<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC. TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO THE SHAREHOLDERS APRIL 30, 1996
DEAR SHAREHOLDER:
The European economic environment during the six months ended April 30, 1996
deteriorated markedly, especially in the Deutschmark bloc. This was attributable
to a number of factors, including a mid-cycle inventory correction, the
persistent strength of the Deutschmark throughout 1995 and generally weaker
global economies. Specific domestic and seasonal factors also had a negative
influence, such as the French general strike in December and a severe winter,
which affected construction activity and rising unemployment in both France and
Germany, impacted consumer spending. Through the first quarter of 1996, while
improvement was seen in a number of these factors, most European economies
remained sluggish.
Continued budgetary rigor is expected in 1996 and 1997 in all countries as
governments struggle to reduce deficits and prepare their economies for possible
monetary union in 1999. While this will clearly dampen the expected recovery in
the second half of the year, there is plenty of scope for continued low interest
rates to help compensate for tight government spending. This environment of
steady non-inflationary recovery for the balance of the year should be
supportive of the equity and fixed-income markets, but previous expectations of
strongly rising earnings in 1996 have been scaled back.
Political developments had a significant influence upon certain markets during
the first quarter of 1996. In both Italy and Spain, old regimes were voted out
of office and new administrations (Rightist in Spain, Leftist in Italy) were
installed early in the second quarter. Both markets responded positively to the
prospects of greater political stability. In the United Kingdom, the prospects
of a general election before the end of 1996 rose and began to influence
investors' thinking. While the new Labour party is very mainstream and moderate,
it would be the first socialist administration in 17 years and the markets are
naturally wary of such a political change of direction. Nevertheless, the
economic environment in the United Kingdom is healthy at present.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1996, CONTINUED
PERFORMANCE AND PORTFOLIO
Against this backdrop, Dean Witter European Growth Fund produced a total return
of 11.84 percent for the six-month period ended April 30, 1996, compared to a
return of 7.36 percent for the Morgan Stanley Capital International Europe Index
(MSCI Index). On April 30, 1996, the Fund's net assets exceeded $1.02 billion.
The Fund remained fully invested throughout the six-month reporting period and,
as always, was well balanced both geographically and by sector and industry. The
Fund's largest country allocations on April 30, 1996 were the United Kingdom
(31.9 percent), France (13.3 percent), the Netherlands (13.4 percent), Sweden
(8.2 percent) and Germany (7.8 percent).
The Fund's main stock orientation is toward blue chip growth stocks. Given the
somewhat uncertain economic outlook, this orientation is likely to remain in
place with cyclical stocks underweighted. Important stock positions include
Sandoz AG and Ciba-Geigy AG in Switzerland, soon to merge as Novartis and will
rank as one of the world's largest pharmaceutical stocks; Shell Transport &
Trading Co. PLC in the United Kingdom, which is currently undergoing a massive
restructuring designed to improve return on capital; and top quality growth
stocks such as Carrefour Supermarche (French retailer), LVMH Moet-Hennessey
Louis Vuitton (French luxury goods), Telecom Italia Mobile SpA (Italian cellular
operation), Elsevier NV (Dutch publisher), Gas Natural SDG S.A. (Spanish gas
utility) and Ericsson (L.M.) Telephone Co. AB (Swedish telecoms manufacturer).
The Fund's defensive currency hedges has helped performance so far in 1996. The
French Franc, Deutschemark and Dutch Guilder hedges have all protected the value
of underlying investments in those countries against the modest rise in the
dollar. Stock selection, however, remained the primary source of value added
over the Index return.
LOOKING AHEAD
One of the main impacts of the economic slowdown has been the lowering of
earnings growth expectations for 1996. The portfolio will continue to hold those
stocks where Morgan Grenfell, the Fund's sub-adviser, believes the prospects are
strong for a steadily rising earnings stream, whether it be driven by management
action or good quality products or franchises. Morgan Grenfell anticipates 1997
to be a year of stronger economies in Europe. The portfolio's stock holdings may
well be widened during 1996 to hold more economically sensitive and cyclical
stocks that will anticipate rising 1997 earnings. Financials and interest rate
sensitive sectors will continue to be underweighted.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1996, CONTINUED
We appreciate your continued support of Dean Witter European Growth Fund Inc.
and look forward to serving your investment needs and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, WARRANTS AND BONDS
(96.5%)
AUSTRIA (1.2%)
OIL & GAS PRODUCTS
54,000 OMV AG...................... $ 5,367,644
-----------------
TRANSPORTATION
108,000 Flughafen Wien AG........... 7,574,899
-----------------
TOTAL AUSTRIA............... 12,942,543
-----------------
BELGIUM (1.0%)
RETAIL
222,020 G.I.B. Holdings Ltd......... 9,840,886
-----------------
DENMARK (1.3%)
BANKING
119,200 Den Danske Bank............. 7,780,943
-----------------
TRANSPORTATION
69,300 Kobenhavns Lufthavne AS..... 6,462,360
-----------------
TOTAL DENMARK............... 14,243,303
-----------------
FINLAND (0.8%)
ELECTRONICS
52,000 Nokia AB (Series A)......... 1,860,371
181,000 Nokia AB (Series K)......... 6,434,324
-----------------
TOTAL FINLAND............... 8,294,695
-----------------
FRANCE (13.3%)
BUILDING MATERIALS
74,100 IMETAL...................... 11,595,145
-----------------
ELECTRICAL EQUIPMENT
19,408 Legrand S.A. (Pref.)........ 2,492,633
-----------------
ELECTRONICS
243,800 SGS-Thomson Microelectronics
NV*......................... 11,619,404
-----------------
FINANCIAL SERVICES
48,200 Cetelem Group............... 10,339,226
25,523 Credit Local de France...... 2,014,688
-----------------
12,353,914
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
66,115 LVMH Moet-Hennessy Louis
Vuitton..................... 16,906,002
257,000 SEITA....................... 9,892,263
-----------------
26,798,265
-----------------
INSURANCE
231,890 Scor S.A.................... 8,445,820
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS
140,779 Sanofi S.A.................. $ 11,354,902
FRF 13K Sanofi S.A. 4.00% due
01/01/00 (Conv.)............ 1,150,783
-----------------
12,505,685
-----------------
RETAIL
17,774 Carrefour Supermarche*...... 13,882,285
58,297 Castorama Dubois
Investissement.............. 11,151,979
35,500 Promodes.................... 10,196,809
-----------------
35,231,073
-----------------
TEXTILES
32,666 Christian Dior S.A.......... 4,353,361
4,666 Christian Dior S.A.
(Warrants due 06/30/98)*.... 97,020
41,152 Hermes International........ 10,896,922
-----------------
15,347,303
-----------------
TOTAL FRANCE................ 136,389,242
-----------------
GERMANY (7.8%)
AUTOMOTIVE
18,500 BMW AG...................... 9,992,974
32,480 Volkswagen AG............... 11,218,665
-----------------
21,211,639
-----------------
CHEMICALS
46,495 Bayer AG.................... 14,980,743
-----------------
ELECTRICAL EQUIPMENT
23,162 Siemens AG.................. 12,689,827
-----------------
HEALTH & PERSONAL CARE
60,000 Rhoen-Klinikum AG........... 7,254,428
34,596 Rhoen-Klinikum AG (Pref.)... 4,069,852
-----------------
11,324,280
-----------------
MANUFACTURING
137,400 Adidas AG................... 10,461,473
-----------------
MERCHANDISING
12,440 Gehe AG..................... 7,187,086
4,435 Gehe AG (Rank for Dividend
Shares)..................... 2,527,495
-----------------
9,714,581
-----------------
TOTAL GERMANY............... 80,382,543
-----------------
ITALY (3.8%)
APPLIANCES & HOUSEHOLD DURABLES
25,800 Industrie Natuzzi SpA
(ADR)....................... 1,341,600
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL & GAS PRODUCTS
3,120,700 Ente Nazionale Idrocarburi
SpA (ADR)*.................. $ 13,495,243
-----------------
TELECOMMUNICATIONS
2,357,402 Stet Societa' Finanziaria
Telefonica SpA.............. 7,974,299
7,526,850 Telecom Italia Mobile SpA... 16,636,320
-----------------
24,610,619
-----------------
TOTAL ITALY................. 39,447,462
-----------------
NETHERLANDS (13.4%)
BANKING
241,300 ABN AMRO Holding NV......... 12,494,635
-----------------
FOOD PROCESSING
97,650 Nutricia Vereenigde
Bedrijven NV................ 10,437,662
-----------------
INSURANCE
276,344 Aegon NV.................... 13,163,847
162,000 Internationale Nederlanden
Groep NV.................... 12,511,734
-----------------
25,675,581
-----------------
MANUFACTURING
114,000 ASM Lithography Holding
NV*......................... 5,084,413
-----------------
MERCHANDISING
100,000 Gucci Group NV*............. 5,417,396
234,976 Koninklijke Ahold NV........ 11,591,052
-----------------
17,008,448
-----------------
MULTI-INDUSTRY
256,181 Hunter Douglas NV........... 16,181,427
-----------------
PUBLISHING
1,130,000 Elsevier NV................. 17,019,265
740,000 Ver Ned Uitgev Ver Bezit
NV.......................... 12,441,331
72,954 Wegener NV.................. 8,343,076
122,211 Wolters Kluwer NV........... 13,362,592
-----------------
51,166,264
-----------------
TOTAL NETHERLANDS........... 138,048,430
-----------------
NORWAY (0.6%)
PHARMACEUTICALS
203,000 Hafslund Nycomed AS (Class
A).......................... 5,968,951
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SPAIN (7.8%)
BANKS
426,500 Banco Bilbao Vizcaya........ $ 16,214,244
71,114 Banco Popular Espanol
S.A......................... 11,787,098
-----------------
28,001,342
-----------------
FINANCIAL SERVICES
133,080 Corporacion Financiera
Alba........................ 10,505,765
-----------------
OIL RELATED
80,342 Gas Natural SDG S.A. (Series
E).......................... 14,605,339
255,826 Repsol S.A.................. 9,383,773
-----------------
23,989,112
-----------------
RETAIL
280,000 Centros Comerciales
Continente S.A.............. 6,164,491
-----------------
UTILITIES
1,140,300 Iberdrola S.A............... 11,162,711
-----------------
TOTAL SPAIN................. 79,823,421
-----------------
SWEDEN (8.2%)
AEROSPACE & DEFENSE
311,550 Securitas AB (Series "B"
Free)....................... 17,877,511
-----------------
HEALTH & PERSONAL CARE
209,885 Getinge Industrier AB (B
Shares)..................... 11,024,637
-----------------
INSURANCE
582,692 Scandia Forsakrings AB...... 13,288,790
-----------------
MACHINERY
324,000 Kalmar Industries AB........ 5,863,606
-----------------
PHARMACEUTICALS
216,830 Astra AB
(Series "A" Free)........... 9,618,810
-----------------
RETAIL
191,660 Hennes & Mauritz AB (B
Shares)..................... 13,197,510
-----------------
TELECOMMUNICATION EQUIPMENT
637,060 Ericsson (L.M.) Telephone
Co. AB (Series "B" Free).... 12,888,362
-----------------
TOTAL SWEDEN................ 83,759,226
-----------------
SWITZERLAND (5.4%)
BUSINESS SERVICES
2,010 Societe Generale de
Surveillance Holdings
S.A......................... 4,525,935
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
MULTI-INDUSTRY
10,859 BBC Brown Boveri AG......... $ 13,063,984
-----------------
PHARMACEUTICALS
6,095 Ciba-Geigy AG............... 7,063,044
1,745 Roche Holdings AG........... 13,703,196
9,780 Sandoz AG................... 10,664,801
6,000 Sandoz AG (Series B)........ 6,523,522
-----------------
37,954,563
-----------------
TOTAL SWITZERLAND........... 55,544,482
-----------------
UNITED KINGDOM (31.9%)
AEROSPACE & DEFENSE
572,222 British Aerospace PLC....... 7,506,159
-----------------
AUTOMOTIVE
1,910,000 BBA Group PLC............... 10,016,063
2,000,000 Rolls-Royce PLC............. 7,142,706
-----------------
17,158,769
-----------------
BANKING
1,050,000 Abbey National PLC.......... 8,987,152
475,000 National Westminster Bank
PLC......................... 4,384,137
925,000 TSB Group PLC............... 4,439,516
-----------------
17,810,805
-----------------
BREWERS
815,000 Scottish & Newcastle
Breweries PLC............... 8,437,208
-----------------
BROADCAST MEDIA
761,000 British Sky Broadcasting
Group PLC*.................. 5,481,469
608,274 Flextech PLC*............... 4,702,199
-----------------
10,183,668
-----------------
BUILDING & CONSTRUCTION
1,626,000 Blue Circle Industries
PLC......................... 9,163,821
1,130,200 Williams Holdings PLC....... 5,841,627
-----------------
15,005,448
-----------------
BUSINESS SERVICES
648,000 Reuters Holdings PLC........ 7,330,858
-----------------
CHEMICALS
1,326,000 Albright & Wilson PLC....... 3,496,761
-----------------
COMPUTERS
625,000 Amstrad PLC................. 1,836,534
468,000 SEMA Group PLC.............. 4,725,036
-----------------
6,561,570
-----------------
CONGLOMERATES
889,857 BTR PLC..................... 4,304,371
1,770,000 Tomkins PLC................. 7,308,164
-----------------
11,612,535
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CONSTRUCTION PLANT & EQUIPMENT
1,320,000 CRH PLC..................... $ 11,855,084
-----------------
ELECTRICAL EQUIPMENT
106,250 The BICC Group PLC.......... 552,373
-----------------
ELECTRONICS
548,000 Smiths Industries PLC....... 5,838,273
-----------------
ENTERTAINMENT & LEISURE TIME
725,000 Carlton Communications
PLC......................... 5,101,987
-----------------
FOOD PROCESSING
950,000 Associated British Foods
PLC......................... 5,697,589
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
711,153 B.A.T. Industries PLC....... 5,379,615
869,600 Grand Metropolitan PLC...... 5,726,449
836,000 Tate & Lyle PLC............. 6,065,785
1,000,000 Vaux Group PLC.............. 4,626,183
-----------------
21,798,032
-----------------
FOREST PRODUCTS, PAPER & PACKAGING
311,000 De La Rue PLC............... 3,500,785
-----------------
INSURANCE
319,000 Britannic Assurance PLC..... 3,860,030
619,884 Commercial Union PLC........ 5,399,116
116,000 Lloyds Abbey Life PLC....... 936,493
1,262,800 Prudential Corp. PLC........ 8,715,343
1,308,666 Royal Insurance Holdings
PLC......................... 7,158,465
-----------------
26,069,447
-----------------
LEISURE
872,000 Granada Group PLC........... 10,801,218
-----------------
MISCELLANEOUS
689,000 Vendome Luxury Group PLC
(Units)++................... 6,073,786
-----------------
NATURAL GAS
1,125,000 British Gas PLC............. 3,998,785
-----------------
OIL RELATED
2,627,000 Lasmo PLC................... 7,600,562
1,220,000 Shell Transport & Trading
Co. PLC..................... 16,104,542
-----------------
23,705,104
-----------------
PHARMACEUTICALS
85,300 British Biotech PLC*........ 3,759,753
1,354,325 Glaxo Wellcome PLC.......... 16,438,905
2,365,000 Medeva PLC.................. 9,176,833
-----------------
29,375,491
-----------------
REAL ESTATE
1,000,000 Hammerson PLC............... 5,801,565
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
RETAIL
370,000 Boots Co. PLC............... $ 3,532,098
518,000 Great Universal Stores
PLC......................... 5,655,260
2,211,000 Morrison (W.M.) Supermarkets
PLC......................... 5,680,644
1,030,000 Next PLC.................... 8,202,885
771,500 W.H. Smith Group PLC........ 5,731,487
-----------------
28,802,374
-----------------
TELECOMMUNICATIONS
2,842,000 British Telecommunications
PLC......................... 15,610,113
398,000 Securicor Group PLC (Class
A).......................... 7,376,878
-----------------
22,986,991
-----------------
TRANSPORTATION
686,300 British Airways PLC......... 5,367,423
-----------------
UTILITIES
875,000 Scottish Power PLC.......... 4,904,959
-----------------
TOTAL UNITED KINGDOM........ 327,335,047
-----------------
TOTAL COMMON AND PREFERRED
STOCKS, WARRANTS AND BONDS
(IDENTIFIED COST
$780,871,662)............... 992,020,231
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (4.8%)
U.S. GOVERNMENT AGENCY
$ 49,400 Federal Home Loan Mortgage
Corp.
5.30% due 05/01/96
(Amortized Cost
$49,400,000)................ 49,400,000
-----------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
PURCHASED PUT OPTIONS ON FOREIGN CURRENCY
(0.9%)
FRF 85,500 May 16, 1996/FRF 4.86....... 4,830,750
DEM 50,500 July 19, 1996/DEM 1.48...... 1,717,000
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
NLG 70,000 July 19, 1996/NLG 1.66...... $ 2,310,000
-----------------
TOTAL PURCHASED PUT OPTIONS
ON FOREIGN CURRENCY
(IDENTIFIED COST
$5,645,150)................. 8,857,750
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$835,916,812) (B)........ 102.2% 1,050,277,981
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS.... (2.2) (22,837,599)
---- --------------
NET ASSETS............... 100.0% $1,027,440,382
---- --------------
---- --------------
<FN>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
++ Consists of one or more class of securities traded together as a unit;
generally stocks with attached warrants.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation was $225,828,147 and the
aggregate gross unrealized depreciation was $11,654,102, resulting in net
unrealized appreciation of $214,174,045.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 1996:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
- --------------------------------------------------------------------
<S> <C> <C> <C>
L 490,918 $ 740,108 05/01/96 $ (344)
L 596,144 $ 896,434 05/01/96 1,896
NLG 5,104,527 $ 3,001,427 05/01/96 (21,551)
DEM 7,815,494 $ 5,101,830 05/02/96 6,002
L 1,074,574 $ 1,624,111 05/02/96 (4,836)
ESP 423,336,899 $ 3,334,280 05/03/96 (5,637)
L 2,856,083 $ 4,294,634 05/03/96 9,197
ITL 1,614,389,390 $ 1,033,639 05/03/96 629
ATS 53,383,799 $ 4,955,977 05/06/96 3,269
ESP 382,000,975 $ 3,029,350 05/06/96 (25,725)
--------
Net unrealized depreciation................ $ (37,100)
--------
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
SUMMARY OF INVESTMENTS APRIL 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ---------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense............................... $ 25,383,669 2.4%
Appliances & Household Durables................... 1,341,600 0.1
Automotive........................................ 38,370,409 3.7
Banking........................................... 38,086,382 3.7
Banks............................................. 28,001,342 2.7
Brewers........................................... 8,437,208 0.8
Broadcast Media................................... 10,183,669 1.0
Building & Construction........................... 15,005,448 1.5
Building Materials................................ 11,595,145 1.1
Business Services................................. 11,856,792 1.2
Chemicals......................................... 18,477,505 1.8
Computers......................................... 6,561,570 0.6
Conglomerates..................................... 11,612,535 1.1
Construction Plant & Equipment.................... 11,855,084 1.2
Electrical Equipment.............................. 15,734,833 1.5
Electronics....................................... 25,752,372 2.5
Entertainment & Leisure Time...................... 5,101,987 0.5
Financial Services................................ 22,859,679 2.2
Food Processing................................... 16,135,251 1.6
Food, Beverage, Tobacco & Household Products...... 48,596,297 4.7
Foreign Currency Put Options...................... 8,857,750 0.9
Forest Products, Paper & Packaging................ 3,500,785 0.3
Health & Personal Care............................ 22,348,916 2.2
Insurance......................................... 73,479,637 7.2
Leisure........................................... 10,801,218 1.1
Machinery......................................... 5,863,606 0.6
Manufacturing..................................... 15,545,886 1.5
Merchandising..................................... 26,723,029 2.6
Miscellaneous..................................... 6,073,786 0.6
Multi-Industry.................................... 29,245,411 2.8
Natural Gas....................................... 3,998,785 0.4
Oil & Gas Products................................ 18,862,887 1.8
Oil Related....................................... 47,694,217 4.6
Pharmaceuticals................................... 95,423,501 9.3
Publishing........................................ 51,166,263 5.0
Real Estate....................................... 5,801,565 0.6
Retail............................................ 93,236,335 9.1
Telecommunication Equipment....................... 12,888,362 1.3
Telecommunications................................ 47,597,610 4.6
Textiles.......................................... 15,347,303 1.5
Transportation.................................... 19,404,682 1.9
U.S. Government Agency............................ 49,400,000 4.8
Utilities......................................... 16,067,670 1.6
--------------- -----
$ 1,050,277,981 102.2%
--------------- -----
--------------- -----
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ---------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks..................................... $ 984,209,943 95.8%
Convertible Bond.................................. 1,150,783 0.1
Foreign Currency Put Options...................... 8,857,750 0.9
Preferred Stocks.................................. 6,562,485 0.6
Short-Term Investment............................. 49,400,000 4.8
Warrants.......................................... 97,020 0.0
--------------- -----
$ 1,050,277,981 102.2%
--------------- -----
--------------- -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $835,916,812)............................ $1,050,277,981
Cash........................................................ 236,983
Unrealized appreciation on forward foreign currency
contracts................................................. 20,993
Receivable for:
Investments sold........................................ 3,817,697
Dividends............................................... 3,755,385
Capital stock sold...................................... 3,142,805
Foreign withholding taxes reclaimed..................... 1,501,579
Prepaid expenses............................................ 69,271
--------------
TOTAL ASSETS........................................... 1,062,822,694
--------------
LIABILITIES:
Unrealized depreciation on forward foreign currency
contracts................................................. 58,093
Payable for:
Investments purchased................................... 32,097,458
Capital stock repurchased............................... 1,009,146
Investment management fee............................... 858,854
Plan of distribution fee................................ 794,976
Accrued expenses............................................ 563,785
--------------
TOTAL LIABILITIES...................................... 35,382,312
--------------
NET ASSETS:
Paid-in-capital............................................. 760,414,183
Net unrealized appreciation................................. 214,299,375
Accumulated undistributed net investment income............. 542,443
Accumulated undistributed net realized gain................. 52,184,381
--------------
NET ASSETS............................................. $1,027,440,382
--------------
--------------
NET ASSET VALUE PER SHARE,
67,014,649 SHARES OUTSTANDING (200,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$15.33
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $1,665,355 foreign withholding tax)....... $ 9,430,686
Interest.................................................... 1,251,148
------------
TOTAL INCOME........................................... 10,681,834
------------
EXPENSES
Investment management fee................................... 4,488,626
Plan of distribution fee.................................... 4,231,895
Transfer agent fees and expenses............................ 602,925
Custodian fees.............................................. 365,777
Registration fees........................................... 78,664
Shareholder reports and notices............................. 50,563
Professional fees........................................... 38,723
Directors' fees and expenses................................ 7,970
Other....................................................... 33,695
------------
TOTAL EXPENSES......................................... 9,898,838
------------
NET INVESTMENT INCOME.................................. 782,996
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments............................................. 53,073,467
Foreign exchange transactions........................... (199,111)
------------
TOTAL GAIN............................................. 52,874,356
------------
Net change in unrealized appreciation on:
Investments............................................. 52,603,171
Translation of forward foreign currency contracts, other
assets and liabilities denominated in foreign
currencies............................................ (154,163)
------------
TOTAL APPRECIATION..................................... 52,449,008
------------
NET GAIN............................................... 105,323,364
------------
NET INCREASE................................................ $106,106,360
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED
APRIL 30, FOR THE YEAR
1996 ENDED
(UNAUDITED) OCTOBER 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 782,996 $ 1,002,440
Net realized gain........................................... 52,874,356 41,187,148
Net change in unrealized appreciation....................... 52,449,008 79,053,572
------------- ----------------
NET INCREASE........................................... 106,106,360 121,243,160
Distributions from net realized gain........................ (44,251,712) (60,625,845)
Net increase from capital stock transactions................ 97,855,238 48,611,356
------------- ----------------
TOTAL INCREASE......................................... 159,709,886 109,228,671
NET ASSETS:
Beginning of period......................................... 867,730,496 758,501,825
------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$542,443 AND ACCUMULATED NET INVESTMENT LOSS OF
$240,553)............................................... $1,027,440,382 $867,730,496
------------- ----------------
------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
\ DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter European Growth Fund Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund was incorporated in Maryland on
February 13, 1990 and commenced operations on May 31, 1990.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market by the Directors); (2)
listed options are valued at the latest sale price on the exchange on which they
are listed unless no sales of such options have taken place that day, in which
case they will be valued at the mean between their latest bid and asked price;
(3) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (4) when market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
that sale and bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Directors (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted over the
life of the respective securities. Interest income is accrued daily.
C. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option, an amount
equal to the premium received is included in the Fund's Statement of Assets and
Liabilities as a liability which is
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
subsequently marked-to-market to reflect the current market value of the option
written. If a written option either expires or the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss without regard to any
unrealized gain or loss on the underlying security or currency and the liability
related to such option is extinguished. If a written call option is exercised,
the Fund realizes a gain or loss from the sale of the underlying security or
currency and the proceeds from such sale are increased by the premium originally
received.
When the Fund purchases a call or put option, the premium paid is recorded as an
investment and is subsequently marked-to-market to reflect the current market
value. If a purchased option expires, the Fund will realize a loss to the extent
of the premium paid. If the Fund enters into a closing sale transaction, a gain
or loss is realized for the difference between the proceeds from the sale and
the cost of the option. If a put option is exercised, the cost of the security
or currency sold upon exercise will be increased by the premium originally paid.
If a call option is exercised, the cost of the security purchased upon exercise
will be increased by the premium originally paid.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward contracts are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are included in the Statement of Operations. Pursuant to U.S.
Federal income tax regulations, certain foreign exchange gains/losses included
in realized and unrealized gain/loss are included in or are a reduction of
ordinary income for federal income tax purposes. The Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized gain/loss on foreign exchange transactions. The Fund
records realized gains or losses on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
F. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays a management fee,
accrued daily and payable monthly, by applying the following annual rates to the
net assets of the Fund determined as of the close of each business day: 1.0% of
the portion of net assets not exceeding $500 million and 0.95% of the portion of
daily net assets exceeding $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Advisor compensation equal to 40%
of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain distributions) less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or upon which such charge has been waived; or (b) the Fund's average daily net
assets. Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by it and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to, and expenses of, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's shares or who
service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation and printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be in
the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered, may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the six months ended April 30,
1996, it received approximately $522,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended April 30, 1996 aggregated
$351,392,946 and $273,286,085, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $603,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors/Trustees for at least five years at the time of retirement. Benefits
under this plan are based on years of service and compensation
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1996 (UNAUDITED) CONTINUED
during the last five years of service. Aggregate pension costs for the six
months ended April 30, 1996 included in Directors' fees and expenses in the
Statement of Operations amounted to $2,176. At April 30, 1996, the Fund had an
accrued pension liability of $48,837 which is included in accrued expenses in
the Statement of Assets and Liabilities.
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
APRIL 30, 1996 FOR THE YEAR ENDED
---------------------------- OCTOBER 31, 1995
--------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 12,673,462 $ 183,670,957 15,721,889 $209,149,980
Reinvestment of distributions.................................... 3,030,461 41,577,920 4,855,138 56,984,815
----------- -------------- ----------- ------------
15,703,923 225,248,877 20,577,027 266,134,795
Repurchased...................................................... (8,801,816) (127,393,639) (16,689,142) (217,523,439)
----------- -------------- ----------- ------------
Net increase..................................................... 6,902,107 $ 97,855,238 3,887,885 $ 48,611,356
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of October 31, 1995, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss and foreign currency
losses.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
At April 30, 1996, there were no outstanding forward contracts other than those
used to facilitate settlement of foreign currency denominated portfolio
transactions.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of capital stock outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, FOR THE YEAR ENDED OCTOBER 31
1996 --------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 14.44 $ 13.49 $ 11.86 $ 8.57 $ 9.22 $ 9.23
------ ---------- ----------- ----------- ----------- -----------
Net investment income (loss)....... 0.01 0.02 0.02 (0.01) 0.01 0.05
Net realized and unrealized gain
(loss)............................ 1.61 2.00 1.84 3.30 (0.23) 0.07
------ ---------- ----------- ----------- ----------- -----------
Total from investment operations... 1.62 2.02 1.86 3.29 (0.22) 0.12
------ ---------- ----------- ----------- ----------- -----------
Less dividends and distributions
from:
Net investment income........... -- -- -- -- (0.03) (0.07)
Net realized gain............... (0.73) (1.07) (0.23) -- (0.40) (0.06)
------ ---------- ----------- ----------- ----------- -----------
Total dividends and
distributions..................... (0.73) (1.07) (0.23) -- (0.43) (0.13)
------ ---------- ----------- ----------- ----------- -----------
Net asset value, end of period..... $ 15.33 $ 14.44 $ 13.49 $ 11.86 $ 8.57 $ 9.22
------ ---------- ----------- ----------- ----------- -----------
------ ---------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN+........... 11.84%(1) 16.83% 15.61% 38.74% (2.39)% 1.33%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.15%(2) 2.23% 2.27% 2.38% 2.40% 2.44%
Net investment income (loss)....... 0.17%(2) 0.13% 0.21% (0.09)% 0.11% 0.51%
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $1,027 $868 $759 $459 $297 $316
Portfolio turnover rate............ 31%(1) 61% 72% 120% 116% 111%
Average commission rate paid....... $0.0521 -- -- -- -- --
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
BOARD OF DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
directors, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
DEAN WITTER
EUROPEAN
GROWTH FUND
(LOGO)
SEMIANNUAL REPORT
APRIL 30, 1996
