SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
THE MEXICO EQUITY AND INCOME FUND, INC.
-----------------------------
(Name of Issuer)
THE MEXICO EQUITY AND INCOME FUND, INC.
-----------------------------
(Name of Person Filing Statement)
COMMON STOCK ($0.001 PAR VALUE)
-----------------------------
(Title of Class of Securities)
592834105
-----------------------------
(CUSIP Number of Class of Securities)
Alan H. Rappaport, Chairman
The Mexico Equity and Income Fund, Inc.
World Financial Center
200 Liberty Street
New York, New York 10281
(212) 667-5000
Copy to:
Laurence E. Cranch, Esq.
Leonard B. Mackey, Jr., Esq.
Rogers & Wells LLP
200 Park Avenue
New York, New York 10166
(212) 878-8000
------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person Filing Statement)
Monday, April 12, 1999
------------------------------
(Date Tender Offer First Published, Sent or Given to Security Holders)
- ---------------------------------------------
Transaction Valuation: Amount of Filing Fee:
$ 8,975,380 (a) $ 1,796 (b)
- ---------------------------------------------
(a) Calculated as the aggregate maximum purchase price to be paid for
1,182,527 shares, based upon a price of $7.59 (90% of the net asset value
per share of $8.43 on April 1, 1999).
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
|_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: ___________
Form or Registration No.:__________
Filing Party: ____________________
Date Filed: _______________________
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EXPLANATORY NOTE
Copies of the Offer, dated April 12, 1999, and the Letter of Transmittal, among
other documents, have been filed by The Mexico Equity and Income Fund, Inc. (the
"Fund"), as Exhibits to this Issuer Tender Offer Statement on Schedule 13E-4
(the "Statement"). Unless otherwise indicated, all material incorporated by
reference in this Statement in response to items or sub-items of this Statement
is incorporated by reference to the corresponding caption in the Offer,
including the information stated under such captions as being incorporated in
response thereto.
Item 1. Security and Issuer.
(a) The Mexico Equity and Income Fund, Inc., World Financial Center, 200
Liberty Street, New York, New York 10281.
(b) See the Introduction and Section 1. No securities are to be purchased from
any officer, director or affiliate of the issuer.
(c) See Section 7.
(d) Not applicable.
Item 2. Source and Amount of Funds or Other Consideration.
(a) See Section 5.
(b) Not applicable.
Item 3. Purpose of the Tender Offer and Plans or Proposals of the Issuer or
Affiliate.
See the Introduction, and Sections 5, 6 and 12.
Item 4. Interest in Securities of the Issuer.
See Section 10.
Item 5. Contracts, Arrangements, Understandings or Relationships With Respect to
the Issuer's Securities.
See Section 10.
Item 6. Persons Retained, Employed or to be Compensated.
See Section 13.
Item 7. Financial Information.
(a) See Exhibit A to the Offer dated April 12, 1999.
(b) See Section 5.
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Item 8. Additional Information.
(a) Not applicable.
(b) See Section 11.
(c) Not applicable.
(d) Not applicable.
(e) See Exhibits (a)(1) and (a)(2) of Item 9.
Item 9. Material to be Filed as Exhibits.
Exhibit No. Description
(a)(1) Letter to Shareholders, dated April 12, 1999.
(a)(2) Offer, dated April 12, 1999.
(a)(3) Letter of Transmittal to holders of Common Stock.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients and Client Letter of Instructions to Holder
of Record of Client Shares.
(a)(6) Notice of Guaranteed Delivery.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Dated: April 12, 1999
THE MEXICO EQUITY AND INCOME FUND, INC.
By /s/ ALAN H. RAPPAPORT
------------------------------------
Alan H. Rappaport
Chairman
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EXHIBIT INDEX
Exhibit No. Description
(a)(1) Letter to Shareholders, dated April 12, 1999.
(a)(2) Offer, dated April 12, 1999.
(a)(3) Letter of Transmittal to Holders of Common Stock.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients and Client Letter of Instructions to Holder
of Record of Client Shares.
(a)(6) Notice of Guaranteed Delivery.
THE MEXICO EQUITY AND INCOME FUND, INC.
World Financial Center
200 Liberty Street
New York, New York 10281
DEAR SHAREHOLDER:
At a meeting held on March 5, 1999, the Board of Directors of The Mexico
Equity and Income Fund, Inc. (the "Fund"), voted in favor of a proposal to
conduct a tender offer for shares of the Fund's common stock. Accordingly, the
Fund is hereby commencing an offer to purchase up to 10% of each Shareholder's
shares of common stock of the Fund. The offer is for cash at a price equal to
90% of the Fund's net asset value per share ("NAV") as of 5:00 p.m., New York
City time, on May 14, 1999, or such later date to which the Offer is extended,
upon the terms and conditions set forth in the enclosed Issuer Tender Offer
Statement and the related Letter of Transmittal (which together constitute the
"Offer").
The Offer is intended to provide tendering Shareholders with a benefit to
the extent that the tender price is above the trading price of the Fund's shares
of common stock. The deadline for participating in the Offer is 5:00 p.m., New
York City time, May 14, 1999, or such later date to which the Offer is extended
(the "Termination Date"). The pricing date for the Offer is also 5:00 p.m., New
York City time, May 14, 1999, unless the Offer is extended (the "Pricing Date").
Should the Offer be extended, the Pricing Date will be the same date and time as
the Termination Date, as extended. Shareholders who choose to participate in the
Offer can expect to receive payment for shares tendered and accepted on or
before May 24, 1999 (the "Payment Date").
If, after carefully evaluating all information set forth in the Offer, you
wish to tender shares pursuant to the Offer, please either follow the
instructions contained in the Offer and Letter of Transmittal or, if your shares
are held of record in the name of a broker, dealer, commercial bank, trust
company or other nominee, contact such firm to effect the tender for you.
Shareholders are urged to consult their own investment and tax advisers and make
their own decisions whether to tender any shares.
As of Thursday, April 1, 1999, the Fund's NAV was $8.43 per share and
11,825,273 shares were issued and outstanding. The Fund's NAV during the
pendency of this Offer may be obtained by contacting D.F. King & Co., Inc., the
Fund's Information Agent toll free at (800) 848-2998 or collect at (212)
269-5550.
Neither the Fund nor its Board of Directors (the "Board") is making any
recommendation to any Shareholder whether to tender or refrain from tendering
shares in the Offer. The Fund and the Board urge each Shareholder to read and
evaluate the Offer and related materials carefully and make his or her own
decision. Questions, requests for assistance and requests for additional copies
of this Offer and related materials should be directed to D.F. King & Co., Inc.,
the Fund's Information Agent at (800) 848-2998.
Sincerely,
/s/ Alan H. Rappaport
ALAN H. RAPPAPORT
Chairman
April 12, 1999
OFFER FOR CASH
BY
THE MEXICO EQUITY AND INCOME FUND, INC.
UP TO 1,182,527 OF ITS ISSUED AND OUTSTANDING
SHARES OF BENEFICIAL INTEREST
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON MAY 14, 1999, UNLESS THE OFFER IS EXTENDED.
THIS ISSUER TENDER OFFER STATEMENT AND THE ACCOMPANYING LETTER OF
TRANSMITTAL (WHICH TOGETHER CONSTITUTE THE "OFFER") ARE NOT CONDITIONED ON ANY
MINIMUM NUMBER OF SHARES BEING TENDERED, BUT ARE SUBJECT TO OTHER CONDITIONS AS
OUTLINED HEREIN AND IN THE LETTER OF TRANSMITTAL.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
AND IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE MEXICO
EQUITY AND INCOME FUND, INC. THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR
EXECUTIVE OFFICER OF THE FUND OR AFFILIATES THEREOF INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER.
IMPORTANT
Any Shareholder desiring to tender any portion of his shares of Common
Stock of the Fund should either (1) complete and sign the Letter of Transmittal
or a facsimile thereof in accordance with the instructions in the Letter of
Transmittal, and mail or deliver the Letter of Transmittal or such facsimile
with his certificates for the tendered Shares if such Shareholder has been
issued physical certificates, signature guarantees for all Shareholders
tendering uncertificated Shares, and any other required documents to the
Depositary, or (2) request his broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for him. Shareholders having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee are urged to contact such broker, dealer, commercial bank, trust
company or other nominee if they desire to tender Shares so registered.
Questions, requests for assistance and requests for additional copies of
this Offer and the Letter of Transmittal may be directed to the Information
Agent in the manner set forth on page 13 of this Offer.
April 12, 1999
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TABLE OF CONTENTS
Section Page
Introduction 3
1. Terms of the Offer; Termination Date 3
2. Acceptance for Payment and Payment for Shares 4
3. Procedure for Tendering Shares 4
4. Rights of Withdrawal 6
5. Source and Amount of Funds; Effect of the Offer 7
6. Purpose of the Offer 8
7. NAV And Market Price Range Of Shares; Dividends 9
8. Federal Income Tax Consequences of the Offer 9
9. Certain Information Concerning the Fund and the
Fund's U.S. Co-Adviser and Mexican Adviser 10
10. Interest of Directors and Officers; Transactions
and Arrangements Concerning the Shares 11
11. Certain Legal Matters; Regulatory Approvals 11
12. Certain Conditions of the Offer 11
13. Fees and Expenses 12
14. Miscellaneous 12
15. Contacting the Depositary and the Information Agent 12
<PAGE>
To the Shareholders of Common Stock of The Mexico Equity and Income Fund, Inc.
Introduction
The Mexico Equity and Income Fund, Inc., a Maryland corporation (the
"Fund") registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a closed-end, non-diversified management investment company,
hereby offers to purchase up to 10% of each Shareholder's shares or 1,182,527
shares in the aggregate (the "Offer Amount"), of its Common Stock, par value
$0.001 per share (the "Shares"), at a price (the "Purchase Price") per Share,
net to the seller in cash, equal to 90% of the net asset value in U.S. dollars
("NAV") per share as of 5:00 p.m., New York City time, on May 14, 1999, or such
later date to which the Offer is extended (the "Termination Date"), upon the
terms and subject to the conditions set forth in this Issuer Tender Offer
Statement and in the related Letter of Transmittal (which together constitute
the "Offer"). Each Shareholder of the Fund may tender up to 10% of his or her
Shares of the Fund. The Fund has mailed materials to record holders on or about
April 12, 1999, for the Offer.
THIS OFFER IS BEING OFFERED TO ALL SHAREHOLDERS OF THE FUND AND IS NOT
CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED, BUT IS SUBJECT TO
OTHER CONDITIONS AS OUTLINED HEREIN AND IN THE LETTER OF TRANSMITTAL.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
AND IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE MEXICO
EQUITY AND INCOME FUND, INC. THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR
EXECUTIVE OFFICER OF THE FUND OR AFFILIATES THEREOF INTENDS TO TENDER ANY SHARES
PURSUANT TO THE OFFER.
As of April 1, 1999, there were outstanding 11,825,273 shares issued and
outstanding, and the NAV was $8.43 per share. The Fund does not expect that the
number of shares issued and outstanding will be materially different on the
Termination Date. Shareholders may contact D.F. King & Co., Inc., the Fund's
Information Agent at (800) 848-2998 to obtain current NAV quotations for the
Shares.
Any Shares acquired by the Fund pursuant to the Offer will become treasury
shares and will be available for issuance by the Fund without further
Shareholder action (except as required by applicable law). Tendering
Shareholders will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares by the Fund; however, the Shareholders may be subject to
other transaction costs, as described in Section 1.
1. Terms of the Offer; Termination Date. Upon the terms and subject to the
conditions set forth in the Offer, the Fund will accept for payment, and pay
for, up to 10% of each Shareholder's Shares validly tendered on or prior to 5:00
p.m., New York City time, on May 14, 1999, or such later date to which the Offer
is extended (the "Termination Date"), and not withdrawn as permitted by Section
4.
If the number of Shares properly tendered and not withdrawn prior to the
Termination Date is less than or equal to the Offer Amount, the Fund will, upon
the terms and conditions of the Offer, purchase all Shares so tendered.
The Fund will not purchase more than 10% of each Shareholder's Shares
("Permitted Tender"); provided, however, that the Fund will accept all Shares
tendered by any Shareholder who owns, beneficially or of record, an aggregate of
not more than 99 Shares and who tenders all such Shares by means of the Letter
of Transmittal tendered by or on behalf of that Shareholder.
Shareholders should consider the relative costs of tendering Shares at a
10% discount to NAV pursuant to the Offer or selling Shares at the market price
with the associated transaction costs.
The Fund expressly reserves the right, in its sole discretion, at any time
or from time to time, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depositary. Any
such extension will also be publicly announced by press release issued no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Termination Date. If the Fund makes a material change
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<PAGE>
in the terms of the Offer or the information concerning the Offer, or if it
waives a material condition of the Offer, the Fund will extend the Offer to the
extent required by Rules 13e-4(d)(2) and 13e-4(e)(2) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). During any extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering Shareholder to withdraw his Shares.
Subject to the terms and conditions of the Offer, the Fund will pay the
consideration offered or return the tendered securities promptly after the
termination or withdrawal of the Offer. Any extension, delay, termination, or
amendment will be followed as promptly as practicable by public announcement
thereof, such announcement, in the case of an extension, to be issued no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Termination Date.
2. Acceptance for Payment and Payment for Shares. Upon the terms and
subject to the conditions of the Offer, the Fund will accept for payment, and
will pay for, Shares validly tendered on or before the Termination Date and not
properly withdrawn in accordance with Section 4 as soon as practicable after the
Termination Date. In all cases, payment for Shares tendered and accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (unless such Shares are held in
uncertificated form), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), and any other documents required by the
Letter of Transmittal. The Fund expressly reserves the right, in its sole
discretion, to delay the acceptance for payment of, or payment for, Shares, in
order to comply, in whole or in part, with any applicable law.
For purposes of the Offer, the Fund will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when the Fund gives
oral or written notice to the Depositary of its acceptance for payment of such
Shares pursuant to the Offer. Payment for Shares accepted for payment pursuant
to the Offer will be made by deposit of the aggregate purchase price therefor
with the Depositary, which will act as agent for the tendering Shareholders for
purpose of receiving payments from the Fund and transmitting such payments to
the tendering Shareholders. Under no circumstances will interest on the purchase
price for Shares be paid, regardless of any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or are not paid because of an
invalid tender, or if certificates are submitted for more Shares than are
tendered (i) certificates for such unpurchased Shares will be returned, without
expense to the tendering Shareholder, as soon as practicable following
expiration or termination of the Offer, (ii) Shares delivered pursuant to the
Book-Entry Delivery Procedures will be credited to the appropriate account
maintained within the appropriate Book-Entry Transfer Facility and (iii)
uncertificated Shares held by the Fund's transfer agent pursuant to the Fund's
dividend reinvestment plan will be returned to the dividend reinvestment plan
account maintained by the transfer agent.
If the Fund is delayed in its acceptance for payment of, or in its payment
for, Shares, or is unable to accept for payment or pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Fund's rights under
this Offer, the Depositary may, on behalf of the Fund, retain tendered Shares,
and such Shares may not be withdrawn unless and except to the extent tendering
Shareholders are entitled to withdrawal rights as described in Section 4.
The purchase price of the Shares will equal 90% of their NAV (a 10%
discount) at 5:00 p.m., New York City time, on May 14, 1999, or such later date
to which the Offer is extended (the "Pricing Date"). Tendering Shareholders will
not be obliged to pay brokerage commissions, fees, or except in the
circumstances set forth in Instruction 6 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by the Fund.
The Fund normally calculates the NAV of its Shares each Thursday at the
close of regular trading on the NYSE. On April 1, 1999, the NAV was $8.43 per
Share. The Shares are listed on the NYSE. On April 1, 1999, the last sales price
at the close of regular trading on the NYSE was $6.9375 per Share. The NAV of
the Fund's Shares will be available weekly through May 7, 1999, and daily from
May 10, 1999 until the Termination Date, through the Fund's Information Agent at
(800) 848-2998.
3. Procedure for Tendering Shares. Shareholders having Shares that are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee should contact such firm if they desire to tender their Shares.
For a Shareholder validly to tender Shares pursuant to the Offer, (a)(i) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, and any other
documents required by the Letter of Transmittal, must be transmitted to and
received by the Depositary at one of its addresses set forth on page 13 of this
Offer, and (ii) either the certificate for Shares must be transmitted to and
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received by the Depositary at one of its addresses set forth on page 13 of this
Offer, or the tendering Shareholder must comply with the Book-Entry Delivery
Procedure set forth in this Section 3, or (b) Shareholders must comply with the
Guaranteed Delivery Procedure set forth in this Section 3, in all cases prior to
the Termination Date. Shareholders must include in the Letter of Transmittal (or
facsimile thereof) a representation stating that such Shareholder is tendering
no more than 10% of the Shares owned by such Shareholder or attributed to it, or
a representation that such Shareholder owns 99 Shares or less.
The Fund's transfer agent holds Shares in uncertificated form for certain
Shareholders pursuant to the Fund's dividend reinvestment plan. Shareholders may
tender such uncertificated Shares, subject to the 10% limitation discussed
herein, by completing the appropriate section of the Letter of Transmittal or
Notice of Guaranteed Delivery.
Signatures on Letters of Transmittal must be guaranteed by a member firm
of a registered national securities exchange or of the National Association of
Securities Dealers, Inc. (the "NASD"), or by a commercial bank or trust company
having an office, branch or agency in the United States (each an "Eligible
Institution") unless (i) the Letter of Transmittal is signed by the registered
holder of the Shares tendered, including those Shareholders who are participants
in a Book-Entry Transfer Facility and whose name appears on a security position
listing as the owner of the Shares, but excluding those registered Shareholders
who have completed either the "Special Payment Instructions" box or the "Special
Delivery Instructions" box on the Letter of Transmittal, or (ii) such Shares are
tendered for the account of an Eligible Institution. In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of the Letter of Transmittal for further
information.
To prevent U.S federal income tax backup withholding on payments made for
the purchase of Shares purchased pursuant to the Offer, a Shareholder who does
not otherwise establish an exemption from such backup withholding must provide
the Depositary with his correct taxpayer identification number and certify that
he is not subject to backup withholding by completing the Substitute Form W-9
included with the Letter of Transmittal. Foreign Shareholders who have not
previously submitted a Form W-8 to the Fund must do so in order to avoid backup
withholding. If the Fund's purchase of Shares were treated as a dividend rather
than an exchange with respect to a tendering Shareholder, such Shareholder may
be subject to backup withholding if the Internal Revenue Service so advised the
Fund, or if such Shareholder failed to certify that such Shareholder is not
subject to backup withholding. See Section 8, "Federal Income Tax Consequences,"
below.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by the Fund, in its sole discretion, which determination shall be final and
binding. The Fund reserves the absolute right to reject any and all tenders of
Shares it determines not to be in proper form or the acceptance for payment of
which may, in the opinion of its counsel, be unlawful. The Fund also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Shares. No tender of Shares will be deemed to
have been validly made until all defects and irregularities have been cured or
waived. Neither the Fund, Advantage Advisers, Inc., the Fund's U.S. Co-Adviser
(the "U.S. Co-Adviser"), Acci Worldwide, S.A. de C.V., the Fund's Mexican
Adviser (the "Mexican Adviser"), the Information Agent, the Depositary, nor any
other person shall be under any duty to give notification of any defects or
irregularities in tenders, nor shall any of the foregoing incur any liability
for failure to give any such notification. The Fund's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and
instructions thereto) will be final and binding.
Payment for Shares tendered and accepted for payment pursuant to the Offer
will be made, in all cases, only after timely receipt of (i) certificates for
such Shares by the Depositary or book-entry confirmation of delivery of such
Shares to the account of the Depositary, (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) for such Shares, and (iii)
any other documents required by the Letter of Transmittal. The tender of Shares
pursuant to any of the procedures described in this Section 3 will constitute an
agreement between the tendering Shareholder and the Fund upon the terms and
subject to the conditions of the Offer.
The method of delivery of all required documents is at the election and
risk of each tendering Shareholder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended.
Book-Entry Delivery Procedure
The Depositary will establish accounts with respect to the Shares at the
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer. Any finan-
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cial institution that is a participant in any of the Book-Entry Transfer
Facility's systems may make delivery of tendered Shares by (i) causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with such Book-Entry Transfer Facility's procedure for
such transfer and (ii) causing a confirmation of receipt of such delivery to be
received by the Depositary. The Book-Entry Transfer Facility may charge the
account of such financial institution for tendering Shares on behalf of
Shareholders. Notwithstanding that delivery of Shares may be properly effected
in accordance with this Book-Entry Delivery Procedure, the Letter of Transmittal
(or facsimile thereof), with signature guarantee, if required, and all other
documents required by the Letter of Transmittal must be transmitted to and
received by the Depositary at the appropriate address set forth on page 13 of
this Offer before the Termination Date, or the tendering Shareholder must comply
with the Guaranteed Delivery Procedure set forth below. Delivery of documents to
a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary for
purposes of this Offer.
Guaranteed Delivery Procedure
If certificates for Shares are not immediately available or time will not
permit the Letter of Transmittal and other required documents to reach the
Depositary prior to the Termination Date, Shares may be properly tendered
provided that (i) such tenders are made by or through an Eligible Institution
and (ii) the Depositary receives, prior to the Termination Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by the Fund (delivered by hand, mail, telegram, telex or facsimile
transmission) and (iii) the certificates for all tendered Shares, or
confirmation of the delivery of Shares delivered into the Depositary's account
in accordance with such Book-Entry Transfer Facility's procedure for such
transfer, together with a properly completed and duly executed Letter of
Transmittal and any other documents required by the Letter of Transmittal, are
received by the Depositary within three business days after the Termination Date
(the "Guaranteed Delivery Deadline").
4. Rights of Withdrawal. Tenders of Shares made pursuant to the Offer may
be withdrawn at any time prior to the Termination Date, unless the Offer is
extended. After the Termination Date or the date to which the Offer is extended,
whichever is later, all tenders made pursuant to the Offer are irrevocable.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on page 13 of this Offer. Any notice of withdrawal must
specify the name of the person who executed the particular Letter of Transmittal
or Notice of Guaranteed Delivery, the number of Shares to be withdrawn, and the
names in which the Shares to be withdrawn are registered. Any signature on the
notice of withdrawal must be guaranteed by an Eligible Institution. If
certificates have been delivered to the Depositary, the name of the registered
holder and the serial numbers of the particular certificates evidencing the
Shares withdrawn must also be furnished to the Depositary. If Shares have been
delivered pursuant to the Book-Entry Delivery Procedure set forth in Section 3,
any notice of withdrawal must specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares (which must be the same name, number, and Book-Entry Transfer Facility
from which the Shares were tendered), and must comply with the procedures of
that Book-Entry Transfer Facility.
All questions as to the form and validity, including time of receipt, of
any notice of withdrawal will be determined by the Fund, in its sole discretion,
which determination shall be final and binding. Neither the Fund, the Fund's
U.S. Co-Adviser, the Fund's Mexican Adviser, the Information Agent, the
Depositary, nor any other person shall be under any duty to give notification of
any defects or irregularities in any notice of withdrawal, nor shall any of the
foregoing incur any liability for failure to give such notification. Any Shares
properly withdrawn will be deemed not to have been validly tendered for purposes
of the Offer. However, withdrawn Shares may be re-tendered by following the
procedures described in Section 3 at any time prior to the Termination Date.
If the Fund is delayed in its acceptance for payment of Shares, or is
unable to accept for payment Shares tendered pursuant to the Offer, for any
reason, then, without prejudice to the Fund's rights under this Offer, the
Depositary may, on behalf of the Fund, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering Shareholders are
entitled to withdrawal rights as set forth in this Section 4.
6
<PAGE>
5. Source and Amount of Funds; Effect of the Offer. The actual cost to the
Fund cannot be determined at this time because the number of Shares to be
purchased will depend on the number tendered, and the price will be based on the
NAV per Share on the Pricing Date. If the NAV per Share on the Pricing Date were
the same as the NAV per Share on April 1, 1999, and if each Shareholder tenders
10% of his or her Shares pursuant to the Offer, the estimated payments by the
Fund to Shareholders would be approximately $8,975,380. See the Pro Forma
Capitalization table below.
The monies to be used by the Fund to purchase Shares pursuant to the Offer
will be obtained from cash and from sales of securities in the Fund's investment
portfolio.
The Offer may have certain adverse consequences for tendering and
non-tendering Shareholders.
Effect on NAV and Consideration Received by Tendering Shareholders. If the
Fund is required to sell a substantial amount of portfolio securities to raise
cash to finance the Offer, the market prices of the Fund's portfolio securities,
and hence the Fund's NAV, may decline. If such a decline occurs, the Fund cannot
predict what its magnitude might be or whether such a decline would be temporary
or continue to or beyond the Termination Date. Because the price per Share to be
paid in the Offer will be dependent upon the NAV per Share as determined on the
Termination Date, if such a decline continued up to the Termination Date, the
consideration received by tendering Shareholders would be reduced. In addition,
the sale of portfolio securities will cause increased brokerage and related
transaction expenses, and the Fund may receive proceeds from the sale of
portfolio securities less than their valuations by the Fund. Accordingly,
because of the Offer, the Fund's NAV per Share may decline more than it
otherwise might, thereby reducing the amount of proceeds received by tendering
Shareholders and the value per Share for non-tendering Shareholders.
Shareholders should note, however, that the Offer may result in accretion
to the Fund's NAV per share, following the Offer, due to the fact that the
Purchase Price represents a 10% discount to the Fund's NAV per share. The
potential accretion to the Fund's NAV per share may offset in whole or in part
any decline in the Fund's NAV as discussed above.
The Fund will sell portfolio securities during the pendency of the Offer
to raise cash for the purchase of Shares. Thus, during the pendency of the
Offer, and possibly for a short time thereafter, the Fund will hold a greater
than normal percentage of its net assets in cash and cash equivalents. The Fund
is required by law to pay for tendered Shares it accepts for payment promptly
after the Termination Date of this Offer. Because the Fund will not know the
number of Shares tendered until the Termination Date, the Fund will not know
until the Termination Date the amount of cash required to pay for such Shares.
If on or prior to the Termination Date the Fund does not have, or believes it is
unlikely to have, sufficient cash to pay for all Shares tendered, it may extend
the Offer to allow additional time to sell portfolio securities and raise
sufficient cash.
Recognition of Capital Gains. As noted, the Fund will likely be required
to sell portfolio securities pursuant to the Offer. If the Fund's tax basis for
the securities sold is less than the sale proceeds, the Fund will recognize
capital gains. The Fund would expect to declare any such gains to Shareholders
of record (reduced by net capital losses realized during the fiscal year, if
any, and available capital loss carryforwards) following the end of the Fund's
fiscal year on July 31st but before December 31st of the same calendar year, and
distribute such gains in January of the next calendar year. This recognition and
distribution of gains, if any, would have two negative consequences: first,
Shareholders at the time of a declaration of distributions would be required to
pay taxes on a greater amount of capital gain distributions than otherwise would
be the case; and second, to raise cash to make the distributions, the Fund might
need to sell additional portfolio securities, thereby possibly being forced to
realize and recognize additional capital gains. It is impossible to predict what
the amount of unrealized gains or losses would be in the Fund's portfolio at the
time that the Fund is required to liquidate portfolio securities (and hence the
amount of capital gains or losses that would be realized and recognized). As of
December 31, 1998, there was unrealized depreciation of over $31,479,093 in the
Fund's portfolio as a whole, and as of July 31, 1998, there were no capital loss
carryforwards that for tax purposes could offset some or all of any gains
actually realized.
In addition, some of the distributed gains may be realized on securities
held for one year or less, which would generate income taxable to the
Shareholders at ordinary income rates. This could adversely affect the Fund's
performance.
Tax Consequences of Repurchases to Shareholders. The Fund's purchase of
tendered Shares pursuant to the
7
<PAGE>
Offer will have tax consequences for tendering Shareholders and may have tax
consequences for non-tendering Shareholders. See Section 8, "Federal Income Tax
Consequences," below.
Higher Expense Ratio and Less Investment Flexibility. If the Fund
purchases a substantial number of Shares pursuant to the Offer, the net assets
of the Fund would be reduced accordingly. The reduced net assets of the Fund as
a result of the Offer will result in a higher expense ratio for the Fund, and
possibly in less investment flexibility for the Fund, depending on the number of
Shares repurchased.
Pro Forma Affects on Capitalization. The following table sets forth the
net assets of the Fund as of April 1, 1999, adjusted to give effect to the Offer
(excluding expenses and assuming the Fund repurchases 10% of its outstanding
Shares):
PRO FORMA CAPITALIZATION (1)
Adjustment for
As of April 1, Purchase at $7.59 Pro Forma As
1999 Per Share (2) Adjusted
-------------- ----------------- ------------
Total net assets .......... $99,632,731 $8,975,380 $90,657,351
Shares outstanding ........ 11,825,273 1,182,527 10,642,746
NAV per Share (3) ......... $8.43 $7.59 $8.52
- ----------
(1) This table assumes purchase by the Fund of 1,182,527 Shares, equal to 10%
of the Fund's outstanding Shares.
(2) This amount represents the Fund's NAV as determined on April 1, 1999.
Shares tendered pursuant to the Offer will be purchased at a 10% discount
to NAV on the Pricing Date, which may be more or less than $7.59 per
Share, and the pro forma NAV per Share also may be more or less.
(3) The NAV per Share of the Fund is normally determined each Friday that the
NYSE is open, as of the close of regular trading on the NYSE, and is
determined by dividing the total net assets of the Fund by the number of
Shares outstanding.
6. Purpose of the Offer. Since the Fund's inception, the Board of
Directors has consistently recognized that it would be in the best interests of
Shareholders to attempt to reduce or eliminate any discount at which the Fund's
Shares may trade to their NAV. At a special meeting of the Board held on March
5, 1999, the Board determined to conduct a tender offer for shares of the Fund's
common stock, and determined to engage in share repurchases to attempt to reduce
the market discount at which the Fund's Shares were currently trading. The Board
committed the Fund to conduct a tender offer beginning in April 1999 for up to
10% of each Shareholder's Shares. The Board determined to conduct the tender
offer at a price equal to 90% of the Fund's NAV on the termination of the Offer.
The Board has determined to effect this Offer under Section 13e-4 of the
Exchange Act.
Any Shares acquired by the Fund pursuant to the Offer will become treasury
Shares and will be available for issuance by the Fund without further
Shareholder action (except as required by applicable law or the rules of
national securities exchanges on which the Shares are listed).
NEITHER THE FUND, NOR ITS BOARD OF DIRECTORS, NOR THE U.S. CO-ADVISER, NOR
THE MEXICAN ADVISER MAKES ANY RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO
TENDER OR REFRAIN FROM TENDERING ANY OF SUCH SHAREHOLDER'S SHARES AND NONE OF
SUCH PERSONS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION.
SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE OFFER,
CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS
WHETHER TO TENDER SHARES.
8
<PAGE>
7. NAV And Market Price Range Of Shares; Dividends. The Shares are traded
on the NYSE. During each fiscal quarter of the Fund during the past two fiscal
years, the NAV (as of the last day of such fiscal quarter), and the High, Low
and Closing Market Price per Share (as of the last day of such fiscal quarter)
were as follows:
Market Price Net Asset Value
------------------------------- ---------------
Fiscal Quarter Ended High Low Close
------ -------- --------
October 31, 1996 ........... $11.25 $ 9.375 $ 9.50 $12.06
January 31, 1997 ........... $10.50 $ 9.25 $10.25 $12.41
April 30, 1997 ............. $10.875 $10.00 $10.25 $12.90
July 31, 1997 .............. $14.125 $10.25 $14.125 $16.83
October 31, 1997 ........... $14.813 $11.50 $12.50 $15.38
January 31, 1998 ........... $13.688 $ 9.563 $ 9.75 $11.88
April 30, 1998 ............. $10.438 $ 9.313 $ 9.688 $12.45
July 31, 1998 .............. $ 9.625 $ 7.75 $ 7.75 $10.16
October 31, 1998 ........... $ 7.563 $ 4.50 $ 6.25 $ 7.80
January 31, 1999 ........... $ 6.50 $ 4.438 $ 5.25 $ 6.57
IT IS ANTICIPATED THAT NO CASH DIVIDEND WILL BE DECLARED BY THE BOARD OF
DIRECTORS WITH A RECORD DATE OCCURRING BEFORE THE EXPIRATION OF THE OFFER AND
THAT, ACCORDINGLY, HOLDERS OF SHARES PURCHASED PURSUANT TO THE OFFER WILL NOT
RECEIVE ANY SUCH DIVIDEND WITH RESPECT TO SUCH SHARES. THE AMOUNT AND FREQUENCY
OF DIVIDENDS IN THE FUTURE WILL DEPEND ON CIRCUMSTANCES EXISTING AT THAT TIME.
8. Federal Income Tax Consequences of the Offer. The U.S. federal income
tax discussion set forth below is a summary included for general information
purposes only. In view of the individual nature of tax consequences, each
Shareholder is advised to consult its own tax adviser with respect to the
specific tax consequences to it of participation in the Offer, including the
effect and applicability of state, local, foreign, and other tax laws and the
possible effects of changes in federal or other tax laws.
The sale of Shares pursuant to the Offer will be a taxable transaction for
federal income tax purposes, either as a "sale or exchange," or under certain
circumstances, as a "dividend." Under Section 302(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), a sale of Shares pursuant to the Offer
generally will be treated as a "sale or exchange" if the receipt of cash by the
Shareholder: (a) results in a "complete termination" of the Shareholder's
interest in the Fund, (b) is "substantially disproportionate" with respect to
the Shareholder, or (c) is "not essentially equivalent to a dividend" with
respect to the Shareholder. In determining whether any of these tests has been
met, Shares actually owned, as well as Shares considered to be owned by the
Shareholder by reason of certain constructive ownership rules set forth in
Section 318 of the Code, generally must be taken into account. If any of these
three tests for "sale or exchange" treatment is met, a Shareholder will
recognize gain or loss equal to the difference between the price paid by the
Fund for the Shares purchased in the Offer and the Shareholder's adjusted basis
in such Shares. If such Shares are held as a capital asset, the gain or loss
will be capital gain or loss. The maximum tax rate applicable to net capital
gains recognized by individuals and other non-corporate taxpayers is (i) the
same as the applicable ordinary income rate for capital assets held for one year
or less or (ii) 20% for capital assets held for more than one year.
If none of the tests set forth in Section 302(b) of the Code is met,
amounts received by a Shareholder who sells Shares pursuant to the Offer will be
taxable to the Shareholder as a "dividend" to the extent of such Shareholder's
allocable share of the Fund's current or accumulated earnings and profits. To
the extent that amounts received exceed such Shareholder's allocable share of
the Fund's current and accumulated earnings and profits, such excess will
constitute a non-taxable return of capital (to the extent of the Shareholder's
adjusted basis in the Shares sold pursuant to the Offer) and any amounts in
excess of the Shareholder's adjusted basis will constitute taxable gain. Thus, a
Shareholder's adjusted basis in the Shares sold will not reduce the amount of
the "dividend." Any remaining adjusted basis in the Shares tendered to the Fund
will be transferred to any remaining Shares held by such Shareholder. In
addition, if a tender of Shares is treated as a "dividend" to a tendering
Shareholder, a constructive dividend under Section 305(c) of the Code may result
to a non-tendering Shareholder whose proportionate interest in the earnings and
assets of the Fund has been increased by such tender. Because each tendering
Shareholder may tender no more than 10% of its shareholding, the sale of shares
will not satisfy the tests described above for a "complete termina-
9
<PAGE>
tion" of a Shareholder's interest or a "substantially disproportionate
redemption." The Fund believes, however, that the nature of the repurchase will
be such that the sale of Shares pursuant to the Offer will normally satisfy the
test for a sale that is "not essentially equivalent to a dividend" and therefore
will qualify for "sale or exchange" treatment (as opposed to "dividend"
treatment).
Foreign Shareholders. Any payments to a tendering Shareholder who is a
nonresident alien individual, a foreign trust or estate or a foreign corporation
that does not hold his, her or its shares in connection with a trade or business
conducted in the United States (a "foreign Shareholder") that are treated as
dividends for U.S. federal income tax purposes under the rules set forth above,
will be subject to U.S. withholding tax at the rate of 30% (unless a reduced
rate applies under an applicable tax treaty). A tendering foreign Shareholder
who realizes a capital gain on a tender of Shares will not be subject to U.S.
Federal income tax on such gain, unless the shareholder is an individual who is
physically present in the United States for 183 days or more and certain other
conditions are satisfied. Such persons are advised to consult their own tax
advisers. Special rules may apply in the case of foreign Shareholders (i) that
are engaged in a U.S. trade or business, (ii) that are former citizens or
residents of the United States or (iii) that are "controlled foreign
corporations", "foreign personal holding companies', corporations that
accumulate earnings to avoid U.S. federal income tax, and certain foreign
charitable organizations. Such persons are advised to consult their own tax
advisers.
Backup Withholding. The Fund generally will be required to withhold tax at
the rate of 31% ("backup withholding") from any payment to a tendering
Shareholder that is an individual (or certain other non-corporate persons) if
the Shareholder fails to provide to the Fund its correct taxpayer identification
number. If the payment by the Fund to any such Shareholder is treated as a
dividend rather than a "sale or exchange" as described above, backup withholding
also will be required with respect to that payment if the Internal Revenue
Service advises the Fund that the shareholder is subject to backup withholding
for prior underreporting of reportable interest or dividend payments or if the
Shareholder fails to certify that it is not subject thereto. A foreign
Shareholder generally will be able to avoid backup withholding with respect to
payments by the Fund that are treated as made in exchange for tendered Shares
only if it furnishes to the Fund a duly completed Form W-8, signed under penalty
of perjury, stating that it (1) is neither a citizen nor a resident of the
United States, (2) has not been and reasonably does not expect to be present in
the United States for a period aggregating 183 days or more during the calendar
year, and (3) reasonably expects not to be engaged in a trade or business within
the United States to which the gain on sale of the Shares would be effectively
connected. Backup withholding is not an additional tax, and any amounts withheld
may be credited against a Shareholder's U.S. federal income tax liability.
9. Certain Information Concerning the Fund and the Fund's U.S. Co-Adviser
and Mexican Adviser. The Fund is a closed-end, non-diversified management
investment company organized as a Maryland corporation. The Shares were first
issued to the public on August 21, 1990. As a closed-end investment company, the
Fund differs from an open-end investment company (i.e., a mutual fund) in that
it does not redeem its Shares at the election of a Shareholder and does not
continuously offer its Shares for sale to the public. The Fund's investment
objective is to seek high total return through capital appreciation and current
income. It is the Fund's policy to invest at least 50% of its assets in equity
and convertible debt securities issued by Mexican companies and the remainder of
its assets in debt (other than convertible debt securities of Mexican issuers)
and, for cash management or temporary defensive purposes, in certain high
quality short-term debt instruments.
Advantage Advisers, Inc. serves as U.S. Co-Adviser to the Fund. The U.S.
Co-Adviser is a wholly-owned subsidiary of CIBC Oppenheimer Corp. ("CIBC OpCo"),
which is indirectly owned by The Canadian Imperial Bank of Commerce. The U.S.
Co-Adviser 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"). The U.S. Co-Adviser has served as U.S.
Co-Adviser since the Fund's inception. The principal business address of the
U.S. Co-Adviser is CIBC Oppenheimer Tower, 200 Liberty Street, One World
Financial Center, New York, New York, 10281.
Acci Worldwide, S.A. de C.V. serves as the Mexican Adviser to the Fund.
The Mexican Adviser 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. The Mexican Adviser is a
wholly owned subsidiary of Acciones y Valores de Mexico, S.A. de C.V. ("AVM").
AVM, organized in 1971, provides institutional and brokerage services as well as
financial advice to investors and securities issuers, specializing in money
market,
10
<PAGE>
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. ("Grupo Banacci"). AVM holds 100% of the capital stock of ACCI Securities,
Inc., a securities brokerage firm incorporated in Delaware in June 1990, with
its principal place of business in New York. ACCI Securities, Inc. is registered
as a broker-dealer with the United States Securities and Exchange Commission and
effects transactions as a broker in Mexican securities, primarily for U.S.
institutional investors and, solely incidental thereto, provides investment
advice and research. The business address of the Mexican Adviser is Paseo de la
Reforma 398, Mexico City, D.F., Mexico 06600.
Exhibit A to this Offer contains the Fund's audited financial statements
for the fiscal year ended July 31, 1998 and the Fund's unaudited financial
statements for the semi-annual period ended January 31, 1999.
The Fund is subject to the information and reporting requirements of the
1940 Act and in accordance therewith is obligated to file reports and other
information with the Commission relating to its business, financial condition
and other matters. The Fund has also filed an Issuer Tender Offer Statement on
Schedule 13E-4 with the Commission. Such reports and other information should be
available for inspection at the public reference room at the Commission's office
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C., and also should be
available for inspection and copying at the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois; 7 World Trade Center, New York, New York. The Fund's filings
are also available to the public on the Commission's internet site
(http://www.sec.gov). Copies may be obtained, by mail, upon payment of the
Commission's customary charges, by writing to its principal office at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
10. Interest of Directors and Officers; Transactions and Arrangements
Concerning the Shares. Except as set forth in this Section 10, neither the Fund
nor any subsidiary of the Fund nor, to the best of the Fund's knowledge, any of
the Fund's officers or directors, or associates of any of the foregoing, has
effected any transaction in Shares during the past 40 business days. Alan H.
Rappaport acquired 10,000 shares of Common Stock at $7.375 per share on April 6,
1999 in the open market. Except as set forth in this Offer, neither the Fund,
nor, to the best of the Fund's knowledge, any of the Fund's officers or
directors, nor any of the officers or directors of any of its subsidiaries, is a
party to any contract, arrangement, understanding or relationship with any other
person relating, directly or indirectly to the Offer with respect to any
securities of the Fund, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations.
11. Certain Legal Matters; Regulatory Approvals. The Fund is not aware of
any approval or other action by any government or governmental, administrative
or regulatory authority or agency, domestic or foreign, that would be required
for the acquisition or ownership of Shares by the Fund as contemplated herein.
Should any such approval or other action be required, the Fund presently
contemplates that such approval or other action will be sought. The Fund is
unable to predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained without substantial
conditions or that the failure to obtain any such approval or other action might
not result in adverse consequences to the Fund's business. The Fund's
obligations under the Offer to accept for payment and pay for Shares are subject
to certain conditions described in Section 12.
12. Certain Conditions of the Offer. Notwithstanding any other provision
of the Offer, the Fund shall not be required to accept for payment or pay for
any Shares, may postpone the acceptance for payment of, or payment for, tendered
Shares, and may, in its reasonable discretion, terminate or amend the Offer as
to any Shares not then paid for if (1) such transactions, if consummated, would
(a) result in delisting of the Fund's Common Stock from the NYSE or (b) impair
the Fund's status as a regulated investment company under the Code (which would
make the Fund subject to U.S. federal income taxes on all of its income and
gains in addition to the taxation of shareholders who receive distributions from
the Fund); (2) the amount of shares of Common Stock tendered would require
liquidation of such a substantial portion of the Fund's securities that the Fund
would not be able to liquidate portfolio securities in an orderly manner in
light of the existing market conditions and such liquidation would have an
adverse effect on the NAV of the Fund to the detriment of non-tendering
shareholders; (3) there is any (a) in the
11
<PAGE>
Board of Directors' judgment, material legal action or proceeding instituted or
threatened challenging such transactions or otherwise materially adversely
affecting the Fund, (b) suspension of or limitation on prices for trading
securities generally on the NYSE or other national securities exchange(s), or
the NASDAQ National Market System, (c) declaration of a banking moratorium by
Federal or state authorities or any suspension of payment by banks in the United
States or New York State, (d) limitation affecting the Fund or the issuers of
its portfolio securities imposed by federal or state authorities on the
extension of credit by lending institutions, (e) commencement of war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States, or (f) in the Board of Directors' judgment, other
event or condition which would have a material adverse effect on the Fund or its
shareholders if tendered Shares were purchased; (4) the Fund's Shares are
trading at a discount to NAV of 10% or less at the Termination Date; or (5) the
Board of Directors determines that effecting any such transaction would
constitute a breach of their fiduciary duty owed to the Fund or its
Shareholders.
The foregoing conditions are for the sole benefit of the Fund and may be
asserted by the Fund regardless of the circumstances (including any action or
inaction by the Fund) giving rise to any such conditions or may be waived by the
Fund in whole or in part at any time and from time to time in its sole
discretion. The failure by the Fund at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by the Fund concerning the events described in this
Section shall be final and binding on all parties.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver.
If the Offer is suspended or postponed, the Fund will provide notice to
Shareholders of such suspension or postponement.
13. Fees and Expenses. The Fund will not pay to any broker or dealer,
commercial bank, trust company or other person any solicitation fee for any
Shares purchased pursuant to the Offer. The Fund will reimburse such persons for
customary handling and mailing expenses incurred in forwarding the Offer. No
such broker, dealer, commercial bank or trust company has been authorized to act
as the agent of the Fund or the Depositary for purposes of the Offer.
The Fund has retained PNC Bank, N.A. to act as Depositary and D.F. King &
Co., Inc., to act as Information Agent. The Depositary and the Information Agent
will each receive reasonable and customary compensation for their services and
will also be reimbursed for certain out-of-pocket expenses and indemnified
against certain liabilities.
14. Miscellaneous. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. The Fund may, in its sole discretion, take
such action as it may deem necessary to make the Offer in any such jurisdiction.
The Fund is not aware of any jurisdiction in which the making of the Offer
or the acceptance of Shares in connection therewith would not be in compliance
with the laws of such jurisdiction. Consequently, the Offer is currently being
made to all holders of Shares. However, the Fund reserves the right to exclude
Shareholders in any jurisdiction in which it is asserted that the Offer cannot
lawfully be made. So long as the Fund makes a good faith effort to comply with
any state law deemed applicable to the Offer, the Fund believes that the
exclusion of Shareholders residing in such jurisdiction is permitted under Rule
13e-4(f)(9) promulgated under the Exchange Act.
15. Contacting the Depositary and the Information Agent. The Letter of
Transmittal, certificates for the Shares and any other required documents should
be sent by each Shareholder of the Fund or his broker-dealer, commercial bank,
trust company or other nominee to the Depositary as set forth below. Facsimile
copies of the Letter of Transmittal will be accepted.
12
<PAGE>
The Depositary for the Offer is:
PNC BANK, N.A.
Facsimile Copy Number: (302) 791-1008
Confirm by Telephone: (302) 791-1043
For Account Information Call:
(302) 791-2748 (Delaware residents only)
or (800) 852-4750
By First Class Mail, By Overnight In New York City, By Hand:
Courier, By Hand:
Depository Trust Company
PNC Bank, N.A. Transfer Agent Drop Service Dept.
400 Bellevue Parkway 55 Water Street (South Street
Mailstop W3-F400-02-4 entrance) -- Ground Floor
Wilmington, DE 19809 New York, NY
Any questions or requests for assistance or additional copies of the
Offer, the Letter of Transmittal, the Notice of Guaranteed Delivery, and other
documents may be directed to the Information Agent at its telephone number and
location listed below. Shareholders may also contact their broker, dealer,
commercial bank or trust company or other nominee for assistance concerning the
Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll free: (800) 848-2998
or call collect at: (212) 269-5550
THE MEXICO EQUITY AND INCOME FUND, INC.
April 12, 1999
13
<PAGE>
EXHIBIT A
Schedule of Investments The Mexico Equity and Income Fund, Inc.
July 31, 1998
Number Percent
of Shares Security of Holdings Value
================================================================================
MEXICO 99.90%
- --------------------------------------------------------------------------------
COMMON STOCKS 75.62%
- --------------------------------------------------------------------------------
Cement 6.60%
330,000 Apasco, S.A. de C.V. .......................... $ 1,689,748
849,000 Cemex, S.A. ................................... 3,129,647
2,269,980 Internacional de Ceramica, S.A. de C.V. + ..... 3,148,723
-----------
7,968,118
-----------
Communications 15.29%
2,123,000 Biper, S.A. de C.V. B + ....................... 773,081
126,800 Grupo Televisa S.A. ADR + ..................... 4,469,700
168,500 Telefonos de Mexico, S.A. de C.V. ADR ......... 8,393,406
1,000,000 Telefonos de Mexico, S.A. de C.V. L ........... 2,487,395
3,004,000 TV Azteca, S.A. de C.V. ....................... 2,335,884
-----------
18,459,466
-----------
Computers 0.17%
482,000 Acer Computec Latino America, S.A. de C.V. + .. 210,622
-----------
Construction 6.33%
1,794,000 Consorcio Hogar, S.A. de C.V. B + ............. 1,656,309
450,000 Corporacion Geo, S.A. de C.V. B + ............. 2,450,420
714,900 Grupo Tribasa S. A. de C.V. ADR + ............. 3,529,819
-----------
7,636,548
-----------
Entertainment 2.41%
1,000,000 Corporacion Interamericana de Entretenimiento,
S.A de C.V. L + ............................... 2,913,165
-----------
Financial Groups 0.56%
2,000,000 Grupo Financiero GBM Atlantico,
S.A. de C.V. B +** ............................ 672,269
-----------
Food, Beverage and Tobacco 15.89%
121,200 Fomento Economico Mexicano, S.A.
de C.V. B. ADR ................................ 3,757,200
1,226,000 Fomento Economico Mexicano, S.A. de C.V. UBD .. 3,756,986
1,080,000 Grupo Industrial Bimbo, S.A. de C.V. A ........ 2,202,353
642,000 Grupo Modelo, S.A. de C.V. C. ................. 5,761,815
2,769,000 Pasteleria Francesa, S.A. de C.V. ............. 983,499
1,295,000 Pepsi Gemex, S.A. de C.V. ..................... 2,727,843
-----------
19,189,696
-----------
A-1
<PAGE>
Schedule of Investments (continued) The Mexico Equity and Income Fund, Inc.
July 31, 1998
Number Percent
of Shares Security of Holdings Value
================================================================================
COMMON STOCKS (continued)
Industrial Conglomerates 14.36%
3,170,000 Accel, S.A. de C.V. B+ ........................ $ 443,978
9,461,626 Accel, S.A. de C.V. C+ ........................ 1,293,354
421,000 Desc Sociedad de Fomento Industrial,
S.A. de C.V. A ................................ 2,264,202
51,000 Desc Sociedad de Fomento Industrial,
S.A. de C.V. B ................................ 304,000
1,268,000 Grupo Carso, S.A. de C.V. A1 .................. 5,398,767
5,649,000 Grupo Empresarial Privado Mexicano,
S.A. de C.V. B+ ............................... 2,519,106
1,732,000 Grupo Imsa, S.A. de C.V. UBC .................. 2,581,020
287,000 Grupo Industrial Alfa, S.A. A ................. 1,154,431
344,000 Grupo Industrial Sanluis, S.A. de C.V. ........ 1,379,854
------------
17,338,712
------------
Paper Products 0.14%
58,000 Kimberly Clark de Mexico, S.A. de C.V.A ....... 168,964
------------
Retailing 6.15%
2,557,000 Cifra, S.A. de C.V. C+ ........................ 3,724,482
613,519 Cifra, S.A. de C.V. V+ ........................ 928,012
1,680,000 Controladora Comercial Mexicana,
S.A. de C.V. .................................. 1,411,765
419,000 Organizacion Soriana S.A. de C.V. B ........... 1,359,109
------------
7,423,368
------------
Specialty Stores 4.14%
839,000 Dermet de Mexico, S.A. de C.V. B+ ............. 404,224
378,000 Grupo Comercial Gomo, S.A. de C.V.+ ........... 689,506
3,569,000 Grupo Elektra, S.A. de C.V. ................... 2,703,242
2,827,000 Nacional de Drogas, S.A. de C.V. L ............ 1,203,653
------------
5,000,625
------------
Steel 0.25%
106,000 Hylaamex, S.A. de C.V.B ....................... 307,608
------------
Textile 3.33%
2,755,000 Grupo Covarra, S.A. de C.V.+ .................. 2,586,768
3,986,000 Hilasal Mexicana, S.A. de C.V. A+ ............. 1,433,620
------------
4,020,388
------------
TOTAL COMMON STOCKS (Cost $112,288,260) 91,309,549
------------
A-2
<PAGE>
Schedule of Investments (continued) The Mexico Equity and Income Fund, Inc.
July 31, 1998
Par Value Percent
(000) Security of Holdings Value
================================================================================
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURES 7.58%
- --------------------------------------------------------------------------------
MXP 24,113 Grupo Financiero Bancomer 26.453%, 05/16/02* .. $ 2,958,340
MXP 32,731 Corporacion Interamericana Entratenimiento
12.00%, 06/06/99 .............................. 6,197,803
------------
TOTAL CONVERTIBLE DEBENTURES (Cost $8,459,383) 9,156,143
------------
- --------------------------------------------------------------------------------
INFLATION INDEXED BOND 4.91%
- --------------------------------------------------------------------------------
MXP 38,180 Vitro, S.A. 13.00%, 12/07/99 .................. 5,934,405
------------
TOTAL INFLATION INDEXED BOND (Cost $4,959,549) 5,934,405
------------
- --------------------------------------------------------------------------------
MEXICAN GOVERNMENT BONDS 2.08%
- --------------------------------------------------------------------------------
MXP 9,859 Bono de Desarrollo del Gobierno
Federal 21.88%, 12/14/00* ..................... 1,104,661
MXP 12,531 Bono de Desarrollo del Gobierno
Federal 20.95%, 01/18/01* ..................... 1,403,989
------------
TOTAL MEXICAN GOVERNMENT BONDS (Cost $2,628,143) 2,508,650
------------
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS 9.71%
- --------------------------------------------------------------------------------
COMMERCIAL PAPER 2.49%
$ 3,000 Cemex S.A. de C.V. 6.80%, 08/31/98 ............ 2,999,993
------------
TOTAL COMMERCIAL PAPER (Cost $2,999,993) 2,999,993
------------
PROMISSORY NOTES 7.22%
MXP 40,000 Grupo Financiero Serfin S.A. de 19.50%,
08/03/98 ...................................... 4,481,793
MXP 37,820 Nacional Financiero S.A. de C.V. 19.50%,
08/03/98 ...................................... 4,237,557
------------
TOTAL PROMISSORY NOTES (Cost $8,719,350) 8,719,350
------------
TOTAL SHORT-TERM OBLIGATIONS (Cost $11,719,343) 11,719,343
------------
TOTAL MEXICO (Cost $140,054,678) 120,628,090
------------
A-3
<PAGE>
Schedule of Investments (concluded) The Mexico Equity and Income Fund, Inc.
July 31, 1998
Number Percent
of Shares Security of Holdings Value
================================================================================
UNITED STATES 0.10%
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS 0.10%
- --------------------------------------------------------------------------------
118,887 Temporary Investment Fund, Inc.
- Temp Cash Portfolio $ 118,887
------------
TOTAL SHORT-TERM OBLIGATIONS (Cost $118,887) 118,887
------------
TOTAL UNITED STATES (Cost $118,887) 118,887
------------
TOTAL INVESTMENTS (Cost $140,173,565)*** 100.00% $120,746,977
============
- ----------
Footnotes and Abbreviations
+ Non-income producing securities.
* Variable rate security. Interest rate represents rate at July 31, 1998.
** At fair value as determined under the supervision of the Board of
Directors.
*** Aggregate cost for Federal income tax purposes is $142,087,085.
The aggregate gross unrealized appreciation (depreciation)
for all securities is as follows:
Excess of market value over tax cost $ 4,439,109
Excess of tax cost over market value (25,779,217)
------------
$(21,340,108)
============
MXP Mexican Pesos
ADR American Depository Receipt
A-4
<PAGE>
Statement of Assets and Liabilities The Mexico Equity and Income Fund, Inc.
July 31, 1998
Assets
Investments, at value (Cost $140,173,565) .................... $ 120,746,977
Foreign currency holdings (Cost $7,974) ...................... 7,966
Receivables:
Interest (net of withholding tax of $10,309) .............. 243,137
Maturities ................................................ 8,715,802
Securities sold ........................................... 242,339
Prepaid expenses ............................................. 91,425
-------------
Total Assets .............................................. 130,047,646
-------------
Liabilities
Payable for securities purchased ............................. 9,718,567
Due to Mexican Adviser ....................................... 55,176
Due to Co-Adviser ............................................ 42,443
Due to Administrator ......................................... 21,222
Accrued expenses ............................................. 62,130
-------------
Total Liabilities ......................................... 9,899,538
-------------
Net Assets ................................................... $ 120,148,108
=============
Net Asset Value per Share ($120,148,108/11,825,273) .......... $ 10.16
=============
Net assets consist of:
Capital stock, $0.001 par value; 11,825,273 shares issued
and outstanding (100,000,000 shares authorized) ........... $ 11,825
Paid-in capital .............................................. 131,288,786
Undistributed net investment income .......................... 597,968
Accumulated net realized gain on investments and foreign
currency related transactions ............................. 7,685,236
Net unrealized depreciation in value of investments and on
translation of other assets and liabilities denominated
in foreign currency ....................................... (19,435,707)
-------------
$ 120,148,108
=============
See accompanying notes to financial statements.
A-5
<PAGE>
Statement of Operations The Mexico Equity and Income Fund, Inc.
For the Year Ended July 31, 1998
<TABLE>
<S> <C> <C>
Investment Income
Interest (Net of taxes withheld of $169,998) ............................. $ 3,787,612
Dividends ................................................................ 1,286,748
------------
Total investment income ............................................... 5,074,360
------------
Expenses
Mexican Advisory fees ..................................... $ 846,869
Co-Advisory fees .......................................... 651,437
Administration fees ....................................... 325,727
Custodian fees ............................................ 157,219
Legal fees ................................................ 144,984
Insurance ................................................. 71,996
Audit fees ................................................ 61,250
Transfer agent fees ....................................... 52,449
Printing .................................................. 13,599
NYSE fees ................................................. 24,262
Directors' fees ........................................... 22,900
Miscellaneous ............................................. 12,902
------------
Total expenses ........................................................ 2,385,594
------------
Net investment income ................................................. 2,688,766
------------
Net Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency Holdings and Translation of Other Assets
and Liabilities Denominated in Foreign Currency:
Net realized gain (loss) from:
Security transactions .................................................. 25,636,440
Foreign currency related transactions .................................. (896,629)
------------
24,739,811
Net change in unrealized depreciation in value of
investments and translation of other assets and
liabilities denominated in foreign currency ............................ (64,248,203)
------------
Net realized and unrealized loss on investments,
foreign currency holdings and translation of other
assets and liabilities denominated in foreign currency ................. (39,508,392)
------------
Net decrease in net assets resulting from operations ..................... $(36,819,626)
============
</TABLE>
See accompanying notes to financial statements.
A-6
<PAGE>
Statement of Changes in Net Assets The Mexico Equity and Income Fund Inc.
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
July 31,1998 July 31,1997
------------- -------------
<S> <C> <C>
Increase (Decrease) In Net Assets
Operations
Net investment income ............................................... $ 2,688,766 $ 5,109,358
Net realized gain on investments and foreign currency
related transactions .......................................... 24,739,811 25,891,614
Net change in unrealized apprecation (depreciation) in value of
investments, foreign currency holdings and translation of other
assets and liabilities denominated in foreign currency ........... (64,248,203) 39,743,168
------------- -------------
Net increase (decrease) in net assets resulting from operations (36,819,626) 70,744,140
------------- -------------
Distributions to shareholders from
Net investment income ($0.19 and $0.44 per share, respectively) ..... (2,239,707) (5,203,120)
Net realized gains ($3.37 and $0.67 per share, respectively) ........ (39,858,265) (7,922,933)
------------- -------------
Decrease in net assets from distributions ..................... (42,097,972) (13,126,053)
------------- -------------
Capital share transactions
Offering costs charged to paid-in capital ........................... -- (789)
------------- -------------
Total increase (decrease) in net assets ............................. (78,917,598) 57,617,298
------------- -------------
Net Assets
Beginning of year ................................................... 199,065,706 141,448,408
------------- -------------
End of year (including undistributed net investment
income of $597,968 and $1,045,538, respectively) ................ $ 120,148,108 $ 199,065,706
============= =============
</TABLE>
See accompanying notes to financial statements.
A-7
<PAGE>
Financial Highlights The Mexico Equity and Income Fund, Inc.
For a Share Outstanding throughout Each Year
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
July 31,1998 July 31, 1997 July 31, 1996 July 31, 1995 July 31, 1994
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of year ..... $16.83 $11.96 $11.31 $20.33 $18.51
------------ ------------ ------------ ------------ ------------
Net investment income .................. 0.23 0.43 0.81+ 0.82 0.51
Net realized and unrealized gains
(losses) on investments, foreign
currency holdings, and translation
of other assets and liabilities
denominated in foreign currency ..... (3.34) 5.55 0.67+ (5.98) 5.47
------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
investment operations ............... (3.11) 5.98 1.48 (5.16) 5.98
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income (0.19) (0.44) -- (0.03) (0.42)
Distributions from net realized gains (3.37) (0.67) (0.09) (3.90) (1.67)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions ... (3.56) (1.11) (0.09) (3.93) (2.09)
------------ ------------ ------------ ------------ ------------
Capital share transactions
Anti-dilutive effect of
dividend reinvestment ............... -- -- -- 0.07 --
Dilutive effect of rights offering .. -- -- (0.74) -- (2.07)
------------ ------------ ------------ ------------ ------------
Total capital share transactions .... -- -- (0.74) 0.07 (2.07)
------------ ------------ ------------ ------------ ------------
Net asset value, end of year ........... $10.16 $16.83 $11.96 $11.31 $20.33
============ ============ ============ ============ ============
Per share market value, end of year .... $7.75 $14.125 $9.625 $11.25 $21.25
Total Investment Return Based
on Market Value* .................... (26.23)% 62.52% (8.26)% (31.96)% 41.40%
Ratios/Supplemental Data
Net assets, end of
year (in 000s) ...................... $120,148 $199,066 $141,448 $99,779 $175,380
Ratios of expenses to
average net assets .................. 1.46% 1.49% 1.56% 1.71% 1.64%
Ratios of net investment income
to average net assets ............... 1.65% 3.29% 7.32% 5.73% 2.75%
Portfolio turnover ..................... 88.85% 127.44% 42.59% 50.52% 43.57%
</TABLE>
* Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each period reported. Dividends and
distributions, if any, are assumed for purposes of this calculation to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Rights offerings, if any, are assumed for purposes of this calculation to
be fully subscribed under the terms of the rights offering. Total
investment return does not reflect sales loads or brokerage commissions.
+ Based on average shares outstanding.
See accompanying notes to financial statements.
A-8
<PAGE>
Notes to Financial Statements The Mexico Equity and
July 31, 1998 Income Fund, Inc.
NOTE A: Summary of Significant Accounting Policies
The Mexico Equity and Income Fund, Inc. (the "Fund") was incorporated in
Maryland on May 24, 1990, and commenced operations on August 21, 1990. The Fund
is registered under the Investment Company Act of 1940, as amended, as a
closed-end non-diversified management investment company.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Significant accounting policies are as follows:
Portfolio Valuation. Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price prior to the time of determination
of net asset value, or, if no sales price is available at that time, at the
closing price last quoted for the securities (but if bid and asked quotations
are available, at the mean between the current bid and asked prices, rather than
the quoted closing price). Securities that are traded over-the-counter are
valued, if bid and asked quotations are available, at the mean between the
current bid and asked prices. Investments in short-term debt securities having a
maturity of 60 days or less are valued at amortized cost if their term to
maturity from the date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity from the date
of purchase when acquired by the Fund was more than 60 days. Securities for
which market values are not readily ascertainable, which aggregated $672,269
(0.56% of net assets) at July 31, 1998, are carried at fair value as determined
in good faith by, or under the supervision of, the Board of Directors.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income, including the accretion of discount and
amortization of premium on investments, is recorded on an accrual basis;
dividend income is recorded on the ex-dividend date or, using reasonable
diligence, when known to the Fund. The collectibility of income receivable from
foreign securities is evaluated periodically, and any resulting allowances for
uncollectible amounts are reflected currently in the determination of investment
income.
Tax Status. No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders that will be
sufficient to relieve it from all or substantially all U.S. Federal income and
excise taxes.
In accordance with U.S. Treasury regulations, the Fund elected to defer $715,759
of net realized foreign currency losses arising after October 31, 1997. Such
losses are treated for tax purposes as arising on August 1, 1998.
A-9
<PAGE>
Notes to Financial Statements - (continued) The Mexico Equity and
July 31, 1998 Income Fund, Inc.
The Fund is subject to the following withholding taxes on income from Mexican
sources:
Dividends distributed by Mexican companies are not subject to Mexican
withholding tax if such dividends are paid out of taxed profits. Mexican
companies are subject to 34% income tax on dividends distributed from
non-taxed profits.
Interest income on debt issued by the Mexican federal government is not
subject to withholding. Withholding tax on interest from other debt
obligations is at a rate of 4.9%. Beginning January 1, 1999, the
withholding tax on interest from other debt obligations will be at a rate
of 15%.
Gains realized from the sale or disposition of debt securities are not
presently subject to taxation unless such securities are listed and traded
on the Mexican Stock Exchange ("MSE") in which case a 4.9% withholding tax
may apply. Gains realized by the Fund from the sale or disposition of
equity securities that are listed and traded on the MSE are exempt from
Mexican withholding tax if sold through the stock exchange. Gains realized
on transactions outside of the MSE may be subject to withholding at a rate
of 20% of the amount received or, upon the election of the Fund, at 30% of
the gain. If the Fund has owned less than 25% of the outstanding stock of
the issuer of the equity securities within the 12 month period preceding
the disposition, then such disposition will not be subject to capital
gains taxes as provided for in the treaty to avoid double taxation between
Mexico and the United States.
Foreign Currency Translation. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, assets and liabilities at the
current peso exchange rate on the valuation date, and
(ii) purchases and sales of investment securities, income and expenses at
the peso rate of exchange prevailing on the respective dates of such
transactions.
The Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market prices of
securities. The Fund does isolate the effect of fluctuations in foreign currency
rates, however, when determining the gain or loss upon the sale of foreign
currency denominated debt obligations pursuant to U.S. Federal income tax
regulations; such amounts are categorized as foreign exchange gain or loss for
both financial reporting and income tax reporting purposes. The Fund reports
foreign exchange realized gains and losses on all other foreign currency related
transactions as components of realized gains and losses for financial reporting
purposes, whereas such gains and losses are treated as ordinary income or loss
for Federal income tax purposes.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in the foreign exchange rate. Foreign
security and currency transactions may involve certain considerations and risks
not typically associated with those of domestic origin as a result of, among
other factors, the level of governmental supervision and regulation of foreign
securities markets and the possibilities of political or economic instability.
A-10
<PAGE>
Notes to Financial Statements - (continued) The Mexico Equity and
July 31, 1998 Income Fund, Inc.
Distribution of Income and Gains. The Fund intends to distribute to
shareholders, at least annually, substantially all of its net investment income,
including foreign currency gains, and to normally distribute annually any net
realized capital gains in excess of net realized capital losses (including any
capital loss carryovers), except in circumstances where the Fund realizes very
large capital gains and where the Directors of the Fund determine that the
decrease in the size of the Fund's assets resulting from the distribution of the
gains would not be in the interest of the Fund's shareholders generally. An
additional distribution may be made to the extent necessary to avoid payment of
a 4% Federal excise tax.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized gains
are determined in accordance with U.S. Federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their Federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions that exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of paid-in-capital.
During the year ended July 31, 1998, the Fund reclassified a loss of $896,629
from accumulated net realized gain on investments and foreign currency related
transactions to undistributed net investment income as a result of permanent
book and tax differences relating primarily to foreign currency losses. Net
investment income and net assets were not affected by the reclassification.
NOTE B: Management, Investment Advisory and Administrative Services
Acci Worldwide, S.A. de C.V. serves as the Fund's Mexican Adviser (the"Mexican
Adviser") under the terms of the Advisory Agreement (the "Advisory Agreement").
Pursuant to the Advisory Agreement, the Mexican Adviser makes investment
decisions for the Fund and supervises the acquisition and disposition of
securities by the Fund. For its services, the Mexican Adviser receives a monthly
fee at an annual rate of 0.52% of the Fund's average monthly net assets. For the
year ended July 31, 1998, these fees amounted to $846,869.
On November 3, 1997, CIBC Wood Gundy Securities Corp., the broker-dealer
subsidiary of The Canadian Imperial Bank of Commerce, acquired all of the stock
of Oppenheimer Holdings, the indirect parent of Advantage Advisers, Inc., the
Fund's U.S. Co-Adviser (the "Co-Adviser"). In connection with the acquisition,
CIBC Wood Gundy Securities Corp. merged into Oppenheimer & Co., Inc., a wholly
owned subsidiary of Oppenheimer Holdings, whose name was changed to CIBC
Oppenheimer Corp. ("CIBC Oppenheimer").
Advantage Advisers, Inc., serves as the Fund's U.S. Co-Adviser under the terms
of the U.S. Co-Advisory Agreement (the "Co-Advisory Agreement"). Pursuant to the
Co-Advisory Agreement, the Co-Adviser makes
A-11
<PAGE>
Notes to Financial Statements - (continued) The Mexico Equity and
July 31, 1998 Income Fund, Inc.
all investment decisions regarding the Fund's convertible debt securities
jointly with the Mexican Adviser and provides advice and consultation to the
Mexican Adviser on investment decisions for the Fund. For its services, the
Co-Adviser receives a monthly fee of 0.40% of the Fund's average monthly net
assets. For the year ended July 31, 1998, these fees amounted to $651,437.
CIBC Oppenheimer, serves as the Fund's administrator (the"Administrator"). The
Administrator provides certain administrative services to the Fund. For its
services, the Administrator 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,
1998, these fees amounted to $325,727.
The Fund pays each of its directors who is not a director, officer or employee
of the Mexican Adviser, the Co-Adviser, the Administrator or any affiliate
thereof an annual fee of $5,000 plus $700 for each Board of Directors meeting
attended in person and $100 for each meeting attended by means of a telephone
conference. In addition, the Fund reimburses the directors for travel and
out-of-pocket expenses incurred in connection with Board of Directors meetings.
NOTE C: Portfolio Activity
Purchases and sales of securities other than short-term obligations, aggregated
$132,340,501 and $173,837,765, respectively, for the year ended July 31, 1998.
NOTE D: Transactions with Affiliates
Acciones y Valores de Mexico, S.A. de C.V., the parent company of the Mexican
Adviser, received total brokerage commissions of $119,672 during the year ended
July 31, 1998.
NOTE E: Other
At July 31, 1998, substantially all of the Fund's assets were invested in
Mexican securities. The Mexican securities markets are substantially smaller,
less liquid, and more volatile than the major securities markets in the United
States. Consequently, acquisitions and dispositions of securities by the Fund
may be inhibited.
- --------------------------------------------------------------------------------
Federal Taxation Notice (unaudited)
The Fund paid foreign taxes of $177,326 during the fiscal year ended July
31, 1998, which it intends to pass through pursuant to Section 853 of the
Internal Revenue Code, to its shareholders, which is deemed to be foreign
source income for tax information reporting purposes. During the fiscal
year ended July 31, 1998, the Fund made long-term capital gains
distributions of $24,629,679. Of this distribution, $14,261,279 is taxable
as 28% rate gain and $10,368,400 is taxable as 20% rate gain.
- --------------------------------------------------------------------------------
A-12
<PAGE>
Report of Independent Accountants The Mexico Equity and Income Fund, Inc.
To the Board of Directors and Shareholders of
The Mexico Equity and Income Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Mexico Equity and Income Fund,
Inc. (the "Fund") at July 31, 1998, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at July
31, 1998 by correspondence with the custodians and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
September 22, 1998
A-13
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Schedule of Investments (Unaudited)
MEXICO (97.88% of holdings)
COMMON STOCKS (72.07% of holdings)
Number of Percent of
Shares Security Holdings Value
- --------------------------------------------------------------------------------
Cement 6.57%
799,000 Apasco, S.A. de C.V. .......................... $ 2,888,662
800,000 Cemex, S.A. ................................... 1,955,730
------------
4,844,392
------------
Communications and Transportation 11.14%
354,000 Grupo Carso Global Telecom - A1 ............... 1,382,568
90,000 Grupo Televisa S.A. ADR* ...................... 2,306,250
74,000 Grupo Televisa S.A. * ......................... 931,825
45,800 Telefonos de Mexico, S.A. de C.V. ADR ......... 2,341,525
494,000 Telefonos de Mexico, S.A. de C.V. L ........... 1,256,262
------------
8,218,430
------------
Computers 0.35%
740,000 Acer Computec Latino America, S.A. de C.V.* ... 254,796
------------
254,796
------------
Construction 3.77%
1,794,000 Consorcio Hogar, S.A. de C.V. B* .............. 773,017
306,000 Corporacion Geo, S.A. de C.V. B* .............. 733,015
849,900 Grupo Tribasa S. A. de C.V. ADR* .............. 1,274,850
------------
2,780,882
------------
Entertainment 1.40%
510,000 Corporacion Interamericana de Entretenimiento,
S.A de C.V. L* ................................ 1,028,529
------------
1,028,529
------------
Financial Groups 3.72%
11,277,000 Grupo Financiero Bancomer, S.A. de C.V. B ..... 2,274,260
2,000,000 Grupo Financiero GBM Atlantico, S.A.
de C.V.B *+ ................................... 472,209
------------
2,746,469
------------
Food, Beverages, and Tobacco 12.78%
13,200 Empresas La Moderna, S.A. de C.V. ADR* ........ 318,450
121,200 Fomento Economico Mexicano, S.A. de C.V. B ADR 2,681,550
A-14
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Schedule of Investments (continued) (Unaudited)
COMMON STOCKS (continued)
Number of Percent of
Shares Security Holdings Value
- --------------------------------------------------------------------------------
Food, Beverages, and Tobacco (continued)
599,000 Fomento Economico Mexicano, S.A. de C.V. UBD .. $ 1,325,873
614,000 Gruma, S.A. de C.V.B * ........................ 1,449,680
1,569,000 Grupo Industrial Bimbo, S.A. de C.V. A ........ 3,326,311
147,000 Grupo Modelo, S.A. de C.V.C .................. 325,381
------------
9,427,245
------------
Industrial Conglomerates 13.85%
221,000 Alfa, S.A. de C.V. A .......................... 526,139
2,105,000 Desc Sociedad de Fomento Industrial,
S.A. de C.V. A ................................ 1,863,748
363,000 Desc Sociedad de Fomento Industrial,
S.A. de C.V. B ................................ 346,394
1,500,000 Grupo Carso, S.A. de C.V. A1 .................. 4,242,499
2,330,000 Grupo Imsa, S.A. de C.V. UBC .................. 2,865,224
139,000 Grupo Industrial Sanluis, S.A. de C.V. ........ 154,520
150,000 Vitro S.A. A .................................. 213,970
------------
10,212,494
------------
Mining 3.17%
708,000 Grupo Mexico, S.A. B* ......................... 1,856,193
158,000 Industrias Penoles S.A. CP* ................... 481,849
------------
2,338,042
------------
Paper Products 3.78%
975,000 Kimberly-Clark de Mexico, S.A. de C.V. A ...... 2,791,195
------------
2,791,195
------------
Retailing 7.12%
2,717,000 Cifra, S.A. de C.V. C* ........................ 3,015,028
816,000 Cifra, S.A. de C.V. V* ........................ 905,507
463,000 Organizacion Soriana, S.A. de C.V. B .......... 1,327,737
------------
5,248,272
------------
Specialty Stores 2.14%
2,673,000 Nacional de Drogas, S.A. de C.V. L ............ 1,577,767
------------
1,577,767
------------
Steel 0.05%
30,000 Hylsamex S.A. B ............................... 33,940
------------
33,940
------------
A-15
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Schedule of Investments (continued) (Unaudited)
COMMON STOCKS (concluded)
Number of Percent of
Shares Security Holdings Value
- --------------------------------------------------------------------------------
Textiles 2.23%
2,756,000 Grupo Covarra, S.A. de C.V.* .................. $ 976,055
3,792,000 Hilasal Mexicana, S.A. de C.V. A* ............. 671,481
------------
1,647,536
------------
TOTAL COMMON STOCKS (Cost $71,792,343) ........ 53,149,989
------------
CONVERTIBLE DEBENTURES (2.78% of holdings)
Par Value
(000)
- --------------------------------------------------------------------------------
MXP 21,505 Grupo Financiero Bancomer 39.25%, 05/16/02** .. 2,052,163
------------
TOTAL CONVERTIBLE DEBENTURES
(Cost $3,515,117) ........................... 2,052,163
------------
INFLATION INDEXED BOND (7.79% of holdings)
- --------------------------------------------------------------------------------
MXP 38,180 Vitro, S.A. 13.00%, 12/07/99 .................. 5,741,171
------------
TOTAL INFLATION INDEXED BOND
(Cost $4,959,549) ........................... 5,741,171
------------
MEXICAN GOVERNMENT BONDS (1.32% of holdings)
- --------------------------------------------------------------------------------
MXP 9,859 Bono de Desarrollo del Gobierno Federal
34.41%, 12/14/00** .......................... 969,907
------------
TOTAL MEXICAN GOVERNMENT BONDS
(Cost $1,156,763) ........................... 969,907
------------
A-16
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Schedule of Investments (continued) (Unaudited)
SHORT-TERM OBLIGATIONS (13.92% of holdings)
Par Value Percent of
(000) Security Holdings Value
- --------------------------------------------------------------------------------
Convertible Debentures 4.81%
MXP 32,791 Corporacion Interamericana Entretenimiento
12.00%, 06/06/99 ............................ $ 3,548,460
------------
Total Convertible Debentures
(Cost $4,525,605) ........................... 3,548,460
------------
Promissory Notes 9.11%
MXP 20,280 Banco Nacional de Obras y Servicias Publicas,
S.A. de C.V. 34.75% 02/01/99 ................ 1,995,107
MXP 16,000 Grupo Financiero Bancomer,
S.A. de C.V. 34.50% 02/01/99 ................ 1,574,029
MXP 32,000 Grupo Financiero Serfin,
S.A. de C.V. 34.75% 02/01/99 ................ 3,148,057
------------
Total Promissory Notes (Cost $6,717,193) ...... 6,717,193
------------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $11,242,798) .......................... 10,265,653
------------
TOTAL MEXICO (Cost $92,666,570) ............... 72,178,883
------------
UNITED STATES SHORT TERM OBLIGATIONS (2.12% of holdings)
Number of Shares
- --------------------------------------------------------------------------------
1,565,640 Temporary Investment Fund, Inc. -
Temp Cash Portfolio ......................... 1,565,640
------------
TOTAL UNITED STATES SHORT TERM OBLIGATIONS
(Cost $1,565,640) ........................... 1,565,640
------------
TOTAL INVESTMENTS (Cost $94,232,210)++ 100.00% $ 73,744,523
============
See page 13 for Footnotes and Abbreviations.
A-17
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Schedule of Investments (concluded) (Unaudited)
Footnotes and Abbreviations
* Non-income producing security.
** Variable rate security. Interest rate represents rate at
January 31, 1999.
+ At fair value as determined under the supervision of the Board
of Directors.
++ Aggregate cost for Federal income tax purposes is $96,810,389.
The aggregate gross unrealized appreciation (depreciation) for
all securities is as follows:
Excess of market value over tax cost $ 2,380,586
Excess of tax cost over market value (25,446,452)
------------
$(23,065,866)
============
MXP - Mexican Pesos
ADR - American Depository Receipt
See accompanying notes to financial statements.
A-18
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Statement of Assets and Liabilities (Unaudited)
ASSETS
Investments, at value (Cost $94,232,210) ................. $ 73,744,523
Foreign currency holdings (Cost $89,411) ................. 89,411
Receivables:
Interest (net of withholding tax of $7,090) .............. 262,376
Maturities ............................................. 7,354,653
Securities sold ........................................ 4,872,915
Prepaid expenses ......................................... 62,020
-------------
Total Assets ...................................... 86,385,898
-------------
LIABILITIES
Payable for securities purchased ......................... 8,491,337
Due to Mexican Adviser ................................... 33,348
Due to Co-Adviser ........................................ 25,652
Due to Administrator ..................................... 12,826
Accrued expenses ......................................... 116,441
-------------
Total Liabilities ................................. 8,679,604
-------------
Net Assets ........................................ $ 77,706,294
-------------
NET ASSET VALUE PER SHARE ($77,706,294/11,825,273) $ 6.57
=============
NET ASSETS CONSIST OF:
Capital stock, $0.001 par value;
11,825,273 shares issued and outstanding (100,000,000
shares authorized) ..................................... $ 11,825
Paid-in capital .......................................... 131,288,786
Undistributed net investment income ...................... 2,300,104
Accumulated net realized loss on investments and foreign
currency related transactions .......................... (35,430,284)
Net unrealized depreciation in value of investments and on
translation of other assets and liabilities denominated
in foreign currency .................................... (20,464,137)
-------------
$ 77,706,294
=============
See accompanying notes to financial statements.
A-19
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
For the Six Months Ended
Statement of Operations January 31, 1999 (Unaudited)
Investment Income
Interest (Net of taxes withheld of $75,922) .................... $ 1,915,743
Dividends (Net of taxes withheld of $1,333) .................... 558,779
------------
Total investment income ................................. 2,474,522
------------
Expenses
Mexican Advisory fees .............................. $ 231,704
Co-Advisory fees ................................... 178,233
Administration fees ................................ 89,117
Custodian fees ..................................... 87,413
Legal fees ......................................... 65,786
Audit fees ......................................... 29,490
Transfer agent fees ................................ 26,617
Insurance .......................................... 20,843
NYSE fees .......................................... 12,230
Directors' fees .................................... 11,796
Printing ........................................... 10,586
Miscellaneous ...................................... 8,571
---------
Total expenses .......................................... 772,386
------------
Net investment income ................................... 1,702,136
------------
Net Realized and Unrealized Loss on Investments, Foreign Currency
Holdings and Translation of Other Assets and Liabilities Denominated
in Foreign Currency:
Net realized loss from:
Security transactions ........................................ (31,294,162)
Foreign currency related transactions ........................ (823,854)
------------
(32,118,016)
Net change in unrealized depreciation in value
of investments and translation of other assets
and liabilities denominated in foreign currency .............. (1,028,430)
------------
Net realized and unrealized loss on investments,
foreign currency holdings and translation of
other assets and liabilities denominated in
foreign currency ............................................. (33,146,446)
------------
Net decrease in net assets resulting from operations ........... $(31,444,310)
============
See accompanying notes to financial statements.
A-20
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year
January 31, 1999 Ended
(Unaudited) July 31, 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income ......................................... $ 1,702,136 $ 2,688,766
Net realized gain (loss) on investments and foreign currency
related transactions ..................................... (32,118,016) 24,739,811
Net change in unrealized depreciation in value of investments,
foreign currency holdings and translation of other assets
and liabilities denominated in foreign currency ............... (1,028,430) (64,248,203)
------------- -------------
Net decrease in net assets resulting from operations .... (31,444,310) (36,819,626)
------------- -------------
Distributions to shareholders from
Net investment income ($0.19 per share) ...................... -- (2,239,707)
Net realized gains ($0.93 and $3.37 per share, respectively) .. (10,997,504) (39,858,265)
------------- -------------
Decrease in net assets from distributions ................ (10,997,504) (42,097,972)
------------- -------------
Total decrease in net assets .................................. (42,441,814) (78,917,598)
------------- -------------
NET ASSETS
Beginning of period ........................................... 120,148,108 199,065,706
------------- -------------
End of period (including undistributed net investment
income of $2,300,104 and $597,968 respectively) ............... $ 77,706,294 $ 120,148,108
============= =============
</TABLE>
See accompanying notes to financial statements.
A-21
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
Financial Highlights
For a Share Outstanding throughout Each Period
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year For the Year For the Year
January 31, 1999 Ended Ended Ended
(Unaudited) July 31, 1998 July 31, 1997 July 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ..... $ 10.16 $ 16.83 $ 11.96 $ 11.31
------------ ------------ ------------ ------------
Net investment income .................... 0.14 0.23 0.43 0.81+
Net realized and unrealized gains (losses)
on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated
in foreign currency ................... (2.80) (3.34) 5.55 0.67+
------------ ------------ ------------ ------------
Net increase (decrease) from
investment operations ................. (2.66) (3.11) 5.98 1.48
------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment
income .............................. -- (0.19) (0.44) --
Distributions from net realized gains . (0.93) (3.37) (0.67) (0.09)
------------ ------------ ------------ ------------
Total dividends and distributions ........ (0.93) (3.56) (1.11) (0.09)
------------ ------------ ------------ ------------
Capital share transactions
Anti-dilutive effect of dividend
reinvestment .......................... -- -- -- --
Dilutive effect of rights offering ....... -- -- -- (0.74)
------------ ------------ ------------ ------------
Total capital share transactions ......... -- -- -- (0.74)
------------ ------------ ------------ ------------
Net asset value, end of period ........... $ 6.57 $ 10.16 $ 16.83 $ 11.96
============ ============ ============ ============
Per share market value, end of period .... $ 5.25 $ 7.75 $ 14.125 $ 9.625
Total Investment Return Based
on Market Value* ...................... (20.28)% (26.23)% 62.52% (8.26)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) ...... $ 77,706 $ 120,148 $ 199,066 $ 141,448
Ratios of expenses to average net
assets ................................ 1.73%++ 1.46% 1.49% 1.56%
Ratios of net investment income
to average net assets ................. 3.82%++ 1.65% 3.29% 7.32%
Portfolio turnover ....................... 55.78% 88.85% 127.44% 42.59%
<CAPTION>
For the Year For the Year
Ended Ended
July 31, 1995 July 31, 1994
-----------------------------
<S> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period ..... $ 20.33 $ 18.51
------------ ------------
Net investment income .................... 0.82 0.51
Net realized and unrealized gains (losses)
on investments, foreign currency
holdings, and translation of other
assets and liabilities denominated
in foreign currency ................... (5.98) 5.47
------------ ------------
Net increase (decrease) from
investment operations ................. (5.16) 5.98
------------ ------------
Less Distributions
Dividends from net investment
income .............................. (0.03) (0.42)
Distributions from net realized gains . (3.90) (1.67)
------------ ------------
Total dividends and distributions ........ (3.93) (2.09)
------------ ------------
Capital share transactions
Anti-dilutive effect of dividend
reinvestment .......................... 0.07 --
Dilutive effect of rights offering ....... -- (2.07)
------------ ------------
Total capital share transactions ......... 0.07 (2.07)
------------ ------------
Net asset value, end of period ........... $ 11.31 $ 20.33
============ ============
Per share market value, end of period .... $ 11.25 $ 21.25
Total Investment Return Based
on Market Value* ...................... (31.96)% 41.40%
Ratios/Supplemental Data
Net assets, end of period (in 000s) ...... $ 99,779 $ 175,380
Ratios of expenses to average net
assets ................................ 1.71% 1.64%
Ratios of net investment income
to average net assets ................. 5.73% 2.75%
Portfolio turnover ....................... 50.52% 43.57%
</TABLE>
See page 18 for footnotes.
A-22
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
Financial Highlights (concluded)
* Total investment return is calculated assuming a purchase of common
stock at the current market price on the first day and a sale at the
current market price on the last day of each period reported.
Dividends and distributions, if any, are assumed for purposes of
this calculation to be reinvested at prices obtained under the
Fund's dividend reinvestment plan. Rights offerings, if any, are
assumed for purposes of this calculation to be fully subscribed
under the terms of the rights offering. Total investment return does
not reflect sales loads or brokerage commissions.
+ Based on average shares outstanding.
++ Annualized.
See accompanying notes to financial statements.
A-23
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Notes to Financial Statements (Unaudited)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Mexico Equity and Income Fund, Inc. (the "Fund") was incorporated in
Maryland on May 24, 1990, and commenced operations on August 21, 1990. The Fund
is registered under the Investment Company Act of 1940, as amended, as a
closed-end, non-diversified management investment company.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
Significant accounting policies are as follows:
Portfolio Valuation. Investments are stated at value in the accompanying
financial statements. All securities for which market quotations are readily
available are valued at the last sales price prior to the time of determination
of net asset value, or, if no sales price is available at that time, at the
closing price last quoted for the securities (but if bid and asked quotations
are available, at the mean between the current bid and asked prices, rather than
the quoted closing price). Securities that are traded over-the-counter are
valued, if bid and asked quotations are available, at the mean between the
current bid and asked prices. Investments in short-term debt securities having a
maturity of 60 days or less are valued at amortized cost if their term to
maturity from the date of purchase was less than 60 days, or by amortizing their
value on the 61st day prior to maturity if their term to maturity from the date
of purchase when acquired by the Fund was more than 60 days. Securities for
which market values are not readily ascertainable, which aggregated $472,209
(0.61% of net assets) at January 31, 1999, are carried at fair value as
determined in good faith by, or under the supervision of, the Board of
Directors.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income, including the accretion of discount and
amortization of premium on investments, is recorded on an accrual basis;
dividend income is recorded on the ex-dividend date or, using reasonable
diligence, when known to the Fund. The collectibility of income receivable from
foreign securities is evaluated periodically, and any resulting allowances for
uncollectible amounts are reflected currently in the determination of investment
income.
Tax Status. No provision is made for U.S. Federal income or excise taxes as it
is the Fund's intention to continue to qualify as a regulated investment company
and to make the requisite distributions to its shareholders that will be
sufficient to relieve it from all or substantially all U.S. Federal income and
excise taxes.
A-24
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Notes to Financial Statements (continued) (Unaudited)
In accordance with U.S. Treasury regulations, the Fund elected to defer $715,759
of net realized foreign currency losses arising after October 31, 1997. Such
losses are treated for tax purposes as arising on August 1, 1998.
The Fund is subject to the following withholding taxes on income from Mexican
sources:
Effective December 31, 1998, dividends distributed by Mexican companies
are subject to a 7.69% withholding tax. Mexican companies that reinvest
profits are subject to income tax at a rate of 32%. Mexican companies that
decide to distribute profits through dividends are subject to income tax
at a rate of 35%. Prior to December 31, 1998, dividends distributed by
Mexican companies were not subject to Mexican withholding tax if such
dividends were paid out of taxed profits. Dividends distributed by Mexican
companies from other sources were subject to a 34% withholding tax.
Interest income on debt issued by the Mexican federal government is not
subject to withholding. Withholding tax on interest from other debt
obligations is at a rate of 4.9%.
Gains realized from the sale or disposition of debt securities are not
presently subject to taxation unless such securities are listed and traded
on the Mexican Stock Exchange, ("MSE"), in which case a 4.9% withholding
tax may apply. Gains realized by the Fund from the sale or disposition of
equity securities that are listed and traded on the MSE are exempt from
Mexican withholding tax if sold through the stock exchange. Gains realized
on transactions outside of the MSE may be subject to withholding at a rate
of 20% of the amount received or, upon the election of the Fund, at 30% of
the gain. If the Fund has owned less than 25% of the outstanding stock of
the issuer of the equity securities within the 12 month period preceding
the disposition, then such disposition will not be subject to capital
gains taxes as provided for in the treaty to avoid double taxation between
Mexico and the United States.
Foreign Currency Translation. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, assets and liabilities at the
current peso exchange rate on the valuation date, and
(ii) purchases and sales of investment securities, income and expenses at
the peso rate of exchange prevailing on the respective dates of such
transactions.
The Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of fluctuations in the market prices of
securities. The Fund does isolate the effect of fluctuations
A-25
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Notes to Financial Statements (continued) (Unaudited)
in foreign currency rates, however, when determining the gain or loss upon the
sale of foreign currency denominated debt obligations pursuant to U.S. Federal
income tax regulations; such amounts are categorized as foreign exchange gain or
loss for both financial reporting and income tax reporting purposes. The Fund
reports foreign exchange realized gains and losses on all other foreign currency
related transactions as components of realized gains and losses for financial
reporting purposes, whereas such gains and losses are treated as ordinary income
or loss for Federal income tax purposes.
Securities denominated in currencies other than U.S. dollars are subject to
changes in value due to fluctuations in the foreign exchange rate. Foreign
security and currency transactions may involve certain considerations and risks
not typically associated with those of domestic origin as a result of, among
other factors, the level of governmental supervision and regulation of foreign
securities markets and the possibilities of political or economic instability.
Distribution of Income and Gains. The Fund intends to distribute to
shareholders, at least annually, substantially all of its net investment income,
including foreign currency gains, and to normally distribute annually any net
realized capital gains in excess of net realized capital losses (including any
capital loss carryovers), except in circumstances where the Fund realizes very
large capital gains and where the Directors of the Fund determine that the
decrease in the size of the Fund's assets resulting from the distribution of the
gains would not be in the interest of the Fund's shareholders generally. An
additional distribution may be made to the extent necessary to avoid payment of
a 4% Federal excise tax.
Distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and net realized gains
are determined in accordance with U.S. Federal income tax regulations, which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their Federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions that exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income and net realized gains. To the
extent they exceed net investment income and net realized gains for tax
purposes, they are reported as distributions of paid-in-capital.
During the year ended July 31, 1998, the Fund reclassified a loss of $896,629
from accumulated net realized gain on investments and foreign currency related
transactions to undistributed net investment income as a result of permanent
book and tax differences relating primarily to foreign currency losses. Net
investment income and net assets were not affected by the reclassification.
A-26
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Notes to Financial Statements (continued) (Unaudited)
NOTE B: MANAGEMENT, INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES
Acci Worldwide, S.A. de C.V. serves as the Fund's Mexican Adviser (the "Mexican
Adviser") under the terms of the Advisory Agreement (the "Advisory Agreement").
Pursuant to the Advisory Agreement, the Mexican Adviser makes investment
decisions for the Fund and supervises the acquisition and disposition of
securities by the Fund. For its services, the Mexican Adviser receives a monthly
fee at an annual rate of 0.52% of the Fund's average monthly net assets. For the
six months ended January 31, 1999, these fees amounted to $231,704.
Advantage Advisers, Inc., serves as the Fund's U.S. Co-Adviser (the "U.S.
Co-Adviser") under the terms of the U.S. Co-Advisory Agreement (the "Co-Advisory
Agreement"). Pursuant to the Co-Advisory Agreement, the Co-Adviser makes
investment decisions regarding the Fund's convertible debt securities jointly
with the Mexican Adviser and provides advice and consultation to the Mexican
Adviser on investment decisions for the Fund. For its services, the Co-Adviser
receives a monthly fee of 0.40% of the Fund's average monthly net assets. For
the six months ended January 31, 1999, these fees amounted to $178,233.
CIBC Oppenheimer Corp. serves as the Fund's administrator (the "Administrator").
The Administrator provides certain administrative services to the Fund. For its
services, the Administrator receives a monthly fee at an annual rate of 0.20% of
the value of the Fund's average monthly net assets. For the six months ended
January 31, 1999, these fees amounted to $89,117.
The Fund pays each of its directors who is not a director, officer or employee
of the Mexican Adviser, the Co-Adviser, the Administrator or any affiliate
thereof an annual fee of $5,000 plus $700 for each Board of Directors meeting
attended in person and $100 for each meeting attended by means of a telephone
conference. In addition, the Fund reimburses the directors for travel and
out-of-pocket expenses incurred in connection with Board of Directors meetings.
NOTE C: PORTFOLIO ACTIVITY
Purchases and sales of securities other than short-term obligations, aggregated
$44,478,439 and $55,267,794 respectively, for the six months ended January 31,
1999.
NOTE D: TRANSACTIONS WITH AFFILIATES
Acciones y Valores de Mexico, S.A. de C.V., the parent company of the Mexican
Adviser, received total brokerage commissions of $83,694 during the six months
ended January 31, 1999.
NOTE E: OTHER
At January 31, 1999, substantially all of the Fund's assets were invested in
Mexican securities. The
A-27
<PAGE>
THE MEXICO EQUITY AND INCOME FUND, INC.
January 31, 1999
Notes to Financial Statements (concluded) (Unaudited)
Mexican securities markets are substantially smaller, less liquid, and more
volatile than the major securities markets in the United States. Consequently,
acquisitions and dispositions of securities by the Fund may be inhibited.
NOTE F: SUBSEQUENT EVENTS
On March 11, 1999, the Fund announced that it intends to conduct a tender offer
for up to 10% of each Shareholder's shares of common stock of the Fund at a
price equal to 90% of the Fund's net asset value per share. The Fund intends to
commence the tender offer on or about April 12, 1999; however, the tender offer
will not commence until the filing of the appropriate documents with the U.S.
Securities and Exchange Commission.
The Fund also announced that the Board of Directors has approved a share
repurchase program that authorizes the Fund to buy back up to 10% of its
outstanding shares of common stock in the open market following the completion
of the tender offer. Under the program, the Fund will repurchase shares at
management's discretion at times when it considers the repurchase to be
consistent with the objectives of the program.
The Board of Directors approved the tender offer and share repurchase program at
a special meeting of the Board held on March 5, 1999.
A-28
LETTER OF TRANSMITTAL
To Accompany Shares of Common Stock
or Order Tender of Uncertificated Shares of
THE MEXICO EQUITY AND INCOME FUND, INC.
Tendered Pursuant to the Offer
Dated April 12, 1999
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON MAY 14, 1999, UNLESS THE OFFER IS EXTENDED.
--------------------
The Depositary for the Offer is:
PNC BANK, N.A.
Facsimile Copy Number: (302) 791-1008
Confirm by Telephone: (302) 791-1043
For Account Information Call:
(302) 791-2748 (Delaware residents only) or (800) 852-4750
By First Class Mail, By Overnight In New York City,
Courier, By Hand: By Hand:
PNC Bank, N.A. Depository Trust Company
400 Bellevue Parkway Transfer Agent Drop Service Dept.
Mailstop W3-F400-02-4 55 Water Street (South Street entrance)
Wilmington, DE 19809 -- Ground Floor
New York, NY
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THOSE LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND EXCEPT AS OTHERWISE PROVIDED IN INSTRUCTION 2, THE DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. THE SHAREHOLDER HAS THE RESPONSIBILITY TO CAUSE THE LETTER OF
TRANSMITTAL, CERTIFICATES AND ANY OTHER DOCUMENTS TO BE TIMELY DELIVERED.
This Letter of Transmittal is to be used (a) if certificates for Shares
(as defined below) are to be forwarded herewith, or (b) if uncertificated Shares
held by the Fund's transfer agent pursuant to the Fund's dividend reinvestment
plan are to be tendered, or (c) if tenders are to be made by book-entry transfer
to any of the accounts maintained by the Depositary at the Depository Trust
Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure
set forth in Section 3, "Procedure for Tendering Shares," of the Fund's Offer.
Shareholders whose certificates are not immediately available or who cannot
deliver certificates for Shares (other than uncertificated Shares held by the
Fund's transfer agent pursuant to the Fund's dividend reinvestment plan) or
deliver confirmation of the book-entry transfer of their Shares into the
Depositary's account at the Book-Entry Transfer Facility and all other documents
required hereby to the Depositary prior to 5:00 p.m., New York City Time, on the
Termination Date may nevertheless tender their Shares according to the
guaranteed delivery procedures set forth in Section 3, "Procedure for Tendering
Shares," of the Fund's Offer. See Instruction 2 below. Delivery of documents to
a Book-Entry Transfer Facility does not constitute delivery to the Depositary.
<PAGE>
|_| CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: _________________________________________________
Account Number: _____________ Transaction Code Number: _________________________
If the tendered shares are being tendered by a Nominee Holder on behalf of its
customers, please state the number of customer accounts for whose benefit the
tender is made: ________________________________________________________________
|_| CHECK HERE IF CERTIFICATES FOR TENDERED SHARES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution which Guaranteed Delivery: _________________________________
Account Number (if delivered by book-entry transfer): __________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING DOCUMENTS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to The Mexico Equity and Income Fund, Inc.,
a Maryland corporation (the "Fund"), the above-described shares of the Fund's
Common Stock, $0.001 par value per share (the "Shares"), at a price per share,
net to the seller in cash, at a price (the "Purchase Price") equal to 90% of the
net asset value in U.S. dollars ("NAV") per Share as of 5:00 p.m., New York City
time, on May 14, 1999, or such later date to which the Offer is extended (the
"Termination Date"), upon the terms and subject to the conditions set forth in
the Fund's Offer, dated April 12, 1999 (the "Fund's Offer"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which together with the
Fund's Offer constitute the "Offer"). If the Fund, in its sole discretion, shall
have extended the period for which the Offer is open, the "Termination Date"
shall mean the latest time and date on which the Offer, as so extended by the
Fund, shall expire.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions of
the Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Fund all right, title and interest in and to all the Shares that
are being tendered hereby and that are being accepted for purchase pursuant to
the Offer (and any and all dividends, distributions, other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
May 14, 1999) and irrevocably constitutes and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any such dividends, distributions, other Shares or securities or
rights), with full power of substitution (such power of attorney being deemed to
be an irrevocable power coupled with an interest) to (a) deliver certificates
for such Shares (and any such other dividends, distributions, other Shares or
securities or rights) or transfer ownership of such Shares (and any such other
dividends, distributions, other Shares or securities or rights), together, in
either such case, with all accompanying evidences of transfer and authenticity
to or upon the order of the Fund, upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price, (b) present such Shares (and any
such other dividends, distributions, other Shares or securities or rights) for
transfer on the books of the Fund, and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any such other
dividends, distributions, other Shares or securities or rights), all in
accordance with the terms of the Offer.
The undersigned hereby represents and warrants that: (a) the undersigned
has full power and authority to tender, sell, assign and transfer the tendered
Shares (and any and all dividends, distributions, other Shares or other
securities or rights issued or issuable in respect of such Shares on or after
May 14, 1999); (b) when and to the extent the Fund accepts the Shares for
purchase, the Fund will acquire good, marketable and unencumbered title hereto,
free and clear of all liens, restrictions, charges, proxies, encumbrances or
other obligations relating to their sale or trans-
2
<PAGE>
fer, and not subject to any adverse claim; (c) on request, the undersigned will
execute and deliver any additional documents deemed by the Depositary or the
Fund to be necessary or desirable to complete the sale, assignment and transfer
of the tendered Shares (and any and all dividends, distributions, other Shares
or securities or rights issued or issuable in respect of such Shares on or after
May 14, 1999); (d) the undersigned has tendered no more than 10% of the Shares
owned by the undersigned or attributed to the undersigned, or that the
undersigned owns 99 Shares or less and (e) the undersigned has read and agreed
to all of the terms of the Offer, including this Letter of Transmittal.
If this tender is made by a broker, commercial bank, trust company or
other nominee for beneficial owner(s) of Shares with respect to which it is the
record holder, such broker, commercial bank, trust company or other nominee
hereby represents and warrants that it believes, based upon representations made
to it by such beneficial owner(s), that each such person has tendered no more
than 10% of the Shares owned by such beneficial owner(s) or attributed to such
beneficial owner(s), or that such person owns 99 Shares or less.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Termination Date in accordance with Section 4, "Rights of Withdrawal", of the
Fund's Offer. After the Termination Date, tenders made pursuant to the Fund's
Offer will be irrevocable.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s): Share(s) Tendered
(Please fill in, if blank) (Attach additional signed
schedule if necessary)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Certificate Total Number
Number(s)* Number of of
Shares Shares
Represented Tendered**
by
Certificates
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Total Shares
Tendered
- ----------------------------------------------------------------------------------------
Total Shares
Owned XXXXXXX
- ----------------------------------------------------------------------------------------
% Tendered
of Total
Owned XXXXXXX
- ----------------------------------------------------------------------------------------
* Need not be completed by Shareholders who tender Shares by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by any
certificates delivered to the Depositary are being tendered. See Instruction 4.
- ----------------------------------------------------------------------------------------
</TABLE>
THE UNDERSIGNED TENDERS ALL UNCERTIFICATED SHARES THAT MAY BE HELD IN THE
NAME OF THE REGISTERED HOLDER(S) BY THE FUND'S TRANSFER AGENT PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN.
______Yes _____No
Note: If you do not check either of the boxes above, uncertificated Shares, if
any, held in the name of the registered holder(s) by the Fund's transfer agent
pursuant to the Fund's dividend reinvestment plan will not be tendered.
3
<PAGE>
ODD LOTS
(SEE INSTRUCTION 11)
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person owning beneficially or of record an aggregate of not more
than 99 Shares. The undersigned either (check one box):
|_| Is the beneficial or record owner of an aggregate of not more than 99
Shares, all of which are being tendered; or
|_| Is a broker, dealer, commercial bank, trust company or other nominee that
(a) is tendering for the beneficial owner(s) thereof Shares with respect
to which it is the record holder, and (b) believes, based upon
representations made to it by such beneficial owner(s), that each such
person is the beneficial owner of an aggregate of not more than 99 Shares
and is tendering all of such Shares;
and, in either case, hereby represents that the above indicated information is
true and correct as to the undersigned.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
The undersigned understands that the valid tender of Shares pursuant to
any one of the procedures described in Section 3, "Procedure for Tendering
Shares," of the Fund's Offer and in the Instructions hereto will constitute a
binding agreement between the undersigned and the Fund upon the terms and
subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer, the Fund may not be required to purchase any of the Shares tendered
hereby, or may accept for purchase fewer than all of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please return any certificates for Shares not tendered or accepted for payment
(and accompanying documents, as appropriate) in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please return any
certificates for Shares not tendered or accepted for payment (and accompanying
documents, as appropriate) to the address(es) of the registered holder(s)
appearing under "Description of Shares Tendered." In the event that either the
Special Delivery Instructions or the Special Payment Instructions are completed,
please return such certificates to, the person or persons so indicated. The
undersigned recognizes that the Fund has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
holder thereof if the Fund does not accept for payment any of the Shares so
tendered. The undersigned recognizes that the Special Payment Instructions and
the Special Delivery Instructions are not applicable to Shares tendered by
book-entry transfer, nor to uncertificated Shares held by the Fund's transfer
agent pursuant to the Fund's dividend reinvestment plan which may be tendered
hereby.
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 5, 6 and 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased are to be issued in the name of and sent to someone other than the
undersigned.
Issue Certificate to:
Name ___________________________________________________________________________
(Please Print)
Address ________________________________________________________________________
________________________________________________________________________________
(City, State, Zip Code)
Complete Payer Substitute Form W-9
________________________________________________________________________________
(Taxpayer Identification (Social Security) Number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased are to be issued in the name of the undersigned, but sent to someone
other than the undersigned or to the undersigned at an address other than that
shown above.
Mail Certificate to:
Name ___________________________________________________________________________
(Please Print)
Address ________________________________________________________________________
________________________________________________________________________________
(City, State, Zip Code)
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 HEREIN.
________________________________________________________________________________
________________________________________________________________________________
(Signatures of Shareholder(s))
Dated:___________________, 1999
(Must be signed by the registered holder(s) exactly as names(s) appear(s) on
certificate(s) for the Shares or on a security position listing or by person(s)
authorized to become registered holder(s) by certificate(s) and documents
transmitted herewith. If signature is by attorney-in-fact, executor,
administrator, trustee, guardian, agent, officer of a corporation or another
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5.)
Name(s) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (Full Title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
City State Zip code
Area Code and Telephone Number _________________________________________________
Employer Identification or
Social Security Number _________________________________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature(s) ________________________________________________________
Name ___________________________________________________________________________
________________________________________________________________________________
(Please Print)
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
City State Zip code
Dated:_____________________, 1999
- --------------------------------------------------------------------------------
5
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Repurchase Offer
1. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for purposes of this document,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions"
herein, or (ii) if such Shares are tendered for the account of a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. ("NASD") or a commercial bank or trust company
having an office, branch or agency in the United States (each being hereinafter)
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be used only (a) if certificates
are to forwarded herewith, (b) if uncertificated Shares held by the Fund's
transfer agent pursuant to the Fund's dividend reinvestment plan are to be
tendered, or (c) if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in Section 3, "Procedure for Tendering
Shares," of the Fund's Offer. Certificates for all physically tendered Shares,
or confirmation of a book-entry transfer in the Depositary's account at the
Book-Entry Transfer Facility of Shares tendered by book-entry transfer,
together, in each case, with a properly completed and duly executed Letter of
Transmittal or facsimile thereof with any required signature guarantees, any
other documents required by this Letter of Transmittal should be mailed or
delivered to the Depositary at the appropriate address set forth herein and must
be received by the Depositary prior to 5:00 p.m., New York City Time, on the
Termination Date. Shareholders whose certificates are not immediately available
or who cannot deliver Shares and all other required documents to the Depositary
prior to 5:00 p.m., New York City Time, on the Termination Date, or whose Shares
cannot be delivered on a timely basis pursuant to the procedures for book-entry
transfer prior to the Termination Date, may tender their Shares by or through
any Eligible Institution by properly completing and duly executing and
delivering a Notice of Guaranteed Delivery (or facsimile thereof), which must be
received by the Depositary prior to the Termination Date, and by otherwise
complying with the guaranteed delivery procedures set forth in Section 3,
"Procedure for Tendering Shares," of the Fund's Offer. Pursuant to such
procedures, the certificates for all physically tendered Shares, or confirmation
of book-entry transfer, as the case may be, as well as a properly completed and
duly executed Letter of Transmittal, all other documents required by this Letter
of Transmittal must be received by the Depositary within three business days
after receipt by the Depositary of such Notice of Guaranteed Delivery, all as
provided in Section 3, "Procedure for Tendering Shares," of the Fund's Offer.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. THE SHAREHOLDER HAS THE RESPONSIBILITY TO CAUSE THE
LETTER OF TRANSMITTAL, CERTIFICATES AND ANY OTHER DOCUMENTS TO BE TIMELY
DELIVERED.
No alternative, conditional or contingent tenders will be accepted, except
as may be permitted in the Fund's Offer. All tendering Shareholders, by
execution of this Letter of Transmittal (or facsimile thereof), waive any right
to receive any notice of the acceptance for payment of Shares.
3. Inadequate Space. If the space provided is inadequate, the certificate
numbers and/or number of Shares should be listed on a separate signed schedule
attached hereto.
4. Partial Tenders and Unpurchased Shares. (Not applicable to shareholders
who tender by book-entry transfer.) If fewer than all the Shares evidenced by
any certificate submitted are to be tendered, fill in the number of Shares which
are to be tendered in the column entitled "Number of Shares Tendered." In such
case, a new certificate for the remainder of the Shares evidenced by the old
certificate(s) will be issued and sent to the registered holder, unless
otherwise specified in the "Special Payment Instructions" or "Special Delivery
Instructions" boxes in this Letter of Transmittal, as soon as practicable after
the Repurchase Request Deadline. All Shares represented by certificates listed
and delivered to the Depositary are deemed to have been tendered unless
otherwise indicated.
6
<PAGE>
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements.
(a) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) on the face of the certificates.
(b) If any of the tendered Shares are held of record by two or more
joint holders, all such holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many Letters of Transmittal as there are different registrations of
certificates.
(d) If this Letter of Transmittal is signed by the registered
holder(s) of the Shares listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless payment is to be
made, or the certificates for Shares not tendered or purchased are to be
issued, to a person other than the registered holder(s), in which case the
endorsements or signatures on the stock powers, as the case may be, must
be signed exactly as the name(s) of the registered holder(s) appear(s) on
the certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution. See also Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock
powers are signed by trustees, executors, administrators, guardians,
agents, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and must submit proper evidence satisfactory to the Fund of their
authority to so act.
(f) If this Letter of Transmittal is signed by a person(s) other
than the registered holder(s) of the certificates listed and transmitted
hereby, the certificates must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name or names of the
registered holder(s) appear on the certificates. Signatures on such
certificates of stock powers must be guaranteed by an Eligible
Institution. See also Instruction 1.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal, and the Fund will pay all stock transfer taxes, if any,
with respect to the transfer and sale of Shares to it pursuant to the Offer to
Repurchase. If, however, payment of the repurchase price is to be made to, or
(in the circumstances permitted by the Fund's Offer) if Shares not tendered or
not purchased are to be registered in the name of any person other than the
registered holder, or if tendered certificates are registered in the name of any
person other than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder or such
other person) payable on account of the transfer to such person will be deducted
from the Purchase Price unless satisfactory evidence of the payment of such
taxes, or exemption therefrom, is submitted.
7. Special Payment and Delivery Instructions. If certificates for Shares
not tendered or not purchased are to be issued in the name of a person other
than the person signing this Letter of Transmittal or if such certificates are
to be sent to someone other than the person signing this Letter of Transmittal
or to the person signing this Letter of Transmittal at an address other than
that shown above, the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed.
8. Irregularities. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Fund, in its sole discretion, which determination
shall be final and binding. The Fund reserves the absolute right to reject any
or all tenders of any particular Shares (i) determined by it not to be in proper
form or (ii) the acceptance of or payment for which may, in the opinion of the
Fund's counsel, be unlawful. The Fund also reserves the absolute right to waive
any of the conditions of the Offer, in whole or in part, or any defect or
irregularity in tender of any particular Shares or Shareholder, and the Fund's
interpretations of the terms and conditions of the Offer (including these
instructions) shall be final and binding. No tender of Shares will be deemed to
be properly made until all defects and irregularities have been cured or waived.
None of the Fund, the Depositary, the Information Agent or any other person
shall be obligated to give notice of defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
Unless waived, any defects or irregularities must be cured within such time as
the Fund shall determine.
7
<PAGE>
9. Requests for Assistance and Additional Copies. Requests for assistance
should be directed to, and additional copies of the Fund's Offer, the Notice of
Guaranteed Delivery and this Letter of Transmittal may be obtained from the
Information Agent at the address set forth at the end of this Letter of
Transmittal, or from your broker, dealer, commercial bank, trust company, or
other nominee. The Information Agent will also provide shareholders, upon
request, with a Certificate of Foreign Status (Form W-8).
10. Backup Withholding. Each Shareholder that desires to participate in
the Offer must, unless an exemption applies, provide the Depositary with the
Shareholder's taxpayer identification number on the Substitute Form W-9 set
forth in this Letter of Transmittal, with the required certifications under
penalties of perjury. If the Shareholder is an individual, the taxpayer
identification number is his social security number. If the Depositary is not
provided with the correct taxpayer identification number, the Shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service in addition to
being subject to backup withholding.
If backup holding applies, the Depositary is required to withhold 31% of
any payment made to the Shareholder with respect to Shares purchased pursuant to
the Offer. Backup withholding is not an additional tax. Rather, the U.S. Federal
income tax liability of persons subject to backup withholding may result in an
overpayment of taxes for which a refund may be obtained by the Shareholder from
the Internal Revenue Service.
Certain Shareholders (including, among others, most corporations and
certain foreign persons) are exempt from backup withholding requirements. To
qualify as an exempt recipient on the basis of foreign status, a shareholder
must submit a properly executed Certificate of Foreign Status (Form W-8), signed
under penalties of perjury, attesting to that person's exempt status. Generally,
a foreign person will be able to avoid backup withholding with respect to
payments that are considered made in exchange for tendered Shares only if he (1)
is neither a citizen nor a resident of the United States, (2) has not been and
reasonably does not expect to be present in the United States for a period
aggregating 183 days or more during the calendar year, and (3) reasonably
expects not be engaged in a trade or business within the United States to which
the gain on the sale of the Shares would be effectively connected. Somewhat
different requirements apply in the case of foreign persons covered by tax
treaties.
A SHAREHOLDER SHOULD CONSULT HIS TAX ADVISER AS TO HIS QUALIFICATION FOR
EXEMPTION FROM THE BACKUP WITHHOLDING REQUIREMENTS AND THE PROCEDURE FOR
OBTAINING AN EXEMPTION.
Shareholders are required to give the Depositary the taxpayer
identification number of the record owner of the Shares. If the Shares are
registered in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on substitute Form W-9.
11. Odd Lots. As described in Section 1 of the Offer, the Fund will
purchase Shares validly tendered and not properly withdrawn prior to the
Termination Date by any stockholder who owns beneficially or of record an
aggregate of not more than 99 Shares (an "Odd Lot Holder"). This preference will
not be available unless the item captioned "Odd Lots" is completed.
8
<PAGE>
- --------------------------------------------------------------------------------
SUBSTITUTE Name___________________ Account number(s)
Form W-9 Address________________ (optional)
Department of the Treasury ------------------------------------------------
Internal Revenue Service Part 1 - PLEASE PROVIDE Social Security Number
YOUR TIN IN THE BOX AT or Employer
Payer's Request for Taxpayer RIGHT AND CERTIFY BY Identification Number
Identification Number ("TIN") SIGNING AND DATING BELOW.
and Certification ------------------
------------------------------------------------
Part 2 - CERTIFICATION. Under penalties of
perjury, I certify that:
1. The number shown on this form is my correct
TIN (or I am waiting for a number to be issued
to me), and
2. I am not subject to backup withholding
because (a) I am exempt from backup withholding
or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of failure to
report all interest or dividends or (c) the IRS
has notified me that I am no longer subject to
backup withholding.
Certification Instruction. -- You must cross out
item 2 above if you have been notified by the
IRS that you are currently subject to backup
withholding because you failed to report all
interest and dividends on your tax return.
Signature_______________________ Date___________
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU DO NOT HAVE
A TAXPAYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a TIN has not been issued to me and
either (a) I have mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Office or (b) I intend
to mail or deliver such an application in the near future. I understand that if
I do not provide a TIN within sixty (60) days, 31% of all reportable payments
made to me thereafter will be withheld until I provide a TIN.
_________________________________________ ____________________________
Signature Date
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
9
<PAGE>
IMPORTANT: This Letter of Transmittal or a manually signed facsimile
thereof (together with certificates for Shares and all other required documents)
or the Notice of Guaranteed Delivery must be received by the Depositary prior to
5:00 p.m., New York City Time, on May 14, 1999, at the appropriate address set
forth below:
The Depositary:
PNC BANK, N.A.
Facsimile Copy Number:
(302) 791-1008
Confirm by Telephone:
(302) 791-1043
For Account Information Call:
(302) 791-2748 (Delaware residents only) or (800) 852-4750
By First Class Mail, By Overnight In New York City,
Courier, By Hand: By Hand:
PNC Bank, N.A. Depository Trust Company
400 Bellevue Parkway Transfer Agent Drop Service Dept.
Mailstop W3-F400-02-4 55 Water Street (South Street entrance)
Wilmington, DE 19809 -- Ground Floor
New York, NY
Any questions or requests for assistance or additional copies of this
Letter of Transmittal, the Fund's Offer, the Notice of Guaranteed Delivery and
other accompanying materials may be directed to the Information Agent at its
telephone number and location listed below. Shareholders may also contact their
broker, dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Repurchase Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free: (800) 848-2998
or
Call Collect: (212) 269-5550
10
Offer by
THE MEXICO EQUITY AND INCOME FUND, INC.
To Purchase for Cash
up to 10% of Each Shareholder's
Shares of Common Stock
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON MAY 14, 1999 ("TERMINATION DATE")
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED, BUT IS SUBJECT TO OTHER CONDITIONS AS OUTLINED IN THE FUND'S
OFFER AND IN THE LETTER OF TRANSMITTAL.
April 12, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith the material listed below relating to the offer
of The Mexico Equity and Income Fund, Inc., a Maryland corporation registered
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified management investment company (the "Fund"), to purchase up to
10% of each shareholder's shares of common stock, par value $0.001 (the
"Shares") upon the terms and conditions set forth in its Offer dated April 12,
1999 and in the related Letter of Transmittal (which together constitute the
"Offer"). The price to be paid for the Shares is an amount per Share, net to the
seller in cash, equal to 90% of the net asset value per Share as determined by
the Fund at 5:00 p.m., New York City time, on May 14, 1999 (the "Termination
Date").
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. No fees or commission will be payable to brokers, dealers
or other persons for soliciting tenders for Shares pursuant to the Offer. The
Fund will, however, upon request, reimburse you for reasonable and customary
mailing and handling expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Fund will pay all transfer taxes on its purchase
of Shares, subject to Instruction 6, "Stock Transfer Taxes," of the Letter of
Transmittal. However, backup withholding at a 31% rate may be required unless
either an exemption is proved or the required taxpayer identification
information and certifications are provided. See Section 8, "Federal Income Tax
Consequences," of the Offer and Instruction 10, "Backup Withholding," of the
Letter of Transmittal.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. A letter to Shareholders of the Fund from Alan H. Rappaport,
Chairman of the Fund;
2. The Offer dated April 12, 1999;
3. The Letter of Transmittal for your use and to be provided to your
clients;
4. Notice of Guaranteed Delivery;
5. Form of letter to clients which may be sent to your clients for
whose accounts you hold Shares registered in your name (or in the
name of your nominee); and
6. Return envelope addressed to the Depositary.
The Offer is not being made to, nor will the Fund accept tenders from,
holders of Shares in any State or other jurisdiction in which the Offer would
not be in compliance with the securities or Blue Sky laws of such jurisdiction.
As described in the Fund's Offer under Section 3, "Procedure for Tendering
Shares," tenders may be made without the concurrent deposit of stock
certificates if (1) such tenders are made by or through a broker or dealer that
<PAGE>
is a member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office, branch, or agency in the United States; and (2)
certificates for Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at a Book-Entry Transfer Facility (as
defined in the Letter of Transmittal)), together with a properly completed and
duly executed Letter of Transmittal, and any other documents required by the
Letter of Transmittal, are received by the Depositary within three business days
after receipt by the Depositary of a properly completed and duly executed Notice
of Guaranteed Delivery.
As described in the Offer, the Fund will not purchase more than 10% of any
one Shareholder's Shares, provided that the Fund will purchase all Shares from
Shareholders who own 99 Shares or less. Furthermore, if this tender is made by a
broker, commercial bank, trust company or other nominee for beneficial owner(s)
of Shares with respect to which it is the record holder, such broker, commercial
bank, trust company or other nominee must represent and warrant in the Letter of
Transmittal that it believes, based upon representations made to it by such
beneficial owner(s), that each such person has tendered no more than 10% of the
Shares owned by such beneficial owner(s) or attributed to such beneficial
owner(s), or that such person owns 99 Shares or less.
Neither the Fund nor its Board of Directors makes any recommendation to
any Shareholder as to whether to tender any Shares.
Additional copies of the enclosed material may be obtained from the
Information Agent at the appropriate address and telephone number set forth in
the Fund's Offer. Any questions you have with respect to the Offer should be
directed to the Information Agent at its address and telephone numbers set forth
in the Offer.
Very truly yours,
THE MEXICO EQUITY AND INCOME FUND, INC.
/s/ Alan H. Rappaport
ALAN H. RAPPAPORT
Chairman
- --------------------------------------------------------------------------------
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON THE AGENT OF THE MEXICO EQUITY AND INCOME FUND, INC., THE
INFORMATION AGENT, OR THE DEPOSITARY OR AUTHORIZE YOU OR ANY OTHER PERSON TO
MAKE ANY STATEMENTS OR USE ANY MATERIAL ON THEIR BEHALF WITH RESPECT TO THE
OFFER, OTHER THAN THE MATERIAL ENCLOSED HEREWITH AND THE STATEMENTS SPECIFICALLY
SET FORTH IN SUCH MATERIAL.
- --------------------------------------------------------------------------------
R&W DRAFT--3/30/99
Offer by
THE MEXICO EQUITY AND INCOME FUND, INC.
To Purchase for Cash
up to 10% of Each Shareholder's Shares of
Common Stock
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON MAY 14, 1999 ("TERMINATION DATE")
THIS OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED,
BUT IS SUBJECT TO OTHER CONDITIONS AS OUTLINED IN THE OFFER AND IN THE LETTER OF
TRANSMITTAL.
April 12, 1999
To Our Clients:
Enclosed for your consideration is the Offer, dated April 12, 1999, of The
Mexico Equity and Income Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, as a closed-end, non-diversified
management investment company (the "Fund"), and a related Letter of Transmittal
(which together constitute the "Offer"), pursuant to which the Fund is offering
to purchase up to 10% of each Shareholder's shares of common stock, par value
$0.001 (the "Shares"), upon the terms and conditions set forth in the Offer.
The Offer and the Letter of Transmittal are being forwarded to you for
your information only and cannot be used by you to tender Shares held by us for
your account. We are the holder of record of Shares held for your account. A
tender of such Shares can be made only by us as the holder of record and only
pursuant to your instructions.
Your attention is called to the following:
(1) The Purchase Price to be paid for the Shares is an amount per
Share, net to the seller in cash, equal to 90% of the net asset value per
Share as determined by the Fund at 5:00 p.m., New York City time, on May
14, 1999 (the "Termination Date"). The current net asset value of the Fund
will be calculated weekly through May 7, 1999 and daily from May 10, 1999
until the Termination Date and may be obtained by calling D.F. King & Co.,
Inc., the Fund's Information Agent, toll free at (800) 848-2998 or call
collect (212) 269-5550.
(2) The Offer is not conditioned upon any minimum number of Shares
being tendered.
(3) Upon the terms and subject to the conditions of the Offer, the
Fund will purchase all Shares validly tendered on or prior to the
Termination Date. Each Shareholder may tender only up to 10% of such
Shareholder's Shares, provided that each Shareholder who owns 99 Shares or
less may tender all 99 Shares.
(4) Tendering shareholders will not be obligated to pay brokerage
commissions or, subject to Instruction 6, "Stock Transfer Taxes," of the
Letter of Transmittal, stock transfer taxes on the purchase of Shares by
the Fund pursuant to the Offer.
(5) Your instructions to us should be forwarded in ample time before
the Termination Date to permit us to submit a tender on your behalf.
An envelope to return your instructions to us is enclosed. YOUR
INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE OFFER.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with applicable law.
Neither the Fund nor its Board of Directors is making any recommendation
to any Shareholder whether to tender or refrain from tendering Shares in the
Offer. Each Shareholder is urged to read and evaluate the Offer and accompanying
materials carefully.
<PAGE>
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter, and the enclosed
Offer, dated April 12, 1999, and Letter of Transmittal, relating to The Mexico
Equity and Income Fund, Inc. (the "Fund") to purchase up to 10% of each
Shareholder's shares of common stock, par value $0.001 (the "Shares").
This will instruct you to tender to the Fund the number of Shares
indicated below (which are held by you for the account of the undersigned), upon
the terms and subject to the conditions set forth in the Offer and in the
related Letter of Transmittal that you have furnished to the undersigned.
- --------------------------------------------------------------------------------
AGGREGATE NUMBER OF SHARES TO BE TENDERED:
_______ Shares
Enter number of Shares to be tendered.
Note that each Shareholder may tender only up to 10% of such
Shareholder's Shares, provided that each Shareholder who owns
99 Shares or less may tender all 99 Shares.
- --------------------------------------------------------------------------------
ODD LOTS
This section is to be completed ONLY if Shares are being tendered by or on
behalf of a person owning beneficially or of record an aggregate of not more
than 99 Shares. The undersigned:
|_| Is the beneficial or record owner of an aggregate of not more than 99
Shares, all of which are being tendered; and, hereby represents that the
above indicated information is true and correct as to the undersigned.
- --------------------------------------------------------------------------------
SIGNATURE BOX
________________________________________________________________________________
________________________________________________________________________________
(Signature(s))
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print Name(s) and Address here)
________________________________________________________________________________
(Area Code and Telephone No.)
________________________________________________________________________________
(Taxpayer Identification (Social Security) Number)
- --------------------------------------------------------------------------------
Date: ______________________, 1999
2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK OF
THE MEXICO EQUITY AND INCOME FUND, INC.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if a shareholder's certificates for shares of
common stock, par value $0.001 (the "Shares") of The Mexico Equity And Income
Fund, Inc., are not immediately available or time will not permit the Letter of
Transmittal and other required documents to be delivered to the Depositary on or
before 5:00 p.m., New York City Time, May 14, 1999 or such later date to which
the Offer is extended (the "Termination Date"). Such form may be delivered by
hand or transmitted by telegram, telex, facsimile transmission or mail to the
Depositary, and must be received by the Depositary on or before the Termination
Date. See Section 3, "Procedure for Tendering Shares," of the Fund's Offer (as
defined below).
The Depositary:
PNC BANK, N.A.
Facsimile Copy Number: (302) 791-1008
Confirm by Telephone: (302) 791-1043
For Account Information Call:
(302) 791-2748 (Delaware residents only) or (800) 852-4750
By First Class Mail, By Overnight In New York City, By Hand:
Courier, By Hand:
Depository Trust Company
PNC Bank, N.A. Transfer Agent Drop Service Dept.
400 Bellevue Parkway 55 Water Street (South Street entrance)
Mailstop W3-F400-02-4 -- Ground Floor
Wilmington, DE 19809 New York, NY
- --------------------------------------------------------------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN ONE
LISTED ABOVE DOES NOT CONSTITUTE A VALID DELIVERY
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to The Mexico Equity and Income Fund, Inc.
(the "Fund"), upon the terms and subject to the conditions set forth in its
Offer, dated April 12, 1999 (the "Fund's Offer") and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares set forth on the reverse side pursuant to the
guaranteed delivery procedures set forth in Section 3, "Procedure for Tendering
Shares," of the Fund's Offer.
<PAGE>
- --------------------------------------------------------------------------------
Number of Shares Tendered:_______________________
Note that each shareholder may not tender more than 10% of the shares owned by
such shareholder, provided that shareholders who own 99 shares or less may
tender all 99 shares.
Certificate Nos. (if available):
________________________________________________________________________________
________________________________________________________________________________
If Shares will be tendered by book-entry transfer, check box:
|_| The Depository Trust Company
Account Number:
________________________________________________________________________________
Name(s) of Record Holder(s):
________________________________________________________________________________
________________________________________________________________________________
Address:
________________________________________________________________________________
________________________________________________________________________________
Area Code and Telephone Number:
________________________________________________________________________________
________________________________________________________________________________
Taxpayer Identification (Social Security) Number:
The undersigned also tenders all uncertificated Shares that may be held in the
name of the registered holder(s) by the Fund's transfer agent pursuant to the
Fund's dividend reinvestment plan:
___________ Yes ____________ No
(Note: If neither of these boxes is checked,
any such uncertificated Shares will not be tendered.)
Dated: ___________________, 1999 __________________________________________
__________________________________________
Signature(s)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GUARANTEE
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office, branch, or agency in the
United States, hereby (a) guarantees to deliver to the Depositary certificates
representing the Shares tendered hereby, in proper form for transfer (or tender
shares pursuant to the procedure for book-entry transfer into the Depositary's
account at The Depository Trust Company, together with (i) a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and (ii) other required documents, within three business
days after the Termination Date of the Offer, and (b) represents that such
tender of Shares complies with Rule 14e-4 under the Securities Exchange Act of
1934, as amended.
Name of Firm: ____________________________ ___________________________________
(Authorized Signature)
Address: _________________________________ Name: _____________________________
(Please Print)
_______________________________________ Title: ____________________________
City State Zip Code
Area Code and Tel. No. ___________________ Dated: ______________________, 1999
DO NOT SEND SHARE CERTIFICATES WITH THIS FORM. YOUR SHARE
CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
