THE AUSTRIA FUND
ALLIANCE CAPITAL
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
LETTER TO SHAREHOLDERS THE AUSTRIA FUND
_______________________________________________________________________________
April 27, 1998
Dear Shareholder:
This semi-annual report provides an update of The Austria Fund's performance
and market activity for the six month period ended February 28, 1998.
INVESTMENT RESULTS
The following table shows how your Fund performed compared to its benchmark,
the Credit Aktien Index, for the three, six and 12-month periods ended February
28, 1998. For the six-month period ended February 28, 1998, your Fund
outperformed its benchmark due to an overweight position in technology stocks
relative to the benchmark.
INVESTMENT RESULTS*
Periods Ended February 28, 1998
TOTAL RETURNS
3 MONTHS 6 MONTHS 12 MONTHS
---------- ---------- ----------
THE AUSTRIA FUND 18.12% 14.54% 22.76%
CREDIT AKTIEN INDEX 14.52% 14.05% 16.24%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE AS OF FEBRUARY 28, 1998. 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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE CREDIT AKTIEN INDEX IS A CAPITALIZATION-WEIGHTED INDEX COMPRISED OF 25
DOMESTIC COMPANIES ON THE VIENNA STOCK EXCHANGE. THE INDEX IS UNMANAGED AND
REFLECTS NO FEES OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
ECONOMIC REVIEW
The Austrian stock market recovered strongly over the past quarter. Investors
were encouraged by a general revival in European markets but also by an
increase in growth expectations for the Austrian economy. We anticipate Gross
Domestic Product growth to have exceeded 2.5% during 1997 and believe that a
rate above 3% is achievable in 1998. At the same time, inflationary pressures
have remained benign. The year-on-year inflation rate at the end of February
1998 was just 1%, and we do not expect the full year rate for 1998 to exceed
1.5%. Obviously, this environment is very favorable for business profits, and
we expect corporate earnings growth of more than 15% during the year.
Despite this increasingly favorable outlook, Austrian investors remain
under-invested in their own market. While the rest of Europe has seen dramatic
increases in mutual funds and overall equity ownership, Austria has been left
behind. We understand that the authorities are looking at ways to increase the
provision of risk capital, and we are optimistic that some form of fiscal
incentives for share ownership will be introduced over the next few years.
The Austrian stock market is now the cheapest in Europe, with a prospective
price to cash flow multiple of around 6 times for 1998. This compares favorably
with the likes of Germany which is currently trading on a comparable multiple
of 9 times and the United Kingdom, now trading on a multiple of 11 times. There
is clearly a case for some multiple expansion over time, for which the catalyst
should prove to be an increase in domestic participation in the equity market.
PORTFOLIO STRATEGY
Your Fund's portfolio remains fully invested with a continuing emphasis on
growth stocks. We have significantly raised the Fund's exposure to the banking
sector. We have become increasingly optimistic about this sector, especially as
a result of a renewed focus on profitability in the industry, subsequent to the
merger between Bank Austria and Creditanstalt. A more profits-focused financial
sector should have important ramifications for the rest of the stock market, as
the cozy relationships between banks and major companies are eroded. We fully
expect to see the banking sector divesting itself of many of their industrial
holdings. We expect this break in the link between major companies and their
"house" banks to open up new opportunities in the future. We also maintain a
significant portion of your Fund's assets in the technology sector, where we
feel there are major opportunities for Austrian companies doing business with
Eastern Europe.
Your Fund remains under-weighted in the utility sector, where we believe that
growth opportunities are constrained and that current valuations are more
reflective of potential corporate activity than on real value. We have also
reduced positions in companies with significant
1
THE AUSTRIA FUND
_______________________________________________________________________________
exposure to the Far East, most notably VA Technologie AG, on the basis that
many of the large infrastructure projects involving this company will be
canceled or scaled back, thereby reducing the group's earnings growth in the
near term.
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 on your Fund's investment results, in the future.
Sincerely,
Dave H. Williams
Chairman and President
Mark H. Breedon
Vice President
2
TEN LARGEST HOLDINGS
FEBRUARY 28, 1998 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Bank Austria AG (preferred and new shares) $ 30,901,381 19.8%
OMV AG 15,621,313 10.0
Austria Tabakwerke AG 14,917,850 9.5
EVN 12,573,706 8.1
Topcall International AG 8,933,342 5.7
Erste Bank Der Oesterreichischen Sparkassen AG 7,381,761 4.7
Schoeller-Bleckmann Oilfield Equipment AG 6,747,024 4.3
VA Technologie AG 6,216,900 4.0
Bau Holdings AG (common and new shares) 5,793,586 3.7
Austria Mikro Systeme International AG 4,187,064 2.7
$113,273,927 72.5%
3
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1998 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-77.7%
BASIC INDUSTRIES-20.9%
ENERGY-10.0%
OMV AG 128,860 $ 15,621,313
TECHNOLOGY-10.9%
Austria Mikro Systeme International AG 63,233 4,187,064
E-Pub Services (a)(b) 14,070 847,871
Scala Business Solutions NV (a) 467,000 3,000,819
Topcall International AG (a) 12,000 8,933,342
------------
16,969,096
------------
32,590,409
CAPITAL GOODS-18.8%
ENGINEERING & CONSTRUCTION-14.8%
Bau Holdings AG 94,480 5,567,584
new 3,900 226,002
Schoeller-Bleckmann Oilfield
Equipment AG (a) 60,000 6,747,024
Strabag Oesterreich AG 9,387 474,456
VA Technologie AG 45,000 6,216,900
Weinerberger Baustoff Industrie AG 20,000 3,863,278
------------
23,095,244
MACHINERY-0.9%
Steyr Daimler Puch Aktiengesells 50,000 1,332,165
PAPER & FOREST PRODUCTS-1.9%
Mayer-Melnhof Karton AG 52,800 3,061,785
STEEL-1.2%
Voest-Alpine Stahl AG 49,500 1,949,949
------------
29,439,143
CONSUMER PRODUCTS & SERVICES-16.1%
AIRLINES-1.9%
Austrian Airlines (a) 70,000 1,760,809
Flughafen Wien AG 29,800 1,202,631
------------
2,963,440
FOOD & BEVERAGES-4.7%
Brau-Union Goess-Reininghaus
Osterreichische Brau AG 60,000 3,526,319
Oesterreichische Brau-Beteillgungs AG 53,568 3,139,902
Royal Tokaj Wine Co., Ltd. (a)(b)(c) 275,254 680,221
------------
7,346,442
TOBACCO-9.5%
Austria Tabakwerke AG (a) 279,955 14,917,850
------------
25,227,732
FINANCIAL SERVICES-12.7%
BANKING-9.0%
Bank Austria AG
Prt Ctf new (a)(d) 82,660 4,806,272
Bank Fuer Oberoesterreich und Salzburg 30,000 1,814,879
Erste Bank Der Oesterreichischen
Sparkassen AG (a) 120,000 7,381,761
------------
14,002,912
INSURANCE-3.7%
Erste Allegemeine Generali AG 10,055 3,295,150
Wiene Staedtische Allgemeine Ver 22,000 2,551,488
------------
5,846,638
------------
19,849,550
4
THE AUSTRIA FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
UTILITIES-9.2%
ELECTRIC & GAS-9.2%
Burgenland Holdings AG 60,000 $ 1,833,686
EVN 89,440 12,573,706
------------
14,407,392
Total Common Stocks
(cost $100,589,289) 121,514,226
PREFERRED STOCKS-18.8%
FINANCIAL SERVICES-17.2%
BANKING-16.7%
Bank Austria AG
new (a)(d) 120,000 7,833,130
Bank Austria AG II
new (a)(d) 278,096 18,261,979
------------
26,095,109
INSURANCE-0.5%
Erste Allegemeine Generali AG 4,507 854,697
------------
26,949,806
CONSUMER PRODUCTS & SERVICES-1.6%
RETAIL-1.6%
BauMax Vertiebs AG (a) 147,000 2,499,690
Total Preferred Stocks
(cost $17,814,055) 29,449,496
TIME DEPOSIT-0.1%
Royal Bank of Canada
5.625%, 3/02/98
(cost $100,000) $100 100,000
TOTAL INVESTMENTS-96.6%
(cost $118,503,344) 151,063,722
Other assets less liabilities-3.4% 5,263,618
NET ASSETS-100% $ 156,327,340
(a) Non-income producing security.
(b) Restricted and illiquid security, valued at fair value (See Notes A & E).
(c) British Pound denominated security.
(d) Security represents investment in an affiliate.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $118,503,344) $ 151,063,722
Cash, at value (cost $5,679,337) 5,688,323
Interest receivable 41,210
Foreign taxes receivable 39,758
Prepaid expenses and other assets 6,431
Total assets 156,839,444
LIABILITIES
Management fee payable 100,029
Payable for investment securities purchased 100,000
Sub-advisory fee payable 21,407
Accrued expenses 290,668
Total liabilities 512,104
NET ASSETS $ 156,327,340
COMPOSITION OF NET ASSETS
Capital stock, at par $ 117,030
Additional paid-in capital 124,326,458
Accumulated net investment loss (1,637,347)
Accumulated net realized gain on investments and
foreign currency transactions 952,615
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 32,568,584
$ 156,327,340
NET ASSET VALUE PER SHARE (based on 11,703,031 shares outstanding) $13.36
See notes to financial statements.
6
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $42,041) $ 294,284
Interest 50,422 $ 344,706
EXPENSES
Management fee 683,096
Sub-advisory fee 146,289
Custodian 199,134
Audit and legal 91,768
Directors' fees and expenses 86,142
Printing 17,556
Transfer agency 15,617
Registration Fee 13,252
Miscellaneous 11,237
Total expenses 1,264,091
Net investment loss (919,385)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 6,750,093
Net realized loss on foreign currency transactions (385,854)
Net change in unrealized appreciation of:
Investments 12,802,897
Foreign currency denominated assets and liabilities 55,379
Net gain on investments and foreign currency transactions 19,222,515
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 18,303,130
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS THE AUSTRIA FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31,
(UNAUDITED) 1997
----------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (919,385) $ 97,501
Net realized gain on investments and
foreign currency transactions 6,364,239 9,003,847
Net change in unrealized appreciation
of investments and foreign currency
denominated assets and liabilities 12,858,276 7,829,782
Net increase in net assets
from operations 18,303,130 16,931,130
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (4,447,152) (97,501)
Distributions in excess of net
investment income -0- (1,423,893)
Net realized gain on investment and
foreign currency transactions (4,271,606) -0-
Total increase 9,584,372 15,409,736
NET ASSETS
Beginning of year 146,742,968 131,333,232
End of period $ 156,327,340 $ 146,742,968
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED) THE AUSTRIA FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Austria Fund, Inc. (the "Fund") was incorporated in the State of Maryland
on December 5, 1988 as a non-diversified, closed-end management investment
company. The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair value of such securities.
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 or loss 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, 1998 was ATS 12.76
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 any, to
shareholders. Therefore, no provisions for U.S. income or excise taxes are
required. Withholding taxes on foreign interest and dividends have been
provided for in accordance with the applicable tax requirements.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. 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.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE AUSTRIA FUND
_______________________________________________________________________________
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
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 $310 during the six months ended February 28, 1998.
Under the Sub-Advisory Agreement, the Fund will pay BAI Fondaberatung
Ges.m.b.H. (the "Sub-Adviser") 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-Adviser serves as the Sub-Custodian of the
Fund. During the six months ended February 28, 1998, the Fund earned interest
of $42,637 on Austrian schillings deposited with the Sub-Custodian, of which
$41,210 was included as interest receivable at February 28, 1998. Brokerage
commissions paid on investment transactions for the six months ended February
28, 1998 amounted to $145,601 of which $7,943 was paid to Bank Austria, and
$4,724 was paid to Creditanstalt Investment Bank Vienna, also affiliates of the
Sub-Adviser.
NOTE C: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government securities) aggregated $28,190,280 and $43,007,350, respectively,
for the six months ended February 28, 1998. There were no purchases or sales of
U.S. government or government agency obligations for the six months ended
February 28, 1998.
At February 28, 1998, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $39,414,098 and
gross unrealized depreciation of investments was $6,853,720 resulting in net
unrealized appreciation of $32,560,378 (excluding foreign currency
transactions).
At August 31, 1997, the Fund had a capital loss carryforward of $867,054 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
contracts and the closing of such contracts is included in net realized gains
or losses on 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 segregated
account of the Fund having a value equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into.
10
THE AUSTRIA FUND
_______________________________________________________________________________
At February 28, 1998, the Fund had no outstanding forward exchange currency
contracts.
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, 1998.
NOTE E: RESTRICTED AND ILLIQUID SECURITIES
DATE ACQUIRED U.S. $ COST
------------- -----------
E-Pub Services 4/02/97 $ 732,515
Royal Tokaj Wine Co., Ltd. 7/28/94 437,655
The securities shown above are restricted as to resale and have been valued at
fair value in accordance with the procedures described in Note A.
The value of these securities at February 28, 1998 was $1,528,092, representing
1.0% of total net assets.
NOTE F: CONCENTRATION OF RISK
Investment in the Fund's shares requires consideration of certain factors that
are not typically associated with investments in U.S. equity securities such as
currency fluctuations, potential price volatility, lower liquidity and
concentration of the Austrian equities market and limitations on the
concentration of investment in the equity of securities of companies in certain
industry sectors. The possibility of political and economic instability of
government supervision and regulation of the market may further affect the
Fund's investments.
NOTE G: MANAGED DISTRIBUTION POLICY
On December 4, 1997, the Fund's Board of Directors approved a managed
distribution policy contemplating the distribution to the Fund's stockholders
on a quarterly basis of at least 2.5% (approximately 10% annualized) of the
Fund's 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,
1998 ---------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $12.54 $11.22 $ 9.99 $11.03 $ 9.62 $ 8.89
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.08) .01 (.02) -0- (.05) .01
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.65 1.44 1.25 (.11) 1.55 .74
Net increase (decrease) in net asset
value from operations 1.57 1.45 1.23 (.11) 1.50 .75
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.38) (.01) -0- (.02) (.01) (.01)
Distributions in excess of net
investment income -0- (.12) -0- -0- (.06) -0-
Distributions from net realized gains
on investments and foreign currency
transactions (.37) -0- -0- -0- (.02) (.01)
Total dividends and distributions (.75) (.13) -0- (.02) (.09) (.02)
CAPITAL SHARE TRANSACTIONS
Dilutive effect of rights offering -0- -0- -0- (.86) -0- -0-
Offering costs charged to additional
paid-in-capital -0- -0- -0- (.05) -0- -0-
Total capital share transactions -0- -0- -0- (.91) -0- -0-
Net asset value, end of period $13.36 $12.54 $11.22 $ 9.99 $11.03 $ 9.62
Market value, end of period $11.44 $ 9.56 $ 8.50 $ 8.25 $10.88 $10.13
TOTAL RETURN(A)
Total investment return based on:
Market value 28.59% 14.10% 3.03% (21.51)% 8.37% 30.96%
Net asset value 14.54% 13.35% 12.31% (9.15)% 15.69% 8.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $156,327 $146,743 $131,333 $116,936 $91,121 $79,464
Ratio of expenses to average net assets 1.72%(b) 1.71% 1.83% 1.71% 1.87% 2.13%
Ratio of net investment income (loss)
to average net assets (1.25)%(b) .07% (.15)% .02% (.51)% .09%
Portfolio turnover rate 39% 19% 39% 27% 36% 42%
Average commission rate paid (c) $.2050 $.1800 $.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 paid 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,
1997. The description of each proposal and number of shares are as follows:
SHARES SHARES VOTED
VOTED FOR WITHOUT AUTHORITY
- -------------------------------------------------------------------------------
1. To elect directors:
Class One Directors
(term expires 2000)
William H.M. de Gelsey 7,356,061 304,925
Dipl. Ing. Hellmut Longin 7,370,926 290,060
Peter Nowak 7,371,316 289,670
Mag. Reinhard Ortner 7,372,898 288,088
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 31,1998: 7,260,158 188,718 212,110
13
THE AUSTRIA FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
DAVE H. WILLIAMS, CHAIRMAN AND PRESIDENT
JOHN D. CARIFA
WILLIAM H. M. DE GELSEY
DR. HANS HAUMER
DIPL. ING. HELLMUT LONGIN (1)
DIPL. ING. PETER MITTERBAUER (1)
PETER NOWAK (1)
MAG. REINHARD ORTNER (1)
DR. MARIA SCHAUMAYER (1)
ANDRAS SIMOR
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
VINCENT S. NOTO, 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.
14
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".
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. 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.
For questions concerning shareholder account information, or if you would like
a brochure describing the Dividend Reinvestment Plan, please call State Street
Bank and Trust Company at 1-800-219-4218.
THE AUSTRIA FUND
1345 Avenue of the Americas
New York, New York 10105
ALLIANCE CAPITAL
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER, ALLIANCE
CAPITAL MANAGEMENT L.P.
AUSSR
