UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSRS
Investment Company Act file number 811-04632
THE GERMANY FUND, INC.
--------------------------
(Exact Name of Registrant as Specified in Charter)
343 Park Avenue, New York, NY 10154
--------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 454-7190
--------------
Paul Schubert
345 Park Avenue
New York, NY 10154
---------------------------------------
(Name and Address of Agent for Service)
Date of fiscal year end: 12/31
Date of reporting period: 06/30/2005
ITEM 1. REPORT TO STOCKHOLDERS
SUMMARY OF GENERAL INFORMATION
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THE FUND
The Germany Fund, Inc. is a non-diversified, actively-managed Closed-End Fund
listed on the New York Stock Exchange with the symbol "GER". The Fund seeks
long-term capital appreciation primarily through investment in German equities.
It is managed and advised by wholly-owned subsidiaries of the Deutsche Bank
Group.
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 XGERX). It is also available by calling: 1-800-GERMANY (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.germanyfund.com.
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THERE ARE THREE CLOSED-END FUNDS INVESTING IN EUROPEAN EQUITIES MANAGED BY
WHOLLY-OWNED SUBSIDIARIES OF THE DEUTSCHE BANK GROUP:
o The Germany Fund, Inc.--investing primarily in equities of major German
corporations. It may also invest up to 20% in equities of other Western
European companies (with no more than 15% in any single country).
o The New Germany Fund, Inc.--investing primarily in the middle market
German companies and up to 20% elsewhere in Western Europe (with no more
than 10% in any single country).
o The Central Europe and Russia Fund, Inc.--investing primarily in Central
European and Russian companies.
Please consult your broker for advice on any of the above or call 1-800-GERMANY
(in the U.S.) or 617-443-6918 (outside of the U.S.) for shareholder reports.
These funds are not diversified and focus their investments in certain
geographical regions, thereby increasing their vulnerability to developments in
that region. Investing in foreign securities presents certain unique risks not
associated with domestic investments, such as currency fluctuation, political
and economic changes, and market risks. This may result in greater share price
volatility.
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19134
[LOGO OMITTED]
THE GERMANY
FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2005
[LOGO OMITTED]
THE GERMANY
FUND, INC.
LETTER TO THE SHAREHOLDERS
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July 22, 2005
Dear Shareholders,
In the first half of the year (2005), global markets struggled with
concerns over the rising price of oil and its impact on demand. Markets
succumbed to the pressure in April caused by concerns of slowing economic growth
in the United States. Global markets dipped lower again in June when oil rose
above $60 per barrel, but recovered when prices moderated to $57 per barrel. In
Europe, markets were impacted by political uncertainty, with the French and
Dutch rejecting the European Union constitution at the end of May. Nonetheless,
European markets performed relatively well. The announcement of Chancellor
Schroder calling for early polls in Germany was the main driver behind the
German market's strong performance in the second quarter. After a weak April,
the DAX index rallied during the rest of the period to its highest level since
July 2002, decoupling from the negative impact of rising oil prices.(1) Even
though stocks have rallied since the start of the year, the German stock market
continues to trade at a discount to its European peers.
For the six months ended June 30, 2005, the total return based on net
asset value of The Germany Fund declined 5.35%, and its total return based on
market price decreased by 3.58%. The fund's benchmark, the DAX, decreased by
4.39% in US dollar terms during the same period. (Past performance is no
guarantee of future results. Please see page 2, for more complete performance
information.)
The fund's underperformance relative to its benchmark was partly due to
the fund's underweight position in the utilities sector. This sector is seen as
a main beneficiary of a potential change in government, as it is widely assumed
that a new coalition would reverse the current antinuclear stance. Another
sector that was in the spotlight during the last quarter was the banking sector.
European cross-border consolidation is finally gaining speed. Italy's
second-largest bank offered to take over HypoVereinsbank, which is expected to
create Europe's ninth-biggest bank in terms of market capitalization. The fund
did not hold HypoVereinsbank due to its significant domestic problems. The
fund's performance was also affected by its holding in Siemens that announced an
exit solution for its mobile business. Though the announcements were seen as
positive, uncertainties about the development of the global economy limited the
performance of the stock. One of the strongest contributors to performance was
Adidas Salomon, one of the top performers within the DAX during the second
quarter. The share price increased after the company announced the disposal of
Salomon. Additionally, the last reported numbers proved to be relatively immune
to lackluster consumer spending in Europe. Another consumer stock that
contributed positively to the fund's performance was Porsche. The strengthening
of the US dollar, which has a positive impact on the underlying profitability of
the company, and the strong product momentum remain strong drivers for the share
price.
The Germany Fund continued its open-market purchases of its shares, buying
183,700 shares during the first six months of 2005.* The fund's discount to its
net asset value averaged 12.87% during this period.
At the July 17, 2005 Board meeting, the Board of Directors approved an
expansion of The Germany Fund's investment objective and fundamental policies to
include equities of companies in all European countries using the Euro currency.
Under the new investment focus that is subject to stockholder approval, the fund
will invest at least 80% of its net assets in equity and equity-linked
securities of companies domiciled in countries utilizing the Euro currency. The
proposed change to the fund's investment objective was based upon the
determination by the Board of Directors, with advice of Deutsche Investment
Management Americas, Inc., the fund's manager (the "Manager") and Deutsche Asset
Management International GmbH, the fund's investment adviser (the "Investment
Adviser"), that particularly after the introduction of the Euro as single
currency and further steps toward European integration, investment opportunities
in large capitalization German equities should be expanded to a geographically
broader range of large capitalization companies. The Board believes that the
economies and securities markets of the countries utilizing the Euro currency
now have sufficient similarities and linkages to justify this expanded
investment focus. Stockholder approval for the investment changes will be sought
at a special meeting to be held in the Fall. In connection with the change, the
fund would change its benchmark to the MSCI EMU (European Economic and Monetary
Union) Index. Additionally, the Board of Directors also approved a self-tender
offer by the Fund for 20% of the outstanding shares at a price of 95% of the net
asset value per share, conditioned on stockholder approval of the investment
changes. The tender offer would commence within two months after stockholder
approval.
----------
The sources, opinions and forecasts expressed are as of July 22, 2005. There is
no guarantee that the views, opinions and forecasts expressed herein will come
to pass. This information is subject to change at any time based on market and
other conditions and should not be construed as a recommendation for any
specific security. Past performance does not guarantee future results.
1 DAX INDEX IS A TOTAL RATE OF RETURN INDEX OF 30 SELECTED GERMAN BLUE CHIP
STOCKS TRADED ON THE FRANKFURT STOCK EXCHANGE. INDEX RETURNS ASSUME
REINVESTEDDIVIDENDS AND, UNLIKE FUND RETURNS, DO NOT REFLECT ANY FEES OR
EXPENSES. IT IS NOT POSSIBLE TO INVEST DIRECTLY INTO AN INDEX.
* THE SHARE BUY BACK PROGRAM WAS SUSPENDED FOR A PORTION OF THE SEMIANNUAL
PERIOD.
Sincerely,
/s/ Christian Strenger /s/ Julian Sluyters
Christian Strenger Julian Sluyters
Chairman President and Chief Executive Officer
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FOR ADDITIONAL INFORMATION ABOUT THE FUND INCLUDING PERFORMANCE, DIVIDENDS,
PRESENTATIONS, PRESS RELEASES, DAILY NAV AND SHAREHOLDER REPORTS, PLEASE VISIT
WWW.GERMANYFUND.COM
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1
FUND HISTORY AS OF JUNE 30, 2005
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PERFORMANCE IS HISTORICAL, ASSUMES REINVESTMENT OF ALL DIVIDEND AND CAPITAL GAIN
DISTRIBUTIONS, AND DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND
PRINCIPAL VALUE FLUCTUATE WITH CHANGING MARKET CONDITIONS SO THAT, WHEN SOLD,
SHARES MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE
MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. PLEASE VISIT
WWW.GERMANYFUND.COM FOR THE FUND'S MOST RECENT PERFORMANCE.
TOTAL RETURNS:
FOR THE SIX FOR THE YEARS ENDED DECEMBER 31,
MONTHS ENDED --------------------------------------------
JUNE 30, 2005(b) 2004 2003 2002 2001 2000
---------------- ------ ------ ------ ------ ------
Net Asset Value(a) ...... (5.35)% 12.58% 59.62% (34.43)% (25.57)% (20.66)%
Market Value(a) ......... (3.58)% 7.25% 68.81% (35.76)% (24.95)% (21.09)%
DAX Index* .............. (4.39)% 15.91% 65.16% (34.14)% (23.20)% (14.67)%
(a) Total return based on net asset value reflects changes in the Fund's net
asset value during each period. Total return based on market value
reflects changes in market value. Each figure includes reinvestments of
dividend and capital gain distributions, if any. These figures will differ
depending upon the level of any discount from or premium to net asset
value at which the Fund's shares trade during the period.
(b) Total returns shown for the six month period are not annualized.
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* DAX INDEX IS A TOTAL RATE OF RETURN INDEX OF 30 SELECTED GERMAN BLUE CHIP
STOCKS TRADED ON THE FRANKFURT STOCK EXCHANGE. INDEX RETURNS ASSUME REINVESTED
DIVIDENDS AND, UNLIKE FUND RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IT IS
NOT POSSIBLE TO INVEST DIRECTLY INTO AN INDEX.
Investments in funds involve risk including the loss of principal.
This Fund is not diversified and primarily focuses its investments in Germany,
thereby increasing its vulnerability to developments in that country. Investing
in foreign securities presents certain unique risks not associated with domestic
investments, such as currency fluctuation and political and economic changes and
market risks. This may result in greater share price volatility.
Shares of closed-end funds frequently trade at a discount to net asset value.
The price of the Fund's shares is determined by a number of factors, several of
which are beyond the control of the Fund. Therefore, the Fund cannot predict
whether its shares will trade at, below or above net asset value. Closed-end
funds, unlike open-end funds, are not continuously offered. There is a one-time
public offering, and once issued, shares of closed-end funds are sold in the
open market through a stock exchange.
The Fund has elected to not be subject to the statutory calculation,
notification and publication requirements of the German Investment Tax Act
(Investmentsteuergesetz). As a result German investors in the Fund may be
subject to less favorable lump-sum taxation under German law.
2
FUND HISTORY AS OF JUNE 30, 2005 (CONTINUED)
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STATISTICS:
Net Assets .................................................... $ 130,932,300
Shares Outstanding ............................................ 14,789,992
NAV Per Share ................................................. $ 8.85
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
RECORD PAYABLE ORDINARY LT CAPITAL
DATE DATE INCOME GAINS TOTAL
-------- ------- -------- ---------- -------------
12/22/04 12/31/04 ............ $ 0.025 $ -- $ 0.025
05/06/04 05/14/04 ............ $ 0.039 $ -- $ 0.039
11/19/02 11/29/02 ............ $ 0.01 $ -- $ 0.01
11/19/01 11/29/01 ............ $ 0.06 $ -- $ 0.06
09/03/01 09/17/01 ............ -- $ 0.02 $ 0.02
11/20/00 11/29/00 ............ -- $ 2.18 $ 2.18
09/01/00 09/15/00 ............ $ 0.19 $ 0.12 $ 0.31
OTHER INFORMATION:
NYSE Ticker Symbol ............................................ GER
NASDAQ Symbol ................................................. XGERX
Dividend Reinvestment Plan .................................... Yes
Voluntary Cash Purchase Program ............................... Yes
Annualized Expense Ratio (6/30/05)* ........................... 1.57%
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* Represents expense ratio before custody credits. Please see "Financial
Highlights" section of this report.
3
PORTFOLIO BY MARKET SECTOR AS OF JUNE 30, 2005 (AS A % OF PORTFOLIO'S MARKET
VALUE*)
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
Financials 17.4%
Health Care 3.3%
Industrials 23.8%
Information Technology 8.9%
Telecommunication Services 2.8%
Utilities 10.2%
Materials 13.0%
Consumer Discretionary 16.8%
Consumer Staples 2.9%
Energy 0.9%
10 LARGEST EQUITY HOLDINGS AS OF JUNE 30, 2005 (AS A % OF PORTFOLIO'S MARKET
VALUE*)
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1. Siemens 14.0
2. SAP 8.0
3. BASF 7.4
4. E.ON 6.1
5. Bayer 5.6
6. Deutsche Post 4.7
7. Allianz 4.4
8. Munchener Ruckversicherungs 4.3
9. DaimlerChrysler 4.1
10. Adidas Salomon 3.9
* Percentage (%) of market value refers to all securities in the portfolio,
except cash and equivalents.
Portfolio by Market Sector and 10 Largest Equity Holdings are subject to change.
Following the Fund's fiscal first and third quarter-end, a complete portfolio
holdings listing is filed with the SEC on Form N-Q. The form will be available
on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information on the operation
of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
4
INTERVIEW WITH THE CHIEF INVESTMENT OFFICER
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QUESTION: THIS PAST SPRING, FRANCE AND THE NETHERLANDS REJECTED A NEW
CONSTITUTION FOR THE EUROPEAN UNION. WHAT ARE THE LONG-TERM IMPLICATIONS FOR THE
FUTURE OF THE EU? IS THIS A SIGN THAT MONETARY UNION IS NOT WORKING?
ANSWER: While the "no" vote is a setback for the EU, it does not have any
immediate implications for the German market. Member countries remain committed
to monetary union, and the EU will continue to be governed by the constitution
that was in place before the vote this spring. Perhaps the most important
consequence of the constitutional defeat is that enlargement of the 25-member
union is likely to pause until the current members get their house in order.
This may be marginally positive for Germany as a net payer to the EU. In terms
of monetary union, the failure of recent EU budgetary negotiations has put
pressure on the euro and could result in delays to planned expansion of the
Eurozone.
QUESTION: GERMAN ELECTIONS THAT WERE SCHEDULED FOR 2006 HAVE BEEN CALLED
EARLY FOR SEPTEMBER THIS YEAR. WHAT ARE THE IMPLICATIONS FOR THE GERMAN MARKET?
ANSWER: At the beginning of July, Chancellor Schroeder requested and
received a vote of no confidence from the Bundestag (lower house) to call early
elections. In mid-September they are expected to bring increased momentum for
reforms. Schroeder has had difficulty implementing some of the Agenda 2010
reforms due to lack of support within his coalition. Depending on the outcome of
the elections, a broad CDU/FDP coalition (CDU: Christich-Demokratische Union;
FDP: Frele Demokratische Partei) with majority control in both houses of
parliament could be established, giving the government power to forge ahead with
labor market, tax, and health care reforms. In terms of the stock market, the
DAX has historically performed well in election years, outperforming its
European peers by more than 20%.(1) Given that many of the reforms would have a
favorable impact on German companies, it is expected that the DAX would follow
this historical trend. Of course, past performance is no guarantee of future
results.
QUESTION: GERMAN SHARES HAVE PERFORMED WELL DESPITE AN UNFAVORABLE
DOMESTIC ENVIRONMENT. ASIDE FROM THEIR FOCUS ON EXPORT MARKETS, WHAT HAVE GERMAN
COMPANIES BEEN DOING TO ACHIEVE SUCH STRONG PERFORMANCE RELATIVE TO THEIR
EUROPEAN PEERS?
ANSWER: Developing a global market for their products has been one of the
most effective strategies for German companies to remain profitable in an
environment of weak domestic consumption. However, German businesses recognize
the importance of remaining competitive on the production side as well. One of
the most significant costs for German companies is labor. Because the government
was slow to implement labor reforms, several German companies took matters into
their own hands and successfully bargained with labor unions, securing
agreements for employees to work longer hours at the same pay. Other companies
built production facilities overseas to take advantage of lower labor costs and
tax rates, a strategy that worked well with the development of global markets
for their products. Now that the outgoing government's reform program looks set
for better speed, German companies operating primarily in Germany are likely to
be the main beneficiaries.
----------
(1) DAX INDEX IS A TOTAL RATE OF RETURN INDEX OF 30 SELECTED GERMAN BLUE CHIP
STOCKS TRADED ON THE FRANKFURT STOCK EXCHANGE. INDEX RETURNS ASSUME REINVESTED
DIVIDENDS AND, UNLIKE FUND RETURNS, DO NOT REFLECT ANY FEES OR EXPENSES. IT IS
NOT POSSIBLE TO INVEST DIRECTLY INTO AN INDEX.
Sandra M. Schaufler, Chief Investment Officer of the Germany Fund, Inc.
5
REPORT FROM THE INVESTMENT ADVISER AND MANAGER
--------------------------------------------------------------------------------
ECONOMIC OUTLOOK
The first half of the year (2005) brought a series of ups and downs on the
economic front. Business confidence, as measured by the ZEW index, and consumer
confidence, as measured by the IFO index, both fell in May (the IFO index
reached a 20-month low) before rebounding in June. Meanwhile gross domestic
product (GDP) grew by 1% quarter-over-quarter in the first quarter of 2005, the
fastest rate since 2001. In the face of weak domestic demand, growth continues
to be driven by net exports. This trend should continue, as the euro weakened
steadily throughout the second quarter, making German products more competitive
overseas. Unemployment peaked at 12% during the first quarter and remained well
above 11% throughout the half. As expected, the European Central Bank kept
interest rates unchanged at 2%.
For the second half of the year, the early elections in Germany can be expected
to affect the economic environment, as uncertainty surrounding the future of
government reforms will likely stifle domestic demand. A potential increase in
the VAT rate could hinder private consumption, which would limit GDP growth
through the end of the year. Once a new government is in place and the reform
program is announced, demand could pick up again as consumers regain confidence
about the future. Overall, we expect modest GDP growth of 1.0% in 2005.
Investment may also be constrained until German companies gain clarity on the
direction of future reforms, but inflation should remain low and is forecast to
be 1.6% in 2005. From a fiscal perspective, the new government's biggest
challenge will be financing the reforms, as the budget deficit is expected to
decrease only slightly from last year, from 3.7% of GDP to 3.6%. However, the
prospects for German growth should improve significantly in 2006 as the
structural reforms that have been set in motion begin to gain traction.
SPECIAL CONSIDERATIONS
The observations in this letter reflect our own opinions as of July 22, 2005 and
are based on our own analysis, and others may have different opinions. Events
may not transpire as we or they currently expect. Also, while economic events
can influence broad market trends, political, monetary and other factors are
also relevant to stock performance. In any event, investment results will depend
on our success in identifying individual stocks, which are influenced by many
factors beyond general economic matters. We cannot predict investment results or
whether they will be successful.
6
THE GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
---------- ----------- -------------
INVESTMENTS IN GERMAN SECURITIES -- 89.6%
COMMON STOCKS -- 84.8%
AIR FREIGHT & LOGISTICS -- 4.6%
260,000 Deutsche Post .................................... 6,071,040
-------------
AUTO COMPONENTS -- 2.7%
50,000 Continental ...................................... 3,601,024
-------------
AUTOMOBILES -- 5.1%
30,000 Bayerische Motoren Werke ......................... 1,368,014
130,000 DaimlerChrysler .................................. 5,276,022
-------------
6,644,036
-------------
CHEMICALS -- 13.0%
145,000 BASF ............................................. 9,638,585
220,000 Bayer ............................................ 7,335,960
-------------
16,974,545
-------------
CONSTRUCTION & ENGINEERING -- 1.1%
30,000 Bilfinger Berger ................................. 1,397,021
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.9%
135,000 Deutsche Telekom ................................. 2,496,363
-------------
ELECTRIC UTILITIES -- 6.0%
88,700 E.ON ............................................. 7,898,704
-------------
FOOD & STAPLES RETAILING -- 2.8%
75,000 Metro ............................................ 3,717,351
-------------
INDUSTRIAL CONGLOMERATES -- 13.9%
250,000 Siemens .......................................... 18,231,731
-------------
INSURANCE -- 9.6%
50,000 Allianz .......................................... 5,739,037
30,000 Hannover Ruckversicherungs ....................... 1,133,063
53,000 Munchener Ruckversicherungs ...................... 5,644,597
-------------
12,516,697
-------------
INTERNET SOFTWARE & SERVICES -- 0.9%
40,000 United Internet .................................. 1,140,918
-------------
SHARES DESCRIPTION VALUE
---------- ----------- -------------
MACHINERY -- 4.0%
90,000 MAN .............................................. 3,734,211
30,000 Rheinmetall+ ..................................... 1,509,058
-------------
5,243,269
-------------
MEDIA -- 1.1%
40,000 Premiere* ........................................ 1,382,639
-------------
MULTI-UTILITIES -- 3.0%
60,000 RWE .............................................. 3,870,904
-------------
PHARMACEUTICALS -- 2.3%
40,000 Altana ........................................... 2,288,122
10,000 Merck KGaA ....................................... 796,104
-------------
3,084,226
-------------
REAL ESTATE -- 1.0%
35,000 Hypo Real Estate Holding ......................... 1,332,058
-------------
SOFTWARE -- 8.0%
60,000 SAP .............................................. 10,443,029
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 3.8%
30,000 Adidas Salomon ................................... 5,022,097
-------------
Total Common Stocks
(cost $86,374,761) ............................... 111,067,652
-------------
PREFERRED STOCKS -- 4.8%
AUTOMOBILES -- 2.9%
20,000 Bayerische Motoren Werke+ ........................ 743,289
4,000 Porsche .......................................... 3,005,256
-------------
3,748,545
-------------
HEALTHCARE PROVIDERS & SERVICES -- 0.9%
10,000 Fresenius+ ....................................... 1,145,147
-------------
TEXTILES, APPAREL & LUXURY GOODS -- 1.0%
40,000 Hugo Boss ........................................ 1,313,509
-------------
Total Preferred Stocks
(cost $5,476,486) ............................... 6,207,201
-------------
Total Investments in German Securities
(cost $91,851,247) .............................. 117,274,853
-------------
The accompanying notes are an integral part of the financial statements.
7
THE GERMANY FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2005 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
SHARES DESCRIPTION VALUE
---------- ----------- -------------
INVESTMENTS IN DUTCH COMMON STOCK -- 1.1%
DIVERSIFIED FINANCIAL SERVICES -- 1.1%
50,000 ING Groep
(cost $1,155,163) ............................... 1,412,249
-------------
INVESTMENTS IN FRENCH COMMON STOCKS -- 4.0%
INSURANCE -- 1.9%
100,000 Axa .............................................. 2,498,176
-------------
MULTI-UTILITIES -- 1.2%
55,000 Suez ............................................. 1,490,989
-------------
OIL, GAS & CONSUMABLE FUELS -- 0.9%
5,000 Total ............................................ 1,174,155
-------------
Total Investments in French Common Stocks
(cost $4,825,196) ............................... 5,163,320
-------------
INVESTMENTS IN SWISS COMMON STOCK -- 2.1%
DIVERSIFIED FINANCIAL SERVICES -- 2.1%
36,000 United Bank of Switzerland
(cost $2,780,973) ............................... 2,805,268
-------------
SHARES DESCRIPTION VALUE
---------- ----------- -------------
INVESTMENTS IN SPANISH COMMON STOCKS -- 2.6%
COMMERCIAL BANKS -- 1.7%
146,800 Banco Bilbao Vizcaya Argentaria .................. 2,263,911
-------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.9%
72,800 Telefonica ....................................... 1,191,331
-------------
Total Investments in Spanish
Common Stocks
(cost $3,588,987) ............................... 3,455,242
-------------
SECURITIES LENDING COLLATERAL -- 2.0%
2,643,390 Scudder Daily Assets Fund Institutional, 3.19%++
(cost $2,643,390) ............................... 2,643,390
-------------
Total Investments--101.4%
(cost $106,844,956) ............................ $ 132,754,322
Liabilities in excess of cash and
other assets--(1.4)% ........................... (1,822,022)
-------------
NET ASSETS--100.0% ............................... $ 130,932,300
=============
----------
* Non-income producing security.
+ All or a portion of these securities were on loan (see Notes to Financial
Statements). The value of all securities loaned at June 30, 2005 amounted
to $2,515,991, which is 1.9% of the net assets.
++ Represents collateral held in connection with securities lending. Scudder
Daily Asset Fund Institutional, an affiliated fund, is managed by Deutsche
Asset Management, Inc. The rate shown is the annualized seven-day yield at
period end.
The accompanying notes are an integral part of the financial statements.
8
THE GERMANY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (cost $104,201,566) - including $2,515,991 of securities loaned .............. $ 130,110,932
Investment in Scudder Daily Assets Fund Institutional (cost $2,643,390)* ........................... 2,643,390
Cash and foreign currency (cost $1,005,332) ........................................................ 1,006,330
Foreign withholding tax refund receivable .......................................................... 50,490
Interest receivable ................................................................................ 249
Other assets ....................................................................................... 11,200
-----------------
Total assets ................................................................................... 133,822,591
=================
LIABILITIES
Payable upon return of securities loaned ........................................................... 2,643,390
Management fee payable ............................................................................. 65,390
Investment advisory fee payable .................................................................... 35,541
Accrued expenses ................................................................................... 145,970
-----------------
Total liabilities .............................................................................. 2,890,291
-----------------
NET ASSETS ......................................................................................... $ 130,932,300
=================
Net assets consist of:
Paid-in capital, $.001 par (Authorized 80,000,000 shares) .......................................... $ 162,120,636
Cost of 2,059,284 shares held in treasury .......................................................... (13,407,399)
Undistributed net investment income ................................................................ 1,731,494
Accumulated net realized loss on investments and foreign currency transactions ..................... (45,427,922)
Net unrealized appreciation of investments and foreign currency transactions ....................... 25,915,491
-----------------
Net assets ......................................................................................... $ 130,932,300
=================
Net asset value per share ($130,932,300 / 14,789,992 shares of common stock issued and outstanding) $ 8.85
=================
----------
* Represents collateral on securities loaned.
The accompanying notes are an integral part of the financial statements.
9
THE GERMANY FUND, INC.
STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED
JUNE 30, 2005
-----------------
NET INVESTMENT INCOME
Investment income
Dividends (net of foreign withholding taxes of $464,453) ........................................ $ 2,796,054
Interest ........................................................................................ 2,864
Securities lending income, including income from Scudder Daily Assets Fund Institutional,
net of borrower rebates ...................................................................... 227,665
-----------------
Total investment income ............................................................................ 3,026,583
-----------------
Expenses
Management fee .................................................................................. 392,340
Investment advisory fee ......................................................................... 216,674
Custodian and Transfer Agent's fees and expenses ................................................ 85,845
Reports to shareholders ......................................................................... 83,754
Directors' fees and expenses .................................................................... 45,138
Legal fee ....................................................................................... 169,283
Audit fee ....................................................................................... 31,588
NYSE listing fee ................................................................................ 10,266
Miscellaneous ................................................................................... 8,097
-----------------
Total expenses before custody credits* .......................................................... 1,042,985
Less: custody credits ........................................................................... (3,201)
-----------------
Net expenses .................................................................................... 1,039,784
-----------------
Net investment income .............................................................................. 1,986,799
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on:
Investments ..................................................................................... 6,661,506
Foreign currency transactions ................................................................... 50,973
Net unrealized depreciation during the period on:
Investments ..................................................................................... (16,334,307)
Translation of other assets and liabilities from foreign currency ............................... (14,296)
-----------------
Net loss on investments and foreign currency transactions .......................................... (9,636,124)
-----------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ............................................... $ (7,649,325)
=================
----------
* The custody credits are attributable to interest earned on U.S. cash balances
held on deposit at custodian.
The accompanying notes are an integral part of the financial statements.
10
THE GERMANY FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
FOR THE
SIX MONTHS
ENDED FOR THE
JUNE 30, 2005 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2004
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income (loss) .................................................... $ 1,986,799 $ (165,363)
Net realized gain on:
Investments .................................................................. 6,661,506 7,701,730
Foreign currency transactions ................................................ 50,973 129,415
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................................. (16,334,307) 7,407,738
Translation of other assets and liabilities from foreign currency ............ (14,296) (52,151)
------------- -----------------
Net increase (decrease) in net assets resulting from operations ................. (7,649,325) 15,021,369
------------- -----------------
Distributions to shareholders from:
Net investment income(a) ........................................................ -- (966,156)
------------- -----------------
Capital share transactions:
Net proceeds from reinvestment of dividends (0 and 52,561 shares, respectively) . -- 341,119
Cost of shares repurchased (183,700 and 652,150 shares, respectively) ........... (1,455,397) (4,801,379)
------------- -----------------
Net increase (decrease) in net assets from capital share transactions ........... (1,455,397) (4,460,260)
------------- -----------------
Total increase (decrease) in net assets ............................................ (9,104,722) 9,594,953
NET ASSETS
Beginning of period ................................................................ 140,037,022 130,442,069
------------- -----------------
End of period (including undistributed net investment income of $1,731,494 and
accumulated distributions in excess of net investment income of
$255,305 as of June 30, 2005 and December 31, 2004, respectively) ............... $ 130,932,300 $ 140,037,022
============= =================
----------
(a) For U.S. tax purposes, total distributions to shareholders consisted
entirely of ordinary income.
The accompanying notes are an integral part of the financial statements.
11
THE GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED)
--------------------------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
The Germany Fund, Inc. (the "Fund") was incorporated in Delaware on April 8,
1986 as a diversified, closed-end management investment company. Investment
operations commenced on July 23, 1986. The Fund reincorporated in Maryland on
August 29, 1990 and on October 16, 1996 the Fund changed from a diversified to a
non-diversified company.
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. If
no sales price is available at that time, and both bid and ask prices are
available, the securities are valued at the mean between the last current bid
and ask prices; if no quoted asked prices are available, they are valued at the
last quoted bid price. All securities for which market quotations are not
readily available will be valued as determined in good faith by the Board of
Directors of the Fund. The Fund calculates its net asset value per share at
11:30 A.M., New York time, in order to minimize the possibility that events
occurring after the close of the securities exchanges on which the Fund's
portfolio securities principally trade would require adjustment to the closing
market prices in order to reflect fair value.
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.
SECURITIES LENDING: The Fund may lend securities to financial institutions. The
Fund retains beneficial ownership of the securities it has loaned and continues
to receive interest and dividends paid by the securities and to participate in
any changes in their market value. The Fund requires the borrowers of the
securities to maintain collateral with the Fund consisting of liquid,
unencumbered assets having a value at least equal to the value of the securities
loaned. The Fund may invest the cash collateral into a joint trading account in
an affiliated money market fund pursuant to Exemptive Orders issued by the SEC.
The Fund receives compensation for lending its securities either in the form of
fees or by earning interest on invested cash collateral net of fees paid to a
lending agent. Either the Fund or the borrower may terminate the loan. The Fund
is subject to all investment risks associated with the value of any cash
collateral received, including, but not limited to, interest rate, credit and
liquidity risk associated with such investments.
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 settlement 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.
CONTINGENCIES: In the normal course of business, the Fund may enter into
contracts with service providers that contain general indemnification clauses.
The Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet been
made. However, based on experience, the Fund expects the risk of loss to be
remote.
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 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 United States 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.
12
THE GERMANY FUND, INC.
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2005 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS
The Fund had a Management Agreement with Deutsche Bank Securities Inc. (the
"Manager"). At its July 12, 2004 Board meeting, the Board approved transferring
the Fund's Management Agreement with Deutsche Bank Securities Inc. to an
affiliated company, Deutsche Investment Management Americas Inc. The transfer,
which became effective September 1, 2004, did not involve any change in control
or actual management of the investment manager, which provides the same scope of
services, utilizes the same people for work on Fund matters and charges the same
fees under the agreement. The Fund has 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 $50 million, and .55% of such assets in excess of $50 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. Accordingly, for the period ended June 30, 2005, the combined
fee pursuant to the Management and Investment Advisory Agreements was equivalent
to an annualized effective rate of .91% of the Fund's average net assets.
Pursuant to the Management Agreement, the Manager is the corporate manager and
administrator of the Fund and, subject to the supervision of the Board of
Directors and pursuant to recommendations made by the Fund's Investment Adviser,
determines the suitable securities for investment by the Fund. The Manager also
provides 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 objectives,
policies and restrictions, makes 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, transmits purchase and sale
orders, and selects brokers and dealers to execute portfolio transactions on
behalf of the Fund.
NOTE 3. TRANSACTIONS WITH AFFILIATES
For the period ended June 30, 2005, Deutsche Bank AG, the German parent of the
Manager and Investment Adviser, and its affiliates received $25,512 in brokerage
commissions as a result of executing agency transactions in portfolio securities
on behalf of the Fund, that the Board determined were effected in compliance
with the Fund's Rule 17e-1 procedures.
Certain officers of the Fund are also officers of either the Manager or Deutsche
Bank AG.
The Fund pays each Director not affiliated with the Manager retainer fees plus
specified amounts for attended board and committee meetings.
NOTE 4. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
for the period ended June 30, 2005 were $41,085,770 and $40,509,823,
respectively.
The cost of investments at June 30, 2005 was $106,978,278 for United States
Federal income tax purposes. Accordingly, as of June 30 2005, net unrealized
appreciation of investments aggregated $25,776,044 of which $26,520,112 and
$744,068 related to unrealized appreciation and depreciation, respectively.
For United States Federal income tax purposes, the Fund had a capital loss carry
forward at December 31, 2004 of approximately $45,332,000, of which $13,630,000
and $31,702,000 will expire in 2009 and 2010, respectively. No capital gains
distribution is expected to be paid to shareholders until future net gains have
been realized in excess of such carry forward. In addition, from November 1,
2004 to December 31, 2004, the Fund incurred approximately $220,000 of net
realized capital losses. As permitted by tax regulations, the Fund intends to
elect to defer these losses and treat them as arising in the fiscal year ended
December 31, 2005.
NOTE 5. PORTFOLIO SECURITIES LOANED
On June 30, 2005, the market value of the securities loaned and its collateral
were $2,515,991 and $2,643,390, respectively. For the period ended June 30,
2005, the Fund earned $227,665 as securities lending fees, net of borrower
rebates and agency fees.
NOTE 6. CAPITAL
During the period ended June 30, 2005 and the year ended December 31, 2004, the
Fund purchased 183,700 and 652,150 of its shares of common stock on the open
market at a total cost of $1,455,397 and $4,801,379, respectively. The weighted
average discount of these purchased shares comparing the purchased price to the
net asset value at the time of purchase was 12.4% and 11.3% respectively. These
shares are held in treasury.
13
THE GERMANY FUND, INC.
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each of the
periods indicated:
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
JUNE 30, 2005 --------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- --------- --------- --------- --------- ----------
Per share operating performance:
Net asset value:
Beginning of period ............................ $ 9.35 $ 8.38 $ 5.25 $ 8.02 $ 10.89 $ 16.93
----------- --------- --------- --------- --------- ----------
Net investment income (loss) ................... .13(a) (.01)(a) .02 -- .05 (.02)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (.64) 1.00 3.09 (2.78) (2.84) (3.48)
----------- --------- --------- --------- --------- ----------
Increase (decrease) from investment operations . (.51) .99 3.11 (2.78) (2.79) (3.50)
----------- --------- --------- --------- --------- ----------
Increase resulting from share repurchases ...... .01 .04 .02 .02 .01 .05
----------- --------- --------- --------- --------- ----------
Distributions from net investment income ....... -- (.06) -- -- (.05) --
Distributions from net realized
foreign currency gains ...................... -- -- -- (.01) (.01) --
Distributions from net realized
short-term capital gains .................... -- -- -- -- -- (.19)
Distributions from net realized
long-term capital gains ..................... -- -- -- -- (.02) (2.30)
----------- --------- --------- --------- --------- ----------
Total distributions+ ........................... -- (.06) -- (.01) (.08) (2.49)
----------- --------- --------- --------- --------- ----------
Dilution in net asset value from
dividend reinvestment ....................... -- .00(b) -- -- (.01) (.10)
----------- --------- --------- --------- --------- ----------
Net asset value:
End of period ............................... $ 8.85 $ 9.35 $ 8.38 $ 5.25 $ 8.02 $ 10.89
=========== ========= ========= ========= ========= ==========
Market value:
End of period ............................... $ 7.82 $ 8.11 $ 7.63 $ 4.52 $ 7.05 $ 9.50
Total investment return for the period:++
Based upon market value ........................ (3.58)%*** 7.25% 68.81% (35.76)% (24.95)% (21.09)%
Based upon net asset value ..................... (5.35)%*** 12.58% 59.62% (34.43)% (25.57)% (20.66)%
Ratio to average net assets:
Total expenses before custody credits* ......... 1.57%** 1.58% 1.77% 1.63% 1.47% 1.29%
Net investment income (loss) ................... 1.48%**** (.13)% .29% .03% .53% (.17)%
Portfolio turnover ............................. 60.80%** 204.88% 286.91% 111.67% 121.37% 137.70%
Net assets at end of period (000's omitted) .... $ 130,932 $ 140,037 $ 130,442 $ 84,809 $ 133,793 $ 183,541
----------
(a) BASED ON AVERAGE SHARES OUTSTANDING DURING
THE PERIOD.
(b) AMOUNT IS LESS THAN $.005 PER SHARE.
+ FOR U.S. TAX PURPOSES, TOTAL DISTRIBUTIONS
CONSISTED OF:
Ordinary income -- $ (.06) -- $ (.01) $ (.06) $ (.19)
Long term capital gains -- -- -- -- (.02) (2.30)
----------- --------- --------- --------- --------- ----------
-- $ (.06) -- $ (.01) $ (.08) $ (2.49)
----------- --------- --------- --------- --------- ----------
++ TOTAL RETURN BASED ON NET ASSET VALUE REFLECTS CHANGES IN THE FUND'S NET
ASSET VALUE DURING EACH PERIOD. TOTAL RETURN BASED ON MARKET VALUE
REFLECTS CHANGES IN MARKET VALUE. EACH FIGURE INCLUDES REINVESTMENTS OF
DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS, IF ANY. THESE FIGURES WILL DIFFER
DEPENDING UPON THE LEVEL OF ANY DISCOUNT FROM OR PREMIUM TO NET ASSET
VALUE AT WHICH THE FUND'S SHARES TRADE DURING THE PERIOD.
* THE CUSTODY CREDITS ARE ATTRIBUTABLE TO INTEREST EARNED ON U.S. CASH
BALANCES. THE RATIO OF TOTAL EXPENSES AFTER CUSTODY CREDITS TO AVERAGE NET
ASSETS ARE 1.56%, 1.57%, 1.77%, 1.63%, 1.46% AND 1.27% FOR 2005, 2004,
2003, 2002, 2001 AND 2000, RESPECTIVELY.
** ANNUALIZED.
*** NOT ANNUALIZED.
**** NOT ANNUALIZED. THE RATIO FOR SIX MONTHS ENDED JUNE 30, 2005 HAS NOT BEEN
ANNUALIZED SINCE THE FUND BELIEVES IT WOULD NOT BE APPROPRIATE BECAUSE THE
FUND'S DIVIDEND INCOME IS NOT EARNED RATABLY THROUGHOUT THE FISCAL YEAR.
14
THE GERMANY FUND, INC.
REPORT OF STOCKHOLDERS' MEETING (UNAUDITED)
--------------------------------------------------------------------------------
The Annual Meeting of Stockholders of The Germany Fund, Inc. was held on June
21, 2005. At the Meeting, the following matters were voted upon by the
stockholders (the resulting votes are presented below):
1. To elect three Directors to serve for a term of three years until their
successors are elected and qualify.
NUMBER OF VOTES
-----------------
FOR WITHHELD
---------- --------
Fred H. Langhammer 11,108,829 369,712
Christian H. Strenger 11,171,903 306,638
Werner Walbrol 11,182,445 296,096
2. To ratify the appointment by the Audit Committee and the Board of
Directors of PricewaterhouseCoopers LLP as independent registered public
accounting firm for the fiscal year ending December 31, 2005.
NUMBER OF VOTES
-----------------
FOR AGAINST ABSTAIN
--------------- ----------- -----------
11,257,805 156,985 63,752
PROXY VOTING
--------------------------------------------------------------------------------
A description of the Fund's policies and procedures for voting proxies for
portfolio securities and information about how the Fund voted proxies relating
to its portfolio securities during the 12 month period ended June 30 is
available on our web site -- www.germanyfund.com -- (click on the "proxy voting
record" link in the left hand tool bar) or on the SEC's web site at www.sec.gov.
To obtain a written copy of the Fund's policies and procedures without charge,
upon request, call us toll free at 1-800-437-6269.
15
[THIS PAGE INTENTIONALLY LEFT BLANK.]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
[THIS PAGE INTENTIONALLY LEFT BLANK.]
EXECUTIVE OFFICES
345 PARK AVENUE, NEW YORK, NY 10154
MANAGER
DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
INVESTMENT ADVISER
DEUTSCHE ASSET MANAGEMENT INTERNATIONAL GMBH
CUSTODIAN AND TRANSFER AGENT
INVESTORS BANK & TRUST COMPANY
LEGAL COUNSEL
SULLIVAN & CROMWELL LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PRICEWATERHOUSECOOPERS LLP
DIRECTORS AND OFFICERS
CHRISTIAN H. STRENGER
CHAIRMAN AND DIRECTOR
DETLEF BIERBAUM
DIRECTOR
KURT W. BOCK
DIRECTOR
JOHN A. BULT
DIRECTOR
RICHARD R. BURT
DIRECTOR
JOHN H. CANNON
DIRECTOR
FRED H. LANGHAMMER
DIRECTOR
DR. FRANK TROMEL
DIRECTOR
ROBERT H. WADSWORTH
DIRECTOR
WERNER WALBROL
DIRECTOR
JULIAN F. SLUYTERS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PAUL H. SCHUBERT
CHIEF FINANCIAL OFFICER AND TREASURER
SANDRA M. SCHAUFLER
CHIEF INVESTMENT OFFICER
DANIEL O. HIRSCH
CHIEF LEGAL OFFICER
PHILIP GALLO
CHIEF COMPLIANCE OFFICER
VINCENT J. ESPOSITO
VICE PRESIDENT
KATHLEEN SULLIVAN D'ERAMO
ASSISTANT TREASURER
CAROLE COLEMAN
SECRETARY
HONORARY DIRECTOR
OTTO WOLFF VON AMERONGEN
39511 (8/05)
--------------------------------------------------------------------------------
VOLUNTARY CASH PURCHASE PROGRAM
AND DIVIDEND REINVESTMENT PLAN
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. Plan participants may invest as little as $100 in any
month and may invest up to $36,000 annually. The Plan has been amended to allow
current shareholders, who are not already participants in the Plan, and first
time investors to enroll in the Plan by making an initial cash deposit of at
least $250 with the plan agent. Share purchases are combined to receive a
beneficial brokerage fee. A brochure is available by writing or telephoning the
plan agent:
Investors Bank & Trust Company
Shareholder Services
P.O. Box 642 OPS22
Boston, MA 02117-0642
Tel. 1-800-437-6269
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is transmitted to the
shareholders of The Germany 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 the 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 DAX 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.
Fund Shares are not FDIC - insured and are not deposits or other obligations of
or guaranteed by any bank. Fund Shares involve investment risk, including
possible loss of principal.
--------------------------------------------------------------------------------
[LOGO OMITTED]
GER
LISTED
NYSE(R)
Copies of this report, monthly fact sheets and
other information are available at:
www.germanyfund.com
For latest net asset value, schedule of the Fund's
largest holdings, dividend data and shareholder
inquiries, please call 1-800-GERMANY in the
U.S. or 617-443-6918 outside of the U.S.
19
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
THE GERMANY FUND, INC.
Item 9 of Form N-CSR - Repurchase Disclosure
----------------------------------------------------------------------
(a) (b)
Total Number of Average Price Paid
Period Shares Purchased* per Share
----------------------------------------------------------------------
January 1 through January 31 31,500 $7.8674
February 1 through February 29 41,400 $8.0212
March 1 through March 31 39,200 $8.1860
April 1 through April 30 36,500 $7.8262
May 1 through May 31 27,100 $7.6209
June 1 through June 30 8,000 $7.8027
----------------------------------------------------------------------
Total 183,700 $7.9227
----------------------------------------------------------------------
--------------------------------------------------------------------------------
(c) (d)
Total Number of Maximum Number of
Period Shares Purchased as Shares that May Yet
Part of Publicly Announced Be Purchased Under
Plans or Programs the Plans or Programs
--------------------------------------------------------------------------------
January 1 through January 31 n/a n/a
February 1 through February 29 n/a n/a
March 1 through March 31 n/a n/a
April 1 through April 30 n/a n/a
May 1 through May 31 n/a n/a
June 1 through June 30 n/a n/a
--------------------------------------------------------------------------------
Total n/a n/a
--------------------------------------------------------------------------------
* All shares were purchased in open market transactions.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Nominating Committee will consider nominee candidates properly submitted by
stockholders in accordance with applicable law, the Fund's Articles of
Incorporation or By-laws, resolutions of the Board and the qualifications and
procedures set forth in the Nominating Committee Charter and this proxy
statement. A stockholder or group of stockholders seeking to submit a nominee
candidate (i) must have beneficially owned at least 5% of the Fund's common
stock for at least two years, (ii) may submit only one nominee candidate for any
particular meeting of stockholders, and (iii) may submit a nominee candidate for
only an annual meeting or other meeting of stockholders at which directors will
be elected. The stockholder or group of stockholders must provide notice of the
proposed nominee pursuant to the requirements found in the Fund's By-laws.
Generally, this notice must be received not less than 90 days nor more than 120
days prior to the first anniversary of the date of mailing of the notice for the
preceding year's annual meeting. Such notice shall include the specific
information required by the Fund's By-laws. The Nominating Committee will
evaluate nominee candidates properly submitted by stockholders on the same basis
as it considers and evaluates candidates recommended by other sources.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Chief Executive and Financial Officers concluded that the Registrant's
Disclosure Controls and Procedures are effective based on the evaluation of the
Disclosure Controls and Procedures as of a date within 90 days of the filing
date of this report.
(b) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Certification pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as
Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as
Exhibit 99.906CERT.
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: The Germany Fund, Inc.
By: /s/ Julian Sluyters
Julian Sluyters
Chief Executive Officer
Date: August 30, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: The Germany Fund, Inc.
By: /s/ Julian Sluyters
Julian Sluyters
Chief Executive Officer
Date: August 30, 2005
By: /s/ Paul Schubert
Paul Schubert
Chief Financial Officer
Date: August 30, 2005