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
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement.
|_| Definitive proxy statement.
|_| Definitive additional materials.
|_| Soliciting material under Rule 14a-12.
|_| Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
THE NEW GERMANY FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
THE NEW GERMANY FUND, INC.
[o], 2006
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Meeting") of The New Germany Fund, Inc. to be held at [o], New York time,
on [o], 2006 at the offices of Deutsche Bank, 345 Park Avenue, New York, New
York 10154. Your Board of Directors and management look forward to greeting
personally those stockholders able to attend.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Meeting. As you may be aware, a group of
hedge funds that are dissident stockholders of the Fund have announced their
intention to solicit proxies against the nominees of your Board of Directors and
in support of proposals that are strongly opposed by the Board and the Fund.
Please do not sign any proxy card sent to you by or on behalf of the
dissident hedge fund group led by Phillip Goldstein and his hedge fund,
Opportunity Partners L.P. (now calling themselves "Bulldog Investors"), Karpus
Investment Management and Laxey Partners Limited. These hedge funds are now
using the misleading name, "The Coalition For Shareholder Democracy." Please be
assured that your Board of Directors, which manages the Fund for the benefit of
all stockholders, is the real advocate for shareholder democracy. Your Board of
Directors will continue to act in the best interest of all Fund stockholders.
Your vote is important regardless of the number of shares you own. We urge
you to complete, sign, date and mail the enclosed White Proxy Card as soon as
possible, even if you currently plan to attend the Meeting. If you hold your
shares in a brokerage or bank account, your broker or bank may allow you to vote
your shares by telephone or internet. Please consult the materials you receive
from your broker or bank prior to voting by telephone or internet.
On behalf of your Board of Directors, thank you for your continued
interest and support.
Sincerely,
[add signature block]
John Millette
Secretary
THE NEW GERMANY FUND, INC.
345 Park Avenue
New York, New York 10154
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
[o], 2006
- --------------------------------------------------------------------------------
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of The New Germany Fund, Inc., a Maryland corporation (the "Fund"),
will be held at [o], New York time, on [o], 2006 at the offices of Deutsche
Bank, 345 Park Avenue, New York, New York 10154 for the following purposes:
1. To elect three (3) Directors, each to serve for a term of three
years and until their successors are elected and qualify.
2. To ratify the appointment by the Audit Committee and the Board of
Directors of PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as independent auditors for the fiscal year
ending December 31, 2006.
3. To act upon, if properly presented, three stockholder proposals.
4. To transact such other business as may properly come before the
Meeting or any postponement or adjournment thereof.
Only holders of record of Common Stock at the close of business on [o],
2006 are entitled to notice of, and to vote at, this Meeting or any postponement
or adjournment thereof.
This Meeting is extremely important in light of the announcement by
dissident stockholder Opportunity Partners, L.P. ("Opportunity Partners"), which
is a hedge fund controlled by Mr. Phillip Goldstein (and which now may go by the
name "Bulldog Investors"), of its intention to solicit proxies against the
nominees of your Board of Directors (the "Board"). Opportunity Partners and its
allies - other hedge funds pursuing their short-term interests - have also made
known their intention to support three stockholder proposals that are strongly
opposed by the Board.
Your vote is very important. Whether or not you plan to attend the
Meeting, and regardless of the number of shares you own, we urge you to vote FOR
your Board's nominees (proposal 1) and against the dissident stockholder
proposals (proposals 3, 4 and 5) by promptly completing, signing, dating and
returning the enclosed White Proxy Card. We strongly urge you not to sign any
proxy card that may be sent to you by Opportunity Partners and the other hedge
fund dissidents, even to vote against their nominees. If you have previously
returned any proxy card sent to you by Opportunity Partners, you may change any
vote you may have cast in favor of Opportunity Partners' nominees, and vote
instead for the election of the Board's nominees and against the dissident
stockholder proposals by completing, signing and returning the enclosed White
Proxy Card in the accompanying envelope. If you hold your shares in a brokerage
or bank account (in "street name"), your broker or bank cannot vote your shares
this year unless you complete, sign and return the enclosed White proxy voting
form. In addition, you may be able to vote your shares by telephone or internet.
Please consult the materials you receive from your broker or bank prior to
voting by telephone or internet.
If you have any questions or need additional information, please contact
The Altman Group, Inc., the Fund's proxy solicitors, at 1200 Wall Street West,
Lyndhurst, New Jersey 07071, or toll-free by telephone at 1-800-884-5101.
By Order of the Board of Directors
[add signature block]
John Millette
Secretary
Dated: [o], 2006
Whether or not you expect to attend the Meeting, please sign the enclosed
White Proxy Card and promptly return it to the Fund. We ask your
cooperation in mailing in your White Proxy Card promptly, so that the Fund
can avoid additional expenses of solicitation of proxies.
2
THE NEW GERMANY FUND, INC.
345 Park Avenue
New York, New York 10154
Annual Meeting of Stockholders
[o], 2006
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement is furnished by the Board of Directors of The New
Germany Fund, Inc. (the "Board of Directors" or "Board"), a Maryland corporation
(the "Fund"), in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders (the "Meeting") to be held at [o], New York time,
on [o], 2006 at the offices of Deutsche Bank, 345 Park Avenue, New York, New
York 10154. The purpose of the Meeting and the matters to be considered are set
forth in the accompanying Notice of Annual Meeting of Stockholders.
THIS IS A VERY IMPORTANT ANNUAL MEETING OF STOCKHOLDERS OF THE FUND.
Despite the continued strong performance of your Fund (2005 total return of
18.94%, based on market value, and an annualized market value return of 27.38%
from January 1 to March 31, 2006), a group of dissident hedge funds led by
Phillip Goldstein and his hedge fund, Opportunity Partners L.P. (now calling
themselves "Bulldog Investors"), along with hedge fund operators Karpus
Investment Management and Laxey Partners Limited, have announced their intention
to solicit proxies against the nominees of your Board of Directors and in favor
of three proposals that, if not rejected by stockholders, could seriously
jeopardize the viability of your Fund.
Your Board strongly believes that the Board's nominees for re-election as
Directors are far better qualified and meet the director qualification
requirements in the Fund's Bylaws, which require experience in relevant
business, investment, economic or political matters. The Board's nominees will
better serve the interests of all stockholders. In contrast, the nominees
supported by the dissident hedge funds are not qualified to serve as directors
in accordance with the Fund's Bylaws. Accordingly, they may not be nominated or
elected to serve as directors of the Fund.
The Board of Directors strongly urges you to complete, sign, date and mail
promptly the White Proxy Card accompanying this Proxy Statement. If you hold
your shares in a brokerage or bank account (in "street name"), your broker or
bank cannot vote your shares this year (as it has in past routine annual
meetings) unless you complete, sign, date and mail promptly the proxy voting
form it will send you. In addition, you may be able to vote your shares by
telephone or internet. Please consult the materials you receive from your broker
or bank prior to voting by telephone or internet.
If the accompanying White Proxy Card is executed properly and returned,
shares represented by it will be voted at the Meeting, and any postponement or
adjournment thereof, in accordance with the instructions on the White Proxy
Card. However, if no instructions are specified, shares will be voted FOR the
election of three (3) directors of the Fund ("Directors") nominated by the Board
(Proposal 1), FOR the ratification of the appointment by the Audit Committee and
the Board of PricewaterhouseCoopers LLP, an independent public accounting firm,
as independent auditors for the Fund (Proposal 2), AGAINST the advisory contract
termination proposal (Proposal 3), AGAINST the bylaw proposal (Proposal 4), and
AGAINST the open-ending proposal (Proposal 5). A proxy may be revoked at any
time prior to the time it is voted by written notice to the Secretary of the
Fund, by submitting a subsequently executed and dated proxy or by attending the
Meeting and voting in person.
3
If a stockholder owns shares of the Fund in violation of applicable law,
including the Investment Company Act of 1940, as amended (the "Investment
Company Act"), the Fund may determine that any vote attributable to such shares
shall not be counted, or that such shares will not be counted for quorum
purposes, or both. Under Section 12(d)(1) of the Investment Company Act, the
acquisition of more than 3% of the Fund's common stock by another fund (whether
registered, private or offshore) is unlawful. There is legal uncertainty about
the operation of Section 12(d)(1) and about the Fund's right under federal and
state law to invalidate votes cast by any person whose Fund shares are held in
violation of law. The Fund is prepared, if necessary, to seek judicial
resolution of the uncertainty in any particular case.
The close of business on [o], 2006 has been fixed as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Meeting. On that date, the Fund had [o] shares of Common Stock outstanding and
entitled to vote. Each share will be entitled to one vote on each matter that
comes before the Meeting. It is expected that the Notice of Annual Meeting, this
Proxy Statement and the form of White Proxy Card will first be mailed to
stockholders on or about [o], 2006.
A quorum is necessary to hold a valid meeting. If stockholders entitled to
cast one-third of all votes entitled to be cast at the Meeting are present in
person or by proxy, a quorum will be established. The Fund intends to treat
properly executed proxies that are marked "abstain" and broker non-votes
(defined below) as present for the purposes of determining whether a quorum has
been achieved at the Meeting. Under Maryland law, abstentions do not constitute
a vote "for" or "against" a matter and will be disregarded in determining the
"votes cast" on an issue. A "broker non-vote" occurs when a broker holding
shares for a beneficial owner does not vote on a particular matter because the
broker does not have discretionary voting power with respect to that matter and
has not received instructions from the beneficial owner.
PROPOSAL 1: ELECTION OF DIRECTORS
The Fund's charter (the "Charter") provides that the Board of Directors be
divided into three classes of Directors serving staggered three-year terms and
until their successors are elected and qualify. The term of office for Directors
in Class III expires at the 2006 Annual Meeting, Class I at the next succeeding
annual meeting and Class II at the following succeeding annual meeting. Three
Class III nominees are proposed in this Proxy Statement for election. The three
Class III nominees, Dr. Franz Wilhelm Hopp, Mr. Ernst-Ulrich Matz and Dr. Frank
Tromel, are the only persons nominated by your Board of Directors for election
at this Meeting and, if elected, each will serve a three-year term of office
until the Annual Meeting of Stockholders in 2009 and until his respective
successor is elected and qualifies. The interests of the Fund and the
stockholders are best served when its Directors have experience in matters
relevant to the Fund's investment business. Accordingly, the Bylaws provide that
a nominee must have Relevant Experience and Country Knowledge and must not have
any Conflict of Interest. The relevant portions of the Fund's Bylaws describing
these requirements are included as Annex B to this Proxy Statement. The
Nominating Committee (excluding Dr. Tromel, who excused himself from its
deliberations and vote) concluded that each of the three Class III nominees
satisfies these requirements. An overview of the experience and current duties
of each of the Board's nominees is therefore appropriate.
Franz Wilhelm Hopp. Dr. Hopp served for many years as chief financial
officer of a large German insurance company, ERGO, which is a member of
the Allianz group of financial companies (owning Fireman's Fund Insurance
Company in the United States). In that capacity, Dr. Hopp helped oversee
over $100 billion in German and other investments. He is fluent in English
and German. Having retired in 2004, Dr. Hopp sits on the supervisory
boards of many prominent German companies in financial, real estate and
environmental businesses.
Ernest-Ulrich Matz. Mr. Matz was chief financial officer for over 20 years
at a large German holding company (IWKA) diversified in automation,
production and manufacturing technologies, such as assembly lines for the
automotive industry, packaging machines and lines for the cosmetics,
pharmaceuticals and food industries, and robotics. He is fluent in English
and German. Having become a consultant after his
4
retirement in 2000, Mr. Matz is a member of the supervisory boards of
several German companies engaged in industrial technology.
Frank Tromel. Dr. Tromel was chief executive officer for over 20 years of
the large diversified German companies Delton AG and Altana AG. Following
his retirement, Dr. Tromel has since 2000 been a member of the German
Accounting Standards Board, which establishes accounting standards for
German companies. He is fluent in English and German. He has been a
director of the Fund since its inception in 1990, and serves on the Audit
Committee of the Fund and of the European Equity Fund, Inc. (formerly The
Germany Fund, Inc.) and Central Europe and Russia Fund, Inc., both of
which are part of the Fund's Complex.
YOUR BOARD STRONGLY BELIEVES THAT ITS NOMINEES ARE BETTER QUALIFIED, MEET THE
DIRECTOR QUALIFICATION REQUIREMENTS IN THE FUND'S BYLAWS, AND WILL BETTER SERVE
THE INTERESTS OF ALL STOCKHOLDERS. ACCORDINGLY, WE UNANIMOUSLY RECOMMEND A VOTE
"FOR" EACH OF DR. HOPP, MR. MATZ, AND DR. TROMEL.
As discussed above, Opportunity Partners and its hedge fund allies have
announced their intention to solicit proxies against the nominees of your Board
of Directors and for the purported nominees of Phillip Goldstein and Opportunity
Partners. Although Opportunity Partners has not furnished complete information
about the persons it has proposed for director, based on the information
provided to date and on Mr. Goldstein's own admission, your Board's Nominating
Committee determined that none of the persons Opportunity Partners intends to
propose is qualified in accordance with the Fund's Bylaws to serve as a director
of the Fund. Your Board believes that through their qualifications and
experience, Dr. Hopp, Mr. Matz and Dr. Tromel will serve the interests of all
stockholders better than the nominees of Opportunity Partners. The contribution
of Opportunity Partners' nominees for director will not, in the opinion of the
Board, in any way compare with the value the three Board nominees have
contributed and will continue to contribute to the Fund as a result of their
extensive background in German business and political affairs:
o The Board nominees of the Fund provide distinct and ongoing
resources for your Board of Directors, especially in the
markets in which the Fund invests.
o On the other hand, the business backgrounds of Opportunity
Partners' potential nominees do not indicate any experience in
the markets in which the Fund invests. We invite you to make
your own comparison of the biographies of Opportunity
Partners' nominees to our nominees when you receive
Opportunity Partners' proxy statement.
We believe that the agenda being pursued by Opportunity Partners and the
hedge fund dissidents is to install a minority of directors who will continue to
pressure the Fund to conduct a partial tender offer, open-end, or liquidate. Our
reasons for believing those actions are not in the interests of Fund
stockholders are discussed at Proposal 5.
While the three dissident-supported candidates cannot become directors
under the Fund's Bylaws, and the Fund will not treat votes for the individuals
as "votes cast" for purposes of determining which individuals received a
plurality of votes cast, we urge stockholders to vote FOR our nominees to send
an important message.
Should any vacancy occur on the Board of Directors, the remaining
Directors would be able to fill that vacancy by the affirmative vote of a
majority of the remaining Directors in office, even if the remaining Directors
do not constitute a quorum. Any Director elected by the Board to fill a vacancy
would hold office until the remainder of the full term of the class of Directors
in which the vacancy occurred and until a successor is elected and qualifies. If
the size of the Board is increased, additional Directors will be apportioned
among the three classes to make all classes as nearly equal as possible.
5
Unless authority is withheld, it is the intention of the persons named in
the accompanying form of White Proxy Card to vote each White Proxy Card for the
election of our three Class III nominees listed above. Each of our Class III
nominees is currently a member of the Board of Directors. Each Class III nominee
has indicated that he will continue to serve as a Director if elected, but if
any nominee should be unable to serve, proxies will be voted for any other
person determined by the persons named in the form of White Proxy Card in
accordance with their discretion. The Board of Directors has no reason to
believe that any of the above nominees will be unable to continue to serve as a
Director.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 1
TO ELECT THE BOARD'S THREE NOMINEES AS CLASS III DIRECTORS.
Required Vote. Provided a quorum has been established, the affirmative
vote of a plurality of the votes cast at the Meeting is required for the
election of each Director. For purposes of the election of Directors,
abstentions and broker non-votes will have no effect on the result of the vote.
INFORMATION REGARDING DIRECTORS AND OFFICERS
The following tables show certain information about the nominees for
election as Directors and about Directors whose terms will continue, including
beneficial ownership of Common Stock of the Fund and about all officers of the
Fund. All Directors resident in the United States own Fund shares. Directors who
are German residents would be subject to adverse German tax consequences if they
owned shares of a fund organized outside of Germany, such as the Fund, that is
not subject to German regulation or tax reporting. Each Director has served as a
Director of the Fund for more than five years, many since the Fund's inception
in 1990, except for Ambassador Burt and Mr. Walbrol, who for many years have
been directors of other funds in the Fund Complex and were elected to the Board
in 2004.
6
Nominees Proposed for Election:
- --------------------------------------------------------------------------------------------------------------------------
Class III Directors; Nominees for Term Expiring in 2009
(Term will Expire in 2006; Nominees for Term Expiring in 2009)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Complex(2)
Overseen Shares
by of Common
Director Stock
Length or Beneficially
Name, of Principal Nominee Other Directorships Held Owned at
Address(1) & Position(s) Time Occupation(s) for by Director or Nominee for March 31,
Age with Fund Served During Past Five Years Director Director 2006(3)
- --------------------------------------------------------------------------------------------------------------------------
Non-Interested Directors
- --------------------------------------------------------------------------------------------------------------------------
Dr. Franz Director Since Former Member of the 1 Chairman of the Supervisory Board None
Wilhelm 1993 Boards of Management of of Ideenkapital Media Finance
Hopp, 63 ERGO Insurance Group AG, (investments and finance).
ERGO Europa Member of the Supervisory Boards
Beteiligungs-gesellschaft of Jenoptik, AG (environmental
AG, and ERGO systems and other technologies);
International AG TMW Immobilien AG (real estate);
(insurance) (over five Oesterreichische Volksbanken
years until 2004). (bank); KarstadtQuelle Bank GmbH;
Former Member of the GFKL Financial Services AG; MEAG
Boards of Management of Munich ERGO
VICTORIA Holding; Kapitalanlagegesellschaft mbH
VICTORIA (asset management);
Lebensversicherung AG Internationales
(life insurance); Immobilieninstitut GmbH (real
VICTORIA Versicherung AG estate); TMW Real Estate Group
(insurance); VICTORIA L.P.; and Victoria Volksbanken,
International; VICTORIA Oesterreich (bank). Member of
Ruckversicherung AG the Administrative Boards of
(reinsurance) and D.A.S. Frankfurter Volksbank (bank) and
Versicherungs-AG. HSBC Trinkaus & Burkhardt
(insurance). (bank). Member of the Advisory
Boards of Dresdner Bank AG; EnBW
Energie Baden-Wuerttemberg AG
(energy); Falke Bank AG;
Landeskreditbank Baden-Wuerttemberg;
Millenium Entertainment Partners
L.P. (real estate) and MPE Hotel,
LLC (real estate).
- --------------------------------------------------------------------------------------------------------------------------
Ernst-Ulrich Director Since Consultant. Vice 1 Member of the District Advisory None
Matz, 72 1995 Chairman of the Board of Gerling-Konzern (until
Supervisory Boards of 2002); Chairman of the Rumanian
Bopp & Reuther AG Group in the German East-West
(valve, control, Trade Committee (until 2002);
measurement and safety Member of the Advisory Council of
technology) (1990-2001). Herder GmbH & Co. KG (publishing);
Chief Financial Officer Member of the Supervisory Board
and member of the Board of Photon AG (laser engineering).
of Directors of IWKA Member of the District Advisory
Aktiengesellschaft Board of Deutsche Bank AG,
(management holding Mannheim (until 1999).
company - manufacturing
and engineering)
(1978-2000). Member of
the Supervisory Boards
of Ex-Cell-O AG (machine
tool and system
manufacturer) (1996-2001)
and ARO SA (1978-2000)
(resistance welding).
- --------------------------------------------------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------------------------------------------------
Class III Directors; Nominees for Term Expiring in 2009
(Term will Expire in 2006; Nominees for Term Expiring in 2009)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Complex(2)
Overseen Shares
by of Common
Director Stock
Length or Beneficially
Name, of Principal Nominee Other Directorships Held Owned at
Address(1) & Position(s) Time Occupation(s) for by Director or Nominee for March 31,
Age with Fund Served During Past Five Years Director Director 2006(3)
- --------------------------------------------------------------------------------------------------------------------------
Non-Interested Directors
- --------------------------------------------------------------------------------------------------------------------------
Dr. Frank Director Since Deputy Chairman of the 3 Director of The Central Europe None
Tromel, 1990 Supervisory Board of and Russia Fund, Inc. (since
70(5) DELTON AG (strategic 2005) and The European Equity
management holding Fund, Inc. (formerly The Germany
company operation in the Fund, Inc.) (since 2005).
pharmaceutical, household
products, logistics and
power supply sectors)
(since 2000). Member
(since 2000) and
Vice-President (since
2002) of the German
Accounting Standards
Board; Chairman of the
Board of Managing Directors
of DELTON AG (1990-1999);
Chairman of the Board of
Managing Directors of
ALTANA AG (management
holding company for the
pharmaceutical and chemical
operations) (1987-1990)
and Member of the Board
(1977-1987).
- --------------------------------------------------------------------------------------------------------------------------
8
Directors whose terms will continue:
- --------------------------------------------------------------------------------------------------------------------------
Class I Directors
(Term will Expire in 2007)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Complex(2)
Overseen Shares
by of Common
Director Stock
Length or Beneficially
Name, of Principal Nominee Other Directorships Held Owned at
Address(1) & Position(s) Time Occupation(s) for by Director or Nominee for March 31,
Age with Fund Served During Past Five Years Director Director 2006(3)
- --------------------------------------------------------------------------------------------------------------------------
Non-Interested Directors
- --------------------------------------------------------------------------------------------------------------------------
Ambassador Director Since Chairman, Diligence LLC 3 Director of The Central Europe 962
Richard R. 2004 (international and Russia Fund, Inc. (since
Burt, 59 information collection 2000) and The European Equity
and risk-management firm) Fund, Inc. (formerly The Germany
(since 2002). Chairman, Fund, Inc.) (since 2000). Board
IEP Advisors LLP Member, IGT, Inc. (gaming
(information services technology) (since 1995). Board
firm) (1998- 2001). Member, HCL Technologies, Inc.
Chairman of the Board, (information technology and
Weirton Steel Corp. product engineering) (since
(1996-2004). Formerly, 1999). Member, Textron Inc.
Partner, McKinsey & International Advisory Council
Company (consulting firm) (aviation, automotive, industrial
(1991-1994). U.S. operations and finance) (since
Ambassador to the Federal 1996). Director, UBS family of
Republic of Germany mutual funds (since 1995).
(1985-1991).
- --------------------------------------------------------------------------------------------------------------------------
Richard Karl Director Since Consultant. Retired Vice 1 Independent Non-Executive 10,985
Goeltz, 63 1990 Chairman and Chief Director of Aviva plc (financial
Financial Officer of services); Director of Federal
American Express Co. Home Loan Mortgage Corporation
(financial services) (Freddie Mac) and The Warnaco
(1996-2000). Former Group, Inc. (apparel); Member of
Chief Financial Officer the Court of Governors and the
of National Westminster Council of the London School of
Bank Plc (1992-1996). Economics and Political Science.
Former Executive Vice
President-Finance
(1986-1991) and Vice
President-Finance
(1976-1986) of The
Seagram Company Ltd.
- --------------------------------------------------------------------------------------------------------------------------
Robert H. Director Since President, Robert H. 91 Director of The European Equity 9,672
Wadsworth, 66 1992 Wadsworth Associates, Fund, Inc. (formerly The Germany
Inc. (consulting firm) Fund, Inc.) (since 1986) and The
(May 1983 to present). Central Europe and Russia Fund,
Formerly, President and Inc. (since 1990), as well as
Trustee, Trust for other funds in the Fund Complex
Investment Managers as indicated.(7)
(registered investment
companies) (April
1999-June 2002).
President, Investment
Company Administration,
L.L.C. (January
1992(6)-July 2001).
President, Treasurer and
Director, First Fund
Distributors, Inc.
(mutual fund
distribution) (June
1990-January 2002). Vice
President, Professionally
Managed Portfolios (May
1991-January 2002) and
Advisors Series Trust
(registered investment
companies) (October
1996-January 2002).
- --------------------------------------------------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------------------------------------------------
Class I Directors
(Term will Expire in 2007)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Complex(2)
Overseen Shares
by of Common
Director Stock
Length or Beneficially
Name, of Principal Nominee Other Directorships Held Owned at
Address(1) & Position(s) Time Occupation(s) for by Director or Nominee for March 31,
Age with Fund Served During Past Five Years Director Director 2006(3)
- --------------------------------------------------------------------------------------------------------------------------
Interested Director(4)
- --------------------------------------------------------------------------------------------------------------------------
Christian H. Director Since Member of Supervisory 3 Director of The European Equity None
Strenger, 62 and 1990 Board (since 1999) and Fund, Inc. (formerly The Germany
Chairman formerly Managing Fund, Inc.) (since 1986) and The
Director (1991-1999) of Central Europe and Russia Fund,
DWS Investment GmbH Inc. (since 1990).(2) Member,
(investment Supervisory Board, Fraport AG
management), a (international airport business)
subsidiary of Deutsche and Hermes Focus Asset Management
Bank AG. Europe Ltd. (asset management)
- --------------------------------------------------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------------------------------------------------
Class II Directors
(Term will Expire in 2007)
- --------------------------------------------------------------------------------------------------------------------------
Number of
Portfolios
in Fund
Complex(2)
Overseen Shares
by of Common
Director Stock
Length or Beneficially
Name, of Principal Nominee Other Directorships Held Owned at
Address(1) & Position(s) Time Occupation(s) for by Director or Nominee for March 31,
Age with Fund Served During Past Five Years Director Director 2006(3)
- --------------------------------------------------------------------------------------------------------------------------
Non-Interested Directors
- --------------------------------------------------------------------------------------------------------------------------
John H. Director Since Consultant (since 3 Director of The European Equity 4,537
Cannon, 64 1990 2002). Vice President Fund, Inc. (formerly The Germany
and Treasurer, Venator Fund, Inc.) (since 2004) and The
Group/ Footlocker Inc. Central Europe and Russia Fund,
(footwear retailer) Inc. (since 2004).(2)
(1982-2001).
- --------------------------------------------------------------------------------------------------------------------------
Werner Director Since President and Chief 3 Director of The Central Europe 928
Walbrol, 68 2004 Executive Officer, The and Russia Fund, Inc. (since
European American 1990) and The European Equity
Chamber of Commerce, Fund, Inc. (formerly The Germany
Inc. (since 2004). Fund, Inc.) (since 1986).(2)
Formerly, President and Director, TUV Rheinland of North
Chief Executive America, Inc. (independent
Officer, The German testing and assessment
American Chamber of services). Director, The
Commerce, Inc. (until German American Chamber of
2003). Commerce, Inc. President and
Director, German-American
Partnership Program (student
exchange programs). Director,
AXA Art Insurance Corporation
(fine art and collectible
insurer).
- --------------------------------------------------------------------------------------------------------------------------
Peter Director Since Managing Director of 1 Chairman of the Supervisory None
Zuhlsdorff, 1997 DIH Deutsche Industrie Board, Merck KGaA
65 Holding (holding (pharmaceuticals and chemicals)
company) (since 1997); and Escada AG (fashion); Member
Managing Director of of the Supervisory Board, GfK AG
DSD Duales System (market research), Deutz AG
Deutschland AG (heavy machinery and engines),
(recycling) (since Kaisers Tengelmann AG (food and
2004). Managing specialty retailing) and TV
Director of Tengelmann Loonland AG (entertainment
Unternehmensgruppe distribution); Member of the
(food and specialty Advisory Board, Tengelmann
retailing) (1998-2003). Verwaltungs-und
Managing Director of Beteiligungsgesellschaft GmbH
Bewerbungskommitee (food and specialty retailing).
Leipzig 2012 GmbH
(olympic bid committee)
(2004) and Managing
Director of PZ
Sportpark GmbH
(1996-2003).
- --------------------------------------------------------------------------------------------------------------------------
Interested Director(4)
- --------------------------------------------------------------------------------------------------------------------------
John Bult, 70 Director Since Chairman, PaineWebber 3 Director of The European Equity 2,830
1990 International (asset Fund, Inc. (formerly The Germany
management) (since 1985). Fund, Inc.) (since 1986) and
The Central Europe and Russia
Fund, Inc. (since 1990).(2)
Director of The Greater China
Fund, Inc. (closed-end fund).
- --------------------------------------------------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------------------------------------------------------
Executive Officers (8)
- --------------------------------------------------------------------------------------------------------------------------------
Term of Shares
Office of Common
and Stock
Length Beneficially
Position(s) of Principal Owned at
Name, Address(1) & with Time Occupation(s) March 31,
Age Fund Served During Past Five Years 2006(3)
- --------------------------------------------------------------------------------------------------------------------------------
Paul H. Schubert, 43 Treasurer Since Managing Director, Deutsche Asset Management (since 2004). None
and Chief 2004 Formerly, Executive Director, Head of Mutual Fund Services and
Financial Treasurer for UBS Family of Funds at UBS Global Asset
Officer Management (1994-2004); Vice President and Director of Mutual
Fund Finance at UBS Global Asset Management (1994-1998).
- --------------------------------------------------------------------------------------------------------------------------------
John Millette, 43(9) Secretary Since Director, Deutsche Asset Management (since 2002). None
2006
- --------------------------------------------------------------------------------------------------------------------------------
Kathleen Sullivan Assistant Since Director, Deutsche Asset Management (since 2002). Formerly None
D'Eramo, 49(9) Treasurer 2003 Senior Vice President, Zurich Scudder Investments (2000-2002).
- --------------------------------------------------------------------------------------------------------------------------------
Elisa D. Metzger, 43 Chief Since Director, Deutsche Asset Management (since Sept. 2005); None
Legal 2005 Counsel, Morrison and Foerster LLP (1999-2005).
Officer
- --------------------------------------------------------------------------------------------------------------------------------
Philip Gallo, 43 Chief Since Managing Director, Deutsche Asset Management (2003-present). None
Compliance 2004 Formerly, Co-Head of Goldman Sachs Asset Management Legal
Officer (1994-2003).
- --------------------------------------------------------------------------------------------------------------------------------
(1) The mailing address of all directors and officers with respect to Fund
operations is c/o Deutsche Investment Management Americas Inc., 345 Park
Avenue, NYC20-2799, New York, New York 10154.
(2) The Fund Complex includes the European Equity Fund, Inc. (formerly The
Germany Fund, Inc.) and The Central Europe and Russia Fund, Inc., which
are the other closed-end registered investment companies for which
Deutsche Investment Management Americas Inc. acts as manager. It also
includes 159 other open- and closed-end funds advised by wholly-owned
entities of the Deutsche Bank Group in the United States.
(3) All Directors and Executive Officers as a group (16 persons) owned 29,616
shares, which constitutes less than 1% of the outstanding Common Stock of
the Fund. Share numbers in this Proxy Statement have been rounded to the
nearest whole share.
(4) Indicates "Interested Person", as defined in the Investment Company Act.
Mr. Bult is an "interested" Director because of his affiliation with
PaineWebber International, an affiliate of UBS Securities L.L.C., a
registered broker-dealer; and Mr. Strenger is an "interested" Director
because of his affiliation with DWS-Deutsche Gesellschaft fur
Wertpapiersparen mbH ("DWS"), a subsidiary of Deutsche Bank AG, and
because of his ownership of Deutsche Bank AG shares.
(5) Dr. Tromel's son has been employed since March 1, 2002 by an indirect
subsidiary of Deutsche Bank AG.
(6) Inception date of the corporation which was the predecessor to the limited
liability company.
(7) Mr. Wadsworth serves as a Director/Trustee of the following investment
companies: DWS Blue Chip Fund, DWS Equity Trust, DWS High Income Series,
DWS State Tax-Free Income Series, DWS Strategic Income Fund, DWS Target
Fund, Cash Account Trust, Investors Cash Trust, Investors Municipal Cash
Fund, Tax-Exempt California Money Market Fund, DWS Technology Fund, DWS
Balanced Fund, DWS U.S. Government Securities Fund, DWS Value Series Inc.,
DWS Variable Series II, and DWS Money Funds. Mr. Wadsworth also serves as
a Trustee of the following closed-end investment companies: DWS High
Income Trust, DWS Multi-Market Income Trust, DWS Municipal Income Trust,
DWS Strategic Income Trust, and DWS Strategic Municipal Income Trust.
These funds are advised by Deutsche Investment Management Americas Inc., a
wholly-owned subsidiary of Deutsche Bank AG.
(8) Each also serving as an officer of The European Equity Fund, Inc.
(formerly The Germany Fund, Inc.) and The Central Europe and Russia Fund,
Inc. The officers of the Fund are elected annually by the Board of
Directors at its meeting following the Annual Meeting of Stockholders.
Each of Messrs. Schubert, Millette and Gallo and Ms. D'Eramo and Ms.
Metzger also serves as an officer of other Funds in the Fund Complex.
(9) Indicates ownership of securities of Deutsche Bank AG either directly or
through Deutsche Bank's deferred compensation plan.
The following table contains additional information with respect to the
beneficial ownership of equity securities by each Director or Nominee in the
Fund and, on an aggregated basis, in any registered investment companies
overseen by the Director or Nominee within the same Family of Investment
Companies as the Fund:
12
- ----------------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of
Equity Securities in All Funds
Dollar Range of Equity Overseen by Director or Nominee
Name of Director or Nominee Securities in the Fund (1) in Family of Investment Companies (1),(2)
- ----------------------------------------------------------------------------------------------------------------
John Bult $10,001 - $50,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
Ambassador Richard R. Burt $10,001 - $50,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
John H. Cannon $50,001 - $100,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
Richard Karl Goeltz Over $100,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
Dr. Franz Wilhelm Hopp None None
- ----------------------------------------------------------------------------------------------------------------
Ernst-Ulrich Matz None None
- ----------------------------------------------------------------------------------------------------------------
Christian H. Strenger None $50,001 - $100,000
- ----------------------------------------------------------------------------------------------------------------
Dr. Frank Tromel None None
- ----------------------------------------------------------------------------------------------------------------
Robert H. Wadsworth Over $100,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
Werner Walbrol $10,001 - $50,000 Over $100,000
- ----------------------------------------------------------------------------------------------------------------
Peter Zuhlsdorff None None
- ----------------------------------------------------------------------------------------------------------------
(1) Valuation date is March 31, 2006. Directors who are German residents would
be subject to adverse German tax consequences if they owned shares of a
fund organized outside of Germany, such as the Fund, that is not subject
to German regulation or tax reporting.
(2) The Family of Investment Companies consists of the Fund, The European
Equity Fund, Inc. (formerly The Germany Fund, Inc.) and The Central Europe
and Russia Fund, Inc., which are closed-end funds and share the same
investment adviser and manager and hold themselves out as related
companies.
The Board of Directors presently has five standing committees including an
audit committee (the "Audit Committee"), an advisory committee (the "Advisory
Committee"), an executive committee (the "Executive Committee"), a nominating
committee (the "Nominating Committee") and a special committee on shareholder
initiatives (the "Special Shareholder Initiatives Committee").
The Audit Committee, comprising Messrs. Cannon, Tromel, Wadsworth and
Walbrol, operates pursuant to a written charter. The Audit Committee's
organization and responsibilities are contained in the Audit Committee Report,
which is included in this Proxy Statement, and in its written charter. The
members of the Audit Committee are "independent" as required by the independence
standards of Rule 10A-3 under the Securities Exchange Act of 1934. The Board of
Directors has determined that each member of the Audit Committee is financially
literate and has determined that each of Messrs. Cannon and Wadsworth meets the
requirements for an audit committee financial expert under the rules of the
Securities and Exchange Commission ("SEC"). Although the Board has determined
that these individuals meet the requirements for an audit committee financial
expert, their responsibilities are the same as those of the other audit
committee members. They are not auditors or accountants, do not perform "field
work" and are not full-time employees. The SEC has determined that an audit
committee member who is designated as an audit committee financial expert will
not be deemed to be an "expert" for any purpose as a result of being identified
as an audit committee financial expert. The Audit Committee met six times during
the fiscal year ended December 31, 2005.
The Advisory Committee, comprising Messrs. Cannon, Goeltz, Matz, Tromel
and Wadsworth, makes recommendations to the full Board with respect to the
Management Agreement between the Fund and Deutsche Investment Management
Americas Inc., and the Investment Advisory Agreement between the Fund and
Deutsche Asset Management International GmbH. The Advisory Committee met two
times during the past fiscal year, in connection with the annual continuance of
those agreements.
The Executive Committee, comprising Messrs. Cannon, Goeltz, Strenger and
Wadsworth, has the authority to act for the Board on all matters between
meetings of the Board, subject to any limitations under applicable state law.
During the past fiscal year the Executive Committee did not meet.
The Special Shareholder Initiatives Committee, comprising Messrs. Bult,
Burt, Cannon, Goeltz, Wadsworth and Walbrol, has the authority to act for the
Board on all matters relating to stockholder initiatives. The Special
Shareholder Initiatives Committee met seven times during the past fiscal year.
The Nominating Committee comprises Messrs. Cannon, Goeltz, Tromel and
Wadsworth. Generally, the Nominating Committee identifies, evaluates and selects
and nominates, or recommends to the Board of Directors, candidates for the Board
or any committee of the Board. To be eligible for nomination as a Director a
person must, at the time of such person's nomination, have Relevant Experience
and Country Knowledge and must not have any
13
Conflict of Interest, as those terms are defined in the Fund's Bylaws. The
relevant portions of the Fund's Bylaws describing these requirements are
included as Annex A. The Nominating Committee may also take into account
additional factors listed in the Nominating Committee Charter, which generally
relate to the nominee's industry knowledge, business experience, education,
ethical reputation, special skills, ability to work well in group settings and
the ability to qualify as an "independent director."
The Nominating Committee will consider nominee candidates properly
submitted by stockholders in accordance with applicable law, the Fund's Charter
or Bylaws, resolutions of the Board and the qualifications and procedures set
forth in the Nominating Committee Charter (set forth in Annex A) 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 Bylaws.
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 Bylaws. The relevant portions describing
these requirements are included as Annex B. 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. The
Nominating Committee met two times during the past fiscal year.
All members on each of the five committees of the Board are not
"interested persons" as the term is defined in the Investment Company Act
(except that Mr. Strenger, an interested person, is a member of the Executive
Committee, and Mr. Bult, an interested person, is a member of the Special
Shareholder Initiatives Committee).
During the past fiscal year, the Board of Directors had five regular
meetings. Each incumbent Director who served as a Director during the past
fiscal year, attended at least 75% of the aggregate number of meetings of the
Board and meetings of Board Committees on which that Director served. The Board
has a policy that encourages Directors to attend the Annual Meeting of
Stockholders, to the extent that travel to the Annual Meeting of Stockholders is
reasonable for that Director. Four Directors attended the 2005 Annual Meeting of
Stockholders.
To communicate with the Board of Directors or an individual Director of
the Fund, a stockholder must send a written communication to the Fund's
principal office at 345 Park Avenue NYC20-2799, New York, New York 10154 (c/o
The New Germany Fund, Inc.), addressed to (i) the Board of Directors of the Fund
or an individual Director, and (ii) the Secretary of the Fund. The Secretary of
the Fund will direct the correspondence to the appropriate parties.
The Fund pays each of its Directors who is not an interested person of the
Fund, of the investment adviser or of the manager an annual fee of $7,500 plus
$750 for each Board and Committee meeting attended. Each such Director who is
also a Director of The European Equity Fund, Inc. (formerly The Germany Fund,
Inc.) or The Central Europe and Russia Fund, Inc. also receives the same annual
and per-meeting fees for services as a Director of each such fund. No Director
of all three funds is paid for attending more than two funds' board and
committee meetings when meetings of the three funds are held concurrently, and
no such Director receives more than the annual fee of two funds. Each of the
Fund, The European Equity Fund, Inc. (formerly The Germany Fund, Inc.) and The
Central Europe and Russia Fund, Inc. reimburses the Directors (except for those
employed by the Deutsche Bank Group) for travel expenses in connection with
Board meetings. These three funds, together with 159 other open- and closed-end
funds advised by wholly-owned entities of the Deutsche Bank Group in the United
States, represent the entire Fund Complex within the meaning of the applicable
rules and regulations of the SEC. The following table sets forth (a) the
aggregate compensation from the Fund for the fiscal year ended December 31,
2005, and (b) the total compensation from each fund in the Fund Complex that
includes the Fund, for the 2005 fiscal year of each such fund, (i) for each
Director who is not an interested person of the Fund, and (ii) for all such
Directors as a group:
Aggregate Compensation Total Compensation
Name of Director From Fund From Fund Complex
---------------- ---------------------- ------------------
Ambassador Richard R. Burt $15,750 $195,280
John H. Cannon $19,750 $51,750
14
Richard Karl Goeltz $18,750 $18,750
Dr. Franz Wilhelm Hopp $12,000 $12,000
Ernst-Ulrich Matz $13,500 $13,500
Dr. Frank Tromel $11,750 $21,250
Robert H. Wadsworth $18,500 $227,510
Werner Walbrol $16,750 $56,250
Peter Zuhlsdorff $11,250 $11,250
Total $138,000 $607,540
No compensation is paid by the Fund to Directors who are interested
persons of the Fund or of any entity of the Deutsche Bank Group or to officers.
Bylaw Litigation
On June 6, 2005, an alleged stockholder of the Fund commenced litigation
in Maryland state court against the Fund and its directors regarding purported
nominees put forth by dissident stockholder Opportunity Partners, L.P. for
election at the 2005 annual meeting of stockholders on June 21, 2005 and
regarding the Fund's Bylaws. The complaint, purportedly a class action on behalf
of all stockholders, alleges, among other things: that the directors breached
their fiduciary duty and the Bylaws in taking the position in 2005 that the
Fund's director qualification Bylaw applied to Opportunity Partners' purported
nominees in 2005 and that they were not permitted to be nominated or elected to
serve as Fund directors; that the director qualification and certain other
provisions of the Fund's Bylaws are not valid; that even if those provisions are
valid, the votes for Opportunity Partners' purported nominees must count as
"votes cast" for purposes of determining whether the Board's nominees received a
plurality of votes cast; that the Fund and the directors should be required to
disclose how votes in favor of Opportunity Partners' purported nominees would be
treated; and that the Fund and the directors did not have authority to disregard
votes purportedly cast by persons whose shareholdings violated the Investment
Company Act. The complaint seeks as relief, among other things, a declaration
that the qualification Bylaw did not apply to Opportunity Partners' nominees in
2005 and/or is invalid. Although it solicited proxies for its purported
nominees, Opportunity Partners did not attend the Fund's 2005 annual meeting of
stockholders and did not cast votes represented by those proxies. On July 12,
2005, the Fund and its Directors removed the case to the United States District
Court for the District of Maryland. On March 29, 2006, the court denied a motion
filed by the Fund and its directors to dismiss the complaint before the
discovery stage. In doing so, the court did not reach the merits. The matter
will now proceed into discovery on the merits. The Board believes that the
Bylaws are valid and the complaint is without merit.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has approved PricewaterhouseCoopers LLP (the "Firm" or
"PwC"), an independent registered public accounting firm, as independent
auditors for the Fund for the fiscal year ending December 31, 2006 A majority of
members of the Board of Directors, including a majority of the members of the
Board of Directors who are not "interested" Directors (as defined in the
Investment Company Act) of the Fund, have ratified the appointment of PwC as the
Fund's independent auditors for that fiscal year. Based principally on
representations from the Firm, the Fund knows of no direct financial or material
indirect financial interest of such Firm in the Fund. That Firm, or a
predecessor firm, has served as the independent auditors for the Fund since
inception.
Neither our Charter nor Bylaws requires that the stockholders ratify the
appointment of PwC as our independent auditors. We are doing so because we
believe it is a matter of good corporate practice. If the stockholders do not
ratify the appointment, the Audit Committee and the Board of Directors will
reconsider whether or not to retain PwC, but may retain such independent
auditors. Even if the appointment is ratified, the Audit Committee and the Board
of Directors in their discretion may change the appointment at any time during
the year if they determine that such change would be in the best interests of
the Fund and its stockholders. It is intended that the
15
persons named in the accompanying form of proxy will vote for PwC. A
representative of PwC will be present at the Meeting and will have the
opportunity to make a statement and is expected to be available to answer
appropriate questions concerning the Fund's financial statements.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
Required Vote. Provided a quorum has been established, the affirmative
vote of a majority of the votes cast at the Meeting is required for the
ratification of the appointment by the Audit Committee and the Board of
Directors of PwC as independent auditors for the Fund for the fiscal year ending
December 31, 2006. For purposes of Proposal 2 abstentions will have no effect on
the result of the vote.
INFORMATION WITH RESPECT TO THE FUND'S INDEPENDENT AUDITORS
The following table shows fees paid to PwC by the Fund during the Fund's
two most recent fiscal years: (i) for audit and non-audit services provided to
the Fund, and (ii) for engagements for non-audit services pre-approved by the
Audit Committee for the Fund's manager and investment adviser and certain
entities controlling, controlled by, or under common control with the manager
and investment adviser that provide ongoing services to the Fund (collectively,
the "Adviser Entities"), which engagements relate directly to the operations and
financial reporting of the Fund. The Audit Committee of each board will review,
at least annually, whether PwC's receipt of non-audit fees from the Fund, the
Fund's manager, the Fund's investment adviser and all Adviser Entities is
compatible with maintaining PwC's independence.
Audit
Fees(1) Audit Related Fees(2) Tax Fees(3) All Other Fees(4)
------- --------------------- ----------------- -----------------
Adviser Adviser Adviser
Fiscal Year Fund Fund Entities Fund Entities Fund Entities
- --------------------- ------- ---- -------- ------ -------- ---- --------
2005................. $63,000 -- $268,900 -- $197,605 -- --
2004................. $54,900 -- $431,907 $6,700 -- -- --
(1) "Audit Fees" are the aggregate fees billed for professional services
for the audit of the Fund's annual financial statements and services
provided in connection with statutory and regulatory filings or
engagements.
(2) "Audit Related Fees" are the aggregate fees billed for assurance and
related services reasonably related to the performance of the audit
or review of financial statements and are not reported under "Audit
Fees."
(3) "Tax Fees" are the aggregate fees billed for professional services
for tax advice, tax compliance and tax planning.
(4) "All Other Fees" are the aggregate fees billed for products and
services other than "Audit Fees," "Audit Related Fees" and "Tax
Fees."
Audit Committee Pre-Approval Policies and Procedures. Generally, the Audit
Committee must pre-approve (i) all services to be performed for the Fund by the
Fund's independent auditors and (ii) all non-audit services to be performed by
the Fund's independent auditors for the Fund's investment adviser or any Adviser
Entities with respect to operations and financial reporting of the Fund. The
Chair of the Audit Committee may approve or deny the request to engage the
auditors to provide any fund services or fund-related services that are not
listed on the pre-approved list if the cost associated with the request is
$50,000 or less, or at the Chair's discretion, determine to call a special
meeting of the Audit Committee for the purpose of considering the proposal.
Should the Chair of the Audit Committee be unavailable, any other member of the
Audit Committee may serve as an alternate for the purpose of approving or
denying the request. The auditors shall report to the Audit Committee at each of
its regular meetings all audit or non-audit services to the Fund and all
non-audit services to the Adviser Entities that relate directly to the Fund's
operations and financial reporting initiated since the last such report was
rendered, including a general description of the services and projected fees and
the means by which such services were approved by the Audit Committee. The
engagement of the auditors to provide certain services customarily required by
the Fund in the ordinary course of its operations or by an Adviser Entity in the
ordinary course of its operations is approved by the Audit Committee subject to
pre-determined dollar limits. In all cases where an Adviser Entity engages the
auditors to provide audit or non-audit services not relating to Fund operations
or financial reporting, and the projected fees for such engagement exceed
$25,000, the auditors will notify the Audit Committee not later than their next
meeting.
16
All Non-Audit Fees. The table below shows the aggregate non-audit fees
billed by PwC for services rendered to the Fund and to the Adviser Entities that
provide ongoing services to the Fund, whether or not such engagements relate
directly to the operations and financial reporting of the Fund, for the two most
recent fiscal years for the Fund.
Aggregate
Fiscal Year Non-Audit Fees
----------- --------------
2005 $302,240
2004 $259,972
AUDIT COMMITTEE REPORT
The purposes of the Audit Committee are 1) to assist the Board of
Directors in its oversight of (i) the integrity of the Fund's financial
statements; (ii) the Fund's compliance with legal and regulatory requirements;
(iii) the independent auditors' qualifications and independence; and (iv) the
performance of the independent auditors; and 2) to prepare this report. Each
Member of the Audit Committee is "independent," as required by the independence
standards of Rule 10A-3 under the Securities Exchange Act of 1934. The Audit
Committee operates pursuant to a written charter. As set forth in the Audit
Committee Charter, management of the Fund and applicable service providers are
responsible for the preparation, presentation and integrity of the Fund's
financial statements and for the effectiveness of internal control over
financial reporting. Management and applicable service providers are responsible
for maintaining appropriate accounting and financial reporting principles and
policies and internal control over financial reporting and other procedures that
provide for compliance with accounting standards and applicable laws and
regulations. The independent auditors are responsible for planning and carrying
out a proper audit of the Fund's annual financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Audit Committee has
considered and discussed the audited financial statements with Management and
the independent auditors of the Fund. The Audit Committee has also discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61, Communication with Audit Committees, as currently
in effect. The Audit Committee has also considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent auditors to the Fund's investment adviser, manager or to any
entity controlling, controlled by or under common control with the Fund's
investment adviser or manager that provides ongoing services to the Fund is
compatible with maintaining the auditors' independence. Finally, the Audit
Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect, and has
discussed with the auditors their independence.
The members of the Audit Committee are not full-time employees of the Fund
and are not performing the functions of auditors or accountants. As such, it is
not the duty or responsibility of the Audit Committee or its members to conduct
"field work" or other types of auditing or accounting reviews or procedures or
to set auditor independence standards. Members of the Audit Committee
necessarily rely on the information provided to them by management and the
independent auditors. Accordingly, the Audit Committee's considerations and
discussions referred to above do not assure that the audit of the Fund's
financial statements has been carried out in accordance with generally accepted
auditing standards, that the financial statements are presented in accordance
with generally accepted accounting principles or that the Fund's auditors are in
fact "independent."
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Charter, the Audit Committee recommended
to the Board of Directors of the Fund that the audited financial statements of
the Fund be included in the Fund's annual report to stockholders for the fiscal
year ended December 31, 2005.
17
Submitted by the Audit Committee
of the Fund's Board of Directors
John H. Cannon
Frank Tromel
Robert H. Wadsworth
Werner Walbrol
INFORMATION ABOUT THE INVESTMENT MANAGER AND INVESTMENT ADVISER
Investment Manager and Investment Adviser
The Fund's Investment Manager is Deutsche Investment Management Americas
Inc. ("DIMA" or the "Manager"). Its Investment Adviser is Deutsche Asset
Management International GmbH ("DeAMI" or the "Investment Adviser"). The Fund
entered into a management agreement with DIMA's predecessor and an investment
advisory agreement with DeAMI (at the time of execution of the agreement, DB
Capital Management International GmbH) on March 6, 1990. The Fund's Board of
Directors approved a transfer of the management agreement to DIMA on July 12,
2004, which became effective September 1, 2004 and did not involve any change in
control or actual management of the investment manager. Both agreements continue
in effect for successive twelve-month periods from their initial term, but only
if the agreements are approved for continuance annually by the Board in
accordance with the requirements of the Investment Company Act. The Board of
directors last voted to continue both the management agreement and the
investment advisory agreement on July 17, 2005. Both agreements were last
submitted to and approved by stockholders on June 21, 1991. Both agreements are
terminable without penalty by vote of the Board or by a vote of the holders of a
majority of the Fund's outstanding common stock, or by DIMA or DeAMI, as the
case may be, at any time upon not less than sixty days' written notice to the
other party. Since neither DIMA nor DeAMI is willing to provide services
separately, each agreement provides that it shall automatically terminate upon
assignment or upon termination of the other agreement.
Pursuant to the management agreement (attached as Annex D), DIMA is the
Fund's corporate manager and administrator and, subject to the supervision of
the Board and pursuant to recommendations made by the investment adviser,
determines which securities are suitable securities for the Fund's investment.
DIMA (i) handles the Fund's relationships with its stockholders, including
stockholder inquiries, (ii) is responsible for, arranges and monitors compliance
with regulatory requirements and New York Stock Exchange listing requirements
and (iii) negotiates contractual arrangements with third-party service
providers, including, but not limited to, custodians, transfer agents, auditors
and printers. DIMA also provides office facilities and personnel to carry out
these services, together with clerical and bookkeeping services which are not
being furnished by our custodian or transfer and dividend-paying agent. In
addition, DIMA (i) determines and publishes the Fund's net asset value in
accordance with its policy as adopted from time to time by the Board, (ii)
establishes the Fund's operating expense budgets and authorizes the payment of
actual operating expenses incurred, (iii) calculates the amounts of dividends
and distributions to be declared and paid by the Fund to its stockholders, (iv)
provides the Board with financial analyses and reports necessary for the Board
to fulfill its fiduciary responsibilities, (v) maintains the Fund's books and
records required under the Investment Company Act (other than those being
maintained by the Fund's custodian and transfer and dividend-paying agent and
registrar, as to which DIMA oversees such maintenance), (vi) prepares the Fund's
United States federal, state and local income tax returns, (vii) prepares
financial information for the Fund's proxy statements and quarterly and annual
reports to stockholders and (viii) prepares the Fund's reports to the SEC. The
Fund pays DIMA a management fee, computed weekly and payable monthly, at an
annual rate of 0.65% of the Fund's average weekly net assets up to $100,000,000,
0.55% of such assets in excess of $100,000,000, and 0.50% of such assets in
excess of $500,000,000. During the fiscal year ended December 31, 2005, the Fund
paid DIMA a management fee of $1,609,719. In addition, during that fiscal year
the Fund paid an aggregate amount of $139,156 in brokerage commissions to
Deutsche Bank AG or its affiliates, which constituted approximately 25% of the
Fund's aggregate brokerage commissions of $559,796.
Pursuant to the investment advisory agreement (attached as Annex C),
DeAMI, in accordance with the Fund's investment objective, policies and
restrictions, makes recommendations to the Fund's Manager with respect to our
investments and, upon instructions given by the Manager as to which securities
are suitable for investment, transmits purchase and sale orders and selects
brokers and dealers to execute portfolio transactions on the Fund's
18
behalf. The Fund pays DeAMI an investment advisory fee, computed weekly and
payable monthly, at an annual rate of 0.35% of the Fund's average weekly net
assets up to $100 million and 0.25% of such assets in excess of $100 million.
During the fiscal year ended December 31, 2005, the Fund paid DeAMI an
investment advisory fee of $786,099.
Neither DIMA nor DeAMI is liable for any error of judgment or for any loss
suffered by the Fund in connection with the matters to which the management
agreement or the investment advisory agreement, respectively, relates, except
for any loss resulting from willful misfeasance, bad faith or gross negligence
in the performance of, or from reckless disregard of, its obligations and duties
under the management agreement or the investment advisory agreement,
respectively, or a loss resulting from a breach of fiduciary duty with respect
to receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the Investment Company Act).
Both the management agreement and the investment advisory agreement
provide that DIMA and DeAMI, respectively, are responsible for all expenses of
all employees and overhead incurred by them in connection with their duties
under their respective agreements. DIMA pays all salaries and fees of the Fund's
directors and officers who are "interested persons" under the Investment Company
Act. An "interested person" is a director who is not independent under the
specific requirements of the Investment Company Act. The Fund bears all of its
own expenses.
Both DIMA and DeAMI are wholly owned direct or indirect subsidiaries of
Deutsche Bank AG, a major German banking institution. The corporate office of
DIMA is located at 345 Park Avenue, New York, New York 10154. DIMA is a
wholly-owned subsidiary of Deutsche Bank Americas Holding Corp., which in turn,
is a wholly-owned subsidiary of Taunus Corporation. Taunus Corporation is a
wholly-owned subsidiary of Deutsche Bank AG. The principal office of both
Deutsche Bank Americas Holding Corp. and Taunus Corporation is located at 60
Wall Street, New York, New York 10005. The corporate office of Deutsche Bank AG
is located at Taunuslage 12, D-60262, Frankfurt am Main, Germany.
The following table shows the directors and officers for DIMA and their
principal occupations. The principal address for all directors and officers of
DIMA is 345 Park Avenue, New York, New York.
Board Member / Officer Officer Title(s)
---------------------- ----------------
Axel Schwarzer(1) President and Chief
Executive Officer
Michael Colon(1) Chief Operating Officer
Jennifer Birmingham Chief Financial Officer and
Treasurer
A. Thomas Smith Secretary and Chief Legal
Officer
Mark Cullen Executive Vice President
Patrick Campion Executive Vice President
John Robbins Chief Compliance Officer
Niral Kalaria Assistant Secretary
John H. Kim Assistant Secretary
(1) Messrs. Schwarzer and Colon also serve as Directors of DIMA.
The principal office of DeAMI is located at Mainzer Landstrasse 178-190,
D-60327 Frankfurt am Main, Germany. DeAMI is a wholly-owned subsidiary of DB
Financial Services Holding GmbH, which is a wholly-owned subsidiary of DB
Capital Markets (Deutschland) GmbH, which is a wholly-owned subsidiary of
Deutsche Bank AG. The directors of DeAMI are Marcus Goering (whose principal
occupation is Managing Director, Business Management), Peter Kerger (whose
principal occupation is Managing Director and Head of Institutional
Distribution) and George Schuh (whose principal occupation is Chief Investment
Officer). The three directors share the management responsibilities of DeAMI.
The other officers of DeAMI are: Stefan Axler (Controlling / Legal Entity),
Karola Plumridge (Legal), Michael Bergman (Legal) and Ralf Ring (Compliance).
Neither DIMA nor DeAMI acts as investment adviser with respect to any
other fund having a similar investment objective.
19
Factors Considered in Continuance
The Fund's directors unanimously approved the continuance of the
management agreement between the Fund and DIMA and the investment advisory
agreement between the Fund and DeAMI (together called the "Agreements") at a
meeting held on July 17, 2005.
In preparation for the meeting, the directors had requested and evaluated
extensive materials from the Manager and Investment Adviser, including
performance and expense information for other investment companies with similar
investment objectives derived from data compiled by Lipper Inc. ("Lipper").
Prior to voting, the directors reviewed the proposed continuance of the
Agreements with management and with experienced counsel who are independent of
the Manager and Investment Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in a private
session with outside counsel at which no representatives of the Manager or
Investment Adviser were present. In reaching their determination relating to
continuance of the Agreements, the directors considered all factors they
believed relevant, including the following:
1. information comparing the performance of the Fund to other
investment companies with similar investment objectives and to an
index;
2. the nature, extent and quality of investment and administrative
services rendered by the Manager and Investment Adviser;
3. payments received by the Manager and Investment Adviser from all
sources in respect of the Fund and all investment companies in the
Deutsche/Scudder family of funds;
4. the costs borne by, and profitability of, the Manager and Investment
Adviser and their affiliates in providing services to the Fund and
to all investment companies in the Deutsche/Scudder family of funds;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized as the Fund
grows and whether fee levels reflect these economies of scale for
the benefit of investors;
7. the Manager's and Investment Adviser's policies and practices
regarding allocation of portfolio transactions of the Fund,
including the extent, if any, to which the Manager and Investment
Adviser benefit from soft dollar arrangements;
8. portfolio turnover rates of the Fund compared to other investment
companies with similar investment objectives;
9. fall-out benefits which the Manager, the Investment Adviser and
their affiliates receive from their relationships with the Fund;
10. the professional experience and qualifications of the Fund's
portfolio management team and other senior personnel of the Manager
and Investment Adviser; and
11. the terms of the Agreements.
The directors also considered their knowledge of the nature and quality of
the services provided by the Manager and Investment Adviser to the Fund gained
from their experience, where relevant, as directors of The European Equity Fund,
Inc. (formerly known as The Germany Fund, Inc.), The Central Europe and Russia
Fund, Inc. and other Deutsche/Scudder funds, their confidence in the Manager's
and Investment Adviser's integrity and competence gained from that experience
and the Manager's and Investment Adviser's responsiveness to concerns raised by
them in the past, including the Manager's and Investment Adviser's willingness
to consider and implement organizational and operational changes designed to
improve investment results and the services provided to the Fund.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and each director attributed
different weights to the various factors.
20
The directors determined that the overall arrangements between the Fund
and the Manager, as provided in the Management Agreement, and between the Fund
and the Investment Adviser, as provided in the Investment Advisory Agreement,
were fair and reasonable in light of the services performed, expenses incurred
and such other matters as the directors considered relevant in the exercise of
their reasonable judgment.
The material factors and conclusions that formed the basis for the
directors' reaching their determination to approve the continuance of the
Agreements (including their determinations that the Manager and Investment
Adviser should continue in those roles for the Fund, and that the fees payable
to the Manager pursuant to the Agreements are appropriate) were separately
discussed by the directors.
Nature, extent and quality of services provided by the Manager and
Investment Adviser
The directors noted that, under the Management Agreement, the Manager acts
as the corporate manager and administrator of the Fund and, subject to the
supervision of the Fund's Board of Directors and pursuant to recommendations
made by the Investment Adviser, determines suitable securities for investment by
the Fund. Under the Investment Advisory Agreement, the Investment Adviser, in
accordance with the Fund's investment objectives, policies and limitations,
makes recommendations 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. Under the Management
Agreement, the Manager also handles the Fund's relationships with stockholders,
is responsible for compliance with regulatory and New York Stock Exchange
listing requirements, negotiates arrangements with third party service
providers, provides the Fund's directors with relevant reports, prepares the
Fund's tax returns and SEC and stockholder reports, calculates dividends and net
asset value, oversees payment of Fund expenses and maintains books and records.
The Manager also provides the Fund with such office facilities and executive and
other personnel adequate to perform its services. The Manager pays all of the
compensation of directors and officers of the Fund who are interested persons of
the Manager.
The directors considered the scope and quality of services provided by the
Manager and Investment Adviser under the Agreements and noted that the scope of
services provided had expanded over time as a result of regulatory and other
developments. The directors noted that, for example, the Manager is responsible
for maintaining and monitoring its own and the Fund's compliance programs, and
these compliance programs have recently been refined and enhanced in light of
new regulatory requirements. The directors considered the quality of the
investment research capabilities of the Manager and Investment Adviser and the
other resources they have dedicated to performing services for the Fund. The
quality of administrative and other services, including the Manager's role in
coordinating the activities of the Fund's other service providers, also were
considered. The directors concluded that, overall, they were satisfied with the
nature, extent and quality of services provided (and expected to be provided) to
the Fund under the Agreements.
Costs of Services Provided and Profitability to the Manager and Investment
Adviser
At the request of the directors, the Manager provided information
concerning profitability of the Manager's and Investment Adviser's respective
investment advisory and investment company activities and their financial
condition based on historical information for 2003 and 2004. The directors
reviewed with the Manager assumptions and methods of allocation used by the
Manager and Investment Adviser in preparing fund specific profitability data.
The Manager stated its belief that the methods of allocation used were
reasonable, but it noted that there are limitations inherent in allocating costs
to multiple individual advisory clients served by an organization such as the
Manager and Investment Adviser where each of the advisory clients draws on, and
benefits from, the research and other resources of the Deutsche Bank Group.
The directors recognized that it is difficult to make comparisons of
profitability from fund management contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability information,
the directors considered the effect of possible fall-out benefits, on the
Manager's and Investment Adviser's expenses, including any affiliated brokerage
commissions.
21
The directors noted that during 2003 the Manager and Investment Adviser
revised their soft dollar practices to discontinue using soft dollars to receive
third party research from brokers that execute purchases and sales of securities
for the Fund, and formalized this change in their policies in 2004. The Manager
and Investment Adviser may continue to allocate brokerage to receive research
generated by executing brokers and to receive other information servicies. The
directors also noted that in 2004 the Manager and Investment Adviser revised
their policies to prohibit consideration of the sale of shares of
Deutsche/Scudder funds when selecting broker dealers to execute portfolio
transactions for the Fund or other Deutsche/Scudder funds. The directors
recognized that the Manager and Investment Adviser should, in the abstract, each
be entitled to earn a reasonable level of profits for the services it provides
to the Fund and, based on their review, concluded that the Manager's and
Investment Adviser's levels of profitability from its relationship with the Fund
were not excessive.
Investment Results
In addition to the information received by the directors for the meeting,
the directors receive detailed performance information for the Fund at each
regular Board meeting during the year. The directors reviewed information
showing performance of the Fund compared to other European Closed End Funds
compiled by Lipper, plus three other equity oriented closed end country funds
managed by affiliates of the Manager and Investment Adviser (a total of 12
funds, including the Fund). The directors also reviewed information showing
performance of the Fund's benchmark index, currently the Germany Midcap Market
index of 80 stocks.
The comparative information showed that the Fund ranked in the top third
for the one year period ended March 31, 2005, the middle third for the
three-year period and the bottom third for the five- and ten-year periods.
Because of its mid cap focus, the Fund's absolute performance in 2000-2002,
following collapse of the mid-cap market, was negative, but in line with its
benchmark. The Fund's results were significantly positive in absolute terms, and
exceeded its benchmark in 2003 and 2004. The Fund exceeded its benchmark, often
substantially, in all but two of the other years in the 10 years ended 2004. It
also exceeded its benchmark in the first quarters of 2005. Taking into account
these comparisons and the other factors considered, including the recent
excellent performance, the directors concluded that the Fund's investment
results over time were satisfactory.
Management and Investment Advisory Fees and Other Expenses
The directors considered the management and investment advisory fee rates
paid by the Fund to the Manager and Investment Adviser. The directors recognized
that it is difficult to make comparisons of management and advisory fees because
there are variations in the services that are included in the fees paid by other
funds. The Fund's peer group consisted of the 12 closed-end country funds
described above in "Investment Results." The information showed that the Fund's
current effective management fee rate of 0.885% was the second lowest in the
peer group and significantly below the average and the median for the peer
group. The directors noted that the Fund's effective fee rate reflects the
effect of breakpoints. The directors also considered the total expense ratio of
the Fund in comparison to the fees and expenses of funds within its peer group.
The directors recognized that the expense ratio information for the Fund
potentially reflected on the Manager's provision of services, as the Manager is
responsible for coordinating services provided to the Fund by others.
The directors also noted that the Fund's expense ratio was the second
lowest of the peer group. The Manager explained that this difference was
principally the result of the Fund's relatively low management and investment
advisory fee and its relatively large asset base. The directors concluded that
the Fund's expense ratio was highly satisfactory.
Economies of Scale
The directors noted that the management fee and investment advisery
schedules for the Fund do contain breakpoints that reduce the fee rate on assets
above specified levels. The directors recognized that breakpoints may be an
appropriate way for the Manager and Investment Adviser to share its economies of
scale with some funds that have substantial assets or that may grow materially
over the next year. However, they also recognized that there is no direct
relationship between the economies of scale realized by funds and those realized
by the Manager and Investment Adviser as assets increase, largely because
economies of scale are realized (if at all) by the Manager and Investment
Adviser across a variety of products and services, and not only in respect of a
single fund. Having taken
22
these factors into account, the directors concluded that the Fund's breakpoint
arrangements were acceptable under the Fund's circumstances.
PROPOSAL 3: STOCKHOLDER PROPOSAL
A beneficial owner (the "proponent") of Common Stock of the Fund has
informed the Fund that he intends to present a proposal to stockholders for
action at the Meeting. The proponent's name and address and the number of shares
owned by him will be furnished by the Secretary of the Fund upon request.
RESOLVED: The investment advisory agreement between Deutsche Asset
Management International GmbH ("Deutsche") and The New Germany Fund, Inc.
("Fund") shall be terminated.
STOCKHOLDER'S SUPPORTING STATEMENT
You may become more wealthy if you vote FOR this shareholder
proposal. For many years the Fund has sold at a persistent, large discount
to its net asset value ("NAV"). If the existing advisory agreement is
terminated by this shareholder proposal, the Board may be forced to
open-end, liquidate or hire a new, more shareholder-friendly advisor. If
the Fund is open-ended or liquidated all shareholders will benefit because
the discount will go away. For example, if you owned 1,000 shares of the
Fund on November 1, 2005, your Fund shares would have been worth
approximately $11,280 (the "NAV") if the Fund opened or liquidated on that
date, but only $9,790 (the "discounted value") if the Fund remained a
closed-end fund. Deutsche, its affiliates, and the Board benefit from
keeping shareholder assets under management, in the closed-end format, so
they can continue to extract various large fees and expenses described
below, which is one of the reasons the Fund sells for a discount to NAV.
If the Fund is open-ended or liquidated shareholders get richer by
receiving the larger number (the NAV), while Deutsche, its affiliates and
the 11 hand-picked Directors may lose their large fees and expenses. If
the Fund is open-ended may shareholders will exit which proves that the
Board is keeping shareholders in the closed-end format against the best
interests of shareholders.
Deutsche and its direct affiliates received management fees,
investment advisory fees, and brokerage fees from the Fund totaling
$1,224,677 for the first six months of 2005. Directors received $91,828 in
fees and expenses during the same six months. Unfortunately for
stockholders, the Board consists of 11 hand-picked Directors who may be
beholden to Deutsche for their jobs as Directors and they have done
nothing to address the discounted value of Fund shares. Directors may be
ignoring their fiduciary responsibilities to shareholders in favor of
their own interests. Under the Investment Company Act of 1940, this
shareholder proposal, to terminate the investment advisory agreement, is
the only type of shareholder proposal that the Board cannot legally
ignore. They have ignored and vigorously thwarted all previous pressure
from shareholders over the past few years (read the SEC filings for
proof).
Deutsche and its affiliates are the main impediment to open-ending
or liquidation because their various large fees will disappear if
shareholders can receive NAV by exiting. Over twenty-five similar
closed-end funds have opened or liquidate over the past few years, but it
takes smart shareholders who want greater wealth, who vote FOR shareholder
proposals. No shareholder needs this German closed-end fund with high fees
paid to Deutsche. Shareholders are better off getting NAV and putting
their money in low-cost, better performing alternatives. Morningstar give
the Fund only two stars out of five, demonstrably below average.
Your vote FOR terminating the Investment Advisory Agreement is a
vote for getting NAV and thereby increasing the value of your shares.
23
For the reasons discussed below, your Board of Directors unanimously
opposes Proposal 3 and strongly urges all stockholders to vote AGAINST the
proposal on the White Proxy Card. Please read carefully the discussion below.
OPPOSING STATEMENT OF YOUR BOARD OF DIRECTORS
Your Board of Directors believes that this proposal is misleading. The
"main impediment" to open-ending the Fund is not its investment adviser. That
decision rests entirely with your independent Directors, subject to approval by
stockholders owning a majority of the outstanding shares. By law, your
independent Directors must apply their business judgment to look solely after
your interests as stockholders. Your Directors believe the Fund is most
effectively continued in its original, closed-end format. It is improper to
suggest the investment adviser controls the decision. We urge you to keep this
important fact in mind in considering our reasons for voting against the
proposal below.
Wrong Means to the Wrong End. This proposal wrongly states that
terminating the investment adviser will lead to open-ending the Fund. It will
not do that, but it could harm your investment. Here are the facts.
If approved by stockholders, this proposal would directly terminate the
investment advisory agreement with your Fund's investment adviser. If the
investment advisory agreement were terminated, there would be no one to manage
the Fund. Even if only for a short period of time, this would disrupt the Fund's
ability to actively manage its investments. A new adviser would have to be hired
and may have a different investment approach. The Fund would incur expenses
because under the Investment Company Act, a new agreement would require another
stockholder approval.
Furthermore, open-ending the Fund could frustrate its basic investment
objective. Open-end funds often must make involuntary portfolio sales to meet
redemption requests. Not having to worry about raising cash on a moment's notice
allows the Fund's manager to keep the Fund fully invested and search out the
medium- and smaller-sized German companies that are the Fund's mandate. Your
Fund is currently over 80% invested in small- and mid-cap companies. This
portion of the portfolio is less liquid than securities with larger
capitalizations; consequently, divesting quickly the holdings of your Fund will
likely depress prices. The Fund's current closed-end format gives stockholders
their liquidity through the ability to sell their shares on the NYSE rather than
through redemptions, and is better suited to investing in less liquid markets.
The Fund can invest for the long term and not worry about raising short-term
cash to meet redemptions. The Fund's total return in 2005 was 13.68% based on
net asset value (NAV) and 18.94% based on market price. In 2004, total return
was 24.44% based on NAV and 30.50% based on market price. Performance in 2006
has been even more impressive: For the first quarter of 2006 (at March 31), the
Fund's market price return was 26.26% (105.04% annualized) and NAV return was
27.38% (109.52% annualized).
The person behind this proposal is seeking to make use of a stockholder
right under the Investment Company Act - the right to terminate an investment
advisory agreement - to achieve the completely unrelated goal of open-ending
your Fund for short-term gain at the expense of remaining stockholders.
The proposal is the wrong means to the wrong end. It will not cause
open-ending, but it could disrupt your Fund's investment program.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL 3.
Required Vote. Adoption of this proposal requires the affirmative vote of
the holders of a majority of the outstanding shares of the Fund which, as
defined by the Investment Company Act, means the vote of (1) 67% or more of the
shares present at the Meeting, if the holders of more than 50% of the
outstanding shares are present and represented by proxy, or (2) more than 50% of
the outstanding shares of the Fund, whichever is less. Abstentions and broker
non-votes will have the same effect as votes against the proposal.
24
PROPOSAL 4: STOCKHOLDER PROPOSAL
The Fund has received a notice from Opportunity Partners, L.P. (the
"proponent") that it intends to submit a proposal to stockholders for action at
the Meeting proposing that "Notwithstanding any provision of the Fund's bylaws
to the contrary, at any meeting of shareholders (1) any beneficial or registered
shareholder of the Fund shall be entitled to make nominations for the board of
directors and (2) the shareholders may vote for and elect as directors any
persons so nominated." The proponent's address and the number of Fund shares
beneficially owned by it are set forth under "Security Ownership of Certain
Beneficial Owners." The proponent owns one share of record.
For the reasons set forth below, your Board unanimously opposes Proposal 4
and strongly urges all stockholders to vote "AGAINST" the proposal on the
enclosed White Proxy Card. Please carefully read the discussion below.
OPPOSING STATEMENT OF YOUR BOARD OF DIRECTORS
The Proponent's Agenda
Although the proposal is phrased in general terms, the proponent has
stated that the intent of the proposal is to nullify the Fund's director
qualification bylaw, which requires a nominee for election to the Board of
Directors to have, at the time of his or her nomination, senior level experience
in business, economic, or political affairs relevant to the Fund's German
investment focus. Many country-specific funds have bylaws that require directors
to meet qualification requirements.
Opportunity Partners and its principal, Phillip Goldstein, believe that
eliminating the director qualification bylaw will make it easier for them and
other stockholders who have little regard for the long-term success of the Fund
to elect candidates who support their narrow agenda of forcing the Fund to
open-end or liquidate. In connection with last year's Annual Meeting of
Stockholders, Opportunity Partners tried to nominate a slate of such candidates
for election. Opportunity Partners' candidates did not meet the bylaw
qualifications, and so legally they could not be elected as directors.
Nevertheless, Opportunity Partners solicited proxies in support of its
candidates, although it ultimately boycotted the 2005 Annual Meeting and did not
vote the proxies it obtained.
This year, Opportunity Partners has again purported to nominate three
candidates for election as directors of the Fund, and again these candidates are
not qualified to become directors under the Fund's bylaw. Because Opportunity
Partners believes that it may continue to have difficulty identifying candidates
who both qualify and support its agenda, Opportunity Partners is pursuing this
proposal. For further discussion about the election of directors, including
discussion of the Board's nominees, Opportunity Partners' purported candidates
and pending litigation about the director qualification bylaw, see "Proposal 1 -
Election of Directors."
The Benefit of the Director Qualification Bylaw
Since 1990, when the Fund was first organized, its practice has been to
have directors with senior-level experience in matters relevant to investments
in Germany - an important characteristic, given that those investments are the
business of the Fund. Six years ago, in January 2000, the Fund's Board of
Directors, in connection with formalizing various matters in its bylaws, adopted
a bylaw that set forth certain specific requirements for directors to have
experience in matters relevant to the German market. The director qualification
bylaw is quite broad, permitting directors to have experience in a variety of
positions -- such as American executives whose responsibilities include
supervision of European business operations; directors of investment businesses
that focus on investment in Germany; consultants, accountants or lawyers whose
principal responsibility involves providing services involving European matters;
or senior officials in various government positions of which Germany or the
United States is a member. Hence, a large number of people are eligible to serve
as directors. The director qualification bylaw serves important purpose of
ensuring that the directors have experience related to the Fund's business. The
bylaw and the policy that preceded it have served the Fund well. All of the
Fund's 11 current directors have broad senior-level experience in German or
European business, economic or government affairs.
25
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL 4.
Required vote. Provided that a quorum has been established, the
affirmative vote of a majority of the votes cast at the Meeting is required to
approve Proposal 4. For purposes of Proposal 4, abstentions will have no effect
on the result of the vote. The timing and effect of this proposal, if adopted,
is uncertain.
PROPOSAL 5: STOCKHOLDER PROPOSAL
The Fund has received a notice from Opportunity Partners (the "proponent")
that it intends to submit an additional proposal to stockholders for action at
the Meeting. The proponent's address and the number of Fund shares beneficially
owned by it are set forth under "Security Ownership of Certain Beneficial
Owners." The proponent owns one share of record.
RESOLVED: The shareholders request that the board of directors promptly
take the steps necessary to open-end the Fund or otherwise enable
shareholders to realize net asset value ("NAV") for their shares.
STOCKHOLDER'S SUPPORTING STATEMENT
The Fund has traded at a discount to its NAV for a very long time.
Open-ending will cause the shares to trade at NAV and thus eliminate the
discount.
In 2004, shareholders voted by a margin of 61-to-39 in favor of a
proposal requesting that the board of directors promptly take the steps
necessary to open-end the Fund or otherwise enable stockholders to realize
NAV for their shares. The board said that vote was not enough to convince
them to open-end the Fund. In 2005 shareholders again supported a similar
proposal by an even larger margin, this time by 71-to-29 but the directors
again refused to bend. If we keep sending similar messages that we want to
open-end the Fund, perhaps the board will eventually pay attention to us.
Like the brutal regime that erected the infamous Berlin Wall to keep
East Germans from escaping to a free and prosperous West Germany, our
Fund's board of directors has thus far kept us trapped in a closed-end
fund against our wishes. Of course, as you know, after more than 28 years,
Communist East Germany finally opened its borders to the West in 1989,
including the Berlin Wall. The first woman who stepped to freedom said, "I
am no longer a prisoner." We are hopeful that it won't take twenty-eight
years before the board of directors listens to us and open-ends our Fund.
Then we too can say, "We are no longer prisoners of the discount."
If you do not want to remain a prisoner of the discount forever,
please vote for this proposal.
For the reasons set forth below, your Board unanimously opposes Proposal 5
and strongly urges all stockholders to vote "AGAINST" the proposal on the
enclosed White Proxy Card. Please carefully read the discussion below.
OPPOSING STATEMENT OF YOUR BOARD OF DIRECTORS
Background
The language of the stockholder proposal is vague and without sufficient
detail, but at its core, it appears to threaten the Fund's existing closed-end
structure, which your Board of Directors believes is essential to its investment
program. The Fund's total return in 2005 was 13.68% based on net asset value
(NAV) and 18.94% based on market price. In 2004, total return was 24.44% based
on NAV and 30.50% based on market price. Performance in 2006 has been even more
impressive: For the first quarter of 2006 (at March 31), the Fund's market price
return was 26.26% (105.04% annualized) and NAV return was 27.38% (109.52%
annualized).
26
Shares of closed-end funds, such as the Fund, trade on the New York Stock
Exchange like those of any other listed company. Market forces and perceptions
of the Fund's prospects drive price movements. The market price of the Fund's
shares is often lower than the value of the Fund's portfolio, which is called
its net asset value, just as the market value of an industrial company's stock
could be below the book value of its assets.
In contrast, traditional open-end mutual funds do not trade on a stock
exchange. Instead, stockholder liquidity is achieved by the fund's standing
ready to buy back shares each day at NAV, called redemptions. Because daily NAV
redemptions are required by law for open-end funds, they must maintain liquidity
reserves. This is usually accomplished by limiting their primary investments to
securities with an active trading market, which constrains investment
flexibility. Also, open-end funds generally hold higher cash reserves in order
meet their requirement to buy back shares. This uninvested cash is a drag on
investment returns.
In 2004 an open-ending proposal received favorable votes from the holders
of only 27% of the outstanding shares, while the holders of nearly 56% of the
Fund's outstanding shares did not even vote on the proposal, and 17% voted
against it. In 2005, the open-ending proposal received favorable votes from the
holders of 14% of shares outstanding, 18% voted against it, and 68% did not even
vote. Other shares represented by proxies that the proponent withheld may or may
not have voted for the proposal, but were not present at the meeting because the
proponent intentionally did not attend and did not submit them.
Advantages of Closed-End Structure
The Board of Directors reaffirms to the Fund's stockholders its commitment
to the Fund's current structure of being a non-diversified closed-end management
investment company that seeks capital appreciation primarily though investment
in small-and mid-cap German companies, which have limited liquidity.
Not having to worry about raising cash on a moment's notice to buy back
shares allows the Fund's manager to keep the Fund fully invested and to search
out the medium- and smaller-sized German companies that are the Fund's mandate.
In contrast, open-end funds must be prepared to liquidate securities regardless
of market conditions in order to satisfy stockholder redemption requests. Your
Fund is especially well-suited to the closed-end format because of its
investment focus on small or mid-cap German companies (the Fund has been over
80% invested in these small- and mid-cap German companies). Because your Fund's
holdings are often thinly traded, divesting quickly these holdings would likely
depress prices.
The closed-end structure also allows managers to preserve their investment
decisions during fluctuating markets. Due to the lack of mandatory redemptions,
the manager can stay focused on long-term goals rather than being forced to
respond to large sentiment swings. Money tends to come into open-end funds
during periods of good market performance and out of the same funds during
market lows. This forces managers in open-end funds to buy at high prices when
new money comes in and sell at low prices to cover redemptions during market
bottoms. The closed-end format protects managers from this pressure to focus
trading in a poorly timed fashion. As noted above, your Fund has had excellent
returns.
Discounts Are Widely Prevalent in the Closed-End Structure
Your Board of Directors recognizes that the Fund's shares have traded at a
discount to their net asset value, although that discount has decreased in
recent periods. Your Board believes there may be some misunderstandings about
the market discount of your Fund and other closed-end funds.
The discount is a function of the NAV and market price, each of which may
be influenced by different factors. There is debate whether the discount is the
cause of market price movements or is merely the effect. The discount is
considered by many to be the result of market supply and demand factors for
shares, although it is uncertain whether the dominant factors are fund-specific,
such as performance, or external, such as U.S. market sentiment towards foreign
investing. If, as we believe to be the case, the discount is the effect and not
the cause, there is no action that will have a long-term effect on the discount
other than liquidation or open-ending (which in the absence of a distribution
system and robust buying interest is equivalent to a slow-motion liquidation).
27
In any event, stockholders experience gain or loss based only on market
price changes in the Fund's shares and dividends on Fund shares. There are no
widely accepted economic theories for explaining the discount phenomenon.
However, the discount does not represent some kind of value that the board has a
duty to distribute to stockholders. That value can be obtained only if the Fund
is liquidated and the opportunity for future investment gain is foregone.
Recognizing that some stockholders nevertheless are troubled when the
discount appears to be "too high," your Board of Directors has for a number of
years conducted a share repurchase program to purchase shares at a discount to
NAV, which increases NAV per share. This repurchase program continues, along
with efforts to increase market awareness of your Fund.
Tender Offers, Aggressive Stock Buybacks and Open-Ending Are Like
Liquidation
A tender offer reduces the discount only during the period of the tender
offer. Repeated tender offers will ultimately cause liquidation. With each
tender offer the fund becomes smaller and harder to manage and continued fixed
costs cause its expense ratio to become larger. At some point complete
liquidation becomes inevitable. The larger the periodic tender offers, the
stronger the effect of reducing the discount but the sooner the Fund shrinks to
the liquidation point.
Open market purchases also have no long-term effect on the discount. After
prolonged aggressive buybacks, the fund will be at the same liquidation point as
after tender offers.
Although open-ending the Fund will by definition eliminate its discount,
doing so brings the investment flexibility limitations described above.
Furthermore, without a demonstrable demand by new U.S. investors to buy shares,
the redemption process will over time - possibly in a very short time - cause
the same shrinkage of the Fund to the liquidation point caused by periodic
tender offers and aggressive buybacks.
Long-Term Interest vs. Short-Term Interests
Long-term investors in your Fund have in recent years done better than
short-term investors. A short-term stockholder in a hypothetical liquidation of
the Fund on January 1, 2003 would have made a modest one-time gain equal to the
discount ($0.98, assuming no expenses). If the stockholder reinvested those
proceeds in the S&P500 index, the stockholder would have seen a total return of
42% at March 31, 2006. However, a long-term stockholder who instead held those
shares would have benefited from a total appreciation of his or her investment
of over 270% through stock price appreciation and dividends totaling $9.26 per
share at March 31, 2006. Your Board believes that potential for superior
long-term gain is what the majority of stockholders want.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL 5.
Required Vote. Provided that a quorum has been established, the
affirmative vote of a majority of the votes cast at the Meeting is required to
approve Proposal 5. For purposes of Proposal 5, abstentions will have no effect
on the result of the vote. Proposal 5 is only a recommendation and, if it is
approved by the required vote, will have no binding effect on the Fund or the
Board of Directors. In considering whether or not to take action in response to
the proposal, the Board of Directors will give the request set forth in the
proposal such weight as it believes appropriate based on the voting of
stockholders for the proposal and other relevant factors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of [o], 2006 no person, to the knowledge of management, owned of record
or beneficially more than 5% of the outstanding Common Stock of the Fund, other
than as set forth below:
28
Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership Outstanding Common Stock
------------------- ----------------------- ------------------------
The Coalition for Shareholder 4,207,802 16.89%
Democracy(1)
c/o Opportunity Partners L.P.
60 Heritage Drive
Pleasantville, NY 10570
Wachovia Corp.(2) 2,311,995 9.39%
One Wachovia Center
Charlotte, NC 28288-0137
- ----------
(1) This information is based exclusively on information provided by such
person on Schedule 13D filed with respect to the Fund on March 13, 2006.
The reporting person is a group consisting of (a) Bulldog Investors,
Phillip Goldstein, Andrew Dakos (2,092,472 shares, 8.42%), (b) Karpus
Investment Management, Karpus Investment Management Profit Sharing Plan,
Jo Ann Van Degriff, George W. Karpus, Dana R. Consler (1,438,030 shares,
5.97%) and (c) Laxey Partners Limited, Andrew Pegge and Colin Kingsnorth
(672,300 shares, 2.70%). The Schedule 13D includes the following
statement: "The 11 members of the [group] have not agreed to jointly take
any specific measures to achieve the group's objective and they have no
agreement to buy, sell, hold or vote their shares together. Any member of
the [group] may take actions it deems to be consistent with the group's
objective without the consent of any other members of the group. In
addition, any member of the [group] may act in the best interests of its
own clients regardless of whether such action is in the best interest of
the [group]."
(2) This information is based exclusively on information provided by such
entity on Schedule 13G filed with respect to the Fund on February 13,
2006.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Based on a review of reports filed by the Fund's directors and executive
officers, the investment manager, officers and directors of the investment
manager, affiliated persons of the investment manager and beneficial holders of
10% or more of the Fund's outstanding stock, and written representations by the
Reporting Persons that no year-end reports were required for such persons, all
filings required by Section 16(a) of the Securities and Exchange Act of 1934 for
the fiscal year ended December 31, 2005 were timely.
OTHER MATTERS
No business other than as set forth herein is expected to come before the
Meeting, but should any other matter requiring a vote of stockholders properly
come before the Meeting, including any question as to an adjournment of the
Meeting, the persons named in the enclosed White Proxy Card will vote thereon
according to their discretion. Abstentions and broker non-votes shall have no
effect on the outcome of a vote to adjourn the Meeting.
STOCKHOLDER PROPOSALS
In order for stockholder proposals otherwise satisfying the eligibility
requirements of SEC Rule 14a-8 to be considered for inclusion in the Fund's
proxy statement for the 2007 Annual Meeting, the proposals must be received at
The New Germany Fund, Inc., c/o Deutsche Asset Management, 345 Park Avenue,
NYC20-2799, New York, New York 10154, Attention: Secretary, on or before [o],
2007.
In addition, the Fund's Bylaws currently provide that if a stockholder
desires to bring business (including director nominations) before the 2007
Annual Meeting that is or is not the subject of a proposal timely submitted for
inclusion in the Fund's proxy statement, written notice of such business as
prescribed in the Bylaws must be delivered to the Fund's Secretary, at the
principal executive offices of the Fund, between [o], 2007 and [o], 2007. For
additional requirements, the stockholder may refer to the Bylaws, a current copy
of which may be obtained without charge upon request from the Fund's Secretary.
If the Fund does not receive timely notice pursuant to the Bylaws, the proposal
may be excluded from consideration at the meeting, regardless of any earlier
notice provided in accordance with SEC Rule 14a-8.
29
EXPENSES OF PROXY SOLICITATION
The cost of preparing, assembling and mailing material in connection with
this solicitation will be borne by the Fund. In addition to the use of mails,
proxies may be solicited personally by regular employees of the Fund or the
manager or by telephone or telegraph. Brokerage houses, banks and other
fiduciaries may be requested to forward proxy solicitation materials to their
principals to obtain authorization for the execution of proxies, and they will
be reimbursed by the Fund for out-of-pocket expenses incurred in this
connection. The Fund has also made arrangements with The Altman Group, Inc. to
assist in the solicitation of proxies, if called upon by the Fund, at an
estimated fee not to exceed $120,000 plus reimbursement of normal expenses.
ANNUAL REPORT DELIVERY
The Fund will furnish, without charge, a copy of its annual report for the
fiscal year ended December 31, 2005 and the most recent semi-annual report, if
any, to any stockholder upon request. Such requests should be directed by mail
to The New Germany Fund, Inc., c/o Deutsche Asset Management, 345 Park Avenue,
NYC20-2799, New York, New York 10154 or by telephone to 1-800-437-6269. Annual
reports are also available on the Fund's web site: www.newgermanyfund.com.
John Millette
Secretary
Dated: [o], 2006
Stockholders who do not expect to be present at the Meeting and who wish
to have their shares voted are requested to date and sign the enclosed
White Proxy Card and return it to the Fund in the enclosed envelope as
soon as practicable.
If you have questions or need additional information, please contact the
Altman Group, the Fund's proxy solicitors, toll-free at 1-800-884-5101.
30
ANNEX A
THE NEW GERMANY FUND, INC.
(the "Fund")
NOMINATING COMMITTEE CHARTER
(Adopted as of April 23, 2004)
The Board of Directors (the "Board") of the Fund has adopted this Charter
to govern the activities of the Nominating Committee (the "Committee") of
the Board.
Statement of Purposes and Responsibilities
The primary purposes and responsibilities of the Committee are:
(i) to identify individuals qualified to become members of the Board in
the event that a position is vacated or created;
(ii) to consider all candidates proposed to become members of the Board,
subject to applicable law, the Fund's Articles of Incorporation or
By-laws, resolutions of the Board and the procedures and policies
set forth in this Charter and the Fund's annual proxy statement;
(iii) to select and nominate, or recommend for nomination by the Board,
candidates for election as Directors;
(iv) in the case of a director nominee to fill a Board vacancy created by
an increase in the size of the Board, to make a recommendation to
the Board as to the class of directors in which the individual
should serve;
(v) to make recommendations to the Board from time to time as to any
changes that the Committee believes to be desirable to the
provisions of the Fund's By-laws regarding minimum standards and
qualifications for service as a Director on the Board or to any
charter of committees of the Board regarding minimum standards and
qualifications for service as a committee member, and to recommend
to the Board, or to set, any additional standards or qualifications
considered necessary or desirable for service as a Director on the
Board or as a member of a committee of the Board;
(vi) to identify Board members qualified to fill vacancies on any
committee of the Board, taking into account any qualifications or
other criteria set forth in the charter of that committee, and to
recommend that the Board appoint the identified member or members to
that committee;
(vii) to make recommendations to the Board from time to time as to changes
that the Committee believes to be desirable to the size of the Board
or any committee thereof;
(viii) to review with counsel, at least annually, each Director's
affiliations and relationships for purposes of determining whether
such Director is a person who is not an "interested person" of the
Fund, as defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended;
(ix) to assist management in the preparation of the disclosure in the
Fund's annual proxy statement regarding the operations of the
Committee; and
(x) to perform any other duties or responsibilities expressly delegated
to the Committee by the Board from time to time relating to the
nomination of Board or committee members.
Organization and Governance
The Committee shall consist solely of three or more members of the Board.
The Committee must consist entirely of Board members who are not
"interested persons" of the Fund, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended ("Independent Directors").
Members shall serve at the pleasure of the Board and for such term or
terms as the Board may determine.
A-1
One or more members of the Committee may be designated by the Board as the
Committee's chairperson or co-chairperson, as the case may be.
The Committee shall meet at least once a year at a time and place
determined by the Committee chairperson, with further meetings to occur,
or actions to be taken by unanimous written consent, when deemed necessary
or desirable by the Committee or its chairperson. Members of the Committee
may participate in a meeting of the Committee by means of conference call
or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Committee meetings shall
be held in accordance with the Fund's By-laws.
Criteria for Director Nominees
To be eligible for nomination as a Director a person must, at the time of
such person's nomination, have Relevant Experience and Country Knowledge,
as defined in the Fund's By-laws, and must not have any Conflict of
Interest, as defined in the Fund's By-laws. Whether a proposed nominee
satisfies the foregoing qualifications shall be determined by the
Committee in its sole discretion. The Committee may also take into account
a wide variety of factors in considering Director candidates, including
(but not limited to): (i) the candidate's knowledge in matters relating to
the investment company industry; (ii) any experience possessed by the
candidate as a director or senior officer of other public or private
companies; (iii) the candidate's educational background; (iv) the
candidate's reputation for high ethical standards and personal and
professional integrity; (v) any specific financial, technical or other
expertise possessed by the candidate, and the extent to which such
expertise would complement the Board's existing mix of skills and
qualifications; (vi) the candidate's perceived ability to contribute to
the ongoing functions of the Board, including the candidate's ability and
commitment to attend meetings regularly, work collaboratively with other
members of the Board and carry out his or her duties in the best interests
of the Fund; (vii) the candidate's ability to qualify as an Independent
Director; and (viii) such other criteria as the Nominating Committee
determines to be relevant in light of the existing composition of the
Board and any anticipated vacancies or other factors.
Identification of Nominees
In identifying potential nominees for the Board, the Committee may
consider candidates recommended by one or more of the following sources:
(i) the Fund's Directors, (ii) the Fund's officers, (iii) the Fund's
investment manager, investment adviser or their affiliates, (iv) the
Fund's stockholders (see below) and (v) any other source the Committee
deems to be appropriate. The Committee will not consider self-nominated
candidates or candidates nominated by members of a candidate's family,
including such candidate's spouse, children, parents, siblings, uncles,
aunts, grandparents, nieces and nephews. The Committee may, but is not
required to, retain a third party search firm at the Fund's expense to
identify potential candidates.
Consideration of Candidates Recommended by Stockholders
The 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 this Charter and the Fund's annual proxy
statement, including the requirements that 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 Committee will evaluate nominee candidates properly
submitted by stockholders on the same basis as it considers and evaluates
candidates recommended by other sources.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee.
A-2
Resources and Authority of the Committee
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to
select, retain, terminate and approve the fees and other retention terms
of special counsel or other experts or consultants, as it deems
appropriate, without seeking approval of the Board or management. With
respect to consultants or search firms used to identify director
candidates, this authority shall be vested solely in the Committee.
A-3
ANNEX B
THE NEW GERMANY FUND, INC.
EXCERPTS OF BYLAWS
Article II
Section 13. Advance Notice of Stockholder Nominees for Director and Other
Stockholder Proposals. (a) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at
the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record both at the time of giving of notice
provided for in this Section 13(a) and at the time of the annual meeting, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 13(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 13, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for action by the stockholders. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation 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; provided, however, that in the event that the
date of mailing of the notice for the annual meeting is advanced or delayed by
more than 30 days from the first anniversary of the date of mailing of the
notice for the preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not earlier than the 120th day prior to the date of
mailing of the notice for such annual meeting and not later than the close of
business on the later of the 90th day prior to the date of mailing of the notice
for such annual meeting or the tenth day following the day on which disclosure
of the date of mailing of the notice for such meeting is first made. In no event
shall the public announcement of a postponement or adjournment of an annual
meeting commence a new time period for the giving of a stockholder's notice as
described above. Such stockholder's notice shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director, (A) the name, age, business address and residence address of such
person, (B) the class and number of shares of stock of the Corporation that are
beneficially owned by such person, (C) all other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors in an election contest (even if an election contest is not
involved), or is otherwise required, in each case pursuant to Regulation 14A (or
any successor provision) under the Exchange Act or pursuant to the Investment
Company Act and the rules thereunder (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected), and (D) a statement specifying which of clauses (1)-(7) of the
definition of "Relevant Experience and Country Knowledge" in Article III,
Section 3 of the Bylaws the person being nominated satisfies, information
relating to such person sufficient to support a determination that the person
satisfies the specified clause or clauses of the definition and a representation
that the person does not have a "Conflict of Interest" as defined in Article
III, Section 3 of the Bylaws; (ii) as to any other business that the stockholder
proposes to bring before the meeting, a description of the business desired to
be brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder
(including any anticipated benefit to the stockholder therefrom) and of each
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the stockholder giving the notice and each beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's stock ledgers and a current
name and address, if different, and of such beneficial owner, and (y) the class
and number of shares of each class of stock of the Corporation which are owned
beneficially and of record by such stockholder and owned beneficially by such
beneficial owner.
(3) Notwithstanding anything in this subsection (a) of this
Section 13 to the contrary, in the event the Board of Directors increases or
decreases the maximum or minimum number of directors in accordance with Article
III, Section 2 of these Bylaws, and there is no public announcement of such
action at least 100 days prior to the first anniversary of the date of mailing
of the preceding year's annual meeting, a stockholder's notice required by this
Section 13(a) shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the
B-1
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 13 and at the time of the special meeting, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 13. In the event the Corporation calls a special meeting
of stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a person or persons (as the case
may be) for election as a director as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph (a)(2) of this
Section 13 shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the 120th day prior to such special
meeting and not later than the close of business on the later of the 90th day
prior to such special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of a postponement or adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 13 and Article III, Section 3 of
these Bylaws shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this Section
13. The chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 13 and, if any proposed nomination or business is not in
compliance with this Section 13, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 13, (a) the "date of mailing
of the notice" shall mean the date of the proxy statement for the solicitation
of proxies for election of directors and (b) "public announcement" shall mean
disclosure (i) in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or (ii) in a document publicly filed
by the Corporation with the Securities and Exchange Commission pursuant to the
Exchange Act or the Investment Company Act.
(3) Notwithstanding the foregoing provisions of this Section
13, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the Investment Company Act and the rules and
regulations thereunder with respect to the matters set forth in this Section 13.
Nothing in this Section 13 shall be deemed to affect any right of stockholders
to request inclusion of proposals in, nor the right of the Corporation to omit a
proposal from, the Corporation's proxy statement pursuant to Rule 14a-8 (or any
successor provision) under the Exchange Act.
Article III
Section 3. Qualifications. Directors need not be stockholders. Each
Director shall hold office until the earlier of: (a) the expiration of his term
and his or her successor shall have been elected and qualifies, (b) his or her
death, (c) his or her resignation, or (d) his or her removal. To be eligible for
nomination as a director a person must, at the time of such person's nomination
by the Board of Directors, (a) have Relevant Experience and Country Knowledge
(as defined below), (b) not have any Conflict of Interest (as defined below) and
(c) not be over 72 years of age; provided that clause (c) shall not apply to any
person who was a Director on October 15, 1999 or to any person whom the
Nominating Committee (or in the absence of such a Committee, the Board of
Directors) determines to except from that clause on the basis that the person's
prior public or government service or other broad-based activities in the
business community make it essential that the Corporation continue to receive
the benefit of the person's services as a Director. The determination described
in the previous sentence shall be made on or before the time of nomination.
Whether a proposed nominee satisfies the foregoing qualifications shall be
B-2
determined by the Nominating Committee or, in the absence of such a Committee,
by the Board of Directors, each in its sole discretion.
"Relevant Experience and Country Knowledge" means experience in business,
investment, economic or political matters of Germany or the United States
through service for 10 of the past 20 years (except where a shorter period is
noted) in one or more of the following principal occupations:
(1) senior executive officer or partner of a financial or industrial
business headquartered in Germany that has annual revenues of at
least the equivalent of US $500 million,
(2) senior executive officer or partner of a financial or industrial
business headquartered in the United States that has annual revenues
of at least the equivalent of US $500 million and whose management
responsibilities include supervision of European business
operations,
(3) director (or the equivalent) for 5 of the past 10 years of one or
more investment businesses or vehicles (including this Corporation)
a principal focus of which is investment in Germany and that have at
least the equivalent of US $250 million in combined total assets of
their own,
(4) senior executive officer or partner of an investment management
business having at least the equivalent of US $500 million in
securities of German companies or securities principally traded in
Germany under discretionary management for others,
(5) senior executive officer or partner (a) of a business consulting,
accounting or law firm having at least 100 professionals and (b)
whose principal responsibility involves or involved providing
services involving European matters for financial or industrial
businesses, investment businesses or vehicles or investment
management businesses as described in (1)-(4) above,
(6) senior official (including ambassador or minister) in the national
government, a government agency or the central bank of Germany or
the United States, in a major supranational agency or organization
of which Germany or the United States is a member, or in a leading
international trade organization relating to Germany or the United
States, in each case in the area of finance, economics, trade or
foreign relations, or
(7) current director or senior officer (without regard to years of
service) of an investment manager or adviser of the Corporation, or
of any entity controlling or under common control with an investment
manager or adviser of the Corporation.
For purposes of clauses (1)-(5) of the preceding sentence and clauses
(1)-(2) of the next paragraph, the term "financial or industrial business"
includes a financial or industrial business unit within a larger
enterprise; the term "investment businesses or vehicles" includes an
investment business unit or investment vehicle within a larger enterprise;
the term "investment management business" includes an investment
management business unit within a larger enterprise; and the term
"investment vehicle" includes an investment vehicle within a larger
enterprise; but in each case only to the extent the unit satisfies the
revenue, asset and other requirements specified for the business or
vehicle in clauses (1)-(5) of the preceding sentence or clauses (1)-(2) of
the next paragraph.
"Conflict of Interest" means the presence of a conflict with the interests
of the Corporation or its operations through any of the following:
(1) current position as a director, officer, partner or employee of
another investment vehicle a significant (i.e., 25% or more of total
assets) focus of which is securities of German companies or
securities principally traded in German markets and that does not
have the same investment adviser as the Corporation or an investment
adviser affiliated with an investment adviser of the Corporation,
(2) current position as a director, officer, partner or employee of the
sponsor or equivalent of an investment vehicle described in the
previous point, or
(3) current position as an official of a governmental agency or
self-regulatory body having responsibility for regulating the
Corporation or the markets in which it proposes to invest.
B-3
ANNEX C
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated as of January 31, 1990, between The New Germany Fund,
Inc., a Maryland corporation ("Fund"), and DB Capital Management
International GmbH, a West German corporation ("CMI").
WHEREAS, the Fund is a non diversified closed end management company
registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act");
WHEREAS, the Fund desires to retain CMI to render certain specified
investment advisory services to the Fund; and
WHEREAS, CMI is willing to render such services if and so long as a
certain Management Agreement, dated as of January 31, 1990, between the
Fund and Deutsche Bank Capital Corporation ("DBCC") is entered into and
not terminated;
NOW, THEREFORE, the parties agree as follows:
1. Investment Adviser. CMI, in accordance with the Fund's stated
investment objectives, policies and limitations, will make recommendations with
respect to the Fund's investments and, upon instructions given by DBCC as to
suitable securities for investment by the Fund, will transmit purchase and sale
orders and select brokers and dealers to execute portfolio transactions on
behalf of the Fund.
2. Fees and Expenses.
2.1 The Fund will pay CMI an annual advisory fee hereunder of 0.35% of the
Fund's average weekly net assets to U.S. $100 million and 0.25% of such assets
in excess of U.S. $100 million, computed by DBCC on the basis of net asset value
at the end of each week and payable at the end of each calendar month.
2.2 CMI shall bear all expenses of its employees and overhead incurred by
it in connection with its duties under this Agreement. The Fund will indemnify
CMI for all taxes (other than income taxes), duties, charges, fees and expenses
(including, without limitation, broker fees, dealer fees, clearing bank fees and
legal fees) CMI incurs in connection with the services provided under this
Agreement. The obligations contained in this clause shall survive the
termination of this Agreement.
2.3 Payments to CMI shall be made in U.S. Dollars to its account with
Deutsche Bank AG, New York branch.
3. Liability.
3.1 Neither CMI nor any of its officers, directors or employees shall be
liable for any error of judgment or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except (i) that CMI
shall be under a fiduciary duty with respect to receipt of compensation for
services pursuant to Section 36 of the 1940 Act, and shall therefore be liable
for a loss resulting from a breach of such fiduciary duty (in which case any
award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the Investment Company Act), or (ii) a loss resulting from
willful misfeasance, bad faith or gross negligence on its or their part in the
performance of, or from reckless disregard by it or them of its or their
obligations and duties under, this Agreement.
3.2 CMI does not assume responsibility for the acts or omissions of any
other person.
3.3 CMI shall not be liable for any losses caused by disturbances of its
operations by virtue of force majeure, riot, or damage caused by nature or due
to other events for which it is not responsible (e.g., strike, lock out or acts
of domestic or foreign authorities).
4. Services Not Exclusive. It is understood that the services of CMI are
not deemed to be exclusive, and nothing in this Agreement shall prevent CMI or
any of its affiliates from providing similar services to other investment
companies and other clients (whether or not their investment objectives and
policies are similar to those of the Fund) or from engaging in other activities.
When other clients of CMI desire to purchase or sell a security at the same time
such security is purchased or sold for the Fund, such purchases and sales will,
to the extent feasible, be allocated among the Fund and such clients in a manner
believed by CMI to be equitable to such clients.
5. Notice. Any notice or other communication required to be given pursuant
to this Agreement shall be in writing or by telex and shall be effective upon
receipt. Notices and communications shall be given (1) to the Fund at 31
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West 52nd Street, New York, New York 10019, Attention: Secretary; and (2) to CMI
at Taunusanlage 12, D 6000 Frankfurt am Main 1, Attention: Managing Director,
Investment Policy Committee.
6. Miscellaneous.
6.1 This Agreement is effective January 31, 1990, and shall continue in
effect until the earlier of January 30, 1992 or the first annual meeting of the
Fund's stockholders after the effective date of the Fund's Registration
Statement on Form N 2 filed with the Securities and Exchange Commission. If
approved at such meeting, and unless sooner terminated, this Agreement shall
continue in effect for successive periods of twelve months after such date,
provided that each such continuance shall be approved as required by the
Investment Company Act. The annual approva1 of the continuance of this Agreement
shall be confirmed to CMI by the Fund in writing. Notwithstanding the foregoing,
this Agreement may be terminated by the Fund in the manner prescribed by the
Investment Company Act, without the payment of any penalty, at any time upon not
1ess than sixty days' prior written notice to CMI, or by CMI upon not less than
sixty days' written notice to the Fund.
This Agreement shall automatically terminate (i) in the event of its
assignment (as defined in the Investment Company Act) by either party, or (ii)
upon termination of the Management Agreement dated as of January 31, 1990,
between the Fund and DBCC.
6.2 This Agreement shall be construed in accordance with the laws of the
Federal Republic of Germany.
6.3 The captions in this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
6.4 If any provisions of this Agreement shall be held or made invalid, in
whole or in part, the other provisions of this Agreement shall remain in force.
Invalid provisions shall, in accordance with the intent and purpose of this
Agreement, be replaced by such valid provisions which in their economic effect
come as close as legally possible to such invalid provisions.
6.5 Nothing herein shall be construed as constituting CMI an agent of the
Fund.
6.6 CMI shall be entitled to rely on any notice or other communication
believed by it to be genuine and correct and to have been sent to it by or on
behalf of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW GERMANY FUND, INC.
By: /s/ ROBERT GAMBEE
-------------------------------
Name: Robert Gambee
Title: VP, Secy, Treasurer
DB CAPITAL MANAGEMENT
INTERNATIONAL GmbH
By: /s/ HANNES-JOERG BAUMANN
-------------------------------
Name: Hannes-Joerg Baumann
Title: Deputy Managing Director
By: /s/ WILLIAM RONALD RICHARDS
-------------------------------
Name: William Ronald Richards
Title: Managing Director
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ANNEX D
MANAGEMENT AGREEMENT
AGREEMENT dated as of January 31, 1990, between The New Germany Fund,
Inc., a Maryland corporation (the "Fund"), and Deutsche Bank Capital
Corporation, a New York corporation ("Deutsche Bank Capital").
WHEREAS, the Fund is a non diversified closed end management company
registered under the Investment Company Act of Investment Company, as
amended (the "Investment Company Act");
WHEREAS, the Fund desires to retain Deutsche Bank Capital to render
certain specified management services to the Fund; and
WHEREAS, Deutsche Bank Capital is willing to render such services if and
so long as the Investment Advisory Agreement, dated as of January 31,
1990, between the Fund and DB Capital Management International GmbH
("CMI") is entered into and not terminated;
NOW, THEREFORE, the parties agree as follows:
1. Manager. Deutsche Bank Capital shall be the corporate manager and
administrator of the Fund and, subject to the supervision of the Board of
Directors of the Fund and pursuant to recommendations made by CMI, will
determine suitable securities for investment by the Fund. It will handle the
Fund's relationships with its shareholders including responding to shareholder
inquiries relating to the Fund, be responsible for, arrange and monitor
compliance with regulatory requirements and compliance with New York Stock
Exchange listing requirements and negotiate contractual arrangements with third
party service providers, including but not limited to, custodians, transfer
agents, auditors and printers. Deutsche Bank Capital will also provide office
facilities and personnel adequate to perform these services, together with those
ordinary clerical and bookkeeping services which are not being furnished by the
Fund's custodian or transfer and dividend paying agent. Deutsche Bank Capital
will also determine and publish the Fund's net asset value in accordance with
the Fund's policy as adopted from time to time by the Board of Directors;
establish the Fund's operating expense budgets and authorize the payment of
actual operating expenses incurred; calculate the amount of dividends and
distributions to be declared and paid to the Fund's shareholders; provide to the
Board of Directors those financial analyses and reports necessary for the Board
to fulfill their fiduciary responsibilities; maintain the books and records of
the Fund required under Rule 31a 1 under the Investment Company Act (other than
those being maintained by the Fund's custodians and transfer and dividend paying
agent, as to which Deutsche Bank Capital will oversee such maintenance); prepare
the Fund's U.S. Federal, state and local income tax returns; prepare financial
information for the Fund's proxy statement quarterly and annual reports to
shareholders; and prepare the Fund's reports to the Securities and Exchange
Commission.
2. Fees. The Fund will pay Deutsche Bank Capital an annual management fee
hereunder of .65% of the Fund's average weekly net assets up to U.S. $100
million, .55% of such assets in excess of U.S. $100 million up to $500 million
and .50% of such assets in excess of $500 million, computed in each case on the
basis of net asset value at the end of each week and payable at the end of each
calendar month.
3. Expenses. Deutsche Bank Capital shall bear all expenses of its
employees and overhead incurred in connection with its duties under this
Agreement and shall pay all salaries and fees of the Fund's directors and
officers who are interested persons (as defined in the Investment Company Act)
of Deutsche Bank Capital. The Fund will bear all of its own expenses, including
expenses of organizing the Fund; fees of the Fund's directors who are not
interested persons (as defined in the Investment Company Act) of any other
party; out of pocket travel expenses for all directors who are not interested
persons (as defined in the Investment Company Act) of any other party and other
expenses incurred by the Fund in connection with meetings of directors; interest
expense; taxes and governmental fees; brokerage commissions and other expenses
incurred in acquiring or disposing of the Fund's portfolio securities; expenses
of preparing stock certificates; expenses of registering and qualifying the
Fund's shares for sale with the Securities and Exchange Commission and in
various states and foreign jurisdictions; charges and expenses of the Fund's
lega1 counsel and independent auditors; custodian, dividend paying and transfer
agent expenses; expenses of obtaining and maintaining stock exchange listings of
the Fund's shares; and the expenses of shareholders' meetings and of the
preparation and distribution of proxies and reports to shareholders.
4. Liability.
4.1 Neither Deutsche Bank Capital nor any of its officers, directors or
employees shall be liable for any error of judgment or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, except
(i) that Deutsche Bank Capital shall be under a fiduciary duty with respect to
receipt of compensation for services
D-1
pursuant to Section 36 of the Investment Company Act and shall therefore be
liable for a loss resulting from a breach of such fiduciary duty (in which case
any award of damages shall be limited to the period and the amount set forth in
Section 36(b)(3) of the Investment Company Act) or (ii) a loss resulting from
willful misfeasance, bad faith or gross negligence on its or their part in the
performance of, or from reckless disregard by it or them of its or their
obligations and duties under, this Agreement.
4.2 Deutsche Bank Capital does not assume responsibility for the acts or
omissions of any other person.
5. Services Not Exclusive. It is understood that the services of Deutsche
Bank Capital are not deemed to be exclusive, and nothing in this Agreement shall
prevent Deutsche Bank Capital, or any of its affiliates from providing similar
services to other investment companies and other clients (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities. When other clients of Deutsche Bank Capital desire
to purchase or sell a security at the same time such security is purchased or
sold for the Fund, such purchases and sales will, to the extent feasible, be
allocated among the Fund and such clients in a manner believed by Deutsche Bank
Capital to be equitable to such clients.
6. Notice. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to Deutsche Bank Capital at 31 West 52nd
Street, New York, New York 10019, Attention: Office of Funds Administration; and
(2) to the Fund at 31 West 52nd Street, New York, New York 10019, Attention:
Secretary.
7. Miscellaneous.
7.1 This Agreement is effective January 31, 1990, and shall continue in
effect until the earlier of January 30, 1992 or the first annual meeting of
Fund's stockholders after the effective date of the Fund's Registration
Statement on Form N 2 filed with the Securities and Exchange Commission. If
approved at such meeting, and unless sooner terminated, this Agreement shall
continue in effect for successive periods of twelve months after such date,
provided that each such continuance shall be approved as required by the
Investment Company Act. The annual approval of the continuance of this Agreement
shall be confirmed to Deutsche Bank Capital by the Fund in writing.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund in
the manner prescribed by the Investment Company Act, without the payment of any
penalty, at any time upon not less than sixty days' prior written notice to
Deutsche Bank Capital, or by Deutsche Bank Capital upon not less than sixty
days' written notice to the Fund. This Agreement shall automatically terminate
(i) in the event of its assignment (as defined in the Investment Company Act) by
either party, or (ii) upon termination of the Investment Advisory Agreement,
dated as of January 31, 1990, between the Fund and CMI.
7.2 This Agreement shall be construed in accordance with the laws of the
State of New York.
7.3 The captions in this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
7.4 If any provisions of this Agreement shall be held or made invalid in
whole or in part, the other provisions of this Agreement shall remain in force.
Invalid provisions shall, in accordance with the intent and purpose of this
Agreement, be replaced by such valid provisions which in their economic effect
come as close as legally possible to such invalid provisions.
7.5 Nothing herein shall be construed as constituting Deutsche Bank
Capital an agent of the Fund.
7.6 Deutsche Bank Capital shall be entitled to rely on any notice or
communication believed by it to be genuine and correct and to have been sent to
it by or on behalf of the Fund.
D-2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
THE NEW GERMANY FUND, INC.
By: /s/ ROBERT GAMBEE
-----------------------------
Name: Robert Gambee
Title: VP, Secy, Treasurer
DEUTSCHE BANK CAPITAL
CORPORATION
By: /s/ CHRISTIAN H. STRENGER
-----------------------------
Name:
Title: Managing Director
D-3
PROXY
THE NEW GERMANY FUND, INC.
This proxy is solicited on behalf of the Board of Directors.
The undersigned stockholder of The New Germany Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints John Millette, Patricia Rosch
Carrington and Elisa Metzger, or any of them, as proxies for the undersigned,
with full power of substitution in each of them, to attend the Annual Meeting of
the Stockholders of the Fund to be held at [o], New York time, on [o], 2006 at
the offices of Deutsche Bank, 345 Park Avenue, New York, New York 10154, and any
adjournment or postponement thereof, to cast on behalf of the undersigned all
votes that the undersigned is entitled to cast at such meeting, and otherwise to
represent the undersigned at the meeting with all powers possessed by the
undersigned if personally present at the meeting. The undersigned hereby
acknowledges receipt of the Notice of the Annual Meeting of Stockholders and of
the accompanying Proxy Statement, the terms of each of which are incorporated by
reference herein, and revokes any proxy heretofore given with respect to such
meeting.
The votes entitled to be cast by the undersigned will be cast as
instructed below. If this Proxy is executed but no instruction is given, the
votes entitled to be cast by the undersigned will be cast "For" each of the
nominees for director, "For" Proposal 2 "Against" Proposal 3, "Against" Proposal
4, and "Against" Proposal 5, as described in the Proxy Statement. Additionally,
the votes entitled to be cast by the undersigned will be cast in the discretion
of the Proxy holder on any other matter that may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors unanimously recommends a vote "For" the nominees below
1. For each of the nominees Withhold Authority For all nominees except
for director listed as to all listed as marked to the
below. |_| nominees. |_| contrary below. |_|
(Instructions: To withhold authority for any individual nominee,
strike a line through the nominee's name in the list below.)
Dr. Franz Wilhelm Hopp
Ernst-Ulrich Matz
Dr. Frank Tromel
The Board of Directors unanimously recommends a vote "For" Proposal 2 below
2. To ratify the appointment by the Audit Committee and the Board of
Directors of PricewaterhouseCoopers LLP, an independent public accounting
firm, as independent auditors for the fiscal year ending December 31,
2006.
For |_| Against |_| Abstain |_|
The Board of Directors unanimously recommends a vote "Against" Proposal 3 below
3. To approve a proposal that shareholders may make nominations
notwithstanding the Fund's director qualification Bylaw.
For |_| Against |_| Abstain |_|
The Board of Directors unanimously recommends a vote "Against" Proposal 4 below
4. To approve a stockholder proposal to terminate the investment advisory
agreement between the Fund and Deutsche Asset Management International
GmbH.
For |_| Against |_| Abstain |_|
The Board of Directors unanimously recommends a vote "Against" Proposal 5 below
5. To approve a stockholder proposal to request that stockholders of the Fund
be afforded an opportunity to realize net asset value for their shares as
soon as practicable.
For |_| Against |_| Abstain |_|
6. To vote and otherwise represent the undersigned on any other matter that
may properly come before the meeting or any adjournment or postponement
thereof in the discretion of the Proxy holder.
Please sign here exactly as name appears on the records of the Fund and
date. If the shares are held jointly, each holder should sign. When signing as
an attorney, executor, administrator, trustee, guardian, officer of a
corporation or other entity or in another representative capacity, please give
the full title under signature(s).
______________________________________
Signature
______________________________________
Signature, if held jointly
______________________________________
Dated: _______________, 2006
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