N-Q 1 nq033108eef.htm N-Q FILING - THE EUROPEAN EQUITY FUND, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

_______________________________

Investment Company Act file number 811-4632

The European Equity Fund, Inc.

(Exact name of registrant as specified in charter)

 

345 Park Avenue

New York, NY 10154

(Address of principal executive offices)             (Zip code)

 

Paul Schubert

345 Park Avenue

New York, NY 10154-0004

(Name and address of agent for service)

Registrant's telephone number, including area code: (212) 454-7190

Date of fiscal year end: 12/31

Date of reporting period: 03/31/08

 

ITEM 1. SCHEDULE OF INVESTMENTS

 

THE EUROPEAN EQUITY FUND
SCHEDULE OF INVESTMENTS — MARCH 31, 2008 (unaudited)

Shares   Description   Value(a)  
INVESTMENTS IN GERMAN
SECURITIES – 31.1%		      
    COMMON STOCKS – 29.8%  
    AUTO COMPONENTS – 2.4%  
  35,000     Continental   $ 3,579,287    
    CHEMICALS – 5.5%  
  26,000     BASF     3,511,855    
  23,000     Linde     3,258,859    
  7,000     Wacker Chemie     1,438,365    
      8,209,079    
    COMMERCIAL SERVICES &
SUPPLIES – 0.4%		  
  45,000     D + S Online*     619,862    
    CONSTRUCTION &
ENGINEERING – 1.1%		  
  25,000     Bauer     1,648,611    
    DIVERSIFIED FINANCIAL
SERVICES – 1.6%		  
  15,000     Deutsche Boerse     2,423,162    
    ELECTRIC UTILITIES – 4.0%  
  32,000     E.ON     5,941,048    
    ELECTRICAL EQUIPMENT – 2.2%  
  38,000     Solarworld     1,815,190    
  64,325     Tognum*     1,414,638    
      3,229,828    
    INDUSTRIAL
CONGLOMERATES – 3.4%		  
  47,500     Siemens     5,162,943    
    INSURANCE – 4.9%  
  23,000     Allianz     4,569,467    
  14,000     Muenchener Rueckversicherungs     2,745,949    
      7,315,416    
    INTERNET SOFTWARE &
SERVICES – 1.2%		  
  85,000     United Internet     1,834,332    
    SOFTWARE – 3.1%  
  60,000     SAP     2,990,537    
  22,000     Software     1,692,864    
      4,683,401    
        Total Common Stocks
(cost $37,949,785)		     44,646,969    

 

Shares   Description   Value(a)  
    PREFERRED STOCK – 1.3%  
    HEALTHCARE EQUIPMENT &
SUPPLIES – 1.3%		  
  24,000     Fresenius
(cost $783,786)		   $ 2,004,458    
        Total Investments in
German Securities
(cost $38,733,571)		     46,651,427    
INVESTMENTS IN FRENCH
COMMON STOCKS – 16.8%		      
    CONSTRUCTION &
ENGINEERING – 2.0%		  
  42,000     Vinci     3,044,971    
    ENERGY EQUIPMENT &
SERVICES – 1.0%		  
  6,000     Compagnie Generale de
Geophysique-Veritas*		     1,497,929    
    FOOD PRODUCTS – 2.1%  
  35,000     Groupe Danone     3,138,734    
    HEALTHCARE EQUIPMENT &
SUPPLIES – 1.8%		  
  41,400     Essilor International     2,713,057    
    INSURANCE – 4.1%  
  170,100     AXA     6,191,651    
    MEDIA – 1.1%  
  40,000     Vivendi     1,567,467    
    MULTILINE RETAIL – 1.9%  
  19,000     PPR     2,823,261    
    OIL, GAS & CONSUMABLE
FUELS – 1.1%		  
  21,600     Total     1,608,734    
    TEXTILE, APPAREL & LUXURY
GOODS – 1.7%		  
  23,000     LVMH Moet Hennessy Louis
Vuitton		     2,567,321    
        Total Investments in French
Common Stocks
(cost $22,358,982)		     25,153,125    

 

The accompanying notes are an integral part of the financial statements.
6


THE EUROPEAN EQUITY FUND
SCHEDULE OF INVESTMENTS — MARCH 31, 2008 (unaudited) (continued)

Shares   Description   Value(a)  
INVESTMENTS IN SPANISH
COMMON STOCKS – 11.5%		      
    BIOTECHNOLOGY – 1.3%  
  73,000     Grifols   $ 1,926,734    
    CONSTRUCTION &
ENGINEERING – 1.2%		  
  24,000     Tecnicas Reunidas     1,823,582    
    DIVERSIFIED FINANCIAL
SERVICES – 0.8%		  
  25,000     Bolsas y Mercados Espanoles     1,224,682    
    DIVERSIFIED
TELECOMMUNICATION
SERVICES – 4.4%		  
  230,000     Telefonica     6,627,694    
    ELECTRIC UTILITIES – 2.6%  
  250,000     Iberdrola     3,887,001    
    IT SERVICES – 1.2%  
  61,000     Indra Sistemas     1,761,643    
        Total Investments in Spanish
Common Stocks
(cost $13,481,209)		     17,251,336    
INVESTMENTS IN FINNISH
COMMON STOCKS – 7.2%		      
    COMMUNICATIONS EQUIPMENT – 3.6%  
  170,000     Nokia     5,393,986    
    ELECTRIC UTILITIES – 2.5%  
  92,000     Fortum     3,759,578    
    MACHINERY – 1.1%  
  31,000     Metso     1,678,615    
        Total Investments in Finnish
Common Stocks
(cost $8,165,505)		     10,832,179    
INVESTMENTS IN ITALIAN
COMMON STOCKS – 6.8%		      
    COMMERCIAL BANKS – 6.8%  
  730,000     Intesa Sanpaolo     5,160,687    
  750,000     UniCredito Italiano SpA     5,034,894    
      10,195,581    
        Total Investments in Italian
Common Stocks
(cost $11,292,969)		     10,195,581    

 

Shares   Description   Value(a)  
INVESTMENTS IN DUTCH
COMMON STOCKS – 6.2%		      
    CONSTRUCTION &
ENGINEERING – 2.6%		  
  43,000     Boskalis Westminster   $ 2,483,628    
  38,000     Grontmij     1,425,318    
      3,908,946    
    ELECTRONIC EQUIPMENT &
INSTRUMENTS – 1.0%		  
  32,000     Smartrac*     1,552,901    
    ENERGY EQUIPMENT &
SERVICES – 1.2%		  
  23,000     Fugro     1,791,298    
    TRANSPORTATION
INFRASTRUCTURE – 1.4%		  
  20,000     Smit Internationale     2,042,457    
        Total Investments in Dutch
Common Stocks
(cost $8,175,047)		     9,295,602    
INVESTMENTS IN AUSTRIAN
COMMON STOCKS – 4.6%		      
    BUILDING PRODUCTS – 1.0%  
  28,800     Wienerberger     1,536,231    
    DIVERSIFIED
TELECOMMUNICATION
SERVICES – 1.2%		  
  90,000     Telekom Austria     1,865,286    
    OIL, GAS & CONSUMABLE
FUELS – 1.3%		  
  30,000     OMV     1,988,308    
    TRANSPORTATION
INFRASTRUCTURE – 1.1%		  
  13,000     Flughafen Wien     1,571,093    
        Total Investments in Austrian
Common Stocks
(cost $6,708,158)		     6,960,918    
INVESTMENTS IN GREEK
COMMON STOCKS – 3.5%		      
    COMMERCIAL BANKS – 1.4%  
  70,176     EFG Eurobank     2,137,750    

 

The accompanying notes are an integral part of the financial statements.
7


THE EUROPEAN EQUITY FUND
SCHEDULE OF INVESTMENTS — MARCH 31, 2008 (unaudited) (continued)

Shares   Description   Value(a)  
    DIVERSIFIED FINANCIAL
SERVICES – 1.0%		  
  61,000     Hellenic Exchanges   $ 1,452,583    
    DIVERSIFIED
TELECOMMUNICATION
SERVICES – 1.1%		  
  60,000     Hellenic Telecommunications
Organization		     1,708,064    
        Total Investments in Greek
Common Stocks
(cost $3,869,687)		     5,298,397    
INVESTMENTS IN SWISS
COMMON STOCKS – 2.3%		      
    ELECTRONIC EQUIPMENT &
INSTRUMENTS – 1.0%		  
  9,000     Inficon Holdings     1,436,364    
    LIFE SCIENCES TOOLS &
SERVICES – 1.3%		  
  15,000     Lonza Group†     1,995,454    
        Total Investments in Swiss
Common Stocks
(cost $2,996,304)		     3,431,818    
INVESTMENTS IN NORWEGIAN
COMMON STOCKS – 2.1%		      
    OIL, GAS & CONSUMABLE
FUELS – 2.1%		  
  104,000     Statoil
(cost $2,434,724)		     3,121,821    
INVESTMENTS IN IRISH
COMMON STOCKS – 1.8%		      
    COMMERCIAL BANKS – 1.8%  
  200,000     Anglo Irish Bank
(cost $2,818,897)		     2,691,610    
INVESTMENTS IN PORTUGUESE
COMMON STOCKS – 1.6%		      
    OIL, GAS & CONSUMABLE
FUELS – 1.6%		  
  100,000     Galp Energia
(cost $2,304,198)		     2,392,366    

 

Shares   Description   Value(a)  
INVESTMENTS IN BELGIAN
COMMON STOCKS – 1.5%		      
    BEVERAGES – 1.5%  
  25,000     Inbev
(cost $2,100,831)		   $ 2,206,328    
INVESTMENTS IN CYPRUS
COMMON STOCKS – 1.1%		      
    COMMERCIAL BANKS – 1.1%  
  145,000     Bank of Cyprus, Ltd.(b)
(cost $2,263,184)		     1,721,839    
        Total Investments in Common
and Preferred Stocks – 98.1%
(cost $127,703,266)		     147,204,347    
SECURITIES LENDING
COLLATERAL – 1.2%		      
  1,766,700     Daily Assets Institutional
Fund, 3.22%(c)(d)
(cost $1,766,700)		     1,766,700    
        Total Investments – 99.3%
(cost $129,469,966)		     148,971,047    
        Other Assets and Liabilities,
Net – 0.7%		     1,084,976    
        NET ASSETS–100.0%   $ 150,056,023    

 

*  Non-income producing securities.

†  All or a portion of this security was on loan. The value of the security loaned at March 31, 2008 amounted to $1,682,544 which is 1.1% of the net assets.

(a)  Values stated in US dollars.

(b)  Security listed in country of incorporation. Significant business activities of company are in Greece.

(c)  Represents collateral held in connection with securities lending. Income earned by the Fund is net of borrower rebates.

(d)  Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.

The accompanying notes are an integral part of the financial statements.
8


THE EUROPEAN EQUITY FUND
MARCH 31, 2008 (unaudited)

The following is a summary of the inputs used as of March 31, 2008 in valuing the Fund's assets carried at fair value:

Valuation Inputs   Investments in
Securities at Value		  
Level 1 – Quoted Prices   $ 148,971,047    
Level 2 – Other Significant     —    
Observable Inputs  
Level 3 – Significant     —    
Unobservable Inputs  
Total   $ 148,971,047    

 

The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective December 1, 2007, which governs the application of generally accepted accounting principles that require fair value measurements of the Fund's assets and liabilities. Fair value is an estimate of the price the Fund would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market of the security. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation tech nique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels as follows:

• Level 1 – quoted prices in active markets for identical securities

• Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

For Level 1 inputs, the Fund uses unadjusted quoted prices in active markets for assets or liabilities with sufficient frequency and volume to provide pricing information as the most reliable evidence of fair value. The Fund's Level 2 valuation techniques include inputs other than quoted prices within Level 1 that are observable for an asset or liability, either directly or indirectly. Level 2 observable inputs may include quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active in which there are few transactions, the prices are not current, or price quotations vary substantially over time or among market participants. Inputs that are observable for the asset or liability in Level 2 include such factors as interest rates, yield curves, prepayment speeds, credit risk, and default rates for similar liabilities. For Level 3 valuation techniques, the Fund uses unobservable inputs that reflect assumptions market participants would be expected to use in pricing the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available and are developed based on the best information available under the circumstances. In developing unobservable inputs, market participant assumptions are used if they are reasonably available without undue cost and effort.

The Fund may record changes to valuations based on the amount that might reasonably be expected to receive for a security upon its current sale consistent with the fair value measurement objective. Each determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to the type of the security, the existence of any contractual restrictions on the security's disposition, the price and extent of public trading in similar securities of the issue or of comparable companies, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company's financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold, and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value determined upon sale of those investments.


9

 

 

ITEM 2.

CONTROLS AND PROCEDURES

 

 

 

(a)          The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on the evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.

 

 

 

(b)          There have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls over financial reporting.

 

 

ITEM 3.

EXHIBITS

 

 

 

Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant:

The European Equity Fund, Inc.

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

May 14, 2008

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Registrant:

The European Equity Fund, Inc.

 

By:

/s/Michael G. Clark

 

Michael G. Clark

President

 

Date:

May 14, 2008

 

 

By:

/s/Paul Schubert

 

Paul Schubert

Chief Financial Officer and Treasurer

 

Date:                                        May 14, 2008