SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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THE NEW GERMANY FUND, INC.
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Following are slides containing information which may be presented to shareholders of The New Germany Fund, Inc.
The New Germany Fund, Inc.
Contents
1.
Overview
2.
The New Germany Fund, Inc.
3.
Superior Slate of Directors
4.
Corporate Governance
5.
Short-Term vs. Long-Term Interests
Overview
1.
Overview – The Issues:
Directors with Better Qualifications (Proposal 1)
Proposal 1: To elect four Directors, each to serve for a term of
three years and until their successors are elected and qualify.
Electing lesser-qualified directors is not in the best interest of all
Fund shareholders
Management’s nominees are better qualified
The Fund’s director qualification bylaw is a common approach to good
corporate governance
1.
Overview – The Issues:
Short-term vs. Long-term Interests (Proposal 3)
Proposal 3: “Stockholders of the Fund be afforded an opportunity
to realize net asset value for their shares as soon as practicable.”
If the Fund had liquidated on Jan. 1, 2003, stockholders would have received
a modest one-time gain equal to the discount of $0.21 for each $1.00 of
market price invested
Long-term stockholders in fact experienced total incremental appreciation of
$1.66 from Jan. 1, 2003 to Mar. 31, 2005 for each $1.00 of market price
Proposal 3 is a referendum on this question
1. Overview - The Fund
Investment Objective: The New Germany Fund, Inc. seeks long-term
capital appreciation primarily through investment in the Mittelstand – an
important group of small and mid-cap German companies. The Fund
invests primarily in middle market German companies and may invest up
to 20% elsewhere in Western Europe.
Total Net Assets: $257,942,387
Shares Outstanding: 24,977,225
NYSE Symbol: GF
Expense Ratio: 1.24%
Cusip: 644465106
As of April 30, 2005
This fund is not diversified and may focus its investments in certain geographical regions, thereby increasing its vulnerability
to developments in that region. Investing in foreign securities presents certain unique risks not associated with domestic investments,
such as currency fluctuations and political and economic changes and market risks. This may result in greater share price volatility.
The New Germany Fund, Inc.
The manager has managed the Fund since inception in January 1990
The manager has a prominent presence in German markets
Portfolio team based in New York and Frankfurt
The Fund ranks in the top quartile of its Lipper peer group for lowest
overall expense ratio (2 of 12 funds as of 12/31/04).
Strong aftermarket support from manager’s closed-end fund department
Shareholder Communications
Public Relations
Expenses as a percentage of Average Net assets for the latest fiscal year.
Funds are ranked according to total expenses.
The expense data is based upon the Fund’s Lippper category of Western European
Fund and also incorporates The Lipper Eastern European Funds category as well.
2.
The New Germany Fund, Inc.
Key Highlights
As of 12/31/04
Retail and institutional
London
Investment specialists 50
Frankfurt
Investment specialists 82
Tokyo
Investment specialists 26
Hong Kong
Investment specialists 2
Seoul
Investment specialists 4
Zurich
Investment specialists 4
Singapore
Investment specialists 8
Sydney
Investment specialists 22
Mumbai
Investment specialists 3
Milwaukee
Investment specialists 3
Boston
Investment specialists 9
New York
Investment specialists 67
Warsaw
Investment specialists 3
Paris
Investment specialists 2
Milan
Investment specialists 12
Madrid
Investment specialists 8
2.
The New Germany Fund, Inc.
People Global Equity Resources
305 Equity Investment Professionals Worldwide
Active management
Fundamental stock analysis
Company visits
Standardized format for independent primary research
Stock ranking
Outperformance
2.
The New Germany Fund, Inc.
Investment philosophy and approach
Ex ante risk simulation (BARRA
tracking error, style analytics)
Maximum derivation of stock
values
Maximum country and sector
valuation
Minimum free-float requirements
Historical tracking error
Client guidelines/legal
requirements
Performance
measurement/portfolio analysis
system
Risk controls – ex post
2.
The New Germany Fund, Inc.
Risk controls – ex ante
3.2
9. Rheinmetall
3.0
10. AWD
3.7
7. Heidelberg Cement
3.7
6. K+S AG
4.0
5. Hannover
Rueckversichherungs
47.0
TOTAL
3.3
4.5
5.8
7.9
7.9
% Weight in New
Germany Fund
3. Depfa Bank Plc
8. Stada Arzneimittel
4. Merck KGaA
2. Hypo Real Estate Holding
1. European Aeronautic Defense
Security Description
100.0%
TOTAL
1.7
8. Telecommunications Services
3.1
7. Consumer Staples
7.5
6. Consumer Discretionary
7.6
5. Information Technology
10.6
4. Materials
17.4
3. Health Care
24.9
2. Financials
27.2
1. Industrials
% of Market Value
Largest Sector Holdings
Source: Deutsche Asset Management
Portfolio Characteristics are subject to change.
2.
The New Germany Fund, Inc.
Portfolio Weightings and Sector Holdings (4/30/05)
Real Estate Financing
Successful restructuring of Hypo Germany
New business at remarkable margins
(14% RoE) replacing old low margin
business after NPL sales
Improved loan portfolio
Promising international expansion
Earnings drivers: lower risk provision and
higher operating revenues
Attractive valuation still below book value
Source: MSCI, Bloomberg as at April 2005
* % of portfolio as at 30 April 2005
Source: Deutsche Asset Management
Portfolio holdings are subject to change.
Market cap: USD 5.4 billion
Sector: Financials
2.
The New Germany Fund, Inc.
Hypo Real Estate 7.9%*
Automotive and defense
Automotive division fuelled by tighter
emission standards and trend of
reduction in fuel consumption
Positive order intake in the defense
division (Puma)
Improving EBIT margins thanks to
restructuring programmes in both
divisions
Still attractive valuation
Dependence on automotive sector
Source: MSCI, Bloomberg as at April 2005
* % of portfolio as at 30 April 2005
Source: Deutsche Asset Management
Portfolio holdings are subject to change.
Market cap: USD 1.9 billion
Sector: Capital goods
2.
The New Germany Fund, Inc.
Rheinmetall 3.2%*
Mechatronics & biotech (equipment for
biomolecular filtration and fermentation)
Biotech: structural growth rate around
8% - 10% pa combined with unique
broad product range and world class
production standards
Mechatronics: No 2 global supplier in
weighing; strong brand in laboratory
weighing market
Financial targets for 2007:
Sales + 7.5% CAGR, EBIT margin 11%
(2004: 7%)
Strategic alliances
Source: MSCI, Bloomberg as at April 2005
* % of portfolio as at 30 April 2005
Source: Deutsche Asset Management
Portfolio holdings are subject to change.
Market cap: USD 450 million
Sector: Capital goods
2.
The New Germany Fund, Inc.
Sartorius 1.8%*
New Germany Fund Proposes Superior Slate of Directors
3. GF Proposes Superior Slate: Current Director Candidates
The four management nominees are better qualified than the
dissident nominees.
They have extensive experience in German investment and
business matters.
Management Nominees
Over 20 years’ experience as senior executive of large German companies in the retail
sector, including Tengelmann (owner of A&P Supermarkets), Wella (hair and beauty
products) and DSD Duales (recycling). Fluent in English and German.
Peter Zühlsdorff
Over 10 years’ experience (until 2003) as CEO of German American Chamber of
Commerce, advising German companies about conducting business in the United States.
Fluent in English and German.
Werner Walbröl
18 years’ experience (until 2002) as Treasurer of Venator/Footlocker (formerly Woolworth),
including Treasurer for European operations. Audit Committee Financial Expert and
Chairman of the Fund's Audit Committee.
John Cannon
20 years’ experience as Chairman of the European private banking and brokerage
business of UBS AG (PaineWebber International). Fluent in English and German.
John Bult
The four dissident nominees have little international investing experience.
They have in common their having been repeatedly nominated by Mr. Goldstein
in closed-end fund proxy contests.
Dissident Nominees
Limited lifetime work experience (age 36); employed by Mr. Goldstein; only public
company experience is as a director of Mexico Equity and Income Fund
(controlled by Mr. Goldstein).
Rajeev Das
Limited lifetime work experience (age 38); only public company experience is as a
director of Mexico Equity and Income Fund (controlled by Mr. Goldstein).
Andrew Dakos
Pursuing this proxy contest for his own economic self-interest, and cannot be
expected to consider the interests of stockholders generally. Long history of
attacking and seeking to destroy closed-end funds.
Phillip Goldstein
Associated with troubled businesses: director of a nursery business emerging
from chapter 11 bankruptcy; president of medical research support business
formerly engaged in a protracted litigation surrounding an unsuccessful merger
transaction.
Gerald Hellerman
3.
GF Proposes Superior Slate:
Dissident Director Candidates Less Qualified
3.
GF Proposes Superior Slate:
Opportunity Partners Self-Serving Interests
A private investment partnership controlled by Phillip Goldstein
Mr. Goldstein and his affiliates have a history of engaging in proxy
contests with closed-end funds
March 2000, Goldstein made to the Italy Fund a non-binding proposal that the Fund open
end or merge into an existing open-end fund, and nominated himself and a colleague for
to be directors. Shareholders elected both nominees and approved the proposal. The
Fund then made two tender offers, each for 25% of its outstanding shares, in 2000 and
2001. Due to the tender offers, the fund's net assets shrunk from approximately $161
million as of January 31, 2000 to approximately $36 million in November 2002 and its
expense ratio rose from 1.23% for the year ended January 31, 2000 to 2.04% for the year
ended January 2003. In 2003 the fund liquidated.
Goldstein initiated a proxy contest for The Mexico Equity and Income Fund, Inc. in late
1999 and was elected to the fund's Board in 2000. The fund subsequently conducted two
large tender offers: one for 20% of the fund's shares in 12/00 and one for 80% in 3/02.
By 1/31/03, the fund's total net assets had shrunk to $20 million, down from $105 million
as of 1/31/00. Over the same period, the fund's expense ratio rose from 1.97% to 2.69%.
Mr. Goldstein has conceded his intended nominees are not qualified to
serve as directors under the Fund’s Bylaws
Corporate Governance
4. Corporate Governance: Independence of Board
The Fund has always had a majority of independent directors currently
over 80% and for over five years none of the directors have been
Deutsche Bank employees
Only two directors serve on more than 2 other boards of funds managed
by the investment manager
Independent audit committee and nominating committee
Independent directors meet in executive sessions with special counsel to
the independent directors at each meeting of the board
Established special committee to oversee shareholder communication
Independent Chairman to be in place this year
Current chairman (Christian Strenger) is a leader of the corporate
governance movement in Germany
Formed a commission in 1999 that developed a governance code now reflected in the official German Corporate
Governance Code issued in 2002
Active pro-investor board member of International Corporate Governance Network (ICGN)
Member of Private Sector Advisory Group of World Bank-OECD Global Corporate Governance Forum
4. Corporate Governance: Stockholder Proposals
The Fund has had almost no prior stockholder proposals
In 2004, in addition to Mr. Goldstein’s non-binding NAV proposal,
there was a binding proposal to terminate the investment advisory
agreement. It garnered votes from only 15.80% of the
outstanding shares and did not pass
The most recent proposals before those were in 1998. Mr.
Goldstein made a binding proposal to terminate the investment
management agreement. It garnered votes from only 9.52% of
the outstanding shares and did not pass. Another stockholder
made a non-binding proposal to open-end or merge with an open-
end fund. It received votes from only 27.76% of the outstanding
shares
Electing partisan and less qualified directors is not an appropriate
way to address that issue
Management’s nominees will balance the interests of all stockholders
Directors are obliged by Maryland law to act in the best interests of
the Fund as a continuing entity. The Goldstein’s nominees do not
have an open mind. They are publicly pre-committed to proposal 3,
to achieve Goldstein’s own economic goals.
Last year’s similar stockholder proposal sent no clear message.
Over a majority (55%) of stockholders did not vote. 27% voted yes;
17% voted no. It is not possible to know whether the 55% do not
care, or did not vote because they were content, but the latter is at
least likely as the former.
4.
Corporate Governance:
Ability to Represent All Stockholders
Principles of good governance favor having minimum qualifications for directors
The Fund Director’s Guidebook (2nd Ed.), published in 2003 by the American Bar Association,
specifically endorses “qualification requirements for nominees as directors.”
Other commentators are to the same effect
Maryland Law (like Delaware Law) specifically authorizes bylaws to contain director
qualification requirements
The Fund’s bylaws have for over five years required at least 10 years’ experience
relevant to the Fund – business, investment, economic or political matters of
Germany
Geographically-based director qualifications are relevant and sensible for a
geographically-oriented fund.
Director qualification bylaws are more likely to yield truly independent directors who
have the experience to weigh the long and short-term factors, and the clout to
implement their decisions.
Such bylaws are common among closed-end funds:
*Dissolved
Aberdeen Australia Equity Fund, Inc
The Asia Pacific Fund, Inc.
The Austria Fund, Inc*
The France Growth Fund, Inc.*
Global Income Fund, Inc.
The Korean Investment Fund, Inc.*
The Mexico Fund, Inc.
The Southern Africa Fund, Inc.*
The Spain Fund, Inc.
The Swiss Helvetia Fund, Inc.
The Taiwan Fund, Inc.
Tortoise Energy Infrastructure Corporation
4.
Corporate Governance:
Director Qualification Bylaws
4. Corporate Governance: Bylaws
Requirements of the Fund’s Bylaws – 10 years experience in business,
investment, economic or political matters of Germany through a senior position at:
German business with annual revenues equivalent to US$500 million
Supervision of European operations at a US business with annual revenues of US$500
million
German investment funds (5 years) with $US250 million total assets
German investment management business with US$500 million under management
Accounting, law or consulting firm having over 100 professionals that advises above
types of businesses
German, US or supranational government agency or German-US trade organization
4. Corporate Governance: Bylaws
Many potential candidates qualify under the Fund’s bylaws
Given a lifetime work expectancy of 40 years, an otherwise-qualified
candidate is eligible to be a Fund director for 40 years – the final 30
years of the person’s working career and first 10 years of retirement.
75 of the 100 largest German public companies met the US$500
million revenue test in 2000. Many private companies also met that
test. Even more today.
Hundreds of US companies having European operations had that
level. The smallest Fortune 500 company in 2000 was US$3.2
billion.
In addition, there are numerous qualifying political entities,
investment management businesses, investment vehicles and
accounting, law and consulting firms.
4. Corporate Governance: Bylaws
The dissident comments about the Fund’s bylaws should not be
allowed to distract investors from the real issue
Election of dissident directors is not an appropriate governance
response
Short-Term vs. Long-Term Interests
5. Short-Term vs. Long-Term Interests
In Proposal 3, the dissidents are seeking liquidation or a large
tender offer
Fund performance has been excellent, returning far more to
stockholders than liquidation would
The closed-end format is well-suited for the Fund, given its
investment focus on thinly traded small- and mid-cap German
companies that cannot readily be sold to meet redemption
demands applicable to open-end funds
Closed-end funds frequently trade a discount
The Fund has been public for 15 years, so most current stockholders would
have purchased in the open market at a discount
Therefore, the discount does not harm investors and in fact, represents an
investment opportunity for long-term investors.
19.13%
40.53%
46.46%
2 Year
1.40%
3.94%
1.45%
Inception
(1/16/90)
-0.98%
4.32%
5.33%
10 Year
-8.12%
-6.01%
-3.77%
5 Year
12.38%
16.67%
17.06%
3 Year
13.16%
15.67%
24.34%
1 Year
-4.40%
-1.71%
-2.32%
YTD
German Mid-Cap
Index (b)
GF(a)
NAV
GF Market
Price
As of 4/30/05
(A)Total investment returns reflect changes in net asset value per share during each period and assume that dividends and capital gains distributions, if
any, were reinvested. These percentages are not an indication of the performance of a shareholder’s investment in the Fund based on market price.
(B) The Fund has changed benchmarks since inception. Page 31 list benchmarks.
5.
Short-Term vs. Long-Term Interests:
Excellent Performance (4/30/05)
Significant open market purchases*
YTD (4/30/05): 311,200 shares repurchased valued at $2,084,270 USD
2004: 1,245,300 shares repurchased valued at $ 9,675,399 USD
2003: 1,079,300 shares repurchased valued at $ 6,196,319 USD
2002: 870,500 shares repurchased valued at $ 3,766,021 USD
Discount has narrowed
12/31/01 Discount -21.73%
12/31/02 Discount -21.63%
12/31/03 Discount -17.89%
12/31/04 Discount -13.89%
Program to maintain market awareness (Year-to-Date)
Portfolio Manager interview on Bloomberg
Coverage in the Wall Street Journal
Participation in industry conference
Shareholder relations award by industry research analysts
Advertisements in US based German Magazine
Comprehensive website: www.newgermanyfund.com
Dedicated Toll-free shareholder line: 1-800-GERMANY
*Value is net of expenses. Shares issued for dividend reinvestment: 81,662 in 2004, 35,920 in 2003.
5.
Short-Term vs. Long-Term Interests:
Efforts to Address the Discount
Important Notes:
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. 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.
Past results of the markets as discussed in this presentation are not necessarily indicative of future performance of
those markets.
This fund is not diversified and may focus its investments in certain geographical regions, thereby increasing its
vulnerability to developments in that region. Investing in foreign securities presents certain unique risks not
associated with domestic investments, such as currency fluctuations and political and economic changes and
market risks. This may result in greater share price volatility.
Benchmark Info:
New Germany Fund Benchmarks
From inception to Dec.31, 1993
100% DAX
Jan.1, 1994 to Dec. 31, 1995
100% CDAX
Jan.1, 1996 to Dec. 31, 1999
100% MDAX
Jan.1, 2000 to Aug. 31, 2002
60% MDAX, 40% NEMAX50
Sept.1, 2002 to Mar. 31, 2003
75% MDAX, 25% NEMAX50
Apr.1, 2003 to Present
100% MCAPM
Important Notes:
05/05 38413
The past performance of a product or service does not guarantee or predict future performance. The products and
services described in this document are not appropriate for everyone, so an interested party must make his or her own
independent legal, tax, accounting and financial evaluation of their merits and risks.
The information provided herein is neither financial advice nor a recommendation, offer or solicitation to engage in a
financial transaction or purchase of a particular product or service, and Deutsche Bank makes no representation
concerning its accuracy, completeness or fairness. We assume no responsibility to advise the recipients of this
document with regard to changes in our views. All opinions and estimates herein, including forecast returns, reflect
our judgement on the date of this report and are subject to change without notice.
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.
Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche
Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Bank
Securities Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and
Scudder Trust Company.
The opinions and forecasts expressed are those of the investment team as of 5/2005, and may not actually 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 of any specific security.
For Further Information please call Investor Services at
800-349.4281
Or
visit us on the web at www.newgermanyfund.com