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 Section 240.14a-11(c) or Section 240.14a-12
THE MEXICO EQUITY AND INCOME FUND, INC.
---------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
(PRELIMINARY PROXY STATEMENT)
THE MEXICO EQUITY AND INCOME FUND, INC.
World Financial Center
200 Liberty Street
New York, New York 10281
(212) 667-5000
October ___, 1999
Dear Stockholders:
The Annual Meeting of Stockholders of The Mexico Equity and Income Fund, Inc.
(the "Fund") will be held at 11:00 A.M. on Friday, December 3, 1999, at the
offices of CIBC World Markets Corp., 200 Liberty Street, 39th Floor, New York,
New York 10281. A Notice and Proxy Statement regarding the meeting, white proxy
card for your vote at the meeting, and postage prepaid envelope in which to
return your proxy are enclosed. It is very important that you read the enclosed
materials carefully, fill out the enclosed white proxy card and return it to us
at your earliest convenience.
At the Annual Meeting, the stockholders will:
1. elect one Class III director; and
2. consider the ratification of the selection of PricewaterhouseCoopers
LLP as independent accountants.
The Board of Directors strongly recommends that you vote for Proposals 1 and 2.
In addition, a stockholder of the Fund has informed the Fund that he intends to
solicit proxies for several proposals. The Board of Directors unanimously
believes that the stockholder proposals are not in the best interests of
stockholders.
The enclosed Proxy Statement under "Other Matters" contains the reasons why the
Fund believes that the stockholder proposals are not in the best interests of
stockholders. In particular, the Fund has recently adopted an aggressive program
designed to reduce the discount at which the Fund's shares trade. Please see
page 8 of the Proxy Statement for a discussion of this program.
The persons named in the enclosed proxy retain discretion to vote in their best
judgment on the stockholder proposals discussed under "Other Matters" in the
Proxy Statement for all proxies submitted to the Fund. It is the current
intention of these persons to exercise that discretion and vote against each of
the stockholder proposals.
Respectfully,
Alan H. Rappaport
Chairman of the Board
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE SIGN, DATE AND MAIL THE ENCLOSED WHITE PROXY CARD
AS SOON AS POSSIBLE. IF YOU HAVE ALREADY RETURNED THE PROXY CARD
SENT TO YOU BY THE STOCKHOLDER, YOU MAY REVOKE THAT PROXY BY
RETURNING A LATER DATED WHITE PROXY CARD WHICH IS ENCLOSED.
YOUR VOTE IS VERY IMPORTANT. THANK YOU FOR YOUR COOPERATION.
<PAGE>
(PRELIMINARY PROXY STATEMENT)
THE MEXICO EQUITY AND INCOME FUND, INC.
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 3, 1999
To the Stockholders of
The Mexico Equity and Income Fund, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The
Mexico Equity and Income Fund, Inc. (the "Fund") will be held at the offices of
CIBC World Markets Corp., 200 Liberty Street, 39th Floor, New York, New York
10281, on Friday, December 3, 1999 at 11:00 A.M., New York time, for the
following purposes:
1. To elect one Class III director to serve for a term expiring on the
date on which the Annual Meeting of Stockholders is held in 2002.
2. To ratify or reject the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for its fiscal year ending July
31, 2000.
The Board of Directors strongly recommends that you vote for Proposals 1 and 2.
In addition, a stockholder of the Fund has informed the Fund that he intends to
solicit proxies for several proposals. The Board of Directors unanimously
believes that the stockholder proposals are not in the best interests of
stockholders.
The enclosed Proxy Statement under "Other Matters" contains the reasons
why the Fund believes that the stockholder proposals are not in the best
interests of stockholders. In particular, the Fund has recently adopted an
aggressive program designed to reduce the discount at which the Fund's shares
trade. Please see page 8 of the Proxy Statement for a discussion of this
program.
The persons named in the enclosed proxy retain discretion to vote in their
best judgment on the stockholder proposals discussed under "Other Matters" in
the Proxy Statement for all proxies submitted to the Fund. It is the current
intention of these persons to exercise that discretion and vote against each of
the stockholder proposals.
The Board of Directors has fixed the close of business on November 1,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting or any adjournments thereof.
You are cordially invited to attend the meeting. Stockholders who do not
expect to attend the meeting in person are requested to complete, date and sign
the enclosed white proxy card and return it promptly in the envelope provided
for that purpose. If you have already returned the proxy card sent to you by the
stockholder, you may revoke that proxy by returning a later dated white proxy
card. You may nevertheless vote in person at the meeting if you choose to
attend. The enclosed proxy is being solicited by the Board of Directors of the
Fund.
By order of the Board of Directors,
Bryan McKigney
President and Secretary
October ___, 1999
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
World Financial Center
200 Liberty Street
New York, New York 10281
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of THE MEXICO EQUITY AND INCOME FUND, INC.
(the "Fund"), for use at the Annual Meeting of Stockholders, to be held at the
offices of CIBC World Markets Corp., 200 Liberty Street, 39th Floor, New York,
New York 10281, on Friday, December 3, 1999 at 11:00 A.M., New York time, and at
any adjournments thereof.
This Proxy Statement and the enclosed white proxy card are being mailed to
stockholders on or about October __, 1999. Any stockholder giving a proxy has
the power to revoke it before its exercise, by voting in person at the meeting,
by executing a superseding proxy or by submitting a notice of revocation to the
Fund (addressed to The Mexico Equity and Income Fund, Inc., World Financial
Center, 200 Liberty Street, New York, New York 10281). All properly executed
proxies received in time for the meeting will be voted as specified in the proxy
or, if no specification is made, for Proposals No. 1 and No. 2 and against the
stockholder proposals referred to in this Proxy Statement.
If a properly executed proxy is returned accompanied by instructions to
withhold authority to vote (an abstention) or represents a broker "non-vote"
(that is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
shares on a particular matter with respect to which the broker or nominee does
not have a discretionary power to vote), the shares represented thereby, with
respect to matters to be determined by a plurality or specified majority of the
votes cast on such matters (i.e., Proposals No. 1 and No. 2), will be considered
present for purposes of determining the existence of a quorum for the
transaction of business but, not being cast, will have no effect on the outcome
of such matters. With respect to any proposal, the adoption of which requires
the affirmative vote of a specified proportion of Fund shares, an abstention or
broker non-vote will be considered present for purposes of determining the
existence of a quorum but will have the effect of a vote against the matter. The
holders of a majority of the Fund's common stock entitled to vote at the
Meeting, present in person or by proxy, constitutes a quorum for the transaction
of business at the Meeting.
On September 29, 1999, the Fund sent a copy of its annual report for its
fiscal year ended July 31, 1999 to each stockholder of the Fund. The Fund will
furnish without charge, an additional copy of its annual report to any
stockholder requesting such report. Requests for a copy of the Fund's annual
report should be made by writing to The Mexico Equity and Income Fund, Inc., c/o
CIBC World Markets Corp., 200 Liberty Street, New York, New York 10281 or by
calling (800) 421-4777 or (212) 667-7000.
The Board of Directors has fixed the close of business on November 1,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting and at any adjournments thereof. Stockholders on
the record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of the record date, the Fund had outstanding
[___________] shares of common stock.
To the knowledge of the Fund's management, no person owns beneficially
more than 5% of the Fund's outstanding shares except for the persons set forth
in the following table.
<PAGE>
Shares Percent of
Beneficially Shares
5% Stockholders Owned(1) Outstanding(2)
Mira L.P. --------- -------------
One Chase Manhattan Plaza - 42nd Floor
New York, NY 10005 2,264,280(3) 20.312%
- ----------
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934. Accordingly, a beneficial owner of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise has or
shares the power to vote such security or the power to dispose of such
security.
(2) Percentages are calculated on the basis of 11,147,394 shares of stock
outstanding as of September 24, 1999.
(3) The above information is based on a Schedule 13G filed October 4, 1999,
which indicates that Mira L.P. has sole voting and dispositive power with
respect to all 2,264,280 shares.
Management of the Fund knows of no business other than that mentioned in
Proposals 1 and 2 of the Notice of the Annual Meeting and the stockholder
proposals which will be presented for consideration at the meeting. If any other
matter is properly presented, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment.
The Board of Directors unanimously recommends that stockholders vote in
favor of Proposals 1 and 2 and against the stockholder proposals. The persons
named in the enclosed proxy retain discretion to vote in their best judgment on
the stockholder proposals discussed under "Other Matters" in this Proxy
Statement for all proxies submitted to the Fund. It is the current intention of
these persons to exercise that discretion and vote against each of the
stockholder proposals.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Persons named in the accompanying form of proxy intend, in the absence of
contrary instructions, to vote all proxies for the election of the nominee
listed below as a director of the Fund:
Class III
Dr. Luis Rubio
to serve for a term expiring on the date of the Annual Meeting of Stockholders
to be held in 2002, or until his successor is elected and qualified. If such
nominee should be unable to serve due to any event not now anticipated, the
proxies will be voted for such person, if any, as shall be designated by the
Board of Directors to replace such nominee. The election of a director will
require the affirmative vote of a plurality of the votes cast at the meeting.
For this purpose, abstentions and broker non-votes will be considered present
for purposes of determining the existence of a quorum for the transaction of
business but, not being cast, will have no effect on the outcome of this matter.
Information Concerning Nominee, Members of the Board of Directors and Officers
of the Fund
The following table sets forth information concerning the nominee as a director
of the Fund, each of the Fund's current directors and each of the Fund's
officers. The nominee is now a director of the Fund.
2
<PAGE>
<TABLE>
<CAPTION>
Shares
Beneficially
Name, Address and Age Principal Occupation or Employment Owned
of Nominee, Director or During Past Five Years and Directorships Position with September Percent of
Officer in Publicly Held Companies the Fund 24, 1999(1) Class
- ----------------------- ---------------------------------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
* Alan H. Rappaport(46) Head of Asset Management Division and Managing Director and 14,371 (2)
World Financial Center Director of CIBC World Markets Corp. (formerly Chairman
200 Liberty Street CIBC Oppenheimer Corp.) (since 1997); Member of of the
New York, New York U.S. Management Committee of CIBC World Markets Board since 1995
10281 Corp. (since February 1998); Director and
President of Advantage Advisers, Inc. (since
June 1993); Executive Vice President of
Oppenheimer & Co., Inc. (1994-1997); Executive
Vice President, Advantage Advisers, Inc.
(1990-1993); Chairman of the Board and Director
of The Asia Tigers Fund, Inc. and The India
Fund, Inc.; Member, New York Stock Exchange
Advisory Committee on International Capital
Markets.
Carroll W. Brewster (63) Executive Director, Hole in the Wall Gang Fund, Director None --
126 Lounsbury Road Inc. (not-for-profit charitable organization) since 1991
Ridgefield, (1991-1998); President, Hobart & William Smith
Connecticut Colleges (1982-1991).
06877
Sol Gittleman (65) Senior Vice President and Provost, Tufts Director None --
Ballou Hall University; Independent Individual General since 1990
Tufts University Partner, Augusta Partners, L.P.; Director, Troon
Medford, Partners, L.P.
Massachusetts
02155
Dr. Luis Rubio (44) President, Centro de Investigacion para el Director 1,000 (2)
Jaime Balme No. 11 Desarrollo A.C. (Center of Research for since 1990
Edificio D, Piso 2 Development); Director, Banco Nacional de Mexico
Polanco Los Morales S.A. (1991-1992); Independent Individual General
11510 Mexico Partner, Augusta Partners, L.P.; Director,
Central European Fund; Director, Troon
Partners, L.P.
**Brian McKigney (41) Executive Director, CIBC World Markets Corp. President --
World Financial Center (Since 1993); Vice President and Division and
200 Liberty Street Executive, Head of Derivative Operations, Chase Secretary
New York, New York Manhattan Bank (1986-1993); Assistant Vice since 1999
10281 President, Securities and Commodity Operations,
Chase Manhattan Bank (1981-1985).
Alan A. Kaye (47) Executive Director of CIBC since 1995; Vice Treasurer none --
World Financial Center President, Oppenheimer & Co., Inc. (1986-1994); since 1999
200 Liberty Street Treasurer of Asia Tigers Fund, Inc. and The
New York, New York India Fund, Inc.
10281
Richard Mayell (44) Managing Director of CIBC, Vice President and Vice President none --
World Financial Center Chief Investment Officer of Oppenheimer since 1999
200 Liberty Street Investment Advisers; Director and Managing
New York, New York Director, Advantage Advisers, Inc. (since 1999);
10281 Vice President and Assistant Secretary of The
India Fund, Inc. and The Asia Tigers
Fund, Inc.
All directors and -- -- 15,371 (2)
officers as a group
</TABLE>
3
<PAGE>
(1) The information as to beneficial ownership is based on statements
furnished to the Fund by the directors and officers or based on filings
made with the U.S. Securities and Exchange Commission.
(2) Less than 1%.
* Director so noted is deemed to be an "interested person" (as defined in
the Investment Company Act of 1940, as amended) of the Fund and of the
Fund's U.S. Co-Adviser, Advantage Advisers, Inc. Mr. Rappaport is an
interested person because of his affiliation with CIBC World Markets
Corp., the parent company of the Fund's U.S. Co-Adviser.
** Effective October 18, 1999, Robert Blum resigned as President and
Secretary of the Fund and Bryan McKigney was elected President and
Secretary of the Fund by the Board of Directors.
The Fund's Board of Directors held four regular meetings and one special
meeting during the fiscal year ended July 31, 1999. Each director attended at
least seventy-five percent of the aggregate number of meetings of the Board and
any committee on which he served. The Fund's Board of Directors has an Audit
Committee which is responsible for reviewing financial and accounting matters.
The current members of the Audit Committee are Messrs. Gittleman and Brewster
and Dr. Rubio. The Audit Committee met twice during the fiscal year ended July
31, 1999.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Fund's officers and directors, and persons who own more than ten percent of
a registered class of the Fund's equity securities, to file reports of ownership
and changes in ownership with the U.S. Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange, Inc. (the "NYSE"). The Fund believes
that during the fiscal year ended July 31, 1999 its officers and directors
complied with all filing requirements applicable to them.
Transactions with and Remuneration of Officers and Directors
The aggregate remuneration paid to directors not affiliated with Acci
Worldwide, S.A. de C.V., the Fund's Mexican Adviser ("Acci"), or Advantage
Advisers, Inc., the Fund's U.S. Co-Adviser ("Advantage"), was approximately
U.S.$22,050 during the fiscal year ended July 31, 1999, and, for that period,
the aggregate amount of expenses reimbursed by the Fund for directors'
attendance at directors' meetings was U.S.$8,375. The Fund pays each
non-affiliated director an annual fee of U.S.$5,000 plus U.S.$700 for each
directors' meeting and committee meeting attended in person and $100 for each
meeting attended by means of a telephonic conference. The officers and
interested directors of the Fund received no compensation from the Fund.
The following table sets forth the aggregate compensation paid by the Fund
to each director during the fiscal year ended July 31, 1999, as well as the
total compensation paid to each director of the Fund by the Fund and other funds
advised by Acci or Advantage or their affiliates (collectively, the "Fund
Complex").
Pension or
Retirement Total
Benefits Estimated Compensation
Accrued As Annual From Fund and
Aggregate Part of Benefits Fund Complex
Compensation Fund Upon Paid to
Name of Person, Position From Fund Expenses Retirement Directors
- ------------------------ --------- -------- ---------- ---------
Alan H. Rappaport,
Director (1).............. $0 $0 $0 $0
Carroll W. Brewster,
Director.................. $7,350 $0 $0 $7,350
Sol Gittleman, Director... $7,350 $0 $0 $21,750
Dr. Luis Rubio, Director.. $7,350 $0 $0 $22,950
- ----------
(1) Mr. Rappaport, who is considered an "interested person" of the Fund, did
not receive any compensation from the Fund for his service as director.
The Board of Directors unanimously recommends that stockholders vote in favor of
Proposal No. 1.
4
<PAGE>
PROPOSAL NO. 2:
RATIFICATION OR REJECTION OF SELECTION OF INDEPENDENT ACCOUNTANTS
At a meeting held on June 11, 1999, the Board of Directors of the Fund,
including a majority of the directors who are not "interested persons" of the
Fund, as defined in the Investment Company Act of 1940, as amended (the "1940
Act"), recommended the selection of PricewaterhouseCoopers LLP to act as
independent accountants for the Fund for the fiscal year ending July 31, 2000.
The Fund's financial statements for the fiscal year ended July 31, 1999
were audited by PricewaterhouseCoopers LLP. In connection with its audit
services, PricewaterhouseCoopers LLP reviewed the financial statements included
in the Fund's annual report to stockholders and its filings with the SEC.
The selection of independent auditors is subject to the ratification or
rejection of the stockholders of the Fund at the meeting. Ratification of the
selection of independent accountants will require the affirmative vote of a
majority of the votes cast at the meeting. For this purpose, abstentions and
broker non-votes will be considered present for purposes of determining the
existence of a quorum for the transaction of business but, not being cast, will
have no effect on the outcome of this matter.
The Board of Directors unanimously recommends that stockholders vote in
favor of Proposal No. 2.
5
<PAGE>
OTHER MATTERS
Stockholder Proposals
A stockholder of the Fund (the "Proponent") has informed the Fund that he
intends to introduce at the Annual Meeting of Stockholders the following
proposals:
1. Within 30 days of approval of this proposal, Advantage and Acci (the
"Investment Advisers") shall present to the Board of Directors a
proposal designed to afford stockholders an opportunity to promptly
realize net asset value ("NAV") for all their shares.
2. If (a) Proposal No. 1 is approved and (b) within 30 days of such
approval the Investment Advisers fail to present to the Board of
Directors a plan designed to afford stockholders an opportunity to
promptly realize NAV for all their shares, the Fund's investment
advisory agreements with the Investment Advisers shall be terminated
as soon as permissible.
3. If (a) the Board of Directors opposes Proposal No. 1 and (b)
Proposal No. 1 is approved, the following Bylaw shall be adopted:
"All compensation earned by the directors shall be held in escrow
and not paid to them until the stockholders are able to realize NAV
for all their shares. This Bylaw may only be altered or repealed by
the stockholders."
4. The following Bylaw shall be adopted: "The expenses incurred by the
Fund related to any contested meeting of stockholders shall be
limited to those legally required to achieve a quorum and to allow
stockholders to cast an informed vote on all matters to be presented
at such meeting. This Bylaw may only be altered or repealed by the
stockholders."
The Proponent also is nominating himself for election as a director of the Fund.
- --------------------------------------------------------------------------------
Your Board of Directors believes that these proposals are not in the best
interests of stockholders. The persons named in the enclosed proxy retain
discretion to vote in their best judgment on the stockholder proposals for all
proxies submitted to the Fund. It is the current intention of these persons to
exercise that discretion and vote against each of the stockholder proposals.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
The Fund has Addressed the Proponent's Concerns by Adopting a Program to Reduce
the Discount
The Proponent indicates that his proposals are designed to afford
shareholders an opportunity to realize NAV for their shares, thereby addressing
the discount at which the Fund's shares trade. The Fund, pursuant to the
direction of the Board of Directors, has, however, already undertaken
significant actions designed to reduce the Fund's discount. On March 5, 1999,
the Fund's Board of Directors approved a tender offer for up to 10% of each
stockholder's shares at a price representing a discount of 10% to NAV and
approved a share repurchase program for up to 10% of the Fund's outstanding
shares. The Fund accepted for tender the 463,179 shares validly tendered
pursuant to the tender offer. As of September 30, 1999, the Fund had repurchased
240,800 shares pursuant to the share repurchase program.
In addition, at a meeting held on October 11, 1999, the Board of Directors
approved a new share repurchase and tender offer program designed to reduce the
discount and enhance stockholder value. Pursuant to this program, the Fund
commenced on October 11, 1999 a two phase share repurchase program for up to
2,800,000 shares of common stock of the Fund. The Fund will purchase such shares
in the open market at times and prices determined by management of the Fund to
be in the best interests of stockholders of the Fund. For example, the Fund
would not purchase shares if the market price represents a discount to NAV of
10% or less. On April 15, 2000 (six months following the commencement of the
first phase of the new share repurchase program), to the extent the Fund has not
yet repurchased 1,400,000 shares (or one-half of 2,800,000), the Fund will
commence a tender offer to purchase the balance of the 1,400,000 shares not yet
purchased in the open market. For example, if the Fund repurchases 1,000,000
shares in the open market by April 15, 2000, the Fund will announce a tender
offer for 400,000 shares (1,400,000 - 1,000,000 = 400,000). The tender offer
will not be necessary and will not be conducted if all 1,400,000 shares are
repurchased in the open market, if the Fund's shares are trading at a discount
to NAV equal to or less than 10%, or if the tender offer will only be for a de
minimis number of shares. It is anticipated that the tender offer will be
conducted at a price equal to 90% of the Fund's NAV per share, less a fee to
assist in defraying the costs of the tender.
Following the completion of this April 15, 2000 tender offer, the Fund
will commence the second phase of the share repurchase program for up to
1,400,000 shares of the Fund's common stock and, if necessary, subsequent tender
offer as described in the preceding paragraph. By November/December 2000 (six
months following the commencement of the second phase), it is anticipated that
the Fund will have repurchased up to 2,800,000 shares of the Fund's common stock
in aggregate pursuant to the new share repurchase and tender offer program.
For the four-week period following the conclusion of this program (which
is expected to be November/December 2000), if the average discount at which
shares of the Fund trade from the Fund's NAV is in excess of 12.5%, the Board of
Directors intends to submit to the stockholders of the Fund for their
consideration at a stockholders meeting of the Fund the question of liquidation
of the Fund.
The Board of Directors believes that these actions represent a
comprehensive, creative and aggressive program to reduce the Fund's discount.
The Board believes that these actions also represent the most effective method
of attempting to reduce the discount while limiting expenses. Accordingly, the
Board has concluded that these actions are in the best interest of the
stockholders of the Fund because this program addresses the discount while
allowing the Fund to continue to pursue its investment objective. Thus, the
Board believes that Stockholder Proposal No. 1 is unnecessary, since the Fund is
already taking aggressive action to reduce the Fund's discount.
- --------------------------------------------------------------------------------
7
<PAGE>
Statements in Opposition to the Stockholder Proposals
The Concerns Reflected in Mr. Goldstein's Proposals Have Been Addressed
The Board of Directors of the Fund believes that the concerns reflected in
Mr. Goldstein's proposals have been addressed by the aggressive discount
reduction program adopted by the Fund and discussed above. Your Board of
Directors believes that the Fund's program discussed above is in the best
interests of stockholders and maintains the integrity of the Fund's investment
process. Your Board of Directors has been considering alternatives to reduce the
discount long before Mr. Goldstein's recent interest in the Fund.
Adverse Consequences of Mr. Goldstein's Proposals
Furthermore, the Board of Directors believes that the ultimate design of
Mr. Goldstein is fundamentally inconsistent with the best interests of
stockholders of the Fund. Mr. Goldstein's actions may serve the interests of
certain arbitrageurs, but do not serve the interests of all stockholders.
Your Board of Directors considers that Mr. Goldstein's proposals are, in
fact, coercive measures ultimately intended to force the Board to take one or
more of three possible actions: convert the Fund into an open-end fund; conduct
a large scale tender offer for up to all of its shares; or liquidate the Fund.
In the Board's view, any of these alternatives would be fundamentally
inconsistent with the best interests of stockholders of the Fund. Each of the
alternatives would disrupt the Fund's investment process, which to date has had
long term success; would impose costs and burdens on those stockholders who wish
to remain investors in the Fund and possibly on all stockholders; and ultimately
would be likely to necessitate liquidation of the Fund.
The Fund was organized to provide investors a vehicle for capital
appreciation and current income through investment in equity and convertible and
other debt securities issued by Mexican companies. The Board continues to
believe that our stockholders derive many benefits from the Fund's closed-end
structure and that these benefits would be lost if the Fund were to open-end or
to conduct a large tender offer for its shares. The closed-end structure allows
the Fund to maintain a stable pool of assets, without the need to keep assets in
low-yielding cash or to liquidate assets, sometimes at inopportune times, to
meet redemption requests. This allows the Fund to buy more illiquid holdings
which can and have benefited the Fund's performance. The Fund believes that the
closed-end structure is especially well suited as the structure, by investing
primarily in the stocks of a single country, frees the Fund to concentrate on
optimizing stock selection.
Furthermore, the Board of Directors is concerned about the impact of
open-ending or a large scale tender offer on the Fund's expenses. These actions
are likely to lead to a higher expense ratio because fixed expenses would be
spread across a smaller asset base. The Board of Directors believes that by
conducting a tender offer and share repurchase program for up to 25% of the
Fund's outstanding shares, the Fund is able to maintain a viable fund size while
still adhering to the Fund's fundamental investment objectives.
The Board of Directors feels that open-ending the Fund would be
detrimental to shareholder value. In the event of significant cash redemptions,
the Fund would need to hold a substantial portion of its assets in short-term
cash reserves. This is harmful to stockholder returns because over time equity
investments produce greater results which far exceed the returns of short-term
money market investments (cash equivalents).
Further, the sale of securities to enable the Fund to produce cash and
meet redemption requests of stockholders or to repurchase shares in a large
scale tender offer would result in the Fund realizing any
8
<PAGE>
capital gains inherent in the securities sold. These capital gains would have to
be distributed, at least in part, to stockholders who choose not to redeem or to
tender their shares. As a result, non-redeeming or non-tendering stockholders
would receive capital gains distributions and be obliged to pay taxes in order
to enable other stockholders to redeem or tender their Fund shares. Your
Directors do not believe stockholders of a closed-end fund who choose to remain
in the Fund should be subjected to tax in order to accommodate the interests of
those short-term stockholders who redeem or tender their shares.
Moreover, the need for the Fund to sell a large portion of its portfolio
in anticipation of significant redemptions if the Fund became open-ended, or to
repurchase a significant number of shares in a large scale tender offer, is
likely to depress the prices of the securities the Fund will be selling; thereby
reducing its NAV to the detriment of all stockholders.
In addition, a September 1998 study by CDA Wiesenberger of closed-end
funds that converted to an open-end structure noted that selling pressure caused
by redemptions following open-ending has had a detrimental effect on the funds
and on remaining investors because of the following:
- Net assets plunged due to large redemptions
- Portfolio holdings were liquidated to meet redemptions
- Funds realized significant capital gains
- Expense ratios increased due to reduction in total assets
- Investment styles were altered
The CDA Wiesenberger study concluded:
"When closed-end funds convert to open-end funds, long-term
investors lose the benefits they sought and may incur significant
expenses. Based on the data examined in this study, conversion from
closed-end to open-end structure is generally not in the best
interest of shareholders in the fund."(1)
This study supports the conclusion of the Fund's directors that, although
open-ending may enable opportunists to realize some degree of short-term gains,
it would also disadvantage long-term investors seeking to invest in the Mexican
market.
Material Information Relating to Mr. Goldstein's Contacts with the Fund
Stockholders of the Fund should also be aware of certain discussions
between the Proponent, Mr. Goldstein, and management of the Fund during the past
year. The Fund is providing this information to all stockholders of the Fund
because it is material information stockholders should know in making an
informed decision as to how to vote on the Proponent's Proposals. Stockholders
of the Fund should make their own conclusions as to the Proponent's interests
with respect to these matters and what bearing the following information has on
the merits of the Proponent's Proposals.
In June 1999, Mr. Goldstein proposed to management of the Fund that if the
Fund would sign a non-disclosure agreement, he would present to the Fund a
unique method to reduce the Fund's discount. It was management's understanding
from the meeting that Mr. Goldstein's position was that if the Fund utilized his
method of reducing the discount and it was successful - he expected to be paid
some form of consideration.
- ----------
(1) Study by Weisenberger Thomson Financial, September 1998.
9
<PAGE>
The Board of Directors has consistently considered options designed to
reduce the discount at which the Fund's shares have traded. Management of the
Fund determined that it should continue to consider any available options. Thus,
the Fund met with Mr. Goldstein and entered into a non-disclosure agreement with
Mr. Goldstein. Mr. Goldstein then presented his plan to management. The Board of
Directors considered Mr. Goldstein's plan, but determined that it was not in the
best interests of all stockholders of the Fund. The Board thus rejected Mr.
Goldstein's plan. In September 1999, Mr. Goldstein and management of the Fund
met again to discuss various other options to be considered by management of the
Fund, including the Fund's program discussed above.
The Proponent's address and the number of shares he owns will be furnished
by the Secretary of the Fund upon request.
Statement in Opposition to Stockholder Proposal No. 1
The Board of Directors strongly believes that this proposal that the
Investment Advisers submit a proposal designed to afford stockholders an
opportunity to promptly realize net asset value for all their shares is not in
the best interests of the stockholders. As discussed above, the Fund has already
undertaken an aggressive program designed to reduce the Fund's discount.
Furthermore, as discussed above, there are numerous adverse consequences
associated with this proposal. Your Board of Directors continues to be concerned
about the market wide phenomenon of discounts and will continue to consider
different options designed to reduce the Fund's discount. The Board will,
however, only take actions it believes will be effective and in the best
interests of stockholders. Stockholder Proposal No. 1 is not in the best
interests of all stockholders of the Fund.
Stockholder Proposal No. 1 is subject to the ratification or rejection of
the stockholders of the Fund at the meeting. Stockholder Proposal No. 1 will
require the affirmative vote of a majority of the votes cast at the meeting. For
this purpose, abstentions and broker non-votes will be considered present for
purposes of determining the existence of a quorum for the transaction of
business but, not being cast, will have no effect on the outcome of this matter.
The directors unanimously agree that this proposal is not in the best
interests of the stockholders of the Fund. The persons named in the enclosed
proxy retain discretion to vote in their best judgment on this proposal for all
proxies submitted to the Fund. It is the current intention of these persons to
exercise that discretion and vote against Stockholder Proposal No. 1.
Statement in Opposition to Stockholder Proposal No. 2
Your Board of Directors strongly believes that the proposal to terminate
the Investment Advisory Agreements (as defined below) with Advantage and Acci
(together, the "Investment Advisers") is not in the best interests of the
stockholders. The Board firmly believes that Advantage and Acci have performed
exceptionally well under difficult circumstances.
Your Board of Directors unanimously approved the continuation of the
Investment Advisory Agreements with Advantage and Acci at a meeting held on June
11, 1999. The Directors considered and evaluated a great deal of information in
making this determination. Such information included descriptions of the
Investment Advisers' businesses, operations and investment philosophies,
financial information, profitability to the Investment Advisers of the
Investment Advisory Agreements, a comparison of the Fund's performance to other
Mexico closed-end funds and the Mexican market, financial information relating
to the Fund, and comparative advisory fees and expense ratios.
10
<PAGE>
After full consideration, the directors unanimously approved the
continuation of the Investment Advisory Agreements with the Investment Advisers.
Your Board of Directors believes that terminating the agreements is not in the
best interests of the stockholders and would substantially impair the ability of
the Fund to continue to deliver superior results.
A. The Fund has outperformed The Mexico Fund, Inc. for the five year
period ended June 30, 1999.
The Fund was created in August 1990 to have a broad exposure to the
Mexican market using a balanced approach. This reflected the Fund's fundamental
objective and policy of seeking high total return through capital appreciation
and current income through investment in equity and convertible and other debt
securities issued by Mexican companies. Consistent with this objective, the Fund
has, since its inception, maintained an average exposure to fixed income
securities at a level greater than 20%.
As a result of the Investment Advisers' successful execution of this
policy, the Fund has outperformed The Mexico Fund, Inc. ("MXF") (the other U.S.
listed closed-end Mexico fund) and the Mexican Bolsa Index (a Mexican equity
only index) for the five year period ended June 30, 1999. The Fund has
experienced solid performance since its inception due to the Investment
Advisers' portfolio management abilities and efforts to enhance stockholder
value.
On a five-year basis as of June 30, 1999, the Fund's U.S. dollar NAV, on
average appreciated 1.36% annually.(2) By comparison, over the same period, on
average the NAV of MXF depreciated 1.90% annually, and the Mexican Bolsa Index
depreciated, on a U.S. dollar basis, 1.4% annually.(3)
The Fund has achieved this strong relative performance with lower
volatility than MXF and the Mexican Bolsa Index. Using volatilities calculated
based upon standard deviations of weekly returns on a U.S. dollar basis, the
Fund is ranked less volatile than MXF. From the Fund's inception through June
30, 1999, the NAV volatility of the Fund was approximately 30%.(5) For the same
period, MXF experienced NAV volatility of approximately 35%, and the Mexican
Bolsa Index experienced volatility in excess of 40%.(6) For the same period, the
Fund's market price volatility was also less than MXF and the Mexican Bolsa.
The Board of Directors realizes that the Fund underperformed relative to
the Mexican Bolsa Index for the Fund's fiscal year ended July 31, 1999. The
Fund's NAV declined 0.66% during the fiscal year ended July 31, 1999 while the
Mexican Bolsa Index grew 17.7%. The Fund's underperformance was the result of a
shareholder distributions and investment limitations.
One of the major factors contributing to the Fund's underperformance was
the approximate U.S.$11 million sale of portfolio securities (approximately 15%
of the Fund's assets) to meet the shareholder distribution on January 15, 1999.
This sale of assets was made during a period when the Mexican market was
experiencing extraordinary volatility. The Mexican Bolsa Index fluctuated 30%
(in dollar terms) during the month of January, closing the month with a loss of
2.6%. The Bolsa Index then rebounded 63% (in dollar terms) from its lowest level
in January 1999 to the end of March 1999.(4)
In addition, the Fund's underperformance is attributable to the 51%(7)
gain in the price of Telefonos de Mexico, S.A. de C.V. ("Telmex") during the
Fund's fiscal year. Telmex had a 25.8% weighting in the Mexican Bolsa Index, and
thus, the index's performance represented the performance of Telmex to a greater
degree than that of the Fund.(4) The Board of Directors understands, however,
that this
- ----------
(2) Source: Lipper Analytical Services, Inc.
(3) Source: Lipper Analytical Services, Inc.
(4) Source: Grupo Financiero Banamex Accival, S.A. de C.V.
(5) In accordance with industry practice, the Fund calculates its net asset
value after the close of the market in Mexico on Thursday and publishes
its NAV on Friday.
(6) The volatility of the Mexican Bolsa is calculated based on standard
deviations of monthly returns on a U.S. dollar basis. The information
necessary to calculate the standard deviation of weekly returns of the
Mexican Bolsa on a U.S. dollar basis is not readily available.
(7) Source: Groupo Financiero Banamex Accival, S.A. de C.V.
11
<PAGE>
is the result of the Fund's risk control policies which limit the Fund's
exposure to any one security.
The Fund's fixed income exposure during the Fund's fiscal year was greater
than 15%. The Fund's adherence to maintaining a significant fixed income
exposure has enhanced the Fund's performance during volatile market cycles. This
fixed income exposure, however, limited the Fund's potential for growth during
the recent period when the Mexican Bolsa Index increased. Furthermore, it is
important to note that the Mexican Bolsa Index is an equity only benchmark and
has no fixed income securities. Also, in January 1999, the Fund sold equities in
order to rebuild the Fund's fixed income exposure. This was considered to be a
prudent move during a difficult period, but at the same time, it contributed
significantly to the Fund's underperformance.
The Fund's directors find no objective basis for terminating the
Investment Advisory Agreements because of poor or unimpressive performance. On
the contrary, the Fund's directors are pleased with the Fund's overall
performance over the five year period and see no basis for changing the Fund's
Investment Advisers.
B. The Board of Directors and the Investment Advisers have been and
continue to be committed to enhancing stockholder value.
The Board of Directors and the Investment Advisers have continuously
sought to enhance stockholder value by achieving superior performance results
and making high dividend payments to stockholders. The Investment Advisers' fees
are based upon the Fund's NAV. Thus, the Investment Advisers' incentive is to
enhance stockholder value through strong performance. As illustrated above, the
Fund has achieved this strong performance, outperforming MXF and the Mexican
Bolsa Index for the five year period ended June 30, 1999. This achievement has
enhanced stockholder value.
Furthermore, the Fund has been committed to enhancing stockholder value
through high dividend payments. The Fund has been managed to generate high
income consistent with its investment objectives. The Fund has distributed an
aggregate of $138.4 million in cash dividends since its inception, and over
U.S.$50 million since January 1998.
C. Termination of the Investment Advisory Agreements could result in
substantial costs and uncertainty.
Your directors also strongly believe that this proposal is not in the best
interests of the stockholders because terminating the Investment Advisory
Agreements will be costly and will pose considerable uncertainties for the Fund.
If the stockholder proposal is adopted, the directors will have to make new
investment advisory arrangements which would then have to be approved by a
majority of stockholders. The Fund's investment process would be disrupted
considerably by this process. Given the current volatility in the Mexican
markets, this disruption raises even greater risks for the Fund.
Moreover, termination of the Investment Advisory Agreements would be
costly. The directors believe that the difficulty of finding and retaining a new
adviser with comparable experience in the Mexican market, the costs of
negotiating acceptable advisory arrangements with a new adviser and the
disturbance that this would entail to the management of the Fund, would result
in significant expenses for the Fund.
An abrupt termination of the Investment Advisory Agreements would be
expensive for the Fund and would substantially disrupt the vital investment
advisory services it now receives from the Investment
12
<PAGE>
Advisers. In addition, the advisory fees paid to the Investment Advisers are
substantially lower than the fees incurred by other Latin American funds.
Currently, for services rendered to the Fund, the Investment Advisers
receive a monthly advisory fee at an annual rate equal to 0.92% (less than 1%)
of the Fund's average monthly net assets. According to a Lipper Analytical
Services, Inc. survey of 10 funds which invest in the Latin American region,
based upon annual expense numbers from the most recent audited annual reports
for such funds (the "Lipper Survey"), average advisory fees are 1.069% of
average net assets for funds investing in the Latin American region. The Fund's
0.92% advisory fees are thus 13.94% below the average advisory fees for other
funds investing in the Latin American region.
The Fund's directors believe it is highly unlikely that they could
identify and install a new investment adviser with a performance record and fee
arrangement as favorable as that which exists with the Investment Advisers. In
any case, the substantial expense and disruption to the Fund which would result
from this action are completely unwarranted given the excellent performance
record achieved by the Investment Advisers and the comparatively low cost to the
Fund of their advisory services.
Approval of Stockholder Proposal No. 2 would require the affirmative vote
of a majority of the Fund's outstanding shares of common stock. As defined in
the 1940 Act, a "majority of outstanding shares" means the lesser of 67% of the
voting securities present at the Annual Meeting of Stockholders, if a quorum is
present, or 50% of the outstanding securities. For this purpose, both
abstentions and broker non-votes will have the effect of a vote against the
stockholder proposal. If the Investment Advisory Agreements are terminated by
the stockholders at the Annual Meeting of Stockholders, the Board of Directors
will consider the Fund's options which may include, among other alternatives,
liquidating the Fund, merging the Fund with another fund, or searching for
replacement investment advisers.
The directors unanimously agree that this proposal is not in the best
interests of the stockholders of the Fund. The persons named in the enclosed
proxy retain discretion to vote in their best judgment on this proposal for all
proxies submitted to the Fund. It is the current intention of these persons to
exercise that discretion and vote against Stockholder Proposal No. 2.
Statement in Opposition to Stockholder Proposal No. 3
The Board of Directors strongly believes that the proposal to amend the
Fund's Bylaws to provide that all compensation earned by the directors shall be
held in escrow and not paid until the stockholders are able to realize net asset
value for all their shares is not in the best interests of the stockholders.
Your Board of Directors, and the boards of many closed-end funds, are
increasingly faced with stockholder proposals and proxy contests from dissident
stockholders, such as the Proponent's Proposals and proxy solicitation. Your
Board takes seriously its duty to take action and make recommendations in the
best interest of the Fund's stockholders, and to inform the stockholders as to
the Board's position on issues faced by the Fund. The Board believes the
Proponent's proposals are not in the best interest of stockholders. The
reasonable fees paid by the Fund to the Board should not be contingent upon the
success or failure of the Proponent's ill-advised proposals.
Stockholder Proposal No. 3 is subject to the ratification or rejection of
the stockholders of the Fund at the meeting. Stockholder Proposal No. 3 will
require the affirmative vote of a majority of the votes cast at the meeting. For
this purpose, abstentions and broker non-votes will be considered present for
purposes of determining the existence of a quorum for the transaction of
business but, not being cast, will have no effect on the outcome of this matter.
13
<PAGE>
The directors unanimously agree that this proposal is not in the best
interests of the stockholders of the Fund. The persons named in the enclosed
proxy retain discretion to vote in their best judgment on this proposal for all
proxies submitted to the Fund. It is the current intention of these persons to
exercise that discretion and vote against Stockholder Proposal No. 3.
Statement in Opposition to Stockholder Proposal No. 4
The Board of Directors strongly believes that the proposal to amend the
Fund's bylaws to include a provision limiting the Fund's proxy solicitation
expenditures to ordinary expenditures necessary to achieve a quorum and to
provide stockholders with information necessary to intelligently exercise their
vote at a stockholders' meeting involving a proxy contest is not in the best
interests of the stockholders.
Your Board of Directors, and the boards of many closed-end funds, are
increasingly faced with stockholder proposals and proxy contests from dissident
stockholders, such as the Proponent's Proposals and proxy solicitation. Your
Board of Directors does not engage in spurious, unreasonable or unnecessary
solicitation expenditures, but does take seriously its duty to take action and
make recommendations in the best interest of the Fund's stockholders, and to
inform the stockholders as to the Board's position on issues faced by the Fund.
Stockholder Proposal No. 4 is subject to the ratification or rejection of
the stockholders of the Fund at the meeting. Stockholder Proposal No. 4 will
require the affirmative vote of a majority of the votes cast at the meeting. For
this purpose, abstentions and broker non-votes will be considered present for
purposes of determining the existence of a quorum for the transaction of
business but, not being cast, will have no effect on the outcome of this matter.
The directors unanimously agree that this proposal is not in the best
interests of the stockholders of the Fund. The persons named in the enclosed
proxy retain discretion to vote in their best judgment on this proposal for all
proxies submitted to the Fund. It is the current intention of these persons to
exercise that discretion and vote against Stockholder Proposal No. 4.
Statement in Opposition to Mr. Goldstein's Nomination of Himself as a Director
The Board of Directors believes the background and experience of each of
the current directors is impressive and that each of them through the years has
provided the Fund with a balanced view on the various issues that have faced the
Fund. Biographical information for each of these individuals is set forth under
Proposal No. 1 to this Proxy Statement.
Dr. Luis Rubio, a director of the Fund since 1990, is being considered for
re-election by the stockholders. Dr. Rubio's breadth of experience with respect
to the Mexican and international markets has been an invaluable asset to the
Fund. He has many years of experience in investment markets, international
economics and the complex laws and regulations relating to closed-end funds.
The Proponent proposes to elect himself a director. The Proponent's
biographical information indicates that he has no experience with the Mexican
market and very little experience in serving as a director of a registered
investment company or a specialized international fund such as The Mexico Equity
and Income Fund, Inc. Rather, he has been "an advocate for shareholder rights
since 1996."
Your Board of Directors strongly recommends that stockholders vote for Dr.
Rubio for re-election as a director of the Fund.
14
<PAGE>
The Investment Advisers
Advantage serves as U.S. Co-Adviser to the Fund pursuant to a U.S.
Co-Advisory Agreement dated November 3, 1997 (the "U.S. Co-Advisory Agreement").
Advantage is a wholly-owned subsidiary of CIBC World Markets Corp. ("CIBC"),
which is indirectly owned by The Canadian Imperial Bank of Commerce. Advantage
Advisers is an integral division of CIBC's Asset Management group which manages
assets in excess of U.S.$8 billion.
Advantage is a corporation organized under the laws of Delaware on May 31,
1990 and a registered investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). Advantage has served as U.S. Co-Adviser
pursuant to the U.S. Co-Advisory Agreement since the Fund's inception. The
principal business address of Advantage is CIBC World Markets Corp., 200 Liberty
Street, World Financial Center, New York, New York, 10281.
The names titles and principal occupations of the current directors and
executive officers of Advantage are set forth in the following table.(8) The
business address of each person listed below is CIBC World Markets Corp., 200
Liberty Street, World Financial Center, New York, New York, 10281.
Name Title and Principal Occupation
---- ------------------------------
Alan H. Rappaport...... President and a Director of Advantage and a
Managing Director and Director of CIBC
Bruce Renihan Chief Financial Officer and Director of Advantage
Richard Mayell Managing Director and Director of Advantage
Gordon Martin Managing Director of Advantage
Bryan McKigney Executive Director of Advantage
Elliot Ganz Assistant Corporate Secretary of Advantage
Pat Bourdon Corporate Secretary of Advantage
The following table provides information regarding the directors and
officers of the Fund who are also directors, officers or employees of Advantage.
Position with
The Mexico Equity
and Income Fund, Position with
Name Inc. Advantage
---- ----------------- -------------
Alan H. Rappaport............. Chairman of the President and
Board Director
Richard Mayell Vice President Managing Director and
Director
Bryan McKigney President and Executive Director
Secretary
Acci serves as the Mexican adviser to the Fund pursuant to the investment
advisory agreement dated October 14, 1991 (the "Mexican Advisory Agreement").
Acci was organized in 1990 as a company with limited liability under the laws of
Mexico to carry on investment management activities, and is a registered
investment adviser under the Advisers Act. Acci is a wholly owned subsidiary of
Acciones y Valores de Mexico, S.A. de C.V. ("AVM").
- ----------
(6) Effective October 18, 1999, Robert Blum resigned as President and
Secretary of the Fund and Bryan McKigney was elected President and
Secretary of the Fund.
15
<PAGE>
AVM, organized in 1971, provides institutional and brokerage services as
well as financial advice to investors and securities issuers, specializing in
money market, brokerage and corporate finance operations, and provides
investment advice to Mexican investment funds. AVM is one of the leading
brokerage firms in Mexico and is a wholly owned subsidiary of Grupo Financiero
Banamex Accival, S.A. de C.V.
The names, titles and principal occupations of the current directors and
executive officers of Acci are set forth in the following table. The business
address of each person listed below is Paseo de la Reforma 398, Mexico City,
D.F., Mexico 06600.
Name Title and Principal Occupation
---- ------------------------------
Alfredo Loera............ Deputy President of GFBA S.A. and Head of Asset
Management of AVM and Chairman of Acci
Maria Eugenia Pichardo... Managing Director and Asset Management Director of
AVM and Director General and Secretary of Acci
Enrique Garay............ Deputy Managing Director of the Trading Equities
Division of AVM and Deputy Director of Acci
Vidal Lavin ............. Deputy Asset Management Director of AVM and Deputy
Director of Acci
The U.S. Co-Advisory Agreement and the Mexican Advisory Agreement
The Board of Directors of the Fund, including a majority of the directors
who are not "interested persons" (as defined in the 1940 Act), most recently
approved the U.S. Co-Advisory Agreement and the Mexican Advisory Agreement (the
"Investment Advisory Agreements") at the meeting of the Board of Directors of
the Fund held on June 11, 1999. If Stockholder Proposal No. 2 is not approved,
the Investment Advisory Agreements will remain in effect until the June 2000
meeting of the Board of Directors.
Investment Advisory Services
Pursuant to the U.S. Co-Advisory Agreement, Advantage provides advice and
consultation to the Mexican Adviser regarding the Fund's overall investment
strategy and the Mexican Adviser's individual decisions to buy, sell or hold
particular securities including issues regarding international economic
information and macroeconomic issues relating to Mexico and North America.
Advantage also furnishes to the Mexican Adviser investment advice regarding
global and U.S. debt securities, particularly with respect to investments made
during defensive periods, and regarding the Fund's assets held for distribution
or payment of expenses or pending reinvestment in securities. In addition, when
appropriate Advantage makes investment decisions jointly with the Mexican
Adviser regarding any convertible debt security acquisitions made by the Fund
and would participate in the process of negotiating and structuring any future
acquisitions of convertible debt securities directly from Mexican companies.
Advantage also provides investors with information with respect to the
Mexican economy and securities market, the net asset value of the Fund's
portfolio and the general composition of such portfolio, including by making
available to investors a toll free telephone number ((800) 421-4277). Advantage
also supervises and coordinates the work of the Fund's administrator with
respect to regulatory filings and the overall administration of the Fund in the
United States.
Pursuant to the Mexican Advisory Agreement, Acci makes investment
decisions for the Fund, prepares and makes available to the Fund research and
statistical data in connection therewith and
16
<PAGE>
supervises the acquisition and disposition of securities by the Fund, including
the selection of brokers or dealers to carry out such transactions on behalf of
the Fund, subject to the direct participation by the U.S. Co-Adviser in any
investment decisions with respect to investments by the Fund in convertible debt
securities. All decisions to acquire convertible debt securities require the
concurrence of both the Mexican Adviser and the U.S. Co-Adviser. In the case of
securities transactions other than the acquisition of convertible debt
securities, the Mexican Adviser receives advice from, and consults with, the
U.S. Co-Adviser regarding the Fund's overall investment strategy and the Mexican
Adviser's individual decisions to buy, sell or hold particular securities.
Subject to this participation by the U.S. Co-Adviser and the oversight and
supervision of the Fund's Board of Directors, the Mexican Adviser is responsible
for the management of the Fund's portfolio in accordance with the Fund's
investment objectives and policies and for making decisions to buy, sell or hold
particular securities.
Limitation on Liability
The Investment Advisory Agreements provide that the Investment Advisers
are not liable for any act or omission, any error of judgment or of law, or for
any loss suffered by the Fund in connection with matters to which the Investment
Advisory Agreements relate, except by reason of willful misfeasance, bad faith
or gross negligence on the part of the Investment Advisers in the performance of
their obligations and duties or by reason of their reckless disregard of their
obligations and duties under the Investment Advisory Agreements.
Expenses and Advisory Fees
The Mexican Adviser and the U.S. Co-Adviser are each obligated to pay
expenses associated with providing the services contemplated by the agreements
to which they are parties, including compensation of and office space for their
respective officers and employees connected with investment and economic
research, trading and investment management and administration of the Fund, as
well as the fees of all directors of the Fund who are affiliated with those
companies or any of their affiliates. The Fund will bear travel expenses, or an
appropriate fraction thereof, of directors and officers of the Fund who are
directors, officers or employees of the Mexican Adviser or any of its affiliates
or the U.S. Co-Adviser or any of its affiliates to the extent that such expenses
relate to attendance at meetings of the Board of Directors of the Fund or any
committees thereof. The Fund pays all other expenses incurred in the operation
of the Fund including, among other things, expenses for legal and independent
accountants' services, costs of printing proxies, stock certificates and
stockholder reports, charges of the custodian, subcustodian and transfer and
dividend paying agent, expenses in connection with the Dividend Reinvestment
Plan, U.S. Securities and Exchange Commission fees, fees and expenses of
unaffiliated directors, accounting and pricing costs, membership fees in trade
associations, fidelity bond coverage for the Fund's officers and employees,
directors' and officers' errors and omissions insurance coverage, interest,
brokerage costs and stock exchange fees, taxes, stock exchange listing fees and
expenses, expenses of qualifying the Fund's shares for sale in various states
and foreign jurisdictions, litigation and other extraordinary or nonrecurring
expenses, and other expenses properly payable by the Fund.
For its services under the U.S. Co-Advisory Agreement, Advantage receives
a monthly advisory fee, which is payable in U.S. Dollars, at an annual rate
equal to 0.40% of the Fund's average monthly net assets. For the year ended July
31, 1999, the Fund incurred U.S. Co-Advisory fees amounting to U.S.$375,924.
For its services as the Fund's administrator, CIBC receives a monthly fee
at an annual rate of 0.20% of the value of the Fund's average monthly net
assets. For the year ended July 31, 1999, these fees amounted to $187,962.
17
<PAGE>
For its services under the Mexican Advisory Agreement, Acci receives a
monthly fee at an annual rate equal to 0.52% of the Fund's average monthly net
assets. For the year ended July 31, 1999, the Fund incurred Mexican Advisory
fees amounting to U.S.$488,702.
For the fiscal year ended July 31, 1999, the Fund paid brokerage
commissions of U.S.$569,994, and AVM earned 32.12% of such brokerage commissions
in the amount of U.S.$183,092.
Duration and Termination
As indicated above, if Stockholder Proposal No. 2 is not approved by the
stockholders, the Investment Advisory Agreements will remain in effect until the
June 2000 meeting of the Board of Directors, and thereafter will continue in
effect for successive annual periods provided such continuance is specifically
approved at least annually by (i) a majority of the members of the Fund's Board
of Directors who are not parties to such agreements, and who are not "interested
persons" (as defined in the 1940 Act) of any such party, and (ii) a majority of
the Fund's Board of Directors or the holders of a "majority of the outstanding
voting securities" (as defined in the 1940 Act) of the Fund. The Investment
Advisory Agreements may be terminated, without penalty, on 60 days' prior
written notice, by the Fund's Board of Directors, and by a vote of the holders
of a "majority of the outstanding voting securities" of the Fund, or by the
Investment Advisers. In addition, the Investment Advisory Agreements will
terminate automatically in the event of their "assignment" (as defined in the
1940 Act).
Miscellaneous
Proxies will be solicited by mail and may be solicited in person or by
telephone or facsimile by officers of the Fund or personnel of CIBC. The Fund
has retained D.F. King & Co., Inc. to assist in the proxy solicitation. The cost
of their services is estimated at U.S.$35,000, plus reimbursement of expenses.
The expenses connected with the solicitation of these proxies and with any
further proxies which may be solicited by the Fund's officers or agents in
person, by telephone or by telegraph will be borne by the Fund. The Fund will
reimburse banks, brokers, and other persons holding the Fund's shares registered
in their names or in the names of their nominees for their expenses incurred in
sending proxy material to and obtaining proxies from the beneficial owners of
such shares. As of the date hereof, the total expenditures of the Fund for the
solicitation of stockholders was U.S.$_____.
Any of the persons named as attorneys in the enclosed proxy may propose
one or more adjournments to permit further solicitations of proxies. Any such
adjournment will require the affirmative vote of the holders of a majority of
the shares present in person or by proxy at the session of the meeting to be
adjourned. The persons named as attorneys in the enclosed proxy will vote in
favor of such adjournment those proxies which they are entitled to a vote in
favor of the proposal for which further solicitation of proxies is to be made.
They will vote against any such adjournment those proxies required to be voted
against such proposal. The costs of any such additional solicitation and of any
adjourned session will be borne by the Fund.
Stockholder Proposals
In order to submit a stockholder proposal to be considered for inclusion
in the Fund's proxy statement for the Fund's 2000 Annual Meeting of
Stockholders, stockholder proposals must be received by the Fund (addressed to
The Mexico Equity and Income Fund, Inc., World Financial Center, 200 Liberty
Street, New York, New York 10281) not later than June ___, 2000. Any stockholder
who desires to bring a proposal at the Fund's 2000 Annual Meeting of
Stockholders without including such proposal
18
<PAGE>
in the Fund's proxy statement, must deliver written notice thereof to the
Secretary of the Fund (addressed to The Mexico Equity and Income Fund, Inc.,
World Financial Center, 200 Liberty Street, New York, New York 10281) not before
August ___, 2000 and not later than September ___, 2000.
By order of the Board of Directors,
Bryan McKigney
President and Secretary
World Financial Center
200 Liberty Street
New York, New York 10281
October __, 1999
19
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 3, 1999
The undersigned stockholder of The Mexico Equity & Income Fund, Inc. (the
"Fund") hereby appoints Alan H. Rappaport, Laurence E. Cranch and Carmine E.
Angone, and each of them, the proxies of the undersigned, with full power of
substitution, to vote and act for and in the name and stead of the undersigned
at the Annual Meeting of Stockholders of the Fund (the "Meeting"), to be held at
the offices of CIBC World Markets Corp., 200 Liberty Street, 39th floor, New
York, New York 10281, on Friday, December 3, at 11:00am New York time, and at
any and all adjournments thereof according to the number of votes the
undersigned would be entitled to cast if personally present.
PROPOSALS (Please check one box for each proposal.)
1. The election of Dr. Luis Rubio as a Class III Director to serve for a term
expiring on the date on which the Annual Meeting of Stockholders is held in
2002.
|_| FOR |_| WITHHOLD AUTHORITY
the nominee listed below to vote for the nominee listed below
NOMINEE CLASS III: Dr. Luis Rubio
2. The ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for its fiscal year ending July 31, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE FOR PROPOSALS 1 AND 2.
(Continued and to be signed on the other side)
The Shares represented by this proxy will be voted in accordance with
instructions given by the stockholders, but if no instructions are given, this
proxy will be voted in favor of Proposals 1 and 2. In addition, the Shares
represented by this proxy will be voted on any other matter that may come before
the Meeting in accordance with the discretion of the attorneys appointed hereby.
The undersigned hereby revokes any and all proxies with respect to such shares
heretofor given by the undersigned. The undersigned acknowledges receipt of the
Proxy Statement dated October __, 1999.
Dated ______________, 1999
- -----------------------------------
Signature
- -----------------------------------
Signature if held jointly
20
<PAGE>
If shares are held jointly, each Shareholder named should sign. If only one
signs, his or her signature will be binding. If the Shareholder is a
corporation, the President or a Vice President should sign in his or her own
name, indicating title. If the Shareholder is a partnership, a partner should
sign in his or her own name, indicating that he or she is a "Partner."
SIGN, DATE AND MAIL YOUR PROXY TODAY
21
