, the Republic of
Slovenia, Ukraine and the Federal Republic of Yugoslavia. The effect of this
definition was to include in "Eastern Europe", which was a secondary investment
focus for the Fund, those countries whose market economies and securities
markets at that time were still in a relatively early stage of transition from
socialism, and in which it was therefor uncertain whether and to what extent the
Fund would invest. In 1995, the Fund also established a country limit. The Fund
may not invest more than 10% of the value of its total assets in the securities
of issuers domiciled in any one country other than Germany and Austria. The Fund
may also invest up to 25% of the value of its total assets in Deutsche
mark-denominated fixed income securities.
As discussed in the next section, the Fund now believes that developments
in the securities markets in Central and parts of Eastern Europe warrant
additional flexibility in the Fund's investment authority.
Proposed Investment Policies. Deutsche Morgan Grenfell Inc., the Fund's
Manager ("DMG" or the "Manager"), and Deutsche Asset Management GmbH, the Fund's
investment adviser ("DBAM" or the "Investment Adviser") have recommended, and
the Directors have approved and authorized for submission to stockholders, that
the Fund's investment policies be changed as described above under "Summary of
Proposal." The Fund's investment objective, policies and restrictions, after
giving effect to these and related changes, are set forth in Appendix A to this
Proxy Statement and hereinafter referred to as the "Revised Investment
Policies."
The Revised Investment Policies will not change the Fund's investment
objective of investing primarily in equity and equity-linked securities of
issuers domiciled in Central Europe or the requirement that the Fund invest at
least 65% of its total assets in securities of Central European issuers. Because
of changes in the securities and other markets in the countries in which the
Fund is currently able to invest (as more fully discussed below under
"--Recommendation of the Board of Directors"), the Manager and Investment
Adviser have advised the Board that they believe that the grouping of countries
into separate Central Europe and Eastern Europe definitions, with different
group investment limits, is no longer appropriate. Accordingly, the Revised
Investment Policies would combine the definitions of Central and Eastern Europe
(excluding the Russian Federation) into the single term "Central Europe", adding
Switzerland, Liechtenstein, Moldova, Montenegro and Serbia. In this connection,
the Board of Directors has also adopted a non-fundamental policy for the Fund to
invest at least 80% (rather than 65%) in Central European equities. At March 31,
1997, about 90.3% of the Fund's total assets were invested in equity and
equity-linked securities of Central European issuers based on this new
definition. Of course, there can be no assurance that the Fund will be able to
achieve its investment objective.
3
<PAGE>
In addition to the changes discussed above under "Summary of Proposal", the
Revised Investment Policies would make some smaller changes in the Fund's
fundamental investment policies. The Revised Investment Policies would expand
the basis for determining an issuer's domicile in a particular country or region
to include deriving 50% or more of its annual revenues or profits from business
(now defined to mean goods produced or sold, investments made or services
performed) in that country or region, having 50% or more of its assets in that
country or region, having its principal office in that country or region or
having its equity securities traded principally in that country or region. The
Revised Investment Policies would expand the Fund's authority to invest in fixed
income securities from Deutsche mark-denominated fixed income securities to any
fixed income securities of European or Russian issuers (while retaining the
limit of 25% of total assets). The changes would also remove the limitation on
the Fund's hedging of its Deutsche mark ("DM") or Austrian schilling ("AS")
currency exposure so that the Fund's authority to hedge currency exposure would
apply to any currency. However, the Fund still does not currently intend to
hedge its DM or AS currency exposure. The Fund's authority to invest in options,
futures and other derivatives with respect to any Central or Eastern European
issuers would be expanded to all European and Russian issuers, but without
changing the types of transactions in such instruments authorized for the Fund.
Recommendation of the Board of Directors. The Fund has been pursuing its
current investment objective and policy of focusing on Central and Eastern
European issuers since June 1995, when stockholders approved the change from the
previous German issuer focus. At March 31, 1997, 34.2% of the Fund's total
assets were invested outside Germany. The Manager and Investment Adviser have
advised the Board of Directors that while the policy of focusing on Central and
Eastern European issuers continues in their view to be sound, they believe
additional investment flexibility in the geographic distribution of the Fund's
investments would be desirable. The two main purposes of increased flexibility
would be to permit investment outside Germany and Austria above the current 10%
limit in any one country, and to permit investment in Western and other parts of
Europe. Because the pace of growth and reform has been uneven throughout
different countries in Central and Eastern Europe and Russia as well as uneven
with respect to individual industries within any one country, the Manager and
Investment Adviser cannot readily predict which industries in which countries
will provide the most attractive investment opportunities for the Fund in the
future. The Manager and Investment Adviser believe that the added flexibility
provided by the Revised Investment Policies would allow the Fund to respond more
rapidly to the evolving realities of markets in Central and Eastern Europe and
Russia. At March 31, 1997, the Fund was at or near the 10% limit for Hungary
(8.9%) and Russia (8.3%). The Manager and Investment Adviser believe that the
continuing privatization and deregulation programs planned throughout Europe and
Russia, as well as the evolving integration of markets throughout Europe and
Russia, may create attractive investment opportunities in other countries beyond
Central and Eastern Europe and Russia. For this reason, the Revised Investment
Policies would permit the Fund to invest to some extent in the securities of
issuers domiciled in the remainder of Europe (as noted in Appendix A). The
Manager and Investment Adviser believe that expanding the number of countries in
which the Fund may invest would allow the Fund to take advantage of such
investment opportunities. Accordingly, the Board of Directors has approved,
subject to approval by stockholders, the change in the Fund's fundamental
policies described above.
The Board unanimously recommends a vote FOR Proposal 1.
Required Vote. A Majority Vote of the Fund's stockholders entitled to vote
is required to approve the amendment to the Fund's fundamental investment
policies.
4
<PAGE>
PROPOSAL 2: 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 III expires at the 1997 annual meeting, Class I at
the next succeeding annual meeting and Class II at the following succeeding
annual meeting. Four Class III nominees are proposed in this Proxy Statement for
election. In addition, one Class I nominee and one Class II nominee, elected by
Directors to fill vacancies on the Board, are also 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 Prof. Dr.
Kohler, Mr. Storr and Dr. Schmitz, who were elected to the Board on May 10,
1991, February 3, 1997, and April 18, 1997, respectively.
The following Directors have been nominated for election at the 1997 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 5,1997(1)
---- ------ ------------------- -------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Prof. Dr. Claus 69 Director Member of the Administrative Board of --
Kohler Bundesanstalt fur Vereinigungsbedingte
Class III Sonderaufgaben (1995-1996). Member of
the Administrative Board of Treuhandanstalt
(1990-1994). Member of the Board of
Governors and of the Central Bank Council
of Deutsche Bundesbank (until 1990).
Member of the Advisory Board of
Westfalische Hypothekenbank
AG. Member of
</TABLE>
5
<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 5,1997(1)
---- ------ ------------------- -------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
the Advisory Panel to the Board of
Governors of the Central Bank of Oman.
Member of the Board (Kuratorium) of the
Institute of Empirical Economic Research.
Professor of Economics, University of
Hannover. Professor of Economics,
University of Frankfurt a.M.
Christian H. 53 Director Managing Director of DWS-Deutsche --
Strenger(2)(3)(4) Gesellschaft fur Wertpapiersparen mbH
Class III (since 1991). Managing Director of
Deutsche Bank Securities Corporation,
predecessor of DMG (1986-1991).
Werner Walbrol(2) 58 Director President and Chief Executive Officer of the 200
Class III German American Chamber of Commerce,
Inc. Member of the United States German
Youth Exchange Council. Director of TUV
Rheinland of North America, Inc. and DB
New World Fund, Limited and LDC.
President and Director of German American
Partnership Program.
Otto Wolff von 78 Director Chairman of the Board of Otto Wolff --
Amerongen Industrieberatung & Beteiligungen GmbH
Class III (industrial consulting). Chairman of the
German East-West Trade Committee.
Honorary Chairman of the Association of
German Chambers of Industry and
Commerce. Chairman of the Board of
Management of the Otto Wolff von
Amerongen Foundation. Member of the
Atlantic Advisory Council of United
Technologies Corp. (until 1992). Chairman
of the Supervisory Board of DWA,
</TABLE>
6
<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 5,1997(1)
---- ------ ------------------- --------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Deutsche Waggonbau AG. Member of the Advisory
Council of Allianz Versicherungs-AG
(through 1994). Member of the Advisory
Council of Creditanstalt-Bankverein.
President of the German Society for East
European Studies. Member of the Board of
Directors of the German Society for Foreign
Affairs.
Dr. Ronaldo H. 58 Chairman, Member of the Board of Managing Directors of --
Schmitz (2)(3)(4) President and Deutsche Bank AG, Chairman of the Boards of
Class I Director Managing Directors of Deutsche Bank North
America Holding Corp. and Deutsche Morgan
Grenfell Inc. Chairman of the Supervisory Boards
of Metallgesellschaft AG and Tchibo Holding AG.
Member of the Supervisory Boards of Bertelsmann
AG, Deutsche Beteiligungs AG, Glaxo Wellcome
plc and Rohm & Haas Company, Deutsche Pfandbrief-
und Hypothekenbank AG (through 1996), Goedecke AG
(through 1995), Gruner & Jahr AG (through 1995),
Kaufhof Holding AG (through 1996) and Villeroy &
Boch AG (through 1995).
Hans G. Storr 65 Director President, Storr Investments. Chief Financial Officer 2,300
Class II of Philip Morris Companies, Inc. (1979-1996),
Member of the Board of Directors of Philip Morris
Companies, Inc. (1982-1996), Chairman and Chief
Executive Officer of Philip Morris Capital
Corporation (1982-1996).
</TABLE>
7
<PAGE>
The following are Directors whose terms continue:
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned,
Directly or Indirectly,
Name Age Position with Fund Principal Occupations During Past Five Years at May 5,1997(1)
------ ------ ------------------ ----------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Detlef Bierbaum(3) 54 Director Partner of Sal. Oppenheim Jr. & Cie KGaA. Member --
Class I of the Supervisory Boards of Nanz Stiftung,
ESCADA Aktiengesellschaft, Deutz AG, Scor
Deutschland Ruckversicherungs-Actiengesellschaft,
Tertia Handelsbeteiligungsgesellschaft
mbH and Douglas AG.
Edward C. Schmults 66 Director Member of the Board of Directors of Green Point 512
Class I Financial Corp. Member of the Board of Trustees
of The Edna McConnell Clark Foundation. Senior
Vice President-External Affairs and General
Counsel of GTE Corporation (1984-1994). Deputy
Attorney General of the U.S., Department of
Justice (1981-1984). Partner, White & Case (1965-
1973 and 1977-1981).
John A. Bult(2)(3) 60 Director Chairman of PaineWebber International, Director 2,382
Class II of PaineWebber Group, Inc., Director of The
France Growth Fund, Inc. and The Greater China
Fund, Inc.
Dr. Juergen F. 58 Director Chairman of the Board of Executive Directors of --
Strube BASF AG. Chairman and President of BASF
Class II Corporation (1985-1988).
Robert H. 57 Director President of Robert H. Wadsworth & Associates, 345
Wadsworth(2) eInc.
Class II
</TABLE>
- --------------------
(1) As of May 5, 1997, all Directors and officers as a group owned less than
1% of the outstanding Common Stock of the Fund.
(2) Indicates that Messrs. Bult, Strenger, Wadsworth and Dr. Schmitz each also
serve as a Director of The New Germany Fund, Inc., one of the two other
closed-end registered investment companies for which DMG acts as manager.
Mr. Walbrol serves as a Director of DB New World Fund, Limited and LDC,
Cayman Island-based investment funds managed by Deutsche Bank AG, New York
Branch.
(3) Indicates "interested" Director, as defined in the 1940 Act. Mr. Bierbaum
is an "interested" Director because of his affiliation with Sal. Oppenheim
Jr. & Cie KGaA, which is the parent company of a registered broker-dealer;
Dr. Schmitz is an "interested" Director because of his affiliation with
Deutsche Bank AG ("Deutsche Bank"), of which DMG 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 mbH ("DWS"), a
majority-owned subsidiary of Deutsche Bank.
(4) Indicates that Dr. Schmitz and Mr. Strenger each own shares of Deutsche
Bank, of which DBAM and DMG are wholly-owned subsidiaries. As of May 5,
1997, each such Director owned less than 1% of the outstanding shares of
Deutsche Bank.
8
<PAGE>
Each Director also serves as a Director of The Germany Fund, Inc., one of
the two other closed-end registered investment companies for which DMG acts as
manager.
The Board of Directors presently has an Audit Committee composed of Messrs.
Schmults, Wadsworth and Walbrol. 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 four times during the fiscal year ended
October 31, 1996. In addition, the Board has an Advisory Committee composed of
Messrs. Schmults, Wadsworth and Walbrol. The Advisory Committee makes
recommendations to the full Board with respect to the Management Agreement
between the Fund and DMG and 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 Dr. Schmitz and Messrs. Wadsworth and
Walbrol. 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 DMG 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 Dr. Strube and Mr. Wolff, 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, with the exception of Dr. Strube
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 New Germany 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 New Germany Fund, Inc. (which three funds
represent the entire Fund Complex advised by the Manager and the Investment
Adviser within the meaning of the applicable rules and regulations of the
Securities and Exchange Commission) 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 October 31, 1996, and from the Fund and such
other two funds for the year ended December 31, 1996, for each Director who is
not an interested person of the Fund, and for all such Directors as a group:
Total Compensation From the
Fund, The Germany Fund, Inc. and
Name of Director Aggregate Compensation The New Germany Fund, Inc.
---------------- ---------------------- ------------------------------
Otto Wolff von Amerongen $ 9,750 $ 19,500
Prof. Dr. Claus Kohler $10,500 $ 21,000
Edward C. Schmults $15,000 $ 30,750
Dr. Juergen F. Strube $ 8,250 $ 16,500
Robert H. Wadsworth $16,500 $ 48,750
Werner Walbrol $16,500 $ 33,000
------- --------
Total $76,500 $169,500
======= ========
No compensation is paid by the Fund to Directors or officers who are
interested persons of the Fund, DMG or DBAM.
9
<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>
G. Richard Stamberger 50 Chief Executive Officer Managing Director of DMG (since 1993).
and Executive Vice President, Deutsche Asset Management
President North America Inc. (since 1995). Director
of DB New World Fund, Limited and
LDC. Managing Director of C.J.
Lawrence, Inc. (1990-1993). Managing
Director of Prudential Equity Management
Associates at the Prudential Insurance Co.
of America (1984-1989).
Robert R. Gambee 54 Vice President, Director of DMG (since 1992). First Vice
Secretary and President of DMG (1987-1991).
Treasurer
Joseph Cheung 38 Assistant Secretary and Vice President (since 1996), Assistant Vice
Assistant Treasurer President (1994-1996) and Associate
(1991-1994) of DMG.
</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 2.
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 3: 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 October 31,
1997. 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 3.
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 October 31, 1997.
ADDRESS OF INVESTMENT ADVISER AND MANAGER
The principal office of the Investment Adviser is located at Bockenheimer
Landstrasse 42, 60323 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.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of May 5, 1997, 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:
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
------------------- ----------------------- ----------------
Franklin Resources, Inc.(1)....... 752,800 6.3
777 Mariners Island Blvd.
San Mateo, California 94404
(1) This information is based exclusively on information provided by
Franklin Resources, Inc. on a Schedule 13G filed with respect to the Fund
on February 12, 1997. Such person reported that its beneficial ownership
resulted from ownership of shares of the Common Stock of the Fund by one or
more open or closed-end investment companies or other managed accounts
which are advised by direct and indirect investment advisory subsidiaries
of such person. To the knowledge of management, no other Schedules 13D or
13G had been filed with respect to the Fund as of May 5, 1997.
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 1998 must be received by the Fund on or before January 9,
1998, 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.
ANNUAL REPORT DELIVERY
The Fund will furnish, without charge, a copy of its annual report for the
fiscal year ended October 31, 1996 to any stockholder upon request. Such
requests should be directed by mail to: The Central European Equity Fund, Inc.,
31 West 52nd Street, New York, New York 10019 or by telephone to 1-800-
437-6269.
Robert R. Gambee
Secretary
Dated: May 5, 1997
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.
11
<PAGE>
APPENDIX A
REVISED INVESTMENT POLICIES
If Proposal No. 1 is approved by stockholders, the Fund's investment
objective and policies and investment restrictions would read as follows:
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of The Central European Equity Fund, Inc. (the
"Fund") is to seek long-term capital appreciation through investment primarily
in equity and equity-linked securities of issuers domiciled in Central Europe,
which term includes, for this purpose, the Republic of Albania, the Republic of
Austria, the Republic of Bosnia and Herzegovina, the Republic of Belarus, the
Republic of Bulgaria, the Republic of Croatia, the Czech Republic, the Republic
of Estonia, the Federal Republic of Germany, the Republic of Hungary, the
Republic of Latvia, the Grand Duchy of Liechtenstein, the Republic of Lithuania,
the Former Yugoslav Republic of Macedonia, the Republic of Moldova, the Republic
of Poland, Romania, the Slovak Republic, the Republic of Slovenia, the Swiss
Confederation ("Switzerland"), Ukraine and the Federal Republic of Yugoslavia.
Under normal circumstances, at least 65% of the value of the Fund's total assets
will be invested in the securities of issuers domiciled in Central Europe. The
Fund may also invest in equity or equity-linked securities of issuers domiciled
elsewhere in Europe or in the Russian Federation. An issuer is deemed to be
"domiciled" in a country or region if (a) it is organized under the laws of that
country, or a country within that region, or maintains its principal place of
business in that country or region, (b) it derives 50% or more of its annual
revenues or profits from goods produce or sold, investments made or service
performed in that country or region, or has 50% or more of its assets in that
country or region, in each case as determined in good faith by Deutsche Morgan
Grenfell Inc. ("DMG" or the "Manager") or (c) its equity securities are traded
principally in that country or region. The term "Europe" includes the countries
of Central Europe, as well as the Kingdom of Belgium, the Kingdom of Denmark,
the Republic of Finland, the Republic of France, the Hellenic Republic
("Greece"), the Republic of Iceland, the Republic of Ireland, the Italian
Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the
Kingdom of Norway, the Republic of Portugal, the Kingdom of Spain, the Kingdom
of Sweden, the Republic of Turkey and the United Kingdom of Great Britain and
Northern Ireland. Any future country or countries (or other political entity)
formed by combination or division of the countries comprising Central Europe,
Europe or Russia shall also be deemed to be included within the term "Central
Europe", "Europe" or "Russia", respectively. The Fund's investment objective and
the foregoing investment policies are fundamental, and may only be changed by
the approval of a majority of the Fund's outstanding voting securities, which is
defined in the Investment Company Act of 1940, as amended (the "1940 Act"), as
the lesser of (1) 67% of the Fund's shares present at a meeting of its
shareholders if the owners of more than 50% of the shares of the Fund then
outstanding are present in person or by proxy or (2) more than 50% of the Fund's
outstanding shares (a "Majority Vote"). The Fund will not trade in securities
for short-term gain. Current interest and dividend income are not an objective
of the Fund. No assurance can be given that the Fund will be able to achieve its
objective.
Portfolio Structure
The Fund will seek to achieve its investment objective of long-term capital
appreciation primarily by investing in equity and equity-linked securities of
companies in a broad spectrum of industries. Equity and equity-linked securities
include common stock, convertible and non-convertible preferred stock, whether
voting or non-voting, convertible bonds, bonds with warrants and unattached
warrants. Equity-linked
A-1
<PAGE>
securities refer to debt securities convertible into equity and securities such
as warrants, options and futures, the prices of which reflect the value of the
equity securities receivable upon exercise or settlement thereof. The Fund may
not invest more than 25% of the value of its total assets in the securities of
issuers having at the time of investment their principal business activities in
the same industry. In selecting industries and companies for investment by the
Fund, Deutsche Asset Management GmbH (the "Investment Adviser") and the Manager
generally consider factors such as overall growth prospects, competitive
position in their product markets, management, technology, research and
development, productivity, labor costs, raw material costs and sources, profit
margins, return on investment, capital resources and government regulation. The
Board of Directors has also adopted a non-fundamental policy that for the time
being the Fund will invest at least 80% of the value of its total assets in
equity and equity-linked securities of Central European issuers. The Board
reserves the right to make this policy a fundamental policy without further
stockholder action at such time in the future as the Board may deem such change
to be in the best interests of the Fund and its stockholders. The Fund may not
purchase more than 10% of the voting securities of any single issuer or invest
more than 15% of the value of its total assets in the securities of any one
issuer.
The Fund has no current intention of focusing its investments in any
particular country or countries other than Germany and Austria, where its
investment is and may in the future be significant (64.5% of total assets at
March 31, 1997); however, except as described below, there are no prescribed
limits on geographic asset distribution within Europe and Russia and, from time
to time, a significant portion of the Fund's assets may be invested in companies
domiciled in as few as three countries. The Board of Directors has adopted a
non-fundamental policy that for the time being the Fund will not invest more
than 15% of the value of its total assets in securities of issuers domiciled in
any one country other than Germany or Austria.
Although it intends to focus its investments in equities or equity-linked
securities that are listed on a recognized securities exchange or otherwise
publicly traded, the Fund may also invest in securities that are not readily
marketable. The Fund may also invest in other investment companies, subject to
applicable limitations under the 1940 Act and certain applicable state
securities regulations. These limitations include a prohibition on the Fund's
acquiring more than 3% of the voting securities of any other investment company
or more than 10% of its total assets in securities of all investment companies.
Any investment companies in which the Fund may invest will have a policy of
investing all or substantially all of their assets in one or more European
countries or Russia. Such investments may involve an additional layer of
expenses because of the fees and expenses payable by such other investment
companies. In determining whether to invest assets of the Fund in other
investment companies, the Manager and Investment Adviser will take into
consideration, among other factors, the advisory fee and other expenses payable
by such other investment companies.
The Fund may also invest in warrants if consistent with the Fund's
investment objective. The warrants in which the Fund may invest are a type of
security, usually issued together with another security of an issuer, that
entitles the holder to buy a fixed amount of common or preferred stock of such
issuer at a specified price for a fixed period of time (which may be in
perpetuity). Warrants are commonly issued attached to other securities of the
issuer as a method of making such securities more attractive and are usually
detachable and thus may be bought or sold separately from the issued security.
Warrants can be a speculative instrument. The value of a warrant may decline
because of a decrease in the value of the underlying stock, the passage of time
or a change in perception as to the potential of the underlying stock, or any
combination thereof. If the market price of the underlying stock is below the
exercise price set forth in the warrant on the expiration date, the warrant will
expire worthless. Publicly traded warrants currently exist with respect to the
stock of a significant number of European companies.
A-2
<PAGE>
Certain German, Swiss and Austrian companies have issued participation
certificates ("Participation Certificates" or "Genuss-Scheine"), which entitle
the holder to participate only in dividend distributions, generally at rates
above those declared on the issuers' common stock, but not to vote, nor usually
to any claim for assets in liquidation. Participation Certificates trade like
common stock on the relevant stock exchanges. Such securities may have higher
yields; however, they may be less liquid than common stock. The Fund may invest
in Participation Certificates of issuers in any European country or Russia.
For hedging purposes, the Fund may also purchase put and call options on
stock of European or Russian issuers and, if and when permitted by applicable
U.S. law, invest in the index and bond futures and any other derivative
securities listed on any organized exchange. Options are contracts which give
the buyer the right, but not the obligation, to buy or sell a fixed amount of
securities at a fixed price for a fixed period of time. A futures contract is a
binding obligation to purchase or deliver the specific type of financial
instrument, or the cash equivalent thereof in certain circumstances, called for
in the contract at a specific price at a future date. The Fund will only invest
in options or futures in an attempt to hedge against changes or anticipated
changes in the value of particular securities in its portfolio or all or a
portion of its portfolio. The Fund will not invest in options or futures if,
immediately thereafter, more than the amount of its total assets would be
hedged. For hedging purposes, the Fund may also purchase put and call options on
bonds and other securities, as well as securities indices, if and when such
investments become available. The Fund may invest in other options, futures and
options on futures with respect to any securities or securities indices
compatible with its investment objective that may from time to time become
available on any organized exchange, if permitted by applicable law.
The Fund may also write (i.e., sell) covered call options on its portfolio
securities and appropriate securities indices for purposes of generating income.
The Fund may write (i.e., sell) covered call options on portfolio securities and
appropriate securities indices up to the amount of its entire portfolio. A call
option gives the holder the right to purchase the underlying securities from the
Fund at a special price (the "exercise price") for a stated period of time
(usually three, six or nine months). Prior to the expiration of the option, the
writer (i.e., seller) of the option has an obligation to sell the underlying
security to the holder of the option at the exercise price regardless of the
market price of the security at the time the option is exercised. The initial
purchaser of an option pays the writer a premium, which is paid at time of
purchase and is retained by the writer whether or not the option is exercised. A
"covered" call option means that so long as the Fund is obligated as the writer
of the option, it will own (i) the underlying securities subject to the option,
(ii) securities convertible or exchangeable without the payment of any
consideration into the securities subject to the option or (iii) warrants on the
securities subject to the option exercisable at a price not greater than the
option exercise price and, at the time the option is exercisable, the securities
subject to the option. In the case of covered call options on securities
indices, references to securities in clauses (i), (ii) or (iii) will include
such securities as the Investment Adviser believes approximate the index (but
not necessarily all those comprising the index), as well as, in the case of
clauses (ii) and (iii), securities convertible, exchangeable or exercisable into
the value of the index. The writing of a call option may involve the pledge of
the underlying security which the call option covers, or other portfolio
securities. In order to make use of its authority to write covered call options,
the Fund may pledge its assets in connection therewith.
In the event the option is exercised, the writer may either deliver the
underlying securities at the exercise price or if it does not wish to deliver
its own securities, purchase new securities at a cost to the writer, which may
be more than the exercise price premium received, and deliver the new securities
for the exercise option. In the event the option is exercised, the Fund's
potential for gain is limited to the difference between the exercise price plus
the premium less the cost of the security. Alternatively, the option's position
could be
A-3
<PAGE>
extinguished or closed out by purchasing a like option. It is possible, although
considered unlikely, that the Fund might be unable to execute such a closing
purchase transaction. If the price of a security declines below the amount to be
received from the exercise price less the amount of the call premium received
and if the option could not be closed out, the Fund would hold a security which
might otherwise have been sold to protect against depreciation. In addition, the
Fund's portfolio turnover may increase to the extent that the market price of
underlying securities covered by call options written by the Fund increases and
the Fund has not entered into closing purchase transactions. Brokerage
commissions associated with writing options transactions are normally higher
than those associated with other securities transactions.
The Fund may also invest up to 25% of its total assets in fixed income
securities of European or Russian issuers. Such investments may include debt
instruments issued by private and public entities, including multinational
lending institutions and supranational institutions if denominated in a European
or the Russian currency or composite currency, which have been determined by the
Fund's Investment Adviser and Manager to be of comparable credit quality to
securities rated in the three highest categories by Moody's Investors Service,
Inc. or Standard & Poor's Corporation. When selecting a debt instrument from
among several investment opportunities, the Investment Adviser and Manager will
consider the potential for capital appreciation, taking into account maturity
and yield considerations. For temporary defensive purposes, the Fund also may
invest in money market instruments denominated in U.S. dollars or in a European
or the Russian currency or composite currency, including bank time deposits and
certificates of deposit.
The Fund may also lend its portfolio securities to banks, securities
dealers and other institutions meeting the creditworthiness standards
established by the Fund's Board of Directors. The Fund may lend its portfolio
securities so long as the terms and the structure of such loans are not
inconsistent with the 1940 Act, which currently requires that (a) the borrower
pledge and maintain with the Fund collateral consisting of cash, a letter of
credit issued by a domestic United States bank or securities issued or
guaranteed by the United States Government having a value at all times of not
less than 100% of the value of the securities loaned, (b) the borrower add to
such collateral whenever the price of the loaned securities rises (i.e., the
value of the loan is "marked to market" on a daily basis), (c) the loan be made
subject to termination by the Fund at any time and (d) the Fund receive
reasonable interest on the loan (which may include a portion of the interest
from the Fund's investing any cash collateral in interest bearing short-term
investments). Any such collateral may be invested by the Fund in repurchase
agreements collateralized by securities issued or guaranteed by the United
States Government. Any distributions on the loaned securities and any increase
in their market value accrue to the Fund. Loan arrangements made by the Fund
will comply with all other applicable regulatory requirements. All relevant
facts and circumstances, including the creditworthiness of the borrowing
institution, will be monitored by the Fund's Investment Adviser and Manager, and
will be considered in making decisions with respect to lending of securities,
subject to review by the Fund's Board of Directors. The Fund may pay reasonable
negotiated fees in connection with loaned securities, so long as such fees are
set forth in a written contract and approved by the Fund's Board of Directors.
In addition, any voting rights may pass with the loaned securities, but if a
material event were to occur affecting an investment on loan, the loan may be
called and the securities voted. Any gain or loss in the market price of the
loaned securities that may occur during the term of the loan will be for the
account of the Fund.
Currency Transactions
The Fund may attempt to hedge its foreign currency exposure by entering
into forward currency contracts. The Fund does not currently engage in foreign
exchange transactions as an investment strategy. However, at such future time as
the Investment Adviser and Manager believe that one or more currencies in which
the
A-4
<PAGE>
Fund's securities are denominated might suffer a substantial decline against the
U.S. dollar, the Fund may, in order to hedge the value of the Fund's portfolio,
enter into forward contracts, e.g., to sell fixed amounts of such currencies for
fixed amounts of U.S. dollars in the interbank market. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract.
The Fund's dealings in forward exchange transactions will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of the Fund, which will generally arise in
connection with the purchase or sale of its portfolio securities. Position
hedging is the sale of forward currency with respect to portfolio security
positions denominated or generally quoted in that currency.
The Fund may engage in "conventional hedging", which involves entering into
forward currency contracts to sell fixed amounts of a foreign currency (e.g.,
Polish zlotys) for fixed amounts of U.S. dollars in order to hedge the U.S.
dollar value of its portfolio. The Fund may also engage in "cross-hedging",
which involves entering into forward currency contracts to sell fixed amounts of
such foreign currency (e.g., Polish zlotys) for fixed amounts of another foreign
currency to which the Fund may seek exposure (e.g., Deutsche marks or Austrian
schillings).
The Fund may not position a hedge with respect to any currency to an extent
greater than the aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or generally quoted in or currently
convertible into such currency. If the Fund enters into a position hedging
transaction, the Fund's custodian or subcustodian will place cash or U.S.
Government or other liquid securities in a segregated account of the Fund in an
amount equal to the value of the Fund's total assets committed to the
consummation of the forward contract, which value will be adjusted on a daily
basis. If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Fund's commitment with respect to the
contract.
INVESTMENT RESTRICTIONS
In addition to its investment objective and the other investment policies
so indicated in the first paragraph under "Investment Objective and Policies",
the Fund has adopted certain investment restrictions, which are fundamental
policies and cannot be changed without a Majority Vote of the Fund's
stockholders. For purposes of the foregoing restrictions and the restrictions
listed below, all percentage limitations apply only immediately after a
transaction, and any subsequent change in any applicable percentage resulting
from changing values will not require elimination of any security from the
Fund's portfolio.
The Fund may not:
(1) Purchase more than 10% of the voting securities of any single
issuer.
(2) Invest more than 15% of the value of its total assets in the
securities of any one issuer or more than 25% of the value of its total
assets in a particular industry.
(3) Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow for temporary or emergency purposes or for the
clearance of transactions in amounts not exceeding 10% of the value of its
total assets (not including the amount borrowed) and will not purchase
securities while any such borrowings are outstanding, and except that the
Fund may pledge its assets in connection with writing covered call options.
A-5
<PAGE>
(4) Make real estate mortgage loans or other loans, except through the
purchase of debt obligations consistent with the Fund's investment
policies.
(5) Buy or sell commodities, commodity contracts, futures contracts,
real estate or interests in real estate (other than as described under
"Portfolio Structure" and "Currency Transactions" under "Investment
Objective and Policies").
(6) Make short sales of securities or maintain a short position in any
security.
(7) Buy, sell or write put or call options (other than as described
under "Portfolio Structure" under "Investment Objective and Policies").
(8) Purchase securities on margin, except such short-term credits as
may be necessary or routine for the clearance or settlement of
transactions.
(9) Act as an underwriter, except to the extent the Fund may be deemed
to be an underwriter in connection with the sale of securities in its
portfolio.
(10) Purchase securities, the sale of which by Fund could not be
effected without prior registration under the Securities Act of 1933, as
amended, except that this restriction shall not preclude the Fund from
acquiring non-U.S. securities.
Non-Diversified Status
The Fund is classified as a "non-diversified" investment company under the
1940 Act, which means the Fund is not limited by the 1940 Act in the proportion
of its assets that may be invested in the securities of a single issuer.
However, the Fund conducts its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code, which relieves
the Fund of any liability for Federal income tax to the extent that its earnings
are distributed to stockholders. To so qualify, among other requirements, the
Fund must limit its investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets may be invested in the securities of a single issuer or a group of
related issuers and (ii) at least 50% of the market value of its total assets
must be represented by cash, U.S. Government securities, and other securities,
with such other securities limited, in respect of any one issuer, to not more
than 5% of the market value of the Fund's total assets and not more than 10% of
the issuer's outstanding voting securities.
A-6
<PAGE>
The back cover displays a map of Europe on which the several countries are
characterized by lines representing their national borders. The countries of
Central Europe (as defined in the Fund's Revised Investment Policies) are
highlighted by the following popular names in the appropriate parts of the map:
Albania, Austria, Belarus, Bosnia, Bulgaria, Croatia, Czech, Estonia, Germany,
Hungary, Latvia, Lithuania, Macedonia, Moldavia, Montenegro, Poland, Romania,
Serbia, Slovakia, Slovenia, Switzerland, Ukraine. Russia is also named, although
the entire border is not shown. The Central European countries are shaded
orange, the other Western European countries are shaded green, and Greece,
Russia and Turkey are shaded yellow-ochre.
<PAGE>
PROXY
THE CENTRAL EUROPEAN EQUITY 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 Central European Equity Fund, Inc. (the "Fund") held of record by the
undersigned on May 5, 1997 at an Annual Meeting of Stockholders to be held on
June 20, 1997 or any adjournment thereof.
1. TO AMEND THE FUND'S INVESTMENT POLICIES TO PERMIT INCREASED
FLEXIBILITY IN THE GEOGRAPHIC DISTRIBUTION OF THE FUND'S INVESTMENTS.
<TABLE>
<CAPTION>
<S> <C> <C>
2. ELECTION OF DIRECTORS. [ ] FOR all nominees listed below [ ] WITHHOLDING AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
(Instruction: To withhold authority for any individual nominee strike a line
through the nominee's name in the list below.)
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS I CLASS II CLASS III
(to serve until the (to serve until the (to serve until the
1998 Annual Meeting of Stockholders) 1999 Annual Meeting of Stockholders) 2000 Annual Meeting of Stockholders)
Dr. Ronaldo H. Schmitz Hans G. Storr Prof. Dr. Klaus Kohler
Christian H. Strenger
Werner Walbrol
Otto Wolff von Amerongen
</TABLE>
3. TO RATIFY THE SELECTION BY THE BOARD OF DIRECTORS OF PRICE WATERHOUSE
LLP AS INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING OCTOBER 31,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
4. TO CONSIDER AND ACT UPON ANY OTHER BUSINESS AS MAY 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 Proposals 1, 2 and 3.
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)______ 1997
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY USING THE ENCLOSED ENVELOPE.
