As filed with the Securities and Exchange
Commission on December 31, 2002
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:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Soliciting Material Pursuant to Rule 14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Additional Materials
THE MEXICO EQUITY AND INCOME FUND, INC.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION
THE MEXICO EQUITY AND INCOME FUND, INC.
615 E. Michigan St., 2nd Floor
Milwaukee, Wisconsin 53202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On January 28, 2003
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of The Mexico Equity and Income Fund, Inc. (the "Fund"), a Maryland
corporation, will be held at the offices of Spitzer & Feldman P.C., 405 Park
Avenue, 6th Floor, New York, New York 10022 on January 28, 2003, at 10:00 a.m.,
for the following purposes:
1. To approve a new investment advisory agreement between Clemente Capital,
Inc. (the "Adviser" or "Clemente") and the Fund (Proposal 1);
2. To elect two Class I Directors to hold office until the year 2005 Annual
Meeting and one Class III Director to hold office until the year 2004
Annual Meeting (Proposal 2);
3. To ratify the selection of Tait, Weller & Baker as the Fund's independent
accountants for the fiscal year ending July 31, 2003 (Proposal 3);
4. To approve the creation, issuance and registration of put warrants
(Proposal 4); and
5. To consider and vote upon such other matters as may properly come before
said Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 30, 2002
as the record date for the determination of stockholders entitled to notice of,
and to vote at this Meeting or any adjournment thereof. The stock transfer books
will not be closed.
Copies of the Fund's most recent annual report and semi-annual report may
be ordered free of charge to any stockholder by writing to the Fund c/o U.S.
Bancorp Fund Services, LLC, 615 E. Michigan St., 2nd Floor, Milwaukee, Wisconsin
53202, or by telephone at (800) 837-2755.
By Order of the Board of Directors,
Andrew P. Chica
Dated: January 3, 2003 Secretary
Unless you expect to be present at the meeting, please fill in, date, sign and
mail the enclosed proxy card in the enclosed reply envelope. Your prompt
response will assure a quorum at the Meeting.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Fund involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the registration.
3. Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of registration. For
example:
REGISTRATION
Corporate Accounts Valid Signature
------------------ -----------------
(1) ABC Corp.................................ABC Corp. (by John Doe, Treasurer)
(2) ABC Corp.............................................John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer..............................John Doe
(4) ABC Corp. Profit Sharing Plan........................John Doe, Trustee
Trust Accounts
--------------
(1) ABC Trust............................................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d/ 12/28/78......................................Jane B. Doe
Custodial or Estate Accounts
----------------------------
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA........................John B. Smith
(2) John B. Smith..................................John B. Smith, Jr., Executor
THE MEXICO EQUITY AND INCOME FUND, INC.
615 E. Michigan St., 2nd Floor
Milwaukee, Wisconsin 53202
-------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
to be held on January 28, 2003
---------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Mexico Equity and Income Fund, Inc.
(the "Fund") for use at the Annual Meeting of Stockholders (the "Meeting") to be
held at the offices of Spitzer & Feldman P.C., 405 Park Avenue, 6th Floor, New
York, New York 10022 on January 28, 2003, at 10:00 a.m., New York time, and at
any and all adjournments thereof. A form of proxy is enclosed herewith. This
Proxy Statement and the accompanying form of proxy are being first mailed to
stockholders on or about January 6, 2003.
Any stockholder who executes and delivers a proxy may revoke it by written
communication to the Secretary of the Fund at any time prior to its use or by
voting in person at the Meeting. Unrevoked proxies will be voted in accordance
with the specifications thereon and, unless specified to the contrary, will be
voted FOR the approval of the new investment advisory agreement between Clemente
Capital, Inc. ("Clemente") and the Fund, FOR the election of the nominees for
Director, FOR the ratification of the selection of Tait, Weller & Baker as the
Fund's independent accountants for the fiscal year ending July 31, 2003, and FOR
the approval of the creation, issuance and registration of the put warrants,
subject to the approval of the Securities and Exchange Commission.
In general, abstentions and broker non-votes (reflected by signed but
unvoted proxies), as defined below, count for purposes of obtaining a quorum but
do not count as votes cast with respect to any proposal where the broker does
not have discretion. With respect to a proposal requiring the affirmative vote
of a majority of the Fund's outstanding shares of common stock, the effect of
abstentions and broker non-votes is the same as a vote against such proposal.
Otherwise, abstentions and broker non-votes have no effect on the outcome of a
proposal. Broker non-votes occur when shares held in the name of the broker or
nominee for whom an executed proxy is received by the Fund, but are not voted on
a proposal because voting instructions have not been received from the
beneficial owners or persons entitled to vote and the broker or nominee does not
have discretionary voting power.
In the event that a quorum is not present at the Meeting, the persons named
as proxies may propose one or more adjournments of the Meeting to a date not
more than one hundred twenty (120) days after the original record date to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares represented at the Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR or AGAINST any such proposal in their discretion.
Under the By-laws of the Fund, a quorum is constituted by the presence in person
or by proxy of the holders of record of a majority of the outstanding shares of
common stock of the Fund entitled to vote at the Meeting.
The cost of soliciting the proxies will be borne by the Fund. Proxy
solicitations will be made primarily by mail, but solicitations may also be made
by telephone, telegraph or personal interviews conducted by officers or
employees of the Fund, Acci Worldwide S.A. de C.V., the Fund's investment
adviser, or U.S. Bancorp Fund Services, LLC, the administrator to the Fund (the
"Administrator").
The Fund will, upon request, bear the reasonable expenses of brokers, banks
and their nominees who are holders of record of the Fund's common stock on the
record date, incurred in mailing copies of this Notice of Meeting and Proxy
Statement and the enclosed form of proxy to the beneficial owners of the Fund's
common stock.
Only holders of issued and outstanding shares of the Fund's common stock of
record at the close of business on December 30, 2002 are entitled to notice of,
and to vote at, the Meeting. Each such holder is entitled to one vote per share
of common stock so held. The number of shares of common stock outstanding on
December 30, 2002 was 2,473,504. The Fund is a closed-end, management investment
company.
Copies of the Fund's most recent annual report and semi-annual report may
be ordered free of charge to any stockholder by writing to the Fund c/o U.S.
Bancorp Fund Services, LLC, 615 E. Michigan St., 2nd Floor, Milwaukee, Wisconsin
53202, or by telephone at (800) 837-2755. This report is not to be regarded as
proxy-soliciting material.
This Proxy Statement is first being mailed to stockholders on or about
January 6, 2003.
PROPOSAL NO. 1
CONSIDERATION OF THE APPROVAL OF
THE NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE FUND AND CLEMENTE CAPITAL, INC.
Acci Worldwide S.A. de C.V. ("Acci Worldwide") currently serves as the
investment adviser to the Fund pursuant to an amended investment management
agreement dated November 27, 2001 (the "Acci Agreement"). At a meeting held on
November 26, 2002, the Board of Directors, and Acci Worldwide mutually, agreed
to terminate the Acci Agreement, effective December 31, 2002.
The Board of Directors unanimously approved a new investment management
agreement (the "Clemente Agreement") by and between the Fund and Clemente
Capital, Inc. ("Clemente Capital"), at a meeting of the Board of Directors held
on November 26, 2002. During the Board's discussion to approve the Clemente
Agreement, the Board noted that Maru Pichardo, the Fund's current portfolio
manager employed by Acci Worldwide, would begin working for Clemente Capital,
Inc. and if the stockholders approve the Clemente Agreement, would continue to
act as the portfolio manager to the Fund. Additionally, Clemente Capital was
unanimously approved by the Board of Directors to provide the Fund with
investment management services during the period between the effective date of
the termination of the Acci Agreement and the date on which the Fund's
stockholders approve the Clemente Agreement at the Meeting (the "Interim
Period"); provided however, that Clemente Capital provide such investment
management services to the Fund during the Interim Period, which shall in no
event be greater than 150 days, on terms substantially identical to those
provided in the Acci Agreement, and for compensation no greater than that
provided for in the Acci Agreement on a pro rata basis. If the stockholders do
not approve the Clemente Agreement, the Board will consider alternative sources
from which to obtain investment management and research services.
The Board hereby submits the Clemente Agreement to the stockholders for
their consideration and approval.
Information Regarding Acci Worldwide
Pursuant to an Investment Advisory Agreement, dated October 14, 1991 and
amended on November 27, 2001 (the "Acci Agreement"), between the Fund and Acci
Worldwide, a subsidiary of Acciones y Valores de Mexico, S.A. de C.V. ("AVM"),
Acci Worldwide has acted as the Fund's investment adviser with respect to
Mexican securities investments.
Acci Worldwide was organized in 1990 as a company with limited liability
under the laws of Mexico to carry on investment management activities and is
registered as an investment adviser in the United States under the Investment
Advisers Act of 1940, as amended (the "1940 Act"). Acci Worldwide is a wholly
owned subsidiary of AVM. The principal address of Acci Worldwide is Paseo de la
Reforma 398, Mexico City, D.F., Mexico 06600. Acci Worldwide is a wholly owned
subsidiary of AVM.
AVM, organized in 1971, provides institutional and brokerage services as
well as financial advice to investors and securities issuers, specializing in
money market, brokerage and corporate finance operations, and provides
investment advice to Mexican investment funds. AVM is one of the leading
brokerage firms in Mexico and is a wholly owned subsidiary of Grupo Banamex.
AVM holds one hundred (100%) percent of the capital stock of ACCI
Securities, Inc., a securities brokerage firm incorporated in Delaware in June
1990, with its principal place of business in New York, New York. ACCI
Securities, Inc. is registered as a broker-dealer with the U.S. Securities and
Exchange Commission ("SEC") and effects transactions as a broker in Mexican
securities, primarily for U.S. institutional investors and, solely incidental
thereto, provides investment advice and research.
The names, titles and principal occupations of the current Directors and
executive officers of Acci Worldwide are set forth in the following table. The
business address of each person listed below is Paseo de la Reforma 398, Mexico
City, D.F., Mexico 06600.
Name Title and Principal Occupation
---- -------------------------------
Alfredo Loera Chairman, Acci Worldwide.
Maria (Maru) Eugenia Pichardo Director General and Secretary, Acci Worldwide.
Francisco Manuel Lopez Assistant to Director General, Acci Worldwide.
Alberto Gomez Sandoval Deputy Director
Francisco Legorreta Flores Deputy Director
Mauricio Correa Deputy Director
Guillermo Hernandez Palacios Deputy Director
Information Regarding Clemente Capital
Clemente Capital, Inc., ("Clemente Capital") the Fund's proposed investment
adviser, has its principal office at 152 West 57th Street, New York, New York
10019. Lilia C. Clemente is Chairman and Chief Executive Officer of the Adviser.
Leopoldo M. Clemente, Jr., is President, Chief Investment Officer and a Director
of the Adviser. In addition to Mr. and Mrs. Clemente, the Adviser's Directors
are: Salvador Diaz-Verson, Jr., President of Diaz-Verson Capital Investments,
Inc., an investment advisory firm located in Columbus, Georgia; and Robert J.
Christian, Chief Investment Officer, Wilmington Trust Company. Mrs. Clemente
owns approximately sixty (60%) percent of the total outstanding shares of common
stock of the Adviser. Wilmington Trust Company owns twenty-four (24%) percent of
the total outstanding shares of common stock of the Adviser.
Clemente provides investment advisory services to partnerships and
investment companies worldwide and currently manages in excess of $515 million
in assets. A copy of the Clemente Agreement is attached hereto as Appendix A.
Comparison of the Acci Agreement with the Clemente Agreement
The Acci Agreement and the Clemente Agreement are substantially identical
with respect to the scope of the services to be provided to the Fund and the
amount of compensation to be paid by the Fund for such services. The following
description of the Clemente Agreement is qualified in its entirety by reference
to the copy of the Clemente Agreement attached hereto and made a part hereof as
Appendix A.
Services to be Performed
Pursuant to the Clemente Agreement, Clemente Capital conducts investment
research and supervision for the Fund and is responsible for the purchase and
sale of investment securities for the Fund's portfolio, subject to the
supervision and direction of the Board of Directors. Clemente Capital provides
the Fund with investment advice, supervises the Fund's management and investment
programs and provides investment advisory facilities and executive and
supervisory personnel for managing the investments and effectuating portfolio
transactions. Clemente Capital also furnishes, at its own expense, all necessary
administrative services, office space, equipment and clerical personnel for
servicing the investments of the Fund. In addition, Clemente Capital will pay
the salaries and fees of all officers of the Fund who are affiliated with
Clemente Capital.
Expenses
The Clemente Agreement provides that the Fund is responsible for all of its
expenses and liabilities, except that Clemente Capital is responsible for the
expenses in connection with maintaining a staff within its organization to
furnish the above services to the Fund. Clemente Capital is not aware of any
circumstances that are reasonably likely to impair the financial ability of
Clemente Capital to fulfill its commitment to the Fund under the Clemente
Agreement.
Limitation of Liability
The Clemente Agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder ("disabling conduct"), Clemente Capital shall
not be liable to the Fund or its stockholders for any act or omission in the
course of or in connection with the rendering of its services thereunder. In
addition, the Clemente Agreement provides that the Fund, under certain
circumstances, will indemnify Clemente Capital against any losses or expenses
incurred, including amounts paid in satisfaction of judgments and reasonable
legal costs, not resulting from disabling conduct.
Duration and Termination
Subject to stockholder approval, the Clemente Agreement will have a term
beginning January 1, 2003 and ending December 31, 2004, and, thereafter, will
continue in effect for successive annual periods provided such continuance is
specifically approved at least annually by (i) a majority of the members of the
Fund's Board of Directors who are not parties to the Clemente Agreement, and who
are not "interested persons" of any such party, and (ii) a majority of the
Fund's Board of Directors or the holders of a "majority of the outstanding
voting securities" of the Fund. The Clemente Agreement may be terminated,
without penalty, on sixty (60) days' notice, by the Fund's Board of Directors,
by a vote of the holders of a "majority of the outstanding voting securities" of
the Fund (as defined under "Required Vote" below) or by Clemente Capital.
Advisory Fees
The annual rate used to determine fees payable by the Fund pursuant to the
Clemente Agreement is identical to the rate in effect under the Acci Agreement.
Under the current fee structure the Fund pays Acci Worldwide, and under the
Clemente Agreement will pay Clemente Capital, a monthly fee at an annual rate of
0.80% of the value of the Fund's average daily net assets for the investment
management and research services provided by Clemente Capital or to be provided
by Clemente Capital, as the case may be. The net assets of the Fund on July 31,
2002 were $21,628,531. The total amount paid to Acci Worldwide by the Fund under
the Acci Agreement was $420,176, during the fiscal year ended July 31, 2002.
Acci Worldwide voluntarily agreed to reimburse the Fund for certain Fees and
expenses on an annual basis. These expense reimbursements may be terminated at
any time. For the year ended July 31, 2002, the total expense reimbursement made
by Acci Worldwide amounted to $3,485.
Soft Dollar Arrangements
It is understood by both Clemente Capital and the Board of Directors that
any soft dollars resulting from soft dollar arrangements between the Fund,
Clemente Capital and selected dealers and brokers (to the extent that such
arrangements are in connection with, or for the benefit of, the Fund), may be
used to pay for certain services provided to the Fund which can be provided by
third parties, including but not limited to administration, accounting and
custodial services. Notwithstanding the foregoing, however, the Clemente
Agreement, like the Acci Agreement, authorizes Clemente Capital to direct the
execution of the Fund's portfolio transactions to dealers and brokers furnishing
statistical information or research deemed by Clemente Capital to be useful or
valuable to the performance of its investment advisory functions for the Fund.
In such circumstances, the commissions paid may be higher than those that the
Fund might otherwise have paid to another broker if those services had not been
provided. Such research services provided to Clemente Capital by brokers who
effect securities transactions for the Fund may be used by Clemente Capital in
servicing other investment companies and accounts that it manages. It is
understood that not all of the research services may be used by Clemente Capital
in managing any particular account, including the Fund. Notwithstanding the
foregoing, however, it is the intention of both Clemente Capital and the Board
of Directors to use such soft dollar arrangements to pay for certain of the
Fund's expenses which may be provided by third parties, including but not
limited to administration, accounting and custodial services.
Evaluation by the Board of Directors
The Fund's Board of Directors, including the Directors who are not
interested persons of any party to the Clemente Agreement or its affiliates, has
approved the Clemente Agreement for the Fund and recommends that shareholders of
the Fund approve such agreement. The Board's deliberations and approval occurred
at a meeting of the Board of Directors held on November 26, 2002, with legal
counsel in attendance. The Clemente Agreement will become effective on January
1, 2003, subject to shareholder approval. If the shareholders do not approve the
Clemente Agreement at the Meeting (or at an adjournment thereof), the Board will
either resubmit the Clemente Agreement to the shareholders for their
consideration and approval or consider alternative sources from which to obtain
investment management and research services for the Fund.
In approving the Clemente Agreement and determining to submit it to the
shareholders of the Fund for their approval, the Board of Directors considered
the best interests of the shareholders and took into account factors they deemed
relevant. The factors considered by the independent Directors included the
nature, quality and scope of the operations and services to be provided by
Clemente Capital, while focusing on the prior experience of Clemente Capital's
principals with respect to: (i) the structure of closed-end investment companies
in general; (ii) management of portfolios of foreign equity securities; (iii)
the fact that the Fund's current portfolio manager, Maru Pichardo, would
continue to act as the portfolio manager at Clemente Capital, Inc.; and (iv)
implementing policies to cut costs and expenses of closed-end investment
companies. Furthermore, the Board of Directors of the Fund considered the
opportunity to obtain investment management and research services at costs that
it deemed appropriate and reasonable and at such fees which fall within the
range of the standard industry fees for comparable investment companies.
Based upon its review of the above factors, the Board of Directors of the
Fund determined that the Clemente Agreement is in the best interests of the Fund
and its shareholders.
Required Vote
As provided by the 1940 Act, approval of the Clemente Agreement will
require the affirmative vote of a "majority of the outstanding voting
securities" of the Fund, which means the affirmative vote of the lesser of (a)
sixty-seven (67%) percent or more of the shares of the Fund entitled to vote
thereon present or represented by proxy at the Meeting, if the holders of more
than fifty (50%) percent of the outstanding shares of the Fund entitled to vote
thereon are present or represented by proxy, or (b) more than fifty (50%)
percent of the total outstanding shares of the Fund entitled to vote thereon.
For this purpose, abstentions and broker non-votes will be counted as shares
present at the Meeting for quorum purposes, but not as votes cast and will have
the same effect as votes cast against the Proposal.
THE BOARD OF DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT "INTERESTED
PERSONS" OF THE FUND, CLEMENTE CAPITAL OR ITS AFFILIATES, RECOMMENDS THAT THE
SHAREHOLDERS OF THE FUND VOTE "FOR" THE APPROVAL OF THE CLEMENTE AGREEMENT.
PROPOSAL 2
ELECTION OF DIRECTORS
In accordance with the Fund's Articles of Incorporation, the terms of the
Fund's Board of Directors are staggered. The Board of Directors is divided into
three classes: Class I, Class II and Class III, each class having a term of
three years. Each year the term of office of one Class expires. The effect of
these staggered terms is to limit the ability of other entities or persons to
acquire control of the Fund by delaying the replacement of a majority of the
Board of Directors.
At the Meeting, stockholders will be asked to elect two Class I Directors
to hold office until the year 2005 Annual Meeting or thereafter until their
successors are duly elected and qualified, and one Class III Director to hold
office until the year 2004 Annual Meeting or thereafter until his successor is
duly elected and qualified. In the event that any of the nominees should become
unavailable for election for any presently unforeseen reason, the persons named
in the form of proxy will vote for any nominee who shall be designated by the
present Board of Directors. Directors shall be elected by a plurality of the
shares voting at the Meeting.
On November 27, 2001, at the Annual Meeting of Stockholders the
Stockholders of the Fund approved Messrs. Goldstein and Goodstein as Class I
directors to serve until the 2002 Annual Meeting of Stockholders; Messrs. Das
and Dakos as Class II directors to serve until the 2003 Annual Meeting of
Stockholders; and Mr. Hellerman as a Class III director to serve until the 2004
Annual Meeting of Stockholders.
At the Meeting, stockholders will be asked to vote for the election of the
following nominees: Messrs. Phillip Goldstein and Glenn Goodstein as Class I
Directors to serve until the year 2005 Annual Meeting or thereafter until each
of their respective successors are duly elected and qualified, and Mr. Leopoldo
M. Clemente, Jr. as a Class III Director to serve until the year 2004 Annual
Meeting or thereafter until his successor is duly elected and qualified. If
elected, each nominee has consented to serve as a Director of the Fund until his
successor is duly elected and qualified. Mr. Clemente, however, has advised the
Fund that in the event Proposal 1 is not approved by stockholders he will
withdraw his name from nomination as a Director.
The persons named in the accompanying form of proxy intend to vote at the
Meeting (unless directed not to vote) FOR the election of Messrs. Goldstein,
Goodstein and Clemente (subject to stockholder approval of Proposal 1). Each
nominee has indicated that he will serve if elected, and the Board of Directors
has no reason to believe that any of the nominees named above will become
unavailable for election as a Director, except as set forth above with respect
to Mr. Clemente, but if any nominee should be unable to serve, the proxy will be
voted for any other person determined by the persons named in the proxy in
accordance with their judgment.
The following tables set forth the ages and principal occupations of each
of the Directors and nominees for election as Class I and Class III. If elected
and if the Clemente Agreement (as defined below) is approved by the Stockholders
of the Fund, Mr. Clemente will be considered an "Interested Person" as defined
in the Investment Company Act of 1940, as amended (the "1940 Act") because of
his relationship with Clemente Capital, Inc., the proposed investment adviser to
the Fund.:
NOMINEES
Term of Directorships held by
Position Office Principal Occupation Nominee for Director
Name, Address and Age with Fund Since during past 5 years Outside of Fund Complex*
Class I Independent Nominees to serve until the Year 2005 Annual Meeting of Stockholders:
Glenn Goodstein (39) Director 2001 Registered investment Director, Italy Fund,
16830 Adlon Road adviser; and held Inc.
Encino, CA 91436 numerous executive
positions with Automatic
Data Processing, Inc.
until 1996.
Phillip Goldstein (57) Director 2000 President, Kimball & Director, Italy Fund,
60 Heritage Drive Winthrop, Inc. (an Inc.; and Director,
Pleasantville, NY 10570 investment advisory Brantley Capital
firm); Portfolio Manager Corporation.
and President, of the
general partner of
Opportunity Partners
L.P.; Investment Manager
for a limited number of
clients; Advocate for
shareholder rights; and
Managing Member of the
general partner of Full
Value Partners L.P.
------------
* The Fund Complex is comprised of only the Fund because none of the nominees
served as a director to another investment company which was managed by
Acci Worldwide during the fiscal year ended July 31, 2002.
Term of Directorships held by
Position Office Principal Occupation Nominee for Director
Name, Address and Age with Fund Since during past 5 years Outside of Fund Complex*
Class III Interested Nominee to serve until the Year 2004 Annual Meeting of Stockholders:
Leopoldo M. Clemente, Jr. (64) Director 2002 President, Clemente Director, The First
152 West 57th Street, 25th Fl. Capital, Inc., an Philippine Fund, Inc.
New York, NY 10019 investment adviser.
REMAINING BOARD OF DIRECTORS
The following tables set forth the names, addresses, ages and principal
occupations of each of the remaining Directors of the Fund:
Term of Directorships held by
Position Office Principal Occupation Nominee for Director
Name, Address and Age with Fund Since during past 5 years Outside of Fund Complex*
Class II Independent Directors serving until the Year 2003 Annual Meeting of Stockholders:
Senior Analyst,
Rajeev Das, CPA (34) Director 2001 Kimball & Winthrop,
68 Lafayette Ave. Inc.; and prior Credit
Dumont, NJ 07628 Manager, Muriel
Siebert & Company.
Andrew Dakos (36) Director 2001 President and CEO,
43 Waterford Drive Uvitec Printing Ink,
Montville, NJ 07045 Inc.; and Managing
Member of the general
partner of Full Value
Partners L.P..
Class III Independent Directors serving until the Year 2004 Annual Meeting of Stockholders:
Managing Director, Director, Frank's Nursery &
Gerald Hellerman (65) Director 2001 Hellerman Associates, Crafts, Inc.; and Director,
10965 Eight Bells Lane and (a financial and Innovative Clinical
Columbia, MD 21044 President corporate consulting Solutions, Ltd.
firm).
---------
* The Fund Complex is comprised of only the Fund.
The following table sets forth, for each Director, the aggregate dollar
range of equity securities owned of the Fund as of December 30, 2002. The
information as to beneficial ownership is based on statements furnished to the
Fund by each Director.
-------------------------- -----------------------
Dollar Range of
Equity Securities in
Name the Fund.
-------------------------- -----------------------
Phillip Goldstein $0-10,000
-------------------------- -----------------------
Glenn Goodstein $0-10,000
-------------------------- -----------------------
Andrew Dakos $0-10,000
-------------------------- -----------------------
Rajeev Das $0-10,000
-------------------------- -----------------------
Gerald Hellerman $0-10,000
-------------------------- -----------------------
Executive Officers
In addition to Mr. Hellerman, the current officers of the Fund are:
---------------------- -------------- --------- --------------------------- ------------------
Term of
Name, Address and Age Position(s) Office Principal Occupation Directorships
with Fund Since during past 5 years held by Officer
---------------------- -------------- --------- --------------------------- ------------------
Andrew P Chica (27) Secretary 2001 Compliance Officer, U.S. N/A
5324 West Terry Ave Bancorp Fund Services,
Milwaukee, WI 53223 LLC; Asst. Treasurer,
Kinetics Mutual Funds,
Inc.
---------------------- -------------- --------- --------------------------- ------------------
Michael Weckwerth (29) Vice 2001 Asst. Vice President, N/A
4543 N. Newhall St. President U.S. Bancorp Fund
Shorewood, WI 53211 and Treasurer Services, LLC; Asst.
Secretary, Kinetics
Mutual Funds, Inc.
---------------------- -------------- --------- --------------------------- ------------------
Under the federal securities laws, the Fund is required to provide to
stockholders in connection with the Meeting information regarding compensation
paid to Directors by the Fund as well as by the various other U.S. registered
investment companies advised by the Fund's investment manager during its prior
fiscal year. The Fund pays each of its directors who is not a director, officer
or employee of the Investment Adviser, the Administrator or any affiliate
thereof an annual fee of $5,000 plus $700 for each Board of Directors meeting
attended in person and $100 for each special telephonic meeting attended. In
addition, the Fund pays the Audit Committee, comprised of Mr. Phillip Goldstein,
Mr. Gerald Hellerman and Mr. Rajeev Das, $100 per meeting attended. The Fund's
Pricing Committee members, consisting of all of the independent directors of the
Fund, are paid $100 each for each pricing committee meeting that does not occur
in conjunction with a regularly scheduled Board meeting. At the Board of
Directors meeting held on December 13, 2001, Mr. Gerald Hellerman, a
non-interested director, was appointed President of the Fund. For serving the
Fund as President, in addition to the aforementioned Directors' fees, Mr.
Hellerman will receive annual compensation in the amount of $6,000, which is
reimbursed to the Fund by the Investment Adviser. In addition, the Fund
reimburses the directors for travel and out-of-pocket expenses incurred in
connection with Board of Directors' meetings.
The following table provides information concerning the compensation paid
during the year ended July 31, 2002, to each Director of the Fund. All of the
Directors received compensation for serving as a Director of the Fund. Please
note that the Fund has no bonus, profit sharing, pension or retirement plans.
Aggregate
Director Compensation
Name of Director Since From Fund
---------------- ----- -------------
Phillip Goldstein 2000 $8,100
Glenn Goodstein 2001 $6,700
Andrew Dakos 2001 $7,900
Rajeev Das 2001 $8,100
Gerald Hellerman* 2001 $8,100
-------------
* In addition to the Directors Fees paid by the Fund, Mr. Hellerman also
receives $6,000 as compensation for his services as the President of the
Fund. Such additional compensation is paid by the Adviser of the Fund.
Each Director attended, in person or by telephone, at least seventy-five
(75%) percent or more of the five (5) meetings of the Board of Directors
(including regularly scheduled and special meetings) held during the period for
which he was a Director.
Nominating Committee
At the Quarterly Meeting of the Board of Directors held on June 20, 2002,
the Board of Directors established a Nominating Committee. The members of the
Nominating Committee of the Board of Directors are all of the non-interested
Directors and are Messrs. Goodstein, Goldstein, Das, Dakos and Hellerman. The
Nominating Committee is responsible for seeking and reviewing candidates for
consideration as nominees for Directors as is from time to time considered
necessary or appropriate. It is the policy of the Nominating Committee to
consider nominees recommended by stockholders of the Fund so long as the
stockholders properly submit their recommendations in accordance with the
requirements contained in the Proposals To Be Submitted By Stockholders section
contained herein.
AUDIT COMMITTEE
The Fund's Audit Committee is currently composed of three independent
directors, Messrs. Hellerman, Das and Goldstein. The principal functions of the
Audit Committee include but are not limited to: (i) recommendations to the Board
for the appointment of the Fund's independent accountants; (ii) review of the
scope and anticipated cost of the independent accountant's audit; and (iii)
consideration of the independent accountant's reports concerning their conduct
of the audit, including any comments or recommendations the Board of Directors
might make in connection thereto. The Audit Committee convened two times during
the fiscal year ended July 31, 2002. Each member of the Audit Committee attended
at least seventy-five percent (75%) or more of the two meetings of the Audit
Committee.
On November 26, 2002, the Audit Committee, followed by the full Board of
Directors, approved the continuance of the Fund's written charter setting forth
the duties and responsibilities of the Audit Committee. The Audit Committee
recommends to the Board of Directors, subject to stockholder approval, the
selection of Tait, Weller & Baker, as the Fund's independent accountants.
On June 20, 2002, the Board of Directors and the Audit Committee determined
to replace PricewaterhouseCoopers LLP ("PwC") as the Fund's independent
accountants. PwC's accountant report for the past two years did not contain any
adverse opinion or any qualification as to uncertainty, audit scope or
accounting principles. Further, the Board's decision to replace PwC was not due
to any disagreement on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
The following table sets forth the aggregate fees billed by Tait, Weller &
Baker, the independent accountants for the Fund's most recent fiscal year, for
professional services rendered for: (i) the audit of the Fund's annual financial
statements and the review of financial statements included in the Fund's reports
to stockholders ("Audit Fees"); (ii) financial information systems design and
implementation services provided to the Fund, its investment manager and
entities that control, are controlled by or under common control with the Fund's
investment manager that provides services to the Fund ("Financial Information
Systems Design"); and (iii) all other services provided to the Fund, its
investment manager and entities that control, are controlled by or under common
control with the Fund's investment manager that provides services to the Fund
("All Other Fees").
------------- --------------------------------------- -----------------------
Audit Fees Financial Information Systems Design All Other Fees
------------- --------------------------------------- -----------------------
$17,000 $0 $1,500
------------- --------------------------------------- -----------------------
Audit Committee Report
The Audit Committee has met and held discussions with the Fund's
Administrator, U.S. Bancorp Funds Services, LLC, and the Fund's independent
accountants. The independent accountants represented to the Audit Committee that
the Fund's financial statements were prepared in accordance with U.S. generally
accepted accounting principles, and the Audit Committee has reviewed and
discussed the financial statements with the Fund's Administrator and its
independent accountants. The Audit Committee also discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61.
The Fund's independent accountants also provided to the Audit Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Audit Committee
discussed with the independent accountants' their independence, in light of the
services they were providing.
Based upon the Audit Committee's discussion with the Fund's Administrator
and the independent accountants and the Audit Committee's review of the
representations of the Fund's Administrator and the report of the independent
accountants to the Audit Committee, the Audit Committee recommended that the
Board of Directors include the audited financial statements in the Fund's Annual
Report for the fiscal year ended July 31, 2002 filed with the U.S. Securities
and Exchange Commission.
Respectfully submitted,
Gerald Hellerman, Chairman
Phillip Goldstein
Rajeev Das
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Section 30(h) of the 1940 Act in combination require the Fund's directors
and officers, persons who own more than ten (10%) percent of the Fund's common
stock, and the Fund's investment adviser and their respective directors and
officers, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the New York Stock Exchange, Inc. The
Fund believes that the Fund's directors and officers, the Fund's investment
adviser and their respective directors and officers have complied with
applicable filing requirements during the year ended July 31, 2002.
Required Vote
Directors are elected by a plurality of the votes cast by the holders of
shares of common stock of the Fund present in person or represented by proxy at
a meeting with a quorum present. For purposes of the election of Directors,
abstentions and broker non-votes will be counted as shares present for quorum
purposes, may be considered votes cast, and may affect the plurality vote
required for Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF MESSRS. GOLDSTEIN AND GOODSTEIN AS CLASS I DIRECTORS OF THE FUND
AND "FOR" THE ELECTION OF MISTER LEOPOLDO M. CLEMENTE, JR. AS A CLASS III
DIRECTOR.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The third proposal to be submitted will be the ratification or rejection of
the selection by the Board of Directors of Tait, Weller & Baker as independent
accountants of the Fund for the fiscal year ending July 31, 2003. At a meeting
held on September 23, 2002, the Board of Directors, including those directors
who are not "interested persons" of the Fund, approved the selection of Tait,
Weller & Baker for the fiscal year ending July 31, 2003 and determined to
replace PricewaterhouseCoopers LLP. Such selection is being submitted to the
stockholders for ratification. The engagement of Tait, Weller & Baker is
conditioned on the right of the Fund, by majority vote of its stockholders, to
terminate such employment.
Tait, Weller & Baker has informed the Fund that it has no material direct
or indirect financial interest in the Fund. A representative of Tait, Weller &
Baker will be available by telephone at the Meeting and will have the
opportunity to make a statement if the representative so desires and will be
available to respond to appropriate questions.
Required Vote
Ratification of the selection of Tait, Weller & Baker as independent
accountants of the Fund requires the affirmative vote of the holders of a simple
majority, defined as a majority of the votes cast by holders of shares of common
stock of the Fund present in person or represented by proxy at a meeting with a
quorum present. For purposes of this proposal, abstentions and broker non-votes
will be counted as shares present at the Meeting for quorum purposes and will
have no effect on the outcome of this proposal.
THE BOARD OF DIRECTORS, INCLUDING THE "NON-INTERESTED" DIRECTORS, RECOMMENDS
THAT THE STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF TAIT, WELLER & BAKER AS THE
FUND'S INDEPENDENT ACCOUNTANTS.
PROPOSAL NO. 4
PROPOSAL TO APPROVE THE creation, ISSUANCE
and registration of put warrants
In connection with the exemptive relief and no-action positions being
requested from the U.S. Securities and Exchange Commission by the Fund regarding
the creation, issuance and registration of the Put Warrants, and as one of the
conditions of the SEC's granting an order for exemptive relief, the SEC has
requested and, the Board has concurred, that it is in the best interest of the
Fund and stockholders to obtain stockholders' approval to create, issue and
register the proposed put warrants designed to afford the stockholders a series
of opportunities to realize NAV for their shares. If it is approved by the
stockholders, the Board will continue to pursue obtaining the approvals and
exemptive orders from the SEC that are necessary to bring the proposed put
warrants to fruition.
Initially conceived by Mr. Goldstein as an innovative means by which
stockholders of a closed-end investment company might realize NAV for their
shares, Mr. Goldstein has developed the terms for the creation and issuance of a
new instrument entitled a "put warrant". The proposed put warrant concept
continues to be reviewed, on an informal basis, by the staff (the "Staff") of
the SEC. The Staff has thus far expressed concern about certain terms and
conditions, as well as the overall concept, of the put warrants as initially
proposed. Furthermore, the Staff has indicated that due to the unique nature of
the put warrants, a newly conceived security designed to permit stockholders to
realize net asset value for their shares, it will likely be necessary for
several divisions within the SEC to review different aspects of the put
warrants, including the Division of Investment Management and the Division of
Corporate Finance. Should the Staff, however, provide favorable responses to the
overall concept of the put warrants, the Fund will proceed to seek the necessary
authorizations and approvals to issue such put warrants, including, to the
extent that it may be required, stockholder approval. In addition to the SEC's
responses noted above, the New York Stock Exchange indicated that, if the Put
Warrants are approved by the SEC, the Put Warrants would be eligible to list on
the NYSE.
THERE CAN, HOWEVER, BE NO ASSURANCE THAT THE STAFF WILL PROVIDE A FAVORABLE
RESPONSE TO THIS CONCEPT OR THAT THE FUND WILL BE ABLE TO REGISTER THE PUT
WARRANTS AS CONCEIVED BY MR. GOLDSTEIN IN THE NEAR FUTURE.
AT THIS TIME, THE FUND IS SEEKING STOCKHOLDER APPROVAL TO CREATE, ISSUE AND
REGISTER THE PUT WARRANTS, IN THE EVENT THAT THE SEC ISSUES THE NECESSARY
EXEMPTIVE ORDER AND NO-ACTION POSITIONS.
As initially conceived by Mr. Goldstein, the put warrants would entitle a
holder thereof to surrender to the Fund one share of the Fund's common stock
(the "Share") for each put warrant held once each calendar quarter, in exchange
for an in-kind pro-rata distribution of the Fund's portfolio securities (and, if
applicable, cash) of the Fund valued at NAV per Share or cash equal to NAV per
Share.
Required Vote
Although this proposal is not binding, if it is approved by a simple
majority of the votes cast at the meeting, the Board of Directors will undertake
to create, issue and register the proposed put warrants, if favorably reviewed,
authorized and approved by the Securities and Exchange Commission (the "SEC").
For purposes of voting on this proposal, abstentions and broker non-votes will
be counted as shares present for quorum purposes but are not considered votes
cast.
The Board has determined that it would be in the best interest of the Fund
and its stockholders for the Fund to pursue the creation, issuance and
registration of the put warrants.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE CREATION, ISSUANCE AND REGISTRATION OF PUT WARRANTS.
INFORMATION PERTAINING TO THE FUND'S
INVESTMENT ADVISER AND ADMINISTRATOR
The Proposed Investment Adviser
Clemente Capital, Inc. has its principal office at 152 West 57th Street,
New York, New York 10019. Lilia C. Clemente is Chairman and Chief Executive
Officer of the Adviser. Leopoldo M. Clemente, Jr. is President, Chief Investment
Officer and a Director of the Adviser.
The Investment Adviser
From August 31, 2001 until December 31, 2002, Acci Worldwide served as the
investment adviser to the Fund pursuant to the Acci Agreement. Acci Worldwide
was organized in 1990 as a company with limited liability under the laws of
Mexico to carry on investment management activities, and is a registered
investment adviser under the Advisers Act. Acci Worldwide has served as
investment advisor and as a co-adviser to the Fund since the Fund's inception.
The principal business address of Acci Worldwide is Paseo de la Reforma 398,
Mexico City, D.F., Mexico 06600.
The Administrator
U.S. Bancorp Fund Services, LLC ("USBFS") serves as the Fund's
Administrator pursuant to an administrative agreement with the Fund. USBFS is
located at 615 E. Michigan St., 2nd Floor, Milwaukee, Wisconsin 53202.
INFORMATION PERTAINING TO CERTAIN STOCKHOLDERS
The following table sets forth information based on filings made with the
Securities and Exchange Commission concerning persons who may be deemed
beneficial owners of 5% or more of the shares of common stock of the Fund
because they possessed or share voting or investment power with respect to the
shares of the Fund:
Shares of Common Stock % of Fund's Outstanding
Name and Address of Beneficial Owner Beneficially Owned Shares Beneficially Owned
Deutsche Bank AG(1) 488,728 5.7%
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany
--------------------------------
(1) Based solely upon information presented in a Schedule 13G, dated February
1, 2002 filed by Deutsche Bank AG.
OTHER BUSINESS
The Board of Directors of the Fund does not know of any other matter which
may come before the Meeting, but should any other matter requiring a vote of
stockholders arise, including any questions as to the adjournment of the
Meeting, it is the intention of the persons named in the proxy to vote the
proxies in accordance with their judgment on that matter.
PROPOSALS TO BE SUBMITTED BY STOCKHOLDERS
All proposals by stockholders of the Fund which are intended to be
presented at the Fund's next Annual Meeting of Stockholders, to be held in the
year 2003, must be received by the Fund addressed to The Mexico Equity and
Income Fund, Inc. c/o U.S. Bancorp Fund Services, LLC, 615 E. Michigan St., 2nd
Floor, Milwaukee, Wisconsin 53202, for inclusion in the Fund's proxy statement
and proxy relating to that meeting in advance of the meeting as set forth below.
Any stockholder who desires to bring a proposal at the Fund's 2003 Annual
Meeting of Stockholders without including such proposal in the Fund's proxy
statement must deliver (via the U.S. Post Office or such other means that
guarantees delivery) written notice thereof to the Secretary of the Fund c/o
U.S. Bancorp Fund Services, LLC, 615 E. Michigan St., 2nd Floor, Milwaukee,
Wisconsin 53202, no less than one hundred twenty (120) calendar days
(approximately July, 2003) before the date of the Annual Meeting of Stockholders
which will be scheduled to be held in November 2003 or the tenth (10th) day
after public announcement is made by way of publication by the New York Stock
Exchange of the Fund's Meeting date.
THE MEXICO EQUITY AND INCOME FUND, INC.
Andrew P. Chica
Secretary
Dated: January 3, 2003
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT dated and effective as of January 1, 2003, between THE MEXICO
EQUITY AND INCOME FUND, INC., a Maryland corporation (herein referred to as the
"Fund") and CLEMENTE CAPITAL, INC., a New York corporation (herein referred to
as the "Investment Adviser").
WHEREAS, the Fund and the Investment Adviser desire to enter into an
investment management agreement whereby the terms of said agreement are set
forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed by the parties as follows:
1. Appointment of the Investment Adviser.
(a) The Investment Adviser hereby undertakes and agrees, upon the
terms and conditions herein set forth, (i) to make investment decisions for
the Fund, to prepare and make available to the Fund research and
statistical data in connection therewith, and to supervise the acquisition
and disposition of securities by the Fund, including the selection of
brokers or dealers to carry out the transactions, all in accordance with
the Fund's investment objective and policies and in accordance with
guidelines and directions from the Fund's Board of Directors; (ii) to
assist the Fund as it may reasonably request in the conduct of the Fund's
business, subject to the direction and control of the Fund's Board of
Directors; (iii) to maintain and furnish or cause to be maintained and
furnished for the Fund all records, reports and other information required
under the United States Investment Company Act of 1940, as amended (the
"1940 Act"), to the extent that such records, reports and other information
are not maintained or furnished by the administrators, custodians or other
agents of the Fund; (iv) to furnish at the Investment Adviser's expense for
the use of the Fund such clerical services and office space and facilities
as the Fund may reasonably require for its needs in the United States and
Mexico related to research, statistical and investment work; and (v) to pay
the reasonable salaries and expenses of such of the Fund's officers and
employees (including, where applicable, the Fund's share of payroll taxes)
and any fees and expenses of such of the Fund's directors as are directors,
officers or employees of the Investment Adviser or any of its affiliates.
The Investment Adviser shall bear all expenses arising out of its duties
hereunder but shall not be responsible for any expenses of the Fund other
than those specifically allocated to the Investment Adviser in this Section
1.
(b) In particular, but without limiting the generality of the
foregoing, the Investment Adviser shall not be responsible, except to the
extent of the compensation of such of the Fund's employees as are
directors, officers or employees of the Investment Adviser whose services
may be involved, for the following expenses of the Fund; organization
expenses (but not the overhead or employee costs of the Investment
Adviser); legal fees and expenses of counsel (United States and Mexican) to
the Fund and, if counsel is retained by the directors who are not
"interested persons" of the Fund, of such counsel; auditing and accounting
expenses; taxes and governmental fees; New York Stock Exchange listing
fees; dues and expenses incurred in connection with membership in
investment company organizations; fees and expenses of the Fund's
custodians, transfer agents and registrars; fees and expenses with respect
to administration except as may be provided otherwise pursuant to
administration agreements; expenses for portfolio pricing services by a
pricing agent, if any; expenses of preparing share certificates and other
expenses in connection with the issuance, offering and underwriting of
shares issued by the Fund; expenses relating to investor and public
relations; fees and expenses involved in registering and maintaining
registration of the Fund and of its shares with the United States
Securities and Exchange Commission, and qualifying its shares under state
securities laws, including the preparation and printing of the Fund's
registration statements and prospectuses for such purposes; freight,
insurance and other charges in connection with the shipment of the Fund's
portfolio securities; brokerage commissions, stamp duties or other costs of
acquiring or disposing of any portfolio holding of the Fund; expenses of
preparation and distribution of reports, notices and dividends to
shareholders; expenses of the dividend reinvestment and share purchase
plan; costs of stationery; any litigation expenses; and costs of
shareholders' and other meetings.
(c) In selecting brokers or dealers to execute portfolio transactions
on behalf of the Fund, the Investment Adviser will seek the best overall
terms available. In assessing the best overall terms available for any
transaction, the Investment Adviser must consider the factors it deems
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis. In addition, the Investment
Adviser may, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, consider
the brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended) provided to the
Fund.
(d) The Investment Adviser may contract with or consult with such
banks, other securities firms or other parties in Mexico or elsewhere as it
may deem appropriate to obtain additional advisory information and advice,
including investment recommendations, advice regarding economic factors and
trends, advice as to currency exchange matters and clerical and accounting
services and other assistance. It is acknowledged and agreed that the
Investment Adviser will be responsible for the management of the Fund's
portfolio and overall investment strategy, in accordance with the Fund's
investment policies, and for making decisions to buy, sell or hold
particular securities, including but not limited to all investment
decisions with respect to the Fund's portfolio of equity, debt and
convertible debt securities.
2. Remuneration. The Fund agrees to pay to the Investment Adviser, in
either U.S. dollars, as may from time to time be agreed among the Fund and the
Investment Adviser, as full compensation for the services to be rendered and
expenses to be borne by the Investment Adviser hereunder, a monthly fee at an
annual rate equal to 0.80% of the value of the Fund's average daily net assets.
For purposes of computing the fee, the average monthly net assets of the Fund
are determined at the end of each month on the basis of the average net assets
of the Fund for each week during the month. The assets for each weekly period
are determined by averaging the net assets at the last business day of a week
with the net assets at the last business day of the prior week. The value of the
net assets of the Fund shall be determined pursuant to the applicable provisions
of the 1940 Act and the directions of the Fund's Board of Directors. Subject to
the provisions of Section 6 of this Agreement, such fee shall be computed
beginning on January 2, 2003 (the "Effective Date") until the termination, for
whatever reason, of this Agreement. The fee for the period from the end of the
last month ending prior to termination of this Agreement to the date of
termination and the fee for the period from the Effective Date through the end
of the month in which the Effective Date occurs shall be pro rated according to
the proportion which such period bears to the full monthly period. Except as
provided below, each payment of a monthly fee to the Investment Adviser shall be
made within ten days of the first day of each month following the day as of
which such payment is computed. Upon the termination of this Agreement before,
the end of any month, such fee shall be payable on the date of termination of
this Agreement.
3. Representations and Warranties. The Investment Adviser represents and
warrants that it is duly registered and authorized as an investment adviser
under the United States Investment Advisers Act of 1940, as amended, and agrees
to maintain effective all requisite registrations, authorizations and licenses,
as the case may be, until the termination of this Agreement.
4. Services Not Deemed Exclusive. Nothing herein shall be construed as
prohibiting the Investment Adviser from providing investment management and
advisory services to, or entering into investment management and advisory
agreements with, other clients, including other registered investment companies
and clients which may invest in securities of Mexican issuers, or from utilizing
(in providing such services) information furnished to the Investment Adviser by
others as contemplated by Section 1 of this Agreement; nor, except as explicitly
provided herein, shall anything herein be construed as constituting the
Investment Adviser an agent of the Fund.
5. Limit of Liability. The Investment Adviser may rely on information
reasonably believed by it to be accurate and reliable. Neither the Investment
Adviser nor its officers, directors, employees, agents or controlling persons as
defined in the 1940 Act shall be subject to any liability for any act or
omission, error of judgment or mistake of law, or for any loss suffered by the
Fund, in the course of, connected with or arising out of any services to be
rendered hereunder, except by reason of willful misfeasance, bad faith or gross
negligence on the part of the Investment Adviser in the performance of its
duties or by reason of reckless disregard on the part of the Investment Adviser
of its obligations and duties under this Agreement. Any person, even though also
employed by the Investment Adviser, who may be or become an employee of the Fund
shall be deemed, when acting within the scope of his employment by the Fund, to
be acting in such employment solely for the Fund and not as an employee or agent
of the Investment Adviser.
6. Duration and Termination. This Agreement shall continue in effect from
year to year, provided, such continuance is specifically approved at least
annually by the affirmative vote of (i) a majority of the members of the Fund's
Board of Directors who are neither parties to this Agreement nor interested
persons of the Fund or of the Investment Adviser or of any entity regularly
furnishing investment advisory services with respect to the Fund pursuant to an
agreement with the Investment Adviser, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) a majority of the Fund's Board
of Directors or the holders of a majority of the outstanding voting securities
of the Fund.
Notwithstanding the above, this Agreement (a) may nevertheless be
terminated at any time without penalty, by the Fund's Board of Directors, by
vote of holders of a majority of the outstanding voting securities of the Fund
or by the Investment Adviser upon 60 days' written notice delivered or sent to
the other party, and (b) shall automatically be terminated in the event of its
assignment; provided, however, that a transaction which does not, in accordance
with the 1940 Act, result in a change of actual control or management of the
Investment Adviser's business shall not be deemed to be an assignment for the
purposes of this Agreement. Any such notice shall be deemed given when received
by the addressee.
7. Non-Assignment and Amendment. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by either party hereto
other than pursuant to Section 6. It may be amended by mutual agreement, but
only after authorization of such amendment by the affirmative vote of (i) the
holders of a majority of the outstanding voting securities of the Fund, and (ii)
a majority of the members of the Fund's Board of Directors who are not
interested persons of the Fund or of the Investment Adviser or of an entity
regularly furnishing investment advisory services with respect to the Fund
pursuant to any agreement with the Investment Adviser, cast in person at a
meeting called for the purpose of voting on such approval.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York; provided, however, that
nothing herein shall be construed as being inconsistent with the 1940 Act. As
used herein, the terms "interested person," "assignment" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
1940 Act.
9. Notices. Any notice hereunder shall be in writing and shall be delivered
in person or by telex or facsimile followed by delivery in person to the parties
at the addresses set forth below:
If to the Fund:
The Mexico Equity and Income Fund, Inc.
615 E. Michigan St., 2nd Floor
Milwaukee, Wisconsin 53202
Telephone: (414) 765-5307
Facsimile: (414) 212-7606
Attention: Andrew P. Chica
with a copy to:
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022
Telephone: (212) 888-6680
Facsimile: (212) 838-7472
Attention: Thomas R. Westle, Esq.
If to the Investment Adviser:
CLEMENTE CAPITAL, INC.
152 West 57th Street, 25th Floor
New York, New York 10019
Telephone: (212) 765-0700
Fax: (212) 765-1939
Attention: Mr. Leopoldo M. Clemente, Jr.
or to such other address as to which the recipient shall have informed the other
parties in writing.
Unless specifically provided elsewhere, notice given as provided above
shall be deemed to have been given, if by personal delivery, on the day of such
delivery, and, if by telex or facsimile and mail, on the date on which such
telex or facsimile and confirmatory letter are sent.
10. Consent to Jurisdiction. Each party hereto irrevocably agrees that any
suit, action or proceeding against the Investment Adviser or the Fund arising
out of or relating to this Agreement shall be subject exclusively to the
jurisdiction of the United States District Court for the Southern District of
New York and the Supreme Court of the State of New York, New York County, and
each party hereto irrevocably submits to the jurisdiction of each such court in
connection with any such suit, action or proceeding. Each party hereto waives
any objection to the laying of venue of any such suit, action or proceeding in
either such court, and waives any claim that such suit, action or proceeding has
been brought in an inconvenient forum. Each party hereto irrevocably consents to
service of process in connection with any such suit, action or proceeding by
mailing a copy thereof registered or certified mail, postage prepaid, to their
respective addresses as set forth in this Agreement.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused their duly authorized
signatories to execute this Agreement as of the day and year first written
above.
THE MEXICO EQUITY AND INCOME FUND, INC.
By: _______________________________________
Name: Gerald Hellerman
Title: President
CLEMENTE CAPITAL, INC.
By: _______________________________________
Name: Leopoldo M. Clemente, Jr.
Title: President
FORM OF PROXY CARD
THE MEXICO EQUITY AND INCOME FUND, INC.
The undersigned stockholder of The Mexico Equity and Income Fund, Inc. (the
"Fund") hereby constitutes and appoints Messrs. Das, Goldstein, and Hellerman,
or any of them, the action of a majority of them voting to be controlling, as
proxy of the undersigned, with full power of substitution, to vote all shares of
common stock of the Fund standing in his or her name on the books of the Fund at
the Annual Meeting of Stockholders of the Fund to be held on Tuesday, January
28, 2003 at 10:00 a.m., New York time, at the offices of Spitzer & Feldman,
P.C., 405 Park Avenue, 6th Floor, New York, New York 10022, or at any
adjournment thereof, with all the powers which the undersigned would possess if
personally present, as designated on the reverse hereof.
The undersigned hereby revokes any proxy previously given and instructs the
said proxies to vote in accordance with the aforementioned instructions with
respect to (a) the approval of the new investment advisory agreement; (b) the
election of two Class I Directors and one Class III Director; (c) the
ratification of the selection by the Board of Directors of the Fund's
independent accountants; (d) the approval of the creation, issuance and
registration of the put warrants, subject to the approval of the Securities and
Exchange Commission; and (e) consideration and vote of such other matters as may
properly come before the Annual Meeting of Stockholders or any adjournment
thereof. If no such specification is made, the undersigned will vote FOR
proposals a, b and c set forth above and will vote in their discretion with
respect to such other matters as may properly come before the Annual Meeting of
Stockholders.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE MEXICO EQUITY AND INCOME
FUND, INC.'S BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON
January 28, 2003
(To be dated and signed on reverse side)
Please mark boxes / / or /X/ in blue or black ink.
Please mark your votes as in this example:
--------
X
--------
1. To approve the new investment advisory agreement between Clemente Capital,
Inc. and the Fund.
FOR AGAINST ABSTAIN
9 9 9
2. To elect: FOR WITHHELD
a) Two Class I Directors:
Phillip Goldstein 9 9
Glenn Goodstein 9 9
b) One Class III Director:
Leopoldo M. Clemente, Jr. 9 9
3. To ratify the selection by the Board of Directors of Tait, Weller & Baker
as the Fund's independent accountants for the fiscal year ending July 31,
2003:
FOR AGAINST ABSTAIN
9 9 9
4. To approve the creation, issuance and registration of the put warrants.
FOR AGAINST ABSTAIN
9 9 9
In their discretion, the proxies are authorized to consider and vote upon
such matters as may properly come before said Meeting or any adjournment
thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the stockholder.
Your proxy is important to assure a quorum at the Annual Meeting of Stockholders
whether or not you plan to attend the meeting in person. You may revoke this
proxy at anytime, and the giving of it will not effect your right to attend the
Annual Meeting of Stockholders and vote in person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature(s)____________________________ Date___________________
NOTE: Please sign exactly as name appears. When shares are held as joint
tenants, both should sign. When signing as attorney, 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 and if a
partnership, please sign in full partnership name by authorized person.