--------------------------------------------------------------------------------
[LOGO]
The Central European
Equity Fund, Inc.
Annual Report
October 31, 2000
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<PAGE>
[LOGO] The Central European
Equity Fund, Inc.
LETTER TO THE SHAREHOLDERS
--------------------------------------------------------------------------------
December 22, 2000
Dear Shareholder,
For the fiscal year ended October 31, 2000, the Central European Equity
Fund's net asset value per share rose by 0.9% in U.S. dollar terms while its
customized MSCI Index rose by 2.1%. During the first half of the fiscal year,
the equity markets of Hungary, Poland and the Czech Republic were strong
outperformers as investors focused on the anticipated benefits of membership in
the European Union. However, in the second half of the year, the Eastern
European equity markets succumbed to the global equity sell-off that began in
April. Despite the correction, the major markets in Eastern Europe outperformed
most markets in local terms. However, the strong dollar eclipsed many of these
gains. We remain positive on the outlook of this region: the equity markets of
Eastern Europe trade at superior valuations to both their U.S. and Western
European counterparts, and their economies enjoy higher projected economic
growth. Currently the U.S. market trades at 26x earnings, Western Europe at 24x
earnings, while Poland trades at 18x earnings and Hungary 14x earnings. The
valuation gap should narrow as investors once again focus on the significant
growth potential of Eastern European equities.
The prospects of EU membership offers Eastern Europe the opportunity to
become part of a larger integrated market and a zone of stability. Over the
coming years, as EU economic law becomes part of the national legal system in
Central and Eastern Europe, substantial financial transfers would be available
for economic and infrastructure development. As a result, Poland, Hungary and
the Czech Republic should be viewed as "converging" rather than "emerging"
markets. It can already be seen that the prospects of EU integration has an
anchor effect for national economic policy in that recent elections have not
triggered major policy changes. This suggests that the candidate countries may
develop an economic momentum that is comparable to the process experienced in
Spain, Portugal and Ireland in the past decade and that will likely result in
considerable economic growth over the long term.
In order for the Fund to capitalize fully on the benefits these changes
should bring to the candidate countries, on November 3, 2000, the Board of
Directors of the Fund removed the requirement that at least 25% of the Fund's
assets be invested in Germany. The Fund is increasing its investments in Eastern
European countries that are expected to join the EU, mainly Poland, Hungary and
the Czech Republic. As of the date of this letter, the Fund's investments in
Germany have been sold.
Sincerely,
/s/ Christian Strenger /s/ Paul W. Higgins
Christian Strenger Paul W. Higgins
Chairman President and Chief Executive Officer
--------------------------------------------------------------------------------
For additional information about the Fund including performance, dividends,
presentations, press releases, daily NAV and shareholder reports, please visit:
www.ceefund.com
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1
<PAGE>
FUND HISTORY AS OF OCTOBER 31, 2000
--------------------------------------------------------------------------------
STATISTICS:
Net Assets ............................................... $ 140,923,475
Shares Outstanding ....................................... 8,730,395
NAV Per Share ............................................ $16.14
TOTAL RETURNS:
Period NAV
--------- --------
1 year ended 10/31/00 .................................... 0.94%
3 years ended 10/31/00(a) ................................ (8.56)%
5 years ended 10/31/00(a) ................................ 2.47%
(a) Average annual return
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
Record Ordinary LT Capital
Date Income Gains Total
------- -------- ---------- -----
11/16/98......................... $0.14 -- $0.14
9/1/98........................... $0.01 $0.01 $0.02
11/17/97......................... $1.54 $5.01 $6.55
9/3/97........................... -- $0.02 $0.02
12/19/96......................... $0.11 $1.79 $1.90
OTHER INFORMATION:
NYSE Ticker Symbol ....................................... CEE
NASDAQ Symbol............................................. XCEEX
Dividend Reinvestment Plan................................ Yes
Voluntary Cash Purchase Program........................... Yes
Annual Expense Ratio...................................... 1.37%
2
<PAGE>
10 LARGEST EQUITY HOLDINGS AS OF OCTOBER 31, 2000
--------------------------------------------------------------------------------
% of
Portfolio
---------
1. Matav 8.2
2. Telekomunikacja Polska 6.9
3. Siemens 6.4
4. Deutsche Telekom 5.0
5. Allianz 4.3
6. SAP 4.0
7. Cesky Telecom 3.8
8. Ceske Energeticke Zavody 3.8
9. Mol Magyar Olaj-ES Gazipari 3.7
10. Komercni Banka 3.2
--------------------------------------------------------------------------------
Country % of
Portfolio
-----------------------
Poland 28.4
-----------------------
Germany 27.9
-----------------------
Hungary 20.0
----------------------- [MAP OMITTED]
Czech
Republic 12.6
-----------------------
Austria 4.3
-----------------------
Croatia 4.1
-----------------------
Russia 2.7
-----------------------
Total 100%
-----------------------
--------------------------------------------------------------------------------
3
<PAGE>
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
--------------------------------------------------------------------------------
Question: In the Letter to Shareholders you mention that you plan to eliminate
the Fund's investment in German equities and reallocate the assets to Eastern
Europe. Why do you want to remove Germany all together just as its economic
growth is picking up and they are lowering taxes?
Answer: Although we are shifting the Fund's investments from Germany to Eastern
Europe, we still believe that Germany is an attractive investment vehicle due to
many factors such as tax reform and the weak euro. However, on a relative basis,
Eastern Europe appears even more attractive. With economic growth slowing on a
global scale and the likelihood of lower interest rates, investors should become
less risk averse to emerging markets. The risk premium for emerging markets
should decline as economic and financial liquidity improves. There are three
reasons why we like this region. First, we believe Eastern Europe offers much
higher economic growth. For example, this year we expect 4.6% and 5.4% GDP
growth for Poland and Hungary, compared to 3.3% in Germany. Second, considering
the far lower equity valuations, the region becomes even more attractive. And
third, the region will benefit from economic and interest rate convergence, as a
result of a massive drive to raise living standards to the EU level. The best
examples of convergence are the equity market returns in Portugal and Greece
three years before being included in the EU.
Question: What is the current status of the negotiations with the Eastern
European countries regarding enlargement of the European Union?
Answer: Negotiations with the Eastern European countries regarding integration
into the body of rules and laws of the EU center around 29 different "chapters"
that must be agreed upon prior to joining the EU. The majority of the chapters
involve political and economic issues including the free movement of goods,
people, and capital, competition policy, taxation, agriculture, social policy,
technology, and common foreign and security policy. Currently, only 5 countries
are in negotiations with the EU regarding all 29 chapters: the Czech Republic,
Estonia, Hungary, Poland, and Slovenia.
Poland, the biggest economy among the applicant countries, has come a long way
from the starting point of its economic and institutional transition. Today it
is one of the most dynamic and prosperous of the Central European countries.
About 65% of GDP is generated by the private sector compared with 80% in the EU,
yet this figure is forecast to rise to 75% as many privatization projects are in
the pipeline. On balance, Poland has reached about 60% of the EU average on most
economic indicators. In addition, Poland is ahead of many of the applicant
countries in terms of regulatory institutions, banking sector and legal reform.
Currently, the most difficult issue, agriculture reform, is under negotiations.
Hungary has commenced negotiations on all 29 chapters and has closed 11 of
these. The government aims to conclude the negotiations by the end of 2001. This
target seems achievable, as there is broad consensus across party lines in favor
of EU membership. In Hungary's case, the difficult issues will involve the free
movement of people and agriculture. Hungary's strengths are its real economy and
foreign trade. A rigorous focus on privatization, coupled with the early
liberalization of foreign trade, has led to rapid growth in investment and
productivity by EU standards. Regarding its business ties with EU companies,
Hungary is the leading country in Eastern Europe. It leads in trade links with
the EU and in the inflow of foreign direct investment per capita. The difference
in personal incomes between Hungary and the EU should continue to diminish amid
sustained future above-average economic growth. Over the next two years, GDP per
capita is likely to rise from 49% of the EU average to about 61%.
The Czech Republic has stepped up its membership efforts considerably and has
made remarkable progress following last year's criticisms from the EU Commission
on its progress up to that point. The new pace is evident in the fact that the
Czech Republic has closed 13 chapters already and is the only country to have
closed the important chapter on the free movement of goods. Its GDP per capita
of 50% of the EU level places it near the top of the EU candidate pool based on
economic fundamentals.
Hanspeter Ackermann, Chief Investment Officer of the Central European Equity
Fund
4
<PAGE>
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
ECONOMIC OUTLOOK FOR THE
CENTRAL EUROPEAN ECONOMIES
Poland:
The tight monetary policy the government has in place has been successful in
reducing inflation and shrinking the current account deficit. After peaking at
11.6% in July, inflation has fallen to below 10% in October, and we expect it to
fall to 9% by January. On the external front, while the tight monetary policy
has kept import growth under control, export performance has recorded a
remarkable turnaround. After declining by 9.8% in the first quarter of 2000,
exports rose by 8.8% and 15.5% in the second and third quarters, respectively.
We expect this trend to continue for the remainder of 2000 and into 2001. Also,
the government approved a draft budget for 2001 that reaffirms the projected
1.6% of GDP deficit target. By keeping the deficit target unchanged, the
government has sent an important signal that it intends to keep fiscal policy
under control. Economic growth in 2001 is forecasted to rise 4.6% largely due to
the strength in exports.
Hungary:
Hungary's strong macroeconomic outlook continues to impress. Hungary should
record GDP growth of 5.3% this year, and 5.5% in 2001, a growth rate
significantly better than most other European countries. The growth was mainly
driven by the industrial sector and in particular, manufacturing which continues
to benefit from stronger Western European demand. In light of the global
economic slowdown, this achievement is quite remarkable. Inflation should
decline to 9.7% by year-end, and to 6.5% by the end of 2001. The current account
deficit is expected to stabilize at 4% of GDP on the back of Hungary's strong
export growth. We expect the Hungary's currency to remain strong over the next
year due to the large inflow of foreign direct investment.
Czech Republic:
The economic recovery in the Czech Republic has continued to improve on steady
export growth and a recovery in domestic demand. GDP growth is forecasted to
rebound significantly over the next two years, increasing by 2.3% this year and
by 3.2% in 2001, after two years of negative economic growth. Industrial
production during the fourth quarter is expected to show growth of 7% compared
to 3.7% during the third quarter. Retail sales should be around 5% this year and
a sustained growth in sales is expected in the first quarter of next year on a
steady recovery in domestic demand. Inflation is close to the EU levels and
should remain low.
5
<PAGE>
THE BOARD OF DIRECTORS OF THE FUND
--------------------------------------------------------------------------------
Since inception, your Board of Directors has consisted largely of
independent professionals having no business relationship with the Manager or
Adviser. In fact all but three of the combined group of 16 Directors are
classified as "disinterested". The three who are considered "interested" are so
classified because of present or past business relationships with the Funds and
the Deutsche Bank Group. They are not employees of the Funds' Manager or
Adviser.
There are several committees of the Board--including Audit, Advisory,
Securities Lending and Pricing--that consist solely of outside Directors. These
committees play an important role in overseeing the working of the Fund and its
compliance with the various securities regulations.
At the April 14, 2000 Board Meeting, the Directors adopted an Audit
Committee charter in keeping with new rules of the Securities and Exchange
Commission and the New York Stock Exchange.
There are four regularly-scheduled Board Meetings each year. These
meetings are combined for the three closed-end funds managed by the Deutsche
Bank Group: Germany Fund, New Germany Fund and Central European Equity Fund.
While each Fund's Board of Directors focuses on matters relating to its
particular Fund, the effect of having combined Boards of Directors meetings
expands the professional knowledge contributed at the meetings. In addition to
the Board Meetings, there are combined committee meetings (primarily Audit and
Advisory) during the year. For coordination, the Fund's Chairman is a member of
the Nominating Committee. All committees of the Board otherwise consist
exclusively of independent Directors (referred to as disinterested Directors by
the SEC), who are free of conflicts that could affect their ability to focus
exclusively on the interests of shareholders.
The list of Directors of all three closed-end funds and their principal
occupations is published each year in the proxy statements. We summarize this
information on page 7.
[PHOTO OMITTED]
Directors and Officers of the three Closed-End Funds, taken at the New York
Stock Exchange after their Board Meetings on November 3, 2000
6
<PAGE>
OFFICERS AND ADVISORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
DIRECTORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
Mr. Detlef Bierbaum, Partner, Sal. Oppenheim & Cie. (private bank)
Mr. John A. Bult, Chairman, PaineWebber International
*Hon. Richard R. Burt, Chairman, IEP Advisers, LLP; former U.S. Ambassador to
Germany
*Mr. John H. Cannon, Vice President & Treasurer, Venator Group
*Mr. Richard Goeltz, former Vice Chairman and Chief Financial Officer, American
Express Co.
*Dr. Franz-Wilhelm Hopp, Member of the Management Board, ERGO
Versich-erungsgruppe AG (insurance)
*Mr. Ernst-Ulrich Matz, former Chief Financial Officer, IWKA AG (engineering)
*Mr. Edward Schmults, former General Counsel, GTE Corp.; former partner, White &
Case, former Deputy Attorney General of the United States
*Mr. Hans G. Storr, former CFO, Philip Morris Companies Inc.
Mr. Christian Strenger, Chairman of the Boards of Directors of the Closed-End
Funds, former CEO, DWS (Deutsche Bank's mutual fund group)
*Dr. Juergen Strube, Chairman of the Management Board, BASF AG (chemicals)
*Dr. Frank Tromel, former Chairman, Delton AG (industrial holding company)
*Mr. Robert Wadsworth, President, Robert H.Wadsworth & Associates, Inc. (fund
administration)
*Mr. Werner Walbrol, President and CEO, German American Chamber of Commerce
*Mr. Otto Wolff von Amerongen, Chairman, Otto Wolff AG (industrial holding
company); former director, Exxon Company
*Mr. Peter Zuhlsdorff, Chairman, DIH-Deutsche Industrie Holding, former Chairman
of the Board, Wella AG (hair care products)
Note: The Directors of the three funds (Germany Fund, New Germany Fund and
Central European Equity Fund) meet together in combined board meetings although
they speak for their respective funds. Three Directors sit on all three fund
boards: Messrs. Bult, Strenger and Wadsworth. The following sit only on the
boards of the Germany Fund and the Central European Equity Fund: Messrs.
Bierbaum, Burt, Schmults, Storr, Strube, Walbroel and Wolff. The following sit
only on the board of the New Germany Fund: Messrs. Cannon, Goeltz, Hopp, Matz,
Troemel and Zuhlsdorff.
* indicates a "disinterested director"
7
<PAGE>
OFFICERS AND ADVISORS OF THE CLOSED-END FUNDS
--------------------------------------------------------------------------------
Mr. Paul W. Higgins, President and Chief Executive Officer of the Closed-End
Funds, Managing Director and Head of Private Banking Americas of Deutsche
Bank
Mr. Hanspeter Ackermann, Chief Investment Officer of the Closed-End Funds and
Managing Director of Deutsche Bank Securities Inc.
Mr. Robert Gambee, Chief Operating Officer and Secretary of the Closed-End
Funds, Director of Deutsche Bank Securities Inc.
Mr. Joseph Cheung, Chief Financial Officer and Treasurer of the Closed-End Funds
and Vice President of Deutsche Bank Securities Inc.
Ms. Isabella Chan, Funds Administrator, Deutsche Bank Securities Inc.
Mr. Thomas Gill, Assistant Vice President of Deutsche Bank Securities Inc.
Mr. Christophe Bernard, Senior Portfolio Manager, Deutsche Asset Management
International GmbH
Mr. Thomas Bucher, Portfolio Manager, Deutsche Asset Management International
GmbH
SHARES REPURCHASED AND ISSUED
--------------------------------------------------------------------------------
During the past five years, the Fund has been purchasing shares of its
common stock in the open market. Your Directors continue to believe the Fund
represents excellent value. Shares repurchased and shares issued for dividend
reinvestment for the past five years are as follows:
<TABLE>
<CAPTION>
Fiscal year 1996 1997 1998 1999 2000
------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shares repurchased 325,300 722,257 2,680,954 1,270,800 1,106,500
Shares issued for
dividend reinvestment 136,723 592,008 2,082,693 66,019 -0-
</TABLE>
VOLUNTARY CASH PURCHASE PROGRAM
--------------------------------------------------------------------------------
The Fund has an attractive way to purchase additional shares at reduced
cost. This is the Voluntary Cash Purchase Program which is part of the Dividend
Reinvestment Plan. By enrolling in the Voluntary Cash Purchase Program, you may
make additional investments each month--as little as $100 in any month or as
much as $36,000 a year. Share purchases are combined to receive a beneficial
brokerage fee. Further information is contained at the end of this Annual
Report.
8
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--OCTOBER 31, 2000
--------------------------------------------------------------------------------
Shares Description Value
-------- ------------- -------
INVESTMENTS IN POLISH
COMMON STOCKS--28.3%
BANKS--4.0%
117,331 Bank Rozwoju Eksportu .......................... $ 2,651,405
31,700 Bank Przemyslowo--Handlowy* .................... 1,296,244
31,500 Bank Pekao* .................................... 317,271
38,000 Bank Pekao (GDR)*+ ............................. 382,850
215,286 Wielkopolski Bank Kredytowy .................... 977,625
-----------
5,625,395
-----------
COMPUTER & PERIPHERALS--3.7%
116,801 Computerland* .................................. 2,664,566
86,994 Optimus* ....................................... 2,546,257
-----------
5,210,823
-----------
CONSTRUCTION &
ENGINEERING--2.3%
373,410 Budimex* ....................................... 1,920,693
588,805 Mostostal Zabrze ............................... 1,260,865
-----------
3,181,558
-----------
DIVERSIFIED TELECOMMUNICATION
SERVICES--7.9%
80,000 Netia (ADR)* ................................... 1,386,000
1,945,000 Telekomunikacja Polska
(GDR)+ ....................................... 9,773,625
-----------
11,159,625
-----------
MEDIA--1.3%
100,000 Agora (GDR)*+ .................................. 1,837,500
-----------
METALS & MINING--1.2%
155,000 KGHM Polska Miedz (GDR) ........................ 1,674,000
-----------
OIL & GAS--1.6%
300,000 Polski Koncern Naftowy (GDR)+ .................. 2,325,000
-----------
SOFTWARE--3.4%
180,000 Prokom Software (GDR) .......................... 3,555,000
93,442 Softbank (GDR) ................................. 1,305,853
-----------
4,860,853
-----------
TRADING COMPANIES &
DISTRIBUTORS--2.9%
512,320 Elektrim* ...................................... 4,057,544
-----------
Total Investments in
Polish Common Stocks
(cost $41,498,979) ........................... 39,932,298
-----------
INVESTMENTS IN GERMAN
SECURITIES--27.9% OF NET ASSETS
COMMON STOCKS--23.9%
AUTOMOBILES--2.1%
60,000 Volkswagen ..................................... 2,995,418
-----------
BANKS--2.2%
74,000 Dresdner Bank .................................. 3,070,261
-----------
CHEMICALS--1.2%
40,000 Bayer .......................................... 1,732,494
-----------
DIVERSIFIED TELECOMMUNICATIONS
SERVICES--5.0%
187,000 Deutsche Telekom ............................... 6,981,978
-----------
HEALTHCARE PROVIDERS &
SERVICES--1.4%
25,000 Fresenius Medical Care ......................... 1,991,860
-----------
INDUSTRIAL CONGLOMERATES--6.4%
70,600 Siemens ........................................ 8,976,084
-----------
INSURANCE--4.3%
18,000 Allianz ........................................ 6,110,348
-----------
MULTI UTILITIES--1.3%
35,000 E.ON ........................................... 1,776,993
-----------
Total Common Stocks
(cost $29,873,490) ........................... 33,635,436
-----------
----------
* Non-income producing securities.
+ 144A. Restricted to resale to institutional investors only.
GDR -- Global Depository Receipt
ADR -- American Depository Receipt
See Notes to Financial Statements.
9
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--October 31, 2000 (continued)
--------------------------------------------------------------------------------
Shares Description Value
-------- ------------- -------
INVESTMENTS IN GERMAN
SECURITIES (continued)
PREFERRED STOCK--4.0%
SOFTWARE--4.0%
28,200 SAP
(cost $5,243,822) ............................ $ 5,700,703
-----------
Total Investments in
German Securities
(cost $35,117,312) ........................... 39,336,139
-----------
INVESTMENTS IN HUNGARIAN
COMMON STOCKS--20.0%
AUTOMOBILES--1.3%
240,000 Raba ........................................... 1,895,185
-----------
BANKS--3.2%
75,000 OTP Bank ....................................... 3,478,534
21,000 OTP Bank (GDR) ................................. 964,950
-----------
4,443,484
-----------
CHEMICALS--0.9%
89,557 Pannonplast .................................... 1,280,169
-----------
DIVERSIFIED TELECOMMUNICATIONS
SERVICES--8.2%
500,000 Matav .......................................... 2,223,941
398,000 Matav (ADR) .................................... 9,353,000
-----------
11,576,941
-----------
IT CONSULTING & SERVICES--0.5%
190,000 Synergon Information System
(GDR)*+ ...................................... 679,250
-----------
OIL & GAS--3.7%
340,000 Mol Magyar Olaj-ES
Gazipari (GDR) ............................... 5,210,500
-----------
PHARMACEUTICALS--2.2%
44,000 Gedeon Richter ................................. 2,140,012
20,000 Gedeon Richter (GDR). .......................... 967,500
-----------
3,107,512
-----------
Total Investments in
Hungarian Common Stocks
(cost $32,282,483) ........................... 28,193,041
-----------
INVESTMENTS IN CZECH
REPUBLIC COMMON STOCKS--12.6%
BANKS--3.2%
629,996 Komercni Banka (GDR)* .......................... 4,472,972
-----------
DIVERSIFIED TELECOMMUNICATION
SERVICES--3.8%
326,000 Cesky Telecom* ................................. 4,289,453
85,000 Cesky Telecom (GDR)* ........................... 1,122,000
-----------
5,411,453
-----------
INDUSTRIAL CONGLOMERATES--3.8%
2,185,000 Ceske Energeticke Zavody* ...................... 5,315,771
-----------
TELECOMMUNICATIONS--1.8%
66,730 Ceske Radiokomunikace (GDR)* ................... 2,510,716
-----------
Total Investments in Czech
Republic Common Stocks
(cost $15,661,453) ........................... 17,710,912
-----------
----------
* Non-income producing securities.
+ 144A. Restricted to resale to institutional investors only.
GDR -- Global Depository Receipt
ADR -- American Depository Receipt
See Notes to Financial Statements.
10
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS--October 31, 2000 (continued)
--------------------------------------------------------------------------------
Shares Description Value
-------- ------------- -------
INVESTMENTS IN AUSTRIAN
COMMON STOCKS--4.3%
CONSTRUCTION & ENGINEERING--0.9%
32,000 VA Technologie ................................... $ 1,293,777
------------
ELECTRONIC EQUIPMENT
& INSTRUMENTS--1.2%
60,000 Austria Technologie &
Systemtechnik .................................. 1,673,162
------------
Hotels Restaurants
& LEISURE--0.6%
30,000 DO & Co. ......................................... 911,340
------------
IT CONSULTING & SERVICES--0.9%
112,000 S&T System Integration
& Technology* .................................. 1,295,811
------------
Wireless Telecommunication
Services--0.7%
90,000 Cybertron Telekom* ............................... 930,666
------------
Total Investments in
Austrian Common Stocks
(cost $12,418,678) ............................. 6,104,756
------------
INVESTMENTS IN CROATIAN
COMMON STOCKS--4.1%
BANKS--2.1%
188,000 Zagrebacka Banka (GDR) ........................... 2,961,000
------------
BEVERAGES--0.2%
8,721 Karlovacka Pivovara(1) ........................... 299,141
------------
PHARMACEUTICALS--1.8%
240,000 Pliva D.D. (GDR) ................................. 2,532,000
------------
Total Investments in
Croatian Common Stocks
(cost $6,441,251) .............................. 5,792,141
------------
INVESTMENTS IN RUSSIAN
COMMON STOCKS--2.7%
OIL & GAS--2.1%
30,000 Lukoil (ADR) ..................................... 1,627,392
100,000 Surgutneftegaz (ADR) ............................. 1,292,590
------------
2,919,982
------------
WIRELESS TELECOMMUNICATION
SERVICES--0.6%
30,400 Mobile Telesystems (ADR)* ........................ 839,800
------------
Total Investments in
Russian Common Stocks
(cost $4,513,635) .............................. 3,759,782
------------
Total Investments--99.9%
(cost $147,933,791) ............................ 140,829,069
Cash and other assets in
excess of liabilities--0.1% .................... 94,406
------------
NET ASSETS--100% ................................. 140,923,475
============
----------
* Non-income producing securities.
(1) Illiquid security.
GDR -- Global Depository Receipt
ADR -- American Depository Receipt
See Notes to Financial Statements.
11
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $147,933,791) .................................... $ 140,829,069
Cash and foreign currencies .................................................. 676,286
Foreign withholding tax refund receivable .................................... 58,850
Other assets ................................................................. 6,461
-------------
Total assets ............................................................. 141,570,666
-------------
LIABILITIES
Payable for securities purchased ............................................. 398,168
Management fee payable ....................................................... 75,160
Investment advisory fee payable .............................................. 38,809
Payable for shares repurchased ............................................... 16,455
Accrued expenses and accounts payable ........................................ 118,599
-------------
Total liabilities ........................................................ 647,191
-------------
NET ASSETS ................................................................... $ 140,923,475
=============
Net assets consist of:
Paid-in capital, $.001 par (Authorized 80,000,000 shares of common stock) .... $ 226,321,803
Cost of 4,775,580 shares held in treasury .................................... (72,114,614)
Accumulated net realized loss on investments and foreign currency transactions (6,163,598)
Net unrealized depreciation of investments and foreign currency .............. (7,120,116)
-------------
Net assets ................................................................... $ 140,923,475
=============
Net asset value per share
($140,923,475 / 8,730,395 shares of
common stock issued and outstanding) ..................................... $16.14
======
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year
ended
October 31,
2000
------------
<S> <C>
NET INVESTMENT LOSS
Income
Dividends (net of foreign withholding taxes of $181,055) ........ $ 1,529,766
Interest ........................................................ 58,189
Securities lending, net ......................................... 52,370
------------
Total income ................................................. 1,640,325
------------
Expenses
Management fee .................................................. 1,102,582
Investment advisory fee ......................................... 555,979
Custodian and Transfer Agent's fees and expenses ................ 255,148
Reports to shareholders ......................................... 211,747
Directors' fees and expenses .................................... 173,783
Legal fee ....................................................... 70,313
Audit fee ....................................................... 58,000
NYSE listing fee ................................................ 24,260
Miscellaneous ................................................... 30,034
------------
Total expenses before custody credits* ....................... 2,481,846
Less: custody credits ........................................ (44,704)
------------
Net expenses ................................................. 2,437,142
------------
Net investment loss ................................................. (796,817)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments ..................................................... 12,859,659
Foreign currency transactions ................................... (290,722)
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... (11,502,067)
Translation of other assets and liabilities from foreign currency (14,036)
------------
Net gain on investments and foreign currency transactions ........... 1,052,834
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................ $ 256,017
============
</TABLE>
* The custody credits are attributable to interest earned on U.S. cash
balances.
See Notes to Financial Statements.
13
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the year For the year
ended ended
October 31, October 31,
2000 1999
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss ..................................................... $ (796,817) $ (750,880)
Net realized gain (loss) on:
Investments .......................................................... 12,859,659 1,326,518
Foreign currency transactions ........................................ (290,722) (608,689)
Net change in unrealized appreciation/depreciation on:
Investments .......................................................... (11,502,067) 878,811
Translation of other assets and liabilities from foreign currency .... (14,036) 81,227
------------- -------------
Net increase in net assets resulting from operations .................... 256,017 926,987
------------- -------------
Distributions to shareholders from:
Net investment income ................................................... -- (1,430,362)
Net realized foreign currency gains* .................................... -- (113,624)
------------- -------------
-- (1,543,986)
------------- -------------
Capital share transactions:
Net proceeds from reinvestment of dividends (0 and
66,019 shares, respectively, issued from treasury) ................... -- 866,499
Cost of shares repurchased (1,106,500 and 1,270,800 shares, respectively) (16,597,292) (16,809,888)
------------- -------------
Net decrease in net assets from capital share transactions .............. (16,597,292) (15,943,389)
------------- -------------
Total decrease in net assets ................................................ (16,341,275) (16,560,388)
NET ASSETS
Beginning of year ........................................................... 157,264,750 173,825,138
------------- -------------
End of year (including undistributed net investment income of $-0- as of
October 31, 2000 and 1999) ................................................ $ 140,923,475 $ 157,264,750
============= =============
</TABLE>
----------
* Characterized as ordinary income for tax purposes.
See Notes to Financial Statements.
14
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--October 31, 2000
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The Central European Equity Fund, Inc. (the "Fund") was incorporated in Maryland
on February 7, 1990 as The Future Germany Fund, Inc., a non-diversified,
closed-end management investment company. The Fund commenced investment
operations on March 6, 1990. Pursuant to shareholder approvals, on June 29,
1995, the Fund changed its name and investment objective to allow investment in
Central European countries, and on June 20, 1997, the Fund changed its
investment policies to permit increased flexibility in the geographic
distribution of the Fund's investments.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Security Valuation: Investments are stated at value. All securities for which
market quotations are readily available are valued at the last sales price on
the primary exchange on which they are traded prior to the time of valuation,
or, if no sales price is available at that time, at the price established by the
exchange. Securities that are traded in an unregulated market are valued, if bid
and asked quotations are available, at the current bid price. If bid and asked
quotations are not available, then such securities will be valued as determined
in good faith by the Board of Directors of the Fund.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Cost of securities sold is calculated using the
identified cost method. Dividend income is recorded on the ex-dividend date and
interest income is recorded on an accrual basis. Such dividend income is
recorded net of unrecoverable foreign withholding tax.
Loans of Portfolio Securities: The Fund may lend portfolio securities while it
continues to earn dividends on such securities loaned. The market value of
government securities received as collateral is at least equal at all times to
105 percent of the market value of the securities loaned, which are
marked-to-market daily. Securities lending fees, net of rebates and agency fees,
are earned by the Fund and are identified separately in the Statement of
Operations.
Foreign Currency Translation: The books and records of the Fund are maintained
in United States dollars.
Assets and liabilities denominated in Euros and other foreign currency amounts
are translated into United States dollars at the 10:00 A.M. mid-point of the
buying and selling spot rates quoted by the Federal Reserve Bank of New York.
Purchases and sales of investment securities, income and expenses are reported
at the rate of exchange prevailing on the respective dates of such transactions.
The resultant gains and losses arising from exchange rate fluctuations are
identified separately in the Statement of Operations, except for such amounts
attributable to investments, which are included in net realized and unrealized
gains and losses on investments.
Foreign investments may involve certain considerations and risks not typically
associated with those of domestic origin as a result of, among others, the
possibility of political and economic developments and the level of governmental
supervision and regulation of foreign securities markets. In addition, certain
foreign markets may be substantially smaller, less developed, less liquid and
more volatile than the major markets of the United States.
Taxes: No provision has been made for United States Federal income tax because
the Fund intends to meet the requirements of the United States Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders.
Dividends and Distributions to Shareholders: The Fund records dividends and
distributions to its shareholders on the ex-dividend date. Income and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from accounting principles generally accepted in
the United States of America. These differences, which could be temporary or
permanent in nature, may result in reclassification of distributions; however,
net investment income, net realized gains and net assets are not affected.
During the year ended October 31, 2000, the Fund reclassified permanent book and
tax differences as follows:
Increase
(decrease)
--------
Undistributed net investment income ....................... $ 796,817
Undistributed net realized gain on investments
and foreign currency translations ....................... 290,722
Paid-in capital ........................................... (1,087,539)
15
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS--October 31, 2000 (continued)
--------------------------------------------------------------------------------
NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS
The Fund has entered into a Management Agreement with Deutsche Bank Securities
Inc. (the "Manager"), and an Investment Advisory Agreement with Deutsche Asset
Management International GmbH (the "Investment Adviser"). The Manager and the
Investment Adviser are affiliated companies.
The Management Agreement provides the Manager with a fee, computed weekly and
payable monthly, at the annual rates of .65% of the Fund's average weekly net
assets up to $100 million, and .55% of such assets in excess of $100 million.
The Investment Advisory Agreement provides the Investment Adviser with a fee,
computed weekly and payable monthly, at the annual rates of .35% of the Fund's
average weekly net assets up to $100 million and .25% of such assets in excess
of $100 million.
Pursuant to the Management Agreement, the Manager will be the corporate manager
and administrator of the Fund and, subject to the supervision of the Board of
Directors and pursuant to recommendations made by the Fund's Investment Adviser,
will determine the suitable securities for investment by the Fund. The Manager
will also provide office facilities and certain administrative, clerical and
bookkeeping services for the Fund. Pursuant to the Investment Advisory
Agreement, the Investment Adviser, in accordance with the Fund's stated
investment objective, policies and restrictions, will make recommendations to
the Manager with respect to the Fund's investments and, upon instructions given
by the Manager as to suitable securities for investment by the Fund, will
transmit purchase and sale orders and select brokers and dealers to execute
portfolio transactions on behalf of the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
For the year ended October 31, 2000, Deutsche Bank AG, the German parent of the
Manager and Investment Adviser, and its affiliates received $119,794 in
brokerage commissions as a result of executing agency transactions in portfolio
securities on behalf of the Fund.
Certain directors and officers of the Fund are also directors and officers of
either the Manager, the Investment Adviser or Deutsche Bank AG.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the year ended October 31, 2000 were $102,539,946 and $117,475,725,
respectively.
The cost of investments at October 31, 2000 was $148,039,434 for United States
Federal income tax purposes. Accordingly, as of October 31, 2000, net unrealized
depreciation of investments aggregated $7,210,365, of which $15,750,107 and
$22,960,472 related to unrealized appreciation and depreciation, respectively.
For United States Federal income tax purposes, the Fund utilized approximately
$13 million of capital loss carry forward during the year ended October 31,
2000, and had a capital loss carry forward at October 31, 2000 of approximately
$6 million which will expire in 2006. No capital gains distribution is expected
to be paid to shareholders until future net gains have been realized in excess
of such carry forward.
NOTE 5. PORTFOLIO SECURITIES LOANED
No securities were on loan at October 31, 2000. For the year ended October 31,
2000, the Fund earned $52,370 as securities lending fees, net of rebates and
agency fees.
NOTE 6. CAPITAL
During the years ended October 31, 2000 and 1999, the Fund purchased 1,106,500
and 1,270,800 of its shares of common stock on the open market at a total cost
of $16,597,292 and $16,809,888, respectively. The weighted average discount of
these purchases comparing the purchase price to the net asset value at the time
of purchase was 25.7% and 20.0%, respectively. These shares are held in
treasury.
NOTE 7. LITIGATION
On December 23, 1998, a complaint purporting to be a class action was filed
against the Fund, its Manager, Investment Adviser and its Directors, alleging
such parties failed to take adequate steps to diminish the trading discount of
the Fund's shares. On December 29, 1999, the district court dismissed the
complaint in its entirety. The decision was appealed and on October 13, 2000,
the United States Court of Appeals for the Second Circuit affirmed the
dismissal. It is not yet known whether the plaintiffs intend to seek further
review of the dismissal. Although the amount of loss, if any, cannot be
estimated at the present time, management believes that it will not have a
material adverse effect on the Fund's financial condition.
16
<PAGE>
THE CENTRAL EUROPEAN EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
years indicated:
<TABLE>
<CAPTION>
For the year ended October 31,
----------------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value:
Beginning of year ............................... $ 15.99 $ 15.74 $ 28.00 $ 24.56 $ 20.70
-------- -------- -------- -------- --------
Net investment income (loss) .................... (.09) (.08) .13 .09 .17
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (.38) .09 (6.18) 5.26 3.93
-------- -------- -------- -------- --------
Increase (decrease) from investment operations .. (.47) .01 (6.05) 5.35 4.10
-------- -------- -------- -------- --------
Increase resulting from share repurchases ....... .62 .40 .82 .28 .14
-------- -------- -------- -------- --------
Distributions from net investment income ........ -- (.13) (.01) (.11) (.13)
Distributions from net realized
foreign currency gains+ ..................... -- (.01) -- -- (.03)
Distributions from net realized
short-term capital gains+ ................... -- -- (1.54) -- --
Distributions from net realized
long-term capital gains ..................... -- -- (5.02) (1.81) (.22)
-------- -------- -------- -------- --------
Total distributions ............................. -- (.14) (6.57) (1.92) (.38)
-------- -------- -------- -------- --------
Dilution in NAV from dividend reinvestment ...... -- (.02) (.46) (.27) --
-------- -------- -------- -------- --------
Net asset value:
End of year ................................. $ 16.14 $ 15.99 $ 15.74 $ 28.00 $ 24.56
======== ======== ======== ======== ========
Market value:
End of year ................................. $ 11.875 $ 12.50 $13.0625 $ 23.125 $ 19.625
Total investment return for the year:++
Based upon market value ..................... (5.00)% (3.29)% (22.89)% 28.93% 25.28%
Based upon net asset value .................. .94% 2.48% (26.09)% 22.41% 20.74%
Ratio to average net assets:
Total expenses before custody credits* ...... 1.37% 1.44% 1.20% 1.10% 1.08%
Net investment income (loss) ................ (.44)% (.44)% .56% .32% .73%
Portfolio turnover .............................. 59.17% 60.35% 97.48% 68.20% 52.30%
Net assets at end of year (000's omitted) ....... $140,923 $157,265 $173,825 $325,972 $289,133
</TABLE>
----------
+ Characterized as ordinary income for tax purposes.
++ Total investment return is calculated assuming that shares of the Fund's
common stock were purchased at the closing market price as of the
beginning of the year, dividends, capital gains and other distributions
were reinvested as provided for in the Fund's dividend reinvestment plan
and then sold at the closing market price per share on the last day of the
year. The computation does not reflect any sales commission investors may
incur in purchasing or selling shares of the Fund. The total investment
return based on the net asset value is similarly computed except that the
Fund's net asset value is substituted for the closing market value.
* The custody credits are attributable to interest earned on U.S. cash
balances. The ratios of total expenses after custody credits to average
net assets would have been 1.35%, 1.43% and 1.17% for 2000, 1999 and 1998,
respectively.
See Notes to Financial Statements.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
The Central European Equity Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Central European Equity Fund,
Inc. (the "Fund") at October 31, 2000, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2000 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 8, 2000
18
<PAGE>
REPORT OF STOCKHOLDERS' MEETING (Unaudited)
--------------------------------------------------------------------------------
The Fund held its Annual Meeting of Stockholders on June 30, 2000. The two
matters voted upon by stockholders and the resulting votes for each matter were
as follows:
Voting Results*
-----------------------------
Against/
For Withheld Abstained
--- -------- ---------
1. Election of the following Directors:
Richard R. Burt .......................... 6,820 250 --
Prof. Dr. Claus Kohler ................... 6,812 258 --
Christian H. Strenger .................... 6,820 250 --
Werner Walbrol ........................... 6,835 236 --
Otto Wolff von Amerongen ................. 5,744 1,327 --
2. Selection of Independent
Accountants ............................ 7,552 92 139
* In thousands of shares.
19
<PAGE>
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN
(unaudited)
--------------------------------------------------------------------------------
The Fund offers stockholders a Voluntary Cash Purchase Program and
Dividend Reinvestment Plan ("Plan") which provides for optional cash purchases
and for the automatic reinvestment of dividends and distributions payable by the
Fund in additional Fund shares. A more complete description of the Plan is
provided in the Plan brochure available from the Fund or from Investors Bank &
Trust Company, the plan agent (the "Plan Agent"), Shareholder Services, P.O. Box
1537, Boston, Massachusetts 02205 (telephone 1-800-356-2754). A stockholder
should read the Plan brochure carefully before enrolling in the Plan.
Under the Plan, participating stockholders ("Plan Participants") appoint
the Plan Agent to receive or invest Fund distributions as described below under
"Reinvestment of Fund Shares." In addition, Plan Participants may make optional
cash purchases through the Plan Agent as often as once a month as described
below under "Voluntary Cash Purchases." There is no charge to Plan Participants
for participating in the Fund's Plan, although when shares are purchased under
the Plan by the Plan Agent on the New York Stock Exchange or otherwise on the
open market, each Plan Participant will pay a pro rata share of brokerage
commissions incurred in connection with such purchases, as described below under
"Reinvestment of Fund Shares" and "Voluntary Cash Purchases."
Reinvestment of Fund Shares. Whenever the Fund declares a dividend or capital
gains distribution payable either in cash or in Fund shares, or payable only in
cash, the Plan Agent automatically receives Fund shares for the account of each
Plan Participant except as provided in the following paragraph. The number of
shares to be credited to a Plan Participant's account shall be determined by
dividing the equivalent dollar amount of the dividend or distribution payable to
such Plan participant by the lower of the net asset value per share or the
market price per share of the Fund's common stock on the payable date, or if the
net asset value per share is less than 95% of the market price per share on such
date, then by 95% of the market price per share.
Whenever the Fund declares a dividend or capital gains distribution
payable only in cash and the net asset value per share of the Fund's common
stock exceeds the market value per share on the payable date, the Plan Agent
will apply the amount of such dividend or distribution payable to Plan
Participants of the Fund in Fund shares (less such Plan Participant's pro rata
share of brokerage commissions incurred with respect to open-market purchases in
connection with the reinvestment of such dividend or distribution) to the
purchase on the open market of Fund shares for such Plan Participant's account.
Such purchases will be made on or after the payable date for such dividend or
distribution, and in no event more than 30 days after such date except where
temporary curtailment or suspension of purchase is necessary to comply with
applicable provisions of federal securities laws. The Plan Agent may aggregate a
Plan Participant's purchases with the purchases of other Plan Participants, and
the average price (including brokerage commissions) of all shares purchased by
the Plan Agent shall be the price per share allocable to each Plan Participant.
For all purposes of the Plan, the market price of the Fund's common stock
on a payable date shall be the last sales price on the New York Stock Exchange
on that date, or, if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such stock on such
Exchange on such date. The net asset value per share of the Fund's common stock
on a valuation date shall be as determined by or on behalf of the Fund.
The Plan Agent may hold a Plan Participant's shares acquired pursuant to
the Plan, together with the shares of other Plan Participants acquired pursuant
to this Plan, in non-certificated form in the name of the Plan Agent or that of
a nominee. The Plan Agent will forward to each Plan Participant any proxy
solicitation material and will vote any shares so held for a Plan Participant
only in accordance with the proxy returned by a Plan Participant to the Fund.
Upon a Plan Participant's written request, the Plan Agent will deliver to a Plan
Participant, without charge, a certificate or certificates for the full shares
held by the Plan Agent.
Voluntary Cash Purchases. Plan Participants have the option of making
investments in Fund shares through the Plan Agent as often as once a month. Plan
Participants may invest as little as $100 in any month and may invest up to
$36,000 annually through the voluntary cash purchase feature of the Plan.
20
<PAGE>
VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN
(unaudited) (continued)
--------------------------------------------------------------------------------
The Plan Agent will purchase shares for Plan Participants on or about the
15th of each month. Cash payments received by the Plan Agent less than five
business days prior to a cash purchase investment date will be held by the Plan
Agent until the next month's investment date. Uninvested funds will not bear
interest. The Plan Agent will deduct a pro rata share of brokerage commissions
incurred in connection with voluntary cash purchases from the cash payments it
receives from Plan Participants on whose behalf the purchases were made. Plan
Participants may withdraw any voluntary cash payment by written notice received
by the Plan Agent not less than 48 hours before such payment is to be invested.
Enrollment and Withdrawal. In order to become a Plan Participant, stockholders
must complete and sign the authorization form included in the Plan brochure and
return it directly to the Plan Agent if shares are registered in their name.
Stockholders who hold Fund shares in the name of a brokerage firm, bank or other
nominee should contact such nominee to arrange for it to participate in the Plan
on such stockholder's behalf. Participation in the dividend reinvestment feature
of the Plan is effective with the next dividend or capital gains distribution
payable after the Plan Agent receives a stockholder's written authorization,
provided such authorization is received prior to the record date for such
dividend or distribution. A stockholder's written authorization must be received
by the Plan Agent at least five business days in advance of the next cash
purchase investment date (normally the 15th of every month) in order to make a
cash purchase in that month.
Plan Participants may withdraw from the Plan without charge by written
notice to the Plan Agent. Plan Participants who choose to withdraw may elect to
receive stock certificates representing all of the full shares held by the Plan
Agent on their behalf, or to instruct the Plan Agent to sell such full shares
and distribute the proceeds, net of brokerage commissions, to such withdrawing
Plan Participant. Withdrawing Plan Participants will receive a cash adjustment
for the market value of any fractional shares held on their behalf at the time
of termination. Withdrawal will be effective immediately with respect to
distributions with a record date not less than 10 days later than receipt of
such written notice by the Plan Agent.
Amendment and Termination of Plan. The Plan may only be amended or supplemented
by the Fund or by the Plan Agent by giving each Plan Participant written notice
at least 90 days prior to the effective date of such amendment or supplement,
except that such notice period may be shortened when necessary or appropriate in
order to comply with applicable law or the rules or policies of the Securities
and Exchange Commission or any other regulatory body.
The Plan may be terminated by the Fund or by the Plan Agent by written
notice mailed to each Plan Participant. Such termination will be effective with
respect to all distributions with a record date at least 90 days after the
mailing of such written notice to the Plan Participants.
Federal Income Tax Implications of Reinvestment of Fund Shares. Reinvestment of
Fund shares does not relieve Plan Participants from any income tax which may be
payable on dividends or distributions. For U.S. federal income tax purposes,
when the Fund issues shares representing an income dividend or a capital gains
dividend, a Participant will include in income the fair market value of the
shares received as of the payment date, which will be ordinary dividend income
or capital gains, as the case may be. The shares will have a tax basis equal to
such fair market value, and the holding period for the shares will begin on the
day after the date of distribution. If shares are purchased on the open market
by the Plan Agent, a participant will include in income the amount of the cash
payment made. The basis of such shares will be the purchase price of the shares,
and the holding period for the shares will begin on the day following the date
of purchase. State, local and foreign taxes may also be applicable.
21
<PAGE>
EXECUTIVE OFFICES
31 West 52nd Street, New York, NY 10019
(For latest net asset value, schedule of the Fund's largest holdings,
dividend data and shareholder inquiries, please call 1-800-437-6269 in the
U.S. or 617-443-6918 outside of the U.S.)
MANAGER
Deutsche Bank Securities Inc.
INVESTMENT ADVISER
Deutsche Asset Management International GmbH
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company
LEGAL COUNSEL
Sullivan & Cromwell
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
DIRECTORS AND OFFICERS
CHRISTIAN STRENGER
Chairman and Director
DETLEF BIERBAUM
Director
JOHN A. BULT
Director
+ RICHARD R. BURT
Director
+ EDWARD C. SCHMULTS
Director
+ HANS G. STORR
Director
DR. JUERGEN F. STRUBE
Director
+ ROBERT H. WADSWORTH
Director
+ WERNER WALBROEL
Director
OTTO WOLFF von AMERONGEN
Director
PAUL W. HIGGINS
President and Chief Executive Officer
HANSPETER ACKERMANN
Chief Investment Officer
ROBERT R. GAMBEE
Chief Operating Officer and Secretary
JOSEPH M. CHEUNG
Chief Financial Officer and Treasurer
----------
+ Member of the Audit Committee
All investment management decisions are made by a committee of United
States and German advisors.
22
<PAGE>
--------------------------------------------------------------------------------
This report, including the financial statements herein, is transmitted to the
shareholders of The Central European Equity Fund, Inc. for their information.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this report. The
information contained in the letter to shareholders, the interview with the
chief investment officer and the report from the investment adviser and manager
in this report is derived from carefully selected sources believed reasonable.
We do not guarantee its accuracy or completeness, and nothing in this report
shall be construed to be a representation of such guarantee. Any opinions
expressed reflect the current judgment of the author, and do not necessarily
reflect the opinion of Deutsche Bank AG or any of its subsidiaries and
affiliates.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
Comparisons between changes in the Fund's net asset value per share and changes
in the MSCI customized composite index should be considered in light of the
Fund's investment policy and objectives, the characteristics and quality of the
Fund's investments, the size of the Fund and variations in the foreign
currency/dollar exchange rate.
--------------------------------------------------------------------------------
CEE
---------------------------
Listed
---------------------------
NYSE
THE NEW YORK STOCK EXCHANGE
Copies of this report and other information are available at:
www.ceefund.com
23
<PAGE>
SUMMARY OF GENERAL INFORMATION
--------------------------------------------------------------------------------
THE FUND
The Central European Equity Fund is a non-diversified, closed-end investment
company listed on the New York Stock Exchange with the symbol "CEE". The Fund
seeks capital appreciation primarily through investment in Central and Eastern
European equities. It is managed by Deutsche Bank Securities Inc., using
investment advice from the Deutsche Asset Management International GmbH unit of
Deutsche Bank AG, the world's largest bank.
SHAREHOLDER INFORMATION
Prices for the Fund's shares are published daily in the New York Stock Exchange
Composite Transactions section of newspapers. Net asset value and market price
information are published each Monday in The Wall Street Journal and The New
York Times, and each Saturday in Barron's and other newspapers in a table called
"Closed End Funds". Daily information on the Fund's net asset value is available
from NASDAQ (symbol XCEEX). It is also available by calling: 1-800-437-6269 (in
the U.S.) or 617-443-6918 (outside of the U.S.). In addition, a schedule of the
Fund's largest holdings, dividend data and general shareholder information may
be obtained by calling these numbers.
The foregoing information is also available on our Web site: www.ceefund.com.
--------------------------------------------------------------------------------
There are three closed-end funds for your selection:
o Germany Fund--investing primarily in equities of major German
corporations. It may also invest up to 35% in equities of other Western
European companies (with no more than 15% in any single country).
o New Germany Fund--investing primarily in the middle market German
companies including the Neuer Markt, and up to 20% elsewhere in Western
Europe (with no more than 10% in any single country).
o Central European Equity Fund--investing primarily in Central and Eastern
Europe.
Please consult your broker for advice on any of the above or call 1-800-437-6269
(in the U.S.) or 617-443-6918 (outside of the U.S.) for shareholder reports.
--------------------------------------------------------------------------------
306608
