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 to Section 240.14a-12
THE MEXICO 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:
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(2) Aggregate number of securities to which transaction applies:
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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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[_] 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.
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THE MEXICO FUND, INC.
1775 I Street, N.W., Suite 1100
Washington, DC 20006-2401
Notice of Annual Meeting of Stockholders
February __, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of The Mexico Fund, Inc., a Maryland corporation (the "Fund"), will
be held at 30 Rockefeller Plaza, 23rd Floor, New York, New York, 10112, on April
3, 2003 at 2:00 P.M. for the following purposes:
(1) To elect two Directors to serve as Class I Directors for three year
terms and until their successors are duly elected and qualify;
(2) To approve an Amended Investment Advisory and Management Agreement to
amend the management fee rate schedule the effect of which is to
increase the fees paid only at certain asset levels; and
(3) To transact such other business that may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed February 11, 2003 as the record date for
the determination of stockholders entitled to notice of, and to vote at, the
Meeting or any adjournment thereof, and only holders of record of shares at the
close of business on that date are entitled to notice of, and to vote at, the
Meeting and any adjournment thereof.
You are cordially invited to attend the Meeting. All stockholders are
requested to complete, date and sign the enclosed form of proxy and return it
promptly in the envelope provided for that purpose. The enclosed proxy is being
solicited on behalf of the Board of Directors of the Fund [insert internet and
telephone proxy voting authorization].
By Order of the Board of Directors,
Samuel Garcia Cuellar
Secretary
New York, New York
Dated: February __, 2003
--------------------------------------------------------------------------------
PLEASE RESPOND - YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE
MANNER PROVIDED. IT IS IMPORTANT THAT YOU RETURN YOUR PROXY AS SOON AS POSSIBLE
TO ASSURE THAT YOUR PROXY WILL BE VOTED AND TO AVOID ANY ADDITIONAL EXPENSE TO
THE FUND OF FURTHER SOLICITATION. FOR MORE INFORMATION, PLEASE CALL
1-800-607-0088.
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PROXY STATEMENT
THE MEXICO FUND, INC.
1775 I Street, N.W., Suite 1100
Washington, DC 20006-2401
-----------------------------
Annual Meeting of Stockholders
April 3, 2003
-----------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of The Mexico Fund, Inc., a
Maryland corporation (the "Fund") to be voted at the Annual Meeting of
Stockholders of the Fund (the "Meeting") to be held at 30 Rockefeller Plaza,
23rd Floor, New York, New York, 10112, on April 3, 2003 at 2:00 P.M. and at any
adjournment thereof. The approximate mailing date of this Proxy Statement is
February __, 2003 or as soon as practicable thereafter. The Fund will furnish,
without charge, a copy of the Fund's annual report for its fiscal year ended
October 31, 2002, and any more recent reports, to any Fund stockholder upon
request. To request a copy, please visit the Fund's web site at
www.themexicofund.com or contact the Fund's Information Agent at: Morrow & Co.,
Inc., 445 Park Avenue, 5th Floor, New York, NY 10022, (800) 607-0088.
All properly executed proxies received prior to the Meeting will be
voted at the Meeting in accordance with the instructions marked on the proxies.
Unless instructions to the contrary are marked thereon with respect to each
Proposal, a properly executed proxy will be voted FOR Proposals 1 and 2. The
appointed proxy holders will vote in their discretion on any other business as
may properly come before the meeting or any adjournment or postponements thereof
as set forth in "Other Business."
For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker non-votes (that is, proxies from
brokers or nominees indicating that such persons have not received instructions
from the beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present.
Approval of Proposal 1 requires the affirmative vote of a majority of
the shares validly cast at the Meeting provided a quorum is present. Abstentions
and broker non-votes will have no effect on the vote on this proposal. Approval
of Proposal 2 requires the affirmative vote of a majority of the Fund's
outstanding voting securities as provided in the Investment Company Act of 1940,
as amended (the "1940 Act"). This means the affirmative vote of the lesser of
(a) more than 50% of the outstanding shares of the Fund, or (b) 67% or more of
the shares present at the meeting, if more than 50% of the outstanding shares
are present at the meeting in person or by proxy. For purposes of Proposal 2,
abstentions and broker non-votes will be treated as shares present but not
voting; therefore, any abstentions and broker non-votes will have the effect of
votes against the Proposal.
Any stockholder giving a proxy has the right to attend the Meeting to
vote his or her shares in person (thereby revoking any prior proxy) and also the
right to revoke the proxy at any time by written notice received by the Fund
prior to its exercise.
In the event that the necessary quorum to transact business at the
Meeting is not obtained or a quorum is present at the Meeting but sufficient
votes to approve any of the proposals are not received, the proxy holders may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Any adjournment will require the affirmative vote of a majority of
those shares present at the Meeting in person or by proxy. If the necessary
quorum is not obtained, the persons named as proxies will vote in favor of the
adjournment. If a quorum is present, the proxy holders will vote proxies which
vote for any proposal with respect to which insufficient votes for approval have
been received in favor of such an adjournment, and will vote those proxies
required to be voted against such a proposal, against adjournment. A stockholder
vote may be taken on one or more of the proposals in this Proxy Statement prior
to any adjournment if sufficient votes have been received for approval. In the
event any of the proposals are not approved by stockholders, the Board of
Directors of the Fund will consider appropriate action.
The Board of Directors has fixed February 11, 2003 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Meeting and at any adjournment thereof. Stockholders on the record date will be
entitled to one vote for each share held. As of [February 6, 2003], the Fund had
outstanding 19,969,057 shares of common stock, par value $1.00 per share. To the
Fund's knowledge based on filings made with the U.S. Securities and Exchange
Commission ("SEC"), [as of February 6, 2003], there is no beneficial owner of
more than five percent (5%) of the voting securities of the Fund.
1
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Fund is divided into three classes of
Directors, as nearly equal in number as possible, each of which serves for three
years with one class being elected each year. Each year the term of office of
one class will expire. The terms of office of Messrs. Caldwell and Serra Puche
expire this year. The Board of Directors, including the Directors who are not
interested persons of the Fund, upon the recommendation of the Fund's Nominating
and Corporate Governance Committee which is comprised solely of Directors who
are not "interested persons" of the Fund (as defined in Section 2(a)(19) of the
1940 Act), have nominated Messrs. Caldwell and Serra Puche, to serve as Class I
Directors for a three year term expiring in 2006 and until their successors are
duly elected and qualify. The nominees have indicated an intention to serve if
elected and have consented to be named in this Proxy Statement. Directors who
are not interested persons are referred to in the Proxy Statement as
"Independent Directors."
It is the intention of the persons named on the enclosed proxy card to
vote for the nominees listed below for a three-year term. The Board of Directors
of the Fund knows of no reason why either nominees would be unable to serve, but
in the event of any such unavailability, the proxies received will be voted for
such substituted nominees as the Board of Directors may recommend. The Fund's
Directors and executive officers, as a group, beneficially own less than 1% of
the Fund's common stock. None of the Directors, with the exception of Mr. Jose
Luis Gomez Pimienta, is an "interested person" of the Fund as defined in the
1940 Act.
The names of the Fund's nominees for election as Directors, and each
other Director of the Fund, and their addresses, ages and principal occupations
during the past five years, are provided in the tables below.
Nominees*
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Term of
Office
and
Position(s) Length of Principal Occupation for Other Directorships Held by
Held With the Time Past Five Years and Other Director or Nominee for
Name, Address and Age Fund Served Directorships Director
------------------------------------------------------------------------------------------------------------------------
Philip Caldwell++ Class I Current Mr. Caldwell was Chairman Director, Mettler-Toledo
Ford Motor Company Director term and Chief Executive International, Inc. (scales
225 High Ridge Road expires Officer of Ford Motor and weighing instruments);
West Building 2003; Company from 1979 to 1985 Director, Waters Corporation
Stamford, CT 06905 Director succeeding Henry Ford II. (scientific instruments);
since 1991 He was the first non-Ford Director, Russell Reynolds
Age: 83 family member to lead the Associates, Inc. (executive
company. From 1953 to recruitment).
1990, he served in a wide
variety of domestic and
international executive
positions at Ford and was
Director from 1973 to
1990. From 1985 until
1998, Mr. Caldwell was a
Director and Senior
Managing Director of
Lehman Bros. Inc. and its
predecessor, Shearson
Lehman Brothers Holdings,
Inc.
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2
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Term of
Office
and
Position(s) Length of Principal Occupation for Other Directorships Held by
Held With the Time Past Five Years and Other Director or Nominee for
Name, Address and Age Fund Served Directorships Director
-------------------------------------------------------------------------------------------------------------------------
Jaime Serra Puche++ Class I Term Dr. Serra is a former Director, Tubos de Acero de
Edificio Plaza Director expires Secretary of Finance for Mexico, S.A. de C.V. (steel
Prolongacion Paseo de la 2003; Mexico and he was the manufacturing); Director,
Reforma 600-103 Director minister in charge of Vitro, S.A. de C.V. (glass
Santa Fe Pena Blanca since 1997 negotiations for NAFTA manufacturer); Director,
01210 Mexico, D.F. and trade agreements Grupo Ferroviario Mexicano,
Mexico between Mexico and Chile, S.A. de C.V. (railways);
Bolivia, Venezuela, Director, Southern Peru
Age: 52 Colombia and Costa Rica Copper Corporation (copper
on behalf of the Mexican manufacturer); Director,
government. Regional Market Makers, Inc.
(procurement company);
Formerly, Dr. Serra was a Director, Bardahl, S.A. de
Weinberg Visiting C.V. (oil products);
Professor at Princeton Director, Tenaris (holding
University, Secretary of company); Co-Chairman,
Trade and Industry President's Council on
(Mexico) and a International Activities of
Distinguished Visiting Yale University; Trustee,
Associate at the Carnegie Yale University.
Endowment for
International Peace. He
has a Ph.D. in economics
from Yale University and
is currently Senior
Partner of the law and
economics consulting firm
Serra and Associates
International.
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* There are no other funds in the Fund Complex.
++ Audit Committee, Valuation Committee, Contract Review Committee and
Nominating and Corporate Governance Committee member.
Other Directors
The balance of the current Directors consists of three Class II Directors
and two Class III Directors, none of whom is a nominee for election at the
Meeting and all of whom will continue in office after the Meeting for the terms
shown below. The other Directors are as follows:
3
Interested Director
-------------------
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Term of
Office
and
Position(s) Length of
Held With the Time Principal Occupation(s) Other Directorships Held by
Name, Address and Age Fund Served During Past Five Years Director or Nominee for Director
-----------------------------------------------------------------------------------------------------------------------
Jose Luis Gomez President of the Term Mr. Gomez Pimienta has Director and member of the
Pimienta* +++ Fund; Class II expires over two decades of Executive Committee of the
Aristoteles 77, 3/rd/ Floor Director 2004; experience investing in Bolsa Mexicana de Valores
Col. Polanco Director the Mexican securities (Mexican Stock Exchange) (since
11560 Mexico, D.F. since market. He has been the 1997).
Mexico 1989 President of the Fund
since its inception and
Age: 63 has also served as a
Director since 1989. Mr.
Gomez Pimienta has been
Chairman of the Board of
the Fund's investment
adviser, Impulsora del
Fondo Mexico, since 1987
and CEO since 1981.
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* Director is an "interested director" (as defined in the 1940 Act
("interested director")). Mr. Gomez Pimienta is deemed to be an
interested director by reason of his affiliation with the Fund's
investment adviser, Impulsora del Fondo Mexico, S.A. de C.V.
+++ Valuation Committee member.
Independent Directors*
---------------------
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Term of
Office
and
Position(s) Length of Principal Occupation for
Held With the Time Past Five Years and Other Other Directorships Held by
Name, Address and Age Fund Served Directorships Director or Nominee for Director
-----------------------------------------------------------------------------------------------------------------------
Juan Gallardo Thurlow++ Chairman of Term Mr. Gallardo is Chairman Nadro, S.A. de C.V.
Monte Caucaso 915 the Board, expires of the Fund's Board of (pharmaceutical retail); Grupo
4/th/ Floor Class III 2005; Directors. Over the last Mexico, S.A. de C.V. (mining);
Col. Lomas de Chapultepec Director Director decade, he has been Director, Caterpillar Inc.
11000 Mexico, D.F. since 1985 extensively involved in (construction equipment);
Mexico the negotiation of the Intercon, S.A. de C.V.
North American Free Trade (diversifying holding company);
Age: 55 Agreement (NAFTA) among Member of the International
the United States, Canada Advisory Board of Lafarge
and Mexico, and free (French cement company); Member
trade agreements between of the International Advisory
Mexico and Israel and the Board of Textron, Inc.; Member
European Union. Mr. of the Mexican Business
Gallardo also serves as Roundtable.
Chairman of the Board of
Grupo Embotelladoras
Unidas, S.A. de C.V., a
bottling company, since
1985; and Vice Chairman
of Home Mart de Mexico,
S.A. de C.V., a retailer,
since 1995.
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4
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Term of
Office
and
Position(s) Length of Principal Occupation for
Held With the Time Past Five Years and Other Other Directorships Held by
Name, Address and Age Fund Served Directorships Director or Nominee for Director
-----------------------------------------------------------------------------------------------------------------------
Emilio Carrillo Gamboa ++ Class III Term Mr. Carrillo Gamboa Secretary, Consejo Mexicano de
Blvd. Manuel Avila Camacho Director expires served as a director of Hombres de Negocios A.C.
No. 1, Ste. 609 2005; the Fund from inception (Business Roundtable of
011009 Mexico, D.F. Director of the Fund in 1981 to Mexico); Chairman of the Board,
Mexico 1981-1987 1987. He resigned as Cementos Apasco, S.A. de C.V.
and since director in 1987 to (cement company); Director,
Age: 65 2002 become Mexico's Grupo Modelo, S.A. de C.V.
Ambassador to Canada. Mr. (beer brewing); Director,
Carrillo Gamboa was Kimberly-Clark de Mexico, S.A.
reelected as a Director de C.V. (consumer products);
of the Fund in 2002. Director, San Luis Corporacion,
S.A. de C.V. (mining and
Mr. Carrillo Gamboa is a automotive parts); Director,
prominent lawyer in Gasoductos de Chihuahua, S. de
Mexico with extensive R.L. de C.V. (public
business experience and utility-gas transportation);
has been a partner of Director; Sistemas Automotrices
Bufete Carrillo Gamboa, y de Potencia, S.A. de CV.
S.C. since 1989. He has (power equipment distribution);
also served or currently Secretary and Alternate
serves on the boards of Director, Innova, S. de R.L. de
many prestigious Mexican C.V. (DTH television);
businesses and charitable Secretary and Alternate
organizations. Director, Servicios Novasa,
S.A. (Innova
subsidiary-services and
administration); Secretary and
Alternate Director; Corporacion
de Radio y Television del Norte
de Mexico, S.A. de C.V. (Innova
subsidiary-DTH concession
holder); Corporacion
Novaimagen, S. de R.L. (Innova
subsidiary-marketing);
Corporacion Novavision, S. de
R.L. (Innova
subsidiary-personnel);
Director, Empresas ICA;
Director, Banco of Tokio
Mitsubishi (Mexico); Director,
Industrias Lubrizol; Director,
Inmobiliaria Costa Baja.
-----------------------------------------------------------------------------------------------------------------------
Claudio X. Gonzalez ++ Class II Term Mr. Gonzalez was Chairman of the Board, Chief
Lagrange 103 Director expires President of the Business Executive Officer and Director,
Piso 3 2004; Coordinating Council of Kimberly-Clark de Mexico, S.A.
Colonia Los Morales Director Mexico. He has served as de C.V. (consumer products);
11510 Mexico, D.F. since 1981 Chairman of the Board and Director, General Electric Co.;
Mexico Chief Executive Officer Director, Investment Company of
of Kimberly-Clark de America; Director, Kellogg Co.;
Age: 68 Mexico S.A. de C.V. since Director, Home Depot; Director,
1966. Mr. Gonzalez is Grupo Alfa; Director, Grupo
also on the Board of Carso; Director, Grupo Mexico;
Directors of several Director, America Movil;
prominent U.S. and Director, Grupo Inbursa;
Mexican companies, Director, Televisa; Director,
including General Banco Inbursa.
Electric Co.
-----------------------------------------------------------------------------------------------------------------------
Robert L. Knauss++ Class II Term Mr. Knauss currently Director, Equus Ltd. II
5151 San Felipe Director expires serves as Chairman of the (investments); Director,
Suite 1661 2004; Board and Principal Seitel, Inc. (oil services).
-----------------------------------------------------------------------------------------------------------------------
5
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Term of
Office
and
Position(s) Length of Principal Occupation for
Held With the Time Past Five Years and Other Other Directorships Held by
Name, Address and Age Fund Served Directorships Director or Nominee for Director
-----------------------------------------------------------------------------------------------------------------------------
Houston, TX 77056 Director Officer of Philips Services
since Corp. (industrial services)
Age: 71 1985 and is also Chairman of the
Board and Chief Executive
Officer of Baltic
International USA, Inc.
(investments). Mr. Knauss
was the former Dean and
Distinguished University
Professor of University of
Houston Law School and
was also Dean of Vanderbilt
Law School.
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* There are no other funds in the Fund Complex.
++ Audit Committee, Valuation Committee, Contract Review Committee and
Nominating and Corporate Governance Committee member.
The Fund has a standing Audit Committee, Valuation Committee, Contract
Review Committee and a Nominating and Corporate Governance Committee. The Audit
Committee, Contract Review Committee and Nominating and Corporate Governance
Committee are composed entirely of Directors who are not "interested persons" of
the Fund or the Fund's investment adviser within the meaning of the 1940 Act and
who are "independent" as defined in the New York Stock Exchange listing
standards. All Directors are members of the Valuation Committee.
The Audit Committee pre-approves and reviews both the audit and non-audit
work of the Fund's independent public accountants, submits recommendations to
the Board of Directors as to the selection of independent public accountants and
reviews compliance of the Fund with regulations of the U.S. Securities and
Exchange Commission ("SEC") and the Internal Revenue Service, and other related
matters.
The Board of Directors has adopted an Audit Charter and a Valuation Charter
for its Audit and Valuation Committees. A copy of the Fund's Audit Charter is
attached to this Proxy Statement as Exhibit A. The Audit Committee has received
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 from PricewaterhouseCoopers LLP ("PwC"), the Fund's independent
accountants, and has discussed with PwC its independence. The Audit Committee
has also reviewed and discussed the audited financial statements with Fund
management and PwC, and discussed certain matters with PwC required to be
discussed by Statement on Auditing Standards No. 61. Based on the foregoing, the
Audit Committee recommended to the Board of Directors that the Fund's audited
financial statements be included in the Fund's Annual Report to Stockholders for
the fiscal year ended October 31, 2002. The members of the Fund's Audit
Committee are Messrs. Caldwell, Gallardo, Carrillo Gamboa, Gonzales, Knauss and
Serra Puche.
The Valuation Committee oversees the implementation of the Fund's Pricing
and Valuation Procedures and the activities of the Fund's Pricing Committee. The
Board of Directors has delegated to the Valuation Committee the responsibility
of determining the fair value of the Fund's securities or other assets in
connection with "significant events," as described in the procedures adopted by
the Board of Directors. The members of the Fund's Valuation Committee are
Messrs. Gomez Pimienta, Caldwell, Gallardo, Carrillo Gamboa, Gonzales, Knauss
and Serra Puche.
The Contract Review Committee reviews and makes recommendations to the
Board of Directors with respect to entering into, renewal or amendment of the
Fund's investment management and advisory agreement, administrative services
agreement and other agreements. The members of the Fund's Contract Review
Committee are Messrs. Caldwell, Gallardo, Carrillo Gamboa, Gonzales, Knauss and
Serra Puche.
The Nominating and Corporate Governance Committee recommends nominations
for membership on the Board of Directors. It evaluates candidates'
qualifications for Board membership and, with respect to nominees for positions
as
6
independent directors, their independence from the Fund's investment adviser and
other principal service providers. It periodically reviews director compensation
and will recommend any appropriate changes to the Board as a group. This
Committee also reviews and may make recommendations to the Board relating to
those issues that pertain to the effectiveness of the Board in carrying out its
responsibilities in governing the Fund and overseeing the management of the
Fund. The Nominating and Corporate Governance Committee does not consider
candidates for the Board of Directors suggested by stockholders. The members of
the Fund's Nominating and Corporate Governance Committee are Messrs. Caldwell,
Gallardo, Carrillo Gamboa, Gonzales, Knauss and Serra Puche.
During the Fund's fiscal year ended October 31, 2002, the Board held three
(3) regular meetings, one (1) telephonic regular meeting, (1) nine (9)
telephonic special meetings, two (2) Audit Committee meetings, no (0) Valuation
Committee meetings, and two (2) Nominating and Corporate Governance Committee
meetings. Each Director then in office attended 75% or more of the aggregate
number of regular and special meetings of the Board and those Committees of
which each Director is a member.
Beneficial Ownership of Shares of the Fund
As February 6, 2003, the Fund's Directors and executive officers, as a
group, owned less than 1% of the Fund's outstanding shares of the Fund. The
information as to ownership of securities which appears below is based on
statements furnished to the Fund by its Directors and executive officers. The
information as to ownership of securities which appears below is based on
statements furnished to the Fund by its Directors and executive officers.
For the period ended December 31, 2002, the dollar range of equity
securities owned beneficially by each Director in the Fund was as follows:
Interested Director
-------------------
--------------------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of Equity
Securities in All Registered
Name of Director Dollar Range of Equity Securities in Investment Companies Overseen or to
the Fund be Overseen by Director or Nominee
in Family of Investment Companies*
--------------------------------------------------------------------------------------------------------------------
Jose Luis Gomez Pimienta Over $100,000 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Independent Directors
---------------------
--------------------------------------------------------------------------------------------------------------------
Aggregate Dollar Range of Equity
Securities in All Registered
Name of Director Dollar Range of Equity Securities in Investment Companies Overseen or to
the Fund be Overseen by Director or Nominee
in Family of Investment Companies*
--------------------------------------------------------------------------------------------------------------------
Juan Gallardo T. Over $100,000 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Philip Caldwell $50,001 - $100,000 $50,001 - $100,000
--------------------------------------------------------------------------------------------------------------------
Emilio Carrillo Gamboa $1 - $10,000 $1 - $10,000
--------------------------------------------------------------------------------------------------------------------
Claudio X. Gonzalez Over $100,000 Over $100,000
--------------------------------------------------------------------------------------------------------------------
Robert L. Knauss $10,001 - $50,000 $10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
Jaime Serra Puche $10,001 - $50,000 $10,001 - $50,000
--------------------------------------------------------------------------------------------------------------------
7
_____________
* There are no other funds in the family of investment companies.
For the period ended December 31, 2002, none of the Independent Directors
or their immediate family members owned any shares of the Adviser or in any
person (other than a registered investment company) directly or indirectly
controlling, controlled by, or under common control with the Adviser.
--------------------------------------------------------------------------------------------------------------------
Name of Director Name of Owners Company Title of Class Value of Percentage of
or Nominee and Relationships Securities Class
to Director or
Nominee
--------------------------------------------------------------------------------------------------------------------
Juan Gallardo T. None None None None None
--------------------------------------------------------------------------------------------------------------------
Philip Caldwell None None None None None
--------------------------------------------------------------------------------------------------------------------
Emilio Carrillo None None None None None
Gamboa
--------------------------------------------------------------------------------------------------------------------
Claudio X. Gonzalez None None None None None
--------------------------------------------------------------------------------------------------------------------
Robert L. Knauss None None None None None
--------------------------------------------------------------------------------------------------------------------
Jaime Serra Puche None None None None None
--------------------------------------------------------------------------------------------------------------------
Compensation of Directors
During the fiscal year ended October 31, 2002, the Fund paid each Director,
with the exception of Mr. Gomez Pimienta (who is not compensated for his
services as Director), an annual retainer of $12,000 and $2,000 per meeting
attended. The Fund also paid a $1,500 per diem fee to each Director for travel
required to attend a Board meeting and reimbursed all Directors and officers of
the Fund for out-of-pocket expenses relating to attendance at meetings. The
aggregate amount of fees paid and expenses reimbursed to the Directors and
officers for the twelve month period ended October 31, 2002 was $399,814.
The following table sets forth the aggregate compensation (not including
per diem fees and expense reimbursements) paid by the Fund to each Director
(other than Mr. Gomez Pimienta, who receives no director fees or other
compensation for services as a Director of the Fund) during the fiscal year
ended October 31, 2002, as well as the total compensation paid by the Fund to
each Director.
Pension or
Retirement
Benefits Estimated
Accrued Annual
Aggregate as Part of Benefits Total Compensation from
Compensation from Fund Upon Fund and Fund Complex
Name of Director Fund Expenses Retirement Paid to Directors*
Juan Gallardo T. $48,000 None None $48,000
Philip Caldwell $50,000 None None $50,000
Emilio Carrillo Gamboa*** $16,000 None None $16,000
Claudio X Gonzalez $50,000 None None $50,000
Robert L. Knauss $48,000 None None $48,000
Agustin Santamarina V** $28,000 None None $28,000
Jaime Serra-Puche $46,000 None None $46,000
8
Jose Luis Gomez Pimienta None None None None
* There are no other funds in the Fund Complex.
**Retired from the Board of Directors of the Fund effective [March 7, 2002].
***Elected to the Board of Directors of the Fund on March ____, 2002
The Fund has a policy that half of the annual retainer paid by the Fund to
its Directors is to be used by each Director to purchase Fund shares on the
secondary market. All Board members are in compliance with this policy.
Executive Officers of the Fund
---------------------------------------------------------------------------------------------------------------------
Position(s) Term of Office and
Held With the Length of Time
Name, Address and Age Fund erved Principal Occupation(S) During Past Five Years
---------------------------------------------------------------------------------------------------------------------
Jose Luis Gomez Pimienta President of Since 1981; Chairman of the Board and Director General of
Aristoteles 77, 3/rd/ Floor the Fund; Director since 1989 the Fund's investment adviser, Impulsora del
Col. Polanco Class II (term expires 2004) Fondo Mexico, S.A. de C.V., and a Director
11560 Mexico, D.F. Director and Member of the Executive Committee of the
Mexico Bolsa Mexicana de Valores, S.A. de C.V.
(Mexican Stock Exchange).
Age: 63
---------------------------------------------------------------------------------------------------------------------
Samuel Garcia-Cuellar Secretary Since 1981 Mr. Garcia-Cuellar is a partner of Creel,
Creel, Garcia-Cuellar y Garcia-Cuellar y Muggenburg, S.C., Mexican
Muggenburg, S.C., counsel to the Fund; Director, El Aguila
Paseo de los Tamarindos 60 Compania de Seguros, S.A. de C.V. (insurance)
Bosques de las Lomas (since 1994); Director, Mercado Mexicano de
05120 Mexico, D.F. Derivados (futures and options) (since 2001);
Mexico Director, GE Capital Bank, S.A. Institucion
de Banca Multiple, GE Capital Grupo Financiero
Age: 60 (bank) (since 2002); Director, GE Capital Grupo
Financiero (financial group) (since 2002).
---------------------------------------------------------------------------------------------------------------------
Alberto Osorio Morales Treasurer Since 2002 Mr. Osorio currently serves as Director of
Aristoteles 77, 3/rd/ Floor Finance of the Fund's investment adviser,
Col. Polanco Impulsora del Fondo Mexico, S.A. de C.V.
11560 Mexico, D.F. (formerly, From 1999 to 2002
Mexico Vice President
of Finance)
Age: 35
---------------------------------------------------------------------------------------------------------------------
Carlos H. Woodworth Ortiz Vice-President Since 2002 Mr. Woodworth has served on the Board of
Aristoteles 77, 3/rd/ Floor of Corporate Directors of the Fund's investment adviser,
Col. Polanco Governance and Impulsora del Fondo Mexico, S.A. de C.V., as
11560 Mexico, D.F. Compliance well as Deputy Director of the Adviser since
Mexico Officer 1981. Mr. Woodworth also serves as an
Alternate Director of the Bolsa Mexicana de
Age: 59 (formerly, Valores, S.A. de C.V. (Mexican Stock
Treasurer) From 1992 to 2002 Exchange).
---------------------------------------------------------------------------------------------------------------------
Eduardo Solano Arroyo Investor Since 1997 Mr. Solano has served as Director of Economic
Aristoteles 77, 3/rd/ Floor Relations Vice Research of the Fund's investment adviser,
Col. Polanco President Impulsora del Fondo Mexico, S.A. de C.V.
11560 Mexico, DF, since 1997.
Mexico
Age: 34
---------------------------------------------------------------------------------------------------------------------
Compensation of Executive Officers
9
The Fund does not pay its officers for the services they provide to the
Fund, except for those expenses incurred in connection with Fund Board or
stockholders meetings which are reimbursed by the Fund under the Fund's
Reimbursement Policy. Instead, the officers, who are also officers or employers
of the Adviser, are compensated by the Adviser.
Report of the Audit Committee; Information About the Fund's Independent Auditor
The Audit Committee reviews both the audit and non-audit work of the
Fund's independent public accountants, submits recommendations to the Board of
Directors as to the selection of independent public accountants, and reviews
compliance of the Fund with regulations of the SEC and the Internal Revenue
Service, and other related matters. The Fund adopted an Audit Committee Charter
on December 6, 1999. The Charter was amended on December 4, 2002, and is
appended to this Proxy Statement.
The members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal controls
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
the Fund's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Fund's auditors are in fact "independent."
On May 6, 2002, the Fund announced that its Board of Directors, upon
recommendation of the Board's Audit Committee, had appointed PwC as the Fund's
independent auditors, effective immediately. The Board's decision to replace
Arthur Andersen LLP as the Fund's independent auditors was made after a thorough
selection process that reviewed several accounting firms. The decision to change
independent auditors was not the result of any disagreement between the Fund and
Arthur Andersen LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. Arthur Andersen
LLP provided excellent services as independent auditors to the Fund and the Fund
valued its relationship with the firm. However, the Board of Directors felt it
was in the best interests of the Fund and its stockholders to retain PwC as
independent auditors at that time. For the last two fiscal years of the Fund,
Arthur Andersen LLP's report on the financial statements for the Fund did not
contain either an adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
In addition, for the last two fiscal years, there were no disagreements with
Arthur Andersen LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreement, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused it to make reference to the subject matter of the disagreement in
connection with its report.
The Audit Committee has received written disclosures and the letter
required by Independence Standards Board No. 1 from PwC and has discussed with
PwC its independence. The Audit Committee has also reviewed and discussed the
audited financial statements with Fund management and PwC, and discussed certain
matters with PwC addressed by Statement on Auditing Standards No. 61. Based on
the foregoing, the Audit Committee recommended to the Board of Directors that
the Fund's audited financial statements be included in the Fund's Annual Report
for the fiscal year ended October 31, 2002.
During the fiscal year ended October 31, 2002*, the Fund incurred the
following fees for services provided by PwC:
Financial Information Systems
Audit Fees Design and Implementation Fees All Other Fees
---------- ------------------------------ --------------
$85,000 None $17,000
*Appointed independent auditors of the Fund effective May 6, 2002.
The Audit Committee has considered whether the provision of the
services covered under the column "All Other Fees" is compatible with
maintaining PwC's independence.
The Board of Directors, upon recommendation of the Audit Committee, has
selected PwC as independent public accountants to examine the financial
statements of the Fund for the fiscal year ending October 31, 2002. Audit
services performed by PwC during the most recent fiscal year included
examination of the financial statements of the Fund and the review of filings
with the SEC. PwC will prepare the Fund's tax returns for the fiscal year ending
October 31, 2002.
10
The Fund knows of no direct or indirect interest of such firm in the
Fund. A representative of PwC is expected to be present at the Meeting and will
have the opportunity to respond to questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES TO THE FUND'S BOARD OF DIRECTORS.
PROPOSAL 2: AMENDMENT OF INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
TO AMEND THE MANAGEMENT FEE RATE SCHEDULE TO INCREASE THE FEES PAID ONLY AT
CERTAIN ASSET LEVELS
About the Investment Advisory and Management Agreement and the Fund's Adviser
The Board of Directors of the Fund is proposing that stockholders
approve amendments to the Investment Advisory and Management Agreement between
the Fund and Impulsora del Fondo Mexico, S.A. de C.V. (the "Adviser"), the
effect of which would be to change the management fee rate schedule to increase
the fee payable only at certain asset levels ("breakpoints"). Stockholders also
are being asked to approve the Management Agreement as so amended. The factors
considered by the Board of Directors, including the Directors who are not
"interested persons" (as defined by the 1940 Act) of the Fund or the Adviser, in
determining the reasonableness and fairness of the proposed management fee
increase are described below under "About the Board's Support for this
Proposal."
The Adviser has served as the Fund's investment adviser since the
Fund's organization in 1981. The Adviser is a registered investment adviser
under the Investment Advisers Act of 1940, as amended, and is located at 77
Aristoteles Street, 3rd Floor, Col. Polanco, 11560 Mexico D.F., Mexico. The
Adviser provides investment advisory and management services pursuant to an
Amended and Restated Investment Advisory and Management Agreement dated December
1, 1990, as amended and restated June 16, 1998 (the "Management Agreement"). The
Management Agreement was last submitted to stockholders for approval in 1990. In
June 2002, the Board unanimously approved the renewal of the Management
Agreement for a one-year term.
The management fee rate schedule for the Fund has not changed since
December 1990, when stockholders approved the Management Fee rate (as defined
below), although the dollar amount of the Management Fee paid by the Fund has
changed over time as the net assets of the Fund have increased or decreased. As
compensation for its management services, the Adviser currently is paid a fee,
computed at the end of each calendar month based on the average daily value of
the net assets of the Fund translated into dollars at an annual rate of 0.85% of
average daily net assets up to $200 million, 0.70% of such assets between $200
million and $400 million and 0.60% of such assets in excess of $400 million (the
"Management Fee"). The Management Fee is among the lowest fee rates for world
equity closed-end funds listed on the New York Stock Exchange.
The Adviser's proposal to increase the Management Fee only at certain
breakpoint levels as set forth in the proposed Management Agreement was
discussed at a meeting of the Board of Directors held on June 18, 2002 and
considered at a meeting of the Board of Directors held on November 12, 2002, at
each of which a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Adviser was present, and at a
meeting of the Contract Review Committee of the Fund (consisting of all the
Directors who are not "interested persons" of the Fund or the Adviser) held on
November 12, 2002. Independent legal counsel to the Fund and the Independent
Directors advised the Directors on the nature of the matters to be considered
and the standards to be used by the Board of Directors and the Independent
Directors in reaching their decision. Such consideration was based upon
financial, statistical and other information supplied to the Directors by the
Adviser and on the Directors' general knowledge of the Adviser and the services
it provides to the Fund. On November 12, 2002, the Directors unanimously
concluded that the proposed amendments to the Management Agreement were fair and
reasonable and justified by business considerations and decided to submit the
Management Agreement as amended to stockholders for their approval.
Terms of the Management Agreement other than Fees
Under the Management Agreement, the Adviser, subject to the control of
the Board of Directors and in accordance with the objectives, policies and
principles of the Fund set forth in the Fund's registration statement and the
requirements of the 1940 Act and other applicable law, manages the affairs of
the Fund. In this regard, it is the responsibility of the Adviser to make
investment decisions on behalf of the Fund, to make available to the Fund any
necessary research and statistical data in connection therewith, and to
supervise the acquisition and disposition of investment for the Fund, including
the selection of the brokers or dealers to carry out portfolio transactions for
the Fund.
The Adviser also pays all salaries, fees, and expenses of the Fund's
Directors and officers who are employees, officers or directors of the Adviser,
except for those expenses incurred in connection with Fund Board or stockholder
meetings which are reimbursed by the Fund under the Fund's Reimbursement Policy.
The Fund bears all of its other expenses including: fees and
11
expenses of the Fund's Directors who are not employees, officers of directors of
the Adviser; taxes and governmental fees; brokerage commissions and other
expense incurred in acquiring or disposing of the Fund's portfolio securities;
expenses of preparing stock certificates and other expenses in connection with
the issuance, offering, distribution, sale or underwriting of securities issues
by the Fund; expenses of registering and qualifying the Fund's shares for sale
with the SEC and in various state and foreign jurisdictions; auditing,
accounting, insurance and legal costs; custodian, dividend disbursing and
transfer agent cost; expenses of obtaining and maintaining a stock exchange
listing of the Fund's shares; and the expenses of stockholders' meetings and of
the preparation and distribution of reports to stockholders. The Management
Agreement does not contain any effective expense limitation provision. The
Management Agreement continues in effect until June 17, 2003 (April 2, 2005 if
the proposed amendments to the Management Agreement are approved) and from year
to year thereafter if such continuance is approved in the manner required by the
1940 Act. The Management Agreement may be terminated at any time by the Fund,
without payment of any penalty, upon vote a majority of the Fund's Board of
Directors or a majority of outstanding voting securities of the Fund, or by the
Adviser, on sixty (60) days' written notice to the other party. The Management
Agreement will terminate automatically in the event of its assignment.
About Adopting a Change to the Management Fee Schedule
The Fund seeks your approval to amend the Management Agreement to
change the management fee rate schedule to increase the fee payable only at
certain breakpoints ("Proposed Management Fee"). A copy of the Management
Agreement reflecting the proposed amendment is set forth as Exhibit B to this
Proxy Statement.
The Management Fee has not been changed since December 1, 1990 when
stockholders approved the current Management Fee, although the dollar amount of
the Management Fee paid by the Fund has changed over time as the net assets of
the Fund have increased or decreased. As a result of the decline in Fund assets
following the Fund's implementation of a periodic in-kind repurchase policy, the
fees received by the Adviser have significantly declined. The purpose of the
periodic repurchase offer policy is to provide stockholders an alternative
source of liquidity for their Fund shares in addition to cash sales of Fund
shares on the New York Stock Exchange and to enhance stockholder value. The
periodic repurchase offers provide stockholders with the opportunity to redeem
their shares in-kind (i.e., in exchange for portfolio securities and cash held
by the Fund) in order to realize close to net asset value for their shares. The
periodic in-kind repurchase offer policy also is intended to insulate
stockholders who choose not to participate from bearing any portion of the
unrealized capital gains of the Fund which would be realized if the Fund sold
the portfolio securities in order to satisfy repurchase requests in cash.
The Proposal would increase the Management Fee paid by the Fund to
1.00% of average daily net assets up to $200 million and 0.90% of such assets in
excess of $200 million up to and including $400 million ("Proposed Management
Fee"). The Management Fee will remain at its current rate of 0.60% for the
Fund's net assets in excess of $400 million.
Since 1990, and prior to the implementation of the Fund's policy of
making periodic in-kind share repurchases, the Adviser's management fees were
calculated based on assets in excess of $400 million, which allowed the Adviser
to provide a high quality of service and to provide reasonable compensation to
its staff. Recently, the Fund's assets have declined significantly as a result
of each of the Fund's June 2002, October 2002, and January 2003 repurchase
offers as a result of which the Fund's assets declined 56%, 20.2%, and 5%
respectively. It is likely the Fund's assets will continue to decline as a
result of additional periodic repurchase offers. Despite a recent internal
restructuring of the Adviser, including a reduction in compensation paid to its
employees, the Adviser has advised the Board that its viability has been
compromised by the decline in fees payable under the Management Agreement. The
Fund is the Adviser's only investment advisory client. The Board of Directors
believes that it is appropriate to consider an increase of the Management Fee
only at asset levels below $400 million. Despite this proposed increase, the
Board of Directors believes that the Fund's total expense ratio will remain
competitive compared with other closed-end funds whose shares are listed for
trading on the New York Stock Exchange.
The net assets of the Fund as of October 31, 2002 were approximately
$308.76 million. The total amount paid by the Fund to the Adviser under the
Management Agreement for the fiscal year ended October 31, 2002 was $5,350.434.
If the Proposed Management Fee had been in effect, the Fund would have paid
approximately $4,650,434 assuming the same average net assets.
The tables below show (i) the aggregate amount of advisory fees paid by
the Fund pursuant to the Management Fee during the fiscal year ended October 31,
2002 and as of January 31, 2003, respectively; (ii) the aggregate amount of
advisory fees that would have been paid if the Proposed Management Fee had been
in effect during the fiscal year ended October 31, 2002 and as of January 31,
2003 based on the average net assets of the Fund during the fiscal year ended
October 31, 2002 and as of January 31, 2003, respectively; (iii) the dollar
difference between the two amounts; and (iv) the percentage difference between
the two amounts.
12
----------------------------------------------------------------------------------------------------------------------
As of October 31, 2002
----------------------------------------------------------------------------------------------------------------------
Aggregate Fees under Current Aggregate Fees under Difference Between Current Percentage Difference
Management Fee Proposed Management Fee Management Fee and Between Current Management
Proposed Management Fee Fee and Proposed
Management Fee
----------------------------------------------------------------------------------------------------------------------
$4,650,434 $5,350,434 $700,000 15.05%
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
As of January 31, 2003*
----------------------------------------------------------------------------------------------------------------------
Aggregate Fees under Current Aggregate Fees under Difference Between Current Percentage Difference
Management Fee Proposed Management Fee Management Fee and Between Current Management
Proposed Management Fee Fee and Proposed
Management Fee
----------------------------------------------------------------------------------------------------------------------
$------ $-------- $--------- ------%
----------------------------------------------------------------------------------------------------------------------
* The net assets of the Fund as of January 31, 2003 were _______.
Fee and Expense Comparison. The table below compares the annual fees
and expenses that an investor would pay under the current Management Fee and
expenses that you would pay under the Proposed Management Fee. The "current"
information reflects the Fund's annual operating expenses for the fiscal year
ended October 31, 2002, calculated as a percentage of the Fund's net assets.
----------------------------------------------------------------------------
Annual Fund Operating Expenses Current Proposed
----------------------------------------------------------------------------
Investment Advisory Fees 0.70% 0.81%
----------------------------------------------------------------------------
Other Expenses 0.76% 0.78%
----------------------------------------------------------------------------
Total Annual Expenses 1.46% 1.59%
----------------------------------------------------------------------------
Example. The following example is intended to help you compare the cost
of investing in the Fund under the current Management Fee and the cost of
investing in the Fund under the Proposed Management Fee.
This example assumes that you invest $10,000 in the Fund for the time
periods indicated. The example also assumes that your investment has a 5% return
each year and the Fund's operating expenses remain the same. Your actual costs
may be higher or lower than those set forth below.
-----------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------
Current Management Fee $153 $500 $905 $2,228
-----------------------------------------------------------------------------------------------------
Proposed Management Fee $167 $543 $983 $2,412
-----------------------------------------------------------------------------------------------------
About the Board's Support for this Proposal
This Proposal is unanimously supported by the Fund's Board of
Directors. During their deliberations the Board was advised by independent legal
counsel and received substantial information about the Adviser's performance and
the fee that is the subject of this Proposal. The Board was given the
opportunity to ask questions and request additional information from management.
13
In the course of its deliberations, the Board of Directors considered,
among other things, (a) the nature and quality of the services provided by the
Adviser; (b) the Fund's performance under the Adviser's management; (c) the
fairness of the compensation in light of the services provided; (d) the
personnel, operations, financial condition, and investment management
capabilities of the Adviser; (e) the impact of the Fund's in-kind repurchase
offer policy; (f) the Board's approval of a strategic decision to invest
significant portions of the Fund's resources in attractive small- and
medium-sized Mexican companies not easily available abroad; (g) the need to
provide adequate resources to the Adviser to implement the Fund's new portfolio
strategy; (h) the overall profitability of the Management Agreement to the
Adviser; and (i) the impact of the Proposed Management Fee on stockholders.
While no one factor was controlling, the Board concluded that the
Proposed Management Fee will benefit stockholders by permitting the Adviser to
continue to provide the quality of service to the Fund it has in the past and
compensate its staff at competitive levels. The Board of Directors noted that
the Fund's decrease in assets as a result of the Fund's periodic repurchase
offers conducted in June 2002, October 2002, and January 2003 significantly
changed the profitability of the Management Agreement to the Adviser, and would
continue to do so as the Fund continued to make periodic repurchase offers under
the Fund's in-kind periodic repurchase offer policy. The Board of Directors
considered the impact of the Proposed Management Fee on the overall expenses of
the Fund and concluded that the total expense ratio of the Fund would continue
to be competitive in the industry. The Board voted unanimously to approve the
Proposed Management Fee finding that it is fair and reasonable to all
stockholders.
More About the Adviser
The Adviser is a Mexican corporation. As of October 31, 2002, the
president and chief executive officer is Jose Luis Gomez Pimienta. Mr. Gomez
Pimienta is also a Director of the Fund. The directors of the Adviser are: Jose
Luis Gomez Pimienta, Chairman and Chief Executive Officer, Impulsora del Fondo
Mexico, S.A. de C.V., Aristoteles 77-3rd Floor, Col. Polanco, 11560 Mexico,
D.F., Mexico; Enrique Trigueros-Legarreta, Chairman's Advisor, Casa de Bolsa
BBV-Probursa, Montes Urales 424-3rd Floor, Col. Lomas de Chapultepec, 11000
Mexico, D.F., Mexico; Ernesto Ortega-Arellano, Director, Capital Markets,
Inversora Bursatil, S.A. de C.V., Av. de las Palmas 736, 11000 Mexico, D.F.,
Mexico; Edgardo Cantu Delgado, Investment Funds and Money Market Director,
Vector Casa de Bolsa, S.A. de CV., Presidente Masarik 29-1st Floor, 11550
Mexico, D.F., Mexico; Alfredo Marquez, Director General, ABN AMRO Securities
(Mexico), S.A. de C.V. Casa de Bolsa, Paseo de la Reforma #600-320, Col. Sta.
Fe, 01210 Mexico, D.F., Mexico; Gabriel Kuri Labarthe, Director General, Casa de
Bolsa Santander Mexicano, Reforma 213-9th Floor, 06500 Mexico, D.F., Mexico; and
Jose Antonio Orvananos, Deputy Director, Casa de Bolsa Invertat, S.A. de C.V.,
Bosque de Ciruelos 120, 11700 Mexico, D.F., Mexico. The officers of the Adviser
are: Carlos H. Woodworth Ortiz, Deputy Director, Impulsora del Fondo Mexico,
S.A. de C.V., Aristoteles 77-3rd Floor, Col. Polanco, 11560 Mexico, D.F.,
Mexico; Alberto Osorio Morales, Director of Finance, Impulsora del Fondo Mexico,
S.A. de C.V., Aristoteles 77-3rd Floor, Col. Polanco, 11560 Mexico, D.F.; and
Eduardo Solano Arroyo, Director of Economic Research, Impulsora del Fondo
Mexico, S.A. de CV., Aristoteles 77-3rd Floor, Col. Polanco, 11560 Mexico, D.F.,
Mexico. Messrs. Gomez Pimienta, Woodworth, Osorio and Solano are also officers
of the fund. Mr. Gomez Pimienta, Aristoteles 77-3rd Floor, Col. Polanco, 11560
Mexico D.F., Mexico, also owns greater than ten percent of the Adviser's equity
interests.
The Adviser also provides administrative services to the Fund pursuant
to an Amended and Restated Administrative Services Agreement dated June 18, 2002
including assisting the Fund with preparation of financial statements and
regulatory filings, calculation of the Fund's net asset value, repurchase offer
services, and maintenance of the Fund's web site. For these services, the
Adviser is paid a monthly fee of 0.07% of the Fund's average daily net assets
with a minimum fee of $350,000, and a fee for services rendered for each
repurchase offer conducted by the Fund. The Adviser was paid $586,441 pursuant
to this contract during fiscal 2002.
The Fund paid $11,407 or 1.44% of total brokerage commissions paid by
the Fund to an affiliated broker. The affiliated broker is Inversora Bursatil,
S.A. de CV. and is affiliated to the Adviser by virtue of one of the Fund's
directors being a director of the broker.
Effect of Approval
If this Proposal is approved, the Proposed Management Fee will take
effect on the next day following approval by stockholders of the Fund. If the
Proposal is not approved, the current Management Fee will remain in effect as
the advisory fee paid by the Fund.
Percentage of Votes Required for Approval
Approval of the amendment to the Management Fee incorporating the
Proposed Management Fee requires the "yes" vote of a majority of the Fund's
outstanding voting securities as provided in the 1940 Act. For this purpose,
this means the "yes" vote of the lesser of (a) more than 50% of the outstanding
shares of the Fund, or (b) 67% or more of the shares present at the
14
Meeting, if more than 50% of the outstanding shares are present at the Meeting
in person or by proxy. Because abstentions and broker non-votes are treated as
shares present but not voting, any abstentions and broker non-votes will have
the effect of votes against this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
AMENDMENT OF THE FUND'S INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT TO INCLUDE
THE PROPOSED MANAGEMENT FEE.
OTHER MATTERS
The Fund knows of no other matters which are to brought before the
Meeting. However, if any other matters come before the Meeting, it is intended
that the persons named in the enclosed form of Proxy, or their substitutes, will
vote the Proxy in accordance with their discretion on such matters. The persons
named in the form of Proxy, or their substitutes, will have discretionary
authority to vote on any stockholder proposal properly presented at the meeting.
ADDITIONAL INFORMATION
Investment Advisory and Administrative Services
The Adviser and Administrator. Impulsora del Fondo Mexico, S.A. de C.V.
(the "Adviser"), 77 Aristoteles Street, 3rd Floor, Polanco, 11560 Mexico D.F.,
Mexico, has served as the investment adviser of the Fund from the time the Fund
was established in 1981. Pursuant to the Investment Advisory and Management
Agreement between the Fund and the Adviser, the Adviser receives an advisory fee
at the rate of 0.85% of the Fund's average daily net assets up to $200 million,
0.70% of such assets between $200 million and $400 million, and 0.60% of such
assets in excess of $400 million. For the fiscal year ended October 31, 2002,
total advisory fees paid by the Fund to the Adviser aggregated $4,650,434 based
on average net assets for the fiscal year of approximately $660 million. The
Adviser is a Mexican corporation incorporated in 1980.
Pursuant to an Administrative Services Agreement, effective April 1,
1994, which was amended and restated as of June 30, 2001, the Adviser also
provides certain administrative services to the Fund which were previously
performed by the Fund's Trustee, including the determination and publication of
the net asset value of the Fund, the provision of assistance to the Fund to
enable the Fund to maintain its books and records in accordance with applicable
United States and Mexican law and the provision of assistance to the Fund's
auditors in the preparation and filing of tax reports and returns. The Fund pays
the Adviser an annual fee of 0.07% of average daily net assets of the Fund as
compensation for services provided under the Administrative Services Agreement
with a minimum of $350,000, and a fee for services rendered for each repurchase
offer conducted by the Fund.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
Section 30(h) of the 1940 Act, as applied to the Fund, require the Fund's
officers and Directors, Adviser, affiliates of the Adviser, and persons who
beneficially own more than ten percent of a registered class of the Fund's
securities ("Reporting Persons"), to file reports of ownership of the Fund's
securities and changes in such ownership with the SEC and the New York Stock
Exchange. Reporting Persons are also required by such regulations to furnish the
Fund with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
and written representations of certain Reporting Persons, the Fund believes that
during fiscal year 2002, its Reporting Persons complied with all applicable
filing requirements.
Corporate Governance
The Fund is a Maryland corporation subject to the provisions of the
Maryland General Corporation Law. The Fund's day-to-day operations and the
requirements as to the place and time, conduct, and voting, at a meeting of the
stockholders are governed by the Fund's charter and bylaws, the provisions of
the Massachusetts General Corporation Law, and the provisions of the 1940 Act.
Any stockholder who would like a copy of the Fund's charter or bylaws may obtain
a copy from the SEC (www.publicinfo@sec.gov) or the Fund.
SOLICITATION OF PROXIES; EXPENSES
The solicitation of proxies will be primarily by mail. In order to
obtain the necessary quorum and stockholder participation at the Meeting,
supplementary solicitation may be made by mail, telephone, telegraph, or
personal interview by Directors, officers or agents of the Fund.
15
The expense of preparation, printing and mailing of the enclosed form
of proxy and accompanying Notice and Proxy Statement will be borne by the Fund.
The Fund will reimburse banks, brokers and others for their reasonable expenses
in forwarding proxy solicitation material to the beneficial owners of the shares
of the Fund. Morrow & Co., Inc. has been engaged by the Fund to assist in the
distribution, tabulation and solicitation of proxies. The anticipated cost of
Morrow & Co., Inc.'s services is $20,000 plus out-of-pocket expenses.
VOTE REQUIRED
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Fund is required to constitute a quorum at the
Meeting. Election of Directors (Proposal 1) will require the approval of the
majority of votes validly cast at the Meeting. The adoption of an amendment to
the Fund's investment advisory and management contract approving a fee increase
at certain assets levels (Proposal 2) will require the approval of the lesser
of: (i) 67% of the Fund's outstanding shares present at a meeting at which
holders of more than 50% of the outstanding shares are present in person or by
proxy; or (ii) more than 50% of the Fund's outstanding shares.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal at the 2004 Annual
Meeting of Stockholders of the Fund and desires to have the proposal included in
the Fund's Proxy Statement and form of proxy for that meeting, the stockholder
must deliver the proposal to the offices of the Fund by October 17, 2003 for
consideration by the Fund.
Stockholders wishing to present proposals at the 2004 Annual Meeting of
Stockholders of the Fund not to be included in the Fund's proxy materials should
send written notice to the Secretary of the Fund of such proposals, which notice
should be received by the Secretary of the Fund by January 4, 2004 but no
earlier than December 5, 2003 in the form prescribed in the Fund's bylaws.
STOCKHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY CARD AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
By Order of the Board of Directors,
Samuel Garcia Cuellar
Secretary
Dated: February __, 2003
16
EXHIBIT A
THE MEXICO FUND, INC.
AUDIT COMMITTEE
Audit Charter
Mission
The mission of the Audit Committee (the "Committee") of the Mexico Fund,
Inc. (the "Fund") is to oversee the Fund's accounting and financial reporting
policies and practices, its internal controls and, as appropriate, the internal
controls of certain service providers, and to oversee the quality and
objectivity of the Fund's financial statements and the independent audit
thereof. The Committee will also report to the Board of Directors (the "Board"),
if necessary, any relationships between the auditor and the Fund, or any other
relationships, which come to the Committee's attention that may adversely affect
the independence of the auditor.
The function of the Committee is to provide oversight; it is the
responsibility of the Fund and the Fund's investment adviser to maintain
appropriate systems for accounting and internal control, and it is the
responsibility of the Fund's independent auditors to plan and carry out a proper
audit.
The independent auditors are directly accountable to the Committee.
Committee Membership
The Committee shall be composed of at least three members. Each member must
have been determined not to be an "interested person" (as that term is defined
in Section 2(a)(19) of the Investment Company Act of 1940, as amended ("1940
Act")) of the Fund (an "Independent Director") and, in addition, each member
shall have the additional qualifications indicated below. The President of the
Fund, although not a member of the Committee, will nonetheless be expected to
have a significant role in assisting the Committee to discharge its
responsibilities, including ensuring adequate access to, and support from, the
staff of the Fund's investment adviser, Impulsora del Fondo Mexico.
Qualifications of Committee Members
1. Members of the Committee may not be officers of the Fund and should be free
of any relationships that would interfere with the exercise of independent
judgment. A director with any of the following relationships will not be
considered independent for this purpose:
A. Employee. A director who is or has been an employee (including
non-employee executive officers) of the Fund or any of its affiliates
may not serve on the Committee until three years following the
termination of his or her employment. An affiliate includes a
subsidiary, sibling company, predecessor, parent company, or former
parent company.
B. Business Relationship. A director (i) who is a partner, controlling
shareholder, or executive officer of an organization that has a
business relationship with the Fund, or (ii) who has a direct business
relationship with the Fund (e.g., a consultant) may serve on the
Committee only if the Fund's Board determines in its business judgment
that the relationship does not interfere with the director's exercise
of independent judgment. In making a determination regarding the
independence of a director pursuant to this paragraph, the Board will
consider, among other things, the materiality of the relationship to
the Fund, to the director, and, if applicable, to the organization
with which the director is affiliated.
"Business relationships" can include commercial, industrial,
banking, consulting, legal, accounting and other relationships. A
director can have this relationship directly with the Fund, or the
director can be a partner, officer or employee of an organization that
has such a relationship. The director may serve on the Committee
without the above-referenced Board determination after three years
following the termination of, as applicable, either (1) the
relationship between the organization with which the director is
affiliated and the Fund, (2) the relationship between the director and
his or her partnership status, shareholder interest or executive
officer position, or (3) the direct business relationship between the
director and the Fund.
A-1
C. Cross Compensation Committee Link. A director who is employed as an
executive of another corporation where any of the Fund's executives
serves on that corporation's compensation committee may not serve on
the Committee.
D. Immediate Family. A director who is an immediate family member of an
individual who is an executive officer of the Fund or any of its
affiliates cannot serve on the Committee until three years following
the termination of such employment relationship. An immediate family
member includes a person's spouse, parents, children, siblings,
mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than employees) who shares such
person's home.
Notwithstanding the requirements of Parts A through D above, one
director who is no longer an employee or who is an immediate family member
of a former executive officer of the Fund or its affiliates, but is not
considered independent pursuant to these provisions due to the three-year
restriction period, may be appointed, under exceptional and limited
circumstances, to the Committee if the Fund's Board determines in its
business judgment that membership on the Committee by the individual is
required in the best interests of the Fund and its shareholders, and the
Fund discloses, in the next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination.
2. Each member of the Committee must be financially literate, or become
financially literate within a reasonable period of time after his or her
appointment to the Committee, as such qualification is interpreted by the
Fund's Board in its business judgment. At least one member of the Committee
must have accounting or related financial experience, as the Fund's Board
interprets such qualification in its business judgment.
3. Unless exempted by order of the SEC, each member of the Committee may not,
other than in his or her capacity as a member of the Committee, the Board,
or any other committee of the Board accept any consulting, advisory, or
other compensatory fee from the Fund.
4. If at least one member of the Committee is not a "financial expert" (as
that term is defined in the rules and regulations of the SEC), the Fund's
periodic reports shall disclose the reason why.
Duties and Powers
To carry out its mission, the Committee shall, to the extent it deems
appropriate, carry out the following functions:
1. To recommend annually to the Board the selection, retention or termination
of independent auditors and, in connection therewith, to evaluate the
independence of the auditors, including whether the auditors provide any
consulting, auditing or tax services to the investment adviser, and to
receive the auditors' specific representations as to their independence,
delineating all relationships between the auditor and the Fund, consistent
with Independence Standards Board ("ISB") Standard No. 1./1/ The Committee
is responsible for actively engaging in a dialogue with the auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the auditor and for taking, or recommending
that the full Board take, appropriate action to oversee the independence of
the outside auditor;
2. To review in advance, and consider approval of, any and all proposals by
management of the Fund or the investment adviser that the Fund, the
investment adviser, or their affiliated persons, employ the independent
auditor to render "permissible non-audit services"/2/ to the Fund and to
consider whether such services are consistent with the independent
_________________________
/1/ ISB Standard No. 1 requires the auditor to annually: (1) disclose to the
Committee, in writing, all relationships between the auditor and its
related entities and the Fund and its related entities that in the
auditor's professional judgment may reasonably be thought to bear on
independence; (2) confirm in the letter that, in its professional judgment,
it is independent of the Fund within the meaning of the Securities Acts
administered by the SEC; and (3) discuss the auditor's independence with
the audit committee.
/2/ "Permissible non-audit services" include any professional services,
including tax services, provided to the Fund by the independent auditor,
other than those provided to the Fund in connection with an audit or a
review of the financial statements of the Fund. Permissible non-audit
services may not include: (i) bookkeeping or other services related to the
accounting records or financial statements of the Fund; (ii) financial
information systems design and implementation; (iii) appraisal or valuation
services, fairness opinions or contribution-in-kind reports; (iv) actuarial
services; (v) internal audit outsourcing services; (vi) management
functions or human resources; (vii) broker or dealer, investment adviser or
investment banking services; (viii) legal services and expert services
unrelated to the audit; and (ix) any other service the Public Company
Accounting Oversight Board determines, by regulation, is impermissible.
A-2
auditor's independence./3/ The Committee may delegate to one or more of its
members ("Delegates") authority to pre-approve permissible non-audit
services to be provided to the Fund. Any pre-approval determination of a
Delegate shall be presented to the full Committee at its next meeting. The
Committee shall communicate any pre-approval made by it or a Delegate to
the Fund's investment adviser, who will ensure that the appropriate
disclosure is made in the Fund's periodic reports required by Section 13(a)
of the Securities Exchange Act of 1934, as amended, and other documents as
required under the federal securities laws;
3. To recommend new independent auditors, should it prove necessary, subject
to ratification by the Board and shareholder approval, if required;
4. To review, in advance and in consultation with the independent auditor, the
staffing of the audit of the Fund's financial statements and obtain from
the independent auditors a written representation that they have appointed
a lead auditor and/or review partner who has not acted in such capacity for
the Fund in each of the Fund's previous five fiscal years;
5. To meet with the Fund's independent auditors, including private meetings,
as necessary (i) to review the arrangements for and scope of the annual
audit and any special audits, and the fees proposed to be charged in
connection with such services, (ii) to discuss any matters of concern
relating to the Fund's financial statements, including any adjustments to
such statements recommended by the auditors, or other results of said
audit(s), including matters required to be discussed by the Statements on
Auditing Standards ("SAS") No. 61,/4/ (iii) to consider the auditors'
comments with respect to the Fund's financial policies, procedures and
internal accounting controls and management's responses thereto, (iv) to
review the form of opinion the auditors propose to render to the Board and
shareholders, and (v) to review the performance of the auditor;
6. To consider the effect upon the Fund of any changes in accounting
principles or practices proposed by management or the auditors;
7. To consider, in consultation with the independent auditor, (i) material
questions of choice with respect to appropriate accounting principles and
practices to be used in the preparation of the financial statements of the
Fund and the effect upon the Fund of any proposed changes in accounting
principles or practices, (ii) all critical accounting policies and
practices to be used; (iii) all alternative treatments of financial
information within generally accepted accounting principles that have been
discussed with management officials of the Fund, the ramifications of the
use of such alternative disclosures and treatments, and the treatment
preferred by the independent auditors; (iv) reasons for major year-to-year
variations in financial statements; (v) reports of any significant
accounting accruals, reserves, estimates made by management, and provisions
for contingent liabilities; and (vi) any other material written
communications between the independent auditor and management, such as any
management letter or schedule of unadjusted differences.
8. To review the fees charged by the auditors for audit and permissible
non-audit services;
9. To review the Fund's system of internal controls, including (i) the
security of tangible and intangible Fund assets and the security of
computer systems and facilities; (ii) instances of employee defalcation and
violations of the Code of Ethics and other Fund policies and procedures;
and (iii) reports from Fund legal counsel with respect to compliance with
laws and regulations, significant litigation, and possible impact on
financial results;
__________
/3/ Pre-approval by the Committee of any permissible non-audit services is not
required so long as: (i) the aggregate amount of all such permissible
non-audit services provided to the Fund constitutes not more than 5% of the
total amount of revenues paid by the Fund to its auditor during the fiscal
year in which the permissible non-audit services are provided; (ii) the
permissible non-audit services were not recognized by the Fund at the time
of the engagement to be non-audit services; and (iii) such services are
promptly brought to the attention of the Committee and approved by the
Committee or its Delegate(s) prior to the completion of the audit.
/4/ SAS 61 requires independent auditors to communicate certain matters related
to the conduct of an audit to those who have responsibility for oversight
of the financial reporting process, specifically the audit committee. Among
the matters to be communicated to the audit committee are: (1) methods used
to account for significant unusual transactions; (2) the effect of
significant accounting policies in controversial or emerging areas for
which there is a lack of authoritative guidance or consensus; (3) the
process used by management in formulating particularly sensitive accounting
estimates and the basis for the auditor's conclusions regarding the
reasonableness of those estimates; and (4) disagreements with management
over the application of accounting principles, the basis for management's
accounting estimates, and the disclosures in the financial statements.
A-3
10. To establish rules and procedures necessary for the Committee to fulfill
its responsibilities and conduct its business;
11. To investigate improprieties or suspected improprieties in Fund operations,
as they are presented to the Committee or brought to the attention of the
Committee;
12. To review the Fund's tax compliance and status, including the status of the
Fund's position relative to tax audits and significant issues disputed by
tax authorities;
13. To investigate matters brought to its attention within the scope of its
duties;
14. To develop, establish and periodically review procedures for: (i) the
receipt, retention and treatment of complaints received by the Fund from
any source regarding accounting, internal accounting controls, or auditing
matters; and (ii) the confidential, anonymous submission by employees of
the Fund or its service providers of concerns regarding questionable
accounting or auditing matters related to the Fund;
15. To assure that all its actions are recorded in minutes of its meetings and
maintained with the Fund's records; and
16. 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
Committee may deem necessary or appropriate.
Other Powers and Responsibilities
1. The Committee normally shall meet in person twice yearly, in June and
December, prior to the meetings of the full Board, and may meet at such
other time or times as the Committee or Board may determine appropriate or
necessary, and is empowered to hold special meetings as circumstances
require.
2. Each December, the Committee shall make a report indicating whether the
Committee (i) reviewed and discussed the financial statements with
management; (ii) discussed the matters required by SAS 61, as modified or
supplemented; and (iii) received from the auditors the letter and written
disclosure required by ISB Standard No. 1, and discussed with the auditors
their independence. The Committee's report should also indicate whether the
Committee, based on its review and its discussions with management and the
auditors, recommends to the Board that the financial statements be included
in the Fund's annual report for the last fiscal year.
3. The Fund's officers shall provide, or arrange to provide, such information,
data and service as the Committee may request. The Committee shall conduct
interviews or discussions as it deems appropriate with personnel of the
Fund, and/or others whose views would be considered helpful to the
Committee. The Committee may ask management and representatives of the
service providers to attend meetings as necessary.
4. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including authority to utilize Fund counsel
and to retain experts or other persons with specific competence at the
expense of the Fund.
5. The Committee shall review this Charter at least annually and recommend any
changes to the full Board of Directors.
December 4, 2002
A-4
EXHIBIT B
THE MEXICO FUND, INC.
AMENDED INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Investment Advisory and Management Agreement dated _________, 2003,
("Agreement") between THE MEXICO FUND, INC., a Maryland corporation (the
"Corporation"), and IMPULSORA DEL FONDO MEXICO, S.A. de C.V., a Mexican
corporation having its principal office in Mexico City, Mexico (the "Adviser").
WHEREAS, the Corporation is registered with the United States Securities
and Exchange Commission ("SEC") as a closed-end, non-diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the Adviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Corporation's investment objective is to invest and reinvest
its assets in Mexican securities; and
WHEREAS, the Corporation desires to retain the Adviser to furnish
investment advisory and management services for the Corporation and the Adviser
is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties as follows:
1. Appointment of the Adviser. The Corporation appoints the Adviser to
act as investment adviser to the Corporation for the period and on the terms set
forth in this Agreement. The Adviser accepts such appointment and agrees to
furnish the services herein set forth for the compensation provided.
2. Investment Advisory and Management Services. The Adviser undertakes
and agrees:
(a) To make investment decisions on behalf of the Corporation, to
make available to the Corporation any necessary research and statistical data in
connection therewith, and to supervise the acquisition and disposition of
investments for the Corporation, including the selection of the brokers or
dealers to carry out portfolio transactions for the Corporation;
(b) To comply with any and all provisions of the 1940 Act and the
Advisers Act, and all provisions of any rules, regulations and orders of the SEC
which are now or may, from time to time, be applicable to the Adviser and to its
directors, officers, employees and interested persons (as such term is defined
in the 1940 Act), and to comply with any and all provisions of the Mexican
securities laws, as well as with any rules, regulations and orders promulgated
thereunder which are now or may, from time to time, be applicable to the Adviser
and to its directors, officers and employees; and
(c) To assist the Corporation in qualifying as a regulated investment
company under the Internal Revenue Code and any and all applicable regulations
of the Internal Revenue Service promulgated thereunder.
3. Compensation.
(a) As compensation for the services rendered and the expenses borne
by the Adviser pursuant to this Agreement, the Corporation agrees to pay to the
Adviser a fee, computed at the end of each calendar month on the basis of the
average daily value of the net assets of the Corporation (as translated into
dollars) for such month, at the annual rate of 1.00% of average daily net assets
up to and including $200 million, 0.90% of such assets in excess of $200 million
and up to and including $400 million, and 0.60% of such assets in excess of $400
million. The fee shall be based on the average daily value of the net assets of
the Corporation for any period less than a full month during which this
Agreement is in effect and shall be prorated according to the proportion which
such period bears to a full month. Each fee payment shall be made within fifteen
days after the end of each month.
B-1
(b) The average daily value of the Corporation's net assets shall be
determined on the basis of the value of all assets held for the account of the
Corporation each business day as of the close of business on the Mexican Stock
Exchange (the "Exchange"). For this purpose the method of establishing such
value shall be as follows:
(i) All securities for which current market quotations on the
Exchange are readily available shall be valued at the last quoted sales price on
the Exchange on such day, or if there has been no sale, at the last quoted bid
price; and
(ii) All other securities shall be valued by the Adviser as
determined by the Board of Directors of the Corporation in good faith to be
fair.
4. Expenses. The Adviser shall bear all expenses incurred by it in
connection with its duties and activities under this Agreement. The Adviser
further agrees to pay all salaries, fees, and expenses. of the Corporation's
directors and officers who are employees, officers, or directors of the Adviser,
except for those expenses incurred in connection with the Corporation's Board of
Directors' or shareholders' meetings which are reimbursed by the Corporation
under the Corporation's Reimbursement Policy. The Corporation will bear all of
its other expenses including expenses of organizing the Corporation; fees and
expenses of the Corporation's directors who are not employees, officers, or
directors of the Adviser; interest expense; taxes and governmental fees;
brokerage commissions and other expense incurred in acquiring or disposing of
the Corporation's portfolio securities; expenses of preparing stock certificates
and other expenses in connection with the issuance, offering, distribution, sale
or underwriting of securities issued by the Corporation; expenses of registering
and qualifying the Corporation's shares for sale with the SEC and in various
states and foreign jurisdictions; auditing, accounting, insurance and legal
costs; custodian, dividend disbursing and transfer agent cost; expenses of
obtaining and maintaining stock exchange listings of the Corporation's shares;
and the expenses of shareholders' meetings and of the preparation and
distribution of reports to shareholders.
5. Duration and Termination. This Agreement shall become effective on
April 3, 2003, shall terminate on April 2, 2005 and, thereafter, if not sooner
terminated, shall continue in effect for successive periods of twelve months
each, provided that each such continuance shall be specifically approved
annually by the vote of a majority of the Corporation's Board of Directors who
are not parties to this Agreement or interested persons (as such term is defined
in the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval and either (a) the vote of a majority of the
outstanding voting securities of the Corporation, or (b) a majority of the
Corporation's Board of Directors as a whole. Notwithstanding the foregoing, this
Agreement may be terminated at any time by the Corporation, without the payment
of any penalty, upon vote of a majority of the Corporation's Board of Directors
or a majority of the outstanding voting securities of the Corporation, or by the
Adviser, on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment (as such term is defined
in the 1940 Act).
6. Short Sales of the Corporation's Stock. The Adviser agrees that it
will not make a short sale of any capital stock of the Corporation or purchase
any share of capital stock of the Corporation otherwise than for investment.
7. Liability of the Adviser. The Adviser may rely on information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be provided by the 1940 Act, neither the Adviser nor its shareholders, officers,
directors, employees or agents shall be subject to, and the Corporation shall
indemnify and hold such persons harmless from and against, any liability for and
any damages, expenses or losses incurred in connection with any act or omission
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 in the performance of the Adviser's duties or by reason of reckless
disregard of the Adviser's obligations and duties under this Agreement.
8. Services Not Exclusive. It is understood that the services of the
Adviser are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Adviser, or any affiliate thereof, from providing similar services
to other investment companies and other clients (whether or not their investment
objective and policies are similar to those of the Corporation) or from engaging
in other activities. When other clients of the Adviser desire to purchase or
sell a security at the same time such security is purchased for the Corporation,
it is understood that such purchases and sales will be made as nearly as
practicable on a pro rata basis in proportion to the amounts desired to be
purchased or sold by each client.
9. Miscellaneous
(a) This Agreement shall be construed in accordance with the laws of
the State of Maryland, provided that nothing herein shall be construed as being
inconsistent with the 1940 Act, the Advisers Act, applicable Mexican securities
laws, and any rules, regulations and orders of the SEC.
(b) The captions in this Agreement are included for convenience only
and in no way define or delimit any of the provisions hereof or otherwise affect
their construction or effect.
B-2
(c) If any provisions of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser an
agent of the Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
The Mexico Fund, Inc.
By:________________________________________
Juan Gallardo T.
Chairman
Board of Directors
Impulsora del Fondo Mexico, S.A. de C.V.
By:________________________________________
Jose Luis Gomez Pimienta
Director General
B-3
PROXY
THE MEXICO FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- March 20, 2003
The undersigned stockholder of The Mexico Fund, Inc., a Maryland corporation
(the "Fund"), hereby appoints Jose Luis Gomez Pimienta and Sander M. Bieber, or
any of them, with full power of substitution in each of them, to attend the
Annual Meeting of Stockholders of the Fund to be held at 30 Rockefeller Plaza,
23rd Floor, New York, New York, 10112, on April 3, 2003 at 2:00 p.m. (Eastern
time), and any adjournment or postponement thereof, to cast on behalf of the
undersigned all votes that the undersigned is entitled to cast at such meeting
and otherwise to represent the undersigned at the meeting with all powers
possessed by the undersigned if personally present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of the Annual Meeting of
Stockholders and of the accompanying Proxy Statement and revokes any proxy
heretofore given with respect to such meeting.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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Instructions for Voting Your Proxy
.. Simply sign and date your proxy card and return it in the postage-paid
envelope [insert internet and telephone proxy authorization]
CONTROL NUMBER COMPANY NUMBER
TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE
(X) PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE MEXICO FUND, INC.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE FUND'S STOCKHOLDERS VOTE "FOR"
PROPOSALS 1 AND 2, EACH AS MORE FULLY DESCRIBED IN THE PROXY STATEMENT.
(1) Election of the following two nominees to For Withhold
serve as Class I Directors for three-year / / / /
terms and until their successors are duly
elected and qualify: Philip Caldwell and
Jaime Serra Puche
You may withhold authority to vote for any individual nominee or nominees
by marking the FOR box and striking out the name of any such nominee. Your
shares will be voted for the remaining nominee(s).
(2) To approve the Amended Investment For Against Abstain
Advisory and Management Agreement to / / / / / /
amend the management fee rate schedule
the effect of which is to increase the
fees paid only at certain asset levels.
The undersigned authorizes the Proxy holder to vote and otherwise represent the
undersigned on any other matter that may properly come before the meeting or any
adjournment or postponement thereof in the discretion of the Proxy holder.
NOTE: Please sign as name appears herein.
Joint owners should each sign. When signing
as attorney, executor, administrator,
trustee, officer of corporation or other
entity or in another representative capacity,
please give the full title under the
signature.
____________________________________
Signature
____________________________________
Signature (if held jointly)
____________________________________
Date