<PAGE>
LETTER TO SHAREHOLDERS THE AUSTRIA FUND
April 17, 1995
Dear Shareholder:
The outlook for the Austrian equity market continues to improve as the economic
recovery gathers pace without any signs of an accompanying upswing in prices.
The recovery is being led by a pick up in industrial investment, as enterprises
continue to build capacity to accommodate the current export boom. This
substantial increase in external demand has been generated in part by the
recovery in Eastern Europe, to which Austria is a major exporter. Another
contributing factor is increasing export penetration in the West -- a result of
Austria's strength in machinery and capital goods production which has benefited
from rising investment spending and the industry's ability to keep unit costs
subdued relative to major competitors.
REDUCTION IN TARIFF BARRIERS
Clearly, Austria's entry into the European Union at the beginning of 1995 will
bring further benefits. This is especially true in the field of exports as the
reduction in tariff barriers will further enhance Austria's relative
competitiveness. At the same time, the reduction on import duties, particularly
on food items, should help inflation to stay low over this stage of the cycle.
Overall we would anticipate Austria's gross domestic product (GDP) growth to be
around 3% in 1995. Inflation is expected to be around 2.5% for the same period.
These are among the highest growth and lowest inflation rates anticipated
anywhere in Europe for the year.
LONG-TERM STRENGTHS BECOME CLEARER
Investors are clearly beginning to appreciate Austria's long-term strengths. The
Austrian schilling maintained its parity with the Deutschemark (DM) over the
first four months of 1995, which was a time of substantial upward pressure on
the DM. This supports the belief that Austria should provide a high growth and
low inflation environment for investors over the longer term, and it is crucial
that this perception be maintained.
Austria must also be able to maintain its relative competitiveness against other
European markets. We shall be closely monitoring the 1995-96 wage bargaining
round for signs of any revival of potentially inflationary settlements. With the
employment situation tightening and corporations struggling to complete large
order inflows, there is clearly a risk of some wage cost-driven inflationary
uptick in 1996-97.
Elsewhere, Austria's budget deficit, while significantly lower than that of many
EU partners, is the country's most significant economic imbalance. Despite the
burgeoning economic recovery it remains at a stubbornly high level of around
4.7% of GDP.
TAX HIKES, SPENDING CUTS
At the same time, the debt-to-GDP ratio stands at around 58%, and some progress
towards reducing Austria's total debt outstanding will be a pre-requisite for
achieving sustainable long-term growth. The government has already introduced a
combination of tax hikes and spending cuts which are expected to amount to
around $30 billion (in Austrian schilling terms) in 1995 and is to be commended
on its quick reaction to the 1994 tax reductions.
At the same time the government continues to reduce its involvement in the
economy through its privatization program. Despite difficult market conditions,
there was a partial privatization of Bohler-Uddeholm, the special steels group,
and a sale of the government's stake in Creditanstalt, one of the country's
leading banks, is scheduled. This
1
<PAGE>
THE AUSTRIA FUND
demonstrates that there remains a strong consensus as to the withdrawal of
government from the productive sector and that Austria will continue to
transform itself towards a modern, market-related economy.
SOLID PERFORMANCE IN EQUITY MARKET
The Austrian stock market has continued to perform well in U.S. dollar terms.
The strength of the Austrian schilling, which has been particularly beneficial
to foreign investors, culminated in a small reduction in domestic interest rates
this month. Looking forward, it will be important to determine the true impact
of this deflationary currency gain on corporate profitability. With so much of
Austria's exports being to hard currency areas, it is likely that any
significant declines in profitability will be incurred by this currency
strength.
We have continued to move the portfolio away from economically sensitive issues,
however, and to concentrate more on companies with strong long-term earnings
potential in the retail, technology and engineering sectors. Reflecting our
optimism for the Austrian market, the Fund remains broadly fully invested and is
well positioned to take advantage of strong growth prospects. We believe that
current valuation levels (e.g., a prospective price-to-cash flow multiple of
only 4.5x for 1995) inadequately reflect the superior long-term growth
characteristics of the Austrian stock market.
INVESTMENT RESULTS
For the six months ended February 28, 1995, The Austria Fund returned -14.5%
based on the net asset value. This compares with a return of 3.9% for the
benchmark Credit Aktien Index over the same period.
We appreciate your investment in The Austria Fund and look forward to reporting
its progress to you in the coming months.
Sincerely,
Dave H. Williams
Chairman and President
Mark H. Breedon
Vice President and Portfolio Manager
2
<PAGE>
TEN LARGEST HOLDINGS
FEBRUARY 28, 1995 (UNAUDITED) THE AUSTRIA FUND
<TABLE>
<CAPTION>
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OEMV AG $14,979,501 13.6%
- ----------------------------------------------------------------------------------------
VA Technologie AG 8,747,919 8.0
- ----------------------------------------------------------------------------------------
BauMax Vertiebs pfd. 6,194,284 5.6
- ----------------------------------------------------------------------------------------
Austria Mikro Systeme International AG 5,917,389 5.4
- ----------------------------------------------------------------------------------------
Creditanstalt-Bankverein 5,567,274 5.1
- ----------------------------------------------------------------------------------------
Verbund Cl.A 5,504,315 5.0
- ----------------------------------------------------------------------------------------
Wienerberger Baustoff Industrie AG 4,655,251 4.2
- ----------------------------------------------------------------------------------------
Waagner-Biro AG 4,456,056 4.1
- ----------------------------------------------------------------------------------------
Wiene Stadtischer Allgemeine 4,126,791 3.8
- ----------------------------------------------------------------------------------------
Bank Austria AG pfd. 3,777,902 3.4
- ----------------------------------------------------------------------------------------
Total $63,926,682 58.2%
- ----------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1995 (UNAUDITED) THE AUSTRIA FUND
<TABLE>
<CAPTION>
COMPANY SHARES U.S.$ VALUE
<S> <C> <C>
- ------------------------------------------------------------
COMMON & PREFERRED STOCKS
AND OTHER INVESTMENTS--97.4%
CAPITAL GOODS--30.3%
ENGINEERING &
CONSTRUCTION--18.5%
Allgemeine Baugesellschaft
Porr. pfd.................... 18,104 $ 1,497,761
Bau Holdings AG............... 29,480 2,131,169
Maculan Holdings AG........... 20,725 1,425,462
Strabag Oesterreich AG........ 8,340 1,163,521
Universale Bau AG*............ 12,600 743,700
VA Technologie AG*............ 81,000 8,747,919
Wienerberger Baustoff
Industrie AG................. 13,109 4,655,251
--------------
20,364,783
--------------
MACHINERY--1.3%
Steyr Daimler Puch
Aktiengesells................ 100,000 1,473,157
--------------
MININGS & METAL--2.6%
Heraklith Baustoffe new*...... 15,000 1,009,747
Radex Heraklith
Industriebeteiligungs AG..... 50,000 1,809,739
--------------
2,819,486
--------------
PAPER & FOREST
PRODUCTS--1.8%
Mayer-Melnhok
Karton AG.................... 30,500 2,002,567
--------------
POLLUTION CONTROL--4.1%
Waagner-Biro AG............... 75,000 4,456,056
--------------
OTHER--2.0%
Jenbacher Transport Systeme
AG*.......................... 110,000 1,159,014
Jenbacher Werke AG............ 6,500 1,001,308
--------------
2,160,322
--------------
33,276,371
--------------
<CAPTION>
COMPANY SHARES U.S.$ VALUE
- ------------------------------------------------------------
<S> <C> <C>
BASIC INDUSTRIES--19.0%
ENERGY--13.6%
OEMV AG*...................... 153,695 $ 14,979,501
--------------
TECHNOLOGY--5.4%
Austria Mikro Systeme
International AG............. 70,120 5,917,389
--------------
20,896,890
--------------
FINANCIAL SERVICES--16.8%
BANKING--10.0%
Bank Austria AG pfd........... 78,230 3,777,902
Bank Fuer Oberoesterreich und
Salzburg..................... 30,000 1,688,765
Creditanstalt-Bankverein...... 88,473 5,567,274
--------------
11,033,941
--------------
INSURANCE--6.8%
Erste Allegemeine Generali
AG........................... 10,055 2,624,085
pfd.......................... 4,507 718,915
Wiene Stadtischer
Allgemeine................... 47,000 4,126,791
--------------
7,469,791
--------------
18,503,732
--------------
CONSUMER PRODUCTS &
SERVICES--16.2%
AIRLINES--2.5%
Austrian Airlines
Oesterreichische Luftverkehrs
AG*.......................... 7,000 1,188,282
Flughafen Wien AG............. 33,000 1,442,328
--------------
2,630,610
--------------
BEVERAGES--1.7%
Oesterreichische Brau-
Beteillgungs AG.............. 25,382 1,453,570
Royal Tokaji Wine Co.,
Ltd.*(a)(e).................. 225,208 413,676
--------------
1,867,246
--------------
</TABLE>
4
<PAGE>
THE AUSTRIA FUND
<TABLE>
<CAPTION>
COMPANY SHARES U.S.$ VALUE
<S> <C> <C>
- ------------------------------------------------------------
HEALTH CARE--2.8%
Immuno International AG(d).... 6,250 $ 3,092,177
--------------
RETAIL--7.4%
BauMax Vertiebs pfd*.......... 144,300 6,194,284
Inku AG....................... 15,000 578,043
Wolford AG.................... 33,200 1,415,441
--------------
8,187,768
--------------
TEXTILE PRODUCTS--1.8%
Graboplast Textile & Artifical
Leather Manufacturing, Ltd.
Serial A*(c)................. 194,500 1,892,986
Styl-Ruhagyar................. 6,312 98,528
--------------
1,991,514
--------------
17,769,315
--------------
UTILITIES--11.2%
Burgenland Holdings AG........ 93,450 3,373,284
EVN........................... 28,700 3,477,568
Verbund Cl.A.................. 88,850 5,504,315
--------------
12,355,167
--------------
<CAPTION>
SHARES
OR CURRENCY
AMOUNT
COMPANY (000) U.S.$ VALUE
- ------------------------------------------------------------
<S> <C> <C>
OTHER INVESTMENTS--3.9%
East Europe Development Fund,
Ltd.*(a)(d).................. 120,000 $ 2,666,400
First Hungary Fund,
Ltd.(a)(d)................... 1,500 1,605,465
--------------
4,271,865
--------------
Total Common & Preferred
Stocks and Other Investments
(cost $100,998,021).......... 107,073,340
--------------
CONVERTIBLE BONDS--0.4%
Maculan Holdings AG 4.00%,
10/07/96
(cost $421,571).............. ATS 5,000 465,849
--------------
TOTAL INVESTMENTS--97.8%
(cost $101,419,592)......... 107,539,189
Other assets less
liabilities-- 2.2%........... 2,438,702
--------------
NET ASSETS--100%.............. $ 109,977,891
--------------
--------------
<FN>
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) Illiquid security, valued at fair value (see Notes A and E).
(b) Swiss Franc denominated security.
(c) Hungarian Forint denominated security.
(d) U.S. Dollar denominated security.
(e) British Pounds denominated security.
Glossary:
ATS -- Austrian Schillings.
See notes to financial statements.
</TABLE>
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 (UNAUDITED) THE AUSTRIA FUND
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $101,419,592).................................. $107,539,189
Cash, at value (cost $2,517,950)......................................................... 2,569,222
Foreign taxes receivable................................................................. 19,313
Dividends and interest receivable........................................................ 9,404
Prepaid expense.......................................................................... 28,756
------------
Total assets............................................................................. 110,165,884
------------
LIABILITIES
Advisory fee payable..................................................................... 73,376
Accrued expenses......................................................................... 114,617
------------
Total liabilities........................................................................ 187,993
------------
NET ASSETS (equivalent to $9.40 per share, based on 11,703,031 shares outstanding)......... $109,977,891
------------
------------
COMPOSITION OF NET ASSETS
Capital stock, at par.................................................................... $ 117,030
Additional paid-in capital............................................................... 127,442,030
Distribution in excess of net investment income.......................................... (2,282,463)
Accumulated net realized loss on investments and foreign currency transactions........... (21,471,556)
Net unrealized appreciation of investments and foreign currency denominated assets and
liabilities.............................................................................. 6,172,850
------------
$109,977,891
------------
------------
NET ASSET VALUE PER SHARE................................................................ $9.40
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1995 (UNAUDITED) THE AUSTRIA FUND
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $16,267)........................ $ 131,630
Interest.................................................................... 111,594 $ 243,224
---------
EXPENSES
Advisory fee................................................................ 486,409
Custodian................................................................... 92,794
Audit and legal............................................................. 44,880
Directors' fees and expenses................................................ 34,034
Transfer agency............................................................. 33,435
Printing.................................................................... 29,096
Registration................................................................ 7,322
Miscellaneous............................................................... 38,314
---------
Total expenses.............................................................. 766,284
-----------
Net investment loss......................................................... (523,060)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain on investments............................................ 1,283,607
Net realized loss on foreign currency transactions.......................... (2,049,380)
Net change in unrealized appreciation of investments........................ (4,293,260)
Net change in unrealized appreciation of foreign currency denominated assets
and liabilities............................................................. (602,456)
-----------
Net loss on investments and foreign currency................................ (5,661,489)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS.................................... $(6,184,549)
-----------
-----------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1995 AUGUST 31,
(UNAUDITED) 1994
----------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss.............................................................. $ (523,060) $ (439,293)
Net realized gain (loss) on investments and foreign currency transactions........ (765,773) 6,465,830
Net change in unrealized appreciation (depreciation) of investments and foreign
currency denominated assets and liabilities...................................... (4,895,716) 6,394,033
----------------- ------------
Net increase (decrease) in net assets from operations............................ (6,184,549) 12,420,570
DIVIDENDS AND DISTRIBUTION TO SHAREHOLDERS:
Dividends from net investment income............................................. (292,576) (59,519)
Dividends in excess of net investment income..................................... -0- (550,279)
Distributions from net realized gain on foreign currency transactions............ -0- (174,808)
CAPITAL STOCK TRANSACTIONS
Proceeds from sale of shares of common stock in rights offering.................. 25,874,456 -0-
Offering costs charged to additional paid-in captial............................. (540,000) -0-
Reinvestment of dividends resulting in issuance of common stock.................. -0- 20,615
----------------- ------------
Total increase................................................................... 18,857,331 11,656,579
NET ASSETS
Beginning of year................................................................ 91,120,560 79,463,981
----------------- ------------
End of period.................................................................... $ 109,977,891 $ 91,120,560
----------------- ------------
----------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995 (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 $2,049,380 represents net
foreign exchange gains or losses from 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 recorded on the Fund's books
and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of unrealized
appreciation on 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 28, 1995 was ATS 10.25
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 its
shareholders. Therefore, no provisions for U.S. income or excise taxes are
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 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 income tax regulations, which may differ from generally accepted
accounting principles.
8
<PAGE>
THE AUSTRIA FUND
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.
The sub-advisory agreement in place in the prior fiscal year between the Fund
and GiroCredit Research Analageberatungund Kapitalmarkforschung Ges, m.b.H.,
("GiroCredit"), has subsequently been terminated and replaced with a new
sub-advisory agreement effective March 8, 1995.
Under the new sub-advisory agreement, the Fund will pay BAI Fondsberatung Ges
m.b.H., the successor of GiroCredit, 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. For the six months ended
February 28, 1995, the Fund earned $34,080 of interest income on cash balances
maintained at GiroCredit. Brokerage commissions paid on securities transactions
for the six months ended February 28, 1995 amounted to $63,478, of which none
was paid to GiroCredit.
- --------------------------------------------------------------------------------
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $29,526,226 and $9,233,301 respectively, for the six months ended
February 28, 1995.
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. 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 contracts 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. 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 28, 1995, 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 $8,717,145 and gross unrealized depreciation of
investments was $2,597,548 resulting in net unrealized appreciation of
$6,119,597 (excluding foreign currency).
At August 31, 1994, the Fund had a capital loss carryforward of $17,786,041 of
which $271,362 expires in the year 2000, $8,957,011 expires in the year 2001 and
$8,557,668 expires in the year 2002. Capital losses incurred after October 31,
1993, 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 elected to defer a net foreign currency loss of $2,283,699 during
such period in fiscal 1994.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE AUSTRIA FUND
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 28, 1995, the Investment Manager owned
9,000 shares.
- --------------------------------------------------------------------------------
NOTE E: ILLIQUID SECURITIES
<TABLE>
<CAPTION>
DATE ACQUIRED U.S. $ COST
-------------- -----------
<S> <C> <C>
East Europe Development Fund, Ltd..................................................... 1/07/91 $ 1,200,000
First Hungary Fund, Ltd............................................................... 10/20/89 1,500,000
Royal Tokaj Wine Company, Ltd......................................................... 7/28/94 345,007
</TABLE>
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 28, 1995 was $4,685,541, representing
4.3% of net assets.
- --------------------------------------------------------------------------------
NOTE F: RIGHTS OFFERING
On October 7, 1994, the Fund issued 3,442,068 shares in connection with a rights
offering of the Fund's shares. Shareholders of record on September 12, 1994 were
issued one non-transferrable right for each share of common stock owned,
entitling shareholders the opportunity to acquire one newly issued share of
common stock for every three rights held at a subscription price of $7.81 per
share. Offering costs of $540,000 were charged to additional paid-in capital.
Dealer management and soliciting fees of $1,008,095 were netted against the
proceeds of the subscription.
- --------------------------------------------------------------------------------
NOTE G: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED GAIN NET INCREASE
(LOSS) ON (DECREASE)
INVESTMENTS AND IN NET ASSETS
NET INVESTMENT FOREIGN CURRENCY RESULTING FROM
INCOME (LOSS) TRANSACTIONS OPERATIONS MARKET PRICE ON
--------------- ------------------- ------------------- NYSE
TOTAL PER TOTAL PER TOTAL PER ------------------
QUARTER ENDED (000) SHARE (000) SHARE (000) SHARE HIGH LOW
- ----------------------- ----- ----- -------- ------ -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 28, 1995...... $(244) $(.02) $ 2,144 $ .18 $ 1,900 $ .16 $ 8.250 $ 7.375
November 30, 1994...... (279) (.03) (7,805) (.83) (8,084) (.86) $11.000 $ 8.000
----- ----- -------- ------ -------- ------
$(523) $(.05) $ (5,661) $(.65) $ (6,184) $(.70)
----- ----- -------- ------ -------- ------
----- ----- -------- ------ -------- ------
August 31, 1994........ $ 347 $.04 $ 6,679 $ .81 $ 7,026 $ .85 $11.125 $ 9.000
May 31, 1994........... (172) (.02) (5,263) (.64) (5,435) (.66) $10.125 $ 8.750
February 28, 1994...... (297) (.03) 9,234 1.11 8,937 1.08 $12.375 $10.375
November 30, 1993...... (317) (.04) 2,210 .27 1,893 .23 $10.000 $ 9.000
----- ----- -------- ------ -------- ------
$(439) $(.05) $ 12,860 $1.55 $ 12,421 $1.50
----- ----- -------- ------ -------- ------
----- ----- -------- ------ -------- ------
</TABLE>
10
<PAGE>
FINANCIAL HIGHLIGHTS THE AUSTRIA FUND
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SEPTEMBER 28,
SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1989*
FEBRUARY 28, 1995 ------------------------------------- TO
(UNAUDITED) 1994 1993 1992 1991 AUGUST 31, 1990
----------------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $11.03 $ 9.62 $ 8.89 $10.89 $14.54 $10.85**
------ ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)............ (.05) (.05) .01 .01 (.04) .12
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions........................... (.65) 1.55 .74 (1.87) (3.19) 3.56
------ ------- ------- ------- ------- ------
Net increase (decrease) in net asset
value from operations.................. (.70) 1.50 .75 (1.86) (3.23) 3.68
------ ------- ------- ------- ------- ------
LESS: DISTRIBUTIONS
- ----------------------------------------
Dividends from net investment income.... (.02) (.01) (.01) -0- (.06) (.06)
Dividends in excess of net investment
income................................. -0- (.06) -0- -0- -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions........................... -0- (.02) (.01) (.14) (.36) (.01)
------ ------- ------- ------- ------- ------
Total dividends and distributions....... (.02) (.09) (.02) (.14) (.42) (.07)
------ ------- ------- ------- ------- ------
Increase resulting from second public
offering............................... -0- -0- -0- -0- -0- .08+
------ ------- ------- ------- ------- ------
CAPITAL SHARE TRANSACTIONS
- ----------------------------------------
Dilutive effect of rights offering...... (.86) -0- -0- -0- -0- -0-
Offering costs charged to additional
paid-in capital........................ (.05) -0- -0- -0- -0- -0-
------ ------- ------- ------- ------- ------
Total capital share transactions........ (.91) -0- -0- -0- -0- -0-
------ ------- ------- ------- ------- ------
Net asset value, end of period.......... $ 9.40 $11.03 $ 9.62 $ 8.89 $10.89 $14.54
------ ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------
Market value, end of period............. $ 8.00 $10.88 $10.13 $ 7.75 $ 9.50 $11.25
------ ------- ------- ------- ------- ------
------ ------- ------- ------- ------- ------
TOTAL RETURN
- ----------------------------------------
Total investment return based on:(a)
Market value.......................... (26.21)% 8.37% 30.96% (17.16)% (11.77)% 1.10%
Net asset value....................... (14.52)% 15.69% 8.47% (17.11)% (21.75)% 30.67%
</TABLE>
- --------------------------------------------------------------------------------
See footnote on page 12.
11
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) THE AUSTRIA FUND
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
SEPTEMBER 28,
SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1989*
FEBRUARY 28, 1995 ------------------------------------------------- TO
(UNAUDITED) 1994 1993 1992 1991 AUGUST 31, 1990
----------------- ---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000's
omitted)............................... $109,978 $91,121 $79,464 $73,418 $89,927 $120,088
Ratio of expenses to average net
assets................................. 1.49%(b) 1.87% 2.13% 1.92% 1.78% 1.82%(b)
Ratio of net investment income (loss) to
average net assets..................... (1.02)%(b) (.51)% .09% .09% (.35)% .89%(b)
Portfolio turnover rate................. 9% 36% 42% 56% 34% 24%
<FN>
- --------------------------------------------------------------------------------
* Commencement of operation.
** Net of offering costs of $(.31).
+ Net of offering costs of $(.07).
(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.
</TABLE>
12
<PAGE>
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. 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 statements 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.
13
<PAGE>
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, INC.
1345 Avenue of the Americas
New York, NY 10105
[Alliance Capital Logo]
- -Registered Trademark-These registered service marks used under license from the
owner,
Alliance Capital Management L.P.
AUSSR
<PAGE>
SEMI-ANNUAL REPORT
FEBRUARY 28, 1995
AUSSR
