FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
--------------------------------
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss. 240.14a-11(c) orss. 240.14a-12
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THE MEXICO EQUITY AND INCOME FUND, INC.
(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.
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(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transaction applies: N/A
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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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FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION
PRELIMINARY PROXY STATEMENT: FOR THE U.S.
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 November 19, 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 Blank Rome LLP, 405 Lexington
Avenue, ___ Floor, New York, New York 10174 on Wednesday, November 19, 2003, at
10:00 a.m., for the following purposes:
1. To approve a new investment advisory agreement between Pichardo Asset
Management, S.A. de C.V. (the "Adviser" or "Pichardo") and the Fund
(Proposal 1);
2. To elect two Class II Directors to hold office until the year 2006
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, 2004
(Proposal 3); and
4. 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 October 2, 2003
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 (888) 294-8217.
By Order of the Board of Directors,
Scott Schuenke
Dated: October __, 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
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
to be held on November 19, 2003
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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 Blank Rome LLP, 405 Lexington Avenue, ___ Floor, New
York, New York 10174 on November 19, 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 October 9, 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 Pichardo
Asset Management, S.A. de C.V. ("PAM") and the Fund, FOR the election of the
nominees for Director, and FOR the ratification of the selection of Tait, Weller
& Baker as the Fund's independent accountants for the fiscal year ending July
31, 2004.
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, PAM, 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 October 2, 2003 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
October 2, 2003 was ___________. 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 (888) 294-8217. This report is not to be regarded as
proxy-soliciting material.
This Proxy Statement is first being mailed to stockholders on or about
October 9, 2003.
PROPOSAL 1
CONSIDERATION OF THE APPROVAL OF
THE NEW INVESTMENT MANAGEMENT AGREEMENT
BETWEEN THE FUND AND Pichardo Asset Management, S.A. de C.V.
Clemente Capital, Inc. ("Clemente") served as the investment adviser to the
Fund from January 2, 2003 until June 30, 2003, pursuant to an investment
management agreement dated January 2, 2003 (the "Clemente Agreement") which was
approved by the Stockholders at the Annual Meeting of Stockholders on February
14, 2003. On June 2, 2003, Clemente notified the Fund in writing that it was
terminating the Clemente Agreement as of June 30, 2003. Clemente stated that it
intended on terminating the Clemente Agreement because it would no longer be
providing investment management services to registered investment companies.
The Board of Directors unanimously approved a new investment management
agreement (the "Pichardo Agreement") by and between the Fund and Pichardo Asset
Management, S.A. de C.V. ("PAM"), at a meeting of the Board of Directors held on
June 18, 2003. During the Board's discussion to approve the Pichardo Agreement,
it was noted that Maria Eugenia Pichardo, the portfolio manager of the Fund
since the Fund's inception, had created her own investment adviser and had
registered as an investment adviser with the U.S. Securities and Exchange
Commission. Additionally, PAM 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 Clemente Agreement and the
date on which the Fund's stockholders approve the Pichardo Agreement at the
Meeting (the "Interim Period"); provided however, that PAM 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 Clemente Agreement, and for compensation no greater than
that provided for in the Clemente Agreement on a pro rata basis. If the
stockholders do not approve the Pichardo Agreement, the Board will consider
alternative sources from which to obtain investment management and research
services.
The Board hereby submits the Pichardo Agreement to the stockholders for
their consideration and approval.
Information Regarding Clemente
Pursuant to the Clemente Agreement, Clemente acted as the Fund's investment
adviser until June 30, 2003. Prior to Clemente becoming the Fund's investment
adviser, Acci Worldwide S.A. de C.V. ("Acci Worldwide"), a subsidiary of
Acciones y Valores de Mexico, S.A. de C.V. ("AVM"), acted as the investment
adviser to the Fund pursuant to an Investment Advisory Agreement, dated October
14, 1991 and amended on November 27, 2001 (the "Acci Agreement"). Ms. Pichardo
has acted as the Fund's portfolio manager from the Fund's inception, as an
employee of Acci Worldwide, and as an employee of Clemente.
Clemente's principal office is located at 152 West 57th Street, New York,
New York 10019. Lilia C. Clemente is Chairman and Chief Executive Officer of
Clemente. 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.
Information Regarding PAM
PAM's principal office is located at Teopanzolco Avenue #408, 3rd Floor,
Cuernavaca 62260, Morelos, Mexico. PAM is a newly organized company, and is
registered with the U.S. Securities and Exchange Commission as an investment
adviser. PAM currently provides investment advisory services to private clients
and to investment companies. Maria Eugenia Pichardo is the President and Chief
Executive Officer of PAM. Ms. Pichardo was previously employed by Clemente as
the Mexico Equity and Income Fund, Inc.'s portfolio manager, and prior to that
served as the Director General and Secretary of Acci Worldwide.
Ms. Pichardo owns one hundred percent (100%) of the total outstanding
shares of common stock of the Adviser.
Comparison of the Clemente Agreement with the Pichardo Agreement
The Clemente Agreement and the Pichardo 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 Pichardo Agreement is qualified in its entirety by
reference to the copy of the Pichardo Agreement attached hereto and made a part
hereof as Exhibit A.
Services to be Performed
Pursuant to the Pichardo Agreement, PAM 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. PAM 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. PAM 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, PAM will pay the salaries and fees of all officers of the
Fund who are affiliated with PAM.
Expenses
The Pichardo Agreement provides that the Fund is responsible for all of its
expenses and liabilities, except that PAM is responsible for the expenses in
connection with maintaining a staff within its organization to furnish the above
services to the Fund. PAM is not aware of any circumstances that are reasonably
likely to impair the financial ability of PAM to fulfill its commitment to the
Fund under the Pichardo Agreement.
Limitation of Liability
The Pichardo Agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations and duties thereunder ("disabling conduct"), PAM 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
Pichardo Agreement provides that the Fund, under certain circumstances, will
indemnify PAM 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 Pichardo Agreement will have a term
beginning November 19, 2003 and ending November 18, 2005, 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 Pichardo 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 Pichardo 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 PAM.
Advisory Fees
The annual rate used to determine fees payable by the Fund pursuant to the
Pichardo Agreement is identical to the rate in effect under the Clemente
Agreement. Under the current fee structure the Fund pays Clemente, and under the
Pichardo Agreement will pay PAM, 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 PAM or to be provided by PAM, as the case may be.
The net assets of the Fund on July 31, 2003 were $25,104,015. The total amount
paid during the fiscal year ended July 31, 2003 by the Fund to Clemente was
$84,669, to Acci Worldwide was $70,417, and to PAM was $16,625. PAM, similar to
Clemente, and Acci Worldwide prior to them, has 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, 2003,
the total expense reimbursement made by Clemente amounted to $1,980, Acci
Worldwide amounted to $2,515, and PAM amounted to $255.
Soft Dollar Arrangements
It is understood by both PAM and the Board of Directors that any soft
dollars resulting from soft dollar arrangements between the Fund, PAM 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 Pichardo Agreement, like the
Clemente Agreement, authorizes PAM to direct the execution of the Fund's
portfolio transactions to dealers and brokers furnishing statistical information
or research deemed by PAM 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 PAM by brokers who effect securities transactions for the
Fund may be used by PAM in servicing other investment companies and accounts
that it manages. It is understood that not all of the research services may be
used by PAM in managing any particular account, including the Fund.
Notwithstanding the foregoing, however, it is the intention of both PAM 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 Pichardo Agreement or its affiliates, has
approved the Pichardo 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 June 18, 2003, with legal counsel
in attendance. The Pichardo Agreement will become effective on November 19,
2003, subject to shareholder approval. If the shareholders do not approve the
Pichardo Agreement at the Meeting (or at an adjournment thereof), the Board will
either resubmit the Pichardo 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 Pichardo 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 PAM,
while focusing on the prior experience of PAM'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, Maria Eugenia Pichardo, would continue to act as the Fund's
portfolio manager at PAM; 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 Pichardo Agreement is in the best interests of the Fund
and its shareholders.
Required Vote
As provided by the 1940 Act, approval of the Pichardo 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, PAM OR ITS AFFILIATES, RECOMMENDS THAT THE SHAREHOLDERS OF
THE FUND VOTE "FOR" THE APPROVAL OF THE PICHARDO 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 II Directors
to hold office until the year 2006 Annual Meeting or thereafter until their
successors are 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. On January 28, 2003, at the Annual Meeting of
Stockholders, the Stockholders approved Mr. Leopoldo Clemente, Jr. as a Class
III director to serve until the 2004 Annual Meeting of Stockholders, but on June
18, 2003, Mr. Clemente resigned from his position as a Director of the Fund.
At the Meeting, stockholders will be asked to vote for the election of the
following nominees: Messrs. Rajeev Das and Andrew Dakos as Class II Directors to
serve until the year 2006 Annual Meeting or thereafter until each of their
respective successors are 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.
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. Das and Dakos.
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, 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 II Directors:
NOMINEES
Term of Directorships held by
Name, Address and Age Position(s) Office Principal Occupation Director Outside of Fund
with Fund Since during past 5 years Complex*
Class II Independent Nominees serving until the Year 2006 Annual Meeting of
Stockholders:
Senior Analyst,
Rajeev Das, CPA (34) Director 2001 Kimball & Winthrop,
68 Lafayette Ave. Dumont, Inc.; and prior Credit
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.
-----------
* 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, Clemente Capital, Inc. or Pichardo Asset Management, S.A.
de C.V. during the fiscal year ended July 31, 2003.
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:
Position Term of Directorships held by
with Fund Office Principal Occupation Nominee for Director
Name, Address and Age Since during past 5 years Outside of Fund Complex*
Class I Independent Directors 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.
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 President (a financial and Innovative Clinical
Columbia, MD 21044 and corporate consulting Solutions, Ltd.
Treasurer 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 in the Fund that is owned by the Director as of
October 2, 2003. The information as to beneficial ownership is based on
statements furnished to the Fund by each Director.
-------------------------- -----------------------
Dollar Range of
Equity Securities in
the Fund.
Name
-------------------------- -----------------------
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 Position(s) Office Principal Occupation Directorships
and Age with Fund Since during past 5 years held by Officer
----------------- ----------- -------- ------------------------- ---------------
Andrew P. Chica Assistant 2003 Compliance Officer, U.S. N/A
(27) Vice Bancorp Fund Services,
President LLC; Asst. Treasurer,
Kinetics Mutual Funds,
Inc.
----------------- ----------- -------- ------------------------- ---------------
Scott J. Schuenke Secretary 2003 Compliance Administrator, N/A
(25) U.S. Bancorp fund
Services, LLC
----------------- ----------- -------- ------------------------- ---------------
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 Messrs. Rajeev Das,
Phillip Goldstein and Gerald Hellerman, $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 receives an annual salary in the amount of $6,000, which is paid
equally by the Fund and the 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, 2003, 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 $8,000
Glenn Goodstein(1) 2001 $8,300
Andrew Dakos 2001 $7,800
Rajeev Das 2001 $8,000
Gerald Hellerman(2) 2001 $8,000
Leopoldo Clemente, Jr.(3) 2003 $0.00
-------------
--------------------------------------------------------------------------------
(1) In addition to the Directors Fees paid by the Fund, Mr. Goodstein also
received a one-time payment of $500 for services rendered at the behest of
the Board of Directors to obtain information on Clemente Capital, Inc.'s
office located in Mexico.
(2) 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. The Fund pays 50% of this salary and the Adviser pays the other 50%
of such salary.
(3) Mr. Clemente served as a Director from February 14, 2003 until June 18,
2003.
Each Director attended, in person or by telephone, at least seventy-five
(75%) percent or more of the four (4) 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, Dakos, Das 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 all independent
directors, Messrs. Das, Goldstein and Hellerman. The principal functions of the
Audit Committee include, but are not limited to, (i) the oversight of the
accounting and financial reporting processes of the und and its internal control
over financial reporting; (ii) the oversight of the quality and integrity of the
Fund's financial statements and the independent audit thereof; and (iii) the
approval, prior to the engagement of, the Fund's independent auditors and, in
connection therewith, to review and evaluate the qualifications, independence
and performance of the Fund's independent auditors. The Audit Committee convened
two times during the fiscal year ended July 31, 2003. Each member of the Audit
Committee attended at least seventy-five percent (75%) or more of the two
meetings of the Audit Committee held during the period for which he was a member
of the Audit Committee.
On September 17, 2003, the Audit Committee, followed by the full Board of
Directors, approved the Fund's amended written Audit Committee Charter, attached
hereto as Exhibit B, 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.
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
--------------- --------------------------------------------- -----------------
$18,000 $0.00 $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, 2003 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, 2003.
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. DAS and DAKOS AS CLASS II DIRECTORS OF THE FUND.
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, 2004. At a meeting
held on June 18, 2003, 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, 2004. 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 direct or
indirect material financial interests in the Fund.
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.
ADDITIONAL INFORMATION PERTAINING TO THE
PROPOSED PUT WARRANT PROGRAM
On February 14, 2003, the Fund obtained stockholder approval for the
creation, issuance and registration of put warrants, pursuant to a put warrant
program, which are designed to afford stockholders a series of opportunities to
realize NAV for their shares. Initially conceived by Mr. Goldstein as an
innovative means by which stockholders of a closed-end management 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 of the Investment Company Division and the staff of
the Division of Corporate Finance of the U.S. Securities and Exchange Commission
(the "SEC").
The SEC 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 SEC 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. 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.
As initially conceived, 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 cash equal to
NAV per Share.
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.
INFORMATION PERTAINING TO THE FUND'S
INVESTMENT ADVISER AND ADMINISTRATOR
The Investment Adviser
Pichardo Asset Management, S.A. de C.V., is the current investment adviser
of the Fund, and will continue to be such, subject to stockholder approval at
the Meeting. PAM is located at Teopanzolco Avenue #408, 3rd Floor, Cuernavaca
62260, Morelos, Mexico.
The Previous Investment Adviser
From January 2, 2003, until June 30, 2003, Clemente Capital, Inc. served as
the investment adviser to the Fund pursuant to the Clemente Agreement. Clemente
Capital is located at 152 West 57th Street, New York, New York 10019.
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) 220,250 2.56%
Taunusanlage 12, D-60325
Frankfurt am Main
Federal Republic of Germany
--------------------------------
(1) Based solely upon information presented in a Schedule 13G, dated January
29, 2003 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 2004, 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 2004 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, 2004) before the date of the Annual Meeting of Stockholders
which will be scheduled to be held in November 2004 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.
Scott Schuenke
Secretary
Dated: October __, 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 July 1, 2003, between THE MEXICO EQUITY
AND INCOME FUND, INC., a Maryland corporation (herein referred to as the "Fund")
and PICHARDO ASSET MANAGEMENT, S.A. DE C.V., a Mexican 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 U.S. 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 U.S. 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 June 18, 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 as 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
initially for a two year period and will continue 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:
----------------
405 Lexington Avenue
New York, NY 10174
Telephone: (212) ___-____
Facsimile: (212) ___-____
Attention: Thomas R. Westle, Esq.
If to the Investment Adviser:
PICHARDO ASSET MANAGEMENT, S.A. DE C.V.
Teopanzolco Avenue #408
3rd Floor Reforma
Cuernavaca, Mexico 62260
Telephone: _______________
Fax: _______________
Attention: Ms. Eugenia Solis Pichardo
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.
[This Remainder of this page has been intentionally left blank]
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: /s/ Gerald Hellerman
---------------------
Name: Gerald Hellerman
Title: President
PICHARDO ASSET MANAGEMENT, S.A. DE C.V.
By: /s/ Eugenia Solis Pichardo
--------------------------
Name: Eugenia Solis Pichardo
Title: President
EXHIBIT B
AMENDED AUDIT COMMITTEE CHARTER
THE MEXICO EQUITY & INCOME FUND, INC.
I. Audit Committee Membership and Qualifications
---------------------------------------------
The Audit Committee of The Mexico Equity & Income Fund, Inc. (the "Fund")
shall consist of at least 3 members appointed by the Fund's Board of Directors
(the "Board"). The Board may replace members of the Audit Committee for any
reason.
No Member of the Audit Committee shall be an "interested person" of the
Fund, as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940, as amended.
The Board shall determine annually whether any member of the Audit
Committee is an "audit committee financial expert" as defined in Item 3 of Form
N-CSR.
II. Purposes of the Audit Committee
-------------------------------
The purposes of the Audit Committee are:
(a) to oversee the accounting and financial reporting processes of the
Fund and its internal control over financial reporting and, as the
Committee deems appropriate, to inquire into the internal control over
financial reporting of certain third-party service providers;
(b) to oversee the quality and integrity of the Fund's financial
statements and the independent audit thereof;
(c) to oversee, or, as appropriate, assist Board oversight of, the Fund's
compliance with legal and regulatory requirements that relate to the
Fund's accounting and financial reporting, internal control over
financial reporting and independent audits;
(d) to approve prior to appointment the engagement of the Fund's
independent auditors and, in connection therewith, to review and
evaluate the qualifications, independence and performance of the
Fund's independent auditors and the full Board; and
(e) to act as liaison between the Fund's independent auditors and the full
Board.
The independent auditors for the Fund shall report directly to the Audit
Committee.
III. Duties and Powers of the Audit Committee
----------------------------------------
To carry out its purposes, the Audit Committee shall have the following
duties and powers:
(a) to approve prior to appointment the engagement of auditors to annually
audit and provide their opinion on the Fund's financial statements, to
recommend to those Board members who are not "interested persons" (as
that term is defined in Section 2(a)(19) of the Investment Company
Act) the selection, retention or termination of the Fund's independent
auditors and, in connection therewith, to review and evaluate matters
potentially affecting the independence and capabilities of the
auditors;
(b) to approve prior to appointment the engagement of the auditor to
provide other audit services to the Fund or to provide non-audit
services to the Fund, its investment adviser or any entity
controlling, controlled by, or under common control with the
investment adviser ("adviser affiliate") that provides ongoing
services to the Fund, if the engagement relates directly to the
operations and financial reporting of the Fund;
(c) to develop, to the extent deemed appropriate by the Audit Committee,
policies and procedures for pre-approval of the engagement of the
Fund's auditors to provide any of the services described in (b) above;
(d) to consider the controls applied by the auditors and any measures
taken by management in an effort to assure that all items requiring a
pre-approval by the Audit Committee are identified and referred to the
Committee in a timely fashion;
(e) to consider whether the non-audit services provided by the Fund's
auditor to the Fund's investment adviser or any adviser affiliate that
provides ongoing services to the Fund, which services were not
pre-approved by the Audit Committee, are compatible with maintaining
the auditor's independence;
(f) to review the arrangements for and scope of the annual audit and any
special audits;
(g) to review and approve the fees proposed to be charged to the Fund by
the auditors for each audit and non-audit service;
(h) to consider information and comments from the auditors with respect to
the Fund's accounting and financial reporting policies, procedures and
internal control over financial reporting (including the Fund's
critical accounting policies and practices), to consider management's
responses to any such comments and, to the extent the Audit Committee
deems necessary or appropriate, to promote improvements in the quality
of the Fund's accounting and financial reporting;
(i) to consider information and comments from the Auditors with respect
to, and meet with auditors to discuss any matters of concern relating
to, the Fund's financial statements, including any adjustments to such
statements recommended by the auditors, and to review the auditors'
opinion on the Fund's financial statements;
(j) to resolve disagreements between management and the auditors regarding
financial reporting;
(k) to review with the Fund's principal executive officer and/or principal
financial officer, in connection with required certifications on Form
N-CSR, any significant deficiencies in the design or operation of
internal control over financial reporting or material weaknesses
therein and any reported evidence of fraud involving management or
other employees who have a significant role in the Fund's internal
control over financial reporting;
(l) to establish procedures for the receipt, retention and treatment of
complaints received by the Fund relating to accounting, internal
accounting controls, or auditing matters, and the confidential,
anonymous submission by employees of the Fund of concerns about
accounting or auditing matters, and to address reports from attorneys
or auditors of possible violations of federal or state law or
fiduciary duty;
(m) to investigate or initiate an investigation of reports of
improprieties or suspected improprieties in connection with the Fund's
accounting or financial reporting;
(n) to report its activities to the full Board on a regular basis and to
make such recommendations with respect to the above and other matters
as the Audit Committee may deem necessary or appropriate; and
(o) to perform such other functions and to have such powers as may be
necessary or appropriate in the efficient and lawful discharge of the
powers provided in this Charter.
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including appropriate funding, as determined by
the Committee, for payment of compensation to the auditors for the purpose of
conducting the audit and rendering their audit report, the authority to retain
and compensate special counsel and other experts or consultants as the Committee
deems necessary, and the authority to obtain specialized training for Audit
Committee members, at the expense of the Fund, as appropriate.
The Audit Committee may delegate any portion of its authority, including
the authority to grant pre-approvals of audit and permitted non-audit services,
to a subcommittee of one or more members. Any decisions of the subcommittee to
grant pre-approvals shall be presented to the full Audit Committee at its next
regularly scheduled meeting.
IV. Role and Responsibilities of the Audit Committee
------------------------------------------------
The function of the Audit Committee is oversight; it is management's
responsibility to maintain appropriate systems for accounting and internal
control over financial reporting, an auditor's responsibility to plan and carry
out a proper audit. Specifically, Fund's management is responsible for: (1) the
preparation, presentation and integrity of the Fund's financial statements; (2)
the maintenance of appropriate accounting and financial reporting principles and
policies; and (3) the maintenance of internal control over financial reporting
and other procedures designed to assure compliance with accounting standards and
related laws and regulations. The independent auditors are responsible for
planning and carrying out an audit consistent with applicable professional
standards and the terms of their engagement letter. Nothing in this Charter
shall be construed to reduce the responsibilities or liabilities of the Fund's
service providers, including the auditors.
Although the Audit Committee is expected to take a detached and questioning
approach to the maters that come before it, the review of a Fund's financial
statements by the Audit Committee is not an audit, nor does the Committee's
review substitute for the responsibilities of the Fund's management for
preparing, or the independent auditors for auditing, the financial statements.
Members of the Audit Committee are not full-time employees of the Fund and, in
serving on this Committee, are not, and do not hold themselves out to be, acting
as accountants or auditors. As such, it is not the duty or responsibility of the
Committee or its members to conduct "field work" or other types of auditing or
accounting reviews or procedures.
In discharging their duties the members of the Audit Committee are entitled
to rely on information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by: (1) one or
more officer(s) of the Fund whom the director reasonably believes to be reliable
and competent in the matters presented; (2) legal counsel, public accountants,
or other persons as to matters the director reasonably believes are within the
person's professional or expert competence; or (3) a Board committee of which
the director is not a member.
V. Operations of the Audit Committee
---------------------------------
(a) The Audit Committee shall meet on a regular basis and at least 2 times
annually and is empowered to hold special meetings as circumstances
require. The chair or a majority of the members shall be authorized to
call a meeting of the Audit Committee and shall send notice thereof;
(b) The Audit Committee shall ordinarily meet in person; however, members
may attend telephonically, and the Committee may act by written
consent, to the extent permitted by law and by the Fund's bylaws.
(c) The Audit Committee shall have the authority to meet privately and to
admit non-members individually by invitation.
(d) The Audit Committee may meet regularly, in separate executive
sessions, with representatives of Fund management and the Fund's
independent auditors. The Committee may also request to meet with
internal legal counsel and compliance personnel of the Fund's
investment adviser and with entities to discuss matters relating to
the Fund's accounting and compliance as well as other Fund-related
matters.
(e) The Audit Committee shall prepare and retain minutes of its meetings
and appropriate documentation of decisions made outside of meetings by
delegated authority.
(f) The Audit Committee may select one of its members to be the chair and
may select a vice chair.
(g) A majority of the members of the Audit Committee shall constitute a
quorum for the transaction of business at any meeting of the
Committee. The action of a majority of the members of the Audit
Committee present at a meeting at which a quorum is present shall be
the action of the Committee.
(h) The Board shall adopt and approve this Charter and may amend it on the
Board's own motion. The Audit Committee shall review this Charter at
least annually and recommend to the full Board any changes the
Committee deems appropriate.
Amended and Restated as of September 17, 2003
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. 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 Wednesday, November 19,
2003 at 10:00 a.m., New York time, at the offices of Blank Rome LLP, 405
Lexington Avenue, ___ Floor, New York, New York 10174, 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 II Directors; (c) the ratification of the selection by the
Board of Directors of the Fund's independent accountants; and (d) 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
November 19, 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 Pichardo Asset
Management, S.A. de C.V. and the Fund.
FOR AGAINST ABSTAIN
9 9 9
2. To elect Two Class II Directors:
FOR WITHHELD
Rajeev Das 9 9
Andrew Dakos 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,
2004:
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.