<PAGE>
As filed with the Securities and Exchange Commission on January 29, 1999
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for Use of
/ / Definitive Proxy Statement the Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
THE EMERGING MEXICO FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
THE EMERGING MEXICO FUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
MARCH 30, 1999
---------------------
To the Stockholders of
The Emerging Mexico Fund, Inc.:
Notice is hereby given that a Special Meeting of Stockholders (the
"Meeting") of The Emerging Mexico Fund, Inc. (the "Fund") will be held at the
offices of Brown & Wood LLP, One World Trade Center, New York, New York on
March 30, 1999 at 10:30 A.M., for the following purposes:
(1) To consider and act upon a proposal to liquidate and dissolve the
Fund, as set forth in the Plan of Liquidation and Dissolution (the
"Plan") adopted by the Board of Directors of the Fund; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has unanimously determined that a complete
liquidation of the Fund in accordance with the terms of the Plan is in the best
interests of the Fund and its stockholders. The Board of Directors strongly
urges you to approve the Plan. Subject to receipt of the requisite stockholder
approval and the satisfactory resolution of any and all claims pending against
the Fund and its Board of Directors, stockholders remaining in the Fund can
expect to receive a liquidation distribution, in cash, as soon as reasonably
practicable. However, there is no minimum distribution to stockholders. The
Fund will not liquidate until all claims are resolved. When the Plan becomes
effective, the stockholders' respective interests in the Fund's assets shall
not be transferable by negotiation of the share certificates and the Fund's
shares will cease to be traded on the New York Stock Exchange, Inc.
The Board of Directors has fixed the close of business on January 15, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournment thereof.
A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after March 16, 1999, at the offices of the Fund, c/o Mitchell Hutchins
Asset Management, Inc., 1285 Avenue of the Americas, New York, New York.
You are cordially invited to attend the Meeting. Stockholders who do not
expect to attend the Meeting in person are requested to complete, date and sign
the enclosed form of proxy and return it promptly in the envelope provided for
that purpose. The enclosed proxy is being solicited on behalf of the Board of
Directors of the Fund.
By Order of the Board of Directors
Thomas R. Smith, Jr.
Secretary
New York, New York
Dated: February , 1999
YOUR VOTE IS IMPORTANT--Please execute and return the enclosed proxy promptly,
whether or not you plan to attend the Special Meeting of Stockholders of The
Emerging Mexico Fund, Inc.
<PAGE>
THE EMERGING MEXICO FUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
SPECIAL MEETING OF STOCKHOLDERS
MARCH 30, 1999
---------------------
PROXY STATEMENT
---------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of The Emerging Mexico Fund, Inc.,
a Maryland corporation (the "Fund"), to be voted at the Special Meeting of
Stockholders of the Fund and at any adjournments thereof (the "Meeting") to be
held at the offices of Brown & Wood LLP, One World Trade Center, New York, New
York on March 30, 1999 at 10:30 A.M. The approximate mailing date of this Proxy
Statement is February , 1999.
The purpose of the Meeting is to consider a proposal to liquidate and
dissolve the Fund as set forth in the Plan of Liquidation and Dissolution (the
"Plan") adopted by the Board of Directors of the Fund on November 30, 1998. All
properly executed proxies received prior to the Meeting will be voted at the
Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted FOR approval of the Plan. Any proxy may be revoked at any time prior
to the exercise thereof by giving written notice to the Secretary of the Fund
at the Fund's address indicated above or by voting in person at the Meeting.
The Board of Directors has fixed the close of business on January 15, 1999
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting and at any adjournment thereof. Stockholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of January 15, 1999, the Fund had
outstanding 10,277,431 shares of Common Stock, par value $0.10 per share.
Persons who, to the knowledge of the Fund, beneficially own more than five
percent of its outstanding shares are listed herein under "Stock Ownership of
Certain Beneficial Owners."
The Board of Directors of the Fund knows of no business other than that
mentioned in Item 1 of the Notice of Meeting which will be presented for
consideration at the Meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.
The Fund is a non-diversified, closed-end management investment company
whose shares trade on the New York Stock Exchange, Inc. (the "NYSE") under the
symbol "MEF." The Fund commenced operations on October 11, 1990, with the
objective of seeking long-term capital appreciation through investments
primarily in Mexican equity securities. The Fund's investments have been
managed by Santander Management Inc. (the "Investment Adviser"), located at
P.O. Box N-1682, Bahamas Financial Centre, Charlotte and Shirley Streets,
Nassau, Bahamas since the Fund's inception in 1990. As of
<PAGE>
December 31, 1998, the Investment Adviser and its affiliates had over $
million in assets under management. Gestion Santander Mexico, S.A. de C.V.,
located at Reforma No. 221, Col. Cuauhtemoc 06500 Mexico, D.F., an affiliate of
the Investment Adviser and the Fund's sub-adviser, provides investment advisory
services relating to Mexican securities to the Fund. The Fund's administrator
is Mitchell Hutchins Asset Management Inc., located at 1285 Avenue of the
Americas, New York, New York 10019.
PROPOSAL TO LIQUIDATE AND DISSOLVE THE FUND
BACKGROUND
Shares of closed-end equity funds typically trade in the marketplace at a
discount to their net asset value (the "discount"). This has been true in the
case of the Fund as well as the other Latin America closed-end single country
equity funds. Thus, the market price paid for the Fund's shares generally has
been less than the underlying value of the Fund's portfolio. For example,
during 1998 the average discount of the Fund's shares was approximately 18.15%.
These discounts do not always prevail, however, since at times in 1993, 1994
and 1995 the Fund's shares traded at a premium to their net asset value.
The Board of Directors over the years has discussed the significance of
the existence of the discount and the impact on stockholders. The Board of
Directors has discussed and considered various alternative strategies to
address the discount, including instituting share repurchases, making tender
offers for outstanding shares, instituting a managed dividend, utilizing
leverage, combining with other funds, converting to an open-end fund, and
liquidating the Fund's assets. The Board of Directors in the past, however, has
consistently concluded that it was in the best interests of the Fund and its
stockholders to maintain the current closed-end format, because, in the view of
the Board of Directors and the Investment Adviser, the closed-end format was
the best structure for a fund investing in Mexico with the Fund's investment
strategies. In the Investment Adviser's view, many attractive equity investment
opportunities in Mexico could be found in the small- and mid-capitalization and
less liquid sectors of the Mexican equity market. An open-end structure would
severely disrupt this portfolio strategy and would force the sale of securities
in a relatively illiquid market at times when it would hurt the Fund and its
stockholders.
At the Fund's 1998 Annual Meeting of Stockholders held on June 24, 1998
(the "1998 Annual Meeting"), a stockholder submitted a proposal recommending
that the Board of Directors take action to convert the Fund to an open-end fund
as a means to eliminate the discount. The non-binding stockholder
recommendation received affirmative votes representing 71.2% of the shares
voted on the proposal, or 44.8% of the shares outstanding.
The Board of Directors took very seriously the vote of the stockholders at
the 1998 Annual Meeting and it continued to consider methods to eliminate the
discount. Since the 1998 Annual Meeting, the Board of Directors and the
Investment Adviser have been actively engaged in extensive discussions
regarding the feasibility of converting the Fund into an open-end mutual fund,
merging the Fund with another fund, or liquidating the Fund. Also, the Board of
Directors discussed various alternatives with outside advisers. Based on its
findings, the Board of Directors determined that open-ending is not a viable
option because: (a) demand for an open-end fund investing only in Mexican
equities is very limited, (b) distributors in the mutual fund industry have
shown little or no interest in selling such a vehicle, and (c) to open-end the
Fund would be very costly to its remaining stockholders since the anticipated
resulting heavy redemptions would likely increase the Fund's operating expense
ratio to an unacceptable level. The Board of Directors also considered merging
or combining the Fund with another fund, but based on discussions with various
parties no satisfactory partner was found.
2
<PAGE>
Additionally, on September 21, 1998, the Board of Directors authorized the
open market repurchase of outstanding shares of the Fund's common stock as long
as the discount continued to exceed 10%. The objective of the stock repurchase
program (the "Program") was to reduce the discount and to increase the return
to stockholders. Since the inception of the Program, 2,635,800 shares,
representing 20.4% of the Fund's outstanding shares when the Program commenced,
have been repurchased through January 15, 1999. As of January 15, 1999, the
discount was 6.48%. It is currently anticipated that the Fund will continue to
purchase shares pursuant to the Program until the Plan is adopted unless the
Board of Directors otherwise determines to terminate the Program earlier.
Based upon the foregoing considerations and other relevant factors, and
despite the Board's belief that the Fund has offered stockholders a significant
opportunity to participate in the Mexican equity market, on October 26, 1998,
the Board of Directors announced its approval and authorization of the orderly
liquidation of the Fund based on its determination that such action is in the
best interests of the Fund and all of its existing stockholders. On November
30, 1998, the Board of Directors, including all of the Directors who are not
"interested persons" of the Fund (as that term is defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act")), adopted the
Plan and directed that the Plan be submitted for consideration by the Fund's
stockholders. A copy of the Plan is attached hereto as Exhibit A.
If (a) the Plan is approved by the requisite stockholder vote and (b) all
outstanding claims against the Fund and the Board of Directors discussed under
"Legal Proceedings" below and any other claims pending against the Fund prior
to the effective date of the Plan are satisfactorily resolved in the sole
discretion of the Board of Directors, the Fund shall file Articles of
Dissolution with the State of Maryland and the Fund's assets will be liquidated
at market prices and on such terms and conditions as determined to be
reasonable and in the best interests of the Fund and its stockholders in light
of the circumstances in which they are sold. Prior to stockholder approval of
the Plan, the Fund will continue to invest its assets in accordance with its
current investment strategies. Stockholders will receive their proportionate
cash interest of the net distributable assets of the Fund upon liquidation.
Under Maryland law and pursuant to the Fund's Articles of Incorporation,
as amended, and Amended and Restated By-Laws, the affirmative vote of the
holders of at least a majority of the outstanding shares of capital stock of
the Fund entitled to vote thereon is needed to approve the liquidation of the
Fund. For purposes of the vote on the Plan, abstentions and broker non-votes
will have the same effect as a vote against the Plan, but will be counted
toward the presence of a quorum. In the event that a majority of the
outstanding shares of capital stock of the Fund are not voted in favor of the
Plan, with the result that the Plan is not approved, the Fund will continue to
exist as a registered investment company in accordance with its stated
investment objective and policies. In the event the Plan is not approved, the
Board of Directors presently intends to meet to consider what, if any, steps to
take in the best interests of the Fund and its stockholders including the
possibility of resubmitting the Plan or another plan of liquidation and
dissolution to stockholders for future consideration. Also, pursuant to the
terms of the settlement agreement discussed under "Legal Proceedings," if the
Plan is not approved by stockholders, the Fund will take all reasonable steps
to reduce the discount and will hold discussions with its ten largest
stockholders in connection with such steps.
Notwithstanding the approval of a majority of the outstanding shares of
capital stock of the Fund, the claims discussed under "Legal Proceedings" below
and any other claims pending against the Fund and/or the Board of Directors
must be satisfactorily resolved prior to the liquidation of the Fund's assets.
Although, as discussed under "Legal Proceedings," the Fund has entered into a
settlement agreement in connection with the pending claims, the Fund is
currently unable to estimate with precision the costs of
3
<PAGE>
resolving such pending claims and exactly when such claims will be resolved.
Consequently, the amounts set forth under "Distribution Amounts" below are for
illustrative purposes only. The Fund will not liquidate until such claims are
satisfactorily resolved in the sole discretion of the Board of Directors.
SUMMARY OF PLAN OF LIQUIDATION AND DISSOLUTION
The following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Plan which is attached hereto as Exhibit A. Stockholders are urged to
read the Plan in its entirety.
Effective Date of the Plan and Cessation of the Fund's Activities as an
Investment Company. The Plan will become effective only upon (a) its adoption
and approval by the holders of a majority of the outstanding shares of the Fund
and (b) the satisfactory resolution in the sole discretion of the Board of
Directors of any and all claims pending against the Fund and its Board of
Directors (the "Effective Date"). Following these two events, the Fund will
file Articles of Dissolution with the State of Maryland and the Fund (i) will
cease to invest its assets in accordance with its investment objective and, to
the extent necessary, will, as soon as reasonable and practicable after the
Effective Date, complete the sale of the portfolio securities it holds in order
to convert its assets to cash or cash equivalents, provided, however, that
after the event in clause (a) the Board of Directors may authorize the
commencement of the sale of portfolio securities and the investment of the
proceeds of such sale in investment grade short-term debt securities
denominated in U.S. dollars, (ii) will not engage in any business activities
except for the purpose of paying, satisfying, and discharging any existing
debts and obligations, collecting and distributing its assets, and doing all
other acts required to liquidate and wind up its business and affairs and (iii)
will dissolve in accordance with the Plan (Plan, Sections 1, 3-4 and 6). The
Fund will, nonetheless, continue to meet the source of income, asset
diversification and distribution requirements applicable to regulated
investment companies through the last day of its final taxable year ending on
liquidation.
Closing of Books and Restriction on Transfer of Shares. The proportionate
interests of stockholders in the assets of the Fund will be fixed on the basis
of their holdings on the Effective Date. On such date, the books of the Fund
will be closed. Thereafter, unless the books of the Fund are reopened because
the Plan cannot be carried into effect under the laws of the State of Maryland
or otherwise, the stockholders' respective interests in the Fund's assets shall
not be transferable by the negotiation of share certificates and the Fund's
shares will cease to be traded on the NYSE (Plan, Section 5).
Liquidation Distributions. The distribution of the Fund's assets will be
made in up to two cash payments in complete cancellation of all the outstanding
shares of capital stock of the Fund. The first distribution of the Fund's
assets (the "First Distribution") is expected to consist of cash representing
substantially all the assets of the Fund, less an estimated amount necessary to
discharge any (a) unpaid liabilities and obligations of the Fund on the Fund's
books on the First Distribution date, and (b) liabilities as the Board of
Directors shall reasonably deem to exist against the assets of the Fund on the
Fund's books. However, there can be no assurance that the Fund will be able to
declare and pay the First Distribution. If the First Distribution is declared
and paid, the amount of the First Distribution currently is uncertain. A second
distribution (the "Second Distribution"), if necessary, is anticipated to be
made within 90 days after the First Distribution and will consist of cash from
any assets remaining after payment of expenses, the proceeds of any sale of
assets of the Fund under the Plan not sold prior to the First Distribution and
any other miscellaneous income of the Fund.
Each stockholder not holding stock certificates of the Fund will receive
liquidating distributions equal to the stockholder's proportionate interest in
the net assets of the Fund. Each stockholder holding stock certificates of the
Fund will receive a confirmation showing such stockholder's proportionate
interest in
4
<PAGE>
the net assets of the Fund with an advice that such stockholder will be paid in
cash upon return of the stock certificate. Stockholders holding stock
certificates should consider arranging with the Fund's transfer agent a return
of their certificates in advance of any liquidating distributions in order to
facilitate payments to them. All stockholders will receive information
concerning the sources of the liquidating distribution (Plan, Section 8).
Expenses of Liquidation and Dissolution. All of the expenses incurred by
the Fund in carrying out the Plan will be borne by the Fund (Plan, Section 9).
Continued Operation of the Fund. The Plan provides that the Board of
Directors has the authority to authorize such non-material variations from or
non-material amendments of the provisions of the Plan (other than the terms of
the liquidating distributions) at any time without stockholder approval, if the
Board of Directors determines that such action would be advisable and in the
best interests of the Fund and its stockholders, as may be necessary or
appropriate to effect the marshalling of Fund assets and the dissolution,
complete liquidation and termination of existence of the Fund, and the
distribution of its net assets to stockholders in accordance with the laws of
the State of Maryland and the purposes to be accomplished by the Plan. In
addition, the Board of Directors may abandon the Plan, with stockholder
approval, prior to the filing of Articles of Dissolution with the State
Department of Assessments and Taxation of Maryland if the Board of Directors
determines that such abandonment would be advisable and in the best interests
of the Fund and its stockholders (Plan, Sections 10 and 11). However, it is the
Board of Directors' current intention to liquidate and dissolve the Fund as
soon as practicable following the settlement of all claims pending against the
Fund and/or the Board of Directors.
DISTRIBUTION AMOUNTS
The Fund's net asset value on December 31, 1998 was $67,444,967. At such
date, the Fund had 10,301,731 shares outstanding. Accordingly, on December 31,
1998, the net asset value per share of the Fund was $6.55. The amounts to be
distributed to stockholders of the Fund upon liquidation will be reduced by the
expenses of the Fund in connection with the liquidation and portfolio
transaction costs as well as any costs incurred in resolving the claims pending
against the Fund discussed under "Legal Proceedings." Liquidation expenses are
estimated to be approximately $86,500 (or $0.0084 per share outstanding on
January 15, 1999). Portfolio transaction costs (including amounts allocated for
dealer markup on securities traded over the counter) are estimated to be
approximately $ , although actual portfolio transaction costs will depend
upon the composition of the portfolio and the timing of the sale of portfolio
securities. Actual liquidation expenses and portfolio transaction costs may
vary. The Fund currently estimates that the costs involved in resolving the
pending claims should not exceed $400,000. Any increase in such costs will be
funded from the cash assets of the Fund and will reduce the amount available
for distribution to stockholders.
GENERAL INCOME TAX CONSEQUENCES
United States Federal Income Tax Consequences. The following is only a
general summary of the United States Federal income tax consequences of the
Plan. Stockholders should consult with their own tax advisers for advice
regarding the application of current United States Federal income tax law to
their particular situation and with respect to state, local and other tax
consequences of the Plan.
The liquidating distributions received by a stockholder may consist of
three elements: (i) a capital gain dividend to the extent of any long-term
capital gains recognized by the Fund during the final tax year; (ii) an
ordinary income dividend to the extent of the Fund's interest income and
short-term capital gains
5
<PAGE>
earned during the final tax year (over and above expenses) that have not
previously been distributed; and (iii) a distribution treated as payment for
the stockholder's shares. As of December 31, 1998, the Fund had accumulated net
realized losses and, additionally, currently expects to realize net losses on
the sale of assets in connection with the liquidation. Therefore, it is not
currently expected that stockholders will receive any capital gain dividend in
the distribution. Also, the Fund does not currently expect to have any
undistributed ordinary income when its assets are liquidated. The composition
of the actual liquidating distributions may vary due to changes in market
conditions and the composition of the Fund's portfolio at the time its assets
are sold. Prior to the last day of the Fund's final taxable year, the Fund's
Board of Directors will authorize any capital dividend and ordinary income
dividend to be distributed as part of the liquidating distribution. Within 60
days after the close of the Fund's final taxable year, the Fund will notify
shareholders as to the portion, if any, of the liquidating distribution which
constitutes a capital gain dividend and that which constitutes an ordinary
income dividend (as well as any amounts qualifying for a credit or deduction
against foreign taxes paid by the Fund).
Any portion of a liquidating distribution paid under the Plan out of
investment income or realized capital gains (i.e., a distribution described in
(i) or (ii), above) will be taxed under the Internal Revenue Code of 1986, as
amended (the "Code"), in the same manner as any other distribution of the Fund.
Accordingly, such amounts will be treated as ordinary income or capital gains,
if so designated.
The balance of any amount received upon liquidation (i.e., a distribution
described in (iii), above) will be treated for Federal income tax purposes as
full payment in exchange for the stockholder's shares. Thus, a stockholder who
is a United States resident or citizen will be taxed only to the extent the
amount of the balance of the distribution exceeds his or her basis in such
shares; if the amount received is less than his or her basis, the stockholder
will realize a loss. The stockholder's gain or loss will be a capital gain or
capital loss if such shares are held as capital assets.
Corporate stockholders should note that there is no preferential Federal
income tax rate applicable to capital gains for corporations under the Code.
Accordingly, all income recognized by a corporate stockholder pursuant to the
liquidation of the Fund, regardless of its character as capital gains or
ordinary income, will be subject to tax at the same Federal income tax rate.
Under certain provisions of the Code, some stockholders may be subject to
a 31% withholding tax on the liquidating distribution ("backup withholding").
Generally, stockholders subject to backup withholding will be those for whom no
taxpayer identification number is on file with the Fund or who, to the Fund's
knowledge, have furnished an incorrect number.
IMPACT OF THE PLAN ON THE FUND'S STATUS UNDER THE INVESTMENT COMPANY ACT
On the Effective Date, the Fund will cease doing business as a registered
investment company and, as soon as practicable, will apply for deregistration
under the Investment Company Act. It is expected that the Securities and
Exchange Commission will issue an order approving the deregistration of the
Fund if the Fund is no longer doing business as an investment company.
Accordingly, the Plan provides for the eventual cessation of the Fund's
activities as an investment company and its deregistration under the Investment
Company Act, and a vote in favor of the Plan will constitute a vote in favor of
such a course of action (Plan, Sections 1, 4 and 10).
Until the Fund's withdrawal as an investment company becomes effective,
the Fund, as a registered investment company, will continue to be subject to
and will comply with the Investment Company Act.
PROCEDURE FOR DISSOLUTION UNDER MARYLAND LAW
After the Effective Date, pursuant to the Maryland General Corporation Law
and the Fund's Articles of Incorporation, as amended, and Amended and Restated
By-Laws, if at least a majority of the
6
<PAGE>
Fund's aggregate outstanding shares of capital stock are voted for the proposed
liquidation and dissolution of the Fund, Articles of Dissolution stating that
the dissolution has been authorized will in due course be executed,
acknowledged and filed with the Maryland State Department of Assessments and
Taxation, and will become effective in accordance with such law. Upon the
effective date of such Articles of Dissolution, the Fund will be legally
dissolved, but thereafter the Fund will continue to exist for the purpose of
paying, satisfying, and discharging any existing debts or obligations,
collecting and distributing its assets, and doing all other acts required to
liquidate and wind up its business and affairs, but not for the purpose of
continuing the business for which the Fund was organized. The Fund's Board of
Directors shall be the trustees of its assets for purposes of liquidation after
the acceptance of the Articles of Dissolution, unless and until a court
appoints a receiver. The Director-trustees will be vested in their capacity as
trustees with full title to all the assets of the Fund (Plan, Sections 4 and
13).
APPRAISAL RIGHTS
Shareholders will not be entitled to appraisal rights under Maryland law
in connection with the Plan (Plan, Section 15).
VOTING INFORMATION
Approval of the Plan requires the affirmative vote of the holders of at
least a majority of the outstanding shares of capital stock of the Fund. Unless
a contrary specification is made, the accompanying proxy will be voted FOR
approval of the Plan.
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
At January 15, 1999, the Directors and officers of the Fund as a group (7
persons) owned an aggregate of less than 1/4 of 1% of the outstanding shares
of the Fund.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the beneficial ownership of the Fund's
common stock for each person known to be the beneficial owner of more than five
percent of the common stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY
OWNED
AS OF JANUARY 15, 1999
NAME AND ADDRESS OF --------------------------------------
BENEFICIAL OWNER NUMBER PERCENT OF TOTAL
- ------------------------------------------ ------------------ ------------------
<S> <C> <C>
President and Fellows of Harvard College 1,005,201(1) 9.78%(2)
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
</TABLE>
- ----------
(1) This information is based upon information reported by the stockholder in
a filing on Schedule 13G made with the Securities and Exchange Commission
on February 13, 1998.
(2) Based on 10,277,431 shares outstanding on January 15, 1999.
7
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE PROPOSED PLAN OF LIQUIDATION AND DISSOLUTION.
LEGAL PROCEEDINGS
On June 16, 1998, two stockholders of the Fund commenced against the Fund
and its Board of Directors an action in the United States District Court for
the Southern District of New York, styled Opportunity Partners L.P. et anno. v.
Emerging Mexico Fund, et al., No. 98 Civ. 4218. The complaint in such suit
alleges, among other things, that in connection with its 1998 Annual Meeting
the Fund violated Federal proxy laws and certain laws of the State of Maryland.
The plaintiffs seek declaratory and injunctive relief, including a new election
of Directors. The plaintiffs later amended the complaint to purport to sue on
behalf of a class of stockholders. On June 22, 1998, the Fund answered the
complaint, denying its principal allegations and asserting numerous defenses.
The Fund also asserted counterclaims against one of the plaintiffs and other
persons, alleging that they violated Federal proxy laws. On June 24, 1998, the
Fund served amended counterclaims. On July 29, 1998, the counterclaim
defendants moved to dismiss the Fund's counterclaims. The Fund opposed the
motion, which remains under the Court's consideration.
On October 16, 1998, another stockholder of the Fund commenced against the
Fund, its Board of Directors and the Investment Adviser a purported class
action in the United States District Court for the Southern District of New
York, styled Brautigam v. Emerging Mexico Fund, et al., No. 98 Civ. 7296.
Purporting to sue on behalf of a class of stockholders, the plaintiff alleges
that the Fund and its Board of Directors violated duties of care and loyalty
under the Investment Company Act and the common law by not open-ending the Fund
or implementing other strategies to reduce the discount. The complaint seeks
unspecified compensatory and punitive damages, declaratory and injunctive
relief.
On January 6, 1999, the parties in both cases entered into a settlement
agreement. In summary, the agreement provides that the Fund will use its best
efforts to secure stockholder approval of the Plan. It further provides that if
the Plan is not approved, the Fund will take all reasonable steps to reduce the
discount and will consult with its ten largest stockholders in connection with
such efforts. The settlement is subject to Court approval. The plaintiffs'
lawyers may request that the Court award them attorneys' fees and expenses to
be paid by the Fund. Pursuant to the settlement agreement, such request will
not exceed a total of $350,000 in attorneys' fees and $5,000 in expenses. The
Court has set a hearing on the fairness of the settlement and the request for
fees and expenses for March 26, 1999.
The Fund cannot predict with precision at this time what the cost of
resolving these claims will be and any liquidation distribution to the Fund's
stockholders will be subject to the satisfactory resolution of these claims.
ADDITIONAL INFORMATION
The expense of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund.
The Fund will reimburse banks, brokers and others for their reasonable expenses
in forwarding proxy solicitation material to the beneficial owners of the
shares of the Fund. The Fund has retained Innisfree M&A Incorporated, a proxy
solicitation firm, to assist in the solicitation of proxies for the Meeting,
for a fee of approximately $6,500, together with reimbursement of such firm's
expenses.
In order to obtain the necessary quorum at the Meeting, supplementary
solicitation may be made by mail, telephone, telegraph, or personal interview.
It is anticipated that the cost of such supplementary solicitation, if any,
will be nominal.
Approval of the proposed Plan of Liquidation and Dissolution requires the
affirmative vote of at least a majority of the outstanding shares of capital
stock of the Fund cast, in person or by proxy, at a
8
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meeting at which a quorum is present. The holders of a majority of the Fund's
outstanding common stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for the transaction of business at the
Meeting. In the event that the necessary quorum to transact business or the
vote required to approve the Plan is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law, to permit further solicitation of proxies with
respect to such proposal. Any such adjournment will require the affirmative
vote of the holders of a majority of the Fund's shares present in person or by
proxy at the Meeting. If the necessary quorum is not obtained, the persons
named as proxies will vote in favor of adjournment. If the necessary quorum is
obtained, the persons named as proxies will vote in favor of such adjournment
those proxies which they are entitled to vote in favor of the Plan and will
vote against any such adjournment those proxies to be voted against the Plan.
The Fund expects that broker-dealer firms holding shares of the Fund in
"street name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on the
proposal before the Meeting. The Fund understands that, under the rules of the
NYSE, such broker-dealers may not, without instructions from such customers and
clients, grant authority to the proxies designated by the Fund to vote on the
proposal to be considered at the Meeting if no instructions have been received
prior to the date specified in the broker-dealer firm's request for voting
instructions.
The shares as to which the proxies so designated are granted authority by
broker-dealer firms to vote on the proposal to be considered at the Meeting,
the shares as to which broker-dealer firms have declined to vote ("broker
non-votes"), as well as the shares as to which proxies are returned by record
stockholders but which are marked "abstain" on any item will be included in the
Fund's tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of stockholders exists. However,
abstentions and broker non-votes will not be counted as votes cast. Therefore,
abstentions and broker non-votes will have the same effect as votes against the
proposal, although they will count toward the presence of a quorum.
Management knows of no other matters to be presented at the special
meeting. However, if other matters are presented for a vote at the meeting or
any adjournments thereof, the proxy holders will vote the shares represented by
properly executed proxies according to their judgment on those matters.
ANNUAL REPORT DELIVERY
THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 1998 TO ANY STOCKHOLDER UPON REQUEST. Such requests
should be directed by mail to PNC Bank, N.A., Attn: The Emerging Mexico Fund,
Inc., P.O. Box 8950, Wilmington, Delaware 19899 or by telephone to
1-800-852-4750.
PROPOSALS OF STOCKHOLDERS
It is expected that if the Fund holds an annual meeting of stockholders in
1999, it will be held in the month of May. Proposals of stockholders intended
to be presented at the 1999 annual meeting of stockholders of the Fund must
have been received by the Fund for inclusion in its proxy statement and form of
proxy relating to that meeting by December 15, 1998.
By Order of the Board of Directors
Thomas R. Smith, Jr.
Secretary
Dated: February , 1999
9
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EXHIBIT A
THE EMERGING MEXICO FUND, INC.
PLAN OF LIQUIDATION AND DISSOLUTION
The following Plan of Liquidation and Dissolution (the "Plan") of The
Emerging Mexico Fund, Inc. (the "Fund"), a corporation organized and existing
under the laws of the State of Maryland, which has operated since October 11,
1990 as a closed-end, management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), is
intended to accomplish the complete liquidation and dissolution of the Fund in
conformity with the provisions of the Fund's Articles of Incorporation, dated
July 6, 1990, as amended on September 7, 1990 (the "Articles of
Incorporation").
WHEREAS, the Fund's Board of Directors has deemed that in its judgment it
is advisable and in the best interests of the Fund and its stockholders to
liquidate and dissolve the Fund and at a meeting of the Board of Directors held
on November 30, 1998, and by a unanimous written consent of the Board of
Directors as of November 30, 1998, has considered and adopted this Plan as the
method of liquidating and dissolving the Fund and has directed that this Plan
be submitted to stockholders of the Fund for approval;
NOW, THEREFORE, the liquidation and dissolution of the Fund shall be
carried out in the manner hereinafter set forth:
1. Effective Date of Plan. The Plan shall be and become effective only
upon (a) the adoption and approval of the Plan at a meeting of stockholders
called for the purpose of voting upon the Plan by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the Fund
and (b) the satisfactory resolution in the sole discretion of the Board of
Directors of any and all claims pending against the Fund and its Board of
Directors. The date of such adoption and approval of the Plan by stockholders
and resolution of all pending claims is hereinafter called the "Effective
Date."
2. Notice to Creditors. Upon approval of the Plan, the Fund shall mail
notice to its known creditors at their addresses as shown on the Fund's
records.
3. Dissolution. As promptly as practicable, consistent with the provisions
of the Plan, the Fund shall be dissolved in accordance with the laws of the
State of Maryland and the Fund's Articles of Incorporation.
4. Cessation of Business. After the Effective Date of the Plan, the Fund
shall cease its business as an investment company and shall not engage in any
business activities except for the purpose of paying, satisfying, and
discharging any existing debts and obligations, collecting and distributing its
assets, and doing all other acts required to liquidate and wind up its business
and affairs and will dissolve in accordance with the Plan.
5. Restriction of Transfer and Redemption of Shares. The proportionate
interests of stockholders in the assets of the Fund shall be fixed on the basis
of their respective stockholdings at the close of business on the Effective
Date. On the Effective Date, the books of the Fund shall be closed. Thereafter,
unless the books of the Fund are reopened because the Plan cannot be carried
into effect under the laws of the State of Maryland or otherwise, the
stockholders' respective interests in the Fund's assets shall not be
transferable by the negotiation of share certificates and the Fund's shares
will cease to be traded on the New York Stock Exchange, Inc.
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6. Liquidation of Assets. After the event in clause (a) in Section 1
hereof, the Board of Directors may authorize the commencement of the sale of
portfolio securities and the investment of the proceeds of such sale in
investment grade short-term debt securities denominated in U.S. dollars. As
soon as is reasonable and practicable after the Effective Date of the Plan, or
as soon thereafter as practicable depending on market conditions and consistent
with the terms of the Plan, all portfolio securities of the Fund not already
converted to U.S. cash or U.S. cash equivalents shall be converted to U.S. cash
or U.S. cash equivalents.
7. Payments of Debts. As soon as practicable after the Effective Date of
the Plan, the Fund shall determine and shall pay, or set aside in U.S. cash or
U.S. cash equivalents, the amount of all known or reasonably ascertainable
liabilities of the Fund incurred or expected to be incurred prior to the date
of the liquidating distribution provided for in Section 7, below.
8. Liquidating Distributions. In accordance with Section 331 of the
Internal Revenue Code of 1986, as amended, the distribution of the Fund's
assets is expected to be made in up to two cash payments in complete
cancellation of all the outstanding shares of capital stock of the Fund. The
first distribution of the Fund's assets (the "First Distribution") is expected
to consist of cash representing substantially all the assets of the Fund, less
an estimated amount necessary to (a) discharge any unpaid liabilities and
obligations of the Fund on the Fund's books on the First Distribution date, and
(b) liabilities as the Board of Directors shall reasonably deem to exist
against the assets of the Fund on the Fund's books. A second distribution (the
"Second Distribution"), if necessary, is anticipated to be made within 90 days
after the First Distribution and will consist of cash from any assets remaining
after payment of expenses, the proceeds of any sale of assets of the Fund under
the Plan not sold prior to the First Distribution and any other miscellaneous
income to the Fund.
Each stockholder not holding stock certificates of the Fund will receive
liquidating distributions equal to the stockholder's proportionate interest in
the net assets of the Fund. Each stockholder holding stock certificates of the
Fund will receive a confirmation showing such stockholder's proportionate
interest in the net assets of the Fund with an advice that such stockholder
will be paid in cash upon return of the stock certificate. All stockholders
will receive information concerning the sources of the liquidating
distribution.
9. Expenses of the Liquidation and Dissolution. The Fund shall bear all of
the expenses incurred by it in carrying out this Plan including, but not
limited to, all printing, legal, accounting, custodian and transfer agency
fees, and the expenses of any reports to or meeting of stockholders whether or
not the liquidation contemplated by this Plan is effected.
10. Power of Board of Directors. The Board of Directors and, subject to
the direction of the Board of Directors, the Fund's officers shall have
authority to do or authorize any or all acts and things as provided for in the
Plan and any and all such further acts and things as they may consider
necessary or desirable to carry out the purposes of the Plan, including,
without limitation, the execution and filing of all certificates, documents,
information returns, tax returns, forms, and other papers which may be
necessary or appropriate to implement the Plan or which may be required by the
provisions of the Investment Company Act or any other applicable laws.
The death, resignation or other disability of any director or any officer
of the Fund shall not impair the authority of the surviving or remaining
directors or officers to exercise any of the powers provided for in the Plan.
11. Amendment or Abandonment of Plan. The Board of Directors shall have
the authority to authorize such non-material variations from or non-material
amendments of the provisions of the Plan
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(other than the terms of the liquidating distributions) at any time without
stockholder approval, if the Board of Directors determines that such action
would be advisable and in the best interests of the Fund and its stockholders,
as may be necessary or appropriate to effect the marshalling of Fund assets and
the dissolution, complete liquidation and termination of existence of the Fund,
and the distribution of its net assets to stockholders in accordance with the
laws of the State of Maryland and the purposes to be accomplished by the Plan.
If any variation or amendment appears necessary and in the judgment of the
Board of Directors will materially and adversely affect the interests of the
Fund's stockholders, such variation or amendment will be submitted to the
Fund's stockholders for approval. In addition, the Board of Directors may
abandon this Plan, with stockholder approval, prior to the filing of the
Articles of Dissolution if it determines that abandonment would be advisable
and in the best interests of the Fund and its stockholders.
12. Notice of Liquidation. As soon as practicable after the Effective
Date, the Fund shall mail notice to the appropriate parties that this Plan has
been approved by the Board of Directors and the stockholders and that the Fund
will be liquidating its assets, to the extent such notice is required under the
Maryland General Corporation Law (the "MGCL").
13. Articles of Dissolution. As soon as practicable after the Effective
Date and pursuant to the MGCL, the Fund shall prepare and file Articles of
Dissolution with and for acceptance by the Maryland State Department of
Assessments and Taxation.
(a) The Fund's Board of Directors shall be the trustees of its assets
for purposes of liquidation after the acceptance of the Articles of
Dissolution, unless and until a court appoints a receiver. The
Director-trustees will be vested in their capacity as trustees with full
title to all the assets of the Fund.
(b) The Director-trustees shall (i) collect and distribute any
remaining assets, applying them to the payment, satisfaction and discharge
of existing debts and obligations of the Fund, including necessary
expenses of liquidation; and (ii) distribute the remaining assets among
the stockholders.
(c) The Director-trustees may (i) carry out the contracts of the
Fund; (ii) sell all or any part of the assets of the Fund at public or
private sale; (iii) sue or be sued in their own names as trustees or in
the name of the Fund; and (iv) do all other acts consistent with law and
the Articles of Incorporation of the Fund necessary or proper to liquidate
the Fund and wind up its affairs.
14. Power of the Directors. Implementation of this Plan shall be under the
direction of the Board of Directors, who shall have full authority to carry out
the provisions of this Plan or such other actions as they deem appropriate
without further stockholder action.
15. Appraisal Rights. Stockholders will not be entitled to appraisal
rights under Maryland law in connection with the Plan.
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THE EMERGING MEXICO FUND, INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul Schubert and Brian S. Shlissel as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse hereof, all the
shares of Common Stock of The Emerging Mexico Fund, Inc. (the "Fund") held of
record by the undersigned on January 15, 1999 at a Special Meeting of the
Stockholders of the Fund to be held on March 25, 1999 or any adjournment
thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ITEM 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
1. To approve the liquidation and dissolution of the Fund, as set forth in the
Plan of Liquidation and Dissolution adopted by the Board of Directors of
the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In the discretion of such proxies, upon such other business as may properly
come before the meeting or any adjournment thereof.
(CONTINUED ON THE REVERSE SIDE)
<PAGE>
Dated , 1999
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X
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Signature
X
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Signature, if held jointly
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
