Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
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)
Robert Nelson
Name of Person Filing Proxy Statement
Payment of Filing Fee (Check appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to
which 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.
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------
TO BE HELD ON MAY 10, 2000
--------------------------
To the Shareholders of The Italy Fund Inc.:
The Annual Meeting of Shareholders of THE ITALY FUND INC. (the "Fund")
will be held at the Fund's offices at 7 World Trade Center, New York, New York,
mezzanine level, on May 10, 2000 at 10:00 a.m. (New York time) for the following
purposes:
1. To elect two directors, each to hold office for the term indicated
and until his successor shall have been elected and qualified;
2. To consider and act upon the ratification of the selection of KPMG
LLP as the independent auditors of the Fund;
3. To consider a non-binding shareholders recommendation that the Board
of Directors take steps to change the Fund's subclassification.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Proposals 1, 2 and 3 are discussed in greater detail in the attached Proxy
Statement. The Board of Directors has fixed the close of business on March 9,
2000 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the meeting and any adjournments thereof.
By Order of the Board of Directors
Christina T. Sydor
Secretary
New York, New York
April x, 2000
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON
OR BY PROXY; IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY/VOTING INSTRUCTION CARD IN THE
ACCOMPANYING ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
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
<PAGE>
THE ITALY FUND INC.
7 WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
--------------------------
PROXY STATEMENT
--------------------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 10, 2000
INTRODUCTION
This proxy statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of The Italy Fund Inc. (the "Fund") of
proxies to be voted at the Annual Meeting of Shareholders (the "Meeting") of the
Fund to be held at the Fund's principal executive offices at 7 World Trade
Center, mezzanine level, New York, New York, on May 10, 2000 at 10:00 a.m. (New
York time), and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders.
The cost of soliciting proxies will be borne by the Fund. Proxy
solicitations will be made primarily by mail. In addition, certain officers,
directors and employees of the Fund; SSB Citi Fund Management LLC, successor to
SSBC Fund Management Inc. ("SSB Citi" or the "Manager"), the Fund's investment
manager; Salomon Smith Barney Inc. ("Salomon Smith Barney"), an affiliate of SSB
Citi; Smith Barney Private Trust Company, the Fund's transfer agent, and/or PFPC
Global Fund Services, the Fund's sub-transfer agent, may solicit proxies in
person, or by telephone or telegraph. Such representatives and employees will
not receive additional compensation for solicitation activities. Salomon Smith
Barney has retained the services of [ ] to assist in the
solicitation of proxies. The anticipated cost of solicitation is approximately
$xxxxx. If the Fund records votes by telephone, it will use procedures designed
to authenticate shareholsers' identities, to allow shareholders to authorize the
voting of their shares in accordance with their instructions, and to confirm
that their instructions have been properly recorded. Proxies voted by telephone
may be revoked at any time before they are voted in the same manner that proxies
voted by mail may be revoked. The Fund will also reimburse brokerage firms and
others for their expenses in forwarding solicitation materials to the beneficial
owners of shares. Salomon Smith Barney, SSB Citi and Smith Barney Private Trust
Company are each located at 388 Greenwich Street, New York, New York 10013; PFPC
Global Fund Services is located at P.O. Box 9699, Providence, RI 02940-9699.
The Annual Report of the Fund, including audited financial statements for
the
<PAGE>
fiscal year ended January 31, 2000, has been furnished to all shareholders of
the Fund. This proxy statement and form of proxy are first being mailed to
shareholders on or about April x, 2000. The Fund will provide, without charge,
additional copies of the annual report to any shareholder upon request by
calling the Fund at 1-800-331-1710.
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 the proxies will be voted "FOR" Proposal 1 and 2 and AGAINST
Proposal 3 all the proposals. 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 persons
entitled to vote shares on a particular matter with respect to which the 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 no impact on the requisite approval of the Proposals.
Proposal 1 requires for approval the affirmative vote of a plurality of the
votes cast at the Meeting with a quorum present, in person or by proxy by the
shareholders of the Fund voting on the matter. Proposal 2 requires for approval
the affirmative vote of a majority of the votes cast at the Meeting with a
quorum present, in person or by proxy by the shareholders of the Fund voting on
the matter. Proposal 3 is a non-binding recommendation by a shareholder that the
Board of Directors take steps to change the Fund's subclassification. The Board
of Directors unanimously voted to oppose the shareholder's proposal at their
Board Meeting on February 9, 2000 (see discussion below). 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 indicated above or by voting in person at the Meeting.
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
with the exception of a proposal by a shareholder to elect alternate directors.
If any other matters are properly presented, it is the intention of the persons
named in the enclosed proxy card to vote in accordance with their best judgment.
The Board of Directors of the Fund has fixed the close of business on
March 9, 2000 as the record date (the "Record Date") for determination of
shareholders of the Fund entitled to notice of, and to vote at, the Meeting or
any adjournment. 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
March 9, 2000, the Fund had outstanding 8,901,914 shares of Common Stock, par
value $0.01 per share, the only authorized class of stock, of which 8,761,579
(or 98.42%) were held in accounts of, but not beneficially owned by, Cede & Co.,
as nominee of The Depository Trust Company. As of the Record Date, the officers
and Board members of the Fund as a group beneficially owned less than 1% of the
outstanding shares of the Fund.
2
<PAGE>
Owners of More Than Five Percent of the Outstanding Shares of the Fund
The following table shows, as of March 9, 2000, the beneficial owners of
more than 5% of the outstanding shares of the Fund. This information is based on
reports (Schedules 13 D and G) filed with the Securities and Exchange Commission
by each of the firms listed in the table below. Information as to beneficial
ownership is based upon reports filed with the Securities and Exchange
Commission on behalf of the holder.
Amount
and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
-------------- ---------------- --------- --------
Common Stock Mira, L.P. 1,694,700 19.7%
One Chase Manhattan
Plaza, 42nd Floor
New York, New York 10005
Common Stock Lazard Freres & Co. LLC 1,392,200 14.65%
30 Rockefeller Plaza
New York, New York 10020
Common Stock President and Fellows of 634,700 7.6%
Harvard College
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
Common Stock Tattersall Advisory Group, Inc. 526,200 5.5%
6620 W. Broad Street,
Suite 300
Richmond, Virginia 23230
3
<PAGE>
As of the Record Date, to the knowledge of the Fund, no shares of
securities issued by Salomon Smith Barney's ultimate parent corporation,
Citigroup Inc. ("Citigroup"), were held by Board members who are not "interested
persons" of the Fund (as that term is used in the Investment Company Act of
1940, as amended (the "1940 Act")).
In the event that a quorum is not present at the Meeting or if a quorum is
present, but sufficient votes in favor of the proposals 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 propose one or more adjournments
of the Meeting to permit further solicitation of proxies with respect to any
such proposals. In determining whether to adjourn the Meeting, the following
factors may be considered: the nature of the proposals that are the subject of
the Meeting, the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the solicitation.
Any such adjournment will require the affirmative vote of a majority of the
shares present at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote in favor of such adjournment those shares
which they are entitled to vote and which have voted in favor of such proposals.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Fund is divided into three classes. The
directors serving in Class II have terms expiring at the Meeting; each Class II
director currently serving on the Board has been nominated by the Board of
Directors for re-election at the Meeting to serve until the year 2003 Annual
Meeting of Shareholders or until his successor has been duly elected and
qualified.
The Board of Directors of the Fund knows of no reason why any of the Class
II nominees listed below will be unable to serve, but in the event of any such
unavailability, the proxies received will be voted for such substitute nominees
as the Board of Directors may recommend.
Certain information concerning the nominees is set forth below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Each Director affiliated with the Manager
and considered an "interested person" as defined in the 1940 Act is indicated by
an asterisk(*).
4
<PAGE>
Persons Nominated for Election as Directors
Number of Shares
Principal Occupations and % Beneficially
During Past Five Years, owned+ as of
Name Other Directorships, and Age March 9, 2000
---- ---------------------------- -------------
Paolo M. Cucchi Dean of College of Liberal (less than 1%)
Director since 1992(II) Arts at Drew University;
Director of two investment
companies managed by
affiliates of Salomon Smith
Barney; 58.
Mario d'Urso Senator of the Republic of (less than 1%)
Director since 1995(II) Italy; formerly Under
Secretary of State of the
Ministry of Commerce with the
Exterior for Italy; 59.
The remainder of the Board constitutes the Class III and Class I directors (as
indicated by the Number III or I), none of whom will stand for election at the
Meeting, as their terms will expire in 2001 and 2002, respectively.
Directors Continuing in Office
Number of Shares
Principal Occupations and % Beneficially
During Past Five Years, owned+ as of
Name Other Directorships, and Age March 9, 2000
---- ---------------------------- -------------
*Heath B. McLendon Managing Director of Salomon (less than 1%)
Director since 1986(III) Smith Barney; Chairman or
Co-Chairman of seventy one
investment companies managed
by affiliates of Salomon Smith
Barney; President and Director
of SSB Citi and Travelers
Investment Adviser, Inc.
("TIA"); formerly Chairman of
the Board of Smith Barney
Strategy Advisers Inc.; 66
Dr. Paul Hardin Chancellor Emeritus and (less than 1%)
Director since 1986(I) Professor of Law at the
University of North Carolina
at Chapel Hill; Director of
twelve investment companies
managed by affiliates of
Salomon Smith Barney and a
Director of The Summit
Bancorporation. Formerly,
Chancellor of the University
of North Carolina at Chapel
Hill; 68.
George M. Pavia Senior Partner, Pavia & --
Director since 1991(I) Harcourt, Attorneys; Director
of two investment companies
managed by affiliates of
Salomon Smith Barney; 72.
+ For this purpose, "beneficial ownership" is defined under Section 13(d) of
the 1934 Act. The information as to beneficial ownership is based upon
information furnished to the Fund by the directors.
5
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires the Fund's officers and directors,
and persons who beneficially own more than ten percent of a registered class of
the Fund's Common Stock, to file reports of ownership with the Securities and
Exchange Commission, the New York Stock Exchange, Inc. and the Fund. Based
solely upon its review of the copies of such forms received by it and written
representations from certain of such persons, the Fund believes that during its
fiscal year ended January 31, 2000, all filing requirements applicable to such
persons were complied with.
The names of the principal officers of the Fund, with the exception of Mr.
d'Urso and Mr. McLendon, are listed in the table below together with certain
additional information. Mr. d'Urso was elected President of the Fund in 1986.
Mr. McLendon was first elected Chairman of the Board and Investment Officer in
1986. Each officer of the Fund holds such office until a successor has been
elected by the Board of Directors.
Principal Occupations and Other
Position Affiliations During the
Name (year first elected) Past Five Years, and Age
- ---- -------------------- ------------------------
Lewis E. Daidone Senior Vice Managing Director of
President and Salomon Smith Barney; Chief
Treasurer (1994) Financial Officer of each
of the Smith Barney Mutual
Funds; Director and Senior
Vice President of SSB Citi
and TIA; 42.
Rein van der Does Vice President Managing Director of
and Investment Salomon Smith Barney; 60.
Officer (1996)
Christina T. Sydor Secretary (1994) Managing Director of
Salomon Smith Barney;
General Counsel and
Secretary of SSB Citi and
TIA; 49.
The principal business address of Messrs. McLendon, and van der Does is 7
World Trade Center, New York, New York 10048. The principal business address of
Mr. Daidone and Ms. Sydor is 388 Greenwich Street, New York, New York 10013. The
principal business address of Mr. d'Urso is 4/A Viale di Grazioli, Rome, Italy.
No officer, director or employee of the Fund's investment adviser and
administrator receives any compensation from the Fund for serving as an officer
or director of the Fund. The Fund pays each director who is not a director,
officer or employee of the Fund's investment adviser and administrator a fee of
$7,500 per year plus $750 per in-person meeting and $100 per telephonic meeting.
All directors are reimbursed for actual out-of-pocket expenses relating to their
attendance at meetings. The aggregate fees (including reimbursement for travel
and out-of-pocket expenses) paid by the Fund to such directors and members of
the Advisory Board during the fiscal year ended January 31, 2000 amounted to
$[2,515.18].
6
<PAGE>
The following table shows the compensation paid by the Fund to each
director during the Fund's last fiscal year.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total
Pension or Compensation Number of
Retirement from Fund Funds for
Aggregate Benefits Accrued and Fund Which Director
Compensation as part of Complex Serves Within
Name of Person from Fund* Fund Expenses Paid to Directors Fund Complex
<S> <C> <C> <C> <C>
Paolo M. Cucchi $ 11,450 $0 $ 19,150 2
Alessandro
di Montezemolo** 9,100 0 17,900 2
Mario d'Urso 9,100 0 9,100 1
Dr. Paul Hardin 11,450 0 139,583 12
Heath B. McLendon*** 0 0 0 71
George M. Pavia 10,800 0 17,900 2
</TABLE>
* Upon attainment of age 80, Fund directors are required to change to
emeritus status. Directors Emeritus are entitled to serve in emeritus
status for a maximum of 10 years during which time they are paid 50% of
the annual retainer fee and meeting fees otherwise applicable to Fund
directors, together with reasonable out-of-pocket expenses for each
meeting attended. During the Fund's last fiscal year aggregate
compensation paid by the Fund to directors achieving emeritus status
totaled $5,300.
** Mr. di Montezemolo achieved emeritus status as of July 1, 1999; part
of his
payment was as a director and part as emeritus director.
*** Designates an "interested director."
The Fund has no compensation or nominating committee of the Board, or any
committee performing similar functions. The Fund has an audit committee
comprised of those directors who are not "interested persons" of the Fund as
defined in the 1940 Act ("Independent Directors"). The audit committee is
responsible for recommending the selection of the Fund's independent accountants
and reviewing all audit as well as nonaudit accounting services performed for
the Fund. During the fiscal year ended January 31, 2000, seven meetings of the
Board of directors of the Fund were held; in addition two audit committee
meetings were held. In the last fiscal year Mr. d'Urso attended less than 75% of
the meetings of the Board and audit committee.
Required Vote
Election of each of the listed nominees for director requires the
affirmative vote of a plurality of the votes cast at the Meeting in person or by
proxy.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE ELECTION OF ALL NOMINEES TO THE
BOARD.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Fund, including all of the Independent
Directors, have selected KPMG LLP ("KPMG") as the independent auditors to audit
the accounts of the Fund for and during the fiscal year ending January 31, 2001,
subject to ratifica-
7
<PAGE>
tion by the shareholders at the Meeting. KPMG also serves as the independent
auditors for the Manager, other investment companies managed by affiliates of
Salomon Smith Barney and for the Manager's ultimate parent corporation,
Citigroup. KPMG has no direct or material indirect financial interest in the
Fund, the Manager, Citigroup or any other investment company sponsored by
Salomon Smith Barney or its affiliates.
If the Fund receives a written request from any shareholder at least five
days prior to the Meeting stating that the shareholder will be present in person
at the Meeting and desires to ask questions of the auditors concerning the
Fund's financial statements, the Fund will arrange to have a representative of
KPMG present at the Meeting who will respond to appropriate questions and have
an opportunity to make a statement.
Required Vote
The affirmative vote of a majority of the votes cast at the Meeting in
person or by proxy is required to ratify the selection of KPMG.
THE BOARD OF DIRECTORS, INCLUDING ALL OF THE INDEPENDENT DIRECTORS,
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF THE SELECTION OF
KPMG.
PROPOSAL 3: SHAREHOLDER PROPOSAL
The Fund has received the following proposal and supporting statement from
Opportunity Partners L.P., which advised the Fund that, at the time it submitted
its proposal to the Fund, it had owned shares of the Fund with a market value of
at least $2,000 continuously for the preceding year. The Fund will provide the
address of Opportunity Partners L.P. to any person who so requests such
information orally or in writing, promptly upon the receipt of any oral or
written request therefor, to Christina T. Sydor, Secretary, The Italy Fund Inc.,
388 Greenwich Street, New York, NY 10013. The Board of Directors and the Fund
accept no responsibility for the accuracy of either the proposal or Opportunity
Partners L.P.'s supporting statement. For the reasons set forth in detail in the
Opposing Statement of the Board of Directors, which follows Opportunity
Partners, L.P.'s Supporting Statement, the Board of Directors recommends a vote
against this shareholder proposal. The text of the shareholder proposal and
supporting statement is as follows:
"RESOLVED: The stockholders of The Italy Fund (the "Fund") urge the Board
of Directors to take the steps necessary to convert the Fund to an open-end
fund.
Supporting Statement
"My name is Phillip Goldstein and I have been a shareholder of the Fund
since August 1995. Its shares have long traded at a double-digit discount to net
asset value ("NAV"). Despite some commendable measures the Board of Directors
has taken to address the discount including a major share repurchase program,
the discount has remained unacceptably wide. As of November 26, 1999, the Fund's
discount was 17.7%. That is about $27 million in "lost value" to shareholders.
8
<PAGE>
"In my opinion, the time has come to convert the Fund to an open-end fund.
Converting it to an open-end fund will give stockholders a tangible benefit,
i.e., elimination of the discount that I believe far outweighs whatever
theoretical advantages the closed-end structure supposedly offers.
"If you wish to discuss this proposal, please call me at (914) 747-5262 or
send me an e-mail me at [email protected]."
Opposing Statement of the Board of Directors
On February 9, 2000, the Board of Directors unanimously resolved to
recommend that you vote AGAINST this Proposal for the reasons described below.
The Board of Directors believes the Fund's closed-end status enhances the
Fund's security selection process by allowing the Fund to maintain a longer
investment horizon. In contrast to an open-end fund, the Fund does not have to
have cash available to meet redemption requests on a daily basis and, therefore,
its assets can be more fully invested. Moreover, the Fund is never forced to
sell securities at an inopportune time to meet redemption requests. Its
closed-end structure also provides the Fund with greater flexibility to invest
in less liquid securities which offer potentially greater returns. Indeed, as of
January 31, 2000, 41% of the number of the Fund's holdings were invested in
securities that were, when acquired by the Fund, issued by less liquid, smaller
capitalized companies which the Fund's investment adviser believed to have
outstanding growth potential over the long term.
The advantages of the closed-end structure and the resulting investment
flexibility available to the adviser are reflected in the Fund's recent
performance. The Fund's market value and net asset value (NAV) returns for the
one-year period ending December 31, 1999 were 37.57% and 34.81%, respectively,
compared to a return of only 0.2% for the Morgan Stanley Capital International
Italy Index (MSCI Index) for the same period. The MSCI Index is a widely-used,
unmanaged index of 50 companies traded on the Milan Stock Exchange. In addition,
the Fund's market value and NAV annualized returns for the three-year period
ended December 31, 1999 were 33.90% and 33.04%, respectively, compared to the
MSCI Index annualized return of 27.90% for the same period, and the Fund's
market value and NAV annualized returns for the five-year period ended December
31, 1999 were 21.97% and 22.70%, respectively, compared to the MSCI Index
annualized return of 19.30% for the same period.
The Board of Directors recognizes shareholders' concerns regarding the
discount at which the Fund's shares have traded and has taken action to
ameliorate its impact on shareholders. In particular, the share buyback program,
which commenced in October 1998, has added liquidity to the market for the
benefit of investors who wish to sell their shares, while benefiting continuing
shareholders by substantially increasing the Fund's net asset value. On October
27, 1998, the Fund's net asset value was $16.32 and by January 31, 2000, it had
risen to $19.24. Of this increase, $0.372 represents the effect that the share
buyback program had on the
9
<PAGE>
Fund's NAV. The Board, based on information provided by the Fund's investment
adviser, believes that the share buyback program also has had a salutary effect
on the Fund's discount to NAV. The Fund currently intends to continue its share
buyback program indefinitely.
The Board of Directors also considered the relative advantages and
disadvantages of open-end and closed-end structures for the Fund. Although the
open-end structure allows shareholders to receive approximately the net asset
value of their shares upon redemption, the Board of Directors expressed concern
at the costs of establishing an open-end fund, including registration, legal,
accounting, printing and other expenses which would be borne by shareholders of
the Fund. Moreover, the Board considered that the potential capital outflow that
may occur upon conversion would reduce the Fund's economies of scale and result
in higher expenses for continuing shareholders. In addition, the costs
associated with a continuous offering of shares, such as Rule 12b-1 fees, were
considered. Accordingly, the Board of Directors anticipates that converting to
an open-end format would likely increase the expense ratio of the Fund to the
detriment of continuing shareholders. Finally, but of critical importance, the
Board of Directors considered the potentially negative impact on the investment
adviser's ability to achieve favorable investment results if the Fund were
converted to an open-end structure.
Because the Fund's Board has and will continue to evaluate the advantages
and disadvantages of the Fund's structure as a closed-end investment company and
intends to continue its buyback program for the benefit of all shareholders, it
believes that it would not be necessary or in the best interests of shareholders
to adopt the resolution suggested by Opportunity Partners L.P. Accordingly,
THE BOARD OF DIRECTORS, INCLUDING THE NON-INTERESTED DIRECTORS, RECOMMENDS
THAT THE SHAREHOLDERS VOTE "AGAINST" THE SHAREHOLDER PROPOSAL.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2001 Annual Meeting
of the Shareholders of the Fund must be received by December 2, 2000 to be
included in the proxy statement and the form of proxy relating to that meeting
as the Fund expects that the 2001 Annual Meeting will be held in May of 2001.
The submission by a shareholder of a proposal for inclusion in the proxy
statement does not guarantee that it will be included. Shareholder proposals are
subject to certain regulations under the federal securities laws.
The persons named as proxies for the 2001 Annual Meeting will have
discretionary authority to vote on any matter presented by a shareholder for
action at that meeting unless the Fund receives notice of the matter by January
10, 2001, in which case these persons will not have discretionary voting
authority except as provided in the SEC's rules governing shareholder proposals.
10
<PAGE>
OTHER MATTERS
Except as previously indicated, Management knows of no other matters which
are to be brought before the Meeting. However, if any other matters properly
come before the Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote such proxy in accordance with their judgment on
such matters.
All proxies received will be voted in favor of Proposals 1 and 2 and
AGAINST Proposal 3, unless otherwise directed therein.
By Order of the Board of Directors
Christina T. Sydor
Secretary
[April 9], 2000
11
? Please mark
votes as in
this example
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
PROPOSALS 1, 2 AND 3.
1. To elect Paolo M. Cucchi and Mario * FOR * WITHHELD
d'Urso as Class II Directors of the Fund.
*
______________________
For
all nominees except as
noted
above
2. To ratify the selection of KPMG LLP * FOR * AGAINST * ABSTAIN
as the independent auditors of the Fund for the
fiscal year ending January 31, 2001.
3. To consider a non-binding shareholder * FOR * AGAINST * ABSTAIN
recommendation that the Board of Directors
take steps to change the Fund's subclassification.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Note: Please sign exactly as your name appears on
this Proxy. If joint owners, EITHER may sign
this Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate
officer, please give your full title.
Signature: ______________________________ Date
___________________________
Signature: ______________________________ Date
___________________________
PROXY
THE ITALY FUND INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
Annual Meeting on May 10, 2000
The undersigned holder of shares of The Italy
Fund Inc. (the "Fund"), a Maryland corporation, hereby
appoints Heath B. McLendon, Christina T. Sydor and
Robert M. Nelson 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 Annual
Meeting of Shareholders of the Fund (the "Meeting") to
be held at the offices of the Fund, 7 World Trade
Center, Mezzanine Level, New York, New York on the
date indicated above, and any adjournment or
adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting
and Proxy Statement dated April , 2000, and hereby
instructs said attorneys and proxies to vote said
shares as indicated hereon. In their discretion, the
proxies are authorized to vote upon such other
business as may properly come before the Meeting. A
majority of the proxies present and acting at 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
proxy previously given.
CONTINUED AND TO
BE SIGNED
ON REVERSE SIDE
SEE REVERSE SIDE
