<PAGE>
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to present to you the Annual Report of The Europe Fund, Inc. On
December 31, 1995, the end of the period under review, the Fund's net assets
totalled $144.2 million. This represents a net asset value per share of $14.32,
a rise of 57.31% from its initial value after taking into account underwriting
discounts, commissions, offering expenses and distributions. This compares with
a 71.61% increase in the MSCI Europe Index over the same time period. At the end
of the period under review, The Europe Fund, Inc. was quoted at $12.75 per share
on the New York Stock Exchange, which represents a 10.96% discount to the Fund's
net asset value per share. A total distribution of $0.88 has been made during
the year ended December 31, 1995.
We also enclose an investment review and European market outlook, together
with a summary of the major portfolio investments.
Yours sincerely,
<TABLE>
<S> <C>
(SIGNATURE) (SIGNATURE)
Anthony M. Solomon Richard J. Oldfield
Chairman of the Board President
</TABLE>
<PAGE>
INVESTMENT REVIEW
During the fourth quarter of 1995, your Fund experienced a rise in net asset
value of 2.59%, which compared with an increase of 3.41% in the value of the
MSCI Europe Index. For the year, your Fund returned 21.38%, which compared with
21.62% for the MSCI Europe Index. These results are recorded in total return and
dollar-based terms.
During the past year the economic environment in Europe deteriorated following
signs of weakness during the summer. In industrial and construction sectors,
companies reported rising stock levels and weakening of order inflow. Business
confidence declined and the price of a number of commodities fell following the
sharp rises seen earlier this year. Consumer confidence remains low throughout
Europe.
The major event over the quarter was the wholesale reshuffling of the French
government, accompanied by proposals to significantly cut public sector spending
and the social security deficit. This move was taken well by the financial
markets but it unleashed a prolonged strike by public sector unions which
resulted in some dilution of the original proposals. These events exacerbated
the extent of the slowdown in France. In response to clear signs of slowdown in
growth rates, interest rates were cut, led by the Bundesbank. Bond yields fell
in all countries during the quarter. In this environment of slowing economic
activity and falling interest rates, financial sectors and utilities
outperformed markedly as did some defensive areas, such as healthcare and the
food sector. The major areas of underperformance were the cyclical sectors such
as paper, metal and capital goods. The technology sector was hit by profit
taking, following spectacular gains earlier in the year. The main markets all
achieved returns clustered around the overall index return, with the exception
of Switzerland, which rose considerably, reflecting the concentration of
pharmaceutical, financial and defensive shares within its index.
ECONOMIC AND MARKET OUTLOOK
The monetary authorities are expected to reduce short-term rates further, in
response to the slowness of European economies seen in the second half of 1995
and, as this occurs, we would expect to see some stabilization and then a
renewed level of growth later in the year. For European equities as a whole, we
believe it is unlikely that there will be the same degree of support from
falling bond yields as was seen during 1995. Within the market, we do not expect
the recent relative strength seen by the bond market and sensitive sectors such
as financials and utilities to continue at the same rate. The Fund remains in
long-standing growth sectors such as media, with a neutral stance being taken in
economically sensitive areas of the market.
PORTFOLIO SUMMARY
During the three-month period to December 31, 1995, the Fund purchased new
holdings in Hoganas, Avesta Sheffield and Central European Media Enterprises.
Holdings in Cipe France, Europista Concesionaria Espanola SA, British
Biotechnology Group PLC and Svenska Stal AB were reduced.
The Fund's and the MSCI Europe Index's country weightings expressed as a
percentage of total equities held at December 31, 1995 are outlined below:
<TABLE>
<CAPTION>
MSCI EUROPE
FUND INDEX
----------- ---------------
<S> <C> <C>
Austria......................... -- % 0.9%
Belgium......................... -- 2.3
Czech Republic.................. 0.7 --
Denmark......................... 0.9 1.6
Finland......................... 2.7 1.0
France.......................... 19.8 12.6
Germany......................... 13.3 13.8
Hungary......................... 0.7 --
Ireland......................... 1.1 0.6
Italy........................... 1.6 4.5
<CAPTION>
MSCI EUROPE
FUND INDEX
----------- ---------------
<S> <C> <C>
Luxembourg...................... 0.8% -- %
Netherlands..................... 7.9 8.1
Norway.......................... 2.5 0.9
Spain........................... 2.9 3.6
Sweden.......................... 11.5 4.1
Switzerland..................... 4.5 12.0
Turkey.......................... 0.2 --
United Kingdom.................. 28.9 34.0
----- -----
100.0% 100.0%
----- -----
----- -----
</TABLE>
2
<PAGE>
The Fund's ten largest equity holdings at December 31, 1995 were:
BRITISH BIOTECHNOLOGY GROUP PLC
The company is one of the leading biotechnology companies in the U.K., with
several of its products showing promise in clinical trials. The leading
development candidate is Batimastat, the anti-cancer drug, which should have
phase III trial results released by March 1996. Although the company will not
report any significant profits before 1997, it is active in several areas which
could produce blockbuster drugs. In our opinion, the company is relatively
attractively valued and there appears to be a chance of further progress over
the next year.
TOTAL SA
Total is one of the leading French oil companies. It has the highest reserve
replacement ratio amongst its European peer group at over 200% and the second
lowest finding cost ratio. Total has a strong balance sheet and its production
profile is set to double by the year 2000 with discoveries in the Far East and
Latin America. In view of the earnings outlook, we believe that the stock is
attractively valued, relative to its European peer group.
BAYER AG
Bayer is one of the world's most diversified companies with business in
chemicals, healthcare and imaging technology. The company reported its first
half of 1995 results ahead of market expectations. Stronger volume and pricing
were the driving force behind the progress.
ASEA AB
Asea forms 50% of the Asea Brown Boveri Group (ABB), having merged its
activities with those of the Swiss industrial, Brown Boveri, in the 1980s. ABB,
which is predominately involved in the provision of infrastructure, divides its
activities between more than 1,000 companies and is present in over 130
countries worldwide. The bulk of its activities is related to the general and
subsequent distribution of power, while the remainder comprises a diverse spread
ranging from transportation and robotics to financial services.
BUT SA
But is the second largest distributor of furniture and consumer durables in
France. The sale of Carrefour's 30% stake to institutional investors in France
and abroad has increased liquidity for what is a very interesting growth company
operating in a specialist niche area.
TELEVISION FRANCAISE
TF1 is the leading TV channel in France. It has the highest audience ratings
and holds 54% of the TV advertising market. We believe the group's financial
position is extremely sound with a strong net cash position. The current share
price does not, in our opinion, take full account of the company's earnings
outlook and is trading at a discount to the French media sector.
HAYS PLC
The group operates in the business services and distribution market. It has a
strong position in its domestic markets and enticing expansion opportunities
abroad. A string of successful acquisitions has trebled the company's market
value over the last six years. Recent results have confirmed that above average
growth may be expected in the medium term.
3
<PAGE>
RHOEN KLINIKUM
The company operates 2 health care clinics, a neurological clinic, an
addiction treatment center and a cardiovascular surgery unit. The cardiovascular
surgery unit accounts for approximately 10% of heart operations in West Germany
and has the lowest mortality rate in the country. The company's profitability is
effectively underwritten by the inefficiency of its state run competitors. Rhoen
operates within the same fee structure as public hospitals and, thus, any
efficiencies achieved relative to its competitors result in improved margins.
The state system has been brought under increased pressure by the process of
reunification. This has provided a major opportunity for Rhoen Klinikum, which
has moved quickly to establish itself in eastern Germany. We believe that the
company is a well managed and rationalized provider of acute hospital services.
Its expanding range of services and geographical locations should provide solid
earnings growth in the forseeable future.
ABN AMRO HOLDING N.V.
ABN Amro is moderately valued relative to other European banks. The company
has a good track record, a strong position in the domestic market and a sound
strategy revolving around the diversification out of traditional markets and
activities. The group has been conservatively managed and has performed well
through the economic cycle. ABN Amro remains a core holding in the sector, and
we believe it is a good play on volume recovery in Europe.
SECURITAS AB
The group is a pure service company operating in the guard, alarm and cash-in
transit services markets. It is a high quality growth company, offering good
earnings visibility and a proven track record in acquisitions. Unlike certain
other growth companies in the business services sector, Securitas' acquisitions
have benefited shareholders generating average per annum profit growth of more
than 25% over the past 5 years.
4
<PAGE>
- -----------------------------------------------
THE EUROPE FUND, INC.
SCHEDULE OF INVESTMENTS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS & WARRANTS -- 88.9%
CZECH REPUBLIC--0.7%
50,000 +Central European Media Enterprises........ $ 1,025,000
--Consumer Goods
-------------
1,025,000
-------------
DENMARK--0.9%
24,900 Unidanmark AS.............................. 1,233,895
--Banking
-------------
1,233,895
-------------
FINLAND--0.6%
50,000 Outokumpu Oy............................... 794,638
--Metals--Non Ferrous
-------------
794,638
-------------
FRANCE--18.8%
10,000 +Axime..................................... 769,859
--Electrical & Electronics
23,000 BIC........................................ 2,338,983
--Recreation & Other Consumer Goods
67,500 But SA..................................... 3,652,747
--Services
23,000 Cie Generale des Eaux...................... 2,296,243
--Business & Public Services
36,835 Cipe France................................ 2,211,454
--Business & Public Services
12,000 Ecco Travail Temporaire.................... 697,162
--Business & Public Services
30,000 Elf Aquitaine.............................. 2,210,333
--Energy Sources
6,900 Esso Francaise............................. 690,423
--Energy Sources
40,000 Michelin................................... 1,595,262
--Tire & Rubber
8,000 Pinault Printemps Redoute.................. 1,596,079
--Merchandising
4,000 Societe Eurafrance......................... 1,343,680
--Financial Services
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
30,000 Television Francaise....................... $ 3,216,255
--Broadcasting & Publishing
66,000 Total SA Class B........................... 4,454,360
--Energy Sources
-------------
27,072,840
-------------
GERMANY--8.6%
11,440 +AGAB AG................................... 1,197,655
--Financial Services
1,320 +AGAB AG (Warrants)(a)..................... 1,833
--Financial Services
15,000 Bayer AG................................... 3,962,521
--Chemicals
40,000 Deutsche Bank AG........................... 1,897,543
--Banking
42,000 Deutsche Pfandbrief Und Hypothekenbank..... 1,632,747
--Banking
16,000 HeidelBerger Zement (Warrants)(b).......... 94,919
--Building Materials & Components
13,700 Hornbach Baumarkt AG....................... 589,957
--Consumer Goods
7,900 +Kiekert AG................................ 469,765
--Automobiles
23,200 Leifheit AG................................ 1,020,100
--Appliances & Household Durables
1,260 Marschollek Lautenschlager Partners
(Ordinary)............................... 914,573
--Financial Services
18,550 +Praktiker Bau Und Heimwerkermarkt......... 568,359
--Appliances & Household Durables
-------------
12,349,972
-------------
HUNGARY--0.7%
16,000 Gedeon Richter............................. 307,200
--Pharmaceutical Distribution
15,000 Pannonplast Muanyagipari................... 197,686
--Consumer Goods
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
18,200 +Pharmavit (GDR) (1)....................... $ 218,400
--Health & Personal Care
10,000 +Primagaz Hungaria......................... 295,274
--Utilities--Electric & Gas
-------------
1,018,560
-------------
IRELAND--1.0%
200,000 Irish Continental Group PLC................ 1,520,950
--Transportation-- Shipping
-------------
1,520,950
-------------
ITALY--1.5%
15,500 +Gucci Group NV............................ 602,563
--Consumer Goods
34,500 Industrie Natuzzi SPA (ADR) (2)............ 1,565,437
--Appliances & Household Durables
-------------
2,168,000
-------------
LUXEMBOURG--0.7%
12,000 Safra Republic Holding..................... 1,072,500
--Banking
-------------
1,072,500
-------------
NETHERLANDS--7.5%
17 +A.B. Capital Fund*........................ 467,603
--Business & Public Services
67,000 ABN Amro Holding N.V....................... 3,054,572
--Finance
150,000 Elsevier................................... 2,001,996
--Broadcasting & Publishing
29,000 Nutricia Ver Bedrj......................... 2,347,636
--Food & Household Products
5,000 Polynorm NV................................ 427,217
--Metals--Steel
18,000 Ver Ned Uitgevers Bezit.................... 2,473,120
--Broadcasting & Publishing
-------------
10,772,144
-------------
NORWAY--2.4%
810,000 Christiania Bank OG Kreditkasse............ 1,883,334
--Banking
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
39,500 +Fokus Bank A/S............................ $ 213,985
--Finance
100,000 Schibsted A/S.............................. 1,360,264
--Broadcasting & Publishing
-------------
3,457,583
-------------
SPAIN--2.8%
7,100 Acerinox................................... 718,550
--Materials
20,000 Banco Santander............................ 1,004,619
--Banking
41,037 Estacion Subterraneos...................... 737,881
--Services
109,332 Europistas Concesionaria Espanola SA....... 900,880
--Business & Public Services
350,000 +Sotogrande................................ 652,425
--Finance
-------------
4,014,355
-------------
SWEDEN--10.9%
40,000 Asea AB.................................... 3,897,436
--Utilities--Electric
30,000 Autoliv AB................................. 1,755,656
--Electronic Components
100,000 Avesta Sheffield........................... 882,353
--Metals--Steel
18,000 Elekta AB (B Free)......................... 722,172
--Electrical & Electronics
21,700 Hennes & Mauritz........................... 1,211,011
--Merchandising
66,500 Hoganas AB (Series B)...................... 1,945,852
--Machinery & Engineering
62,500 Securitas AB (Series B).................... 2,969,457
--Health & Personal Care
60,000 Svedala Industrie.......................... 1,547,511
--Machinery & Engineering
80,000 Svenska Stal AB (Series B)................. 808,446
--Metals--Non Ferrous
-------------
15,739,894
-------------
SWITZERLAND--4.3%
3,240 +Adia SA (Bearer).......................... 529,209
--Business & Public Services
700 Baloise Holding Ltd. (Registered).......... 1,459,600
--Insurance
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
560 Bobst AG (Bearer).......................... $ 875,760
--Machinery & Engineering
4,410 Fust AG.................................... 1,111,121
--Appliances & Household Products
1,900 Hilti AG (Participating Certificates)...... 1,517,029
--Industrial Components
1,330 Phoenix Mecano............................. 667,889
--Capital Equipment
-------------
6,160,608
-------------
TURKEY--0.1%
483,000 Erciyas Biracilik.......................... 227,529
--Beverages & Tobacco
-------------
227,529
-------------
UNITED KINGDOM--27.4%
100,000 Amersham International PLC (Ordinary)...... 1,374,850
--Health & Personal Care
200,000 Bemrose Corp. PLC (Ordinary)............... 1,221,400
--Forest Products & Paper Materials
415,809 Birkby PLC (Ordinary)...................... 998,981
--Real Estate
250,000 British Airport Authority PLC (Ordinary)... 1,879,375
--Business & Public Services
200,000 +British Biotechnology Group PLC
(Ordinary)............................... 5,642,000
--Health & Personal Care
250,000 Cable & Wireless PLC (Ordinary)............ 1,782,500
--Telecommunications
80,000 Cadbury Schweppes PLC (Ordinary)........... 659,060
--Food & Household Products
50,000 Domestic & General Group (Ordinary)........ 1,197,375
--Insurance
200,000 GKN PLC (Ordinary)......................... 2,414,900
--Machinery & Engineering
150,000 Great Universal Store PLC.................. 1,591,462
--Merchandising
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
SHARES DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
666,666 Halma PLC (Ordinary)....................... $ 1,808,332
--Machinery & Engineering
550,000 Hays PLC (Ordinary)........................ 3,205,400
--Business & Public Services
318,000 Hewden-Stuart Plant PLC (Ordinary)......... 670,344
--Construction & Housing
160,000 Jarvis Porter Group PLC.................... 686,960
--Forest Products & Paper Materials
400,000 Mai PLC (Ordinary)......................... 1,884,800
--Financial Services
200,000 Marks & Spencer PLC (Ordinary)............. 1,395,000
--Merchandising
150,000 Pearson PLC (Ordinary)..................... 1,449,637
--Broadcasting & Publishing
100,000 Reuters Holdings PLC (Ordinary)............ 913,725
--Business & Public Services
300,000 Royal Bank of Scotland PLC (Ordinary)...... 2,724,900
--Banking
195,000 Serco Group PLC (Ordinary)................. 1,109,257
--Business & Public Services
50,000 Thorn EMI PLC (Ordinary)................... 1,175,287
--Appliances & Household Durables
60,000 Unilever PLC (Ordinary).................... 1,229,925
--Food & Household Products
1,000,000 Waterford Wedgwood PLC (Units)............. 951,276
--Food & Household Products
220,000 Wolseley PLC (Ordinary).................... 1,537,910
--Building Materials & Components
-------------
39,504,656
-------------
Total Common Stocks & Warrants
(cost--$115,577,676)..................... 128,133,124
-------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
SHARES/FACE VALUE
AMOUNT DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS -- 6.0%
FINLAND--2.0%
75,000 Nokia AB (Oy).............................. $ 2,902,156
--Electrical & Electronics
-------------
2,902,156
-------------
GERMANY--4.0%
10,000 Fresenius.................................. 949,190
--Health & Personal Care
2,590 Marschollek Lautenschlager Partners
(Non-Voting)............................. 1,789,573
--Financial Services
35,412 Rhoen Klinikum
(Non-Voting)............................. 3,089,405
--Health & Personal Care
-------------
5,828,168
-------------
Total Preferred Stocks
(cost--$7,122,171)....................... 8,730,324
-------------
CONVERTIBLE BONDS -- 3.2%
FINLAND--0.7%
FIM 4,550,000 Lansivoima, 7.425% due 03/29/2001.......... 1,035,425
--Utilities--Electric & Gas
-------------
1,035,425
-------------
FRANCE--0.8%
FF 5,331,730 Virbac, 5% due 12/31/2001.................. 1,164,863
--Health & Personal Care
-------------
1,164,863
-------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
VALUE
FACE AMOUNT DESCRIPTION (NOTE 1)
- ----------------------------------------------------------------------------
<C> <S> <C>
NETHERLANDS--1.7%
NLG 3,900,000 Draka Holding, 4.5% due 05/18/2001......... $ 2,398,279
--Finance
-------------
2,398,279
-------------
Total Convertible Bonds
(cost--$3,971,890)....................... 4,598,567
-------------
OTHER INVESTMENT -- 0.2%
UNITED KINGDOM--0.2%
GBP 215,016 Carlton Communications PLC Loan Note
Certificates, 2.256% due 01/31/99
(cost--$318,331)......................... 333,275
--Business & Public Services
-------------
333,275
-------------
Total Investments--98.3%
(cost--$126,990,068)(c).................. 141,795,290
Unrealized Appreciation on
Foreign Currency Contracts--0.0%(d)...... 11,206
Other Assets in Excess of
Liabilities--1.7%........................ 2,383,044
-------------
Net Assets--100.0%......................... $ 144,189,540
-------------
-------------
</TABLE>
- ------------------------------
(a) The warrants enable the holder to subscribe to one ordinary share for
every warrant held at DM 304 per share until November 30, 1997.
(b) The warrants enable the holder to subscribe to eleven ordinary shares
for every 100 warrants held at DM 1215 per share until June 13, 2000.
(c) The United States Federal income tax basis of the Fund's investments
at December 31, 1995 was $127,334,455 and, accordingly, net unrealized
appreciation for United States Federal income tax purposes was $14,460,835
(gross unrealized appreciation--$20,323,352; gross unrealized
depreciation--$5,862,517).
(d) Foreign Currency contracts as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
EXPIRATION CURRENCY CURRENCY
DATE PURCHASED VALUE SOLD VALUE
- --------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
January 1996 British Pound $ 2,631,040 U.S. Dollar $2,618,309
January 1996 U.S. Dollar 63,171 Dutch Guilder 63,372
January 1996 U.S. Dollar 293,656 Swedish Krona 294,980
- --------------------------------------------------------------------------------
Total Foreign Currency
Contracts............................ $2,987,867 $2,976,661
----------- ----------
----------- ----------
- --------------------------------------------------------------------------------
</TABLE>
(1) Global Depositary Receipt (GDR).
(2) American Depositary Receipt (ADR).
+ Non-income producing security.
* Investment in restricted security with an aggregate value of $467,603,
representing 0.32% of net assets at December 31, 1995. The investment was
acquired on October 22, 1990 and September 5, 1991 for $759,153.
See Notes to Financial Statements.
8
<PAGE>
- ----------------------------------------------------
THE EUROPE FUND, INC.
STATEMENT OF
ASSETS AND LIABILITIES
DECEMBER 31, 1995
- ----------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost $126,990,068) (Note 1).............................. $141,795,290
Domestic cash................................................................... 4,832,810
Foreign cash (Note 1)........................................................... 380,070
Withholding tax refund receivable............................................... 518,739
Interest receivable............................................................. 195,980
Dividends receivable............................................................ 157,786
Receivable for securities sold.................................................. 110,606
Unrealized appreciation on foreign currency contracts........................... 11,206
Prepaid expenses and other assets............................................... 2,502
------------
Total assets.............................................................. 148,004,989
------------
LIABILITIES
Payable for securities purchased................................................ 2,631,041
Dividend payable................................................................ 816,826
Investment management fee payable
(Note 2)....................................................................... 92,080
Administration fee payable (Note 2)............................................. 30,693
Accrued expenses and other liabilities.......................................... 244,809
------------
Total liabilities......................................................... 3,815,449
------------
NET ASSETS...................................................................... $144,189,540
------------
------------
Net Assets consist of:
Common Stock, $.001 par value
(Authorized 100,000,000 shares)
(Note 4)..................................................................... $ 10,066
Paid-in surplus............................................................... 129,299,044
Undistributed net investment income........................................... 174,279
Accumulated net realized losses on investments................................ (112,128)
Net unrealized appreciation on investments and foreign currency related
transactions................................................................. 14,818,279
------------
Net Assets.................................................................... $144,189,540
------------
------------
Net Asset Value per share
($144,189,540 DIVIDED BY 10,066,319 shares of common stock issued and
outstanding)................................................................... $14.32
------
------
</TABLE>
- ----------------------------------------------------
THE EUROPE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
- ----------------------------------------------------
<TABLE>
<S> <C>
NET INVESTMENT INCOME
Income
Dividends...................................................................... $ 3,280,582
Interest....................................................................... 563,133
-----------
3,843,715
Less: Withholding tax on foreign source dividends.............................. 456,643
-----------
Total income............................................................... 3,387,072
-----------
Expenses
Investment management fee (Note 2)............................................. 1,045,219
Administration fee (Note 2).................................................... 348,406
Legal fees..................................................................... 144,269
Custodian fees................................................................. 125,102
Directors' fees and expenses................................................... 106,518
Shareholder servicing fees..................................................... 60,282
Reports to shareholders........................................................ 50,022
Audit fees..................................................................... 46,000
NYSE listing fee............................................................... 24,260
Amortization of organization expenses (Note 1)................................. 13,420
Miscellaneous.................................................................. 20,269
-----------
Total expenses............................................................. 1,983,767
-----------
Net investment income............................................................ 1,403,305
-----------
</TABLE>
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY RELATED TRANSACTIONS
<TABLE>
<S> <C> <C>
Realized gain (loss) from:
Investments -- net............................................ $ 7,199,520
Foreign currency transactions................................. (135,000) 7,064,520
-------------
Change in unrealized appreciation (depreciation) on:
Investments -- net............................................ 18,170,637
Foreign currency related transactions......................... (21,129) 18,149,508
------------- -------------
Net realized and unrealized gain on investments and foreign
currency related transactions.................................. 25,214,028
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ $ 26,617,333
-------------
-------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE EUROPE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income....................................... $ 1,403,305 $ 1,205,012
Net realized gain on investments and foreign currency
related transactions....................................... 7,064,520 8,796,070
Change in unrealized appreciation (depreciation) on
investments and foreign currency related transactions...... 18,149,508 (2,164,729)
------------ ------------
Net Increase in Net Assets Resulting from Operations.......... 26,617,333 7,836,353
------------ ------------
Dividends and Distributions:
Net investment income ($0.100 and $0.147 per share,
respectively).............................................. (1,008,363) (1,481,591)
Net realized gain on investments and foreign currency
related transactions ($0.780 and $0.813 per share,
respectively) (Note 1)..................................... (7,849,998) (8,182,075)
------------ ------------
Net Decrease in Net Assets Resulting from Dividends and
Distributions................................................ (8,858,361) (9,663,666)
------------ ------------
Capital Share Transactions:
Additional offering costs from rights issue charged to
paid-in surplus............................................ -- (14,399)
------------ ------------
Total Increase (Decrease)..................................... 17,758,972 (1,841,712)
NET ASSETS
Beginning of year........................................... 126,430,568 128,272,280
------------ ------------
End of year (including undistributed net investment income
of $174,279 and $219,761, respectively).................... $144,189,540 $126,430,568
------------ ------------
------------ ------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE EUROPE FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following per share data and ratios have been derived from information
provided in the financial statements:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 12.56 $ 12.74 $ 10.74 $ 12.59 $ 13.73
-------- -------- -------- -------- --------
Operations:
Net investment income........................... 0.14 0.12 0.12 0.25 0.30
Net realized and unrealized gain (loss) on
investments and foreign currency related
transactions................................... 2.50 0.66 2.63 (1.22) 0.30
-------- -------- -------- -------- --------
Total from operations......................... 2.64 0.78 2.75 (0.97) 0.60
-------- -------- -------- -------- --------
Dividends and distributions to shareholders from:
Net investment income........................... (0.10) (0.15) (0.07) (0.25) (1.06)
Net realized gain on investments and foreign
currency related transactions.................. (0.78) (0.81) (0.68) -- (0.55)
Paid-in surplus................................. -- -- -- (0.63) (0.13)
-------- -------- -------- -------- --------
Total dividends and distributions............. (0.88) (0.96) (0.75) (0.88) (1.74)
-------- -------- -------- -------- --------
Net asset value, end of year...................... $ 14.32 $ 12.56 $ 12.74 $ 10.74 $ 12.59
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Per share market value, end of year............... $ 12.75 $ 10.75 $ 13.00 $ 9.88 $ 11.50
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return, market value*............ 26.26% (10.21)% 39.40% (7.03)% 16.58%
Net assets at end of year (000 omitted)........... $144,190 $126,431 $128,272 $ 89,587 $105,072
Ratio of operating expenses to average net
assets........................................... 1.42% 1.42% 1.46% 1.47% 1.56%
Ratio of net investment income to average net
assets........................................... 1.01% 0.90% 1.17% 1.98% 2.30%
Portfolio turnover rate........................... 52% 68% 184% 83% 95%
</TABLE>
- --------------------------
* Total investment return, market value, is based on the change in market price
of a share during the period and assumes reinvestment of distributions at
actual prices pursuant to the Fund's distribution reinvestment plan.
See Notes to Financial Statements.
11
<PAGE>
- ----------------------------------------------
THE EUROPE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------
NOTE 1. ACCOUNTING
POLICIES
The Europe Fund, Inc. (the "Fund") was incorporated in Maryland on February 8,
1990, as a closed-end, diversified management investment company. Prior to the
commencement of operations on May 3, 1990, the Fund had no operations other than
those relating to organizational matters and the sale of 7,092 shares of common
stock on April 23, 1990 to Mercury Asset Management Group plc for $100,000.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION: All securities for which current market quotations are
readily available are valued at the last sale price prior to the time of
determination, or, if there is no sales price on such date, and if bid and ask
quotations are available, at the mean between the last current bid and asked
prices. Securities that are traded over-the-counter, if bid and asked quotations
are available, are valued at the mean between the current bid and asked prices,
or, if quotations are not available, are valued as determined in good faith by
the Board of Directors of the Fund. Short-term investments having a maturity of
60 days or less are valued at amortized cost. Securities and assets for which
current market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors of the Fund.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized gains and losses on sales of investments
are calculated on the identified cost basis. Dividend income is recorded on the
ex-dividend date, or as soon as the Fund is informed of the dividend, and
interest income is recorded on an accrual basis.
FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts and transactions are translated into
U.S. dollars on the following basis:
(i) market value of investment securities, other assets and liabilities at a
10:00 A.M. midpoint rate of exchange on valuation date.
(ii) purchases and sales of investment securities, income and expenses at the
10:00 A.M. midpoint rate of exchange prevailing on the respective dates
of such transactions.
The resultant exchange gains and losses are included in the Statement of
Operations.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year-end, resulting
from changes in the exchange rate.
FOREIGN CURRENCY CONSISTS OF:
<TABLE>
<CAPTION>
UNITS COST VALUE
---------- -------- --------
<S> <C> <C> <C>
Austrian Schilling................. 37,503 $ 3,725 $ 3,722
British Pound...................... 4,239 6,602 6,571
French Franc....................... 249,153 50,873 50,880
German Deutschemark................ 34,187 23,815 23,860
Swedish Krona...................... 1,953,022 294,808 295,037
-------- --------
$379,823 $380,070
-------- --------
-------- --------
</TABLE>
12
<PAGE>
The Fund holds foreign currency in order to facilitate the purchases of
foreign securities.
FORWARD CURRENCY EXCHANGE CONTRACTS: The Fund enters into forward currency
exchange contracts to hedge certain purchase and sale commitments denominated in
foreign currencies. The Fund may enter into forward currency exchange contracts
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. Fluctuations in the value of forward
currency exchange contracts are recorded for book purposes as unrealized gains
or losses by the Fund. If the Fund enters into a closing transaction, the Fund
will realize a gain or loss equal to the difference between the value of forward
currency contracts to sell and the forward currency contracts to buy. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar.
TAXES: No provision has been made for United States Federal income taxes
because the Fund intends to meet the requirements of the United States Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The Fund intends to
distribute to shareholders annually by the end of January an amount equal to at
least 7 percent of the Fund's net asset value determined as of the beginning of
the previous calendar year. If, for any calendar year, the aggregate of net
investment income and net realized capital gains (if any) is less than 7 percent
of the Fund's net asset value as of the beginning of that calendar year, the
difference will be distributed from the Fund's paid-in surplus.
DEFERRED ORGANIZATION EXPENSES: Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five year period from the date operations commenced.
RECLASSIFICATION OF COMPONENTS OF NET ASSETS: During the year ended December
31, 1995, accumulated net realized losses on foreign currency related
transactions of $440,424 were reclassified from accumulated net realized loss on
investments to undistributed net investment income as a result of permanent
book-to-tax differences. This reclassification had no effect on net assets or
net asset value per share.
NOTE 2. TRANSACTIONS
WITH AFFILIATES AND
AGREEMENTS
The Fund has entered into Agreements with Mercury Asset Management International
Channel Islands Ltd. (the "Investment Manager") and Mercury Asset Management
International Ltd. (the "Investment Adviser").
The Investment Management Agreement provides that the Fund will pay the
Investment Manager a fee, computed weekly and payable monthly, at the following
rates: 0.75% of the Fund's average weekly net assets up to $250 million, and
0.65% of such assets in excess of $250 million. The Investment Manager makes
investment decisions on behalf of the Fund on the basis of recommendations from
the Investment Adviser subject to the overall supervision of the Board of
Directors for the Fund. The Investment Manager pays a fee to the Investment
Adviser for services rendered.
The Fund has entered into an Administration Agreement with Princeton
Administrators, L.P. ("Administrator"). The Administration Agreement provides
that the Fund will pay the Administrator a fee at the annual rate of 0.25% of
the Fund's average weekly net assets up to $200 million and 0.20% on such assets
in excess of $200 million. The Administrator performs administrative services
necessary for the operation of the Fund, including maintaining certain books and
records of the Fund and preparing certain reports and documents required by laws
and regulations, and provides the Fund with administrative office facilities.
Certain directors and officers of the Fund are also directors and officers of
either the Investment Manager, the Investment Adviser, and/or Mercury Asset
Management Group plc (the parent company of the Investment Adviser and
Investment Manager or "Mercury").
13
<PAGE>
NOTE 3. INVESTMENT
TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
for the year ended December 31, 1995 were $69,894,564 and $78,685,118,
respectively.
NOTE 4. CAPITAL
There are 100 million shares of $.001 par value common stock authorized. Of the
10,066,319 shares outstanding at December 31, 1995, Mercury owned 11,976 shares
in respect of the Fund's initial seed capital and reinvested distributions.
NOTE 5. QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED
AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS AND
FOREIGN
NET INVESTMENT CURRENCY
INVESTMENT RELATED
INCOME INCOME TRANSACTIONS
--------------- --------------- ---------------
PER PER PER
QUARTER ENDED TOTAL SHARE TOTAL SHARE TOTAL SHARE
- -------------------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1994.................. $ 398 $0.04 $ (48) $(0.01) $2,985 $ 0.30
June 30, 1994................... 1,251 0.12 725 0.08 (3,236) (0.33)
September 30, 1994.............. 628 0.06 309 0.03 6,524 0.66
December 31, 1994............... 825 0.08 219 0.02 358 0.03
------ ------ ------ ------ ------ ------
Total........................... $3,102 $0.30 $1,205 $ 0.12 $6,631 $ 0.66
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
March 31, 1995.................. $ 652 $0.07 $ 215 $ 0.02 $4,484 $ 0.45
June 30, 1995................... 1,544 0.15 1,034 0.10 10,072 1.00
September 30, 1995.............. 643 0.06 135 0.02 7,161 0.71
December 31, 1995............... 548 0.06 19 0.00 3,497 0.34
------ ------ ------ ------ ------ ------
Total........................... $3,387 $0.34 $1,403 $ 0.14 $25,214 $ 2.50
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
</TABLE>
- ------------------------
* Totals expressed in thousands of dollars except per share amounts.
NOTE 6. PER SHARE SELECTED QUARTERLY
FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET ASSET VALUE MARKET PRICE*
--------------- -------------
QUARTER ENDED HIGH LOW HIGH LOW VOLUME**
- ----------------------------------------- ------ ------ ----- ----- -------
<S> <C> <C> <C> <C> <C>
March 31, 1994........................... $13.78 $12.99 $14 $111/8 1,985
June 30, 1994............................ 13.40 12.72 123/4 107/8 930
September 30, 1994....................... 13.91 12.69 125/8 11 2,300
December 31, 1994........................ 14.13 12.18 121/8 101/2 1,784
March 31, 1995........................... 13.03 12.43 12 105/8 1,987
June 30, 1995............................ 14.13 13.03 123/4 113/8 1,817
September 30, 1995....................... 14.86 14.32 131/2 123/8 1,389
December 31, 1995........................ 14.90 14.10 131/2 121/4 2,490
</TABLE>
- ------------------------
* As reported on the New York Stock Exchange.
** In thousands.
ADDITIONAL
INFORMATION
During the period, there have been no material changes in the Fund's investment
objective or fundamental policies that have not been approved by the
shareholders. There have been no changes in the Fund's charter or By-Laws that
would delay or prevent a change in control of the Fund which have not been
approved by shareholders. There have been no changes in the principal risk
factors associated with investment in the Fund. During the period, James Hordern
joined C. Consuelo Brooke as co-portfolio manager; Ms. Brooke and Mr. Hordern
are primarily responsible for the day-to-day management of the Fund's portfolio.
14
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and
Board of Directors of
The Europe Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Europe Fund, Inc., including the schedule of investments, as of December 31,
1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Europe Fund, Inc. at December 31, 1995, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
(SIGNATURE)
New York, New York
February 8, 1996
15
<PAGE>
- --------------------------------------------------------------------------------
THE EUROPE FUND, INC.
- --------------------------------------------------------------------------------
Dear Shareholder:
The following information summarizes all of the 1995 per share distributions
payable by the Fund on December 29, 1995 for shareholders of record on December
21, 1995.
<TABLE>
<CAPTION>
FOREIGN
DOMESTIC FOREIGN TOTAL TAXES LONG-TERM
ORDINARY SOURCE ORDINARY PAID OR CAPITAL
INCOME INCOME INCOME WITHHELD GAINS
- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 0.460023 $ 0.245772 $ 0.705795 $ 0.047681 $ 0.174205
</TABLE>
The foreign taxes paid or withheld per share represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources. Foreign taxes paid
or withheld should be included in taxable income with an offsetting deduction
from gross income or as a credit for taxes paid to foreign governments. You
should consult your tax counsel or other tax advisers regarding the appropriate
treatment of foreign taxes paid.
- --------------------------------------------------------------------------------
DISTRIBUTION REINVESTMENT AND CASH PURCHASE PLAN
- --------------------------------------------------------------------------------
Pursuant to the Fund's Distribution Reinvestment and Cash Purchase Plan (the
"Plan"), shareholders will have all distributions, net of any applicable U.S.
withholding tax (including, in the case of non-U.S. shareholders, backup
withholding taxes), automatically reinvested by The Bank of New York (the "Plan
Agent"), in Fund shares pursuant to the Plan. Shareholders who do not wish to
participate in the Plan or who wish to terminate participation in the Plan may
elect, by notifying the Plan Agent in writing, to receive all distributions, net
of any applicable U.S. withholding tax, in cash paid by check in U.S. dollars
mailed directly to the shareholder by the Plan Agent, as dividend paying agent.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners, the Plan Agent will administer the
Plan on the basis of the number of shares certified from time to time by the
shareholders as representing the total amount registered in the shareholders'
name and held for the account of beneficial owners who are to participate in the
Plan. A beneficial owner of shares registered in the name of a bank, broker or
other nominee should consult with the nominee to determine whether they should
participate in the Plan or how they may withdraw from the Plan. A beneficial
owner holding shares through a nominee may not be able to transfer their shares
and continue to participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
If the directors of the Fund declare a distribution, participants in the Plan
will receive the equivalent in shares of the Fund valued as set forth below.
Whenever market price is equal to or exceeds net asset value at the time shares
are valued for the purpose of determining the number of shares equivalent to the
cash distribution, participants will be issued shares of the Fund at a price
equal to the greater of net asset value or an amount equal to 95 per cent of the
then current market price of the Fund's shares. The Fund will not issue shares
under the Plan below net asset value. If net asset value exceeds the market
price of Fund shares at that time, or if the Fund should declare a distribution
payable only in cash (i.e., if the Board of Directors should preclude
reinvestment at net asset value), the Plan Agent will buy, as agent for the
participants, Fund shares in the open market, on the New York Stock Exchange or
elsewhere, for the participants' accounts. Purchases by the Plan Agent will be
made on or shortly after the payment date for the distribution and in no event
more than 30 days after that date except where temporary curtailment or
suspension of purchase is necessary to comply with U.S. Federal securities laws.
If, before the Plan Agent has completed its purchases, the market price exceeds
the net asset value of a Fund share, the average per share purchase price paid
by the Plan Agent may exceed the net asset value of the Fund's shares, resulting
in the acquisition of fewer shares than if the distribution had been paid in
shares issued by the Fund on the dividend payment date. Because of the foregoing
difficulty with respect to
16
<PAGE>
open-market purchases, the Plan provides that if the Plan Agent is unable to
invest the full dividend amount in open-market purchases during the purchase
period or if the market discount shifts to a market premium during the purchase
period, the Plan Agent will cease making open-market purchases and will invest
the uninvested portion of the dividend amount in newly issued shares at the
close of business on the last purchase date.
Participants have the option of making additional cash payments to the Plan
Agent, quarterly, in any amount from U.S. $100 to U.S. $3,000, for investment in
the Fund's Common Stock. The Plan Agent will use all funds received from
participants to purchase Fund shares in the open market on or about March 15,
June 15, September 15 and December 15 of each year. Any voluntary cash payments
received more than 30 days prior to these dates will be returned by the Plan
Agent, and interest will not be paid on any uninvested cash payments. To avoid
unnecessary cash accumulations, and also to allow ample time for receipt and
processing by the Plan Agent, it is suggested that participants send in
voluntary cash payments to be received by the Plan Agent approximately ten days
before March 15, June 15, September 15 or December 15, as the case may be.
Optional cash payments must be made in U.S. dollars. Optional cash payments
drawn on a non-U.S. bank will be subject to collection fees and must be
collected by the foregoing quarterly dates to be invested. A participant may
withdraw a voluntary cash payment by written notice, if the notice is received
by the Plan Agent not less than 48 hours before the payment is to be invested.
The Plan Agent maintains all shareholder accounts in the Plan and furnishes
written confirmations of all transactions in an account, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each shareholder's proxy will include those
shares purchased pursuant to the Plan.
There is no charge to participants for reinvesting distributions. The Plan
Agent's fees for the reinvestment of distributions will be paid by the Fund.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of distributions payable either in stock or in cash. However,
each participant will pay a PRO RATA share of brokerage commissions incurred
with respect to the Plan Agent's open market purchases in connection with
voluntary cash payments made by the participant or any distributions payable
only in cash.
With respect to purchases for voluntary cash payments, the Plan Agent will
charge U.S. $2.00 for each purchase for a participant, plus a PRO RATA share of
the brokerage commissions. Brokerage charges for purchasing small amounts of
stock for individual accounts through the Plan are expected to be less than the
usual brokerage charges for these transactions because the Plan Agent will be
purchasing stock for all participants in blocks and prorating the
proportionately lower commission thus attainable.
The receipt of distributions under the Plan will not relieve participants of
any income tax (including withholding tax) which may be payable on the
distributions. Under presently outstanding regulations, shareholders receiving
dividends or distributions in the form of additional shares pursuant to the Plan
should be treated for U.S. Federal income tax purposes as receiving a taxable
distribution in an amount equal to the amount of money that the shareholders
receiving cash dividends will receive, and should have a cost basis in the
shares received equal to such amount.
Experience under the Plan may indicate that changes in the Plan are desirable.
Accordingly, the Fund and the Plan Agent reserve the right to terminate the Plan
as applied to any voluntary cash payments made and any distribution paid
subsequent to notice of the termination sent to members of the Plan at least 30
days before the record date for the distribution. The Plan also may be amended
by the Fund or the Plan Agent, but only by at least 30 days' written notice to
participants in the Plan (except when necessary or appropriate to comply with
applicable law, rules or policies of a regulatory authority). Further
information concerning the Plan may be obtained by contacting the Plan Agent at
P.O. Box 11260, Church Street Station, New York, New York 10277-0760, Attention:
Dividend Reinvestment Service, or by calling 1 (800) 524-4458.
17
<PAGE>
(This page has been left blank intentionally.)
18
<PAGE>
-------------------------------------------------------------
DIRECTORS AND OFFICERS
ANTHONY M. SOLOMON, Chairman of the Board and
Director
RICHARD J. OLDFIELD, President
GEORGE F. BENNETT, Director
* SIR ARTHUR BRYAN, Director
PETER STORMONTH DARLING, Director
LEON N. LEVY, Director
* J. MURRAY LOGAN, Director
* JAMES S. MARTIN, Director
FRANCOIS-XAVIER ORTOLI, Director
STEVEN W. GOLANN, Vice President and Secretary
JAMES M. DONALD, Vice President, Treasurer and
Assistant Secretary
THADDEA M. FELDMAN, Assistant Secretary
* Member of the Audit Committee
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its Common Stock in the open market.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
------------------------------------------------
EXECUTIVE OFFICES--
780 Third Avenue
New York, New York 10017
(For latest net asset value and requests for Fund
Reports, please call 1 (800) 543-6217 or (609)
282-4600.)
INVESTMENT MANAGER--
Mercury Asset Management International Channel Islands
Ltd.
Forum House
Grenville Street
St. Helier, Jersey
Channel Islands
INVESTMENT ADVISER--
Mercury Asset Management International Ltd.
33 King William Street
London EC4R 9AS
England
ADMINISTRATOR--
Princeton Administrators, L.P.
P.O. Box 9011
Princeton, New Jersey 08543
CUSTODIAN--
Morgan Guaranty Trust Co.
60 Victoria Embankment
London EC4Y OJP
England
TRANSFER AGENT AND REGISTRAR--
The Bank of New York
101 Barclay Street
New York, New York 10286
LEGAL COUNSEL--
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
INDEPENDENT AUDITORS--
Ernst & Young LLP
787 Seventh Avenue
New York, New York 10019
<PAGE>
------------------------------------------------
SUMMARY OF GENERAL INFORMATION
-------------------------------------------
THE FUND
The Europe Fund, Inc. (the "Fund") is a closed-end investment company whose
shares trade on the New York Stock Exchange. The Fund seeks long-term capital
appreciation through investment primarily in European equity securities. The
Fund is managed by Mercury Asset Management International Channel Islands Ltd.,
relying on investment advice from Mercury Asset Management International Ltd.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the New York Stock
Exchange Composite Transactions section of newspapers under the designation
"Europe Fd." The Fund's New York Stock Exchange trading symbol is EF. Weekly
comparative net asset value (NAV) and market price information about the Fund's
shares are published each Monday in THE WALL STREET JOURNAL and THE NEW YORK
TIMES and other newspapers in a table called "Closed End Funds."
Shareholders interested in receiving the quarterly newsletter entitled "Closed
End Fund Focus" should call 1-800-543-6217 or 1-212-888-6941 and request to be
placed on the mailing list or send a request by mail to the Fund's address.
DISTRIBUTION REINVESTMENT PLAN-SUMMARY
An automatic Distribution Reinvestment Plan (the "Plan") is available to
provide shareholders with automatic reinvestment of their dividend income and
capital gains distributions in additional shares of the Fund's common stock. A
brochure describing the Plan is available from the Plan Agent, The Bank of New
York, by calling (800) 524-4458.
If you wish to participate and your shares are held in your own name, no
action is required on your part. However, if your shares are held in the name of
a brokerage firm, bank or other nominee, you should instruct your nominee to
participate in the Plan on your behalf. If your nominee is unable to participate
on your behalf, you should request it to register your shares in your own name
which will enable you to participate in the Plan.
TRANSFER AGENT:
The Bank of New York
Telephone Inquiries: 1-800-432-8224
Address Shareholder Inquiries To:
Shareholder Relations Department - 11 E
P.O. Box 11258
Church Street Station
New York, NY 10286
Send Certificates for Transfer and Address Changes to:
Receive and Deliver Department - 11 W
P.O. Box 11002
Church Street Station
New York, NY 10286
[LOGO]
THE EUROPE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1995
