European Equity Fund (EEA)

SUMMARY OF GENERAL INFORMATION THE FUND The European Equity Fund, Inc. (the “Fund”) is a diversified, actively-managed closed-end fund listed on the New York Stock Exchange with the symbol “EEA.” The Fund seeks long-term capital appreciation primarily through investment in European equities. It is managed and advised by wholly-owned subsidiaries of the Deutsche Bank Group and under applicable law may not invest in securities of Deutsche Bank AG. SHAREHOLDER INFORMATION Prices for the Fund’s shares are published daily in the New York Stock Exchange Composite Transactions section of certain newspapers. Net asset value and market price information are published each Saturday in Barron’s and other newspapers in a table called “Closed End Funds.” Daily information on the Fund’s net asset value is available from NASDAQ (symbol XEEAX). It is also available by calling: 1-800-437-6269. In addition, a schedule of the Fund’s largest holdings, dividend data and general shareholder information may be obtained by calling this number. The foregoing information is also available on our web site: www.dws-investments.com.

There are three closed-end funds investing in European equities managed by wholly-owned subsidiaries of the Deutsche Bank Group: • The European Equity Fund, Inc.—investing primarily in equity and equity-linked securities of companies domiciled in countries utilizing the euro currency (with normally at least 80% in securities of issuers in such countries). • The New Germany Fund, Inc.—investing primarily in middle market German companies with up to 20% in other Western European companies (with no more than 10% in any single country). • The Central Europe and Russia Fund, Inc.—investing primarily in equity and equity-linked securities of issuers of domiciled in Central Europe and Russia (with normally at least 80% in securities of issuers in such countries). Please consult your broker for advice on any of the above or call 1-800-437-6269 for shareholder reports. Investing in foreign securities, particularly those of emerging markets, presents certain risks, such as currency fluctuations, political and economic changes and market risks. Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly.

The European Equity Fund, Inc.
Annual Report

December 31, 2010

The European Equity Fund, Inc.
LETTER TO THE SHAREHOLDERS Dear Shareholder, For the 12 months ended December 31, 2010, The European Equity Fund, Inc.’s total return in USD was 1.99% based on net asset value, and 8.32% based on market value. During the same period, the total return in USD of the Fund’s benchmark, the MSCI-EMU Index, was -4.25%.1 For the last three months in 2010, the Fund’s total return in USD was 6.57% based on net asset value, and 10.01% based on market value. The benchmark return, in comparison, was 2.06%. The full year performance numbers shown above do not display, at first glance, the high level of volatility seen throughout the year. While full year performance numbers reflect very positively when compared to the Fund’s benchmark, a return of 1.99% for the full year seems rather lackluster, especially when currency moves are considered. In the first half of the year, the Fund declined close to -24.2% based on market value from peak to trough (on June 8th), then returned 42.2% in the second half of the year to recover more than the earlier losses and to close the year in positive territory. During the year under review, among the most significant contributors to the Fund’s performance were LVMH Moet Hennessy Louis Vuitton (LVMH), Deutsche Lufthansa and Xstrata. LVMH, the world’s largest diversified luxury goods producer, benefitted from several trends: robust demand for luxury items such as watches and accessories, which reached the previous sales highs of 2007, and exposure to the emerging markets, where a significant part of its growth took place. For Deutsche Lufthansa, the year 2010 was characterized by a very strong recovery of the passenger and cargo businesses. As a result, the company was able to use its high operating leverage to considerably increase its earnings. Xstrata, a Swiss-based mining company, operates in 19 countries and focuses on the production of copper, coking and thermal coal, as well as other metals that are distributed to the construction, infrastructure and electricity generation sectors. With over 70% of its production concentrated in copper and coal, the stock benefitted from the 54% rise in the copper price since its low in June of 2010. The most significant detractors to the Fund’s performance were Vestas Wind Systems*, Societe Generale and Siemens. Vestas Wind Systems is a Denmark-based company and the world’s largest wind-turbine maker. Vestas stock lost almost a quarter of its value on August 18th after management reported a larger-than-expected loss of 119 million euros and cut sales forecasts by 1 billion euros to 6 billion euros, blaming delayed orders. We sold the stock before it continued to decline well into December 2010, losing an additional 33% of its value. While market analysts have been turning more positive on Societe Generale shares, the stock moved mostly sideways throughout the year. Investors have seemingly taken a wait-and-see approach in determining what level of Equity Tier 1 Ratio is appropriate under Basel III rules. The Fund’s third largest detractor from relative performance was an underweight of Siemens in the portfolio vs. the benchmark weighting.2 The stock returned close to 37% for the period in review, benefitting from a strong outlook for the industrial businesses. The Fund, however, benefitted greatly from similar industrial stocks such as Tognum and Metso. On a country basis, the Fund’s most important asset allocation is in Germany, with an underweight in France vs. the benchmark. On a sector basis, the Fund finished the year with its biggest overweight positions in consumer discretionary, materials, industrials and information technology. The biggest sector underweights include utilities, consumer staples, financials and telecommunications. Beyond the stocks mentioned above, the most significant positions include stocks such as Software, Aareal Bank, SBM Offshore, and Daimler. The most significant underweight stocks include Total, Unilever, E.ON and Deutsche Telekom.

For additional information about the Fund including performance, dividends, presentations, press releases, daily NAV and shareholder reports, please visit www.dws-investments.com

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LETTER TO THE SHAREHOLDERS (continued) The Fund’s market value discount to net asset value averaged 11.68% for the full year 2010 compared with 15.37% for the same period a year earlier. For the three months ended December 31, 2010, the discount was 9.62% compared with 14.14% for the same quarter a year earlier. Please see Note 7 for details on the Fund’s tender offer. We are maintaining our general current view for the coming months. We believe macroeconomic topics will remain on the agenda and in particular, sovereign debt issues are likely to cause uneasiness in the market. However, our view is that, at least for the time being, the government will keep the euro intact. Germany, in particular, with its strong export machinery to markets outside of Europe, is benefiting from a weaker euro. Besides sovereign debt issues, we believe the markets will focus on corporate earnings. Although domestic demand in core Europe is picking up, the growth component is still likely to come from the emerging markets. Again there is the special case of Germany where the exposure to China has grown in importance. Emerging markets growth will strongly depend first on whether central banks are able to reduce inflation and second on how well overall growth is affected by monetary headwinds. Overall, we expect a positive environment for equities with stockpicking to become an even greater differentiating factor among investors.
Sincerely,

Christian Strenger Rainer Vermehren Chairman Vice President and Lead Portfolio Manager

Michael G. Clark President and Chief Executive Officer

The sources, opinions and forecasts expressed are as of the date of this report. There is no guarantee that the views, opinions and forecasts expressed herein will come to pass. This information is subject to change at any time based on market and other conditions and should not be construed as a recommendation for any specific security. Past performance does not guarantee future results. * Not held in the portfolio as of December 31, 2010. 1 The MSCI-EMU Index is an unmanaged capitalization-weighted index that is comprised of approximately 300 stocks of companies domiciled in the countries utilizing the euro currency. MSCI indices are calculated using closing local market prices and translate into US dollars using the London close foreign exchange rates. Index returns assume reinvested dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possibly to invest directly in an index. 2 “Overweight” means the Fund holds a higher weighting in a given sector or security than the benchmark. “Underweight” means the Fund holds a lower weighting.

For additional information about the Fund including performance, dividends, presentations, press releases, daily NAV and shareholder reports, please visit www.dws-investments.com

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FUND HISTORY AS OF DECEMBER 31, 2010 All performance shown is historical, assumes reinvestment of all dividend and capital gain distributions, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when sold, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please visit www.dws-investments.com for the Fund’s most recent performance. TOTAL RETURNS:
For the years ended December 31, 2010 2009 2008 2007 2006
(a)

Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . Market Value(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . Benchmark(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a)

1.99% 8.32% (4.25)%

33.76% 36.84% 31.41%

(50.68)% (53.96)% (47.57)%

15.35% 11.79% 19.55%

34.01% 42.35% 36.29%

Total return based on net asset value reflects changes in the Fund’s net asset value during each period. Total return based on market value reflects changes in market value during each period. Each figure includes reinvestments of dividend and capital gains distributions, if any. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund’s shares trade during the period. (b) The MSCI-EMU Index is an unmanaged capitalization weighted index that is comprised of approximately 300 stocks of companies domiciled in the countries utilizing the euro currency. MSCI indices are calculated using closing local market prices and translate into US dollars using the London close foreign exchange rates.
Index returns assume reinvestment of dividends and, unlike Fund returns, do not reflect any fees or expenses. It is not possible to invest directly in an index.

Investments in funds involve risks, including the loss of principal. This Fund is diversified and primarily focuses its investments in equity securities of issuers domiciled in European countries that utilize the euro currency, thereby increasing its vulnerability to developments in that region. Investing in foreign securities presents certain risks not generally associated with domestic investments, such as currency fluctuation, political and economic changes, and market risks. This may result in greater market price volatility. Closed-end funds, unlike open-end funds, are not continuously offered. Shares, once issued, are traded in the open market through a stock exchange. Shares of closed-end funds frequently trade at a discount to net asset value. The price of the Fund’s shares is determined by a number of factors, several of which are beyond the control of the Fund. Therefore, the Fund cannot predict whether its shares will trade at, below, or above net asset value. The Fund has elected to be subject to the statutory calculation, notification and publication requirements of the German Investment Tax Act (Investmentsteuergesetz) for the fiscal year ended December 31, 2010.

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FUND HISTORY AS OF DECEMBER 31, 2010 (continued) STATISTICS: Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Asset Value (NAV) Per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS:
Record Date Payable Date Ordinary Income ST Capital Gains LT Capital Gains Total Distribution

$94,079,928 11,499,478 $8.18

12/31/10 04/30/10 12/31/09 05/11/09 05/06/08 12/21/07 05/03/07 12/21/06 05/05/06 12/22/05 12/22/04 05/06/04 11/19/02 11/19/01 09/03/01

1/28/11* . . . . . . . . . . . . . . . . . . . . . 05/10/10 . . . . . . . . . . . . . . . . . . . . . 01/28/10** . . . . . . . . . . . . . . . . . . . 06/05/09 . . . . . . . . . . . . . . . . . . . . . 05/15/08 . . . . . . . . . . . . . . . . . . . . . 12/31/07 . . . . . . . . . . . . . . . . . . . . . 05/15/07 . . . . . . . . . . . . . . . . . . . . . 12/28/06 . . . . . . . . . . . . . . . . . . . . . 05/15/06 . . . . . . . . . . . . . . . . . . . . . 12/30/05 . . . . . . . . . . . . . . . . . . . . . 12/31/04 . . . . . . . . . . . . . . . . . . . . . 05/14/04 . . . . . . . . . . . . . . . . . . . . . 11/29/02 . . . . . . . . . . . . . . . . . . . . . 11/29/01 . . . . . . . . . . . . . . . . . . . . . 09/17/01 . . . . . . . . . . . . . . . . . . . . .

$0.045 $0.010 $0.100 $0.234 $ — $ — $0.250 $0.290 $0.090 $0.060 $0.025 $0.039 $0.010 $0.060 $ —

$ — $ — $ — $ — $0.124 $ — $ — $ — $ — $ — $ — $ — $ — $ — $ —

$ — $ — $ — $ — $0.403 $1.000 $ — $ — $ — $ — $ — $ — $ — $ — $ 0.02

$0.045 $0.010 $0.100 $0.234 $0.527 $1.000 $0.250 $0.290 $0.090 $0.060 $0.025 $0.039 $0.010 $0.060 $0.020 EEA XEEAX Yes Yes 1.41%

OTHER INFORMATION: NYSE Ticker Symbol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NASDAQ Symbol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Voluntary Cash Purchase Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annual Expense Ratio (12/31/10)*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fund statistics and expense ratio are subject to change. Distributions are historical, will fluctuate and are not guaranteed.
* Although this distribution is payable in 2011, it may have been taxable for 2010. ** Although this distribution was paid in 2010, it may have been taxable for 2009. *** Represents expense ratio after expense reductions. Please see the “Financial Highlights” section of this report.

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PORTFOLIO BY MARKET SECTOR AS OF DECEMBER 31, 2010 (As a % of Common and Preferred Stocks)
Telecommunication Services (4.8%) Utilities (4.7%) Financials (19.0%) Information Technology (6.6%) Health Care (4.0%) Energy (7.8%) Consumer Discretionary (17.1%)

Consumer Staples (5.9%)

Materials (13.8%) Industrials (16.3%)

10 LARGEST EQUITY HOLDINGS AS OF DECEMBER 31, 2010 (As a % of Common and Preferred Stocks) 1. 2. 3. 4. 5. Daimler LVMH Moet Hennessy Louis Vuitton Telefonica Societe Generale Banco Santander 4.4% 4.1% 3.7% 3.5% 3.4% 6. 7. 8. 9. 10. Siemens Software Xstrata Aareal Bank SBM Offshore 3.3% 3.3% 3.0% 2.9% 2.7%

Portfolio by Market Sector and 10 Largest Equity Holdings are subject to change and not indicative of future portfolio composition. For more complete details about the Fund’s Schedule of Investments, see page 13. Following the Fund’s fiscal first and third quarter-ends, a complete portfolio holdings listing is filed with the SEC on Form N-Q. The form is available on the SEC’s web site at www.sec.gov, and it also may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling (800) SEC-0330. A complete list of the Fund’s portfolio holdings as of the month end is posted on www.dws-investments.com on or after the last day of the following month. More frequent posting of portfolio holdings information may be made from time to time on www.dws-investments.com. 5

INTERVIEW WITH THE VICE PRESIDENT AND LEAD PORTFOLIO MANAGER — RAINER VERMEHREN Question: Which do you believe are the most important outcomes of the European Stability Mechanism (ESM), the package of measures implemented to support Ireland and possibly other future troubled European Union (EU) countries? Answer: The EU Finance Ministers and the International Monetary Fund jointly agreed at the end of November 2010 to extend €85 billion in financial support to Ireland, up to €35 billion of which is meant for the restructuring of the banking sector. The most important outcome was the confirmation that the EU does not plan to impose haircuts on investors in existing senior sovereign bonds, which had been widely rumored to happen; haircuts will become standard, however, in the resolution process of troubled countries only on debt issued after mid-2013. After that date, investors will bear part of the risk of debt restructuring and of a potential default. European debt issued before June 2013, which expires in mid-2013, does not include this risk. Question: One of the investment themes within the fund focuses on stocks that benefit from the strong growth in emerging markets. Can you elaborate? Answer: Yes, while in the past we invested in a “Made in Emerging Markets” theme, we have shifted investments to a “Consumed in Emerging Markets” theme. Since growth within the European continent has been the slowest among the world’s major economic regions (US, Europe and Asia), and hence, consumption has stagnated, we invested in companies based in Europe that produce and export their products to these faster growing emerging markets. Important holdings worth mentioning include Volkswagen and HeidelbergCement of Germany and LVMH of France. Volkswagen has been rapidly growing in India and China, countries that have been displaying above average gross domestic product (GDP, the value of goods and services produced in an economy) growth rates for years and where greater wealth in recent years has caused demand for automobiles to explode. HeidelbergCement produces cement, aggregates and building materials which it markets in Europe and North America, as well as in Asia, Australia and Africa, where demand has been much more robust. LVMH, the French luxury goods maker, announced emerging markets sales growth in 2010 that was stronger than ever before: exports to Hong Kong, for example, grew 71% year-over-year (YOY) and are 48% above 2008 levels, their prior peak year of sales in the region; growth in mainland China was at +39% YOY and 91% above 2008 levels. Question: Which do you see as the most important equity drivers for 2011? Answer: For Europe in particular, the main question for 2011 is whether there is enough growth in the global economy to continue to paper over the cracks of an imbalanced Eurozone or whether disappointing growth dynamics will exacerbate these differences and create greater disorder in the financial system.1 The growing disparities within Europe between north and south, center and periphery, may be slowed or muted by accelerating economic and profit growth dynamics. Continued lackluster growth, on the other hand, can exacerbate some of the debt problems that have already surfaced. Other key topics include inflation, sovereign debt issues and geopolitical pressures around foreign exchange (the strength of currencies) and trade.
1

The Eurozone refers to a currency union among the European Union member states that have adopted the euro as their sole currency.

The sources, opinions and forecasts expressed are as of the date of this report. There is no guarantee that the views, opinions and forecasts expressed herein will come to pass. This information is subject to change at any time based on market and other conditions and should not be construed as a recommendation for any specific security. Past performance does not guarantee future results.

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DIRECTORS OF THE FUND Term of Office and Length of Time Principal Occupation(s) Served† During Past Five Years††

Name, Address, Age* Detlef Bierbaum, 68(1)(2)

Other Directorships Held by Director

Class I Vice Chairman of the Supervisory Director, The Central Europe and Russia Since 1986 Board of Oppenheim KAG GmbH Fund, Inc. (since 1990) and The New (asset management) and a member of Germany Fund, Inc. (since 2008). the Supervisory Board of Deutsche Bank Österreich AG since April 2010 (formerly Bank Sal. Oppenheim Jr. & Cie. (österreich) AG (private bank) from July 2005 until April 2010). Mr. Bierbaum also serves as a member of the Board or Supervisory Board of a number of non-U.S. investment companies and of companies in diverse businesses including insurance, reinsurance, real estate, and retailing. He is a former member of the Supervisory Board of Sal. Oppenheim Jr. & Cie. KGaA (private bank) (2008 to March 2010) and was formerly a partner of that firm. He is also a former member of the Supervisory Board of DWS Investment GmbH (asset management) (2005-2008). Class II Chairman, PaineWebber International Since 1986 (financial services holding company) (since 1985). Mr. Bult has many years of experience in the securities industry. Director of The Central Europe and Russia Fund, Inc. (since 1990) and The New Germany Fund, Inc. (since 1990). Director of The Greater China Fund, Inc. (closed-end fund) (Since 1992).

John Bult, 74(1)(2)

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DIRECTORS OF THE FUND (continued) Term of Office and Length of Time Principal Occupation(s) Served† During Past Five Years†† Class II Managing Director, McLarty Since 2000 Associates (international strategic advisory). Formerly, Chairman, Diligence, Inc. (international information and risk management firm) (2002-2007); Chairman of the Board, Weirton Steel Corp. (1996-2004); Partner, McKinsey & Company (consulting firm) (1991-1994); State Department, Chief Negotiator in charge of negotiating the Arms Treaty with Russia (1989-1991); U.S. Ambassador to the Federal Republic of Germany (1985-1989). Mr. Burt is also Director, IGT, Inc. (gaming technology) (since 1995), and HCL Technologies, Inc. (information technology and product engineering) (since 1999) and member, Textron Inc. International Advisory Council (aviation, automotive, industrial operations and finance) (since 1996).

Name, Address, Age* Ambassador Richard R. Burt, 63(1)

Other Directorships Held by Director Director, The Central Europe and Russia Fund, Inc. (since 2000) and The New Germany Fund, Inc. (since 2004). Director, UBS family of mutual funds (since 1995).

John H. Cannon, 68(1)

Director of The New Germany Fund, Inc. Class I Consultant (since 2002). Formerly, Since 2004 Vice President and Treasurer, Venator (since 1990) and The Central Europe and Group/Footlocker, Inc. (footwear re- Russia Fund, Inc. (since 2004). tailer) (1982-2002). Class I Retired. Formerly Vice Chairman and Since 2008 Chief Financial Officer of American Express Co. (financial services) (1996-2000) and previously served as chief financial officer of two other major multi-national corporations. Mr Goeltz is a member of the Council and Court of Governors of the London School of Economics and Political Science, Trustee of the American Academy in Berlin and of other charitable organizations. 8 Director, The Central Europe and Russia Fund, Inc. (since 2008) and The New Germany Fund, Inc. (since 1990). Independent Non-Executive Director of Aviva plc (financial services) and The Warnaco Group Inc. (apparel). Formerly director of Federal Home Loan Mortgage Corporation and Delta Air Lines, Inc. (air transport).

Richard Karl Goeltz, 68(1)

DIRECTORS OF THE FUND (continued) Term of Office and Length of Time Principal Occupation(s) Served† During Past Five Years††

Name, Address, Age* Dr. Franz Wilhelm Hopp, 68(1)

Other Directorships Held by Director

Class III Member of the Board of Management Director of The Central Europe and Since 2008 of KarstadtQuelle Pension Trust e.V . Russia Fund, Inc. (since 2008) and The New Germany Fund, Inc. (since 1993). (February 2007-September 2009). Former Member of the Boards of Management of ERGO Insurance Group AG, ERGO Europa Beteiligungsgesellschaft AG, and ERGO International AG (insurance) (over five years until 2004). Former Member of the Boards of Management of VICTORIA Holding, VICTORIA Lebensversicherung AG (life insurance), VICTORIA Versicherung AG (insurance), VICTORIA International, VICTORIA Rückversicherung AG (reinsurance) and D.A.S. Versicherungs-AG. (insurance). Director, The Central Europe and Russia Class II Vice Chairman and Member of the Fund, Inc. (since 2007) and The New Since 2007 Executive Committee of NOL Neptune Orient Lines Ltd., Singapore Germany Fund, Inc. (since 2007). (“NOL”) (since 2002). He currently is also a Director of NOL (since 2000) and TÜV Rheinland of North America, Inc., a company offering independent testing and assessment services. Formerly, Dr. Malt was a Member of the Executive Board of DG Bank (now DZ Bank), Frankfurt (until 2001).

Dr. Friedbert Malt, 69(1)

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DIRECTORS OF THE FUND (continued) Term of Office and Length of Time Principal Occupation(s) Served† During Past Five Years††

Name, Address, Age*

Other Directorships Held by Director

Christian H. Strenger, 67(1)(2) Class III Member of Supervisory Board (since Director of The Central Europe and Russia Fund, Inc. (since 1990) and The Since 1986 1999) and formerly Managing New Germany Fund, Inc. (since 1990). Director (1991-1999) of DWS Investment GmbH (investment management), a subsidiary of Deutsche Bank AG. Mr. Strenger is also a Supervisory Board Member, Evonik Industries AG (chemical, utility and property business), Fraport AG (international airport business) and Hermes Equity Ownership Services Ltd. (governance advisory). Robert H. Wadsworth, 70(1)(3) Class I President, Robert H. Wadsworth Since 1986 Associates, Inc. (consulting firm) (1983-present). Mr. Wadsworth also has experience as an owner and chief executive officer of various businesses serving the mutual fund industry, including a registered brokerdealer and a registered transfer agent, and has served as a senior executive officer of several mutual funds. Joachim Wagner, 63(1) Director of The Central Europe and Russia Fund, Inc. (since 1990) and The New Germany Fund, Inc. (since 1992), as well as other funds in the Fund Complex.

Class II Chief Financial Officer, RAG Director of The New Germany Fund, Inc. Since 2009 Beteiligungs AG/Evonik Industries AG, (since 2009). Germany (chemical, utility and property business) (2006-2009). Formerly, Chief Financial Officer, Degussa AG, Germany (chemical manufacturer) (2001-2006). Mr. Wagner is also a member of the Supervisory Board of a German retail bank and a member of the advisory board of a private German bank.

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DIRECTORS OF THE FUND (continued) Term of Office and Length of Time Principal Occupation(s) Served† During Past Five Years††

Name, Address, Age* Werner Walbröl, 73(1)

Other Directorships Held by Director

Class III Delegate for North American Director of The Central Europe and Since 1986 Humboltt Universitat (Berlin). Russia Fund, Inc. (since 1990) and The New Germany Fund, Inc. (since 2004). Formerly, President and Chief Executive Officer, The European American Chamber of Commerce, Inc. (2004-2008); President and Chief Executive Officer, The German American Chamber of Commerce, Inc. (until 2003). Mr. Walbröl is also a Director of The German American Chamber of Commerce, Inc. President and Director, GermanAmerican Partnership Program (student exchange programs), and a Director of an independent testing and assessment company.

that each Director also serves as a Director of The Central Europe and Russia Fund, Inc. and The New Germany Fund, Inc., two other closedend registered investment companies for which Deutsche Investment Management Americas Inc. acts as Manager (except Mr. Wagner who also serves as a Director of The New Germany Fund, Inc). (2) Indicates “interested” Director, as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). Mr. Bult is an “interested” Director because of his affiliation with PaineWebber International, an affiliate of UBS Securities LLC, a registered broker-dealer, and Mr. Strenger is an “interested” Director because of his affiliation with DWS-Deutsche Gesellschaft für Werpapiersparen mbH (“DWS”), a majority-owned subsidiary of Deutsche Bank AG, and because of his ownership of Deutsche Bank AG shares. Prior to April 2010, Mr. Bierbaum was “interested” because of his prior relationship with Sal. Oppenheim Jr. & Cie KGaA, which executed portfolio securities transactions for the Fund and certain affiliated persons, and because of his former ownership of Deutsche Bank AG shares. (3) Indicates that Mr.Wadsworth also serves as Director/Trustee of the DWS Investments’ open-end and closed-end investment companies. These Funds are advised by Deutsche Investment Management Americas Inc., an indirect wholly-owned subsidiary of Deutsche Bank AG. * The address of each Director is c/o Deutsche Investment Management Americas Inc., 345 Park Avenue, NYC20-2799, New York, NY 10154. † The term of office for Directors in Class I expires at the 2012 Annual Meeting, Class II expires at the 2013 Annual Meeting and Class III expires at the 2011 Annual Meeting. †† The information above includes each Director’s principal occupation during the last five years and other information relating to the experience, attributes and skills relevant to each Director’s qualifications to serve as a Director, which led (together with the Director’s current and prior experience as a Director of other SEC reporting companies, if any, as indicated elsewhere in the table) to the conclusion that each Director should serve as a Director for the Fund.

(1) Indicates

11

OFFICERS OF THE FUND* Name, Age Michael G. Clark(1)(2), 45 President and Chief Executive Officer Paul H. Schubert(2)(4), 47 Chief Financial Officer and Treasurer Rainer Vermehren(5)(6), 42 Vice President John Millette(7)(8), 48 Secretary Rita Rubin(9)(10), 40 Chief Legal Officer Alexis Kuchinsky(10)(11), 34 Chief Compliance Officer John Caruso(5)(10), 45 Anti-Money Laundering Compliance Officer Principal Occupations During Past Five Years Managing Director(3), Deutsche Asset Management (since 2006); President of DWS family of funds. Formerly, Director of Fund Board Relations (2004-2006) and Director of Product Development, Merrill Lynch Investment Managers (2000-2004). Managing Director(3), Deutsche Asset Management (since 2004). Formerly, Executive Director, Head of Mutual Fund Services and Treasurer for UBS Family of Funds at UBS Global Asset Management (1998-2004). Director(3), DWS Investment GmbH (since 2007). Fund Manager, DWS Investment GmbH (since 1997). Director(3), Deutsche Asset Management (since 2002). Vice President and Counsel, Deutsche Asset Management (since 2007). Formerly, Vice President, Morgan Stanley Investment Management Inc. (2004-2007). Vice President, Deutsche Asset Management (since 2002); Head of Compliance Program Oversight of Deutsche Asset Management. Managing Director(3), Deutsche Asset Management.

Each also serves as an Officer of The Central Europe and Russia Fund, Inc. and The New Germany Fund, Inc., two other closed-end registered investment companies for which Deutsche Investment Management Americas Inc. acts as Manager. * As a result of their respective positions held with the Manager, these individuals are considered “interested persons” of the Manager within the meaning of the 1940 Act. Interested persons receive no compensation directly from the Fund. Since June 15, 2006. Address: 100 Plaza One, Jersey City, New Jersey 07311. Executive title, not a board directorship. Since November 5, 2004. Since February 1, 2010. Address: Mainzer Landstraße 178-190, Frankfurt am Main, Germany. Since January 3, 2011. From July 14, 2006 to January 3, 2011 served as Assistant Secretary to the Fund. From January 30, 2006 to July 14, 2006 served as Secretary to the Fund. (8) Address: One Beacon Street, Boston, Massachusetts 02108. (9) Since July 21, 2008. (10) Address: 60 Wall Street, New York, New York 10005. (11) Since August 24, 2009.
(1) (2) (3) (4) (5) (6) (7)

12

THE EUROPEAN EQUITY FUND, INC. SCHEDULE OF INVESTMENTS — DECEMBER 31, 2010
Shares Description Value(a) Shares Description Value(a)

INVESTMENTS IN GERMAN SECURITIES – 41.7%
97,000 60,000 21,000 11,000 8,000 COMMON STOCKS – 37.7% AIRLINES – 2.3% Deutsche Lufthansa* . . . . . . . . . . . AUTOMOBILES – 4.3% Daimler* . . . . . . . . . . . . . . . . . . . . CHEMICALS – 5.0% Lanxess . . . . . . . . . . . . . . . . . . . . . Linde . . . . . . . . . . . . . . . . . . . . . . . Wacker Chemie . . . . . . . . . . . . . . . CONSTRUCTION MATERIALS – 2.4% HeidelbergCement . . . . . . . . . . . . . DIVERSIFIED TELECOMMUNICATION SERVICES – 1.1% Deutsche Telekom . . . . . . . . . . . . . ELECTRIC UTILITIES – 1.6% E.ON . . . . . . . . . . . . . . . . . . . . . . . ELECTRICAL EQUIPMENT – 2.3% Tognum . . . . . . . . . . . . . . . . . . . . . INDUSTRIAL CONGLOMERATES – 3.3% Siemens . . . . . . . . . . . . . . . . . . . . . INSURANCE – 2.0% Allianz . . . . . . . . . . . . . . . . . . . . . . INTERNET SOFTWARE & SERVICES – 1.9% United Internet . . . . . . . . . . . . . . . PHARMACEUTICALS – 1.9% Bayer . . . . . . . . . . . . . . . . . . . . . . . SOFTWARE – 4.6% SAP . . . . . . . . . . . . . . . . . . . . . . . . Software . . . . . . . . . . . . . . . . . . . . . TEXTILES, APPAREL & LUXURY GOODS – 2.1% Adidas* . . . . . . . . . . . . . . . . . . . . . $ 2,128,202 4,083,258 1,664,936 1,675,600 1,401,599 4,742,135

36,000

2,264,989

THRIFTS & MORTGAGE FINANCE – 2.9% 88,000 Aareal Bank* . . . . . . . . . . . . . . . . . $ 2,691,586 Total Common Stocks (cost $26,596,549) . . . . . . . . . . . . 35,502,703 PREFERRED STOCKS – 4.0% AUTOMOBILES – 1.7% 10,000 Volkswagen (cost $951,062) . . . . . . . . . . . . . . 1,628,581 HOUSEHOLD PRODUCTS – 2.3% 34,000 Henkel & Co. (cost $1,288,680) . . . . . . . . . . . . . 2,122,508 Total Preferred Stocks (cost $2,239,742) . . . . . . . . . . . . . 3,751,089 Total Investments in German Securities (cost $28,836,291) . . . . . . . . . . . . 39,253,792

80,000 49,000 80,000

1,036,175 1,507,598 2,116,887

INVESTMENTS IN FRENCH COMMON STOCKS – 16.0%
60,000 COMMERCIAL BANKS – 3.4% Societe Generale . . . . . . . . . . . . . . HEALTH CARE EQUIPMENT & SUPPLIES – 2.1% Essilor International . . . . . . . . . . . HOTELS, RESTAURANTS & LEISURE – 2.4% Accor . . . . . . . . . . . . . . . . . . . . . . . MULTI-UTILITIES – 2.3% GDF Suez . . . . . . . . . . . . . . . . . . . OIL, GAS & CONSUMABLE FUELS – 1.8% Total . . . . . . . . . . . . . . . . . . . . . . . . TEXTILES, APPAREL & LUXURY GOODS – 4.0% LVMH Moet Hennessy Louis Vuitton . . . . . . . . . . . . . . . . Total Investments in French Common Stocks (cost $14,456,818) . . . . . . . . . . . . 3,237,308

25,000 16,000

3,108,926 1,908,793

30,000

1,938,803

50,000 60,000

2,233,598 2,161,156

110,000 24,000 25,000 21,000

1,795,128 1,780,439 1,277,779 3,093,230 4,371,009

32,000

1,702,095

23,000

3,798,189

30,000

1,967,578

15,071,149

The accompanying notes are an integral part of the financial statements.

13

THE EUROPEAN EQUITY FUND, INC. SCHEDULE OF INVESTMENTS — DECEMBER 31, 2010 (continued)
Shares Description Value(a) Shares Description Value(a)

INVESTMENTS IN SPANISH COMMON STOCKS – 9.8%
300,000 COMMERCIAL BANKS – 3.4% Banco Santander . . . . . . . . . . . . . . DIVERSIFIED TELECOMMUNICATION SERVICES – 3.6% Telefonica . . . . . . . . . . . . . . . . . . . INDEPENDENT POWER PRODUCERS & ENERGY TRADERS – 0.8% Iberdrola Renovables . . . . . . . . . . . OIL, GAS & CONSUMABLE FUELS – 2.0% Repsol YPF* . . . . . . . . . . . . . . . . . Total Investments in Spanish Common Stocks (cost $7,659,446) . . . . . . . . . . . . . $ 3,190,623

110,000 40,000

150,000

3,413,782

ENERGY EQUIPMENT & SERVICES – 2.7% SBM Offshore . . . . . . . . . . . . . . . . FOOD PRODUCTS – 1.3% Unilever . . . . . . . . . . . . . . . . . . . . . Total Investments in Dutch Common Stocks (cost $6,689,178) . . . . . . . . . . . . .

$ 2,473,927 1,250,278

7,686,165

200,000

712,605

INVESTMENTS IN FINNISH COMMON STOCKS – 5.7%
60,000 AUTO COMPONENTS – 2.4% Nokian Renkaat . . . . . . . . . . . . . . . CONSTRUCTION & ENGINEERING – 2.0% Yit . . . . . . . . . . . . . . . . . . . . . . . . . MACHINERY – 1.3% Metso . . . . . . . . . . . . . . . . . . . . . . . Total Investments in Finnish Common Stocks (cost $4,367,000) . . . . . . . . . . . . . 2,209,451

68,000

1,901,979 76,000 9,218,989 22,000

1,901,442 1,233,643

INVESTMENTS IN SWISS COMMON STOCKS – 8.8%
20,500 9,000 120,000 COMMERCIAL SERVICES & SUPPLIES – 1.2% Gategroup Holding AG* . . . . . . . . INSURANCE – 2.5% Zurich Financial Services . . . . . . . METALS & MINING – 3.0% Xstrata . . . . . . . . . . . . . . . . . . . . . . PROFESSIONAL SERVICES – 2.1% Adecco* . . . . . . . . . . . . . . . . . . . . . Total Investments in Swiss Common Stocks (cost $6,663,419) . . . . . . . . . . . . . 1,124,236 2,337,086 2,828,413 70,000 1,970,087 48,000 8,259,822

5,344,536

INVESTMENTS IN BRITISH COMMON STOCKS – 4.1%
1,000,000 COMMERCIAL BANKS – 1.1% Lloyds Banking Group* . . . . . . . . COMMERCIAL SERVICES & SUPPLIES – 1.7% Aggreko . . . . . . . . . . . . . . . . . . . . . ENERGY EQUIPMENT & SERVICES – 1.3% Acergy . . . . . . . . . . . . . . . . . . . . . . Total Investments in British Common Stocks (cost $3,528,797) . . . . . . . . . . . . . 1,028,599

1,624,153

30,000

1,178,835

3,831,587

INVESTMENTS IN DUTCH COMMON STOCKS – 8.2%
36,000 CHEMICALS – 2.2% Koninklijke DSM . . . . . . . . . . . . . DIVERSIFIED FINANCIAL SERVICES – 2.0% ING Groep* . . . . . . . . . . . . . . . . . . 2,057,566

INVESTMENTS IN NORWEGIAN COMMON STOCKS – 2.2%
2,000,000 1,904,394 FOOD PRODUCTS – 2.2% Marine Harvest . . . . . . . . . . . . . . . Total Investments in Norwegian Common Stocks (cost $1,856,590) . . . . . . . . . . . . . 2,119,292

195,000

2,119,292

The accompanying notes are an integral part of the financial statements.

14

THE EUROPEAN EQUITY FUND, INC. SCHEDULE OF INVESTMENTS — DECEMBER 31, 2010 (continued)
Shares Description Value(a) For purposes of its industry concentration policy, the Fund classifies issuers of portfolio securities at the industry sub-group level. Certain of the categories in the above Schedule of Investments consist of multiple industry sub-groups or industries.

INVESTMENTS IN ITALIAN COMMON STOCKS – 1.5%
700,000 COMMERCIAL BANKS – 1.5% UniCredit . . . . . . . . . . . . . . . . . . . . Total Investments in Italian Common Stocks (cost $1,422,533) . . . . . . . . . . . . . $ 1,453,649

1,453,649

INVESTMENTS IN DANISH COMMON STOCKS – 1.1%
50,000 CHEMICALS – 1.1% Christian Hansen Holding . . . . . . . Total Investments in Danish Common Stocks (cost $834,047) . . . . . . . . . . . . . . Total Investments in Common and Preferred Stocks – 99.1% (cost $76,314,119) . . . . . . . . . . . . 1,025,992

1,025,992

93,264,973

CASH EQUIVALENTS – 0.1%
56,740 Central Cash Management Fund, 0.19% (cost $56,740)(b) . . . . . . . . . . . . . . Total Investments – 99.2% (cost $76,370,859)** . . . . . . . . . . Other Assets and Liabilities, Net – 0.8% . . . . . . . . . . . . . . . . . . NET ASSETS – 100.0% . . . . . . . . 56,740 93,321,713 758,215 $94,079,928

* Non-income producing security. ** The cost for federal income tax purposes was $76,492,007. At December 31, 2010, net unrealized appreciation for all securities based on tax cost was $16,829,706. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $20,676,826 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $3,847,120. (a) Value stated in US dollars. (b) Affiliated fund managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end. The accompanying notes are an integral part of the financial statements.

15

THE EUROPEAN EQUITY FUND, INC. SCHEDULE OF INVESTMENTS — DECEMBER 31, 2010 (continued) Fair Value Measurements
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used as of December 31, 2010 in valuing the Fund’s investments. For information on the Fund’s policy regarding the valuation of investments, please refer to the Security Valuation section of Note 1 in the accompanying Notes to Financial Statements.
Category Level 1 Level 2 Level 3 Total

Common Stocks and/or Other Equity Investments(c) Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Britain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-Term Instruments . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$39,253,792 15,071,149 9,218,989 8,259,822 7,686,165 5,344,536 3,831,587 2,119,292 1,453,649 1,025,992 56,740 $93,321,713

$

$

— — — — — — — — — — — —

$

$

— — — — — — — — — — — —

$39,253,792 15,071,149 9,218,989 8,259,822 7,686,165 5,344,536 3,831,587 2,119,292 1,453,649 1,025,992 56,740 $93,321,713

There have been no significant transfers in and out of Level 1 and Level 2 fair value measurements during the year December 31, 2010.
(c) See Schedule of Investments for additional detailed categorizations.

The accompanying notes are an integral part of the financial statements.

16

THE EUROPEAN EQUITY FUND, INC. STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2010 ASSETS
Investments in securities, at value (cost $76,314,119) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in Central Cash Management Fund (cost $56,740) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total investments, at value (cost $76,370,859) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency, at value (cost $1,436,549) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 93,264,973 56,740 93,321,713 1,471,079 51,115 1,159 8,009 94,853,075 45,492 26,408 27,169 517,476 156,602 773,147 $ 94,079,928 164,966,969 (43,784,355) 76,733 (44,170,138) 16,990,719 $ 94,079,928 $8.18

LIABILITIES
Management fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment advisory fee payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payable for Directors’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets consist of: Paid-in capital, $0.001 par (Authorized 80,000,000 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of 5,349,798 shares held in Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Undistributed net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated net realized gain (loss) on investments and foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net unrealized appreciation on investments and foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets value per share ($94,079,928 ÷ 11,499,478 shares of common stock issued and outstanding) . . . . . . . . . . .

The accompanying notes are an integral part of the financial statements.

17

THE EUROPEAN EQUITY FUND, INC. STATEMENT OF OPERATIONS
For the year ended December 31, 2010

NET INVESTMENT INCOME
Income: Dividends (net of foreign witholding taxes of $326,338) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income distributions — Central Cash Management Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Securities lending, including income from Daily Assets Fund Institutional, net of borrower rebates . . . . . . . . . . . Total investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses: Management fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Custodian fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Services to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reports to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Directors’ fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Audit and tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NYSE listing fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total expenses before expense reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Partial waiver of management fee and investment advisory fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total expenses after expense reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,993,232 1,518 345 105,981 2,101,076 530,360 305,683 82,732 37,490 117,673 165,778 77,871 57,002 23,757 9,811 18,951 1,427,108 (198,916) 1,228,192 872,884

REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from: Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment made by affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in net unrealized appreciation (depreciation) on: Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
The accompanying notes are an integral part of the financial statements.

1,038,315 (270,470) 13,773 781,618 (730,724) 82,760 (647,964) 133,654 $1,006,538

18

THE EUROPEAN EQUITY FUND, INC. STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 2010 For the year ended December 31, 2009

INCREASE (DECREASE) IN NET ASSETS
Operations: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net realized gain (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in net unrealized appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net increase in net assets resulting from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distributions to shareholders from: Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital share transactions: Net proceeds from reinvestment of dividends (77,238 and 207,315 shares, respectively) . . Cost of shares repurchased (627,075 and 265,168 shares, respectively) . . . . . . . . . . . . . . . Net decrease in net assets from capital share transactions . . . . . . . . . . . . . . . . . . . . . . . . . . Total increase (decrease) in net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,004 (4,156,102) (3,664,098) (3,297,119) 1,167,182 (1,604,014) (436,832) 20,113,674 (639,559) (4,013,767) $ 872,884 781,618 (647,964) 1,006,538 $ 1,294,273 (23,615,941) 46,885,941 24,564,273

NET ASSETS
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . End of year (including undistributed net investment income of $76,733 and $113,878, as of December 31, 2010 and December 31, 2009, respectively) . . . . . . . . . . . . 97,377,047 $94,079,928 77,263,373 $ 97,377,047

The accompanying notes are an integral part of the financial statements.

19

THE EUROPEAN EQUITY FUND, INC. FINANCIAL HIGHLIGHTS Selected data for a share of common stock outstanding throughout each of the years indicated:
For the years ended December 31, 2010 2009 2008 2007 2006

Per share operating performance: Net asset value: Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net realized and unrealized gain (loss) on investments and foreign currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) from investment operations . . . . . . . . . . . . . . . . .. Distributions from net investment income . . . . . . . . . . . . . . . . . . . . . . Distributions from net realized gains . . . . . . . . . . . . . . . . . . . . . . . . . . Total distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilution in net asset value from dividend reinvestment . . . . . . . . . . . Increase resulting from share repurchases . . . . . . . . . . . . . . . . . . . . . . Net asset value: End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market value: End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total investment return for the year:† Based upon market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Based upon net asset value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ratio to average net assets: Ratio of expenses before expense reductions . . . . . . . . . . . . . . . . . . . Ratio of expenses after expense reductions . . . . . . . . . . . . . . . . . . . . . Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net assets at end of year (000’s omitted) . . . . . . . . . . . . . . . . . . . . . . .
(a)

$

8.08 .07 .06 .13 (.06) — (.06) (.01) .04

$ 6.38 .11 1.92 2.03 (.33) — (.33) (.02) .02 $ 8.08 $ 7.05

$ 13.52 .25 (6.87) (6.62) — (.53) (.53) — .01 $ $ 6.38 5.45

$

12.94 .16 1.71 1.87 (.25) (1.00) (1.25) (.04) —

$

9.95 .10 3.27 3.37 (.38) — (.38) — .00(b)

$ $

8.18 7.58

$ $

13.52 12.39 11.79% 15.35%

$ 12.94 $ 12.20 42.35% 34.01% 1.60%* 1.60%* .89% 64% $152,986

8.32% 36.84% (53.96)% 1.99%** 33.76%** (50.68)% 1.63% 1.41% 1.00% 67% $94,080 1.69% 1.55% 1.59% 77% $97,377 1.43% 1.43% 2.40% 85% $77,263

1.23%* 1.23%* 1.18% 78% $165,662

(a) Based on average shares outstanding during the year. (b) Amount is less than $0.005 per share. † Total return based on net asset value reflects changes in the Fund’s net asset value during each period. Total return based on market value reflects changes in market value during each period. Each figure includes reinvestments of dividend and capital gains distributions, if any. These figures will differ depending upon the level of any discount from or premium to net asset value at which the Fund’s shares trade during the period. * Prior to February 2007, custody credits were earned on U.S. cash balances. The ratios of total expenses after custody credits to average net assets are 1.23% and 1.59% for 2007 and 2006, respectively. ** Total return would have been lower had certain expenses not been reduced.

20

THE EUROPEAN EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS — DECEMBER 31, 2010 NOTE 1. ACCOUNTING POLICIES The European Equity Fund, Inc. (the “Fund”) was incorporated in Delaware on April 8, 1986 as a diversified, closedend management investment company. Investment operations commenced on July 23, 1986. The Fund reincorporated in Maryland on August 29, 1990 and, on October 16, 1996, the Fund changed from a diversified to a non-diversified company. The Fund became a diversified fund on October 31, 2008. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Security Valuation: The Fund calculates its daily net asset value per share for publication at 11:30 a.m., New York time. Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Equity securities are valued at the most recent sale price or official closing price reported on the exchange or over-thecounter market on which they trade prior to the time of valuation and are categorized as Level 1 securities. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost, which approximates value, and are categorized as Level 2. Investments in open-end investment companies are valued at their net asset value each business day and are categorized as Level 1. Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors used in determining value may include, but are not limited to, the type of security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold and with respect to debt securities; the maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities. Disclosure about the classification of the fair value measurements is included in a table following the Fund’s Schedule of Investments. Securities Transactions and Investment Income: Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Certain dividends from foreign securities may be recorded subsequent to the ex-dividend date as soon as the Fund is 21

THE EUROPEAN EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS — DECEMBER 31, 2010 (continued) informed of such dividends. Realized gains and losses from investment transactions are recorded on an identified cost basis. Securities Lending: The Fund lends securities to certain financial institutions. The Fund retains beneficial ownership of the securities it has loaned and continues to receive interest and dividends paid by the issuer of securities and to participate in any changes in their market value. The Fund requires the borrowers of the securities to maintain collateral with the Fund consisting of either cash or liquid, unencumbered assets having a value in excess of the value of the securities loaned. When the collateral falls below specified amounts, the lending agent will use its best effort to obtain additional collateral on the next business day to meet required amounts under the security lending agreement. The Fund may invest the cash collateral into a joint trading account in an affiliated money market fund pursuant to Exemptive Orders issued by the SEC. Deutsche Investment Management Americas Inc. receives a management/administration fee (0.10% annualized effective rate as of December 31, 2010) on the cash collateral invested in the affiliated money fund. The Fund receives compensation for lending its securities either in the form of fees or by earning interest on invested cash collateral net of borrower rebates and fees paid to a lending agent. Either the Fund or the borrower may terminate the loan. There may be risks of delay and costs in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. The Fund is subject to all investment risks associated with the reinvestment of any cash collateral received, including, but not limited to, interest rate, credit and liquidity risk associated with such investments. The Fund had no securities on loan as of December 31, 2010. Foreign Currency Translations: The books and records of the Fund are maintained in United States dollars. Assets and liabilities denominated in foreign currency are translated into United States dollars at the 11:00 a.m. midpoint of the buying and selling spot rates quoted by the Federal Reserve Bank of New York. Purchases and sales of investment securities, income and expenses are reported at the rate of exchange prevailing on the respective dates of 22 such transactions. The portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments. Contingencies: In the normal course of business, the Fund may enter into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. Taxes: No provision has been made for United States Federal income tax because the Fund intends to meet the requirements of the United States Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to shareholders. For United States Federal income tax purposes, the Fund had a capital loss carryforward at December 31, 2010 of approximately $44,049,000 which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2016 ($8,658,000) and December 31, 2017 ($35,391,000), the respective expiration dates, whichever occurs first. During the year ended December 31, 2010, the fund utilized $347,000 of prior year capital loss carryforward. Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for the foreign jurisdictions in which it invests, the Fund will provide for foreign taxes, and where appropriate, deferred foreign taxes. The Fund has reviewed the tax positions for the open tax years as of December 31, 2010 and has determined that no provision for income tax is required in the Fund’s financial statements. The Fund’s federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service.

THE EUROPEAN EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS — DECEMBER 31, 2010 (continued) Dividends and Distributions to Shareholders: The Fund records dividends and distributions to its shareholders on the ex-dividend date. Income and capital gain distributions are determined in accordance with United States Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to investments in foreign denominated investments, investments in foreign passive investment companies, recognition of certain foreign currency gains (losses) as ordinary income (loss) and certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund. At December 31, 2010, the Fund’s components of distributable earnings (accumulated losses) on a tax basis were as follows:
Undistributed ordinary income . . . . . . . . . . . . . $ 76,733 Capital loss carryforward . . . . . . . . . . . . . . . . . . $(44,049,000) Net unrealized appreciation (depreciation) . . . . $ 16,829,706

The Management Agreement provides the Manager with a fee, computed weekly and payable monthly, at the annual rates of 0.65% of the Fund’s average weekly net assets up to $50 million, and 0.55% of such assets in excess of $50 million. The Investment Advisory Agreement provides the Investment Adviser with a fee, computed weekly and payable monthly, at the annual rates of 0.35% of the Fund’s average weekly net assets up to $100 million and 0.25% of such assets in excess of $100 million. In addition, the Manager and Investment Adviser have agreed to implement temporary partial fee waivers. For the period from January 1, 2010 through August 31, 2010, the aggregate fees payable by the Fund to the Manager and the Investment Adviser were reduced by 35 basis points. As a result, the aggregate investment management and investment advisory fees payable by the Fund during the waiver period was 0.65% of the first $50 million of the Fund’s average weekly net assets, 0.55% of the next $50 million of average weekly net assets, and 0.45% of average weekly net assets in excess of $100 million. Accordingly, for the year ended December 31, 2010, the combined fee pursuant to the Management and Investment Advisory Agreements aggregated $836,043 of which $198,916 was waived resulting in an annual effective rate of 0.73% of the Fund’s average daily net assets. Pursuant to the Management Agreement, the Manager is the corporate manager and administrator of the Fund and, subject to the supervision of the Board of Directors and pursuant to recommendations made by the Fund’s Investment Adviser, determines suitable securities for investment by the Fund. The Manager also provides office facilities and certain administrative, clerical and bookkeeping services for the Fund. Pursuant to the Investment Advisory Agreement, the Investment Adviser, in accordance with the Fund’s stated investment objective, policies and restrictions, makes recommendations to the Manager with respect to the Fund’s investments and, upon instructions given by the Manager as to suitable securities for investment by the Fund, transmits purchase and sale orders and selects brokers and dealers to execute portfolio transactions on behalf of the Fund. 23

In addition, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
Years Ended December 31, 2010 2009

Distributions from ordinary income* . . . . . . . . . . . . . . . . . . . . .

$639,559

$4,013,767

*For tax purposes short-term capital gains are considered ordinary income.

NOTE 2. MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS The Fund has a Management Agreement with Deutsche Investment Management Americas Inc. (the “Manager”). The Fund has an Investment Advisory Agreement with Deutsche Asset Management International GmbH (the “Investment Adviser”). The Manager and the Investment Adviser are affiliated companies.

THE EUROPEAN EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS — DECEMBER 31, 2010 (continued) NOTE 3. TRANSACTIONS WITH AFFILIATES DWS Investments Service Company (“DISC”), an affiliate of the Manager, is the transfer agent, dividend-paying agent and shareholder service agent of the Fund. Pursuant to a sub-transfer agency agreement between DISC and DST Systems, Inc. (“DST”), DISC has delegated certain transfer agent and dividend-paying agent paying functions to DST. DISC compensates DST out of the shareholder servicing fee it receives from the Fund. For the year ended December 31, 2010, the amount charged to the Fund by DISC aggregated $37,490, of which $6,249 is unpaid. Deutsche Bank AG, the German parent of the Manager and the Investment Adviser, and its affiliates may receive brokerage commissions as a result of executing agency transactions in portfolio securities on behalf of the Fund, that the Board determined were effected in compliance with the Fund’s Rule 17e-1 procedures. For the year ended December 31, 2010, Deutsche Bank did not receive brokerage commissions. Certain Officers of the Fund are also officers of either the Manager or Investment Adviser. The Fund pays each Director not an “interested person” of the Manager or Investment Adviser retainer fees plus specified amounts for attended board and committee meetings. The Fund may invest uninvested cash balances in Central Cash Management Fund, which is managed by the Advisor. The Fund indirectly bears its proportionate share of the expenses of the underlying money market funds. Central Cash Management Fund does not pay the Advisor an investment management fee. Central Cash Management Fund seeks a high level of current income consistent with liquidity and the preservation of capital. NOTE 4. PORTFOLIO SECURITIES Purchases and sales of investment securities, excluding short-term investments, for the year ended December 31, 2010 were $56,948,877 and $58,982,885, respectively. NOTE 5. INVESTING IN FOREIGN MARKETS Foreign investments may involve certain considerations and risks not typically associated with those of domestic origin as a result of, among others, the possibility of political and economic developments, and the level of governmental supervision and regulation of foreign securities markets. In addition, certain foreign markets may be substantially smaller, less developed, less liquid and more volatile than the major markets of the United States. Any fund that concentrates in a particular segment of the market will generally be more volatile than a fund that invests more broadly. NOTE 6. CAPITAL During the year ended December 31, 2010 and the year ended December 31, 2009, the Fund purchased 627,075 and 265,168 of its shares of common stock on the open market at a total cost of $4,156,102 and $1,604,014 ($6.63 and $6.05 average per share), respectively. The weighted average discount of these purchased shares comparing the purchased price to the net asset value at the time of purchase was 11.19% and 14.09%, respectively. During the year ended December 31, 2010 and the year ended December 31, 2009, the Fund issued for dividend reinvestment 77,238 and 207,315 shares, respectively. The average discount of these issued shares comparing the issue price to the net asset value at the time of reissuance was 12.62% and 15.21%, respectively. NOTE 7. TENDER OFFER AND SHARE REPURCHASES On July 20, 2010 the Fund announced that the Board of Directors approved a series of up to four, consecutive, semiannual tender offers each for up to 5% of the Fund’s outstanding shares at a price equal to 98% of net asset value. The Fund conducted a tender offer if its shares traded at an average discount to NAV of more than 10% during the applicable twelve-week measurement period. The first measurement period commenced September 1, 2010 and expired on November 24, 2010. During the measurement

24

THE EUROPEAN EQUITY FUND, INC. NOTES TO FINANCIAL STATEMENTS — DECEMBER 31, 2010 (continued) period, the Fund’s shares traded at an average discount to NAV of 10.02%. Therefore, the Fund conducted a tender offer which commenced on January 7, 2011 and expired on February 8, 2011. The Fund accepted 574,974 tendered shares (which represents 5% of the Fund’s oustanding shares of common stock) at a price equal to 98% of the net asset value per share as of the close of the regular trading session of the New York Stock Exchange on February 9, 2011. Approximately 4,789,310 shares of common stock, or approximately 42% of the Fund’s common shares outstanding, were tendered through the expiration date. Because the offer was oversubscribed, not all of the tendered shares were accepted for payment by the Fund. Under the final pro-ration calculation, approximately 12% of the tendered shares were accepted for payment. The shares accepted for payment received cash at a repurchase price of $8.62 per share, which was equal to 98% of the net asset value per share on February 9, 2011. The second measurement period will commence on March 7, 2011 and expire on May 27, 2011. The Fund simultaneously announced that the Board of Directors had authorized the Fund to repurchase up to 600,000 shares during the period August 1, 2010 through July 31, 2011. The Fund had previously been authorized to repurchase up to 500,000 shares between November 1, 2009 through October 31, 2010. Purchases are made when it is believed that such repurchases are advantageous to the Fund. Monthly updates concerning the Fund’s repurchase program are available on its web site at www.dws-investments.com. NOTE 8. PAYMENT MADE BY AFFILIATES During the year ended December 31, 2010, the Advisor fully reimbursed the Fund $13,773 to compensate for a breach of the Fund’s procedures relating to an affiliate. The amount of the reimbursement was 0.02% of the Fund’s average net assets.

25

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of The European Equity Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The European Equity Fund, Inc. (the “Fund”) at December 31, 2010, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2010 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP Boston, Massachusetts February 24, 2011

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VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN (unaudited) The Fund offers shareholders a Voluntary Cash Purchase Program and Dividend Reinvestment Plan (the “Plan”) which provides for optional cash purchases and for the automatic reinvestment of dividends and distributions payable by the Fund in additional Fund shares. A more complete description of the Plan is provided in the Plan brochure available from DWS Investments Service Company, the transfer agent (the “Transfer Agent”), P.O. Box 219066, Kansas City, Missouri 64105 (telephone 1-800-437-6269). Computershare, Inc. (the Plan Agent”) acts as the plan agent under the Plan. A shareholder should read the Plan brochure carefully before enrolling in the Plan. Under the Plan, participating shareholders (“Plan Participants”) appoint the Transfer Agent to receive or invest Fund distributions as described below under “Reinvestment of Fund Shares.” In addition, Plan Participants may make optional cash purchases through the Transfer Agent as often as once a month as described below under “Voluntary Cash Purchases.” There is no charge to Plan Participants for participating in the Plan, although when shares are purchased under the Plan by the Plan Agent on the New York Stock Exchange or otherwise on the open market, each Plan Participant will pay a pro rata share of brokerage commissions incurred in connection with such purchases, as described below under “Reinvestment of Fund Shares” and “Voluntary Cash Purchases.” Participant’s account, except that if the Fund does not offer shares for such purpose because it concludes Securities Act registration would be required and such registration cannot be timely effected or is not otherwise a cost-effective alternative for the Fund, then the Transfer Agent shall follow the procedure described in the next paragraph. The number of additional shares to be credited to a Plan Participant’s account shall be determined by dividing the dollar amount of the distribution payable to a Plan Participant by the net asset value per share of the Fund’s common stock on the valuation date, or if the net asset value per share is less than 95% of the market price per share on such date, then by 95% of the market price per share. The valuation date will be the payable date for such dividend or distribution. Whenever the Fund declares a capital gains distribution, an income dividend or a return of capital distribution payable only in cash and the net asset value per share of the Fund’s common stock exceeds the market price per share on the valuation date (the “Market Discount”), the Plan Agent shall apply the amount of such dividend or distribution payable to a Plan Participant (less a Plan Participant’s pro rata share of brokerage commissions incurred with respect to open-market purchases in connection with the reinvestment of such dividend or distribution) to the purchase on the open market of Fund shares for a Plan Participant’s account. The valuation date will be the payable date for such dividend or distribution. Such purchases will be made on or shortly after the valuation date and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities laws. The Transfer Agent or the Plan Agent may aggregate a Plan Participant’s purchases with the purchases of other Plan Participants, and the average price (including brokerage commissions) of all shares purchased by the Plan Agent shall be the price per share allocable to each Plan Participant. For all purposes of the Plan, the market price of the Fund’s common stock on a payable date shall be the last sales price on the New York Stock Exchange on that date, or, if there is no sale on such Exchange (or, if different, the 27

Reinvestment of Fund Shares. Whenever the Fund declares a capital gains distribution, an income dividend or a return of capital distribution payable, at the election of shareholders, either in cash or in Fund shares, or payable only in cash, the Transfer Agent shall automatically elect to receive Fund shares for the account of each Plan Participant.
Whenever the Fund declares a capital gains distribution, an income dividend or a return of capital distribution payable only in cash and the net asset value per share of the Fund’s common stock equals or is less than the market price per share on the valuation date (the “Market Parity or Premium”), the Transfer Agent shall apply the amount of such dividend or distribution payable to a Plan Participant to the purchase from the Fund of Fund Shares for a Plan

VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN (unaudited) (continued) principal exchange for Fund shares) on that date, then the mean between the closing bid and asked quotations for such stock on such Exchange on such date. The net asset value per share of the Fund’s common stock on a valuation date shall be as determined by or on behalf of the Fund. The Transfer Agent may hold a Plan Participant’s shares acquired pursuant to the Plan, together with the shares of other Plan Participants acquired pursuant to this Plan, in non-certificated form in the name of the Transfer Agent or that of a nominee. The Transfer Agent will forward to each Plan Participant any proxy solicitation material and will vote any shares so held for a Plan Participant only in accordance with the proxy returned by a Plan Participant to the Fund. Upon a Plan Participant’s written request, the Transfer Agent will deliver to a Plan Participant, without charge, a certificate or certificates for the full shares held by the Transfer Agent.

Enrollment and Withdrawal. Both current shareholders and first-time investors in the Fund are eligible to participate in the Plan. Current shareholders my join the Plan by either enrolling their shares with the Transfer Agent or by making an initial cash deposit of at least $250 with the Transfer Agent. First-time investors in the Fund may join the Plan by making an initial cash deposit of at least $250 with the Transfer Agent. In order to become a Plan Participant, shareholders must complete and sign the enrollment form included in the Plan brochure and return it, and, if applicable, an initial cash deposit of at least $250 directly to the Transfer Agent if shares are registered in their name. Shareholders who hold Fund shares in the name of a brokerage firm, bank or other nominee should contact such nominee to arrange for it to participate in the Plan on such shareholder’s behalf.
If the Plan Participant elects to participate in the Plan by enrolling current shares owned by the Plan Participant with the Transfer Agent, participation in the dividend reinvestment feature of the Plan begins with the next dividend or capital gains distribution payable after the Transfer Agent receives the Plan Participant’s written authorization, provided such authorization is received by the Transfer Agent prior to the record date for such dividend or distribution. If such authorization is received after such record date, the Plan Participant’s participation in the dividend reinvestment feature of the Plan begins with the following dividend or distribution. If the Plan Participant elects to participate in the Plan by making an initial cash deposit of at least $250 with the Transfer Agent, participation in the dividend reinvestment feature of the Plan begins with the next dividend or capital gains distribution payable after the Transfer Agent receives the Plan Participant’s authorization and deposit, and after the Plan Agent purchases shares for the Plan Participant on the New York Stock Exchange (or, if different, on the principal exchange for Fund shares) or otherwise on the open market, provided that the authorization and deposit are received, and the purchases are made by the Plan Agent prior to the record date. If such authorization and deposit are received after the record date, or if the Plan Agent purchases 28

Voluntary Cash Purchases. Plan Participants have the option of making investments in Fund shares through the Transfer Agent as often as once a month. Plan Participants may invest as little as $100 in any month and may invest up to $36,000 annually through the voluntary cash purchase feature of the Plan.
The Plan Agent shall apply such funds (less a Plan Participant’s pro rata share of brokerage commissions or other costs, if any) to the purchase on the New York Stock Exchange (or, if different, on the principal exchange for Fund shares) or otherwise on the open market of Fund shares for such Plan Participant’s account, regardless of whether there is a Market Parity or Premium or a Market Discount. The Plan Agent will purchase shares for Plan Participants on or about the 15th of each month. Cash payments received by the Transfer Agent less than five business days prior to a cash purchase investment date will be held by the Transfer Agent until the next month’s investment date. Uninvested funds will not bear interest. Plan Participants may withdraw any voluntary cash payment by written notice received by the Transfer Agent not less than 48 hours before such payment is to be invested.

VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN (unaudited) (continued) shares for the Plan Participant after the record date, the Plan Participant’s participation in the dividend reinvestment feature of the Plan begins with the following dividend or distribution. A shareholder’s written authorization and cash payment must be received by the Transfer Agent at least five business days in advance of the next cash purchase investment date (normally the 15th of every month) in order for the Plan Participant to participate in the voluntary cash purchase feature of the Plan in that month. Plan Participants may withdraw from the Plan without charge by written notice to the Transfer Agent. Plan Participants who choose to withdraw may elect to receive stock certificates representing all of the full shares held by the Transfer Agent on their behalf, or to instruct the Transfer Agent to sell such full shares and distribute the proceeds, net of brokerage commissions, to such withdrawing Plan Participant. Withdrawing Plan Participants will receive a cash adjustment for the market value of any fractional shares held on their behalf at the time of termination. Withdrawal will be effective immediately with respect to distributions with a record date not less than 10 days later than receipt of such written notice by the Transfer Agent. payable on dividends or distributions. For U.S. federal income tax purposes, when the Fund issues shares representing an income dividend or a capital gains dividend, a Participant will include in income the fair market value of the shares received as of the payment date, which will be ordinary dividend income or capital gains, as the case may be. The shares will have a tax basis equal to such fair market value, and the holding period for the shares will begin on the day after the date of distribution. If shares are purchased on the open market by the Plan Agent, a Plan Participant will include in income the amount of the cash payment made. The basis of such shares will be the purchase price of the shares, and the holding period for the shares will begin on the day following the date of purchase. State, local and foreign taxes may also be applicable.

Amendment and Termination of Plan. The Plan may only be amended or supplemented by the Fund or by the Transfer Agent by giving each Plan Participant written notice at least 90 days prior to the effective date of such amendment or supplement, except that such notice period may be shortened when necessary or appropriate in order to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory body. The Plan may be terminated by the Fund or by the Transfer Agent by written notice mailed to each Plan Participant. Such termination will be effective with respect to all distributions with a record date at least 90 days after the mailing of such written notice to the Plan Participants. Federal Income Tax Implications of Reinvestment of Fund Shares. Reinvestment of Fund shares does not relieve Plan Participants from any income tax which may be
29

PROXY VOTING A description of the Fund’s policies and procedures for voting proxies for portfolio securities and information about how the Fund voted proxies related to its portfolio securities during the 12-month period ended June 30 is available on our web site — www.dws-investments.com or on the SEC’s web site at www.sec.gov. To obtain a written copy of the Fund’s policies and procedures without charge, upon request, call us toll free at (800) 437-6269. 2010 U.S. TAX INFORMATION (unaudited) The Fund paid foreign taxes of $220,819 and earned $823,223 of foreign source income year during the year ended December 31, 2010. Pursuant to section 853 of the Internal Revenue Code, the Fund designates $0.0192 per share as foreign taxes paid and $0.0716 per share as income earned from foreign sources for the year ended December 31, 2010. For Federal income tax purposes, the Fund designates approximately $2,552,000, or the maximum amount allowable under tax law, as qualified dividend income. SHARES REPURCHASED AND ISSUED The Fund has been purchasing shares of its common stock in the open market. Shares repurchased and shares issued for dividend reinvestment for the past five years are as follows: Fiscal years ended December 31, Shares repurchased Shares issued for dividend reinvestment
2010 2009 2008 2007 2006

627,075 77,238

265,168 207,315

141,900 —

— 427,524

10,450 —

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PRIVACY NOTICE FACTS Why? What Does DWS Investments Do With Your Personal Information? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. The types of personal information we collect and share can include: • • • • • How? Social Security number Account balances Purchase and transaction history Bank account information Contact information such as mailing address, e-mail address and telephone number

What?

All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons DWS Investments chooses to share; and whether you can limit this sharing. Does DWS Investments share? Yes Can you limit this sharing? No

Reasons we can share your personal information For our everyday business purposes — such as to process your transactions, maintain your account(s), respond to court orders or legal investigations For our marketing purposes — to offer our products and services to you For joint marketing with other financial companies For our affiliates’ everyday business purposes — information about your transactions and experiences For our affiliates’ everyday business purposes — information about your creditworthiness For nonaffiliates to market to you

Yes No No No No

No We do not share We do not share We do not share We do not share

Questions?

Call (800) 349-4281 or e-mail us at [email protected]

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PRIVACY NOTICE (continued) Who we are Who is providing The European Equity Fund, Inc. this notice? What we do How does DWS To protect your personal information from unauthorized access and use, we use security measures Investments pro- that comply with federal law. These measures include computer safeguards and secured files and tect my personal buildings. information? How does DWS We collect your personal information, for example. When you Investments col• open an account lect my personal • give us your contact information information? • provide bank account information for ACH or wire transactions • tell us where to send money • seek advice about your investments Why can’t I limit Federal law gives you the right to limit only all sharing? • sharing for affiliates’ everyday business purposes — information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. Definitions Affiliates Companies related by common ownership or control. They can be financial or non-financial companies. Our affiliates include financial companies with the DWS or Deutsche Bank (“DB”) name, such as DB AG Frankfurt and DB Alex Brown. Companies not related by common ownership or control. They can be financial and non-financial companies. Non-affiliates we share with include account service providers; service quality monitoring services; mailing service providers; and verification services to help in the fight against money laundering and fraud. Joint marketing A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • DWS Investments does not jointly market.

Non-affiliates

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INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT APPROVAL The Fund’s directors unanimously approved the continuance of the management agreement between the Fund and Deutsche Investment Management Americas Inc. (“DIMA”) and the investment advisory agreement between the Fund and Deutsche Asset Management International GmbH (“DeAMI”) (together called the “agreements”) at a meeting held on July 19, 2010. In preparation for the meeting, the directors had requested and evaluated extensive materials from DIMA and DeAMI, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by Lipper Inc. (“Lipper”). Prior to voting, the directors reviewed the proposed continuance of the agreements with management and with experienced counsel who are independent of DIMA and DeAMI and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed continuance. The directors also discussed the proposed continuance in a private session with counsel at which no representatives of DIMA or DeAMI were present. In reaching their determination relating to continuance of the agreements, the directors considered all factors they believed relevant, including the following: 1. information comparing the Fund’s performance to other investment companies with similar investment objectives and to an index; 2. the nature, extent and quality of investment and administrative services rendered by DIMA and DeAMI; 3. payments received by DIMA and DeAMI from all sources in respect to the Fund and all investment companies in the Deutsche family of funds; 4. the costs borne by, and profitability of, DIMA and DeAMI and their affiliates in providing services to the Fund and to all investment companies in the Deutsche family of funds; 5. comparative fee and expense data for the Fund and other investment companies with similar investment objectives; 6. the extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect these economies of scale for the benefit of investors; 7. DIMA’s and DeAMI’s policies and practices regarding allocation of the Fund’s portfolio transactions, including the extent, if any, to which DIMA and DeAMI benefit from soft dollar arrangements; 8. the Fund’s portfolio turnover rates compared to those of other investment companies with similar investment objectives; 9. fall-out benefits which DIMA, DeAMI and their affiliates receive from their relationships with the Fund; 10. the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of DIMA and DeAMI; and DeAMI’s strengthening of the investment resources supporting the Fund in 2009; 11. Information concerning the programs established by DIMA and DeAMI with respect to compliance, risk management, disclosure and ethics; 12. DIMA’s and DeAMI’s agreement to implement temporary partial fee waivers, effective September 1, 2009, aggregating 35 basis points for a one year period; and 13. the terms of the agreements. The directors also considered their knowledge of the nature and quality of the services provided by DIMA and DeAMI to the Fund gained from their experience as directors of the Central Europe and Russia Fund and, where relevant, the New Germany Fund and other Deutsche funds, their confidence in DIMA’s and DeAMI’s integrity and competence gained from that experience and DIMA’s and DeAMI’s responsiveness to concerns raised by them in the past, including DIMA’s and DeAMI’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Fund. In their deliberations, the directors did not identify any particular information that was all-important or controlling,

33

INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT APPROVAL (continued) and each director attributed different weights to the various factors. The directors determined that the overall arrangements between the Fund and DIMA, as provided in the management agreement, and between the Fund and DeAMI, as provided in the investment advisory agreement, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the directors considered relevant in the exercise of their reasonable judgment. The directors further determined that they were satisfied that the services provided by DIMA and DeAMI to the Fund represented good value for the money payable to them by the Fund. The material factors and conclusions that formed the basis for the directors’ reaching their determination to approve the continuance of the agreements (including their determinations that DIMA and DeAMI should continue in those roles for the Fund, and that the fees payable to DIMA and DeAMI pursuant to the agreements are appropriate) were separately discussed by the directors. Nature, Extent and Quality of Services Provided by DIMA and DeAMI The directors noted that, under the management agreement, DIMA acts as the Fund’s corporate manager and administrator and, subject to the supervision of the Fund’s board of directors and pursuant to recommendations made by DeAMI, determines suitable securities for investment by the Fund. Under the investment advisory agreement, DeAMI, in accordance with the Fund’s investment objectives, policies and limitations, makes recommendations with respect to the Fund’s investments and, upon instructions given by DIMA as to suitable securities for investment by the Fund, transmits purchase and sale orders and selects brokers and dealers to execute portfolio transactions on the Fund’s behalf. Under the management agreement, DIMA also handles the Fund’s relationships with shareholders, is responsible for compliance with regulatory and NYSE listing requirements, negotiates arrangements with third party service providers, provides the Fund’s directors with relevant reports, prepares the Fund’s tax returns and SEC and shareholder reports, calculates dividends and net 34 asset value, oversees payment of the Fund’s expenses and maintains books and records. DIMA also provides the Fund with such office facilities and executive and other personnel adequate to perform its services. DIMA pays all of the compensation of the Fund’s directors and officers who are interested persons of DIMA. The directors considered the scope and quality of services provided by DIMA and DeAMI under the agreements and noted that the scope of services provided had expanded over time as a result of regulatory and other developments. The directors noted that, for example, DIMA is responsible for maintaining and monitoring its own and the Fund’s compliance programs, and these compliance programs have in recent years been refined and enhanced in light of evolving regulatory requirements. The directors also considered the commitment of DIMA and DeAMI to, and the programs established by each with respect to, compliance, risk management, disclosure and ethics. The directors considered the quality of the investment research capabilities of DIMA and DeAMI and the other resources they have dedicated to performing services for the Fund. The quality of administrative and other services, including DIMA’s role in coordinating the activities of the Fund’s other service providers, also were considered. The directors concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Fund under the agreements. Costs of Services Provided and Profitability to DIMA and DeAMI At the request of the directors, DIMA provided information concerning profitability of DIMA’s and DeAMI’s respective investment advisory and investment company activities and their financial condition based on historical information for 2008 and 2009. The directors reviewed with DIMA assumptions and methods of allocation used by DIMA and DeAMI in preparing Fund specific profitability data. DIMA stated its belief that the methods of allocation used were reasonable, but it noted that there are limitations inherent in allocating costs to multiple individual advisory clients served by an organization such as DIMA and DeAMI where each of the advisory clients draws on, and

INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT APPROVAL (continued) benefits from, the research and other resources of the Deutsche Bank organization. The directors recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. In considering profitability information, the directors considered the effect of possible fall-out benefits, on DIMA’s and DeAMI’s expenses, including any affiliated brokerage commissions. The directors noted that during 2003 and 2004 DIMA discontinued using soft dollars to receive third party research from brokers that execute purchases and sales of securities for the Fund, and revised their policies to prohibit consideration of the sale of shares of Deutsche funds when selecting broker dealers to execute portfolio transactions for the Fund or other Deutsche funds. DIMA and DeAMI may continue to allocate brokerage to receive research generated by executing brokers and to receive other information services. The directors recognized that DIMA and DeAMI should, in the abstract, each be entitled to earn a reasonable level of profits for the services it provides to the Fund and, based on their review, concluded that DIMA’s and DeAMI’s levels of profitability from their relationships with the Fund were not excessive. Investment Results In addition to the information received by the directors for the meeting, the directors receive detailed performance information for the Fund at each regular board meeting during the year. The directors reviewed information showing the Fund’s performance compared to that of other investment vehicles compiled by Lipper (a total of 26 funds, consisting of exchange-traded funds, open-end funds and single-country funds). The directors also reviewed information showing performance of the Fund’s benchmark index, which, since November 1, 2005 (when the Fund changed its investment focus from Germany to the European countries utilizing the Euro currency), was the MSCI EMU index, an 35 unmanaged capitalization-weighted index comprising several hundred companies domiciled in the 15 countries using the Euro currency, and prior thereto was the Germany DAX index of 30 large cap stocks. The comparative information showed that the Fund ranked above the median for the one-year period ended December 31, 2009 and below the median for the three-, five- and 10-year periods ended December 31, 2009 and in the second quartile for the one-year period, the third quartile for the three-year period, and the bottom quartile for the five- and 10-year periods. As noted above, the Fund changed its investment focus from Germany to Europe on November 1, 2005. The Fund has underperformed its benchmark since that time except that the Fund outperformed the benchmark in 2009 and the first half of 2010. Taking into account these comparisons and the other factors considered, including DeAMI’s strengthening of the investment resources supporting the Fund in 2009 and the improvement in the Fund’s performance since that time, the directors concluded it was reasonable to continue the Agreements and for the 35 basis point one year partial fee waiver implemented effective September 1, 2009 to expire in accordance with its terms on August 31, 2010. Management and Investment Advisory Fees and Other Expenses The directors considered the management and investment advisory fee rates paid by the Fund to DIMA and DeAMI. The directors recognized that it is difficult to make comparisons of management and advisory fees because there are variations in the services that are included in the fees paid by other funds. The directors also considered the representation by DIMA and DeAMI that they do not manage any institutional accounts that are similar to the Fund, and their review of the reasons that they do not consider institutional fee rates to be relevant to the consideration of appropriate fee rates payable by investment companies such as the Fund. The directors also reviewed the fees charged by the DeAMI in respect of certain institutional accounts managed by the portfolio managers for the Fund. The Fund’s expense comparison group consisted of 33 closed end country funds and the information showed that the

INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT APPROVAL (continued) Fund’s effective management fee rate for 2009 of 0.957% was below the average and median of the comparison group. The directors noted that the Fund’s effective fee rate reflects the effect of breakpoints and that the effective management fee for the Fund reflected the partial fee waiver effective September 1, 2009 aggregating 35 basis points for a one year period referred to above. The directors also considered the Fund’s total expense ratio in comparison to the fees and expenses of funds within the comparison group. The directors recognized that the expense ratio information for the Fund potentially reflected on DIMA’s provision of services, as DIMA is responsible for coordinating services provided to the Fund by others. The directors also noted that the Fund’s expense ratio was at the median and slightly below the average of the comparison group. The directors concluded that the Fund’s expense ratio was satisfactory. Economies of Scale The directors noted that the Fund’s management fee and investment advisory schedules do contain breakpoints that reduce the fee rate on assets above specified levels. The directors recognized that breakpoints may be an appropriate way for DIMA and DeAMI to share their economies of scale with some funds that have substantial assets or that may grow materially over the next year. However, they also recognized that there is no direct relationship between the economies of scale realized by funds and those realized by DIMA and DeAMI as assets increase, largely because economies of scale are realized (if at all) by DIMA and DeAMI across a variety of products and services, and not only in respect of a single fund. Having taken these factors into account, the directors concluded that the Fund’s breakpoint arrangements were acceptable under the Fund’s circumstances.

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EXECUTIVE OFFICES 345 Park Avenue, New York, NY 10154 MANAGER Deutsche Investment Management Americas Inc. INVESTMENT ADVISER Deutsche Asset Management International GmbH CUSTODIAN Brown Brothers Harriman & Co. TRANSFER AGENT DWS Investments Service Company LEGAL COUNSEL Sullivan & Cromwell LLP INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM PricewaterhouseCoopers LLP DIRECTORS AND OFFICERS CHRISTIAN H. STRENGER Chairman and Director DETLEF BIERBAUM Director JOHN A. BULT Director RICHARD R. BURT Director JOHN H. CANNON Director RICHARD KARL GOELTZ Director DR. FRANZ WILHELM HOPP Director DR. FRIEDBERT MALT Director ROBERT H. WADSWORTH Director JOACHIM WAGNER Director WERNER WALBRÖL Director MICHAEL CLARK President and Chief Executive Officer PAUL H. SCHUBERT Chief Financial Officer and Treasurer RITA RUBIN Chief Legal Officer RAINER VERMEHREN Vice President and Lead Portfolio Manager ALEXIS KUCHINSKY Chief Compliance Officer JOHN CARUSO Anti-Money Laundering Compliance Officer JOHN MILLETTE Secretary R-20590-1 (2/11) VOLUNTARY CASH PURCHASE PROGRAM AND DIVIDEND REINVESTMENT PLAN The Fund offers shareholders a Voluntary Cash Purchase Program and Dividend Reinvestment Plan (“Plan”) which provides for optional cash purchases and for the automatic reinvestment of dividends and distributions payable by the Fund in additional Fund shares. Plan participants may invest as little as $100 in any month and may invest up to $36,000 annually. The Plan allows current shareholders who are not already participants in the Plan and first time investors to enroll in the Plan by making an initial cash deposit of at least $250 with the plan agent. Share purchases are combined to receive a beneficial brokerage fee. A brochure is available by writing or telephoning the transfer agent:
DWS Investments Service Company 210 W 10th Street 6th Floor Attn: Closed-End Fund Area Kansas City, MO 64105 Tel.: 1-800-437-6269

This report, including the financial statements herein, is transmitted to the shareholders of The European Equity Fund, Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report. The information contained in the letter to the shareholders, the interview with the lead portfolio manager and the report from the investment adviser and manager in this report are derived from carefully selected sources believed reasonable. We do not guarantee its accuracy or completeness, and nothing in this report shall be construed to be a representation of such guarantee. Any opinions expressed reflect the current judgment of the author, and do not necessarily reflect the opinion of Deutsche Bank AG or any of its subsidiaries and affiliates. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices from time to time shares of its common stock in the open market. Comparisons between changes in the Fund’s net asset value per share and changes in the MSCI-EMUI Index should be considered in light of the Fund’s investment policy and objectives, the characteristics and quality of the Fund’s investments, the size of the Fund and variations in the foreign currency/dollar exchange rate. Fund Shares are not FDIC - insured and are not deposits or other obligations of or guaranteed by any bank. Fund Shares involve investment risk, including possible loss of principal.

For latest net asset value, schedule of the Fund’s largest holdings, dividend data and shareholder inquiries, please call 1-800-437-6269 in the U.S. or 617-443-6918 outside of the U.S.