-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SNwZhPwyfAY4ogSP63IeuNx2hL/GLJ7ZZXeT1QaJDDAY2Zw9QcAiekJzKtN1i1cm 9bg03om2ZqYziffHCrIteQ== 0000936772-96-000114.txt : 19960430 0000936772-96-000114.hdr.sgml : 19960430 ACCESSION NUMBER: 0000936772-96-000114 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960429 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUSTRIA FUND INC CENTRAL INDEX KEY: 0000843615 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05736 FILM NUMBER: 96552360 BUSINESS ADDRESS: STREET 1: 1345 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 2129691000 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANAGEMENT LP STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 N-30D 1 THE AUSTRIA FUND SEMI-ANNUAL REPORT FEBRUARY 29,1996 ALLIANCECAPITAL MUTUAL FUNDS WITHOUT THE MYSTERY. LETTER TO SHAREHOLDERS THE AUSTRIA FUND _______________________________________________________________________________ April 16, 1996 Dear Shareholder: The formalization of the federal budget for 1996 between the SPO (Social Democrats) and the OVP (Conservatives) following the December election opened the way for the resuscitation of the coalition between the two parties. The overall budget package is designed to raise around 100 billion Austrian schillings over the next two years and consequently reduce the budget deficit to below 3% of gross domestic product (GDP) by 1997 within the constraints of the Maastricht criteria for European monetary union. GOVERNMENT SPENDING REDUCTIONS Encouragingly, approximately two thirds of the amount to be saved will be derived from government spending cuts and only one third from higher taxation. The willingness of the government to attack Austria's generous social welfare provisions is an encouraging aspect for the future competitiveness of the Austrian economy. Additionally it has helped alleviate many investors' fears as to the socialists' propensity to tax and spend following their improved showing in the December election. Moreover, with this new budget it appears that Austria will be one of the very few European nations likely to comply fully with the Maastricht criteria for convergence in 1997. However, this contraction in spending is taking place in the face of a slowing economy. A weak fourth quarter of 1995 brought GDP growth for the year to only 1.8% and consensus expectations for 1996, currently at around 1.5%, are likely to be reduced further as all indications are that economic activity slowed again in the first quarter of the year. MONETARY EASING LIKELY While growth estimates have been cut so have inflationary expectations. It is now probable that consumer prices will rise by only around 2% in 1996 and that consequently there is further scope for monetary easing over the course of the year. Clearly the extent of any relaxation will depend on events in Germany given the Austrian schilling's link to the Deutschemark, but in our view a meaningful reduction in rates is probable. It is the prospect of falling interest rates that makes the outlook for stock prices so promising. Certainly corporate profits growth is likely only to be in the low single figures for 1996, but the potential for some expansion of multiples in the face of lower interest rates is considerable. With the stock market standing at a prospective cash flow multiple of around only 4.5 times, Austria remains among the lowest valued markets in Europe. Given the progress made in recent years on privatization, accounting standards, earnings growth and shareholder focus, the low valuation level appears unjustifiably pessimistic. We continue to attribute this phenomenon largely to the reluctance of Austrian residents to consider equities as a form of long-term savings. It is anticipated that this situation will improve in the future, particularly given the recent equalization of tax treatment between alternative savings vehicles, including equities. PRIVATIZATION TRANSACTIONS SCHEDULED Austria's aggressive privatization program is likely to proceed apace in 1996, which should also continue to attract further interest in the stock market. The government-owned OIAG is currently preparing for the sale of a further stake of OMV, the energy group with interests in the chemicals and plastics businesses. The excellent reception given to the recent placing of a further tranche of the specialist steel group Bohler Uddeholm should ensure a strong interest in the OMV transaction. In light of further evidence of an economic slowdown within Austria we have re-directed your Fund's portfolio towards more defensive stocks where we anticipate the rewards to be a maximum participation in multiple expansion and minimal sensitivity to the economic cycle. INVESTMENT RESULTS For the six months ended February 29, 1996, The Austria Fund returned +8.5% on a net asset value basis, which compares with the Credit Aktien Index return of +2.1% over the same period with net dividends reinvested. For the twelve months ended February 29, The Austria Fund achieved a total return of +15.3%, which compares favorably with the +2.1% return for the benchmark 1 THE AUSTRIA FUND Index. (The Index returns were the same for both periods.) The Fund's outperformance in recent periods is due to our continued focus on growth stocks, which are relatively underweighted in the Index. Thank you for your continued interest in The Austria Fund. We look forward to reporting to you again on market activity and the Fund's investment results in coming periods. Sincerely, Dave H. Williams Chairman and President Mark H. Breedon Vice President and Portfolio Manager 2 TEN LARGEST HOLDINGS FEBRUARY 29, 1996 (UNAUDITED) THE AUSTRIA FUND _______________________________________________________________________________ COMPANY U.S. $VALUE PERCENT OF NET ASSETS - ------------------------------------------------------------------------------- VA Technologie AG $12,778,153 10.1% OEMV AG 12,665,727 10.0 Oest El Wirtsch A Verbundgslschft 8,145,990 6.4 EVN 7,882,341 6.2 Burgenland Holdings 6,467,978 5.1 BauMax Vertiebs pfd 6,110,497 4.8 Weinerberger Baustoff Industrie AG 5,646,325 4.4 Creditanstalt-Bankverein 5,502,508 4.3 Flughafen Wien AG 5,470,769 4.3 Austria Mikro Systeme International AG 5,329,833 4.2 $76,000,121 59.8% 3 PORTFOLIO OF INVESTMENTS FEBRUARY 29, 1996 (UNAUDITED) THE AUSTRIA FUND _______________________________________________________________________________ COMPANY SHARES U.S. $VALUE - ------------------------------------------------------------------------ COMMON AND PREFERRED STOCKS AND OTHER INVESTMENTS-97.5% CAPITAL GOODS-24.3% ENGINEERING & CONSTRUCTION-18.8% Bau Holdings AG 74,480 $ 4,704,265 Strabag Oesterreich AG 11,040 747,491 VA Technologie AG (b) 101,000 12,778,153 Weinerberger Baustoff Industrie AG 25,000 5,646,325 ----------- 23,876,234 MACHINERY-1.8% Steyr Daimler Puch Aktiengesells* 150,000 2,306,892 PAPER & FOREST PRODUCTS-2.4% Mayer-Melnhof Karton AG 60,000 3,000,411 STEEL-1.3% Voest-Alpine Stahl Ag 49,500 1,670,973 ----------- 30,854,510 CONSUMER PRODUCTS & SERVICES-21.1% AIRLINES-5.3% Austrian Airlines Oesterreichische Luftverkehrs AG* 7,000 1,289,829 Flughafen Wien AG 80,000 5,470,769 ----------- 6,760,598 FOOD & BEVERAGES-3.5% Agrana Beteiligungs AG pfd 13,900 324,019 Brau-Union Goess-Reininghaus Osterreichische Brau AG 40,000 2,298,187 Oesterreichische Brau-Beteillgungs AG (b) 25,382 1,301,190 Royal Tokaj Wine Co., Ltd.*(a)(f) 275,254 489,303 ----------- 4,412,699 HEALTH CARE-2.9% Immuno International AG (c) 6,250 3,675,244 RETAIL-8.0% BauMax Vertiebs pfd (b) 159,530 6,110,497 Inku AG 15,000 459,928 Wolford AG* 20,000 3,617,517 ----------- 10,187,942 TEXTILE PRODUCTS-1.4% Graboplast Textile & Artificial Leather Manufacturing, Ltd. Serial A*(d) 100,000 1,799,486 26,835,969 UTILITIES-17.7% Burgenland Holdings AG 143,190 6,467,978 EVN (b) 59,440 7,882,341 Oest El Wirtsch A Verbundgslschft (b) 123,850 8,145,990 ----------- 22,496,309 BASIC INDUSTRIES-17.1% ENERGY-10.0% OEMV AG (b) 135,695 12,665,727 TECHNOLOGY-7.1% Austria Mikro Systeme International AG 36,492 5,329,833 Scala /Overseas/ Ece Bearer Sh (a) 43,500 3,681,597 ----------- 9,011,430 ----------- 21,677,157 FINANCIAL SERVICES-15.3% BANKING-8.4% Bank Austria AG pfd 78,230 3,503,429 Bank Fuer Oberoesterreich und Salzburg 30,000 1,680,114 Creditanstalt-Bankverein 88,473 5,502,508 ----------- 10,686,051 4 THE AUSTRIA FUND _______________________________________________________________________________ COMPANY SHARES U.S. $VALUE - ------------------------------------------------------------------------ INSURANCE-6.9% Erste Allegemeine Generali AG (b) 10,055 $ 3,480,829 pfd. 4,507 784,256 Wiene Staedtische Allgemeine Ver 47,000 4,496,070 ----------- 8,761,155 ----------- 19,447,206 OTHER INVESTMENTS-2.0% East Europe Development Fund, Ltd.* (a)(e) 40,000 945,000 First Hungary Fund, Ltd.(a)(e) 1,500 1,538,100 ----------- 2,483,100 PRINCIPAL AMOUNT COMPANY (000) U.S. $VALUE - ------------------------------------------------------------------------ Total Common & Preferred Stocks and Other Investments (cost $107,471,214) $123,794,251 TIME DEPOSIT-0.5% Canadian Imperial Bank of Commerce 5.44%, due 3/01/1996 (cost $600,000) 600 600,000 TOTAL INVESTMENTS-98.0% (cost $108,071,214) 124,394,251 Other assets less liabilities-2.0% 2,506,021 NET ASSETS-100% $126,900,272 * Non-income producing security. (a) Illiquid security, valued at fair value (see Note A and E). (b) Securities (with an aggregate market value of $35,990,988) partially or fully segregated to collateralize a forward exchange currency contract. (c) Swiss Franc denominated security. (d) Hungarian Forint denominated security. (e) U.S. Dollar denominated security. (f) British pounds denominated security. See notes to financial statements. 5 STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 1996 (UNAUDITED) THE AUSTRIA FUND _______________________________________________________________________________ ASSETS Investments in securities, at value (cost $108,071,214) $124,394,251 Cash, at value (cost $2,185,834) 2,151,679 Receivable for investment securities sold 1,507,864 Unrealized appreciation of forward exchange currency contract 319,339 Foreign taxes receivable 7,023 Prepaid expenses and other assets 30,212 Total assets 128,410,368 LIABILITIES Payable for investment securities purchased 1,193,923 Advisory fee payable 95,782 Sub-advisory fee payable 20,402 Accrued expenses 199,989 Total liabilities 1,510,096 NET ASSETS $126,900,272 COMPOSITION OF NET ASSETS Capital stock, at par $ 117,030 Additional paid-in capital 125,342,532 Accumulated net investment loss (3,851,072) Accumulated net realized loss on investments and foreign currency transactions (11,311,385) Net unrealized appreciation of investments and foreign currency denominated assets and liabilities 16,603,167 $126,900,272 NET ASSET VALUE PER SHARE (based on 11,703,031 shares outstanding) $10.84 See notes to financial statements. 6 STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED) THE AUSTRIA FUND _______________________________________________________________________________ INVESTMENT INCOME Dividends (net of foreign taxes withheld of $19,950) $161,413 Interest 20,813 $ 182,226 EXPENSES Advisory fee 566,071 Sub-advisory fee 120,253 Audit and legal 165,024 Custodian 130,228 Directors' fees and expenses 128,579 Printing 33,656 Transfer agency 27,115 Registration 10,321 Miscellaneous 5,015 Total expenses 1,186,262 Net investment loss (1,004,036) REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY Net realized gain on investments 4,851,661 Net realized loss on foreign currency transactions (423,815) Net change in unrealized appreciation of investments 6,026,677 Net change in unrealized depreciation of foreign currency denominated assets and liabilities 513,575 Net gain on investments and foreign currency 10,968,098 NET INCREASE IN NET ASSETS FROM OPERATIONS $ 9,964,062 See notes to financial statements. 7 STATEMENT OF CHANGES IN NET ASSETS THE AUSTRIA FUND _______________________________________________________________________________ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29,1996 AUGUST 31, (UNAUDITED) 1995 -------------- ------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income (loss) $ (1,004,036) $ 27,204 Net realized gain on investments and foreign currency transactions 4,427,846 1,666,950 Net change in unrealized appreciation of investments and foreign currency denominated assets and liabilities 6,540,252 (1,005,651) Net increase in net assets from operations 9,964,062 688,503 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends from net investment income -0- (243,171) Dividends in excess of net investment income -0- (49,405) CAPITAL STOCK TRANSACTIONS Proceeeds from sale of shares of common stock in rights offering -0- 25,874,456 Offering costs charged to additional paid-in capital -0- (512,347) Reimbursement of expenses -0- 57,614 Total increase 9,964,062 25,815,650 NET ASSETS Beginning of year 116,936,210 91,120,560 End of period $126,900,272 $116,936,210 See notes to financial statements. 8 NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 1996 (UNAUDITED) THE AUSTRIA FUND _______________________________________________________________________________ NOTE A: SIGNIFICANT ACCOUNTING POLICIES The Austria Fund, Inc. (the 'Fund'), was incorporated in the State of Maryland on December 5, 1988 as a non-diversified, closed-end management investment company. The following is a summary of significant accounting policies followed by the Fund. 1. SECURITY VALUATION Investments are stated at value. All investments for which market quotations are readily available are valued at the closing price on the primary exchange on which they are traded on the day of valuation or, if no such closing price is available at the last bid price quoted on such day. Securities for which current market quotations are not readily available and restricted securities are valued in good faith at fair value using methods determined by the Board of Directors. In determining fair value, consideration is given to cost, operating and other financial data. Short-term debt securities that mature in 60 days or less are valued at amortized cost, which approximates market value, unless this method does not represent fair value. 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the quoted bid and asked price of the respective currency against the U.S. dollar on the valuation date. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated at rates of exchange prevailing when earned or accrued. Net realized loss on foreign currency transactions of $423,815 represents net foreign exchange gains and losses from the holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, foreign currency forward contracts and the difference between the amounts of dividends, interest and foreign taxes receivable recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net currency gains and losses from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of net unrealized appreciation of investments and foreign currency denominated assets and liabilities. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities during the period. The exchange rate for the Austrian Schilling at February 29, 1996 was ATS 10.34 to U.S. $1.00. 3. TAXES It is the Fund's policy to meet the requirements of the U.S. Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if applicable, to shareholders. Therefore, no provision for U.S. income or excise taxes is required. Withholding taxes on foreign interest and dividends have been provided for in accordance with the applicable tax requirements. 4. INVESTMENT INCOME AND SECURITY TRANSACTIONS Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Security transactions are accounted for on the date securities are purchased or sold. Realized and unrealized gains and losses from security and currency transactions are calculated on the identified cost basis. The Fund accretes discounts on short-term securities as adjustments to interest income. 5. DIVIDENDS AND DISTRIBUTIONS Dividends and distributions to shareholders are recorded on the ex-dividend date. Income dividends and capital gain distributions are determined in accordance with tax regulations, which may differ from generally accepted accounting principals. NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES Under the terms of an Investment Management and Administration Agreement, the Fund pays Alliance Capital Management, L.P., (the 'Investment Manager') a fee, calculated weekly and paid monthly, at an annual rate of 1% of the Fund's average weekly net assets up to $50 million and .90 of 1% of the Fund's average weekly net assets in excess of $50 million. 9 NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE AUSTRIA FUND _______________________________________________________________________________ Under the sub-advisory agreement, the Fund will pay BAI Fondaberatung Ges.m.b.H. a fee, calculated weekly and paid monthly, at an annual rate of .20 of 1% of the Fund's average weekly net assets. GiroCredit serves as the sub-custodian of the Fund. Brokerage commissions paid on securities transactions for the six months ended February 29, 1996 amounted to $64,307, of which none was paid to GiroCredit. NOTE C: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) aggregated $30,245,334 and $25,842,777 respectively, for the six months ended February 29, 1996. The Fund enters into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to hedge certain firm purchase and sale commitments denominated in foreign currencies. A forward exchange currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contracts and the closing of such contract is included in net realized gain or loss from foreign currency transactions. Fluctuations in the value of forward exchange currency contracts are recorded for financial reporting purposes as unrealized gains or losses by the Fund. The Fund's custodian will place and maintain cash not available for investment or securities in a separate account of the Fund having a value equal to the aggregate amount of the Fund's commitments under forward exchange currency contracts entered into with respect to position hedges. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At February 29, 1996, the Fund had an outstanding forward exchange currency contract, to sell 253,050,000 Austrian Schillings expiring on March 29, 1996, with a cost of $24,833,170. The market value of the forward exchange currency contract at February 29, 1996 was $24,513,831, resulting in unrealized appreciation of $319,339. At February 29, 1996, the cost of securities for federal income tax purposes was the same as the cost for financial purposes. Accordingly, gross unrealized appreciation of investments was $21,406,524 and gross unrealized depreciation of investments was $5,083,487 resulting in net unrealized appreciation of $16,323,037 (excluding foreign currency). At August 31, 1995, the Fund had a capital loss carryforward of $15,103,188 of which $6,545,520 expires in the year 2001 and $8,557,668 expires in the year 2002. The Fund utilized a capital loss carryover of $2,682,853 to offset gains realized during the year ended August 31, 1995. No capital gain distribution is expected to be paid to shareholders until future net gains have been realized in excess of the carry forward. Currency losses incurred after October 31, 1994, within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. In accordance with the Internal Revenue Code, the Fund incurred and will elect to defer a net foreign currency loss of $1,137,036 during such period in fiscal 1995. NOTE D: CAPITAL STOCK There are 100,000,000 shares of $.01 par value common stock authorized. Of the 11,703,031 shares outstanding at February 29, 1996, the Investment Manager owned 9,000 shares. 10 THE AUSTRIA FUND _______________________________________________________________________________ NOTEE: ILLIQUID SECURITIES DATE ACQUIRED U.S. $COST ---------------- ---------- East Europe Development Fund, Ltd. 1/07/91 $ 400,000 First Hungary Fund, Ltd. 10/20/89 1,500,000 Royal Tokaj Wine Company, Ltd. 7/28/94 437,655 Scala/Overseas Ece. Ltd. 6/29/95-10/31/95 965,721 The securities shown above are illiquid and have been valued at fair value in accordance with the procedures described in Note A. The value of these securities at February 29, 1996 was $6,654,000, representing 5.2% of total assets. 11 FINANCIAL HIGHLIGHTS THE AUSTRIA FUND _______________________________________________________________________________ SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS ENDED FEBRUARY 29, YEAR ENDED AUGUST 31, 1996 --------------------------------------------------------- (UNAUDITED) 1995 1994 1993 1992 1991 ------------- ---------- ---------- ---------- ---------- --------- Net asset value, beginning of period $ 9.99 $11.03 $ 9.62 $ 8.89 $10.89 $14.54 INCOME FROM INVESTMENT OPERATIONS Net investment income (loss) (.09) -0- (.05) .01 .01 (.04) Net realized and unrealized gain (loss) on investments and foreign currency transactions .94 (.11) 1.55 .74 (1.87) (3.19) Net increase (decrease) in net asset value from operations .85 (.11) 1.50 .75 (1.86) (3.23) LESS: DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income -0- (.02) (.01) (.01) -0- (.06) Dividends in excess of net investment income -0- -0- (.06) -0- -0- -0- Distributions from net realized gains on investments and foreign currency transactions... -0- -0- (.02) (.01) (.14) (.36) Total dividends and distributions -0- (.02) (.09) (.02) (.14) (.42) CAPITAL SHARE TRANSACTIONS Dilutive effect of rights offering -0- (.86) -0- -0- -0- -0- Offering costs charged to additional paid-in capital -0- (.05) -0- -0- -0- -0- Total capital share transactions -0- (.91) -0- -0- -0- -0- Net asset value, end of period $10.84 $9.99 $11.03 $9.62 $8.89 $10.89 Market value, end of period $8.88 $8.25 $10.88 $10.13 $7.75 $9.50 TOTAL RETURN(A) Total investment return based on: Market value 7.73% (21.51)% 8.37% 30.96% (17.16)% (11.77)% Net asset value 8.51% (9.15)% 15.69% 8.47% (17.11)% (21.75)% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) $126,900 $116,936 $91,121 $79,464 $73,418 $89,927 Ratio of expenses to average net assets 1.97%(b) 1.71% 1.87% 2.13% 1.92% 1.78% Ratio of net investment income (loss) to average net assets (1.67)%(b) .02% (.51)% .09% .09% (.35)% Portfolio turnover rate 43% 27% 36% 42% 56% 34%
(a) Total investment return is calculated assuming a purchase of common stock on the opening of the first day and a sale on the closing of the last day of each period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund's dividend reinvestment plan. Generally, total investment return based on net asset value will be higher than total investment return based on market value in periods where there is an increase in the discount or a decrease in the premium of the market value to the net asset value from the beginning to the end of such periods. Conversely, total investment return based on net asset value will be lower than total investment return based on market value in periods where there is a decrease in the discount or an increase in the premium of the market value to the net asset value from the beginning to the end of such periods. Total investment return for a period of less than one year is not annualized. (b) Annualized. 12 THE AUSTRIA FUND _______________________________________________________________________________ SUPPLEMENTAL PROXY INFORMATION The Annual Meeting of Shareholders of the Austria Fund, Inc. was held on Tuesday, December 19, 1995. The description of each proposal and number of shares are as follows: SHARES VOTED SHARES WITHOUT VOTED FOR AUTHORITY - ------------------------------------------------------------------------------- 1.To elect directors: Class Two Directors (term expires 1998) Dave H. Williams 6,929,552 237,377 Inmaculada de Habsburgo-Lorena 6,907,467 259,462 Dipl. Ing. Peter Mitterbauer 6,911,673 255,256 Mag. Reinhard Ortner 6,911,573 255,356 Dr. Maria Schaumayer 6,911,815 255,114 Dr. Walter Wolfsberger 6,910,973 255,956 SHARES SHARES VOTED SHARES VOTED VOTED FOR AGAINST ABSTAIN - ------------------------------------------------------------------------------- 2. To ratify the selection of Price Waterhouse LLP as the Fund's independent auditors for the Fund's fiscal year ending August 31, 1996: 7,035,127 98,246 33,556 13 THE AUSTRIA FUND _______________________________________________________________________________ BOARD OF DIRECTORS DAVE H. WILLIAMS, CHAIRMAN AND PRESIDENT JOHN D. CARIFA H.R.H. PILAR DE BORBON Y BORBON WILLIAM H. M. DE GELSEY INMACULADA DE HABSBURGO-LORENA DR. HANS HAUMER DIPL. ING. HELLMUT LONGIN DIPL. ING. PETER MITTERBAUER PETER NOWAK MAG. REINHARD ORTNER DR. MARIA SCHAUMAYER DR. JOSEF VLCEK REBA W. WILLIAMS DR. WALTER WOLFSBERGER OFFICERS NORMAN S. BERGEL, VICE PRESIDENT MARK H. BREEDON, VICE PRESIDENT NICHOLAS CROSSLAND, VICE PRESIDENT EDMUND P. BERGAN, JR., SECRETARY MARK D. GERSTEN, TREASURER &CHIEF FINANCIAL OFFICER JOSEPH J. MANTINEO, CONTROLLER CUSTODIAN BROWN BROTHERS HARRIMAN &CO. 40 Water Street Boston, MA 02109 LEGAL COUNSEL SEWARD &KISSEL One Battery Park Plaza New York, NY 10004 INDEPENDENT ACCOUNTANTS PRICE WATERHOUSE LLP 1177 Avenue of Americas New York, NY 10036-2798 DIVIDEND PAYING AGENT, TRANSFER AGENT AND REGISTRAR STATE STREET BANK AND TRUST COMPANY 225 Franklin Street Boston, MA 02110 The financial information included is taken from the records of the Fund without audit by independent accountants who do not express an opinion thereon. 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. This report, including the financial statement herein, is transmitted to the shareholders of The Austria Fund, Inc. for their information. This is not a prospectus, circular or representation intended for use in the purchases of shares of the Fund or any securities mentioned in this report. 14 THE AUSTRIA FUND, INC. Summary of General Information SHAREHOLDER INFORMATION Daily market prices for the Fund's shares are published in the New York Stock Exchange Composite Transaction section of newspapers under the designation AustriaFd. The Fund's NYSE trading symbol is 'OST'. Weekly comparative net asset value (NAV) and market price information about the Fund is published each Monday in THE WALL STREET JOURNAL and each Saturday in THE NEW YORK TIMES and BARRON'S, and other newspapers in a table called 'Closed-End Funds'. Additional information about the Fund is available by calling 1-800-221-5672. DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN A Dividend Reinvestment Plan is available to shareholders in the Fund, which provides automatic reinvestment of dividends and capital gain distributions in additional Fund shares. The Plan also allows you to make optional cash investments in Fund shares through the Plan Agent. A brochure describing the Plan is available from the Plan Agent, State Street Bank and Trust Company, by calling 1-800-219-4218. If you wish to participate in the Plan and your shares are held in your name, simply complete and mail the enrollment form in the brochure. If your shares are held in the name of your brokerage firm, bank or other nominee, you should ask them whether or how you can participate in the Plan. THE AUSTRIA FUND 1345 Avenue of the Americas New York, New York 10105 ALLIANCECAPITAL MUTUAL FUNDS WITHOUT THE MYSTERY. R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE CAPITAL MANAGEMENT L.P. AUSSR -----END PRIVACY-ENHANCED MESSAGE-----