The European Equity Fund

The European Equity Fund, Inc. (NYSE:EEA)

Deutsche Asset & Wealth Management                       

Semi-Annual Fund Overview:
As of December 2016

For the year 2016, European stock markets had another positive year in local currency terms. In euro terms, the MSCI Europe Index had a total
return of +3.1% and the German DAX +6.9%. The euro depreciated against the USD by 3.1%. During the 12-month period ended December 31, 2016, the European Equity Fund, Inc.’s total return in U.S. dollars (USD) was –1.52% based onnet asset value and –3.31% based on market price. During the same
period, the total return of the Fund’s benchmark, the MSCI Europe Index, was –0.40%. Equity markets experienced unusual volatility in the first quarter caused by credit-related fears: The continued drop in oil prices produced additional stress for the U.S. high‐yield bond market given the largely debt‐financed U.S. shale gas boom; at the same time, persistently weak economic data from China brought fears of a large expansion of bad debt. In contrast,
European leading indicators such as indices tracking manufacturing activity levels, stayed in expansionary territory.

The resulting market rebound was driven by a lack of corporate earnings disappointment and dovish global central bank policies. The European Central Bank (ECB) raised its monthly asset buying program and, surprisingly, announced the buying of corporate bonds. Economic leading indicators in Europe stayed in positive territory throughout the year. High readings of the German Ifo Business Climate Index pointed to an expansionary economic phase. The remaining Eurozone PMIs entered the recovery phase. Consumer confidence was supported by low oil prices and rising wages. Eurozone GDP growth reached approximately +1.9% for the year, higher than initial consensus estimates of +1.5%.

Diverging growth trends continued for European exporters between North America and China. The tightening U.S. labor market gave continued strength to the consumer, and, therefore, to imports. In China, however, the previously high growth rates slowed further, reducing demand for
imports. Leading indicators disappointed and the yuan devalued further, causing capital flight. Importantly, a demand‐driven rise in the oil price
restored confidence in global economic growth. For more information about the fund please visit:
The European Equity Fund, Inc. (NYSE:EEA)