<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC. TWO WORLD TRADE CENTER, NEW YORK, NEW
YORK 10048
LETTER TO SHAREHOLDERS OCTOBER 31, 1996
DEAR SHAREHOLDER:
The twelve-month period ended October 31, 1996, was marked by good performance
of the European equity markets, despite generally weaker European economies.
WEAKNESS ON THE ECONOMIC FRONT
The economic environment in Europe throughout 1996 has, with the notable
exception of the United Kingdom, been generally weaker than expected. Within the
deutsche mark bloc, sluggish conditions persisted well into the second quarter
before evidence of a pick-up emerged. Progress has varied considerably from
industry to industry: stronger auto sales and better chemical pricing, but weak
pricing in the pulp and paper industry and in the steel sector. Unemployment has
continued to rise in both France and Germany. In light of the above, the
European central banks continued to maintain a loose monetary policy, and
interest rates fell steadily in most countries throughout 1996. Inflation does
not pose a threat in any Continental economy. The combination of a low
inflationary environment and low interest rates sets the stage for better
economic performance in 1997.
In the United Kingdom, the economy has been performing much better, driven by a
competitive currency, flexible labor markets, substantial foreign direct
investment and robust consumer spending. In November, the benchmark interest
rate (base rate) was raised as a preemptive strike at inflation and will likely
rise again in the near future. Assuming that an inflationary spiral can be
avoided, 1997 could be another good year for the United Kingdom.
As ever, politics featured in Europe in 1996, most notably in Spain and Italy,
with new governments being installed in both countries during the second
quarter. A rightist government was installed in Spain and a leftist government
in Italy. The respective political orientations of both administrations are of
less importance than the fact that both are pursuing pro-deregulation,
pro-business policies and both are hawkish on fiscal rectitude. While 1997 will
likely be a generally quiet political
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO SHAREHOLDERS OCTOBER 31, 1996, CONTINUED
year on the Continent, a general election is probable in the U.K. in April.
Given the centrist nature of the current Labour Party, the political risk of a
change in government is limited, but nervousness in the U.K.'s stock markets is
to be expected.
Overall, Europe's equity markets turned in a strong performance during the
period under review. For the most part, growth stocks delivered earnings in line
with expectations. The economies were clearly strong enough to enable
well-managed companies to deliver rising earnings and this, in turn,
[GRAPHIC]
was rewarded by the market with higher
valuations. By contrast, cyclical
earnings frequently disappointed in
1996 and cyclical stocks made little
progress. The financial sectors also
underperformed, mainly because of the
high cost nature and relative
inflexibility of much of the European
banking sector. In the U.K. there was
more sector rotation and a more
balanced stock market performance.
PORTFOLIO STRATEGY
[GRAPHIC]
Against this backdrop, Dean Witter
European Growth Fund produced a total
return of 22.27 percent, compared to a
return of 14.48 percent for the Morgan
Stanley Capital International (MSCI)
World Index and a return of 17.03
percent for the Lipper European Region
Funds Average. The accompanying chart
illustrates the growth of a
hypothetical $10,000 investment in the
Fund from inception (May 31, 1990)
through October 31, 1996, versus
investments in the companies that
comprise the MSCI World Index and the
Lipper European Region Funds Average.
(The Lipper European Region Funds
Average tracks the performance of funds
that invest in equity securities whose
primary trading markets or operations
are concentrated in the European region
or a single country within this
region.)
[GRAPHIC]
At the end of the fiscal year, the
United Kingdom, at 33.7 percent of
assets, remained the Fund's largest
country weighting. Rounding out the
Fund's largest
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO SHAREHOLDERS OCTOBER 31, 1996, CONTINUED
country weightings are France (14.0 percent), the Netherlands (13.1 percent),
Germany (8.7 percent) and Sweden (7.7 percent).
The portfolio's orientation shifted in a number of ways during the fiscal year.
The core blue-chip holdings in a wide range of growth stocks provided a solid
center to the Fund, e.g., Hennes & Mauritz AB (retail/Sweden), Carrefour
Supermarche (retail/France), Aegon NV (insurance/
Netherlands) and Reuters Holdings PLC (business services/U.K.). Positions in a
number of cyclical stocks were increased during the period, including Usinor
Sacilor (steel and iron/France), SGL Carbon AG (chemicals/Germany), The BICC
Group PLC (electric equipment/U.K.) and Akzo Nobel (chemicals/Netherlands). The
weighting in cyclical and economically sensitive stocks will likely increase
further if the economic growth expected underpins rising cyclical earnings.
Given the relatively stable currency relationships currently prevailing, the
Fund had no currency hedges in place at the end of the fiscal year.
LOOKING AHEAD
According to Morgan Grenfell Investment Services Limited, the Fund's
sub-adviser, the stronger economies expected in 1997, coupled with low inflation
and easy monetary policy, should provide a reasonable environment for Europe's
stock markets. However, the bond markets, which in 1996 have provided
considerable support for equities, may not be as supportive in 1997 and a number
of external factors may come into play, most notably concerns over monetary
union. Decision time on the Euro is looming in December 1997, although
implementation of the single currency will not be before 1999.
Morgan Grenfell believes the Fund is well positioned to take advantage of the
wide range of investment opportunities that the European markets present.
We appreciate your support of Dean Witter European Growth Fund and look forward
to continuing to serve your investment needs.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, BONDS AND
WARRANTS (97.5%)
AUSTRIA (0.4%)
TRANSPORTATION
108,000 Flughafen Wien AG.......... $ 5,314,495
-----------------
BELGIUM (1.1%)
RETAIL
330,154 G.I.B. Holdings Ltd........ 13,895,886
-----------------
DENMARK (2.1%)
PHARMACEUTICALS
81,900 Novo-Nordisk AS (Series
B)......................... 13,597,324
-----------------
TRANSPORTATION
119,900 Kobenhavns Lufthavne AS.... 12,441,386
-----------------
TOTAL DENMARK.............. 26,038,710
-----------------
FRANCE (14.0%)
BUILDING MATERIALS
89,400 IMETAL..................... 13,905,503
-----------------
ENERGY
208,500 Societe National Elf
Aquitaine.................. 16,634,426
-----------------
FINANCIAL SERVICES
63,475 Cetelem Group.............. 13,515,071
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
55,835 LVMH Moet-Hennessy Louis
Vuitton.................... 12,760,106
427,500 SEITA...................... 17,178,425
56,250 Societe BIC S.A............ 8,419,936
-----------------
38,358,467
-----------------
INSURANCE
160,000 AXA........................ 9,970,336
160,326 Scor S.A................... 6,148,333
-----------------
16,118,669
-----------------
PHARMACEUTICALS
158,437 Sanofi S.A................. 14,319,316
FRF 12,850K Sanofi S.A. 4.00% due
01/01/00 (Conv.)*.......... 1,286,505
-----------------
15,605,821
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
RETAIL
34,541 Carrefour Supermarche...... $ 19,124,281
89,731 Castorama Dubois
Investissement............. 15,322,917
FRF 2,331K Castorama Dubois
Investissement 3.15% due
01/01/03 (Conv.)*.......... 539,533
-----------------
34,986,731
-----------------
STEEL & IRON
899,000 Usinor Sacilor............. 13,307,797
-----------------
TEXTILES
32,666 Christian Dior S.A......... 4,335,066
4,666 Christian Dior S.A.
(Warrants due 06/30/98)*... 96,981
18,734 Hermes International....... 4,745,654
-----------------
9,177,701
-----------------
TOTAL FRANCE............... 171,610,186
-----------------
GERMANY (8.7%)
AUTOMOTIVE
18,500 Bayerische Motoren Werke
(BMW) AG................... 10,797,760
50,560 Volkswagen AG.............. 19,859,289
-----------------
30,657,049
-----------------
CHEMICALS
489,000 BASF AG.................... 15,591,304
464,950 Bayer AG................... 17,525,981
99,000 SGL Carbon AG.............. 11,119,565
-----------------
44,236,850
-----------------
HEALTH & PERSONAL CARE
60,000 Rhoen-Klinikum AG.......... 7,193,676
34,596 Rhoen-Klinikum AG
(Pref.).................... 4,056,711
-----------------
11,250,387
-----------------
MANUFACTURING
113,450 Adidas AG.................. 9,700,797
-----------------
MERCHANDISING
168,750 Gehe AG.................... 11,338,933
-----------------
TOTAL GERMANY.............. 107,184,016
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
ITALY (4.0%)
APPLIANCES & HOUSEHOLD DURABLES
204,000 Industrie Natuzzi SpA
(ADR)...................... $ 9,256,500
-----------------
FOOD MANUFACTURER
9,692,800 Parmalat Finanzeria SpA.... 13,882,418
-----------------
OIL & GAS PRODUCTS
3,120,700 Ente Nazionale Idrocarburi
SpA........................ 14,929,465
-----------------
TELECOMMUNICATIONS
5,426,850 Telecom Italia Mobile
SpA........................ 11,203,197
-----------------
TOTAL ITALY................ 49,271,580
-----------------
NETHERLANDS (13.1%)
BANKING
204,196 ABN-AMRO Holding NV........ 11,514,993
-----------------
CHEMICALS
115,000 Akzo Nobel................. 14,457,838
-----------------
FOOD PROCESSING
85,506 Nutricia Vereenigde
Bedrijven NV............... 11,966,616
-----------------
INSURANCE
224,799 Aegon NV................... 11,407,829
485,572 ING Groep NV............... 15,104,527
-----------------
26,512,356
-----------------
MANUFACTURING
176,000 ASM Lithography Holding
NV*........................ 6,313,066
-----------------
MERCHANDISING
140,000 Gucci Group NV............. 9,566,036
-----------------
MULTI-INDUSTRY
148,163 Hunter Douglas NV.......... 10,454,875
-----------------
PUBLISHING
1,130,000 Elsevier NV................ 18,738,092
820,000 Ver Ned Uitgev Ver Bezit
NV......................... 14,851,229
82,419 Wegener NV................. 6,881,982
123,615 Wolters Kluwer NV.......... 15,853,482
-----------------
56,324,785
-----------------
RETAIL
242,071 Koninklijke Ahold NV....... 14,092,102
-----------------
TOTAL NETHERLANDS.......... 161,202,667
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
NORWAY (0.5%)
INSURANCE
1,075,000 UNI Storebrand AS (A
Shares)*................... $ 6,283,504
-----------------
SPAIN (6.7%)
BANKS
334,401 Banco Bilbao Vizcaya....... 16,214,016
60,388 Banco Popular Espanol
S.A........................ 11,518,443
-----------------
27,732,459
-----------------
FINANCIAL SERVICES
133,080 Corporacion Financiera
Alba....................... 11,240,041
-----------------
OIL RELATED
54,309 Gas Natural SDG S.A.
(Series E)................. 9,479,760
-----------------
TELECOMMUNICATIONS
851,000 Telefonica de Espana....... 17,037,303
-----------------
UTILITIES
1,590,300 Iberdrola S.A.............. 16,851,932
-----------------
TOTAL SPAIN................ 82,341,495
-----------------
SWEDEN (7.7%)
BUSINESS & PUBLIC SERVICES
500,000 Assa Abloy AB (Series B)... 7,673,722
-----------------
BUSINESS SERVICES
599,650 Securitas AB (Series "B"
Free)...................... 15,490,359
-----------------
HEALTH & PERSONAL CARE
443,655 Getinge Industrier AB (B
Shares).................... 8,089,866
-----------------
INSURANCE
456,992 Scandia Forsakrings AB..... 12,812,081
-----------------
PHARMACEUTICALS
345,000 Astra AB (B Shares)........ 15,727,332
-----------------
RETAIL
159,860 Hennes & Mauritz AB (B
Shares).................... 20,672,075
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION EQUIPMENT
506,480 Ericsson (L.M.) Telephone
Co. AB (Series "B" Free)... $ 13,699,257
-----------------
TOTAL SWEDEN............... 94,164,692
-----------------
SWITZERLAND (5.5%)
INSURANCE
15,000 Schweizerische
Rueckversicherungs-
Gesellschaft............... 16,041,009
-----------------
MULTI-INDUSTRY
8,091 ABB AG - Bearer............ 9,966,989
-----------------
PHARMACEUTICALS
6,095 Ciba-Geigy AG.............. 7,484,160
2,026 Roche Holdings AG.......... 15,274,890
9,780 Sandoz AG.................. 11,268,596
6,000 Sandoz AG (Series B)....... 6,927,445
-----------------
40,955,091
-----------------
TOTAL SWITZERLAND.......... 66,963,089
-----------------
UNITED KINGDOM (33.7%)
AEROSPACE & DEFENSE
572,222 British Aerospace PLC...... 10,863,495
1,950,000 Rolls-Royce PLC*........... 8,073,402
-----------------
18,936,897
-----------------
AUTOMOTIVE
1,910,000 BBA Group PLC.............. 11,123,733
1,300,000 LucasVarity PLC*........... 5,255,377
-----------------
16,379,110
-----------------
BANKING
1,050,000 Abbey National PLC......... 10,897,933
925,000 Lloyds TSB Group PLC....... 5,861,157
475,000 National Westminster Bank
PLC........................ 5,416,837
-----------------
22,175,927
-----------------
BREWERS
815,000 Scottish & Newcastle
Breweries PLC.............. 8,465,501
-----------------
BROADCAST MEDIA
608,274 Flextech PLC*.............. 6,085,672
-----------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
BUILDING & CONSTRUCTION
1,626,000 Blue Circle Industries
PLC........................ $ 10,509,287
-----------------
BUILDING MATERIALS
1,250,000 Redland PLC................ 8,540,700
-----------------
BUSINESS SERVICES
648,000 Reuters Holdings PLC....... 8,064,373
-----------------
CHEMICALS
1,326,000 Albright & Wilson PLC...... 4,184,845
850,000 Courtaulds PLC............. 6,291,649
-----------------
10,476,494
-----------------
COMPUTER SOFTWARE & SERVICES
1,000,000 Sage Group (The) PLC....... 7,792,372
-----------------
COMPUTERS
750,000 Amstrad PLC................ 1,830,150
568,090 SEMA Group PLC............. 8,234,344
-----------------
10,064,494
-----------------
CONGLOMERATES
1,871,857 BTR PLC.................... 7,841,228
2,020,000 Tomkins PLC................ 8,445,369
1,130,200 Williams Holdings PLC...... 6,692,538
-----------------
22,979,135
-----------------
CONSTRUCTION PLANT & EQUIPMENT
1,320,000 CRH PLC.................... 13,592,890
-----------------
ELECTRICAL EQUIPMENT
1,481,818 The BICC Group PLC......... 7,051,068
-----------------
ELECTRONICS
498,000 Smiths Industries PLC...... 6,651,302
-----------------
FOOD PROCESSING
950,000 Associated British Foods
PLC........................ 6,537,296
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
663,153 B.A.T. Industries PLC...... 4,595,762
869,600 Grand Metropolitan PLC..... 6,535,754
900,000 Guinness PLC............... 6,442,128
836,000 Tate & Lyle PLC............ 6,500,823
1,565,000 Vaux Group PLC............. 6,415,774
-----------------
30,490,241
-----------------
FOREST PRODUCTS, PAPER & PACKAGING
650,000 De La Rue PLC.............. 6,196,481
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
INSURANCE
319,000 Britannic Assurance PLC.... $ 3,793,519
619,884 Commercial Union PLC....... 6,554,777
1,262,800 Prudential Corp. PLC....... 9,552,602
1,526,246 Royal & Sun Alliance
Insurance Group PLC........ 10,428,167
-----------------
30,329,065
-----------------
LEISURE
872,000 Granada Group PLC.......... 12,554,341
-----------------
MISCELLANEOUS
622,000 Vendome Luxury Group PLC
(Units)++.................. 5,868,844
-----------------
OIL RELATED
2,627,000 Lasmo PLC.................. 9,102,776
1,250,000 Shell Transport & Trading
Co. PLC.................... 20,477,345
-----------------
29,580,121
-----------------
PHARMACEUTICALS
959,620 British Biotech PLC*....... 3,528,108
1,354,325 Glaxo Wellcome PLC......... 21,261,034
2,759,166 Medeva PLC................. 11,849,934
-----------------
36,639,076
-----------------
REAL ESTATE
1,000,000 Hammerson PLC.............. 6,214,376
-----------------
RETAIL
370,000 Boots Co. PLC.............. 3,749,937
518,000 Great Universal Stores
PLC........................ 5,174,070
2,211,000 Morrison (W.M.)
Supermarkets PLC........... 5,754,968
1,030,000 Next PLC................... 9,349,870
771,500 W.H. Smith Group PLC....... 5,748,249
-----------------
29,777,094
-----------------
TELECOMMUNICATIONS
3,262,000 British Telecommunications
PLC........................ 18,891,573
1,776,330 Securicor PLC.............. 8,004,562
-----------------
26,896,135
-----------------
TRANSPORTATION
1,032,800 British Airways PLC........ 9,291,279
-----------------
UTILITIES
964,250 Scottish Power PLC......... 4,925,536
-----------------
TOTAL UNITED KINGDOM....... 413,065,107
-----------------
TOTAL COMMON AND PREFERRED
STOCKS, BONDS AND WARRANTS
(IDENTIFIED COST
$927,196,477).............. 1,197,335,427
-----------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<C> <S> <C>
PURCHASED PUT OPTION ON FOREIGN CURRENCY
(0.0%)
FRF 74,000 November 5, 1996/
FRF 5.192 (Identified
Cost $1,494,800)........... $ 44,400
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (2.9%)
U.S. GOVERNMENT AGENCY
$ 35,000 Federal Home Loan Mortgage
Corp. 5.53% due 11/01/96
(Amortized Cost
$35,000,000)............... 35,000,000
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$963,691,277) (B).......... 100.4% 1,232,379,827
LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS...... (0.4) (4,529,867)
----- -------------
NET ASSETS................. 100.0% $1,227,849,960
----- -------------
----- -------------
<FN>
- ---------------------
ADR American Depositary 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 is $969,666,680; the
aggregate gross unrealized appreciation was $274,847,596 and the aggregate
gross unrealized depreciation was $12,134,449, resulting in net unrealized
appreciation of $262,713,147.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1996:
<TABLE>
<CAPTION>
CONTRACT TO IN DELIVERY UNREALIZED
RECEIVE EXCHANGE FOR DATE APPRECIATION
- ----------------------------------------------------
<S> <C> <C> <C>
$22,423 NLG 38,133 11/01/96 $ 141
-----
-----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
SUMMARY OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense............................................................... $ 18,936,897 1.5%
Appliances & Household Durables................................................... 9,256,500 0.8
Automotive........................................................................ 47,036,159 3.8
Banking........................................................................... 33,690,920 2.7
Banks............................................................................. 27,732,459 2.3
Brewers........................................................................... 8,465,501 0.7
Broadcast Media................................................................... 6,085,672 0.5
Building & Construction........................................................... 10,509,287 0.9
Building Materials................................................................ 22,446,204 1.8
Business & Public Services........................................................ 7,673,722 0.6
Business Services................................................................. 23,554,731 1.9
Chemicals......................................................................... 69,171,183 5.6
Computer Software & Services...................................................... 7,792,372 0.6
Computers......................................................................... 10,064,494 0.8
Conglomerates..................................................................... 22,979,135 1.9
Construction Plant & Equipment.................................................... 13,592,890 1.1
Electrical Equipment.............................................................. 7,051,068 0.6
Electronics....................................................................... 6,651,302 0.5
Energy............................................................................ 16,634,426 1.4
Financial Services................................................................ 24,755,112 2.0
Food, Beverage, Tobacco & Household Products...................................... 68,848,708 5.6
Food Manufacturer................................................................. 13,882,418 1.1
Food Processing................................................................... 18,503,912 1.5
Foreign Currency Put Option....................................................... 44,400 0.0
Forest Products, Paper & Packaging................................................ 6,196,481 0.5
Health & Personal Care............................................................ 19,340,254 1.6
Insurance......................................................................... 108,096,685 8.9
Leisure........................................................................... 12,554,341 1.0
Manufacturing..................................................................... 16,013,863 1.3
Merchandising..................................................................... 20,904,968 1.7
Miscellaneous..................................................................... 5,868,844 0.5
Multi-Industry.................................................................... 20,421,864 1.7
Oil & Gas Products................................................................ 14,929,465 1.2
Oil Related....................................................................... 39,059,880 3.2
Pharmaceuticals................................................................... 122,524,643 10.0
Publishing........................................................................ 56,324,785 4.6
Real Estate....................................................................... 6,214,376 0.5
Retail............................................................................ 113,423,888 9.2
Steel & Iron...................................................................... 13,307,797 1.1
Telecommunication Equipment....................................................... 13,699,257 1.1
Telecommunications................................................................ 55,136,636 4.5
Textiles.......................................................................... 9,177,701 0.7
Transportation.................................................................... 27,047,160 2.2
U.S. Government Agency............................................................ 35,000,000 2.9
Utilities......................................................................... 21,777,467 1.8
--------------------- -----
$ 1,232,379,827 100.4%
--------------------- -----
--------------------- -----
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks..................................................................... 1,191,355,697 97.1%
Convertible Bonds................................................................. 1,826,038 0.1
Foreign Currency Put Option....................................................... 44,400 0.0
Preferred Stocks.................................................................. 4,056,711 0.3
Short-Term Investment............................................................. 35,000,000 2.9
Warrants.......................................................................... 96,981 0.0
--------------------- -----
$ 1,232,379,827 100.4%
--------------------- -----
--------------------- -----
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $963,691,277)............................ $1,232,379,827
Cash (including $9,331,541 in foreign currency)............. 10,183,725
Receivable for:
Investments sold........................................ 5,273,748
Capital stock sold...................................... 3,381,628
Dividends............................................... 1,835,708
Foreign withholding taxes reclaimed..................... 1,634,306
Prepaid expenses and other assets........................... 48,794
--------------
TOTAL ASSETS........................................... 1,254,737,736
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 24,129,370
Investment management fee............................... 994,328
Plan of distribution fee................................ 893,180
Capital stock repurchased............................... 462,752
Accrued expenses and other payables......................... 408,146
--------------
TOTAL LIABILITIES...................................... 26,887,776
--------------
NET ASSETS:
Paid-in-capital............................................. 860,072,771
Net unrealized appreciation................................. 268,682,630
Accumulated undistributed net investment income............. 1,933,547
Accumulated undistributed net realized gain................. 97,161,012
--------------
NET ASSETS............................................. $1,227,849,960
--------------
--------------
NET ASSET VALUE PER SHARE,
73,246,986 SHARES OUTSTANDING (200,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$16.76
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $3,625,117 foreign withholding tax)....... $ 20,698,341
Interest.................................................... 2,332,257
------------
TOTAL INCOME........................................... 23,030,598
------------
EXPENSES
Investment management fee................................... 9,903,670
Plan of distribution fee.................................... 9,213,394
Transfer agent fees and expenses............................ 1,347,660
Custodian fees.............................................. 731,558
Registration fees........................................... 144,553
Shareholder reports and notices............................. 120,391
Professional fees........................................... 84,050
Directors' fees and expenses................................ 18,339
Other....................................................... 51,882
------------
TOTAL EXPENSES......................................... 21,615,497
------------
NET INVESTMENT INCOME.................................. 1,415,101
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments............................................. 97,683,962
Foreign exchange transactions........................... 758,999
------------
NET GAIN............................................... 98,442,961
------------
Net change in unrealized appreciation on:
Investments............................................. 106,414,452
Translation of forward foreign exchange contracts, other
assets and liabilities denominated in foreign
currencies............................................ 417,811
------------
NET APPRECIATION....................................... 106,832,263
------------
NET GAIN............................................... 205,275,224
------------
NET INCREASE................................................ $206,690,325
------------
------------
</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 YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 1,415,101 $ 1,002,440
Net realized gain........................................... 98,442,961 41,187,148
Net change in unrealized appreciation....................... 106,832,263 79,053,572
---------------- ----------------
NET INCREASE........................................... 206,690,325 121,243,160
Distributions from net realized gain........................ (44,251,712) (60,625,845)
Net increase from capital stock transactions................ 197,680,851 48,611,356
---------------- ----------------
NET INCREASE........................................... 360,119,464 109,228,671
---------------- ----------------
NET ASSETS:
Beginning of period......................................... 867,730,496 758,501,825
---------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,933,547 AND ACCUMULATED NET INVESTMENT LOSS OF
$240,553, RESPECTIVELY)................................. $ 1,227,849,960 $867,730,496
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996
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's investment objective is to
maximize the capital appreciation of its investments. The Fund was incorporated
in Maryland on February 13, 1990 and commenced operations on May 31, 1990.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. 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 or 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
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
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 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
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
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.
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 the Investment
Manager 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
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
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 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.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
the investors upon redemption of shares, if for any reason the Plan is
terminated, the Trustees will consider at that time the manner in which to treat
such expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $25,872,741 at October 31, 1996.
The Distributor has informed the Fund that for the year ended October 31, 1996,
it received approximately $1,047,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1996 aggregated
$656,461,382 and $473,648,972, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $139,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended October 31, 1996 included
in Directors' fees and expenses in the Statement of Operations amounted to
$2,820. At October 31, 1996, the Fund had an accrued pension liability of
$47,866 which is included in accrued expenses in the Statement of Assets and
Liabilities.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold............................................................. 24,444,448 $ 371,386,556 15,721,889 $ 209,149,980
Reinvestment of distributions.................................... 3,030,461 41,577,920 4,855,138 56,984,815
------------ ------------- ------------ -------------
27,474,909 412,964,476 20,577,027 266,134,795
Repurchased...................................................... (14,340,465) (215,283,625) (16,689,142) (217,523,439)
------------ ------------- ------------ -------------
Net increase..................................................... 13,134,444 $ 197,680,851 3,887,885 $ 48,611,356
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of October 31, 1996, the Fund had temporary book/tax differences primarily
attributable to income from the mark-to-market of passive foreign investment
companies and permanent book/tax differences attributable to foreign currency
gains. To reflect reclassifications arising from permanent book/tax differences
for the year ended October 31, 1996, accumulated undistributed net realized gain
was charged $591,974, paid-in-capital was charged $167,025 and accumulated
undistributed net investment income was credited $758,999.
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 October 31, 1996, there were no outstanding forward contracts other than that
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 PERIOD
FOR THE YEAR ENDED OCTOBER 31 MAY 31, 1990*
------------------------------------------------------------------------ THROUGH
1996 1995 1994 1993 1992 1991 OCTOBER 31, 1990
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $ 10.00
--------- --------- --------- ---------- ---------- ---------- ------
Net investment income (loss)....... 0.02 0.02 0.02 (0.01) 0.01 0.05 0.05
Net realized and unrealized gain
(loss)............................ 3.03 2.00 1.84 3.30 (0.23) 0.07 (0.82)
--------- --------- --------- ---------- ---------- ---------- ------
Total from investment operations... 3.05 2.02 1.86 3.29 (0.22) 0.12 (0.77)
--------- --------- --------- ---------- ---------- ---------- ------
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..... $ 16.76 $ 14.44 $ 13.49 $ 11.86 $ 8.57 $ 9.22 $ 9.23
--------- --------- --------- ---------- ---------- ---------- ------
--------- --------- --------- ---------- ---------- ---------- ------
TOTAL INVESTMENT RETURN+........... 22.27% 16.83% 15.61% 38.74% (2.39)% 1.33% (7.70)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.13% 2.23% 2.27% 2.38% 2.40% 2.44% 2.45%(2)
Net investment income (loss)....... 0.14% 0.13% 0.21% (0.09)% 0.11% 0.51% 1.52%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $1,228 $868 $759 $459 $297 $316 $304
Portfolio turnover rate............ 49% 61% 72% 120% 116% 111% 36%(1)
Average commission rate paid....... $0.0448 -- -- -- -- -- --
<FN>
- ---------------------
* Commencement of operations.
+ 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>
DEAN WITTER EUROPEAN GROWTH FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER EUROPEAN GROWTH FUND INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter European Growth Fund
Inc. (the "Fund") at October 31, 1996, 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 six years in the
period then ended and for the period May 31, 1990 (commencement of operations)
through October 31, 1990, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1996 by correspondence with the
custodian and brokers, and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 17, 1996
- --------------------------------------------------------------------------------
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended October 31, 1996, Fund paid to shareholders
$0.73 per share from long-term capital gains.
<PAGE>
DEAN WITTER EUROPEAN GROWTH
GROWTH OF $10,000
DATE TOTAL MSCI WORLD INDEX LIPPER
- ---------------------------------------------------------------------
June 1, 1990 $10,000 $10,000 $10,000
October 31, 1990 $ 9,230 $ 8,742 $ 8,806
October 31, 1991 $ 9,353 $ 9,921 $ 9,049
October 31, 1992 $ 9,129 $ 9,212 $ 8,660
October 31, 1993 $12,666 $11,492 $10,931
October 31, 1994 $14,643 $12,170 $12,307
October 31, 1995 $17,108 $13,099 $13,585
October 31, 1996 $20,918 (3) $14,995 $15,899
- ---------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS LIFE OF FUND
--------------------------------------
22.27 (1) 17.47 (1) 12.19 (1)
17.27 (2) 17.26 (2) 12.19 (2)
--------------------------------------
---------------------------------------------------
Fund MSCI (4) LIPPER (5)
------- ------- -------
---------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
________________________________________
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable contingent deferred sales charge (CDSC) (1 year-5%,
5 years - 2%, since inception - 0%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on October 31, 1996.
(4) The Morgan Stanley Capital International World Index (MSCI) measures
performance for a diverse range of global stock markets including the U.S.,
Canada, Europe, Australia, New Zealand and the Far East. The index does
not include any expenses, fees or charges or reinvestment of dividends.
The Index is unmanaged and should not be considered an investment.
(5) The Lipper European Region Funds Average tracks the performance of the
funds which primarily invest in equity securities whose primary trading
markets or operations are concentrated in the European region or a single
country within this region, as reported by Lipper Analytical Services.
