Shareholder activist and hedge fund arbitrageur Phillip Goldstein is clashing again with the investment adviser and directors of a close-end fund.

Shareholders of the $94 million Mexico Equity and Income Fund were scheduled, on Dec. 3, to elect a new director. Goldstein placed himself on the ticket Nov. 6.

Upon hearing of Goldstein's candidacy, the fund's adviser, Advantage Advisers of New York, took action.

After Goldstein sent a letter to fellow shareholders asking them to vote for him to eliminate the "persistent 20 percent discount from net asset value at which the fund's shares trade," Advantage Advisers sent a letter on Nov. 19 asking shareholders not to vote for Goldstein. Advantage told shareholders Goldstein's designs on the fund "were not in the best interest of shareholders" and that the fund had already addressed Goldstein's concerns through a stock repurchase plan.

"If I am elected, my number one priority will be to promptly eliminate the discount from NAV [by] converting the fund from closed-end fund to an open-end fund, conducting a self-tender offer at NAV [or] liquidating the fund," said Goldstein in his letter to the Mexico fund shareholders. Goldstein is president of Opportunity Partners of Pleasantville, N.Y.

The Mexico Equity and Income Fund has traded at a discount to net asset value in the 19 percent to 20 percent range for several years, according to Lipper of Summit, N.J.

Because of this persistent discount, Goldstein had also suggested, in an Oct. 6 preliminary proxy statement, that all compensation earned by the directors be held in escrow until the fund realizes its net asset value. (MFMN 10/18/99) He further suggested that if the adviser to the fund did not recommend a plan to deal with the discount within 30 days, the adviser be terminated.

Just five days later, on Oct. 11, Advantage Advisers announced the start of a share repurchase and tender offer program in order to deal with the fund's discount.

Goldstein said in an interview that he did not believe Advantage Advisers' announcement that it would deal with the discount was sincere and that was why he decided to run for the board. The fund's adviser had promised Goldstein a year ago, when he made his initial purchase in the fund, that it would reduce the discount, he said.

"Thus, a year from now, there is no assurance that the discount won't be wider than today," Goldstein wrote in his Nov. 6 letter. "I think it is time to stop stalling and simply eliminate the discount. . . . I am convinced that this board will not adopt the aggressive measures necessary to guarantee NAV unless further pressure is applied. That is why I am conducting this contest."

Goldstein holds 2.46 percent of shares valued at approximately $280,000, in the fund. A 20 percent increase in value would be worth roughly $56,000 to him.

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