N-2/A

As filed with the Securities and Exchange Commission on September 1, 2005
and as amended on October 31, 2005
1933 Act File No. 333-128040
1940 Act File No. 811-06111

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-2

þ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
þ PRE-EFFECTIVE AMENDMENT NO. 1                   
o POST-EFFECTIVE AMENDMENT NO. __________

þ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
o AMENDMENT NO. _______

THE MEXICO EQUITY & INCOME FUND, INC.

(Exact Name of Registrant as Specified in Charter)
615 East Michigan St., 2^nd Floor
Milwaukee, WI 53202
(Address of Principal Executive Offices)
Registrant’s Telephone Number, including Area Code: (888) 294-8217

The Mexico Equity & Income Fund, Inc.
615 East Michigan St., 2^nd Floor
Milwaukee, WI 53202
(Name and Address of Agent for Service)
Copies of information to:

Thomas R. Westle, Esq.
Rustin I. Paul, Esq.
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
(212) 885-5239

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. o

It is proposed that this filing will become effective (check appropriate box):

þwhen declared effective pursuant to section 8(c).

If appropriate, check the following box:

o This post-effective amendment designates a new effective date for a previously filed post-effective amendment registration statement.

o This form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is __________.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

			Proposed
	Amount of	Proposed	Maximum
	Rights/Shares	Maximum	Aggregate	Amount of
	Being	Offering Price	Offering	Registration
Title of Securities Being Registered	Registered	Per Share (3)	Price (3)	Fee (4)
Rights to Purchase Preferred Stock (1)	1,855,128(2)	0.00	0.00	0.00
Preferred Stock	1,855,128	$ 20.35	$ 37,750,000	$ 4,443.17

(1)	Evidencing the rights to subscribe for shares of Preferred Stock of the Registrant being registered herewith. Pursuant to Rule 457(g) of the Securities Act of 1933, no separate registration fee is required for the rights because the rights are being registered in the same registration statement as the Preferred Stock of the Registrant underlying the rights.
(2)	Represents 0.75 Subscription Rights for each share of common stock of Registrant outstanding as of the Record Date.
(3)	Estimated solely for the purpose of calculating the registration fee. Based on 90% of net asset value per Fund share on October 28, 2005.
(4)	Calculated in accordance with Rule 457(c) of the Securities Act of 1933, as amended, based on the estimated maximum aggregate offering price of the common stock of the Registrant.

WE HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL WE SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.

The Mexico Equity & Income Fund, Inc.
Cross Reference Sheet

     PART A — INFORMATION REQUIRED IN A PROSPECTUS

No.	Description	Location
Item 1.	Outside Front Cover	Outside Front Cover
Item 2.	Cover Pages; Other Offering Information	Inside Front and Outside Back Cover
Item 3.	Fee Table and Synopsis	Fees and Expenses
Item 4.	Financial Highlights	Financial Highlights
Item 5.	Plan of Distribution	Outside Front Cover; Prospectus Summary
Item 6.	Selling Stockholders	Not Applicable
Item 7.	Use of Proceeds	Use of Proceeds
Item 8.	General Description of the Registrant	Outside Front Cover Page; Prospectus Summary; Risk Factors; Business of the Fund
Item 9.	Management	Management
Item 10.	Capital Stock, Long-Term Debt and Other Securities	Description of our Capital Stock
Item 11.	Defaults and Arrears on Senior Securities	Not Applicable
Item 12.	Legal Proceedings	Legal Proceedings
Item 13.	Table of Contents of the Statement of Additional Information	Not Applicable

     PART B — INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION ^*

No.	Description	Location
Item 14.	Cover Page	Outside Front Cover
Item 15.	Table of Contents	Table of Contents
Item 16.	General Information and History	Prospectus Summary; Business of the Fund
Item 17.	Investment Objective and Policies	Prospectus Summary; Investment Objective and Policies; Risk Factors; Business of the Fund
Item 18.	Management	Management
Item 19.	Control Persons and Principal Holders of Securities	Control Persons and Principal Stockholders

No.	Description	Location
Item 20.	Investment Advisory and Other Services	Prospectus Summary; Business of the Fund; Investment Advisory Agreement
Item 21.	Portfolio Managers	Prospectus Summary; Business of the Fund; Investment Advisory Agreement
Item 22.	Brokerage Allocation and Other Practices	Fees and Expenses; Prospectus Summary; Brokerage Allocation and Other Practices
Item 23.	Tax Status	Distributions; Material United States Federal Income Tax Consequences
Item 24.	Financial Statements	Financial Statements

PART C — OTHER INFORMATION

Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C of this Registration Statement.

* PURSUANT TO THE GENERAL INSTRUCTIONS TO FORM N-2, ALL INFORMATION REQUIRED TO BE SET FORTH IN PART B “STATEMENT OF ADDITIONAL INFORMATION” HAS BEEN INCLUDED IN THE PROSPECTUS AND, ACCORDINGLY, NO STATEMENT OF ADDITIONAL INFORMATION HAS BEEN FILED AS PART OF THIS REGISTRATION STATEMENT.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT ISSUE THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR ISSUE THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO PURCHASE OR ACCEPT THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PRELIMINARY PROSPECTUS              SUBJECT TO COMPLETION              October 31, 2005

1,855,128 Shares Issuable Upon Exercise of Rights to Purchase Preferred Stock

The Mexico Equity & Income Fund, Inc.

Each of our stockholders as of ___, 2005 (the “Record Date”) shall receive, at no cost, 0.75 nontransferable rights (each whole right, a “Subscription Right”) to purchase one share of Preferred Stock for each share of our common stock such stockholder owns as of the Record Date (the “Basic Subscription Right”). We will not issue fractional shares upon the exercise of your Basic Subscription Right or Over-Subscription Privilege (as defined below). We intend to offer shares of Preferred Stock to these stockholders for a price equal to the greater of (a) 90% of the Fund’s net asset value per share (“NAV”) as determined on the Expiration Date (as defined below) or (b) the average closing price of our common stock over the four consecutive trading days ending on the Expiration Date. The offer to purchase Preferred Stock will expire at 5:00 p.m., New York City time, on December ___, 2005, unless we decide to extend it to some later date (the “Expiration Date”).

If you elect to purchase the maximum amount of our Preferred Stock that you are entitled to pursuant to your Basic Subscription Right, you will also be entitled to subscribe, subject to allotment, to purchase additional shares of our Preferred Stock, if any, that are not purchased by our other stockholders pursuant to their Basic Subscription Right as of the Expiration Date (the “Over-Subscription Privilege”). If you do not fully subscribe for your Basic Subscription Right, your ownership may be diluted. See “Risk Factors — Dilution of Ownership.”

We intend to file an application to list our Preferred Stock on the New York Stock Exchange under the symbol “MXEP,” but we cannot assure you that the Preferred Stock will be listed for trading or that a liquid market for our Preferred Stock will develop. Since August 21, 1990, our common stock has traded on the NYSE under the symbol “MXE.”

An investment in the Fund involves risks. See “Risk Factors” beginning on page 9.

We will conduct a series of tender offers for Preferred Stock only (each, a “Tender Offer”) on a semi-annual basis, on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, in which 25% of the issued and outstanding Preferred Stock as of the date the Preferred Stock is issued may be tendered to the Fund and repurchased in kind for the Fund’s portfolio securities. Each stockholder participating in a Tender Offer may have his or her tendered shares of Preferred Stock repurchased by the Fund in kind for portfolio securities having a value equal to 99% of NAV as determined on the date of each Tender Offer.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The Mexico Equity & Income Fund, Inc. is registered under the Investment Company Act of 1940, as amended, as a closed-end, non-diversified management investment company. Our investment objective is high total return through capital appreciation and current income by investing at least 80% of the Fund’s assets in equity and convertible securities issued by Mexican companies and debt securities of Mexican issuers.

This Prospectus sets forth concisely the information about the Fund that a prospective investor ought to know before investing. Additional information about the Fund has been filed with the SEC and is available upon written or oral request and without charge by calling our administrator at (888) 294-8217. Our SEC filings, including annual and semi-annual reports to stockholders, are also available to the public on the SEC’s Internet website at http://www.sec.gov and can be inspected at the offices of the NYSE, 20 Broad Street, New York, NY 10005. We do not have a website. This Prospectus should be retained for future reference.

     You should rely only on the information contained in this Prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This Prospectus is not an offer to sell or issue, or a solicitation of an offer to buy or accept, any securities in any jurisdiction where it is unlawful to make such an offer or solicitation.

TABLE OF CONTENTS

Prospectus Summary	1
The Offering	3
Fees and Expenses	6
Financial Highlights	7
Risk Factors	9
Preferred Stock Rights Offering	12
Material United States Federal Income Tax Consequences	19
Use of Proceeds	23
Price Range of Common Stock	23
Distributions	23
Business of the Fund	24
Management	25
Compensation of Directors	29
Investment Advisory Agreement	29
Administration Agreement	31
Control Persons and Principal Stockholders	31
Determination of Net Asset Value	33
Description of our Capital Stock	33
Limitation on Liability of Directors and Officers; Indemnification and Advancement of Expenses	34
Provisions of the Maryland General Corporation Law and our Charter and Bylaws	35
Regulation	36
Share Repurchases	41
Custodian, Transfer and Dividend Paying Agent and Registrar	42
Brokerage Allocation and Other Practices	43
Privacy Policy	43
Legal Matters	44
Experts	44
Available Information	44
Forward-Looking Statements	44
Financial Statements	45

Prospectus Summary

     This summary highlights some of the information in this Prospectus. It may not contain all of the information that you may want to consider. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this Prospectus. The terms “we,” “us,” the “Fund” and “our” refer to The Mexico Equity & Income Fund, Inc. “PAM” or the “investment adviser” refers to Pichardo Asset Management, S.A. de C.V.

The Company

General

     We were incorporated in Maryland on May 24, 1990 and commenced investment operations on August 21, 1990. We are registered under the Investment Company Act of 1940, as amended ( the “1940 Act”), as a closed–end, non-diversified management investment company. Our common stock is listed and trades on the NYSE under the trading symbol “MXE.”

Our Investment Objective

     Our investment objective is high total return through capital appreciation and current income. We seek to achieve our investment objective by investing at least 80% of our assets in equity and convertible securities issued by Mexican companies and debt securities of Mexican issuers.

Our Adviser

     Our investment adviser is Pichardo Asset Management, S.A. de C.V., a corporation organized under the laws of Mexico. PAM is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Maria Eugenia Pichardo, who owns 99% of PAM, has acted as the Fund’s portfolio manager since the inception of the Fund in 1990. Under our Investment Advisory Agreement, we pay PAM a monthly fee at an annual rate of 0.80% of the value of our average daily net assets. See “Investment Advisory Agreement.”

Rights Offering of Preferred Stock

     Each of our stockholders as of the Record Date shall receive, at no cost, 0.75 nontransferable rights (each whole right, a “Subscription Right”) to purchase one share of Preferred Stock for each share of our common stock such stockholder owns as of the Record Date (the “Basic Subscription Right”). We will not issue fractional shares of our Preferred Stock upon the exercise of any Rights (as defined below). The number of Rights issued to Record Date stockholders will be rounded down to the nearest whole number of Rights. We intend to offer shares of Preferred Stock to these stockholders for a price (the “Subscription Price”) equal to the greater of (a) 90% of the Fund’s net asset value per share (“NAV”) as determined on the Expiration Date (as defined herein) or (b) the average closing price of our common stock as of the Expiration Date. The “average closing price” of our common stock shall be calculated as an average of the last reported sale prices of a share of our common stock on the NYSE over the four consecutive trading days ending on the Expiration Date. The offer to purchase Preferred Stock will expire at 5:00 p.m., New York City time, on December ___, 2005, unless we decide to extend it to some later date (the “Expiration Date”).

     If you elect to purchase the maximum amount of our Preferred Stock that you are entitled to purchase pursuant to your Basic Subscription Right, you will also be entitled to subscribe, subject to allotment, to purchase additional shares of our Preferred Stock, if any, that are not purchased by our other stockholders pursuant to their Basic Subscription Right as of the Expiration Date (the “Over-Subscription Privilege”). See “Preferred Stock Rights Offering – Over-Subscription Privilege.” If you do not fully subscribe for your Basic Subscription Right, your ownership is likely to be diluted. See “Risk Factors – Dilution of Ownership.” The Basic Subscription Right and the Over-Subscription Privilege shall be collectively referred to herein as the “Rights.”

     The Fund will conduct a series of tender offers for Preferred Stock only (each, a “Tender Offer”) on a semi-annual basis (each semi-annual period, a “Tender Period”), on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, in which 25% of the issued and outstanding Preferred Stock on the date the Preferred Stock is issued may be tendered to the Fund and repurchased

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in kind for the Fund’s portfolio securities. The consideration for the Preferred Stock to be repurchased by the Fund shall be that value of portfolio securities equal to 99% of NAV as determined, with respect to each Tender Offer, on a date designated by the Board. The Fund may pay cash for fractional shares; or round off (up or down) fractional shares so as to eliminate them prior to distribution. See “Preferred Stock Rights Offering – Semi Annual Tender Offer.”

How to Subscribe

Ø	Deliver a completed Subscription Certificate (enclosed) and payment to the Subscribing Agent at the address below (Attn: Reorg. Dept.) so that it is received by the Expiration Date (we recommend using an insured courier), or
Ø	If your shares are held in an account with your broker-dealer, trust company, bank or other nominee, have your broker-dealer, trust company, bank or other nominee deliver a Notice of Guaranteed Delivery to the Subscribing Agent by the Expiration Date.

Subscribing Agent

Computershare Trust Company of New York, 88 Pine Street — 19th Floor, New York NY 10005 (the “Subscribing Agent”).

Important Dates to Remember

Record Date	, 2005
Subscription Period	, 2005-December ___, 2005*
Expiration Date/ Deadline to Purchase Preferred Stock†	December ___, 2005*
Deadline for Notice of Guaranteed Delivery†	December ___, 2005
Deadline for Payment to Notice of Guaranteed Delivery	, 2005
Confirmation Mailed to Participating Holders	, 2005

*	Unless the offer is extended.
†	A person purchasing Preferred Stock pursuant to his or her Rights must deliver either (i) Subscription Certificate and payment for the Preferred Stock or (ii) a Notice of Guaranteed Delivery by the Expiration Date, unless the offer is extended.

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The Offering

Preferred Stock to be issued by Us	1,855,128 shares of Preferred Stock
Description of Preferred Stock	Shares of the Preferred Stock will have identical rights, voting powers, restrictions, and qualifications of the common stock of the Fund except for the liquidation, repurchase and conversion preference features described in “Liquidation Preference,” “Repurchase” and “Automatic Conversion” below.
Purpose of the Offering/Use of Proceeds	As of July 31, 2005, portfolio sales have resulted in the probability that we will be required, under Subchapter M of the Code, to distribute the capital gains realized on such sales to our stockholders. We are required to distribute at least 98% of the our realized capital gains, if any, for the one-year period ending on October 31 of each calendar year. If we do not distribute any realized capital gains by January 31, 2006, we will not be able to meet the Subchapter M requirements with respect to calendar year 2005. We are making this offering to raise cash to permit us to meet our distribution requirements of capital gains realized, if any, in an effort (i) to avoid an excise tax and to meet our Subchapter M requirements and (ii) to avoid having to sell portfolio securities which would further decrease the Fund’s assets to invest and would result in additional realized capital gains. See “Preferred Stock Rights Offering – Purpose of the Offering/Use of Proceeds.” Any remaining proceeds, after meeting our current distribution requirements, will be invested in accordance with the Fund’s investment objectives and policies as stated herein. See “Business of the Fund.”
Basic Subscription Right	Each of our stockholders as of the Record Date shall receive, at no cost, 0.75 nontransferable rights (each whole right, a “Subscription Right”) to purchase one share of Preferred Stock for each share of our common stock such stockholder owns as of the Record Date (the “Basic Subscription Right”). We will not issue fractional shares of our Preferred Stock upon the exercise of Rights. The number of Rights issued to Record Date stockholders will be rounded down to the nearest whole number of Rights. We intend to offer shares of Preferred Stock to these stockholders for a price (the “Subscription Price”) equal to the greater of (a) 90% of the Fund’s net asset value per share (“NAV”) as determined on the Expiration Date or (b) the average closing price of our common stock over the four consecutive trading days ending on the Expiration Date.
Over-Subscription Privilege	If you elect to purchase the maximum amount of our Preferred Stock that you are entitled to purchase pursuant to your Basic Subscription Right, you will also be entitled to subscribe, subject to allotment, to purchase additional shares of our Preferred Stock, if any, that are not purchased by our other stockholders pursuant to their Basic Subscription Right as of the Expiration Date (the “Over-Subscription Privilege”). See “Preferred Stock Rights Offering – Over-Subscription Privilege.” If you do not fully subscribe for your Basic Subscription Right, your ownership is likely to be diluted. See “Risk Factors – Dilution of Ownership.”
Expiration Date	5:00 p.m., New York City time, on December ___, 2005, unless we decide to extend it to some later date.
Liquidation Preference	In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the holders of Preferred Stock will be entitled to receive preferential liquidating distribution, which is expected to equal the original Subscription Price per share of Preferred Stock before any distribution of assets is made to the holders of our common stock. After payment of the full amount of the liquidating distribution to which they are

3

	entitled, the holders of shares of Preferred Stock will not be entitled to any further participation in any distribution of assets by the Fund. See “Preferred Stock Rights Offering – Description of Preferred Stock.”
Voting Rights	The 1940 Act requires that the holders of any Preferred Stock, voting separately as a single class, have the right to elect at least two directors at all times. The remaining directors will be elected by holders of common stock and Preferred Stock, voting together as a single class. The 1940 Act also requires that, in addition to any approval by stockholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Stock voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the Preferred Stock, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things, changes in the Fund’s subclassification as a closed-end investment company or changes in its fundamental investment restrictions. As a result of these voting rights, the Fund’s ability to take any such actions may be impeded to the extent that there is any Preferred Stock outstanding. The Board presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law or the Fund’s Articles of Incorporation or bylaws, holders of Preferred Stock will have equal voting rights with our holders of common stock (one vote per share, unless otherwise required by the 1940 Act) and will vote together with our holders of common stock as a single class. See “Preferred Stock Rights Offering – Description of Preferred Stock.”
Repurchase	The Fund will conduct a series of tender offers for the Preferred Stock only (each, a “Tender Offer”) on a semi-annual basis (each semi-annual period, a “Tender Period”), on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, in which 25% of the issued and outstanding Preferred Stock on the date the Preferred Stock is issued may be tendered to the Fund and repurchased in kind for the Fund’s portfolio securities. The consideration for the Preferred Stock to be repurchased by the Fund shall be that value of portfolio securities equal to 99% of NAV as determined, with respect to each Tender Offer, on a date designated by the Board.
	The Fund may pay cash for fractional shares; or round off (up or down) fractional shares so as to eliminate them prior to distribution. See “Preferred Stock Rights Offering – Semi Annual Tender Offer.”
Automatic Conversion	In the event the Put Warrant Program (as defined herein) is approved by the SEC and upon the anticipated issuance of put warrants by the Fund, all issued and outstanding shares of Preferred Stock will automatically convert to our common stock on a one-to-one basis., and, shortly thereafter, stockholders will receive put warrants. See “Preferred Stock Rights Offering - Put Warrant Program.”
Risk Factors	See “Risk Factors” beginning on page 9 and the other information included in this Prospectus for a discussion of risks that you should carefully consider about us and about this offering.
Non-Transferability of the Rights	Your Rights are non-transferable. If you do not exercise them, you give up any right to the underlying shares of Preferred Stock.
Termination of the Offering	The Board of Directors may decide to terminate this offering at any time, on or before the Expiration Date. If we terminate the offering, our only obligation to you will be to return any payment, without interest.

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Distribution Arrangements	We do not intend to engage a dealer manager for the offer. Our officers and directors may solicit the exercise of Rights by our stockholders. The offer is not contingent on any number of Rights being exercised. We will pay all expenses incurred in connection with the offer.
Listing	It is the Fund’s intention to list the Preferred Stock for trading on the NYSE under the symbol “MXEP” prior to the issuance of the Preferred Stock.
Trading	We cannot assure you that the Preferred Stock will develop any liquidity in the secondary market. In addition, we cannot predict how the issuance of the Preferred Stock will affect the market value of our common stock.
Material United States Federal Income Tax Consequences	The receipt and election to purchase Preferred Stock are intended to be nontaxable events. If you sell the Preferred Stock after purchasing them, you will recognize gain or loss. You should obtain specific tax advice from your personal tax advisor. See “Material United States Federal Income Tax Consequences —Taxation of Stockholders” below.
Available Information	We are subject to the reporting requirements of the 1940 Act and are required to file reports, proxy statements and other information with the SEC. This information will be available at the SEC’s public reference room at 100 F St. NE, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. Our SEC filings are also available to the public on the SEC’s Internet website at http://www.sec.gov and can be inspected at the offices of the NYSE, 20 Broad Street, New York, NY 10005.
Management Arrangements	Pichardo Asset Management, S.A. de C.V. (“PAM”) serves as our investment adviser. U.S. Bancorp Fund Services, LLC (“Administrator”) serves as our administrator. For a description of PAM or the Administrator and our contractual arrangements with these companies, see “Investment Advisory Agreement” and “Administration Agreement.”
Subscribing Agent	Computershare Trust Company of New York, 88 Pine Street — 19th Floor, New York NY 10005.
Dilution	As a result of the terms of this offer, stockholders who do not fully exercise their Rights will own, upon completion of this offer, a smaller proportional interest in us than they owned prior to the offer. In addition, because the Subscription Price may be less than NAV per share, the offer may result in an immediate dilution of NAV. See “Risk Factors – Dilution of Ownership.”

5

Fees and Expenses

     The following table is intended to assist prospective investors in understanding the costs and expenses associated with this offering and an investment in the Fund.

Stockholder transaction expenses(1):

Total stockholder transaction expenses	$	0
Annual expenses (as a percentage of net assets of the Fund), as of July 31, 2005:
Management fees		0.80	%
Interest payments on borrowed funds		—	(2)
Other expenses		0.97	%
Total annual expenses		1.77	%

(1)	We will pay all transactions expenses incurred in connection with this offering.
(2)	We do not plan to incur any indebtedness, or to pay interest in respect thereof, during the term after this offering.

Example

     The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in the Fund. These amounts are based upon payment by an investor of a $1,000 as an investment in the Fund and our payment of annual operating expenses at the levels set forth in the table above which, as indicated above, does not include leverage or related expenses.

	1 year		3 years		5 years		10 years
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return	$	18	$	56	$	96	$	208

This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses may be greater or less than those shown. Moreover, while the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%.

     We will not pay any broker or dealer, commercial bank, trust company or other person any solicitation fee for any Preferred Stock purchased pursuant to this offering. No such broker, dealer, commercial bank, trust company or other person has been authorized to act as our agent for purposes of this offering.

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Financial Highlights
For a Share Outstanding Throughout Each Year

	For Year			For Year			For Year			For Year						For Year			For Year			For Year			For Year			For Year
	Ended			Ended			Ended			Ended			For Year			Ended			Ended			Ended			Ended			Ended
	July 31,			July 31,			July 31,			July 31,			Ended			July 31,			July 31,			July 31,			July 31,			July 31,
	2005			2004			2003			2002			July 31, 2001			2000			1999			1998			1997			1996
Per Share Operating Performance
Net asset value, beginning of year	$	13.66		$	10.15		$	8.74		$	10.19		$	11.36		$	8.64		$	10.16		$	16.83		$	11.96		$	11.31
Net investment income (loss)		0.01			(0.02	)		0.00	(1)		(0.03	)		(0.02	)		0.03			0.22			0.23			0.43			0.81
Net realized and unrealized gains (losses) on investments and foreign currency transactions		7.60			3.55			1.41			(1.42	)		(0.64	)		2.62			(0.87	)		(3.34	)		5.55			0.67
Net increase (decrease) from investment operations		7.61			3.53			1.41			(1.45	)		(0.66	)		2.65			(0.65	)		(3.11	)		5.98			1.48
Less: Distributions Dividends from net investment income		—			(0.02	)		—			—			(0.01	)		(0.12	)		—			(0.19	)		(0.44	)		—
Distributions from net realized gains		—			—			—			—			(0.60	)		—			(0.93	)		(3.37	)		(0.67	)		(0.09	)
Return of capital		—			—			—			—			(0.01	)		—			—			—			—			—
Total dividends and distributions		—			(0.02	)		—			—			(0.62	)		(0.12	)		(0.93	)		(3.56	)		(1.11	)		(0.09	)
Capital share transactions Anti-dilutive effect of Tender Offer		—			—			—			—			0.09			—			0.04			—			—			—
Anti-dilutive effect of dividend reinvestment		—			—			—			—			—			—			—			—			—			—
Dilutive effect of rights Offering		—			—			—			—			—			—			—			—			—			(0.74	)
Anti-dilutive effect of Share Repurchase Program		—			—			—			—			0.02			0.19			0.02			—			—			—
Total capital share transactions		—			—			—			—			0.11			0.19			0.06			—			—			(0.74	)
Net asset value, end of year	$	21.27		$	13.66		$	10.15		$	8.74		$	10.19		$	11.36		$	8.64		$	10.16		$	16.83		$	11.96
Per share market value, end of year	$	18.82		$	11.73		$	9.10		$	7.95		$	9.11		$	10.69		$	7.06		$	7.75		$	14.125		$	9.625
Total Investment Return Based on Market Value, end of year*		60.44	%		29.10	%		14.47	%		(12.73	)%		(8.64	)%		53.36	%		7.24	%		(26.23	)%		62.52	%		(8.26	)%

7

Financial Highlights (concluded)
For a Share Outstanding Throughout Each Year

										For the
	For Year			For Year			For year			Year			For Year			For Year			For Year			For Year			For Year			For Year
	Ended			Ended			Ended			Ended			Ended			Ended			Ended			Ended			Ended			Ended
	July 31,			July 31,			July 31,			July 31,			July 31,			July 31,			July 31,			July 31,			July 31,			July 31,
	2005			2004			2003			2002			2001			2000			1999			1998			1997			1996
Ratios/Supplemental Data
Net assets, end of year (in 000s)	$	52,621		$	33,779		$	25,104		$	21,629		$	87,620		$	114,112		$	97,150		$	120,148		$	199,066		$	141,448
Ratios of expenses to average net assets:
Before expense Reimbursement		1.77	%		2.09	%		2.64	%		1.81	%		1.90	%		2.03	%		1.88	%		1.46	%		1.49	%		1.56	%
After expense Reimbursement		1.77	%		2.08	%		2.62	%		1.81	%		1.90	%		2.03	%		1.88	%		1.46	%		1.49	%		1/56	%
Ratios of net investment income (loss) to average net assets:
Before expense Reimbursement		0.03	%		(0.15	)%		0.02	%		(0.14	)%		(0.16	)%		0.27	%		2.72	%		1.65	%		3.29	%		7.32	%
After expense Reimbursement		0.03	%		(0.14	)%		0.04	%		(0.14	)%		(0.16	)%		0.27	%		2.72	%		1.65	%		3.29	%		7.32	%
Portfolio turnover		259.60	%		234.42	%		180.67	%		189.05	%		220.85	%		249.28	%		163.23	%		88.85	%		127.44	%		42.59	%

*

Total investment return is calculated assuming a purchase of common stock at the current market price on the first day and a sale at the current market price on the last day of each period reported. Dividends and distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.

(1)

The amount listed is less than $0.005 per share.

8

Risk Factors

     An investment in the Fund involves risks. You should carefully consider these risk factors, together with all of the other information included in this Prospectus. If any of the following adverse events and circumstances described in the risk factors occur, our business, financial condition and results of operations could be materially adversely affected, and our NAV and the trading price of our common stock and the Preferred Stock could decline.

RISKS RELATED TO THIS OFFERING

     Decline in Preferred Stock Trading Price: The public trading price for our Preferred Stock cannot yet be determined as there is currently no market for the Preferred Stock. After you purchase Preferred Stock, and once a market is established for the Preferred Stock, the public trading price of our Preferred Stock may decline. If our trading price declines below the Subscription Price, you will suffer an immediate unrealized loss.

     Absence of Existing Public Market; Market Prices: There is no existing market for the Preferred Stock. There can be no assurance that an active and liquid trading market for the Preferred Stock will develop or that quotation of the Preferred Stock will be available on the NYSE. Future trading prices of the Preferred Stock will depend on many factors including, among other things, prevailing interest rates, the operating results and financial condition of the Fund, and the market for similar securities.

     No Revocation: Once you elect to purchase Preferred Stock, you may not revoke the election, even if you later learn information about us that you consider to be unfavorable.

     Value versus Subscription Price: The Subscription Price was not determined based on established criteria for valuation, such as expected future operations, cash flows or financial condition. You should not rely on the Subscription Price to bear a relationship to those criteria or to be a guaranty of the value of the Fund or of our Preferred Stock.

     Termination of Offering: Our Board of Directors may terminate the offering at any time. If we decide to terminate the offering, we have no obligation to you except to return, without interest, your subscription payments.

     Discount to Net Asset Value: The Fund’s shares of common stock have historically traded on the NYSE at a discount to the Fund’s NAV per share, and the discount has at times exceeded 20%. There is no assurance that this offering of Preferred Stock or any subsequent Tender Offer will have any effect on the persistent discount to NAV experienced by the Fund.

     Dilution of Ownership: As a result of the terms of this offer, stockholders who do not fully exercise their Rights will own, upon completion of this offer, a smaller proportional interest in our voting stock than they owned prior to the offer. In addition, because the Subscription Price may be less than NAV per share, the offer may result in an immediate dilution of NAV per share for all of our stockholders. Such dilution is not currently determinable because it is not known how many shares of Preferred Stock will be subscribed for, what the market price of our Preferred Stock will be on the Expiration Date or what the Subscription Price will be. Such dilution will disproportionately affect non-exercising stockholders.

     Unwillingness of Brokers to Hold Foreign Securities: As more fully stated in “Preferred Stock Rights Offering — Semi Annual Tender Offer,” stockholders participating in the Tender Offers will receive the Fund’s portfolio securities in exchange for tendering their Preferred Stock to the Fund for repurchase. The majority of such portfolio securities will be securities of Mexican issuers. Your broker may be unwilling to hold such foreign securities for you.

RISKS RELATED TO THE FUND’S INVESTMENTS

     Investments in Foreign Securities Risks: We invest a majority of our assets in foreign securities of Mexican issuers. Investing in the Mexican financial market presents political, regulatory and economic risks which are significant and which may differ in kind and degree from the risks presented by investing in the U.S. financial

9

markets. Some of these risks may include changes in foreign currency exchange rates or controls, greater price volatility, differences in accounting standards and policies, and in the type and nature of disclosures required to be provided by Mexican issuers, substantially less liquidity, controls on foreign investment, and limitations on repatriation of invested capital. Our exposure to developing country financial markets may involve greater risk than a portfolio that invests only in developed country financial markets. Some of these risks are detailed below:

     Market Illiquidity, Volatility. Although one of the largest in Latin America by market capitalization, the Bolsa Mexicana de Valores, S.A. de C.V. (the “Mexican Stock Exchange” or “Bolsa”) is substantially smaller, less liquid and more volatile than the major securities markets in the United States. In addition, trading on the Mexican Stock Exchange is concentrated. Approximately 80% of the total traded volume of the Mexican Stock Exchange in 2004 was produced by fourteen issuers as of December 31, 2004. At such date, the stock of Teléfonos de Mexico, S.A. de C.V. (“Telmex”) and its affiliates accounted for approximately 23.225% of the aggregate market capitalization of the Mexican Stock Exchange, while no single stock issue accounted for more than 2.6% of the aggregate market capitalization of the NASDAQ and the NYSE. Thus, the performance of the Mexican Stock Exchange, as further described below, is highly dependent on the performance of a few issuers. Additionally, prices of equity securities traded on the Mexican Stock Exchange are generally more volatile than prices of equity securities traded on the NYSE. 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 Fund.

     Market Corrections. Although less so in recent times, the Mexican securities market has been subject to periodic severe market corrections. In the two months following the general destabilization of the Mexican economy in December 1994, the Bolsa’s Index declined 36.3% in nominal peso terms and 58.0% in dollar terms from December 20, 1994 to February 27, 1995 before beginning to recover. Due to the high concentration of investors, issuers and intermediaries in the Mexican securities market and the general high volatility of the Mexican economy, the Mexican securities market may be subject to severe market corrections than more broadly based markets. As is the case with investing in any securities market, there can be no assurance that market corrections will not occur again.

     The Mexican Economy. The Mexican economy is currently stable as a result of initiatives implemented in the last few years, successful free trade agreements with other countries, economic and fiscal discipline and stable political and social conditions. Nevertheless, in the past the Mexican economy has experienced peso devaluations, significant rises in inflation and domestic interest rates and other economic instability and there can be no assurance that the economy will remain stable. In addition, although Mexico has exhibited in recent times positive market indicators in terms of GDP growth, long-term interest rates, current account deficits, exports, and foreign investment, there is no assurance that these trends will continue. Overt unemployment continues to exist at levels of over three percent and more than one million new jobs will be required annually according to economic estimates. The economy has recently witnessed significant increases in energy, transportation and telecommunications costs and there is significant pressure to increase wage and energy productivity.

     Smaller Capitalization Risks: We may invest in securities without regard to market capitalization. Investments in securities of smaller companies may be subject to more abrupt or erratic market movements then larger, more established companies, because these securities typically are traded in lower volume and issuers are more typically subject to changes in earnings and future earnings prospects.

     Borrowing Risks: Because we may borrow money from banks or other financial institutions to purchase securities, commonly referred to as “leveraging,” our exposure to fluctuations in the prices of these securities is increased in relation to our capital. Our borrowing activities will exaggerate any increase or decrease in our net asset value. In addition, the interest which we must pay on borrowed money, together with any additional fees to maintain a line of credit or any minimum average balances required to be maintained, are additional costs which will reduce or eliminate any net investment profits. Unless profits on assets acquired with borrowed funds exceed the costs of borrowing, the use of borrowing will diminish our investment performance compared with what it would have been without borrowing.

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     High Portfolio Turnover Rate Risk: Our portfolio management may result in high turnover rates which may increase our short-term capital appreciation and increase brokerage commission costs. If we have a higher portfolio turnover rate, then our performance could be negatively impacted due to the increased expenses incurred as a result of the higher brokerage commissions. Rapid portfolio turnover also exposes stockholders to a higher current realization of capital gains and this could cause you to pay higher taxes.

     Credit Risk: Debt obligations are generally subject to the risk that the issuer may be unable to make principal and interest payments when they are due. There is also the risk that the securities could lose value because of a loss of confidence in the ability of the borrower to pay back debt. Non-investment grade debt — also known as “high-yield bonds” and “junk bonds” — have a higher risk of default and tend to be less liquid than higher-rated securities.

     Interest Rate Risk: Fixed income securities are subject to the risk that the securities could lose value because of interest rate changes. For example, bonds tend to decrease in value if interest rates rise. Debt obligations with longer maturities sometimes offer higher yields, but are subject to greater price shifts as a result of interest rate changes than debt obligations with shorter maturities.

     Initial Public Offerings Risks: We may purchase securities of companies in initial public offerings. Special risks associated with these securities may include a limited number of shares available for trading, unseasoned trading, lack of investor knowledge of the company and limited operating history. These factors may contribute to substantial price volatility for the shares of these companies. The limited number of shares available for trading in some initial public offerings may make it more difficult for the us to buy or sell significant amounts of shares without unfavorable impact on prevailing market prices. Some companies in initial public offerings are involved in relatively new industries or lines of business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental stage companies without revenues or operating income, or the near-term prospects of achieving them.

     Restricted Securities Risks: We may invest in securities that are subject to restrictions on resale, such as Rule 144A securities. Rule 144A securities are securities that have been privately placed but are eligible for purchase and sale by certain qualified institutional buyers under Rule 144A under the Securities Act of 1933. Under the supervision of the Board of Directors, we will determine whether securities purchased under Rule 144A are illiquid. Our ability to invest in illiquid securities is limited to 15% of our total assets. If it is determined that qualified institutional buyers are unwilling to purchase these securities, the percent of our assets invested in illiquid securities would increase.

     Shares of Other Investment Companies: We may invest in shares of other investment companies as a means to pursue our investment objective. As a result of this policy, your cost of investing will generally be higher than the cost of investing directly in the underlying investment company shares. You will indirectly bear fees and expenses charged by the underlying investment companies in addition to our direct fees and expenses. Furthermore, the use of this strategy could affect the timing, amount and character of distributions to you and therefore may increase the amount of taxes payable by you.

     Discount Risk: Historically, our shares, as well as those of other closed-end investment companies, have frequently traded at a discount to their NAV, which discount often fluctuates over time. See “Financial Highlights.”

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Preferred Stock Rights Offering

Purpose of Offering/Use of Proceeds

     As of July 31, 2005, portfolio sales have resulted in the probability that we will be required, under Subchapter M of the Code, to distribute the capital gains realized on such sales to our stockholders. We are required to distribute at least 98% of the our realized capital gains, if any, for the one-year period ending on October 31 of each calendar year. If we do not distribute any realized capital gains by January 31, 2006, we will not be able to meet the Subchapter M requirements with respect to calendar year 2005. We are making this offering to raise cash to permit us to meet our distribution requirements of capital gains realized, if any, in an effort (i) to avoid an excise tax and to meet our Subchapter M requirements and (ii) to avoid having to sell portfolio securities which would further decrease the Fund’s assets to invest and would result in additional realized capital gains.

     Any remaining proceeds, after meeting our current distribution requirements, will be invested in accordance with the Fund’s investment objectives and policies as stated herein. It is anticipated that such remaining proceeds will be invested in equity and convertible securities issued by Mexican companies and securities of Mexican issuers.

Basic Subscription Right

     Each of our stockholders as of the Record Date shall receive, at no cost, 0.75 nontransferable rights ( each whole right, a “Subscription Right”) to purchase one share of Preferred Stock for each share of our common stock such stockholder owns as of the Record Date (the “Basic Subscription Right”). We will not issue fractional shares of our Preferred Stock upon the exercise of Rights. The number of Rights issued to Record Date stockholders will be rounded down to the nearest whole number of Rights. We intend to offer shares of Preferred Stock to these stockholders for a price (the “Subscription Price”) equal to the greater of (a) 90% of the Fund’s net asset value per share (“NAV”) as determined on the Expiration Date or (b) the average closing price of our common stock as of the Expiration Date. The “average closing price” of our common stock shall be calculated as an average of the last reported sale prices of a share of our common stock on the NYSE over the four consecutive trading days ending on the Expiration Date. The offer to purchase Preferred Stock will expire at 5:00 p.m., New York City time, on December ___, 2005, unless we decide to extend it to some later date (the “Expiration Date”).

     The Fund announced the offer after the close of trading on the NYSE on ___, 2005. The NAV per share of our common stock at the close of business on ___, 2005 (the last trading date on which the Fund publicly reported its NAV prior to the announcement) and on ___, 2005 (the last trading date on which the Fund publicly reported its NAV prior to the date of this Prospectus) was $___ and $___, respectively, and the last reported sales price of a share of our common stock on the NYSE on those dates was $___ and $___, respectively.

     Because we will not determine the actual Subscription Price until the Expiration Date, stockholders who wish to purchase Preferred Stock pursuant to their Rights will not know the Subscription Price per share at the time they elect to purchase the Preferred Stock. As a result, we are requiring that stockholders deliver an estimated Subscription Price of $20.35 per share. If the actual Subscription Price is lower, excess payments will be refunded without interest, and if the actual Subscription Price is higher, stockholders purchasing Preferred Stock must make an additional payment with five (5) business days of the Expiration Date to get the full number of shares.

     The purpose of setting the determination of the Subscription Price upon the expiration of the offer is to attract the maximum participation of stockholders in the offer, with minimum dilution to nonparticipating stockholders.

     All questions as to the validity, form, eligibility (including time of receipt), payment and acceptance for payment of any Preferred Stock will be determined by us, in our sole discretion, which determination shall be final and binding. We reserve the absolute right to reject any and all requests for participation in this offering and to issue a lower number of shares of Preferred Stock, with our only obligation being to return any excess payment without

12

interest. We shall be under no duty to give notification of any defects or irregularities in any request for participation in this offering, nor shall we incur any liability for failure to give any such notification.

Description of Preferred Stock

     The Preferred Stock is a new class of our capital stock designated by the Board specifically for issuance pursuant to this offering. The Preferred Stock has identical rights and qualifications of our common stock, except as set forth in paragraphs (a), (b), (c) and (d) below (See “Description of our Capital Stock”):

(a) Liquidation Preference: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the holders of Preferred Stock will be entitled to receive preferential liquidating distribution, which is expected to equal the original Subscription Price per share of Preferred Stock before any distribution of assets is made to the holders of our common stock. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of Preferred Stock will not be entitled to any further participation in any distribution of assets by the Fund.

(b) Voting Rights: The 1940 Act requires that the holders of any Preferred Stock, voting separately as a single class, have the right to elect at least two directors at all times. The remaining directors will be elected by holders of common stock and Preferred Stock, voting together as a single class. The 1940 Act also requires that, in addition to any approval by stockholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Stock voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the Preferred Stock, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things, changes in the Fund’s subclassification as a closed-end investment company or changes in its fundamental investment restrictions. As a result of these voting rights, the Fund’s ability to take any such actions may be impeded to the extent that there is any Preferred Stock outstanding. The Board presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law or the Fund’s Articles of Incorporation or bylaws, holders of Preferred Stock will have equal voting rights with our holders of common stock (one vote per share, unless otherwise required by the 1940 Act) and will vote together with our holders of common stock as a single class.

(c) Repurchase. On a semi-annual basis, on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, the Fund will conduct special Tender Offers for Preferred Stock as further described in “Semi-Annual Tender Offer” below.

(d) Automatic Conversion. If the Put Warrant Program (as described below) is approved by the SEC, the Preferred Stock will automatically convert into common stock on a one-to-one basis upon the anticipated issuance of put warrants by the Fund, and, shortly thereafter, stockholders will receive put warrants. Holders of the Preferred Stock will have no other conversion rights. See “Put Warrant Program” below.

     Immediately following the issuance of the Preferred Stock to purchasing stockholders and in accordance with the rules promulgated under the 1940 Act, (i) the Fund shall have an asset coverage of at least 200 percent, (ii) the Fund will be prohibited from declaring any dividend (except a dividend payable in our common stock) or any other distribution upon the our common stock, unless the Preferred Stock has at the time of any such declaration an asset coverage of at least 200 percent after deducting the amount of such dividend or distribution, as the case may be, (iii) holders of Preferred Stock will be entitled, voting as a class, to the voting rights outlined in (b) above, and (iv) holders of Preferred Stock will have the liquidation preference outlined in (a) above.

Over-Subscription Privilege

     If you elect to purchase the maximum amount of our Preferred Stock that you are entitled to purchase pursuant to your Basic Subscription Right, you will also be entitled to subscribe, subject to allotment, to purchase additional shares of our Preferred Stock, if any, that are not purchased by our other stockholders pursuant to their Basic Subscription Right as of the Expiration Date (the “Over-Subscription Privilege”). If the number of shares of

13

our Preferred Stock available for sale pursuant to the Over-Subscription Privilege is not sufficient to satisfy in full all subscriptions submitted for additional shares, we will allocate any available shares pro rata among stockholders who exercise their Over-Subscription Privilege in proportion to the number of shares each stockholder subscribing for additional shares was entitled to and elected to purchase under his or her Basic Subscription Right; up to the number of additional shares that the stockholder subscribed for pursuant to the exercise of his or her Over-Subscription Privilege, rounded down to the nearest whole share.

     Banks, brokers, trustees and other nominee holders of Rights will be required to certify to the Subscribing Agent, before any Over-Subscription Privilege may be exercised with respect to any particular beneficial owner, as to the aggregate number of Subscription Rights exercised and the number of Preferred Stock subscribed for pursuant to the Over-Subscription Privilege by such beneficial owner and that such beneficial owner’s Basic Subscription Right was exercised in full. A Notice of Guaranteed Delivery form will be distributed to banks, brokers, trustees and other nominee holders with the Subscription Certificate.

     We have been advised that the directors who own shares of our common stock intend to exercise all of the Rights initially issued to them. If additional shares of Preferred Stock remain after all over-subscriptions exercised by stockholders other than the directors are honored in full, the directors may, on the Expiration Date, purchase all or any of the remaining shares of Preferred Stock on the same terms offered to all stockholders.

Semi-Annual Tender Offer

     The Fund will conduct a series of tender offers for the Preferred Stock only (each, a “Tender Offer”) on a semi-annual basis (each semi-annual period, a “Tender Period”), on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, in which 25% of the issued and outstanding Preferred Stock as of the date the Preferred Stock is issued may be tendered to the Fund and repurchased for the Fund’s portfolio securities. Each stockholder participating in a Tender Offer may have his or her tendered shares of Preferred Stock repurchased by the Fund in kind for portfolio securities having a value equal to 99% of NAV as determined, with respect to each Tender Offer, on a date designated by the Board.

     The Fund may pay cash for fractional shares of securities; or round off (up or down) fractional shares so as to eliminate them prior to distribution.

     We intend to file an exemptive application with the Division of Investment Management of the SEC seeking the ability of stockholders who are “affiliated persons” of the Fund solely by reason of owning, controlling or holding with the power to vote 5% or more of our common stock to have their Preferred Stock repurchased by the Fund for portfolio securities pursuant to the Tender Offers. We cannot assure you that the SEC will grant our request for exemptive relief. If the SEC does not grant relief pursuant to the exemptive application, we will pay such 5% holders cash for their Preferred Stock tendered.

     Although the intention of the Board is to conduct a semi-annual Tender Offer in which 25% of the issued and outstanding Preferred Stock may be tendered to the Fund and repurchased for the Fund’s portfolio securities, the Board may, in its sole discretion, direct the Fund to conduct a Tender Offer for less than 25% of the issued and outstanding Preferred Stock. For example, if the SEC does not grant our request for exemptive relief as explained above, the Fund will be required to pay the 5% holders cash for their Preferred Stock if tendered. In such a case, the Fund may not have enough cash to pay such holders if the Tender Offer is conducted for 25% of the issued and outstanding Preferred Stock. In order to avoid this dilemma, the Fund may reduce the Tender Offer to as little as 5% of the issued and outstanding Preferred Stock. In no event, except in the event of a Tender Termination Event (as defined below), shall any Tender Offer be conducted in which less than 5% of the issued and outstanding Preferred Stock may be tendered to the Fund.

     Each Tender Offer shall be governed by substantially the same terms and conditions that governed the Fund’s previous tender offer which commenced on February 19, 2002 and expired on March 20, 2002. See “Share Repurchases.”

14

     In the event that the average trade weighted discount to the last published NAV per Fund share is less than 5% for any five consecutive trading days during any Tender Period (a “Tender Termination Event”), the Fund will not conduct a Tender Offer during that Tender Period. In the event of a Tender Termination Event, a Tender Offer will be conducted during the next Tender Period (unless a Tender Termination Event exists during such next Tender Period).

     We normally publish our NAV on the last business day of each week (generally Friday) at the close of regular trading on the NYSE. The NAV per Fund share is available daily through the Administrator by calling toll free 888-294-8217. As an example, the NAV per Fund share on October 28, 2005 was $22.61.

Put Warrant Program

     In 2001, the Fund’s Board of Directors approved the creation and registration of a put warrant program (the “Put Warrant Program”) whereby the Fund would issue without charge one put warrant for each whole share of common stock issued by the Fund held by each stockholder of record as of a date selected by our Board. As envisioned, each put warrant would allow our stockholders to “put” (sell) on a quarterly basis one share of our common stock to us for an amount of cash equal to our NAV per share. Our Board believes that the Put Warrant Program would give a holder the ability to realize NAV without us incurring the substantial expenses associated with conducting a traditional tender offer pursuant to the requirements contained in the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

     In March 2004, we filed a No-Action Request Letter with the SEC’s Division of Corporate Finance, and, in May 2004, we filed an exemptive application with the Division of Investment Management seeking the ability to issue and register the put warrants. To date, we have received no definitive answer on whether the Fund may administer the Put Warrant Program from either Division of the SEC, and there is no guarantee that the SEC will decide to grant exemptive relief.

     In the event the Put Warrant Program is approved by the SEC, and upon the anticipated issuance of put warrants by the Fund, all issued and outstanding shares of Preferred Stock will automatically convert to common stock on a one-to-one basis, and, shortly thereafter, stockholders will receive put warrants.

Asset Coverage

     Immediately following the issuance of the Preferred Stock to purchasing stockholders and in accordance with the rules promulgated under the 1940 Act, the Fund shall have an asset coverage of at least 200 percent.

No Fractional Shares

     We will not issue fractional shares of our Preferred Stock upon the exercise of Rights. The number of Rights issued to Record Date stockholders will be rounded down to the nearest whole number of Rights.

Non-Transferability of Rights

     The Rights granted in this offer are non-transferable. If you do not exercise them, you give up any right to the underlying shares of Preferred Stock.

Expiration Date of the Offering

     You may elect to purchase Preferred Stock pursuant to your Basic Subscription Right and/or Over-Subscription Privilege at any time before 5:00 p.m., New York City time, on December ___, 2005 (the “Expiration Date”). The Board reserves the right to extend the date upon which the Rights expire. If you do not elect to purchase Preferred Stock pursuant to your Rights before the time they expire, then your Rights will be null and void. We will not be obligated to honor your election to purchase Preferred Stock if we receive the documents relating to your purchase of Preferred Stock or collect your payment after the time they expire, regardless of when you transmitted the documents. See “Receipt of Payment” below.

15

     Any extension of the offer will be followed as promptly as practicable by announcement thereof, and in no event later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Date. Without limiting the manner in which the Fund may choose to make such announcement, the Fund will not, unless otherwise required by law, have any obligation to publish, advertise or otherwise communicate any such announcement other than by making a release to the Dow Jones News Service or such other means of announcement as the Fund deems appropriate.

     Although we have no present intention to do so, we may, in the future and in our discretion, choose to make additional offerings from time to time for a number of shares and on terms which may or may not be similar to this offer. Any such future offering will be made in accordance with the 1940 Act.

Distribution Arrangements

     We do not intend to engage a dealer manager for the offer. Our officers and directors may solicit the exercise of Rights by our stockholders. The offer is not contingent on any number of Rights being exercised, and we will pay all expenses incurred in connection with the offer.

Election to Purchase Preferred Stock

     You may elect to purchase Preferred Stock by delivering the following to the Subscribing Agent at or before the Expiration Date:

• your properly completed and signed Subscription Certificate, with any required signature guarantees, evidencing those rights with any other supplemental documentation; and

• your payment in full of the Subscription Price for each share of our Preferred Stock that you choose to subscribe for under your Basic Subscription Right and your Over-Subscription Privilege.

Method of Payment

     Your payment of the Subscription Price must be made by either:

• check or bank draft drawn upon a U.S. bank or postal, telegraphic, or express money order payable to: “The Mexico Equity and Income Fund, Inc.”; or

• wire transfer of immediately available funds to the account maintained by the Subscribing Agent for such purpose at: [ ].

• If you hold our common stock through a nominee holder, you will need to have your broker, custodian bank or other nominee act for you. To indicate your decision with respect to your Rights, you should have your broker, custodian bank or other nominee deliver a Notice of Guaranteed Delivery to the Subscribing Agent by the Expiration Date.

Receipt of Payment

	Your payment of the Subscription Price will be deemed to have been received by us only upon:
•	clearance of any uncertified check;
•	receipt by us of any certified check or bank draft drawn upon a U.S. bank or any postal, telegraphic or express money order; or
•	receipt of collected funds in our account designated above.

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Clearance of Uncertified Checks

     You should note that funds paid by uncertified personal checks may take 5 business days or more to clear. If you wish to pay the Subscription Price by an uncertified personal check, we recommend that you make payment at least 10 days in advance of the Expiration Date to ensure that your payment is received and clears by that time. If your check does not clear before the Expiration Date, you will not receive any shares of Preferred Stock, and our only obligation will be to return your subscription payment, without interest. It is safer to use a certified or cashier’s check, money order or wire transfer of funds to avoid missing the opportunity to purchase Preferred Stock.

Delivery of Subscription Materials and Payment

     You should deliver the Subscription Certificate and payment of the Subscription Price, as well as any other subscription documentation as follows:

If by Mail, Hand Delivery or Overnight Delivery, to:

Computershare Trust Company of New York
88 Pine Street — 19th Floor
New York NY 10005
Attn: Reorg. Dept.

Calculation of Preferred Stock Purchased

     If you do not indicate the number of shares of Preferred Stock being subscribed for, or do not forward full payment of the aggregate Subscription Price for the number of shares of Preferred Stock that you indicate are subscribed for, then you will be deemed to have purchased the maximum number of shares of the Preferred Stock that may be purchased for the payment that you delivered to our Subscribing Agent.

Funds Will Be Held by our Subscribing Agent until Shares of Preferred Stock Are Issued

     Our Subscribing Agent will hold your payment in a segregated account with other payments received from stockholders until we issue to you your shares of our Preferred Stock.

Notice to Nominee Holders

     If you are a broker, a trustee or a depositary for securities who holds shares of our common stock for the account of others as of the Record Date, you should notify the respective beneficial owners of the shares about the rights offering as soon as possible to find out their intentions. You should obtain instructions from the beneficial owner with respect to the rights by using the instructions that we have provided to you for your distribution to beneficial owners. If the beneficial owner so instructs, you should complete the appropriate Subscription Certificate and Notice of Guaranteed Delivery, if applicable, and submit them to our Subscribing Agent with the proper payment.

Notice to Beneficial Owners Whose Shares are Held by a Broker or Nominee

     If you are a beneficial owner of shares of our common stock or rights that you hold through a nominee holder, we will ask your broker, custodian bank or other nominee to notify you of this offering. If you wish to purchase Preferred Stock, you will need to have your broker, custodian bank or other nominee act for you. To indicate your decision with respect to your rights, you should complete and return to your broker, custodian bank or other nominee the Subscription Certificate. You should receive this form from your broker, custodian bank or other nominee with the other rights offering materials. We suggest that you contact your broker or other nominee to be sure that they are sending you the election form without delay. If you are giving instructions to your nominee, you should act promptly to allow a sufficient amount of time to ensure that the nominee can act to follow your instructions in time.

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Notice of NAV Decline

     The Fund, as required by the SEC’s registration form, will suspend the offer until it amends this Prospectus if, subsequent to the date of this Prospectus, the Fund’s NAV declines more than 10% from its NAV as of that date. Accordingly, the Expiration Date would be extended and the Fund would notify Record Date stockholders of the decline and permit stockholders to cancel their exercise of Rights.

Mailing of Confirmation

     On a date within eight (8) business days following the Expiration Date (“Confirmation Date”), the Subscribing Agent will send to each exercising Rights holder (or, if shares of common stock are held by a nominee, to such nominee) a confirmation showing (i) the number of shares of Preferred Stock purchased pursuant to the Basic Subscription Right; (ii) the number of shares, if any, acquired pursuant to the Over-Subscription Privilege (for Record Date stockholders who are exercising all of the Rights originally issued to them); (iii) the per share and total Subscription Price for the shares and (iv) any additional amount payable to the Fund by the Rights holder or any excess to be refunded by the Fund to the Rights holder, in each case based on the Subscription Price as determined on the Expiration Date. If any Rights holder, if eligible, exercises his right to acquire shares of Preferred Stock pursuant to the Over-Subscription Privilege, any excess payment which would otherwise be refunded to him will be applied by the Fund toward payment for shares acquired pursuant to the exercise of the Over-Subscription Privilege. Any additional payment required from a Rights holder must be received by the Subscribing Agent within ten (10) business days after the Confirmation Date. Any excess payment to be refunded by the Fund to a Rights holder will be mailed by the Subscribing Agent to the Rights holder as promptly as practicable. All payments by an exercising Rights holder must be in U.S. dollars by money order or check drawn on a bank or branch located in the United States and payable to “The Mexico Equity and Income Fund, Inc.”

Determinations Regarding the Election to Purchase Preferred Stock

     We will decide all questions concerning the timeliness, validity, form and eligibility of your election to purchase Preferred Stock. Our decisions will be final and binding. We, in our sole discretion, may waive any defect or irregularity, or permit a defect or irregularity to be corrected within such time as we may determine. We may reject the election to purchase Preferred Stock because of any defect or irregularity. Your election will not be deemed to have been received or accepted until all irregularities have been waived by us or cured by you within such time as we decide, in our sole discretion.

     Neither we nor our Subscribing Agent will be under any duty to notify you of a defect or irregularity. We will not be liable for failing to give you any such notice. We reserve the right to reject your election to purchase Preferred Stock if your election is not in accordance with the terms of the offering or in proper form. We will also not accept your election to purchase Preferred Stock if our issuance of shares of our Preferred Stock upon your election could be deemed unlawful or materially burdensome.

Termination

     We may terminate this offering at any time prior to the Expiration Date. If we terminate the offering, our only obligation to you will be to return your subscription payment to you, without interest.

Effects of this Offer on the Fund Adviser

     Our investment adviser will benefit from this offer because a portion of the investment management fee we pay to the investment adviser is based on our gross assets. See “Investment Advisory Agreement.” It is not possible to state precisely the amount of additional compensation the investment adviser will receive as a result of this offer because it is not known how many shares of Preferred Stock will be subscribed for. However, assuming (i) all Rights are exercised, (ii) the average value of our gross assets remains between $50 million and $55 million, and (iii) the Subscription Price is $20.35 per share, and after giving effect to expenses related to this offer, the investment adviser would receive additional annualized advisory fees of $302,015 and the amount of the administrative fee received would be an additional fee of $45,302. Maria Eugenia Pichardo, President of the

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Fund, is also an officer and owner of our investment adviser. None of our directors who approved this offer are affiliated with the investment adviser.

No Recommendations to Holders

     WE MAKE NO RECOMMENDATION TO ANY PERSON TO PARTICIPATE IN THIS OFFERING, AND WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. POTENTIAL HOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN THE REGISTRATION STATEMENT, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN DECISIONS WHETHER OR NOT TO PARTICIPATE IN THIS OFFERING.

Material United States Federal Income Tax Consequences

     The following discussion is a summary of certain material U.S. federal income tax consequences to a typical “U.S. holder” (defined below) that Receives rights pursuant to this offering and that either (i) exercises such Rights, (ii) allows such Rights to expire, or (iii) sells, exchanges, redeems or otherwise disposes of such Rights.

     This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code,” applicable current, temporary and proposed Treasury regulations promulgated thereunder, which we refer to as the “Treasury Regulations,” the legislative history of the Code and publicly available administrative and judicial interpretations thereof, all as in effect of the date of this prospectus and all of which are subject to change, possibly with retroactive effect, or to different interpretations. In addition, the administrative interpretations and practices of the Internal Revenue Service include its practices and policies as expressed in private letter rulings which are not binding on the Internal Revenue Service, except with respect to the particular taxpayers who requested and received these rulings. This discussion is included for general information purposes only and does not purport to be a complete technical analysis or listing of all potential tax considerations that may be relevant to U.S. holders in light of their particular circumstances. This discussion does not address any state, local or foreign tax consequences or any non-income tax consequences (such as estate or gift tax consequences). This discussion applies only to U.S. holders that hold shares of our common stock as capital assets and that will hold the Rights distributed pursuant to this offering as capital assets (and, in the event such rights are exercised, will hold newly acquired shares of our common stock as capital assets), in each case, within the meaning of Section 1221 of the Code. This discussion also does not address the United States federal income tax consequences to a U.S. holder that is one of our affiliates or that is subject to special rules under the Code, including but not limited to:

• A financial institution, insurance company, or regulated investment company;

• Persons who are subject to alternative minimum tax;

• A tax-exempt organization, retirement plan, or mutual fund;

• A dealer, broker, or trader in securities;

• Non-U.S. holders (as defined below);

• An entity treated as a partnership for U.S. federal income tax purposes;

• A stockholder that owns its shares of our common stock indirectly through an entity treated as a partnership for United States federal income tax purposes, or a trust or estate;

• Persons deemed to sell their shares of common stock under the constructive sale provisions of the Code;

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• A stockholder that holds its shares of our common stock as part of a hedge, appreciated financial position, straddle or conversion transaction; or

• A stockholder that acquired our common stock pursuant to the exercise of compensatory stock options or otherwise as compensation.

     We will not seek a ruling from the Internal Revenue Service, or the “IRS,” with respect to the rights offering. The IRS could take positions concerning the tax consequences of this offering that are different from those described in this discussion, and, if litigated, a court could sustain any such positions taken by the IRS.

     For purposes of this discussion, the term “U.S. holder” means a holder of shares of our common stock that, for U.S. federal income tax purposes, is:

• A citizen or resident of the U.S.;

• A corporation or other entity treated as a corporation for U.S. federal income tax purposes created or organized in the U.S. or under U.S. laws or the laws of any state or political subdivision thereof;

• An estate the income of which is subject to U.S. federal income taxation regardless of its source; or

• A trust (i) if, in general, a court within the U.S. is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all of its substantial decisions or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

     A “non-U.S. holder” is a holder other than a U.S. holder. If a holder of our common stock is a non-U.S. holder, the tax consequences of the rights offering to such holder will depend upon a variety of factors, including whether such person conducts a trade or business in the U.S. Non-U.S. holders are urged to consult their own tax advisors regarding the tax consequences associated with the rights offering.

Holders of our common stock are urged to consult their own tax advisors regarding the specific tax consequences associated with the rights offering, including the applicability and effect of any state, local, foreign, or other tax laws as well as changes in applicable tax laws.

Distribution of Rights

     We believe that pursuant to Section 305 of the Code and the Treasury Regulations issued thereunder, a U.S. holder that receives Rights pursuant to this offering should not be required to recognize taxable income for U.S. federal income tax purposes upon the receipt of such Rights.

     We intend to report this offering accordingly. However, if our intended treatment of the Rights were challenged by the IRS and if such challenge were ultimately upheld, the U.S. federal income tax consequences to a U.S. holder that receives Rights pursuant to this offering may differ from the consequences described herein, and it is possible that a U.S. holder’s receipt of Rights or a portion thereof pursuant to this offering may be taxable.

Basis and Holding Period of Rights

     If, in accordance with Section 307 of the Code, if the fair market value of the Rights which we distribute to U.S. holder is less than 15% of the fair market value of such U.S. holder’s shares of our common stock with respect to which such Rights were distributed, such U.S. holder’s basis in the Rights distributed generally will be zero. A U.S. holder may elect, however, to allocate its basis in our common stock between such common stock and the Rights received in proportion to the fair market value of such common stock and such Rights. This election may be

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made pursuant to Section 307 of the Code and the Treasury Regulations thereunder and will be irrevocable once made.

     If the fair market value of the Rights which we distribute to a U.S. holder is 15% or more of the fair market value of such U.S. holder’s shares of our common stock with respect to which such Rights were distributed, such U.S. holder will be required to allocate its basis between such commons tock and such Rights in proportion to their relative fair market values.

     In either case, a U.S. holder’s holding period for the Rights that we distribute will include the holding period of such U.S. holder’s shares of our common stock with respect to which such Rights were distributed.

Exercise of Rights; Basis and Holding Period of Acquired Shares; Sale, Exchange, Redemption or Other Disposition of Acquired Shares

     A U.S. holder will not recognize gain or loss upon the exercise of the Rights. A U.S. holder’s basis in our Preferred Stock acquired through exercise of the Rights generally will equal the sum of (i) the Subscription price paid by such U.S. holder to acquire such stock and (ii) such U.S. holder’s basis, if any, in the Rights exercised. A U.S. holder’s holding period in shares of our Preferred Stock acquired through the exercise of Rights will begin on the day such U.S. holder exercises the Rights.

     Upon the sale, exchange, redemption or other disposition of the Preferred Stock acquired upon the exercise of Rights, a U.S. holder generally will recognize gain or loss equal to the difference between the amount realized and such U.S. holder’s basis in such Preferred Stock. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if a U.S. holder’s holding period exceeds one year at the time of the sale, exchange or other disposition. The deductibility of capital losses is subject to limitations.

Expiration of Rights

     If a U.S. holder receives Rights pursuant to this offerings, and such U.S. holder’s basis in our common stock is not allocated between such common stock and the Rights received and such U.S. holder’s Rights expire unexercised, then such U.S. holder will not recognize taxable loss upon expiration of the Rights. In addition, such U.S. holder’s basis in its shares of our common stock will not be affected by this offering and such U.S. holder’s decision to allow its Rights to expire and will remain the same as before this offering.

     If a U.S. holder receives Rights pursuant to this offering, and such U.S. holder’s basis in our common stock is allocated between such a common stock and the Rights received and such U.S. holder’s Rights expire unexercised, then such U.S. holder will recognize a taxable loss upon the expiration of the Rights equal to the basis that was allocated to the Rights. Such loss will be a capital loss.

Backup Withholding

     A U.S. holder that sells, exchanges, redeems or otherwise disposes shares of our Preferred Stock acquired upon the exercise of Rights or that sells, exchanges or otherwise disposes of Rights may be subject to backup withholding on the proceeds received, unless such U.S. holder:

• Is a corporation or other exempt recipient and, when required, establishes this exemption; or

• Provides a correct taxpayer identification number, certifies that it is not currently subject to backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules.

     Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules will generally be creditable against the United States federal income tax liability of a U.S. holder if appropriate information is provided to the IRS. If a U.S. holder does not provide the appropriate party with the correct taxpayer

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identification number or any other proper document or certification required by the IRS (generally a Form W-9 in the case of a U.S. holder), such U.S. holder may be subject to penalties imposed by the IRS.

THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO THIS OFFERING AND IS NOT TAX ADVICE. THEREFORE, HOLDERS OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THIS OFFERING, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

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Use of Proceeds

     We intend to use the proceeds of this offering to make required distributions of capital gains realized on 2005 portfolio sales to our stockholders. We are required to distribute at least 98% of the our realized capital gains, if any, for the one-year period ending on October 31 of each calendar year. See “Preferred Stock Rights Offering — Purpose of Offering/Use of Proceeds.”

     Any remaining proceeds, after meeting our current distribution requirements, will be invested in accordance with the Fund’s investment objectives and policies as stated herein. It is anticipated that such remaining proceeds will be invested in equity and convertible securities issued by Mexican companies and debt securities of Mexican issuers.

Price Range of Common Stock

     Our common stock is traded on the NYSE under the symbol “MXE.” The following table lists the high and low closing sales prices for our common stock, and the closing sales price as a percentage of NAV:

			Closing Sales
			Price				Premium/Discount			Premium/Discount
							of High Sales			of Low Sales			Declared
	NAV		High		Low		Price to NAV			Price to NAV			Dividends
Year ended July 31, 2004
First Quarter	$	11.17	$	9.90	$	9.79		(11.37	)%		(12.35	)%		—
Second Quarter		12.96		11.60		11.43		(10.49	)%		(11.81	)%		.02
Third Quarter		13.29		12.15		11.90		(8.58	)%		(10.46	)%		—
Fourth Quarter		13.66		11.73		11.73		(14.13	)%		(14.13	)%		—
Year ended July 31, 2005
First Quarter	$	15.78	$	13.60	$	13.50		(13.81	)%		(14.45	)%		—
Second Quarter		18.45		16.33		15.98		(11.49	)%		(13.39	)%		—
Third Quarter		17.76		15.24		15.10		(14.19	)%		(14.98	)%		—
Fourth Quarter		21.27		18.82		18.54		(11.52	)%		(12.83	)%		—
Year ending July 31, 2006
First Quarter (through October 28, 2005)	$	22.61	$	26.27	$	22.73		16.19	%		0.53	%		—

Distributions

     We make annual distributions to our stockholders of at least 90% of our ordinary income and short-term capital gains. Holders of shares of Preferred Stock shall have the same distribution rights as holders of shares of common stock. We will distribute during each calendar year an amount equal to the sum of (1) at least 98% of our ordinary income for the calendar year, (2) at least 98% of the Fund’s capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for the preceding year that were not distributed during such year, in order to avoid excise taxes imposed on registered investment companies that do not make these distributions. In addition, although we currently intend to distribute net realized long-term capital gains at least annually, we may in the future decide to retain such capital gains for investment in accordance with our investment objective. In such event, the consequences of our retention of ordinary income and net realized capital gains could be the required distribution of as much as $10,206,909, as described in more detail under “Material United States Federal Income Tax Consequences.” This number could change based on portfolio and economic conditions. No stockholder should assume that there will be a distribution.

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Business of the Fund

     Our investment objective is a high total return through capital appreciation and current income by investing at least 80% of our assets in equity and convertible securities issued by Mexican companies and debt securities of Mexican issuers.

     Our investment activities are managed by Pichardo Asset Management, S.A. de C.V. (“PAM”). PAM is registered as an investment adviser under the Advisers Act. Under PAM’s investment advisory agreement with us, we have agreed to pay PAM a monthly fee at an annual rate of 0.80% of the value of our average daily net assets.

     U.S. Bancorp Fund Services, LLC (“Administrator”) serves as our administrator pursuant to an administrative agreement with the Fund. Administrator is located at 615 East Michigan Avenue, Milwaukee, WI 53202.

Fundamental Investment Policies

     The Fund has adopted certain fundamental investment restrictions that may not be changed without the prior approval of the holders of a majority of the Fund’s outstanding voting securities. For purposes of the restrictions listed below, all percentage limitations apply immediately after a purchase or initial investment, and any subsequent change in any applicable percentage resulting from market fluctuations does not require elimination of any security from the Fund’s portfolio. Fund policies which are not fundamental may be modified by the Directors if, in the reasonable exercise of the Directors’ business judgment, modification is determined to be necessary or appropriate to carry out the Fund’s objectives. Under its fundamental restrictions, the Fund may not:

     1. invest 25% or more of the total value of its assets in a particular industry; this restriction does not apply to investments in U.S. Government securities but does apply to investments in Mexican Government securities;

     2. issue senior securities, borrow or pledge its assets, except that the Fund may borrow from a bank to make distributions required for the Fund to maintain its qualification as a regulated investment company under U.S. tax law, for temporary or emergency purposes or for the clearance of transactions in amounts not exceeding 10% (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) and may also pledge its assets to secure such borrowings. Additional investments will not be made when borrowings exceed 5% of the Fund’s assets;

     3. lend money to other persons except through the purchase of debt obligations and the entering into of repurchase agreements in the United States or Mexico consistent with the Fund’s investment objective and policies;

     4. make short sales of securities or maintain a short position in any security except for short sales against the box as a form of hedging;

     5. purchase securities on margin, except such short-term credit as may be necessary or routine for the clearance or settlement of transactions and the maintenance of margin with respect to forward contracts or other hedging transactions;

     6. underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the Securities Act, in selling portfolio securities;

     7. purchase or sell commodities or real estate, except that the Fund may invest in securities secured by real estate or interests in real estate or in securities issued by companies, including real estate investment trusts, that invest in real estate or interests in real estate, and may purchase and sell forward contracts on foreign currencies to the extent permitted under applicable law; or

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     8. make investments for the purpose of exercising control over, or management of, the issuers of any securities.

Employees

     Gerald Hellerman, our Chief Financial Officer and Chief Compliance Officer, is our only employee. The officers of the Fund, except for Mr. Hellerman, are employees of our investment adviser. Our day-to-day investment operations are managed by our investment adviser.

Legal Proceedings

     Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business, we are not currently a party to any pending material legal proceedings.

Management

     Our business and affairs are managed under the direction of our Board. The Board currently consists of five members, four of whom are not “interested persons” as that term is defined in Section 2(a)(19) of the 1940 Act. We refer to these individuals as our independent directors. Our Board elects our officers, who serve at the discretion of the Board. The officers of the Fund, except for Mr. Hellerman, are employees of our investment adviser.

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Directors and Executive Officers

     Our directors and executive officers, their positions, year born and principal occupation are set forth below. The address for each director and executive officer is c/o U.S. Bancorp Fund Services, LLC, 615 East Michigan Street, Milwaukee, WI 53202.

INDEPENDENT DIRECTORS

					Other
	Position(s)			Principal Occupation(s)	Directorships
Name and	Held with the	Held Office		During	Held by
Age	Fund	Since		Past 5 Years	Director
Glenn Goodstein (1963)	Class I Director		2001	Registered investment adviser; Managing Member of the General Partner of Mercury Partners LP. (an investment partnership)	None
Phillip Goldstein (1945)	Class I Director		2000	President, Kimball & Winthrop, Inc. (an investment advisory firm); and general partner of Opportunity Partners L.P. (an investment partnership)	Director of Brantley Capital Corporation (a business development company); The Emerging Markets Telecommunications Fund (a registered closed-end investment company) and First Israel Funds (a registered closed-end investment Company)
Rajeev Das (1968)	Class II Director		2001	Senior Analyst, Kimball & Winthrop, Inc. (an investment advisory firm)	None
Andrew Dakos (1966)	Class II Director		2001	President and CEO of Uvitec Printing Ink, Inc. (an ink and coating manufacturing company); Managing Member of the general partner of Full Value Partners L.P. (an investment partnership); President of Elmhurst Capital, Inc. (an investment advisory firm).	None

INTERESTED DIRECTOR

					Other
	Position(s)			Principal Occupation(s)	Directorships
Name and	Held with the	Held Office		During	Held by
Age	Fund	Since		Past 5 Years	Director
Gerald Hellerman (1937)*	Class III Director, Chief Financial Officer and Chief Compliance Officer		2001	Managing Director, Hellerman Associates (a financial and corporate consulting firm)	Director, Brantley Capital Corporation (a business development company); and MVC Capital, Inc. (a business development company); and AirNet Systems, Inc. (a specialty air courier)

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* Mr. Hellerman is only deemed an interested director because he is an executive officer.

Our Board is divided into three classes with each class serving a staggered three year term ending on the date of our annual meeting as follows: Class I directors’ terms expire in the year 2005; Class II directors’ terms expire in 2006; and Class III directors’ terms expire in 2007.

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OFFICERS

     In addition to Mr. Hellerman, our only other current executive officers are:

					Directorships
Name and	Position(s) Held	Held Office		Principal Occupation(s)	Held by
Age	with the Fund	Since		During Past 5 Years	Officer
Maria Eugenia Pichardo (1950)	President		2004	Portfolio manager of the Fund since the Fund’s inception in 1990; President and General Partner of Pichardo Asset Management, S.A. de C.V., the Fund’s registered investment adviser.	None
Francisco Lopez (1971)	Secretary		2005	For the period May 1997 through December 2002, acted as portfolio manager assistant to the Fund at Acciones y Valores de Mexico, S.A. de C.V., a wholly owned subsidiary of Acciworldwide, S.A. de C.V., the Fund’s registered investment adviser prior to 2002; Portfolio manager at Pichardo Asset Management, S.A. de C.V., the Fund’s registered investment adviser.	None

Each officer’s term of office is one year and until their respective successors are chosen and qualified. The officers of the Fund serve without compensation, except that Mr. Hellerman received an annual fee of $25,000 for the fiscal year ended July 31, 2005 for serving as Chief Compliance Officer.

Board of Directors

     Under our Certificate of Incorporation, our directors are divided into three classes: Class I, Class II and Class III, each class having a term of three years. Each year the term of office of one Class expires. The effect of these staggered terms is to limit the ability of other entities or persons to acquire control of us by delaying the replacement of a majority of the Board. Messrs. Goodstein and Goldstein’s term will expire in 2005, the terms of Messrs. Das and Dakos will expire in 2006, and Mr. Hellerman’s term will expire in 2007. At each annual meeting of our stockholders, the successors to the class of directors whose terms expire at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.

Committees of the Board Of Directors

     Audit Committee

     The members of the Audit Committee are Messrs. Das, Dakos and Goldstein, each of whom is an independent director. The Audit Committee is responsible for approving our independent auditors, reviewing with our independent auditors the plans and results of the audit engagement, approving professional services provided by our independent auditors, reviewing the independence of our independent auditors and reviewing the adequacy of our internal accounting controls. In addition, the Audit Committee members have been designated the Qualified Legal Compliance Committee for attorney and employee reporting purposes. During the last fiscal year, the Audit Committee conducted one meeting.

     Nominating Committee

     The Nominating Committee is comprised of all of the directors who are non-interested, namely, Messrs. Goodstein, Goldstein, Dakos and Das. The Nominating Committee is responsible for seeking and reviewing

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candidates for consideration as nominees for directors as is from time to time considered necessary or appropriate. During the last fiscal year, the Nominating Committee conducted no meetings.

     It is the policy of the Nominating Committee to consider nominees recommended by stockholders of the Fund so long as the stockholders properly submit their recommendations in accordance with the following: A stockholder wishing to recommend to the Nominating Committee a candidate for election as director must submit the recommendation in writing, addressed to the Committee care of our Secretary c/o U.S. Bancorp Fund Services, LLC, 615 Michigan St., 2^nd Floor, Milwaukee, Wisconsin 53202. Submissions recommending candidates for election at an annual meeting of stockholders must be received no later than 120 calendar days prior to the first anniversary of the date of the proxy statement for the prior annual meeting of stockholders. In the event that the date of the next annual meeting of stockholders is more than 30 days following or preceding the first anniversary date of the annual meeting of stockholders for the prior year, the submission must be made a reasonable time in advance of the mailing of our next annual proxy statement. The written recommendation should include information concerning the stockholder or group of stockholders making the recommendation, the proposed nominee, relationships between the recommending stockholder and the proposed nominee and the qualifications of the proposed nominee to serve as director, describing the contributions that the nominee would be expected to make to the Board. The recommendation must also be accompanied by the consent of the proposed nominee to serve if nominated and the agreement of the nominee to be interviewed by the Nominating Committee, if the Nominating Committee decides in its discretion to do so.

     Valuation Committee

     The members of the Valuation Committee are all of the directors who are non-interested, namely, Messrs. Goodstein, Goldstein, Dakos and Das. The Valuation Committee is responsible for reviewing and approving the fair value determinations provided by the adviser with respect to any securities for which market quotations are not readily available. During the last fiscal year, the Valuation Committee conducted no meetings.

Compensation of Directors

     The following table shows information regarding the compensation expected to be received by the directors for the fiscal year ending July 31, 2005.

	Total Compensation
	from Fund Paid during the
Name of Director	Period Ended July 31, 2005
Glenn Goodstein	$	7,900
Phillip Goldstein	$	8,600
Andrew Dakos	$	8,600
Gerald Hellerman	$	27,500
Rajeev Das	$	8,600

The directors will receive an annual fee of $5,000 plus $700 for each Board Meeting attended in person and $100 for each special telephonic meeting attended. We pay the members of the Audit Committee $100 per meeting attended. Of the compensation paid to Mr. Hellerman during the fiscal year ended July 31, 2005, $24,000 was in consideration for his services as Chief Compliance Officer.

Investment Advisory Agreement

Management Services/Portfolio Manager

     PAM serves as our investment adviser. PAM is a registered investment adviser under the Advisers Act. Subject to the overall supervision of our Board of Directors, PAM manages our day-to-day operations and provides us with investment advisory services. Under the terms of an Investment Advisory Agreement, PAM will conduct all

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investment research and supervision and is responsible for the purchase and sale of our investment portfolio securities, subject to the supervision and direction of the Board. PAM also provides us with advice, supervises our management and investment programs and provides investment advisory facilities and executive and supervisory personnel for managing the investments and effectuating portfolio transactions. PAM also furnishes, at its own expense, all necessary administrative services, office space, equipment and clerical personnel for servicing our investments. In addition, PAM will pay the salaries and fees of all of our officers who are affiliated with PAM.

     PAM’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

Management Fees

     We pay PAM a monthly fee at an annual rate of 0.80% of the value of our average daily net assets for the investment management and research services provided. In addition, PAM has voluntarily agreed to reimburse us for certain fees and expenses on an annual basis. These expense reimbursements may be terminated at any time.

Payment of Expenses

     The Investment Advisory Agreement provides that we will be responsible for all of our expenses and liabilities, except that PAM is responsible for the expense in connection with maintaining a staff within its organization to furnish the above services to us.

Duration and Termination

     The Investment Advisory Agreement was approved by our Board on June 18, 2003, and by our stockholders on November 19, 2003. Unless terminated earlier as described below, it will continue in effect for a period of two years from its effective date. It will remain in effect from year to year thereafter if approved annually by our Board or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our Directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon not more than 60 days’ written notice to the other.

Organization of the Investment Adviser

     PAM is organized as a corporation under the laws of Mexico and is registered as an investment adviser under the Advisers Act. PAM’s principal office is located at Teopanzolco Avenue #408, 3^rd Floor, Cuernavaca 62260, Morelos, Mexico. Maria Eugenia Pichardo is the President and Chief Executive Officer of PAM. Ms. Pichardo owns 99% of the total outstanding shares of common stock of PAM and has acted as the Fund’s portfolio manager since the Fund’s inception.

Factors in Approving the Investment Advisory Agreement

     The Fund’s Board of Directors, including the directors who are not interested persons of any party to the Investment Advisory Agreement or its affiliates, approved the Investment Advisory Agreement at a meeting of the Board of Directors held on June 29, 2004, with legal counsel in attendance. In approving the Investment Advisory Agreement, the Board of Directors considered the best interests of the stockholders and took into account factors they deemed relevant, as described below.

     PAM provided the Board with written materials concerning: (a) information on the investment performance of the investment adviser; (b) the economic outlook and the general investment outlook in the markets in which the Fund invests; (c) the procedures employed to determine the value of Fund assets; (d) the investment adviser’s management of the relationships with the Fund’s administrator and custodian; (e) the resources devoted to compliance with the Fund’s investment policies and restrictions and with policies on personal securities transactions; and (f) the nature, cost and character of non-investment management services provided by the investment adviser.

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     The factors considered by the independent directors, who met in executive session, included the nature, quality and scope of the operations and services to provided by PAM, while focusing on the prior experience of PAM’s principals with respect to: (i) the structure of closed-end investment companies in general; (ii) management of portfolios of foreign equity securities; (iii) the fact that the Fund’s current portfolio manager, Maria Eugenia Pichardo, would continue to act as the Fund’s portfolio manager at PAM; and (iv) implementing policies to cut costs and expenses of closed-end investment companies. Furthermore, the Board considered the opportunity to obtain investment management and research services at costs that it deemed appropriate and reasonable and at such fees which fall within the range of the standard industry fees for comparable investment companies.

     During the Board’s deliberations, it was noted that they did not identify any single piece of information that was all-important or controlling with respect to the Investment Advisory Agreement. Based on the Board’s deliberations and its evaluation of the information described above, the Board, including all of the independent directors, unanimously concluded that: (a) the terms of the Investment Advisory Agreement are fair and reasonable; (b) the investment adviser’s fees are reasonable in light of the services that it provides to the Fund; (c) the Investment Advisory Agreement was in the best interests of the Fund and its stockholders; and (d) agreed to approve the Investment Advisory Agreement for term of one year.

Administration Agreement

     U.S. Bancorp Fund Services LLC serves as our administrator pursuant to an Administration Agreement dated July 21, 2001. Pursuant to the Administration Agreement, Administrator provides us with, but is not limited to the following types of services, general fund management, compliance oversight, financial reporting oversight and tax reporting. For the fiscal year ended July 31, 2005, the Fund paid Administrator $50,459. In addition, we reimbursed Administrator for certain expenses and fees incurred on our behalf.

Control Persons and Principal Stockholders

     The following table sets forth certain ownership information with respect to our common stock for those persons who directly or indirectly own, control or hold with the power to vote, 5% or more of our outstanding common stock and all officers and directors, as a group.

		Immediately
		prior to this
	Type of	offering
Name and address	ownership	Shares owned		Percentage
QVT Financial LP (1) 527 Madison Avenue, 8th Floor New York, New York 10022	Record and beneficial		359,650		14.54	%
Deutsche Bank AG(2)      Taunusanlage 12, D-60325      Frankfurt am Main      Federal Republic of Germany	Record and beneficial		287,154		11.61	%
Richard J. Shaker, d/b/a Shaker      Financial Services (3)      1094 Mogothy Circle      Annapolis, MD 21401	Record and beneficial		159,200		6.40	%
All officers and directors      as a group (7 persons)(4)	Record and beneficial		1		*

* All of the officers and directors as a group hold less than 1% of the Fund’s shares of common stock.

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(1)	Based solely upon information presented in a Schedule 13G, dated September 20, 2005, filed by QVT Financial LP (“QVT Financial”). QVT Financial is the investment manager for QVT Fund LP (“QVT Fund”), which beneficially owns 72,496 shares of common stock of the Fund. QVT Financial is also the investment manager for a separate discretionary account managed for Deutsche Bank AG (the “Separate Account”), which holds 287,154 shares of common stock of the Fund. QVT Financial has the power to direct the vote and disposition of the common stock held by each of QVT Fund and the Separate Account. Accordingly, QVT Financial may be deemed to be the beneficial owner of an aggregate amount of 359,650 shares of the Fund’s common stock, consisting of the shares owned by QVT Fund and the shares held in the Separate Account.
(2)	Based solely upon information presented in a Schedule 13G/A, dated February 10, 2005 filed by Deutsche Bank AG.
(3)	Based solely upon information presented in a Schedule 13G/A, dated July 12, 2004 filed by Richard J. Shaker, d/b/a Shaker Financial Services.
(4)	The address for all officers and directors is c/o US Bancorp Fund Services, LLC, 615 East Michigan Street, 2nd Floor, Milwaukee, WI 53202.

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Outstanding Securities

     The following table sets forth certain information regarding our authorized shares and shares outstanding as of July 31, 2005.

			(3)
(1)	(2)		Amount Issued and
Title of Class	Amount Authorized		Outstanding
Common Stock		100,000,000		2,473,504

Determination of Net Asset Value

     The NAV per share of our outstanding shares of common stock is determined daily, by dividing the value of total assets minus liabilities by the total number of shares outstanding at the date as of which such determination is made.

     All securities for which market quotations are readily available are valued at the last sales price prior to the time of determination of net asset value, or , if no sales price is available at that time, at the closing price last quoted for the securities (but if bid and asked quotations are available, at the mean between the current bid and asked prices, rather than the quoted closing price). Securities that are traded over-the-counter are valued (if bid and asked quotations are available) at the mean between the current bid and asked prices. Investments in short-term debt securities having a maturity of 60 days or less are valued at amortized cost if their term to maturity from the date of purchase was less than 60 days, or by amortizing their value on the 61^st day prior to maturity if their term to maturity from the date of purchase when acquired by us was more than 60 days. Securities for which market values are not readily ascertainable are carried at fair value as determined in good faith by, or under the supervision of, the Board. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material.

Description of our Capital Stock

Capital Stock

     Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share, and 1,855,128 shares of Preferred Stock, par value $0.001 per share. Our common stock trades on the NYSE under the symbol “MXE.” We intend to file an application to list our Preferred Stock on the NYSE under the symbol “MXEP.” No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, our stockholders generally are not personally liable for our debts or obligations.

     As permitted by the Maryland General Corporation Law, our charter provides that the Board of Directors, without any action by our stockholders, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Fund have authority to issue. In addition, our charter provides that the Board, by majority vote, may reclassify any unissued shares of our capital stock into one or more additional or other classes or series of stock with such designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and qualifications as determined by the Board. As discussed below, our Board has designated a new class of Preferred Stock created specifically for issuance pursuant to this offering.

Common Stock

     All shares of our common stock have equal rights as to earnings, assets, dividends and voting privileges and, when they are issued, will be duly authorized, validly issued, fully paid and nonassessable. Distributions may

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be paid to the holders of our common stock if, as and when authorized by our Board of Directors and declared by us out of funds legally available for such distributions. Shares of our common stock have no preemptive, conversion or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share would be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities. Each of our shares of common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other class or series of stock, the holders of the Fund’s common stock will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common stock will elect all of our directors, and holders of less than a majority of such shares will be unable to elect any director.

Preferred Stock

     The Preferred Stock is a new class of our capital stock designated by the Board specifically for issuance pursuant to this offering. See “Description of our Capital Stock.” The Preferred Stock has identical rights and qualifications of our common stock, except as set forth in paragraphs (a), (b), (c) and (d) below:

(a) Liquidation Preference: In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Fund, the holders of Preferred Stock will be entitled to receive preferential liquidating distribution, which is expected to equal the original Subscription Price per share of Preferred Stock before any distribution of assets is made to the holders of our common stock. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of Preferred Stock will not be entitled to any further participation in any distribution of assets by the Fund.

(b) Voting Rights: The 1940 Act requires that the holders of any Preferred Stock, voting separately as a single class, have the right to elect at least two directors at all times. The remaining directors will be elected by holders of common stock and Preferred Stock, voting together as a single class. The 1940 Act also requires that, in addition to any approval by stockholders that might otherwise be required, the approval of the holders of a majority of any outstanding Preferred Stock voting separately as a class, would be required to (1) adopt any plan of reorganization that would adversely affect the Preferred Stock, and (2) take any action requiring a vote of security holders under Section 13(a) of the 1940 Act, including, among other things, changes in the Fund’s subclassification as a closed-end investment company or changes in its fundamental investment restrictions. As a result of these voting rights, the Fund’s ability to take any such actions may be impeded to the extent that there is any Preferred Stock outstanding. The Board presently intends that, except as otherwise indicated in this prospectus and except as otherwise required by applicable law or the Fund’s Articles of Incorporation or bylaws, holders of Preferred Stock will have equal voting rights with our holders of common stock (one vote per share, unless otherwise required by the 1940 Act) and will vote together with our holders of common stock as a single class.

(c) Repurchase. On a semi-annual basis, on dates to be determined by the Board of Directors and beginning within the 6 month period between January 31, 2006 and July 31, 2006, the Fund intends to conduct special Tender Offers for Preferred Stock as further described in “Preferred Stock Rights Offering — Semi-Annual Tender Offer.”

(d) Automatic Conversion. If the Put Warrant Program is approved by the SEC, the Preferred Stock will automatically convert into common stock on a one-to-one basis upon the anticipated issuance of put warrants by the Fund, and, shortly thereafter, stockholders will receive put warrants. Holders of the Preferred Stock will have no other conversion rights. See “Preferred Stock Rights Offering — Put Warrant Program” above.

     Immediately following the issuance of the Preferred Stock to purchasing stockholders and in accordance with the rules promulgated under the 1940 Act, (i) the Fund shall have an asset coverage of at least 200 percent, (ii) the Fund will be prohibited from declaring any dividend (except a dividend payable in our common stock) or any other distribution upon the our common stock, unless the Preferred Stock has at the time of any such declaration an asset coverage of at least 200 percent after deducting the amount of such dividend or distribution, as the case may

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be, (iii) holders of Preferred Stock will be entitled, voting as a class, to the voting rights outlined in (b) above, and (iv) holders of Preferred Stock will have the liquidation preference outlined in (a) above.

Limitation on Liability of Directors and Officers; Indemnification and Advancement of Expenses

     Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment and which is material to the cause of action. Our charter contains such a provision which eliminates directors’ and officers’ liability to the maximum extent permitted by Maryland law, subject to the requirements of the 1940 Act.

     Our bylaws obligate us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any director, officer, employees or agents of the Fund against any judgments, fines, settlements or expenses.

     Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

Provisions of the Maryland General Corporation Law and our Charter and Bylaws

     The Maryland General Corporation Law and our charter and bylaws contain provisions that could make it more difficult for a potential acquiror to acquire us by means of a tender offer, proxy contest or otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our Board. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.

Classified Board of Directors

     Our Board is divided into three classes of directors serving staggered three-year terms. A classified board may render a change in control of us or removal of our incumbent management more difficult. We believe, however, that the longer time required to elect a majority of a classified board of directors will help to ensure the continuity and stability of our management and policies.

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Action by Stockholders

     The Maryland General Corporation Law provides that stockholder action can be taken only at an annual or special meeting of stockholders or by unanimous written consent in lieu of a meeting. These provisions, combined with the requirements of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting.

Ability of Stockholders to call a Special Meeting of Stockholders

     Our bylaws only allow our stockholders to call a Special Meeting of Stockholders if such request is made to the Secretary of the Fund in writing signed by stockholders having at least 50% of the issued and outstanding shares of voting stock.

Regulation

     We intend to continue to be regulated as a registered management investment company under the 1940 Act and as a registered investment company under Subchapter M of the Internal Revenue Code. The 1940 Act contains prohibitions and restrictions relating to transactions between registered investment companies and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act.

Temporary Investments

     We may take temporary defensive positions in cash or in high quality, short-term debt securities or other money market instruments in response to adverse market, economic, political or other conditions.

Code of Ethics

     The Fund and PAM have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made pursuant to the code’s requirements. For information on how to obtain a copy of each code of ethics, see “Available Information.”

Proxy Voting Policies and Procedures

     The Proxy Voting Policies and Guidelines contained in this document summarize our positions on various issues of concern to our stockholders. These Guidelines give general indication as to how our investment adviser will vote our portfolio securities on each issue listed. However, this listing does not address all potential voting issues or the intricacies that may surround individual proxy votes. For that reason there may be instances in which votes may vary from the guidelines presented here. We endeavor to vote our shares in accordance with our investment objectives and strategies.

     The Fund will vote NO on any proposals that would limit or restrict a stockholders rights.

I.	CORPORATE GOVERNANCE
A.	Board and Governance Issues
1.	Board of Director/Trustee Composition

The Board of Directors is responsible for the overall governance of the corporation.

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The Fund adviser will oppose slates without at least a majority of independent directors (1/3 of directors who are outsiders to the corporation).

The Fund adviser will vote for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively.

2. Increase Authorized Common Stock

The Fund adviser will generally support the authorization of additional common stock necessary to facilitate a stock split.

The Fund adviser will generally support the authorization of additional common stock, if the company already has a large amount of stock authorized but not issued or reserved for its stock option plans. In this latter instance, there is a concern that the authorized but unissued shares will be used as a poison pill or other takeover defense, which will be opposed. In addition, the Fund will require the company to provide a specific purpose for any request to increase shares by more than 100 percent of the current authorization.

3. Blank Check Preferred Stock

Blank check preferred is stock with a fixed dividend and a preferential claim on company assets relative to common shares. The terms of the stock (voting dividend and conversion rights) are set by the Board at a future date without further shareholder action. While such an issue can in theory have legitimate corporate purposes, most often it has been used as a takeover defense since the stock has terms that make the entire company less attractive.

The Fund adviser will generally oppose the creation of blank check preferred stock.

4. Classified or “Staggered” Board

On a classified (or staggered) board, directors are divided into separate classes (usually three) with directors in each class elected to overlapping three-year terms. Companies argue that such Boards offer continuity in direction which promotes long-term planning. However, in some instances they may serve to deter unwanted takeovers since a potential buyer would have to wait at least two years to gain a majority of Board seats.

The Fund adviser will vote no on proposals involving classified boards.

5. Supermajority Vote Requirements

Supermajority vote requirements in a company’s charter or bylaws require a level of voting approval in excess of a simple majority. Generally, supermajority provisions require at least 2/3 affirmative vote for passage of issues.

The Fund adviser will vote no on proposals involving supermajority voting.

6. Restrictions on Stockholders to Act by Written Consent

Written consent allows stockholders to initiate and carry out a shareholder action without waiting until the annual meeting or by calling a special meeting. It permits action to be taken by the written consent of the same percentage of outstanding shares that would be required to effect the proposed action at a shareholder meeting.

The Fund adviser will vote no on proposals to limit or eliminate the right of stockholders to act by written consent.

7. Restrictions on Stockholders to Call Meetings

The Fund adviser will generally oppose such a restriction as it limits the right of the stockholder.

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8. Limitations, Director Liability and Indemnification

Because of increased litigation brought against directors of corporations and the increased costs of director’s liability insurance, many states have passed laws limiting director liability for those acting in good faith. Stockholders however must opt into such statutes. In addition, many companies are seeking to add indemnification of directors to corporate bylaws.

The Fund adviser will generally support director liability and indemnification resolutions because it is important for companies to be able to attract the most qualified individuals to their Boards. Note: Those directors acting fraudulently would remain liable for their actions irrespective of this resolution.

9. Reincorporation

Corporations are in general bound by the laws of the state in which they are incorporated. Companies reincorporate for a variety of reasons including shifting incorporation to a state where the company has its most active operations or corporate headquarters, or shifting incorporation to take advantage of state corporate takeover laws.

While each reincorporation proposal will be evaluated based on its own merits, the Fund adviser will generally support reincorporation resolutions for valid business reasons (such as reincorporating in the same state as the corporate headquarters).

10. Cumulative Voting

Cumulative voting allows stockholders to “stack” their votes behind one or a few director nominees running for the Board, thereby helping a minority of stockholders to win board representation. Cumulative voting gives minority stockholders a voice in corporate affairs proportionate to their actual strength in voting shares.

The Fund adviser will generally support proposals calling for cumulative voting in the election of directors.

11. Dual Classes of Stock

In order to maintain corporate control in the hands of a certain group of stockholders, companies may seek to create multiple classes of stock with differing rights pertaining to voting and dividends.

The Fund adviser will generally oppose dual classes of stock. However, the advisor will support classes of stock offering different dividend rights (such as one class which pays cash dividends and a second which pays stock dividends) depending on the circumstances.

12. Limit Directors’ Tenure

In general corporate directors may stand for re-election indefinitely. Opponents of this practice suggest that limited tenure would inject new perspectives into the boardroom as well as possibly creating room for directors from diverse backgrounds; however, continuity is important to corporate leadership and in some instances alternative means may be explored for injecting new ideas or members from diverse backgrounds into corporate boardrooms.

Accordingly, the Fund adviser will vote on a case-by-case basis attempts to limit director tenure.

13. Minimum Director Stock Ownership

The director share ownership proposal requires that all corporate directors own a minimum number of shares in the corporation. The purpose of this resolution is to encourage directors to have the same interest as other stockholders.

The Fund adviser will support resolutions that require corporate directors to own shares in the company.

14. Selection of Independent Registered Public Accounting Firm

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Annual election of the outside accountants is standard practice. While it is recognized that the company is in the best position to evaluate the competence of the outside accountants, we believe that outside accountants must ultimately be accountable to stockholders. Furthermore, audit committees have been the subject of a report released by the Blue Ribbon Commission on Improving the Effectiveness of Corporate Audit Committees in conjunction with the NYSE and the National Association of Securities Dealers. The Blue Ribbon Commission concluded that audit committees must improve their current level of oversight of independent accountants. Given the rash of accounting irregularities that were not detected by audit panels or auditors, shareholder ratification is an essential step in restoring investor confidence.

The Fund adviser will oppose the resolutions seeking ratification of the auditor when fees for financial systems design and implementation exceed audit and all other fees, as this can compromise the independence of the Independent Registered Public Accounting Firm.

The Fund adviser will oppose the election of the audit committee chair if the audit committee recommends an auditors whose fees for financial systems design and implementation exceed audit and all other fees, as this can compromise the independence of the Independent Registered Public Accounting Firm.

B. Executive Compensation

1. Disclosure of President, Executive Officers, Board and Management Compensation

On a case-by-case basis, the Fund adviser will support shareholder resolutions requesting companies to disclose the salaries of top management and the Board of Directors.

2. Compensation for President, Executive Officers, Board and Management

The Fund adviser will oppose an executive compensation proposal if we believe the compensation does not reflect the economic and social circumstances of the company (i.e. at times of layoffs, downsizing, employee wage freezes, etc.).

3. Formation and Independence of Compensation Review Committee

The Fund adviser will support stockholder resolutions requesting the formation of a committee of independent directors to review and examine executive compensation.

4. Stock Options for Board and Executives

The Fund adviser will generally oppose stock option plans that in total offer greater than 15% of shares outstanding because of voting and earnings dilution.

The Fund adviser will generally oppose option programs that allow the repricing of underwater options. (Repricing divides stockholder and employee interests. Stockholders cannot “reprice” their stock and, therefore, optionees should not be treated differently).

The Fund adviser will generally oppose stock option plans that have option exercise prices below the marketplace on the day of the grant.

The Fund adviser will generally support options programs for outside directors subject to the same constraints previously described.

5. Employee Stock Ownership Plan (ESOPs)

The Fund adviser will support ESOPs created to promote active employee ownership. However, they will oppose any ESOP whose purpose is to prevent a corporate takeover.

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6. Pay Equity

The Fund adviser will support stockholder resolutions that request that management provide a race and/or gender pay equity report.

7. Changes to Charter or ByLaws

The Fund adviser will conduct a case-by-case review of the proposed changes with the voting decision resting on whether the proposed changes are in stockholder’s best interests.

8. Confidential Voting

Typically, proxy voting differs from voting in political elections in that the company is made aware of shareholder votes as they are cast. This enables management to contact dissenting stockholders in an attempt to get them to change their votes.

The Fund adviser will support confidential voting because the voting process should be free of coercion.

9. Equal Access to Proxy

Equal access proposals ask companies to give stockholders access to proxy materials to state their views on contested issues, including director nominations. In some cases, they would actually allow stockholders to nominate directors. Companies suggest that such proposals would make an increasingly complex process even more burdensome.

In general, the Fund adviser will oppose resolutions for equal access proposals.

10. Golden Parachutes

Golden parachutes are severance payments to top executives who are terminated or demoted pursuant to a takeover. Companies argue that such provisions are necessary to keep executives from “jumping ship” during potential takeover attempts.

The Fund adviser will support the right of stockholders to vote on golden parachutes because they go above and beyond ordinary compensation practices. In evaluating a particular golden parachute, we will examine total management compensation, the employees covered by the plan, and the quality of management.

C. Mergers and Acquisitions

1. Considering the Non-Financial Effects of a Merger Proposal

Such a proposal allows or requires the Board to consider the impact of merger decisions on various “stakeholders,” such as employees, communities, customers and business partners. This proposal gives the Board the right to reject a tender offer on the grounds that it would adversely affect the Fund’s stakeholders.

The Fund adviser will support stockholder resolutions that consider non-financial impacts of mergers.

2. Mergers, Restructuring and Spin-offs

A merger, restructuring, or spin-off in some way affects a change in control of the Fund’s assets. In evaluating the merit of each issue, we will consider the terms of each proposal. This will include an analysis of the potential long-term value of the investment.

The Fund adviser will support management proposals for merger or restructuring if the transaction appears to offer fair value and other proxy voting policies stated are not violated. For example, the adviser may oppose restructuring

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resolution which include in it significant takeover defenses and may again oppose the merger of a non-nuclear and a nuclear utility if it poses potential liabilities.

3. Poison Pills

Poison pills (or stockholder rights plans) are triggered by an unwanted takeover attempt and cause a variety of events to occur which may make the company financially less attractive to the suitor. Typically, directors have enacted these plans without stockholder approval. Most poison pill resolutions deal with putting poison pills up for a vote or repealing them altogether.

The Fund adviser will support proposals to put rights plans up for a stockholder vote. In general, poison pills will be opposed unless management is able to present a convincing case fur such a plan.

4. Opt-Out of State Anti-Takeover Law

A strategy for dealing with anti-takeover issues has been a stockholder resolution asking for a company to opt-out of a particular state’s anti-takeover laws.

The Fund adviser will generally support bylaws changes requiring a company to opt-out of state anti-takeover laws. However, resolutions requiring companies to opt-into state anti-takeover statutes will be opposed.

Share Repurchases

     Stockholders of a closed-end management investment company generally do not have the right to cause it to repurchase its shares. Generally, a closed-end management company may repurchase its shares under the 1940 Act: (1) on a securities exchange or such other open market as may be designated by the SEC (provided that it has, in any such case, informed holders of the class of stock involved within the preceding six months of its intention to repurchase such stock), (2) by a tender offer open to all holders of the class of shares involved or (3) as otherwise permitted by the SEC. If the Fund intends to repurchase its shares other than on a securities exchange, in the open market or by making a tender offer, a rule adopted by the SEC under the 1940 Act provides that the closed-end fund must meet certain conditions regarding the distribution of our net income, the identity of the seller, the price paid, any brokerage commissions, prior notice to holders of the class of shares involved of an intention to purchase such shares and that the purchase is not being made in a manner or on a basis which discriminates unfairly against the other holders of such class.

     While we are not required to repurchase our shares, we have done so in the past and may continue to do so if the Board believes that such repurchase is in our best interests and of our stockholders.

     At a Meeting of the Board held on December 13, 2001, the Board approved a tender offer (the “Tender”). The Tender allowed us to purchase up to 100% of each stockholder’s shares of common stock, not to exceed 80% of the total outstanding shares of our common stock, for cash at a price equal to 100% of our net asset value per share as of the closing date. The Tender commenced on February 19, 2002 and expired on March 20, 2002. In connection with the Tender, the Fund purchased 6,122,069 shares of capital stock at a total cost of $68,444,728. There were no gains or losses to the Fund because the repurchase of tendered shares was executed at 100% of the Fund’s NAV as calculated on the Expiration Date.

     At a Special Meeting of the Board of Directors held on October 11, 1999, the Board approved a share repurchase program. Pursuant to the share repurchase program, we were authorized to commence a two phase share repurchase program for up to 2,800,000 shares, or approximately 25% of our then outstanding shares of common stock, through a combination of share purchases and tender offers.

     During the years ended July 31, 2002, 2003, 2004 and 2005, we made no repurchases pursuant to the program. Pursuant to the share repurchase program, during the year ended July 31, 2001, we purchased 174,000 share of capital stock in the open market at a total cost of $1,703,552. The weighted average discount of these purchases comparing the purchase price to the net asset value at the time of purchase was 9.01%. During the fiscal

41

year ended July 31, 2000, we purchased 1,199,700 shares of capital stock in the open market at a total cost of $10,573,159. The weighted average discount of these purchases comparing the purchase prices to the net asset value at the time of purchase was 16.40%.

     As discussed under “Preferred Stock Rights Offering — Semi-Annual Tender Offer” herein, the Fund will conduct a series of tender offers for Preferred Stock only (each, a “Tender Offer”) on a semi-annual basis (each semi-annual period, a “Tender Period”), on dates to be determined by the Board of Directors and beginning within the 6-month period between January 31, 2006 and July 31, 2006, in which 25% of the issued and outstanding Preferred Stock on the date the Preferred Stock is issued may be tendered to the Fund and repurchased for the Fund’s portfolio securities. Each stockholder participating in a Tender Offer may have his or her tendered shares of Preferred Stock repurchased by the Fund in kind for portfolio securities having a value equal to 99% of NAV as determined, with respect to each Tender Offer, on a date designated by the Board. In the event that the average trade weighted discount to the last published NAV for the Fund is less than 5% for any five consecutive trading days during any Tender Period (a “Tender Termination Event”), the Fund will not conduct a Tender Offer during that Tender Period. In the event of a Tender Termination Event, a Tender Offer will be conducted during the next Tender Period (unless a Tender Termination Event exists during such next Tender Period).

     In order to ensure that the Fund conducts such a Tender Offer, the Fund has adopted, by unanimous written consent of the Board of Directors to action taken without a meeting, the following Fundamental Periodic Repurchase Offer Policy:

Fundamental Preferred Stock Periodic Repurchase Offer Policy

(a) The Fund will make offers to repurchase its Preferred Stock semi-annually;

(b) Repurchase request deadlines shall be disclosed in the notification provided to stockholders of a repurchase offer and repurchase request deadlines shall be determined by the Board consistent with the 1940 Act, applicable SEC regulations and the terms of any exemptive order issued to the Fund by the SEC; and

(c) The date on which the repurchase price for shares of Preferred Stock is to be determined shall occur no later than the fourteenth day after a repurchase request deadline, or the next business day if such day is not a business day.

For each repurchase offer, the Fund will offer to repurchase 25% of the Fund’s outstanding shares of Preferred Stock. Participating stockholders generally will receive a pro-rata distribution or “slice” of the Fund’s portfolio securities in return for their repurchase shares of Preferred Stock except for (a) securities which, if distributed, would be required to register under the Securities Act of 1933; (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, include 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. Additionally, the Fund may pay cash for fractional shares and/or odd lots of securities and/or amounts attributable to any cash positions (including short-term non-equity securities); distribute odd lots, fractional shares and any cash position to stockholders; round down fractional shares so as to eliminate them prior to distribution; or pay a higher pro-rata percentage of equity securities to represent those items.

The Fund anticipates that it will conduct its Tender Offers semi-annually, beginning within the 6-month period between January 31, 2006 and July 31, 2006, for 25% of the issued and outstanding shares of Preferred Stock. See “Preferred Stock Rights Offering — Semi-Annual Tender Offer.”

Custodian, Transfer and Dividend Paying Agent and Registrar

     Our portfolio securities are held under a custody agreement by U.S. Bank, N.A. The address of the custodian is: 425 Walnut Street, Cincinnati, OH 45202. Our assets are held under bank custodianship in compliance with the 1940 Act. Computershare Trust Company of New York acts as our transfer agent, dividend paying agent and registrar (as well as Subscribing Agent in connection with this offering). The principal business address of the transfer agent is 2 North La Salle Street, Chicago, IL 60602.

42

Brokerage Allocation and Other Practices

     Subject to the supervision of the directors, decisions to buy and sell securities for the Fund are made by the adviser. The adviser is authorized by the directors to allocate the orders placed by them on behalf of the Fund to brokers and dealers who may, but need not, provide research or statistical material or other services to the Fund or the adviser for the Fund’s use. Such allocation is to be in such amounts and proportions as the adviser may determine.

     In selecting a broker or dealer to execute each particular transaction, the adviser will take the following into consideration: (i) best net price available; (ii) the reliability, integrity and financial condition of the broker or dealer; (iii) the size of and difficulty in executing the order; and (iv) the value of the expected contribution of the broker or dealer to the investment performance of the Fund on a continuing basis.

     Brokers or dealers executing a portfolio transaction on behalf of the Fund may receive a commission in excess of the amount of commission another broker or dealer would have charged for executing the transaction if the adviser determines in good faith that such commission is reasonable in relation to the value of brokerage, research and other services provided to the Fund.

     In allocating portfolio brokerage, the adviser may select brokers or dealers who also provide brokerage, research and other services to other accounts over which the adviser exercise investment discretion. Some of the services received as the result of the Fund’s transactions may primarily benefit accounts other than the Fund’s, while services received as the result of portfolio transactions effected on behalf of those other accounts may primarily benefit the Fund.

Privacy Policy

     We have adopted the following privacy policy in order to safeguard the personal information of its consumers and customers in accordance with SEC Regulation S-P, 17 CFR 284.30:

     Commitment to Consumer Privacy. The Fund recognizes and respects the privacy expectations of each of our customers and believes that the confidentiality and protection of consumer information is one of our fundamental responsibilities. The Fund is committed to maintaining the confidentiality, integrity and security of the customers’ personal information and will handle personal consumer and customer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations. The Fund will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that unauthorized access to, or use of, customer records or information is protected against.

     Collection and Disclosure of Shareholder Information. Consumer information collected by, or on behalf of, the Fund, generally consists of the following:

• Information received from consumers or customers on or in applications or other forms, correspondence, or conversations, including, but not limited to, their name, address, phone number, social security number, assets, income and date of birth; and

• Information about transactions with us, our affiliates, or others, including, but not limited to, shareholder account numbers and balance, payments history, parties to transactions, cost basis information, and other financial information.

     The Fund does not disclose any nonpublic personal information about our current or former consumers or customers to nonaffiliated third parties, except as permitted by law. For example, as the Fund has no employees, it conducts its business affairs through third parties that provide services pursuant to agreements with the Fund (as well as through its officers and directors).

43

     Security of Consumer and Customer Information. The Fund will determine whether the policies and procedures of its affiliates and service providers and reasonably designed to safeguard customer information and require only appropriate and authorized access to, and use of, customer information through the application of appropriate administrative, technical, physical, and procedural safeguards that comply with applicable federal standards and regulations. The Fund directs each of its service providers to adhere to the Fund’s privacy policy and to their respective privacy policies with respect to all customer information of the Fund and to take all actions reasonably necessary so that the Fund is in compliance with the provisions of 17 CFR 248.30, including, as applicable, the development and delivery of initial and annual privacy notices and maintenance of appropriate and adequate records. The Fund will require its service providers to confirm to the Fund, in writing, that they are restricting access to nonpublic personal information about customers to those employees who need to know that information to provide products or services to customers.

     The Fund requires its service providers to provide periodic reports, no less frequently than annually, to the Board of Directors outlining their privacy policies and implementation and promptly report to the Fund any material changes to their privacy policy before, or promptly after, their adoption.

Legal Matters

     Legal matters regarding the securities offered by this Prospectus and of the Fund in general will be passed upon for the Fund by Blank Rome LLP, New York, New York.

Experts

     The financial statements included in this Prospectus and in the Registration Statement have been audited by Tait, Weller & Baker LLP, an independent registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and in the Registration Statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

Available Information

     We will file with or submit to the SEC reports, proxy statements and other information meeting the informational requirements of the 1940 Act and the Exchange Act. You may inspect and copy these reports, proxy statements and other information at the Public Reference Room of the SEC at 100 F St. NE, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. Our SEC filings are also available to the public on the SEC’s Internet website at http://www.sec.gov and can be inspected at the offices of the NYSE, 20 Broad Street, New York, NY 10005. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, 100 F St. NE, Washington, D.C. 20549-0102.

Forward-Looking Statements

     This Prospectus contains forward-looking statements, within the meaning of the Securities Act, that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “expects,” “objectives,” “future,” “intends,” “will,” “may,” “should,” and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements because of various risks and uncertainties, including the factors set forth in “Risk Factors” and elsewhere in this Prospectus.

     We have based the forward-looking statements included in this Prospectus on information available to us on the date of this Prospectus, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports, if any, that we in the future may file with the SEC, including an annual or semi-annual report on Form N-CSR.

44

Financial Statements

     The Fund hereby incorporates its Annual Report to Stockholders dated July 31, 2005 and the Semi-Annual Report to Stockholders dated January 31, 2005 each of which was filed with the Securities and Exchange Commission.

45

The Mexico Equity & Income Fund, Inc.

1,855,128 Shares Issuable Upon Exercise of Rights to Purchase Preferred Stock,
$.001 par Value

PART C
OTHER INFORMATION

ITEM 25. FINANCIAL STATEMENTS AND EXHIBITS

1. Financial Statements.

2. Exhibits

a. 1) Articles of Incorporation (Incorporated by reference to the Registrant’s Registration Statement on Form N-2 (File No. 33-35089)

2) Articles of Amendment to the Articles of Incorporation (Incorporated by reference to Exhibit 1(b) to Pre-Effective Amendment Nos. 2 and 3 to the Registrant’s Registration Statement on Form N-2 (File No. 33-35089)

b.	Amended and Restated Bylaws (Incorporated by reference to Exhibit 2(b) to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 33-35089)
c.	Not Applicable
d.	1) Form of Subscription Certificate

2) Form of Notice of Guaranteed Delivery

e.	Not Applicable
f.	Not Applicable
g.	Investment Advisory Agreement between Registrant and Pichardo Asset Management, S.A. de C.V.
h.	Not Applicable
i.	Not Applicable
j.	Custodian Agreement between Registrant and U.S. Bank, N.A.
k.	1) Administration Agreement between Registrant and U.S. Bancorp Fund Services, LLC

2) Transfer Agency and Service Agreement between Registrant and Computershare Investors Services, LLC

l.	Opinion and Consent of Blank Rome LLP, counsel for Registrant
m.	Not Applicable
n.	Consent of Tait, Weller & Baker LLP, the independent registered public accounting firm for Registrant
o.	Not Applicable
p.	Not Applicable
q.	Not Applicable
r.	Codes of Ethics of Registrant

ITEM 26. MARKETING ARRANGEMENTS

Not Applicable

ITEM 27. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Commission registration fee	$	—
Accounting fees and expenses	$	2,000
Legal fees and expenses	$	75,000
NYSE Listing fee	$	27,363
Subscribing Agent fees and expenses	$	15,000
Printing and engraving	$	10,000
Miscellaneous fees and expenses	$	1700
Total	$	129,363

     All of the expenses set forth above shall be borne by the Fund.

ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

Not Applicable

ITEM 29. NUMBER OF HOLDERS OF SECURITIES

     The following table sets forth the approximate number of record holders of the Fund’s common stock, $0.001 par value per share, at July 31, 2005.

Title of Class	Number of Record Holders
Common	572

ITEM 30. INDEMNIFICATION

     Reference is made to Section 2-418 of the Maryland General Corporation Law, Article XI of the Company’s Articles of Incorporation, Article VII of the Company’s bylaws, the Investment Advisory Agreement and Administration Agreement.

     Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty established by a final judgment and which is material to the cause of action. The Registrant’s charter contains such a provision which eliminates directors’ and officers’ liability to the maximum extent permitted by Maryland law, subject to the requirements of the 1940 Act.

     Our charter authorizes us, to the fullest extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her status as a present or former director or officer and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding. Our bylaws obligate us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual who is made a party to the proceeding by reason of his service in that capacity from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her status as a present or former director or officer and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding. The charter and bylaws also permit us to indemnify and advance expenses to any person who served a predecessor of us in any of the capacities described above and any of our employees or agents or any employees or agents of our predecessor.

     Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (b) a

written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

     The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, our investment adviser and its officers, managers, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from the Fund for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the adviser’s services under the Investment Advisory Agreement or otherwise as an investment adviser of the Fund.

     The Administration Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Administrator and its officers, manager, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from the Fund for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Administrator’s services under the Administration Agreement or otherwise as administrator for the Fund.

     The law also provides for comparable indemnification for corporate officers and agents.

ITEM 31. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Not Applicable

ITEM 32. LOCATION OF ACCOUNTS AND RECORDS

     All accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act, and the rules thereunder are maintained at the offices of:

     (1) the Registrant, 615 East Michigan St., 2^nd Floor, Milwaukee, WI 53202;

     (2) the transfer agent, Computershare Investor Services, LLC, 2 North LaSalle Street, Chicago, IL 60602;

     (3) the Custodian, U.S. Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202; and

     (4) the investment adviser, Pichardo Asset Management, S.A. de C.V., Teopanzolco Avenue #408, 3^rd Floor, Cuernavaca 62260, Morelos, Mexico.

ITEM 33. MANAGEMENT SERVICES

     Not Applicable.

ITEM 34. UNDERTAKINGS

1.

The Registrant undertakes to suspend the issuance of Preferred Stock until the Prospectus is amended if (1) subsequent to the effective date of its registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of the registration statement; or (2) the net asset value increases to an amount greater than the net proceeds as stated in the Prospectus.

2.

The Registrant undertakes that:

(a)

For the purpose of determining any liability under the Securities Act of 1933, the information omitted from the form of Prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

(b)

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

SIGNATURES

     As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of New York and the State of New York, on the 31^st day of October, 2005.

MEXICO EQUITY & INCOME FUND, INC.
By:	/s/ Maria Eugenia Pichardo
Name: Maria Eugenia Pichardo
Title: President

     As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated:

Name	Title	Date
/s/ Maria Eugenia Pichardo
Maria Eugenia Pichardo	President	October 31, 2005
/s/ Gerald Hellerman Gerald Hellerman	Director, Chief Financial Officer and Chief Compliance Officer	October 31, 2005
* Phillip Goldstein	Director	October 31, 2005
* Rajeev Das	Director	October 31, 2005
* Andrew Dakos	Director	October 31, 2005
* Glenn Goodstein	Director	October 31, 2005

*By:	/s/ Gerald Hellerman
	Gerald Hellerman
	Attorney-in-Fact

Exhibit Index

Exhibit
Number	Description
Ex-2(d)(1)	Form of Subscription Certificate
Ex-2(d)(2)	Form of Notice of Guaranteed Delivery
Ex-2(g)	Investment Advisory Agreement between Registrant and Pichardo Asset Management, S.A. de C.V.
Ex-2(j)	Custodian Agreement between Registrant and U.S. Bank, N.A.
Ex-2(k)(1)	Administration Agreement between Registrant and U.S. Bancorp Fund Services, LLC
Ex-2(k)(2)	Transfer Agency and Service Agreement between Registrant and Computershare Investors Services, LLC
Ex-2(l)	Opinion and Consent of Blank Rome LLP, counsel for Registrant
Ex-2(n)	Consent of Tait, Weller & Baker LLP, the independent registered public accounting firm for Registrant
Ex-2(r)	Codes of Ethics of Registrant

EX-99.2(D)(1)

		Exhibit 2(d)(1)
CONTROL NUMBER:	THIS SUBSCRIPTION CERTIFICATE	SUBSCRIPTION
	MAY BE USED TO SUBSCRIBE	CERTIFICATE
	FOR PREFERRED STOCK. FULL	FOR
	INSTRUCTIONS APPEAR ON THE
	BACK OF THIS SUBSCRIPTION
	CERTIFICATE	SHARES

THE MEXICO EQUITY & INCOME FUND, INC.

SUBSCRIPTION CERTIFICATE FOR PREFERRED SHARES

ESTIMATED SUBSCRIPTION PRICE: U.S. $20.35 PER PREFERRED SHARE

THE FINAL SUBSCRIPTION PRICE WILL BE THE GREATER OF (a) 90% OF THE FUND’S NET ASSET VALUE PER SHARE AS DETERMINED ON THE EXPIRATION DATE OR (b) THE AVERAGE CLOSING PRICE OF OUR COMMON STOCK OVER THE FOUR CONSECUTIVE TRADING DAYS ENDING ON THE EXPIRATION DATE

VOID IF NOT EXERCISED AT OR BEFORE 5:00 P.M.
(NEW YORK TIME) ON DECEMBER __, 2005, THE EXPIRATION DATE

REGISTERED OWNER:

The registered owner of the Subscription Certificate, named above, or assignee, is entitled to the number of Rights to subscribe for Preferred Stock, $0.001 par value, of The Mexico Equity and Income Fund, Inc. (the “Fund”) shown above, in the ratio of one share of Preferred Stock for each 0.75 Rights, pursuant to the Basic Subscription Right and upon the terms and conditions and at the price for each share of Preferred Stock specified in the Prospectus dated ___2005 relating thereto.

Dated: __________, 2005	IMPORTANT: Complete appropriate form on reverse
Secretary		President
	COUNTERSIGNED AND REGISTERED:
	COMPUTERSHARE TRUST COMPANY OF
	NEW YORK
	TRANSFER AGENT AND REGISTRAR
	By:
		Authorized Signature

PLEASE FILL IN ALL APPLICABLE INFORMATION

Expiration Date December __, 2005

TO: Computershare Trust Company of New York
88 Pine Street, 19^th Floor
New York, New York 10005

A.	Basic Subscription Right		x	$20.35	= $	(1	)
		(No. of Shares)		(Subscription Price)
B.	Over-Subscription Privilege		x	$20.35	= $	(2	)
		(No. of Shares)		(Subscription Price)
C.	Amount of Check Enclosed (or amount in notice of guaranteed delivery) payable to
	“The Mexico Equity and Income Fund, Inc.”				= $

SECTION 1. TO SUBSCRIBE: I hereby irrevocably subscribe for the face amount of Preferred Stock indicated as the total of A and B hereon upon the terms and conditions specified in the Prospectus related hereto, receipt of which is acknowledged, I hereby agree that if I fail to pay for the shares of Preferred Stock for which I have subscribed, the Fund may exercise any of the remedies set forth in the Prospectus.

Signature of Subscriber(s)

Address for delivery of Shares

If permanent change address, check here o

Please give your telephone number: (    ) ________________________

Tax I.D. Number or Social Security Number: ______________________

METHOD OF PAYMENT (CHECK ONE)

o   Check or certified check, cashier’s check or bank draft drawn on a U.S. bank, or U.S. postal money order payable to “The Mexico Equity and Income Fund, Inc.” Funds paid by an uncertified check may take at least five business days to clear.

o   Wire transfer of immediately available funds directly to the account maintained by Computershare Trust Company of New York, as Subscribing Agent, for purpose of accepting subscriptions in this Rights Offering at Harris N.A., ABA #071000288, Account # 2279388.

If you do not indicate the number of shares being purchased, or do not forward full payment of the total Subscription Price for the number of shares that you indicate are being purchased, then you will be deemed to have exercised your Rights with respect to the maximum number of shares that may be purchase on the actual payment delivered. The Fund will make this determination as follows:

• you will be deemed to have exercised your Basic Subscription Right to the full extent of the payment received, and

• if any funds remain, you will be deemed to have exercised your Over-subscription Privilege to the extent of the remaining funds.

IMPORTANT: The signature(s) must correspond in every particular, without alteration, with the name(s) as printed on your Subscription Certificate

Your signature must be guaranteed by an Eligible Guarantor Institutions that term is defined under Rule 17AD-15 of the Securities Exchange Act of 1934, which may include:

(A)	Commercial bank or trust company, or
(B)	A member of a domestic stock exchange, or
(C)	A savings bank or credit union

Signature Guaranteed
	(Name of Bank or Firm)
By
	(Signature of Officer and Title)

PROCEEDS FROM THE SALE OF RIGHTS MAY BE SUBJECT TO WITHHOLDING OF U.S. TAXES UNLESS THE SELLER’S CERTIFIED U.S. TAXPAYER IDENTIFICATION NUMBER (OR CERTIFICATE REGARDING FOREIGN STATUS) IS ON FILE WITH THE SUBSCRIPTION AGENT AND THE SELLER IS NOT OTHERWISE SUBJECT TO U.S. BACKUP WITHHOLDING.

EX-99.2(D)(2)

Exhibit 2(d)(2)

NOTICE OF GUARANTEED DELIVERY FOR SHARES OF PREFERRED STOCK OF THE MEXICO EQUITY AND INCOME FUND, INC. SUBSCRIBED FOR PURSUANT TO THE BASIC SUBSCRIPTION RIGHT AND THE OVER-SUBSCRIPTION PRIVILEGE

The Mexico Equity and Income Fund, Inc. Rights Offering

As set forth in the Fund’s Prospectus dated                     , 2005 (the “Prospectus”) under “Preferred Stock Rights Offering — Election to Purchase Preferred Stock,” this form or one substantially equivalent hereto may be used as a means of effecting subscription and payment for all shares of The Mexico Equity and Income Fund, Inc. Preferred Stock subscribed for by exercise of Rights pursuant to the Basic Subscription and the Over-Subscription Privilege. Such form may be delivered by hand or sent by facsimile transmission, overnight courier or mail to the Subscribing Agent and must be received prior to 5:00 p.m. New York City time on December ___, 2005 (the “Expiration Date”).^* The terms and conditions of the Offer set forth in the Prospectus are incorporated by reference herein. Capitalized terms used and not otherwise defined herein have the meanings attributed to them in the Prospectus.

The Subscribing Agent is:

COMPUTERSHARE TRUST COMPANY OF NEW YORK

BY FACSIMILE	BY MAIL:
(TELECOPIES):	Computershare Trust Company of New York
(212) 701-7664	88 Pine Street, 19th Floor
Confirm by telephone to:	New York, New York 10005
(212) 701-7600
BY EXPRESS MAIL OR OVERNIGHT	BY HAND:
COURIER:	Computershare Trust Company of New York
Computershare Trust Company of New York	88 Pine Street, 19th Floor
88 Pine Street, 19th Floor	New York, New York 10005
New York, New York 10005

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

The New York Stock Exchange member firm or bank or trust company which completes this form must communicate the guarantee and the number of Shares subscribed for under both the Basic Subscription Right and the Over-Subscription Privilege to the Subscribing Agent and must deliver this Notice of Guaranteed Delivery prior to 5:00 p.m., New York City time, on the Expiration Date,* guaranteeing delivery of (i) payment in full for all subscribed shares and (ii) a properly completed and executed Subscription Certificate to the Subscribing Agent. The

^* Unless extended by the Fund

Subscription Certificate and full payment must then be delivered by the close of business on the third business day (                    , 2005) after the Expiration Date (December ___, 2005)* to the Subscription Agent. Failure to do so will result in a forfeiture of the Rights.

GUARANTEE

The undersigned, a member firm of the New York Stock Exchange or a bank or trust company, guarantees delivery of payment to the Subscription Agent by the close of business (5:00 p.m., New York City time) on the third business day (                    , 2005) after the Expiration Date (December ___, 2005), unless extended by the Fund) of (i) a properly completed and executed Subscription Certificate and (ii) payment of the full Subscription Price for shares subscribed for in the Basic Subscription Right and pursuant to the Over-Subscription Privilege, if applicable, as subscription for such shares is indicated herein or in the Subscription Certificate.

The Mexico Equity and Income Fund, Inc.

		Broker Assigned Control #: ________
1. Basic Subscription	Number of Rights to	Number of shares	Payment to be made
Right	be exercised ______	requested for which	in connection with
	Rights	you are guaranteeing	Basic Subscription
		delivery of Rights and	shares: $______
		payment ______shares:
		(Rights ÷ by .75)
2. Over-Subscription		Number of Over-	Payment to be made
		Subscription shares	in connection with
		requested for which	Over-Subscription
		you are guaranteeing	shares: $______
		payment: ______shares
3. Totals	Total number of		$______
	Rights to be delivered		Total Payment
	______Rights

Method of Delivery of Rights (circle one)

A.	Through The Depository Trust Company (“DTC”)**
B.	Direct to the Subscription Agent. Please reference below the registration of the Rights to be delivered

^** IF THE RIGHTS ARE TO BE DELIVERED THROUGH DTC, CALL THE SUBSCRIBING AGENT TO OBTAIN A PROTECTED IDENTIFICATION NUMBER, WHICH NEEDS TO BE COMMUNICATED BY YOU TO DTC.

PLEASE ASSIGN A UNIQUE CONTROL NUMBER FOR EACH GUARANTEE SUBMITTED. This number needs to be referenced on any direct delivery of Rights or any delivery through DTC. In addition, please note that if you are guaranteeing for Over-Subscription Shares and are a DTC participant, you must also execute and forward to Computershare Trust Company of New York a DTC Participant Over-Subscription Exercise Form.

Name	Authorized Signature
DTC Participant Number	Title
Address	Name (please type or print)
Zip Code	Phone Number
Contact Name	Date

BENEFICIAL OWNER LISTING CERTIFICATION

The Mexico Equity and Income Fund, Inc. Rights Offering

The undersigned, a bank, broker or other nominee holder of Rights (“Rights”) to purchase shares of Preferred Stock, $.001 par value, of The Mexico Equity and Income Fund, Inc. (the “Fund”) pursuant to the Rights Offering (the “Offer”) described and provided for in the Fund’s Prospectus dated                     , 2005 (the “Prospectus”), hereby certifies to the Fund and to Computershare Trust Company of New York, as Subscribing Agent for such Offer, that for each numbered line filled in below, the undersigned has exercised, on behalf of the beneficial owner thereof (which may be the undersigned), the number of Rights specified on such line pursuant to the Basic Subscription Right (as defined in the Prospectus) and such beneficial owner wishes to subscribe for the purchase of additional shares pursuant to the Over-Subscription Privilege (as defined in the Prospectus), in the amount set forth in the third column of such line.

	NUMBER OF RIGHTS	NUMBER OF SHARES
Number of Record Date	exercised pursuant to the	requested pursuant to the
Shares owned	Basic Subscription Right	Over-Subscription Privilege
1
2
3
4
5
6
7
8
9
10

                                          vested
Name of Nominee Holder

By:
Name:
Title:
Dated:	, 2005

Provide the following information, if applicable:

Depository Trust Corporation (“DTC”)	Name of Broker
Participant Number
DTC Primary Subscription Confirmation	Address
Number(s)

EX-99.2(G)

Exhibit 2(g)

INVESTMENT ADVISORY AGREEMENT

     AGREEMENT dated and effective as of July 1, 2003, between THE MEXICO EQUITY AND INCOME FUND, INC., a Maryland corporation (herein referred to as the “Fund”) and PICHARDO ASSET MANAGEMENT, S.A. DE C.V., a Mexican corporation (herein referred to as the “Investment Adviser”).

     WHEREAS, the Fund and the Investment Adviser desire to enter into an investment management agreement whereby the terms of said agreement are set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is agreed by the parties as follows:

     1. Appointment of the Investment Adviser.

          (a) The Investment Adviser hereby undertakes and agrees, upon the terms and conditions herein set forth, (i) to make investment decisions for the Fund, to prepare and make available to the Fund research and statistical data in connection therewith, and to supervise the acquisition and disposition of securities by the Fund, including the selection of brokers or dealers to carry out the transactions, all in accordance with the Fund’s investment objective and policies and in accordance with guidelines and directions from the Fund’s Board of Directors; (ii) to assist the Fund as it may reasonably request in the conduct of the Fund’s business, subject to the direction and control of the Fund’s Board of Directors; (iii) to maintain and furnish or cause to be maintained and furnished for the Fund all records, reports and other information required under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), to the extent that such records, reports and other information are not maintained or furnished by the administrators, custodians or other agents of the Fund; (iv) to furnish at the Investment Adviser’s expense for the use of the Fund such clerical services and office space and facilities as the Fund may reasonably require for its needs in the United States and Mexico related to research, statistical and investment work; and (v) to pay the reasonable salaries and expenses of such of the Fund’s officers and employees (including, where applicable, the Fund’s share of payroll taxes) and any fees and expenses of such of the Fund’s directors as are directors, officers or employees of the Investment Adviser or any of its affiliates. The Investment Adviser shall bear all expenses arising out of its duties hereunder but shall not be responsible for any expenses of the Fund other than those specifically allocated to the Investment Adviser in this Section 1.

          (b) In particular, but without limiting the generality of the foregoing, the Investment Adviser shall not be responsible, except to the extent of the compensation of such of the Fund’s employees as are directors, officers or employees of the Investment Adviser whose services may be involved, for the following expenses of the Fund; organization expenses (but not the overhead or employee costs of the Investment Adviser); legal fees and

expenses of counsel (United States and Mexican) to the Fund and, if counsel is retained by the directors who are not “interested persons” of the Fund, of such counsel; auditing and accounting expenses; taxes and governmental fees; New York Stock Exchange listing fees; dues and expenses incurred in connection with membership in investment company organizations; fees and expenses of the Fund’s custodians, transfer agents and registrars; fees and expenses with respect to administration except as may be provided otherwise pursuant to administration agreements; expenses for portfolio pricing services by a pricing agent, if any; expenses of preparing share certificates and other expenses in connection with the issuance, offering and underwriting of shares issued by the Fund; expenses relating to investor and public relations; fees and expenses involved in registering and maintaining registration of the Fund and of its shares with the U.S. Securities and Exchange Commission, and qualifying its shares under state securities laws, including the preparation and printing of the Fund’s registration statements and prospectuses for such purposes; freight, insurance and other charges in connection with the shipment of the Fund’s portfolio securities; brokerage commissions, stamp duties or other costs of acquiring or disposing of any portfolio holding of the Fund; expenses of preparation and distribution of reports, notices and dividends to shareholders; expenses of the dividend reinvestment and share purchase plan; costs of stationery; any litigation expenses; and costs of shareholders’ and other meetings.

          (c) In selecting brokers or dealers to execute portfolio transactions on behalf of the Fund, the Investment Adviser will seek the best overall terms available. In assessing the best overall terms available for any transaction, the Investment Adviser must consider the factors it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, for the specific transaction and on a continuing basis. In addition, the Investment Adviser may, in selecting brokers or dealers to execute a particular transaction and in evaluating the best overall terms available, consider the brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as amended) provided to the Fund.

          (d) The Investment Adviser may contract with or consult with such banks, other securities firms or other parties in Mexico or elsewhere as it may deem appropriate to obtain additional advisory information and advice, including investment recommendations, advice regarding economic factors and trends, advice as to currency exchange matters and clerical and accounting services and other assistance. It is acknowledged and agreed that the Investment Adviser will be responsible for the management of the Fund’s portfolio and overall investment strategy, in accordance with the Fund’s investment policies, and for making decisions to buy, sell or hold particular securities, including but not limited to all investment decisions with respect to the Fund’s portfolio of equity, debt and convertible debt securities.

     2. Remuneration. The Fund agrees to pay to the Investment Adviser, in either U.S. dollars, as may from time to time be agreed among the Fund and the Investment Adviser, as full compensation for the services to be rendered and expenses to be borne by the Investment Adviser hereunder, a monthly fee at an annual rate equal to 0.80% of the value of the Fund’s average daily net assets. For purposes of computing the fee, the average monthly net assets of the Fund are determined at the end of each month on the basis of the average net assets of the Fund for each week during the month. The assets for each weekly period are determined by averaging the net assets at the last business day of a week with the net assets at the last business day of the prior week. The value of the net assets of the Fund shall be determined pursuant to the applicable provisions of the 1940 Act and the directions of the Fund’s Board of Directors. Subject to the provisions of Section 6 of this Agreement, such fee shall be computed beginning on July 1, 2003 (the “Effective Date”) until the termination, for whatever reason, of this Agreement. The fee for the period from the end of the last month ending prior to termination of this Agreement to the date of termination and the fee for the period from the Effective Date through the end of the month in which the Effective Date occurs shall be pro rated according to the proportion which such period bears to the full monthly period. Except as provided below, each payment of a monthly fee to the Investment Adviser shall be made within ten days of the first day of each month following the day as of which such payment is computed. Upon the termination of this Agreement before, the end of any month, such fee shall be payable on the date of termination of this Agreement.

     3. Representations and Warranties. The Investment Adviser represents and warrants that it is duly registered and authorized as an investment adviser under the United States Investment Advisers Act of 1940, as amended, and agrees to maintain effective all requisite registrations, authorizations and licenses, as the case may be, until the termination of this Agreement.

     4. Services Not Deemed Exclusive. Nothing herein shall be construed as prohibiting the Investment Adviser from providing investment management and advisory services to, or entering into investment management and advisory agreements with, other clients, including other registered investment companies and clients which may invest in securities of Mexican issuers, or from utilizing (in providing such services) information furnished to the Investment Adviser by others as contemplated by Section 1 of this Agreement; nor, except as explicitly provided herein, shall anything herein be construed as constituting the Investment Adviser as an agent of the Fund.

     5. Limit of Liability. The Investment Adviser may rely on information reasonably believed by it to be accurate and reliable. Neither the Investment Adviser nor its officers, directors, employees, agents or controlling persons as defined in the 1940 Act shall be subject to any liability for any act or omission, error of judgment or mistake of law, or for any loss suffered by the Fund, in the course of, connected with or arising out of any services to be rendered hereunder, except by reason of willful misfeasance, bad faith or gross

negligence on the part of the Investment Adviser in the performance of its duties or by reason of reckless disregard on the part of the Investment Adviser of its obligations and duties under this Agreement. Any person, even though also employed by the Investment Adviser, who may be or become an employee of the Fund shall be deemed, when acting within the scope of his employment by the Fund, to be acting in such employment solely for the Fund and not as an employee or agent of the Investment Adviser.

     6. Duration and Termination. This Agreement shall continue in effect initially for a two year period and will continue from year to year, provided, such continuance is specifically approved at least annually by the affirmative vote of (i) a majority of the members of the Fund’s Board of Directors who are neither parties to this Agreement nor interested persons of the Fund or of the Investment Adviser or of any entity regularly furnishing investment advisory services with respect to the Fund pursuant to an agreement with the Investment Adviser, cast in person at a meeting called for the purpose of voting on such approval, and (ii) a majority of the Fund’s Board of Directors or the holders of a majority of the outstanding voting securities of the Fund.

     Notwithstanding the above, this Agreement (a) may nevertheless be terminated at any time without penalty, by the Fund’s Board of Directors, by vote of holders of a majority of the outstanding voting securities of the Fund or by the Investment Adviser upon 60 days’ written notice delivered or sent to the other party, and (b) shall automatically be terminated in the event of its assignment; provided, however, that a transaction which does not, in accordance with the 1940 Act, result in a change of actual control or management of the Investment Adviser’s business shall not be deemed to be an assignment for the purposes of this Agreement. Any such notice shall be deemed given when received by the addressee.

     7. Non-Assignment and Amendment. This Agreement may not be transferred, assigned, sold or in any manner hypothecated or pledged by either party hereto other than pursuant to Section 6. It may be amended by mutual agreement, but only after authorization of such amendment by the affirmative vote of (i) the holders of a majority of the outstanding voting securities of the Fund, and (ii) a majority of the members of the Fund’s Board of Directors’ who are not interested persons of the Fund or of the Investment Adviser or of an entity regularly furnishing investment advisory services with respect to the Fund pursuant to any agreement with the Investment Adviser, cast in person at a meeting called for the purpose of voting on such approval.

     8. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York; provided, however, that nothing herein shall be construed as being inconsistent with the 1940 Act. As used herein, the terms “interested person,” “assignment” and “vote of a majority of the outstanding voting securities” shall have the meanings set forth in the 1940 Act.

     9. Notices. Any notice hereunder shall be in writing and shall be delivered in person or by telex or facsimile followed by delivery in person to the parties at the addresses set forth below:

If to the Fund:
THE MEXICO EQUITY AND INCOME FUND, INC.
615 E. Michigan St., 2nd Floor
Milwaukee, Wisconsin 53202
Telephone:	(414)765-5307
Facsimile:	(414)212-7606
Attention:	Andrew P. Chica

with a copy to:
SPITZER & FELDMAN P.C.
405 Park Avenue
New York, NY 10022
Telephone:	(212) 888-6680
Facsimile:	(212) 838-7472
Attention:	Thomas R. Westle, Esq.

If to the Investment Adviser:
PICHARDO ASSET MANAGEMENT, S.A. DE C.V.
Teopanzolco Avenue #408
3rd Floor Reforma
Cuernavaca, Mexico 62260
Telephone:	52 777 380 15 34
Fax:	52 777 380 15 34
Attention:	Ms. Eugenia Solis Pichardo

or to such other address as to which the recipient shall have informed the other parties in writing.

               Unless specifically provided elsewhere, notice given as provided above shall be deemed to have been given, if by personal delivery, on the day of such delivery, and, if by telex or facsimile and mail, on the date on which such telex or facsimile and confirmatory letter are sent.

     10. Consent to Jurisdiction. Each party hereto irrevocably agrees that any suit, action or proceeding against the Investment Adviser or the Fund arising out of or relating to

this Agreement shall be subject exclusively to the jurisdiction of the United States District Court for the Southern District of New York and the Supreme Court of the State of New York, New York County, and each party hereto irrevocably submits to the jurisdiction of each such court in connection with any such suit, action or proceeding. Each party hereto waives any objection to the laying of venue of any such suit, action or proceeding in either such court, and waives any claim that such suit, action or proceeding has been brought in an inconvenient forum. Each party hereto irrevocably consents to service of process in connection with any such suit, action or proceeding by mailing a copy thereof registered or certified mail, postage prepaid, to their respective addresses as set forth in this Agreement.

     11. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

[This Remainder of this page has been intentionally left blank]

     IN WITNESS WHEREOF, the parties have caused their duly authorized signatories to execute this Agreement as of the day and year first written above.

THE MEXICO EQUITY AND INCOME FUND, INC.
By:	/s/ Gerald Hellerman
Name: Gerald Hellerman
Title: President

PICHARDO ASSET MANAGEMENT S.A. DE C.V.
By:	/s/ Eugenia Solis Pichardo
Name: Eugenia Solis Pichardo
Title:   President

EX-99.2(J)

Exhibit 2(j)

CUSTODY AGREEMENT

          THIS AGREEMENT is made and entered into as of this 11^th  day of July, 2001, by and between The Mexico Equity and Income Fund, Inc., a Company organized under the laws of the State of Maryland, (the “Company”), and Firstar Bank, N.A., a national banking association (the “Custodian”);

WITNESSETH:

     WHEREAS, the Company is a closed-end management investment company registered under the Investment Company Act of 1940, as amended (the“1940 Act”); and

     WHEREAS, the Company desires to retain Firstar Bank, N.A. to act as Custodian; and

     WHEREAS, the Company desires that the Fund’s Securities and cash be held and administered by the Custodian pursuant to this Agreement; and

     WHEREAS, the Custodian represents that it is a bank having the qualifications prescribed in Section 26(a)(1) of the 1940 Act;

     NOW, THEREFORE, in consideration of the mutual agreements herein made, the Company and the Custodian hereby agree as follows:

ARTICLE I

DEFINITIONS

     Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

1.1	“Authorized Person” means any Officer or other person duly authorized by resolution of the Board of Directors to give Oral Instructions and Written Instructions on behalf of the Fund and named in Exhibit A hereto or in such resolutions of the Board of Directors, certified by an Officer, as may be received by the Custodian from time to time.
1.2	“Board of Directors” shall mean the Directors from time to time serving under the Company’s Articles of Incorporation, as from time to time amended.
1.3	“Book-Entry System” shall mean a federal book-entry system as provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR Part 350, or in such book-entry regulations of federal agencies as are substantially in the form of such Subpart O.

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1.4	“Business Day” shall mean any day recognized as a settlement day by The New York Stock Exchange, Inc. and any other day for which the Company computes the net asset value of Shares of the Fund.
1.5	“Fund Custody Account” shall mean any of the accounts in the name of the Company, which is provided for in Section 3.2 below.
1.6	“NASD” shall mean The National Association of Securities Dealers, Inc.
1.7	“Officer” shall mean the Chairman, President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Company.
1.8	“Oral Instructions” shall mean instructions orally transmitted to and accepted by the Custodian because such instructions are: (i) reasonably believed by the Custodian to have been given by an Authorized Person, (ii) recorded and kept among the records of the Custodian made in the ordinary course of business and (iii) orally confirmed by the Custodian. The Company shall cause all Oral Instructions to be confirmed by Written Instructions prior to the end of the next Business Day. If such Written Instructions confirming Oral Instructions are not received by the Custodian prior to a transaction, it shall in no way affect the validity of the transaction or the authorization thereof by the Company. If Oral Instructions vary from the Written Instructions which purport to confirm them, the Custodian shall notify the Company of such variance but such Oral Instructions will govern unless the Custodian has not yet acted.
1.9	“Proper Instructions” shall mean Oral Instructions or Written Instructions. Proper Instructions may be continuing Written Instructions when deemed appropriate by both parties.
1.10	“Securities Depository” shall mean The Depository Trust Company and (provided that Custodian shall have received a copy of a resolution of the Board of Directors, certified by an Officer, specifically approving the use of such clearing agency as a depository for the Fund) any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities and Exchange Act of 1934 as amended (the “1934 Act”), which acts as a system for the central handling of Securities where all Securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities.
1.11	“Securities” shall include, without limitation, common and preferred stocks, bonds, call options, put options, debentures, notes, bank certificates of deposit, bankers’ acceptances, mortgage-backed securities or other obligations, and any certificates, receipts, warrants or other instruments or documents representing rights to receive, purchase or subscribe for the same, or evidencing or

2

	representing any other rights or interests therein, or any similar property or assets that the Custodian has the facilities to clear and to service.
1.12	“Shares” shall mean, with respect to a Fund, the units of beneficial interest issued by the Company on account of the Fund.
1.13	“Sub-Custodian” shall mean and include (i) any branch of a “U.S. Bank,” as that term is defined in Rule 17f-S under the 1940 Act, (ii) any “Eligible Foreign Custodian,” as that term is defined in Rule 17f-5 under the 1940 Act, having a contract with the Custodian which the Custodian has determined will provide reasonable care of assets of the Fund based on the standards specified in Section 3.3 below. Such contract shall include provisions that provide: (i) for indemnification or insurance arrangements (or any combination of the foregoing) such that the Fund will be adequately protected against the risk of loss of assets held in accordance with such contract; (ii) that the Fund’s assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the Sub-Custodian or its creditors except a claim of payment for their safe custody or administration, in the case of cash deposits, liens or rights in favor of creditors of the Sub-Custodian arising under bankruptcy, insolvency, or similar laws; (iii) that beneficial ownership for the Fund’s assets will be freely transferable without the payment of money or value other than for safe custody or administration; (iv) that adequate records will be maintained identifying the assets as belonging to the Fund or as being held by a third party for the benefit of the Fund; (v) that the Fund’s independent public accountants will be given access to those records or confirmation of the contents of those records; and (vi) that the Fund will receive periodic reports with respect to the safekeeping of the Fund’s assets, including, but not limited to, notification of any transfer to or from a Fund’s account or a third party account containing assets held for the benefit of the Fund. Such contract may contain, in lieu of any or all of the provisions specified above, such other provisions that the Custodian determines will provide, in their entirety, the same or a greater level of care and protection for Fund assets as the specified provisions, in their entirety.
1.14	“Written Instructions” shall mean (i) written communications actually received by the Custodian and signed by an Authorized Person, or (ii) communications by telex or any other such system from one or more persons reasonably believed by the Custodian to be Authorized Persons, or (iii) communications between electro-mechanical or electronic devices provided that the use of such devices and the procedures for the use thereof shall have been approved by resolutions of the Board of Directors, a copy of which, certified by an Officer, shall have been delivered to the Custodian.

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ARTICLE II
APPOINTMENT OF CUSTODIAN

2.1	Appointment. The Company hereby constitutes and appoints the Custodian as custodian of all Securities and cash owned by or in the possession of the Fund at any time during the period of this Agreement.
2.2	Acceptance. The Custodian hereby accepts appointment as such custodian and agrees to perform the duties thereof as hereinafter set forth.
2.3	Documents to be Furnished. The following documents, including any amendments thereto, will be provided contemporaneously with the execution of the Agreement to the Custodian by the Company:

a.	A copy of the Articles of Incorporation certified by the Secretary;
b.	A copy of the Bylaws of the Company certified by the Secretary;
c.	A copy of the resolution of the Board of Directors of the Company appointing the Custodian, certified by the Secretary;
d.	A copy of the then current Prospectus of the Fund; and
e.	A certification of the Chairman and Secretary of the Company setting forth the names and signatures of the current Officers of the Company and other Authorized Persons.

2.4 Notice of Appointment of Dividend and Transfer Agent. The Company agrees to notify the Custodian in writing of the appointment, termination or change in appointment of any Dividend and Transfer Agent of the Fund.

ARTICLE III
CUSTODY OF CASH AND SECURITIES

3.1	Segregation. All Securities and non-cash property held by the Custodian for the account of the Fund (other than Securities maintained in a Securities Depository or Book-Entry System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian (including the Securities and non-cash property of the other series of the Company) and shall be identified as subject to this Agreement.
3.2	Fund Custody Accounts. As to each Fund, the Custodian shall open and maintain in its trust department a custody account in the name of the Company coupled with the name of the Fund, subject only to draft or order of the Custodian, in which the Custodian shall enter and carry all Securities, cash and other assets of such Fund which are delivered to it.
3.3	Appointment of Agents.   (a) In its discretion, the Custodian may appoint one or more Sub-Custodians to act as Securities Depositories or as sub-custodians to hold Securities and cash of the Fund and to carry out such other provisions of this

4

	Agreement as it may determine, provided, however, that the appointment of any such agents and maintenance of any Securities and cash of the Fund shall be at the Custodian’s expense and shall not relieve the Custodian of any of its obligations or liabilities under this Agreement.
(b)	If, after the initial approval of Sub-Custodians by the Board of Directors in connection with this Agreement, the Custodian wishes to appoint other Sub-Custodians to hold property of the Fund, it will so notify the Company and provide it with information reasonably necessary to determine any such new Sub-Custodian’s eligibility under Rule 17f-5 under the 1940 Act, including a copy of the proposed agreement with such Sub-Custodian. The Company shall at the meeting of the Board of Directors next following receipt of such notice and information give a written approval or disapproval of the proposed action.
(c)	The Agreement between the Custodian and each Sub-Custodian acting hereunder shall contain the required provisions set forth in Rule 17f-5(a)(1)(iii).
(d)	At the end of each calendar quarter, the Custodian shall provide written reports notifying the Board of Directors of the placement of the Securities and cash of the Fund with a particular Sub-Custodian and of any material changes in the Fund’s arrangements. The Custodian shall promptly take such steps as may be required to withdraw assets of the Fund from any Sub-Custodian that has ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(e)	With respect to its responsibilities under this Section 3.3, the Custodian hereby warrants to the Company that it agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of property of the Fund. The Custodian further warrants that a Fund’s assets will be subject to reasonable care, based on the standards applicable to custodians in the relevant market, if maintained with each Sub-Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation: (i) the Sub-Custodian’s practices, procedures, and internal controls, for certificated securities (if applicable), the method of keeping custodial records, and the security and data protection practices; (ii) whether the Sub-Custodian has the requisite financial strength to provide reasonable care for Fund assets; (iii) the Sub-Custodian’s general reputation and standing and, in the case of a Securities Depository, the Securities Depository’s operating history and number of participants; and (iv) whether the Fund will have jurisdiction over and be able to enforce judgments against the Sub-Custodian, such as by virtue of the existence of any offices of the Sub-Custodian in the United States or the Sub-Custodian’s consent to service of process in the United States.
(f)	The Custodian shall establish a system to monitor the appropriateness of maintaining the Fund’s assets with a particular Sub-Custodian and the contract governing the Fund’s arrangements with such Sub-Custodian.

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3.4	Delivery of Assets to Custodian. The Company shall deliver, or cause to be delivered, to the Custodian all of the Fund’s Securities, cash and other assets, including (a) all payments of income, payments of principal and capital distributions received by the Fund with respect to such Securities, cash or other assets owned by the Fund at any time during the period of this Agreement, and (b) all cash received by the Fund for the issuance, at any time during such period, of Shares. The Custodian shall not be responsible for such Securities, cash or other assets until actually received by it.
3.5	Securities Depositories and Book-Entry Systems. The Custodian may deposit and/or maintain Securities of the Fund in a Securities Depository or in a Book- Entry System, subject to the following provisions:
(a)	Prior to a deposit of Securities of the Fund in any Securities Depository or Book-Entry System, the Company shall deliver to the Custodian a resolution of the Board of Directors, certified by an Officer, authorizing and instructing the Custodian on an on-going basis to deposit in such Securities Depository or Book- Entry System all Securities eligible for deposit therein and to make use of such Securities Depository or Book-Entry System to the extent possible and practical in connection with its performance hereunder, including, without limitation, in connection with settlements of purchases and sales of Securities, loans of Securities, and deliveries and returns of collateral consisting of Securities.
(b)	Securities of the Fund kept in a Book-Entry System or Securities Depository shall be kept in an account (“Depository Account”) of the Custodian in such Book- Entry System or Securities Depository which includes only assets held by the Custodian as a fiduciary, custodian or otherwise for customers.
(c)	The records of the Custodian with respect to Securities of the Fund maintained in a Book-Entry System or Securities Depository shall, by book-entry, identify such Securities as belonging to the Fund.
(d)	If Securities purchased by the Fund are to be held in a Book-Entry System or Securities Depository, the Custodian shall pay for such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that such Securities have been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such payment and transfer for the account of the Fund. If Securities sold by the Fund are held in a Book-Entry System or Securities Depository, the Custodian shall transfer such Securities upon (i) receipt of advice from the Book-Entry System or Securities Depository that payment for such Securities has been transferred to the Depository Account, and (ii) the making of an entry on the records of the Custodian to reflect such transfer and payment for the account of the Fund.
(e)	The Custodian shall provide the Company with copies of any report (obtained by the Custodian from a Book-Entry System or Securities Depository in which

6

	Securities of the Fund are kept) on the internal accounting controls and procedures for safeguarding Securities deposited in such Book-Entry System or Securities Depository.
(f)	Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Company for any loss or damage to the Fund resulting (i) from the use of a Book-Entry System or Securities Depository by reason of any negligence or willful misconduct on the part of Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above or any of its or their employees, or (ii) from failure of Custodian or any such Sub-Custodian to enforce effectively such rights as it may have against a Book-Entry System or Securities Depository. At its election, the Company shall be subrogated to the rights of the Custodian with respect to any claim against a Book-Entry System or Securities Depository or any other person from any loss or damage to the Fund arising from the use of such Book-Entry System or Securities Depository, if and to the extent that the Fund has not been made whole for any such loss or damage.
3.6	Disbursement of Moneys from Fund Custody Account. Upon receipt of Proper Instructions, the Custodian shall disburse moneys from the Fund Custody Account but only in the following cases:

(a)

For the purchase of Securities for the Fund but only in accordance with Section 4.1 of this Agreement and only (i) in the case of Securities (other than options on Securities, futures contracts and options on futures contracts), against the delivery to the Custodian (or any Sub-Custodian appointed pursuant to Section 3.3 above) of such Securities registered as provided in Section 3.9 below or in proper form for transfer, or if the purchase of such Securities is effected through a Book-Entry System or Securities Depository, in accordance with the conditions set forth in Section 3.5 above; (ii) in the case of options on Securities, against delivery to the Custodian (or such Sub-Custodian) of such receipts as are required by the customs prevailing among dealers in such options; (iii) in the case of futures contracts and options on futures contracts, against delivery to the Custodian (or such Sub-Custodian) of evidence of title thereto in favor of the Fund or any nominee referred to in Section 3.9 below; and (iv) in the case of repurchase or reverse repurchase agreements entered into between the Company and a bank which is a member of the Federal Reserve System or between the Company and a primary dealer in U.S. Government securities, against delivery of the purchased Securities either in certificate form or through an entry crediting the Custodian’s account at a Book-Entry System or Securities Depository with such Securities;

(b)

In connection with the conversion, exchange or surrender, as set forth in Section 3.7(f) below, of Securities owned by the Fund;

7

(c)	For the payment of any dividends or capital gain distributions declared by the Fund;
(d)	In payment of the redemption price of Shares as provided in Section 5.1 below;
(e)	For the payment of any expense or liability incurred by the Fund, including but not limited to the following payments for the account of the Fund: interest; taxes; administration, investment advisory, accounting, auditing, transfer agent, custodian, director and legal fees; and other operating expenses of the Fund; in all cases, whether or not such expenses are to be in whole or in part capitalized or treated as deferred expenses;
(f)	For transfer in accordance with the provisions of any agreement among the Company, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD, relating to compliance with rules of The Options Clearing Corporation and of any registered national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements in connection with transactions by the Fund;
(g)	For transfer in accordance with the provision of any agreement among the Company, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits in connection with transactions by the Fund;
(h)	For the funding of any uncertificated time deposit or other interest-bearing account with any banking institution (including the Custodian), which deposit or account has a term of one year or less; and
(i)	For any other proper purpose, but only upon receipt, in addition to Proper Instructions, of a copy of a resolution of the Board of Directors, certified by an Officer, specifying the amount and purpose of such payment, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom such payment is to be made.

3.7 Delivery of Securities from Fund Custody Account. Upon receipt of Proper Instructions, the Custodian shall release and deliver Securities from the Fund Custody Account but only in the following cases:

(a) Upon the sale of Securities for the account of the Fund but only against receipt of payment therefor in cash, by certified or cashiers check or bank credit;

8

(b)	In the case of a sale effected through a Book-Entry System or Securities Depository, in accordance with the provisions of Section 3.5 above;
(c)	To an offeror’s depository agent in connection with tender or other similar offers for Securities of the Fund; provided that, in any such case, the cash or other consideration is to be delivered to the Custodian;
(d)	To the issuer thereof or its agent (i) for transfer into the name of the Fund, the Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above, or of any nominee or nominees of any of the foregoing, or (ii) for exchange for a different number of certificates or other evidence representing the same aggregate face amount or number of units; provided that, in any such case, the new Securities are to be delivered to the Custodian;
(e)	To the broker selling Securities, for examination in accordance with the “street delivery” custom;
(f)	For exchange or conversion pursuant to any plan or merger, consolidation, recapitalization, reorganization or readjustment of the issuer of such Securities, or pursuant to provisions for conversion contained in such Securities, or pursuant to any deposit agreement, including surrender or receipt of underlying Securities in connection with the issuance or cancellation of depository receipts; provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian;
(g)	Upon receipt of payment therefor pursuant to any repurchase or reverse repurchase agreement entered into by the Fund;
(h)	In the case of warrants, rights or similar Securities, upon the exercise thereof, provided that, in any such case, the new Securities and cash, if any, are to be delivered to the Custodian;
(i)	For delivery in connection with any loans of Securities of the Fund, but only against receipt of such collateral as the Company shall have specified to the Custodian in Proper Instructions;
(j)	For delivery as security in connection with any borrowings by the Fund requiring a pledge of assets by the Company, but only against receipt by the Custodian of the amounts borrowed;
(k)	Pursuant to any authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Company;
(l)	For delivery in accordance with the provisions of any agreement among the Company, the Custodian and a broker-dealer registered under the 1934

9

	Act and a member of the NASD, relating to compliance with the rules of The Options Clearing Company and of any registered national securities exchange (or of any similar organization or organizations) regarding escrow or other arrangements in connection with transactions by the Fund;
(m)	For delivery in accordance with the provisions of any agreement among the Company, the Custodian, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any contract market (or any similar organization or organizations) regarding account deposits in connection with transactions by the Fund; or
(n)	For any other proper corporate purpose, but only upon receipt, in addition to Proper Instructions, of a copy of a resolution of the Board of Directors, certified by an Officer, specifying the Securities to be delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such Securities shall be made.

3.8 Actions Not Requiring Proper Instructions. Unless otherwise instructed by the Company, the Custodian shall with respect to all Securities held for the Fund:

(a)	Subject to Section 7.4 below, collect on a timely basis all income and other payments to which the Fund is entitled either by law or pursuant to custom in the securities business;
(b)	Present for payment and, subject to Section 7.4 below, collect on a timely basis the amount payable upon all Securities which may mature or be called, redeemed, or retired, or otherwise become payable;
(c)	Endorse for collection, in the name of the Fund, checks, drafts and other negotiable instruments;
(d)	Surrender interim receipts or Securities in temporary form for Securities in definitive form;
(e)	Execute, as custodian, any necessary declarations or certificates of ownership under the federal income tax laws or the laws or regulations of any other taxing authority now or hereafter in effect, and prepare and submit reports to the Internal Revenue Service (“IRS”) and to the Company at such time, in such manner and containing such information as is prescribed by the IRS;
(f)	Hold for the Fund, either directly or, with respect to Securities held therein, through a Book-Entry System or Securities Depository, all rights and similar securities issued with respect to Securities of the Fund; and

10

(g) In general, and except as otherwise directed in Proper Instructions, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with Securities and assets of the Fund.

3.9

Registration and Transfer of Securities. All Securities held for the Fund that are issued or issuable only in bearer form shall be held by the Custodian in that form, provided that any such Securities shall be held in a Book-Entry System if eligible therefor. All other Securities held for the Fund may be registered in the name of the Fund, the Custodian, or any Sub-Custodian appointed pursuant to Section 3.3 above, or in the name of any nominee of any of them, or in the name of a Book-Entry System, Securities Depository or any nominee of either thereof. The Company shall furnish to the Custodian appropriate instruments to enable the Custodian to hold or deliver in proper form for transfer, or to register in the name of any of the nominees hereinabove referred to or in the name of a Book-Entry System or Securities Depository, any Securities registered in the name of the Fund.

3.10

Records.

(a)

The Custodian shall maintain, for the Fund, complete and accurate records with respect to Securities, cash or other property held for the Fund, including (i) journals or other records of original entry containing an itemized daily record in detail of all receipts and deliveries of Securities and all receipts and disbursements of cash; (ii) ledgers (or other records) reflecting (A) Securities in transfer, (B) Securities in physical possession, (C) monies and Securities borrowed and monies and Securities loaned (together with a record of the collateral therefor and substitutions of such collateral), (D) dividends and interest received, and (E) dividends receivable and interest receivable; and (iii) canceled checks and bank records related thereto. The Custodian shall keep such other books and records of the Fund as the Company shall reasonably request, or as may be required by the 1940 Act, including, but not limited to, Section 31 of the 1940 Act and Rule 31a-2 promulgated thereunder.

(b)

All such books and records maintained by the Custodian shall (i) be maintained in a form acceptable to the Company and in compliance with rules and regulations of the Securities and Exchange Commission, (ii) be the property of the Company and at all times during the regular business hours of the Custodian be made available upon request for inspection by duly authorized officers, employees or agents of the Company and employees or agents of the Securities and Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the 1940 Act.

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3.11	Fund Reports by Custodian. The Custodian shall furnish the Company with a daily activity statement and a summary of all transfers to or from each Fund Custody Account on the day following such transfers. At least monthly and from time to time, the Custodian shall furnish the Company with a detailed statement of the Securities and moneys held by the Custodian and the Sub-Custodians for the Fund under this Agreement.
3.12	Other Reports by Custodian. The Custodian shall provide the Company with such reports, as the Company may reasonably request from time to time, on the internal accounting controls and procedures for safeguarding Securities, which are employed by the Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above.
3.13	Proxies and Other Materials. The Custodian shall cause all proxies relating to Securities which are not registered in the name of the Fund, to be promptly executed by the registered holder of such Securities, without indication of the manner in which such proxies arc to be voted, and shall promptly deliver to the Company such proxies, all proxy soliciting materials and all notices relating to such Securities.
3.14	Information on Corporate Actions. The Custodian shall promptly deliver to the Company all information received by the Custodian and pertaining to Securities being held by the Fund with respect to optional tender or exchange offers, calls for redemption or purchase, or expiration of rights as described in the Standards of Service Guide attached as Exhibit B. If the Company desires to take action with respect to any tender offer, exchange offer or other similar transaction, the Company shall notify the Custodian at least five Business Days prior to the date on which the Custodian is to take such action. The Company will provide or cause to be provided to the Custodian all relevant information for any Security which has unique put/option provisions at least five Business Days prior to the beginning date of the tender period.

ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND

4.1 Purchase of Securities. Promptly upon each purchase of Securities for the Fund, Written Instructions shall be delivered to the Custodian, specifying (a) the name of the issuer or writer of such Securities, and the title or other description thereof, (b) the number of shares, principal amount (and accrued interest, if any) or other units purchased, (c) the date of purchase and settlement, (d) the purchase price per unit, (e) the total amount payable upon such purchase, and (f) the name of the person to whom such amount is payable. The Custodian shall upon receipt of such Securities purchased by the Fund pay out of the moneys held for the account of the Fund the total amount specified in such Written Instructions to the person

12

	named therein. The Custodian shall not be under any obligation to pay out moneys to cover the cost of a purchase of Securities for the Fund, if in the Fund Custody Account there is insufficient cash available to the Fund for which such purchase was made.
4.2	Liability for Payment in Advance of Receipt of Securities Purchased. In any and every case where payment for the purchase of Securities for the Fund is made by the Custodian in advance of receipt of the Securities purchased but in the absence of specified Written Instructions to so pay in advance, the Custodian shall be liable to the Fund for such Securities to the same extent as if the Securities had been received by the Custodian.
4.3	Sale of Securities. Promptly upon each sale of Securities by the Fund, Written Instructions shall be delivered to the Custodian, specifying (a) the name of the issuer or writer of such Securities, and the title or other description thereof, (b) the number of shares, principal amount (and accrued interest, if any), or other units sold, (c) the date of sale and settlement, (d) the sale price per unit, (e) the total amount payable upon such sale, and (f) the person to whom such Securities are to be delivered. Upon receipt of the total amount payable to the Fund as specified in such Written Instructions, the Custodian shall deliver such Securities to the person specified in such Written Instructions. Subject to the foregoing, the Custodian may accept payment in such form as shall be satisfactory to it, and may deliver Securities and arrange for payment in accordance with the customs prevailing among dealers in Securities.
4.4	Delivery of Securities Sold. Notwithstanding Section 4.3 above or any other provision of this Agreement, the Custodian, when instructed to deliver Securities against payment, shall be entitled, if in accordance with generally accepted market practice, to deliver such Securities prior to actual receipt of final payment therefor. In any such case, the Fund shall bear the risk that final payment for such Securities may not be made or that such Securities may be returned or otherwise held or disposed of by or through the person to whom they were delivered, and the Custodian shall have no liability for any for the foregoing.
4.5	Payment for Securities Sold, etc. In its sole discretion and from time to time, the Custodian may credit the Fund Custody Account, prior to actual receipt of final payment thereof, with (i) proceeds from the sale of Securities which it has been instructed to deliver against payment, (ii) proceeds from the redemption of Securities or other assets of the Fund, and (iii) income from cash, Securities or other assets of the Fund. Any such credit shall be conditional upon actual receipt by Custodian of final payment and may be reversed if final payment is not actually received in full. The Custodian may, in its sole discretion and from time to time, permit the Fund to use funds so credited to the Fund Custody Account in

13

	anticipation of actual receipt of final payment. Any such funds shall be repayable immediately upon demand made by the Custodian at any time prior to the actual receipt of all final payments in anticipation of which funds were credited to the Fund Custody Account.
4.6	Advances by Custodian for Settlement. The Custodian may, in its sole discretion and from time to time, advance funds to the Company to facilitate the settlement of a Fund’s transactions in the Fund Custody Account. Any such advance shall be repayable immediately upon demand made by Custodian.

ARTICLE V
REDEMPTION OF FUND SHARES

5.1

Transfer of funds. From such funds as may be available for the purpose in the relevant Fund Custody Account, and upon receipt of Proper Instructions specifying that the funds are required to redeem Shares of the Fund, the Custodian shall wire each amount specified in such Proper Instructions to or through such bank as the Company may designate with respect to such amount in such Proper Instructions.

5.2

No Duty Regarding Paying Banks. The Custodian shall not be under any obligation to effect payment or distribution by any bank designated in Proper. Instructions given pursuant to Section 5.1 above of any amount paid by the Custodian to such bank in accordance with such Proper Instructions.

ARTICLE VI
SEGREGATED ACCOUNTS

     Upon receipt of Proper Instructions, the Custodian shall establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or Securities, including Securities maintained in a Depository Account,

(a)

in accordance with the provisions of any agreement among the Company, the Custodian and a broker-dealer registered under the 1934 Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Company and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund,

(b)

for purposes of segregating cash or Securities in connection with securities options purchased or written by the Fund or in connection with financial futures contracts (or options thereon) purchased or sold by the Fund,

14

(c)	which constitute collateral for loans of Securities made by the Fund,
(d)	for purposes of compliance by the Fund with requirements under the 1940 Act for the maintenance of segregated accounts by registered investment companies in connection with reverse repurchase agreements and when-issued, delayed delivery and firm commitment transactions, and
(e)	for other proper corporate purposes, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Directors, certified by an Officer, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes.

     Each Segregated account established under this Article VI shall be established and maintained for the Fund only. All Proper Instructions relating to a segregated account shall specify the Fund.

ARTICLE VII
CONCERNING THE CUSTODIAN

7.1	Standard of Care. The Custodian shall be held to the exercise of reasonable care-in carrying out its obligations under this Agreement, and shall be without liability to the Company or any Fund for any loss, damage, cost, expense (including attorneys’ fees and disbursements), liability or claim unless such loss, damage, cost, expense, liability or claim arises from negligence, bad faith or willful misconduct on its part or on the part of any Sub-Custodian appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall promptly notify me Company of any action taken or omitted by the Custodian pursuant to advice of counsel The Custodian shall not be under any obligation at any time to ascertain whether the Company or the Fund is in compliance with the 1940 Act, the regulations thereunder, the provisions of the Company’s charter documents or by-laws, or its investment objectives and policies as then in effect.
7.2	Actual Collection Required. The Custodian shall not be liable for, or considered to be the custodian of, any cash belonging to the Fund or any money represented by a check, draft or other instrument for the payment of money, until the Custodian or its agents actually receive such cash or collect on such instrument
7.3	No Responsibility for Title, etc. So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received or delivered by it pursuant to this Agreement.

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7.4	Limitation on Duty to Collect. Custodian shall not be required TO enforce collection, by legal means or otherwise, of any money or property due and payable with respect to Securities held for the Fund if such Securities are in default or payment is not made after due demand or presentation.
7.5	Reliance Upon Documents and Instructions. The Custodian shall be entitled to rely upon any certificate, notice or other instrument in writing received by it and reasonably believed by it to be genuine. The Custodian shall be entitled to rely upon any Oral Instructions and any Written Instructions actually received by it pursuant to this Agreement.
7.6	Express Duties Only. The Custodian shall have no duties or obligations whatsoever except such duties and obligations as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against the Custodian.
7.7	Co-operation. The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the Company to keep the books of account of the Fund and/or compute the value of the assets of the Fund. The Custodian shall take all such reasonable actions as the Company may from time to time request to enable the Company to obtain, from year to year, favorable opinions from the Company’s independent accountants with respect to the Custodian’s activities hereunder in connection with (a) the preparation of the Company’s reports on Form N-l A and Form N-SAR and any other reports required by the Securities and Exchange Commission, and (b) the fulfillment by the Company of any other requirements of the Securities and Exchange Commission.

ARTICLE VIII
INDEMNIFICATION

8.1 Indemnification by Company. The Company shall indemnify and hold harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3 above, and any nominee of the Custodian or of such Sub-Custodian, from and against any loss, damage, cost, expense (including attorneys’ fees and disbursements), liability (including, without limitation, liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or banking laws) or claim arising directly or indirectly (a) from the fact that Securities are registered in the name of any such nominee, or (b) from any action or inaction by the Custodian or such Sub-Custodian (i) at the request or direction of or in reliance on the advice of the Company, or (ii) upon Proper Instructions, or (c) generally, from the performance of its obligations under this Agreement or any sub-custody agreement with a Sub-Custodian appointed pursuant to Section 3.3

16

above, provided that neither the Custodian nor any such Sub-Custodian shall be • indemnified and held harmless from and against any such loss, damage, cost, expense, liability or claim arising from the Custodian’s or such Sub-Custodian’s negligence, bad faith or willful misconduct.

8.2	Indemnification by Custodian. The Custodian shall indemnify and hold harmless the Company from and against any loss, damage, cost, expense (including attorneys’ fees and disbursements), liability (including without limitation, liability arising under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or banking laws) or claim arising from the negligence, bad faith or willful misconduct of the Custodian or any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the Custodian or of such Sub- Custodian.
8.3	Indemnity to be Provided. If the Company requests the Custodian to take any action with respect to Securities, which may, in the opinion of the Custodian, result in the Custodian or its nominee becoming liable for the payment of money or incurring liability of some other form, the Custodian shall not be required to take such action until the Company shall have provided indemnity therefor to the Custodian in an amount and form satisfactory to the Custodian.
8.4	Security. If the Custodian advances cash or Securities to the Fund for any purpose, either at the Company’s request or as otherwise contemplated in this Agreement, or in the event that the Custodian or its nominee incurs, in connection with its performance under this Agreement, any loss, damage, cost, expense (including attorneys’ fees and disbursements), liability or claim (except such as may arise from its or its nominee’s negligence, bad faith or willful misconduct), then, in any such event, any property at any time held for the account of the Fund shall be security therefor, and should the Fund fail promptly to repay or indemnify the Custodian, the Custodian shall be entitled to utilize available cash of such Fund and to dispose of other assets of such Fund to the extent necessary to obtain reimbursement or indemnification.

ARTICLE IX
FORCE MAJEURE

     Neither the Custodian nor the Company shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power failures; computer failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation, computer (hardware or software) or telephone communication service; accidents; labor disputes; acts of civil or military authority; governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that the Custodian in the event of a failure or delay (i) shall

17

not discriminate against the Fund to favor of any other customer of the Custodian in making computer time and personnel available to input or process the transactions contemplated by this Agreement and (ii) shall use its best efforts to ameliorate the effects of any such failure or delay.

ARTICLE X
EFFECTIVE PERIOD; TERMINATION

10.1	Effective Period. This Agreement shall become effective as of its execution and shall continue in full force and effect for a period of three (3) years; Subsequent to the initial three (3) year term, this Agreement may be terminated according to the following provision.
10.2	Termination. Either party hereto may terminate this Agreement by giving to the other party a notice in writing specifying the date of such termination, which shall be not less than 90 days after the date of the giving of such notice. If a successor custodian shall have been appointed by the Board of Directors, me Custodian shall, upon receipt of a notice of acceptance by the successor custodian, on such specified date of termination (a) deliver directly to the successor custodian all Securities (other than Securities held in a Book-Entry System or Securities Depository) and cash then owned by the Fund and held by the Custodian as custodian, and (b) transfer any Securities held in a Book-Entry System or Securities Depository to an account of or for the benefit of the Fund at the successor custodian, provided that the Company shall have paid to the Custodian all fees, expenses and other amounts to the payment or reimbursement of which it shall then be entitled. Upon such delivery and transfer, the Custodian shall be relieved of all obligations under this Agreement. The Company may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
10.3	Failure to Appoint Successor Custodian. If a successor custodian is not designated by the Company on or before the date of termination specified pursuant to Section 10.1 above, then the Custodian shall have the right to deliver to a bank or Company company of its own selection, which (a) is a “bank” as defined in the 1940 Act and (b) has aggregate capital, surplus and undivided profits as shown on its then most recent published report of not less than $25 million, all Securities, cash and other property held by Custodian under this Agreement and to transfer to an account of or for the Fund at such bank or trust company all Securities of the Fund held in a Book-Entry System or Securities Depository. Upon such delivery and transfer, such bank or trust company shall be the successor custodian under this Agreement and the Custodian shall be relieved of all obligations under this Agreement.

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ARTICLE XI
COMPENSATION OF CUSTODIAN

     The Custodian shall be entitled to compensation as agreed upon from time to time by the Company and the Custodian. The fees and other charges in effect on the date hereof and applicable to the Fund are set forth in Exhibit C attached hereto.

ARTICLE XII
LIMITATION OF LIABILITY

     It is expressly agreed that the obligations of the Company hereunder shall not be binding upon any of the Directors, shareholders, nominees, officers, agents or employees of the Company personally, but shall bind only the property of the Company as provided in the Company’s Articles of Incorporation, as from time to time amended. The execution and delivery of this Agreement have been authorized by the Directors, and this Agreement has been signed and delivered by an authorized officer of the Company, acting as such, and neither such authorization by the Directors nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the Company property of the Company as provided in the above-mentioned Articles of Incorporation.

ARTICLE XIII
NOTICES

     Unless otherwise specified herein, all demands, notices, instructions, and other communications to be given hereunder shall be in writing and shall be sent or delivered to the recipient at the address set forth after its name hereinbelow:

To the Company:

The Mexico Equity and Income Fund, Inc.
Spitzer & Feldman P.C.
405 Park Avenue
New York. NY 10022
Attention: Thomas R. Westle
212-888-6680

To Custodian:

Mr. James C. Tyler
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202

or at such other address as either party shall have provided to the other by notice given in

19

accordance with this Article XIII. Writing shall include transmissions by or through teletype, facsimile, central processing unit connection, on-line terminal and magnetic tape.

20

ARTICLE XIV
MISCELLANEOUS

14.1	Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio.
14.2	References to Custodian. The Company shall not circulate any printed matter which contains any reference to Custodian without the prior written approval of Custodian, excepting printed matter contained in the prospectus or statement of additional information for the Fund and such other printed matter as merely identifies Custodian as custodian for the Fund. The Company shall submit printed matter requiring approval to Custodian in draft form, allowing sufficient time for review by Custodian and its counsel prior to any deadline for printing.
14.3	No Waiver. No failure by either party hereto to exercise, and no delay by such party in exercising, any right hereunder shall operate as a waiver thereof. The exercise by either party hereto of any right hereunder shall not preclude the exercise of any other right, and the remedies provided herein are cumulative and not exclusive of any remedies provided at law or in equity.
14.4	Amendments. This Agreement cannot be changed orally and no amendment to this Agreement shall be effective unless evidenced by an instrument in writing executed by the parties hereto.
14.5	Counterparts. This Agreement may be executed in one or more counterparts, and by the parties hereto on separate counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument.
14.6	Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not be affected or unpaired thereby.
14.7	Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party hereto without the written consent of the other party hereto.
14.8	Headings. The headings of sections in this Agreement are for convenience of reference only and shall not affect the meaning or construction of any provision of this Agreement.

21

     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered in its name and on its behalf by its representatives thereunto duly authorized, all as of the day and year first above written.

THE MEXICO EQUITY AND INCOME
FUND, INC.		FIRSTAR BANK, N.A.
By:	/s/ Thomas R. Westle	By:	/s/ Paul Rock
Print:	Thomas R. Westle	Print:	Paul Rock
Title:	Secretary	Title:	Senior V.P.
Date:	July 11, 2001	Date:	July 11, 2001

22

EXHIBIT A

AUTHORIZED PERSONS

     Set forth below are the names and specimen signatures of the persons authorized by the Company to administer the Fund Custody Accounts.

Authorized Persons		Specimen Signatures
President:
Secretary:	Andrew P. Chica	/s/ Andrew P. Chica
Treasurer:	Michael J. Weckwerth	/s/ Michael J. Weckwerth
Vice President:	Michael J. Weckwerth	/s/ Michael J. Weckwerth
Adviser Employees:	Marcela Martinez Gonzales	/s/ Marcela Martinez Gonzales
	Luis E. Martinez Ibarguen	/s/ Luis E. Martinez Ibarguen
Transfer Agent/Fund Accountant
Employees:

23

EXHIBIT B

Firstar Bank, N.A.
Standards of Service Guide

     Firstar Bank, N.A. is committed to providing superior quality service to all customers and their agents at all times. We have compiled this guide as a tool for our clients to determine our standards for the processing of security settlements, payment collection, and capital change transactions. Deadlines recited in this guide represent the times required for Firstar Bank to guarantee processing. Failure to meet these deadlines will result in settlement at our client’s risk. In all cases, Firstar Bank will make every effort to complete all processing on a timely basis.

     Firstar Bank is a direct participant of the Depository Trust Company, a direct member of the Federal Reserve Bank of Cleveland, and utilizes the Bankers Trust Company as its agent for ineligible and foreign securities.

     For corporate reorganizations, Firstar Bank utilizes SETs Reorg Source, Financial Information, Inc., XCITEK, DTC Important Notices, and the Wall Street Journal.

     For bond calls and mandatory puts, Firstar Bank utilizes SETs Bond Source, Kenny Information Systems, Standard &. Poor’s Company, and DTC Important Notices. Firstar Bank will not notify clients of optional put opportunities.

     Any securities delivered free to Firstar Bank or its agents must be received three (3) business days prior to any payment or settlement in order for the Firstar Bank standards of service to apply.

     Should you have any questions regarding the information contained in this guide, please feel free to contact your account representative.

The information contained in this Standards of Service Guide is subject to change. Should any changes be made Firstar Bank will provide you with an updated copy of its Standards of Service Guide.

24

Firstar Bank Security Settlement Standards

Transaction Type	Instructions Deadlines*	Delivery Instructions
DTC	1:30 P.M. on Settlement Date	DTC Participant #2803
		Agent Bank ID 27895
		Institutional #
		For Account #
Federal Reserve Book Entry	12:30 P.M. on Settlement Date	Federal Reserve Bank of Cinti/Trust
		for Firstar Bank, N. A. ABA #042000013
		For Account #
Fed Wireable FNMA & FHLMC	12:30 P.M. on Settlement Date	Bk of NYC/Cust
		ABA 021000018
		A/C Firstar Bank # 117612
		For Account #
Federal Reserve Book Entry (Repurchase	1:00 P.M. on Settlement Date	Federal Reserve Bank of Cinti/Spec
Agreement Collateral Only)		for Firstar Bank, N.A. ABA# 042000013
		For Account #
PTC Securities	12:00 P.M. on Settlement Date	PTC For Account BYORK
(GNMA Book Entry)		Firstar Bank/ 117612
Physical Securities	9:30 A.M. EST on Settlement Date	Bank of New York
	(for Deliveries, by 4:00 P.M. on Settlement Date minus 1)	One Wall Street- 3rd Floor — Window A
		New York, NY 10286
		For account of Firstar Bank /Cust #117612
		Attn: Donald Hoover
CEDEL/EURO-CLEAR	11:00 A.M. on Settlement Date minus 2	Cedel a/c 55021
		FFC: a/c 387000
		Firstar Bank / Global Omnibus
Cash Wire Transfer	3:00 P.M.	Firstar Bank, N.A. Cinti/Trust ABA# 042000013
		Credit Account #9901877
		Further Credit to
		Account #

* All times listed are Eastern Standard Time.

25

Firstar Bank Payment Standards

Security Type	Income	Principal
Equities	Payable Date
Municipal Bonds*	Payable Date	Payable Date
Corporate Bonds*	Payable Date	Payable Date
Federal Reserve Bank Book Entry*	Payable Date	Payable Date
PTC GNMA’s (P&I)	Payable Date + 1	Payable Date +1
CMOs*
DTC Bankers Trust	Payable Date +1 Payable Date + 1	Payable Date +1 Payable Date + 1
SBA Loan Certificates	When Received	When Received
Unit Investment Trust
Certificates*	Payable Date	Payable Date
Certificates of Deposit*	Payable Date +1	Payable Date +1
Limited Partnerships	When Received	When Received
Foreign Securities	When Received	When Received
*Variable Rate Securities
Federal Reserve Bank Book Entry DTC Bankers Trust	Payable Date Payable Date + 1 Payable Date + 1	Payable Date Payable Date + 1 Payable Date + 1

NOTE: If a payable date falls on a weekend or bank holiday, payment will be made on the immediately following business day.

25

Firstar Bank Corporate Reorganization Standards

Type of Action	Notification to Client	Deadline for Client Instructions	Transaction
		to Firstar Bank	Posting
Rights, Warrants, and Optional Mergers	Later of 10 business days prior to expiration or receipt of notice	5 business days prior to expiration	Upon receipt
Mandatory Puts with Option to Retain	Later of 10 business days prior to expiration or receipt of notice	5 business days prior to expiration	Upon receipt
Class Actions	10 business days prior to expiration date	5 business days prior to expiration	Upon receipt
Voluntary Tenders, Exchanges, and Conversions	Later of 10 business days prior to expiration or receipt of notice	5 business days prior to expiration	Upon receipt
Mandatory Puts. Defaults, Liquidations, Bankruptcies, Stock Splits, Mandatory Exchanges	At posting of funds or securities received	None	Upon receipt
Full and Partial Calls	Later of 10 business days prior to expiration or receipt of notice	None	Upon receipt

NOTE: Fractional shares/par amounts resulting from any of the above will be sold.

26

EXHIBIT C

Firstar Bank, N.A.
Domestic Custody Fee Schedule

Firstar Bank, N, A., as Custodian, will receive monthly compensation for services according to the terms of the following Schedule:

Annual fee based upon market value

2 basis points per year
Minimum annual fee per fund — $3,000

Investment transactions (purchase; sale, exchange, tender, redemption, maturity, receipt, delivery):

$ 5.00 per disbursement (waived if Firstar is Administrator)
$12.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$ 6.00 per short sale/liability transaction
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal

Variable Amount Demand Notes: Used as a short-term investment, variable amount notes offer safety and prevailing high interest rates. Our charge, which is ¼ of 1%, is deducted from the variable amount note income at the time it is credited to your account.

Plus cut-of-pocket expenses, and extraordinary expenses based upon complexity.

Fees are billed monthly, based upon market value at the beginning of the month.

All pricing valid for 45 days.

27

AMENDMENT TO THE CUSTODY AGREEMENT

     THIS AMENDMENT dated as of January 1, 2002 to the Custody Agreement dated as July 11^th, 2001, between The Mexico Equity and Income Fund, Inc., a Company organized under the laws of the State of Maryland (the “Fund”), and Firstar Bank, N.A., shall be as follows:

     Effective January 1, 2002, the name Firstar Bank, N.A. has been changed to U.S. Bank, N.A. Accordingly, all references to Firstar Bank, N.A. in this Agreement should be replaced with U.S. Bank, N.A. Similarly, any references to Firstar Mutual Fund Services, LLC should be replaced with U.S. Bancorp Fund Services, LLC.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by a duly authorized officer on one or more counterparts as of the day and year first written above.

THE MEXICO EQUITY AND INCOME FUND, INC.		U.S. BANK, N.A.
By:	[Illegible]	By:	[Illegible]

EX-99.2(K)(1)

Exhibit 2(k)(1)

FUND ADMINISTRATION SERVICING AGREEMENT

     THIS AGREEMENT is made and entered into as of this 11th day of July, 2001, by and between The Mexico Equity and Income Fund, Inc., a corporation organized under the laws of the State of Maryland (the “Company”), and Firstar Mutual Fund Services, LLC, a limited liability company organized under the laws of the State of Wisconsin (“FMFS”).

     WHEREAS, the Company is a closed-end management investment company which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”);

     WHEREAS, FMFS is in the business of providing fund administration services for the benefit of its customers; and

     WHEREAS, the Company desires to retain FMFS to act as Administrator for the Company.

     NOW, THEREFORE, in consideration of the mutual agreements herein made, the Company and FMFS agree as follows:

1. Appointment of Administrator

The Company hereby appoints FMFS as Administrator of the Company on the terms and conditions set forth in this Agreement, and FMFS hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement in consideration of the compensation provided for herein.

2. Duties and Responsibilities of FMFS

A. General Fund Management

(1)	Act as liaison among all Company service providers
(2)	FMFS shall supply:

a.	Corporate secretarial services;
b.	Office facilities (which may be in FMFS’ office or its affiliate’s own offices); and
c.	Non-investment related statistical and research data as needed.

(3) Coordinate board communication by:

a.	Assisting Company counsel in establishing meeting agendas;
b.	Preparing board reports based on financial and administrative data;
c.	Evaluating independent auditor;

Page 2

d.	Securing and monitoring fidelity bond and director and officer liability coverage, and making the necessary SEC filings relating thereto; and
e.	Preparing minutes of meetings of the board and shareholders.

(4) Audits

a.	Prepare appropriate schedules and assist independent auditors;
b.	Provide information to SEC and facilitate audit process; and
c.	Provide office facilities.

(5)	Assist in overall operations of the Company.
(6)	Pay Company expenses upon written authorization from the Company.

B. Compliance

(1) Regulatory Compliance

a. Monitor compliance with 1940 Act requirements, including:

(i)	Asset diversification tests;
(ii)	Total return and SEC yield calculations;
(iii)	Maintenance of books and records under Rule 3la-3; and
(iv)	Code of Ethics for the disinterested directors of the Company.

b. Monitor Company’s compliance with the policies and investment limitations of the Company as set forth in its Prospectus and Statement of Additional Information.

(2) SEC Registration and Reporting

a.	Assist Company counsel in updating Prospectus and Statement of Additional Information (if necessary) and in preparing proxy statements;
b.	Prepare annual and semiannual reports;
c.	Coordinate the printing of publicly disseminated Prospectuses and reports;
d.	File fidelity bond under Rule I7g-l;
e.	File shareholder reports under Rule 30b2-1; and
f.	Prepare and file reports and other documents required by U.S. stock exchanges on which the Company’s shares are listed.

(3) IRS Compliance

a. Monitor Company’s status as a regulated Investment company under Subchapter M through review of the following:

Page 3

(i)	Asset diversification requirements;
(ii)	Qualifying income requirements; and
(iii)	Distribution requirements.

b. Calculate required distributions (including excise tax distributions)

C. Financial Reporting

(1)	Provide financial data required by Company’s Prospectus and Statement of Additional Information;
(2)	Prepare financial reports for shareholders, the board, the SEC, U.S. stock exchanges on which the Company’s shares are listed and independent auditors; and
(3)	Supervise the Company’s custodian and accountants in the maintenance of the Company’s general ledger and in the preparation of the Company’s financial statements, including oversight of expense accruals and payments, of the determination of net asset value of the Company’s net assets and of the Company’s shares, and of the declaration and payment of dividends and other distributions to shareholders.

D. Tax Reporting

(1)	Prepare and file on a timely basis appropriate federal and state tax returns
	including Forms 1120/8610 with any necessary schedules;
(2)	Prepare state income breakdowns where relevant;
(3)	File Form 1099 Miscellaneous for payments to directors and other service
	providers;
(4)	Monitor wash losses; and
(5)	Calculate eligible dividend income for corporate shareholders.

3. Compensation

     The Company agrees to pay FMFS the fees and reasonable out-of-pocket expenses as set forth in the attached Exhibit A for the performance of the duties listed in this Agreement.

     These fees may be changed from time to time, subject to mutual written Agreement between the Company and FMFS.

Page 4

     The Company agrees to pay all fees and reimbursable expenses within ten (10) business days following the receipt of the billing notice.

4. Performance of Service; Limitation of Liability

A. FMFS shall exercise reasonable care in the performance of its duties under this Agreement. FMFS shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Company in connection with matters to which this Agreement relates, including losses resulting from mechanical breakdowns or the failure of communication or power supplies beyond FMFS’s control, except a loss resulting from FMFS’s refusal or failure to comply with the terms of this Agreement or from bad faith, negligence, or willful misconduct on its part in the performance of its duties under this Agreements. Notwithstanding any other provision of this Agreement, the Company shall indemnify and hold harmless FMFS from and against any and all claims, demands, losses, expenses, and liabilities (whether with or without basis in fact or law) of any and every nature (including reasonable attorneys’ fees) which FMFS may sustain or incur or which may be asserted against FMFS by any person arising out of any action taken or omitted to be taken by it in performing the services hereunder (i) in accordance with the foregoing standards, or (ii) in reliance upon any written or oral instruction provided to FMFS by any duly authorized officer of the Company, such duly authorized officer to be included in a list of authorized officers furnished to FMFS and as amended from time to time in writing by resolution of the Board of Directors of the Company.

     FMFS shall indemnify and hold the Company harmless from and against any and all claims, demands, losses, expenses, and liabilities (whether with or without basis in fact or law) of any and every nature (including reasonable attorneys’ fees) which the Company may sustain or incur or which may be asserted against the Company by any person arising out of any action taken or omitted to be taken by FMFS as a result of FMFS’s refusal or failure to comply with the terms of this Agreement, its bad faith, negligence, or willful misconduct.

     In the event of a mechanical breakdown or failure of communication or power supplies beyond its control, FMFS shall take all reasonable steps to minimize service interruptions for any period that such interruption continues beyond FMFS’s control. FMFS will make every reasonable effort to restore any lost or damaged data and correct any errors resulting from such a breakdown at the expense of FMFS. FMFS agrees that it shall, at all times, have reasonable contingency plans with appropriate parties, making reasonable provision for emergency use of electrical data processing equipment to the extent appropriate equipment is available. Representatives of the Company shall be entitled to inspect FMFS’s premises and operating capabilities at any time during regular business hours of FMFS, upon reasonable notice to FMFS.

     Regardless of the above, FMFS reserves the right to reprocess and correct administrative errors at its own expense.

Page 5

B. In order that the indemnification provisions contained in this section shall apply, it is understood that if in any case the indemnitor may be asked to indemnify or bold the indemnitee harmless, the indemnitor shall be fully and promptly advised of all pertinent facts concerning the situation in question, and it is further understood that the indemnitee will use all reasonable care to notify the indemnitor promptly concerning any situation which presents or appears likely to present the probability of a claim for indemnification. The indemnitor shall have the option to defend the indemnitee against any claim which may be the subject of this indemnification, In the event that the indemnitor so elects, it will so notify the indemnitee and thereupon the indemnitor shall take over complete defense of the claim, and the indemnitee shall in such situation initiate no further legal or other expenses for which it shall seek indemnification under this section. The indemnitee shall in no case confess any claim or make any compromise in any case in which the indemnitor will be asked to indemnify the indemnitee except with the indemnitor’s prior written consent.

5. Proprietary and Confidential Information

     FMFS agrees on behalf of itself and its directors, officers, and employees to treat confidentially and as proprietary information of the Company all records and other information relative to the Company and prior, present, or potential shareholders of the Company (and clients of said shareholders), and not to use such records and information for any purpose other than the performance of its responsibilities-and duties hereunder, except after prior notification to and approval in writing by the Company, which approval shall not be unreasonably withheld and may not be withheld where FMFS may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Company.

6. Data Necessary to Perform Services

     The Company or its agent, which may be FMFS, shall furnish to FMFS the data necessary to perform the services described herein at times and in such form as mutually agreed upon.

7. Term of Agreement

     This Agreement shall become effective as of the date hereof and shall continue in effect for a period of one (1) year. Subsequent to the initial one (1) year term, this Agreement may be terminated by either party upon giving ninety (90) days prior written notice to the other party or such shorter period as is mutually agreed upon by the parties. However, this Agreement may be amended by mutual written consent of the parties.

Page 6

8. Notices

     Notices of any kind to be given by either party to the other party shall be in writing and shall be duly given if mailed or delivered as follows: Notice to FMFS shall be sent to:

Mr. James C. Tyler
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202

and notice to the Company shall be sent to:

The Mexico Equity and Income Fund, Inc.
Spitzer & Feldman P.C.
405 Park Avenue
New York, NY 10022
Attention: Thomas R. Westle

212-888-6680

9. Duties in the Event of Termination

     In the event that, in connection with termination, a successor to any of FMFS’s duties or responsibilities hereunder is designated by the Company by written notice to FMFS, FMFS will promptly, upon such termination and at the expense of the Company, transfer to such successor all relevant books, records, correspondence, and other data established or maintained by FMFS under this Agreement in a form reasonably acceptable to the Company (if such form differs from the form in which FMFS has maintained, the Company shall pay any expenses associated with transferring the data to such form), and will cooperate in the transfer of such duties and responsibilities, including provision for assistance from FMFS’s personnel in the establishment of books, records, and other data by such successor.

10. Governing Law

     This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of the State of Wisconsin. However, nothing herein shall be construed in a manner inconsistent with the 1940 Act or any rule or regulation promulgated by the Securities and Exchange Commission thereunder.

11. Records

Page 7

     FMFS shall keep records relating to the services to be performed hereunder, in the form and manner, and for such period as it may deem advisable and is agreeable to the Company but not inconsistent with the rules and regulations of appropriate government authorities, in particular. Section 31 of the 1940 Act and the rules thereunder. FMFS agrees that all such records prepared or maintained by FMFS relating to the services to be performed by FMFS hereunder are the property of the Company and will be preserved, maintained, and made available in accordance with such section and rules of the 1940 Act and will be promptly surrendered to the Company on and in accordance with its request.

12.	No Agency Relationship
	Nothing herein contained shall be deemed to authorize or empower FMFS to act as agent for the other party to this Agreement, or to conduct business in the name of, or for the account of the other party to this Agreement

              IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by a duly authorized officer on one or more counterparts as of the day and year first written above,

THE MEXICO EQUITY AND INCOME FUND, INC.		FIRSTAR MUTUAL FUND SERVICES, LLC
By:	/s/  Thomas R. Westle	By:	/s/  Paul Rock
Print:	Thomas R. Westle	Print:	Paul Rock
Title:	Secretary	Title:	Senior V.P.

Page 8

Fund Administration and Compliance
Annual Fee Schedule — Domestic Funds

Exhibit A

Annual fee based upon average net fund assets

9 basis points on the first $200 million
7 basis points on the next $500 million
5 basis points on the balance
Minimum annual fee: $58,000

Plus reasonable out-of-pocket expense reimbursements, including but not limited to:

Postage
Programming
Stationery
Proxies
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses

Extraordinary services — quoted separately

Fees and reasonable out-of-pocket expense reimbursements are billed monthly

AMENDMENT TO THE FUND ADMINISTRATION SERVICING AGREEMENT

     THIS AMENDMENT dated as of January 1, 2002 to the Fund Administration Servicing Agreement dated as of the 11th day of July, 2001, by and between The Mexico Equity and Income Fund, Inc., a corporation organized under the laws of the State of Maryland, and Firstar Mutual Fund Services, LLC, a Wisconsin limited liability company, shall be as follows:

     Effective January 1, 2002, the name Firstar Mutual Fund Services, LLC has been changed to U.S. Bancorp Fund Services. LLC. Accordingly, all references to Firstar Mutual Fund Services, LLC in this Agreement should be replaced with U.S. Bancorp Fund Services, LLC, Similarly, any references to Firstar Bank, N.A. should be replaced with U.S. Bank, N.A.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by a duly authorized officer on one or more counterparts as of the day and year first written above.

THE MEXICO EQUITY AND INCOME FUND, INC.

By:  [Illegible] By:  [Illegible]

Exhibit A to the
Fund Administration Servicing Agreement
As Amended January 1, 2003

U.S. BANCORP FUND SERVICES, LLC
FUND ADMINISTRATION & COMPLIANCE SERVICES
ANNUAL FEE SCHEDULE

Fee per fund for Closed-End International Equity Funds

Annual fee based upon the greater of:

Annual basis point charge calculated utilizing the assets of the Fund as determined by the schedule below:
12 basis points on the first $200 million
10 basis points on the next $500 million
5 basis points on the balance

Or a Minimum annual fee of: $50,000 effective January 1, 2003 through July 31, 2004

$53,000 effective August 1, 2004 through July 31, 2005
$57,000 effective August 1, 2005 through July 31, 2006

Extraordinary services — quoted separately

Plus out-of-pocket expenses, including but not limited to.

Postage, Stationery
Programming
Proxies
EDGAR filing - Approx. $9.00/page
Retention of records
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses

Fees are billed monthly

Exhibit B to the
Fund Administration Servicing Agreement
Additional Termination Conditions

In addition to the termination provisions under Paragraph 7 of this Agreement, the Fund agrees that should it (or the Board of Directors) be required to terminate this Agreement within the initial 3-year period due to a merger of the Fund, sale of the Fund, change of fund administration servicing agents or similar reason (other than the dissolution of the Fund), the Fund shall be responsible for reimbursing USBFS any amount lost between the effective date of this Agreement and the termination date due to the special discounted fee arrangement provided for the Fund under Exhibit A compared to the standard fee schedule shown below (Exhibit B).

Exhibit B to the
Fund Administration Servicing Agreement

U.S. BANCORP FUND SERVICES, LLC
FUND ADMINISTRATION & COMPLIANCE SERVICES
ANNUAL FEE SCHEDULE

Fee per fund for Closed-End International Equity Funds

Annual fee based upon the greater of:

Annual basis points charge calculated utilizing the assets of the Fund as determined by the schedule below:
9 basis points on the first $200 million
7 basis points on the next $500 million
5 basis points on the balance

Or a Minimum annual fee of: $58,000

Extraordinary services — quoted separately

Plus out-of-pocket expenses, including but not limited to:

Postage, Stationery
Programming
Proxies
EDGAR filing — Approx. $9.00/page
Retention of records
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses

Fees are billed monthly

AMENDMENT TO THE FUND ADMINISTRATION SERVICING AGREEMENT
BETWEEN
THE MEXICO EQUITY AND INCOME FUND, INC.
AND
U.S. BANCORP FUND SERVICES,LLC

Paragraph 7, Term of Agreement, of the Fund Administration Servicing Agreement made and entered into as of July 11, 2001, by and between The Mexico Equity Income Fund, Inc., a corporation organized under the laws of the State of Maryland (the “Fund”), and U.S. Bancorp Fund Services, LLC, a limited liability company organized under the laws of the State of Wisconsin (“USBFS”) is hereby amended as follows:

     7. Term of Agreement (amended January 1, 2003)

     This Agreement shall become effective as of January 1, 2003 and shall continue in effect for a period of three (3) years. Subsequent to the initial three-year term, this Agreement may be terminated by either party upon giving ninety (90) days prior written notice to the other party or such shorter period as is mutually agreed upon by the parties. However, this Agreement may be amended by mutual written consent of the parties. See Exhibit D for additional termination conditions.

This Amendment to the Agreement is dated as of January 22, 2003 and effective retroactively to January 1, 2003 by:

THE MEXICO EQUITY AND INCOME FUND, INC.		U.S. BANCORP FUND SERVICES, LLC
By:	/s/ Gerald Hellerman	By:	/s/ Joseph Redwine
Print:	Gerald Hellerman	Print:	Joseph Redwine
Title:	President	Title:	President
Date:	1/24/03	Date:	1/22/03

EX-99.2(K)(2)

Exhibit 2(k)(2)

SECURITY SERVICES AGREEMENT

This Agreement dated as of August 14, 2002, by and between The Mexico Equity and Income Fund, Inc., (“Company”) and THE FIFTH THIRD BANK, an Ohio banking corporation (“Bank”) for the purposes of performing the services indicated below with respect to the Company’s securities.

WITNESSETH:

WHEREAS, the Company desires that certain services be rendered by Bank with respect to the issuance, transfer and/or registration of certificates for a number of securities of the Company; and

WHEREAS, the Bank is engaged in the business of providing services for issuers of securities and desires to provide Company’s services.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereby agree as follows:

1) SCOPE. The Company hereby agrees to employ and hire Bank and Bank hereby agrees to provide Company the issuance, transfer and/or registration of certificates and services indicated herein (referred to as the “Services”), subject to the terms of this Agreement and the Bank’s Regulations attached hereto as Exhibit A which are incorporated herein and made a part hereof. In the event of a conflict between the terms of this Agreement and the Regulations, the terms of this Agreement shall control.

2) FEES. The Company shall pay the Bank fees for services rendered pursuant to the fee schedule attached hereto as Exhibit B. Fees shall be determined quarterly in arrears on the last day of such quarter and payable upon receipt. The Company’s failure to pay Bank’s fees under this Agreement within thirty (30) calendar days of billing date shall constitute good cause for termination of Bank’s services. In the event of non-payment of Bank’s fees, the Company shall be liable to Bank for all reasonable costs of collection, including but not limited to, interest, court costs and attorneys’ fees.

3) EFFECTIVE DATE. Bank shall perform the Services indicated herein in the City of Cincinnati, Ohio effective as of August 26, 2002 with regard to certificates for the securities described below, and now or hereafter authorized by the Company’s governing documents:

			NUMBER OF SHARES		NUMBER OF SECURITIES REPRESENTED
	PAR		NOW AUTHORIZED BY		BY CERTIFICATES OUTSTANDING AT
CLASS OF SECURITIES	VALUE		GOVERNING DOCUMENTS		TIME OF THIS APPOINTMENT
Common	$	0.001		100,000.000		2,473,503.989
Treasury Stock (held issued but					6,122,068.723 held
unauthorized)	$	0.00l	included in total above		(none outstanding)

Company hereby certifies that all outstanding securities as of the date hereof covered by this Agreement have been duly authorized and are fully-paid, non-assessable and in the hands of the respective holders thereof.

4) SERVICES. Bank shall perform the services indicated below by the Company:

INSTRUCTIONS. For each item in A through E on the following pages, the applicable services to be provided by Bank are so noted by Company. Company has placed and (X) in each service that it desires bank to provide in its entirety.

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     A) TRANSFER AGENT SERVICES. The Bank:  X  shall___shall not provide transfer agent services, which include the following:

i)	Maintaining shareholder account. records, including name, address, taxpayer identification number, shares held and certificate numbers.
ii)	Processing of all transfers of certificates including the review of those transfer items requiring supporting documents commonly referred to as “legal transfers.”
iii)	Furnishing a list of shareholders as of each dividend record date if requested by the Company.
iv)	Furnishing a journal sheet reflecting the daily transfer activity if requested by the Company.
v)	Maintaining a record of all certificates against which a stop transfer notice has been placed.

     B) REGISTRAR SERVICES. The Bank:  X  shall___shall not provide registrar services, which include:

i)	Maintaining a record of the number of authorized and outstanding shares.
ii)	Registering upon original issue or transfer all certificates for securities.

     C) DIVIDEND DISBURSING AGENT SERVICES. The Bank:  X  shall___shall not provide dividend disbursing agent services, which include the following:

i)	Preparing dividend checks for each shareholder of record as of the record date established for such dividend or dividend credit for those shareholders that participate in the dividend reinvestment plan.
ii)	Mailing dividend checks by First Class regular mail.
iii)	Maintaining a checking account against which checks will be paid with funds to be supplied by the Company.
iv)	Preparing applicable Internal Revenue Service forms, mailing copies of such forms to the shareholders annually and furnishing a computer tape summary of such forms to the U.S. Treasury Department.
v)	Mailing quarterly financial reports of the Company.
vi)	Obtaining U.S. Treasury Forms or other certificates with respect to Taxpayer Identification Numbers as may be required under U.S. Treasury regulations.
vii)	Withholding of Federal Income Tax on such dividends and processing the payment of that tax over to the U.S. Treasury as may from time to time be required by the U.S. Treasury regulations.
viii)	Filing tax information returns on shares held and dividends paid with the various states as requested by the Company.

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     D) DIVIDEND REINVESTMENT SERVICES. The Bank:   X   shall        shall not provide Dividend Reinvestment Agent Services, which (if such services shall be performed) shall include the services initialized (frequency of reports and statements should be provided for those items initialized) and shall be subject to a Company sponsored dividend reinvestment plan acceptable to the Bank.

i)	___  Collecting the dividends and/or voluntary cash deposits from the holders.
ii)	___  Purchasing of stock at market price on a (monthly/quarterly) basis.
iii)	___  Crediting full and fractional shares to the participant accounts.
iv)	___  Updating and balancing participant records as transactions occur.
v)	___  Generating (monthly/quarterly) reports for the Company.
vi)	___  Generating (monthly/quarterly) statements for the participants.
vii)	___  Issuing, as applicable, all Internal Revenue Service forms.

     E) PROXY AGENT SERVICES. The Bank:  X     shall___ shall not provide proxy agent services, which include the following:

i)	Mailing broker-search cards prior to the voting record date of annual and special meetings of shareholders
ii)	Preparing one set of proxies for the general annual or any special meeting of shareholders for each shareholder of record on the record date established for such meeting
iii)	If requested by the Company mailing those proxies along with the proxy statement and annual report
iv)	Tabulating those proxies voted and furnishing the Company with interim reports and a summary of such vote
v)	Providing the Company with a shareholder list as of record date of the proxy, in alphabetical sequence, for the annual meeting of shareholders.

5) AUTHORIZATION OF BANK. Bank is authorized to countersign for original issue and to deliver when registered by it, certificates for shares in a number not to exceed the number of unissued shares of said securities at such time authorized to be issued by the Company and in such names as Bank may be directed in writing from time to time by the officer or officers authorized to do so pursuant to resolution of the Company delivered to Bank, including, unless otherwise specified, certificates for such number of unissued shares of said stock reserved for issuance upon exercise of options granted under plans or agreements disclosed to Bank by Company in writing. Notwithstanding the death, resignation, or removal of any officer of the Company authorized to sign certificates of stock, the Bank may continue to issue or register such certificates and continue to countersign certificates bearing the manual or facsimile signature of such officer until otherwise directed in writing by the Company.

6) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify the Bank and hold it harmless from any losses, damages, liabilities and expenses (including reasonable attorney’s fees) which the Bank may suffer or incur from claims made against the Bank related to the Bank’s performance of its duties or arising from this Agreement by reason of any act or omission to act by the Company in the conduct of its business, provided that no indemnification shall be provided by the Company pursuant to this Section for damages, losses, liabilities or expenses resulting from the reckless or willful misconduct of the Bank its officers, directors or employees in connection with

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carrying out its duties under this Agreement.

The Company shall further protect and hold Bank harmless from any losses, damages, liabilities and expenses (including reasonable attorney’s fees) which the Bank may suffer or incur from claims made against the Bank by reason of the Bank’s performance of duties as a Transfer Agent, Registrar and Dividend Disbursement Agent for the Company, including, without limitation all liability and expense in acting upon any signature, certificate or other document believed by the Bank to be genuine and to have been signed by the proper person, or refusing in good faith to transfer a certificate if it is not satisfied as to the propriety of the requested transfer.

Bank may perform any of its duties by or through attorneys or agents. Bank shall be entitled to advice of counsel concerning all matters hereunder and may pay reasonable compensation to all attorneys and agents as may reasonably be employed and shall be entitled to reimbursement therefor from the Company. Bank shall not be responsible for any loss or damage resulting from any action or nonaction taken in good faith in reliance upon such opinion or advice and Bank has provided notice to Company.

7) LIMITATION OF LIABILITY. In no event shall the Bank be liable or responsible with respect to any loss, liability, cost, damage or expense arising out of a claim by Company or by any third party in connection with the Services provided and/or performed by Bank under this Agreement, to the extent such services as to which any claim arises are provided and/or performed in accordance with (i) the Company’s written requirements and/or instructions; or (ii) the Company’s written concurrence that such Services are provided or performed or to be provided or performed comply with Company’s previously communicated requirements and/or instructions in such regard.

In no event shall Bank be liable for special, consequential or punitive damages arising from the performance or non-performance of any of the Services under this Agreement and the Bank’s liability hereunder to Company shall be limited, for the initial and subsequently renewal terms of the Agreement, to the lessor of the Company’s annual fee charged by Bank or actual damages as may be substantiated and documented.

8) REPRESENTATIONS OF COMPANY. The Company hereby makes the following representations;

a) The Company is duly organized and validly existing and in good standing under the laws of the state of its formation.

     b) The execution, delivery and performance by the Company of this Agreement has been duly authorized by all necessary corporate action and properly executed and constitutes the valid and binding obligation of the Company, subject to applicable bankruptcy and insolvency laws and general principles of equity, and will not violate any agreement or instrument by which the Company is bound.

     c) The Company agrees to furnish the Bank with any and all information in such forms as the Bank may require in order to comply with the reporting and other requirements of the Securities and Exchange Commission or such other regulatory body having jurisdiction over the services to be performed by the Bank for the Company under this Agreement.

     d) Company agrees to maintain records relating to the services performed hereunder for a period of six months and keep such records in a place of ready access for a period of at least six years thereafter and to return copies of such records, canceled stock certificates, instruments or documents, or any of the foregoing when requested to do so, to Bank.

     e) Company shall immediately advise the Bank in writing of all original issues and transfers of certificates for securities made or effected by the Company.

9) REPRESENTATIONS OF THE BANK.

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     a) The Bank represents that this Agreement has been duly authorized by all necessary action and constitutes a valid and binding obligation of the Bank, subject to applicable bankruptcy and insolvency laws and general principles of equity.

     b) The Bank represents that it presently has and shall maintain during the term of this Agreement adequate staff and facilities to perform the Services agreed to by the Bank pursuant to this Agreement.

     c) The Bank agrees to furnish the Company with all information and such forms as the Company may require in order to comply with the reporting or other requirements of the Securities and Exchange Commission or such other regulatory body having jurisdiction over the Services to be performed by the Bank for the Company under this Agreement.

10) TERM. This Agreement shall be a continuous contract between both parties beginning at its effective date and may be cancelable to either party upon sixty (60) days written notice by Registered Mail return receipt requested. The Company shall provide Bank with the name of a successor securities services provider within thirty (30) days of the date set for termination of the Agreement and Bank shall forward records to such successor. If the Company fails to provide the name of a successor within said thirty (30) days, Bank shall forward records to the Company.

In the event that the Company cancels this Agreement, the Company shall pay a deconversion fee equal to $2,500 while the company, is not in a dividend payment mode. This fee payable in this section is payable as consideration for the work involved during and after the deconversion and is not a penalty for such termination.

11) FORCE MAJEURE. Bank shall have no liability or responsibility hereunder with respect to its failure to perform the Services or duties and obligations under this Agreement arising out of or related to acts beyond its control including those attributable to acts of God, war, conditions or events of nature, civil disturbances, work stoppage, equipment failure, power failure, fire and or other similar events beyond Bank’s control. If such failures Shall extend beyond a reasonable period of time, then the Company at its discretion, may immediately terminate this Agreement without any charges or damages and Bank shall cooperate and assist Company in such transfer.

12) NOTICES. Any notices required or permitted to be given shall be deemed effective upon receipt when sent by Certified Mail, Return Receipt Requested, to the following address or to such other addresses which a parry may later designate:

BANK:

The Fifth Third Bank
Stock Transfer Department
Corporate Trust Department, MD #IOAT60
38 Fountain Square Plaza
Cincinnati, Ohio 45202
Attention: Mr. Randolph J. Stierer

COMPANY:

The Mexico Equity and Income Fund, Inc.
ATTN: Andrew P. Chica
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, LC-2
Milwaukee, Wisconsin 53202

13) EXPENSES. The Company further agrees to reimburse the Bank for all reasonable out of pocket expenses including, but not limited to, the following:

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     a) Courier charges plus insurance for any and all shipments.

     b) Postage and insurance on mailing stock certificates, dividend checks and other mailings.

     c) Reimbursement for envelopes, printing of checks, other forms and other cost of supplies directly related to the Company’s shareholder requirements:

     d) Reimbursement for costs incurred in distributing materials to the beneficial owners of the Company’s stock.

     e) Fees of counsel or agents.

14) MISCELLANEOUS.

     a) Except as herein before provided, the terms and conditions of this Agreement shall not be amended, supplemented or otherwise changed except in writing signed by both of the parties hereto.

     b) The headnotes contained herein are considered only as a matter of convenience and for reference and in no way define or limit the scope or intent of this Agreement or in any way affect this Agreement.

     c) This Agreement contains the entire agreement of the parties and no representations, inducements, promises or agreements or otherwise not embodied herein shall be of any force or effect.

     d) The representations and warranties contained herein shall survive the terms of this Agreement but not beyond the applicable statute of limitations.

     e) If any section, subsection, sentence, clause, portion of mis Agreement or underlying the Agreement is for any reason held invalid or unconstitutional by any court, federal or state agency of competent jurisdiction, such portions shall be deemed a separate, distinct and independent provision and such holdings shall not effect the validity of the remaining portions hereof.

     f) This Agreement shall be controlled by the laws of the State of Ohio.

IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first written above.

	Fifth Third Bank.
	/s/ Gene E. Ploege
	By: Gene E. Ploege Its: Vice President
ATTEST:	The Mexico Equity and Income Fund, Inc.
/s/ Andrew P. Chica	/s/ Phillip Goldstein
By: Andrew P. Chica Title: Secretary of the Fund	By: Phillip Goldstein Its: Director & Chairman of the Board

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EXHIBIT A

REGULATIONS

FOR SECURITIES TRANSFER AND REGISTRATION

1) DOCUMENTS TO BE FILED WITH APPOINTMENT.

In connection with the appointment of Fifth Third Bank (hereinafter called the “Bank”) as Transfer Agent or as Registrar of securities, there shall be filed with the Bank the documents listed on Appendix I Hereto.

2) LIMIT OF AUTHORITY.

Unless expressly limited by the resolution of appointment or by subsequent corporate action, the appointment of the Bank as Transfer Agent or as Registrar shall include and cover the amount of securities of the class for which the bank is appointed Agent pursuant to the Security Services Agreement between the Bank and the Company, us the same shall at any time be constituted and authorized by the governing documents of the Company. If there are any subsequent increases or changes in such authorized securities the Company shall file with the Bank:

a)	A certified copy of the amendment to the governing documents of the Company authorizing the increase o securities or other changes as is applicable.f
b)	A certified copy of such commission, governmental or other consent to the issuance of the securities as may be required by law.
c)	If the original appointment of the Bank was expressly limited, a certified copy of a resolution of the Company’s governing board increasing the authority of the Bank.
d)	Information that the securities have been registered under the Securities Act of 1933, as amended, or opinion of counsel for the Company that the securities are exempt from registration.

3) TEMPORARY CERTIFICATES.

If temporary certificates are issued in the first instance, the Bank will issue or register definitive certificates when the same are ready in exchange for, or in transfer of, such temporary certificates.

4) RECAPITALIZATION OR READJUSTMENT.

In case of any recapitalization, readjustment or other change in the structure of the Company requiring a change in the form of the stock certificates, the Bank will issue or register certificates in the new form in exchange for, or in transfer of, the outstanding certificates in the old form, upon receiving:

a)	Written instructions from an officer of the Company.
b)	A certified copy of the amendment to the governing documents of the Company reflecting the change.
c)	A certified copy of such commission, governmental or other consent to the issuance of the securities in the new form as may be required by law.
d)	Information that the securities have been registered under the Securities Act of 1933, as amended, or opinion of counsel for the Company that the securities are exempt form registration.

5) SECURITIES CERTIFICATES.

The Company will furnish the Bank with a sufficient supply of blank stock certificates and from time to time will renew such supply upon the request of the Bank. Such blank stock certificates shall be signed by the officers of the Company authorized by law or by the by-laws or code of regulations to sign stock certificates, and shall bear the corporate seal.

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6) AMENDMENTS OF GOVERNING DOCUMENTS.

The Company will file with the Bank certified copies of all amendments to its governing documents (including, in the case of a corporation articles of incorporation, certificate of incorporation, by-laws or code of regulations) made after the date of creation of the agency.

7) INSTRUCTION FROM THE COMPANY AND OPINION FROM COUNSEL.

At any time the Bank may request to any officer of the Company for instructions, and may seek advice with legal counsel for the Company or its own legal counsel, in respect of any matter arising in connection with the agency, and it shall not be liable for any action taken or suffered by it in good faith in accordance with such instructions or with the opinion of such counsel.

8) PAPERS SUBJECT TO APPROVAL OF BANK COUNSEL.

The acceptance by the Bank of its appointment as Transfer Agent or as Registrar, and all documents filed in connection with such appointment and thereafter in connection with the agency, shall be subject to the approval of legal counsel for the Bank.

9) CERTIFICATION OF DOCUMENTS.

The copy of the governing documents of the Company and copies of all amendments thereto shall be certified by the Secretary of State of the state of the Company’s formation, and if such governing documents and amendments are required by law to be also filed with a county, city or to the officer or official body, a certificate of such filing shall appear on the certified copy submitted to the Bank. Copies of commission, governmental or other consents to the issuance of the securities shall be certified by the Secretary or Clerk or the commission or other body granting the consent, or by the officer having custody of the records, The copy of the governing documents and copies of all amendments thereto, and copies of resolutions of the Company’s governing body, shall be certified by the Secretary or an Assistant Secretary of the Company under the Company’s seal.

10) SIGNATURES.

The Bank shall be protected in acting under any paper or document believed by it to be genuine and to have been signed by the proper person or persons. It shall also be protected in recognizing stock certificates for securities, which it reasonably believes to bear the genuine signatures of the officers of the company and the genuine counter-signature of the Transfer Agent or Registrar.

11) ORIGINAL ISSUE OF STOCK CERTIFICATES.

The Bank as Transfer Agent will make original issues of certificates of securities upon the written requisition of any officer of the Company having authority to make such request.

12) ORIGINAL ISSUE TAX.

Before making any original issue of certificates the Bank must be furnished with a sufficient amount of money to pay any applicable federal or state tax on the original issue of securities. If the securities have no par value the Company will furnish to the Bank such evidence as may be required by the Bank to show the actual value of the securities.

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13) TRANSFER OF SECURITIES.

Shares of securities will be transferred and new certificates issued in transfer upon the surrender of the old certificates properly endorsed for transfer, accompanied by such documents as the Bank may deem necessary to evidence the authority of the person making the transfer, and bearing the necessary transfer tax stamps, if any. The Bank reserves the right to refuse to transfer securities until it is satisfied that the endorsement on the certificate is valid and genuine, and for that purpose it may require a guaranty of signature by a firm having membership in the Securities Transfer Agents Medallion Program or by a bank or trust company approved by it.

The Bank also reserves the right to refuse to transfer securities until it is satisfied that the requested transfer is legally authorized, and it shall incur no liability far the refusal in good faith to make transfers which it, in its judgment, deems improper or unauthorized.

14) SUBSCRIPTION WARRANTS.

The Bank as Transfer Agent will issue and mail warrants for rights to subscribe to securities and will accept subscriptions and issue certificates of securities therefor upon receiving written instructions from an officer of the company and upon being supplied with such warrants.

15) LOST STOCK CERTIFICATES.

The Bank may issue new or duplicate certificates in place of certificates represented to have been lost, stolen or destroyed upon receiving an adequate bond of indemnity from the appropriate shareholder or upon written instructions from the Company and indemnity satisfactory to the Bank, the Company and the Registrar. Such instructions from the Company shall be in the form of a certified copy of a resolution of the Company’s governing board and shall be in accordance with the provisions of law or of the governing documents of the Company. The Bank may issue new certificates in exchange for, and upon surrender of, mutilated certificates.

16) SECURITIES DIVIDENDS.

The Bank will issue and mail certificates of securities representing a securities dividend upon receiving written instructions from an officer of the Company.

17) CASH DIVIDENDS.

The Bank will distribute cash dividends on the securities of the Company upon receiving the money for the dividend and written instructions from an officer of the Company.

18) STOCKHOLDERS’ LISTS.

The Bank will supply a securities holders’ list as of the record date to the Company for its annual or special meetings upon receiving a request from an officer of the Company. It will also supply lists at such other times as may be requested by an officer of the Company.

19) NOTICES TO STOCKHOLDERS.

At the written request of an officer of the Company, the Bank will address and mail such notices to securities holders and broker search cards released to meetings of stockholders as the Company may desire to send out.

20) DISPOSITION OF CANCELLED CERTIFICATES.

The Bank may send periodically to the Secretary of the Company certificates of securities which have been canceled in transfer or in exchange, upon the understanding that the same will not be destroyed by the Company but will be

9

safely stored for future reference.

21) INSPECTION OF STOCK BOOKS.

In case of any request or demand for the inspection of the securities books of the Company, the Bank will endeavor to notify the Company and to secure instructions as to permitting or refusing such inspection. The Bank reserves the right, however, to exhibit the securities books to any person in case it is advised by its counsel that it may be held responsible for the failure to exhibit the stock books to such person.

22) REGISTRATION OF ORIGINAL ISSUE OF STOCK CERTIFICATES.

The Bank, as Registrar, will register original issues of stock certificates upon the presentation to it for that purpose by the Transfer Agent of signed and countersigned securities certificates. If the stock is listed on any stock exchange, the requirements of such exchange as to the registration of stock certificates must be fulfilled.

23) REGISTRATION IN TRANSFER.

Certificates of securities will be registered in transfer upon the presentation to the Bank by the Transfer Agent of certificates theretofore issued for a like amount of securities and not previously discharged from registry in canceled form. The Bank, as Registrar, will not be responsible for the validity of the transfer of securities, the genuineness of the endorsement, the authority of the transferor or the payment of taxes.

24) CONFLICTS.

In the event of any conflict between the terms of these Regulations and the terms of the Agreement between the Bank and the Company regarding the appointment of the Bank, as Registrar and/or Transfer Agent, the terms of such Agreement shall control.

25) AMENDMENT.

The Bank may amend these Regulations at any time and Company shall be bound by and subject to such amendments.

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APPENDIX I

Stock Transfer Agent Appointment

A) Documents needed upon Acceptance of Appointment

1.	Copy of Articles of Incorporation or other governing documents and all amendments to date, certified by Secretary or other authorized officer of the Company.
2.	Copy of Bylaws and all amendments 10 date, certified by the Secretary or other authorized officer of the Company.
3.	Copy of resolutions of the governing board of the Company appointing Bank as Transfer Agent certified by the Secretary or other authorized officer of the Company.
4.	Certificates of Election and specimen signatures of officers authorized to instruct us in connection with the agency, certified by the Secretary of the Company.
5.	Specimens of each form and denomination of securities certificates which Bank will be authorized to issue and/or accept in transfer, certified by the Secretary or other authorized officer of the Company as being in the form approved by the governing board of the Company.
6.	Opinion of counsel to the Company covering:

a)	The good standing of the corporation,
b)	The validity of the issue, and
c)	The applicability of the Securities Act of 1933; Trust Indenture Act of 1939, the Investment Company Act of 1940, and the laws or regulations of other Governmental Agencies, if any.

7.	Certification as to outstanding stock at the time of our appointment.
8.	Certified list of registered holders showing full details as to addresses, certificates held, issue dates and I.D. numbers.
9.	List of “stop transfer” orders in effect, if any.
10.	If daily transfer reports are to be mailed, instructions in this connection,
11.	Certified Resolution appointing our Bank as Dividend Disbursing Agent and letter of instructions regarding procedure — including authorization of Bank to open account and draw from account.
12.	Copies of any merger or acquisition agreement or other document, which will result in any stock exchange.

B) Transactions involving an original issue or public offering of stock.

1.	Copy of the Prospectus, certified by the Secretary or other authorized officer of the Company to be a true copy of the Prospectus filed with and made a part of the Registration Statement.
2.	Opinion of counsel to the effect that the subject shares being offered by the Prospectus have been registered under the Securities Act of 1933, as amended, and that the registration has become effective,
3.	Certified or photostat copy of the SEC Order declaring the Registration Statement effective.

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4.	Photostat copy of a “no stop order” telegram, which is issued by the SEC on or before the closing date.
5.	Officer’s instructions to Bank reissuance and delivery of the securities certificates.

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EXHIBIT B

TRANSFER AGENT SERVICES

Conversion Fee: $    0.00

There is no conversion fee assuming that we receive a good electronic file from your existing transfer agent. If manual set up were required, a conversion fee based upon time and materials would apply. We do not anticipate any such occurrence with the Mexico Equity and Income Fund, Inc. common stock.

Annual Transfer Agent Administration Fee: $10,500.00

The Annual Administration Fee covers the administration of all open and closed shareholder accounts for The Mexico Equity and Income Fund, Inc. common stock. Moreover, the Annual Administration Fee includes the following services:

Ø Shareholder record keeping for up to 1,000 shareholders (shareholders in excess of 1,000 billed at a rate of $10.00 per shareholder)

Ø Processing of all transfers

Ø Issuance of all certificates

Ø Registrar services

Ø Processing of up to 25 stock options per annum (options in excess of 25 billed at a rate of $10 per option)

Ø Payment of quarterly cash dividend via check or ACH

Ø Administration of dividend reinvestment plan for up to 1,000 participants (participants in excess of 1,000 billed at a rate of $5.00 per participant)

Ø Annual meeting services including the mailing and tabulation of proxy cards relating to all registered shareholders, attendance at the annual meeting, and serving as inspector of elections (electronic proxy voting via the Internet and telephone available at a cost of $3,000 per annum or special event)

Ø Shareholder reports of 12 per annum (you pick the reports you desire and when you get them-reports in excess of 12 billed at a rate of $100 per report)

Ø Tax reporting

Ø Escheatment services to all 50 states

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Out of Pocket Expenses

Reimbursable expenses include, but are not limited to, the following:

Ø Postage

Ø Wire charges

Ø Courier fees

Ø Stationery

Ø Insurance

Ø Broker search and distribution for annual meeting

Ø Inserting and/or match mailing

Ø Brokerage commissions on buys/sells (typically paid by shareholder, but if not, reimbursable by the company at a rate of $0.10 per share)

Ø Research fees for other than current year (typically paid by shareholder, but if not, reimbursable by the company at rate of $10 per year)

Ø Replacement certificates (typically paid by shareholder, but if not, reimbursable by the company at a rate of $30 per certificate)

Ø Copies of paid checks (typically paid by shareholder, but if not, reimbursable by the company at a rate of $10 per check)

Ø Duplicate dividend reinvestment statements (typically paid by shareholder, but if not, reimbursable by the company at a rate of $25 per statement)

Other Services

The following services represent services which are extraordinary in nature and as such, fees for such services will be provided on a time and materials basis if and when they arise:

Ø Tender and exchange agent

Ø Stock splits and stock dividends

Ø Small shareholder buyback

Ø Secondary offerings

Ø Direct stock purchase plan administration

These fees are contingent upon the review and execution of the Fifth Third Bank Security Services Agreement (the “Agreement”) by The Mexico Equity and Income Fund, Inc. and Fifth Third Bank. This fee proposal shall be made a part of the Agreement and shall be amended from time to time with the mutual approval of both parties.

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EX-99.2(L)

Exhibit 2(1)

October 31, 2005

The Mexico Equity and Income Fund, Inc.
615 East Michigan St., 2^nd Floor
Milwaukee, WI 53202

Gentlemen:

     We have acted as counsel to The Mexico Equity and Income Fund, Inc. (the “Fund”), a Maryland corporation, in connection with the preparation and filing of the Registration Statement of the Fund filed on Form N-2 (the “Registration Statement”) covering shares of preferred stock of the Fund, par value $0.001 per share (the “Shares”).

     We have examined originals or copies certified or otherwise identified to our satisfaction of the Articles of Incorporation of the Fund, By-Laws of the Fund, the Registration Statement, and such other corporate records, proceedings and documents, as we have deemed necessary as a basis for the opinion hereinafter expressed. With respect to such examination, we have assumed the genuineness of all signatures appearing on all documents presented to us as originals, and the conformity to the originals of all documents presented to us as conformed or reproduced copies. Where factual matters relevant to such opinion were not independently established, we have relied upon statements and certificates of officers and representatives of the Fund and others.

     In addition, the opinions expressed herein are limited to the laws of the State of Maryland and we express no opinion as to the effect on the matters covered by this letter of the laws of any other jurisdiction.

     Based upon and subject to the foregoing, we are of the opinion that the Shares have been duly and validly authorized and when sold, paid for and issued as contemplated by the Registration Statement will be duly and validly issued and fully paid and non-assessable.

The Mexico Equity and Income Fund, Inc.
October 31, 2005
Page 2

     We hereby consent to the use of this opinion as Exhibit 2(1) to the Registration Statement and to the reference to this firm in the Fund’s Prospectus, included as part of the Registration Statement. In giving this consent, we do not hereby concede that we come within the categories of persons whose consent is required by the Securities Act of 1933, as amended, or the General Rules and Regulations promulgated thereunder.

Very truly yours,
 

/s/ Blank Rome LLP
 

BLANK ROME LLP
 

EX-99.2(N)

EXHIBIT 2.N

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the references to our firm in this Registration Statement (Form N-2) of the Mexico Equity & Income Fund, Inc. and to the use of our report dated September 6, 2005 on the financial statements and financial highlights of the Mexico Equity & Income Fund, Inc. Such financial statements and financial highlights appear in the 2005 Annual Report to Shareholders which is incorporated by reference in the Registration Statement.

/s/ Tait, Weller & Baker LLP

Philadelphia, PA
October 31, 2005

EX-99.2(R)

Exhibit 2(r)

MEXICO EQUITY & INCOME FUND, INC.

CODE OF ETHICS

I. Introduction.

     The purpose of this Code of Ethics is to prevent Access Persons (as defined below) of MEXICO EQUITY & INCOME FUND, INC. (“MXE”) (the “Fund”) from engaging in any act, practice or course of business prohibited by paragraph (a) of Rule 17j-1 (the “Rule”) under the Investment Company Act of 1940, as amended (the “Act”). This Code of Ethics is required by paragraph (b) of the Rule. A copy of the Rule is available from the Fund’s Compliance Officer upon request.

     Access Persons of the Fund, in conducting their personal securities transactions, owe a fiduciary duty to the shareholders of the Fund. The fundamental standard to be followed in personal securities transactions is that Access Persons may not take inappropriate advantage of their positions. All personal securities transactions by Access Persons must be conducted in such a manner as to avoid any actual or potential conflict of interest between the Access Person’s interest and the interests of each Fund, or any abuse of an Access Person’s position of trust and responsibility. Potential conflicts arising from personal investment activities could include buying or selling securities based on knowledge of the Fund’s trading position or plans (sometimes referred to as front-running), and acceptance of personal favors that could influence trading judgments on behalf of the Fund. While this Code of Ethics is designed to address identified conflicts and potential conflicts, it cannot possibly be written broadly enough to cover all potential situations and, in this regard, Access Persons are expected to adhere not only to the letter, but also the spirit, of the policies contained herein.

II. Definitions.

     In order to understand how this Code of Ethics applies to particular persons and transactions, familiarity with the key terms and concepts used in this Code of Ethics is necessary. Those key terms and concepts are:

     1. “Access Person” means any director, officer or “advisory person” of the Fund. A list of the Fund’s Access Persons is attached as Appendix 1 to this Code of Ethics and will be updated from time to time.

     2. “Advisory Person” means (a) any employee of the Fund or of any company in a control relationship to the Fund, who, in connection with his regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales; and (b) any natural person in a control relationship to the Fund who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of a security.

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     3. “Beneficial Ownership” has the meaning set forth in Rule 16a-l(a)(2) of the Securities Exchange Act of 1934, as amended, a copy of which is available from the Fund’s Compliance Officer upon request. The determination of direct or indirect beneficial ownership shall apply to all securities which an Access Person has or acquires.

     4. “Control” has the meaning set forth in Section 2(a)(9) of the Act.

     5. “Independent Director” means a director of the Fund who is not an “interested person” of the Fund within the meaning of Section 2(a)(19) of the Act.

     6. “Purchase or Sale of a Security” includes, among other things, the purchase or sale of an equivalent security, such as the writing of an option to purchase or sell a security.

     7. “Security” has the meaning set forth in Section 2(a)(36) of the Act, except that it shall not include “long-term” debt securities (securities with a remaining maturity of more than 397 days) issued by the Government of the United States or “short-term” debt securities (securities with a remaining maturity of 397 days or less) issued or guaranteed as to principal or interest by the Government of the United States or by a person controlled or supervised by and acting as an instrumentality of the Government of the United States, bankers’ acceptances, bank certificates of deposit, commercial paper and shares of registered open-end investment companies.

III. Prohibitions; Exemptions.

     1. Prohibited Purchases and Sales.

          No Access Person may purchase or sell, directly or indirectly, any security in which that Access Person has, or by reason of the transaction would acquire, any direct or indirect beneficial ownership and which to the actual knowledge of that Access Person at the time of such purchase or sale:

          A. is being considered for purchase or sale by the Fund; or

          B. is being purchased or sold by the Fund.

     2. Exemptions From Certain Prohibitions.

          The prohibited purchase and sale transactions described in paragraph III.l. above do not apply to the following personal securities transactions:

A. purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control;

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B.	purchases or sales which are non-volitional on the part of either the Access Person or the Fund;
C.	purchases which are part of an automatic dividend reinvestment plan (other than pursuant to a cash purchase plan option);
D.	purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent the rights were acquired from that issuer, and sales of the rights so acquired;
E.	any purchase or sale, or series of related transactions, involving 500 shares or less in the aggregate, if the issuer has a market capitalization (outstanding shares multiplied by the current price per share) greater than $1 billion;
F.	purchases or sales of (i) “long-term” debt securities (securities with a remaining maturity of more than 397 days) issued by the U.S. Government or “short-term” debt securities (securities with a remaining maturity of 397 days or less) issued or guaranteed as to principal or interest by the U.S. Government or by a person controlled or supervised by and acting as an instrumentality of the U.S. Government, (ii) bankers’ acceptances and bank certificates of deposit, (iii) commercial paper, and (iv) shares of registered open-end investment companies (each of the foregoing being referred to herein as “Exempt Securities”);
G.	any purchase or sale which the Chairman of the Fund’s Audit Committee, or in the event of such Chairman’s unavailability or if such purchase or sale is to be undertaken by the Chairman of the Fund’s Audit Committee, any other member of the Fund’s Audit Committee, approves on the grounds that its potential harm to that Fund is remote; and
H.	any purchase or sale of the Fund’s shares by an Access Person or any affiliated person of that Fund, directly or indirectly, during any time period that the Board of Directors has authorized the Fund to engage in a Share Buyback Program provided that: (i) the Board has determined that any potential harm to that Fund is remote and (ii) proper dissemination of any material non-public information has been made on a timely basis.

3. Prohibited Recommendations.

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          Subject to certain exceptions for Exempt Securities, as indicated below, an Access Person may not recommend the purchase or sale of any security to or for the Fund without having disclosed his or her interest, if any, in such security or the issuer thereof, including without limitation:

          A. any direct or indirect beneficial ownership of any security of such issuer, including any security received in a private securities transaction (other than an Exempt Security);

          B. any contemplated purchase or sale by such person of such security (other than an Exempt Security);

          C. any position with such issuer or its affiliates; and

          D. any present or proposed business relationship between such issuer or its affiliates and such person or any party in which such person has a significant interest.

IV. Reporting.

     1. Quarterly Reporting.

          A. Subject to the provisions of paragraph B below, every Access Person shall either report to the Fund the information described in paragraph C below with respect to transactions in any security in which the Access Person has, or by reason of the transaction acquires, any direct or indirect beneficial ownership in the security or, in the alternative, make the representation in paragraph D below, or by submitting a copy of the quarterly reporting form to be used in complying with this section IV, attached to this Code of Ethics as Appendix 2.

          B. (1) An Access Person is not required to make a report with respect to any transaction effected for any account over which the Access Person does not have any direct or indirect influence; provided, however, that if the Access Person is relying upon the provisions of this paragraph B(l) to avoid making such a report, the Access Person shall, not later than ten (10) days after the end of each calendar quarter, identify any such account in writing and certify in writing that he or she had no direct or indirect influence over any such account.

               (2) An independent director of the Fund who would be required to make a report pursuant to paragraph A above solely by reason of being a director of the Fund is required to report a transaction in a security only if the independent director, at the time of the transaction knew or, in the ordinary course of fulfilling the independent director’s official duties as a director of the Fund, should have known that (a) the Fund has engaged in a transaction in the same security within the last fifteen (15) days or is engaging or going to engage in a transaction in the same security within the next fifteen (15) days, or (b) the Fund has within the last fifteen (15) days considered a transaction in the same security or is considering a transaction in the same security or within the next fifteen (15) days is going to consider a transaction in the same security.

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          C. Every report shall be made not later than ten (10) days after the end of the calendar quarter in which the transaction to which the report relates was effected and shall contain the following information:

               (i) the date of the transaction, the title and the number of shares and the principal amount of each security involved;

               (ii) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

               (iii) the price at which the transaction was effected;

               (iv) the name of the broker, dealer or bank with or through whom the transaction was effected; and

               (v) a description of any factors potentially relevant to a conflict of interest analysis, including the existence of any substantial economic relationship between the transaction and securities held or to be acquired by the Fund.

          D. If no transactions were conducted by an Access Person during a calendar quarter that are subject to the reporting requirements described above, such Access Person shall, not later than ten (10) days after the end of that calendar quarter, provide a written representation to that effect to the Fund.

          2. Annual Reporting and Certification.

               All Access Persons are required to certify annually that they have read and understand this Code of Ethics and recognize that they are subject to the provisions hereof and will comply with the policy and procedures stated herein. Further, all Access Persons are required to certify annually that they have complied with the requirements of this Code of Ethics and that they have reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of such policies. A copy of the certification form to be used in complying with this paragraph A is attached to this Code of Ethics as Appendix 3.

          3. Miscellaneous.

               Any report under this Code of Ethics may contain a statement that the report shall not be construed as an admission by the person making the report that the person has any direct or indirect beneficial ownership in the securities to which the report relates.

V. Confidentiality.

     No Access Person shall reveal to any other person (except in the normal course of his or her duties on behalf of the Fund) any information regarding securities transactions by the Fund or consideration by the Fund of any such securities transaction.

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     All information obtained from any Access Person hereunder shall be kept in strict confidence, except that reports of securities transactions hereunder will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation.

VI. Sanctions.

     Upon discovering a violation of this Code of Ethics, the Boards of Directors of the Fund may impose any sanctions it deems appropriate, including a letter of censure, the suspension or termination of any director or officer of the Fund, or the recommendation to the employer of the violator of the suspension or termination of the employment of the violator.

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APPENDIX 1

MEXICO EQUITY & INCOME FUND, INC.

ACCESS PERSONS

Chairman of the Board and President

Vice President and Treasurer

Secretary

Assistant Treasurer

Assistant Secretary

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APPENDIX 2

MEXICO EQUITY & INCOME FUND, INC.

SECURITY TRANSACTION REPORT

For the Calendar Quarter Ended                    

Instructions

     1. List transactions in securities (other than Exempt Securities) (“Covered Securities”) held in any account in which you may be deemed to have Beneficial Ownership as of the date indicated above. You are deemed to have Beneficial Ownership of accounts of your immediate family members. You may exclude any of such accounts from this report, however, if you have no direct or indirect influence or control over those accounts.

     2. Write “none” if you had no transactions in Covered Securities during the quarter.

     3. You must submit this form within 10 days after the end of the calendar quarter.

     4. If you are Director who is not an “interested person” of a Fund and who would otherwise be required to report solely by reason of being a Director, then you need only report transactions in Covered Securities when you knew at the time of the transaction or, in the ordinary course of fulfilling your duties as a Director, you should have known, that during the 15-day period immediately preceding or after the date of the transaction, such security is or was purchased or sold, or was considered for purchase or sale, by the Fund. Please write “none” if you have no transactions in Covered Securities during the quarter that meet the above conditions.

     5. If you submit copies of your monthly brokerage statements to the Fund or its designee, and those monthly brokerage statements disclose the required information with respect to all Covered Securities in which you may be deemed to have Beneficial Ownership, you need not file this form unless you established a new brokerage account during the quarter.

     6. For each account that you established during the previous quarter that held securities for your direct or indirect benefit, state the name of the broker, dealer or bank with whom you established the account, the account number and the date you established the account.

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					Broker, Dealer or
					Other Party
			No. of Shares or		Through Whom
	Date of	Purchase/	Principal		Transaction
Name of Security1	Transaction	Sale	Amount	Price	Was Made

During the previous quarter, I established the following accounts with a broker, dealer or bank:

		Date
Broker, Dealer or Bank	Account Number	Established

Certifications: I hereby certify that:

          1. The information provided above is correct.

          2. This report excludes transactions with respect to which I had no direct or indirect influence or control.

Date:	Signature:
Name:

¹ Including interest rate and maturity, if applicable

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APPENDIX 3

MEXICO EQUITY & INCOME FUND, INC.

ANNUAL ASSET CERTIFICATION OF ACCESS PERSONS

For the Year Ended                    

Instructions

     1. List each Covered Security held in any account in which you may be deemed to have Beneficial Ownership as of the date indicated above. You are deemed to have Beneficial Ownership of accounts of your immediate family members. You are deemed to have Beneficial Ownership of accounts of your immediate family members. You may exclude any of such accounts from this report, however, if you have no direct or indirect influence or control over those accounts.

     2. Write “none” if you did not hold any Covered Securities at year end.

     3. You must submit this form no later than January 30,           .

     4. You must complete and sign this form for annual certification whether or not you or your broker sends statements directly to the Fund or its designee.

     5. If you are Director who is not an “interested person” of a Fund and who would otherwise be required to report solely by reason of being a Director, then you need not submit this report.

	No. of Shares	Registration on
	or Principal	Security or	Nature of	Broker, Dealer or
Name of Security2	Amount	Account	Interest	Bank

² Including interest rate and maturity, if applicable.

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Certifications: I hereby certify that:

     1. The securities listed above, or listed in the brokerage statements that I have provided, reflect all the Covered Securities in which I may be deemed to have Beneficial Ownership at the end of the period.

     2. I have read the Code of Ethics and certify that I am in compliance with them.

     3. This report excludes holdings with respect to which I had no direct or indirect influence or control.

Date:	Signature:
	Name:

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