THE AUSTRIA FUND
Semi-Annual Report
February 28,1997
LETTER TO SHAREHOLDERS THE AUSTRIA FUND
_______________________________________________________________________________
April 1, 1997
Dear Shareholder:
We are pleased to provide you with an update of your Fund's performance and
market activity for the period ended February 28, 1997.
INVESTMENT RESULTS
As you can see by the table below, for the six month period ending February 28,
1997, The Austria Fund returned 4.67% as measured by U.S. dollar net asset
value. This compares with a -3.50% return for the Fund's benchmark, the Credit
Aktien Index. Your Fund also performed better than its benchmark for the twelve
month period.
INVESTMENT RESULTS*
Period Ended February 28, 1997
TOTAL RETURN
6 MONTHS 12 MONTHS
--------- ---------
THE AUSTRIA FUND 4.67% 8.34%
CREDIT AKTIEN INDEX -3.50% -7.10%
* The Fund's investment results are cumulative total returns for the period
and are based on the net asset value as of February 28, 1997. All fees and
expenses related to the operation of the Fund have been deducted. Returns for
the Fund include the reinvestment of any distributions paid during the period.
The index is unmanaged and reflects no fees or expenses.
ECONOMIC OVERVIEW
In 1996, the Austrian government raised taxes to reduce the country's budget
deficit in order to achieve Maastricht compliance. This, among other factors,
contributed to a relatively lack-luster year. Prospects for the Austrian stock
market in 1997 appear far more promising as can be seen by recent developments.
Overall, Austria, unlike Germany, should easily achieve the convergence targets
for compliance with Maastricht by the end of 1997, particularly as tax
collection revenues have been slightly higher than original estimations.
Consequently, we anticipate a more benign fiscal and monetary environment in
1998 which, we believe, will be increasingly reflected in equity market prices.
Coupled with the ending of fiscal tightening, we also look forward to a
significant jump in corporate earnings in 1998 as companies are again allowed
to utilize tax-loss carry forwards which were suspended for 1996 and 1997.
While profit growth should remain below 10% in 1997, we expect gains of between
15% and 20% in 1998-well ahead of the forecasted European average.
The 1997 forecast for Austria's Gross Domestic Product (GDP) is positive.
Following estimated growth of around 0.8% in 1996, expectations are for an
increase to 1.2% in 1997 with exports providing the major impetus for recovery.
It seems probable to us that these forecasts can be exceeded, particularly in
view of the recent weakness of the Austrian schilling against the U.S. dollar.
Despite this mild currency weakness, prospects for inflation remain very
positive with consumer prices expected to rise by less than 2% over the course
of this year.
Recently, the chancellor's position was handed over to former finance minister,
Viktor Klima. This bodes well for the future as Mr. Klima seems to understand
the necessity of providing a financial climate which encourages investment and
competition. This view is particularly important considering the jolt to
investor confidence which resulted from the poorly managed privatization of
Creditanstalt.
Despite these positive signs, certain structural problems still remain. As we
mentioned in our last letter, the continued lack of interest shown by Austrian
domestic investors in their own stock market remains a concern. Austrian
residents' participation in the Vienna Bourse remains low. We still believe
that a more proactive fiscal policy by the government would be appropriate.
Giving incentives to people who invest long-term savings in the stock market
would be beneficial for a number of reasons. It would put the responsibility of
retirement savings in the hands of individuals rather than the state, provide a
solid domestic base for providing risk capital for entrepreneurs, and reduce
the volatility of the equity market which remains at the mercy of fickle
foreign capital flows.
We would also like to see a change in the law which would allow companies to
buy back and cancel their own shares. Today, many Austrian corporations hold
excess cash because paying out dividends is not tax efficient. However, this
results in diminished return on equity and could potentially contribute to poor
company performance. Allowing companies to buy back their own shares could
provide a substantial impetus to stock prices.
1
THE AUSTRIA FUND
_______________________________________________________________________________
PORTFOLIO STRATEGY
Overall, we think Austria offers both growth and value. Price to cash earnings
ratios are below the mean level for the area and earnings per share should grow
more rapidly than the European average. Consequently, we currently maintain a
broadly fully invested position with cash reserves representing only around
2.5% of the portfolio. We also maintain a hedge of around 16% of the portfolio
back into the U.S. dollar, as we think the U.S. dollar remains undervalued in
an international context.
Our emphasis remains on "growth" stocks which display less vulnerability to the
economic cycle, although we expect our next significant portfolio move will be
towards increasing the economic sensitivity of the portfolio. To this end, we
have recently added Radex, the supplier of refractory products and building
materials, to the portfolio. We have also moved our position in Creditanstalt
out of the ordinary shares and into the non-voting preference on the basis that
the former had become overvalued as a result of bid speculation.
Thank you for your continued interest and participation in The Austria Fund. We
look forward to reporting to you again on developments in the Austrian market
and your Fund's investment results in coming periods.
Sincerely,
Dave H. Williams
Chairman
Mark H. Breedon
Vice President
2
TEN LARGEST HOLDINGS
FEBRUARY 28, 1997 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
OEMV AG $15,442,097 11.4%
VA Technologie AG 15,240,197 11.3
EVN 13,171,297 9.7
Oest El Wirtsch A Verbundgslschft 7,266,374 5.4
Mayer-Melnhof Karton AG 7,191,182 5.3
Flughafen Wien AG 6,824,656 5.0
Austria Mikro Systeme International AG 5,947,082 4.4
Scala/Overseas ECE, Ltd. 4,925,642 3.6
Creditanstalt-Bankverein 4,733,109 3.5
BauMax Vertiebs AG (preferred) 4,196,478 3.1
$84,938,114 62.7%
3
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON, PREFERRED STOCKS AND OTHER
INVESTMENTS-96.9%
COMMON STOCKS-91.5%
CAPITAL GOODS-27.6%
ENGINEERING & CONSTRUCTION-17.6%
Bau Holdings AG 74,480 $ 4,088,784
Strabag Oesterreich AG 15,456 899,253
VA Technologie AG (a) 101,000 15,240,197
Weinerberger Baustoff Industrie AG 20,000 3,632,345
------------
23,860,579
MACHINERY-2.3%
Steyr Daimler Puch Aktiengesells (b) 180,000 3,182,722
PAPER & FOREST PRODUCTS-5.3%
Mayer-Melnhof Karton AG (b) 140,472 7,191,182
STEEL-2.4%
Boehler Uddeholm AG 18,500 1,278,078
Voest-Alpine Stahl AG 49,500 1,963,266
------------
3,241,344
------------
37,475,827
BASIC INDUSTRIES-19.4%
ENERGY-11.4%
OEMV AG (a) 131,000 15,442,097
TECHNOLOGY-8.0%
Austria Mikro Systeme International AG 63,233 5,947,082
Scala/Overseas ECE, Ltd. (b) (c) 30,000 4,925,642
------------
10,872,724
------------
26,314,821
UTILITIES-16.7%
Burgenland Holdings AG 60,000 2,142,023
EVN (a) 89,440 13,171,297
Oest El Wirtsch A Verbundgslschft (a) 100,000 7,266,374
------------
22,579,694
CONSUMER PRODUCTS & SERVICES-16.4%
AIRLINES-5.8%
Austrian Airlines Oesterreichische
Luftverkehrs AG (b) 7,000 1,043,226
Flughafen Wien AG 136,225 6,824,656
------------
7,867,882
FOOD & BEVERAGES-5.4%
Brau-Union Goess-Reininghaus
Osterreichische Brau AG 60,000 3,384,800
Oesterreichische Brau-Beteillgungs AG (a) 53,568 3,292,572
Royal Tokaj Wine Co., Ltd. (b) (c) (d) 275,254 605,362
------------
7,282,734
HEALTHCARE-0.8%
Semperit Holdings AG 20,000 1,094,587
POLLUTION CONTROL-1.5%
BWT AG 20,000 2,096,555
RETAIL-2.9%
Inku AG 15,000 301,853
KTM Motorradholding AG (b) 30,000 1,851,536
Wolford AG 15,000 1,777,020
------------
3,930,409
------------
22,272,167
4
THE AUSTRIA FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
FINANCIAL SERVICES-10.1%
BANKING-5.1%
Bank Austria AG new (b) 8,145 $552,070
Bank Fuer Oberoesterreich und Salzburg 30,000 1,692,400
Creditanstalt-Bankverein 123,573 4,733,109
------------
6,977,579
INSURANCE-5.0%
Erste Allegemeine Generali AG (a) 10,055 2,793,849
Wiene Staedtische Allgemeine Ver 47,000 3,897,993
------------
6,691,842
------------
13,669,421
OTHER INVESTMENTS-1.3%
East Europe Development Fund,
Ltd. (b) (c) (e) 40,000 1,400,000
First Hungary Fund, Ltd. (c) (e) 455 386,755
------------
1,786,755
Total Common Stocks and Other Investments
(cost $110,604,451) 124,098,685
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
PREFERRED STOCKS-5.4%
CONSUMER PRODUCTS & SERVICES-3.4%
FOOD & BEVERAGES-0.3%
Agrana Beteiligungs AG 13,900 $ 353,451
RETAIL-3.1%
BauMax Vertiebs AG (a) 140,000 4,196,478
------------
4,549,929
FINANCIAL SERVICES-2.0%
BANKING-1.6%
Bank Austria AG 63,230 2,220,068
INSURANCE-0.4%
Erste Allegemeine Generali 4,507 469,423
------------
2,689,491
Total Preferred Stocks (cost $8,830,672) 7,239,420
TIME DEPOSIT-1.4%
Sumitomo Bank 5.44%, 03/03/97
(cost $1,900,000) $1,900 1,900,000
TOTAL INVESTMENTS-98.3%
(cost $121,335,123) 133,238,105
Other assets less liabilities-1.7% 2,325,545
NET ASSETS-100% $135,563,650
(a) Securities, or portion thereof, with an aggregate market value of
$36,706,466 have been segregated to collateralize forward exchange currency
contracts.
(b) Non-income producing security.
(c) Restricted and illiquid security, valued at fair value. (See Notes A & E).
(d) British Pound denominated security.
(e) U.S. Dollar denominated security.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $121,335,123) $133,238,105
Foreign cash, at value (cost $3,604,707) 3,603,832
Cash 96,635
Receivable for investment securities sold 1,899,751
Unrealized appreciation of forward exchange currency contract 198,737
Foreign taxes receivable 28,687
Prepaid expenses and other assets 28,074
Interest receivable 15,684
Total assets 139,109,505
LIABILITIES
Payable for investment securities purchased 3,218,317
Advisory fee payable 96,766
Sub-advisory fee payable 21,203
Accrued expenses and other liabilities 209,569
Total liabilities 3,545,855
NET ASSETS $135,563,650
COMPOSITION OF NET ASSETS
Capital stock, at par $ 117,030
Additional paid-in capital 124,326,458
Accumulated net investment loss (2,950,310)
Accumulated net realized gain on investments and foreign
currency transactions 1,972,195
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 12,098,277
$135,563,650
NET ASSET VALUE PER SHARE (based on 11,703,031 shares outstanding) $11.58
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $38,491) $269,382
Interest 86,651 $ 356,033
EXPENSES
Advisory fee 612,944
Sub-advisory fee 130,699
Custodian 162,813
Directors' fees and expenses 95,050
Audit and legal 53,609
Transfer agency 28,066
Registration fee 19,474
Printing 16,612
Miscellaneous 7,250
Total expenses 1,126,517
Net investment loss (770,484)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 3,686,347
Net realized gain on foreign currency transactions 2,618,198
Net change in unrealized appreciation of:
Investments 48,096
Foreign currency denominated assets and liabilities 169,655
Net gain on investments and foreign currency transactions 6,522,296
NET INCREASE IN NET ASSETS FROM OPERATIONS $5,751,812
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS The Austria Fund
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
FEB. 28,1997 AUGUST 31,
(UNAUDITED) 1996
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (770,484) $ (193,831)
Net realized gain on investments and foreign
currency transactions 6,304,545 12,773,242
Net change in unrealized appreciation of
investments and foreign currency denominated
assets and liabilities 217,751 1,817,611
Net increase in net assets from operations 5,751,812 14,397,022
DIVIDENDS TO SHAREHOLDERS FROM:
Dividends in excess of net investment income (1,521,394) -0-
Total increase 4,230,418 14,397,022
NET ASSETS
Beginning of year 131,333,232 116,936,210
End of period $135,563,650 $131,333,232
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Austria Fund (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 gain on foreign currency transactions 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, gains or losses arising from the closing of forward exchange
currency 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 unrealized
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 year.
The exchange rate for the Austrian Schilling at February 28, 1997 was ATS 11.88
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 INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Realized and unrealized gains and losses from investment 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.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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.
Under the terms of a Shareholder Inquiry Agency Agreement with Alliance Fund
Services, Inc. ("AFS"), an affiliate of the Investment Manager, the Fund
reimburses AFS for costs relating to servicing phone inquiries for the Fund.
The Fund reimbursed AFS $780 during the six months ended February 28, 1997.
Under the sub-advisory agreement, the Fund will pay BAI Fondaberatung
Ges.m.b.H. (the "Sub-Advisor") a fee, calculated weekly and paid monthly, at an
annual rate of .20 of 1% of the Fund's average weekly net assets.
GiroCredit, an affiliate of the Sub-Advisor serves as the Sub-Custodian of the
Fund. During the six months ended February 28, 1997, the Fund earned interest
of $63,546 on Austrian schillings deposited with the Sub-Custodian. Brokerage
commissions paid on securities transactions for the six months ended February
28, 1997 amounted to $48,778, of which none was paid to affiliated broker
dealers.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government securities) aggregated $18,712,664 and $16,857,477 respectively, for
the six months ended February 28, 1997. There were no purchases or sales of
U.S. government or government agency obligations for the six months ended
February 28, 1997.
At February 28, 1997, the cost of securities for federal income tax purposes
was the same as the cost for financial reporting purposes $121,335,123.
Accordingly, gross unrealized appreciation of investments was $22,838,679 and
gross unrealized depreciation of investments was $10,935,697 resulting in net
unrealized appreciation of $11,902,982 (excluding foreign currency).
At August 31, 1996, the Fund had a capital loss carryforward of $3,696,307
which expires in the year 2002.
FORWARD EXCHANGE CURRENCY CONTRACTS
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
contract 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.
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.
The Fund's custodian will place and maintain liquid assets 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.
At February 28, 1997, the Fund had an outstanding forward exchange currency
contract as follows:
Contract Value on U.S. $
Amount Origination Current Unrealized
(000) Date Value Appreciation
-------- ----------- ----------- ------------
FOREIGN CURRENCY SALE CONTRACT
Austrian Schillings
expiring 3/27/97 253,050 $21,534,887 $21,336,150 $198,737
10
THE AUSTRIA FUND
_______________________________________________________________________________
NOTE D: CAPITAL STOCK
There are 100,000,000 shares of $.01 par value common stock authorized of which
11,703,031 shares were outstanding at February 28, 1997.
NOTE E: RESTRICTED SECURITIES
DATE ACQUIRED U.S. $ COST
--------------- ------------
East Europe Development Fund, Ltd. 1/07/91 $ 400,000
First Hungary Fund, Ltd. 10/20/89 455,000
Royal Tokaj Wine Company, Ltd. 7/28/94 437,655
Scala/Overseas Ece. Ltd. 6/29/95-3/27/96 1,021,164
The securities shown above are restricted and 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, 1997 was $7,317,759, representing
5.4% of total net assets.
11
FINANCIAL HIGHLIGHTS THE AUSTRIA FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Six Months
Ended
February 28, Year Ended August 31,
1997 --------------------------------------------------------------
(unaudited) 1996 1995 1994 1993 1992
------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.22 $9.99 $11.03 $ 9.62 $8.89 $10.89
Income From Investment Operations
Net investment income (loss) (.07) (.02) -0- (.05) .01 .01
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .56 1.25 (.11) 1.55 .74 (1.87)
Net increase (decrease) in net asset
value from operations .49 1.23 (.11) 1.50 .75 (1.86)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- (.02) (.01) (.01) -0-
Dividends in excess of net investment
income (.13) -0- -0- (.06) -0- -0-
Distributions from net realized gains on
investments and foreign currency
transactions -0- -0- -0- (.02) (.01) (.14)
Total dividends and distributions (.13) -0- (.02) (.09) (.02) (.14)
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering -0- -0- (.86) -0- -0- -0-
Offering costs charged to additional
paid-in capital -0- -0- (.05) -0- -0- -0-
Total capital share transactions -0- -0- (.91) -0- -0- -0-
Net asset value, end of period $11.58 $11.22 $ 9.99 $11.03 $9.62 $ 8.89
Market value, end of period $9.125 $8.50 $8.25 $10.88 $10.13 $7.75
TOTAL RETURN(a)
Total investment return based on:
Market value 8.87% 3.03% (21.51)% 8.37% 30.96% (17.16)%
Net asset value 4.67% 12.31% (9.15)% 15.69% 8.47% (17.11)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $135,564 $131,333 $116,936 $91,121 $79,464 $73,418
Ratio of expenses to average net assets 1.72%(b) 1.83% 1.71% 1.87% 2.13% 1.92%
Ratio of net investment income (loss)
to average net assets (1.18)%(b) (.15)% .02% (.51)% .09% .09%
Portfolio turnover rate 26% 39% 27% 36% 42% 56%
Average commission rate paid (c) $.2453 $.1997 - - - -
</TABLE>
(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 the 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.
(b) Annualized.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged. This amount includes commissions to foreign brokers
which may materially affect the rate shown. Amounts paid in foreign currencies
have been converted into U.S. dollars using the prevailing exchange rate on the
date of the transaction.
12
ADDITIONAL INFORMATION THE AUSTRIA FUND
_______________________________________________________________________________
SUPPLEMENTAL PROXY INFORMATION
The Annual Meeting of Shareholders of The Austria Fund was held on December 17,
1996. The description of each proposal and number of shares are as follows:
SHARES SHARES VOTED
VOTED FOR WITHOUT AUTHORITY
- -------------------------------------------------------------------------------
1. To elect directors: Class Three Directors
(term expires 1999)
John D. Carifa 7,938,920 112,352
Dr. Hans Haumer 7,937,990 113,283
Reba H. Williams 7,940,319 110,954
SHARES VOTED SHARES VOTED SHARES 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, 1997: 7,957,191 77,299 16,783
13
THE AUSTRIA FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
Dave H. Williams, Chairman and President
John D. Carifa
William H. M. de Gelsey (1)
Dr. Hans Haumer (1)
Dipl. Ing. Hellmut Longin (1)
Dipl. Ing. Peter Mitterbauer (1)
Peter Nowak
Mag. Reinhard Ortner (1)
Dr. Maria Schaumayer (1)
Dr. Reba W. Williams
Dr. Walter Wolfsberger (1)
OFFICERS
Norman S. Bergel, Vice President
Mark H. Breedon, 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
(1) Member of the Audit Committee
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 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.
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THE AUSTRIA FUND
Summary of General Information
Investment Objective and Policies
The investment objective of the Fund is to seek long-term capital appreciation
through investment primarily in the equity securities of Austrian companies.
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, each Sunday in The New York Times and each
Saturday in 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
R These registered service marks used under license from the owner, Alliance
Capital Management L.P.
AUSSR
