SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
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 Section 240.14a-12
The Austria Fund, Inc.
- -----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ----------------------------------------------------------------
(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)(1) 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:
2
THE AUSTRIA FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
February __, 2001
To the Stockholders of The Austria Fund, Inc. (the "Fund"):
The accompanying Notice of Meeting and Proxy Statement
present four proposals to be considered at the Fund's Annual
Meeting of Stockholders (the "Meeting") to be held on April 12,
2001. The proposals are discussed more fully in the accompanying
Proxy Statement.
Proposal One and Proposal Two are for, respectively, the
election of five of the Fund's Directors and the ratification of
the Board of Directors' selection of PricewaterhouseCoopers LLP
as independent accountants for the Fund for its fiscal year
ending August 31, 2001. The Board of Directors recommends that
stockholders (i) vote for the election of five Directors and (ii)
approve Proposal Two.
Proposal Three is for the approval of a new sub-advisory
agreement (the "New Sub-Advisory Agreement") between the Fund and
BAI Fondsberatung Ges. m.b.H (the "Sub-Adviser"), which currently
provides sub-advisory services to the Fund. The New Sub-Advisory
Agreement will have substantially the same terms and conditions,
including sub-advisory fees, as the current sub-advisory
agreement with the Sub-Adviser, except for the dates of
execution, effectiveness and termination. Your consideration of
the New Sub-Advisory Agreement is necessitated by the
reorganization of Bank Austria AG, the parent of the Sub-Adviser,
and its combination on December 8, 2000 with Bayerische Hypo und
Vereinsbank Aktiengesellschaft ("HVB"). By its terms and as
required by the Investment Company Act of 1940, an advisory
agreement automatically terminates upon its assignment. As more
fully discussed in the accompanying Proxy Statement, the
reorganization of Bank Austria AG and its combination with HVB
(the "Combination") was considered an assignment, and, as a
consequence, the sub-advisory agreement then in effect between
the Fund and the Sub-Adviser terminated as of December 8, 2000.
The current [3~su-aavisory agreement is an interim agreement
approved by the Board of Directors and is effective for a maximum
of 150 days. Approval of the New Sub-Advisory Agreement by the
stockholders is necessary to enable the Sub-Adviser to continue
to provide sub-advisory services to the Fund. The Board of
Directors recommends that stockholders approve Proposal Three.
3
The last proposal, Proposal Four, would lead to the repeal of
a provision of the Fund's Amended and Restated Bylaws prescribing
qualifications for nominees as Directors of the Fund. The
proposal is included in the Proxy Statement as a result of the
settlement of certain litigation, which is referred to in the
Proxy Statement. The Fund's Board of Directors adopted the
provision after determining that it was in the best interests of
the Fund. The Board of Directors does not support the proposal
and, accordingly, recommends that stockholders vote against
Proposal Four.
We welcome your attendance at the Meeting. If you are unable
to attend, we encourage you to vote by proxy promptly.
Shareholder Communication Corporation ("SCC"), a professional
proxy solicitation firm, has been selected to assist stockholders
in the voting process. As the date of the Meeting approaches, if
we have not received your proxy, you may receive a telephone call
from SCC reminding you to exercise your right to vote. If you
have any questions regarding the Meeting agenda or how to vote by
proxy,toll free pls[3~1-888-t[3~565-60781-888-565-6078.
Sincerely,
[3~ Dave H. Williams
Chairman and President
4
THE AUSTRIA FUND, INC.
[Alliance Logo]
_________________________________________________________________
1345 Avenue of the Americas, New York, New York 10105
Toll Free (800) 221-567
_________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2001
To the Stockholders of The Austria Fund, Inc.:
Notice is hereby given that the Annual Meeting of
Stockholders (the "Meeting") of The Austria Fund, Inc., a
Maryland corporation (tC[3~e "Fund"), will be held at the offices
of the Fund, 1345 Avenue of the Americas, 33rd Floor, New York,
New York 10105, on Thursday, April 12, 2001, at2:[BC[3~0 ppm.,
for the following purposes, all of which are more fully described
in the accompanying Proxy Statement dated February __, 2001.
1. To elect five Directors of the Fund, each to hold office
for a term of three years and until his or her successor
is duly elected and qualifies;
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants for the Fund for its fiscal year
ending August 31, 2001;
3. To approve a new sub-advisory agreement between the Fund
and BAI Fondsberatung Ges. m.b.H (the "Sub-Adviser"),
which presently provides sub-advisory services to the
Fund, containing the same terms and conditions,
including sub-advisory fee, as the Fund's current sub-
advisory agreement with the Sub-Adviser except for the
dates of execution, effectiveness and termination;
4. To approve a proposal to repeal a provision of the
Fund's Amended and Restated Bylaws prescribing
qualifications for nominees as Directors of the Fund;
and
5. To transact such other business as may properly come
before the Meeting.
The Board of Directors has fixed the close of business on
February 5, 2001 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting
or any postponement or adjournment thereof.
5
The enclosed proxy is being solicited on behalf of the Board
of Directors of the Fund. Each stockholder who does not expect
to attend the Meeting in person is requested to complete, date,
sign and promptly return the enclosed proxy card.
By Order of the Board of Directors,
Edmund P. Bergan, Jr.
Secretary
New York, New York
February __, 2001
_________________________________________________________________
YOUR VOTE IS IMPORTANT
Please indicate your voting directions on the enclosed proxy
card, sign and date it, and return it in the envelope provided,
which needs no postage if mailed in the United States. Your vote
is very important no matter how many shares you own. Please mark
and mail your proxy card promptly in order to save the Fund any
additional cost of further proxy solicitation and in order for
the Meeting to be held as scheduled.
_________________________________________________________________
(R)This registered service mark used under license from the
owner, Alliance Capital Management L.P.
6
PROXY STATEMENT
THE AUSTRIA FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
----------------
ANNUAL MC[3~ETING OF STOCKHOLDERS
APRIL 12, 2001
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
The Austria Fund, Inc., a Maryland corporation (the "Fund"), to
be voted at the Annual Meeting of Stockholders of the Fund (the
"Meeting"), to be held at the offices of the Fund, 1345 Avenue of
the Americas, 33rd Floor, New York, New York 10105, on Thursday,
April 12, 2001 at 2:02p.[BC[3~. pThe Notice of Meeting, this
Proxy Statement and the accompanying Proxy Card are being mailed
to stockholders on or about February __, 2001.
The Board of Directors has fixed the close of business on
February 5, 2001 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Meeting
and at any postponement or adjournment thereof (the "Record
Date"). The outstanding voting shares of the Fund as of the
Record Date consisted of 6,406,912 shares of common stock, each
share being entitled to one vote. All properly executed and
timely received proxies will be voted at the Meeting in
accordance with the instructions marked thereon or otherwise
provided therein. Accordingly, unless instructions to the
contrary are marked, proxies solicited on behalf of the Board of
Directors will be voted for the election of five Directors
(Proposal One), for the ratification of the selection of
PricewaterhouseCoopers LLP as the Fund's independent accountants
for its fiscal year ending August 31, 2001 (Proposal Two), for
the approval of a new sub-advisory agreement (the "New Sub-
Advisory Agreement") between the Fund and BAI Fondsberatung Ges.
m.b.H (the "Sub-Adviser") (Proposal Three), and against approval
of a proposal to repeal a provision of the Fund's Amended and
Restated Bylaws (Proposal Four). (These proposals are referred
to individually as a "Proposal" and collectively as the
"Proposals"). Any stockholder may revoke his or her proxy at any
time prior to the exercise thereof by giving written notice to
the Secretary of the Fund at 1345 Avenue of the Americas, New
7
York, New York 10105, by signing another proxy of a later date or
by personally voting at the Meeting.
Properly executed proxies may be returned with instructions
to abstain from voting or withhold authority to vote (an
"abstention") or may represent a broker "non-vote" (which is a
proxy from a broker or nominee indicating that the broker or
nominee has not received instructions from the beneficial owner
or other person entitled to vote the shares on a particular
matter with respect to which the broker or nominee does not have
discretionary power to vote). The shares represented by
abstentions or broker non-votes will be considered present for
purposes of determining the existence of a quorum for the
transaction of business. However, with respect to Proposals One
and Two, which are matters to be determined by a plurality or
majority, respectively, of the votes cast on such matters,
neither abstentions or broker non-votes, not being votes cast,
will have any effect on the outcome of these Proposals. With
respect to Proposals Three and Four, the adoption of which
requires the affirmative vote of holders of a majority of a
Fund's outstanding shares, an abstention and broker non-vote will
have the effect of a negative vote on these Proposals. If any
matter, other than the Proposals properly comes before the
Meeting, shares represented by proxies will be voted on all such
proposals in the discretion of the person or persons holding the
proxies.
A quorum for the Meeting will consist of the presence in
person or by proxy of the holders of a majority of the shares
entitled to vote at the Meeting. Whether or not a quorum is
present at the Meeting, if sufficient votes in favor of the
position recommended by the Board of Directors on any proposal
described in the Proxy Statement are not timely received, the
persons named as proxies may, but are under no obligation to,
with no other notice than announcement at the Meeting, propose
and vote for one or more adjournments of the Meeting for up to
120 days after the Record Date to permit further solicitation of
proxies. The Meeting may be adjourned with respect to fewer than
all of the Proposals, and a stockholder vote may be taken on any
one or more of the Proposals prior to adjournment if sufficient
votes have been received for approval thereof. Shares
represented by proxies indicating a vote contrary to the position
recommended by a majority of the Board of Directors on a proposal
will be voted against adjournment of the Meeting as to that
proposal.
The Fund will bear the cost of this Proxy Statement. The
Fund has engaged Shareholder Communications Corporation, 17 State
Street, New York, New York 10004, to assist the Fund in
soliciting proxies for the Meeting. The Fund will pay
Shareholder Communications Corporation a fee of $7,500 for its
8
solicitation services plus reimbursement for out-of-pocket
expenses.
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Meeting, five Directors will be elected each to serve
for a term of three years and until his successor is duly elected
and qualifies. The affirmative vote of a plurality of the votes
cast at the Meeting is required to elect a Director. It is the
intention of the persons named in the enclosed proxy card to
nominate and vote in favor of election of the nominees listed
below.
Pursuant to the Charter and Bylaws of the Fund, the Board of
Directors is divided into three classes. The terms of the
members of Class One will expire as of the Meeting, the terms of
the members of Class Two will expire as of the annual meeting of
stockholders for the year 2001, and the terms of the members of
Class Three will expire as of the annual meeting of stockholders
for the year 2002. Upon expiration of the terms of the members
of a class as set forth above, the term of their successors in
that class will continue until the third annual meeting of
stockholders following their election and until their successors
are duly elected and qualify. Messrs. Dave H. Williams, William
H.M. de Gelsey and Peter Nowak, Dipl. Ing. Dr. Hellmut Longin
and Mag. Reinhard Ortner are currently the Directors constituting
Class One; Messrs. Gary A. Bentz, Ralph W. Bradshaw, William A.
Clark, Ronald G. Olin and Dipl. Ing. Peter Mitterbauer are
currently the Directors constituting Class Two; and Messrs. John
D. Carifa, Thomas G. Lachs and Andras Simor, Dr. Reba W. Williams
and Dr. Stefan K. Zapotocky are currently the Directors
constituting Class Three.
Under this classified Board structure, only those Directors
in a single class may be replaced in any one year. It would
require two years to replace a majority of the Board of
Directors, although Maryland law provides that stockholders may
remove Directors on a classified board for cause, even if they
are not then standing for reelection and, under regulations of
the Securities and Exchange Commission (the "Commission"),
appropriate stockholder proposals may be included in the Fund's
annual proxy statement. This classified Board structure, which
may be regarded as an "anti-takeover" provision, may make it more
difficult for the Fund's stockholders to change the majority of
Directors and, thus, has the effect of maintaining the continuity
of management.
The Board of Directors has nominated each of Messrs. Dave H.
Williams, William H.M. de Gelsey and Peter Nowak, Dipl. Ing. Dr.
9
Hellmut Longin and Mag. Reinhard Ortner for election as a
Director in Class One. Each nominee has consented to serve as a
Director. The Board of Directors knows of no reason why any of
these nominees would be unable to serve, but in the event any
nominee is unable to serve or for good cause will not serve, the
proxies received indicating a vote in favor of such nominee will
be voted for a substitute nominee as the Board of Directors may
recommend.
In 1999 the Board of Directors amended the Fund's Amended and
Restated Bylaws to require, among other things, that to be
eligible thereafter for nomination as a Director, an individual
must have either (i) a substantial Austrian connection of a type
specified, or (ii) be, or previously have been, connected in a
specified manner with the investment adviser or subadviser (or
any of their affiliates). The Nominating Committee of the Board
of Directors, all of the members of which are not "interested
persons" of the Fund (the "Disinterested Directors") under the
Investment Company Act of 1940, as amended (the "Act"),
determines whether an individual so qualifies and has determined
that each of the five nominees named below satisfies the Bylaw
requirements. These Bylaw requirements and other actions taken
by certain of the Directors, including certain of these nominees,
are the subject of the lawsuit discussed below in connection with
Proposal Four.
Although the Fund is a Maryland corporation, certain of the
Fund's Directors and officers are residents of Austria, Hungary
or the United Kingdom, and substantially all of the assets of
such persons may be located outside of the United States. As a
result, it may be difficult for United States investors to effect
service upon such Directors or officers within the United States,
or to realize judgments of courts of the United States predicated
upon civil liabilities of such Directors or officers under the
federal securities laws of the United States. The Fund has been
advised that there is substantial doubt as to the enforceability
in Austria, Hungary or the United Kingdom of the civil remedies
and criminal penalties afforded by the federal securities laws of
the United States. Also, it is unclear if extradition treaties
now in effect between the United States and any of Austria,
Hungary or the United Kingdom would subject Directors and
officers residing in these countries to effective enforcement of
the criminal penalties of the federal securities laws.
Certain information concerning the Fund's Directors,
including the nominees for election as Directors, is set forth
below. Messrs. Dave H. Williams and John D. Carifa and Dr. Reba
W. Williams are each a director or trustee of one or more other
investment companies sponsored by Alliance Capital Management
L.P., the Fund's investment adviser and administrator ("Alliance"
10
or the "Adviser"). Mr. Williams and Dr. Williams are husband and
wife.
11
Number of shares
of the Fund
Name, age, positions and beneficially
offices with the Fund, principal Year first Year term as owned directly or
occupations during the past five became a a Director indirectly as of
years and other Directorships Director will expire February 5, 2001
- -------------------------------- ---------- ------------ ------------------
* Dave H. Williams, Chairman and
President, 68. Chairman of the
Board, and until 1999 Chief
Executive Officer, of Alliance
Capital Management Corporation
("ACMC"),** and Director of AXA
Financial, Inc. and The
Equitable Life Assurance 2003+
Society of the United States. 1989 (Class One) 26,500
Gary A. Bentz, Director, 44.
Chief Financial Officer, Vice
President and Treasurer of Deep
Discount Advisors, Inc. ("DDA");
formerly Director and Treasurer
of Clemente Strategic Value
Fund, Inc. and Cornerstone 2001
Strategic Return Fund, Inc. 1999 (Class Two) 100
Ralph W. Bradshaw, Director, 50.
Consultant; Chairman of the
Board and Director of Clemente
Strategic Value Fund, Inc.,
Cornerstone Strategic Return
Fund, Inc. and The Portugal
Fund, Inc. Formerly, Vice 2001
President and Secretary of DDA. 1999 (Class Two) 354
* John D. Carifa, Director, 55.
President, Chief Operating 2002
Officer and Director of ACMC. 1991 (Class Three) 1,118
William A. Clark, Director, 55.
Investment Consultant;
Principal, DDA; formerly a
Director of Clemente Strategic
Value Fund, Inc., The Portugal
Fund, Inc. and Cornerstone
Strategic Return Fund, Inc.
Formerly, Principal of Research 2001
for DDA. 1999 (Class Two) 300
12
- --------
* "Interested person", as defined in the Act, of the Fund because of an
affiliation with Alliance.
** ACMC is the sole general partner of Alliance.
+ If elected at the Meeting.
13
Number of shares
of the Fund
Name, age, positions and beneficially
offices with the Fund, principal Year first Year term as owned directly or
occupations during the past five became a a Director indirectly as of
years and other Directorships Director will expire February 5, 2001
- -------------------------------- ---------- ------------ ------------------
*** William H.M. de Gelsey,
Director, 79. Senior Advisor to
the Managing Board of CA IB
Investmentbank AG since 1997;
Senior Advisor to the Managing
Board of Creditanstalt AG,
Vienna from 1988 to 1997; prior
thereto, Deputy Chairman of
Orion Royal Bank Ltd., London;
and currently Director of Okura
Ltd., Grand Cayman, Provence
Europe, Paris, Gedeon Richter
Chemical Works Ltd., Budapest,
Royal Tokaji Boraszati Kft, Mad 2003+
and CA Management Company Ltd. 1991 (Class One) 1,005
++ Thomas G. Lachs, Director,
62. Independent consultant;
Executive Director of
Oesterreichische Nationalbank 2002
from 1982 until 1997. 1999 (class Three) -0-
++ Dipl. Ing. Dr. Hellmut
Longin, Director, 66. Honorary
Chairman of the Board of Radox-
Heraklith Industriebeteiligungs
A.G.; Chairman, Federation of
Mining and Steel Producing
Industry of Austria; Chairman of
the Board of Directors of Mining
University of Loeben; Vice-
Chairman of the Boards of
Umdasch AG, Zumtobel Holding AG
and Zumtobel AG; Vice President
of Federation of Austrian
Industry; and member of the
Boards of Federation of Austrian
Industry Eisenhutte Osterreich,
Auricon Beteiligungs AG and Bank 2003+
Gutmann AG. 1989 (Class One) 1,000
14
- --------
+ If elected at the Meeting.
++ Member of the Audit Committee and the Nominating Committee.
*** "Interested person", as defined in the Act, of the Fund because of an
affiliation with the Fund's Sub-Adviser.
15
Number of shares
of the Fund
Name, age, positions and beneficially
offices with the Fund, principal Year first Year term as owned directly or
occupations during the past five became a a Director indirectly as of
years and other Directorships Director will expire February 5, 2001
- -------------------------------- ---------- ------------ ------------------
++ Dipl. Ing. Peter
Mitterbauer, Director, 58.
Chairman of the Executive Board
of Miba A.G.; Chairman of the
Supervisory Boards of Miba
Gleitlager A.G. and Miba
Sintermetall A.G.; and Member of
the Supervisory Boards of
Strabag Osterreich A.G.,
Teufelberger Holding A.G., Bank
fur Oberosterreich and Salzburg,
SCA Laakitchen AG and EA- 2001
enerali AG. 1989 (Class Two) 1,080
++ Peter Nowak, Director, 55.
Managing Director of CDI-
Beteiligungsberatung GmbH;
member of the Boards of Roth
Beteilingungs AG, Adolf Darbo AG
and The Romanian Investment
Fund; formerly Director of Erste
Bank AG, Investment Bank Austria 2003+
AG and GiroCredit Bank AG. 1990 (Class One) 1,000
Ronald G. Olin, Director, 55.
Chairman and Chief Executive
Officer of DDA; Chief Executive
Officer and General Partner of
Ron Olin Investment Management 2001
Co. 1999 (Class Two) 1
++ Mag. Reinhard Ortner,
Director, 51. Member of the
Management Board of Erste Bank
AG; Chairman of the Supervisory
Boards of Amanda
Industriebeteiligungen GesmbH
and Vereinigte Pensionskasse AG;
and member of the Supervisory
Boards of Generali Holding AG,
Leasfinanz AG, Oesterreichische
Kontrollbank AG and
Oesterreichische Lotterlen 2003+
16
GesmbH. 1992 (Class One) 500
- --------
* "Interested person", as defined in the Act, of the Fund because of an
affiliation with Alliance.
+ If elected at the Meeting.
++ Member of the Audit Committee and the Nominating Committee.
17
Number of shares
of the Fund
Name, age, positions and beneficially
offices with the Fund, principal Year first Year term as owned directly or
occupations during the past five became a a Director indirectly as of
years and other Directorships Director will expire February 5, 2001
- -------------------------------- ---------- ------------ ------------------
++ Andras Simor, Director, 46.
Chairman of the Budapest Stock
Exchange; and Director of The
Romanian Investment Fund and
Central European Telecom
Investments; previously,
Chairman of the Managing Board
of CA-IB Investment Bank AG
(Vienna) during 1997 and 1998;
and prior thereto, Chief
Executive Officer of
Creditanstalt Securities Ltd. 2002
(Budapest) since 1989. 1998 (Class Three) -0-
* Dr. Reba W. Williams,
Director, 64. Director of ACMC;
Director of Special Projects of
ACMC; art historian and writer;
formerly Vice President and
security analyst for Mitchell
Hutchins, Inc. and an analyst 2002
for McKinsey & Company, Inc. 1991 (Class Three) 26,500
Dr. Stefan K. Zapotocky,
Director, 48. Director of
Weiner Borse AG. Formerly,
Senior General Manager of Bank 2002
Austria Aktiengesellschaft. 1999 (Class Three) -0-
- --------
* "Interested person", as defined in the Act, of the Fund because of an
affiliation with Alliance.
++ Member of the Audit Committee and the Nominating Committee.
During the fiscal year ended August 31, 2000, the Board of
Directors met nine times, the Audit Committee met twice for the
purposes described below in Proposal Two, and the Nominating
Committee met once. Both the Audit Committee and the Nominating
Committee are standing committees of the Board. John D. Carifa,
Dr. Reba W. Williams and Dr. Stefan K. Zapotocky attended fewer
than 75% of the meetings of the Fund's Board of Directors.
Andras Simor attended fewer than 75% of the meetings of the
Fund's Board of Directors and the committees on which he serves.
The Nominating Committee was constituted for the purpose of
18
selecting and nominating persons to fill any vacancies on the
Board of Directors and is responsible for determining whether all
candidates for election as Directors, whether duly submitted by
the Board or a stockholder, satisfy the qualifications prescribed
by the Fund's Amended and Restated Bylaws which all candidates
must meet. Except for determining whether a stockholder-
nominated candidate as a Director satisfies the qualifications
prescribed by the Fund's Amended and Restated Bylaws, the
Nominating Committee does not consider for nomination candidates
recommended by stockholders.
In accordance with the listing standards of the New York
Stock Exchange ("NYSE"), the members of the Audit Committee are
independent as defined in Section 303.01(B)(2)(a) and (3) of the
NYSE's listing standards.
The aggregate compensation paid by the Fund to each of the
Directors during its fiscal year ended August 31, 2000, the
aggregate compensation paid to each of the Directors during the
calendar year 2000 by all of the investment companies to which
Alliance provides advisory services (collectively, the "Alliance
Fund Complex") and the total number of funds in the Alliance Fund
Complex with respect to which each of the Directors serves as a
director or trustee are set forth below. Neither the Fund nor
any other fund in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
directors or trustees.
19
Total Number
Total Total of Investment
Compensation Number of Portfolios
from the Funds in the within the
Alliance Alliance Fund Alliance Fund
Aggregate Fund Complex, Complex,
Compensation Complex, Including the Including the
from the Fund Including Fund, as to Fund, as
During the the Fund, which the to which the
Fiscal Year During the Director is a Director is a
Name of Director Ended August 2000 Calendar Director or Director or
of the Fund 31, 2000 Year Trustee Trustee
- --------------------- ------------ ------------- ------------- -------------
Dave H. Williams $0 $0 6 15
Gary A. Bentz $9,500 $9,000 1 1
Ralph W. Bradshaw $9,000 $8,500 1 1
John D. Carifa $0 $0 50 116
William A. Clark $9,500 $9,000 1 1
William H.M. de Gelsey $9,250 $8,250 1 1
Thomas G. Lachs $10,000 $9,500 1 1
Dipl. Ing. Dr. Hellmut
Longin $10,000 $9,500 1 1
Dipl. Ing. Peter
Mitterbauer $8,500 $8,000 1 1
Peter Nowak $9,500 $9,500 1 1
Ronald G. Olin $8,500 $7,500 1 1
Mag. Reinhard Ortner $9,500 $9,000 1 1
Andras Simor $7,000 $7,000 1 1
Dr. Reba W. Williams $0 $0 3 3
Dr. Stefan K. Zapotocky $3,500 $6,250 1 1
As of the Record Date, the Directors and officers of the Fund
as a group owned less than 1% of the shares of the Fund.
The Board of Directors recommends that the stockholders vote
FOR the election of each of the foregoing nominees to serve as a
Director of the Fund.
PROPOSAL TWO
RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends that the stockholders of
the Fund ratify the selection of PricewaterhouseCoopers LLP,
independent accountants ("Pricewaterhouse"), to audit the
accounts of the Fund for the fiscal year ending August 31, 2001.
The selection of Pricewaterhouse was approved by the vote, cast
in person, of a majority of the Directors of the Fund, including
a majority of the Disinterested Directors, at a meeting held on
20
November 3, 2000. The affirmative vote of a majority of the
votes cast at the Meeting is required to ratify such selection.
Pricewaterhouse (or its predecessor) has audited the accounts
of the Fund since the Fund's commencement of operations, and has
represented that it does not have any direct financial interest
or any material indirect financial interest in the Fund. A
representative of Pricewaterhouse is expected to attend the
Meeting and will have the opportunity to make a statement and
respond to appropriate questions from the stockholders.
The Audit Committee of the Board of Directors will normally
meet twice during each full fiscal year with representatives of
the independent accountants to discuss and review various matters
as contemplated by the Audit Committee Charter attached as
Appendix A.
Audit Committee Report
The Fund's Board of Directors has adopted a written charter
for the Fund's Audit Committee. The purposes of the Fund's Audit
Committee are set forth in the Fund's Audit Committee Charter, a
form of which is included as Appendix A. The role of the Audit
Committee is to assist the Board of Directors in its oversight of
the Fund's financial reporting process.As set forth in the
Charter, management of the Fund is responsible for the
preparation, presentation and integrity of the Fund's financial
statements, the Fund's accounting and financing reporting
principles and internal controls and procedures designed to
assure compliance with accounting standards and applicable laws
and regulations. The independent accountants are responsible for
auditing the Fund's financial statements and expressing an
opinion as to their conformity with generally accepted accounting
principles.
In the performance of its oversight function, the Audit
Committee of the Fund has considered and discussed the audited
financial statements with management and the independent
accountants. The Audit Committee of the Fund has also discussed
with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The
Audit Committee of the Fund also considered whether the provision
by the Fund's independent accountants of non-audit services to
the Fund, and of professional services to the Adviser and
affiliates of the Adviser that provide services to the Fund, is
compatible with maintaining the independent accountants'
independence. Finally, the Audit Committee of the Fund has
received the written disclosures and the letter from the
independent accountants required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees,
21
as currently in effect, and has discussed with the independent
accountants, the independent accountants' independence.
The members of the Fund's Audit Committee are not
professionally engaged in the practice of accounting and are not
experts in the fields of accounting, including in respect of
auditor independence. Members of the Audit Committee rely
without independent verification on the information provided to
them and on the representations made by management and the
independent accountants. Accordingly, the Audit Committee's
oversight does not provide an independent basis to determine that
management has maintained appropriate accounting and financial
reporting principles or appropriate internal controls and
procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the
Audit Committee's considerations and discussions referred to
above do not assure that the audits of the Fund's financial
statements have been carried out in accordance with generally
accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting
principles or that the Fund's accountants are in fact
"independent".
Based upon the reports and discussions described in this
report, and subject to the limitations on the role and
responsibilities of the Audit Committee of the Fund referred to
above and in the Audit Committee Charter, the Audit Committee of
the Fund recommended to the Board of Directors of the Fund that
the audited financial statements be included in the Fund's annual
report to stockholders for the most recent fiscal period.
Submitted by the Audit Committee of the Board of Directors
Thomas G. Lachs Peter Nowak
Dipl. Ing. Dr. Hellmut Longin Mag. Reinhard Ortner
Dipl. Ing. Peter Mitterbauer Andras Simor
Independent Accountants' Fees
The following table sets forth the aggregate fees billed by
the independent accountants for the Fund's most recent fiscal
year for professional services rendered for: (i) the audit of the
Fund's annual financial statements and the review of financial
statements included in the Fund's reports to stockholders; (ii)
financial information systems design and implementation services
provided to the Fund, the Adviser and entities that control, are
controlled by or under common control with the Adviser that
provide services to the Fund; and (iii) all other services
provided to the Fund, the Adviser and entities that control, are
controlled by or under common control with the Adviser that
provide services to the Fund.
22
Financial Information
Systems Design and All
Audit Fees Implementation* Other Fees*
--------------- ----------------- -------------
$60,000 N/A $1,425,333
_____________________
*Substantially all of the fees reflected are comprised of amounts
billed to the Adviser and its affiliates.
Your Board of Directors recommends that the stockholders vote FOR
the ratification of the selection of PricewaterhouseCoopers LLP
as independent accountants of the Fund.
PROPOSAL THREE
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
WITH THE SUB-ADVISER
Background
The Sub-Adviser, an Austrian advisory firm, has served as
sub-adviser to the Fund with respect to the Fund's investments in
Austrian securities since March 1995, when it succeeded
GiroCredit Research Anlageberatund und Kapitalmarktforschung Ges.
m.b.H. ("GiroCredit Research") as sub-adviser as a result of a
reorganization of GiroCredit Research's parent. The Sub-Adviser
is a wholly-owned subsidiary of CAIB Investmentbank
Aktiengesellschaft ("CAIB"), which specializes in research,
trading activities, mergers and acquisitions, underwriting
initial public offerings and asset management. CAIB is a joint
stock company existing under the laws of Austria, 100% of whose
shares are held by Bank Austria Creditanstalt International AG
("BACAI"), a wholly-owned subsidiary of Bank Austria AG ("Bank
Austria"). As described in more detail below, in November 2000
Bank Austria was reorganized in anticipation of its combination
with Bayerische Hypo und Vereinsbank Aktiengesellschaft ("HVB"),
which was completed on December 8, 2000 (the "HVB Combination").
The HVB Combination was effected in several stages. First,
Bank Austria contributed substantially all of its assets and
liabilities to Sparkasse Stockerau Aktiengesellschaft ("SPK"), a
savings bank organized under the laws of the Republic of Austria
that was an existing subsidiary of Bank Austria. SPK succeeded
to substantially all of the global assets and liabilities of Bank
Austria, Bank Austria became a holding company and changed its
name to "BA Holding AG" and SPK changed its name to "Bank Austria
Aktiengesellschaft". BA Holding AG contributed its entire
interest in SPK to HVB and received in exchange approximately 22%
of the shares of HVB. Finally, BA Holding AG merged with and
23
into SPK, with SPK as the surviving entity in the merger,
resulting in the ownership by BA Holding AG's shareholders of
pro-rata shares of the approximately 22% of HVB acquired by SPK.
HVB is a bank organized under the laws of the Federal
Republic of Germany, with its principal office in Munich. HVB is
the second largest banking group in Germany and the tenth largest
banking group in the world. With core competencies in real
estate financing, asset management, structured finance and
European capital and money markets, HVB provides a broad range of
banking, financial and related services to its private and
corporate customers. As of June 30, 2000, HVB had total assets
of approximately U.S. $515.3 billion and core capital of
approximately U.S. $13.4 billion. The HVB combination was
designed to maximize the strengths of Bank Austria and HVB in
Central and Eastern Europe as well as other regions, with Bank
Austria concentrating on Central and European business and other
non-Austrian markets falling under the jurisdiction of HVB.
The sub-advisory agreement in effect immediately prior to the
time of the HVB Combination (the "Prior Sub-Advisory Agreement")
was initially approved by the stockholders at the Annual Meeting
of Stockholders held on March 8, 1995, and its continuance was
most recently approved by the Fund's Board of Directors for the
period ending December 31, 2001, at a Special Meeting of the
Board on November 29, 2000. As required by the Act, the Prior
Sub-Advisory Agreement contained a provision for its automatic
termination upon its "assignment." Under the Act a management
agreement, including a sub-advisory agreement such as that
between the Fund and the Sub-Adviser, terminates automatically in
the event of its "assignment". Under the Act such an assignment
is deemed to occur as the result of transactions, typically in
the nature of mergers and acquisitions, that in fact entail an
"actual change in control or management" of the contracting
investment manager.
The HVB Combination resulted in an assignment and consequent
termination of the Prior Sub-Advisory Agreement under the Act as
of December 8, 2000. In order to ensure that a fund is not left
without contractual advisory services after the automatic
termination of an advisory agreement but before the fund's
stockholders can approve the new agreement, Rule 15a-4 under the
Act allows a fund's board of directors to approve and put into
place without stockholders' approval an interim advisory
agreement, subject to certain conditions, for a maximum of 150
days. Alliance advised the Board of Directors that it believed
that it was desirable that the Fund continue to receive the
benefit of the sub-advisory services provided by the Sub-Adviser.
Accordingly, Alliance recommended that the Board of Directors
approve (i) an interim sub-advisory agreement (the "Interim Sub-
Advisory Agreement") in accordance with Rule 15a-4 under the Act
24
and (ii) the New Sub-Advisory Agreement, both of which are
described below.
Board Approval of Interim Sub-Advisory Agreement and New
Sub-Advisory Agreement
The Board of Directors considered both the Interim Sub-
Advisory Agreement and the new Sub-Advisory Agreement at its
Special Meeting on November 29, 2000. In making its
recommendation to the Board, Alliance noted that Bank Austria and
its U.S. counsel indicated to Alliance that it was not then
contemplated that there will be a restructuring of the Sub-
Adviser itself (or of its parent CAIB) in connection with the HVB
Combination. In addition, Bank Austria's U.S. counsel confirmed
that the same personnel will be responsible for providing sub-
advisory services to the Fund following the HVB Combination as
were providing sub-advisory services under the Prior Sub-Advisory
Agreement. In this regard, Alliance advised the Board of
Directors that in its daily contacts with the Sub-Adviser's
personnel, Alliance has encountered no change in the nature or
quality of the Sub-Adviser's services nor any expectation on the
part of the Sub-Adviser's personnel that there will be any
changes.
Alliance advised the Board of Directors that its current
assessment was that, for the foreseeable future, the HVB
Combination would cause no change in the level or quality of the
services provided to the Fund under the Prior Sub-Advisory
Agreement, nor any diminution in the Sub-Adviser's capacity to
provide those services. In the event that Alliance's assessment
in this regard was to change, Alliance indicated that it would
promptly report that development to the Board of Directors and
make any appropriate recommendations responsive to the changed
circumstances.
Alliance recommended that the Board of Directors approve the
Interim Sub-Advisory Agreement in order to ensure continuity in
the provision of sub-advisory services to the Fund. In
contemplation of the HVB Combination, the Board of Directors,
including a majority of the Disinterested Directors, considered
and approved, consistent with Alliance's recommendation, the
Interim Sub-Advisory Agreement. In approving the Interim Sub-
Advisory Agreement, the Board concluded that the Interim Sub-
Advisory Agreement was in the best interests of the Fund and its
stockholders because it would allow the Fund to receive
contractual investment management services after the automatic
termination of the Prior Sub-Advisory Agreement during the period
before the Fund's stockholders could consider and approve the New
Sub-Advisory Agreement. The Board of Directors also determined
that the scope and quality of services to be provided to the Fund
under the Interim Sub-Advisory Agreement would be equivalent to
25
the scope and quality of services provided under the Prior Sub-
Advisory Agreement.
At the November 29, 2000 Meeting, the Board of Directors of
the Fund also concluded that entry into the New Sub-Advisory
Agreement would be in the best interests of the Fund and its
stockholders. The Board of Directors of the Fund approved the
New Sub-Advisory Agreement and recommended it for approval by the
stockholders of the Fund at the Meeting, with the New Sub-
Advisory Agreement to take effect upon the date of stockholder
approval.
The Fund's stockholders must approve the New Sub-Advisory
Agreement for it to become effective. This requires the
affirmative vote of "a majority of the outstanding voting
securities" as defined in the Act, which means the lesser of (i)
67% or more of the voting securities of the Fund present or
represented at the Meeting, if the holders of more than 50% of
the Fund's outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding
voting securities. If the New Sub-Advisory Agreement is not
approved by the stockholders of the Fund, the Board of Directors
of the Fund would consider what action to take, if any, to
provide the Fund with sub-advisory services of the type currently
provided by the Sub-Adviser.
In determining to recommend that the Fund's stockholders
approve the New Sub-Advisory Agreement, the Board of Directors
took into account that, except for the dates of execution,
effectiveness and termination, there are no differences between
the terms and conditions of the Prior Sub-Advisory Agreement and
the New Sub-Advisory Agreement, including the terms relating to
the services to be provided thereunder by the Sub-Adviser and the
fees and expenses payable by the Fund. The Board of Directors
reviewed the materials provided by the Adviser and considered,
among other things, the following: (1) the performance of the
Fund, (2) the level of the sub-advisory fees, which in the
aggregate with the advisory fee, are within the range of fees
charged to other comparable closed-end equity funds investing in
the securities of a particular country or geographic region, (3)
the nature and quality of services provided by the Sub-Adviser,
(4) the Fund's aggregate expense ratio, which is in the range of
expense ratios of other comparable closed-end single country
funds, and (5) the profitability of the Fund to the Sub-Adviser.
In the course of their deliberations regarding the New Sub-
Advisory Agreement, the Disinterested Directors consulted
separately with their independent counsel.
On the basis of its review of the information and factors
discussed above, the Board of Directors of the Fund, including a
26
majority of the Disinterested Directors, concluded that it is in
the best interests of the Fund and its stockholders to approve
the New Sub-Advisory Agreement, thereby enabling the Fund to
continue to receive sub-advisory services from the Sub-Adviser
and, accordingly, to continue to receive the benefit of such
services. The Board of Directors determined to recommend the New
Sub-Advisory Agreement to stockholders for their approval.
Description of the Interim Sub-Advisory Agreement
The Interim Sub-Advisory Agreement has the same terms and
conditions, including the sub-advisory fee of .20% of the Fund's
average weekly net assets, as the Prior Sub-Advisory Agreement,
except for the dates of execution, effectiveness and termination
and the additional provisions pursuant to Rule 15a-4 under the
Act noted in this paragraph. The Fund's Board of Directors or a
majority of the Fund's outstanding voting securities may
terminate the Interim Sub-Advisory Agreement at any time, without
the payment of any penalty upon ten calendar days' written notice
to the Sub-Adviser. In addition, the Interim Sub-Advisory
Agreement provides that the compensation earned by the Sub-
Adviser will be held in an interest-bearing escrow account to be
paid to the Sub-Adviser only if the Fund's stockholders approve
the New Sub-Advisory Agreement. The Interim Sub-Advisory
Agreement also provides that if the Fund's stockholders do not
approve the New Sub-Advisory Agreement, the Sub-Adviser will be
entitled to the portion of the compensation earned under the
Interim Sub-Advisory Agreement that equals the lesser of: (i)
its costs incurred in providing services under the Interim Sub-
Advisory Agreement (plus interest earned on that amount while in
escrow) or (ii) the total amount in the escrow account (plus
interest earned therein). The Interim Sub-Advisory Agreement
will remain in effect until the Fund's stockholders have approved
the New Sub-Advisory Agreement, but in no event after May 7, 2001
which is 150 days following the date on which the Prior Sub-
Advisory Agreement was terminated by reason of its assignment.
Comparison of the Prior Sub-Advisory Agreement and the New
Sub-Advisory Agreement
The only differences between the Prior Sub-Advisory Agreement
and the New Sub-Advisory Agreement (collectively, the
"Agreements") are their dates of the execution, effectiveness and
termination. A copy of the New Sub-Advisory Agreement (which
reflects these differences) is attached hereto as Exhibit B. If
the New Sub-Advisory Agreement is approved by the Fund's
stockholders, it will be dated and will take effect upon
stockholder approval of the Agreement. The New Sub-Advisory
Agreement will continue in effect until December 31, 2002 and
thereafter for successive twelve-month periods if approved at
least annually (i) by the Directors of the Fund or by vote of a
27
majority of the outstanding voting securities of the Fund and
(ii) by vote of the majority of the Disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval.
The Agreements provide that they will remain in effect for
successive twelve-month periods (computed from each January 1),
provided that such continuance is specifically approved at least
annually (i) by the Fund's Board of Directors or by vote of a
majority of the outstanding voting securities (as defined in the
Act) of the Fund and, in either case, (ii) by vote of a majority
of the Directors who are not "interested persons" of the Fund,
the Sub-Adviser or Alliance, within the meaning of the Act, cast
in person at a meeting called for the purpose of voting on such
approval.
Each Agreement provides that the Sub-Adviser, subject to the
supervision of Alliance, provides investment advice and research
to the Fund and Alliance with respect to investments in Austrian
securities on a continuing basis. The Sub-Adviser does not have
any investment discretion. The Sub-Adviser renders its services
on its own initiative and in response to the inquires and
requests of Alliance. Representatives of the Sub-Adviser report
directly to representatives of Alliance on both a formal and
informal basis. For its services under the Agreements, the Fund
pays the Sub-Adviser a fee, calculated and paid monthly, at an
annualized rate of .20% of 1% of the Fund's average weekly net
assets. The fees payable by the Fund to the Sub-Adviser are
based on all of the Fund's assets, not just those invested in
Austrian securities. The Sub-Adviser will bear all of its
expenses in connection with the performance of its services under
the Agreements. For the Fund's fiscal year ended August 31,
2000, the fees paid under the Prior Sub-Advisory Agreement
amounted to $217,321.
Each Agreement provides that it is terminable at any time,
without penalty, on 60 days' written notice to the Sub-Adviser,
or by vote of a majority of the Fund's outstanding securities, or
by vote of a majority of the Fund's Board of Directors or by
Alliance, or by the Sub-Adviser, on 60 days' written notice to
Alliance and the Fund, and that it automatically terminates in
the event of its assignment. Under each Agreement in the absence
of willful misfeasance, bad faith or gross negligence on the part
of the Sub-Adviser, or of reckless disregard of its obligations
and duties thereunder, the Sub-Adviser is not liable for any
action or failure to act in accordance with its duties
thereunder.
Subject to best execution, the Fund has placed or may place
orders for portfolio transactions with banks and brokers that
supply research, market and statistical information ("research"
28
as defined in Section 28(e) of the Securities Exchange Act of
1934) to the Fund and the Sub-Adviser. The research has been or
may be used by the Sub-Adviser in advising other clients, and the
Fund's negotiated commissions paid to brokers and banks supplying
research may not represent the lowest obtainable commission
rates. During the Fund's fiscal year ended August 31, 2000, the
Fund paid brokerage commissions to Creditanstalt Investment Bank
Vienna, an affiliate of the Sub-Adviser amounting to $8,291 which
represented 6.58% of the Fund's aggregate brokerage commission
for such period.
The Sub-Adviser
The Sub-Adviser was established on March 4, 1994 as a company
with limited liability under Austrian law and has its principal
office at Burgring 3, A-1010, Vienna, Austria. The Sub-Adviser
has a board of directors that operates independently of influence
from Bank Austria, and HVB and is autonomous in making its
investment decisions and in rendering investment advice to its
clients, but has access to the extensive research and other
resources of Bank Austria and HVB. The Sub-Adviser is an
investment adviser registered under the Investment Advisers Act
of 1940. The managing directors of the Sub-Adviser are Mr. Lukas
Stipkovich and Mr. Alfred Reisenberger, both of whose address is
Burgring 3, A-1010, Vienna, Austria.
The Sub-Adviser's personnel do not discuss their investment
advice for the Fund with personnel of CAIB, BACAI, Bank Austria
or HVB who are managing the investment portfolios of CAIB, BACAI,
Bank Austria or HVB. Bank Austria, HVB and their affiliates may
have deposit, loan and other commercial banking relationships
with issuers of securities purchased by the Fund. The Fund does
not purchase securities in any primary public offering where, to
the knowledge of the Sub-Adviser, the proceeds will be used to
retire indebtedness to Bank Austria, HVB or their affiliates.
The Fund, Bank Austria, HVB and their affiliates do not act
jointly to cause the Fund to make investments that are designed
to benefit other commercial interests of Bank Austria, HVB or
their affiliates. The Sub-Adviser has advised the Fund that in
rendering its investment advice, the investment personnel at the
Sub-Adviser do not obtain or use material inside information in
the possession of Bank Austria, HVB or their affiliates and that
its personnel do not disclose to Bank Austria, HVB or their
affiliates any material inside information in their possession.
Your Board of Directors of the Fund recommends that the
stockholders vote FOR the approval of Proposal Three.
29
PROPOSAL FOUR
APPROVAL OF A PROPOSAL FOR THE REPEAL OF A PROVISION
OF THE FUND'S BYLAWS PRESCRIBING QUALIFICATIONS
FOR NOMINEES AS DIRECTORS
Pursuant to a settlement of a putative class action brought
against the Fund and certain of its Directors entitled Steiner v.
Williams, et al., 99 Civ. 10186 (S.D.N.Y.), the Fund agreed to
include in this Proxy Statement the following proposal with
respect to paragraph (c) of Section 1 of Article III of the
Fund's Bylaws, the text of which is set forth in Appendix C (the
"Bylaw Provision"), which requires that nominees for election as
Directors possess substantial contacts with Austria in order to
qualify as Disinterested Directors of the Fund:
That the stockholders recommend to the Board of Directors
that paragraph (c) of Section 1 of Article III of the Bylaws
of the Fund be repealed.
In furtherance of the settlement, the Board of Directors has
resolved (i) to repeal the foregoing paragraph of the Bylaws
forthwith if the proposal receives the affirmative vote of
holders of a majority of the Fund's shares outstanding on the
Record Date, and (ii) in the event that the proposal receives
such vote, not to adopt the same or a materially similar Bylaw
within three years of the date of the stockholder vote. As of
the date of this Proxy Statement, a notice of settlement has been
issued, and the settlement is subject to final court approval.
Proposal Four will be presented to the stockholders at the
Meeting unless the settlement is not approved by the court. In
the event that Proposal Four is approved by the stockholders at
the Meeting, it will not become effective unless and until the
court approves the settlement.
Plaintiff's Statement in Support of the Resolution
The plaintiff in Steiner v. Williams, et al., 99 Civ. 10186
(S.D.N.Y.) urges his fellow shareholders to vote in favor of the
resolution repealing the Bylaw for the following reasons:
1. Requiring independent directors to possess
substantial contacts with Austria will not provide any
benefit to the Fund in the form of improved investment
performance or otherwise. The task of the board of directors
is not to make investment decisions, but to assess
independently the performance and actions of the adviser.
Independence, judgment, and diligence, not relationships with
Austria, should be the measure of a good independent
director. If management believed the Bylaw would enhance the
Fund's performance, management should have negotiated a
30
reduction in the compensation payable to the investment
adviser which heretofore has been solely responsible for the
Fund's investments.
2. The Bylaw is manifestly harmful to the Fund's
shareholders because, as a practical matter, it will prevent
shareholders from presenting any slate of directors to
challenge the existing board. Shareholders could not
nominate such qualified investors as Arthur Levitt, for he
would not have the requisite Austrian connection. We, the
shareholders should vote to repeal the Bylaw and preserve our
right to challenge the board of directors. The Fund has
operated for its entire history without this Bylaw - it can
continue to do so without it.
Opposing Statement of Your Board of Directors
The substantive qualifications prescribed by the Bylaw
Provision are intended to ensure that the Board of Directors will
consist of persons qualified to perform the full range of duties
and responsibilities of a Director of the Fund, as required by
Federal and Maryland law. In the opinion of the Board, a Board
of Directors so comprised is best able to further the Fund's
investment objective and to act in the best interests of the
Fund.
The Bylaw Provision codifies the historical practice of the
Nominating Committee in its selection of candidates for election
to the Board as Disinterested Directors, which has been to seek
individuals with close connections with Austria, expertise
regarding Austria and distinguished Austrian backgrounds. There
is a large pool of individuals from which qualified nominees can
be selected. The criteria are not overly restrictive or
discriminatory as the same criteria apply to all candidates
regardless of whether they are recommended by any stockholder, or
by a Director, or by the Adviser. The Bylaw Provision does not
bear on the right of stockholders to recommend qualified
candidates.
For the foregoing reasons, your Board of Directors recommends
that the stockholders vote AGAINST this Proposal Four.
INFORMATION AS TO THE FUND'S PRINCIPAL OFFICERS, INVESTMENT
ADVISER AND ADMINISTRATOR, AND THE FUND'S SUB-ADVISER
The principal officers of the Fund and their principal
occupations during the past five years are set forth below. Each
of the officers listed below also serves as an officer of one or
more of the other registered investment companies sponsored by
Alliance.
31
Dave H. Williams, Chairman (see page 7 for biographical
information).
Norman S. Bergel, Vice President, 50, a Senior Vice President
of ACMC since prior to 1996; Director and a Senior Vice President
of Alliance Capital Limited ("ACL") since prior to 1996.
Mark H. Breedon, Vice President, 47, a Vice President of ACMC
since prior to 1994; Director and a Senior Vice President of ACL
since prior to 1996.
Russell Brody, Vice President, 34, a Vice President and Head
Trader of the London Desk of ACL, with which he has been
associated since July 1997; prior thereto, he was Head of
European Equity Dealing with Lombard Odier Cie, London office,
since prior to 1996.
Mark D. Gersten, Treasurer and Chief Financial Officer, 50, a
Senior Vice President of Alliance Fund Services, Inc. ("AFS"),
with which he has been associated since prior to 1996.
Edmund P. Bergan, Jr., Secretary, 50, a Senior Vice President
and the General Counsel of Alliance Fund Distributors, Inc. and
AFS, with which he has been associated since prior to 1996.
Vincent S. Noto, Controller, 36, an Assistant Vice President
of AFS, with which he has been associated prior to 1996.
The address of Messrs. Williams and Bergan is c/o Alliance
Capital Management L.P., 1345 Avenue of the Americas, New York,
New York 10105. The address of Messrs. Bergel, Breedon and Brody
is c/o Alliance Capital Management International, 53 Stratton
Street, London, W1X 6JJ. The address of Messrs. Gersten and Noto
is c/o Alliance Fund Distributors, Inc., 500 Plaza Drive,
Secaucus, New Jersey 07094.
The investment adviser and administrator for the Fund is
Alliance Capital Management L.P., with principal offices at 1345
Avenue of the Americas, New York, New York 10105. The Fund's
sub-adviser is BAI Fondsberatung Ges .m.b.H., with principal
offices at Burgring 3, A1010, Vienna, Austria.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 30(h) of the Act and the rules under Section 16 of
the Securities Exchange Act of 1934 require that the Directors
and officers of the Fund and the Directors of ACMC, among others,
file with the Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of
shares of the Fund. For the fiscal year ended August 31, 2000,
all such reports were timely filed.
32
OTHER MATTERS
Management of the Fund does not know of any matters proposed
to be presented at the Meeting other than those mentioned in this
Proxy Statement. Therefore, the only other matters that may
properly come before the Meeting in accordance with the Bylaws
are those presented by or at the direction of the Board of
Directors. If any such matter were properly to come before the
Meeting, the shares represented by proxies will be voted with
respect thereto in the discretion of the person or persons
holding the proxies.
According to information filed with the Commission, as of
August 31, 2000, the following person was the beneficial owner of
more than 5% of the Fund's common stock.
Percent of
Amount of Common Stock
Name and Address Beneficial Based on Shares
of Beneficial Owner Ownership Outstanding
Bank Austria Aktiengesellschaft
Vordere Zollamtsstrasse 13
A-1030 Vienna, Austria ......... 2,518,500 shares 37.3
SUBMISSION OF PROPOSALS FOR THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
Proposals of stockholders intended for inclusion in the
Fund's proxy statement and form of proxy relating to the Annual
Meeting of Stockholders of the Fund for 2001 (the "2001 Annual
Meeting") must be received within a reasonable time before the
Fund begins to print and mail the proxy materials for the
meeting. The Fund will make a public announcement, through the
issuance of a press release, of the date of the 2001 Annual
Meeting. The submission by a stockholder of a proposal for
inclusion in the proxy statement does not guarantee that it will
be included. Stockholder proposals are subject to certain
requirements under the federal securities laws and the Maryland
General Corporation Law and must be submitted in accordance with
the Fund's Amended and Restated Bylaws.
In accordance with the Fund's Amended and Restated Bylaws for
a stockholder nomination or proposal to be considered at the 2001
Annual Meeting, the nomination or proposal must be delivered by a
holder of record to the Fund's Secretary not earlier than the
close of business on the 120th day prior to the 2001 Annual
Meeting and not later than the close of business on the later of
(i) the 90th day prior to the 2001 Annual Meeting or (ii) the
10th day following the day on which public announcement of the
date of the 2001 Annual Meeting is first made by the Fund. The
33
persons named as proxies for the 2001 Annual Meeting will with
respect to proxies in effect at that meeting have discretionary
authority to vote on any matter presented by a stockholder for
action at that meeting unless the Fund receives notice of the
matter by the date specified in the advance notice provision in
the Fund's Amended and Restated Bylaws, which is described in the
first sentence of this paragraph. If the Fund receives such
timely notice, these persons will not have this authority except
as provided in the applicable rules of the Commission.
REPORTS TO STOCKHOLDERS
The Fund will furnish each person to whom this Proxy
Statement is delivered with a copy of the Fund's latest annual
report to stockholders upon request and without charge. To
request a copy, please call Alliance Fund Services, Inc. at (800)
227-4618 or contact Christina A. Santiago at Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105.
By Order of the Board of Directors,
Edmund P. Bergan, Jr.
Secretary
February __, 2001
New York, New York
34
Appendix A
AUDIT COMMITTEE CHARTER
For
Registered Investment Companies in the Alliance Complex
I. Composition of the Audit Committee: The Audit Committee
shall be comprised of at least three directors, each of
whom shall have no relationship to the Company or any
investment adviser, sub-adviser, administrator, sub-
administrator, custodian, principal underwriter or transfer
agent that may interfere with the exercise of his or her
independence from management and the Company and, with
respect to his or her relationship to the Company, may
otherwise satisfy any applicable membership requirements of
stock exchange or Nasdaq rules, as such requirements are
interpreted by the Board of Directors in its business
judgment.*
____________________
* The New York Stock Exchanges rules require that the Audit
Committee members have no relationship with the Company
that may interfere with their independence. More
specifically, the standards restrict the eligibility of
people with certain relationships from membership on the
Audit Committee. Notably, a director who is an employee,
including an executive officer, of the Company or any of
its affiliates may not serve on the Audit Committee until
three years after termination of the employment, and a
director who is a partner, controlling shareholder, or
executive officer of an entity that has a business
relationship with the Company may not serve on the Audit
Committee unless the Board of Directors of the Company
determines that such relationship will not interfere with
the directors independence.
The New York Stock Exchange rules also require that (i)
each Audit Committee member be financially literate and
(ii) at least one member of the Audit Committee have
accounting or related financial management expertise.
Each of these qualifications is subject to the
interpretation of the Companys Board of Directors in its
business judgment. The Company is required to regularly
provide certifications to the New York Stock Exchange
regarding its compliance with the Audit Committee rules.
The SECs proxy rules require closed-end investment
companies listed on the NYSE or AMEX, or quoted on Nasdaq,
to disclose in their proxy statements relating to the
election of directors whether the committee members are
independent under the applicable stock exchange or Nasdaq
(footnote continued)
35
II. Purpose of the Audit Committee: The purposes of the Audit
Committee are to assist the Board of Directors:
1. in its oversight of the Company's accounting and
financial reporting principles and policies and
related controls and procedures maintained by or on
behalf of the Company;
2. in its oversight of the Company's financial
statements and the independent audit thereof;
3. in selecting (or nominating the independent
accountants to be proposed for shareholder approval
in any proxy statement), evaluating and, where deemed
appropriate, replacing the independent accountants;
and
4. in evaluating the independence of the independent
accountants.
The function of the Audit Committee is oversight. The
management of the Company, including contractually
obligated service providers, are responsible for the
preparation, presentation and integrity of the Company's
financial statements. Management and applicable service
providers are responsible for maintaining appropriate
accounting and financial reporting principles and policies
and related controls and procedures designed to assure
compliance with accounting standards and applicable laws
and regulations. The independent accountants are
responsible for planning and carrying out a proper audit.
In fulfilling their responsibilities hereunder, it is
recognized that the members of the Audit Committee are not
full-time employees of the Company, and the members of the
Audit Committee are neither acting as, nor do they
represent themselves to be acting as, accountants, auditors
or experts in the fields of accounting or auditing. As
such, in fulfilling their oversight duties under this
Charter, it is neither the duty nor the responsibility of
the Audit Committee or its members to conduct "field work"
or other types of auditing or accounting reviews or
procedures, and each member of the Audit Committee shall be
entitled to rely on (i) the integrity of those persons and
organizations within and outside the Company that provide
information to the Audit Committee and (ii) the accuracy of
____________________
(footnote continued)
rules, and, if not independent, the nature of the
relationship and the reasons the board appointed the non-
independent director.
36
the financial and other information provided to the Audit
Committee by such persons or organizations absent actual
knowledge to the contrary (which shall be promptly reported
to the Board of Directors).
The independent accountants for the Company are ultimately
accountable to the Board of Directors and the Audit
Committee. The Board of Directors, with the assistance of
the Audit Committee, has the ultimate authority and
responsibility to select, evaluate and, where appropriate,
replace the independent accountants (or to nominate the
independent accountants to be proposed for shareholder
approval in the proxy statement).
The Audit Committee shall also be responsible for ensuring
that the independent accountants submit to the Company
annually a formal written statement delineating all
relationships between the independent accountants and the
Company ("Statement as to Independence"), addressing at
least the matters set forth in Independence Standards Board
Standard No. 1. The Statement as to Independence shall
also identify any audit, tax or consulting services to the
Company's investment adviser, sub-adviser, administrator,
sub-administrator, custodian, principal underwriter or
transfer agent or other service providers, and such other
investment companies advised by the Company's investment
adviser, as the Audit Committee may specify.
III. Meetings of the Audit Committee: The Audit Committee shall
meet as often as may be required to consider the matters
set forth in Article IV. In addition, the Audit Committee
should meet separately at least annually with management
and the independent accountants to discuss any matters that
the Audit Committee or any of these persons or firms
believe should be discussed privately. The Audit Committee
may request any officer or employee of the Company or of
any service provider, outside counsel to the Company or to
the independent directors, or representatives of the
Company's independent accountants to attend a meeting of
the Audit Committee or to meet with any members of, or
consultants to, the Audit Committee. Members of the Audit
Committee may participate in a meeting of the Audit
Committee by means of conference call or similar
communications equipment by means of which all persons
participating in the meeting can hear each other.
IV. Duties and Powers of the Audit Committee: To carry out its
purposes, the Audit Committee shall have the following
responsibilities and powers:
1. with respect to the independent accountants,
37
(i) to provide advice to the Board of Directors in
selecting, evaluating or replacing the
independent accountants;
(ii) to review the fees charged by the independent
accountants for the performance of audit and
non-audit services to the Company;
(iii) to ensure that the independent accountants
prepare and deliver annually a Statement as to
Independence (it being understood that the
independent accountants are responsible for the
accuracy and completeness of this Statement),
to discuss with the independent accountants any
relationships or services disclosed in this
Statement that may impact the objectivity and
independence of the Company's independent
accountants and to recommend that the Board of
Directors take appropriate action in response
to this Statement to satisfy itself of the
independent accountants' independence; and
(iv) to instruct the independent accountants that
the independent accountants are ultimately
accountable to the Board of Directors and Audit
Committee;
2. with respect to financial reporting principles and
policies and related controls and procedures,
(i) to advise management and the independent
accountants that they are expected to provide
or cause to be provided to the Audit Committee
a timely analysis of significant financial
reporting issues and practices;
(ii) to consider any reports or communications (and
management's responses thereto) submitted to
the Audit Committee by the independent
accountants required by generally accepted
auditing standards, as they may be modified or
supplemented, including reports and
communications related to:
-- deficiencies noted in the audit in the
design or operation of related controls;
-- consideration of fraud in a financial
statement audit;
-- detection of illegal acts;
38
-- the independent accountants'
responsibility under generally accepted
auditing standards;
-- significant accounting policies;
-- management judgments and accounting
estimates;
-- adjustments recorded and unadjusted
differences arising from the audit;
-- the responsibility of the independent
accountants for other information in
documents containing audited financial
statements;
-- disagreements with management;
-- consultation by management with other
independent accountants;
-- major issues discussed with management
prior to retention of the independent
accountants;
-- difficulties encountered with management
in performing the audit; and
-- the independent accountant's judgments
about the quality of the Company's
accounting principles;
(iii) to meet with management and/or the independent
accountants:
-- to discuss the scope of the annual audit
or any audit or review of interim
financial statements;
-- to discuss the audited financial
statements;
-- to discuss any significant matters
arising from any audit or report or
communication referred to in item 2(ii)
above, whether raised by management or
the independent accountants, relating to
the Company's financial statements;
39
-- to review the opinion rendered, or the
form of opinion the independent
accountants propose to render, to the
Board of Directors and shareholders;
-- to discuss allocations of expenses
between the Company and other entities
and, if applicable, among different
series of the Company and among different
classes of shares of the Company;
-- to discuss the Company's compliance with
Subchapter M and, if applicable,
Subchapter L** , of the Internal Revenue
Code of 1986, as amended;
-- to discuss the Company's compliance with
Rule 2a-7*** of the Investment Company
Act of 1940, to the extent that such Rule
applies to the Company;
-- to discuss with management and the
independent accountants their respective
procedures to assess the
representativeness of securities prices
provided by external pricing services;
-- to discuss with independent accountants
their conclusions as to the
reasonableness of procedures employed to
determine the fair value of securities
for which market quotations are not
readily available, management's adherence
to such procedures and the adequacy of
supporting documentation;
-- to discuss with management and the
independent accountants any reports
issued by independent accountants
regarding the Company's transfer, custody
and accounting agents;
-- to discuss the report of the independent
accountants on the Company's system of
____________________
** Subchapter L is relevant only to investment companies that
sell their shares to insurance company separate accounts.
*** Rule 2a-7 applies only to money market funds.
40
internal accounting controls required to
be filed with the Company's Form N-SAR;
-- to discuss significant changes to the
Company's accounting principles,
policies, controls, procedures and
practices proposed or contemplated by
management;
-- to discuss significant changes to
auditing principles and to auditing
policies, controls, procedures and
practices contemplated by the independent
accountants;
-- to inquire about significant risks and
exposures, if any, and the steps taken to
monitor and minimize such risks; and
(iv) to discuss with the Company and its legal
advisors any significant legal matters that may
have a material effect on the financial
statements; and
3. with respect to reporting, recommendations and other
matters,
(i) to provide advice to the Board of Directors in
electing the principal accounting officer of
the Company;
(ii) to provide any report required by the rules of
the Securities and Exchange Commission to be
included in the Company's annual proxy
statement;****
____________________
**** Closed-end investment companies must include in their
proxy statements relating to the election of directors a
signed report of the Audit Committee in which the Audit
Committee states whether it has (i) reviewed and discussed
the audited financial statements, (ii) discussed the
matters to be discussed under SAS 61 and (iii) received
from and discussed with the independent accountants their
Statement as to Independence. The report must also include
a statement as to whether, based on these three items, the
Audit Committee recommended to the Board of Directors the
inclusion of the audited financial statements in the
Companys annual report required by 30(e) of the
Investment Company Act.
41
(iii) to review this Charter at least annually and
recommend any changes to the full Board of
Directors; and
(iv) to report its activities to the full Board of
Directors on a regular basis and to make such
recommendations with respect to the above and
other matters as the Audit Committee may deem
necessary or appropriate.
V. Resources and Authority of the Audit Committee: The Audit
Committee shall have the resources and authority
appropriate to discharge its responsibilities, including
the authority to engage independent accountants for special
audits, reviews and other procedures and to retain special
counsel and other experts or consultants.
42
Appendix B
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the [ ] of [ ], 2001, by and
between The Austria Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, and BAI
Fondsberatung Ges.m.b.H., a corporation organized under the laws
of the Republic of Austria (the "Sub-Adviser").
WITNESSETH:
WHEREAS, the Fund has entered into an Investment Management
and Administration Agreement (the "Management Agreement") with
Alliance Capital Management L.P. (the "Investment Adviser"), a
Delaware limited partnership, pursuant to which the Fund has
engaged the Investment Adviser to manage the investment and
reinvestment of its assets; and
WHEREAS, as permitted under the Management Agreement, the
Investment Adviser desires to utilize the services of the Sub-
Adviser as sub-adviser with respect to certain portfolio assets
as defined in the Management Agreement; and
WHEREAS, the Sub-Adviser is willing to perform such services
on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements
herein contained, it is agreed as follows:
1. The Sub-Adviser agrees to furnish to the Fund and the
Investment Adviser information, investment recommendations,
advice and assistance with respect to the Fund's investment in
Austrian securities and shall furnish the Fund and the Investment
Adviser with such data, analysis and other information regarding
particular Austrian securities and issuers and such information
on Austrian economic conditions, statistics and forecasts as the
Fund or the Investment Adviser shall reasonably require from time
to time. The Sub-Adviser's activities under this Agreement will
at all times be subject to the supervision of the Investment
Adviser. The Investment Adviser will from time to time instruct
the Sub-Adviser to render investment advice with respect to all
or some of the Fund's assets.
2. In consideration of the services to be performed by the
Sub-Adviser hereunder, the Fund shall pay the Sub-Adviser a fee,
calculated and paid monthly, at an annualized rate of .20% of the
Fund's average weekly net assets. For purposes of the
calculation of such fee, average weekly net assets shall be
determined on the basis of the average net assets of the Fund for
each weekly period (ending on Friday) ending during the month.
The net assets for each weekly period are determined by averaging
43
the net assets on the Friday of such weekly period with the net
assets on the Friday of the immediately preceding weekly period.
When a Friday is not a business day for the Fund, then the
calculation will be based on the Fund's net assets on the
business day immediately preceding such Friday. Such fee shall
be payable in arrears on the last day of each calendar month for
services performed hereunder during such month. For purposes of
this Agreement, a business day shall be a day on which stock
exchanges in the United States are open for business. If this
Agreement becomes effective after the beginning of a month, or
this Agreement terminates prior to the end of a month, such fee
shall be pro-rated according to the proportion which such portion
of the month bears to the full month.
3. The Sub-Adviser will bear all of its expenses in
connection with the performance of its services hereunder and
will from time to time at its sole expense employ or associate
with itself such persons as it believes to be particularly fitted
to assist it in the execution of its duties. The Investment
Adviser will be responsible for all expenses which it has agreed
to bear pursuant to the Management Agreement.
4. The Sub-Adviser is, and at all times during the term of
this Agreement shall be, duly registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act")
and not prohibited by the Advisers Act or the Investment Company
Act of 1940, as amended (the "Investment Company Act") or the
rules and regulations under such Acts, from acting as Sub-Adviser
for the Fund as contemplated by the Fund's Prospectus and this
Agreement. The Sub-Adviser agrees that it will be in full compliance
with any provisions of the Investment Company Act and the Advisers
Act, applicable to it and its directors, officers or employees, and to
interested persons with respect to it.
5. The Sub-Adviser's services to the Fund and the
Investment Adviser are not to be deemed exclusive, and the
Sub-Adviser is free to render similar services to others.
6. Nothing herein shall be construed as constituting
the Sub-Adviser an agent of the Investment Adviser or of
the Fund or requiring the Sub-Adviser to take or refrain
from taking any action that would cause the Sub-Adviser to
be in violation of the laws of the Republic of Austria or
any other law applicable to the Sub-Adviser in connection
with its duties hereunder.
7. The Sub-Adviser shall be entitled to rely on
information reasonably believed by it to be accurate and
reliable. The Fund and the Investment Adviser agree that,
except as may otherwise be provided by the Investment
Company Act, neither the Sub-Adviser nor its officers,
44
directors, employees or agents shall be subject to any
liability for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
protect, the Sub-Adviser against any liability to the Fund
or the Investment Adviser to which it would otherwise be
subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties
hereunder, or by reason of its reckless disregard of its
obligations and duties hereunder.
8. This Agreement shall become effective on the date
it is approved by the majority vote of holders of the
Fund's outstanding securities (as defined in the
Investment Company Act), and shall continue in effect
until December 31, 2002 and thereafter for successive
twelve month periods (computed from each January 1)
provided that such continuance is specifically approved at
l[3~Deast annually by the affirmative vote of (i) a
majority of the members of the Fund's Board of Directors
who are not interested persons of the Fund, the Sub-
Adviser or the Investment Adviser, cast in person at a
meeting called for the purpose of voting on such approval
and (ii) the Fund's Board of Directors or the holders of a
majority of the outstanding voting securities of the Fund.
This Agreement may nevertheless be terminated at any time,
without penalty, by the Investment Adviser or by the
Fund's Board of Directors or by vote of holders of a
majority of the outstanding voting securities of the Fund,
upon sixty (60) days written notice delivered or sent by
registered mail, postage prepaid, to the Sub-Adviser, at
its latest known address or at any other address of which
the Sub-Adviser shall have notified the Fund or the
Investment Adviser in writing, or by the Sub-Adviser upon
sixty (60) days written notice to the Investment Adviser
and to the Fund. Any such notice shall be deemed given
when received by the addressee.
9. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged by either
party hereto, and this Agreement shall terminate
automatically in the event of its assignment. It may be
amended by mutual agreement, but only after authorization
of such amendment by the affirmative vote of (i) the
holders of a majority of the outstanding voting securities
of the Fund and (ii) a majority of the members of the
Fund's Board of Directors who are not interested persons
of the Fund, the Sub-Adviser or the Investment Adviser,
cast in person at a meeting called for the purpose of
voting on such amendment.
45
10. This Agreement shall be construed in accordance
with the laws of the State of New York, provided, however,
that nothing herein shall be construed as being
inconsistent with the Investment Company Act. As used
herein the terms "interested person", "assignment", and
"vote of a majority of the outstanding voting securities"
shall have the meanings set forth in the Investment
Company Act.
IN WITNESS WHEREOF, this Agreement has been entered into
the day and year first above written.
THE AUSTRIA FUND, INC.
By_________________________________
Name:
Title:
[3~D BAI Fondsberatung Ges.m.b.H.
By_________________________________
Name:
Title:
Agreed to and accepted as of
the date first set forth above.
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its General Partner
By______________________________
Name:
Title:
46
Appendix C
Bylaws
Article III, Section 1, Paragraph (c)
Qualification. To qualify as a nominee for a
directorship, an individual, at the time of nomination,
(i) shall have substantial expertise, experience or
relationships relevant to the business of the Corporation
and (ii) shall be at least one of the following: (A) a
citizen of Austria or an individual for whom Austria has
been a primary residence for at least four years preceding
the date of nomination as a director; (B) a present or
former director of, member of the supervisory board or
senior executive officer of, or senior consultant to, (1)
at least one company the securities of which, or of an
affiliate or successor of which, are listed or traded on a
securities exchange located in Austria or (2) a securities
exchange located in Austria; (C) a present or former
senior official of, or senior adviser to, any ministry,
department, agency or instrumentality of the Austrian
national government or of a provincial government in
Austria; (D) a present or former senior official of a city
in Austria with a population of at least 100,000; (E) a
present or former member of a national or provincial
legislative body in Austria; (F) a present or former
senior official of a major political party in Austria; (G)
an attorney licensed to practice in Austria whose practice
involves to a substantial degree the representation of
publicly traded Austrian companies in commercial matters;
(H) a former judge of any court in Austria with
jurisdiction over commercial or corporate matters; (I) a
present or former ambassador or minister of another
country to Austria, or consul or economic, financial or
commercial attache of another country posted to Austria;
(J) a present or former director or senior executive
officer of an investment advisor or sub-advisor of the
Corporation, or of any person controlling, or under common
control with, an advisor or sub-advisor of the
Corporation; or (K) a present officer of the Corporation.
The Nominating Committee of the Board of Directors, in its
sole discretion, shall determine whether an individual
satisfies the foregoing qualifications. Any individual
who does not satisfy the qualifications set forth under
this subsection (c) shall not be eligible for nomination
or election as a director. Directors need not be
stockholders.
47
TABLE OF CONTENTS Page
_________________________________________________________________
Introduction.............................................
Proposal One: Election of Directors......................
Proposal Two: Ratification of Selection of Independent
Accountants..............................................
Proposal Three: Approval of the New Sub-Advisory
Agreement with the Sub-Adviser...........................
Proposal Four: Approval of a Proposal for the Repeal
of a Provision of the Fund's Bylaws Prescribing
Qualifications for Nominees as Directors.................
Information as to the Fund's Principal Officers,
Investment Adviser and Administrator,
and the Fund's Sub-Adviser...............................
Other Matters............................................
Submission of Proposals for the Next Annual Meeting of
Stockholders.............................................
Reports to Stockholders...............................
Appendix A............................................... A-1
Appendix B............................................... B-1
Appendix C............................................... C-1
The Austria Fund, Inc.
_________________________________________________________________
[LOGO OF ALLIANCE CAPITAL]
Alliance Capital Management L.P.
_________________________________________________________________
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
February __, 2001
48
PROXY THE AUSTRIA FUND, INC. PROXY
PROXY IN CONNECTION WITH THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD APRIL 12, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE FUND.
The undersigned stockholder of The Austria Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Carol H. Rappa and
Israel Grafstein, or either of them, as proxies for the
undersigned, with full power of substitution in each of them, to
attend the Annual Meeting of Stockholders of the Fund to be held
at 2:00 p.m., Eastern Time, on April 12, 2001 at the offices of
the Fund, 1345 Avenue of the Americas, 33rd Floor, New York, New
York 10105, and any postponements or adjournments thereof, to
cast on behalf of the undersigned all votes that the undersigned
is entitled to cast at the meeting and otherwise to represent the
undersigned at the meeting with all powers possessed by the
undersigned if personally present at such meeting. The
undersigned hereby acknowledges receipt of the Notice of the
Annual Meeting and accompanying Proxy Statement, revokes any
proxy heretofore given with respect to such meeting and hereby
instructs said proxies to vote said shares as indicated on the
reverse side hereof.
The votes entitled to be cast by the undersigned will be cast as
instructed on the reverse side hereof. If this proxy is executed
but no instruction is given, the votes entitled to be cast by the
undersigned will be cast "for" the election of each of the
nominees referred to in Proposal One as Directors, "FOR" the
ratification of the selection of PricewaterhouseCoopers LLP as
the independent accountants for the Fund (Proposal Two), "FOR"
the approval of the New Sub-Advisory Agreement with the sub-
Adviser (Proposal Three), "AGAINST" the approval of the repeal of
a provision of the Fund's Bylaws prescribing qualifications for
nominees as Directors (Proposal Four), and in the discretion of
the proxy holders(s) on any other matters that may properly come
before the Annual Meeting or any adjournment or postponement
thereof.
Please sign this proxy exactly as your name(s) appear(s) on the
records of the Fund. Joint owners should each sign personally.
Trustees and other representatives should indicate the capacity
in which they sign, and where more than one name appears, a
majority must sign. If a corporation or another entity, the
signature should be that of an authorized officer who should
state his or her full title.
49
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE HEREOF AND RETURN
THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
50
THE AUSTRIA FUND, INC.
CONTROL NUMBER:
Please mark votes as in this
example: /x/
WITH-
HOLD
FOR ALL AS TO ALL FOR ALL
1. Election of Directors. NOMINEES NOMINEES EXCEPT
Class One Directors / / / / / /
(term expires 2003):
Dave H. Williams
William H. M. de Gelsey
Peter Nowak
Dipl. Ing. Dr. Hellmut Longin
Mag. Reinhard Ortner
Your Board of Directors recommends a vote "FOR" the election of all Nominees.
NOTE: If you do not wish your shares voted "FOR" a particular Nominee,
mark the "For All Except" box and strike a line through the name(s)
of such Nominee(s). Your shares will be voted for the remaining
Nominee(s).
2. Ratification of the selection of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as / / / / / /
independent accountants for the
Fund for the fiscal year
ending August 31, 2001
(Proposal Two).
Your Board of Directors recommends a vote "FOR" Proposal Two.
3. Approval of the new sub-advisory FOR AGAINST ABSTAIN
agreement between the Fund and BAI / / / / / /
Fondsberatung Ges. m.b.H
(Proposal Three).
Your Board of Directors recommends a vote "FOR" Proposal Three.
4. Approval of repeal of a provision FOR AGAINST ABSTAIN
of the Fund's Bylaws prescribing / / / / / /
51
qualifications for nominees as
Directors (Proposal Four).
Your Board of Directors recommends a vote "AGAINST" Proposal Four.
5. To voteABC[3~and otherwise represent the undersigned on any other matter
that may properly come before the meeting or any adjournment or postponement
thereof in the discretion of the proxy holder.
PLEASE BE SURE TO SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Dated:
_________________, 2001 2BC[3~(Cla
ss Two)
Signature
________________________
Signature, if held jointly
f3~C[3~354[ 5
C8~3~
19AXA FiACC[3~an 2003+
One)ACC[3~~C[3 2002
ACC[3~BC(Class Three~ 2003+5Pricipal, DDA [A
formerly a [B(Class One)Or[CA~
1
00250000.B8
<EF=1>CCC[3~7,5C[3~0
~or ~C 2001Or[CA~
2
00250000.B8
<EF=1>CCC[3~7,5C[3~0
for
C[~[B~~
CC[3~February 5[BC~B~60015 2001
3
00250050B~116EF=1>CCC[3~7,5C[3~0
for
C[3~
[3~[B 2002~C[3~February 5
A~ [10,00[BB3,500(Class Two(Class
Three)35~[BB~3,50050[C~[B~99[B3~[B~183~[B7,000
3~[B3~7,000
All[D[BB'
60,
52
00
C[3 2001~0000.B8
immediat
[3~ely prior to
1~C[3~D
[3~D~C[3~D
ba[3~dc[3~dtrBA[3~Dhe
~C[N[BAS3~DA
C[3~DDrBA[3AD
26~C[3~D
p
any [3~rse side hereofD
on the reve
000
bA[3~DAM[
.
.
A[3~D
.
53
00
C[3 2001~0000.B8