Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-
12
The Italy Fund Inc.
(Name of Registrant as Specified in its Charter)
Smith Barney Mutual Funds Management Inc.
Name of Person Filing Proxy Statement
Payment of Filing Fee (Check appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which the
transaction applies:
(2) Aggregate number of securities to which transactions
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
[ ] 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:
THE ITALY FUND INC.
388 Greenwich Street
New York, New York 10013
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be Held on
December 15, 1995
To the Shareholders of THE ITALY FUND INC.:
Notice is hereby given that a Special Meeting of
Shareholders (the "Meeting") of The Italy Fund Inc. (the "Fund"),
will be held at 388 Greenwich Street, New York, New York, 22nd
Floor, on December 15, 1995 at 10:00 a.m. for the following
purposes:
1. To consider and vote upon a proposal to approve a
management agreement between the Fund and Smith Barney
Mutual Funds Management Inc.
2. To transact such other business as may be properly come
before the Meeting or any adjournments thereof.
All Shareholders are invited to attend the Meeting.
Regardless of whether you plan to attend the Meeting, please
complete, sign and date the enclosed Proxy and return it promptly
in the enclosed envelope so that a quorum will be present and a
maximum number of shares may be voted. If you are present at the
Meeting, you may change your vote, if desired, at that time.
Shareholders of record at the close of business on November
1, 1995 are entitled to notice of and to vote at the Meeting or
any adjournment thereof.
By Order of the Board of
Directors,
Christina T. Sydor
Secretary
November 7, 1995
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be
of assistance to you and avoid the time and expense to the Fund
involved in validating your vote if you fail to sign your proxy
card properly.
1. Individual Accounts: Sign your name exactly as it
appears in the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the
name of the party signing should conform exactly to a name
shown in the registration.
3. All Other Accounts: The capacity of the individual
signing the proxy should be indicated unless it is
reflected in the form of registration. For example:
Registration Valid Signature
- --------------- ------------------
Corporate Accounts
(1) ABC Corp. ...................................... ABC Corp.
(2) ABC Corp. ...................................... John Doe,
Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer ........................ John Doe
(4) ABC Corp. Profit Sharing Plan ........ John Doe, Trustee
Trust Accounts
(1) ABC Trust ...................................... Jane B.
Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 ....................................... Jane B.
Doe
Custodian or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA ............. John B. Smith
(2) Estate of John B. Smith ................... John B. Smith,
Jr., Executor
THE ITALY FUND INC.
388 Greenwich Street
New York, New York 10013
Special Meeting of Shareholders
December 15, 1995
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of The Italy Fund Inc.
(the "Fund") of proxies to be voted at the Special Meeting of
Shareholders of the Fund to be held on December 15, 1995, at the
offices of the Fund, 388 Greenwich Street, 22nd Floor, New
York, New York at 10:00 a.m. and at any adjournments thereof
(the "Meeting"), for the purpose set forth in the accompanying
Notice of Special Meeting of Shareholders. This Proxy Statement
was first mailed to Shareholders on or about November 8, 1995.
The Fund will furnish, without charge, a copy of the Fund's
most recent Annual and Semi-Annual Report to Shareholders on
request. Written request should be directed to the Fund at 388
Greenwich Street, 22nd floor, New York, New York 10013. Requests
by telephone can be made at 1-800-331-1710.
The cost of soliciting proxies will be borne by
[___________]. Proxy solicitations will mainly be made by mail.
In addition, solicitations may also be made by certain officers,
directors and employees of: the Fund; Lehman Brothers Global
Asset Management Ltd. ("Global Management"), the Fund's
investment adviser; Smith Barney Mutual Funds Management Inc.
("Funds Management"), the Fund's administrator; and The
Shareholder Services Group, Inc., a subsidiary of First Data
Corporation ("TSSG"), the Fund's transfer agent.
All properly executed proxies received prior to the Meeting
will be voted at the Meeting in accordance with the instructions
marked thereon or otherwise as provided therein. Unless
instructions to the contrary are marked, shares represented by
proxies will be voted "FOR" the proposal. Any proxy may be
revoked at any time prior to the exercise thereof by submitting
another proxy bearing a later date or by giving written notice to
the Secretary of the Fund at the Fund's address. For purposes of
determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (i.e. proxies
from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other person
entitled to vote shares on a particular matter with respect to
which brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been
voted. For this reason, abstentions and broker non-votes will
have the effect of counting against the proposal to which they
relate.
The Board knows of no business other than that specifically
mentioned in the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matters are properly
presented, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their judgment.
The Board of Directors of the Fund has fixed the close of
business on November 1, 1995 as the record date for the
determination of shareholders of the Fund entitled to notice of
and to vote at the Meeting or any adjournment thereof.
Shareholders of the Fund on that date will be entitled to one
vote on each matter for each share held and a fractional vote
with respect to fractional shares with no cumulative voting
rights. At the close of business on November 1, 1995, the Fund
had outstanding _____________ shares of common stock, par value
$.01 per share ("Shares"), the only authorized class of stock.
As of November, 1995, the United Nations Joint Staff Pension
Fund, United Nations, New York, New York 10017, owned
beneficially [1,425,000 or 14.99%] of the Shares. Information as
to beneficial ownership is based on reports filed with the
Securities and Exchange Commission (the "SEC") by such holder.
As of November 1, 1995, Cede & Co., a nominee partnership of
Depository Trust Company held [9,098,211 Shares, or 95.7%] of the
Shares, including the Shares beneficially owned by the United
Nations Joint Staff Pension Fund, which are held by Boston Safe
Deposit and Trust Company. Of the Shares included in the Shares
held by Cede & Co., Nomura International Trust Company, c/o ADP,
51 Mercedes Way, Edgewood, New York 11717, held [654,400 or
6.88%] of the Shares, Brown Brothers Harriman & Co., located at
63 Wall St., New York, New York 10005, held [869,899 or 9.15%] of
the Shares, Charles Schwab & Co., located c/o ADP Proxy Services,
51 Mercedes, Edgewood, New York 11717, held [668,325 or 7.03%]
of the Shares, Chemical Bank/MHT, located at 270 Park Avenue, New
York, New York 10017, held [591,013 or 6.21%] of the Shares and
Merrill Lynch, Pierce Fenner and Smith Safekeeping, located c/o
Depository Trust Company, 7 Hanover Square, New York, New York
10004 held [526,760 or 5.54%] of the Shares.
As of November 1, 1995, the Fund's officers and directors
beneficially owned less than 1% of the outstanding Shares of the
Fund (as specified below) and [none] of the outstanding
securities of Funds Management or Global Management or any of
each of their respective parent or subsidiary companies.
Further, since the beginning of the most recently completed
fiscal year of the Fund, [no director has purchased or sold any
securities issued by Global Management or any securities of its
parent or subsidiary companies].
Amount and Type Percent of
Name of Beneficial Owner of Ownership
Shares
Paolo Cucchi, Director [500] *
Dr. Paul Hardin, Director [510] *
Heath B. McLendon, Director [8,209] *
Alessandro C. di Montezemolo, Director -- --
George M. Pavia, Director -- --
Mario d' Urso, President -- --
Erich Stock, Vice President and -- --
Investment Officer
Lewis E. Daidone, Senior Vice President -- --
and Treasurer
Christina T. Sydor, Secretary -- --
_______________
* Less than 1%
In the event that sufficient votes in favor of the proposal
set forth in the Notice of Meeting and this Proxy Statement are
not received by the time scheduled for the Meeting, the persons
named as proxies may move for one or more adjournments of the
Meeting to permit further solicitation of proxies with respect to
any such proposal. In determining whether to adjourn the Meeting,
the following factors may be considered: the nature of the
proposals that are subject to the Meeting, the percentage of
votes actually cast, the percentage of negative votes cast, the
nature of any further solicitation and the information to be
provided to shareholders with respect to reasons for the
solicitations. Any adjournment will require the affirmative vote
of a majority of those Shares represented at the Meeting in
person or by proxy. A shareholder vote may be taken on a
proposal prior to any adjournment if sufficient votes have been
received for approval of that proposal. Under the Fund's By-
laws, a quorum is constituted by the presence in person or by
proxy of the holders of a majority of the outstanding Shares of
the Fund entitled to vote at the Meeting.
PROPOSAL 1: TO APPROVE A MANAGEMENT AGREEMENT BETWEEN SMITH
BARNEY MUTUAL FUNDS MANAGEMENT INC. AND THE FUND
For the reasons discussed below, this Meeting has been
called for the purpose of considering a new management agreement
between the Fund and Funds Management (the "New Agreement")
embodying substantially the same terms as the existing investment
advisory agreement with Global Management. It is proposed that,
in light of the commonality of parties and for ease of
administration, the New Agreement include the services of Funds
Management both as investment adviser and as administrator.
Background
While the Fund has been managed by Global Management (and
its predecessor firms) since its inception in 1986, certain
changes have occurred involving the reporting relationship of
Global Management and there may be additional changes in the near
future with respect to its ultimate ownership. Recognizing this
issue, Global Management, Funds Management, which has served as
the Fund's administrator since May, 1994, and Lehman Brothers
Holdings Inc. ("Lehman"), the ultimate parent corporation of
Global Management, have entered into an agreement under which
Funds Management would acquire Global Management's business
associated with the Fund (the "Purchase Agreement"). Under the
Purchase Agreement, Global Management would receive aggregate
compensation of $500,000. The completion of the transaction
contemplated by the Purchase Agreement is contingent upon, among
other things, the approval of the Fund's Board of Directors and
its shareholders of a new management agreement between the Fund
and Funds Management. Importantly, the Purchase Agreement also
provides Fund's Management the opportunity to negotiate an
employment agreement with Mr. Erich Stock, the Fund's current
portfolio manager. Mr. Stock has managed the Fund's portfolio
since January, 1989. Mr. Stock has indicated his intention to
accept an offer of employment with Funds Management upon the
completion of the transaction.
Description of Current Agreement and the New Agreement
Global Management currently serves as the Fund's investment
adviser pursuant to an investment advisory agreement dated
February 26, 1986 (the "Current Agreement") which was approved by
shareholders on August 11, 1987 in connection with the first
annual meeting of shareholders. The Current Agreement was last
approved by the Board of Directors on November 16, 1994 in
conjunction with its regular annual review of advisory
arrangements. Under the Current Agreement, Global Management
receives a fee, which is calculated daily and paid monthly, at an
annual rate of 0.75% of the Fund's average daily net assets.
Funds Management, pursuant to an administration agreement dated
May 20, 1994 (the "Administration Agreement"), receives a fee,
calculated daily and paid monthly, at an annual rate of 0.20% of
the Fund's daily net assets. Under the New Agreement, Funds
Management, as both investment adviser and administrator, would
receive a fee at the annual rate of 0.95% of the Fund's daily net
assets.
Except for the change in investment adviser and the
differing effective and termination dates, the terms of the New
Agreement and the Current Agreement relating to portfolio
management are identical in all material respects. Because the
New Agreement incorporates the terms governing the administration
responsibilities of Funds Management, there are some minor
differences between the Current Agreement and the New Agreement.
However, these differences would not affect the fundamental
responsibilities of Funds Management as investment adviser to the
Fund. Funds Management's obligations as investment adviser would
be unchanged under the New Agreement as compared to Global
Management's obligations under the Current Agreement.
Both the Current Agreement and the New Agreement provide
that the investment adviser, in return for its fees, will (1)
provide a program of continuous investment management for the
Fund in accordance with the Fund' s investment objective,
policies and limitations, (2) make investment decisions for the
Fund, and (3) place orders to purchase and sell securities for
the Fund subject to the supervision of the Fund and its
Directors. The Current Agreement and the New Agreement provide
that the investment adviser will provide adequate office space,
facilities and personnel to perform its advisory services for the
Fund.
Both the Current Agreement and the New Agreement also
provide that the Fund will pay all its expenses for services not
provided by the investment adviser. These expenses include, among
others: the fees and expenses of the Directors of the Fund who
are not "interested persons" of the adviser; travel expenses of
Directors, officers and employees of the Fund related to
attendance at meetings of the Fund's Board of Directors or
committees thereof; the cost of the Fund's legally-required
fidelity bond; interest expenses; taxes, brokerage fees and
commissions; fees and expenses of registering and qualifying the
Fund and its shares for distribution under federal and state
securities laws; expenses of preparing, printing and distributing
prospectuses to existing shareholders; fees to the custodian and
transfer agent; auditing and legal expenses; insurance expenses;
association membership dues; and the expenses of preparing
printing and distributing materials to shareholders, including
annual and semi-annual reports and proxy solicitations.
Proposed Management Agreement with Funds Management
A copy of the form of the proposed New Agreement is set
forth as Appendix A to this Proxy Statement. Under the terms of
the New Agreement, Funds Management, subject to the supervision
and approval of the Board, would provide the Fund with all the
services rendered under the Current Agreement, as well as
continuing to provide the services it presently provides under
the Administration Agreement. Pursuant to the New Agreement,
Funds Management would receive a management fee of 0.95% of the
value of the Fund's average daily net assets, which would be
equal to the total fees paid under the Current Agreement and the
Administration Agreement. Under the terms of the New Agreement,
Funds Management would bear all expenses in connection with its
performance.
The New Agreement if approved would remain in effect
pursuant to its terms for an initial period of two years from its
date of execution and thereafter for successive one-year periods
if and so long as such continuance is specifically approved
annually by (a) the Fund's Board or (b) a vote of a "majority of
the Fund's outstanding voting securities" (as that term is
defined in the Investment Company Act of 1940, as amended (the
"1940 Act")), provided that in either event the continuance is
also approved by a majority of the Board who are not "interested
persons" (as defined in the 1940 Act) of any party to the New
Agreement by vote cast in person at a meeting called for the
purpose of voting on such approval. The New Agreement would be
terminable, without penalty, on 60 days' written notice, by the
Board of the Fund or by a vote of holders of a majority of the
Fund's shares, or upon 60 days' written notice by Funds
Management. The New Agreement would terminate automatically in
the event of its assignment (as defined in the 1940 Act and the
rules thereunder).
Information About Global Management and Funds Management
Global Management currently serves as the Fund's investment
adviser. Global Management is an investment adviser registered
under the Investment Advisers Act of 1940, as amended. Pursuant
to the Current Agreement, Global Management receives a fee from
the Fund paid monthly at the annual rate of 0.75% of the value of
the Fund's average daily net assets. In addition, the Fund pays
the travel and out-of-pocket expenses incurred by Global
Management personnel to attend meetings of the Fund's Board of
Directors. During the fiscal year ended January 31, 1995, the
Fund paid Global Management $738,029 in advisory fees.
Global Management is a wholly-owned subsidiary of Lehman
Brothers Holdings Plc., which is in turn a wholly-owned
subsidiary of Lehman Brothers U.K. Holdings Limited, which is in
turn a wholly-owned subsidiary of Lehman Brothers U.K. Holdings
(Delaware) Inc. which is in turn a wholly-owned subsidiary of
Lehman, a public company. Prior to May 31, 1994 Global
Management was an indirect subsidiary of American Express Company
through American Express Company's ownership of a majority of the
voting stock of Lehman. The names, positions with Global
Management and principal occupation of each executive officer and
director of Global Management are set forth in the following
table.
Position with Global Management and
Name Principal Occupation
Peter Barbieri Director of Global Management;
Senior Vice President
and Chief Financial Officer of the
Financial Services
Division and Asset Management
Division of Lehman
Brothers Holdings Inc.
Pauline Barrett Director and Chief Investment
Officer
Philip Howard Director
Laura Panayotou Company Secretary and Chief
Administrative Officer
The principal business address of Lehman Brothers Holdings
Plc., Lehman Brothers U.K. Holdings Limited and Mr. Howard is One
Broadgate, London, EC2M 7HA England. The principal business
address of Global Management, Ms. Barrett and Ms. Panayotou is
Two Broadgate, London EC2M 7HA England. The principal address of
Lehman Brothers U.K. Holdings (Delaware) Inc., Lehman and Mr.
Barbieri is 3 World Financial Center, 200 Vesey Street, New York,
New York 10285.
Funds Management currently serves as the Fund's
administrator and oversees all aspects of the Fund's
administration. Funds Management located at 388 Greenwich
Street, New York, New York 10013, is a wholly-owned subsidiary
of Smith Barney Holdings Inc. which is in form a wholly-owned
subsidiary of the Travelers Group Inc., a public company. For
administration services rendered under the Administration
Agreement, the Fund pays Funds Management a monthly fee at the
annual rate of 0.20% of the value of the Fund's average daily net
assets. In addition, the Fund pays the travel and out-of-pocket
expenses incurred by Funds Management personnel to attend
meetings of the Fund's Board of Directors. For the fiscal year
ended January 31, 1995, the Fund paid The Boston Company
Advisors, its previous administrator, an aggregate administration
fee of $196,808.
As stated above, it is proposed that the Fund terminate both
the Current Agreement with Global Management and the
Administration Agreement with Funds Management, and in lieu
thereof, enter into a single agreement with Funds Management.
Under the New Agreement, Funds Management would provide all
necessary investment advisory and administration services to the
Fund for a single fee which would be equal to the fees paid under
the Current Agreement and Administration Agreement. Funds
Management, through predecessor entities, has been in the
investment counseling business since 1934 and is a registered
investment adviser. The name, address, position with Funds
Management and principal occupation of each executive officer and
director of Funds Management are set forth in the following
table.
Name
Position with Funds
Management
Principal Occupation
Jessica Bibliowicz*
Chief Executive
Officer
Executive Vice
President of Smith
Barney Inc.
A. George Saks*
Director
Executive Vice
President, Secretary
and Chief Legal Officer
of Smith Barney Inc.
Bruce D. Sargent*
Director and Vice
President
Managing Director of
Smith Barney Inc.
Director of Capital
Management Division of
Smith Barney Inc.
Lewis E. Daidone* /2
Director
Managing Director of
Smith Barney Inc. Chief
Financial Officer of
Smith Barney Mutual
Funds.
Heath B. McLendon* /2
President
Managing Director of
Smith Barney Inc.
Chairman of the Board
of Smith Barney Mutual
Funds.
Michael J. Day*
Treasurer
Managing Director of
Smith Barney Inc.
Christina T.
Sydor* /2
General Counsel and
Secretary
Managing Director of
Smith Barney Inc.
Secretary of Smith
Barney Mutual Funds.
* The business address of the officers listed above is 388
Greenwich Street, New York, New York 10013.
/2 Also an officer of the Fund.
Evaluation by the Board and Reasons for Proposal
[Over the past year, the Board of Directors has, at its
regular meetings, considered potential action regarding its
investment advisory arrangements. Most recently, the Board met
on October 18, 1995 by telephone conference call and on November
7, 1995, the Board of Directors of the Fund convened a meeting of
the Board for the purpose of considering, among other things, the
New Agreement with Funds Management. After careful deliberation,
the Board of Directors of the Fund has determined to terminate
the Fund's Current Agreement and to enter into the New Agreement
subject to the approval of shareholders. In so doing, the Board
evaluated a variety of factors.
First, the Board considered the fact that at the time of the
Fund's inception, Global Management (then acting as the Fund's
investment adviser) had been an integral part of the asset
management structure of Shearson Lehman Brothers Inc. ("Shearson
Lehman") and that this relationship was fundamentally altered
upon the separation of the asset management business from
Shearson Lehman in July, 1993 when a substantial portion of such
business and certain other assets were acquired by Smith Barney
Inc. ("Smith Barney"). Prior to that time, Heath B. McLendon,
the Fund's Chief Executive Officer, was in close contact with the
Global Management team and, as an officer of Shearson Lehman, was
able to participate actively in decisions regarding its
management and investment philosophies. Currently, Shearson
Lehman (now Lehman Brothers Inc.) is a completely separate
company and Mr. McLendon no longer has unrestricted access to
Global Management. The Board noted that this would not be the
case, however, if Funds Management were appointed manager of the
Fund, as Mr. McLendon is President of Funds Management which is a
wholly owned subsidiary of Smith Barney Holdings Inc., the parent
company of Smith Barney, of which Mr. McLendon is a managing
director.
The Board also discussed the agreement entered into between
Global Management, Funds Management and Lehman under which Funds
Management would, subject to various contingencies, acquire all
assets related to the investment advisory services rendered by
Global Management to the Fund. In addition, the Board noted the
anticipated employment of Mr. Stock by Funds Management.
Moreover, while not a determining factor, the Board discussed
press reports of a potential sale of the balance of Global
Management's business.
The Board of Directors also reviewed various materials
regarding Funds Management which described, among other matters,
affiliates, senior personnel, portfolio managers, analysts,
economists and others, as well as its method of operation and
financial condition. As part of its analysis, the Board
carefully evaluated (i) the quality of services Funds Management
has provided to the Fund as administrator and would be expected
to provide as its investment adviser, (ii) the performance of the
Fund since commencement of operations, (iii) the history,
reputation, qualification and background of Funds Management, as
well as the qualifications of its personnel and its financial
condition, (iv) the investment performance record of Funds
Management, and (v) other factors deemed by the Board to be
relevant.
Funds Management has advised the Board of Directors that it
expects that there would be no dilution in the scope and quality
of advisory and administration services provided to the Fund
under the New Agreement. The Board noted that having all
management functions performed by a single entity would also
permit the Fund to operate more efficiently. For the reasons
stated above, the Board of Directors believes that the Fund would
receive investment advisory and administration services under the
New Agreement equal or superior to those the Fund currently
receives under the Current Agreement.
After carefully evaluating the foregoing materials and
factors, and after meeting in executive session with independent
counsel, the Directors who were not "interested persons" of the
Fund approved, and then the Board as a whole approved, subject to
shareholder approval, the New Agreement with Funds Management
substantially in the form of Appendix A to this Proxy Statement.]
Required Vote
Approval of the New Agreement requires the affirmative vote
of a "majority of the outstanding voting securities" of the Fund.
The term "majority of the outstanding voting securities" of the
Fund, as used in this Proxy Statement and as defined in the 1940
Act, means the affirmative vote of the lesser of:
(1) 67% or more of the Shares of the Fund present at the Meeting
if holders of more than 50% of the outstanding Shares are present
in person or by proxy at the Meeting; or (2) more than 50% of the
outstanding Shares of the Fund.
THE DIRECTORS INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE "FOR" THE APPROVAL
OF THE NEW AGREEMENT.
Portfolio Transactions with Affiliated Broker-Dealers
To the extent consistent with applicable provisions of the
1940 Act and the rules and exemptions adopted by the SEC under
the 1940 Act, the Board has determined that transactions for the
Fund may be executed through Lehman and other affiliated broker-
dealers if, in the judgment of the investment adviser, the use of
an affiliated broker-dealer is likely to result in price and
execution at least as favorable as those of other qualified
broker-dealer. The Board periodically reviews the commissions
paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to
benefits inuring to the Fund. During the fiscal year ended
January 31, 1995, the Fund incurred total brokerage commissions
on portfolio transactions of $193,112, of which $9,734, or 5.04%
of the aggregate, was paid to Lehman.
Shareholder Proposals
The Fund is a Maryland business corporation and holds an
annual shareholder meeting generally convened in May of each
year. Shareholders wishing to submit proposals for inclusion in
a proxy statement for the 1996 meeting of shareholders must
submit their proposals for inclusion in the proxy materials in
writing to the Secretary of the Fund, 388 Greenwich Street, 22nd
floor, New York, New York 10013 by November 30, 1995.
Shareholder Request for Special Meeting
Shareholders entitled to cast at least 25% of all votes
entitled to be cast at meeting may require the calling of a
meeting of shareholders for the purpose of voting on the removal
of any Director of the Fund. Meetings of shareholders for any
other purpose also shall be called by the Chairman of the Board,
the President or the Secretary when requested in writing by
shareholders entitled to cast at least 25% of all votes entitled
to be cast at a meeting.
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY.
APPENDIX A
THE ITALY FUND INC.
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made this 15th day of December 1995 between The
Italy Fund Inc., a Maryland corporation (the "Fund"), and Smith
Barney Mutual Funds Management Inc., a New York corporation
("Manager").
W I T N E S S E T H:
WHEREAS, the Fund is a closed-end management investment
company registered under the Investment Company Act of 1940, as
amended, and the rules thereunder (the "1940 Act"); and
WHEREAS, the Fund has been organized for the purpose of
investing its funds and desires to avail itself of the experience,
sources of information, advice, assistance and facilities
available to the Manager and to have the Manager perform for it
various investment management services; and the Manager is willing
to furnish such advice and services on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed as follows:
1. The Fund hereby appoints the Manager to act as
investment manager to the Fund on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to
render the services herein described, for the compensation herein
provided.
2. Subject to the supervision of the Board of Directors of
the Fund (the "Board"), the Manager shall manage the investment of
the Fund assets and provide investment research advice and
supervision of the Fund's portfolio in accordance with the Fund's
investment objective, policies and restrictions as stated in the
Fund's Registration Statement under the 1940 Act as it may be
amended from time to time (the Fund's "Registration Statement"),
and subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's
investments and determine from time to time the investments or
securities that will be purchased, retained, sold or loaned by
the Fund, and the portion of the assets that will be invested
in securities or otherwise.
In determining the securities to be purchased or sold by
the Fund, the Manager shall place orders with respect to
portfolio securities either directly with the issuer or with
or through underwriters or dealers. It is understood that it
may be desirable for the Fund that the Manager have access to
supplemental investment and market research and security and
economic analysis provided by dealers who may effect portfolio
transactions for the Fund. Therefore, the Manager is
authorized to place orders for the purchase and sale of
securities for the Fund with such dealers, subject to review
by the Fund's Board from time to time with respect to the
extent and continuation of this practice. It is understood
that the services provided by such dealers may be useful to
the Manager or its affiliates in connection with their
services to other clients.
(b) The Manager shall use its best judgment in the
performance of its duties under this Agreement.
(c) The Manager undertakes to perform its duties and
obligations under this Agreement in conformity with the
Registration Statement of the Fund, with the requirements of
the 1940 Act and all other applicable Federal and state laws
and regulations and with the instructions and directions of
the Board.
(d) The Manager shall maintain such books and records with
respect to the Fund's portfolio transactions and such books
and records required to be maintained by the Manager pursuant
to the Rules of the Securities and Exchange Commission ("SEC")
under the 1940 Act and the Manager shall render to the Fund's
Board such periodic and special reports as the Board may
reasonably request. The Manager agrees that all records that
it maintains for the Fund are the property of the Fund and it
will surrender promptly to the Fund any of such records upon
the Fund's request.
3. The Manager will bear all of its expenses of its
employees and overhead in connection with its duties under this
Agreement. It will also pay all directors' fees and salaries of
the Fund's directors and officers who are affiliated persons (as
such term is defined in the 1940 Act) of the Manager.
Except for the expenses specifically assumed by the Manager,
the Fund will pay all of its expenses, including, without
limitation, fees of the directors not affiliated with the Manager
and board meeting expenses; fees of the Manager; interest charges;
taxes; charges and expenses of the Fund's legal counsel and
independent accountants, and of the transfer agent, registrar and
dividend disbursing agent of the Fund; expenses of repurchasing
the Fund's Shares; expenses of printing and mailing share
certificates, stockholder reports, notices, proxy statements and
reports to governmental offices; brokerage and other expenses
connected with the execution, recording and settlement of
portfolio security transactions; expenses connected with
negotiating, effecting purchases or sales or registering privately
issued portfolio securities; fees and expenses of the Fund's
custodians for all services to the Fund, including safekeeping of
funds and securities and maintaining required books and accounts;
expenses of calculating and publishing the net asset value of the
Fund's shares; expenses of membership in investment company
associations; expenses of fidelity bonding and other insurance
premiums; expenses of stockholders' meetings; SEC and state blue
sky registration fees; New York Stock Exchange listing fees; fees
payable to the National Association of Securities Dealers, Inc. in
connection with offerings of securities; and its other business
and operating expenses.
4. For the services provided and the expenses assumed
pursuant to this Agreement, the Fund will pay to the Manager a
monthly fee in arrears equal to 0.95% per annum of the Fund's
average daily net assets during the month.
5. The Manager shall authorize and permit any of its
directors, officers and employees who may be elected as directors
or officers of the Fund to serve in the capacities in which they
are elected.
6. The Manager shall not be liable for any error of judgment
or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section
36(b)(3) of the 1940 Act) or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
7. This Agreement shall continue in effect for a period of
two years from its effective date, and if not sooner terminated,
will continue in effect for successive periods of 12 months
thereafter, provided that each continuance is specifically
approved at least annually in conformity with the requirements of
the 1940 Act. This Agreement may be terminated as a whole at any
time by the Fund, without the payment of any penalty, upon the
vote of a majority of the Fund's Board of Directors or the vote of
a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, or by the Manager, on 60 days' written
notice by either party to the other. This Agreement shall
terminate automatically in the event of its assignment (as defined
in the 1940 Act).
8. Nothing in this Agreement shall limit or restrict the
right of any of the Manager's directors, officers, or employees
who may also be a director, officer or employee of the Fund to
engage in any other business or to devote his time and attention
in part to management or other aspects of any business, whether of
a similar or a dissimilar nature, nor limit or restrict the
Manger's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or
association. The investment management services provided by the
Manager hereunder are not to be deemed exclusive, and the Manager
shall be free to render similar services to others.
9. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered
or mailed by registered mail, postage prepaid, (i) to the Manager
at 388 Greenwich Street, New York, New York 10013, Attention:
Secretary; or (ii) to the Fund at 388 Greenwich Street, New York,
New York 10013, Attention: Secretary.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as of
the day and year first above written.
THE ITALY FUND INC. SMITH BARNEY MUTUAL
FUND MANAGEMENT INC.
By:
___________________________________ By:
___________________________________
Attest: _________________________________ Attest:
_________________________________
The Italy Fund Inc., Special Meeting of Shareholders on
December 15, 1995
FRONT
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
The undersigned holders of shares of the Italy Fund Inc.
(the "Fund") hereby appoint Heath B. McLendon, Christina T. Sydor
and Caren A. Cunningham as attorneys and proxies for the
undersigned, with full powers of substitution and revocation to
represent the undersigned and to vote on behalf of the
undersigned all shares of the Fund that the undersigned is
entitled to vote at the special meeting of shareholders of the
Fund to be held at the executive offices of the Fund, 388
Greenwich Street, New York, New York at 10:00 a.m. on the date
indicated above and any adjournments thereof (the "Meeting"). The
undersigned hereby instructs said attorneys and proxies to vote
upon such other business as may properly come before the Meeting.
A majority of the proxies present and acting as the Meeting in
person or by substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of the power and
authority of said proxies hereunder. The undersigned hereby
revokes any previously proxy given.
DATE:_____________
NOTE: Please sign exactly as your name appears on this
Proxy. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please giver your full
title
________________________________________________
Signature(s) (Title(s), if applicable)
BACK
VOTE THIS PROXY CARD TODAY
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
This proxy, if properly executed, will be voted in the
manner directed by the undersigned shareholder. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE PROPOSAL LISTED BELOW.
Please refer to the Proxy Statement for a discussion of the
Proposal. Please indicate by filing in the appropriate box below.
1. To approve the Investment Advisory Agreement with Smith
Barney Mutual Funds Management Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE DO NOT FORGET TO SIGN THE REVERSE ]
