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:

|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| 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

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY __, 2003

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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 January __, 2003
at _____ ____ (New York time) for the following purposes:

1. To approve the liquidation and dissolution of the Fund;

2. To elect three directors, to hold office for the term indicated and
until their successors shall have been elected and qualified; and

3. To transact such other business as may properly come before the
meeting or any adjournments thereof.

Proposals 1 and 2 are discussed in greater detail in the attached Proxy
Statement. The Board of Directors has fixed the close of business on December 4,
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
December ___, 2002

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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.

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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

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FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY __, 2003

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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 January __, 2003 at _________ (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. Costs of this
solicitation are expected to be approximately $_____. 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. 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, as well as the most recent semi-annual
report succeeding the Annual Report (each, a "Report") have previously been
furnished to all shareholders of the Fund. The Fund will provide, without
charge, additional copies of each Report to any shareholder upon request by
calling the Fund at 1-800-331-1710.

This proxy statement and form of proxy are first being mailed to
shareholders on or about December ____, 2002. For more information about the
proxy statement, please call 1-800-223-2064 between 9:00 a.m. and 5:00 p.m.,
Eastern time.

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 Proposal 2. 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.
Proposal 1 requires for approval the affirmative vote of a majority of the
outstanding shares of the Fund entitled to vote at the Meeting, and Proposal 2
requires for approval the affirmative vote of a plurality of the votes cast in
person or by proxy at the Meeting, in each case with a quorum present. Because
abstentions and broker "non-votes" are treated as shares present but not voting,
they will have the effect of votes against Proposal 1, which requires the
approval of a specified percentage of the outstanding shares of the Fund
entitled to vote on the matter, but will have no effect on Proposal 2. 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
December 4, 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
the Record Date, the Fund had outstanding 4,961,786 shares of Common Stock, par
value $0.01 per share, the only authorized class of stock of the Fund, of which
4,815,769,048 (or 97.1%) were held in accounts of, but not beneficially owned by
Cede & Co., as nominee of The Depository Trust Company.

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. Those persons named as proxies will vote those proxies
that they are entitled to vote "FOR" any Proposal in favor of an adjournment and
will vote those proxies required to be voted "AGAINST" any such Proposal against
any adjournment.

As the shareholders know, during the original pendency of the solicitation
for the Fund's Annual Meeting, originally scheduled for November 14, 2002, the
Board of Directors met and determined to postpone the Annual Meeting in order to
allow the Board to consider certain alternatives for the Fund; as further
discussed under Proposal 1, the Board is proposing that shareholders approve the
liquidation and dissolution of the Fund.

Owners of More Than Five Percent of the Outstanding Shares of the Fund

The following table shows, as of the Record Date, the beneficial owners of
more than 5% of the outstanding shares of the Fund. This information is based on
reports (Schedules 13D 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.

[To be updated]

Amount
and Nature
Name and Address of of Beneficial Percent*
Title of Class Beneficial Owner Ownership of Class
-------------- ---------------- --------- --------

Common Stock Bankgesellschaft Berlin _______ _____%
Alexanderplatz 2
D-10178 Berlin
Germany

Common Stock Lazard Freres &Co. LLC _______ _____%
30 Rockefeller Plaza
New York, New York 10020

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* Based upon 4,961,786 shares outstanding as of the Record Date.

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")).

PROPOSAL NO. 1
APPROVAL OF THE LIQUIDATION AND DISSOLUTION OF THE FUND

The Board is recommending that shareholders vote to liquidate and dissolve
the Fund based on the Board's determination that such action is advisable and in
the best interests of the Fund.

Background and Reasons for Liquidation and Dissolution

When the Italy Fund was organized in 1986, the Italian securities markets
were less liquid and more volatile than many other major securities markets.
Capitalization of the Italian markets was highly concentrated and the processing
of securities transactions was less efficient than is currently the case. These
and other factors created a circumstance where a closed-end investment company,
such as the Fund, organized for the purpose of investing primarily in Italian
securities served a unique purpose recognized by the U.S. capital markets.

However, in recent years various factors have changed, raising questions
whether the Fund continues to meet the needs of investors. First, the Italian
securities markets have matured and U.S. and other investors have developed
alternatives for investing in Italian securities. In addition, largely as a
result of two issuer tender offers, the distribution of substantial realized
capital gains and the continuing program to repurchase its shares, the Fund has
contracted in size and now has total net assets of only approximately $[36]
million.

In light of the Fund's history and current condition, the Board met on
June 28, 2002 to consider ways to foster desirable investment strategies and to
enhance the benefits the Fund provides to its shareholders. At that meeting, the
Board unanimously adopted two Fund performance standards for the next two years
commencing June 28, 2002: (1) the Fund must maintain an average market price per
share that does not result in a discount to NAV exceeding 10% over the
immediately concluded rolling 12 month period and (2) the Fund must outperform
the MSCI Italy Index over a rolling 12 month period based on the performance of
the Fund before deduction of expenses calculated on a monthly basis. The Board
indicated that if the Fund failed to meet either of these performance criteria,
the Board would promptly consider actions designed to provide enhanced liquidity
for shareholders.

On November 6, 2002, the Board announced that, while the Fund had been
successful in outperforming the MSCI Italy Index, the Fund's shares failed to
trade at an average market price per share that did not result in a discount to
NAV exceeding 10% over the immediately concluded 12 month period, one of the
criteria previously set by the Board. In light of the Board's previous
announcement and the market price of the Fund's shares at the time, the Board
determined to postpone the annual

meeting of shareholders of the Fund, originally scheduled for November 14, 2002,
in order to allow the Board to consider what recommendation, if any, should be
made to shareholders.

At meetings held on November 6, November 14 and November 20, 2002, the
Board considered the alternatives available to the Fund. Among the alternatives
considered by the Board were: conversion of the Fund to open-end status;
combination with and into an existing open-end fund; operation as an "interval"
fund; commencement of another cash tender offer; and liquidation of the Fund. In
addition, an investment manager otherwise unaffiliated with the Fund made a
proposal to the Board to manage the Fund as a closed-end investment company. The
Board, with the assistance of independent counsel, sought to evaluate the
interests of shareholders by considering, among other things, the relative
benefits and costs to investors of liquidation, continued operation as a
closed-end fund, the uncertainties of possible new management of the Fund's
portfolio, the difficulties of operating as an open-end fund (either as a fund
investing primarily in Italian equity securities or after a merger with and into
another open-end fund with a broader investment mandate), and other matters. The
Board recognized the outstanding investment performance SBFM has provided for
the Fund, with the Fund having exceeded the performance of relevant independent
benchmark indices designed to measure the performance of Italian equity
securities, while at the same time recognizing that the Fund had continued to
trade at a significant discount to NAV. In weighing the benefits and drawbacks
of available alternatives, the Board concluded that shareholders would receive
an immediate financial benefit from termination and liquidation of the Fund.

After a full and complete discussion extending over several meetings, 80%
of the Fund's Continuing Directors (as such term is defined in the Fund's
Articles of Incorporation, as amended) (the "Articles of Incorporation"),
including a majority of the "non-interested" directors, as such term is defined
under the Investment Company Act of 1940, as amended (the "1940 Act"), approved,
subject to shareholder approval, a proposal to liquidate and dissolve the Fund.

Description of the Plan of Liquidation and Dissolution

In connection with the proposed liquidation and dissolution of the Fund,
the Board has approved a Plan of Liquidation and Dissolution (the "Plan"),
pursuant to which, upon shareholder approval of Proposal 1, the Fund will be
liquidated and dissolved. The following summary of the Plan is subject in all
respects to the provisions of, and is qualified in its entirety by reference to,
the Plan, which is attached to this Proxy Statement as Appendix A. Shareholders
are urged to read the Plan in its entirety.

Adoption of the Plan. The effective date of the Plan (the "Effective
Date") is the close of business 10 business days after the date on which the
shareholders of the Fund approve the liquidation and dissolution of the Fund. On
the Effective Date, the Fund will cease its business as an investment company
and will not engage in any

business activities except for the purpose of winding up its business and
affairs, preserving the value of its assets, discharging or making reasonable
provision for the payment of all of the Fund's liabilities (as provided in the
Plan), and distributing its remaining assets to shareholders in accordance with
the Plan.

Closing of Shareholder Register Books and Restriction on Transfer of
Shares. The proportionate interests of shareholders in the assets of the Fund
will be fixed on the basis of their respective share holdings on the Effective
Date. On such date, the books of the Fund will be closed. Thereafter, unless the
books of the Fund are reopened because the Plan cannot be carried into effect
under the laws of the State of Maryland or otherwise, the shareholders'
respective interests in the Fund's assets will not be transferable by the
negotiation of share certificates and the Fund's shares will cease to be traded
on the New York Stock Exchange.

Liquidation Distributions. The distribution of the Fund's assets will be
made in one or more cash payments in complete cancellation of all the
outstanding shares of the Fund. The first distribution of the Fund's assets (the
"First Distribution") is expected to consist of cash representing a substantial
portion of the assets of the Fund, less an estimated amount necessary to
discharge any (a) unpaid liabilities and obligations of the Fund on the Fund's
books on the First Distribution date, and (b) liabilities as the Board
reasonably deems to exist against the assets of the Fund on the Fund's books.
Each subsequent distribution (each such other distribution, a "Liquidating
Distribution" and with the First Distribution, a "Distribution") will consist of
cash from any assets remaining after accrual of expenses, the proceeds of any
sale of assets of the Fund under the Plan not sold prior to the earlier
Distributions and any other miscellaneous income of the Fund. The Board will set
the record date and the payment date for the First Distribution and each
Liquidating Distribution.

Each shareholder not holding stock certificates of the Fund will receive
Liquidating Distributions equal to the shareholder's proportionate interest in
the net assets of the Fund. Each shareholder holding stock certificates of the
Fund will receive a confirmation showing such shareholder's proportionate
interest in the net assets of the Fund with a statement that such shareholder
will be paid in cash upon return of the stock certificate. All shareholders will
receive information concerning the sources of the Liquidating Distribution. Upon
mailing of the final Liquidating Distribution, all outstanding shares of the
Fund will be deemed cancelled.

Amendment or Abandonment of the Plan. The Plan provides that the Board has
the authority to authorize such variations from, or amendments of, the
provisions of the Plan (other than the terms governing Liquidating
Distributions) as may be necessary or appropriate to effect the liquidation and
dissolution of the Fund and the distribution of its net assets to shareholders
in accordance with the purposes to be accomplished by the Plan. In addition, the
Board may abandon the Plan with- out shareholder approval at any time prior to
the date of liquidation if it determines that abandonment would be advisable and
in the best interests of the Fund and its shareholders.

Expenses. The expenses incurred in carrying out the terms of the Plan will
be borne by the Fund.

Distribution Amounts. The Fund's net assets on December __, 2002 were
$_________. At such date, the Fund had _____________ shares outstanding.
Accordingly, on __________ __, 2002, the NAV per share of the Fund was $____.
The amounts to be distributed to shareholders of the Fund upon liquidation will
be reduced by any remaining expenses of the Fund, including the expenses of the
Fund in connection with this solicitation and with the liquidation and portfolio
transaction costs, as well as any costs incurred in resolving any claims that
may arise against the Fund. Liquidation and dissolution expenses are estimated
to be approximately $_____________, plus the transaction costs of liquidating
the Fund's portfolio. Actual liquidation expenses may vary from this estimate.
Any increase in such expenses will be funded from the cash assets of the Fund
and will reduce the amount available for distribution to shareholders.

Impact of the Plan on the Fund's Status Under the 1940 Act. On the
Effective Date, the Fund will cease doing business as a registered investment
company and, as soon as practicable, will apply for deregistration under the
1940 Act. It is expected that the SEC will issue an order approving the
deregistration of the Fund if the Fund is no longer doing business as an
investment company, although there can be no assurance that the SEC will issue
such an order. Accordingly, the Plan provides for the eventual cessation of the
Fund's activities as an investment company and its deregistration under the 1940
Act. A vote in favor of the Plan will constitute a vote in favor of such a
course of action. Until the Fund's withdrawal as an investment company becomes
effective, the Fund, as a registered investment company, will continue to be
subject to and will comply with the 1940 Act.

Procedure for Dissolution Under the Maryland General Corporation Law

If shareholders approve Proposal 1, after the Fund has distributed its
remaining assets to shareholders in accordance with the Plan, discharged any
existing debts or obligations and has done all other acts required to liquidate
and wind up its business and affairs, pursuant to the Maryland General
Corporation Law (the "MGCL"), Articles of Dissolution will in due course be
executed, acknowledged and filed with the State Department of Assessments and
Taxation of Maryland, and will become effective in accordance with the MGCL.
Upon the effective date of such Articles of Dissolution, the Fund will be
legally dissolved.

Appraisal Rights

Shareholders will not be entitled to appraisal rights under Maryland law
in connection with the Plan.

General Tax Consequences

The following is only a general summary of the significant United States
federal income tax consequences of the Plan to the Fund and its U.S.
shareholders who are subject to United States federal income taxation on a net
income basis ("U.S. Shareholders") and is limited in scope. This summary is
based on the tax laws and applicable Treasury regulations in effect on the date
of this Proxy Statement, all of which are subject to change by legislative or
administrative action, possibly with retroactive effect. The Fund has not sought
a ruling from the Internal Revenue Service (the "IRS") with respect to the
federal income tax consequences to the Fund or its U.S. Shareholders that will
result from the Fund's liquidation and dissolution. The statements below are,
therefore, not binding upon the IRS, and there can be no assurance that the IRS
will concur with this summary or that the tax consequences to any U.S.
Shareholder upon receipt of a Distribution will be as set forth below.

While this summary addresses the significant United States federal income
tax consequences of the Plan, neither state nor local tax consequences of the
Plan are discussed. Implementing the Plan may impose unanticipated tax
consequences on U.S. Shareholders and affect U.S. Shareholders differently,
depending on their particular tax situations independent of the Plan. U.S.
Shareholders should therefore consult their own tax advisers for advice
regarding the United States federal, state, local and other tax consequences of
the Plan to their particular situations.

The Liquidating Distributions received by a U.S. Shareholder may consist
of three elements: (i) a capital gain dividend to the extent of any net
long-term capital gains recognized by the Fund during its final tax year; (ii)
an ordinary income dividend to the extent the amount of the Fund's ordinary
income and net short-term capital gains earned during its final tax year that
has not previously been distributed exceeds the Fund's expenses for the year;
and (iii) a distribution treated as a payment for the U.S. Shareholder's shares.
[As of _________ __, 2002 the Fund had accumulated net realized capital losses
and does not currently expect to realize significant net gains on the sale of
assets in connection with the liquidation.]/[The Fund expects to realize
significant net gains on the sale of assets in connection with its liquidation.]

Therefore, it is currently expected that U.S. Shareholders [will]/[will
not] receive a capital gain dividend in the distribution. The Fund also
[does]/[does not] currently expect to have undistributed ordinary income when
its assets are liquidated. However, the composition of the actual Liquidating
Distributions may vary due to changes in market conditions and the composition
of the Fund's portfolio at the time its assets are sold. Prior to the last day
of the Fund's final taxable year, the Fund's Board will authorize any capital
gain dividend and ordinary income dividend to be distributed as part of the
Liquidating Distribution. Within 60 days after the close of the Fund's final
taxable year, the Fund will notify U.S. Shareholders as to the portion, if any,
of the Liquidating Distribution which constitutes a capital gain

dividend and that which constitutes an ordinary income dividend (as well as any
amounts qualifying for a credit or deduction against foreign taxes paid by the
Fund).

Since the Fund expects to retain its qualification as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code"), during the liquidation period and expects to pay capital gain
dividends to the extent of any realized net long-term capital gains and to pay
ordinary income dividends to the extent of any ordinary net earnings, the Fund
does not expect to be taxed on any of its net capital gains realized from the
sale of its assets or ordinary income earned. In the unlikely event that the
Fund should lose its status as a RIC during the liquidation process, the Fund
would be subject to taxes which would reduce any or all of the three types of
Liquidating Distributions, and result in the inability of the Fund to pass
through to its U.S. Shareholders credits or deductions against foreign taxes
paid by the Fund.

Any portion of a Liquidating Distribution paid under the Plan out of
ordinary income or net realized long-term capital gains will be taxed under the
Code in the same manner as other comparable distributions of the Fund.
Accordingly, such amounts will be treated as ordinary income or, if so
designated, long-term capital gains.

The balance of any amount (after accounting for any capital gain dividend
and ordinary income dividend positions of the Liquidating Distributions)
received upon liquidation will be treated for federal income tax purposes as a
payment in exchange for a U.S. Shareholder's shares in the Fund. A U.S.
Shareholder will recognize a taxable gain or loss on such exchange equal to the
difference between the amount of the payment and the U.S. Shareholder's tax
basis in its Fund shares. Any such gain or loss will be a capital gain or
capital loss if the U.S. Shareholder holds its shares as capital assets. In such
event, any recognized gain or loss will constitute a long-term capital gain or
long-term capital loss, as the case may be, if the Fund's shares were held for
more than one year by the U.S. Shareholder at the time of the exchange. Under
current law, long-term capital gains are taxed to non-corporate U.S.
Shareholders at a maximum tax rate of 20%. If the U.S. Shareholder held its Fund
shares for not more than one year at the time of the exchange and such shares
are held as capital assets, any gain or loss will be a short-term capital gain
or loss. Short term capital gains are taxed to non-corporate U.S. Shareholders
at the graduated federal income tax rates applicable to ordinary income.
Corporate U.S. Shareholders should note that there is no preferential federal
income tax rate applicable to long-term capital gains derived by corporations
under the Code. Accordingly, all income recognized by a corporate U.S.
Shareholder pursuant to the liquidation of the Fund, regardless of its character
as capital gains or ordinary income, will be subject to tax at the regular
graduated federal corporate income tax rates. The foregoing discussion relates
only to the federal income tax consequences of receiving a Liquidating
Distribution. Shareholders may wish to consult with their personal tax advisers
concerning any state or local income tax consequences.

Under the Code, certain non-corporate U.S. Shareholders may be subject to
a withholding tax at the fourth lowest tax rate in effect for individuals other
than surviving spouses and heads of households ("backup withholding") on the
Liquidating Distributions they receive from the Fund Generally, U.S.
Shareholders subject to backup withhold will be those for whom no taxpayer
identification number is on file with the Fund, those who, to the Fund's
knowledge, have furnished an incorrect number, and those who under-report their
tax liability. An individual's taxpayer identification number is his or her
social security number. Certain U.S. Shareholders specified in the Code may be
exempt from backup withholding. The backup withholding tax is not an additional
tax and may be credited against a taxpayer's federal income tax liability.

THE TAX CONSEQUENCES DISCUSSED HEREIN MAY AFFECT SHAREHOLDERS DIFFERENTLY
DEPENDING UPON THEIR PARTICULAR TAX SITUATIONS UNRELATED TO THE LIQUIDATING
DISTRIBUTION AND, ACCORDINGLY, THIS SUMMARY IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING ON AN INDIVIDUAL BASIS. SHAREHOLDERS MAY WISH TO CONSULT THEIR PERSONAL
TAX ADVISERS CONCERNING THEIR PARTICULAR TAX SITUATIONS AND THE IMPACT THEREON
OF RECEIVING THE LIQUIDATING DISTRIBUTION AS DISCUSSED HEREIN, INCLUDING ANY
STATE AND LOCAL TAX CONSEQUENCES.

Recommendation of the Board

In determining to approve Proposal 1 and submit it to shareholders for
approval, the Board considered the factors listed above under "Background and
Reasons for Liquidation and Distribution."

Required Vote

Approval of Proposal 1 will require the affirmative vote of a majority of
the outstanding shares of the Fund entitled to vote at the Meeting. Pursuant to
the Articles of Incorporation, a proposal to liquidate the Fund must be approved
by the affirmative vote of either (i) 80% of the Fund's outstanding shares, or
(ii) a majority of the Fund's outstanding shares, but only if the proposal to
liquidate the Fund has been approved by at least 80% of the Fund's Continuing
Directors (as such term is defined in the Articles of Incorporation). At its
November 20 meeting, the Board, including 80% of the Continuing Directors, voted
to approve the liquidation and dissolution of the Fund and to propose the
liquidation and dissolution for approval by shareholders. Consequently, approval
of Proposal No. 1 will require the affirmative vote of a majority of the Fund's
outstanding shares entitled to vote at the Meeting.

If Proposal 1 is approved, the Fund will proceed to liquidate and dissolve
pursuant to the Plan, as described above. If Proposal 1 is not approved, the
Board will consider what other action, if any, is appropriate in the interests
of the shareholders.

THEREFORE, AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS, INCLUDING
A MAJORITY OF THE INDEPENDENT DIRECTORS, RECOMMENDS THAT THE SHAREHOLDERS OF THE
FUND VOTE "FOR" THE LIQUIDATION AND DISSOLUTION OF THE FUND AS SET FORTH IN THIS
PROPOSAL.

PROPOSAL NO. 2
ELECTION OF DIRECTORS

The Board of Directors of the Fund is currently classified into three
classes. One director previously serving in Class III, Heath B. McLendon,
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 is currently serving as a Director, having been nominated and elected by
the Board of Directors at a meeting held on ________ __, 2002, in order to fill
the vacancy resulting from Mr. McLendon's resignation. Mr. Gerken has been
nominated by the Board of Directors to be elected at the Meeting to serve as 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.

If Proposal 1 to liquidate and dissolve the Fund is approved, there will
be some period of time during which the Fund will have to take actions to
effectuate the liquidation and dissolution. It is therefore necessary and
appropriate to elect Directors to oversee the liquidation. In the event that
Proposal 1 is not approved, the Board will continue to oversee the operation of
the Fund while considering what other action, if any, is appropriate.

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
Term of Portfolios
Office* Principal in Fund
Position(s) and Length Occupations Complex Other
Held with of Time During Past Overseen Directorships
Name, Address and Age Fund Served Five Years by Director Held by Director
- ----------------------- ----------- ---------- ---------------------------- ----------- ----------------

R. Jay Gerken Chairman Since Managing Director of 226 None
399 Park Avenue and Chief 2002 Salomon Smith Barney
New York, New York 10022 Excutive ("SSB"); formerly portfolio
Age 51 Officer 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

Persons Nominated for Re-Election as Class I Directors

Dr. Paul Hardin (I) Director Since Professor of Law and 36 None
12083 Morehead 1986 Chancellor Emeritus at the
Chapel Hill, NC 27517 University of North Carolina
Age 72 at Chapel Hill; Director of
twenty-one investment
companies affiliated with
Citigroup; formerly,
Chancellor of the University
of North Carolina at Chapel
Hill

George M. Pavia (I) Director Since Senior Partner, Pavia & 8 None
600 Madison Avenue 1991 Harcourt, Attorneys
New York, New York 10022
Age 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 not expire until 2003.

Directors Continuing in Office

Phillip Goldstein (II) Director Since Since 1992, Mr. Goldstein 1 Mexico Equity and
60 Heritage Drive 2000 has managed investments for Income Fund and
Pleasantville, NY 10570 a limited number of clients Brantley Capital
Age 57 and has served as the Corporation
portfolio manager and
President of the general
partner of Opportunity
Partners, a private
investment partnership.

Glenn Goodstein (II) Director Since Since 1992, Mr. Goodstein has 1 Mexico Equity and
13200 Kirkham Way Suite 113 2000 managed investments for a Income Fund
Poway, CA 92064 limited number of clients.
Age 39 Between 1988 and 1996,
Mr. Goodstein held several
executive positions with
Automatic Data Processing;
-----------

- ----------
* Directors are elected until the Fund's next annual meeting and until their
successors are elected and qualified.

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 November 30, 2002:

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 SBFM
- ------------------------ ---------------------- --------------------------------

Non-Interested Directors/Nominees

Dr. Paul Hardin* __________________ __________________
George Pavia ____ ____
Philip Goldstein** _____________ _____________
Glenn Goodstein*** _____________ _____________

Interested Directors/Nominees

R. Jay Gerken* ____ _____________

- ----------
* Mr. Gerken is an "interested person" as defined in the 1940 Act.

+ For this purpose, "beneficial ownership" is defined under Section
16a-1(a)(2) of the 1934 Act. The inclusion in this table of shares
beneficially owned does not constitute an admission of beneficial
ownership of the shares for any other purpose. The information as to
beneficial ownership is based upon information furnished to the Fund by
the Directors.

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, as well as SBFM and
certain of its affiliated persons, 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 on 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 Audit
Committee's Charter, 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 of the Fund.

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 one of the Board's nominees 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
Officer (2002) Smith Barney; formerly, 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 Formerly, Director and Head of
and Treasurer (2002) Internal 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
Investment Officer (1996) Smith Barney; 62.

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$___________.

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* for Benefits Accrued Paid to Directors Which Director
Fiscal Year as part of for 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

- ----------
* 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."

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 [________ ___, 2002] to be
included in the proxy statement and the form of proxy relating to that meeting
as the Fund expects that, unless the Fund has liquidated and dissolved pursuant
to Proposal No 1, the 2003 Annual Meeting will be held in [______ 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
_________, 2003, in which case these persons will not have discretionary voting
authority except as provided in the SEC's rules governing shareholder proposals.

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 and Proposal 2 unless
otherwise directed therein.

By Order of the Board of Directors

Christina T. Sydor
Secretary

December __, 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.

Appendix A

THE ITALY FUND INC.
Form of Plan of Liquidation and Dissolution

The Italy Fund Inc. (the "Fund"), a Maryland corporation and a closed-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), intends to accomplish the complete liquidation and
dissolution of the Fund according to the procedures set forth in this Plan of
Liquidation and Dissolution (the "Plan") and the laws of the State of Maryland.

Whereas, the Board of Directors (the "Board") of the Fund, including at
least 80% of the Board's Continuing Directors (as defined in the Fund's Articles
of Incorporation, as amended), has determined that it is advisable to liquidate
and dissolve the Fund; and

Whereas, the Board has considered and approved this Plan as the method of
liquidating and dissolving the Fund and has directed that the liquidation and
dissolution of the Fund be submitted to the shareholders of the Fund (the
"Stockholders") for their consideration;

Now, therefore, the liquidation and dissolution of the Fund shall be
carried out in the manner hereinafter set forth:

1. Effective Date of Plan.

The Plan shall be and become effective only at the close of business ten
business days after the day on which it is determined that approval of the
liquidation and dissolution of the Fund has been voted by the holders of a
majority of the Fund's outstanding securities at a duly called meeting of the
Stockholders at which a quorum is present (the "Effective Date").

2. Cessation of Business.

After the Effective Date, the Fund shall cease its business as an
investment company and shall not engage in any business activities except for
the purposes of winding up its business and affairs, preserving the value of its
assets, discharging or making reasonable provision for the payment of all the
Fund's liabilities as provided in Section 5 herein, and distributing its
remaining assets to the Stockholders in accordance with this Plan.

3. Fixing of Interests and Closing of Books.

The proportionate interests of Stockholders in the assets of the Fund
shall be fixed on the basis of their respective shareholdings at the close of
business on the Effective Date. On the Effective Date, the books of the Fund
shall be closed. Thereafter, unless the books are reopened because the Plan
cannot be carried into effect under the laws of the State of Maryland or
otherwise, the Stockholders' respective interests in the Fund's assets shall not
be transferable by the negotiation of share certificates and the Fund's shares
will cease to be traded on the New York Stock Exchange, Inc. (the "NYSE").

A-1

4. Notice of Liquidation.

As soon as practicable after the Effective Date, the Fund shall mail
notice to its known creditors, if any, at their addresses as shown on the Fund's
records, that this Plan has been approved by the Board and the Stockholders and
that the Fund will be liquidating its assets, to the extent such notice is
required under the Maryland General Corporation Law.

5. Liquidation of Assets and Payment of Debts.

As soon as is reasonable and practicable after the Effective Date, all
portfolio securities of the Fund shall be converted to cash or cash equivalents.
As soon as practicable after the Effective Date, the Fund shall pay, or make
reasonable provision to pay in full, all known or reasonably ascertainable
liabilities of the Fund incurred or expected to be incurred prior to the date of
the final Liquidating Distribution provided for in Section 6 below.

6. Liquidating Distributions.

In accordance with Section 331 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Fund's assets are expected to be distributed by one or
more cash payments in complete cancellation of all the outstanding shares of
stock of the Fund. The first distribution of the Fund's assets (the "First
Distribution") is expected to consist of cash representing a substantial portion
of the assets of the Fund, less an estimated amount necessary to discharge any
(a) unpaid liabilities and obligations of the Fund on the Fund's books on the
First Distribution date, and (b) liabilities as the Board shall reasonably deem
to exist against the assets of the Fund on the Fund's books. Any subsequent
distribution (each a "Distribution" and together with the First Distribution and
all other Distributions, the "Liquidating Distribution") will consist of cash
from any assets remaining after payment of expenses, the proceeds of any sale of
assets of the Fund under the Plan not sold prior to the earlier Distributions
and any other miscellaneous income to the Fund. The Board will set the record
date and payment date for the First Distribution and each subsequent
Distribution.

Each Stockholder not holding stock certificates of the Fund will receive
Liquidating Distributions equal to the Stockholder's proportionate interest in
the net assets of the Fund. Each Stockholder holding stock certificates of the
Fund will receive a confirmation showing such Stockholder's proportionate
interest in the net assets of the Fund with an advice that such Stockholder will
be paid in cash upon surrender of the stock certificates. All Stockholders will
receive information concerning the sources of the Liquidating Distribution.

Upon the mailing of the final Liquidating Distribution, all outstanding
shares of the Fund will be deemed canceled.

7. Expenses of the Liquidation and Dissolution of the Fund.

The Fund shall bear all of the expenses incurred in carrying out this
Plan, whether or not the liquidation and dissolution contemplated by this Plan
are effected.

A-2

8. Deregistration as an Investment Company.

Upon completion of the Liquidating Distribution, the Fund shall file with
the Securities and Exchange Commission an application for an order declaring
that the Fund has ceased to be an investment company.

9. Dissolution.

As promptly as practicable, but in any event no earlier than 30 days after
the mailing of notice to the Fund's known creditors, if any, the Fund shall be
dissolved in accordance with the laws of the State of Maryland and the Fund's
Articles of Incorporation and upon the filing Articles of Dissolution with the
State of Department of Assessments and Taxation (the "Department").

10. Assets Remaining After Dissolution.

Once dissolved, if any additional assets remain available for distribution
to the stockholders, the Board may provide such notices to stockholders and make
such distributions in the manner provided by the Maryland General Corporation
Law or in such other manner as may be permitted by Maryland law.

11. Power of Directors.

In addition to the power of the directors of the Fund under Maryland law,
the Board, and subject to the discretion of the Board, the officers of the Fund,
shall have authority to do or authorize any or all acts and things as they may
consider necessary or desirable to carry out the purposes of the Plan,
including, without limitation, the execution and filing of all certificates,
documents, information returns, tax returns, forms and other papers which may be
necessary or appropriate to implement the Plan or which may be required by the
provisions of Maryland law, the 1940 Act, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the Code or the NYSE.

12. IRS Form 966.

The Fund will cause the timely filing of a Form 966 with the Internal
Revenue Service in connection with the adoption of the Plan.

13. Amendment or Abandonment.

The Board shall have the authority to authorize such variations from, or
amendments of, the provisions of the Plan (other than the terms governing
Liquidating Distributions) as may be necessary or appropriate to effect the
liquidation and dissolution of the Fund and the distribution of its net assets
to Stockholders in accordance with the purposes to be accomplished by the Plan.
If any variation or amendment appears necessary and, in the judgment of the
Board, will materially and adversely affect the interests of the Stockholders,
such variation or amendment will be submitted to the Stockholders for approval.
In addition, the Board may abandon this Plan at any time prior to the time that
the Articles of Dissolution are accepted for record by the Department by
following the same procedure required for its approval, if the Board determines
that abandonment would be advisable and in the best interests of the Fund and
the Stockholders.

A-3

PROXY

THE ITALY FUND INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING ON JANUARY __, 2003

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, and each of them, 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 December __, 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 AND PROPOSAL 2.

1. To approve the liquidation and dissolution of the Fund.

FOR AGAINST ABSTAIN

|_| |_| |_|

2. To elect (01) R. Jay Gerken as Class III Director of the Fund and to
re-elect (02) 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:_________