SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Italy Fund, Inc.
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(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the 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 transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by the registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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THE ITALY FUND INC.
125 Broad Street
New York, New York 10004
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 2002
-----------------
To the Shareholders of The Italy Fund Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of THE
ITALY FUND INC. (the "Fund") will be held at Citigroup Center on the 14th floor,
Conference Room J at 153 E. 53rd St., New York, New York, on November 14, 2002
at 1:00 p.m. (New York time) for the following purposes:
1. To elect three directors, to hold office for the term indicated and
until their successors shall have been elected and qualified;
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Proposal 1 is discussed in greater detail in the attached Proxy Statement.
The Board of Directors has fixed the close of business on September 17, 2002 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
October 4, 2002
- --------------------------------------------------------------------------------
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.
125 Broad Street
New York, New York 10004
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PROXY STATEMENT
-----------------
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 14, 2002
-----------------
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 Citigroup Center on the 14th floor, Conference Room J at 153
E. 53rd St., New York, New York, on November 14, 2002 at 1:00 p.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; Smith Barney Fund Management LLC ("SBFM" or
the "Manager"), the Fund's investment manager; Salomon Smith Barney Inc.
("Salomon Smith Barney"), an affiliate of SBFM; 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. 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 SBFM are located at 125 Broad Street, New York,
New York 10004; 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, 2002, has previously been furnished to all
shareholders of the Fund. This proxy statement and form of proxy are first being
mailed to shareholders on or about October 4, 2002. The Fund will provide,
without charge, additional copies of the annual report to any shareholder upon
request by calling the
1
Fund at 1-800-331-1710. For more information about the proxy material, please
call 1-800-223-2064 between 9:00 a.m. and 5:00 p.m.
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. 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. 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.
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
September 17, 2002 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
September 17, 2002, the Fund had outstanding 4,982,386 shares of Common Stock,
par value $0.01 per share, the only authorized class of stock, of which
4,834,070.048 (or 97.0%) were held in accounts of, but not beneficially owned by
Cede & Co., as nominee of The Depository Trust Company.
2
Owners of More Than Five Percent of the Outstanding Shares of the Fund
The following table shows, as of September 17, 2002, 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 ("SEC") by each of the firms listed in the table below as well as
information as to beneficial ownership reported to the Fund 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. 722,028 14.5%
One Chase Manhattan
Plaza, 42nd Floor
New York, New York 10005
Common Stock Lazard Freres & Co. LLC 730,361 14.7%
30 Rockefeller Plaza
New York, New York 10020
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* Based upon 4,982,386 shares outstanding as of September 17, 2002.
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 DIRECTOR
The Board of Directors of the Fund is currently classified into three
classes. The director currently serving in Class III, Heath B. McLendon, has
resigned as Chairman and Director of the Fund in order to serve as Chairman of
the Equity Research Policy Committee of Salomon Smith Barney Inc. Mr. R. Jay
Gerken has been nominated by the Board of Directors to be elected at the Meeting
to serve as
3
a Class III director until the year 2004 Annual Meeting of Shareholders or until
his successor has been duly elected and qualified. Two additional directors who
are currently serving in Class I have been nominated for re-election at the
Meeting to serve until the year 2005 Annual Meeting.
The Board of Directors of the Fund knows of no reason why the 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 nominee
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(*).
Person Nominated for Election as a Class III Director
Number of Shares
Principal Occupations and % Beneficially
During Past Five Years, owned+ as of
Name Other Directorships, and Age December 31, 2001
- ----------------------- ---------------------------------- ------------------
* R. Jay Gerken Managing Director of Salomon Smith None
Director since 2002 Barney ("SSB"); formerly portfolio (less than 1%)
manager, Smith Barney Growth and
Income Fund (1994-2000) and Smith
Barney Allocation Series Inc.
(1996-2001); Chairman or
Co-Chairman of seventy-three
investment companies affiliated
with Citigroup; 51.
Persons Nominated for Re-Election as Class I Directors
Number of Shares
Principal Occupations and % Beneficially
During Past Five Years, owned+ as of
Name Other Directorships, and Age December 31, 2001
- ----------------------- ---------------------------------- ------------------
Dr. Paul Hardin Professor of Law and Chancellor 1,566.402
Director since 1986 (I) Emeritus at the University of (less than 1%)
North Carolina at Chapel Hill;
Director of twenty-one investment
companies affiliated with
Citigroup; formerly, Director of
The Summit Bancorporation;
Chancellor of the University of
North Carolina at Chapel Hill; 71
George M. Pavia Senior Partner, Pavia & Harcourt,
Director since 1991 (I) Attorneys; Director of ten None
investment companies affiliated
with Citigroup; 74
The remainder of the Board constitutes Class II Directors (as indicated by the
Number II), neither of whom will stand for election at the meeting, as their
terms will expire in 2003.
4
Directors Continuing in Office
Number of Shares
Principal Occupations and % Beneficially
During Past Five Years, owned+ as of
Name Other Directorships, and Age December 31, 2001
- ----------------------- ---------------------------------- ------------------
Phillip Goldstein Since 1992, Mr. Goldstein has 105,560
Director since 2000 (II) managed investments for a limited (2.1%)
number of clients and has served
as the portfolio manager and
President of the general partner
of Opportunity Partners, a private
investment partnership. Director
of The Mexico Equity and Income
Fund since 2000, and Brantley
Capital Corporation since July,
2001; formerly, director of
Clemente Strategic Value Fund
(1998 to 2000) and Dresdner RCM
Global Strategic Income Fund
(2000-2002); 57
Glenn Goodstein Since 1992, Mr. Goodstein has 38,353
Director since 2000 (II) managed investments for a limited (less than 1%)
number of clients. Between 1988
and 1996, Mr. Goodstein held
several executive positions with
Automatic Data Processing;
Director of The Mexico Equity and
Income Fund; formerly, director of
Dresdner RCM Global Strategic
Income Fund (2000-2001); 39
--------------
145,479.402*
- -------
+ 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.
* Total number of shares owned by the officers and directors as a group
which represents 2.9% of the outstanding shares.
5
The following table provides information concerning the dollar range of
equity securities owned beneficially by each Director and nominee for election
as Director as of December 31, 2001:
Aggregate Dollar Range of Equity
Securities in All Funds Overseen
Dollar Range of Equity by Director/Nominee and
Name of Director/Nominee Securities in the Fund Advised by SBAM
- ----------------------- ---------------------- --------------------------------
Non-Interested Directors/Nominees
Dr. Paul Hardin $10,001-$50,000 Over $100,000
George Pavia None None
Philip Goldstein Over $100,000 Over $100,000
Glenn Goodstein Over $100,000 Over $100,000
Interested Directors/Nominees
R. Jay Gerken None Over $100,000
- ----------
* Mr Gerken is an "interested person" as defined in the 1940 Act.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and Section 30(h) of
the 1940 Act in combination require the Fund's directors and officers and
persons who own more than 10% of the Fund's common stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange, Inc. Such persons are required by SEC
regulations to furnish the Fund with copies of all such filings. Based solely
upon its review of the copies of such filings received by it and certain other
information received by it, the Fund believes that, for the fiscal year ended
January 31, 2002, all filing requirements applicable to such persons were
complied with.
Report of the Audit Committee
The Audit Committee reports that it: (i) reviewed and discussed the Fund's
audited financial statements with management; (ii) discussed with the
independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61; and (iii) received written confirmation from KPMG
LLP("KPMG") that it is independent and disclosures regarding such independence
as required by Independence Standards Board Standard No. 1, and discussed with
the auditors the auditors' independence. Based on the review and discussions
referred to in items (i) through (iii) above, and subject to the limitations on
the responsibilities and role of the Audit Committee set forth in the Charter
(attached hereto as Appendix A), the Audit Committee recommended to the Board
that the audited financial statements be included in the Fund's annual report
for the Fund's fiscal year ended January 31, 2002. The membership of the Audit
Committee is comprised of all of the independent directors.
6
Current Officers
The names of the principal officers of the Fund, with the exception of Mr.
Gerken, are listed in the table below along with certain additional information.
Mr. Gerken was elected Chairman of the Board and Director in 2002 by the Board
of Directors and accordingly is the Board's nominee for election as Director.
Principal Occupations and Other
Position Affiliations During the
Name (year first elected) Past Five Years, and Age
- ---------------- ----------------------- --------------------------------
Mario D'Urso President (1986) Private investor; formerly,
Senator of the Republic of Italy;
Under Secretary of State of the
Ministry of Commerce with the
Exterior for the Republic of
Italy; 61.
Lewis E. Daidone Chief Administrative Managing Director of Salomon Smith
Officer (2002) Barney; Chief Financial Officer of
each of the Smith Barney Mutual
Funds; Director and Senior Vice
President of SBFM and TIA; 44.
Richard L. Peteka Chief Financial Officer Director and Head of Internal
and Treasurer (2002) Control for Citigroup Asset
Management U.S. Mutual Fund
Administration from 1999-2002;
Vice President, Head of Mutual
Fund Administration and Treasurer
at Oppenheimer Capital from
1996-1999; 40
Rein van der Does Vice President and Managing Director of Salomon Smith
Investment Officer Barney; 62.
(1996)
Christina T. Sydor Secretary (1994) Managing Director of Salomon Smith
Barney; General Counsel and
Secretary of SBFM and TIA; 51.
The principal business address of Messrs. Gerken, van der Does, Daidone
and Peteka is 125 Broad Street, New York, New York 10004. The principal business
address of Mr. d'Urso is 4/A Viale di Grazioli, Rome, Italy. The principal
business address of Ms. Sydor is 300 First Stamford Place, Stamford, Connecticut
06902.
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. These aggregate expenses (including reimbursement
for travel and out-of-pocket expenses) paid by the Fund to such directors during
the calendar year ended December 31, 2001 amounted to$2,059.82.
7
Required Vote
Election 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 THE NOMINEES TO THE
BOARD.
Disclosure of Auditor Fees
Audit Fees. Audit fees billed to the Fund by KPMG in connection with the
Fund's annual audit for the year ended January 31, 2002 totaled $36,000.
Financial Information Systems Design and Implementation. KPMG was not
engaged by the Fund, its investment adviser, or any entity controlling,
controlled by, or under common control with the investment adviser that provides
services to the Fund, to provide financial information systems design or
implementation services.
All other Fees. The aggregate fees billed to the Fund for non-audit
services by KPMG and paid by the Fund, its investment adviser, or any entity
controlling, controlled by, or under common control with the investment adviser
that provides services to the Fund totaled approximately $2,000 (tax services).
The following table shows the compensation paid by the Fund to each
director during the Fund's last fiscal year ended January 31, 2002 and by the
Fund complex for the calendar year ended December 31, 2001:
COMPENSATION TABLE
Compensation
from Fund Total
Aggregate Pension or and Fund Number of
Compensation Retirement Complex Funds for
from Fund* Benefits Accrued Paid to Directors Which Director
Fiscal Year as part of Calendar Year Serves within
Name of Person Ended 1/31/02 Fund Expenses Ended 12/31/01 Fund Complex
- -------------- ------------- ---------------- ----------------- --------------
R. Jay Gerken** $ 0 0 $ 0 73
Glenn Goodstein 10,700 0 10,700 1
Phillip Goldstein 10,700 0 10,700 1
Dr. Paul Hardin 9,950 0 100,800 21
George M. Pavia 10,700 0 10,700 10
- ----------
* During the calendar year they attain 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 $5,250.
** Designates an "interested director."
8
Committees of The Board of Directors
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") and a Pricing Committee of the
Board comprised of the Chairman of the Board and one independent director. 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 as set forth in the Audit Committee's charter,
which is attached hereto as Appendix A. During the fiscal year ended January 31,
2002, six meetings of the Board of Directors of the Fund were held, four of
which were regular meetings; in addition two Audit Committee meetings were held.
In the last fiscal year no director attended less than 75% of these meetings.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2003 Annual Meeting
of the Shareholders of the Fund must be received by December 1, 2002 to be
included in the proxy statement and the form of proxy relating to that meeting
as the Fund expects that the 2003 Annual Meeting will be held in May of 2003.
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 2003 Annual Meeting will have
discretionary authority to vote on any other matter presented by a shareholder
for action at that meeting unless the Fund receives notice of the matter by
January 1, 2003, in which case these persons will not have discretionary voting
authority except as provided in the SEC's rules governing shareholder proposals.
9
OTHER MATTERS
The Manager 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 "for" Proposal 1 unless otherwise
directed therein.
By Order of the Board of Directors
Christina T. Sydor
Secretary
October 4, 2002
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE AND SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
10
APPENDIX A
THE ITALY FUND INC.
AUDIT COMMITTEE CHARTER
I. Composition of the Audit Committee: The Audit Committee shall be
comprised of at least three directors, each of whom shall have no relationship
to the Company that may interfere with the exercise of their independence from
management and the Company and shall otherwise satisfy the applicable membership
requirements under the rules of the New York Stock Exchange, Inc. as such
requirements are interpreted by the Board of Directors in its business judgment.
II. Purposes of the Audit Committee: The purposes of the Audit Committee
are to assist the Board of Directors:
1. in its oversight of the Company's accounting and financial
reporting principles, policies and controls, and audit processes;
2. in its oversight of the Company's financial statements and the
independent audit thereof;
3. in selecting, evaluating and, where deemed appropriate, replacing
the outside auditors; and
4. in evaluating the independence of the outside auditors.
The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements. Management and the internal auditing department
are responsible for maintaining appropriate accounting and financial reporting
principles and policies and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
outside auditors are responsible for planning and carrying out a proper audit of
the Company's annual financial statement in accordance with Generally Accepted
Auditing Standards. In fulfilling their responsibilities hereunder, it is
recognized that members of the Audit Committee are not full-time employees of
the Company and are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting or auditing
including the issue of auditor independence. As such, it is not the duty or
responsibility of the Audit Committee or its members to conduct "field work" or
other types of auditing or accounting reviews or procedures or to set auditor
independence standards, and each member of the Audit Committee shall be entitled
to rely on (i) the integrity of those persons and organizations within and
outside the Company from which it receives information (ii) the accuracy of the
financial and other information provided to the Audit Committee by such persons
and organizations absent actual knowledge to the contrary (which shall be
promptly reported to the Board of Directors) and (iii) representations made by
management of the Company or of Smith Barney Fund Management LLC ("SBFM")
A-1
as to any information technology, internal audit and other non-audit services
provided by the outside auditors of the Company to the Company, SBFM and any
entity controlling, controlled by or under common control with SBFM that
provides services to the Company ("SBFM Affiliates").
The outside auditors for the Company are ultimately accountable to the
Board of Directors (as assisted by the Audit Committee). The Board of Directors,
with the assistance of the Audit Committee, has the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the outside
auditors.
The outside auditors shall submit to the Audit Committee annually a formal
written statement delineating all relationships between the outside auditors and
the Company ("Statement as to Independence") which, in the auditor's
professional judgement may be reasonably thought to bear on independence,
addressing each non-audit service provided to the Company, SBFM and the SBFM
Affiliate and at least the matters set forth in Independence Standards Board No.
1. The Statement as to Independence shall also identify any audit, tax or
consulting services to the custodian, or other service providers to the Company,
and to other investment companies advised by the Company's investment adviser or
administered by the Company's administrator, as the Audit Committee and the
outside auditors may agree. These professional services may include those
relating to the services provided by such service providers to the Company or
any other services that the outside auditors or the Committee believe may bear
on the outside auditor independence with respect to the Company. The Audit
Committee acknowledges that the disclosure of such services provided by the
outside auditors may be limited by the Code of Professional Conduct of the
American Institute of Certified Public Accountants.
The outside auditors shall submit to the Company annually a formal written
statement of the fees billed for each of the following categories of services
rendered by the outside auditors: (i) the audit of the Company's financial
statements; (ii) information technology consulting services provided to the
Company, SBFM, and the SBFM Affiliates for the most recent fiscal year, in the
aggregate and, (iii) all other services provided to the Company, SBFM, and the
SBFM Affiliates by the outside auditors for the most recent fiscal year, in the
aggregate.
III. Meetings of the Audit Committee: The Audit Committee shall meet at
least annually with the outside auditors to discuss the annual audited financial
statements and results of their audit. The Audit Committee may request any
officer or employee of the Company or the Company's outside counsel or outside
auditors to attend a meeting of the Audit Committee or to meet with any members
of, or consultants to, the Audit Committee.
A-2
IV. Duties and Powers of the Audit Committee: To carry out its purposes,
the Audit Committee shall have the following duties and powers:
1. to provide advice to the Board of Directors in selecting,
evaluating or replacing outside auditors;
2. to review the fees charged by the outside auditors for audit and
non-audit services;
3. to ensure that the outside auditors prepare and deliver annually
a Statement as to Independence (it being understood that the outside
auditors are responsible for the accuracy and completeness of this
Statement), to discuss with the outside auditors any relationships or
services disclosed in this Statement that may impact the objectivity and
independence of the Company's outside auditors and to recommend that the
Board of Directors take appropriate action in response to this Statement
to satisfy itself of the outside auditors' independence;
4. If applicable, to consider whether the outside auditors'
provision of (a) information technology consulting services relating to
financial information systems design and implementation and (b) other
non-audit services is compatible with maintaining the independence of the
outside auditors;
5. to instruct the auditors that the outside auditors are ultimately
accountable to the Board of Directors and Audit Committee;
6. to advise management and the outside auditors that they are
expected to provide to the Audit Committee a timely analysis of
significant financial reporting issues and practices;
7. to consider any reports or communications (and management's
responses thereto) submitted to the Audit Committee by the outside
auditors required by or referred to in SAS 61 (as codified by AU Section
380), as may be modified or supplemented, including reports and
communications related to:
o deficiencies noted in the audit in the design or operation of
internal controls;
o consideration of fraud in a financial statement audit;
o detection of illegal acts;
o the outside auditors' responsibility under generally accepted
auditing standards;
o significant accounting policies;
o management judgments and accounting estimates;
o adjustments arising from the audit;
o the responsibility of the outside auditors for other
information in documents containing audited financial
statements;
A-3
o disagreements with management;
o consultation by management with other accountants;
o major issues discussed with management prior to retention of
the outside auditors;
o difficulties encountered with management in performing the
audit;
o the outside auditors' judgments about the quality of the
entity's accounting principles; and
o reviews of interim financial information conducted by the
outside auditors;
8. with respect to reporting and recommendations, to discuss with
the Company's General Counsel any significant legal matters that may have
a material effect on the financial statements, the Company's compliance
policies, including material notices to or inquiries received from
governmental agencies;
9. to prepare any report or other disclosures, including any
recommendation of the Audit Committee, required by the rules of the
Securities and Exchange Commission to be included in the Company's annual
proxy statement;
10. to review this Charter at least annually and recommend any
changes to the full Board of Directors; and
11. to report its activities to the full Board of Directors on a
regular basis and to make such recommendations with respect to the above
and other matters as the Audit Committee may deem necessary or
appropriate.
V. Resources and Authority of the Audit Committee: The Audit Committee
shall have the resources and authority appropriate to discharge its
responsibilities, including the authority to engage outside auditors for special
audits, reviews and other procedures and to retain special counsel and other
experts or consultants.
A-4
PROXY
THE ITALY FUND INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING ON NOVEMBER 14, 2002
The undersigned holder of shares of The Italy Fund Inc. (the "Fund"), a Maryland
corporation, hereby appoints R. Jay Gerken, 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 Citigroup Center, 153 East 53rd Street, 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 October 4, 2002, 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 SEE REVERSE SIDE
X 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
PROPOSAL 1 .
1. To elect (01) R. Jay Gerken as Class III Director of the Fund And (02) to
re-elect Dr. Paul Hardin and (03) George M. Pavia As Class I Directors of
the Fund
FOR WITHHOLD
ALL FROM ALL
NOMINEES NOMINEES
-------- --------
_____ For all nominees except as noted above
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
full title.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
Signature:_______________ Date:_________ Signature:______________ Date:_________