AUSTRIA FUND INC PREC14A
Filing Date: 11/17/98
1
2
3
4
TYPE: PREC14A
SEQUENCE: 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as
permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
AUSTRIA FUND, INC.
- ------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Deep Discount Advisors, Inc.
- ------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies: _____________________________________________
(2) Aggregate number of securities to which transaction
applies: _____________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
______________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________
(5) Total fee paid:_______________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of
its filing.
(1) Amount previously paid:
_______________________________________
(2) Form, Schedule or Registration Statement No.:
_______________________________________
(3) Filing Party:
_______________________________________
(4) Date Filed:
_______________________________________
Deep Discount Advisors, Inc.
One West Pack Square, Suite 777, Asheville, NC 28801
828-274-1863 Fax: 828-255-4834 E-mail: [email protected]
Dear Fellow Stockholders:
I am President of Deep Discount Advisors, Inc., and General Partner of Ron Olin
Investment Management Company, both registered investment advisors, which are
the Soliciting Shareholders ("Soliciting Shareholder") for this Proxy.
As a long-term stockholder of The Austria Fund (the "Fund"), I am concerned
about the persistent discount from net asset value per share ("NAV") at which
shares of the Fund have traded.
To help give stockholders a stronger voice on matters affecting the value of
their investments in the Fund at the 1998 Meeting of Stockholders, we intend to
nominate four persons for election as directors of the Fund. We also intend to
introduce four proposals for action by stockholders. The meeting will be held
on January 13, 1999.
The persons we intend to nominate for election as directors are: Ronald G. Olin,
Ralph W. Bradshaw, Gary A. Bentz, and William A. Clark. Each is committed to
exploring fully and implementing measures intended to increase the NAV of your
shares and to eliminate the discount from NAV. If elected, Messrs. Olin,
Bradshaw, Bentz, and Clark would encourage the Board of Directors to consider
and to implement a variety of actions designed to enhance stockholder value.
Some of these might include, but are not limited to:
* Significant perpetual repurchases of shares in the market, which
would have the effect of increasing NAV and the likely effect of
reducing the discount;
* Delivering NAV to those shareholders who want it as soon as
is practical while minimizing the impact on those investors who may
want to remain in a closed-end fund structure;
* Implementing an open-ending of the Fund as cheaply and quickly as
possible WITH NO REDEMPTION FEES WHATSOEVER if the open-ending
proposal presented to shareholders is approved;
At the meeting, we will introduce for approval by stockholders
the following proposals:
* A resolution terminating the investment advisory agreement
between the Fund and Alliance Capital Management, L.P.
("Alliance"), the Fund's investment adviser;
* A resolution recommending that the Board of Directors take necessary
steps to require all Board Members to stand for election every year;
* A resolution stating that it would be in the best interests
of the Fund and its stockholders for members of the Board of
Directors who are not standing for re-election this year to
resign;
* A resolution recommending that the Board of Directors
authorize and direct the officers of the Fund to reimburse
the Soliciting Shareholder for reasonable expenses incurred in
connection with our solicitation of proxies.
We believe that both the management of the Fund, Alliance, and the Fund's Board
of Directors have been unresponsive to the legitimate concerns of long-term
stockholders. Consequently, we now believe that the only way to assure that
stockholder interests are given primary consideration is through significant
stockholder representation on the Board of Directors. We are not interested
in competing for the Fund's advisory contract and would not agree to be the
replacement for Alliance as manager if their advisory contract were terminated.
Don't let the Fund's proxy confuse the issues for you. Alliance did not dispute
the facts and dollar amounts stated in the supporting statement for the
termination proposal (Exhibit 3) because they are indisputable. On 2/28/98,
when the market price of the shares was $11.44, the shareholders had
collectively made about $12 million on their investment over eight years while
paying out $25 million in advisory fees, director fees, underwriting fees and
other expenses. As of 11/13/98 the market price of the shares had fallen to
$10.19, representing approximately $15 million less in value. The elimination
of the discount (over $16 million on 11/13/98) would substantially improve the
investment results of the shareholders. We believe Alliance is currently
standing in the way of the shareholders realizing full value for their shares.
In its self-serving claims to "set the record straight", the Fund's proxy
states that the Fund has had "fine performance", that Alliance has demonstrated
its commitment to stockholder values, and that approval of the termination
proposal could "substantially harm" the fund's shareholders by disrupting the
Fund.
Please read between the lines before you vote on all the issues presented to
you. By almost any objective standard, this has not been a good investment for
shareholders but has been a great investment for Alliance. Effective solutions
to ending the discount are likely to reduce the size of the fund and the
corresponding management fees. Alliance has made a business decision concerning
the balance between their well being and the well being of the shareholders.
Shareholders need to do the same.
Look at the record. Last year Alliance asked us and other shareholders not to
submit a request for an open ending vote in exchange for their initiating a
managed distribution policy. Other shareholders agreed but we refused, and
because of our submission of this request, you now have the right to vote on
open-ending this year, even if the super-majority requirement may make passage
virtually impossible.
On July 4, 1998 (Independence Day) we sent Alliance a letter asking to meet with
the Board, suggesting an aggressive share buyback program and/or other discount
reduction methods, and included a termination proposal as a last resort if the
Fund didn't fix the discount. Alliance responded by permitting us to meet with
one director and one other officer of the Fund, both affiliated with Alliance.
As we continued to express our displeasure at the poor investment results of the
Fund and the growing discount, and told them we were considering possible
challenges in the annual meeting, the Fund announced a repurchase program "at
such times and in such amounts" as Fund management believes is appropriate.
When we asked that the Fund consider outside individuals representing
substantial shareholder interests as director nominees in this year's annual
meeting, we, and others who made the same request, were told that such nominees
were not needed. Alliance's claims concerning its commitment to stockholder
value seem to us to represent measured responses calculated to defeat more
effective shareholder actions.
Finally, in their opposition to the termination proposal, Alliance is claiming
that their removal would disrupt the Fund and could hurt shareholder value.
They are well aware that the relevant provision of the Investment Company Act
permits shareholders to terminate the advisor with "up to 60 days notice" and
that the fiduciary responsibilities of the Directors would require them to
insure an orderly transition and replacement of the advisor. They further know,
as representatives of substantial shareholder interests, that we would expect
the Directors and Alliance to effect a smooth transition if the termination
proposal were to come into effect.
We cannot afford to spend a lot of money on expensive lawyers, multiple
mailings, and proxy solicitors who will call you on the telephone and try to
record your vote. Indeed, we suspect that the Fund will spend our money, and
yours, to do exactly that. They will make it as easy as possible for you to
record your vote for management and the status quo. We believe the status quo
is your enemy here. You have a chance to vote your own pocketbook. We
represent substantial shareholder interests and, if you elect us, we will
represent your interests as shareholders. Please vote and return the green
proxy card.
Please read the attached Proxy Statement carefully. It contains additional
information about the persons we plan to nominate for election as directors and
the proposals we plan to introduce.
To enable us to vote your shares in favor of the election of our
nominees and the proposals noted above, PLEASE MARK, SIGN, and DATE AND RETURN
THE ENCLOSED [GREEN] PROXY CARD IN THE POSTAGE PRE-PAID ENVELOPE THAT HAS BEEN
PROVIDED. You may vote on all proposals contained in the Fund's [WHITE] proxy
card by using the enclosed [GREEN] proxy card. Instructions for executing the
[GREEN] proxy card are on the next page.
If you have already returned the [WHITE] proxy card sent to you by the
Fund, you may revoke that proxy and vote for our nominees and proposals by
marking, signing, dating and mailing a later dated [GREEN] proxy card.
AFTER SUBMITTING A [GREEN] PROXY CARD, PLEASE DO NOT RETURN A [WHITE]
PROXY CARD (EVEN IF YOU ARE VOTING AGAINST THE NOMINEES NAMED IN THE FUND'S
PROXY STATEMENT). DOING SO WILL REVOKE YOUR [GREEN] PROXY CARD.
If you have any questions, please call me at (828) 274-1863
Sincerely yours,
Ronald G. Olin
TO SUPPORT OUR EFFORTS TO ENHANCE STOCKHOLDER VALUE, PLEASE MARK,
DATE, SIGN AND RETURN THE ENCLOSED [GREEN] PROXY CARD USING THE ENCLOSED POSTAGE
PRE-PAID ENVELOPE.
VOTING INFORMATION
The Fund's proxy materials include proposals relating to the election of
Directors, ratification of the selection of the Fund's independent Accountants,
terminating the investment advisory contract, and open-ending the Fund. You may
vote on each of the matters contained in the Fund's proxy statement, as well as
additional shareholder proposals by completing and returning the enclosed
[GREEN] proxy card.
The Soliciting Shareholder is not making any recommendation as to how you should
vote on ratification of the selection of the Fund's independent accountants.
A [GREEN] proxy card which is returned to the Soliciting Shareholder or its
agent will be voted as you indicate on the card. If a [GREEN] proxy card is
returned without indicating how to vote on a matter, your shares will be voted
FOR the election of our nominees, FOR the proposal recommending that the Board
take steps to require all Board members to stand for election every year, FOR
the proposal recommending that the Board authorize management to reimburse the
Soliciting Shareholder for reasonable expenses incurred in this proxy
solicitation, and will ABSTAIN on the proposal to ratify the selection of the
Fund's independent accountants. All other stockholder proposals contained in
this proxy or introduced at the meeting for which you have not indicated your
preference will be voted at the time of the meeting by the Soliciting
Shareholder in accordance with the best interests of the stockholders in the
sole judgement and opinion of the Soliciting Shareholder.
If you have already returned the [WHITE] proxy card that was sent to you by the
Fund, you may revoke that proxy and vote for the Soliciting Shareholder's
nominees and proposals by marking, signing, dating and mailing a later dated
[GREEN] proxy card.
Completing and returning a [WHITE] proxy card, even to vote against the nominees
named in the Fund's proxy statement, after you return the enclosed [GREEN] proxy
card will revoke the proxy given in the [GREEN] card. Therefore, DO NOT return
a [WHITE] proxy card after returning the [GREEN] card, unless you wish to
completely cancel ALL of your choices on the [GREEN] proxy card.
PROXY STATEMENT IN OPPOSITION TO SOLICITATION BY THE BOARD
OF DIRECTORS OF AUSTRIA FUND, INC.
ANNUAL MEETING OF STOCKHOLDERS
To be held on January 13, 1999
This proxy statement and the enclosed [GREEN] proxy card are being furnished to
holders of record on October 30, 1998 (the "Record Date") of shares of common
stock, par value $.01 per share (the "Common Stock"), of The Austria Fund,
Inc., a Maryland corporation (the "Fund"), by Deep Discount Advisors, Inc. and
Ron Olin Investment Management Company, both registered investment advisors,
(the "Soliciting Shareholder"), in connection with the solicitation of proxies
by the Soliciting Shareholder for use at the 1998 Annual Meeting of the Fund to
be held on January 13, 1999, at the offices of the Fund, 1345 Avenue of the
Americas, New York, New York 10105, at 11:00 a.m., New York time. The
principal executive offices of the Fund are located at 1345 Avenue of the
Americas, New York, New York 10105. The Soliciting Shareholder is soliciting a
proxy to vote your shares at the 1998 Annual Meeting of Stockholders of the Fund
and at any and all adjournments or postponements of the meeting.
This proxy statement and the enclosed [GREEN] proxy card are
first being sent to stockholders of the Fund on or about November ___,
1998.
INTRODUCTION
There are four matters that the Fund has scheduled to be voted on at the
meeting:
1. The election of four persons to serve as directors of
the Fund;
2. The ratification of the selection by the Board of
Directors of PricewaterhouseCoopers LLP as the
independent accountants of the Fund for the year ending
August 31, 1999;
3. A stockholder proposal to terminate the Fund's
advisory agreement with Alliance Capital Management, L.P.,
which serves as the investment advisor of the Fund (the
"Contract Termination Proposal");
4. A proposal that the Board of Directors of the Fund
take steps to convert the Fund to an open-end investment
company ("Open-Ending Proposal") by amending the Articles of
Incorporation accordingly and to change the subclassification
of the Fund from a closed-end investment company to an
open-end investment company.
With respect to these matters, the Soliciting Shareholder is soliciting a proxy
to vote your shares:
* IN FAVOR of the election of four persons whom the Soliciting
Shareholder intends to nominate for election as directors of the
Fund; and
With regard to items 3 and 4 above, the Contract Termination Proposal and the
Open-Ending Proposal, respectively, the Soliciting Shareholder will vote in
accordance with your wishes on those matters. If no instructions are given, the
Soliciting Shareholder will vote in accordance with the best interests of all
shareholders at the time of the Annual Meeting. This decision will be made in
the sole discretion of the Soliciting Shareholder, unless otherwise specified on
the [GREEN] Proxy card.
The Soliciting Shareholder is making no recommendation on how shares should be
voted on the ratification of the selection of the Fund's independent accountants
and will ABSTAIN if no preference is indicated.
The Soliciting Shareholder is also soliciting your proxy to vote your shares on
the following proposals, which we intend to introduce at the meeting (but which
do not appear in the Fund's proxy statement or on its [white] proxy card):
5. A stockholder proposal recommending that the Board of
Directors take necessary steps to require all Board Members to
stand for election every year, ("Annual Election of All
Directors");
6. A stockholder proposal stating that it would be in the
best interests of the Fund and its stockholders for
members of the Board of Directors who are not standing
for re-election this year to resign, ("Resignation of
Directors"); and
7. A stockholder proposal recommending that the Board of
Directors authorize and direct the officers of the Fund
to reimburse the Soliciting Shareholder for reasonable expenses
incurred in connection with its solicitation of proxies.
How Proxies Will Be Voted
All of the proposals scheduled by the Fund to be voted on at the meeting are
included in the enclosed [GREEN] proxy card. If you wish to vote IN FAVOR of
our nominees, and FOR any of the other proposals, you may do so by completing
and returning a [GREEN] proxy card.
If you return a [GREEN] proxy card to the Soliciting Shareholder or its agent,
your shares will be voted on each matter as you indicate. If you do not
indicate how your shares are to be voted on a matter, they will be voted FOR the
election of our nominees for director, FOR the proposal recommending that the
Board take steps to require all Board members to stand for election each year,
FOR the proposal recommending that the Board authorize management to reimburse
the Soliciting Shareholder for reasonable expenses incurred in this proxy
solicitation. If you do not indicate how to vote on the ratification of the
selection of the Fund's independent accountants, your shares will be voted TO
ABSTAIN on that matter. All other stockholder proposals contained in this proxy
or introduced at the meeting will be voted at the time of the meeting by the
Soliciting Shareholder in accordance with the best interests of the
stockholders, in the sole judgement and opinion of the Soliciting Shareholder.
If you return a [GREEN] proxy card, you will be granting the persons named as
proxies discretionary authority to vote on any other matters of which they are
not now aware that may come before the meeting. These may include, among other
things, matters relating to the conduct of the meeting and proposals of other
stockholders.
Voting Requirements
Only stockholders of record on the Record Date are entitled to vote at the
meeting. According to the Fund's proxy statement, there were 11,703,031 shares
of Common Stock issued and outstanding on the Record Date. Holders of record on
the Record Date will be entitled to cast one vote on each matter for each share
of Common Stock held. Directors of the Fund are elected by a plurality of the
votes cast. Ratification of the selection of the Fund's independent accountants
and approval of stockholder proposals numbers 5, 6, and 7 described in this
proxy statement each require the affirmative vote of a majority of the shares
voting on the matter. The Contract Termination Proposal, Proposal 3, requires
the vote of a majority of the outstanding voting securities of the Fund, as
defined by the Investment Company Act of 1940 (the "1940 Act"). This majority
means the lesser of: (1) 67% or more of the Common Stock of the Fund present at
the meeting, if the holders of more than 50% of the outstanding Common Stock are
present or represented by proxy; or (2) more than 50% of the outstanding Common
Stock. The Open-Ending proposal, Proposal 4, requires the affirmative vote of
two thirds of the Fund's outstanding shares.
In tallying stockholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (a) instructions have not been received
from the beneficial owners or persons entitled to vote and (b) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the meeting. Abstentions and broker non-votes will have no effect on
the election of directors. The four nominees receiving the largest number of
votes will be elected to serve as directors of the Fund. In addition,
abstentions and broker non-votes are not considered votes "cast" and thus, will
have no effect on any proposal other than the Contract Termination Proposal,
Proposal 3, and the Open-Ending Proposal, Proposal 4, in which case they will
have the same effect as "no" votes.
The presence, in person or by proxy, of the holders of more than 50% of the
shares of Common Stock of the Fund entitled to vote at the meeting will
constitute a quorum for the transaction of business. If a quorum is not present
at the meeting, or if a quorum is present but sufficient votes to approve any of
the stockholder proposals are not received, the persons named as proxies may
propose one or more adjournments of the meeting to permit further solicitation
of proxies. The proxies may also propose an adjournment for other reasons. Any
adjournment will require the affirmative vote of a majority of those shares
present at the meeting in person or by proxy. If an adjournment of the meeting
is proposed, the persons named as proxies on the [GREEN] proxy card will vote
for or against such adjournment in their discretion.
Revocation of Proxies
You may revoke any proxy you give to management or the Soliciting
Shareholder at any time prior to its exercise in the following ways:
Deliver a written revocation of your proxy to the Secretary of
the Fund;
Execute and deliver a later dated proxy to the Soliciting Shareholder
or to the Fund or our respective agents; or
Vote in person at the meeting. (Attendance at the meeting
will not in and of itself revoke a proxy.)
There is no limit on the number of times you may revoke your
proxy prior to the meeting. Only the latest dated, properly signed
proxy card will be counted.
INFORMATION CONCERNING THE SOLICITING SHAREHOLDER
The beneficial shareholders making this solicitation are Deep Discount Advisors,
Inc. and Ron Olin Investment Management Company, both registered investment
advisors. These companies presently manage investment portfolios having assets
in excess of $180 million.
Our address is One West Pack Square, Suite 777, Asheville, NC 28801.
As of the Record Date, the Soliciting Shareholder has the beneficial ownership
of 1,397,366 shares of Common Stock of the Fund, held by principals and clients
of the companies and representing approximately 11.9 % of the issued and
outstanding shares of Common Stock of the Fund.
Exhibit 1 to this proxy statement contains a schedule showing the purchases and
sales of Common Stock of the Fund by the Soliciting Shareholder within the past
two years.
The Soliciting Shareholder has made the decision to seek Board representation
after what we consider to be an extended period of unsatisfactory shareholder
results. Moreover, we have not seen effective measures taken by Alliance nor
effective direction by the current Board to deal with the persistent discount to
NAV at which the Fund's shares trade on the open market. We have had an active
dialogue with the Fund in an attempt to address these issues. A summary of our
recent communication with the Fund follows below:
1. 12/29/97 Shareholder Vote to Open-End the Fund - Deep Discount
Advisors, Inc. president, Ron Olin, submits a letter to the Fund requesting that
the Fund include a proposal to convert the fund to an "open-end company"
pursuant to the Fund's Articles of Incorporation which require that such a
proposal be submitted to the shareholders if (i) the Fund's shares have traded
at an average discount of more than 10% for the 12 weeks preceding December 31,
and (ii) 10% or more of the Fund's shareholders request in writing that such
an open-ending proposal be submitted to all shareholders at the next Annual
Meeting.
2. 7/4/98 Independence Day Letter - Deep Discount Advisors, Inc. sends a
letter to the Fund outlining techniques for enhancing shareholder value and
eliminating the Fund's discount and also requesting a meeting with the Fund's
Board. The letter includes a shareholder proposal to the Fund, to be included
in the Fund's Proxy statement, which requires that the advisory agreement
between the Fund and Alliance Capital Management, L.P. be terminated and that
competitive bids for a new investment manager be solicited by the Board. This
letter which includes a supporting statement detailing the reasons for the
proposal is attached as Exhibit 3.
3. 10/7/98 Nominate Non-Incumbent Candidates with large Shareholder
Interests for Board Representation - Deep Discount Advisors, Inc. submits a
request to the Board of Directors of the Fund that they nominate as Directors
for the next Annual Meeting the 4 nominees cited in this proxy as candidates who
would represent substantial shareholder interests on the Board. This letter is
attached as Exhibit 4.
4. 10/23/98 Refusal to Nominate Non-Incumbent Board Candidates - The
Nominating Committee for the Fund refuses to nominate Messrs Olin, Bradshaw,
Bentz, and Clark as requested, citing their satisfaction with the past
performance of the incumbent Directors and the importance of the presence of
Austrian citizens on the Board of Directors.
REASONS FOR THE SOLICITATION
In our view, management has not taken meaningful steps to enhance stockholder
value. For this reason, the Soliciting Shareholder is soliciting your vote to
elect Messrs. Olin, Bradshaw, Bentz, and Clark to the Board of Directors and to
effect various stockholder proposals, which we believe will enhance stockholder
value.
The election of Messrs. Olin, Bradshaw, Bentz, and Clark as directors will
provide stockholders with an independent voice on important matters affecting
the Fund. Their election will give the Board a new perspective and will help
assure that measures intended to benefit stockholders are more actively
considered. The approval of various proposals will also further these goals to
the extent that they may result in:
* implementation of new investment advisory arrangements with
an investment adviser that is committed to enhancing value
for stockholders; and
* greater shareholder guidance to the Board, enhancing its ability to
act in the best interests of stockholders.
If you share these goals, we urge you to vote for our nominees and proposals,
using the enclosed [GREEN] proxy card.
CERTAIN CONSIDERATIONS
In deciding whether to give the Soliciting Shareholder your proxy, you should
consider the following information.
Even if our nominees are elected and our proposals are approved by stockholders,
there can be no assurance that the full Board of Directors will take any actions
that we may advocate or that such actions, if taken, will achieve their intended
goals. Our nominees will, if elected, represent only four of the Fund's eleven
directors, absent the resignation of any Class I or Class III directors.
Implementation of certain Board actions may require stockholder approval, and no
assurance can be given that such approval will be obtained. In addition,
various costs, which would be borne indirectly by stockholders, may be
associated with certain actions, including but not limited to those associated
with holding a special meeting of stockholders.
We believe that all stockholders of the Fund will benefit if any actions taken
to improve stockholder value or to reduce or eliminate the discount from NAV are
successful. However, the Soliciting Shareholder is paid fees by its clients who
hold shares of the Fund. These fees will be greater if the value of the Fund's
shares increases and, in some cases, are based upon a share of the profits the
client earns.
If the Contract Termination Proposal is approved, it will be necessary for the
Fund to retain a new investment adviser and obtain approval of an investment
advisory agreement with the new adviser by the Board of Directors of the Fund,
including the vote of a majority of the directors who are not "interested
persons" of the Fund as defined by the 1940 Act, and by stockholders of the
Fund. No assurance can be given that a new adviser will be identified or
approved prior to the date as of which the investment advisory agreement with
Alliance Capital Management, L.P. terminates. In such event, the Fund might
have to implement interim arrangements to assure continued management of the
Fund's assets, which might require the issuance of an order by the Securities
and Exchange Commission (and of which there can be no assurance).
Alternatively, the Board of Directors or officers of the Fund would have to
manage the Fund's investment portfolio.
Ron Olin and Deep Discount Advisors, Inc. are parties to a pending legal action
involving a closed-end fund. These actions are described in Exhibit 2. In that
action, the closed-end fund has alleged that the Soliciting Shareholder has
violated certain provisions of the Federal securities laws in connection with
the solicitation of proxies. Both Ron Olin and Deep Discount Advisors, Inc.
vigorously deny the allegation and have moved for dismissal.
ELECTION OF DIRECTORS
At the meeting, stockholders will have the opportunity to elect four persons as
directors of the Fund. The Fund currently has a total of eleven directors,
divided into three classes. There are presently four Class I directors, whose
terms expire in 2000, four Class II directors, whose terms expire in 1998, and
three Class III directors, whose terms expire in 2002. Each person elected as a
director at the meeting will be a Class II director and have a term expiring in
2001.
The Soliciting Shareholder will nominate Messrs. Olin, Bradshaw, Bentz, and
Clark for election as Class II directors of the Fund. Information about the
nominees is as follows:
Name, Business Address Age Principal Business Occupations
- ---------------------- --- ---------------------------------------------
Ronald G. Olin 53 Mr. Olin is President and Chief Executive
One West Pack Square Officer of Deep Discount Advisors, Inc. and
Suite 777 General Partner of Ron Olin Investment
Asheville, NC 28801 Management Co. Both firms are registered
investment advisors specializing in
investments in closed-end funds. He has
recently been elected as Chairman of the
Board of Clemente Global Growth Fund, a NYSE
Traded closed-end fund with an
Internationally diversified portfolio. Prior
to founding these investment management
firms, Mr. Olin was a senior manager with IBM
supporting government software contracts with
the N.A.S.A. and D.O.D.
Number of Shares Owned
Directly or Indirectly
As of October 30, 1998 138,366
Ralph W. Bradshaw 47 Mr. Bradshaw has served as Vice President and
One West Pack Square Secretary of Deep Discount Advisors, Inc., a
Suite 777 registered investment advisor specializing in
Asheville, NC 28801 closed-end fund investments, for over five
years. During that period he has also
provided financial consulting services in the
area of closed-end funds. In previous years,
he has held various managerial positions.
Mr. Bradshaw currently serves as a Director
on the Board of Clemente Global Growth Fund,
a NYSE-traded closed-end fund with an
internationally diversified portfolio.
Number of Shares Owned
Directly or Indirectly
As of October 30, 1998 354
Gary A. Bentz 42 Mr. Bentz has served as Vice President and
One West Pack Square Chief Financial Officer of Deep Discount
Suite 777 Advisors, Inc., a registered investment
Asheville, NC 28801 advisor specializing in closed-end fund
investments, for over five years. He has
also provided financial accounting,
investment analysis and consulting services
to companies and private investors for the
last 13 years. After commencing his career
with Arthur Andersen & Co., Mr. Bentz held
various financial managerial positions in
industry. He currently serves as a Director
on the Board of Clemente Global Growth Fund,
a NYSE-traded closed-end fund with an
internationally diversified portfolio.
Number of Shares Owned
Directly or Indirectly
As of October 30, 1998 2,800
William A. Clark 53 Since 1995 Mr. Clark has served as Director
One West Pack Square of Research for Deep Discount Advisors,
Suite 777 Inc., a registered investment advisor
Asheville, NC 28801 specializing in closed-end fund investment,
in addition to providing consulting services
in closed-end fund portfolio management.
Mr. Clark has served as an investment
analyst and advisor to private clients for
over 17 years. Before joining Deep Discount
Advisors, Mr. Clark served in various
managerial positions, and provided financial
services to banks, telecommunications
/software companies, private investors, and
regional developers. During this period, he
also served as CFO of a company in the
energy related business.
Number of Shares Owned
Directly or Indirectly
As of October 30, 1998 300
As previously noted, Deep Discount Advisors and Ron Olin Investment Management
Company are deemed to own beneficially 1,397,336 shares of Common Stock,
representing 11.9 % of the shares outstanding on the Record Date.
Directors of the Fund who are not affiliated with Alliance Capital Management,
L.P. receive an annual stipend for serving on the Board and its committees, an
additional sum for each Board meeting which they attend and reimbursement for
out-of-pocket expenses in connection with their attendance at directors'
meetings. According to the Fund's Proxy statement, Directors not affiliated
with Alliance each received total compensation between $11,500 and $12,000 for
the fiscal year ending August 31, 1998. The Fund does not pay any pension or
other benefits to its directors.
Other than fees that may be payable by the Fund to its directors, none of the
nominees named above has any arrangement or understanding with any person with
respect to any future employment by the Fund or by any affiliate of the Fund.
The persons named as proxies in the enclosed [GREEN] proxy
card intend, in the absence of contrary instructions, to vote all
proxies they are entitled to vote IN FAVOR of the election of the four
nominees named above. Each nominee has consented to stand for election
and to serve if elected. If any nominee is unable to serve, an event
not now anticipated, the proxies will be voted for such other person, if
any, as is designated by the persons named as proxies.
Information regarding the persons now serving as directors and
officers of the Fund, and additional information regarding the Fund, is
contained in the Fund's proxy statement.
STOCKHOLDER PROPOSALS
The Soliciting Shareholder intends to introduce the following four proposals at
the meeting.
CONTRACT TERMINATION PROPOSAL
Several months ago, Ron Olin, President of Deep Discount Advisors, Inc.
submitted a stockholder proposal to the Fund. This proposal is included in the
Fund's proxy statement and states as follows:
RESOLVED, The Fund's investment advisory agreement with its investment
advisor, Alliance Capital Management, L.P. (Alliance), shall be terminated and
the shareholders recommend that the board solicit competitive proposals for a
new investment advisor.
If this proposal is approved by stockholders, the investment
advisory agreement with the Fund's investment advisory agreement with
Alliance Capital Management, L.P. will be required to be terminated. We believe
that Alliance Capital Management, L.P. has been the primary impediment to
allowing shareholders to receive full Net Asset Value (NAV) if and when they
desire to dispose of their shares. Although passage of this proposal would not
directly result in achieving this goal, it will encourage the Board of Directors
to seek a new investment adviser who is committed to enhancing stockholder
value.
In the event this proposal is approved by stockholders, it will be necessary for
the Board of Directors, including a majority of the directors who are not
"interested persons" (as defined by the 1940 Act) of the Fund, to approve an
investment advisory agreement with a new investment adviser to assure continuity
of services to the Fund. This new advisory agreement will also have to be
approved by stockholders of the Fund prior to its effectiveness. If a new
advisory agreement is not approved by stockholders and directors and implemented
prior to the effective date of the termination of the present investment
advisory agreement, it is possible that there will be a period of time during
which the Fund will not have an independent investment adviser responsible for
the management and supervision of its investment portfolio.
PROPOSAL RECOMMENDING THAT THE BOARD TAKE STEPS TO REQUIRE ALL BOARD MEMBERS TO
STAND FOR ELECTION EVERY YEAR
At the meeting, the Soliciting Shareholder intends to introduce the following
resolution for approval by the stockholders:
RESOLVED: That the stockholders hereby recommend that the Board of
Directors take necessary steps and obtain the necessary approvals to eliminate
the current staggered-term structure of the Board and to require all Board
members to stand for election every year.
We believe that the Directors of a Fund owe their primary responsibility to the
interests of the stockholders and to maximizing stockholder value to the best of
their ability. We also believe that anti-takeover provisions such as staggered
Board terms, which exist in this Fund, are in conflict with direct Board
accountability to the stockholders and are therefore inappropriate for the Fund,
which should be run solely for the benefit of the Stockholders. Consequently,
the elimination of staggered terms for Board members and the requirement that
all Board members stand for election every year will make them more immediately
accountable to the demands and interests of the stockholders.
PROPOSAL THAT CLASS I AND CLASS III DIRECTORS RESIGN
At the meeting, the Soliciting Shareholder intends to introduce the following
resolution for approval by the stockholders:
RESOLVED, That it would be in the best interests of the Fund and its
stockholders for the Class I and Class III directors to resign their positions
as directors of the Fund.
Resignation of the Class I and Class III directors will enable the Class II
directors, elected at the 1998 Annual Meeting of Stockholders, to have sole
responsibility for the consideration and determination of actions that should be
taken in seeking to enhance stockholder value and to eliminate or reduce the
discount from NAV at which shares of the Fund trade. They would also have the
ability to seek additional, independent, qualified directors to serve on the
Board.
If our nominees are elected as directors of the Fund and if at least four of the
seven Class I and Class III directors of the Fund resign their positions, our
nominees will constitute a majority of the Board of Directors. If Messrs. Olin,
Bradshaw, Bentz, and Clark comprise a majority of the Board of Directors, they
will have the ability to implement measures they believe will enhance
stockholder value and are in the best interest of stockholders. Of course, no
assurance can be given that any such measures will be successful.
PROPOSAL RECOMMENDING REIMBURSEMENT OF EXPENSES OF SOLICITING SHAREHOLDER
At the meeting, the Soliciting Shareholder intends to introduce the following
resolution for approval by the stockholders:
RESOLVED, That the stockholders hereby recommend that the Board of
Directors authorize and direct the officers of the Fund to reimburse the
Soliciting Shareholder for such reasonable fees and expenses as have been and
may hereafter be incurred by it in connection with its solicitation of proxies
to be voted at the 1998 Annual Meeting of Stockholders.
We believe that the election of our nominees as directors of the Fund and the
approval of the stockholder proposals we intend to introduce will benefit the
Fund and its stockholders. For this reason, we intend to seek reimbursement to
the maximum extent permitted by law of the reasonable fees and expenses we incur
in connection with the solicitation of proxies and believe that reimbursement by
the Fund would be appropriate.
PRINCIPAL HOLDERS OF VOTING SECURITIES
According to the Fund's proxy statement, as of the Record date: (i) Ron Olin
Investment Management Company and Deep Discount Advisers, Inc., both located at
One West Pack Square, Suite 777, Asheville, North Carolina 28801, together owned
approximately 11.9% of the outstanding Common Stock of the Fund; (ii)
Bankgesellschaft Berlin AG, Alexanderplatz 2, D-10178 Berlin, Germany, owned
approximately 7.7% of the outstanding Common Stock of the Fund; and (iii) no
other person owned of record or, to the knowledge of the Fund, beneficially
owned more than 5% of the outstanding Common Stock. Mr. Olin and Deep Discount
Advisers, Inc. are defendants in litigation involving a closed-end investment
company. See Exhibit 2.
According to the Fund's proxy statement for last year's Annual Meeting, the
directors of the Fund, as a group (11 persons), owned an aggregate of 45,563
shares of Common Stock, representing less than 1% of the outstanding shares.
THE SOLICITATION
Deep Discount Advisors, Inc. and Ron Olin Investment Management Company
(Soliciting Shareholder) are making this solicitation.
Banks, brokerage houses and other custodians, nominees and fiduciaries will be
requested to forward this proxy statement and the enclosed [GREEN] proxy card to
the beneficial owners of shares of Common Stock for whom they hold shares of
record. The Soliciting Shareholder will reimburse these organizations for their
reasonable out-of-pocket expenses.
The Soliciting Shareholder will bear all of the fees and expenses related to
this proxy solicitation except to the extent that it seeks and obtains
reimbursement. We intend to seek reimbursement of these expenses from
the Fund and will propose at the meeting that stockholders authorize and
direct such reimbursement at the meeting. We estimate that the total
amount of fees and expenses we will incur in soliciting proxies will not exceed
$50,000, of which none has been expended to date.
We are not and, within the past year, has not been a party to any contract,
arrangement or understanding with any person with respect to any securities of
the Fund. In addition, there is no arrangement or understanding involving
either the Soliciting Shareholder, Inc. or any associate which relates to future
employment by the Fund or any future transaction with the Fund.
If you have any questions concerning this proxy solicitation or the procedures
to be followed to execute and deliver a proxy, please contact the Soliciting
Shareholder at 828-274-1863.
ADDITIONAL PROPOSALS
We know of no business that will be presented for consideration at the meeting
other than that set forth in this proxy statement and in the Fund's proxy
statement. If any other matters are properly presented for consideration at the
meeting, it is the intention of the persons named as proxies in the enclosed
[GREEN] proxy card to vote in accordance with their own best judgment on such
matters.
The date by which a stockholder must submit a proposal to be presented at the
1999 Annual Meeting of Stockholders is set forth in the Fund's proxy statement.
Dated: November 17, 1998
EXHIBIT 1
SECURITIES OF THE FUND PURCHASED OR SOLD
WITHIN THE PAST TWO YEARS BY THE SOLICITING STOCKHOLDER
Except as disclosed in this proxy statement, neither Ronald G. Olin nor Deep
Discount Advisors, Inc. nor Ron Olin Investment Management Company has, or had,
any interest, direct or indirect, by security holdings or otherwise, in the
Fund. The following table sets forth certain information with respect to
purchases and sales of shares of Common Stock of the Fund by Deep Discount
advisors, Inc. and Ron Olin Investment Management Company for accounts holding
shares as to which they are deemed to be the beneficial owners (the "Accounts").
Some of the shares are held in margin accounts. Therefore, a portion of the
purchase price and market value of the shares may from time to time be
represented by margin borrowings, depending upon the net debit balances, if any,
of the margin accounts, which fluctuate daily.
Date Shares Purchased
11/1/96 -986
11/19/96 986
11/21/96 3,400
12/3/96 3,954
12/17/96 1,076
12/31/96 -7,816
2/7/97 1,076
3/10/97 -1,231
3/13/97 7,500
3/14/97 1,919
3/17/97 7,500
3/24/97 4,641
3/27/97 11,000
3/31/97 -10,261
4/1/97 2,813
4/3/97 3,500
4/4/97 741
4/7/97 1,000
4/8/97 1,000
4/9/97 1,500
4/16/97 4,000
4/22/97 600
4/24/97 1,600
4/25/97 5,511
4/28/97 4,000
4/30/97 4,000
5/1/97 3,500
5/2/97 4,000
5/5/97 5,000
5/7/97 4,000
5/8/97 4,000
5/12/97 1,941
5/13/97 13,500
5/16/97 4,000
5/19/97 3,500
5/20/97 3,300
5/22/97 6,100
5/28/97 4,000
5/29/97 2,300
5/30/97 5,900
6/2/97 2,500
6/4/97 3,300
6/5/97 4,888
6/9/97 4,000
6/10/97 4,200
6/11/97 1,700
6/13/97 1,400
6/16/97 4,000
6/17/97 5,500
6/18/97 600
6/19/97 3,400
6/20/97 2,600
6/23/97 900
6/24/97 3,900
6/25/97 4,100
6/26/97 3,500
6/27/97 4,000
6/30/97 -10,447
7/2/97 1,200
7/3/97 9,700
7/8/97 2,500
7/9/97 3,000
7/14/97 13,300
7/15/97 6,700
7/17/97 3,000
7/18/97 3,500
7/21/97 7,000
7/28/97 7,000
7/30/97 3,000
7/31/97 5,000
8/1/97 15,000
8/4/97 3,000
8/5/97 11,700
8/6/97 7,300
8/7/97 4,000
8/11/97 2,600
8/12/97 8,500
8/13/97 4,400
8/14/97 3,000
8/15/97 6,000
8/19/97 2,200
8/20/97 2,800
8/21/97 5,000
8/26/97 1,000
8/27/97 2,386
8/28/97 2,600
9/2/97 6,000
9/4/97 800
9/5/97 6,000
9/8/97 3,000
9/10/97 6,611
9/12/97 5,000
9/15/97 6,500
9/16/97 4,000
9/17/97 6,000
9/22/97 4,000
9/23/97 5,000
9/24/97 8,500
9/25/97 5,000
9/26/97 7,000
9/29/97 4,000
9/30/97 -32,541
10/1/97 7,100
10/2/97 3,100
10/3/97 3,000
10/8/97 2,100
10/9/97 6,000
10/10/97 5,000
10/17/97 15,000
10/20/97 700
10/21/97 3,000
10/23/97 2,000
10/28/97 16,000
10/29/97 5,000
10/30/97 10,200
10/31/97 7,000
11/3/97 2,469
11/4/97 1,291
11/5/97 4,000
11/6/97 10,500
11/7/97 741
11/10/97 13,000
11/11/97 29,000
11/12/97 4,000
11/13/97 46,088
11/14/97 13,814
11/17/97 7,500
11/18/97 8,900
11/19/97 1,000
11/20/97 9,600
11/24/97 25,600
11/25/97 3,400
11/26/97 16,200
11/28/97 3,700
12/1/97 28,200
12/3/97 11,700
12/4/97 5,000
12/5/97 13,300
12/11/97 22,300
12/19/97 5,700
12/26/97 700
12/31/97 -34,262
1/7/98 3,068
1/8/98 3,400
1/15/98 -986
1/16/98 1,300
1/20/98 10,000
2/5/98 3,900
2/10/98 753
2/17/98 5,400
3/4/98 688
3/9/98 200
3/10/98 1,500
3/24/98 18,600
4/3/98 -5,000
4/9/98 -700
4/16/98 531
4/27/98 800
5/5/98 -900
5/12/98 -950
6/10/98 -4,880
6/12/98 -4,100
6/16/98 -1,500
6/25/98 -3,086
9/1/98 -13,620
9/11/98 3,000
9/16/98 6,000
9/17/98 2,300
9/22/98 3,000
9/24/98 5,000
9/25/98 1,000
9/29/98 18,000
9/30/98 5,900
10/1/98 99,000
10/5/98 42,000
10/9/98 2,000
EXHIBIT 2
PENDING LITIGATION INVOLVING THE SOLICITING STOCKHOLDER
The soliciting stockholder, and entities affiliated with him, are involved in
the following pending litigation relating to closed-end funds. The litigation
is pending in U.S. District Court for the Southern District of New York.
The Emerging Germany Fund Litigation
Ronald Olin and Deep Discount Advisors, Inc., of which Ronald Olin is President
and Chief Executive Officer, are named defendants in a federal court action for
injunctive relief filed on April 8, 1998 by The Emerging Germany Fund, Inc.
("FRG"). FRG filed this action immediately after canceling its 1998 annual
meeting scheduled for April 27, 1998, and stated that it would not schedule an
annual meeting until the litigation has been resolved.
Subsequently, a class action lawsuit was filed by a stockholder who demanded
that FRG reschedule its 1998 Annual Meeting. Recently, FRG rescheduled its
1998 Annual Meeting for January 26, 1999 and announced that it would recommend
open-ending the Fund.
In its action, FRG alleges that the defendants solicited proxies in violation of
Section 14(a) of the Securities Exchange Act of 1934 (the "Exchange Act") in
connection with certain postings by Mr. Olin on an Internet bulletin board. FRG
also alleges that Mr. Olin, Deep Discount Advisors, Inc. and the three other
defendants, Mr. Goldstein, and Opportunity Partners L.P., and Kimball &
Winthrop, were a "group" within the meaning of Section 13(d) of the Williams
Act, and had failed to file a Schedule 13D.
All defendants have moved to dismiss FRG's complaint. Those motions are
pending.
* * *
All of the above actions were filed in the Federal District Court , S.D.N.Y.
Copies of all pleadings in the above actions are available upon request.
EXHIBIT 3
RONALD G. OLIN
One West Pack Square, Suite 777, Asheville, NC 28801
828-274-1863 Fax: 828-255-4834 E-mail: [email protected]
Edmund P. Bergan, Jr., Secretary Ph: 212-969-2108 Fax: 212-969-2290
The Board of Directors, The Austria Fund, Inc.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, NY 10105
(via both Fax and Federal Express) July 4, 1998
To the Board of Directors of The Austria Fund:
My clients and I currently own more than 10% of the Austria Fund and have held
most of the shares for a long time. We are disappointed by the long-term
performance of the Fund and the persistent discount at which the Fund's shares
have traded.
We feel that there is no need to tolerate such a discount, as adequate remedies
exist that are beneficial to all shareholders. The purpose of this letter is to
suggest two specific remedies, to request a meeting with the Board of Directors
to discuss these matters, and to submit a shareholder proposal for the next
meeting of the Fund's shareholders.
The shareholder proposal to terminate the management contract with Alliance may
seem extreme, but it represents the only effective means the shareholders have
to indicate their displeasure if the Board and Advisor fail to respond to their
wishes.
A POOR LONG-TERM INVESTMENT
All of the shareholder reports since the inception of the Fund are the basis of
the following synopsis of the "out of pocket" investment results of the Fund's
owners:
AUSTRIA FUND SHAREHOLDER RESULTS
(Values in Thousands - Source: Data from Regular Shareholder Reports)
All Total Total Distr. Monthly
Period Shares Offer Share Mgmt. Director Oper. Paid Index Index
Ending Issued Fees Cost Fees Costs Expense Out Value Units
9/28/89 5,759 4,830 69,101 1,581 +43.7
2/22/90 2,500 2,450 42,500 2,568 +16.6
8/30/90 1,078 125 1,713 374 2,240 -0.2
8/31/91 1,148 120 1,779 3,469 1,695 -2.0
8/31/92 937 179 1,545 1,115 1,565 -0.7
8/31/93 789 225 1,431 135 1,814 -0.1
8/31/94 2 21 993 85 1,603 785 1,967 -0.4
10/07/94 3,442 1,463 26,883 1,808 +14.9
8/31/95 1,152 173 1,954 293 1,842 -0.2
8/31/96 1,432 182 2,291 1,801
8/31/97 1,552 202 2,332 1,521 1,782 -0.9
2/28/98 829 86 1,264 8,719 2,070 -4.2
TOTALS 11,703 8,743 138,504 9,912 1,377 15,912 16,411 66.5
MSCI Austria Total 2/28/98 Per Total Results Fund Index
Return Index (US$)** Values Share Value Comparison Shares Units
- ------------------------ ---------------------- ----------------------------
Index Units from Market
Same Cash Flow 66.5 Price: 11.44 133,853 Market Value 133,853 137,671
Times 2/28/88 Net Asset + Payouts 16,411 16,411
Index Value 2,070 Value: 13.36 156,352 - Share Cost 138,504 138,504
Shareholder Value Discount
w/ Index Units 137,671 Loss: 1.92 22,499 Net Gain: 11,760 15,578
WHO GOT WHAT IN THE AUSTRIA FUND?
(September 1989 - February 1998)
Net Gain to Shareholders $ 12 Mil. xxxxxxxxxxxxxxxxxxxx
Total Fees & Expenses $ 25 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Shareholder Loss to Discount $ 22 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Gain to the Austria Index** $ 16 Mil. xxxxxxxxxxxxxxxxxxxxxxxxxx
**Note: The MSCI Austria Total Return Index is a standard measure of the returns
of capitalization weighted Austrian equities. Index results may be affected
because the index is not subject to the same investment policies and
restrictions as the Fund. Also, the index is computed on a month-end basis
only, so applying the Fund cash flows during each fiscal year to year-end and
month-end index values is only an approximation of alternative results.
SYNOPSIS OF SHAREHOLDER INVESTMENT RESULTS
This has been a poor long-term investment. Since inception on 9/28/89, the
Fund's shareholders have paid $138 million to buy new shares, received $16
million in distributions, and had an investment with a market value of $134
million as of the Fund's report dated 2/28/98.
The shareholders paid out $25 million in advisory fees, director fees,
underwriting fees, and other expenses while making less than $12 million on
their investment. As of 2/28/98, the discount was costing each and every
shareholder $1.92 a share or a +17% extra return. The $22.5 million lost to the
discount is almost twice as much as the $12 million the shareholders have
collectively managed to realize on their investment since inception of the Fund.
REMEDIES TO REDUCE THE DISCOUNT AND ENHANCE SHAREHOLDER RETURNS
The discount represents an opportunity to markedly improve shareholder
investment results with this Fund. All that is required is that Alliance and
the Board take the actions necessary to enhance shareholder wealth through the
reduction and eventual elimination of the discount. Remedies are available
which would enhance the Net Asset Value (NAV) of the Fund's shares,
reduce/eliminate the discount, and allow shareholders a choice between a closed-
end structure and receiving NAV for all their shares. The only significant
impact of such actions would be a reduction in the advisory fee income paid to
Alliance due to those shareholders who choose to cash out entirely.
Transactions can be structured so that there will be no resulting tax impact on
those shareholders choosing to remain in the closed-end structure.
REMEDY #1 - PERPETUAL SHARE BUYBACKS TO ENHANCE NAV AND REDUCE THE DISCOUNT
Share buybacks have been viewed by the industry as a failure because, even
though they have always enhanced NAV, they have never permanently fixed the
discount. This is not surprising because all repurchase plans have been limited
in size and duration. You don't get a permanent fix with a temporary band-aid.
Instead, if a fund unequivocally committed to perpetual, sizable buybacks
whenever a discount existed, there would always be a buyer for the Fund's
shares. Potential sellers would learn to be patient and would lower the
discount at which they were willing to sell. Every share that the Fund bought
at a discount would enhance NAV and the performance of the Fund. This would
attract other buyers and serve to rebalance the demand/supply equation at a
lower discount level. Logic says that eventually the price would stabilize in a
range somewhere near NAV.
The value of such a program to existing shareholders is significant. For
example, suppose repurchases began at a 15% discount (similar to that of The
Austria Fund), suppose it took one half of the Fund's assets and one year to
reduce the discount to 0%, suppose the average purchase price were at a 8%
discount, and further suppose that the Fund's portfolio securities appreciated
10% during the same year net of expenses. In this case, those shareholders
sticking with the Fund would see their investment increase by about +35% (+17%
from discount elimination, +8% from NAV enhancement, +10% from the portfolio
increase).
Repurchasing shares at a discount is equivalent to buying the fund's own
carefully chosen portfolio at prices cheaper than those available in the market.
The turnover of the Austria Fund has ranged from 19% to 42% in recent years.
What could be a better investment for the Fund?
Sixty per cent of the Fund's yearly expenses are advisory fees which are
proportional to the size of the Fund. A reduction in Fund size by one half
might increase the Fund's expense ratio from about 1.8% to about 2.5%. Most
shareholders would gladly make this tradeoff to eliminate the discount and
enhance their wealth.
REMEDY #2 - SPLITTING UP THE FUND TO SATISFY ALL SHAREHOLDERS
Many shareholders feel that they should be entitled to receive full NAV for
their shares right away and should not have to wait for perpetual share buybacks
or other techniques to slowly eliminate the discount. They desire that the Fund
be open-ended. Fund Advisors and Boards often object that this is not fair to
shareholders who like the closed-end structure. They argue that open-ending
will create tax consequences and costs due to massive redemptions when other
shareholders cash out.
There is a solution which should satisfy all shareholders. The Fund could do a
self-tender offer for its shares in exchange of an in-kind distribution of its
portfolio. Those wishing to remain in the closed-end fund would not have any
tax consequences as a result.
The tendering shareholders could be given a further option to exchange their
portfolio proceeds for shares of a newly formed open-end fund created for that
purpose or alternatively a liquidating trust which would sell them out. The
entire series of transactions could be structured so that all expenses and tax
impacts would be borne only by the those shareholders who chose to tender.
A somewhat similar action has already been proposed by another closed-end fund
organization. In that case, complications have been introduced by a decision to
first orchestrate a merger between two different closed-end funds. The merger
results in restrictions as to the sizes of the resulting open and closed-end
entities which limits the tender offer. I believe such restrictions would not
exist in the case of the Austria Fund. Never-the-less, the groundwork has
already been laid for a technique which could satisfy all shareholders.
A further advantage of this approach is that it would remove from the market the
large number of the Fund's shareholders who are currently willing to sell their
shares at less than NAV, and leave only those shareholders who truly desire the
closed-end format in the remaining closed-end fund.
The optimal solution for the Austria Fund might be a combination of the two
remedies: First, allowing those who wished NAV to exit to an open-end
counterpart, and then instituting a perpetual buyback program in the remaining
closed-end fund to keep the discount from reappearing.
A REQUESTED MEETING WITH THE BOARD
I would like to request a meeting with the Fund's Board to discuss these
potential remedies and other issues relating to performance of the Fund and the
discount. The managed distribution policy has not worked, and will never work
adequately. It is largely "smoke and mirrors" which may have at best a
temporary and relatively small impact on the discount. I believe there is a
growing intolerance of the status quo among the shareholders and a level of
impatience that will not be satisfied by a "wait and see" response.
Alliance and its closed-end fund Boards have a history of relatively friendly
shareholder actions. As closed-end management companies go, Alliance is one of
the better ones. However, times are changing and shareholder activism in
closed-end funds with discounts is becoming increasingly prominent.
Shareholders "need" to be heard and shareholders "will" be heard. I am asking
this Board to listen.
THE SHAREHOLDER PROPOSAL TO TERMINATE ALLIANCE
On May 8, 1998 the SEC overruled the objections of eight fund management
companies (including Alliance) and their Boards of Directors and determined that
the shareholders of closed-end funds could fire their investment advisor without
Board approval. This is the only practical tool the shareholders have if their
Board and their Advisor are not responsive to shareholder wishes. The decision
to submit this shareholder proposal is occasioned by the filing deadline and the
possibility that Alliance and the Board will not take steps which result in
eliminating the discount. It would be preferable if the Board would take
actions prior to the next meeting of shareholders which would eliminate the need
for shareholders to vote in support of this proposal.
I own 1291 shares of The Austria Fund Inc. in my IRA and intend to continue to
own these shares until the Fund's next annual meeting. (I am enclosing
independent certification from my broker demonstrating continuous beneficial
ownership of Fund shares in the required amounts for the required period of
time). Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, I am
hereby submitting the following proposal and supporting statement for inclusion
in the Fund's proxy material for its 1998 annual meeting of stockholders or any
earlier special meeting. The notice of annual meeting for 1997 specifies July
13, 1998 as the deadline for such submissions. It should be noted for the
record that I am not interested in competing for the Fund's advisory contract
and would not accept it if offered.
SUBMITTED SHAREHOLDER PROPOSAL:
RESOLVED: The Fund's investment advisory agreement with its investment advisor,
Alliance Capital Management, L.P. (Alliance), shall be terminated and the
shareholders recommend that the board solicit competitive proposals for a new
investment advisor.
SUPPORTING STATEMENT:
I believe Alliance's advisory contract should be terminated because shareholder
results with the Fund have been very poor, and because management fees are
apparently so lucrative to Alliance that effective steps to enhance shareholder
value are not taken.
Since inception on 9/28/89, the Fund's shareholders have paid $138 million to
buy new shares, received $16 million in distributions, and had an investment
with a market value of $134 million as of the Fund's report dated 2/28/98. The
resulting gain of only $12 million dollars spread over more than 8 years brings
into question the value of this manager and this entire economic endeavor. The
Net Asset Value (NAV) return of the Fund is somewhat better, but it fails to
reflect the devastating impact of the discount on shareholder investment
results.
The shareholders paid out $25 million in advisory fees, director fees,
underwriting fees, and other expenses while making less than $12 million on
their investment. As of 2/28/98, the discount was costing each and every
shareholder $1.92 a share or a +17% extra return. The $22.5 million lost to the
discount alone is almost twice as much as the meager $12 million the
shareholders have collectively managed to realize on their investment since
inception of the Fund.
After 25 years as a private investor and 10 additional years as an investment
professional managing up to $240 million in closed-end fund shares, I am
convinced that the biggest problem in fixing discounts and adding market value
is the investment advisor. Fees are so lucrative that the fund manager will
rarely recommend more than token steps (such as a 10% distribution policy) to
enhance shareholder value. I believe the Directors owe their positions to
Alliance and therefore will not take effective actions such as committing to
perpetual share buy-backs, tender offers, open-endings, or other means to
deliver Net Asset Value to shareholders. Such steps would reduce the Fund size
and the advisory fees paid to Alliance.
Instead, this Fund conducted a rights offering and sold new shares at a
discount, which diluted the asset value, added to the supply of shares, and
increased the advisory fees paid to Alliance. Further, the board has indicated
its opposition to the open-ending proposal in this proxy forced upon it by
shareholders. I believe the super-majority requirement imposed by the Fund
makes passage virtually impossible.
It is very expensive and time consuming for shareholders to wage successful
proxy fights to replace staggered Boards of Directors hand picked by the
investment advisor. Fortunately, the law gives shareholders one practical tool
to fix this problem. A majority can vote to "fire" the investment manager.
Qualified advisors are available that will work with a motivated Board to
enhance shareholder value.
We have a chance to send a loud and clear message to the Board that we want the
Fund run exclusively for the benefit of the Fund's owners. Vote for this
shareholder sponsored resolution.
***End of supporting statement***
CONCLUSION
I am sure the Board would agree that the discount represents both a wasteful
loss of shareholder wealth, and an issue of contention between the Fund's owners
and its fiduciaries. The shareholders and the Board should work together to
resolve this problem expeditiously. Getting rid of the discount would eliminate
the need for disruptive activities such as proxy fights, opposing director
candidates, and shareholder proposals like the one above.
I remain available at any time for discussions with Alliance or members of the
Board concerning any issues related to the Austria Fund, suggestions to remedy
the discount, the submitted shareholder proposal, and other ideas to enhance
shareholder value. I am looking forward to your response.
Very truly yours,
Ronald G. Olin
EXHIBIT 4
October 7, 1998 Via Fax and Federal Express
The Austria Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attn: Mr. Edmund P. Bergan, Jr.
Dear Mr. Bergan:
Deep Discount Advisors, Inc. and Ron Olin Investment Management Company are the
beneficial holders of 1,395,408 shares of the common stock, par value $.01 per
share (the "Common Stock"), of The Austria Fund, Inc. (the "Fund"), representing
approximately 11.9% of the outstanding shares of Common Stock as of October 7,
1998. According to the Fund's proxy statement for last year's annual meeting of
stockholders, December 17, 1997, four Class II Directors are up for election for
a term of three years from 1998 to 2001 at the next annual stockholders meeting.
These Class II positions are currently held by Mr. Dave H. Williams, Dipl.
Ing., Mr. Peter Mitterbauer, Dr. Maria Schaumayer, and Dr. Walter Wolfsberger.
The purpose of this letter is to request that the Nominating Committee nominate
Ronald G. Olin, Ralph W. Bradshaw, Gary A. Bentz, and William A. Clark for
election to the Board to fill the four Directors positions that are due for
consideration at the next annual meeting. Brief biographies of Messrs. Olin,
Bradshaw, Bentz, and Clark are attached as Exhibit 1. They are prepared to
complete any questionnaire prepared by the Fund in order to verify that they are
in compliance with all requirements, applicable to directors, of the Investment
Company Act of 1940, as amended, and the Fund's articles of incorporation and
by-laws. All four gentlemen have extensive experience in closed-end fund
analysis and evaluation, investment consulting, and related private portfolio
management.
As longtime beneficial stockholders of The Austria Fund, we have been deeply
concerned about the persistent discount from net asset value ("NAV") at which
the Fund's shares trade on the open market. We believe that other stockholders
of The Austria Fund must share this concern. Messrs. Olin, Bradshaw, Bentz, and
Clark represent substantial stockholder interests in The Austria Fund, and, if
elected to the Board, they would be dedicated to exploring methods of enhancing
stockholder returns in a variety of ways, one of which would be the active
management of the discount problem. Such methods might include, but are not
limited to, the structured purchase of shares in the market by the Fund, which
would have the effect of increasing NAV and reducing the discount, and the
evaluation of several different ways of delivering NAV to those stockholders who
desire it while minimizing the effects on those stockholders who want to keep
the closed-end structure and its related benefits.
We believe that the Board, based on its current composition, has not been
sufficiently responsive to the concerns of stockholders whose investment returns
have suffered unnecessarily because of the persistent discount to NAV. The
nomination and election of Messrs. Olin, Bradshaw, Bentz, and Clark will provide
a greater degree of independence in evaluating methods of managing the discount
structure proactively, and also a fresh perspective for all Board decisions
which is more representative of shareholder interests rather than the interests
of the Fund's investment manager. The primary objective of Messrs. Olin,
Bradshaw, Bentz, and Clark will be to enhance shareholder value.
In the event that the Nominating Committee does not wish to nominate Messrs.
Olin, Bradshaw, Bentz, and Clark, we would appreciate the opportunity to discuss
this issue with the Nominating Committee and to suggest other nominees who would
provide the degree of objectivity and true shareholder representation that we
think the Board of The Austria Fund needs at this time.
We thank you and the Nominating Committee for your attention to this request,
and would be happy to discuss this request in more detail at your convenience.
In view of the schedule for the upcoming meeting, we respectfully request a
response to our proposal in writing by October 23, 1998.
Very truly yours,
Gary A. Bentz
Chief Financial Officer
Attch
EXHIBIT 1
Ronald G. Olin
U.S. Citizen
Age: 53
Mr. Olin is President and Chief Executive Officer of Deep Discount Advisors,
Inc. and General Partner of Ron Olin Investment Management Co. Both firms are
registered investment advisors specializing in investments in closed-end funds.
Prior to founding these investment management firms, Mr. Olin was a senior
manager with IBM supporting government software contracts with the N.A.S.A. and
D.O.D. Mr. Olin currently serves as a Director on other public and private
Boards, including a domestically traded closed-end fund with an internationally
diversified portfolio.
Number of Shares Owned
Ralph W. Bradshaw
U.S. Citizen
Age: 47
B.S. Chemical Engineering, 1973, Texas A & M University
M.B.A., 1977, Oklahoma State University
Mr. Bradshaw has served as Vice President and Secretary of Deep Discount
Advisors, Inc., a registered investment advisor specializing in closed-end fund
investments, for over five years. During that period he has also provided
financial consulting services in the area of closed-end funds. In previous
years, he has held various managerial positions. Mr. Bradshaw currently serves
as a Director on the Board of a domestically traded closed-end fund with an
internationally diversified portfolio.
Gary A. Bentz
U.S. Citizen
Age: 42
B.S. Business and Finance, 1978, Trinity University, San Antonio
Certified Public Accountant, 1986
Mr. Bentz has served as Vice President and Chief Financial Officer of Deep
Discount Advisors, Inc., a registered investment advisor specializing in closed-
end fund investments, for over five years. He has also provided financial
accounting, investment analysis and consulting services to companies and private
investors for the last 13 years. After commencing his career with Arthur
Andersen & Co., Mr. Bentz held various financial managerial positions in
industry. He currently serves as a Director on the Board of a domestically
traded closed-end fund with an internationally diversified portfolio.
William A. Clark
U.S. Citizen
Age: 52
B.A., 1967, University of Texas, Austin
M.B.A., Finance 1980, Southern Methodist University, Dallas
Since 1995 Mr. Clark has served as Director of Research for Deep Discount
Advisors, Inc., a registered investment advisor specializing in closed-end fund
investment, in addition to providing consulting services in closed-end fund
portfolio management. Mr. Clark has served as an investment analyst and advisor
to private clients for over 17 years. Before joining Deep Discount Advisors Mr.
Clark served in various managerial positions, and provided financial services to
banks, telecommunications/software companies, private investors, and regional
developers. During this period, he also served as CFO of a company in the
energy related business.
PROXY CARD
PROXY SOLICITED IN OPPOSITION TO
THE BOARD OF DIRECTORS OF
AUSTRIA FUND, INC.
BY
DEEP DISCOUNT ADVISORS, INC.
AND RON OLIN INVESTMENT MANAGEMENT COMPANY
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 13, 1999
The undersigned hereby appoints Ronald G. Olin, Ralph W. Bradshaw, Gary A.
Bentz, and William A. Clark, and each of them, as the undersigned's proxies,
with full power of substitution, to attend the Annual Meeting of Stockholders of
AUSTRIA Fund, Inc. (the "Fund") to be held on January 13, 1999, at the offices
of the Fund, 1345 Avenue of the Americas, New York, New York 10105, at 11:00
a.m., New York time, (the "Meeting"), and any adjournment(s) or postponement(s)
thereof, and to vote on all matters that may come before the Meeting and any
such adjournment or postponement the number of shares that the undersigned would
be entitled to vote, with all the power the undersigned would possess if present
in person, as specified below. The proxies may vote in their discretion with
respect to such other matter or matters as may come before the Meeting and with
respect to all matters incident to the conduct of the Meeting.
(INSTRUCTIONS: Mark votes by placing an "x" in the appropriate [ ].)
1. ELECTION OF DIRECTORS.
Class two Directors (term expires in 2001)
FOR ALL NOMINEES [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
RONALD G. OLIN
RALPH W. BRADSHAW
GARY A. BENTZ
WILLIAM A. CLARK
NOTE: IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" ANY PARTICULAR NOMINEE,
MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NAME(S) OF THE
NOMINEE(S). YOUR SHARES WILL BE VOTED FOR THE REMAINING NOMINEE(S).
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" THE ELECTION OF ALL
NOMINEES
2. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as the Fund's independent accountants
for the year ending December 31, 1998:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Stockholder proposal to terminate the investment advisory
agreement between the Fund and Alliance Capital Management, L.P.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF PROPOSAL THREE (3) IS LEFT BLANK FOR ALL BOXES, THE SOLICITING
SHAREHOLDER WILL VOTE ON THIS PROPOSAL IN THE BEST INTERESTS
OF THE STOCKHOLDERS AT THE TIME OF THE ANNUAL MEETING, BASED ON
THE SOLE JUDGEMENT OF THE SOLICITING SHAREHOLDER
4. A proposal that the Board of Directors of the Fund take steps
to convert the Fund to an open-end investment company by amending the
Articles of Incorporation accordingly and to change the subclassification
of the Fund from a closed-end investment company to an open-end investment
company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF PROPOSAL FOUR (4) IS LEFT BLANK FOR ALL BOXES, THE SOLICITING
SHAREHOLDER WILL VOTE ON THIS PROPOSAL IN THE BEST INTERESTS
OF THE STOCKHOLDERS AT THE TIME OF THE ANNUAL MEETING, BASED ON
THE SOLE JUDGEMENT OF THE SOLICITING SHAREHOLDER
5. Stockholder proposal recommending that the Board of Directors
take necessary steps to require all Board Members to stand for
election every year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" PROPOSAL FIVE
6. Stockholder proposal stating that resignation of Class I and
Class III directors would be in the best interests of the Fund
and its stockholders.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
IF PROPOSAL SIX (6) IS LEFT BLANK FOR ALL BOXES, THE SOLICITING
SHAREHOLDER WILL VOTE ON THIS PROPOSAL IN THE BEST INTERESTS
OF THE STOCKHOLDERS AT THE TIME OF THE ANNUAL MEETING, BASED ON
THE SOLE JUDGEMENT OF THE SOLICITING SHAREHOLDER
7. Stockholder proposal recommending that the Board authorize and
direct the Fund's officers to reimburse the Soliciting Shareholder for
reasonable fees and expenses incurred in soliciting proxies.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE SOLICITING SHAREHOLDER URGES YOU TO VOTE "FOR" PROPOSAL SEVEN
IMPORTANT - - PLEASE SIGN AND DATE THE [REVERSE SIDE].
SHARES WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF THE ELECTION OF ALL NOMINEES NAMED ABOVE IN
ITEM 1 AND "FOR" PROPOSALS 5 AND 7 AND WILL ABSTAIN FROM VOTING ON
PROPOSAL 2. ALL OTHER PROPOSALS WILL BE VOTED BY THE SOLICITING SHAREHOLDER IN
THE BEST INTERESTS OF STOCKHOLDERS AS DETERMINED BY THE SOLE JUDGEMENT OF THE
SOLICITING SHAREHOLDER AT THE TIME OF THE MEETING. THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT DATED NOVEMBER ___, 1998, OF DEEP
DISCOUNT ADVISORS, INC. THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE
EXECUTED BY THE UNDERSIGNED RELATING TO THE SUBJECT MATTER HEREOF AND CONFIRMS
ALL THAT THE PROXIES MAY LAWFULLY DO BY VIRTUE HEREOF.
(IMPORTANT - PLEASE FILL IN DATE)
This proxy card is provided by Deep Discount Advisors, Inc. and Ron Olin
Investment Management Company, both beneficial shareholders of the Fund.
Please sign exactly as your name appears hereon or on proxy cards
previously sent to you. When shares are held by joint tenants, both
should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation,
please sign in full corporate name by the President or other duly
authorized officer.
If a partnership, please sign in partnership name by authorized person.
SIGNATURE(S) Dated:
Please sign as registered and return promptly in the enclosed envelope.
Executors, trustees and other signing in a representative capacity
should include their names and the capacity in which they sign.
