<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC. TWO WORLD TRADE CENTER, NEW
LETTER TO THE SHAREHOLDERS APRIL 30, 1998 YORK, NEW YORK 10048
DEAR SHAREHOLDER:
During the six-month period ended April 30, 1998, European stock markets
delivered exceptionally strong returns in both local currency and U.S. dollar
terms. Although the economic crisis in Asia did produce a setback in late 1997,
the European markets recovered strongly in early 1998. This performance was
driven by several factors but can primarily be attributed to the strong ongoing
recovery of Europe's economies. Continental Europe is now the only major region
in the world where analysts expect 1998 economic growth to be stronger than that
of 1997. In the core European economies, growth has accelerated as a result of
increased business optimism, a benign inflation outlook and the strength of the
U.S. dollar, which delivered a boost to exports. At the same time, interest-rate
cuts in Spain and Italy as part of the European Monetary Union (EMU) convergence
process have pushed real GDP growth to more than 3 percent in these countries
and additional strengthening is likely this year.
In the United Kingdom, which is at a different stage in its economic cycle than
the rest of Europe, high interest rates and a strong currency negatively
affected economic activity despite robust consumer demand. However, the British
pound is expected to depreciate from its current levels over the medium term,
and U.K. GDP growth should be above 2 percent this year.
Corporate earnings for 1997 generally met or exceeded market expectations and
companies have been broadly upbeat so far on their prospects for 1998. Although
there had been concerns that the slowdown in Asia would have a negative effect
on European corporate earnings through pricing pressures and increased
competition, the impact has been less severe than expected. Earnings, supported
by the acceleration in the Continental European economies, should grow by 12 to
15 percent this year. In the United Kingdom, high interest rates and the
strength of the British pound continue to damage manufacturers and exporters.
Mainly because of this, U.K. corporate earnings are expected to grow by a more
moderate 5 to 7 percent in 1998.
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1998, CONTINUED
In addition to positive economic fundamentals, the upcoming transition to the
European single currency, the Euro, has been an important factor in market
performance over the last six months. With the 11 first-wave EMU members now
established, the two main issues remain the convergence of short-term interest
rates and the formulation of a monetary policy framework for the European
Central Bank. Although long-term interest rates have largely converged,
short-term rates must converge further during the rest of 1998, implying cuts in
Spain and Italy, with a slight rise in Germany. Although there are some concerns
regarding the possibility of economic overheating in southern Europe, markets
appear to be anticipating a generally smooth transition throughout the rest of
the year.
This upcoming transition has prompted a significant increase in European
corporate activity. This has been especially true for banking and financial
stocks, where the single currency is likely to create opportunities for
significant operational synergies and cost savings. Most of the recent activity,
including the mergers of UBS/SBC, Santander/Banesto and IMI/San Paolo, has taken
place within national borders as companies have attempted to strengthen their
domestic positions. However, once the Euro is established, competitive pressures
and pricing transparency are likely to lead to cross-border deals, creating
larger companies with a pan-European presence. For banks especially, internal
reorganization and restructuring have become increasingly important as
managements recognize the importance of profitability in a competitive
single-currency environment. Although consolidation in banking is happening now
in advance of the Euro launch, the process is likely to accelerate in other
sectors once the Euro is established. This is particularly true for industries
such as transport and automobiles, where the disappearance of pricing
differentials across Europe may create significant margin pressure.
PERFORMANCE AND PORTFOLIO
For the six months ended April 30, 1998, Dean Witter European Growth Fund Class
B shares posted a total return of 25.30 percent versus 18.10 percent for the
Morgan Stanley Capital International (MSCI) World Index and 27.38 percent for
the Lipper European Region Funds Index. For the same period, the Fund's Class A,
C and D shares had total returns of 25.78 percent, 25.27 percent and 27.35
percent, respectively. The performance of the Fund's four share classes varies
because of differing expenses.
The United Kingdom remains the Fund's largest single country allocation at
approximately 32 percent, followed by France (15 percent), the Netherlands (10
percent) and Germany (10 percent). The Fund remains overweighted relative to the
MSCI World Index in Sweden, where stocks continue to offer an attractive balance
of growth and value, and underweighted in Switzerland. The Fund's
2
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
LETTER TO THE SHAREHOLDERS APRIL 30, 1998, CONTINUED
holdings remain concentrated in blue-chip issues positioned to benefit from the
ongoing recovery in the European economies. Over the past six months we have
increased the portfolio's weighting in financials, because of the likelihood of
increased banking consolidation due to the launch of the Euro. We are now
neutral in this sector relative to the index, with holdings including Bayerische
Vereinsbank (Germany), Banca di Roma (Italy) and Credit Suisse (Switzerland).
LOOKING AHEAD
The outlook for the European stock markets during the balance of 1998 remains
positive. The MSCI Europe Index currently trades at a price/earnings multiple of
22 times for 1998 and 19 times for 1999. Although many markets are trading at
historically high levels, earnings are underpinned by the strength of the
European economies, and these markets have strong technical support from high
levels of cash flows to mutual funds. The threat of further negative surprises
from Asia appears to have receded and the principal risk to markets now would be
a setback in progress toward EMU, especially in regard to interest-rate
convergence or a sharp upturn in inflation.
We appreciate your ongoing support of Dean Witter European Growth Fund and look
forward to continuing to serve your investment needs.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
* * *
In May 1998, Dean Witter European Growth Fund's sub-adviser, Morgan Grenfell
Investment Services Limited, advised the Board of Directors of the Fund and
InterCapital of its resignation as sub-adviser, effective at the close of
business on December 31, 1998. On June 2, 1998, the Board of Directors
unanimously recommended that a new sub-advisory agreement with Morgan Stanley
Asset Management Inc. ("MSAM"), an affiliate of InterCapital, be submitted to
shareholders for approval at a special meeting expected to be held in August
1998. A letter enclosing a prospectus supplement, which contains complete
details, has been mailed to you.
3
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS AND RIGHTS (96.4%)
DENMARK (1.1%)
PHARMACEUTICALS
149,180 Novo-Nordisk AS (Series B).................................................... $ 24,178,635
--------------
FINLAND (2.2%)
INSURANCE
172,766 Pohjola Insurance Co. "B"..................................................... 9,573,807
--------------
PAPER PRODUCTS
200 UPM-Kymmene Oy................................................................ 6,000
--------------
TELECOMMUNICATION EQUIPMENT
543,000 Nokia Oyj (A Shares).......................................................... 36,467,026
--------------
TOTAL FINLAND................................................................. 46,046,833
--------------
FRANCE (14.6%)
BANKING
298,931 Banque Nationale de Paris..................................................... 25,182,025
268,750 Credit Commercial de France................................................... 21,433,912
--------------
46,615,937
--------------
ELECTRICAL EQUIPMENT
241,350 Alcatel Alsthom............................................................... 44,713,010
--------------
ELECTRONICS - SEMICONDUCTORS
362,400 SGS-Thomson Microelectronics N.V.*............................................ 30,950,170
--------------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
229,900 Societe BIC S.A............................................................... 15,806,699
--------------
INSURANCE
454,100 AXA-UAP....................................................................... 53,268,190
--------------
LEISURE
185,150 Accor S.A..................................................................... 50,421,343
--------------
MERCHANDISING
34,000 Carrefour S.A................................................................. 19,461,660
--------------
OIL RELATED
192,000 Total S.A. (B Shares)......................................................... 22,809,670
--------------
PHARMACEUTICALS
218,800 Sanofi S.A.................................................................... 26,502,484
--------------
TOTAL FRANCE.................................................................. 310,549,163
--------------
GERMANY (10.1%)
AIRLINES
1,025,500 Deutsche Lufthansa AG......................................................... 24,388,109
--------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
APPAREL
6,730 Hugo Boss AG (Pref.).......................................................... $ 12,369,257
--------------
AUTOMOTIVE
29,204 Bayerische Motoren Werke (BMW) AG............................................. 32,204,912
27,960 Volkswagen AG................................................................. 22,252,765
--------------
54,457,677
--------------
BANKING
410,500 Bayerische Vereinsbank AG..................................................... 31,207,602
205,000 Dresdner Bank AG.............................................................. 11,086,327
--------------
42,293,929
--------------
HEALTH & PERSONAL CARE
452 Rhoen-Klinikum AG............................................................. 47,201
534 Rhoen-Klinikum AG (Pref.)..................................................... 55,021
--------------
102,222
--------------
MACHINERY - DIVERSIFIED
35,000 Mannesmann AG................................................................. 27,758,285
--------------
MULTI-LINE INSURANCE
1,798 Allianz AG (New)*............................................................. 547,762
99,515 Allianz AG (Reg).............................................................. 30,594,419
--------------
31,142,181
--------------
UTILITIES
331,400 Veba AG....................................................................... 21,890,304
--------------
TOTAL GERMANY................................................................. 214,401,964
--------------
ITALY (3.0%)
BANKING
6,000,000 Banca di Roma*................................................................ 11,055,305
--------------
HOUSEHOLD FURNISHINGS & APPLIANCES
408,000 Industrie Natuzzi SpA (ADR)................................................... 10,480,500
--------------
TELECOMMUNICATIONS
5,500,750 Telecom Italia SpA............................................................ 41,131,454
--------------
TOTAL ITALY................................................................... 62,667,259
--------------
NETHERLANDS (10.0%)
ELECTRICAL EQUIPMENT
644,400 Philips Electronics NV........................................................ 56,744,435
--------------
INSURANCE
182,606 Aegon NV...................................................................... 23,668,137
621,502 ING Groep NV.................................................................. 40,369,651
--------------
64,037,788
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL INTEGRATED - INTERNATIONAL
290,000 Royal Dutch Petroleum Co...................................................... $ 15,996,339
--------------
PUBLISHING
865,000 Ver Ned Uitgev Ver Bezit NV................................................... 27,986,049
--------------
RETAIL
1,020,990 Koninklijke Ahold NV.......................................................... 31,820,703
--------------
SEMICONDUCTOR EQUIPMENT
175,100 ASM Lithography Holding NV*................................................... 15,886,683
--------------
TOTAL NETHERLANDS............................................................. 212,471,997
--------------
SPAIN (5.0%)
BANKING
726,503 Banco Bilbao Vizcaya S.A...................................................... 37,354,299
293,713 Banco Popular Espanol S.A..................................................... 24,077,994
--------------
61,432,293
--------------
TELECOMMUNICATIONS
1,061,291 Telefonica S.A................................................................ 44,266,860
1,061,291 Telefonica S.A. (Rights)*..................................................... 821,303
--------------
45,088,163
--------------
TOTAL SPAIN................................................................... 106,520,456
--------------
SWEDEN (9.9%)
AUTOMOBILES
935,000 Volvo AB (B Shares)........................................................... 27,297,154
--------------
BANKING
1,625,000 Nordbanken Holding AB......................................................... 11,965,354
--------------
BUSINESS SERVICES
759,650 Securitas AB
(Series "B" Free)........................................................... 27,967,634
--------------
INSURANCE
476,792 Scandia Forsakrings AB........................................................ 33,198,239
--------------
MULTI-INDUSTRY
550,000 Assa Abloy AB (Series B)...................................................... 19,183,320
--------------
PHARMACEUTICALS
1,138,900 Astra AB (B Shares)........................................................... 22,657,064
513,100 Astra AB (Series "A" Free).................................................... 10,538,929
--------------
33,195,993
--------------
RETAIL
279,685 Hennes & Mauritz AB (B Shares)................................................ 14,560,341
--------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION EQUIPMENT
826,730 Ericsson (L.M.) Telephone Co. AB (Series "B" Free)............................ $ 43,573,373
--------------
TOTAL SWEDEN.................................................................. 210,941,408
--------------
SWITZERLAND (8.4%)
BANKING
106,000 Credit Suisse Group........................................................... 23,312,229
17,930 UBS........................................................................... 28,869,630
--------------
52,181,859
--------------
CONGLOMERATES
10,700 Compagnie Financiere Richemont AG (Series A).................................. 15,331,556
--------------
FOODS & BEVERAGES
22,109 Nestle S.A.................................................................... 42,877,168
--------------
PHARMACEUTICALS
22,281 Novartis AG................................................................... 36,825,645
6,000 Novartis AG - Bearer.......................................................... 9,948,684
2,077 Roche Holdings AG............................................................. 21,046,841
--------------
67,821,170
--------------
TOTAL SWITZERLAND............................................................. 178,211,753
--------------
UNITED KINGDOM (32.1%)
AEROSPACE & DEFENSE
459,532 British Aerospace PLC......................................................... 15,342,202
3,550,000 Rolls-Royce PLC*.............................................................. 16,550,419
544,060 Smiths Industries PLC......................................................... 7,823,014
--------------
39,715,635
--------------
AUTOMOTIVE
1,835,910 BBA Group PLC................................................................. 15,078,265
--------------
BANKING
1,553,000 Abbey National PLC............................................................ 29,142,557
728,000 Barclays Bank PLC............................................................. 20,984,418
939,124 HSBC Holdings PLC............................................................. 29,612,242
925,000 Lloyds TSB Group PLC.......................................................... 13,841,520
692,000 Standard Chartered PLC........................................................ 10,592,001
--------------
104,172,738
--------------
BEVERAGES - ALCOHOLIC
1,262,828 Diageo PLC.................................................................... 15,024,521
--------------
BROADCAST MEDIA
761,274 Flextech PLC*................................................................. 6,296,840
--------------
BUILDING & CONSTRUCTION
1,626,000 Blue Circle Industries PLC.................................................... 9,652,306
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES
784,333 Reuters Holdings PLC.......................................................... $ 8,492,820
--------------
COMPUTER SOFTWARE & SERVICES
665,000 Sage Group (The) PLC.......................................................... 13,945,748
--------------
COMPUTERS
374,090 SEMA Group PLC................................................................ 13,608,523
--------------
CONGLOMERATES
3,398,857 BTR PLC....................................................................... 11,287,986
2,020,000 Tomkins PLC................................................................... 11,881,478
--------------
23,169,464
--------------
ELECTRICAL EQUIPMENT
1,481,818 BICC Group (The) PLC.......................................................... 4,159,878
979,000 General Electric Co. PLC...................................................... 8,097,750
--------------
12,257,628
--------------
FOOD, BEVERAGE, TOBACCO, & HOUSEHOLD PRODUCTS
950,000 Associated British Foods PLC.................................................. 8,905,595
1,211,420 B.A.T. Industries PLC......................................................... 11,416,955
836,000 Tate & Lyle PLC............................................................... 6,705,389
1,380,000 Unilever PLC.................................................................. 14,689,093
--------------
41,717,032
--------------
HEALTH & PERSONAL CARE
4,008,000 London International Group PLC................................................ 13,126,841
--------------
INSURANCE
319,000 Britannic Assurance PLC....................................................... 6,583,155
1,277,800 Prudential Corp. PLC.......................................................... 18,085,176
1,526,246 Royal & Sun Alliance Insurance Group PLC...................................... 17,036,385
--------------
41,704,716
--------------
LEISURE
979,000 Granada Group PLC............................................................. 16,849,863
1,391,000 Rank Group PLC................................................................ 8,995,277
--------------
25,845,140
--------------
NATURAL GAS
2,669,097 BG PLC*....................................................................... 14,249,895
--------------
OIL RELATED
3,630,000 Lasmo PLC..................................................................... 15,937,706
4,664,000 Shell Transport & Trading Co. PLC............................................. 34,681,271
--------------
50,618,977
--------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS
1,529,325 Glaxo Wellcome PLC............................................................ $ 43,187,985
2,100,323 SmithKline Beecham PLC........................................................ 25,023,731
--------------
68,211,716
--------------
PUBLISHING
911,000 United News & Media PLC....................................................... 12,345,699
--------------
RAILROAD EQUIPMENT
397,000 Railtrack Group PLC........................................................... 7,247,503
--------------
REAL ESTATE
1,000,000 Hammerson PLC................................................................. 8,772,750
--------------
RETAIL
949,000 Great Universal Stores PLC.................................................... 14,446,447
2,211,000 Morrison (W.M.) Supermarkets PLC.............................................. 9,790,640
1,030,000 Next PLC...................................................................... 8,519,594
803,194 Tesco PLC..................................................................... 7,515,968
--------------
40,272,649
--------------
RETAIL - DEPARTMENT STORES
724,843 Kingfisher PLC................................................................ 13,153,769
--------------
TELECOMMUNICATIONS
3,798,000 British Telecommunications PLC................................................ 41,188,512
2,099,000 General Cable PLC*............................................................ 6,383,521
1,776,330 Securicor PLC................................................................. 11,754,260
820,000 Vodafone Group PLC............................................................ 8,974,941
--------------
68,301,234
--------------
TRANSPORTATION
699,830 British Airways PLC........................................................... 7,285,461
--------------
UTILITIES - ELECTRIC
794,862 National Power PLC............................................................ 7,736,849
--------------
TOTAL UNITED KINGDOM.......................................................... 682,004,719
--------------
TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS
(IDENTIFIED COST $1,372,479,093).............................................. 2,047,994,187
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (a) (3.1%)
COMMERCIAL PAPER
$ 65,000 American Express Credit Corp. 5.53% due 05/01/98 (AMORTIZED COST $65,000,000)........ $ 65,000,000
--------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $1,437,479,093) (B).................................................... 99.5 % 2,112,994,187
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES.......................................... 0.5 10,071,756
------ ---------------
NET ASSETS.............................................................................. 100.0 % $ 2,123,065,943
------ ---------------
------ ---------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(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 is $684,868,630 and the
aggregate gross unrealized depreciation is $9,353,536, resulting in net
unrealized appreciation of $675,515,094.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN DELIVERY APPRECIATION/
RECEIVE EXCHANGE FOR DATE DEPRECIATION
- -------------------------------------------------------------------
<S> <C> <C> <C>
L 1,508,818 $ 2,521,235 05/01/98 $ --
DEM 17,813,248 $ 9,932,115 05/04/98 (11,064)
$ 73,790 DEM 132,305 05/05/98 103
$ 1,302,033 NLG 2,628,804 05/05/98 1,546
$ 2,064,949 NLG 4,168,719 05/05/98 2,656
$ 904,775 FIM 4,923,784 05/06/98 1,295
$ 1,016,898 L 607,502 05/06/98 1,762
--------------
Net unrealized depreciation.................. $ (3,702)
--------------
--------------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
L British Pound
NLG Dutch Gilder
FIM Finnish Markka
DEM German Deutschemark
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
SUMMARY OF INVESTMENTS APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Aerospace & Defense............................................................. $ 39,715,635 1.9 %
Airlines........................................................................ 24,388,109 1.1
Apparel......................................................................... 12,369,257 0.6
Automobiles..................................................................... 27,297,154 1.3
Automotive...................................................................... 69,535,942 3.3
Banking......................................................................... 329,717,415 15.5
Beverages - Alcoholic........................................................... 15,024,521 0.7
Broadcast Media................................................................. 6,296,840 0.3
Building & Construction......................................................... 9,652,306 0.4
Business Services............................................................... 36,460,454 1.7
Commercial Paper................................................................ 65,000,000 3.1
Computer Software & Services.................................................... 13,945,748 0.6
Computers....................................................................... 13,608,523 0.6
Conglomerates................................................................... 38,501,020 1.8
Electrical Equipment............................................................ 113,715,073 5.4
Electronics - Semiconductors.................................................... 30,950,170 1.5
Food, Beverage, Tobacco, & Household Products................................... 57,523,731 2.7
Foods & Beverages............................................................... 42,877,168 2.0
Health & Personal Care.......................................................... 13,229,063 0.6
Household Furnishings & Appliances.............................................. 10,480,500 0.5
Insurance....................................................................... 201,782,740 9.5
Leisure......................................................................... 76,266,483 3.6
Machinery - Diversified......................................................... 27,758,285 1.3
Merchandising................................................................... 19,461,660 0.9
Multi-Industry.................................................................. 19,183,320 0.9
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Multi-Line Insurance............................................................ $ 31,142,181 1.5 %
Natural Gas..................................................................... 14,249,895 0.7
Oil Integrated - International.................................................. 15,996,339 0.8
Oil Related..................................................................... 73,428,647 3.5
Paper Products.................................................................. 6,000 0.0
Pharmaceuticals................................................................. 219,909,998 10.4
Publishing...................................................................... 40,331,748 1.9
Railroad Equipment.............................................................. 7,247,503 0.3
Real Estate..................................................................... 8,772,750 0.4
Retail.......................................................................... 86,653,693 4.1
Retail - Department Stores...................................................... 13,153,769 0.6
Semiconductor Equipment......................................................... 15,886,683 0.7
Telecommunication Equipment..................................................... 80,040,399 3.8
Telecommunications.............................................................. 154,520,851 7.3
Transportation.................................................................. 7,285,461 0.3
Utilities....................................................................... 21,890,304 1.0
Utilities - Electric............................................................ 7,736,849 0.4
-------------- ---
$2,112,994,187 99.5 %
-------------- ---
-------------- ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks................................................................... $2,034,748,606 95.8 %
Preferred Stocks................................................................ 12,424,278 0.6
Rights.......................................................................... 821,303 0.0
Short-Term Investment........................................................... 65,000,000 3.1
-------------- ---
$2,112,994,187 99.5 %
-------------- ---
-------------- ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,437,479,093).......................................................... $2,112,994,187
Cash (including $1,300,502 in foreign currency)............................................. 3,712,098
Receivable for:
Investments sold........................................................................ 11,090,263
Capital stock sold...................................................................... 7,506,664
Dividends............................................................................... 7,033,420
Foreign withholding taxes reclaimed..................................................... 3,422,862
Prepaid expenses and other assets........................................................... 252,970
--------------
TOTAL ASSETS........................................................................... 2,146,012,464
--------------
LIABILITIES:
Payable for:
Investments purchased................................................................... 12,368,615
Capital stock repurchased............................................................... 7,072,413
Investment management fee............................................................... 1,667,589
Plan of distribution fee................................................................ 1,417,375
Accrued expenses and other payables......................................................... 420,529
--------------
TOTAL LIABILITIES...................................................................... 22,946,521
--------------
NET ASSETS............................................................................. $2,123,065,943
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $1,337,495,104
Net unrealized appreciation................................................................. 675,492,032
Accumulated net investment loss............................................................. (5,244,338)
Accumulated undistributed net realized gain................................................. 115,323,145
--------------
NET ASSETS............................................................................. $2,123,065,943
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $6,715,686
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 319,859
NET ASSET VALUE PER SHARE.............................................................. $21.00
--------------
--------------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)........................................ $22.16
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $2,105,186,516
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 100,469,237
NET ASSET VALUE PER SHARE.............................................................. $20.95
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $9,295,705
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 444,194
NET ASSET VALUE PER SHARE.............................................................. $20.93
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $1,868,036
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 87,873
NET ASSET VALUE PER SHARE.............................................................. $21.26
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $2,090,532 foreign withholding tax)......................................... $ 13,606,211
Interest...................................................................................... 1,245,166
------------
TOTAL INCOME............................................................................. 14,851,377
------------
EXPENSES
Investment management fee..................................................................... 8,874,928
Plan of distribution fee (Class A shares)..................................................... 4,264
Plan of distribution fee (Class B shares)..................................................... 8,040,259
Plan of distribution fee (Class C shares)..................................................... 23,110
Transfer agent fees and expenses.............................................................. 1,099,842
Custodian fees................................................................................ 687,486
Registration fees............................................................................. 96,058
Shareholder reports and notices............................................................... 66,378
Professional fees............................................................................. 37,869
Directors' fees and expenses.................................................................. 9,260
Other......................................................................................... 13,616
------------
TOTAL EXPENSES........................................................................... 18,953,070
------------
NET INVESTMENT LOSS...................................................................... (4,101,693)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments............................................................................... 114,769,916
Foreign exchange transactions............................................................. 642,575
------------
NET GAIN................................................................................. 115,412,491
------------
Net change in unrealized appreciation on:
Investments............................................................................... 311,788,460
Translation of forward foreign currency contracts, other assets and liabilities
denominated in foreign currencies....................................................... (202,419)
------------
NET APPRECIATION......................................................................... 311,586,041
------------
NET GAIN................................................................................. 426,998,532
------------
NET INCREASE.................................................................................. $422,896,839
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 1998 OCTOBER 31, 1997*
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)............................................ $ (4,101,693) $ 3,448,857
Net realized gain....................................................... 115,412,491 163,871,393
Net change in unrealized appreciation................................... 311,586,041 95,223,361
--------------- -----------------
NET INCREASE....................................................... 422,896,839 262,543,611
--------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares...................................................... (30,346) --
Class B shares...................................................... (15,068,038) (8,287,857)
Class C shares...................................................... (31,106) --
Class D shares...................................................... (374,194) --
Net realized gain
Class A shares...................................................... (215,076) --
Class B shares...................................................... (143,682,142) (97,160,987)
Class C shares...................................................... (276,452) --
Class D shares...................................................... (2,520,602) --
--------------- -----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................................. (162,197,956) (105,448,844)
--------------- -----------------
Net increase from capital stock transactions............................ 150,137,516 327,284,817
--------------- -----------------
NET INCREASE....................................................... 410,836,399 484,379,584
NET ASSETS:
Beginning of period..................................................... 1,712,229,544 1,227,849,960
--------------- -----------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $5,244,338 AND UNDISTRIBUTED NET
INVESTMENT INCOME OF $14,361,039, RESPECTIVELY)..................... $ 2,123,065,943 $ 1,712,229,544
--------------- -----------------
--------------- -----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (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'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. On
July 28, 1997, the Fund commenced offering three classes of shares, with the
then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
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 pursuant to procedures
adopted 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 are 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 Dean Witter InterCapital Inc. (the "Investment Manager") or Morgan
Grenfell Investment Services Limited (the "Sub-Adviser") 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
12
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. 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
13
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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.
E. 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 foreign currency
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.
F. 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.
G. 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.
H. 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
14
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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; 0.95% of the portion of daily net assets exceeding $500 million but not
$2 billion and 0.90% of the portion of daily net assets in excess of $2 billion.
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 the Sub-Adviser and the Investment
Manager, the Sub-Adviser 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-Adviser 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. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since inception of
the Fund (not including reinvestment of dividends or capital gain distributions)
less the average net asset value of the Class B shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or
waived; or (b) the average daily net assets of Class B; and (iii) Class C -- up
to 1.0% of
15
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
the average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for services provided and the expenses borne by it and others in the
distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes 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 others who engage in or
support distribution of the 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 these shares to
other than current shareholders; and preparation, printing and distribution of
sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate DWR and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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 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 $32,417,764 at April 30, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the six months ended April 30, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended April 30,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C
16
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
shares of $1,084,005 and $1,976, respectively and received $63,710 in front-end
sales charges from sales of the Fund's Class A shares. The respective
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, 1998 aggregated
$526,439,862 and $558,418,168, respectively.
For the six months ended April 30, 1998, the Fund incurred brokerage commissions
of $31,670 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At April 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $13,200.
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 six months ended April 30, 1998
included in Directors' fees and expenses in the Statement of Operations amounted
to $1,953. At April 30, 1998, the Fund had an accrued pension liability of
$47,498 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. FEDERAL INCOME TAX STATUS
As of October 31, 1997, the Fund had temporary book/tax differences primarily
attributable to income from the mark-to-market of passive foreign investment
companies.
17
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
6. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1998 FOR THE YEAR
------------------------------ ENDED
OCTOBER 31, 1997*
(UNAUDITED) -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 212,666 $ 4,234,972 102,145 $ 1,884,214
Reinvestment of dividends and distributions...................... 13,547 229,902 -- --
Redeemed......................................................... (7,237) (147,910) (1,262) (23,880)
------------- -------------- ------------ --------------
Net increase - Class A........................................... 218,976 4,316,964 100,883 1,860,334
------------- -------------- ------------ --------------
CLASS B SHARES
Sold............................................................. 21,393,576 414,300,236 42,082,583 738,349,917
Reinvestment of dividends and distributions...................... 8,774,632 148,905,493 6,087,300 98,796,887
Redeemed......................................................... (22,364,220) (427,082,044) (28,751,620) (514,693,020)
------------- -------------- ------------ --------------
Net increase - Class B........................................... 7,803,988 136,123,685 19,418,263 322,453,784
------------- -------------- ------------ --------------
CLASS C SHARES
Sold............................................................. 578,304 11,479,725 168,016 3,136,766
Reinvestment of dividends and distributions...................... 17,786 301,660 -- --
Redeemed......................................................... (308,675) (6,077,728) (11,237) (210,091)
------------- -------------- ------------ --------------
Net increase - Class C........................................... 287,415 5,703,657 156,779 2,926,675
------------- -------------- ------------ --------------
CLASS D SHARES
Sold............................................................. 1,708,743 32,028,105 2,419 44,024
Reinvestment of dividends and distributions...................... 231 3,921 -- --
Redeemed......................................................... (1,623,520) (28,038,816) -- --
------------- -------------- ------------ --------------
Net increase - Class D........................................... 85,454 3,993,210 2,419 44,024
------------- -------------- ------------ --------------
Net increase in Fund............................................. 8,395,833 $ 150,137,516 19,678,344 $ 327,284,817
------------- -------------- ------------ --------------
------------- -------------- ------------ --------------
</TABLE>
- ---------------------
* For Classes A, C, and D shares, for the period July 28, 1997 (issue date)
through October 31, 1997.
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.
18
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS APRIL 30, 1998 (UNAUDITED) CONTINUED
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.
At April 30, 1998, there were outstanding forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions.
At April 30, 1998, investments in securities of issuers in the United Kingdom
represented 32.1% of the Fund's net assets. These investments, which involve
risks and considerations not present with respect to U.S. securities, may be
affected by economic or political developments in this region.
8. SUBSEQUENT EVENT
In May 1998, the sub-adviser advised the Fund's Board of Directors and the
Investment Manager of its resignation as sub-adviser, effective at the close of
business on December 31, 1998. On June 2, 1998 the Board of Directors
unanimously recommended that a new sub-advisory agreement with Morgan Stanley
Asset Management Inc., an affiliate of the Investment Manager, be submitted to
shareholders for approval at a special meeting expected to be held in August
1998.
19
<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
1998++ ----------------------------------------------------
(UNAUDITED) 1997*++ 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 18.43 $ 16.76 $ 14.44 $ 13.49 $ 11.86 $ 8.57
------ -------- -------- -------- -------- --------
Net investment income (loss)...................... (0.04) 0.04 0.02 0.02 0.02 (0.01)
Net realized and unrealized gain.................. 4.29 3.02 3.03 2.00 1.84 3.30
------ -------- -------- -------- -------- --------
Total from investment operations.................. 4.25 3.06 3.05 2.02 1.86 3.29
------ -------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income.......................... (0.16) (0.11) -- -- -- --
Net realized gain.............................. (1.57) (1.28) (0.73) (1.07) (0.23) --
------ -------- -------- -------- -------- --------
Total dividends and distributions................. (1.73) (1.39) (0.73) (1.07) (0.23) --
------ -------- -------- -------- -------- --------
Net asset value, end of period.................... $ 20.95 $ 18.43 $ 16.76 $ 14.44 $ 13.49 $ 11.86
------ -------- -------- -------- -------- --------
------ -------- -------- -------- -------- --------
TOTAL INVESTMENT RETURN+.......................... 25.30%(1) 19.40% 22.27% 16.83% 15.61% 38.74%
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 2.06%(2) 2.06%** 2.13% 2.23% 2.27% 2.38%
Net investment income (loss)...................... (0.45)%(2) 0.22% 0.14% 0.13% 0.21% (0.09)%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions............ $2,105 $1,707 $1,228 $868 $759 $459
Portfolio turnover rate........................... 29%(1) 44% 49% 61% 72% 120%
Average commission rate paid...................... $0.0550 $0.0559 $0.0448 -- -- --
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
** Restated
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JULY 28, 1997*
APRIL 30, THROUGH
1998++ OCTOBER 31,
(UNAUDITED) 1997++
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 18.46 $ 18.64
------ ------
Net investment income (loss)................................ 0.05 (0.02)
Net realized and unrealized gain (loss)..................... 4.28 (0.16)
------ ------
Total from investment operations............................ 4.33 (0.18)
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.22) --
Net realized gain........................................ (1.57) --
------ ------
Total dividends and distributions........................... (1.79) --
------ ------
Net asset value, end of period.............................. $ 21.00 $ 18.46
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... 25.78%(1) (0.97)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.43%(2) 1.48%**(2)
Net investment income (loss)................................ 0.54%(2) (0.33)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $6,716 $1,862
Portfolio turnover rate..................................... 29%(1) 44%
Average commission rate paid................................ $0.0550 $0.0559
</TABLE>
<TABLE>
<S> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 18.43 $ 18.64
------ ------
Net investment loss......................................... (0.02) (0.04)
Net realized and unrealized gain (loss)..................... 4.27 (0.17)
------ ------
Total from investment operations............................ 4.25 (0.21)
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.18) --
Net realized gain........................................ (1.57) --
------ ------
Total dividends and distributions........................... (1.75) --
------ ------
Net asset value, end of period.............................. $ 20.93 $ 18.43
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... 25.27%(1) (1.13)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.18%(2) 2.24%**(2)
Net investment loss......................................... (0.22)%(2) (0.76)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $ 9,296 $ 2,889
Portfolio turnover rate..................................... 29%(1) 44%
Average commission rate paid................................ $0.0550 $0.0559
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
** Restated
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JULY 28, 1997*
APRIL 30, THROUGH
1998++ OCTOBER 31,
(UNAUDITED) 1997++
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 18.47 $ 18.64
------ ------
Net investment income....................................... 0.08 0.02
Net realized and unrealized gain (loss)..................... 4.51 (0.19)
------ ------
Total from investment operations............................ 4.59 (0.17)
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.23) --
Net realized gain........................................ (1.57) --
------ ------
Total dividends and distributions........................... (1.80) --
------ ------
Net asset value, end of period.............................. $ 21.26 $ 18.47
------ ------
------ ------
TOTAL INVESTMENT RETURN+.................................... 27.35%(1) (0.91)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.24%(2) 1.23%**(2)
Net investment income....................................... 0.94%(2) 0.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,868 $45
Portfolio turnover rate..................................... 29%(1) 44%
Average commission rate paid................................ $0.0550 $0.0559
</TABLE>
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
** Restated
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
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-ADVISER
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
[PHOTO]
SEMIANNUAL REPORT
APRIL 30, 1998
