T H E E M E R G I N G
M E X I C O
F U N D , I N C .
ANNUAL REPORT
JUNE 30, 1998
SANTANDER
MANAGEMENT INC. [LOGO]
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THE EMERGING MEXICO FUND, INC.
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GENERAL INFORMATION
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THE FUND
The Emerging Mexico Fund, Inc. (the "Fund") is a non-diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
("NYSE"). Its investment objective is long-term capital appreciation through
investment primarily in Mexican equity securities. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in equity
securities issued by Mexican companies. The balance of the Fund's assets will be
invested in Mexican peso or U.S. dollar-denominated fixed-income securities.
THE INVESTMENT ADVISER
Santander Management Inc. is the Fund's investment adviser. Santander Management
Inc. is an indirect subsidiary of Banco Santander, S.A. Gestion Santander
Mexico, S.A. de C.V., an affiliate of the Investment Adviser, serves as the
Fund's sub-adviser in Mexico.
SHAREHOLDER INFORMATION
Daily market prices for the Fund's shares are published in the NYSE Composite
Transactions section of major newspapers under the designation "EmMx" or
"EmergMexFd." The Fund's NYSE trading symbol is "MEF".
Net asset value and market price information about the Fund's shares are
published each Monday in The Wall Street Journal, each Sunday in The New York
Times and each Saturday in Barron's, as well as in other newspapers, in a table
captioned "Publicly Traded Funds" or "Closed-End Funds". Inquiries regarding
registered shareholder accounts may be directed to the Fund's transfer agent,
dividend paying agent and registrar, PNC Bank, National Association, at (800)
852-4750.
DIVIDEND REINVESTMENT PLAN
Pursuant to the Fund's Dividend Reinvestment Plan (the "Dividend Plan"),
shareholders may elect to have all dividend and capital gain distributions
(collectively referred to as "dividends") reinvested by PNC Bank, National
Association (the "Plan Agent") in additional shares of Common Stock of the Fund.
Holders of Common Stock who do not elect to participate in the Dividend Plan
will receive all dividends in cash paid by check mailed directly to the
shareholder of record (or, if the shares are held in street or other nominee
name, then to such nominee) by the Plan Agent. Participation in the Dividend
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THE EMERGING MEXICO FUND, INC.
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GENERAL INFORMATION (continued)
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Plan is completely voluntary and may be terminated or resumed at any time
without penalty by written notice if received by the Plan Agent not less than
ten days prior to any dividend record date; otherwise, such termination will be
effective with respect to any subsequently declared dividends. Shareholders who
intend to hold their shares through a broker or nominee should contact such
broker or nominee to confirm that they may participate in the Dividend Plan.
Whenever the Fund declares a dividend payable either in shares or in cash,
non-participants in the Dividend Plan will receive cash and participants in the
Dividend Plan will receive the equivalent in shares of Common Stock. The shares
will be acquired by the Plan Agent for the participant's account, depending upon
the circumstances described below, either (i) through receipt of additional
shares of unissued but authorized shares of Common Stock from the Fund ("newly
issued shares") or (ii) by purchase of outstanding shares of Common Stock in the
open market ("open-market purchases") on the NYSE or elsewhere. If on the
payment date of the dividend, the net asset value per share of the Common Stock
is equal to or less than the market price per share of the Common Stock plus
estimated brokerage commissions (such condition being referred to herein as
"market premium"), the Plan Agent will invest the dividend amount in newly
issued shares on behalf of the participant. The number of newly issued shares of
Common Stock to be credited to the participant's account will be determined by
dividing the dollar amount of the dividend by the net asset value per share on
the date the shares are issued, provided that the maximum discount from the then
current market price per share on the date of issuance does not exceed 5%. If on
the dividend payment date, the net asset value per share is greater than the
market price per share (such condition being referred to herein as "market
discount"), the Plan Agent will invest the dividend amount in shares acquired on
behalf of the participant in open-market purchases.
In the event of a market discount on the dividend payment date, the Plan Agent
will have until the last business day before the next date on which the shares
trade on an "ex-dividend" basis, but in no event more than thirty days after the
dividend payment date (the "last purchase date"), to invest the dividend amount
in shares acquired in open-market purchases. If the market price of a share of
Common Stock exceeds the net asset value per share, the average per share
purchase price paid by the Plan Agent may exceed the net asset value of the
Fund's shares resulting in the acquisition of fewer shares than if
2
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THE EMERGING MEXICO FUND, INC.
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the dividend had been paid in newly issued shares on the dividend payment date.
Due to the foregoing difficulty with respect to open-market purchases, the
Dividend Plan provides that if the Plan Agent is unable to invest the full
dividend amount in open-market purchases during the purchase period or if the
market discount shifts to a market premium during the purchase period, the Plan
Agent will cease making open-market purchases and will invest the uninvested
portion of the dividend amount in newly issued shares at the close of business
on the last purchase date.
The Plan Agent maintains all shareholders' accounts in the Dividend Plan and
furnishes written confirmation of all transactions in the account, including
information required by shareholders for their tax records. Shares in the
account of each Dividend Plan participant will be held by the Plan Agent in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased or received pursuant to the Dividend
Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends payable either in shares or in cash. However, each
participant will be charged a pro rata share of brokerage commissions incurred
with respect to the Plan Agent's open-market purchases in connection with the
reinvestment of dividends. The reinvestment of dividends will not relieve
participants of any federal income tax that may be payable(or required to be
withheld) on such dividends.
Experience under the Dividend Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Dividend
Plan. There is no direct service charge to participants in the Dividend Plan;
however, the Fund reserves the right to amend the Dividend Plan to include a
service charge payable by the participants.
Information relating to the Plan is available from the Plan Agent, PNC Bank,
National Association, at PNC Bank, National Association, Closed-End
Department-Mexico, P.O. Box 8950, Wilmington, Delaware 19809 or by calling (800)
852-4750.
3
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THE EMERGING MEXICO FUND, INC.
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GENERAL INFORMATION (continued)
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ANNUAL SHAREHOLDERS' MEETING
The Fund's annual meeting of shareholders was held on June 24, 1998.
Shareholders voted to: 1) re-elect Gonzalo de Las Heras and Philip L. Bullen as
Directors; 2) ratify the appointment of PricewaterhouseCoopers LLP (formerly
Price Waterhouse LLP) as the Fund's independent accountants for the fiscal year
ending June 30, 1999; 3) recommend to open-end the Fund; and, 4) not terminate
the investment advisory agreement between Santander Management Inc. and the
Fund. The resulting vote count for each proposal is indicated below:
1. Election of Directors:
Gonzalo de Las Heras For: 7,455,792
Withheld Authority: 3,868,750
Philip L. Bullen For: 7,456,104
Withheld Authority: 3,868,438
In addition to the above re-elected Directors, Edgar R. Fiedler, Rodney B.
Wagner and Richard S. Weinert continue to serve as Directors of the Fund.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the Fund's
independent accountants:
For: 9,801,059
Against: 1,440,772
Abstain: 82,711
3. Recommend to open-end the Fund:
For: 5,785,064
Against: 2,334,985
Withheld Authority: 184,490
This is a non-binding shareholder recommendation.
4. Termination of the investment advisory agreement between Santander Management
Inc. and the Fund:
For: 4,520,513
Against: 3,486,544
Withheld Authority: 297,482
This vote failed to achieve the legal prescribed majority of outstanding shares.
4
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THE EMERGING MEXICO FUND, INC.
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DISCOUNT TO NET ASSET VALUE
Some shareholders of the Fund have expressed concern about the discount to net
asset value that the Fund has been trading at recently. The non-binding
shareholder recommendation approved at the Fund's annual meeting that the Board
of Directors convert the Fund to an open-end fund reflects this concern. The
Directors of your Fund share this concern.
Shares of closed-end funds frequently trade at a discount to their net asset
value. In recent years, the attractiveness of the U.S. stock market relative to
the Mexican market and volatility in the Mexican stock market have contributed
to a decrease in demand for shares of the Fund. For the year ended June 30,
1998, the Fund's discount to net asset value ranged from 10.71% to 26.16% and
averaged 19.76% during the period. At August 7, 1998, the Fund's discount to net
asset value was 18.18%. The other Latin American closed-end single country
equity funds had discounts of a similar magnitude as of this date. Discounts do
not always prevail, however, and many investors may recall periods in 1993, 1994
and 1995 when the Fund's shares traded at a premium to their net asset value.
Your Directors review the discount at every Board meeting and have consistently
considered and studied many steps aimed at reducing it. In light of the
shareholder recommendation to convert the Fund to open-end status, the Board is
reviewing the viability of converting to an open-end fund. If the Board
determines that open-ending is not a viable option, it will continue to consider
other appropriate steps aimed at reducing the discount.
OTHER INFORMATION
Since June 30, 1997, there have been no: (i) material changes in the Fund's
investment objectives or policies with the exception of approval at a special
meeting of stockholders held October 8, 1997 of an amendment to the fundamental
investment restrictions of the Fund to allow for the lending of portfolio
securities. The resulting vote count was as follows: Shares for--5,005,243;
Shares against--977,494; Withheld authority--923,997; (ii) changes to the Fund's
Charter or By-laws with the exception of the matters discussed in the "Corporate
Developments" section on the following page; (iii) material changes in the
principal risk factors associated with investment in the Fund; or (iv) change in
the person primarily responsible for the day-to-day management of the Fund.
5
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THE EMERGING MEXICO FUND, INC.
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GENERAL INFORMATION (concluded)
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CORPORATE DEVELOPMENTS
On February 26, 1998, the Board of Directors adopted certain amendments to the
Fund's By-Laws, including an amendment generally requiring that advance notice
be given to the Fund in the event a stockholder desires to nominate a person for
election to the Board of Directors or to transact any other business at an
annual meeting of stockholders. With respect to an annual meeting, notice of any
such nomination or business must be delivered to or received at the principal
executive offices of the Fund not less than 60 calendar days prior to the
anniversary date of the prior year's annual meeting.
The notice provision was adopted to afford stockholders a fair opportunity to
present matters for consideration at stockholder meetings while assuring that
stockholders and Directors will have a reasonable opportunity to thoughtfully
consider the matters proposed and to allow for full information to be
distributed to all stockholders about all sides of the particular issue.
The foregoing summary of the terms of the changes to the By-Laws does not
purport to be complete and is subject to and qualified in its entirety by
reference to the complete text of amended and restated By-Laws filed with the
Securities and Exchange Commission as an Exhibit to the Fund's Form N-SAR for
the period ended December 31, 1997.
YEAR 2000 PROCESSING ISSUE
Many computer programs employed throughout the world use two digits rather than
four to identify the year. These programs, if not adapted, may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. The Year 2000 issue affects virtually all companies
and organizations.
The Investment Adviser has advised the Fund that it is implementing steps
intended to ensure that its computer systems are capable of Year 2000
processing. In addition, the Fund is inquiring with third parties to assess the
adequacy of their Year 2000 compliance efforts. The Fund intends to develop
contingency plans intended to assure that third-party noncompliance will not
materially affect the Fund's operations. The Fund does not currently anticipate
that the Year 2000 issue will have an adverse effect on the Investment Adviser's
ability to continue to provide the services currently provided to the Fund.
Companies in which the Fund invests could be adversely affected by the Year 2000
issue, but the Fund cannot predict the consequential affect on its investment
return. To the extent the impact on a portfolio holding is negative, the Fund's
investment return could be adversely affected.
6
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THE EMERGING MEXICO FUND, INC.
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LETTER TO SHAREHOLDERS
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August 3, 1998
Dear Shareholders:
We are pleased to present the annual report of The Emerging Mexico Fund, Inc.,
(the "Fund") for the year ended June 30, 1998.
The Fund's per share net asset value at June 30, 1998 was $9.35, representing a
17.26% decrease for the year. The closing market price on the New York Stock
Exchange on June 30, 1998 was $7.9375, a decrease of 14.19% for the year. On
June 30, 1998, the Fund's net assets aggregated $120.8 million and the price on
the New York Stock Exchange ranged from a high of $11.8125 on October 6, 1997 to
a low of $7.3125 on June 15, 1998.
THE MEXICAN ECONOMY
The story of the Mexican economy during the first semester of 1998 could be
summarized as sustained economic growth overshadowed by volatility in the
international financial markets. Gross Domestic Product ("GDP") grew 6.6% in the
first quarter supported by a strong 10.1% increase in private consumption.
Retail sales and manufacturing exports also contributed to the economic dynamism
by growing in excess of 10.8% and 16.9%, respectively, during the January
through April period.
As expected, the trade and current account balances deteriorated in the first
semester of 1998 as compared to last year. In addition, import growth
accelerated and oil exports collapsed after the more than 30% decrease in
international oil prices. For calendar year 1998, we maintain our expectations
of the trade and current account balances reaching deficits of 1.5% and 3.5% of
GDP, respectively.
In response to the decline in international oil prices, the government has kept
a prudence policy enacting three budget cuts totaling US$4 billion, equivalent
to approximately 1% of Mexican GDP or 3.8% of the initial budget. Although the
fiscal adjustment has affected all areas, government-owned oil and electric
companies were the most affected. The authorities have maintained their
commitment to keep the fiscal deficit to approximately 1.25% of GDP.
7
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THE EMERGING MEXICO FUND, INC.
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LETTER TO SHAREHOLDERS (continued)
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Despite the strength reflected in the first semester, both foreign exchange and
interest rates have reacted to the volatility witnessed in the international
financial markets. While the Mexican peso weakened about 10% versus the US
dollar during the first six months of the year, interest rates reversed the
declining trend we had seen over the past year. Concerns over turmoil in
Indonesia, recession in Japan and Southeast Asia, and in the Russian and Chinese
currencies, have contributed to the heightened volatility in local financial
markets.
Attending to the higher than expected exchange rate and the financial markets
volatility, monetary authorities changed their neutral stance to a restrictive
policy. Authorities imposed a monetary short position of MXP 20 million in March
and in June increased it to MXP 30 million. Although the amounts were not
significant relative to the monetary base, these policy actions have sent a
clear signal to the market of the authority's intention to keep inflation under
control. For the first half of 1998, inflation reached 8.3%, similar to the 8.7%
recorded during the first semester of 1997 but higher than expectations at the
beginning of the year. We continue to believe that inflation for 1998 will
surpass the government's target of 12%, to reach approximately 14.5%.
For the second semester of 1998, we expect a scenario similar to what we have
witnessed this year-to-date, namely, a growing economy in a volatile
international financial market. We believe that continued volatility in the
international markets, high domestic interest rates, a slowing US economy, weak
oil prices and the government's budget reductions will hinder economic growth
during the second half of the year, effectively reducing GDP growth to levels
below 4%. Despite this expected deceleration, the strong economic growth
recorded during the first half of the year makes our 1998 full year growth
forecast of 4.5% attainable. In the long-term, we remain confident that Mexico's
economy will continue to grow faster than population growth accompanied by lower
inflation and interest rates.
On the political front, the race for the presidential elections in the year 2000
has begun. While Vicente Fox from the PAN and Cuauhtemoc Cardenas from the PRD
seem headed toward successfully obtaining their party's nomination, there is no
clear cut candidate from the governing party. We believe, that over the next six
to nine months, the political agenda will be dominated by peace negotiations in
Chiapas, congressional discussions on the Fobaproa financial
8
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THE EMERGING MEXICO FUND, INC.
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package and the 1999 fiscal budget. This last issue will include an evaluation
of the comprehensive tax reform that authorities are planning to submit to
Congress next fall.
THE MEXICAN MARKET
During the first six months of 1998, the Mexican market along with emerging
markets overall, were adversely affected by the volatility in the international
financial markets. In this period, the market was driven by international events
and consequently, paid little attention to the continuing domestic strength
supported by quarterly results and economic statistics. This situation resulted
in the Mexican Stock Index falling 18.1% in peso terms (26.3% decrease in US
dollars). We believe that international events will continue to contribute to
the Mexican market's volatility.
The strength of the domestic economy was reflected in company results announced
for the first quarter. Companies whose business is concentrated in the domestic
market, such as beverages, telephone, construction, cement, and department
stores, posted double digit sales growth accompanied by even stronger growth in
operating profits. However, companies exposed to commodities and with
significant exposure to international markets, such as steel, industrial
conglomerates, mining and chemicals, reported flat to decreasing sales along
with deteriorating operating margins. At the net income level, the peso
depreciation adversely affected earnings of US dollar indebted companies. We
anticipate more of the same regarding company quarterly results during the
balance of the year.
Despite the volatility that could continue to affect financial markets in the
short-term, we maintain a positive stance on the long-term outlook for the
Mexican market. Among the factors we expect to drive the market, include:
o domestic economic growth surpassing that of the population;
o a slowing US economy towards a modest economic growth, low inflation
scenario;
o concrete policies to pull Japan and Asia out of recession;
o attractive valuations in the Mexican market.
9
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THE EMERGING MEXICO FUND, INC.
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LETTER TO SHAREHOLDERS (concluded)
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THE PORTFOLIO
During the past year, the Fund's portfolio has concentrated its investments on
domestically-oriented growth companies, with positions in small, medium and
large capitalization stocks such as, Controladora Comercial Mexicana,
Corporacion Geo, Data Capital, and Grupo Modelo. The performance of the Fund,
along with that of the Mexican market, has been hindered by the turbulence the
Asian crisis brought to emerging markets.
The Fund will continue to maintain a full investment strategy, investing 95-100%
of its assets in Mexican equities. We will continue to look for investment
opportunities in companies with high growth potential and solid management. We
remain positive on the long-term fundamentals of Mexico and the potential
attractive returns the Mexican market can offer to our shareholders.
Thank you for your continued interest in the Fund.
Sincerely,
/s/ GONZALO DE LAS HERAS /s/ PABLO MANCERA DE ARRINGUNAGA
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Gonzalo de Las Heras Pablo Mancera de Arringunaga
President Portfolio Manager
10
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THE EMERGING MEXICO FUND, INC.
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PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
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MEXICAN EQUITIES -- 98.97%
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Shares Value
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BUILDING MATERIALS & CEMENT -- 6.70%
569,590 Cemex, S.A. de C.V.--Series CPO ................. $ 2,136,359
768,400 Cemex, S.A. de C.V.--Series CPO ADR ............. 5,955,100
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8,091,459
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COMMUNICATIONS -- 10.59%
1,491,000 Carso Global Telecom, S.A. de C.V.--Series A1 ... 4,646,411
390,000 Grupo Televisa, S.A. de C.V.--Series CPO* ....... 7,287,813
1,277,632 T.V. Azteca, S.A. de C.V.--Series CPO ........... 853,177
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12,787,401
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CONSTRUCTION -- 13.88%
1,420,800 Corporacion Geo, S.A. de C.V.--Series B* ........ 7,906,511
2,025,000 Grupo Tribasa, S.A. de C.V.* .................... 5,521,703
643,700 Grupo Tribasa, S.A. de C.V. ADR* ................ 3,339,194
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16,767,408
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ENTERTAINMENT -- 5.80%
1,522,180 Corporacion Interamericana de Entretenimiento,
S.A. de C.V.--Series B* ....................... 4,235,337
1,182,957 Corporacion Interamericana de Entretenimiento,
S.A. de C.V.--Series L* ....................... 2,764,841
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7,000,178
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FINANCIAL SERVICES -- 7.50%
15,167,000 Grupo Financiero Bancomer, S.A. de C.V.--
Series B+ ..................................... 5,654,919
3,065,000 Grupo Financiero Banorte, S.A. de C.V.--
Series B* ..................................... 3,411,241
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9,066,160
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11
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THE EMERGING MEXICO FUND, INC.
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PORTFOLIO OF INVESTMENTS (concluded)
JUNE 30, 1998
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Shares Value
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FOOD, BEVERAGE, TOBACCO -- 20.01%
340,600 Fomento Economico Mexicano, S.A. de C.V.--
Series B ...................................... $ 10,708,904
1,537,000 Grupo Embotelladoras Unidas, S.A. de C.V.--
Series B* ..................................... 2,565,943
475,000 Grupo Modelo, S.A. de C.V.--Series C ............ 4,033,667
3,264,000 Pasteleria Francesa, S.A. de C.V. ............... 1,173,369
2,845,000 PepsiGemex, S.A. de C.V.--Series CPO ............ 5,686,834
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24,168,717
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INDUSTRIAL CONGLOMERATES -- 5.98%
590,000 Desc, S.A. de C.V.--Series B .................... 2,987,757
1,086,000 Sanluis Corporacion, S.A. de C.V.--Series CPO ... 4,230,384
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7,218,141
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LODGING -- 1.15%
8,914,000 Grupe, S.A. de C.V.--Series B* .................. 1,388,937
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METALS & MINING -- 6.63%
1,526,000 Industrias CH, S.A. de C.V.--Series B* .......... 4,942,304
50,000 Tubos de Acero de Mexico, S.A. .................. 639,955
189,000 Tubos de Acero de Mexico, S.A. ADR .............. 2,421,563
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8,003,822
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PAPER -- 3.68%
7,136,000 Empaques Ponderosa, S.A.--Series B* ............. 4,447,590
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RETAIL -- 8.49%
6,477,000 Controladora Comercial Mexicana, S.A. de C.V.--
Series UBC+ ................................... 5,348,841
1,709,000 Soriana, S.A. de C.V.--Series B ................. 4,907,312
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10,256,153
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THE EMERGING MEXICO FUND, INC.
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Shares Value
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SPECIALTY RETAIL -- 8.56%
3,288,000 Data Capital, S.A. de C.V.* ..................... $ 1,090,511
662,000 Grupo Comercial Gomo, S.A. de C.V.* ............. 1,171,486
7,892,000 Grupo Elektra, S.A. de C.V.* .................... 8,080,846
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10,342,843
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TOTAL MEXICAN EQUITIES (cost--$133,119,108) .................... 119,538,809
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REPURCHASE AGREEMENT -- 1.43%
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Principal
Amount
(000)
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MXP 15,535 Repurchase Agreement with Dresdner Bank Mexico,
20.51%, dated 6/30/98 to be repurchased 7/01/98
in the amount of MXP 15,544,133, collateralized
by MXP 16,794,935 Bankers Acceptance of Banque
Nationale de Paris due 11/17/98
(cost--$1,729,024) ............................... 1,729,024
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TIME DEPOSIT -- 0.04%
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$50 Brown Brothers Harriman & Co.
Grand Cayman, 4.25%++ (cost--$50,000) ............ 50,000
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TOTAL INVESTMENTS--100.44% (cost--$134,898,132) ................ 121,317,833
Liabilities in excess of other assets--(0.44)% ................. (532,244)
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NET ASSETS (applicable to 12,913,231 shares; equivalent
to $9.35 per share)--100.00% ................................. $120,785,589
============
- ----------
ADR American Depositary Receipt.
MXP Mexican Pesos.
* Non-income producing security.
+ Security, or a portion thereof, was on loan at June 30, 1998.
++ Variable rate account-rate resets on a monthly basis; amount available
upon 48 hours' notice.
See accompanying notes to financial statements.
13
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THE EMERGING MEXICO FUND, INC.
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STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
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ASSETS
Investments, at value (cost--$134,898,132) .................... $121,317,833
Investments of collateral received for securities on loan,
at value (cost--$2,187,100) ................................. 2,187,100
Cash (including Mexican pesos with a cost and value
of $116,905) ................................................ 118,218
Receivable for investments sold ............................... 1,729,023
Dividends and interest receivable ............................. 226,569
Prepaid expenses .............................................. 14,798
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Total assets 125,593,541
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LIABILITIES
Collateral for securities on loan ............................. 2,187,100
Payable for investments purchased ............................. 1,729,024
Investment advisory fee payable ............................... 95,575
Administration fee payable .................................... 19,046
Other accrued expenses ........................................ 777,207
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Total liabilities 4,807,952
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NET ASSETS
Common stock, $0.10 par value; 12,913,231 shares issued
and outstanding (100,000,000 shares authorized) ............. 1,291,323
Additional paid-in capital .................................... 133,733,155
Accumulated net investment loss ............................... (121,108)
Accumulated net realized loss ................................. (537,687)
Net unrealized depreciation of investments and other
assets and liabilities denominated in Mexican pesos ......... (13,580,094)
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Net assets applicable to shares outstanding ............. $120,785,589
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NET ASSET VALUE PER SHARE ....................................... $9.35
=====
See accompanying notes to financial statements.
14
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THE EMERGING MEXICO FUND, INC.
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STATEMENT OF OPERATIONS
For the Year Ended June 30, 1998
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INVESTMENT INCOME
Dividends ..................................................... $ 1,513,689
Interest (net of Mexican withholding taxes of $10,180) ........ 650,793
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2,164,482
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EXPENSES
Investment advisory fees ...................................... 1,423,062
Legal and audit fees .......................................... 588,487
Custodian and accounting fees ................................. 354,104
Administration fees ........................................... 277,989
Reports to shareholders ....................................... 173,452
Public relations expense ...................................... 86,952
Directors' fees and expenses .................................. 40,058
Transfer agent fees and expenses .............................. 28,960
Miscellaneous expenses ........................................ 22,822
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2,995,886
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NET INVESTMENT LOSS .............................................. (831,404)
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS
WRITTEN AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain (loss) on:
Investments ................................................. 29,156,100
Options written ............................................. (571,926)
Foreign currency transactions ............................... (434,836)
Net change in unrealized appreciation/depreciation of:
Investments ................................................. (52,673,446)
Options written ............................................. 216,044
Other assets and liabilities denominated in Mexican pesos ... (1,749)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS, OPTIONS
WRITTEN AND FOREIGN CURRENCY TRANSACTIONS ...................... (24,309,813)
------------
NET DECREASE IN NET ASSETS FROM INVESTMENT OPERATIONS ............ $(25,141,217)
============
See accompanying notes to financial statements.
15
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) .................. $ (831,404) $ 720,252
Net realized gain on investments,
options written and foreign currency
transactions ................................ 28,149,338 12,333,267
Net change in unrealized appreciation/
depreciation of investments, options
written and other assets and liabilities
denominated in Mexican pesos ................ (52,459,151) 23,422,950
------------ ------------
Total from investment operations .............. (25,141,217) 36,476,469
------------ ------------
DIVIDENDS TO SHAREHOLDERS
From net investment income .................... -- (180,626)
In excess of net investment income ............ -- (1,065,501)
------------ ------------
Total dividends to shareholders ............... -- (1,246,127)
------------ ------------
Net increase (decrease) in net assets ......... (25,141,217) 35,230,342
NET ASSETS
Beginning of period ........................... 145,926,806 110,696,464
------------ ------------
End of period ................................. $120,785,589 $145,926,806
============ ============
See accompanying notes to financial statements.
16
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Mexico Fund, Inc. (the "Fund") was incorporated in the State of
Maryland on June 25, 1990, as a non-diversified, closed-end management
investment company. The Fund's investment objective is long-term capital
appreciation through investment primarily in Mexican equity securities. Prior to
commencing investment operations on October 11, 1990, the Fund had no operations
other than the sale to Santander Management Inc. (the "Investment Adviser") of
9,000 shares of common stock for $100,440 on September 26, 1990.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Fund management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund.
Valuation of Investments--Securities which are regularly traded on Mexican and
U.S. stock exchanges are valued at the last sales price as of the close of
business on the day of valuation or, lacking any sales, at the last available
bid price. Securities traded in the over-the-counter market are generally valued
at the last reported sales price as of the close of business on the day of
valuation or, if there was no sale, at the mean of the bid and offer prices at
the close of business on such day or, if none is available, the last reported
sales price available. Securities and assets for which market quotations are not
readily available (or for which market quotations are not considered
representative of fair value) are valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Directors. Short-term
investments having a maturity of 60 days or less are valued at amortized cost,
or by amortizing their value on the 61st day prior to maturity if their term to
maturity from date of purchase was greater than 60 days, unless the Board of
Directors determines that such value does not represent the fair value of such
investments.
Option Transactions--For hedging purposes, the Fund may purchase
and write (sell) put and call options on Mexican securities. The risk associated
with purchasing an option is that the Fund pays a premium whether or not the
option is exercised. Additionally, the Fund bears the risk of loss of premium
and change in market value should the counterparty not perform under the
17
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
contract. Put and call options purchased are accounted for in the same manner as
portfolio securities. The cost of securities acquired through the exercise of
call options is increased by the premiums paid. The proceeds from securities
sold through the exercise of put options are decreased by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as a realized gain from options
written. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether the Fund has a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security
purchased by the Fund. In writing an option, the Fund bears the market risk of
an unfavorable change in the price of the security or currency underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security or currency at a price different from the
current market value.
Transactions in options written for the year ended June 30, 1998 were as
follows:
CONTRACTS PREMIUMS
--------- --------
Options outstanding, beginning of period ............ 936,130 $ 64,604
Options written ..................................... 2,093,458 494,278
Options expired ..................................... (2,093,458) (494,278)
Options terminated in closing purchase
transactions ...................................... (936,130) (64,604)
--------- ---------
Options outstanding, end of period .................. 0 $ 0
========= =========
18
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Repurchase Agreements--The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. If the
seller defaults, the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Security Lending--The Fund may lend up to 33-1/3% of its total assets to
qualified institutions. When the Fund lends its securities, it continues to earn
dividends and other income on such securities. Under the terms of the securities
lending agreement, the securities on loan are to be secured at all times by cash
or liquid securities in an amount at least equal to 105% of the market value of
the securities on loan that are foreign securities, which are marked to market
daily. The Fund bears the risk of delay in recovery of, or even loss of rights
in, the securities on loan should the borrower fail financially. The Fund's
lending agent is PaineWebber Incorporated ("PaineWebber") who administers the
Fund's lending program. PaineWebber is authorized to invest the cash collateral
received in short-term securities, including investments in affiliated mutual
funds. Any income from investments of cash collateral in excess of agency fees
and of a predetermined rebate to the borrowers is retained by the Fund and is
included in interest income. For non-cash collateral, the Fund earns a net fee
after the payment of the lending agents' fees paid by the borrowers. For the
year ended June 30, 1998, net earnings to the Fund from investment of cash
collateral was $21,586, after deducting the borrowers' rebate of $92,258 and
PaineWebber fees of $11,649, $790 of which was due at June 30, 1998. At June 30,
1998, the market value of the securities on loan and the cash collateral
received with respect to such loans were $1,977,704 and $2,187,100,
respectively.
19
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
At June 30, 1998, the Funds' investments from cash collateral for securities on
loan were as follows:
Shares
- ---------
2,131,675 AIM Liquid Asset Portfolio ............................ $2,131,675
28,700 AIM Prime Portfolio ................................... 28,700
19,007 Provident Institutional Temporary Investment
Fund--Class B ....................................... 19,007
7,718 Provident Institutional Temporary Investment
Fund--Class C ....................................... 7,718
----------
$2,187,100
==========
U.S. Federal Income Taxes--The Fund intends to distribute all of its taxable
income and to comply with the other requirements of the Internal Revenue Code of
1986, as amended applicable to regulated investment companies. Accordingly, no
provision for U.S. federal income tax is required.
During the year ended June 30, 1998, the Fund utilized $27,973,209 of capital
loss carryforwards.
In accordance with U.S. Treasury regulations, the Fund elected to defer realized
foreign currency losses occurring after October 31, 1997 in the amount of
$121,108. Such losses are treated for tax purposes as arising on July 1, 1998.
Mexican Withholding Taxes--Dividends distributed by Mexican companies from after
tax profits are not subject to tax. However, any other dividends distributed by
Mexican companies are subject to withholding tax at a rate of 35%. Interest
income is subject to withholding tax at a rate of 15% with the exception of debt
issued by the Mexican federal government. Realized gains from the sale or
disposition of equity securities listed on the Mexican Stock Exchange that are
either directly available to foreign investors or available through the Neutral
Trust arrangements are exempt from Mexican withholding tax. Realized gains from
off-exchange transactions in both listed and unlisted securities are subject to
20% withholding tax on the amount received or at the election of the Fund, 30%
tax on the realized gain. For the year ended June 30, 1998, the Fund did not
realize any gains from off-exchange transactions.
20
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Investment Transactions and Investment Income--Investment transactions are
recorded on the trade date (the date on which the order to buy or sell is
executed). Realized gains and losses from investments and foreign currency
transactions are calculated on the identified cost basis. Interest income is
recorded on an accrual basis. Dividend income and other distributions are
recorded on the ex-dividend date ("ex-date") except for certain dividends from
Mexican securities which are recorded as soon after the ex-date as the Fund,
using reasonable diligence, becomes aware of such dividends.
Foreign Currency Translation--The books and records of the Fund are maintained
in U.S. dollars. Mexican peso amounts are translated into U.S. dollars on the
following basis: (i) the foreign currency market value of investments and other
assets and liabilities denominated in Mexican pesos at the closing rate of
exchange on the valuation date; and (ii) purchases and sales of investments,
income and expenses are translated at the rate of exchange prevailing on the
respective dates of such transactions. The resulting net foreign currency gain
or loss is included in the Statementof Operations.
The Fund does not generally isolate that portion of the results of operations
arising as a result of changes in foreign currency exchange rates from
fluctuations arising from changes in the market prices of securities.
Accordingly, such foreign currency gain (loss) is included in net realized and
unrealized gain (loss) on investments. However, the Fund does isolate the effect
of fluctuations in foreign currency exchange rates when determining the gain or
loss upon the sale or maturity of Mexican peso denominated debt obligations
pursuant to U.S. federal income tax regulations; such amount is categorized as
foreign currency gain or loss for both financial reporting and income tax
reporting purposes.
Net foreign currency gain (loss) from valuing Mexican peso denominated assets
and liabilities at the period end exchange rate is reflected as a component of
net unrealized appreciation of investments and other assets and liabilities
denominated in Mexican pesos. Net realized foreign currency gain (loss) is
treated as ordinary income (loss) for income tax reporting purposes.
21
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Net realized foreign currency loss of $434,836 represents foreign currency gains
and losses from sales and maturities of debt securities, transactions in Mexican
pesos, currency gains and losses realized between the trade and settlement dates
on security transactions, and the difference between the amounts of interest and
dividends recorded on the Fund's books and the U.S. dollar equivalent of the
amounts actually received.
Dividends and Distributions--Dividends and distributions to shareholders are
recorded on the ex-date. Dividends and distributions from net investment income
and net realized capital gains are determined in accordance with federal income
tax regulations, which may differ from generally accepted accounting principles.
These "book/tax" differences are considered either 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 which exceed net investment income or net realized capital gains
for financial reporting purposes, but not for tax purposes, are reported as
dividends in excess of net investment income or distributions in excess of net
realized gain on investments. To the extent they exceed net investment income or
net realized capital gains for tax purposes, they are reported as distributions
of additional paid-in capital. As a result of permanent book/tax differences,
$1,145,132, attributable to a net operating loss for the year, has been
reclassified from accumulated net investment loss to additional paid-in capital.
Net assets were not affected by this reclassification.
INVESTMENT ADVISER, MEXICAN ADVISER AND ADMINISTRATOR
The Investment Adviser has an Investment Advisory Agreement with the Fund. In
accordance with the Investment Advisory Agreement, the Investment Adviser
provides or arranges for the provision of investment advisory services to the
Fund subject to the oversight and supervision of the Board of Directors. As
compensation for its services, the Investment Adviser receives a monthly fee,
computed weekly, at an annual rate of 0.90% of the Fund's average weekly net
assets up to $200 million and 0.80% of such net assets in excess of $200
million.
22
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund and the Investment Adviser have a Sub-Advisory Agreement with Gestion
Santander Mexico, S.A. de C.V. (the "Mexican Adviser"), an affiliate of the
Investment Adviser. Under the terms of the Sub-Advisory Agreement, the Mexican
Adviser is responsible for making investment decisions on behalf of the Fund and
providing other portfolio management services. As compensation for its services,
the Investment Adviser, out of its investment advisory fee, pays the Mexican
Adviser a monthly fee, computed weekly, at an annual rate of 0.15% of the Fund's
average weekly net assets.
Mitchell Hutchins Asset Management Inc. (the "Administrator") has an
Administration Agreement with the Fund. Under the terms of the Administration
Agreement, the Administrator provides certain administrative services to the
Fund. As compensation for its services, the Administrator receives a monthly
fee, computed weekly, at an annual rate of 0.20% of the Fund's average weekly
net assets up to $50 million, 0.18% of the Fund's next $25 million of average
weekly net assets and 0.16% of such net assets in excess of $75 million, subject
to a minimum annual fee of $125,000.
TRANSACTIONS WITH AFFILIATES
Banco Santander de Negocios Mexico, S.A., an affiliate of the Investment
Adviser, in its capacity as the Fund's subcustodian in Mexico, earned fees of
approximately $40,000, for the year ended June 30, 1998, of which approximately
$2,800 was payable at June 30, 1998.
For the year ended June 30, 1998, the Fund paid $14,001, $10,374, and $10 in
brokerage commissions to Casa de Bolsa Santander Mexico, S.A. de C.V., Santander
Investment Securities, Inc., and Invermexico Casa de Bolsa S.A. de C.V.,
respectively, affiliates of the Investment Adviser.
The Fund paid or accrued approximately $526,000 for the year ended June 30, 1998
for legal services to Brown & Wood LLP, the law firm in which the Fund's
secretary is a partner.
23
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
For U.S. federal income tax purposes, the cost of securities owned at June 30,
1998 was $134,943,894. Accordingly, net unrealized depreciation of investments
of $13,626,061 was composed of gross appreciation of $6,681,979 for those
investments having an excess of value over cost and gross depreciation of
$20,308,040 for those investments having an excess of cost over value.
For the year ended June 30, 1998, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $130,125,292 and $131,931,411,
respectively.
CAPITAL STOCK
At June 30, 1998, the Investment Adviser owned 12,000 shares of the Fund. There
were no transactions in shares of common stock for the years ended June 30, 1998
and June 30, 1997.
CONCENTRATION OF RISK
The Fund invests in securities listed on the Mexican Stock Exchange through
Neutral Trust arrangements pursuant to which the Fund obtains the monetary and
economic rights but not voting rights with respect to the securities.
Investments in Mexico may involve certain considerations and risks not typically
associated with investments in the United States as a result of, among other
factors, future political and economic developments and the level of Mexican
governmental supervision and regulation of its securities markets.
The ability of the issuers of the debt securities held by the Fund to meet their
obligations may be affected by economic and political developments in a specific
industry or region.
SHAREHOLDER PROPOSAL
At the Fund's annual shareholders' meeting, held on June 24, 1998, shareholders
voted in favor of a non-binding proposal recommending that the Board of
Directors convert the Fund to an open-end fund. The Board of Directors is
considering this proposal and other options in an effort to reduce the discount
to net asset value.
24
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of common stock outstanding throughout each period is
presented below.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................ $ 11.30 $ 8.57 $ 7.02 $ 7.69 $ 15.79
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income (loss) ........................ (0.07) 0.06 0.25* 0.43 0.08*
Net realized and unrealized gain (loss) on
investments, options written and foreign
currency transactions ............................. (1.88) 2.77 1.67* (8.74) 4.78*
-------- -------- -------- ------- --------
Total from investment operations ................ (1.95) 2.83 1.92 (8.31) 4.86
-------- -------- -------- ------- --------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......................... -- (0.02) -- (0.10) (0.21)
In excess of net investment income .................. -- (0.08) -- -- --
From net realized gain on investments ............... -- -- -- (0.92) (2.18)
In excess of net realized gain on
investments ....................................... -- -- -- (1.42) --
-------- -------- -------- ------- --------
Total dividends and distributions to
shareholders .................................. -- (0.10) -- (2.44) (2.39)
-------- -------- -------- ------- --------
CAPITAL SHARE TRANSACTIONS
Anti-dilutive effect of dividend
reinvestment ...................................... -- -- -- 0.03 0.02
Dilutive effect of rights offering .................. -- -- (0.32) -- (0.57)
Offering costs charged and adjustments to
additional paid-in capital ........................ -- -- (0.05) 0.05 (0.02)
-------- -------- -------- ------- --------
Total capital share transactions ................ -- -- (0.37) 0.08 (0.57)
-------- -------- -------- ------- --------
Net asset value, end of period ...................... $ 9.35 $ 11.30 $ 8.57 $ 7.02 $ 17.69
======== ======== ======== ======= ========
Market value, end of period ......................... $ 7.94 $ 9.25 $ 7.00 $ 8.00 $ 17.38
======== ======== ======== ======= ========
TOTAL INVESTMENT RETURN** ........................... (14.19)% 33.71% (10.42)% (41.83)% 36.71%
======== ======== ======== ======= ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) ............. $120,786 $145,927 $110,696 $64,029 $158,466
Ratio of expenses to average net
assets ............................................ 1.89% 1.66% 1.77% 1.75% 1.56%
Ratio of net investment income (loss) to
average net assets ................................ (0.53)% 0.60% 3.29% 3.38% 0.62%
Portfolio turnover .................................. 87% 71% 67% 83% 36%
- ---------------
* Based on average shares outstanding.
** Total investment return is calculated assuming a purchase of common stock at the current market price on the first day,
the purchase of common stock pursuant to any rights offering occurring in the period 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. Total investment return
does not reflect sales charges or brokerage commissions.
</TABLE>
25
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Emerging Mexico Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio 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 Emerging Mexico Fund, Inc. (the
"Fund") at June 30, 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 June
30, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
August 7, 1998
26
<PAGE>
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
Comparisons between changes in the Fund's net asset value per share and changes
in the Mexican Stock Exchange Index should be considered in light of the Fund's
investment policies and objective, the characteristics and quality of the Fund's
investments, the size of the Fund and variations in the Mexican peso/U.S. dollar
exchange rate.
[LOGO]
<PAGE>
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
Gonzalo de Las Heras President & Director
Philip L. Bullen Director
Edgar R. Fiedler Director
Rodney B. Wagner Director
Richard S. Weinert Director
C. William Maher Treasurer
Thomas R. Smith, Jr. Secretary
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Santander Management Inc.
P.O. Box N-1682
Bahamas Financial Centre, 3rd Floor
Charlotte and Shirley Streets
Nassau, Bahamas
MEXICAN ADVISER
- --------------------------------------------------------------------------------
Gestion Santander Mexico, S.A. de C.V.
Monte Pelvoux No. 220 Piso 2
Lomas de Chapultepec
11000 Mexico, D.F.
ADMINISTRATOR
- --------------------------------------------------------------------------------
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
CUSTODIANS
- --------------------------------------------------------------------------------
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Banco Santander de Negocios Mexico, S.A.
Monte Pelvoux No. 220 Piso 2
Lomas de Chapultepec
11000 Mexico, D.F.
SHAREHOLDER SERVICING AGENT
- --------------------------------------------------------------------------------
PNC Bank, National Association
400 Bellevue Parkway
Wilmington, Delaware 19809
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Brown & Wood LLP
One World Trade Center
New York, New York 10048
TO OBTAIN ADDITIONAL INFORMATION, INCLUDING UPDATED NET ASSET VALUES AND SHARE
PRICES, CALL TOLL-FREE: (800) 852-4750.
