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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
The Austria Fund, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction
applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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THE AUSTRIA FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
Toll Free (800) 221-5672
October 3, 2001
To the Stockholders of The Austria Fund, Inc. (the "Fund"):
The accompanying Notice of Special Meeting of
Stockholders and Proxy Statement present one proposal (the
"Proposal") to be considered at the Fund's Special Meeting of
Stockholders (the "Meeting") to be held on October 24, 2001. The
Proposal is discussed more fully in the accompanying Proxy
Statement.
The Proposal is to consider and act upon a proposal to
liquidate and dissolve the Fund as set forth in the Plan of
Liquidation and Dissolution (the "Plan") adopted by the Board of
Directors of the Fund. The Board of Directors recommends that
stockholders approve the Proposal.
We welcome your attendance at the Meeting. If you are
unable to attend, we encourage you to vote by proxy promptly.
Georgeson Shareholder Communications Inc. ("Georgeson"), 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 Georgeson reminding you to exercise your
right to vote. If you have any questions regarding the Meeting
agenda or how to vote by proxy, please call Georgeson toll free
at 1-888-565-6078.
Sincerely,
Dave H. Williams
Chairman and President
THE AUSTRIA FUND, INC.
Alliance Capital [LOGO](R)
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1345 Avenue of the Americas, New York, New York 10105
Toll Free (800) 221-5672
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
October 24, 2001
To the Stockholders of The Austria Fund, Inc.:
Notice is hereby given that a Special Meeting of
Stockholders (the "Meeting") of The Austria Fund, Inc., a
Maryland corporation (the "Fund"), will be held at the offices of
the Fund, 1345 Avenue of the Americas, 33rd Floor, New York, New
York 10105, on Wednesday, October 24, 2001, at 11:00 a.m., for
the following purposes, which are more fully described in the
accompanying Proxy Statement dated October 3, 2001:
1. To consider and act upon a proposal to liquidate and
dissolve the Fund, as set forth in the Plan of Liquidation and
Dissolution (the "Plan") adopted by the Board of Directors of the
Fund; and
2. To transact such other business as may properly come
before the Meeting.
The Board of Directors has unanimously determined that a
complete liquidation and dissolution of the Fund in accordance
with the terms of the Plan is advisable and is in the best
interests of the Fund and its stockholders. The Board of
Directors has recommended that the stockholders approve the
liquidation and dissolution of the Fund in accordance with the
Plan. Subject to receipt of the requisite stockholder approval,
stockholders remaining in the Fund can expect to receive
liquidation distributions, in cash installments, as soon as
reasonably practicable. However, there is no minimum
distribution to stockholders.
When and if the Plan becomes effective (as further
described in the Plan), the stockholders' respective interests in
the Fund's assets will not be transferable by negotiation of the
share certificates and the Fund's shares will cease to be traded
on the New York Stock Exchange, Inc. In order to facilitate
payments to them, stockholders holding stock certificates should
consider contacting the Fund's transfer agent to arrange the
return of their certificates in advance of any liquidation
distributions. The Fund's transfer agent is State Street Bank
and Trust Company, located at 225 Franklin Street, Boston,
Massachusetts 02110. They can be reached at (800) 219-4218.
The Board of Directors has fixed the close of business
on August 31, 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.
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
October 3, 2001
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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.
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(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
PROXY STATEMENT
THE AUSTRIA FUND, INC.
1345 Avenue of the Americas
New York, New York 10105
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SPECIAL MEETING OF STOCKHOLDERS
October 24, 2001
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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 a Special 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 Wednesday,
October 24, 2001 at 11:00 a.m. The Notice of Special Meeting of
Stockholders, this Proxy Statement and the accompanying Proxy
Card are being mailed to stockholders on or about October 3,
2001.
The Board of Directors has fixed the close of business
on August 31, 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 approval of the liquidation and
dissolution of the Fund (the "Proposal"), as set forth in the
Plan of Liquidation and Dissolution (the "Plan") adopted by the
Board of Directors of the Fund. 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 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. With respect to the Proposal, the
adoption of which requires the affirmative vote of holders of a
majority of the Fund's outstanding shares, an abstention or
broker non-vote will have the effect of a negative vote on the
Proposal. If any matter, other than the Proposal, 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 the 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. Shares represented by proxies indicating a vote contrary
to the position recommended by the unanimous vote of the Board of
Directors on the Proposal will be voted against adjournment of
the Meeting as to the Proposal.
The Fund will bear the cost of this Proxy Statement.
The Fund has engaged Georgeson Shareholder Communications Inc.
("Georgeson"), 17 State Street, New York, New York 10004, to
assist the Fund in soliciting proxies for the Meeting. The Fund
will pay Georgeson a fee of $10,000 for its solicitation services
plus reimbursement of out-of-pocket expenses.
THE PROPOSAL
APPROVAL OF THE LIQUIDATION AND DISSOLUTION OF THE FUND
Background and Reasons for the Proposal
Alliance Capital Management L.P. (the "Investment
Adviser") has served as the Fund's investment adviser since the
Fund commenced operations in September 1989. In connection with
its deliberations on the Proposal, the Board of Directors at a
meeting held on July 25, 2001 considered a presentation and
recommendations of the Investment Adviser.
2
The Investment Adviser recalled for the Board that the
Fund was created in 1989 based upon the Investment Adviser's
belief that Austria would be a prime economic beneficiary of the
opening to investment of Central and Eastern Europe, and that
Austrian economic growth would translate to highly attractive
growth potential for investors in Austrian equities. The Fund
was further premised on the projection that the Vienna Stock
Exchange would develop into a thriving regional market for
Central and Eastern Europe. All of this has materialized only to
a limited degree. Moreover, evidently under the pressures of
European economic integration and the acquisition of several
prominent Austrian companies, the Austrian equity market has
contracted significantly.
The Investment Adviser stated that the aggregate market
capitalization of the Austrian equity market had declined to
approximately US$25 billion. The Investment Adviser indicated
that this compared with approximately US$1.3 trillion for
Germany, US$444 billion for Spain, US$250 billion for South
Africa, and US$148 billion for Belgium. In addition, the general
perception has been that acquisitions of prominent Austrian
companies are likely to cause a decline in the Austrian equity
market capitalization.
The Investment Adviser expressed its belief that as
European markets continued to integrate, it was increasingly
likely that Austrian companies would list their shares away from
the Vienna Stock Exchange, and that some significant Austrian
companies would effectively delist from the Vienna Stock
Exchange, either by going private or by obtaining a primary
listing elsewhere. In addition, the Investment Adviser stated
that the Austrian securities markets have been beset by low
valuations and disappointing returns.
Furthermore, the Investment Adviser indicated that
Morgan Stanley Capital International Inc., a leading provider of
global indices and benchmark-related products and services to
investors worldwide, was in the process of moving to a "free
float" weighting basis for its various international indices.
This means that only the portion of a company's shares that are
considered freely tradeable will be included in index weightings.
This shift, which began on May 31, 2001, reduced the weighting of
Austria in the MSCI Europe Index to only approximately 0.18%.
The Investment Adviser indicated that there have been forecasts
that the change in Austria's weighting in the MSCI Europe Index
will lead to a further net outflow of more than US$800 million of
indexed assets from the Austrian market.
The Investment Adviser further indicated that, in the
Investment Adviser's view, as the Austrian weighting in
benchmarks continued to decline, it would be increasingly
3
unlikely that foreign investment will assume a more significant
role in the Austrian equity market. It also seemed unlikely that
Austrian investors would broaden their participation in the
Austrian equity market, especially in view of recent
disappointing returns. This suggested to the Investment Adviser
that for the foreseeable future there was likely to be little
respite from the relatively low valuations and returns that have
characterized the Austrian market in recent years.
The Investment Adviser then presented its views on
conversion of the Fund from a closed-end investment company to an
open-end investment company. Open-ending the Fund would allow
stockholders desiring liquidity to redeem their shares at net
asset value (less any applicable redemption fee) at times of such
stockholders' choosing following the effective date of open-
ending. However, the Investment Adviser indicated that, based on
the Investment Adviser's extensive experience with several prior
open-endings of closed-end funds, it was foreseeable that
approximately 90% of the Fund's assets would be redeemed shortly
after the open-ending, thus leaving the Fund with remaining
assets on the order of approximately $5 million.
At this asset level, it would be difficult for the
Investment Adviser to maintain a properly diversified portfolio
for the Fund, at least without incurring both inferior executions
and abnormally high levels of transaction costs. Moreover,
redemptions on this scale would oblige the Fund to liquidate
portfolio positions in order to raise cash to meet such
redemptions, at times largely not of its own choosing, thus
subjecting the Fund and its remaining stockholders to the risks
of significant, dilutive market impact as the result of such
forced liquidations. Because of the Fund's lack of appeal to
U.S. investors, in the Investment Adviser's view it would be
virtually impossible to engender sufficient investor interest in
the Fund to offset ongoing redemptions, let alone appreciably
increase the size of the Fund through net subscriptions. The
Investment Adviser also stated to the Board that in view of the
focus and concentration of the Fund's investments, it did not
believe that a combination with an open-end fund with investment
objectives similar to the Fund's was a viable alternative.
The Investment Adviser stated to the Board that these
considerations impelled the Investment Adviser to two
conclusions. First, from both the liquidity and growth potential
standpoints the investment rationale for an "Austria fund", as
conceived by the Investment Adviser at the time of the Fund's
inception, has been fundamentally weakened, and, under current
and foreseeable circumstances it was unlikely that the Fund could
compete effectively for the attention of the largely American
investors for whom the Fund was designed. Second, there is no
viable and practicable alternative investment configuration to
4
which the Fund might be converted. The Investment Adviser noted
in this regard that the Fund's largest stockholder, currently
with a 39.3% ownership interest, had expressed its desire that
the Fund take action to open-end the Fund as soon as possible.
The Investment Adviser also noted the implications of the
stockholder's position.
In view of the prospects for the Fund in the Austrian
market, and after reviewing the open-ending alternatives, the
Investment Adviser recommended to the Board of Directors the
liquidation and dissolution of the Fund as the most equitable
manner of providing liquidity to all stockholders. In this
regard, the Investment Adviser presented its analysis of the
Fund's investment portfolio in order to determine the amount of
time required to effect its orderly liquidation without
significant market impact. While most of the Fund's net assets
currently are comprised of relatively liquid securities that
could be liquidated fairly quickly, a portion of the Fund's
positions might take longer to liquidate, including a period of
six months or more to negotiate the sale of two relatively small
positions in unlisted securities.
After consideration and discussion of the Investment
Adviser's presentation and recommendation and other factors,
including the tax consequences described below, the Board of
Directors determined that liquidation and dissolution of the Fund
was advisable and approved the Plan of Liquidation and
Dissolution (the "Plan"), which is attached hereto as Appendix A.
Under the Plan, upon stockholder approval of the liquidation and
dissolution, the Fund would cease all business activities except
those undertaken for the purpose of winding up its business and
affairs, including the orderly liquidation of its investment
portfolio. As soon as reasonable and practicable after
stockholder approval, all portfolio securities of the Fund would
be converted to cash or cash equivalents.
The Board of Directors believes that the liquidation and
dissolution of the Fund is advisable and in the Fund's best
interest and therefore recommends that the stockholders approve
the Proposal.
Summary Of Plan Of Liquidation And Dissolution
The following summary does not purport to be complete
and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the Plan which is
attached hereto as Appendix A. Stockholders are urged to read the
Plan in its entirety.
5
Effective Date of the Plan and Cessation of the Fund's Activities
as an Investment Company
The Plan will become effective only upon the approval of
the liquidation and dissolution of the Fund by the holders of at
least a majority of the outstanding shares of the Fund entitled
to vote at a duly called meeting of the stockholders at which a
quorum is present (the "Effective Date"). After the Effective
Date, the Fund will cease its business as an investment company
and will not engage in any business activities except for the
purpose of winding up its business and affairs, preserving the
value of its assets, discharging or making reasonable provision
for the payment of all of the Fund's liabilities (as provided in
the Plan), and distributing its remaining assets to stockholders
in accordance with the Plan.
Closing of Books and Restriction on Transfer of Shares
The proportionate interests of stockholders in the
assets of the Fund will be fixed on the basis of their respective
share holdings on the Effective Date. On such date, the books of
the Fund will be closed. Thereafter, unless the books of the Fund
are reopened because the Plan cannot be carried into effect under
the laws of the State of Maryland or otherwise, the stockholders'
respective interests in the Fund's assets will not be
transferable by the negotiation of share certificates and the
Fund's shares will cease to be traded on the Exchange (Plan,
Section 3).
Liquidating Distributions
The distribution of the Fund's assets will be made in
two or more cash payments in complete cancellation of all the
outstanding shares of stock of the Fund. The first distribution
of the Fund's assets (the "First Distribution") is expected to
consist of cash representing a substantial portion of the assets
of the Fund, less an estimated amount necessary to discharge any
(a) unpaid liabilities and obligations of the Fund on the Fund's
books on the First Distribution date, and (b) liabilities as the
Board of Directors reasonably deem to exist against the assets of
the Fund on the Fund's books. Each subsequent distribution (each
a "Distribution" and together with the First Distribution and all
other Distributions, the "Liquidating Distributions") will
consist of cash from any assets remaining after accrual of
expenses, the proceeds of any sale of assets of the Fund under
the Plan not sold prior to the earlier Distributions and any
other miscellaneous income of the Fund. The Board will set the
record date and the payment date for the First Distribution and
each subsequent Distribution.
6
Each stockholder not holding stock certificates of the
Fund will receive Liquidating Distributions equal to the
stockholder's proportionate interest in the net assets of the
Fund. Each stockholder holding stock certificates of the Fund
will receive a confirmation showing such stockholder's
proportionate interest in the net assets of the Fund with a
statement that such stockholder will be paid in cash upon return
of the stock certificate. In order to facilitate payments to
them, stockholders holding stock certificates should consider
contacting the Fund's transfer agent to arrange the return of
their certificates in advance of any Liquidating Distributions.
The transfer agent is State Street Bank and Trust Company,
located at 225 Franklin Street, Boston, Massachusetts 02110. They
can be reached at (800) 219-4218. All stockholders will receive
information concerning the sources of the Liquidating
Distribution (Plan, Section 6). Upon mailing of the final
Liquidating Distribution, all outstanding shares of the Fund will
be deemed cancelled.
Expenses of Liquidation and Dissolution
The Fund will bear all of the expenses incurred by the
Fund in carrying out the Plan (Plan, Section 7). Such expenses
are estimated to be approximately $80,000.
Amendment of the Plan
The Plan provides that the Board of Directors has the
authority to authorize such variations from, or amendments of,
the provisions of the Plan (other than the terms governing
Liquidating Distributions) as may be necessary or appropriate to
effect the liquidation and dissolution of the Fund and the
distribution of its net assets to stockholders in accordance with
the purposes to be accomplished by the Plan (Plan, Section 11).
Distribution Amounts
The Fund's net asset value on August 31, 2001 was
$46,924,343. At such date, the Fund had 6,406,912 shares
outstanding. Accordingly, on August 31, 2001, the net asset value
per share of the Fund was $7.32. The amounts to be distributed to
stockholders of the Fund upon liquidation will be reduced by any
remaining expenses of the Fund, including the expenses of the
Fund in connection with this solicitation and with the
liquidation and portfolio transaction costs, as well as any costs
incurred in resolving any claims that may arise against the Fund.
Liquidation and dissolution expenses are estimated to be
approximately $80,000 (or approximately $.0125 per share
outstanding on August 31, 2001). The Fund's remaining portfolio
transaction costs (including amounts allocated for dealer markup
on securities traded over the counter) are estimated to be
7
approximately $1,536,126, although actual portfolio transaction
costs will depend upon the composition of the portfolio and the
timing of the sale of portfolio securities. Actual liquidation
expenses and portfolio transaction costs may vary from these
estimates. Any increase in such costs will be funded from the
cash assets of the Fund and will reduce the amount available for
distribution to stockholders.
United States Tax Considerations
The following is only a general summary of the
significant United States federal income tax consequences of the
Plan to the Fund and its U.S. Stockholders who are subject to
United States federal income taxation on a net income basis
("U.S. Stockholders") and is limited in scope. This summary is
based on the tax laws and applicable Treasury regulations in
effect on the date of this Proxy Statement, all of which are
subject to change by legislative or administrative action,
possibly with retroactive effect. The Fund has not sought a
ruling from the Internal Revenue Service (the "IRS") with respect
to the federal income tax consequences to the Fund or its U.S.
Stockholders which will result from the Fund's Liquidation and
Dissolution. The statements below are, therefore, not binding
upon the IRS, and there can be no assurance that the IRS will
concur with this summary or that the tax consequences to any U.S.
Stockholder upon receipt of a Liquidating Distribution will be as
set forth below.
While this summary addresses the significant United
States federal income tax consequences of the Plan, neither state
nor local tax consequences of the Plan are discussed.
Implementing the Plan may impose unanticipated tax consequences
on U.S. Stockholders and affect U.S. Stockholders differently,
depending on their particular tax situations independent from the
Plan. U.S. Stockholders should therefore consult with their own
tax advisers for advice regarding the United States federal,
state, local and other tax consequences of the Plan to their
particular situation.
The Liquidating Distributions received by a U.S.
Stockholder may consist of three elements: (i) a capital gain
dividend to the extent of any net long-term capital gains
recognized by the Fund during its final tax year; (ii) an
ordinary income dividend to the extent the amount of the Fund's
ordinary income and short-term capital gains earned during its
final tax year that has not previously been distributed exceeds
the Fund's expenses for the year; and (iii) a distribution
treated as payment for the U.S. Stockholder's shares. As of
August 31, 2001, the Fund had accumulated net realized capital
losses and does not currently expect to realize significant net
gains on the sale of assets in connection with the liquidation.
8
Therefore, it is currently expected that U.S. Stockholders will
not derive a capital gain dividend in the distribution. The Fund
also does not currently expect to have undistributed ordinary
income when its assets are liquidated. However, the composition
of the actual Liquidating Distributions may vary due to changes
in market conditions and the composition of the Fund's portfolio
at the time its assets are sold. Prior to the last day of the
Fund's final taxable year, the Fund's Board of Directors will
authorize any capital gain dividend and ordinary income dividend
to be distributed as part of the Liquidating Distribution.
Within 60 days after the close of the Fund's final taxable year,
the Fund will notify U.S. Stockholders as to the portion, if any
of the Liquidating Distribution which constitutes a capital gain
dividend and that which constitutes an ordinary income dividend
(as well as any amounts qualifying for a credit or deduction
against foreign taxes paid by the Fund).
Since the Fund expects to retain its qualification as a
regulated investment company ("RIC") under the Internal Revenue
Code of 1986, as amended (the "Code"), during the liquidation
period it does not expect to be taxed on any of its net capital
gains realized from the sale of its assets or ordinary income
earned. In the unlikely event that the Fund should lose its
status as a RIC during the liquidation process, the Fund would be
subject to taxes which would reduce any or all of the three types
of Liquidating Distributions, and result in the inability of the
Fund to pass through to its U.S. Stockholders credits against
foreign taxes paid.
Any portion of a Liquidating Distribution paid under the
Plan out of ordinary income or realized long-term capital gains
will be taxed under the Code, in the same manner as any other
distribution of the Fund. Accordingly, such amounts will be
treated as ordinary income or long-term capital gains, if so
designated.
The balance of any amount (after accounting for the
capital gain dividend and ordinary income dividend positions of
the Liquidating Distributions) received upon liquidation will be
treated for federal income tax purposes as a payment in exchange
for a U.S. Stockholder's shares in the Fund. A U.S. Stockholder
will recognize a taxable gain or loss on such exchange equal to
the difference between the amount of the payment and the U.S.
Stockholder's tax basis in its Fund shares. Any such gain or
loss will be a capital gain or capital loss if the U.S.
Stockholder holds its shares as capital assets. In such event,
any recognized gain or loss will constitute a long-term capital
gain or long-term capital loss, as the case may be, if the Fund's
shares were held for more than one year by the U.S. Stockholder
at the time of the exchange. Under current law, long-term
capital gains are taxed to non-corporate U.S. Stockholders at a
9
maximum tax rate of 20%. If the U.S. Stockholder held its Fund
shares for not more than one year at the time of the deemed
exchange, any gain or loss will be a short-term capital gain or
loss. Short term capital gains are taxed to non-corporate U.S.
Stockholders at the graduated income tax rates applicable to
ordinary income. Corporate U.S. Stockholders should note that
there is no preferential federal income tax rate applicable to
long-term capital gains derived by corporations under the Code.
Accordingly, all income recognized by a corporate U.S.
Stockholder pursuant to the liquidation of the Fund, regardless
of its character as capital gains or ordinary income, will be
subject to tax at the regular graduated federal corporate income
tax rates.
Under the Code, certain non-corporate U.S. Stockholders
may be subject to a withholding tax at the fourth lowest tax rate
in effect for individuals other than surviving spouses and heads
of households ("backup withholding") on the Liquidating
Distribution they receive from the Fund. Generally, U.S.
Stockholders subject to backup withholding will be those for whom
no taxpayer identification number is on file with the Fund, those
who, to the Fund's knowledge, have furnished an incorrect number,
and those who underreport their tax liability. An individual's
taxpayer identification number is his or her social security
number. Certain U.S. Stockholders specified in the Code may be
exempt from backup withholding. The backup withholding tax is
not an additional tax and may be credited against a taxpayer's
federal income tax liability.
Impact Of The Plan On The Fund's Status Under The 1940 Act
On the Effective Date, the Fund will cease doing
business as a registered investment company and, as soon as
practicable, will apply for deregistration under the 1940 Act. It
is expected that the Securities and Exchange Commission (the
"Commission") will issue an order approving the deregistration of
the Fund if the Fund is no longer doing business as an investment
company. Accordingly, the Plan provides for the eventual
cessation of the Fund's activities as an investment company and
its deregistration under the 1940 Act. A vote in favor of the
Plan will constitute a vote in favor of such a course of action
(Plan, Sections 1, 2 and 11). Until the Fund's withdrawal as an
investment company becomes effective, the Fund, as a registered
investment company, will continue to be subject to and will
comply with the 1940 Act.
10
Procedure For Dissolution Under The Maryland General Corporation
Law
After the Effective Date, pursuant to the Maryland
General Corporation Law and the Fund's Charter and Amended and
Restated Bylaws, if at least a majority of the Fund's outstanding
shares of stock entitled to vote are voted in favor of the
proposed liquidation and dissolution of the Fund, the Articles of
Dissolution will in due course be executed, acknowledged and
filed with the State Department of Assessments and Taxation of
Maryland, and will become effective in accordance with the
Maryland General Corporation Law. Upon the effective date of such
Articles of Dissolution, the Fund will be legally dissolved, but
thereafter the Fund will continue to exist for the purpose of
paying, satisfying, and discharging any existing debts or
obligations, collecting and distributing its assets, and doing
all other acts required to liquidate and wind up its business and
affairs, but not for the purpose of continuing the business for
which the Fund was organized. The Fund's Board of Directors will
be the trustees of its assets for purposes of liquidation after
the acceptance of the Articles of Dissolution, unless and until a
court appoints a receiver. The Director-trustees will be vested
in their capacity as trustees with full title to all the assets
of the Fund (Plan, Sections 2 and 9).
Appraisal Rights
Stockholders will not be entitled to appraisal rights
under Maryland law in connection with the Plan.
Your Board of Directors of the Fund recommends that the
stockholders vote FOR the approval of the Proposal.
OTHER MATTERS
Management of the Fund does not know of any matters
proposed to be presented at the Meeting other than those
discussed in this Proxy Statement. Therefore, the only other
matters that may properly come before the Meeting in accordance
with the Amended and Restated Bylaws of the Fund 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.
As of August 31, 2001, the Directors and officers of the
Fund as a group owned less than 1% of the outstanding shares of
the Fund.
11
According to information filed with the Commission, as
of February 28, 2001, the following person was the only
beneficial owner of more than 5% of the Fund's common stock.
Percent of
Common Stock
Name and Address of Amount of Beneficial Based on Shares
Beneficial Owner Ownership Outstanding
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Bank Austria
Aktiengesellschaft
Vordere Zollamtsstrasse 13
A-1030 Vienna, Austria 2,518,500 shares 39.3
The expense of preparation, printing and mailing of the
enclosed form of proxy and accompanying Notice and Proxy
Statement will be borne by the Fund. The Fund will reimburse
banks, brokers and others for their reasonable expenses in
forwarding proxy solicitation material to the beneficial owners
of the shares of the Fund.
In order to obtain the necessary quorum at the Meeting,
supplementary solicitation may be made by mail, telephone,
telegraph, or personal interview. It is anticipated that the cost
of such supplementary solicitation, if any, will be nominal.
The Fund's Investment Adviser is Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York,
10105.
PROPOSALS OF STOCKHOLDERS
If the liquidation and dissolution of the Fund is
approved, it is not intended that there will be an annual
meeting. However, if the Proposal is not approved or if the
liquidation does not occur, 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
12
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 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 within a reasonable time before the Fund
begins to print and mail the proxy materials for the meeting. 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 Global Investor 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
October 3, 2001
New York, New York
13
This Page Intentionally Left Blank
14
Appendix A
THE AUSTRIA FUND, INC.
PLAN OF LIQUIDATION AND DISSOLUTION
This Plan of Liquidation and Dissolution (the "Plan") of The
Austria Fund, Inc. (the "Fund"), a corporation organized and
existing under the laws of the State of Maryland and a closed-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), is intended to
accomplish the complete liquidation and dissolution of the Fund
in conformity with the laws of the State of Maryland.
WHEREAS, on July 25, 2001, the Fund's Board of Directors (the
"Board") unanimously determined that it is advisable to dissolve
the Fund; and
WHEREAS, the Board has considered and approved this Plan as the
method of liquidating and dissolving the Fund and has directed
that the dissolution of the Fund be submitted to the stockholders
of the Fund (the "Stockholders") for their consideration;
NOW, THEREFORE, the liquidation and dissolution of the Fund shall
be carried out in the manner hereinafter set forth:
1. Effective Date of Plan. The Plan shall be and become
effective only upon the approval of dissolution of the Fund
by the holders of at least a majority of the outstanding
voting shares of the Fund at a duly called meeting of the
Stockholders at which a quorum is present. The day of such
approval by the Stockholders is hereinafter called the
"Effective Date."
2. Cessation of Business. After the Effective Date, the Fund
shall cease its business as an investment company and shall
not engage in any business activities except for the
purposes of winding up its business and affairs, preserving
the value of its assets, discharging or making reasonable
provision for the payment of all of the Fund's liabilities
as provided in Section 5 herein, and distributing its
remaining assets to the Stockholders in accordance with this
Plan.
3. Fixing of Interests and Closing of Books. The proportionate
interests of Stockholders in the assets of the Fund shall be
fixed on the basis of their respective shareholdings at the
close of business on the Effective Date. On the Effective
Date, the books of the Fund shall be closed. Thereafter,
unless the books are reopened because the Plan cannot be
carried into effect under the laws of the State of Maryland
or otherwise, the Stockholders' respective interests in the
A-1
Fund's assets shall not be transferable by the negotiation
of share certificates and the Fund's shares will cease to be
traded on the New York Stock Exchange, Inc. (the "NYSE").
4. Notice of Liquidation. As soon as practicable after the
Effective Date, the Fund shall mail notice to its known
creditors, if any, at their addresses as shown on the Fund's
records, that this Plan has been approved by the Board of
Directors and the Stockholders and that the Fund will be
liquidating its assets, to the extent such notice is
required under the Maryland General Corporation Law.
5. Liquidation of Assets and Payment of Debts. As soon as is
reasonable and practicable after the Effective Date, all
portfolio securities of the Fund shall be converted to cash
or cash equivalents. As soon as practicable after the
Effective Date, the Fund shall pay, or make reasonable
provision to pay in full all known or reasonably
ascertainable liabilities of the Fund incurred or expected
to be incurred prior to the date of the final Liquidating
Distribution provided for in Section 6 below.
6. Liquidating Distributions. In accordance with Section 331
of the Internal Revenue Code of 1986, as amended, the Fund's
assets are expected to be distributed by two or more cash
payments in complete cancellation of all the outstanding
shares of stock of the Fund. The first distribution of the
Fund's assets (the "First Distribution") is expected to
consist of cash representing a substantial portion of the
assets of the Fund, less an estimated amount necessary to
discharge any (a) unpaid liabilities and obligations of the
Fund on the Fund's books on the First Distribution date, and
(b) liabilities as the Board of Directors shall reasonably
deem to exist against the assets of the Fund on the Fund's
books. Each subsequent distribution (each a "Distribution"
and together with the First Distribution and all other
Distributions, the "Liquidating Distribution") will consist
of cash from any assets remaining after payment of expenses,
the proceeds of any sale of assets of the Fund under the
Plan not sold prior to the earlier Distributions and any
other miscellaneous income to the Fund. The Board will set
the record date and payment date for the First Distribution
and each subsequent Distribution.
Each Stockholder not holding stock certificates of the Fund
will receive Liquidating Distributions equal to the
Stockholder's proportionate interest in the net assets of
the Fund. Each Stockholder holding stock certificates of
the Fund will receive a confirmation showing such
Stockholder's proportionate interest in the net assets of
the Fund with an advice that such Stockholder will be paid
A-2
in cash upon return of the stock certificate. All
Stockholders will receive information concerning the sources
of the Liquidating Distribution.
Upon the mailing of the final Liquidating Distribution, all
outstanding shares of the Fund will be deemed canceled.
7. Expenses of the Liquidation and Dissolution of the Fund.
The Fund shall bear all of the expenses incurred in carrying
out this Plan.
8. Deregistration as an Investment Company. Upon completion of
the Liquidating Distribution, the Fund shall file with the
Securities and Exchange Commission an application for an
order declaring that the Fund has ceased to be an investment
company.
9. Dissolution. As promptly as practicable, but in any event
no earlier than 20 days after the mailing of notice to the
Fund's known creditors, if any, the Fund shall be dissolved
in accordance with the laws of the State of Maryland and the
Fund's Charter, including filing Articles of Dissolution
with the State Department of Assessments and Taxation.
10. Assets Remaining After Dissolution. Once dissolved, if any
additional assets remain available for distribution to the
stockholders, the Board may provide such notices to
stockholders and make such distributions in the manner
provided by the Maryland General Corporation Law.
11. Power of Directors. In addition to the power of the
directors of the Fund under Maryland law, the Board, and
subject to the discretion of the Board, the officers of the
Fund, shall have authority to do or authorize any or all
acts and things as they may consider necessary or desirable
to carry out the purposes of the Plan, including, without
limitation, the execution and filing of all certificates,
documents, information returns, tax returns, forms and other
papers which may be necessary or appropriate to implement
the Plan or which may be required by the provisions of
Maryland law, the 1940 Act, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, or
the NYSE. The Board shall have the authority to authorize
such variations from, or amendments of, the provisions of
the Plan (other than the terms governing Liquidating
Distributions) as may be necessary or appropriate to effect
the liquidation and dissolution of the Fund and the
distribution of its net assets to Stockholders in accordance
with the purposes to be accomplished by the Plan.
A-3
The Austria Fund, Inc.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Alliance Capital [LOGO](R)
Alliance Capital Management L.P.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
NOTICE OF SPECIAL MEETING
OF STOCKHOLDERS AND
PROXY STATEMENT
October 3, 2001
TABLE OF CONTENTS
Page
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Introduction....................................................1
The Proposal: Approval of the Liquidation
and Dissolution of the Fund..................................2
Other Matters...................................................9
Proposals of Stockholders......................................10
Reports to Stockholders........................................11
Appendix A....................................................A-1
APPENDIX B
PROXY THE AUSTRIA FUND, INC. PROXY
PROXY IN CONNECTION WITH THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD OCTOBER 24, 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 Reid Conway and
Christina Santiago, or either of them, as proxies for the
undersigned, with full power of substitution in each of them, to
attend the Special Meeting of Stockholders of the Fund to be held
at 11:00 a.m., Eastern Time, on October 24, 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 Special
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 with
respect to the Proposal 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 approval of the liquidation
and dissolution of the Fund in accordance with the Plan of
Liquidation and Dissolution of the Fund attached to the Proxy
Statement as Appendix A and in the discretion of the Proxy
holders(s) on any other matter that may properly come before the
Special 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.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE HEREOF AND RETURN
THIS PROXY CARD PROMPTLY. YOU MAY USE THE ENCLOSED ENVELOPE.
AUSTRIA FUND, INC.
CONTROL NUMBER:
Please mark votes as in this example: / x /
1. Approval of the liquidation and For Against Abstain
dissolution of the Fund in accordance / / / / / /
with the Plan of Liquidation and
Dissolution of the Fund attached to the
Proxy Statement as Appendix A.
Your Board of Directors recommends a vote "For" the Proposal.
2. To vote 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(s).
Please be sure to sign, date, and return this Proxy card
promptly. You may use the enclosed envelope.
Dated:
, 2001
_ _ _ _ _ _ _ _ _ _ _ _ _
Signature
_ _ _ _ _ _ _ _ _ _ _ _ _
Signature, if held jointly
00250000.BC9