<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
Dear Fellow Shareholder:
At the conclusion of my letter to you dated May 12, 1995 I stated that the
only prediction anyone may make for the financial markets in 1995 is that there
appear to be signs of improvement. Looking back over the last several months,
this has not proven to be the case. Worries about the European growth outlook
have intensified, as Pan-European Real Gross Domestic Product Growth has slowed
to 2.3% in the second quarter of 1995. These concerns, coupled with the Japanese
banking crisis and bickering amongst European governments in creating a single
currency by January 1, 1999, has once again affected worldwide markets with
turbulence.
ECONOMIC REVIEW
The last six months reflected an extremely selective market in Europe.
Switzerland and the Netherlands stock markets profited strongly due to lower
interest rates and stable currencies together with high profit growth of their
leading companies. The United Kingdom market advanced on the back of a strong
U.S. market. On the other hand, the German stock market was virtually flat
despite the supporting interest rate scenario based on a deteriorating economy
which eventually can be expected to lead to sluggish growth and increasing
pessimism. Disappointing again was the performance of the French stock market
having started on high hopes for the new government under the leadership of the
new President Chirac and Prime Minister Juppe. The 'honeymoon' for Chirac and
Juppe was over quickly and never in recent history has a French government
disappointed financial markets as much. Rather than balancing the budget through
spending cuts on the government sector, the Prime Minister substantially
increased taxes which had a further negative effect on an already sluggish
economy. Political scandals of the Prime Minister and the foreign policy of the
President, coupled with an increasing crisis in the Paris real estate market,
led to a sharp sell off of French equities and its currency. The Southern
European markets continued their volatile movements, which were a result of the
current state of political instability. In the near future, both Spain and Italy
will face upcoming elections. With this said, The European Warrant Fund Inc.
(the 'Fund') increased +22.05% or by +16.36% based on market price for the six
months ended September 30, 1995.
Our macroeconomic scenario outlook stays largely unchanged. We look for
sluggish growth to continue in Europe leading to modest and gradual easing by
Germany's Bundesbank and by other European Central banks as much as the currency
strength will allow. Inflationary fear is not expected to be a topic for 1996
and consumer demand should stay at low levels. The upcoming European Monetary
Union ('EMU') will force governments across Europe to increase their efforts on
budget consolidation in order to fulfill the planned Maastricht criteria. The
EMU should keep volatility high in Europe due to uncertainty about the timing
and conditions of its introduction. It is not yet clear which countries will
fulfill all the Maastricht criteria and, therefore, will start the EMU. France
is working very hard to achieve the yearly budget deficit spending target of 3%.
Another open question is, will maintenance criteria be matched after
introduction of EMU and what will the sanction process be if a country does not
comply?
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
It is also not yet decided how the currencies of countries that will not
initially join EMU will be pegged to EMU. We believe that there is a very
limited time frame to solve all the questions prior to the commencement of the
EMU in 1999. As a consequence of the German government and central bank's strict
demand to achieve these criteria, countries will have to follow a very
regimented budget policy lowering deficits which could lead to lower growth and
higher bond prices.
INVESTMENT POLICY
Due to our forecast of sluggish growth outlook in Europe, the Fund is
overweighted in solid growth stocks, financials and utilities and will remain
underweighted in construction and cyclicals. From a country allocation
standpoint, we plan to continue the large weighting in Germany, Switzerland and
the Netherlands, but will look at increasing our exposure in France, Spain and
Italy on any sign of political improvements. On the currency front we do expect
the U.S. Dollar to be forming a base and anticipate it to gradually increase
against European currencies over the next six months leading to an improved
situation for European exporters. Overall we forecast a continuation of the 'low
growth-low inflation' scenario for Europe being an ideal outlook for the
financial markets in 1996.
PORTFOLIO INFORMATION
As of the close of business on November 9, 1995 the Fund was 65.18%
invested in warrants with an average weighted life of derivatives at 387 days.
The percentage of foreign currencies hedged to invested assets was 11.32% and
the net asset value per share was $9.12. For a complete analysis as well as the
Fund's investment weighting by country, please refer to the chart on Page 4.
Shareholders can call Investors Bank and Trust Company, the Fund's Transfer
Agent, at the Fund's toll free number 1-800-EUROWRS for weekly information on
portfolio holdings and geographic diversification.
DIVIDEND REINVESTMENT PROGRAM
We wish to remind shareholders that they automatically participate in the
Fund's Dividend Reinvestment Plan. The Dividend Reinvestment Plan can be of
value to shareholders in maintaining their proportional ownership interest in
the Fund in an easy and convenient way. Any shareholder wishing to discontinue
participating in this Plan, so as to receive future dividends in cash, should
write to the Plan Agent of the Fund, Investors Bank and Trust Company, P.O. Box
1537, Boston, MA 02205-1537. Be sure to include in your correspondence your name
exactly as it appears on your share registration, your Social Security or tax
identification number and a reference to The European Warrant Fund, Inc. The
Fund also offers shareholders a voluntary Cash Purchase Program. For a copy of
the complete terms and conditions of these Plans, please write to the Plan Agent
at the above address. Furthermore, in September 1990, the Fund's Board of
Directors approved a share repurchase program that allows the Fund from time to
time to
2
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
buy up to 10% (800,000) of the Fund's shares outstanding if and when the shares
are trading at a discount to net asset value of at least 15%. To date, the Fund
has not repurchased any of its shares.
In closing, it is our belief that many international markets are at an
earlier stage of development than the current U.S. economy. This means that
growth in the international markets is potentially superior to that of the U.S.
domestic markets and ultimately should lead to higher European equity prices,
which should in turn lead to an increase in the European warrant markets. We
appreciate your patience and continue to believe that the Fund and its
shareholders should benefit in the near future.
Sincerely,
Bernard Spilko
November 9, 1995 President
3
<PAGE>
THE EUROPEAN WARRANT FUND, INC. FACT SHEET
(UNAUDITED)
- - ---------------------------------------- --------------------------------------
COUNTRY WEIGHTINGS SECTOR WEIGHTINGS
September 30, 1995 September 30, 1995
- - ---------------------------------------- --------------------------------------
[PIE CHART] [PIE CHART]
Germany 35% Financials 28%
Switzerland 27% Utilities 13%
France 7% Consumer Goods 12%
Netherlands 7% Index Warrants 12%
Italy 4% Chemicals 8%
Sweden 3% U.S. Cash Equivalents and Net Other
Spain 3% Assets and Liabilities 7%
United Kingdom 3% Capital Goods 7%
U.S. Cash Equivalents and Net Other Mutual Funds 5%
Assets and Liabilities 7% Construction 2%
Miscellaneous 4% Foreign Government 2%
Interest Rate Warrants 2%
Miscellaneous 2%
--------------------------------------
- - ---------------------------------------- TOP TEN EQUITY WARRANT HOLDINGS
MISCELLANEOUS SEPTEMBER 30, 1995+
- - ---------------------------------------- --------------------------------------
Average Life of Derivatives 1 Daimler Cap Put, expires
(9/30/95) 1.1 years 6/28/96 5.28%
Average Gearing (9/30/95)++ 6.0 2 DAX Index Call STK 1700,
Average Premium (9/30/95) 5.06% expires 8/21/97 2.07%
Average Annual Premium (9/30/95) 3.85% 3 DAX Index Call STK 1800,
Year to Date Total Return* expires 8/21/97 1.79%
(1/1/95-9/30/95) 10.32% 4 German Utility Basket,
One Year Total Return* expires 3/5/96 1.44%
(10/1/94-9/30/95) 13.48% 5 Allianz Holdings, expires
Inception to Date Total Return* 2/18/98 1.27%
(7/17/90-9/30/95) 20.75% 6 Telef Ericsson, expires
- - ---------------------------------------- 9/20/96 1.25%
WARRANT CHARACTERISTICS 7 Zurich Insurance, expires
- - ---------------------------------------- 11/16/95 0.96%
The cost of a warrant is substantially 8 Sandoz AG, expires 2/8/96 0.84%
less than the cost of the underlying 9 Daimler Cap Call, expires
securities themselves, and price 6/28/96 0.83%
movements in the underlying securities 10 Allianz Holdings, expires
are generally magnified in the price 3/29/96 0.73%
movements of the warrant. This --------------------------------------
leveraging effect enables an investor Currency Hedge At September 30,
to gain exposure to the underlying 1995 11.36%
instrument with a relatively low capital --------------------------------------
investment. Currently, the underlying
equity exposure of a Fund share is
approximately three times the value of
the share.
- - ----------------------------------------
GLOSSARY OF TERMS
Annual Premium: The premium divided by the number of years until expiration of
the warrant.
Gearing: The value of the number of shares underlying each warrant
compared to the value of the warrant. This serves as an
indicator of the warrant price's sensitivity to a movement in
the underlying stock price.
Premium: The amount by which the sum of a warrant's exercise price and
purchase price exceeds the current stock price (in the case of
put warrants, the premium is the amount by which the sum of the
warrant's exercise price and purchase price is less than the
current share price). This is expressed as a percentage of the
current stock price.
* Total returns are based on Net Asset Value.
+ Percentages are based on Market Value of Portfolio Assets invested.
++ The average gearing is based on the derivative portion of the portfolio.
4
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
PORTFOLIO OF INVESTMENTS
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARE VALUE
AMOUNT (NOTE 1)
- - ---------- -----------
<S> <C>
WARRANTS--62.5%
GERMANY--29.7%
6,000 Allianz Holdings, expires 1/15/96.................... $ 32,266
1,100 Allianz Holdings, expires 3/29/96.................... 1,035,956
39,500 Allianz Holdings, expires 2/18/98.................... 1,944,368
10,000 BASF, expires 6/20/96................................ 52,656
30,000 Bayer Vereinsbank, expires 3/29/96................... 97,050
20,000 Bayer Vereinsbank, expires 9/13/96................... 63,158
1,500 BMW, expires 10/27/95................................ 161,485
275 BMW, Libor 7.5% Floor Certificate, expires
4/28/03............................................ 185,817
30,000 Bund D.A.R.T, expires
2/2/96............................................. 68,901
6,600 Commerzbank, expires 10/2/95......................... 224,136
55,000 Commerzbank, expires 12/14/95........................ 3,465
11,500 Commerzbank, expires 12/10/96........................ 314,043
3,500 Commerzbank, expires 12/15/97........................ 62,494
23,500 Commerzbank, expires 12/10/99........................ 366,943
12,800 Continental AG, expires 7/6/00....................... 452,613
81,000 Daimler Cap Call, expires 6/28/96.................... 1,191,048
67,000 Daimler Cap Put, expires 6/28/96..................... 3,377,798
300,000 DAX Call, expires 7/31/96............................ 768,840
500,000 DAX Call STK 1700, expires 8/21/97................... 2,184,650
550,000 DAX Call STK 1800, expires 8/21/97................... 2,093,080
10,000 DAX Lookback Put, expires 12/29/95................... 65,329
9,500 Deutsche Bank, expires 1/25/96....................... 367,521
20,000 Deutsche Bank, expires 2/23/96....................... 96,978
19,500 Deutsche Bank, expires 8/9/96........................ 15,621
10,000 Deutsche Bank, expires 9/20/96....................... 32,822
26,000 Dresdner Financial, expires 12/10/97................. 324,056
50,000 Floor C Zerti, expires 1/19/98....................... 153,170
95,000 German Utility Basket, expires 3/5/96................ 2,050,233
42,500 Heiderberger, expires 6/13/00........................ 357,106
5,300 Herlitz AG, expires 7/30/99.......................... 549,242
2,500 Hoesch, expires 8/1/96............................... 188,181
4,600 Kaufhof Holdings Finance, expires 12/19/95........... 611,980
1,730 Kaufhof Holdings Finance, expires 9/1/98............. 117,502
700 Kolbenschmidt AG, expires 6/29/99.................... 19,214
10,000 Mannesmann AG, expires 12/18/96...................... 66,695
2,500 Metallgesellschaft, expires 5/31/96.................. 12,079
4,000 Metallgesellschaft, expires 10/1/97.................. 64,419
5,500 Munich Re, expires
3/13/98............................................ 627,735
94,000 REX Bull Call STK 102, expires 12/13/95.............. 266,565
115,000 Siemens, expires 6/20/96............................. 740,819
10,000 Trinkaus & Burkhardt 6 month LIBOR 9.000%, expires
3/31/98............................................ 68,970
5,000 Veba, expires 10/13/95............................... 121,889
2,000 Veba, expires 4/22/96................................ 113,433
10,000 Veba, expires 10/4/96................................ 290,725
3,000 Volkswagen AG, expires 10/27/98...................... 262,577
-----------
22,265,628
-----------
SWITZERLAND--17.6%
2,000 Alusuisse, expires 10/05/95.......................... 137,680
4,500 Arbonia Forster, expires 1/14/97..................... 358,535
20,000 BBC, expires 11/22/95................................ 337,750
30,000 BBC, expires 7/5/96.................................. 357,237
45,000 Clariant AG, expires
12/20/96........................................... 418,941
20,000 Clariant AG, expires
3/29/96............................................ 50,230
5,000 Clariant AG, expires
7/19/96............................................ 70,581
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
PORTFOLIO OF INVESTMENTS--(Continued)
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARE VALUE
AMOUNT (NOTE 1)
- - ---------- -----------
<S> <C>
WARRANTS--(CONTINUED)
SWITZERLAND--(CONTINUED)
13,000 Clariant AG, expires
9/5/96............................................. $ 271,045
5,000 Cyclical Basket, expires 8/9/96...................... 313,935
1,000 Elektrowatt, expires
4/28/97............................................ 28,146
12,500 Elektrowatt, expires
7/15/96............................................ 920,153
4,600 EMS Chemie, expires 3/15/96.......................... 324,673
9,300 Finance Basket, expires 8/2/96....................... 167,121
1,250 Hilti, expires 8/30/96............................... 404,867
20,000 Holderbank, expires 6/3/96........................... 47,632
10,000 Industrie Basket, expires 1/27/97.................... 324,760
7,000 Intershop, expires
10/8/96............................................ 806,270
10,000 Keramik, expires 4/30/97............................. 86,603
40,000 Nestle SA, expires 1/19/96........................... 675,500
11,000 Nestle SA, expires 6/14/96........................... 161,946
2,500 Roche Bearer, expires 12/19/96....................... 129,904
2,000 Roche Holdings, expires 1/17/96...................... 643,284
1,000 Roche Holdings, expires 7/17/96...................... 197,454
30,000 Sandoz AG, expires 2/8/96............................ 1,227,591
1,600 Sandoz AG, expires
2/16/96............................................ 170,434
15,000 Sandoz AG, expires 8/2/96............................ 542,349
5,000 SBV, expires 11/29/96................................ 214,342
9,500 SIG, expires 2/11/97-- Class A....................... 222,136
4,100 SIG, expires 2/11/97-- Class B....................... 102,970
5,000 SMI Call, expires 10/19/95........................... 252,230
10,000 SMI Put, expires 10/19/95............................ 866
6,000 Sulzer AG, expires 7/12/96........................... 45,466
5,000 Sulzer AG, expires 3/14/97........................... 40,054
2,500 Von Roll AG, expires 12/21/95........................ 17,862
10,000 Vontobel Holding, expires 11/4/96.................... 25,981
15,000 Winterthur Insurance, expires 9/20/96................ 344,246
11,000 Winterthur Insurance, expires 11/15/95............... 771,629
24,000 Winterthur Insurance, expires 12/20/96............... 176,669
20,000 Winterthur Insurance, expires 2/28/97................ 146,792
8,000 Zurich Insurance, expires 11/16/95................... 1,247,077
9,500 Zurich Insurance, expires 4/30/96.................... 355,828
1,100 Zurich Insurance, expires 5/26/96.................... 26,674
-----------
13,165,443
-----------
SWEDEN--3.1%
96,000 ASTRA Class A, expires 9/20/96....................... 923,597
30,000 Telef Ericsson Class B, expires 9/20/96.............. 1,373,595
-----------
2,297,192
-----------
ITALY--2.9%
1,000,000 Banca Commerciale, expires 12/31/95.................. 382,900
4,000 BCI, expires 1/19/97................................. 57,378
150,000 BTP 9.5%, expires
1/16/96............................................ 251,070
320,000 Creditano Italiano, expires 12/31/97................. 97,088
355,000 Fiat SPA, expires 8/16/96............................ 137,953
100,000 Italgas, expires 1/1/96.............................. 111,530
225,000 MIB 30, expires 12/27/96............................. 306,428
200,000 SIP, expires 1/14/96................................. 190,781
250,000 SIP, expires 3/30/98................................. 571,775
5,000 STET, expires 9/30/96................................ 87,477
-----------
2,194,380
-----------
SPAIN--2.4%
30,000 Argentaria, expires
10/25/96........................................... 205,074
10,000 Endesa, expires 10/11/96............................. 61,055
40,000 Endesa, expires 8/30/96.............................. 491,080
25,000 Espania Bond, expires 5/3/96......................... 137,240
64,000 Ibex Call, expires 1/3/97............................ 300,685
80,000 Ibex Call, expires 8/2/96............................ 271,456
20,000 Repsol, expires 2/1/96............................... 44,406
130,000 Telefonica, expires
10/11/96........................................... 309,608
-----------
1,820,604
-----------
</TABLE>
See accompanying notes to the financial statements.
6
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
PORTFOLIO OF INVESTMENTS--(Continued)
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARE VALUE
AMOUNT (NOTE 1)
- - ---------- -----------
<S> <C>
WARRANTS--(CONTINUED)
NETHERLANDS--2.1%
10,000 AEX Put, expires 12/11/95............................ $ 63
140,000 International Nederlanden Groep, expires 3/1/96...... 515,284
67,500 Royal Dutch, expires 11/12/96........................ 745,322
31,000 Wolters Kluwer, expires 12/20/96..................... 334,490
-----------
1,595,159
-----------
UNITED KINGDOM--1.7%
100,000 Anglian Water, expires 8/24/98....................... 158,100
200,000 BTR, expires 10/15/95................................ 218,180
450,000 BTR, expires 10/31/97................................ 490,905
20,000 FTSE 100, expires
11/24/95........................................... 208,032
209,059 Hanson STK 300 Call (Societe Generale), expires
9/30/97............................................ 23,958
313,500 Hanson STK 300 Call, expires 9/30/97................. 23,031
100,000 Pilkington, expires 5/4/98........................... 133,590
-----------
1,255,796
-----------
AUSTRIA--0.8%
20,000 ATX Call 1000, expires 11/17/95...................... 28,862
10,000 ATX Call 1000, expires 12/7/95....................... 19,536
20,000 ATX Call 1000, expires 2/16/96....................... 63,136
10,000 ATX Call 900, expires 2/16/96........................ 93,701
20,000 Bank Austria, expires 10/10/95....................... 1,006
39,600 Bank Austria, expires 2/28/97........................ 240,063
2,500 EVN, expires 6/20/01................................. 92,063
10,000 Leykam Murztaler Paper Zell, expires 7/7/96.......... 30,356
15,000 Wienerberger, expires 12/14/95....................... 3,732
-----------
572,455
-----------
FRANCE--0.7%
5,000 AXA, expires 10/09/95................................ 712
25,000 BNP, expires 11/8/95................................. 558
25,000 CAC Call, expires 11/29/95........................... 10,503
300,866 Michelin, expires 12/31/95........................... 128,921
20,000 OAT Bund, expires
2/16/96............................................ 89,346
10,000 Sanofi, expires 7/19/96.............................. 70,973
28,500 Schneider, expires
12/31/95........................................... 219,935
32,400 Suez, expires 10/20/95............................... 3,292
-----------
524,240
-----------
UNITED STATES--0.7%
22,500 S&P 500 Lookback Put, expires 2/22/96................ 78,773
100,000 S&P 500 Lookback Put, expires 11/14/96............... 425,472
-----------
504,245
-----------
DENMARK--0.1%
55,000 KFX Call, expires 1/17/96............................ 90,503
-----------
CURRENCY OPTIONS--0.7%
10,000,000 United States Dollar Call/French Franc Put STK 5.135,
expires 12/15/95................................... 59,500
5,000,000 United States Dollar Call/Japanese Yen Put STK 90,
expires 3/27/96.................................... 446,000
5,000,000 United States Dollar Call/Japanese Yen Put STK 105,
expires 11/28/95................................... 43,000
-----------
548,500
-----------
OTHER--0.0%
11,700 Eastern Europe Exposure Basket, expires 2/26/96...... 5,382
-----------
TOTAL WARRANTS
(Cost $47,475,218)................................. 46,839,527
-----------
EQUITIES--18.1%
SWITZERLAND--9.9%
1,350 APG.................................................. 586,906
9,350 Elektrowatt.......................................... 2,874,557
300 Merck Holdings--Preferred Stock...................... 290,465
100 Motor--Columbus...................................... 164,545
12,000 Swiss Bank Corp...................................... 2,296,700
250 Swiss Re............................................. 244,652
235 Vaudoise Assurances
Holding............................................ 488,439
250 Winterthur Insurance................................. 163,246
</TABLE>
See accompanying notes to the financial statements.
7
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
PORTFOLIO OF INVESTMENTS--(Continued)
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
SHARE VALUE
AMOUNT (NOTE 1)
- - ---------- -----------
<S> <C>
EQUITIES--(CONTINUED)
SWITZERLAND--(CONTINUED)
1,000 Zurich Insurance..................................... $ 280,592
-----------
7,390,102
-----------
FRANCE--5.0%
17,000 AGF.................................................. 464,783
10,000 Alcatel Alsthom*..................................... 841,752
1,500 Alcatel Cable........................................ 82,935
36,000 BNP.................................................. 1,412,338
2,500 Bouygues............................................. 287,631
5,000 GAN.................................................. 134,668
5,000 Havas SA............................................. 374,429
2,500 Lafarge Coppee French................................ 164,549
-----------
3,763,085
-----------
GERMANY--1.3%
2,000 Bankgesellschaft Berlin AG........................... 552,463
833 Koelnische Rueckvers AG--Preferred Stock............. 393,709
-----------
946,172
-----------
ITALY--1.0%
250,000 Telecom Italia Mobile*............................... 415,825
250,000 Telecom Italia
SPA--Ordinary...................................... 409,475
-----------
825,300
-----------
NETHERLANDS--0.7%
40,000 Elsevier............................................. 512,916
-----------
SPAIN--0.2%
20,000 Iberdrola I S.A*..................................... 151,206
-----------
TOTAL EQUITIES (Cost $12,072,628).................... 13,588,781
-----------
MUTUAL FUNDS--4.5%
GERMANY--2.1%
40,000 Emerging Germany Fund................................ 290,000
102,000 The New Germany Fund................................. 1,275,000
-----------
1,565,000
-----------
UNITED KINGDOM--0.9%
55,000 United Kingdom Fund.................................. 680,625
-----------
SPAIN--0.5%
35,000 Growth Fund of Spain................................. 371,875
-----------
UNITED STATES--0.3%
20,000 Scudder New Europe Fund.............................. 215,000
-----------
FRANCE--0.3%
20,000 France Growth Fund................................... 195,000
-----------
AUSTRIA--0.2%
20,000 Austria Fund......................................... 160,000
-----------
HUNGARY--0.1%
1,500 Hungarian Fund....................................... 87,750
-----------
CZECHOSLOVAKIA--0.1%
5,041 The Czech Republic Fund.............................. 64,903
-----------
TOTAL MUTUAL FUNDS (Cost $3,363,264)................. 3,340,153
-----------
FOREIGN CORPORATE BONDS--2.7%
BRAZIL--0.3%
250,000 Minas Gerais 8.25%, due 2/10/00 (USD)................ 189,753
-----------
GERMANY--1.5%
1,500,000 Landesbank Schleswig, 8.5% due 7/11/01 (DEM)......... 1,150,614
-----------
PORTUGAL--0.9%
500,000 BCP Bank & Trust 8.75%, due 5/21/02 (ECU)............ 665,232
-----------
TOTAL FOREIGN CORPORATE BONDS (Cost $1,945,260)...... 2,005,599
-----------
FOREIGN GOVERNMENT BONDS--1.9%
FRANCE--1.4%
5,000,000 BTAN French T-Bill 9.000%, due 11/12/95 (FRF)........ 1,019,159
-----------
GERMANY--0.5%
500,000 Federal Republic of Germany, 8.875% due 12/20/00
(DEM).............................................. 394,497
-----------
TOTAL FOREIGN GOVERNMENT BONDS (Cost $1,525,969)..... 1,413,656
-----------
</TABLE>
See accompanying notes to the financial statements.
8
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
PORTFOLIO OF INVESTMENTS--(Continued)
September 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
STRIKE VALUE
CONTRACTS PRICE (NOTE 1)
- - -------- ------ ----------
<S> <C> <C>
CALL OPTIONS PURCHASED--3.7%
NETHERLANDS
800 ABN Amro, expires 1/19/96*.................... $ 53 $ 700,569
15,000 ABN Amro, expires 5/14/96*.................... 59 703,697
200 Akzo, expires 10/18/96*....................... 120 900,732
180 Unilever, expires 10/17/97*................... 160 365,922
20 Unilever, expires 10/18/96*................... 185 62,426
----------
TOTAL CALL OPTIONS PURCHASED (Cost $1,791,837)........ $2,733,346
----------
<CAPTION>
FACE
AMOUNT
- - ---------
<S> <C>
SHORT-TERM INVESTMENT--2.0%
UNITED STATES
$1,500,000 US Treasury Bill, 5.11%, due 10/12/95............. $ 1,497,658
-----------
TOTAL SHORT-TERM INVESTMENT (at Amortized Cost)... $ 1,497,658
-----------
TOTAL INVESTMENTS--95.4%
TOTAL INVESTMENTS (Cost $69,671,834+)........................ 71,418,720
Excess of Other Assets over Liabilities...................... 3,475,642
-----------
NET ASSETS--100.0%
$74,894,362
-----------
-----------
</TABLE>
- - ------------------
* Non-income producing security. In addition, all warrants are non-income
producing.
+ Aggregate cost for Federal income tax purposes (Note 3).
See accompanying notes to the financial statements.
9
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS AND FINANCIAL
FUTURES CONTRACTS
September 30, 1995 (Unaudited)
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
<TABLE>
<CAPTION>
CONTRACTS TO RECEIVE NET UNREALIZED
------------------------------- IN APPRECIATION
CONTRACT LOCAL VALUE IN EXCHANGE (DEPRECIATION)
EXERCISE DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- - ------------- ------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
10/11/95 ITL 5,921,250,000 3,665,183 3,669,726 $ (4,543)
10/11/95 DEM 5,000,000 3,503,231 3,578,970 (75,739)
10/20/95 CHF 11,768,500 10,212,874 10,000,000 212,874
--------------
$ 132,592
--------------
</TABLE>
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
<TABLE>
<CAPTION>
CONTRACTS TO DELIVER NET UNREALIZED
------------------------------- IN APPRECIATION
CONTRACT LOCAL VALUE IN EXCHANGE (DEPRECIATION)
EXERCISE DATE CURRENCY U.S. $ FOR U.S. $ OF CONTRACTS
- - ------------- ------------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
10/11/95 ITL 5,921,250,000 3,665,183 3,611,845 $ (53,338)
10/11/95 DEM 5,000,000 3,503,231 3,669,726 166,495
--------------
$ 113,157
--------------
NET UNREALIZED APPRECIATION OF FORWARD FOREIGN EXCHANGE
CONTRACTS............................................... $ 245,749
--------------
--------------
</TABLE>
SCHEDULE OF OPEN FINANCIAL FUTURES CONTRACTS
<TABLE>
<CAPTION>
NET UNREALIZED
NUMBER OF EXPIRATION CONTRACT DEPRECIATION
CONTRACTS CONTRACTS DATE VALUE OF CONTRACTS
- - --------- ----------------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Buys:
20 Italian 10-Year
Bond Index Future 12/04/95 2,508,581 $ (22,798)
45 Spanish 10-Year
Bond Index Future 12/20/95 3,133,035 (50,992)
--------------
NET UNREALIZED DEPRECIATION OF OPEN FUTURE
CONTRACTS......................................... $ (73,790)
--------------
--------------
</TABLE>
GLOSSARY OF TERMS
CHF -- Swiss Franc
DEM -- German Deutsche Mark
ECU -- European Currency Unit
FRF -- French Franc
ITL -- Italian Lira
USD -- United States Dollar
See accompanying notes to the financial statements.
10
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Cost $69,671,834)
(Note 1)................................... $71,418,720
Cash and foreign currency, at value (Cost
$2,419,469) (Note 1)....................... 2,174,035
Receivable for investments sold.............. 3,298,479
Dividends and interest receivable............ 272,908
Net unrealized appreciation of forward
foreign exchange contracts (Note 1)........ 245,749
Prepaid expenses............................. 41,248
------------
Total assets.......................... 77,451,139
LIABILITIES:
Written options at value (Premium received,
$439,675).................................. $1,073,100
Payable for investments purchased............ 926,482
Payable for variation margin on open
financial futures contracts (Note 1)....... 163,876
Investment advisory fee payable (Note 2)..... 191,349
Accrued expenses and other payables.......... 201,970
----------
Total liabilities..................... 2,556,777
------------
TOTAL NET ASSETS.................................. $74,894,362
------------
------------
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments................................ $(9,902,058)
Net unrealized appreciation on investments... 1,074,859
Undistributed net investment loss............ (2,133,867)
Par value.................................... 8,154
Paid-in capital in excess of par value....... 85,847,274
------------
TOTAL NET ASSETS (equivalent to $9.19 per share
based on 8,153,712 shares of common stock
outstanding)............................... $74,894,362
------------
------------
</TABLE>
See accompanying notes to the financial statements.
11
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended September 30, 1995 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest..................................... $ 198,486
Dividends (net of foreign withholding taxes
of $79,347)................................. 445,767
-----------
Total Investment Income................. 644,253
EXPENSES:
Investment advisory fee (Note 2)............. 454,902
Administration and custodian fees............ 160,317
Transfer agent fees.......................... 63,140
Legal and audit fees......................... 29,227
Directors' fees and expenses (Note 2)........ 18,055
Amortization of organizational costs......... 15,474
Other........................................ 56,800
--------
Total Expenses.......................... 797,915
Less: Fees waived by investment
adviser (Note 2)............ (90,940)
Fees paid indirectly (Note 2) (16,563)
--------
Net expenses................................. 690,412
-----------
NET INVESTMENT LOSS............................... (46,159)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
(Notes 1 and 3):
Net realized gain (loss) on:
Securities transactions................. (82,403)
Written option transactions............. 43,514
Futures contracts....................... (42,276)
Forward foreign exchange contracts...... 347,859
Foreign currencies and net other
assets................................ (128,750)
-----------
Net realized gain on investments during the
period...................................... 137,944
-----------
Net change in net unrealized appreciation
(depreciation) of:
Securities.............................. 13,977,220
Written options......................... (633,425)
Futures contracts....................... (73,790)
Forward foreign exchange contracts...... 475,328
Currency and net other assets........... (373,066)
-----------
Net unrealized appreciation of investments
during the period........................... 13,372,267
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS... 13,510,211
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $13,464,052
-----------
-----------
</TABLE>
See accompanying notes to the financial statements.
12
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
------------------ --------------
(UNAUDITED)
<S> <C> <C>
Net investment loss..................... $ (46,159) $ (96,996)
Net realized gain (loss) on investments
during the period..................... 137,944 (13,796,037)
Net unrealized appreciation
(depreciation) of investments during
the period............................ 13,372,267 (17,546,011)
------------------ --------------
Net increase (decrease) in net assets
resulting from operations............. 13,464,052 (31,439,044)
Distributions to shareholders from:
Net realized gains on investments..... -- (15,367,452)
Net increase in net assets resulting
from Fund share transactions
(Note 4).............................. -- 548,306
------------------ --------------
Net increase (decrease) in net assets... 13,464,052 (46,258,190)
NET ASSETS:
Beginning of period..................... 61,430,310 107,688,500
------------------ --------------
End of period (including accumulated net
investment loss of $2,133,867 and
$2,087,708, respectively)............. $ 74,894,362 $ 61,430,310
------------------ --------------
------------------ --------------
</TABLE>
See accompanying notes to the financial statements.
13
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
FINANCIAL HIGHLIGHTS
For a Fund share outstanding throughout each period
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
1995 MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
(UNAUDITED) 1995 1994 1993 1992 1991*
------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period.............................. $ 7.53 $ 13.34 $ 8.95 $ 7.57 $ 9.88 $ 11.16
------------- ---------- ---------- ---------- ---------- ------------
Net investment income/(loss)++........ (0.01) (0.01) (0.12) (0.02) (0.07) 0.09
Net realized and unrealized gain
(loss) on investments............... 1.67 (3.90) 5.10 1.56 (1.80) (1.37)
------------- ---------- ---------- ---------- ---------- ------------
Net increase/(decrease) in net
assets resulting from investment
operations.......................... 1.66 (3.91) 4.98 1.54 (1.87) (1.28)
Capital effect of rights offering..... -- -- (0.50) -- -- --
Distributions:
Dividends from net investment
income.............................. -- -- -- -- (0.02) --
Distributions from net realized
gains............................... -- (1.90) (0.09) -- -- --
Distributions from capital (Note 1)... -- -- -- (0.16) (0.42) --
------------- ---------- ---------- ---------- ---------- ------------
Total distributions:.................. -- (1.90) (0.09) (0.16) (0.44) --
------------- ---------- ---------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD.......... $ 9.19 $ 7.53 $ 13.34 $ 8.95 $ 7.57 $ 9.88
------------- ---------- ---------- ---------- ---------- ------------
------------- ---------- ---------- ---------- ---------- ------------
MARKET VALUE, END OF PERIOD............. $ 8.000 $ 6.875 $ 11.875 $ 8.250 $ 6.375 $ 7.625
------------- ---------- ---------- ---------- ---------- ------------
------------- ---------- ---------- ---------- ---------- ------------
Total investment return............... 16.36% (26.37)% 44.89% 32.13% (9.78)% (36.46)%
------------- ---------- ---------- ---------- ---------- ------------
------------- ---------- ---------- ---------- ---------- ------------
Ratios to average net
assets/supplemental data:
Net assets, end of period (000's)..... $74,894 $ 61,430 $ 107,689 $ 54,178 $ 45,741 $ 59,377
Ratio of net investment
income/(loss) to average net
assets.............................. (0.13)%+ (0.11)% (0.93)% (0.21)% (0.79)% 1.35%
Ratio of operating expenses to average
net assets**........................ 1.89%+ 1.74% 1.73% 2.13% 2.44% 2.36%
Portfolio turnover rate............... 70% 104% 150% 164% 100% 248%
</TABLE>
- - ------------------
* The Fund commenced operations on July 17, 1990.
** Ratio of operating expenses before waiver of fees by investment advisor for
the period ended September 30, 1995 and the years ended March 31, 1995, March
31, 1994 and March 31, 1993 were 2.19%, 1.99%, 1.90% and 2.26%, respectively.
+ Annualized.
++ Net investment loss per share before waiver of fees by investment advisor for
the period ended September 30, 1995 and the years ended March 31, 1995, March
31, 1994 and March 31, 1993 were $(0.02), $(0.04), $(0.14) and $(0.03),
respectively.
See accompanying notes to the financial statements.
14
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
The European Warrant Fund, Inc. (the 'Fund') was incorporated under the
laws of the State of Maryland on May 23, 1990 and is a diversified, closed-end
management investment company registered under the Investment Company Act of
1940, as amended. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
Portfolio valuation: All non-German securities for which market
quotations are readily available are valued at the last sales price prior
to the time of determination, or, if no sales price is available at that
time, at the mean between the bid and asked quotations. If bid and ask
quotations are not available, the security is priced at the bid quotation.
If this is unavailable, the security is priced at the last available quoted
price. German securities which trade on the German exchange are valued at
the last sale price prior to the time of determination. If this quotation
is not available, the securities are valued at the Kassa closing price of
the exchange. Securities that are traded over-the-counter are valued, if
bid and asked quotations are available, at the mean between the current bid
and asked prices. If bid and asked quotations are not available, then
over-the-counter securities will be valued as determined in good faith by
the Fund's Board of Directors. In making this determination, the Board will
consider, among other things, publicly available information regarding the
issuer, market conditions and values ascribed to comparable companies. In
instances where the price determined above is deemed not to represent fair
market value, the price is determined in such manner as the Board may
prescribe. Investments in short-term debt securities having a maturity of
60 days or less are valued at amortized cost or by amortizing their value
on the 61st day prior to maturity if their term to maturity from the date
of purchase was more than 60 days, unless this is determined by the Fund's
Board of Directors not to represent fair value. All other securities and
assets are taken at fair value as determined in good faith by the Fund's
Board of Directors, although the actual calculation may be done by others.
Warrants: Under normal market conditions the Fund invests primarily
in European warrants. The Fund's holdings of European warrants may consist
of equity warrants, index warrants, covered warrants, interest rate
warrants, currency options and long-term options of, or relating to,
European issuers. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying securities themselves,
and price movements in the underlying securities are generally magnified in
the price movements of the warrant. Warrants generally pay no dividends and
confer no voting or other rights other than to purchase the underlying
security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will
generally expire without value.
Foreign Currency: The books and records of the Fund are maintained in
United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange
rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated on the respective
dates of such transactions. Unrealized gains or losses which result from
changes in foreign currencies have been included in the unrealized
appeciation/(depreciation) of investments. Net realized currency gains and
losses include foreign
15
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--(Continued)
currency gains and losses between trade date and settlement date on
investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the
books of the Fund and the amount actually received. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between
the initial purchase trade date and subsequent sale trade date is included
in realized gains and losses on security transactions.
Options: Purchase of put and call options are recorded as an
investment, the value of which is marked-to-market daily. When a purchased
option expires, the Fund will realize a loss equal to the premium paid.
When the Fund enters into a closing sale transaction, the Fund will realize
a gain or loss depending on whether the sales proceeds from the closing
sale transaction are greater or less than the cost of the option. When the
Fund exercises a put option, it will realize a gain or loss from the sale
of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Fund exercises a call
option, the cost of the security which the Fund purchases upon exercise
will be increased by the premium originally paid.
When the Fund writes a call option or a put option, an amount equal to
the premium received by the Fund is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Fund
realizes a gain equal to the amount of the premium received. When the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or
loss if the cost of the closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain or
loss on the underlying security, and the liability related to such option
is eliminated. When a call option is exercised, the Fund realizes a gain or
loss from the sale of the underlying security and the proceeds from such
sale are increased by the premium originally received. When a put option is
exercised, the amount of the premium originally received will reduce the
cost of the security which the Fund purchased upon exercise.
Unlike options on specific securities, all settlements of options on
stock indices are in cash and gains or losses depend on general movements
in the stocks included in the index rather than price movements in a
particular stock. There is no physical delivery of securities.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Fund may
forego the opportunity for profit if the market price of the underlying
security increases and the option is exercised. The risk in writing a put
option is that the Fund may incur a loss if the market price of the
underlying security decreases and the option is exercised. There is also
the risk the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. In addition, the Fund could be
exposed to risks if the counterparties to the transaction are unable to
meet the terms of the contracts.
Over-the-counter options: The Fund may invest in options on
securities which are traded in the over-the-counter market. The applicable
accounting principles used are the same as those for options discussed
above.
Forward foreign currency contracts: Forward foreign currency
contracts are valued at the forward rate and are marked-to-market daily.
The change in market value is recorded by the Fund as an
16
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--(Continued)
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities,
but it does establish a rate of exchange that can be achieved in the
future. Although forward foreign currency contracts limit the risk of loss
due to a decline in the value of the currency holdings, they also limit any
potential gain that might result should the value of the currency increase.
In addition, the Fund could be exposed to risks if the counterparties to
the contracts are unable to meet the terms of the contracts.
Futures contracts: Upon entering into a futures contract, the Fund is
required to deposit with the broker an amount of cash or cash equivalents
equal to a certain percentage of the contract amount. This is known as the
'initial margin'. Subsequent payments ('variation margin') are made or
received by the Fund each day, depending on the daily fluctuation of the
value of the contract.
For long futures positions, the asset is marked-to-market daily. For
short futures positions, the liability is marked-to-market daily. The daily
changes in the contract are recorded as unrealized gains or losses. The
Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments, which
may not correlate with the change in value of the hedged investments. In
addition, there is the risk the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market.
Securities transactions and investment income: Securities
transactions are recorded as of the trade date. Realized gains and losses
from securities sold are recorded on the identified cost basis. Dividend
income and distributions to shareholders are recorded on the ex-dividend
date except that certain dividends from foreign securities are recorded as
soon as the Fund is informed of the ex-dividend date. Interest income is
recorded on the accrual basis.
Organization Costs: Costs incurred by the Fund, in connection with
its organization, were amortized on a straight-line basis over 60 months
starting at the commencement of the Fund's operations.
Dividends and distributions to shareholders: The Fund intends to
distribute annually to its shareholders substantially all of its investment
company taxable income. The Fund will determine annually whether to
distribute any net realized long-term capital gains in excess of net
realized short-term capital losses; however, it currently expects to
distribute any excess annually to its shareholders. Additional
distributions of net investment income and capital gains may be made at the
discretion of the Fund's Board of Directors to avoid the application of a
4% nondeductible excise tax on certain undistributed amounts of ordinary
income and capital gains. Income distributions and capital gain
distributions on a Fund level are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing
17
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--(Continued)
treatments of income and gains on various investment securities held by the
Fund, foreign currency transactions, other timing differences and differing
characterization of distributions made by the Fund as a whole. Permanent
differences incurred during the year ended March 31, 1995 resulting from a
tax basis net operating loss were classified to accumulated realized gains
at year end.
Federal income taxes: The Fund intends to continue to qualify as a
regulated investment company for Federal income tax purposes. It is
expected that certain capital gains earned by the Fund and certain
dividends and interest received by the Fund will be subject to foreign
withholding taxes.
2. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS
Julius Baer Securities Inc. (the 'Adviser') serves as the Fund's investment
adviser pursuant to an advisory agreement with the Fund. The Fund pays the
Adviser a fee for its advisory services at an annual rate of 1.25% of the value
of the Fund's average weekly net assets. For the period ended September 30,
1995, the Adviser waived fees in the amount of $90,940, representing an annual
rate of .25% of the value of the Fund's average weekly net assets.
For the period ended September 30, 1995, the Fund incurred total brokerage
commissions of $185,025 of which $62,865 in total was paid to Bank Julius Baer,
Frankfurt and Bank Julius Baer, Zurich (affiliates of the Adviser).
No director, officer or employee of the Adviser or any affiliates of those
entities will receive any compensation from the Fund for serving as an officer
or director of the Fund. The Fund pays each of its directors who is not a
director, officer or employee of the Adviser or any affiliate thereof an annual
fee of $7,500 plus $250 for each Board of Directors meeting attended. In
addition, The Fund reimburses these directors for travel and out-of-pocket
expenses incurred in connection with Board of Directors meetings.
The Fund has entered into an expense offset arrangement as part of its
custody agreement with Investors Bank & Trust. Under this arrangement, the
Fund's custody fees are reduced when the Fund maintains cash on deposit at the
custodian. For the period ended September 30, 1995, the Fund incurred net
custody fees in the amount of $143,754 after receiving a credit of $16,563
pursuant to the expense offset arrangement, resulting in a total expense of
$160,317.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the period ended September 30, 1995 amounted to
$46,334,996 and $46,961,930, respectively.
Activity in written options for the period ended September 30, 1995 was as
follows:
<TABLE>
<CAPTION>
PREMIUM FACE VALUE
--------- ------------
<S> <C> <C>
Options beginning of year..................... $ -- $ --
Options written............................... 528,675 60,000,000
Options expired during period................. (59,500) (10,000,000)
Options closed during period.................. (29,500) (5,000,000)
--------- ------------
Options outstanding at September 30, 1995..... $ 439,675 $ 45,000,000
--------- ------------
--------- ------------
</TABLE>
18
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--(Continued)
At September 30, 1995, aggregated gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an excess of
tax cost over value amount to $12,534,014 and $10,787,128, respectively.
4. COMMON STOCK
At September 30, 1995, 100,000,000 shares of $0.001 par value Common Stock
were authorized. For the six months ended September 30, 1995, there were no Fund
share transactions. For the year ended March 31, 1995, there were 78,330 shares
issued as reinvestment of dividends totaling $548,306.
5. EUROPEAN WARRANTS
The Fund's investments in European warrants involve certain considerations
not typically associated with investment in securities of U.S. companies or the
United States Government, including risks relating to (1) price volatility in
and relative illiquidity of European warrant markets; (2) currency exchange
matters; (3) restrictions on foreign investment; (4) the absence of uniform
accounting, auditing and financial reporting standards, practices and disclosure
requirements and less government supervision and regulation; and (5) certain
economic and political conditions.
6. CAPITAL LOSS CARRYFORWARD
At March 31, 1995, the Fund had available for Federal income tax purposes
an unused capital loss carryover of $5,509,845 expiring in the year 2003.
Under current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
In the fiscal year ended March 31, 1995, the Fund deferred capital losses of
$4,338,184 and currency losses of $2,320,046 into the current fiscal year.
7. SUBSEQUENT EVENT
On September 27, 1995, the Directors announced that the Adviser will
discontinue waiving a portion of the advisory fees paid by the Fund in order to
offset increased costs relating to technological improvement in the Adviser's
investment management systems. Effective October 1, 1995, the Adviser will
retain the full amount of the advisory fees paid under its contract with the
Fund at an annual rate of 1.25% of average weekly net assets. The Adviser had
been waiving .25% of the fees.
19
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)--(Continued)
- - --------------------------------------------------------------------------------
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
NET
NET REALIZED AND INCREASE/(DECREASE)
NET INVESTMENT UNREALIZED GAIN/(LOSS) IN NET ASSETS FROM
INVESTMENT INCOME INCOME (LOSS) ON INVESTMENTS OPERATIONS
------------------- -------------------- ----------------------- -----------------------
QUARTER ENDED TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE TOTAL PER SHARE
- - ----------------------- -------- --------- --------- --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1993.......... $167,150 $0.03 $ (83,708) $ (.02) $ 8,525,383 $ 1.41 $ 8,441,675 $ 1.39
September 30, 1993..... 183,182 0.02 (151,224) (.02) 14,144,853 2.33 13,993,629 2.31
December 31, 1993...... 181,170 0.02 (288,251) (.04) 31,273,455 3.87 30,985,204 3.83
March 31, 1994......... 183,480 0.02 (308,718) (.04) (20,331,208) (2.51) (20,639,926) (2.55)
June 30, 1994.......... 314,903 0.04 (118,849) (.02) (18,524,870) (2.29) (18,643,719) (2.31)
September 30, 1994..... 384,980 0.05 (5,985) (.00) (5,866,405) (.73) (5,872,390) (.73)
December 31, 1994...... 340,776 0.04 (42,311) (.01) (513,049) (.06) (555,360) (.07)
March 31, 1995......... 346,477 0.04 70,149 0.02 (6,437,724) (.82) (6,367,575) (.80)
June 30, 1995.......... 412,950 0.05 107,316 0.01 9,890,418 1.22 9,997,734 1.23
September 30, 1995..... 231,303 0.03 (153,475) (0.02) 3,619,793 0.45 3,466,318 0.43
</TABLE>
20
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
ADDITIONAL INFORMATION
PORTFOLIO MANAGEMENT
In managing the day-to-day operations of the Fund, including the making of
all investment decisions, the Adviser employs Hansruedi Huber as its Portfolio
Manager. Mr. Huber has been employed as a Vice President with the Adviser since
July 1992 and is currently First Vice President at Bank Julius Baer & Co., Ltd.
and Senior Vice President of Julius Baer Asset Management Ltd., both affiliates
of the Adviser.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Under the Fund's Dividend Reinvestment and Cash Purchase Plan (the 'Plan'),
a shareholder whose Common Stock is registered in his own name will have all
distributions reinvested automatically by Investors Bank & Trust ('IBT') as
agent under the Plan, unless the shareholder elects to receive cash.
Distributions with respect to shares registered in the name of a broker-dealer
or other nominee (that is, in 'street name') may be reinvested by the broker or
nominee in additional shares under the Plan, but only if the service is provided
by the broker or nominee, unless the shareholder elects to receive distributions
in cash. A shareholder who holds Common Stock registered in the name of a broker
or other nominee may not be able to transfer the Common Stock to another broker
or nominee of a broker or other nominee and continue to participate in the Plan.
Investors who own Common Stock registered in street name should consult their
broker or nominee for details regarding reinvestment.
The number of shares of Common Stock distributed to participants in the
Plan in lieu of a cash dividend is determined in the following manner. If the
market price per share on the valuation date equals or exceeds net asset value
per share on that date, the Fund will issue new shares to participants valued at
net asset value or, if the net asset value is less than 95% of the market price
on the valuation date, then valued at 95% of the market price. If net asset
value per share on the valuation date exceeds the market price per share on that
date, participants in the Plan will receive shares of stock from the Fund valued
at market price. The valuation date is the dividend or distribution payment date
or, if that date is not a New York Stock Exchange trading day, the next
proceeding trading day. To the extent the Fund issues shares of Common Stock to
participants in the Plan at a discount to net asset value, the remaining
shareholders' interests in the Fund's net assets will be diluted
proportionately. If the Fund should declare an income dividend or capital gains
distribution payable only in cash, IBT will, as agent for the participants, buy
Fund shares in the open market, on the New York Stock Exchange or elsewhere, for
the participants' accounts on, or shortly after, the payment date .
Participants in the Plan have the option of making additional semi-annual
cash payments to IBT in any amount from $100 to $3,000 for investment in Fund
shares. IBT uses all funds so received (as well as any dividends and capital
gains distributions received in cash) to purchase Fund shares in the open market
on or about February 15 and August 15 of each year.
Plan participants are not subject to any charge for reinvesting dividends
or capital gains distributions. Each Plan participant, however, bears a pro rata
share of brokerage commissions incurred with respect to IBT's open market
purchases of Fund shares in connection with voluntary cash payments or the
reinvestment of dividends or capital gains distributions payable only in cash.
21
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
ADDITIONAL INFORMATION--(Continued)
The automatic reinvestment of dividends and capital gains distributions
does not relieve Plan participants of any income tax that may be payable on the
dividends or capital gains distributions. A participant in the Plan is treated
for federal income tax purposes as having received, on the dividend payment
date, a dividend or distribution in an amount equal to the cash that the
participant could have received instead of shares.
A shareholder may terminate participation in the Plan at anytime by
notifying IBT in writing. A termination will be effective immediately if notice
is received by IBT not less than 10 days before any dividend or distribution
record date. Otherwise, the termination will be effective, and only with respect
to any subsequent dividends or distributions, on the first trading day after the
dividend or distribution has been credited to the participant's account in
additional shares of Common Stock of the Fund. Upon termination and according to
a participant's instructions, IBT will either (a) issue certificates from the
whole shares credited to your Plan account and a check representing any
fractional shares or (b) sell the shares in the market. There will be a $5.00
fee assessed for liquidation service, plus brokerage commissions, and IBT is
authorized to sell a sufficient number of a participant's shares to cover such
amounts.
22
<PAGE>
- - --------- THE EUROPEAN WARRANT FUND, INC.
330 Madison Ave.,
New York, New York 10017
INVESTMENT ADVISER
Julius Baer Securities Inc.
330 Madison Ave.
New York, New York 10017
ADMINISTRATOR, CUSTODIAN, AND
TRANSFER AGENT
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
COUNSEL
Baker & McKenzie
805 Third Avenue
New York, New York 10022
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
99 High Street
Boston, MA 02108
OFFICERS
Bernard Spilko
President
Hansruedi Huber
Chief Investment Officer
Robert Discolo
Chief Financial Officer
and Secretary
DIRECTORS
Antoine Bernheim
David Bodner*
Lawrence A. Fox
Thomas J. Gibbons
Harvey B. Kaplan
Bernard Spilko
* Chairman of the Board
<PAGE>
THE EUROPEAN WARRANT FUND, INC.
SEMI-ANNUAL
REPORT
SEPTEMBER 30, 1995
THE EUROPEAN WARRANT FUND, INC.
330 MADISON AVENUE
NEW YORK, NEW YORK 10017
This report is sent to the shareholders of The European Warrant Fund, Inc. for
their information. It is not a Prospectus, circular or representation intended
for use in the purchase or sale of shares of the Fund or of any securities
mentioned in the report.
