THE MEXICO FUND, INC.
Offer to Repurchase Up to 100%
of the Fund's Issued and Outstanding Shares of Common Stock
at
98% of Net Asset Value,
In Exchange for Portfolio Securities of the Fund
THE REPURCHASE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON FRIDAY, JUNE 7, 2002, UNLESS THE REPURCHASE OFFER IS EXTENDED.
THE REPURCHASE OFFER IS BEING MADE PURSUANT TO THE REPURCHASE OFFER
STATEMENT, DATED MAY 8, 2002, BY THE MEXICO FUND, INC. (THE "FUND"). THE BOARD
OF DIRECTORS OF THE FUND HAS UNANIMOUSLY APPROVED THE REPURCHASE OFFER
STATEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. NEITHER THE FUND NOR ITS
BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY SHAREHOLDERS AS TO WHETHER
TO PARTICIPATE IN THE REPURCHASE OFFER. THE FUND HAS BEEN ADVISED THAT NO
DIRECTOR OR OFFICER OF THE FUND NOR THE FUND'S INVESTMENT ADVISER WILL
PARTICIPATE IN THE REPURCHASE OFFER. SHAREHOLDERS ARE URGED TO EVALUATE
CAREFULLY ALL INFORMATION IN THIS REPURCHASE OFFER STATEMENT, AND CONSULT THEIR
OWN FINANCIAL AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER OR NOT TO
PRESENT SHARES FOR REDEMPTION.
THE REPURCHASE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES
SUBMITTED FOR REPURCHASE, BUT IS SUBJECT TO OTHER CONDITIONS SET FORTH IN THIS
REPURCHASE OFFER STATEMENT. SEE SECTIONS 3 AND 14.
-----------------
IMPORTANT
Any shareholder desiring to participate in the Repurchase Offer should
either (i) complete and sign the enclosed Letter of Transmittal (or a facsimile
thereof) in accordance with the Instructions in the Letter of Transmittal, have
such shareholder's signature thereon guaranteed (if required by Instruction 1
to the Letter of Transmittal), mail or deliver the Letter of Transmittal (or
facsimile thereof) and any other required documents to the Depositary (as
defined herein) and either deliver the certificates for such Fund shares to the
Depositary along with the Letter of Transmittal (or such facsimile) or, in the
case of a book-entry transfer effected pursuant to the procedures described in
Section 3 of this Repurchase Offer Statement, deliver any other required
documents to the Depositary and deliver such shares pursuant to the procedure
for book-entry transfer set forth in Section 3 of this Repurchase Offer
Statement, or (ii) request such shareholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such shareholder.
Any shareholder whose shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee to tender such shares.
Any shareholder who desires to participate in the Repurchase Offer and whose
certificates for Fund shares are not immediately available, or who cannot
comply with the procedures for book-entry transfer on a timely basis, or who
cannot deliver all required documents to the Depositary prior to the expiration
of the Repurchase Offer, may tender such shares by following the procedures for
guaranteed delivery set forth in Section 3 of this Repurchase Offer Statement.
Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its respective business address and telephone
number set forth on the last page of this Repurchase Offer Statement. Requests
for additional copies of this Repurchase Offer Statement, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other repurchase offer
materials may be directed to the Information Agent, or to brokers, dealers,
commercial banks or trust companies.
IF YOU DO NOT WISH TO PRESENT YOUR SHARES FOR REDEMPTION IN THE REPURCHASE
OFFER, YOU NEED NOT TAKE ANY ACTION.
1
TABLE OF CONTENTS
INTRODUCTION...................................................................................... 1
The Repurchase Offer.............................................................................. 3
1. Terms of the Repurchase Offer; Expiration Date............................................ 5
2. Acceptance for Payment and Payment for Shares............................................. 6
3. Procedure for Participating in the Repurchase Offer....................................... 7
A. Proper Presentation of Shares for Redemption........................................ 7
B. Signature Guarantees and Method of Delivery......................................... 8
C. Book-Entry Delivery Procedure....................................................... 8
D. Guaranteed Delivery Procedure....................................................... 8
E. Determination of Validity........................................................... 9
F. Federal Income Tax Withholding...................................................... 9
4. Withdrawal Rights......................................................................... 10
5. Source and Amount of Funds; Effect of the Repurchase Offer................................ 10
6. Purpose of the Repurchase Offer; Plans or Proposals of the Fund........................... 12
7. Factors to Consider Regarding the Decision to Participate in the Repurchase Offer......... 13
8. Net Asset Value and Market Price Range of Shares, Dividends............................... 16
9. Federal Income Tax Consequences of the Repurchase Offer................................... 17
10. Selected Financial Information............................................................ 19
11. Certain Information Concerning the Fund and the Fund's Investment Adviser................. 21
12. Interests of Directors and Officers; Transactions and Arrangements Concerning Fund Shares. 22
13. Certain Legal Matters; Regulatory Approvals............................................... 22
14. Certain Conditions of the Repurchase Offer................................................ 23
15. Fees and Expenses......................................................................... 23
16. Miscellaneous............................................................................. 24
17. Contacting the Depositary and the Information Agent....................................... 24
2
THE MEXICO FUND, INC.
1775 Eye Street, NW
Washington, DC 20006
Offer to Repurchase up to 100% of
the Fund's Issued and Outstanding Shares of Common Stock at
98% of Net Asset Value, in Exchange for Portfolio
Securities of the Fund
To All Shareholders of The Mexico Fund, Inc.:
The Mexico Fund, Inc. (the "Fund") is offering to repurchase up to 100% of
the Fund's issued and outstanding shares of common stock, par value $1.00 per
share, at 98% of the Fund's per share net asset value at the close of business
on the Expiration Date (as defined below) in exchange for Portfolio Securities
(as defined below) (the "Repurchase Offer"). Portfolio Securities are a
pro-rata portion of each of the securities (other than short-term fixed income
securities with maturities of less than one year, securities with transfer
restrictions and certain illiquid securities), subject to adjustments for
fractional shares and odd lots, and any cash held in the Fund's investment
portfolio at the close of business on the Expiration Date. The purchase price
is 98% of the Fund's per share net asset value in U.S. dollars determined as of
the close of the regular trading session on the New York Stock Exchange on the
Expiration Date (the "Repurchase Price").
The Repurchase Offer is subject to the terms and conditions set forth in
this Repurchase Offer Statement dated May 8, 2002 and the related Letter of
Transmittal. The Repurchase Offer represents the launch of the Fund's
anticipated policy of making quarterly in-kind share repurchases. The Fund
anticipates that future repurchase offers will be scheduled to occur in
conjunction with the Fund's fiscal quarters with the next such offer occurring
during the Fund's fourth fiscal quarter which ends October 31, 2002.
THE REPURCHASE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON JUNE 7,
2002, UNLESS EXTENDED (THE "EXPIRATION DATE"). The Fund is mailing materials
for the Repurchase Offer to record holders as of April 30, 2002, on or about
May 8, 2002. However, any shareholder who holds shares of the Fund on the
Expiration Date may participate in the Repurchase Offer. The depositary for the
Repurchase Offer is American Stock Transfer & Trust Co. (the "Depositary") and
the Information Agent for the Repurchase Offer is Morrow & Co., Inc. (the
"Information Agent").
As of April 30, 2002, there were 45,456,232 Fund shares issued and
outstanding, and the net asset value per share was $20.67. The Fund does not
expect that the number of Fund shares issued and outstanding will be materially
different on the Expiration Date.
Fund shares are currently listed for trading on the New York Stock Exchange
under the symbol "MXF." You may continue to purchase and sell Fund shares in
cash transactions over the New York Stock Exchange. The Repurchase Offer is an
alternative means to permit you to sell your shares to the Fund in exchange for
Portfolio Securities. In order to participate in the Repurchase Offer, you must
provide information regarding a Mexican brokerage or custodial account
available to or established by you which can receive the Portfolio Securities
(the "Mexican Account").
You can obtain the current net asset value per share as of the close of
business on the previous business day during the period of the Repurchase Offer
by calling the Information Agent, at 800-607-0088, between the hours of 9:00
a.m. and 5:00 p.m., New York City time, Monday-Friday (except holidays). You
can also access the Fund's web site, www.themexicofund.com, for this
information, which is typically updated on a daily basis at around 6:30 p.m.,
New York City time.
The Fund anticipates publishing its schedule of investments via press
release and on the Fund's web site on the Expiration Date. The Portfolio
Securities to be received by participating shareholders will be a pro-rata
portion of the Fund's schedule of investments subject to certain adjustments.
See "Background and Purpose of the Repurchase Offer'' below.
Background and Purpose of the Repurchase Offer
The purpose of the Repurchase Offer is to provide shareholders an
alternative source of liquidity for their Fund shares in addition to cash sales
of Fund shares on the New York Stock Exchange, to enhance shareholder
3
value, and to narrow the discount to net asset value at which Fund shares
trade. The Repurchase Offer provides shareholders with the opportunity to
redeem their shares in-kind (i.e., in exchange for Portfolio Securities and
cash held by the Fund) in order to realize close to net asset value for their
shares.
The sale proceeds of the Repurchase Offer will be paid in Portfolio
Securities except for (a) securities which, if distributed, would be required
to be registered under the Securities Act of 1933, as amended (the "Securities
Act"); (b) securities issued by entities in countries which restrict or
prohibit the holding of securities by non-nationals other than through
qualified investment vehicles; and (c) certain portfolio assets (such as
forward currency exchange contracts, futures and options contracts and
repurchase agreements) that, although they may be liquid and marketable,
involve the assumption of contractual obligations, require special trading
facilities or can only be traded with the counterparty to the transaction in
order to effect a change in beneficial ownership. With respect to the Portfolio
Securities, as to fractional shares and/or odd lots of securities and/or
amounts attributable to any cash position (including short-term non-equity
securities), for shareholders of record the Fund will (a) pay cash for
fractional shares and/or odd lots of securities and/or amounts attributable to
any cash position (including short-term non-equity securities); (b) round off
(up or down) odd lots or fractional shares so as to eliminate them prior to
distribution; or (c) pay a higher pro-rata percentage of equity securities to
represent such items. The choice of option (a), (b) or (c) with respect to the
treatment of fractional shares and/or odd lots of securities is at the
discretion of the Fund.
The Repurchase Offer also is intended to insulate shareholders who choose
not to participate from bearing any portion of the significant unrealized
capital gains of the Fund which would be realized if the Fund sold the
Portfolio Securities in order to satisfy redemption requests in cash.
If you desire to participate in the Repurchase Offer, you should either (1)
complete and sign the Letter of Transmittal and mail or deliver it to the
Depositary together with the Fund shares (in proper certificated or
uncertificated form), and any other documents required by the Letter of
Transmittal; or (2) request your broker, dealer, commercial bank, trust company
or other nominee to effect the transaction for you. If your Fund shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact that firm if you desire to participate in the
Repurchase Offer. Shareholders whose shares are not registered in the name of a
broker, dealer, commercial bank, trust company of other nominee may wish to
consult with such an entity to facilitate their participation in the Repurchase
Offer and fulfill the requirements for participation. Shareholders are not
required to pay a service charge to the Fund or the Depositary in connection
with their participation in the Repurchase Offer, but may be charged a fee by a
broker, dealer or other institution for processing the documentation required
to participate in the Repurchase Offer and may incur other expenses as
described in this Repurchase Offer Statement.
IF YOU DO NOT WISH TO PRESENT YOUR SHARES FOR REDEMPTION IN THE REPURCHASE
OFFER, YOU NEED NOT TAKE ANY ACTION.
THIS REPURCHASE OFFER IS BEING EXTENDED TO ALL SHAREHOLDERS OF THE FUND AND
IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING SUBMITTED FOR
REPURCHASE, BUT IS SUBJECT TO OTHER CONDITIONS AS OUTLINED HEREIN AND IN THE
LETTER OF TRANSMITTAL. SEE SECTIONS 3 AND 14 OF THIS REPURCHASE OFFER STATEMENT.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO PARTICIPATE IN THE REPURCHASE OFFER. SHAREHOLDERS
ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THIS REPURCHASE OFFER
STATEMENT, CONSULT THEIR OWN FINANCIAL AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER OR NOT TO PRESENT SHARES FOR REDEMPTION.
THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF THE FUND NOR THE
FUND'S INVESTMENT ADVISER WILL PARTICIPATE IN THE REPURCHASE OFFER.
4
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND OR ITS INVESTMENT ADVISER, AS TO WHETHER SHAREHOLDERS SHOULD PRESENT THEIR
SHARES FOR REDEMPTION PURSUANT TO THE REPURCHASE OFFER. ANY RECOMMENDATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR ITS INVESTMENT
ADVISER.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE REPURCHASE OFFER OTHER THAN THOSE
CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, ANY
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND OR THE INVESTMENT ADVISER.
PARTICIPATING SHAREHOLDERS WILL BE RECEIVING PORTFOLIO SECURITIES WHICH WILL
INCLUDE SHARES OF MEXICAN PUBLIC COMPANIES. INFORMATION ABOUT MEXICAN PUBLIC
COMPANIES MAY BE LESS EXTENSIVE THAN U.S. PUBLIC COMPANIES, IS LIKELY TO BE IN
SPANISH, AND MAY NOT BE AS ACCURATE OR CURRENT. SHAREHOLDERS MAY WISH TO
CONDUCT THEIR OWN INVESTMENT RESEARCH AND/OR CONSULT THEIR FINANCIAL ADVISOR.
1. Terms of the Repurchase Offer; Expiration Date.
Upon the terms and conditions set forth herein, the Fund will accept for
payment in Portfolio Securities, and repurchase, up to 100% of the Fund's
issued and outstanding shares of common stock, or 45,456,232 shares in the
aggregate, validly submitted for redemption on or prior to 5:00 p.m., New York
City time, on the Expiration Date and not withdrawn as permitted by Section 4.
A shareholder may submit for redemption some or all of the Fund shares owned by
the shareholder.
If an overwhelming majority of shares are submitted for repurchase, the Fund
may have to delist its shares from the New York Stock Exchange or may decide to
liquidate in its entirety following completion of the Repurchase Offer and/or
the Fund's investment adviser may decide to resign as investment adviser.
If a shareholder decides against continuing to own shares of the Fund,
consideration should be given to the relative benefits and costs of
participating in the Repurchase Offer, including, but not limited to, the
requirement of providing information regarding the Mexican Account, the risks
of receiving the Portfolio Securities for which there may be less information
available, and the costs and risks of disposing of the Portfolio Securities or
retaining them, versus selling the Fund shares on the open market, such as a
transaction on the New York Stock Exchange, at the prevailing market price with
the associated transaction costs, and receiving cash payment in U.S. dollars.
See Section 7 of this Repurchase Offer Statement.
The Fund expressly reserves the right, in its sole discretion, at any time
and from time to time, to extend the period of time during which the Repurchase
Offer is open by giving oral or written notice of such extension to the
Depositary. Any such extension will also be publicly announced by press release
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. If the Fund makes a material
change in the terms of the Repurchase Offer or the information concerning the
Repurchase Offer, or if it waives a material condition in the terms of the
Repurchase Offer, the Fund will extend the Repurchase Offer to the extent
required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). During any extension, all shares
previously submitted for redemption and not withdrawn will remain subject to
the Repurchase Offer, subject to the right of the participating shareholder to
withdraw his or her shares.
Subject to the terms and conditions of the Repurchase Offer, the Fund will
pay the consideration offered or return the Fund shares submitted for
redemption as promptly as practicable after the termination or withdrawal of
the Repurchase Offer. Any extension, delay or termination will be followed as
promptly as practicable by public announcement thereof, such announcement, in
the case of an extension, to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
5
2. Acceptance for Payment and Payment for Shares.
Upon the terms and subject to the conditions of the Repurchase Offer, the
Fund will accept for payment, and will pay for, Fund shares validly submitted
for repurchase on or before the Expiration Date and not properly withdrawn in
accordance with Section 4 as soon as practicable after the Expiration Date. In
all cases, payment for Fund shares submitted for repurchase and accepted for
payment pursuant to the Repurchase Offer will be made only after timely receipt
by the Depositary of certificates for such Fund shares (unless such Fund shares
are held in uncertificated form), a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), and any other documents required by the
Letter of Transmittal, including any necessary tax forms. The Fund expressly
reserves the right, in its sole discretion, to delay the acceptance for payment
of, or payment for, Fund shares, in order to comply, in whole or in part, with
any applicable law.
For purposes of the Repurchase Offer, the Fund will be deemed to have
accepted for payment Fund shares validly submitted for repurchase and not
withdrawn as, if and when the Fund gives oral or written notice to the
Depositary of its acceptance for payment of such Fund shares pursuant to the
Repurchase Offer. The Depositary will, as the Fund's transfer agent, cancel
Fund shares accepted for repurchase, and the Fund's custodian will transfer the
Portfolio Securities to the Mexican Accounts as promptly as practicable after
the Expiration Date. Although the Fund will try to make payment for Fund shares
repurchased as promptly as possible, the Fund may be delayed in making payment,
but such delays are likely to be the result of circumstances beyond the Fund's
control. Under no circumstances will the Fund pay interest on the Repurchase
Price, regardless of any delay in making payment therefor. If any Fund shares
submitted for repurchase are not accepted for payment pursuant to the terms and
conditions of the Repurchase Offer for any reason, or are not paid because of
an invalid submission (i) certificates for such unpurchased Fund shares will be
returned, without expense to the participating shareholder, as soon as
practicable following expiration or termination of the Repurchase Offer; (ii)
Fund shares delivered pursuant to the Book-Entry Delivery Procedure (as defined
in Section 3 below) will be credited to the appropriate account maintained with
the appropriate Book-Entry Transfer Facility (as defined in Section 3 below):
and (iii) uncertificated Fund shares held by the Fund's transfer agent pursuant
to the Fund's dividend reinvestment plan will be returned to the dividend
reinvestment plan account maintained by the transfer agent.
If the Fund is delayed in payment for, or is unable to accept for payment or
pay for, Fund shares pursuant to the Repurchase Offer for any reason, then,
without prejudice to the Fund's rights under the Repurchase Offer, the
Depositary may, on behalf of the Fund, retain Fund shares submitted for
repurchase, and such Fund shares may not be withdrawn.
Participating shareholders may be required to pay brokerage fees to a U.S.
broker, dealer, commercial bank, trust company or other nominee in order to
participate in the Repurchase Offer. Participating shareholders may also be
subject to certain tax consequences as discussed in Section 9 of this
Repurchase Offer Statement.
The Fund normally publishes its net asset value per share on each business
day after the close of regular trading on the New York Stock Exchange. The
Fund's shares are listed for trading under the symbol "MXF" on the New York
Stock Exchange. On April 30, 2002, the net asset value per share was $20.67,
and the Fund's last reported sales price was $19.10 per share, representing a
7.60% discount from the net asset value per share. The Fund's net asset value
per share will be available daily through the Expiration Date, through the
Fund's toll free number at 800-224-4134 and is typically available daily
through the Fund's web site, www.themexicofund.com.
The Fund anticipates publishing the Fund's investment portfolio via press
release and the Fund's web site on the Expiration Date. The Portfolio
Securities to be received by participating shareholders will be a pro-rata
portion of the Fund's Schedule of Investments subject to certain adjustments.
See "Background and Purpose of the Repurchase Offer" in this Repurchase Offer
Statement.
Shareholders submitting shares in the Repurchase Offer must ensure that all
required information has been provided and is accurate. The Fund is not
responsible for notifying shareholders of any inaccuracies or deficiencies in
their submission and an invalid submission will result in the return of Fund
shares submitted for repurchase by a shareholder.
6
3. Procedure for Participating in the Repurchase Offer.
A. Proper Presentation of Shares for Redemption.
Shareholders having Fund shares that are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee should contact such
firm if they desire to participate in the Repurchase Offer. For a shareholder
to properly submit Fund shares pursuant to the Repurchase Offer, either (a)(i)
a properly completed and duly executed Letter of Transmittal, together with any
required signature guarantees, and any other documents required by the Letter
of Transmittal, including any required U.S. tax information, must be
transmitted to and received by the Depositary at the address set forth on the
page 24 of this Repurchase Offer Statement or, in the case of a book-entry
transfer, an Agent's Message (as defined below), and DTC Delivery Election Form
must be received by the Depositary at the address set forth on the last page of
this Repurchase Offer Statement prior to the Expiration Date and either the
certificate for Fund shares must be transmitted to and received by the
Depositary at its address set forth on the page 24 of this Repurchase Offer
Statement or the participating shareholder must comply with the Book-Entry
Delivery Procedure set forth in this Section 3, or (b) participating
shareholders must comply with the Guaranteed Delivery Procedures set forth in
this Section 3, in all cases prior to the Expiration Date.
Letters of Transmittal and certificates representing Fund shares presented
for redemption should NOT be sent or delivered to the Fund. Shareholders who do
not have Fund shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee may wish to contact one of these entities
and deposit their shares with it and seek its assistance in submitting the
documents (including the Mexican Account information) for participation in the
Repurchase Offer.
Participating shareholders must submit instructions as to brokerage or
custodial arrangements entered into with appropriate Mexican stock brokers or
Mexican banks, i.e. the Mexican Account, required in the transmittal documents
in order to have validly presented Fund shares for participation in the
Repurchase Offer. The forms for these instructions appear in the Letter of
Transmittal and, in the case of brokers, dealers, commercial banks, trust
companies or other nominees submitting shares on behalf of clients, on the DTC
Delivery Election Form.
The Fund's transfer agent holds Fund shares in uncertificated form for
certain Fund shareholders pursuant to the Fund's dividend reinvestment plan.
Shareholders may submit such Fund shares for redemption by completing the
appropriate section of the Letter of Transmittal or Notice of Guaranteed
Delivery.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility (as defined in Part C below) to, and received by, the
Depositary and forming a part of a Book-Entry Delivery Procedure (as defined in
Part C below), which states that such Book-Entry Transfer Facility has received
an express acknowledgement from the participant in such Book-Entry Transfer
Facility submitted the shares for repurchase that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Fund may enforce such agreement against such participant.
Section 14(e) of the Exchange Act and Rule 14e-4 promulgated thereunder
prohibit both "short" redemption requests and "hedged" redemption requests by
any person, whether acting alone or in concert with others. It is a violation
of Rule 14e-4 under the Exchange Act for a person to request redemption of Fund
shares unless the person requesting redemption (i) has a net long position
equal to or greater than the amount as to which a redemption request has been
made in Fund shares presented for redemption; and (ii) will cause these Fund
shares to be delivered in accordance with the terms of the Repurchase Offer.
The acceptance by the Fund of Fund shares for repurchase will constitute a
binding agreement between the participating shareholder and the Fund upon the
terms and subject to the conditions of the Repurchase Offer, including the
participating shareholder's representation that (i) the shareholder has a net
long position in the Fund shares being presented for redemption within the
meaning of Rule 14e-4 under the Exchange Act, and (ii) the presentation of Fund
shares for redemption complies with Rule 14e-4.
7
B. Signature Guarantees and Method of Delivery.
No signature guarantee is required on the Letter of Transmittal if (a) the
Letter of Transmittal is signed by the registered holder(s) (which includes any
participant in the Depository Trust Company ("DTC") book-entry transfer
facility whose name appears on DTC's security position listing as the owner of
Fund shares) of Fund shares presented for redemption; or (b) Fund shares are
presented for redemption for the account of a firm (an "Eligible Institution")
which is a bank, broker, dealer, credit union, savings association or other
entity which is a member in good standing of a Stock Transfer Association
approved medallion program (such as STAMP, SEMP or MSP). In all other cases,
all signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of the Letter of Transmittal.
Signature(s) on the Letter of Transmittal by the registered holder(s) of
Fund shares submitted for redemption must correspond with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Fund shares presented for redemption are owned of record by
two or more joint owners, all such owners must sign the Letter of Transmittal.
If any of the Fund shares presented for redemption are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations of certificates.
If the Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
they should so indicate when signing, and proper evidence satisfactory to the
Fund of their authority to act must be submitted. "Satisfactory" evidence is in
the sole discretion of the Fund.
C. Book-Entry Delivery Procedure.
The Depositary will establish an account with respect to the Fund shares at
DTC for purposes of the Repurchase Offer within two business days after the
date of this Repurchase Offer Statement (the "Book-Entry Transfer Facility").
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make delivery of Fund shares submitted for redemption by
causing (i) such Book-Entry Transfer Facility to transfer such Fund shares into
the Depositary's account in accordance with such Book-Entry Transfer Facility's
procedure for such transfer; and (ii) a confirmation of receipt of such
delivery to be received by the Depositary (the "Book-Entry Delivery
Procedure"). The Book-Entry Transfer Facility may charge the account of such
financial institution for submitted Fund shares on behalf of shareholders.
Notwithstanding that delivery of Fund shares may be effected in accordance with
this Book-Entry Delivery Procedure, the DTC Delivery Election Form and
Authorization Instructions Form must be transmitted to and received by the
Depositary at the appropriate address set forth on the last page of this
Repurchase Offer Statement before the Expiration Date or the participating
shareholder must comply with the Guaranteed Delivery Procedure set forth below
(which requires submission of the Authorization Instructions Form).
Delivery of documents to a Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary for purposes of this Repurchase Offer.
D. Guaranteed Delivery Procedure.
If certificates for Fund shares are not immediately available or time will
not permit the Letter of Transmittal and other required documents to reach the
Depositary prior to the Expiration Date, Fund shares may be properly submitted
for redemption provided that:
(i) the submission is made by or through an Eligible Institution, as
defined above;
8
(ii) a properly completed and executed Notice of Guaranteed Delivery, DTC
Delivery Election Form and Authorization Instructions Form, substantially in
the form provided by the Fund, is received by the Depositary by the
Expiration Date; and
(iii) the Fund share certificates evidencing all Fund shares, in proper
form for transfer, or a Book-Entry Confirmation, together with the Letter of
Transmittal properly completed and executed with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message)
and any other documents required by the Letter of Transmittal, are received
by the Depositary within three New York Stock Exchange trading days after
the date of execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mailed to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, repurchase of Fund shares
accepted for repurchase pursuant to the Repurchase Offer will in all cases be
made only after timely receipt by the Depositary of (a) certificates for (or a
timely receipt of confirmation with respect to such Fund shares (b) a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and (c) any other documents required by the
Letter of Transmittal. Accordingly, participating shareholders may be paid at
different times depending upon when certificates for shares or confirmations of
receipt for such shares are actually received by the Depositary.
E. Determination of Validity.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Fund shares presented for redemption will be
determined by the Fund, in its sole discretion, and the determination shall be
final and binding. The Fund reserves the absolute right to reject any or all
presentations for redemption determined not to be in appropriate form or to
refuse to accept for payment, repurchase or pay for any Fund shares if, in the
opinion of the Fund's counsel, accepting, repurchasing or paying for the Fund
shares would be unlawful. The Fund also reserves the absolute right to waive
any of the conditions of the Repurchase Offer or any defect in any redemption,
whether generally or with respect to any particular Fund share(s) or
shareholder(s). The Fund's interpretations of the terms and conditions of the
Repurchase Offer shall be final and binding.
NONE OF THE FUND, THE INVESTMENT ADVISER, THE DEPOSITARY, THE INFORMATION
AGENT, THE CUSTODIAN OR ANY OTHER PERSON IS OR WILL BE OBLIGATED TO GIVE ANY
NOTICE OF DEFECTS OR IRREGULARITIES, OR WAIVERS OF DEFECTS OR IRREGULARITIES IN
A REDEMPTION REQUEST, AND NONE OF THEM WILL INCUR ANY LIAIBLITY FOR FAILURE TO
DO SO.
The method of delivery of Fund shares, the Letter of Transmittal, and any
other required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the participating shareholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a Book-Entry Transfer, by confirmation of receipt of
delivery received by the Depositary). If delivery is by mail, registered mail
with return receipt requested, properly insured, is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery.
F. Federal Income Tax Withholding.
To prevent U.S. federal income tax backup withholding at a rate generally
equal to 30% of the gross payments made pursuant to the Repurchase Offer, each
U.S. shareholder who has not previously submitted a correct, completed and
signed Form W-9 to the Fund or does not otherwise establish an exemption from
withholding must notify the Depositary of the shareholder's correct taxpayer
identification number (or certify that the taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing the
Substitute Form W-9 included in the Letter of Transmittal. Certain U.S.
shareholders (including, among others, all corporations) are not subject to
these backup withholding requirements.
9
Non-U.S. shareholders who have not previously submitted a correct, completed
and signed Form W-8 to the Fund must submit a form to the Depositary in order
to avoid backup withholding. For those shareholders, a copy of Form W-8 is
included with the Letter of Transmittal.
Failure to submit the documentation described above or establish an
exemption necessary to prevent backup withholding will result in an invalid
submission of shares for participation in the Repurchase Offer and,
accordingly, the shareholder's submitted shares will not be accepted for
repurchase.
For a discussion of certain other U.S. federal income tax consequences to
participating shareholders, see Section 9.
4. Withdrawal Rights.
A request for redemption of Fund shares made pursuant to the Repurchase
Offer may be withdrawn at any time prior to the Expiration Date. After the
Expiration Date (including any date to which the Repurchase Offer is extended),
all redemption requests made pursuant to the Repurchase Offer are irrevocable.
However, a request for redemption of Fund shares may be withdrawn if payment
for Fund shares submitted for repurchase has not been made after the expiration
of 40 business days from the commencement of the Repurchase Offer.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at its address set forth
on page 24 of this Repurchase Offer Statement. Any notice of withdrawal must
specify the name of the person who executed the particular Letter of
Transmittal or Notice of Guaranteed Delivery, the number of Fund shares to be
withdrawn, and the names in which the Fund shares to be withdrawn are
registered. Any signature on the notice of withdrawal must be guaranteed by an
Eligible Institution. If certificates have been delivered to the Depositary,
the name of the registered holder and the serial numbers of the particular
certificates evidencing the Fund shares withdrawn must also be furnished to the
Depositary. If Fund shares have been delivered pursuant to the Book-Entry
Delivery Procedure set forth in Section 3 of this Repurchase Offer Statement,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Fund shares
(which must be the same name, number and Book-Entry Transfer Facility from
which the Fund shares were submitted for redemption, and must comply with the
procedures of the Book-Entry Transfer Facility).
Shares may be submitted again after a withdrawal has been made if the
necessary documents and procedures for the submission of shares for
participation in the Repurchase Offer are followed as described in this
Repurchase Offer Statement.
5. Source and Amount of Funds; Effect of the Repurchase Offer.
The actual cost of the Repurchase Offer cannot be determined at this time
because the number of Fund shares to be repurchased will depend on the number
of Fund shares submitted for redemption, and the Repurchase Price will be
determined on the Expiration Date. The total cost to the Fund of repurchasing
100% of its issued and outstanding Fund shares pursuant to the Repurchase Offer
would be approximately $920,723,144.00 (based on the Fund's total net asset
value on April 30, 2002). The Fund has the resources necessary to make payment
for Fund shares submitted for repurchase in the Repurchase Offer since the Fund
will distribute to shareholders participating in the Repurchase Offer the
Portfolio Securities.
Participating shareholders may experience a delay in the reregistration of
the Portfolio Securities received as proceeds from the Repurchase Offer due to
the process of transferring title and verification of Mexican Account
information. Participating shareholders who are not Fund shareholders of
record, but instead hold and present their Fund shares in the name of a broker,
dealer, financial institution or other nominee, will receive the Portfolio
Securities to which they are entitled in the name of their broker, dealer,
financial institution or other nominee. It will be the responsibility of such
brokers, dealers, financial institutions or other nominees to calculate and
10
distribute or credit either fractional shares or cash in respect of fractional
shares, at their election, to their clients' accounts. Participating
shareholders will have to confirm that the correct number of Portfolio
Securities has been credited to the participating shareholders by the
participating shareholder's broker or agent.
The Fund anticipates publishing the identity of the Portfolio Securities via
press release and the Fund's web site on the Expiration Date.
Under no circumstances will the Fund pay interest to participating
shareholders for Fund shares redeemed, regardless of any delay in making
payment therefor. Participating shareholders will not be obligated to pay the
Fund brokerage commissions or fees in connection with their demand to redeem
Fund shares, although a participating shareholder's broker may charge a
processing fee for assistance in transmitting the required documentation for
participation in the Repurchase Offer to the Depositary and a participating
shareholder may incur expenses associated with establishment of the Mexican
Account to receive the Portfolio Securities plus fees, expenses and brokerage
commissions associated with the disposal or retention of such Portfolio
Securities. The fact that Fund shares are being repurchased at 98% of the net
asset value per share reflects that all redemptions effected by the Fund
pursuant to the Repurchase Offer will bear the administrative costs and
expenses incurred in transferring Portfolio Securities from the Fund to the
participating shareholder. The Fund estimates that expenses related to the
Repurchase Offer will be $700,000 including legal, accounting, filing,
printing, Depositary and Information Agent fees. To the extent expenses exceed
2% of the Fund's assets to be repurchased, the Fund will absorb the remaining
expenses.
The repurchase of Fund shares pursuant to the Repurchase Offer will have the
effect of increasing the proportionate interest in the Fund of
non-participating shareholders and reducing the net assets of the Fund. The
reduced net assets of the Fund as a result of the Repurchase Offer will result
in a higher expense ratio for the Fund. Additionally, a reduction in the number
of Fund shares issued and outstanding may reduce the liquidity and the depth of
the trading market for the Fund shares. All Fund shares repurchased by the Fund
pursuant to the Repurchase Offer will be cancelled.
In addition, there is a risk that the Fund's investments and the Portfolio
Securities may experience a decrease in value following the Repurchase Offer
depending on the level of participation in the Repurchase Offer and whether
participating shareholders choose to dispose of the Portfolio Securities
shortly after the Repurchase Offer. Because of the size of the Fund and the
characteristics of the Mexican securities market, if a large percentage of
shareholders participate in the Repurchase Offer and choose to liquidate the
Portfolio Securities shortly after they receive them, there could be an adverse
impact on the Mexican securities market and the market prices of the Portfolio
Securities and the Fund's other investments, which risk affects both
participating and non-participating shareholders.
Finally, because the Fund is offering to repurchase all of its issued and
outstanding shares, there is a risk that the Fund may have to delist its shares
from the New York Stock Exchange or liquidate in its entirety following the
Repurchase Offer, depending on the level of participation. In addition, there
is the risk that the Fund's investment adviser may resign.
PRO FORMA CAPITALIZATION
Adjustment for Adjustment for
Repurchase at Repurchase at
$20.26 per $20.26 per
As of Share(1) assuming Pro Forma as Share(1) assuming Pro Forma as
April 30, 2002 20% Repurchase Adjusted 40% Repurchase Adjusted
-------------- ----------------- ------------ ----------------- ------------
Total Net Assets.. $939,513,412 $(184,188,644) $755,324,768 $(368,377,308) $571,136,104
Shares Outstanding 45,456,232 (9,091,246) 36,364,985 (18,182,493) 27,273,739
- --------
(1) Based on the net asset value per Fund share of $20.67 on April 30, 2002.
11
On the other hand, because the proceeds of the Repurchase Offer are
Portfolio Securities, the Fund will not experience the typical effects
associated with a cash tender offer including the attendant risks of declining
net asset value because of significant market pressure to dispose of
securities, increased Fund brokerage and related transaction expenses, and the
realization of capital gains by the Fund accompanying the liquidation of
portfolio securities for cash.
Participation in the Repurchase Offer will, however, have certain tax
consequences, risks and expenses as further discussed below.
6. Purpose of the Repurchase Offer; Plans or Proposals of the Fund.
In view of the discount levels from net asset value at which Fund shares
have traded, the Board of Directors of the Fund has regularly considered
actions consistent with the interests of all shareholders to reduce or
eliminate these discounts. In 1986, the Fund repurchased 699,700 shares through
a repurchase program which reduced the market discount only temporarily. In
1987, the Fund conducted a tender offer for its shares which briefly narrowed
the market discount. The Board conducted a comprehensive study in 1998
regarding the Fund's market discount and possible solutions which involved
discussions with analysts, consideration of other closed-end funds' actions and
the production of a detailed report containing the Board's discussions and
analysis of the phenomenon. In August 2000, the Fund commenced a share
repurchase program which it completed in May 2001 after repurchasing 10% of the
Fund's issued and outstanding shares of common stock. In March 2001, the Fund
filed an exemptive application with the Securities and Exchange Commission
("SEC") seeking regulatory relief necessary for the Fund to adopt a fundamental
policy committing the Fund to repurchase in-kind on a periodic basis no less
than 5% of the Fund's issued and outstanding shares of common stock each fiscal
year. This Repurchase Offer is the result of an announcement that the Fund
would offer to repurchase in-kind up to 100% of its issued and outstanding
shares of common stock on a quarterly basis.
The Repurchase Offer has been provided to create greater liquidity in Fund
shares by permitting Fund shareholders to redeem their shares other than
through secondary market transactions and has as a goal the reduction of the
discount to net asset value per share at which Fund shares trade on a more
sustained basis although there is no assurance that any of these goals will be
achieved. Payment in Portfolio Securities is expected to prevent the
involuntary recognition and receipt by non-participating shareholders of any
portion of the unrealized capital gains which would be realized if the Fund
sold the Portfolio Securities in order to satisfy redemption requests in cash.
As discussed below, however, the Repurchase Offer is generally a taxable
transaction for participating shareholders. The Fund is continuing to seek
regulatory authorization to conduct future repurchase offers under Rule 23c-3
of the Investment Company Act of 1940, as amended (the "1940 Act"), but will
continue to provide quarterly repurchase offers for up to 100% of the Fund's
shares under Rules 13e-3 and 13e-4 pending resolution of the exemptive
application filed in March 2001.
The Repurchase Offer has been unanimously approved by the Board. However,
none of the members of the Board, the Fund's executive officers or any of its
affiliates has made any recommendations to any shareholders as to whether to
participate in the Repurchase Offer, and the Fund has been advised that none
intends to participate in the Repurchase Offer. In making its decision, the
Board considered the desire of certain Fund shareholders to realize close to
net asset value per share for their Fund shares and the support of Fund
shareholders for a closed-end fund structure which would allow them to invest
in the Mexican securities market. The Board also sought an alternative that
would minimize adverse tax consequences to the Fund and its shareholders. As
discussed above, based on the Fund's experience with other methods to reduce
the Fund's market discount and consideration of the proposed Repurchase Offer,
the Board concluded that the Repurchase Offer is reasonably fair to all
shareholders. The in-kind nature of the Repurchase Offer is expected to prevent
Fund shareholders who do not participate in the Repurchase Offer from
experiencing the adverse tax consequences that would accrue in a cash
repurchase while allowing Fund shareholders who want to sell their Fund shares
to do so at close to net asset value. However, the Repurchase Offer is
generally a taxable transaction for participating shareholders. Additionally,
the Board intends to retain its closed-end structure while providing
12
Fund shareholders an alternative means of liquidity, other than the secondary
market on which the Fund's shares trade by conducting the Repurchase Offer and
seeking exemptive relief to conduct periodic in-kind Fund share repurchases.
Tax consequences to participating shareholders are discussed below. No report,
opinion or appraisal has been obtained or prepared by any party relating to the
Repurchase Offer. The Board did not believe that there was a need for such a
report considering shareholder support for periodic in-kind repurchases as
evidenced by the approval of a periodic repurchase policy by Fund shareholders
at the Fund's annual meeting of shareholders on March 7, 2002.
7. Factors to Consider Regarding the Decision to Participate in the Repurchase
Offer.
The decision whether a Fund shareholder should participate in the Repurchase
Offer depends on the facts and circumstances of each Fund shareholder. The Fund
suggests that shareholders consider the expenses associated with participation
in the Repurchase Offer, including establishment of the Mexican Account, and
other related paperwork, the implications of owning Portfolio Securities and
the tax consequences of participation. Shareholders should also consider that
the Fund will be making future quarterly in-kind repurchase offers.
Without consideration of any potential tax consequences to a shareholder of
participation in the Repurchase Offer, the actual per share expense to a
shareholder of participation depends on a number of factors including the
number of shares submitted for repurchase, the varying expenses associated with
establishing the Mexican Account and/or enlisting the assistance of a U.S. bank
or broker which may charge clients a fee for submitting the documentation
necessary for participation. Moreover, participating shareholders may incur
additional expenses following their participation in the Repurchase Offer
depending on whether they sell or retain the Portfolio Securities.
Participating shareholders may wish to retain the Portfolio Securities as an
investment for the long term. The Fund is not providing shareholders with
specific information regarding each of the Portfolio Securities. However,
participating shareholders may not have the means to effectively monitor, or
monitor as efficiently as with a managed investment vehicle, the performance of
the Portfolio Securities, and the Portfolio Securities would be subject to the
typical investment risks associated with foreign investments in developing
markets, such as the risk of political and economic instability that developing
countries periodically experience. In addition, information regarding the
Mexican companies that comprise the Portfolio Securities may not be as current
as information provided by U.S. public companies and is likely to be available
only in Spanish. Mexican public companies are subject to less stringent
disclosure standards and regulatory oversight than U.S. public companies. There
also may be additional future expenses participating shareholders incur in
retaining the Portfolio Securities. If participating shareholders receive
Portfolio Securities and then determine to liquidate the Portfolio Securities,
participating shareholders would be subject to investment and currency risks as
well as additional expenses and tax consequences associated with liquidation of
the Portfolio Securities. Shareholders will need to conduct their own
investment research regarding the Mexican companies comprising the Portfolio
Securities and/or seek assistance from their financial advisors. Shareholders
are encouraged to consult with their financial and tax advisors regarding these
issues.
The Mexican Account
Participating shareholders must provide information regarding the Mexican
Account where Portfolio Securities may be transferred. Establishing and
maintaining the Mexican Account may entail additional expenses that should be
considered when determining whether participation in the Repurchase Offer
represents the best method to realize the value of the shareholder's investment
in the Fund. Furthermore, the Mexican Account may be subject to different
procedures, laws and risks than a U.S. brokerage account. It may be more
convenient for shareholders to seek the assistance of a U.S. broker or dealer
in meeting this requirement.
Investing in Foreign Securities
The decision to participate in the Repurchase Offer and retain the Portfolio
Securities represents a direct investment in the securities of Mexican issuers.
13
Participating shareholders should be aware of the risks of such a direct
investment and the potential difficulties of managing a portfolio of foreign
securities.
Investment in Mexican securities involves special considerations and risks
that are not normally associated with investments in U.S. securities, including
(1) relatively higher price volatility, lesser liquidity and small market
capitalization of the Mexican securities markets; (2) currency fluctuations and
the cost of converting Mexican pesos into U.S. dollars; (3) restrictions on
foreign investment and potential restrictions on repatriation of capital
invested in Mexico and remittance of profits and dividends accruing thereon;
(4) political, economic and social risks and uncertainties, including risks of
confiscatory taxation and expropriation or nationalization of assets; (5)
higher rates of inflation, unemployment and interest rates than in the United
States; and (6) less stringent disclosure requirements, less available
information regarding Mexican public companies and less active regulatory
oversight of Mexican public companies.
Market Illiquidity; Volatility. The Mexican securities market is
substantially smaller, less liquid and more volatile than the major securities
markets in the United States. Although the Mexican Stock Exchange is one of
Latin America's largest exchanges by market capitalization, it remains
relatively small and illiquid compared to major world markets. In fact, in
recent years trading activity has contracted and market capitalization has
decreased. The market capitalization of the Mexican Stock Exchange at the end
of 2001 amounted to approximately 127 billion U.S. dollars, compared to 220
billion U.S. dollars in February 1994, and the dollar value of daily trading
activity averaged 152.9 million U.S. dollars in 2001 compared to 317.1 million
U.S. dollars in 1994. In addition, trading on the Mexican Stock Exchange is
concentrated. Approximately 80% of the total traded volume of the Mexican Stock
Exchange during 2001 was produced by 10 issuers. Finally, prices of equity
securities traded on the Mexican Stock Exchange are generally more volatile
than prices of equity securities traded on the New York Stock Exchange. The
combination of price volatility and the relatively limited liquidity of the
Mexican Stock Exchange may have an adverse impact on the investment performance
of the Portfolio Securities.
There is a risk that the Fund's investments and the Portfolio Securities may
experience a decrease in value following the Repurchase Offer depending on the
level of participation in the Repurchase Offer and whether participating
shareholders choose to dispose of the Portfolio Securities shortly after the
Repurchase Offer. Because of the size of the Fund and the characteristics of
the Mexican securities market, if a large percentage of shareholders
participate in the Repurchase Offer and choose to liquidate the Portfolio
Securities shortly after they receive them, there could be an adverse impact on
the Mexican securities market and the market prices of the Portfolio Securities
and the Fund's other investments, which risk affects both participating and
non-participating shareholders.
Mexican Economic and Political Factors. Although Mexico's economy has
strengthened in recent years and Mexico's sovereign debt was recently upgraded
to an "investment-grade" rating by the three most prominent rating agencies,
including Standard and Poor's, Mexico continues to be characterized as a
developing economy and investments in developing countries are subject to
certain economic risks. Mexico has experienced widespread bank failures,
currency devaluations, high levels of inflation and interest rates. Mexico is
also dependent on certain industries and exports for the health of its economy.
The Portfolio Securities are denominated in pesos. As a result, the Portfolio
Securities must increase in market value at a rate in excess of the rate of any
decline in the value of the peso against the U.S. dollar in order to avoid a
decline in their equivalent U.S. dollar value.
Mexico's political system has reformed substantially in recent years,
resulting in the peaceful democratic election of the non-dominant political
party's candidate as president in 2000 (the first time the Partido
Revolucionario Institucional's candidate has not held that office in 70 years).
However, Mexico's political past has been characterized by considerable
political uncertainty and instability and there is no guarantee that Mexico
will not experience political unrest in the future which could affect the value
of the Portfolio Securities. As with any foreign investment, there also exists
the risk of expropriation and restrictions on foreign investment.
14
Mexican Securities Laws and Accounting Rules. There is less publicly
available information about the issuers of Mexican securities, such as the
Portfolio Securities, than is regularly published by issuers in the United
States. Information provided by Mexican public companies may not be current,
accurate or easily obtainable and, to the extent available, is likely to be in
Spanish. Also, there is generally less governmental supervision and regulation
of exchanges, brokers and issuers in Mexico than there is in the United States.
U.S. holders of Portfolio Securities may also experience difficulties enforcing
U.S. laws or obtaining service of process against the issuers of the Portfolio
Securities.
Managing and Retaining the Portfolio Securities as an Investment. In
addition to the risk factors discussed above, participating shareholders who
desire to retain the Portfolio Securities as part of their investment portfolio
should consider whether they have the ability to actively manage a portfolio of
foreign securities. Shareholders may have invested in the Fund for exposure to
the Mexican securities market with the assistance of the Fund's investment
adviser, a professional portfolio manager familiar with that market.
Shareholders may not have access to the information and experience necessary to
effectively manage the Portfolio Securities and may incur losses from holding
the Portfolio Securities as an investment.
Tax Consequences of Participating and Retaining or Disposing of Portfolio
Securities. Participation in the Repurchase Offer is generally a taxable event
and participating shareholders will recognize a gain or loss or dividend income
upon receipt of the Portfolio Securities. Additionally, the disposition of the
Portfolio Securities represents a separate taxable event and shareholders will
generally recognize a taxable gain or loss at the time of sale based upon the
difference in the value of the Portfolio Securities received after the
Expiration Date and the value of the Portfolio Securities at their time of sale.
Depending on the level of participation in the Repurchase Offer, the
liquidity of Fund shares is likely to decrease and the Fund expense ratio
increase because there will be fewer Fund shares issued and outstanding as a
result of the repurchases. There is also the risk that a significant amount of
participation could lead to the Fund's liquidation in its entirety and/or the
resignation of the Fund's investment adviser. However, outside of a liquidation
scenario, the Fund has been advised that the Fund's investment adviser does not
anticipate that its investment strategy and the Fund's investment objective
will be materially affected by the Repurchase Offer.
Fund shareholders who desire to sell their Fund shares should evaluate these
factors and their own particular situation to determine if it is
administratively easier and less costly to sell their shares for cash on the
New York Stock Exchange.
NONE OF THE FUND, ITS BOARD OF DIRECTORS, NOR ITS INVESTMENT ADVISER MAKES
ANY RECOMMENDATION TO ANY SHAREHOLDER WHETHER TO PARTICIPATE IN THE REPURCHASE
OFFER, AND NONE OF SUCH PERSONS HAS AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE REPURCHASE OFFER, CONSULT THEIR OWN FINANCIAL AND TAX ADVISORS AND MAKE
THEIR OWN DECISIONS WHETHER OR NOT TO PARTICIPATE.
THE FUND HAS BEEN ADVISED THAT NO DIRECTOR OR OFFICER OF THE FUND NOR THE
FUND'S INVESTMENT ADVISER INTENDS TO PARTICIPATE IN THE REPURCHASE OFFER.
15
8. Net Asset Value and Market Price Range of Shares, Dividends.
The following tables set forth, for the periods indicated, the high and low
net asset value per share as reported by the Fund's investment adviser and the
high and low sales prices per share of the Fund as reported by the New York
Stock Exchange and the amount of any income dividends and distributions of
realized capital gains paid per share during each period. Shares are traded on
the New York Stock Exchange under the symbol "MXF."
Net Dividend Gross Dividend
NAV Market Price Distribution Distributions
------------- --------------- --------------- ---------------
High Low High Low Income Capital Income Capital
------ ------ ------- ------- ------- ------- ------- -------
Fiscal 2000
1st quarter $25.10 $19.71 $14.438 $14.250 $0.0154 $ -- $0.0193 $ --
2nd quarter $26.97 $20.62 $19.250 $13.813 $ -- $ -- $ -- $ --
3rd quarter $24.38 $18.68 $17.188 $12.375 $0.0850 $ -- $0.0900 $ --
4th quarter $23.52 $18.83 $17.625 $13.813 $0.0770 $ -- $0.0790 $ --
Fiscal 2001
1st quarter $21.00 $17.47 $14.625 $14.313 $ -- $0.0500 $ -- $0.0500
2nd quarter $20.91 $18.31 $17.600 $14.800 $ -- $ -- $ -- $ --
3rd quarter $23.79 $20.36 $19.880 $16.790 $0.1135 $0.0031 $0.1279 $0.0031
4th quarter $22.90 $17.14 $19.550 $13.600 $ -- $ -- $ -- $ --
Fiscal 2002
1st quarter $19.70 $16.92 $17.690 $14.570 $0.1207 $2.6667 $0.1339 $2.6667
- --------
Sources: New York Stock Exchange and Impulsora del Fondo Mexico, S.A. de C.V.
IT IS ANTICIPATED THAT NO CASH DIVIDEND WILL BE DECLARED BY THE BOARD OF
DIRECTORS WITH A RECORD DATE OCCURRING BEFORE THE EXPIRATION OF THE REPURCHASE
OFFER AND THAT, ACCORDINGLY, HOLDERS OF SHARES PURCHASED PURSUANT TO THE
REPURCHASE OFFER WILL NOT RECEIVE ANY SUCH DIVIDEND WITH RESPECT TO SUCH
SHARES. THE AMOUNT AND FREQUENCY OF DIVIDENDS IN THE FUTURE WILL DEPEND ON
CIRCUMSTANCES EXISTING AT THAT TIME.
Below is a table representing share repurchases by the Fund in the last two
fiscal years, including the amount of securities purchased, the high and low
repurchase prices paid and the average repurchase price during each fiscal
quarter where Fund share repurchases occurred. The repurchases were part of a
Share Repurchase Program which the Fund announced on July 31, 2000 and
concluded in May 2001 which permitted the Fund to purchase in the open market
up to 10% of its issued and outstanding shares of common stock.
Shares Price Paid
------------------- ---------------
Repurchased High Low Average
----------- ------- ------- -------
Fiscal 2000
1st quarter 0 0 0 0
2nd quarter 0 0 0 0
3rd quarter 0 0 0 0
4th quarter 1,285,000 $16.187 $14.231 $15.459
Fiscal 2001
1st quarter 2,527,900 $16.656 $14.425 $15.365
2nd quarter 564,100 $17.579 $15.360 $16.617
3rd quarter 673,693 $19.575 $16.750 $17.840
4th quarter 0 0 0 0
Fiscal 2002
1st quarter 0 0 0 0
Total...... 5,050,693
16
9. Federal Income Tax Consequences of the Repurchase Offer.
The following discussion is a general summary of the U.S. federal income tax
consequences of the Repurchase Offer. The discussion is for general information
purposes only and does not purport to consider all aspects of U.S. federal
income taxation that might be relevant to shareholders. The discussion is based
upon current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing regulations promulgated thereunder, and administrative and
judicial interpretations thereof, all of which are subject to change, which
change could be retroactive. The discussion applies only to shareholders in
whose possession shares are capital assets within the meaning of Section 1221
of the Code, and may not apply to certain types of shareholders (such as
insurance companies, tax-exempt organizations, and broker-dealers) who may be
subject to special rules. Persons who may be subject to tax in more than one
country should consult the provisions of any applicable tax treaty to determine
the potential tax consequences to them.
You should consult your own tax advisor for a complete description of the
tax consequences to you of a redemption of shares pursuant to the Repurchase
Offer, including potential state, local and non-U.S. taxation by taxing
jurisdictions of which you are a resident or domiciliary.
U.S. SHAREHOLDERS. This subsection will be relevant to individuals who are
citizens of the United States or resident aliens of the United States, domestic
corporations, domestic partnerships, and certain estates and trusts treated as
"US. persons" under the U.S. federal tax law. Under current federal income tax
law, the receipt of Portfolio Securities for Fund shares pursuant to the
Repurchase Offer will generally be a taxable transaction. Shareholders who
redeem their shares receive either "exchange treatment" or "dividend treatment"
with respect to their redemption proceeds (i.e., the Portfolio Securities).
If a redemption satisfies any of paragraphs (1), (2), (3), or (4) of Code
section 302(b), the redemption proceeds shall be treated as payment for the
stock that is redeemed, i.e., the redemption will be accorded exchange
treatment. If a redeeming shareholder is entitled to exchange treatment, such
shareholder would recognize gain or loss for U.S. federal income tax purposes
equal to the difference between: (i) the fair market value of the Portfolio
Securities he or she receives, and (ii) the shareholder's adjusted tax basis in
the shares redeemed. Such gain or loss would be capital gain or loss if the
shares were a capital asset in the hands of the shareholder. Under current law,
the maximum federal income tax rate applicable to most non-corporate taxpayers
on capital gain for assets held more than one year is 20% and the maximum rate
for shares held for shorter periods is generally 38.6%. Gain or loss must be
determined separately for each block of shares (i.e., shares acquired at the
same cost in a single transaction) redeemed pursuant to the Repurchase Offer.
On the other hand, if none of paragraphs (1), (2), (3), or (4) of Code
section 302(b) applies, such redemption may be accorded dividend treatment. If
so, Code section 301 provides that redeeming shareholders shall include the
amount of that distribution (i.e., the fair market value of the Portfolio
Securities received) as ordinary income (generally taxed at the rate of 38.6%)
to the extent of the Fund's earnings and profits. In addition, if certain
shareholders receive dividend (and not exchange treatment) under Code section
302(b), there may be a constructive dividend under section 305(c) of the Code
to shareholders who do not participate in the Repurchase Offer whose
proportionate interest in the earnings and assets of the Fund has been
increased.
Code section 302(b) provides, in pertinent part, that a redemption shall be
accorded exchange treatment if the redemption:
(1) is "not essentially equivalent to a dividend";
(2) is "substantially disproportionate" with respect to the shareholder;
(3) is "in complete redemption" of all of the stock of the corporation owned
by the shareholder, or
(4) in the case of a non-corporate shareholder, is "in partial liquidation"
of the distributing corporation.
In all cases, a redeeming shareholder would take a tax basis in the
Portfolio Securities he or she receives that is equal to the fair market value
of those Portfolio Securities on the date of the exchange.
17
Under the "wash sale" rules, recognition of a loss on shares sold pursuant
to the Repurchase Offer will ordinarily be disallowed to the extent a
shareholder acquires shares within 30 days before or after the date shares are
redeemed pursuant to the Repurchase Offer and, in that event, the basis and
holding period of the shares acquired will be adjusted to reflect the
disallowed loss. There are also restrictions on the ability to deduct any
capital losses. In addition, any loss within six months after the payment of a
capital gain dividend with respect to such shares must also be treated as a
long-term capital loss.
Because the Depositary may be required to withhold 30% of the gross proceeds
paid to a shareholder pursuant to the Repurchase Offer unless either: (a) the
shareholder has completed and submitted to the Depositary the Substitute Form
W-9 included with the Transmittal Letter, providing the shareholder's taxpayer
identification number/social security number and certifying under penalties of
perjury: (i) that the number is correct, and (ii) either that (A) the
shareholder is exempt from backup withholding, (B) the shareholder has not been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding as a result of an underreporting interest or dividends or
(C) the Internal Revenue Service has notified the shareholder that the
shareholder is no longer subject to backup withholding; (b) the shareholder is
a corporation; or (c) an exception applies under applicable law and Treasury
regulations to such shareholders, failure to have provided the information
mentioned in this paragraph will result in a defective submission and the Fund
will be unable to repurchase the participating shareholder's shares. A
beneficial owner who does not provide a correct TIN may be subject to penalties
imposed by the IRS. Any amount paid as backup withholding does not constitute
an additional tax and will be creditable against the beneficial owner's federal
income tax liability. Each beneficial owner of shares should consult with his
or her own tax advisor as to his or her qualification for exemption from backup
withholding and the procedure for obtaining such exemption.
NON-U.S. SHAREHOLDERS. In general, a "Non-U.S. Shareholder" is any person
other than (1) a citizen or resident of the United States; (2) a corporation or
partnership created or organized in the United States under the laws of the
United States or any state; (3) an estate or trust that is subject or
potentially subject to U.S. federal income tax on its worldwide income on a net
basis; or (4) a trust, the administration of which is subject to the primary
supervision of a U.S. court and the substantial decisions of which may be made
by U.S. persons. U.S. taxation of a "Non-U.S. Shareholder" depends on whether
the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by the Non-U.S. Shareholder. Ordinarily, income from the
Fund will not be treated as "effectively connected" and, if that is the case,
any gain realized upon the redemption of shares pursuant to the terms of the
Repurchase Offer will not ordinarily be subject to U.S. taxation. If, however,
the Non-U.S. Shareholder is treated as a non-resident alien individual but is
physically present in the United States for more than 182 days during the
taxable year, then, in certain circumstances, gain from the redemption of
shares pursuant to the terms of the Repurchase Offer and gain from a
liquidation of Portfolio Securities will be subject to U.S. tax of 30% (or
lower treaty rate).
If the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by a Non-U.S. Shareholder, then any gain (or dividend
income) realized upon the sale of shares of the Fund pursuant to the terms of
the Repurchase Offer will be subject to U.S. federal income tax at the
graduated rates applicable to U.S. taxpayers.
Non-U.S. Shareholders may be subject to dividend tax withholding at a 30%
rate or a lower applicable tax treaty rate on the gross proceeds of the
redemption received by such shareholder, if the proceeds are treated as a
"dividend" under the rules described above. In the event that the tax status of
the Repurchase Offer as a dividend is not clear to the Fund at the time of
payment, the Fund will withhold a portion of the proceeds as if the proceeds
constitute a dividend. In that case, the redeeming shareholder may be eligible
to claim a refund of the withheld tax by filing a U.S. tax return if the
shareholder can demonstrate that the proceeds were not dividends. Non-U.S.
Shareholders should consult their tax advisers regarding application of these
withholding rules.
18
Non-U.S. Shareholders should provide the Depositary with a completed Form
W-8 in order to avoid 30% backup withholding. A copy of Form W-8 is provided
with the Letter of Transmittal for such Shareholder. Failure to provide a
completed Form W-8 will result in a defective submission and the Fund will be
unable to repurchase the shares submitted.
Non-U.S. Shareholders are advised to consult their own tax advisers with
respect to the particular consequences to them of a redemption of shares
pursuant to the Repurchase Offer.
10. Selected Financial Information.
Set forth below is a summary of selected financial information for the Fund
for the fiscal years ended October 31, 1997, 1998, 1999, 2000 and 2001. The
information with respect to the fiscal years has been excerpted from the Fund's
audited financial statements contained in its Annual Reports to Shareholders
for these years. These Annual Reports were previously provided to Fund
shareholders. Copies of the audited statements can be obtained free of charge,
each at the web site of the SEC (http://www.sec.gov). The summary of selected
financial information set forth below is qualified in its entirety by reference
to such statements and the financial information, the notes thereto and related
matters contained therein.
19
SUMMARY OF SELECTED FINANCIAL INFORMATION FOR THE PERIODS INDICATED BELOW
For the Three
Months Ended For the Year Ended October 31
The Mexico Fund, Inc. January 31, 2002 ---------------------------------------------------------
Financial Highlights (Unaudited) 2001 2000 1999 1998 1997
-------------------- ---------------- -------- ---------- -------- -------- ----------
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 18.98 $ 20.84 $ 19.57 $ 15.52 $ 23.49 $ 17.33
-------- -------- ---------- -------- -------- ----------
Net investment income (Note 1). 0.01 0.23** 0.18** 0.40 0.39** 0.40
Net gain (loss) on investments
and translation of foreign
currency (Note 1)............ 3.51 (2.31)** 1.10** 4.10 (7.48)** 6.16
-------- -------- ---------- -------- -------- ----------
Total from investment
operations................ 3.52 (2.08)** 1.28** 4.50 (7.09)** 6.56
-------- -------- ---------- -------- -------- ----------
Less Dividends:
Dividends to shareholders from
net investment income........ (0.13) (0.13) (0.19) (0.45) (0.23) (0.38)
Dividends to shareholders
from net realized gains or
investments.................. (2.67) (0.05) -- -- (0.60) (0.02)
-------- -------- ---------- -------- -------- ----------
Total dividends............. (2.80) (0.18) (0.19) (0.45) (0.83) (0.40)
-------- -------- ---------- -------- -------- ----------
Capital Share Transactions:
Effect on NAV of stock
repurchased.................. -- 0.40 0.18 -- -- --
Capital charge resulting from
issuance of fund shares...... -- -- -- -- (0.05) --
-------- -------- ---------- -------- -------- ----------
Net asset value, end of period. $ 19.70 $ 18.89 $ 20.84 $ 19.57 $ 15.52 $ 23.49
======== ======== ========== ======== ======== ==========
Market value per share, end of
period....................... $ 17.40 $ 16.70 $ 15.81 $ 14.31 $ 11.25 $ 18.69
======== ======== ========== ======== ======== ==========
Total investment return
based on market value
per share................. 21.76% 6.64% 11.82% 31.92% (36.70%) 35.03%
Ratios to Average Net Assets:
Expenses....................... 1.25% 1.07% 0.96% 0.98% 0.93% 0.91%
Net investment income.......... 0.11% 1.12% 0.78% 2.14% 1.87% 1.80%
Supplemental Data:
Net assets at end of period (in
000's)....................... $895,395 $862,977 $1,022,136 $988,627 $783,775 $1,167,893
Portfolio turnover rate........ 9.25% 29.69% 22.27% 6.40% 3.69% 7.58%
- --------
* Annualized.
** Amounts were computed based on average shares outstanding during the period.
See Notes to Financial Statements as provided in the Fund's Annual Reports.
20
11. Certain Information Concerning the Fund and the Fund's Investment Adviser.
The Fund is a closed-end, non-diversified management investment company
organized as a Maryland corporation. The Fund's shares were first issued to the
public in June 1981. As a closed-end investment company; it does not redeem its
shares at the election of a shareholder and does not continuously offer its
shares for sale to the public but facilitates secondary market trading in its
shares through its listing on the New York Stock Exchange. The Fund's
investment objective is long-term capital appreciation through investment in
equity securities of Mexican companies listed primarily on the Mexican Stock
Exchange. The principal executive offices and business address of the Fund are
located at 1775 Eye Street, NW, Washington, DC 20006 and the Fund's business
telephone number is 202-261-7941. The Fund has not been involved in any
criminal, judicial or administrative proceeding in the past five years.
Impulsora del Fondo Mexico, S.A. de C.V. serves as the investment adviser to
the Fund (the "Investment Adviser"). The Investment Adviser is a Mexican
corporation and a registered investment adviser under the Investment Advisers
Act of 1940. The principal business address of the Investment Adviser is 77
Aristoteles Street, 3/rd Floor, Col. Polanco, 11560 Mexico D.F., Mexico. The
Investment Adviser has served as the Fund's investment adviser since the Fund's
inception in 1981. /
The Fund is subject to the information and reporting requirements of the
1940 Act and in accordance therewith is obligated to file reports and other
information with the Securities and Exchange Commission relating to its
business, financial condition and other matters. The Fund has also filed this
Repurchase Offer Statement as part of Schedule TO and Schedule 13e-3 with the
Securities and Exchange Commission in connection with the Repurchase Offer.
Such reports and other information should be available for inspection at the
public reference room at the Securities and Exchange Commission's office, 450
Fifth Street, NW, Judiciary Plaza, Washington, DC 20549. The Fund's filings are
also available to the public on the Securities and Exchange Commission's
internet site (http://www.sec.gov). Copies may be obtained, by mail, upon
payment of the Securities and Exchange Commission's customary charges, or by
writing to its principal office at 450 Fifth Street, NW, Judiciary Plaza,
Washington, DC 20549.
21
12. Interests of Directors and Officers; Transactions and Arrangements
Concerning Fund Shares.
The directors and executive officers of the Fund and the aggregate number
and percentage of Fund shares each of them beneficially owns is set forth in
the table below. The address of each of them is in care of the Fund at 1775 Eye
Street, NW, Washington, DC 20006.
Number of Percentage of
Name and Position Shares Beneficially Owned Shares Beneficially Owned
----------------- ------------------------- -------------------------
Juan Gallardo T.,
Chairman of the Board... 15,000 0.032%
Philip Caldwell, Director. 7,159 0.015%
Emilio Carrillo Gamboa*,
Director................ None 0.0%
Claudio X. Gonzalez,
Director................ 22,900 0.050%
Jose Luis Gomez Pimienta,
President and Director.. 9,860 0.021%
Robert L. Knauss, Director 3,024 0.006%
Jaime Serra Puche,
Director................ 1,625 0.003%
Carlos Woodworth Ortiz,
Treasurer............... None 0.0%
Samuel Garcia-Cuellar,
Secretary............... None 0.0%
Hector Trigos, Research
Vice President.......... None 0.0%
Alberto Osorio, Finance
Vice President.......... None 0.0%
Eduardo Solano, Investor
Relations Vice President None 0.0%
- --------
* Newly-elected Director as of March 7, 2002.
During the 60 days prior to the Repurchase Offer, except as provided below,
neither the Fund nor, to the best of the Fund's knowledge, any of the Fund's
officers, directors, affiliates or associates has effected any other
transaction in Fund shares.
To the best of the Fund's knowledge, none of the members of the Board of
Directors, officers of the Fund or affiliates (other than affiliates solely by
reason of owning 5% or more of the Fund's issued and outstanding shares of
common stock) intends to participate in the Repurchase Offer.
None of the Fund nor, to the best of the Fund's knowledge, any of the Fund's
officers or directors is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly to the
Repurchase Offer with respect to any securities of the Fund, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against
loss or the giving or withholding of proxies, consents or authorizations.
13. Certain Legal Matters; Regulatory Approvals.
The Fund has sought exemptive relief from the SEC from the provisions of
Section 17(a) of the 1940 Act to permit certain "affiliated persons" of the
Fund who own 5% or more of the Fund's shares as indicated in public filings
made with the SEC to participate in the Repurchase Offer. The Fund currently
has at least one such 5% shareholder. A notice has been issued by the SEC which
states that interested persons have until May 24, 2002 to request a hearing on
the Fund's exemptive relief request. However, the Fund cannot provide any
assurance that it will receive the requested relief prior to the Expiration
Date. Any shareholder that owns more than 5% of the Fund's issued and
outstanding shares of common stock should consider whether the provisions of
Section 17 of the 1940 Act prohibit that shareholder from participating in the
Repurchase Offer.
22
Other than as mentioned in the immediately prior paragraph, the Fund is not
aware of any approval or other action by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, that
would be material to a shareholder's decision whether to participate in the
Repurchase Offer.
The Fund's obligations under the Repurchase Offer to accept for payment and
pay for Fund shares are subject to certain conditions described in Section 14
of this Repurchase Offer Statement.
14. Certain Conditions of the Repurchase Offer.
Notwithstanding any other provision of the Repurchase Offer, the Fund shall
not be required to accept for payment or pay for any Fund shares, may postpone
the acceptance for payment of, or payment for, Fund shares submitted for
redemption, and may, in its reasonable discretion, terminate or amend the
Repurchase Offer as to any Fund shares not then paid for if (1) such
transactions, if consummated, would impair the Fund's status as a regulated
investment company under the Code (which would make the Fund subject to U.S.
federal (and possibly certain state and local) income taxes on all of its
income and gains in addition to the taxation of Fund shareholders who receive
distributions from the Fund); (2) there is any (a) in the Board of Directors'
judgment, material legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely affecting the
Fund; (b) suspension of or limitation on prices for trading securities
generally on the Bolsa Mexicana de Valores, S.A. and/or the New York Stock
Exchange or other national securities exchange(s), or the NASDAQ National
Market System; (c) declaration of a banking moratorium by federal or state
authorities or any suspension of payment by banks in the United States, Mexico
or New York State; (d) limitation affecting the Fund or the issuers of its
portfolio securities imposed by U.S. or Mexican federal or state authorities on
the extension of credit by lending institutions; (e) commencement or escalation
of war, armed hostilities or other international or national calamity directly
or indirectly involving the United States or Mexico which, based on the Board's
reasonable business judgment, has a material adverse effect on the securities
market in Mexico or the United States or both; or (f) in the Board of
Directors' judgment, other event or condition that would have a material
adverse effect on the Fund or its shareholders if shares submitted for
redemption were repurchased; or (3) the Board of Directors determines that
effecting any such transaction would constitute a breach of any of its
fiduciary duties owed to the Fund or its shareholders.
The foregoing conditions are for the sole benefit of the Fund and may be
asserted by the Fund regardless of the circumstances (including action or
inaction by the Fund) giving rise to any such conditions or may be waived by
the Fund in whole or in part at any time and from time to time in its sole
discretion. The failure by the Fund at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Fund concerning the events
described in this section shall be final and binding on all parties.
A public announcement shall be made of a material change in, or waiver of,
such conditions, and the Repurchase Offer may, in certain circumstances, be
extended in connection with any such change or waiver.
If the Repurchase Offer is suspended or postponed, the Fund will provide
notice to shareholders of such suspension or postponement.
15. Fees and Expenses.
The Fund will not pay to any broker or dealer, commercial bank, trust
company or other person any solicitation fee for any Fund shares repurchased
pursuant to this Repurchase Offer. The Fund will reimburse such persons for
customary handling and mailing expenses incurred in forwarding the Repurchase
Offer. No such broker, dealer, commercial bank, trust company or other person
has been authorized to act as agent of the Fund or the Depositary for purposes
of the Repurchase Offer.
23
The Fund has retained American Stock Transfer & Trust Co. to act as
Depositary and Morrow & Co., Inc. to act as Information Agent. The Depositary
and the Information Agent will each receive reasonable and customary
compensation for their services and will also be reimbursed for certain
out-of-pocket expenses, and the Information Agent will be indemnified against
certain liabilities by the Fund. As previously mentioned in Section 5, the Fund
estimates that expenses pertaining to the Repurchase Offer will be $700,000.
16. Miscellaneous.
The Repurchase Offer is not being extended to (nor will redemption requests
be accepted from or on behalf of) holders of Fund shares in any jurisdiction in
which the offering of the Repurchase Offer or the acceptance thereof would not
be in compliance with the laws of such jurisdiction. The Fund may, in its sole
discretion, take such action as it may deem necessary to make the Repurchase
Offer in any such jurisdiction.
The Fund is not aware of any jurisdiction in which the making of the
Repurchase Offer or the acceptance of Fund shares in connection therewith would
not be in compliance with the laws of such jurisdiction. Consequently, the
Repurchase Offer is currently being made to all holders of Fund shares.
However, the Fund reserves the right to exclude Fund shareholders in any
jurisdiction in which it is asserted that the Repurchase Offer cannot lawfully
be made. So long as the Fund makes a good faith effort to comply with any state
law deemed applicable to the Repurchase Offer, the Fund believes that the
exclusion of Fund shareholders residing in such jurisdiction is permitted under
Rule 13e-4(f)(9) promulgated under the Exchange Act.
17. Contacting the Depositary and the Information Agent.
The Letter of Transmittal, certificates for the Fund shares and any other
required documents should be sent by each shareholder or his or her
broker-dealer, commercial bank, trust company or other nominee to the
Depositary as set forth below.
The Depositary for the Repurchase Offer is:
American Stock Transfer & Trust Co.
Delivery by Mail, Hand or Courier
American Stock Transfer & Trust Co.
59 Maiden Lane--Plaza Level
New York, NY 10038
Telephone Number:
800-937-5449
Facsimile Number
(For Eligible Institutions Only):
718-234-5001
For Confirmation:
718-921-8200
24
Any questions or requests for assistance or additional copies of this
Repurchase Offer Statement, the Letter of Transmittal, the Notice of Guaranteed
Delivery, and other documents may be directed to the Information Agent at its
telephone number and location listed below. Shareholders may also contact their
broker, dealer, commercial bank or trust company or other nominee for
assistance regarding the Repurchase Offer.
The Information Agent for the Repurchase Offer is:
Morrow & Co., Inc.
445 Park Avenue
5/th Floor /
New York, New York 10022
E-mail: MXF.INFO@morrowco.com
Call Collect 212-754-8000
Banks and Brokerage Firms, Please Call Toll Free: 800-654-2468
Shareholders, Please Call Toll Free: 800-607-0088
THE MEXICO FUND, INC.
May 8, 2002
25