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: [ ] Preliminary proxy statement [X] 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. 388 Greenwich Street NEW YORK, NEW YORK 10013 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 in the Downtown Conference Center on the mezzanine level at 7 World Trade Center, New York, New York, 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 shareholder recommendation that the Board of Directors take steps to convert the Fund to an open-end 		structure. 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 March 30, 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. 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 -------------------------- 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 in the Downtown Conference Center on the mezzanine level at 7 World Trade Center, 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; and/or PFPC Global Fund Services, the Fund's 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 Georgeson Shareholder Communications Inc. to assist in the solicitation of proxies. The anticipated cost of solicitation is approximately $50,000. If the Fund records votes by telephone, it will use procedures designed to authenticate shareholders' 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 and SSB Citi are 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 fiscal year ended January 31, 2000, will be furnished to all shareholders of the Fund. This proxy statement and form of proxy are first being mailed to shareholders on or about March 30, 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" Proposals 1 and 2 and AGAINST Proposal 3. 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 convert the Fund to an open-end structure. 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 8,297,014 shares of Common Stock, par value $0.01 per share, the only authorized class of stock, of which 8,199,361 (or 98.8%) 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 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 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 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 500 Director since 1992(II) Arts at Drew University; (less than 1%) Director of two investment companies managed by affiliates of Salomon Smith Barney; 58. Mario d'Urso Senator of the Republic of 1,000 Director since 1995(II) Italy; formerly Under (less than 1%) 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 10,533.05050 Director since 1986(III) Smith Barney; Chairman or (less than 1%) 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 657.212 Director since 1986(I) Professor of Law at the (less than 1%) 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 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 calendar year ended December 31, 1999 amounted to $11,578. 6 The following table shows the compensation paid by the Fund to each director during the Fund's last fiscal year. COMPENSATION TABLE Compensation from Fund Total Pension or and Fund Number of Aggregate Retirement Complex Funds for Compensation Benefits Accrued Paid to Directors Which Director from Fund* as part of Calendar Year Serves Within Name of Person Fiscal Year Ended 1/31/00 Fund Expenses Ended 12/31/99 Fund Complex - -------------- ----------- ------------- --------------- ------------ Paolo M. Cucchi $ 11,450 $0 $ 19,150 2 Alessandro di Montezemolo** 4,513 0 10,613 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 * 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 $7,875. ** 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 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 "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 at OPLP@worldnet.att.net." 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 ended 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 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 9, 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 8, 2001, in which case these persons will not have discretionary voting authority except as provided in the SEC's rules governing shareholder proposals. 10 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 March 30, 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 convert the Fund to an open-end 	structure. 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 in the Downtown Conference Center on the mezzanine level at 7 World Trade Center, 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 March 30, 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