-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MbkcGigNVAymAQ27puskg/sliKud35Ujhhczm2QQHpRsjA2XwNu2soKvmOjx/bdd 9N3Ig0Td7JtQJJeEoN8eBg== 0000912057-96-011354.txt : 19960604 0000912057-96-011354.hdr.sgml : 19960604 ACCESSION NUMBER: 0000912057-96-011354 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960603 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMERGING GERMANY FUND INC CENTRAL INDEX KEY: 0000860127 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133560296 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-06038 FILM NUMBER: 96575917 BUSINESS ADDRESS: STREET 1: ONE BATTERY PARK PLZ CITY: NEW YORK STATE: NY ZIP: 10004 BUSINESS PHONE: 2123635155 MAIL ADDRESS: STREET 1: 75 WALL ST CITY: NEW YORK STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: DRESDNER EMERGING GERMANY FUND INC DATE OF NAME CHANGE: 19900306 N-30B-2 1 QUARTERLY REPORT - -------------------------------------------------------------------------------- LETTER TO SHAREHOLDERS - -------------------------------------------------------------------------------- May 28, 1996 Dear Shareholder, We are pleased to present to shareholders of The Emerging Germany Fund Inc. the Fund's report for the quarter ended March 31, 1996. Although the economic weakness of the latter part of 1995 extended into the first quarter 1996, the German stock market began the new year on a strong note, with blue chips continuing to outperform medium and smaller stocks. Low inflation, the ongoing effects of monetary easing and a number of mostly positive tax changes supported the economy. Unemployment reached record levels, however, while capacity utilization, new orders and investment demand declined. GDP for the first quarter 1996 is expected to continue to shrink. Our outlook for the German economy is moderately positive. Improving corporate profits, a stabilizing labor market and a positive monetary environment should provide a favorable background for the German equity markets. At the end of the first quarter 1996, the Fund had net assets of $133.7 million, or $9.55 per share, compared wtih $128.9 million or $9.20 per share at year-end 1995. This represented a gain in net asset value of 3.80% in the first quarter, compared with a gain in the FAZ (Frankfurter Allgemeine Zeitung) Index of 5.03% in dollar terms. At March 31, 1996, the Fund's invested position comprised 96% of net assets and consisted of 54 common stocks and eight preferred stocks of German companies. We are pleased to announce that at the Fund's 1996 Annual Meeting, the shareholders approved a proposal to amend the Fund's investment policies which, among other things, authorizes the Fund to invest in securities of German companies without any restrictions based on the size of such companies. We thank our shareholders for their continued interest and support. Sincerely, [SIG] [SIG] Hansgeorg B. Hofmann George N. Fugelsang Chairman President 1 - -------------------------------------------------------------------------------- INVESTMENT REVIEW - -------------------------------------------------------------------------------- POLITICAL AND ECONOMIC DEVELOPMENTS Economic data for the fourth quarter 1995 were released in March 1996 and were as weak as expected. Quarter-over-quarter, real GDP decreased by a seasonally adjusted 0.4%, while total final demand fell 1.1%, primarily as a result of declining capital spending activity, notably in investment in construction (which was down 2.2%). The pickup in private and government consumption was also only marginal. By contrast, exports rose by 3.4%, preventing the economy from slipping into recession. Since the beginning of 1996, the already weak trend in business activity was exacerbated by adverse weather conditions. New orders, capacity utilization and investment demand have declined. Employment has fallen at an ever faster rate, and record increases in the number of jobless propelled the seasonally adjusted unemployment rate to over 10%. The only positive signal came from exports, but here, too, the February numbers were disappointing. For lack of offsetting stimuli, GDP is expected to continue to shrink over the first quarter 1996. However, some factors point to a recovery in economic activity. At the beginning of 1996, various taxes were lowered. The tax exemption of subsistence wages, the expanded exemption of the family allowance and the abolition of the Kohlepfennig have eased the pressure on private households. On the other hand, social security contributions (retirement and health insurance, nursing care insurance) have been raised. Overall, the positive effects of these changes outweigh the negative ones, and private disposable income is expected to climb about 4.5% this year, up approximately 1% over 1995. In addition, exports should benefit from the expansion of world trade and the considerably weaker German currency. Western German inflation is expected to remain subdued, running at just over 1.5% in 1996. The monetary easing since the end of 1994 should also bolster the economy as interest rates have always a delayed effect on the economy. Given the very tight job market situation, wage agreements are expected to be moderate this year. STOCK MARKET REVIEW After the lackluster performance of equities in 1995, the German stock market started the year on a high note, supported by low interest rates, low inflation and a stronger dollar. In DM-terms, the FAZ Index gained over 8% in January alone, almost as much as for the whole first quarter of 1996. The strongest performance could again be seen among large cap companies. German large caps gained 13% in the first quarter, as measured by the DAX Index, whereas the recently introduced Mid Cap Index rose only 2%, and small caps lost almost 1% in DM-terms. The announcements of 1995 results by some companies in the first three months of 1996 have not included any seriously negative surprises. The dominant feature of the past few months has been the surge of positive sentiment towards the chemical and pharmaceutical sector, prompted by the announcement of the Ciba/Sandoz merger. In addition, the utilities sector continued to outperform the market. Other industrial sectors tended to weaken. Background data and company announcements have been discouraging, bearing out weak economic indicators. Continuing bad news from the domestic market together with difficult wage talks weighed on the construction sector. Preussag's share price started to suffer from bearish comments at the company's annual meeting, and Thyssen shares felt the impact of a weak first half of their business year. BMW has let the automobile sector down on weak preliminary 1995 profit numbers and a sharp drop in domestic market share in the first two months of the year. PORTFOLIO STRATEGY AND REVIEW During the first quarter, the Fund's net asset value rose by 3.80% compared with a rise in the FAZ Index of 5.03% in dollar terms. The Fund underperformed primarily because small and medium capitalization stocks underperformed large caps by more than 8% and 11%, respectively. 2 During the first quarter of 1996, the Fund implemented the following changes in the sector weighting and structure of its portfolio: Holdings in the banking and insurance sectors were reduced by decreasing the positions in Bankgesellschaft Berlin and Allianz Holding and partly replacing them with positions in Deutsche Pfandbrief- und Hypothekenbank and MUNCHENER RUCKVERSICHERUNGS-GESELLSCHAFT, the world's largest reinsurer. Holdings in the miscellaneous materials sector and the utilities sector were decreased by reducing the positions in Degussa and Veba after strong price increases, and by selling RWE preferred shares. In addition, the position in VEW was sold and replaced by Berliner Kraft- und Licht. The weighting of the multi-industry sector was reduced by selling AGIV. Weightings were increased in the automobiles sector by purchasing Daimler and Volkswagen, and in the building materials and components sector by acquiring WERU, a manufacturer of window systems and entrance doors, and FRIEDRICH GROHE, a producer of sanitary fittings, accessories and components. The weighting in the electricals and electronics sector was also increased by purchasing EFF-EFF, a producer of door openers and security and alarm systems. In the machinery and engineering sector, Kogel Fahrzeugbau was sold and replaced by acquiring BUDERUS, a manufacturer of heating installations, cast iron materials, stainless steel forgings and aircraft equipment. In the chemicals sector, the Fund slightly reduced its Hoechst holdings by taking some profits after the share price rose by more than 70% over the past three quarters, and increased positions in Bayer and SKW Trostberg. At the end of the first quarter, however, Hoechst represented the largest position in the Fund. The stock market outlook is predicated on the further development of the German economy. Although the macroeconomic scenario is still weak, we expect an improvement in exports and private consumption. In spite of increases in social security contributions, income tax adjustments are expected to boost private household income. The main concern remains unemployment, but we consider the worst to be behind us. As the inventory reduction process ends, production will pick up and help stabilize the labor market. After the relatively good performance of the German equity market in the first quarter of 1996, our outlook for the next six months is moderately positive. Cost reduction and restructuring measures by German companies are continuing to improve corporate profits, and a positive monetary environment is expected to continue to provide a favorable background for the German equity market. Stocks of the following companies represented the Fund's ten largest positions at March 31, 1996:
PERCENT OF COMPANY VALUE (IN $) NET ASSETS - -------------------------------------------------- ------------ ---------- Hoechst AG........................................ $ 7,083,841 5.30% Veba AG........................................... 6,073,920 4.54 Siemens AG........................................ 5,502,506 4.11 Bayer AG.......................................... 5,278,986 3.95 Daimler-Benz AG................................... 4,622,443 3.45 Volkswagen AG..................................... 4,380,841 3.27 BHF-Bank AG....................................... 4,145,063 3.10 RWE AG............................................ 4,013,951 3.00 Altana AG......................................... 3,860,219 2.89 Lufthansa AG...................................... 3,565,624 2.67 ------------ ----- $ 48,527,394 36.28% ------------ ----- ------------ -----
May 28, 1996 Dresdner Securities (USA) Inc. 3 PERCENT OF NET ASSETS BY INDUSTRY
PERCENT OF INDUSTRY CLASS NET ASSETS - -------------------------------------------------- ----------- Apparel........................................... 1.21% Appliance & Household............................. 2.26 Automobiles....................................... 7.28 Banking........................................... 13.08 Building Materials & Components................... 3.02 Business & Publishing Services.................... 1.05 Chemicals......................................... 10.09 Construction & Housing............................ 1.36 Electrical & Electronics.......................... 7.10 Health & Personal Care............................ 4.77 Industrial Components............................. 3.05 Insurance......................................... 8.98 Machinery & Engineering........................... 11.28 Merchandising..................................... 2.87 Miscellaneous Materials........................... 5.58 Multi-Industry.................................... 1.99 Transportation/Airlines........................... 2.67 Utilities/Electrical & Gas........................ 8.58 ----- Percent of Investments in German Securities..... 96.22% ----- -----
4 - ------------------------------------------------- THE EMERGING GERMANY FUND INC. SCHEDULE OF INVESTMENTS MARCH 31, 1996 (UNAUDITED)
- ------------------------------------------------------------------------ SHARES/ PAR VALUE DESCRIPTION VALUE - ------------------------------------------------------------------------ INVESTMENTS IN SHORT-TERM SECURITIES--0.18% U.S. TREASURY OBLIGATIONS--0.18% $250,000 United States Treasury Bills, 4.85%, 4/04/96 (cost $249,899).................. $ 249,899 ------------ INVESTMENTS IN GERMAN SECURITIES--96.22% COMMON STOCKS--88.39% APPLIANCE & HOUSEHOLD--0.31% 10,000 Leifheit AG....................................... 414,466 ------------ AUTOMOBILES--6.73% 8,500 Daimler-Benz AG................................... 4,622,443 12,500 Volkswagen AG..................................... 4,380,841 ------------ 9,003,284 ------------ BANKING--13.08% 10,000 Bankgesellschaft Berlin AG........................ 2,309,359 100,000 Bayerische Vereinsbank AG (a)..................... 3,067,859 151,500 BHF-Bank AG....................................... 4,145,063 5,000 Commerzbank AG (a)................................ 1,151,294 65,000 Deutsche Bank AG.................................. 3,272,010 50,000 DT Pfandbrief-und Hypothekenbank AG............... 1,804,822 9,000 IKB Deutsche Industriebank AG................................ 1,743,194 ------------ 17,493,601 ------------ BUILDING MATERIALS & COMPONENTS--1.04% 2,200 VBH Ver. Baubeschlag-Handel AG.................... 543,817 2,500 Weru AG........................................... 848,232 ------------ 1,392,049 ------------ BUSINESS & PUBLISHING SERVICES--1.05% 1,250 Axel Springer Verlag AG........................... 825,376 1,500 Herlitz International Trading AG.................. 585,128 ------------ 1,410,504 ------------ - ------------------------------------------------------------------------ SHARES/ PAR VALUE DESCRIPTION VALUE - ------------------------------------------------------------------------ CHEMICALS--10.09% 15,500 Bayer AG.......................................... $ 5,278,986 20,000 Hoechst AG (a).................................... 7,083,841 50,000 SKW Trostberg AG.................................. 1,130,977 ------------ 13,493,804 ------------ CONSTRUCTION & HOUSING--1.36% 2,000 Bilfinger & Berger Bau AG......................... 784,911 30,000 Kampa-Haus AG..................................... 1,038,196 ------------ 1,823,107 ------------ ELECTRICAL & ELECTRONICS--7.10% 20,000 eff-eff KGaA...................................... 1,049,709 21,000 SAP AG............................................ 2,943,925 10,000 Siemens AG........................................ 5,502,506 ------------ 9,496,140 ------------ HEALTH & PERSONAL CARE--4.77% 6,000 Altana AG......................................... 3,860,219 17,500 Schwarz Pharma AG................................. 1,096,268 18,000 Schering AG....................................... 1,425,030 ------------ 6,381,517 ------------ INDUSTRIAL COMPONENTS--3.05% 125,000 Continental AG (a)................................ 2,200,156 6,500 Phoenix AG........................................ 1,052,079 17,500 Kiekert AG........................................ 829,609 ------------ 4,081,844 ------------ INSURANCE--8.98% 6,638 Aach. u. Munch. Vers. AG.......................... 1,685,798 1,750 Allianz AG Holding................................ 3,250,880 1,750 CKAG Colonia Konzern AG........................... 1,315,522 4,580 Victoria Holding AG............................... 2,946,634 1,350 Munchener Ruckversicherungs-Gesellschaft.......... 2,811,357 ------------ 12,010,191 ------------
5
- ------------------------------------------------------------------------ SHARES/ PAR VALUE DESCRIPTION VALUE - ------------------------------------------------------------------------ MACHINERY & ENGINEERING--9.67% 2,500 BDAG Balcke-Durr.................................. $ 506,230 2,500 Buderus AG........................................ 944,738 5,000 Durr-Beteiligungs AG.............................. 1,574,563 5,000 IWKA AG........................................... 863,470 3,500 Linde AG.......................................... 2,154,612 10,500 MAN AG (a)........................................ 2,894,149 3,000 Rheinelektra AG................................... 2,375,051 10,000 Thyssen Industrie AG.............................. 907,490 2,000 Weinig AG......................................... 715,156 ------------ 12,935,459 ------------ MERCHANDISING--2.87% 90,000 Douglas Holding AG................................ 3,078,017 2,000 Karstadt AG....................................... 755,113 ------------ 3,833,130 ------------ MISCELLANEOUS MATERIALS--5.05% 5,000 Degussa AG........................................ 1,828,525 9,000 Gerresheimer Glas AG.............................. 1,688,338 10,000 PWA AG............................................ 1,418,800 19,000 SGL Carbon AG..................................... 1,814,303 ------------ 6,749,966 ------------ MULTI-INDUSTRY--1.99% 4,500 Industrieverwaltungsgesellschaft AG............... 1,266,254 5,000 Preussag AG (a)................................... 1,390,018 ------------ 2,656,272 ------------ TRANSPORTATION/AIRLINES--2.67% 22,500 Lufthansa AG...................................... 3,565,624 ------------ UTILITIES/ELECTRICAL & GAS--8.58% 5,000 Berliner Kraft & Licht AG......................... 1,388,325 100,000 RWE AG (a)........................................ 4,013,951 125,000 Veba AG........................................... 6,073,920 ------------ 11,476,196 ------------ Total Common Stocks (cost $108,253,130)............................. 118,217,154 ------------ - ------------------------------------------------------------------------ SHARES/ PAR VALUE DESCRIPTION VALUE - ------------------------------------------------------------------------ PREFERRED STOCKS--7.83% APPAREL--1.21% 1,500 Hugo Boss AG...................................... $ 1,610,118 ------------ APPLIANCE & HOUSEHOLD--1.95% 7,000 Henkel KGaA....................................... 2,607,341 ------------ AUTOMOBILES--0.55% 40,000 SG Holding AG..................................... 731,410 ------------ BUILDING MATERIALS & COMPONENTS--1.98% 6,000 Dyckerhoff AG..................................... 1,418,123 5,000 Friedrich Grohe AG................................ 1,230,868 ------------ 2,648,991 ------------ MACHINERY & ENGINEERING--1.61% 6,000 Dragerwerk AG..................................... 967,087 7,500 Jungheinrich AG................................... 1,188,541 ------------ 2,155,628 ------------ MISCELLANEOUS MATERIALS--0.53% 1,750 Sudzucker AG...................................... 712,278 ------------ Total Preferred Stocks (cost $9,754,633)............................... 10,465,766 ------------ Total Investments (cost $118,267,662) --96.40%........................................ 128,932,819 ------------ Other assets in excess of liabilities--3.60%.............................. 4,809,843 ------------ Net Assets--100.00%............................... $133,742,662 ------------ ------------
- ---------------- Percentages are of net assets. (a) All or part of this security is on loan. 6 THE EMERGING GERMANY FUND INC. - -------------------------------------------------------------------------------- BOARD OF DIRECTORS Hansgeorg B. Hofmann, Chairman* George N. Fugelsang, President* Robert J. Birnbaum Carroll Brown Theodore J. Coburn James E. Dowd** Siegfried A. Kessler** Rolf Passow* Gottfried W. Perbix** Jacob Saliba * Interested person within the meaning of the Investment Company Act of 1940 ** Member, Audit Committee - -------------------------------------------------------------------------------- OFFICERS Markus W. Bischofberger, Vice President Herbert Doenges, Vice President Alexandra Simou, Secretary Edward P. Reginald Jr., Treasurer Gisela Misch, Assistant Secretary - -------------------------------------------------------------------------------- INVESTMENT ADVISER AND MANAGER Dresdner Securities (USA) Inc. 75 Wall Street New York, New York 10005 - -------------------------------------------------------------------------------- CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 DIVIDEND PAYING AGENT TRANSFER AGENT AND REGISTRAR State Street Bank and Trust Company P.O. Box 8209 Boston, Massachusetts 02266-8209 LEGAL COUNSEL Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W. Washington, D.C. 20037 THE EMERGING GERMANY FUND INC. SUMMARY OF GENERAL INFORMATION - --------------------------------------- SHAREHOLDER INFORMATION Daily market prices for the Fund's shares are published in the New York Stock Exchange Composite Transaction section of The Wall Street Journal (designation "EmergGerFd" under the letter "G"). The Fund's NYSE trading symbol is "FRG." Weekly comparative net asset value (NAV) and market price information about the Fund is published each Monday in THE WALL STREET JOURNAL, each Sunday in THE NEW YORK TIMES, as well as in BARRON'S and other newspapers in a table called "Closed End Funds." Additional information about the Fund is available by calling 1-800-356-6122. DIVIDEND REINVESTMENT PLAN Through the Fund's voluntary Dividend Reinvestment Plan, shareholders may elect to receive dividends and capital gains distributions in the form of additional shares of the Fund. A brochure describing the Plan is available from the Plan Agent, State Street Bank and Trust Company, by calling 1-800-426-5523. This report is furnished to shareholders of The Emerging Germany Fund Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or any securities mentioned in this report. All references in this report to "dollars" or "$" are to United States dollars. Comparisons between changes in the Fund's net asset value per share and changes in the Frankfurter Allgemeine Zeitung Index should be considered in light of the Fund's investment objective and policies, the characteristics and quality of the Fund's investments, the size of the Fund and variations in the Deutsche Mark/dollar exchange rate. [LOGO] THE EMERGING GERMANY FUND INC. QUARTERLY REPORT MARCH 31, 1996 -----END PRIVACY-ENHANCED MESSAGE-----