The Central and Eastern Europe Fund, Inc. Provides Update on Developments Regarding Russian Holdings

Rhea-AI Summary

The Central and Eastern Europe Fund (NYSE: CEE) reports progress on its Russian holdings situation. The Fund successfully sold depositary receipts of six non-sanctioned Russian issuers through private transactions in May, August, and September 2024, positively impacting its NAV. Additionally, former holding Yandex NV's restructuring into Nebius Group N.V. led to a $3.6 million increase in Fund's net assets as of October 30, 2024. However, remaining Russian securities are either local shares that cannot be traded or sanctioned depositary receipts, all currently valued at zero. A recent Russian Presidential Decree may result in asset expropriation from foreign investors, potentially affecting the Fund.

Positive

• Successful sale of depositary receipts from six non-sanctioned Russian issuers
• $3.6 million increase in net assets from Nebius Group N.V. (former Yandex NV) restructuring

Negative

• Remaining Russian securities valued at zero
• Risk of asset expropriation due to Russian Presidential Decree
• Unable to trade local shares and sanctioned depositary receipts

Insights

Financial Analyst

The Fund's successful sale of depository receipts from six non-sanctioned Russian issuers through private transactions marks a significant development in managing frozen Russian assets. The restructuring of Yandex NV into Nebius Group N.V. and its subsequent Nasdaq listing resulted in a $3.6 million increase in net assets, demonstrating potential pathways for value recovery.

However, substantial challenges remain. The Fund's remaining Russian holdings are either restricted local shares or sanctioned securities, effectively valued at zero. The recent Russian Presidential Decree threatening potential expropriation of foreign-held assets adds another layer of risk. These developments highlight the ongoing complexities of managing Russian exposure in CEE investment portfolios and the gradual nature of any potential value recovery.

Market Research Analyst

This development represents a important shift in the frozen assets landscape, particularly for funds with Russian exposure. The ability to execute private transactions for non-sanctioned securities, albeit at deep discounts, provides a template for other funds facing similar challenges. The Nebius Group transition demonstrates how corporate restructuring can unlock value from previously frozen assets.

The geopolitical situation continues to create significant barriers for full portfolio recovery, with sanctions and Russian counter-measures limiting options for remaining holdings. Investors should note that while some progress has been made, the majority of Russian assets remain illiquid and at risk of further deterioration or expropriation.

NEW YORK--(BUSINESS WIRE)-- The Central and Eastern Europe Fund, Inc. (NYSE: CEE) (the “Fund”). As previously reported, certain of the Fund’s Russian holdings have been valued at zero since March 14, 2022 in light of measures adopted by the Russian Central Bank and Government, as well as sanctions implemented by the United States and other countries in response to Russia’s invasion of Ukraine. The effects of the sanctions and measures adopted by the Russian Central Bank and Government are far-reaching and include, among others, the freezing of certain Russian assets held by entities, such as the Fund, that are organized in countries viewed as “unfriendly” by the Russian Government.

The Fund’s investment manager has been monitoring the situation closely and, as previously disclosed, has observed occasional privately negotiated transactions in depositary receipts of certain non-sanctioned Russian issuers taking place (at prices that are generally deeply discounted from those taking place through the facilities of the Moscow Stock Exchange). On May 30, 2024, the Fund announced that in May 2024 the Fund had been successful in selling depositary receipts of one non-sanctioned Russian issuer in such a privately negotiated transaction resulting in positive impact to the Fund’s net asset value (“NAV”). In August and September 2024, the Fund was successful in selling additional depositary receipts of five non-sanctioned Russian issuers in privately negotiated transactions, resulting in positive impact to the Fund’s NAV.

The Fund notes that recently, former CEE portfolio holding Yandex NV was restructured and now, as Nebius Group N.V., holds only non-Russian assets. CEE’s shares of Nebius Group N.V. recently began trading on the Nasdaq. As a result, CEE stopped fair valuing the securities at a discount as of October 30, 2024, resulting in an increase in the Fund’s net assets of $3.6 million.

The Fund will continue to monitor developments in this area but notes that the Fund’s remaining positions in Russian securities are held as either “local shares,” (which cannot currently be transacted in by the Fund) or as depositary receipts for securities of issuers that are subject to U.S. sanctions such that it would not be possible for the Fund to sell them, absent receipt of special permissions granted by the U.S., which permissions are unlikely to be forthcoming if requested at the present time. Moreover, a recent Russian Presidential Decree may result in the expropriation of certain Russian assets held by certain foreign investors, which potentially could include the Fund. Currently, all of the Russian securities and depository receipts for Russian securities held by the Fund are being valued at zero.

In light of recent events, the Fund has provided its portfolio holdings as of the close of business on October 31, 2024, at www.dwsfunds.com.

Important Information

The Central and Eastern Europe Fund, Inc. is non-diversified and can take larger positions in fewer issues, increasing its potential risk. Investing in foreign securities presents certain risks, such as currency fluctuations, political and economic changes, and market risks. Emerging markets tend to be more volatile and less liquid than the markets of more mature economies, and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. Any fund that focuses in a particular segment of the market or region of the world will generally be more volatile than a fund that invests more broadly. This fund is non-diversified and can take larger positions in fewer issues, increasing its potential risk.

Investing in foreign securities, particularly of emerging markets, presents certain risks, such as currency fluctuations, and risks of currency and capital controls, political and economic changes, and market risks. Any fund that concentrates in a particular segment of the market or a particular geographical region will generally be more volatile than a fund that invests more broadly.

War, terrorism, sanctions, economic uncertainty, trade disputes, public health crises and related geopolitical events have led, and, in the future, may lead to significant disruptions in US and world economies and markets, which may lead to increased market volatility and may have significant adverse effects on the funds and their investments.

The European Union, the United States and other countries have imposed sanctions on Russia in response to Russian military and other actions in recent years. These sanctions have adversely affected Russian individuals, issuers and the Russian economy. Russia, in turn, has imposed sanctions targeting Western individuals, businesses and products. The various sanctions have adversely affected, and may continue to adversely affect, not only the Russian economy, but also the economies of many countries in Europe, including countries in Central and Eastern Europe. In the case of the Central and Eastern Europe Fund, Inc., Russia’s invasion of Ukraine has materially adversely affected, and may continue to materially adversely affect, the value and liquidity of the Fund’s portfolio.

Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the fund’s shares is determined by a number of factors, several of which are beyond the control of the fund. Therefore, the fund cannot predict whether its shares will trade at, below or above net asset value.

This press release shall not constitute an offer to sell or a solicitation to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer or solicitation or sale would be unlawful prior to registration or qualification under the laws of such state or jurisdiction.

Certain statements contained in this release may be forward-looking in nature. These include all statements relating to plans, potential future transactions, expectations, and other statements that are not historical facts and typically use words like “may,” “expect,” “anticipate,” “believe,” “intend,” and similar expressions. Such statements represent management’s current beliefs, based upon information available at the time the statements are made, with regard to the matters addressed. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Management does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The following factors, among others, could cause actual results to differ materially from forward-looking statements: (i) the effects of adverse changes in market and economic conditions; (ii) legal and regulatory developments including with respect to relevant sanctions; and (iii) other additional risks and uncertainties, including public health crises, war, terrorism, trade disputes and related geopolitical events.

Past performance is no guarantee of future results.

NOT FDIC/ NCUA INSURED • MAY LOSE VALUE • NO BANK GUARANTEE
NOT A DEPOSIT • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

DWS Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.dws.com
Tel (800) 621-1148
© 2024 DWS Group GmbH & Co. KGaA. All rights reserved

The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries such as DWS Distributors, Inc. which offers investment products or DWS Investment Management Americas, Inc. and RREEF America L.L.C. which offer advisory services. (R-103599-1) (11/24)

View source version on businesswire.com: https://www.businesswire.com/news/home/20241121311598/en/

For additional information:

DWS Press Office (212) 454-4500

Shareholder Account Information (800) 294-4366

DWS Closed-End Funds (800) 349-4281

Source: DWS

FAQ

What progress has CEE made with its Russian holdings in 2024?

CEE successfully sold depositary receipts of six non-sanctioned Russian issuers through private transactions in May, August, and September 2024, and benefited from the Yandex NV restructuring into Nebius Group N.V., which added $3.6 million to net assets.

How are CEE's remaining Russian securities currently valued?

All of CEE's remaining Russian securities and depository receipts are currently valued at zero due to trading restrictions and sanctions.

What risks does CEE face regarding its Russian holdings as of October 2024?

CEE faces risks of potential asset expropriation due to a recent Russian Presidential Decree, and cannot trade its local shares or sanctioned depositary receipts without special permissions from the U.S.