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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid
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THE MEXICO FUND, INC.
1775 I Street, N.W., Suite 1100
Washington, DC 20006-2401
Notice of Annual Meeting of Stockholders
February 12, 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 or authorize the proxy vote
by telephone or internet pursuant to instructions on the enclosed proxy card.
The enclosed proxy is being solicited on behalf of the Board of Directors of
the Fund.
By Order of the Board of Directors,
/s/ Samuel Garcia Quellar
Samuel Garcia-Cuellar
Secretary
New York, New York
Dated: February 12, 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 OR, AUTHORIZE THE PROXY VOTE BY TELEPHONE OR INTERNET
PURSUANT TO THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. 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 (800) 607-0088.
PROXY STATEMENT
THE MEXICO FUND, INC.
1775 I Street, N.W., Suite 1100
Washington, DC 20006-2401
-----------------
Annual Meeting of Stockholders
April 3, 2003
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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 12, 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." 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 prior to its
exercise by written notice received by the Fund addressed to American Stock
Transfer and Trust Company at 59 Maiden Lane, Plaza Level, New York, New York
10273-0923, Attn: Proxy Department. Stockholders may vote using the enclosed
proxy card along with the enclosed postage-paid envelope. Stockholders may also
authorize proxy voting by telephone or internet. To authorize proxy voting by
telephone or internet, stockholders should follow the instructions contained on
their proxy card.
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.
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 16,357,931 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.
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 nominee 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.
2
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/*/
Position(s) Principal Occupation for Other Directorships Held
Held With Term of Office and Past Five Years and Other by Director or Nominee for
Name, Address and Age the Fund Length of Time Served Directorships Director
--------------------- ----------- --------------------- ------------------------- --------------------------
Philip Caldwell++ Class I Term expires 2003; Mr. Caldwell was Director, Mettler-Toledo
Ford Motor Company Director Director since 1991 Chairman and Chief International, Inc.
225 High Ridge Road Executive Officer of (scales and weighing
West Building Ford Motor Company instruments); Director,
Stamford, CT 06905 from 1979 to 1985 Waters Corporation
Age: 83 succeeding Henry Ford (scientific instruments);
II. He was the first non- Director, Russell
Ford family member to Reynolds Associates,
lead the company. From Inc. (executive
1953 to 1990, he served recruitment).
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.
Jaime Serra Puche++ Class I Term expires 2003; Dr. Serra is a former Director, Vitro, S.A. de
Edificio Plaza Director Director since 1997 Secretary of Finance for C.V. (glass
Prolongacion Paseo de la Mexico and he was the manufacturer); Director,
Reforma 600-103 minister in charge of Grupo Ferroviario
Santa Fe Pena Blanca negotiations for NAFTA Mexicano, S.A. de C.V.
01210 Mexico, D.F. and trade agreements (railways); Director,
Mexico between Mexico and Southern Peru Copper
Age: 52 Chile, Bolivia, Corporation (copper
Venezuela, Colombia manufacturer); Director,
and Costa Rica on Regional Market
behalf of the Mexican Makers, Inc.
government. (procurement company);
Director, Bardahl, S.A.
Formerly, Dr. Serra was de C.V. (oil products);
a Weinberg Visiting Director, Tenaris
Professor at Princeton (holding company); Co-
University, Secretary of Chairman, President's
Trade and Industry Council on International
(Mexico) and a Activities of Yale
Distinguished Visiting University; Trustee,
Associate at the Yale University.
Carnegie 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.
3
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* There are no other funds 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:
Interested Director
Position(s) Other Directorships Held
Held With Term of Office and Principal Occupation(s) by Director or Nominee for
Name, Address and Age the Fund Length of Time Served During Past Five Years Director
--------------------- ----------- --------------------- ----------------------- --------------------------
Jose Luis Gomez President Term expires 2004; Mr. Gomez Pimienta Director and member
Pimienta* +++ of the Director since 1989 has over two decades of of the Executive
Aristoteles 77, 3rd Floor Fund; experience investing in Committee of the Bolsa
Col. Polanco Class II the Mexican securities Mexicana de Valores
11560 Mexico, D.F. Director market. He has been the (Mexican Stock
Mexico President of the Fund Exchange)
Age: 63 since its inception and (since 1997).
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). 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.
4
Independent Directors/*/
Position(s) Principal Occupation for Other Directorships Held
Held With Term of Office and Past Five Years and Other by Director or Nominee for
Name, Address and Age the Fund Length of Time Served Directorships Director
--------------------- ----------- --------------------- ------------------------- --------------------------
Juan Gallardo T.++ Chairman Term expires 2005; Mr. Gallardo is Nadro, S.A. de C.V.
Monte Caucaso 915 of the Director since 1985 Chairman of the Fund's (pharmaceutical retail);
4th Floor Board, Board of Directors. Grupo Mexico, S.A. de
Col. Lomas de Class III Over the last decade, he C.V. (mining); Director,
Chapultepec Director has been extensively Caterpillar Inc.
11000 Mexico, D.F. involved in the (construction
Mexico negotiation of the North equipment); Intercon,
Age: 55 American Free Trade S.A. de C.V.
Agreement (NAFTA) (diversifying holding
among the United company); Member of
States, Canada and the International
Mexico, and free trade Advisory Board of
agreements between Lafarge (French cement
Mexico and Israel and company); Member of
the European Union. the International
Mr. Gallardo also serves Advisory Board of
as Chairman of the Textron, Inc.; Member,
Board of Grupo Consejo Mexicano de
Embotelladoras Unidas, Hombres de Negocios
S.A. de C.V., a bottling A.C. (Business
company, since 1985; Roundtable of Mexico).
and Vice Chairman of
Home Mart de Mexico,
S.A. de C.V., a retailer,
since 1995.
Emilio Carrillo Class III Term expires 2005; Mr. Carrillo Gamboa Secretary, Consejo
Gamboa++ Director Director 1981- served as a director of Mexicano de Hombres
Blvd. Manuel Avila 1987 and since the Fund from inception de Negocios A.C.
Camacho No. 1, Ste. 609 2002 of the Fund in 1981 to (Business Roundtable of
011009 Mexico, D.F. 1987. He resigned as Mexico); Chairman of
Mexico director in 1987 to the Board, Cementos
Age: 65 become Mexico's Apasco, S.A. de C.V.
Ambassador to Canada. (cement company);
Mr. Carrillo Gamboa Director, Grupo
was reelected as a Modelo, S.A. de C.V.
Director of the Fund (beer brewing);
in 2002. Director, Kimberly-
Mr. Carrillo Gamboa is Clark de Mexico, S.A.
a prominent lawyer in de C.V. (consumer
Mexico with extensive products); Director, San
business experience and Luis Corporacion, S.A.
has been a partner of de C.V. (mining and
Bufete Carrillo automotive parts);
Gamboa, S.C. since Director, Gasoductos de
1989. He has also Chihuahua, S. de R.L.
served or currently de C.V. (public utility-
serves on the boards of gas transportation);
many prestigious Director; Sistemas
Mexican businesses and Automotrices y de
charitable organizations. Potencia, S.A. de CV.
(power equipment
distribution); Secretary
5
Position(s) Principal Occupation for Other Directorships Held
Held With Term of Office and Past Five Years and Other by Director or Nominee for
Name, Address and Age the Fund Length of Time Served Directorships Director
--------------------- ----------- --------------------- ------------------------- --------------------------
and Alternate Director,
Innova, S. de R.L. de
C.V. (DTH television);
Secretary and Alternate
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 expires 2004; Mr. Gonzalez was Chairman of the Board,
Lagrange 103 Director Director since 1981 President of the Chief Executive Officer
Piso 3 Business Coordinating and Director, Kimberly-
Colonia Los Morales Council of Mexico. He Clark de Mexico, S.A.
11510 Mexico, D.F. has served as Chairman de C.V. (consumer
Mexico of the Board and Chief products); Director,
Age: 68 Executive Officer of General Electric Co.;
Kimberly-Clark de Director, Investment
Mexico S.A. de C.V. Company of America;
since 1966. Mr. Director, Kellogg Co.;
Gonzalez is also on the Director, Home Depot;
Board of Directors of Director, Grupo Alfa;
several prominent U.S. Director, Grupo Carso;
and Mexican Director, Grupo
companies, including Mexico; Director,
General Electric Co. America Movil;
Director, Grupo
Inbursa; Director,
Televisa; Director,
Banco Inbursa.
6
Position(s) Principal Occupation for Other Directorships Held
Held With Term of Office and Past Five Years and Other by Director or Nominee for
Name, Address and Age the Fund Length of Time Served Directorships Director
--------------------- ----------- --------------------- ------------------------- --------------------------
Robert L. Knauss++ Class II Term expires 2004; Mr. Knauss currently Director, Equus Ltd. II
5151 San Felipe Director Director since 1985 serves as Chairman of (investments); Director,
Suite 1661 the Board and Principal Seitel, Inc. (oil
Houston, TX 77056 Executive Officer of services).
Age: 71 Philips Services Corp.
(industrial services) 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.
--------
* 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, or alternate 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 SEC and the Internal
Revenue Service, and other related matters.
The Board of Directors has adopted a Charter for each of 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,
Gonzalez, 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
7
"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, Gonzalez, 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, Gonzalez, 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 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, Gonzalez, 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, nine (9) telephonic
special meetings, two (2) Audit Committee meetings, no (0) Valuation Committee
meetings, one (1) Contract Review Committee meeting, and three (3) 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 of 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.
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
Investment Companies Overseen or
to be Overseen by Director or
Dollar Range of Equity Securities Nominee in Family of Investment
Name of Director in the Fund Companies*
---------------- --------------------------------- --------------------------------
Jose Luis Gomez Pimienta Over $100,000 Over $100,000
8
Independent Directors
Aggregate Dollar Range of Equity
Securities in All Registered
Investment Companies Overseen or
to be Overseen by Director or
Dollar Range of Equity Nominee in Family of
Name of Director Securities in the Fund 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
--------
* 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 (defined below)
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 Owners
and Relationships
Name of Director to Director or Value of Percentage
or Nominee Nominee Company Title of Class Securities of Class
---------------- ----------------- ------- -------------- ---------- ----------
Juan Gallardo T. None None None None None
Philip Caldwell None None None None None
Emilio Carrillo Gamboa None None None None None
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
Aggregate Benefits Accrued Estimated Total Compensation from
Compensation as Part of Annual Benefits Fund and Fund Complex
Name of Director from Fund Fund Expenses Upon Retirement Paid to Directors*
---------------- ------------ --------------------- --------------- -----------------------
Juan Gallardo Thurlow $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
Jose Luis Gomez Pimienta None None None None
9
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* 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 7, 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
Term of Office and
Position(s) Held Length of Time
Name, Address and Age With the Fund Served Principal Occupation(s) During Past Five Years
--------------------- ---------------- ------------------ ----------------------------------------------
Jose Luis Gomez Pimienta President of the Since 1981; Chairman of the Board and Director
Aristoteles 77, 3rd Floor Fund; Class II Director since General of the Fund's investment adviser,
Col. Polanco Director 1989 (term Impulsora del Fondo Mexico, S.A. de
11560 Mexico, D.F. expires 2004) C.V., and a Director and Member of the
Mexico Executive Committee of the Bolsa
Age: 63 Mexicana de Valores, S.A. de C.V.
(Mexican Stock Exchange).
Samuel Garcia-Cuellar Secretary Since 1981 Mr. Garcia-Cuellar is a partner of Creel,
Creel, Garcia-Cuellar y Garcia-Cuellar y Muggenburg, S.C.,
Muggenburg, S.C., Mexican counsel to the Fund; Director, El
Paseo de los Tamarindos 60 Aguila Compania de Seguros, S.A. de
Bosques de las Lomas C.V. (insurance) (since 1994); Director,
05120 Mexico, D.F. Mercado Mexicano de Derivados (futures
Mexico and options) (since 2001); Director, GE
Age: 60 Capital Bank, S.A. Institucion de Banca
Multiple, GE Capital Grupo Financiero
(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, 3rd Floor Finance of the Fund's investment adviser,
Col. Polanco Impulsora del Fondo Mexico, S.A. de
11560 Mexico, D.F. (formerly, Vice From 1999 to C.V.
Mexico President of 2002
Age: 35 Finance)
Carlos H. Woodworth Ortiz Vice-President Since 2002 Mr. Woodworth has served on the Board
Aristoteles 77, 3rd Floor of Corporate From 1992 to of Directors of the Fund's investment
Col. Polanco Governance and 2002 adviser, Impulsora del Fondo Mexico,
11560 Mexico, D.F. Compliance S.A. de C.V., as well as Deputy Director
Mexico Officer of the Adviser since 1981. Mr.
Age: 59 (formerly, Woodworth also serves as an Alternate
Treasurer) Director of the Bolsa Mexicana de
Valores, S.A. de C.V. (Mexican Stock
Exchange).
Eduardo Solano Arroyo Investor Since 1997 Mr. Solano has served as Director of
Aristoteles 77, 3rd Floor Relations Vice Economic Research of the Fund's
Col. Polanco President investment adviser, Impulsora del Fondo
11560 Mexico, DF, Mexico, S.A. de C.V. since 1997.
Mexico
Age: 34
10
Compensation of Executive Officers
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 Impulsora del Fondo Mexico (the "Adviser") 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
---------- ------------------------------ --------------
$100,250. None $17,000
--------
* Appointed independent auditors of the Fund effective May 6, 2002.
11
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.
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 defined below) 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
12
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 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 3, 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
13
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 following
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 $4,650,434. If the
Proposed Management Fee had been in effect, the Fund would have paid
approximately $5,350,434 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.
As of October 31, 2002
-----------------------------------------------------------------------------------------------------------
Difference Between Percentage Difference
Current Management Fee Between Current
Aggregate Fees under Aggregate Fees under and Proposed Management Management Fee and
Current Management Fee Proposed Management Fee Fee Proposed Management Fee
------------------------- ------------------------- ------------------------- -------------------------
$4,650,434 $5,350,434 $700,000 15.05%
As of January 31, 2003*
-----------------------------------------------------------------------------------------------------------
Difference Between Percentage Difference
Current Management Fee Between Current
Aggregate Fees under Aggregate Fees under and Proposed Management Management Fee and
Current Management Fee Proposed Management Fee Fee Proposed Management Fee
------------------------- ------------------------- ------------------------- -------------------------
$1,739,041 $2,050,195 $311,154 17.89%
--------
* The net assets of the Fund as of January 31, 2003 were $205,577,242.
14
Fee and Expense Comparison. The tables below compare the annual fees and
expenses that an investor would pay under the current Management Fee and
expenses that an investor would pay under the Proposed Management Fee.
Current Proposed Fee
Net Assets Fee Rate Rate
---------- -------- ------------
First $200 million 0.85% 1.00%
Over $200 million up 0.70% 0.90%
to and including
$400 million
Over $400 million 0.60% 0.60%
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%
--------
* 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.
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. $149 $462 $797 $1,746
Proposed Management Fee $162 $502 $866 $1,889
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.
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 periodic 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 fees of comparable closed-end funds; (i) the overall
profitability of the Management Agreement to the Adviser; and (j) 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 periodic in-kind repurchase offer policy. The Board of
Directors considered the impact of the Proposed Management Fee on the overall
expenses
15
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 y Lopez, 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 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.
16
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 18, 2002, 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
17
meeting of the stockholders are governed by the Fund's charter and bylaws, the
provisions of the Maryland 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. Authorization
to execute proxies may be obtained by telephonic or electronically transmitted
instructions from stockholders of the Fund. Proxies that are obtained
telephonically will be recorded in accordance with procedures that the Fund
believes are reasonably designed to ensure that the identity of the stockholder
casting the vote is accurately determined and that the voting instructions of
the stockholder are accurately determined.
If a stockholder wishes to participate in the Meeting, but does not wish to
authorize a proxy by telephone or internet, such stockholder may still submit
the proxy card originally sent with the Proxy Statement or attend in person.
Any proxy given by a stockholder, whether in writing, by telephone or via the
internet, is revocable. A stockholder may revoke the accompanying proxy or a
proxy given telephonically or via the internet at any time prior to its use by
submitting a properly executed, subsequently dated proxy, giving notice to the
Fund addressed to American Stock Transfer and Trust Company at 59 Maiden Lane,
Plaza Level, New York, New York 10273-0923, Attn: Proxy Department, or by
attending the Meeting and voting in person.
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 Agreement approving a fee
increase at certain assets levels (Proposal 2) will require the approval 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.
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 15, 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.
18
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. STOCKHOLDERS ALSO MAY AUTHORIZE THE PROXY VOTE BY TELEPHONE OR
INTERNET PURSUANT TO THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD.
By Order of the Board of Directors,
/s/ Samuel Garcia Quellar
Samuel Garcia-Cuellar
Secretary
Dated: February 12, 2003
19
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
A-1
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.
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;
--------
/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.
A-2
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 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;
--------
/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.
/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
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;
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
A-4
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-5
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
B-1
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) 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.
B-2
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.
(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
ANNUAL MEETING OF SHAREHOLDERS OF
THE MEXICO FUND, INC.
April 3, 2003
----------------------------------------------------------------------
INSTRUCTIONS FOR AUTHORIZING YOUR PROXY
----------------------------------------------------------------------
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as --------------------------- ----------------------
possible. --------------------------- ----------------------
-OR- COMPANY NUMBER
TELEPHONE - Call toll-free 1-800-PROXIES from any touch-tone telephone and --------------------------- ----------------------
follow the instructions. Have your control number and proxy card available --------------------------- ----------------------
when you call.
ACCOUNT NUMBER
-OR-
--------------------------- ----------------------
INTERNET - Access "www.voteproxy.com" and follow the on-screen instructions. --------------------------- ----------------------
Have your control number available when you access the web page.
CONTROL NUMBER
----------------------------- --------------------
----------------------------- --------------------
Please detach and mail in the envelope provided IF you are not
voting via telephone or the Internet.
----------------------------------------------------------------------------------------------------------------------------------
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.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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-------------------------------------------------------------------------- -------------------------------------------------------
1. Election of the following two nominees to serve as Class I Directors FOR AGAINST ABSTAIN
for three-year terms and until their successors are duly elected and qualify: |_| |_| |_|
|_| FOR ALL NOMINEES NOMINEES 2. To approve the Amended Investment
o Philip Caldwell Advisory and Management Agreement to
o Jaime Serra Puche amend the management fee rate schedule
|_| WITHOUT AUTHORITY the effect of which is to increase the
FOR ALL NOMINEES fees paid only at certain asset levels.
The undersigned authorized the Proxy holder to vote
|_| FOR ALL EXCEPT and otherwise represent the undersigned on any other
(See instructions matter that may properly come before the meeting or
below) any adjournment thereof in the discretion of the
Proxy holder.
INSTRUCTION: To withhold authority to vote for any individual TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON
nominee(s), mark "FOR ALL EXCEPT" and fill in the circle next to THE REVERSE SIDE HEREOF.
each nominee you wish to withhold, as shown here: o
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
|_|
--------------------------------------------------------------------------
Signature of Shareholder ______________ Date _____________ Signature of Shareholder __________________ Date _________
Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
ANNUAL MEETING OF SHAREHOLDERS OF
THE MEXICO FUND, INC.
April 3, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided
----------------------------------------------------------------------------------------------------------------------------------
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.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------- -------------------------------------------------------
1. Election of the following two nominees to serve as Class I Directors FOR AGAINST ABSTAIN
for three-year terms and until their successors are duly elected and qualify: |_| |_| |_|
|_| FOR ALL NOMINEES NOMINEES 2. To approve the Amended Investment
o Philip Caldwell Advisory and Management Agreement to
o Jaime Serra Puche amend the management fee rate schedule
|_| WITHOUT AUTHORITY the effect of which is to increase the
FOR ALL NOMINEES fees paid only at certain asset levels.
The undersigned authorized the Proxy holder to vote
|_| FOR ALL EXCEPT and otherwise represent the undersigned on any other
(See instructions matter that may properly come before the meeting or
below) any adjournment thereof in the discretion of the
Proxy holder.
INSTRUCTION: To withhold authority to vote for any individual TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON
nominee(s), mark "FOR ALL EXCEPT" and fill in the circle next THE REVERSE SIDE HEREOF.
to each nominee you wish to withhold, as shown here: o
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
|_|
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Signature of Shareholder ______________ Date _____________ Signature of Shareholder __________________ Date _________
Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
PROXY
THE MEXICO FUND, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders -- April 3, 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 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.
(Continued and to be signed on the reverse side)
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COMMENTS:
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