-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QhcYDdX86ffTSH/T0j141852LPh8Ar8jafnw7cufEe2ks77pK2qB5YIe4ya+Gk29 awc3dZTzQIB0iDRFtEgGhQ== 0001047469-03-042219.txt : 20031230 0001047469-03-042219.hdr.sgml : 20031230 20031230162402 ACCESSION NUMBER: 0001047469-03-042219 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20031230 EFFECTIVENESS DATE: 20031230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY EUROPEAN GROWTH FUND INC CENTRAL INDEX KEY: 0000860720 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-06044 FILM NUMBER: 031078048 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 MAIL ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER EUROPEAN GROWTH FUND INC DATE OF NAME CHANGE: 19980622 FORMER COMPANY: FORMER CONFORMED NAME: WITTER DEAN EUROPEAN GROWTH FUND INC DATE OF NAME CHANGE: 19920703 N-CSR 1 a2125325zn-csr.txt N-CSR UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-06044 Morgan Stanley European Growth Fund Inc. (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: October 31, 2003 Date of reporting period: October 31, 2003 Item 1 - Report to Shareholders WELCOME, SHAREHOLDER: IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY EUROPEAN GROWTH FUND PERFORMED DURING THE ANNUAL PERIOD. WE WILL PROVIDE AN OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. Fund Report For the Year Ended October 31, 2003 TOTAL RETURN FOR THE 12 MONTHS ENDED OCTOBER 31, 2003
MORGAN STANLEY CAPITAL INTERNATIONAL LIPPER (MSCI) EUROPEAN CLASS CLASS CLASS CLASS EUROPE REGION FUNDS A B C D INDEX(1) INDEX(2) - -------------------------------------------------------------------- 15.55% 15.02% 14.67% 15.81% 24.16% 24.62%
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION. MARKET CONDITIONS The European market followed trends in the U.S. and global markets closely, demonstrating two distinct phases. Geopolitical uncertainties such as the war with Iraq as well as downward trends throughout world economies continued to influence the European markets negatively. Within the region, concerns about core economies led to increasingly negative investor sentiment toward European assets. Germany, for instance, was bogged down by negative views on its competitive positioning with regard to labor laws and labor market flexibility. In March, however, the market saw a dramatic reversal. With the surprisingly quick resolution to the Iraq conflict, macroeconomic indicators began a global upturn. At the same time, growing optimism in regional business centers led to a recovery in the European market, where many assets were perceived as oversold and undervalued. The sectors that had suffered most heavily during the bear market, such as information technology and other economically sensitive industries, were the ones to experience the sharpest recovery. In addition, the European recovery was aided by the appreciation of its domestic currencies, led by the euro, against the U.S. dollar and Japanese yen. Since its introduction in 1999, the euro has generally performed poorly relative to other major currencies. This pattern reversed itself early in this period, however, in part due to a U.S. pullback from its "strong dollar" policy in an attempt to increase U.S. companies' ability to export and aid the national economy's recovery. The dollar's fall had a substantial impact on all dollar-based investors in European equities. PERFORMANCE ANALYSIS The Fund underperformed its benchmarks for the period, primarily based on stock selection and the Fund's defensive posture toward economically sensitive companies. The Fund's overall investment strategy emphasizes companies that are well positioned for consistent, long-term growth and less affected by cyclical factors. From a sector standpoint the Fund was overweighted in business services and consumer discretionary industries, relative to the MSCI Europe Index, both of which lagged in the period's rally, which was one involving more-speculative issues. While the portfolio gained from its overweighted position in industrials, relative to the MSCI Europe Index, we focused on the sector's least-cyclical elements, which lagged other industrials and capital goods. Health care and information technology stocks emerged as negative contributors. Our overweighted position in information technologies, relative to the 2 MSCI Europe Index, was successful, but the Fund's stocks underperformed. Because the technology sector recovered so sharply, the companies that were weakest from the perspective of sustained growth benefited the most. The Fund's investment philosophy leads its managers to avoid exposure to the risks involved with these volatile companies, and therefore our information technology picks lagged. Several positions proved very successful, however, led by top performers Adecco and Phillips Electronics. Our holdings of Adecco, the world's largest temporary employment agency, benefited from the economic recovery and the ongoing trend toward outsourcing--especially in Europe, where stiff labor laws lead to a greater need for temporary employment. Phillips, a well-diversified consumer and capital goods manufacturer, was well placed to make gains when consumer purchases turned up and semiconductor demand increased. Our underweighted position in utilities relative to the MSCI Europe Index turned out to be beneficial but lagged the recovery. Not only are utilities with long-term growth potential difficult to find, but because they performed reasonably well during the bear market they were not attractive from a valuation perspective. 3 TOP 10 HOLDINGS GlaxoSmithKline PLC 4.0% Novartis A.G. (Registered Shares) 3.7 Nokia OYJ 3.6 UBS A.G. (Registered Shares) 3.6 Vodafone Group PLC 3.4 Shell Transport & Trading Co. PLC 3.3 Total S.A. 3.2 Royal Bank of Scotland Group PLC 2.6 BNP Paribas S.A. 2.6 Koninklijke (Royal) Phillips Electronics NV 2.6
TOP FIVE COUNTRIES United Kingdom 37.4% France 14.9 Netherlands 11.7 Switzerland 10.1 Germany 9.3
SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A RECOMMENDATION TO BUY THE SECURITIES MENTIONED. MORGAN STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL ADVISORY SERVICES. INVESTMENT STRATEGY 1. THE FUND WILL NORMALLY INVEST AT LEAST 80 PERCENT OF ITS ASSETS IN SECURITIES ISSUED BY COMPANIES LOCATED IN EUROPEAN COUNTRIES. 2. THE PRINCIPAL COUNTRIES IN WHICH THE FUND INVESTS ARE FRANCE, THE UNITED KINGDOM, GERMANY, THE NETHERLANDS, SPAIN, SWEDEN, SWITZERLAND AND ITALY. 3. THE FUND INVESTS PRINCIPALLY IN COMMON STOCKS AND OTHER EQUITY SECURITIES BUT MAY ALSO INVEST WITHOUT LIMITATION IN FIXED-INCOME SECURITIES (INCLUDING ZERO-COUPON SECURITIES) ISSUED OR GUARANTEED BY EUROPEAN GOVERNMENTS. 4. THE FUND GENERALLY INVESTS IN COMPANIES ITS MANAGEMENT BELIEVES TO HAVE A HIGH RATE OF EARNINGS GROWTH POTENTIAL. THE MANAGEMENT ATTEMPTS TO SELECT SECURITIES THAT IN THEIR VIEW POSSESS ATTRACTIVE PRICE/EARNINGS, PRICE/CASH FLOW AND PRICE/REVENUE RATIOS. ANNUAL HOUSEHOLDING NOTICE TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS. YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M. ET. ONCE OUR CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS. PROXY VOTING POLICIES AND PROCEDURES A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. 4 (This page has been left blank intentionally.) PERFORMANCE SUMMARY [CHART] PERFORMANCE OF A $10,000 INVESTMENT--CLASS B ($ IN THOUSANDS)
FUND@@ MSCI EUROPE(1) LIPPER(2) October 31, 1993 $ 10,000 $ 10,000 $ 10,000 October 31, 1994 $ 11,561 $ 11,124 $ 11,178 October 31, 1995 $ 13,507 $ 12,594 $ 12,209 October 31, 1996 $ 16,515 $ 14,794 $ 14,411 October 31, 1997 $ 19,719 $ 18,638 $ 17,704 October 31, 1998 $ 22,810 $ 22,935 $ 20,418 October 31, 1999 $ 26,424 $ 25,807 $ 23,845 October 31, 2000 $ 29,079 $ 26,050 $ 27,573 October 31, 2001 $ 22,775 $ 20,098 $ 20,362 October 31, 2002 $ 19,788 $ 17,309 $ 17,761 October 31, 2003 $ 22,760 $ 21,491 $ 22,134
ENDING VALUE
FUND@@ MSCI EUROPE(1) LIPPER(2) -------- --------------- -------- $ 22,760 $ 21,491 $ 22,134
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES. 6 AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED OCTOBER 31, 2003
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++ 07/28/97 06/01/90 07/28/97 07/28/97 SYMBOL EUGAX EUGBX EUGCX EUGDX 1 YEAR 15.55%(3) 15.02%(3) 14.67%(3) 15.81% 9.49(4) 10.02(4) 13.67(4) - 5 YEARS 0.68(3) (0.04)(3) (0.08)(3) 0.89 (0.40)(4) (0.31)(4) (0.08)(4) - 10 YEARS - 8.57(3) - - - 8.57(4) - - SINCE INCEPTION 2.87(3) 8.21(3) 2.09(3) 3.27 1.98(4) 8.21(4) 2.09(4) -
- ---------- Notes on Performance (1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EUROPE INDEX MEASURES THE PERFORMANCE FOR A DIVERSE RANGE OF GLOBAL STOCK MARKETS WITHIN AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, GERMANY, ITALY, THE NETHERLANDS, NORWAY, SPAIN, SWEDEN, SWITZERLAND, IRELAND, PORTUGAL, AND THE UNITED KINGDOM. THE PERFORMANCE OF THE INDEX IS LISTED IN U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET DIVIDENDS" REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. (2) THE LIPPER EUROPEAN REGION FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER EUROPEAN REGION FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 30 FUNDS REPRESENTED IN THIS INDEX. (3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT THE DEDUCTION OF ANY SALES CHARGES. (4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR COMPLETE DETAILS ON FEES AND SALES CHARGES. * THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%. ** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%. THE CDSC DECLINES TO 0% AFTER SIX YEARS. + THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. @@ CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON OCTOBER 31, 2003. 7 MORGAN STANLEY EUROPEAN GROWTH FUND INC. PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2003
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------ COMMON AND PREFERRED STOCKS (98.6%) BELGIUM (0.0%) ELECTRONIC EQUIPMENT/INSTRUMENTS 2,599 Agfa Gevaert NV $ 64,206 -------------- DENMARK (1.0%) PHARMACEUTICALS: MAJOR 245,330 Novo Nordisk AS (Series B) 8,782,241 -------------- FINLAND (4.0%) INFORMATION TECHNOLOGY SERVICES 115,727 TietoEnator Oyj 3,053,096 -------------- TELECOMMUNICATION EQUIPMENT 1,844,628 Nokia Oyj 31,183,862 -------------- TOTAL FINLAND 34,236,958 -------------- FRANCE (14.9%) ELECTRICAL PRODUCTS 327,871 Schneider Electric S.A. 19,101,760 -------------- FOOD RETAIL 216,679 Carrefour S.A. 11,322,482 -------------- INTEGRATED OIL 179,462 Total S.A. 27,763,538 -------------- MAJOR BANKS 423,661 BNP Paribas S.A. 22,157,860 126,413 Societe Generale 9,346,812 -------------- 31,504,672 -------------- MAJOR TELECOMMUNICATIONS 552,567 France Telecom S.A.* 13,311,793 -------------- MULTI-LINE INSURANCE 868,576 AXA 16,381,977 -------------- OILFIELD SERVICES/EQUIPMENT 80,558 Technip S.A. 7,923,161 -------------- TOTAL FRANCE 127,309,383 -------------- GERMANY (9.3%) APPAREL/FOOTWEAR 106,039 Adidas-Salomon AG 9,779,009 -------------- ELECTRIC UTILITIES 156,653 E. ON AG $ 7,881,323 -------------- INDUSTRIAL CONGLOMERATES 296,101 Siemens AG 19,871,871 -------------- INVESTMENT BANKS/BROKERS 234,915 Deutsche Boerse AG 12,998,440 -------------- MAJOR TELECOMMUNICATIONS 852,120 Deutsche Telekom AG (Registered Shares)* 13,360,138 -------------- MOTOR VEHICLES 11,235 Porsche AG (Pref.) 5,492,768 -------------- PACKAGED SOFTWARE 68,422 SAP AG 9,908,263 -------------- TOTAL GERMANY 79,291,812 -------------- IRELAND (0.8%) MAJOR BANKS 542,349 Bank of Ireland 6,652,052 -------------- ITALY (3.9%) INTEGRATED OIL 689,601 ENI SpA 10,899,824 -------------- MAJOR BANKS 2,534,353 Unicredito Italiano SpA 12,433,799 -------------- MAJOR TELECOMMUNICATIONS 4,012,597 Telecom Italia SpA* 10,423,481 -------------- TOTAL ITALY 33,757,104 -------------- NETHERLANDS (11.7%) FINANCIAL CONGLOMERATES 335,723 ING Groep NV 6,937,986 (Share Certificates) -------------- FOOD: MAJOR DIVERSIFIED 224,906 Unilever NV 13,004,130 (Share Certificates) -------------- INDUSTRIAL CONGLOMERATES 815,967 Koninklijke (Royal) Philips 21,894,964 Electronics NV --------------
SEE NOTES TO FINANCIAL STATEMENTS 8
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------ INTEGRATED OIL 482,150 Royal Dutch Petroleum Co. $ 21,294,881 -------------- LIFE/HEALTH INSURANCE 686,661 Aegon NV 8,962,360 -------------- MAJOR TELECOMMUNICATIONS 1,669,726 Koninklijke (Royal) KPN NV* 12,635,541 -------------- SEMICONDUCTORS 565,344 STMicroelectronics NV 14,980,254 -------------- TOTAL NETHERLANDS 99,710,116 -------------- NORWAY (0.6%) REGIONAL BANKS 857,760 DnB Holding ASA 4,977,517 -------------- SPAIN (2.8%) APPAREL/FOOTWEAR RETAIL 205,416 Industria de Diseno Textil, S.A. 4,223,695 -------------- MAJOR BANKS 786,918 Banco Bilbao Vizcaya Argentaria, S.A. 8,987,058 -------------- MAJOR TELECOMMUNICATIONS 879,645 Telefonica S.A.* 10,890,889 -------------- TOTAL SPAIN 24,101,642 -------------- SWEDEN (2.1%) INDUSTRIAL MACHINERY 991,265 Assa Abloy AB (B Shares) 9,719,769 -------------- MISCELLANEOUS COMMERCIAL SERVICES 680,187 Securitas AB (B Shares) 8,315,245 -------------- TOTAL SWEDEN 18,035,014 -------------- SWITZERLAND (10.1%) CHEMICALS: AGRICULTURAL 138,317 Syngenta AG 7,373,403 -------------- FINANCIAL CONGLOMERATES 500,093 UBS AG (Registered Shares) 30,552,545 -------------- PERSONNEL SERVICES 101,558 Adecco SA $ 5,958,644 -------------- PHARMACEUTICALS: MAJOR 826,111 Novartis AG (Registered Shares) 31,328,453 131,797 Roche Holdings AG 10,850,521 -------------- 42,178,974 -------------- TOTAL SWITZERLAND 86,063,566 -------------- UNITED KINGDOM (37.4%) ADVERTISING/MARKETING SERVICES 760,914 WPP Group PLC 7,234,251 2,198,714 Yell Group PLC* 10,684,615 -------------- 17,918,866 -------------- BEVERAGES: ALCOHOLIC 994,823 Diageo PLC 11,673,130 -------------- BIOTECHNOLOGY 485,865 Celltech Group PLC* 3,776,040 -------------- CABLE/SATELLITE TV 633,514 British Sky Broadcasting 6,865,062 Group PLC* -------------- CHEMICALS: SPECIALTY 669,051 BOC Group PLC 9,102,347 -------------- DEPARTMENT STORES 2,549,142 Marks & Spencer 12,419,886 Group PLC -------------- ELECTRIC UTILITIES 1,220,136 National Grid Transco PLC 7,773,078 -------------- FINANCIAL CONGLOMERATES 1,893,853 Lloyds TSB Group PLC 13,123,305 -------------- FOOD RETAIL 2,389,693 Tesco PLC 9,559,214 -------------- INTEGRATED OIL 1,335,450 BP PLC 9,248,242 4,565,758 Shell Transport & Trading 28,449,129 Co. PLC -------------- 37,697,371 -------------- INVESTMENT MANAGERS 851,213 Amvescap PLC 6,723,542 --------------
SEE NOTES TO FINANCIAL STATEMENTS 9
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------ LIFE/HEALTH INSURANCE 1,377,477 Prudential PLC $ 10,664,643 -------------- MAJOR BANKS 1,497,757 Barclays PLC 12,603,931 1,340,390 HSBC Holdings PLC 20,085,503 838,259 Royal Bank of Scotland Group PLC 22,411,381 -------------- 55,100,815 -------------- MEDICAL SPECIALTIES 1,350,837 Smith & Nephew PLC 10,709,988 -------------- MISCELLANEOUS COMMERCIAL SERVICES 3,220,970 Hays PLC 6,653,571 -------------- PHARMACEUTICALS: MAJOR 1,601,345 GlaxoSmithKline PLC 34,217,835 -------------- PUBLISHING: BOOKS/MAGAZINES 635,524 EMAP PLC 8,613,934 2,081,702 Reed Elsevier PLC 16,143,299 -------------- 24,757,233 -------------- RESTAURANTS 2,167,811 Compass Group PLC 12,470,651 -------------- WIRELESS TELECOMMUNICATIONS 13,763,287 Vodafone Group PLC 28,838,697 -------------- TOTAL UNITED KINGDOM 320,045,274 -------------- TOTAL COMMON AND PREFERRED STOCKS (COST $719,235,274) 843,026,885 -------------- PRINCIPAL AMOUNT IN THOUSANDS VALUE - ------------------------------------------------------------------------ SHORT-TERM INVESTMENT (1.0%) REPURCHASE AGREEMENT $ 8,799 Joint repurchase agreement account 1.05% due 11/03/03 (dated 10/31/03; proceeds $8,799,770) (a) (COST $8,799,000) $ 8,799,000 -------------- TOTAL INVESTMENTS (COST $728,034,274) (b) 99.6% 851,825,885 OTHER ASSETS IN EXCESS OF LIABILITIES 0.4 3,386,718 ----- -------------- NET ASSETS 100.0% $ 855,212,603 ===== ==============
- ---------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (a) COLLATERIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $744,743,321. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $113,400,195 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $6,317,631, RESULTING IN NET UNREALIZED APPRECIATION OF $107,082,564. FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 2003:
CONTRACTS IN EXCHANGE DELIVERY UNREALIZED TO DELIVER FOR DATE APPRECIATION - ------------------------------------------------------ EUR 99,736 $ 117,110 11/03/03 $ 1,705 GBP 4,354,946 $ 7,425,619 11/03/03 51,824 --------- Total unrealized appreciation $ 53,529 =========
CURRENCY ABBREVIATIONS: EUR Euro. GBP British Pound. SEE NOTES TO FINANCIAL STATEMENTS 10 MORGAN STANLEY EUROPEAN GROWTH FUND INC. SUMMARY OF INVESTMENTS - OCTOBER 31, 2003
PERCENT OF INDUSTRY VALUE NET ASSETS - ---------------------------------------------------------------------------- Advertising/Marketing Services $ 17,918,866 2.1% Apparel/Footwear 9,779,009 1.1 Apparel/Footwear Retail 4,223,695 0.5 Beverages: Alcoholic 11,673,130 1.4 Biotechnology 3,776,040 0.4 Cable/Satellite TV 6,865,062 0.8 Chemicals: Agricultural 7,373,403 0.9 Chemicals: Specialty 9,102,347 1.1 Department Stores 12,419,886 1.5 Electric Utilities 15,654,401 1.8 Electrical Products 19,101,760 2.2 Electronic Equipment/Instruments 64,206 0.0 Financial Conglomerates 50,613,836 5.9 Food Retail 20,881,696 2.4 Food: Major Diversified 13,004,130 1.5 Industrial Conglomerates 41,766,835 4.9 Industrial Machinery 9,719,769 1.1 Information Technology Services 3,053,096 0.4 Integrated Oil 97,655,614 11.4 Investment Banks/Brokers 12,998,440 1.5 Investment Managers 6,723,542 0.8 Life/Health Insurance 19,627,003 2.3 Major Banks 114,678,396 13.4 Major Telecommunications $ 60,621,842 7.1% Medical Specialties 10,709,988 1.3 Miscellaneous Commercial Services 14,968,816 1.7 Motor Vehicles 5,492,768 0.6 Multi-Line Insurance 16,381,977 1.9 Oilfield Services/Equipment 7,923,161 0.9 Packaged Software 9,908,263 1.2 Personnel Services 5,958,644 0.7 Pharmaceuticals: Major 85,179,050 10.0 Publishing: Books/Magazines 24,757,233 2.9 Regional Banks 4,977,517 0.6 Repurchase Agreement 8,799,000 1.0 Restaurants 12,470,651 1.5 Semiconductors 14,980,254 1.8 Telecommunication Equipment 31,183,862 3.6 Wireless Telecommunications 28,838,697 3.4 --------------- ---- $ 851,825,885 99.6% =============== ==== PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS - ---------------------------------------------------------------------------- Common Stocks $ 837,534,117 98.0% Preferred Stocks 5,492,768 0.6 Short-Term Investment 8,799,000 1.0 --------------- ---- $ 851,825,885 99.6% =============== ====
SEE NOTES TO FINANCIAL STATEMENTS 11 MORGAN STANLEY EUROPEAN GROWTH FUND INC. FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2003 ASSETS: Investments in securities, at value (cost $728,034,274) $ 851,825,885 Unrealized appreciation on open forward foreign currency contracts 53,529 Cash (including $995,969 in foreign currency) 1,123,901 Receivable for: Investments sold 8,738,667 Foreign withholding taxes reclaimed 899,700 Dividends 744,494 Capital stock sold 245,853 Prepaid expenses and other assets 64,261 Receivable from affiliate 524,116 --------------- TOTAL ASSETS 864,220,406 --------------- LIABILITIES: Payable for: Investments purchased 6,532,863 Capital stock redeemed 882,900 Distribution fee 684,530 Investment management fee 679,806 Accrued expenses and other payables 227,704 --------------- TOTAL LIABILITIES 9,007,803 --------------- NET ASSETS $ 855,212,603 =============== COMPOSITION OF NET ASSETS: Paid-in-capital $ 1,064,685,583 Accumulated net unrealized appreciation 123,881,666 Accumulated undistributed net investment income 3,010,119 Accumulated net realized loss (336,364,765) --------------- NET ASSETS $ 855,212,603 =============== CLASS A SHARES: Net Assets $ 16,612,472 Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE) 1,248,965 NET ASSET VALUE PER SHARE $ 13.30 =============== MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 14.04 =============== CLASS B SHARES: Net Assets $ 777,564,664 Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE) 60,809,910 NET ASSET VALUE PER SHARE $ 12.79 =============== CLASS C SHARES: Net Assets $ 18,581,287 Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE) 1,458,613 NET ASSET VALUE PER SHARE $ 12.74 =============== CLASS D SHARES: Net Assets $ 42,454,180 Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE) 3,098,367 NET ASSET VALUE PER SHARE $ 13.70 ===============
SEE NOTES TO FINANCIAL STATEMENTS 12 STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2003 NET INVESTMENT INCOME: INCOME Dividends (net of $2,800,984 foreign withholding tax) $ 19,234,742 Interest 200,667 --------------- TOTAL INCOME 19,435,409 --------------- EXPENSES Investment management fee 8,059,991 Distribution fee (Class A shares) 53,007 Distribution fee (Class B shares) 7,848,617 Distribution fee (Class C shares) 187,900 Transfer agent fees and expenses 1,747,338 Custodian fees 281,566 Shareholder reports and notices 132,362 Professional fees 67,697 Registration fees 56,523 Directors' fees and expenses 21,873 Other 22,585 --------------- TOTAL EXPENSES 18,479,459 Less: distribution fee rebate (Class B shares) (1,989,012) --------------- NET EXPENSES 16,490,447 --------------- NET INVESTMENT INCOME 2,944,962 --------------- NET REALIZED AND UNREALIZED GAIN (LOSS): NET REALIZED GAIN/LOSS ON: Investments (35,188,229) Foreign exchange transactions 122,651 --------------- NET REALIZED LOSS (35,065,578) --------------- NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 152,261,378 Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies (207,330) --------------- NET APPRECIATION 152,054,048 --------------- NET GAIN 116,988,470 --------------- NET INCREASE $ 119,933,432 ===============
SEE NOTES TO FINANCIAL STATEMENTS 13 STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss) $ 2,944,962 $ (3,884,292) Net realized loss (35,065,578) (105,304,885) Net change in unrealized appreciation (depreciation) 152,054,048 (35,632,902) ---------------- ---------------- NET INCREASE (DECREASE) 119,933,432 (144,822,079) ---------------- ---------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares -- (384,980) Class B shares -- (8,390,397) Class C shares -- (190,827) Class D shares -- (949,255) ---------------- ---------------- TOTAL DIVIDENDS -- (9,915,459) ---------------- ---------------- Net decrease from capital stock transactions (213,539,916) (333,059,661) ---------------- ---------------- NET DECREASE (93,606,484) (487,797,199) NET ASSETS: Beginning of period 948,819,087 1,436,616,286 ---------------- ---------------- END OF PERIOD (INCLUDING AN ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $3,010,119 AND A NET INVESTMENT LOSS OF $57,494, RESPECTIVELY) $ 855,212,603 $ 948,819,087 ================ ================
SEE NOTES TO FINANCIAL STATEMENTS 14 MORGAN STANLEY EUROPEAN GROWTH FUND INC. NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2003 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley 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 June 1, 1990. On July 28, 1997, the Fund converted to a multiple class share structure. 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 and 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 following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded on the New York or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other equity portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") or Morgan Stanley Investment Management Limited (the "Sub-Advisor"), an affiliate of the Investment Manager, determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect 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 Fund's Directors; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Directors; and (7) 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. 15 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 and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. 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. E. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- 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 ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. 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. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. F. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. 16 G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. H. USE OF ESTIMATES -- 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. 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: 0.95% to the portion of net assets not exceeding $500 million; 0.90% to the portion of daily net assets exceeding $500 million but not exceeding $2 billion; 0.85% to the portion of daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.825% to the portion of daily net assets in excess of $3 billion. Effective August 11, 2003, the Investment Manager entered into a new Sub-Advisory Agreement with the Sub-Advisor, thereby replacing the previous Sub-Advisory Agreement with Morgan Stanley Investment Management Inc. (the "Former Sub- Advisor"). Under both the current and the former Sub-Advisory Agreements, the Sub-Advisor invests the Fund's assets including the placing of orders for the purchase and sale of portfolio securities. As compensation for its services provided pursuant to the Sub-Advisory Agreements, the Investment Manager paid the Sub-Advisor compensation of $716,939 for the period August 11, 2003 through October 31, 2003 and paid the Former Sub-Advisor compensation of $2,507,058 for the period November 1, 2002 through August 10, 2003. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager and Sub-Advisor. 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 the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate 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 the average daily net assets of Class C. 17 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 Directors will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that there were no excess expenses as of October 31, 2003. For the year ended October 31, 2003, the Distributor rebated a portion of the distribution fees paid by the Fund on Class B shares in the amount of $1,989,012. Included in the Statement of Assets and Liabilities is a receivable from affiliate which represents distribution fee rebates due to the Fund. 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 Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the year ended October 31, 2003, 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 year ended October 31, 2003, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $124,687, $667,531 and $2,810, respectively and received $15,526 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 year ended October 31, 2003 aggregated $750,872,498 and $956,895,221, respectively. At October 31, 2003, Morgan Stanley Fund of Funds -- International Portfolio, an affiliate of the Investment Manager, Sub-Advisor and Distributor, owned 2,539,146 Class D shares of capital stock of the Fund. Morgan Stanley Trust, an affiliate of the Investment Manager, Sub-Advisor, and Distributor, is the Fund's transfer agent. At October 31, 2003, the Fund had transfer agent fees and expenses payable of approximately $14,000. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Directors of the Fund who will have served as independent Directors for at least five years at the time 18 of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the year ended October 31, 2003 included in Directors' fees and expenses in the Statement of Operations amounted to $7,007. At October 31, 2003, the Fund had an accrued pension liability of $59,363 which is included in accrued expenses in the Statement of Assets and Liabilities. 5. FEDERAL INCOME TAX STATUS 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 tax purposes are reported as distributions of paid-in-capital. The tax character of distributions paid was as follows:
FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 ---------------- ---------------- Ordinary income -- $ 9,915,402
As of October 31, 2003, the tax-basis components of accumulated losses were as follows: Undistributed ordinary income $ 3,214,003 Undistributed long-term gains -- ---------------- Net accumulated earnings 3,214,003 Foreign tax credit pass-through 2,709,992 Capital loss carryforward* (319,655,718) Temporary differences (2,860,347) Net unrealized appreciation 107,119,090 ---------------- Total accumulated losses $ (209,472,980) ================
- ---------- * As of October 31, 2003, the Fund had a net capital loss carryforward of $319,655,718 of which $162,858,416 will expire on October 31, 2009, $102,923,112 will expire on October 31, 2010 and $53,874,190 will expire on October 31, 2011 to offset future capital gains to the extent provided by regulations. 19 As of October 31, 2003, the Fund had temporary book/tax differences primarily attributable to capital loss deferrals on wash sales and foreign tax credit pass-through and permanent book/tax differences attributable to foreign currency gains. To reflect reclassifications arising from the permanent differences, accumulated net realized loss was charged and accumulated undistributed net investment income was credited $122,651. 6. CAPITAL STOCK Transactions in capital stock were as follows:
FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 ------------------------------- ------------------------------- SHARES AMOUNT SHARES AMOUNT -------------- -------------- -------------- -------------- CLASS A SHARES Sold 20,595,524 $ 240,024,811 9,833,843 $ 121,583,658 Reinvestment of dividends -- -- 25,008 345,855 Redeemed (20,936,181) (248,059,299) (9,961,813) (125,116,664) -------------- -------------- -------------- -------------- Net decrease -- Class A (340,657) (8,034,488) (102,962) (3,187,151) -------------- -------------- -------------- -------------- CLASS B SHARES Sold 2,602,222 28,926,477 7,792,547 98,323,416 Reinvestment of dividends -- -- 568,379 7,650,380 Redeemed (20,026,785) (225,759,996) (33,838,980) (426,664,386) -------------- -------------- -------------- -------------- Net decrease -- Class B (17,424,563) (196,833,519) (25,478,054) (320,690,590) -------------- -------------- -------------- -------------- CLASS C SHARES Sold 818,242 9,094,822 2,512,493 31,290,984 Reinvestment of dividends -- -- 13,268 178,189 Redeemed (1,239,678) (13,947,336) (2,907,554) (36,516,640) -------------- -------------- -------------- -------------- Net decrease -- Class C (421,436) (4,852,514) (381,793) (5,047,467) -------------- -------------- -------------- -------------- CLASS D SHARES Sold 4,540,208 51,606,931 4,390,707 52,522,878 Reinvestment of dividends -- -- 7,170 101,747 Redeemed (4,799,575) (55,426,326) (4,647,865) (56,759,078) -------------- -------------- -------------- -------------- Net decrease -- Class D (259,367) (3,819,395) (249,988) (4,134,453) -------------- -------------- -------------- -------------- Net decrease in Fund (18,446,023) $ (213,539,916) (26,212,797) $ (333,059,661) ============== ============== ============== ==============
20 7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. 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 October 31, 2003, there were outstanding forward contracts. At October 31, 2003, investments in securities of issuers in the United Kingdom represented 37.4% of the Fund's net assets. These investments, as well as other non-U.S. 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. 21 MORGAN STANLEY EUROPEAN GROWTH FUND INC. FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of capital stock outstanding throughout each period:
FOR THE YEAR ENDED OCTOBER 31 ------------------------------------------------------ 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 11.51 $ 13.35 $ 20.17 $ 20.70 $ 19.45 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income@@ 0.12 0.06 0.07 0.05 0.10 Net realized and unrealized gain (loss) 1.67 (1.67) (3.71) 2.34 3.03 -------- -------- -------- -------- -------- Total income (loss) from investment operations 1.79 (1.61) (3.64) 2.39 3.13 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income - (0.23) - - - Net realized gain - - (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Total dividends and distributions - (0.23) (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Net asset value, end of period $ 13.30 $ 11.51 $ 13.35 $ 20.17 $ 20.70 ======== ======== ======== ======== ======== TOTAL RETURN+ 15.55% (12.41)% (21.07)% 10.92% 16.75% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.45% 1.38% 1.27% 1.29% 1.36% Net investment income 0.79% 0.41% 0.43% 0.23% 0.44% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 16,612 $ 18,294 $ 22,604 $ 53,012 $ 26,600 Portfolio turnover rate 89% 51% 86% 71% 56%
- ---------- @@ 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. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 22
FOR THE YEAR ENDED OCTOBER 31 ------------------------------------------------------ 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 11.12 $ 12.88 $ 19.70 $ 20.41 $ 19.34 -------- -------- -------- -------- -------- Income (loss) from for investment operations: Net investment income (loss)@@ 0.03 (0.05) (0.06) (0.11) (0.07) Net realized and unrealized gain (loss) 1.64 (1.62) (3.58) 2.32 3.02 -------- -------- -------- -------- -------- Total income (loss) from investment operations 1.67 (1.67) (3.64) 2.21 2.95 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income - (0.09) - - - Net realized gain - - (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Total dividends and distributions - (0.09) (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Net asset value, end of period $ 12.79 $ 11.12 $ 12.88 $ 19.70 $ 20.41 ======== ======== ======== ======== ======== TOTAL RETURN+ 15.02% (13.11)% (21.68)% 10.05% 15.84% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.94%(2) 2.15% 2.10% 2.05% 2.13% Net investment income (loss) 0.30%(2) (0.36)% (0.40)% (0.53)% (0.33)% SUPPLEMENTAL DATA: Net assets, end of period, in millions $ 778 $ 870 $ 1,335 $ 2,206 $ 2,090 Portfolio turnover rate 89% 51% 86% 71% 56%
- ---------- @@ 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. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. (2) IF THE DISTRIBUTOR HAD NOT REBATED A PORTION OF ITS FEES TO THE FUND, THE EXPENSE AND NET INVESTMENTS INCOME RATIOS WOULD HAVE BEEN 2.20% AND 0.04%, RESPECTIVELY. SEE NOTES TO FINANCIAL STATEMENTS 23
FOR THE YEAR ENDED OCTOBER 31 ------------------------------------------------------ 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 11.11 $ 12.85 $ 19.67 $ 20.38 $ 19.31 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)@@ 0.00 (0.04) (0.06) (0.11) (0.05) Net realized and unrealized gain (loss) 1.63 (1.61) (3.58) 2.32 3.00 -------- -------- -------- -------- -------- Total income (loss) from investment operations 1.63 (1.65) (3.64) 2.21 2.95 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income - (0.09) - - - Net realized gain - - (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Total dividends and distributions - (0.09) (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Net asset value, end of period $ 12.74 $ 11.11 $ 12.85 $ 19.67 $ 20.38 ======== ======== ======== ======== ======== TOTAL RETURN+ 14.67% (12.98)% (21.76)% 10.11% 15.87% RATIOS TO AVERAGE NET ASSETS(1): Expenses 2.20% 2.08% 2.10% 2.05% 2.13% Net investment income (loss) 0.04% (0.29)% (0.40)% (0.53)% (0.33)% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 18,581 $ 20,881 $ 29,075 $ 46,886 $ 31,211 Portfolio turnover rate 89% 51% 86% 71% 56%
- ---------- @@ 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. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 24
FOR THE YEAR ENDED OCTOBER 31 ------------------------------------------------------ 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 11.83 $ 13.73 $ 20.61 $ 21.05 $ 19.72 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income@@ 0.13 0.09 0.10 0.12 0.13 Net realized and unrealized gain (loss) 1.74 (1.72) (3.80) 2.36 3.08 -------- -------- -------- -------- -------- Total income (loss) from investment operations 1.87 (1.63) (3.70) 2.48 3.21 -------- -------- -------- -------- -------- Less dividends and distributions from: Net investment income - (0.27) - - - Net realized gain - - (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Total dividends and distributions - (0.27) (3.18) (2.92) (1.88) -------- -------- -------- -------- -------- Net asset value, end of period $ 13.70 $ 11.83 $ 13.73 $ 20.61 $ 21.05 ======== ======== ======== ======== ======== TOTAL RETURN+ 15.81% (12.20)% (20.95)% 11.19% 16.93% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.20% 1.15% 1.10% 1.05% 1.13% Net investment income 1.04% 0.64% 0.60% 0.47% 0.67% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 42,454 $ 39,716 $ 49,539 $ 54,016 $ 5,657 Portfolio turnover rate 89% 51% 86% 71% 56%
- ---------- @@ 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. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 25 MORGAN STANLEY EUROPEAN GROWTH FUND INC. INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF MORGAN STANLEY EUROPEAN GROWTH FUND INC.: We have audited the accompanying statement of assets and liabilities of Morgan Stanley European Growth Fund Inc. (the "Fund"), including the portfolio of investments, as of October 31, 2003, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley European Growth Fund Inc. as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP NEW YORK, NEW YORK DECEMBER 17, 2003 26 MORGAN STANLEY EUROPEAN GROWTH FUND INC. DIRECTOR AND OFFICER INFORMATION INDEPENDENT DIRECTOR:
NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** BY DIRECTOR*** HELD BY DIRECTOR - ---------------------------- ----------- ------------ ------------------------------------- -------------- ------------------- Michael Bozic (62) Director Since Retired; Director or Trustee of 211 Director of Weirton c/o Mayer, Brown, Rowe & Maw April 1994 the Retail Funds and TCW/DW Term Steel Corporation. LLP Trust 2003 (since April 1994) and Counsel to the Independent the Institutional Funds (since Directors July 2003); formerly Vice Chairman 1675 Broadway of Kmart Corporation (December New York, NY 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991- July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (71) Director Since Director or Trustee of the Retail 211 Director of c/o Summit Ventures LLC January 1993 Funds and TCW/DW Term Trust 2003 Franklin Covey 1 Utah Center (since January 1993) and the (time management 201 S. Main Street Institutional Funds (since July systems), BMW Bank Salt Lake City, UT 2003); member of the Utah Regional of North America, Advisory Board of Pacific Corp.; Inc. (industrial formerly United States Senator loan corporation), (R-Utah) (1974-1992) and Chairman, United Space Senate Banking Committee Alliance (joint (1980-1986), Mayor of Salt Lake venture between City, Utah (1971-1974), Astronaut, Lockheed Martin and Space Shuttle Discovery (April the Boeing Company) 12-19, 1985), and Vice Chairman, and Nuskin Asia Huntsman Corporation (chemical Pacific (multilevel company). marketing); member of the board of various civic and charitable organizations. Wayne E. Hedien (69) Director Since Retired; Director or Trustee of 211 Director of The PMI c/o Mayer, Brown, Rowe & Maw September the Retail Funds and TCW/DW Term Group Inc. (private LLP 1997 Trust 2003; (Since September 1997) Mortgage Insurance); Counsel to the Independent and the Institutional Funds (since Trustee and Vice Directors July 2003); formerly associated Chairman of The 1675 Broadway with the Allstate Companies Field Museum of New York, NY (1966-1994), most recently as Natural History; Chairman of The Allstate director of various Corporation (March 1993-December other business and 1994) and Chairman and Chief charitable Executive Officer of its wholly- organizations. owned subsidiary, Allstate Insurance Company (July 1989-December 1994).
27
NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** BY DIRECTOR*** HELD BY DIRECTOR - ---------------------------- ----------- ------------ ------------------------------------- -------------- ------------------- Dr.Manuel H. Johnson (54) Director Since Chairman of the Audit Committee 211 Director of NVR, c/o Johnson Smick July 1991 and Director or Trustee of the Inc. (home International, Inc. Retail Funds and TCW/DW Term Trust construction); 2099 Pennsylvania Avenue, 2003 (since July 1991) and the Chairman and N.W. Institutional Funds (since July Trustee of the Suite 950 2003); Senior Partner, Johnson Financial Washington, D.C. Smick International, Inc., a Accounting consulting firm; Co-Chairman and a Foundation founder of the Group of Seven (oversight Council (G7C), an international organization of the economic commission; formerly Vice Financial Chairman of the Board of Governors Accounting of the Federal Reserve System and Standards Board); Assistant Secretary of the U.S. Director of RBS Treasury. Greenwich Capital Holdings (financial holding company). Joseph J. Kearns (61) Director Since Deputy Chairman of the Audit 212 Director of Electro PMB754 July 2003 Committee and Director or Trustee Rent Corporation 23852 Pacific Coast Highway of the Retail Funds and TCW/DW (equipment leasing), Malibu, CA Term Trust 2003 (since July 2003) The Ford Family and the Institutional Funds (since Foundation, and the August 1994); previously Chairman UCLA Foundation. of the Audit Committee of the Institutional Funds (October 2001-July 2003); President, Kearns & Associates LLC (investment consulting); formerly CFO of the J. Paul Getty Trust. Michael E. Nugent (67) Director Since Chairman of the Insurance 211 Director of various c/o Triumph Capital, L.P. July 1991 Committee and Director or Trustee business 445 Park Avenue of the Retail Funds and TCW/DW organizations. New York, NY Term Trust 2003 (since July 1991) and the Institutional Funds (since July 2001); General Partner of Triumph Capital, L.P., a private investment partnership; formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). Fergus Reid (71) Director Since Chairman of the Governance 212 Trustee and 85 Charles Colman Blvd. July 2003 Committee and Director or Trustee Director of certain Pawling, NY of the Retail Funds and TCW/DW investment Term Trust 2003 (since July 2003) companies in the and the Institutional Funds (since JPMorgan Funds June 1992); Chairman of Lumelite complex managed by Plastics Corporation. JP Morgan Investment Management Inc.
28 INTERESTED DIRECTOR:
NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) DURING OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT DIRECTOR REGISTRANT TIME SERVED* PAST 5 YEARS** BY DIRECTOR*** HELD BY DIRECTOR - ---------------------------- ----------- ------------ ------------------------------------- -------------- ------------------- Charles A. Fiumefreddo (70) Chairman Since Chairman and Director or Trustee 211 None c/o Morgan Stanley Trust of the July 1991 of the Retail Funds and TCW/DW Harborside Financial Center, Board and Term Trust 2003 (since July 1991) Plaza Two, Director and the Institutional Funds (since Jersey City, NJ July 2003); formerly Chief Executive Officer of the Retail Funds and the TCW/DW Term Trust 2003 (until September 2002). James F. Higgins (55) Director Since Director or Trustee of the Retail 211 Director of AXA c/o Morgan Stanley Trust June 2000 Funds and TCW/DW Term Trust 2003 Financial, Inc. and Harborside Financial Center, (since June 2000) and the The Equitable Life Plaza Two, Institutional Funds (since July Assurance Society Jersey City, NJ 2003); Senior Advisor of Morgan of the United Stanley (since August 2000); States (financial Director of the Distributor and services). Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). Philip J. Purcell (60) Director Since Director or Trustee of the Retail 211 Director of 1585 Broadway April 1994 Funds and TCW/DW Term Trust 2003 American Airlines, New York, NY (since April 1994) and the Inc. and its parent Institutional Funds (since July company, AMR 2003); Chairman of the Board of Corporation. Directors and Chief Executive Officer of Morgan Stanley and Morgan Stanley DW Inc.; Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries.
- ---------- * THIS IS THE EARLIEST DATE THE DIRECTOR BEGAN SERVING THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER ") (THE "RETAIL FUNDS"). ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. *** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT INC. AND MORGAN STANLEY INVESTMENTS LP). 29 OFFICERS:
TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S)DURING PAST 5 YEARS** - ---------------------------- ----------------- -------------------- ------------------------------------------------------------ Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley 1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief New York, NY Executive Officer of the Investment Manager and Morgan Stanley Services; Chairman, Chief Executive Officer and Director of the Distributor; Chairman and Director of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President Morgan Stanley Investments LP (since February 2003); President of the Institutional Funds (since July 2003) and President of the Retail Funds and TCW/DW Term Trust 2003 (since May 1999); Trustee (since July 2003) and President (since December 2002) of the Van Kampen Closed-End Funds; Trustee (since May 1999) and President (since October 2002) of the Van Kampen Open-End Funds. Ronald E. Robison (64) Executive Vice Since April 2003 Chief Global Operations Officer and Managing Director of 1221 Avenue of the Americas President and Morgan Stanley Investment Management Inc.; Managing Director New York, NY Principal of Morgan Stanley & Co. Incorporated; Managing Director of Executive Officer Morgan Stanley; Managing Director, Chief Administrative Officer and Director of the Investment Manager and Morgan Stanley Services; Chief Executive Officer and Director of the Transfer Agent; Executive Vice President and Principal Executive Officer of the Institutional Funds (since July 2003); and the TCW/DW Term Trust 2003 (since April 2003); previously President of the Institutional Funds (March 2001-July 2003) and Director of the Institutional Funds (March 2001-July 2003). Barry Fink (48) Vice President Since February 1997 General Counsel (since May 2000) and Managing Director 1221 Avenue of the Americas and General (since December 2000) of Morgan Stanley Investment New York, NY Counsel Management; Managing Director (since December 2000), Secretary (since February 1997) and Director (since July 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Chief Legal Officer of Morgan Stanley Investments LP (since July 2002); Vice President of the Institutional Funds (since July 2003); Vice President and Secretary of the Distributor; previously Secretary of the Retail Funds (February 1997-July 2003); previously Vice President and Assistant General Counsel of the Investment Manager and Morgan Stanley Services (February 1997-December 2001). Joseph J. McAlinden (60) Vice President Since July 1995 Managing Director and Chief Investment Officer of the 1221 Avenue of the Americas Investment Manager, Morgan Stanley Investment Management New York, NY Inc. and Morgan Stanley Investments LP; Director of the Transfer Agent, Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995). Stefanie V. Chang (36) Vice President Since July 2003 Executive Director of Morgan Stanley & Co. and Morgan Stanley 1221 Avenue of the Americas Investment Management Inc. and Vice President of the New York, NY Institutional Funds (since December 1997) and the Retail Funds (since July 2003); formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance LLP).
30
TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S)DURING PAST 5 YEARS** - ---------------------------- ----------------- -------------------- ------------------------------------------------------------ Francis J. Smith (38) Treasurer and Treasurer since July Executive Director of the Investment Manager and Morgan c/o Morgan Stanley Trust Chief Financial 2003 and Chief Stanley Services (since December 2001); previously Vice Harborside Financial Center, Officer Financial Officer President of the Retail Funds (September 2002-July 2003); Plaza Two, Since September 2002 previously Vice President of the Investment Manager and Jersey City, NJ Morgan Stanley Services (August 2000-November 2001) and Senior Manager at PricewaterhouseCoopers LLP (January 1998-August 2000). Thomas F. Caloia (57) Vice President Since July 2003 Executive Director (since December 2002) and Assistant c/o Morgan Stanley Trust Treasurer of the Investment Manager, the Distributor and Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the Retail Plaza Two, Funds (April 1989-July 2003); formerly First Vice President Jersey City, NJ of the Investment Manager, the Distributor and Morgan Stanley Services. Mary E. Mullin (36) Secretary Since July 2003 Vice President of Morgan Stanley & Co. Incorporated and 1221 Avenue of the Americas Morgan Stanley Investment Management Inc.; Secretary of the New York, NY Institutional Funds (since June 1999) and the Retail Funds (since July 2003); formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP.
- ---------- * THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED. ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. 31 DIRECTORS Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Barry Fink VICE PRESIDENT and GENERAL COUNSEL Joseph J. McAlinden VICE PRESIDENT Stefanie V. Chang VICE PRESIDENT Francis J. Smith TREASURER and CHIEF FINANCIAL OFFICER Thomas F. Caloia VICE PRESIDENT Mary E. Mullin SECRETARY TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 SUB-ADVISOR Morgan Stanley Investment Management Limited 25 Cabot Square, Canary Wharf London, United Kingdom E14 4QA This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its directors. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. (C) 2003 Morgan Stanley [MORGAN STANLEY LOGO] MORGAN STANLEY FUNDS MORGAN STANLEY EUROPEAN GROWTH FUND ANNUAL REPORT OCTOBER 31,2003 [MORGAN STANLEY LOGO] 37908RPT-00-13124L03-OP-12/03 Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Directors has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Directors in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services Applicable only for reports covering fiscal years ending on or after December 15, 2003. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to annual reports filed by closed-end funds. Item 8. [Reserved.] Item 9 - Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10 Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley European Growth Fund Inc. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer December 18, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer December 18, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer December 18, 2003 EX-99.CODEETH 3 a2125325zex-99_codeeth.txt EX-99.CODEETH EXHIBIT 10 A CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED JULY 31, 2003 I. This Code of Ethics (the "Code") for the investment companies within the Morgan Stanley complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. - full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: - use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly) to the detriment of the Fund; - cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or - use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: - service or significant business relationships as a director on the board of any public or private company; - accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; - each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; - annually thereafter affirm to the Boards that he has complied with the requirements of the Code; - not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and - notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(1) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any potential violations reported to him; - ---------- (1) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; - any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; - if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; - the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. - ------------------------- Date: -------------------- EXHIBIT B INSTITUTIONAL FUNDS COVERED OFFICERS Mitchell M. Merin - President Ronald E. Robison - Executive Vice President and Principal Executive Officer James W. Garrett - Chief Financial Officer and Treasurer RETAIL FUNDS COVERED OFFICERS Mitchell M. Merin - President Ronald E. Robison - Executive Vice President and Principal Executive Officer Frank Smith - Chief Financial Officer and Treasurer EXHIBIT C GENERAL COUNSEL Barry Fink EX-99.CERT 4 a2125325zex-99_cert.txt EX-99.CERT EXHIBIT 10 B1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER CERTIFICATIONS I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley European Growth Fund Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 18, 2003 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer EXHIBIT 10 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 6. I have reviewed this report on Form N-CSR of Morgan Stanley European Growth Fund Inc.; 7. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 8. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 9. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] e) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and f) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 10. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): c) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: December 18, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer EX-99.906CERT 5 a2125325zex-99_906cert.txt EX-99.906CERT SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley European Growth Fund Inc. In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended October 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: December 18, 2003 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley European Growth Fund Inc. and will be retained by Morgan Stanley European Growth Fund Inc. and furnished to the Securities and Exchange Commission or its staff upon request. SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley European Growth Fund Inc. In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended October 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: December 18, 2003 /s/ Francis Smith ----------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley European Growth Fund Inc. and will be retained by Morgan Stanley European Growth Fund Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----