mexicoequity_n-q.htm  
 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 
FORM N-Q
 
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
 
 
Investment Company Act file number  811-06111
 

The Mexico Equity & Income Fund, Inc.
(Exact name of registrant as specified in charter)

 
615 East Michigan Street
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
 

Ms. Laura Garcia
C/O U.S. Bancorp Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
(Name and address of agent for service)



877-785-0367
Registrant's telephone number, including area code



Date of fiscal year end: July 31, 2015
 
Date of reporting period:  October 31, 2014
 
 
 
 
 
 
 
Item 1. Schedule of Investments.
 
The Mexico Equity and Income Fund, Inc.
            
Schedule of Investments
            
October 31, 2014 (Unaudited)
            
             
MEXICO - 98.53%
  
Shares
    
Value
  
               
COMMON STOCKS - 89.68%
            
Airports - 2.64%
            
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
     659,862     $ 3,287,489  
Beverages - 4.74%
                
Arca Continental, S.A.B. de C.V.
     372,704       2,400,141  
Fomento Economico Mexicano, S.A.B. de C.V.
     363,000       3,491,377  
              5,891,518  
Building Materials - 6.18%
                
Cemex, S.A.B. de C.V. CPO (a)
     6,239,318       7,686,645  
Cable & Satellite - 6.58%
                
Megacable Holdings, S.A.B. de C.V.
     1,787,451       8,188,460  
Chemical Products - 1.99%
                
Alpek, S.A.B. de C.V.
     412,993       730,530  
Mexichem, S.A.B. de C.V.
     426,648       1,745,403  
              2,475,933  
Construction and Infrastructure - 8.72%
                
Impulsora del Desarrollo y el Empleo en America Latina, S.A.B. de C.V. (a)
     1,626,914       5,144,268  
Promotora y Operadora de Infraestructura, S.A.B. de C.V. (a)
     415,231       5,704,155  
              10,848,423  
Consumer Discretionary - 2.53%
                
Rassini, S.A.B. de C.V. (a)
     886,650       3,151,217  
Consumer Staples - 3.77%
                
Coca-Cola Femsa, S.A.B. de C.V.
     208,750       2,202,329  
Grupo Bimbo, S.A.B. de C.V.
     851,800       2,491,592  
              4,693,921  
Energy - 2.40%
                
Infraestructura Energetica Nova, S.A.B. de C.V.
     487,334       2,982,721  
Financial Groups - 10.99%
                
Banregio Grupo Financiero, S.A.B. de C.V.
     455,393       2,633,696  
Compartamos, S.A.B. de C.V.
     878,544       1,956,561  
Credito Real, S.A.B. de C.V.
     980,288       2,520,194  
Grupo Financiero Banorte, S.A.B. de C.V. - Series O
     693,408       4,448,419  
Grupo Financiero Interacciones, S.A.B de  C.V.
     258,702       2,107,654  
              13,666,524  
Food Manufacturing - 4.05%
                
Gruma, S.A.B. de C.V.
     260,517       2,868,807  
Grupo Lala, S.A.B. de C.V.
     943,395       2,164,738  
              5,033,545  
Holding Companies - 6.51%
                
Alfa, S.A.B. de C.V. - Series A
     1,395,768       4,447,594  
Grupo Carso, S.A.B. de C.V.
     639,718       3,655,056  
              8,102,650  
Hotels, Restaurants, and Recreation - 7.83%
                
Alsea, S.A.B. de C.V. - Series A (a)
     662,700       2,069,853  
Grupe, S.A.B. de C.V. (a)
     1,980,127       4,705,398  
Grupo Sanborns, S.A.B. de C.V.
     585,300       936,654  
Grupo Sports World, S.A.B. de C.V. (a)
     1,062,512       2,023,043  
              9,734,948  
Insurance Services - 3.16%
                
Qualitias Controladora, S.A.B. de C.V.
     1,519,747       3,930,774  
Mining - 2.21%
                
Grupo Mexico, S.A.B. de C.V. - Series B
     800,904       2,751,904  
Real Estate Services - 2.67%
                
Corporacion Inmobiliaria Vesta, S.A.B. de C.V.
     1,514,340       3,324,154  
Retail - 2.33%
                
Corporativo Fragua, S.A.B. de C.V.
     47,287       853,299  
El Puerto de Liverpool, S.A.B. de C.V.
     174,482       2,047,074  
              2,900,373  
 
 
 
 
 
 
 
Specialty Pharmaceuticals - 1.30%
                
Genomma Lab Internacional, S.A.B. de C.V. (a)
     638,800       1,612,387  
Telecommunication Services - 9.08%
                
America Movil, S.A.B. de C.V. - Series L
     9,261,500       11,299,838  
TOTAL COMMON STOCKS (Cost $91,267,173)
             111,563,424  
                   
CAPITAL DEVELOPMENT CERTIFICATES - 2.06%
                
Atlas Discovery Trust II (b)
     300,000       2,561,511  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES (Cost $2,190,759)
             2,561,511  
                   
ASSET BACKED SECURITIES - 0.31%
                
Nafin (Infonavit - Banamex)
                
3.460%, 10/21/2041
     11,034       380,881  
TOTAL ASSET BACKED SECURITIES (Cost $329,274)
             380,881  
                   
MORTGAGE BACKED SECURITIES - 1.36%
                
Nafin (Infonavit)
                
4.950%, 03/22/2039
     58,600       1,692,254  
TOTAL MORTGAGE BACKED SECURITIES (Cost $1,644,233)
             1,692,254  
                   
REAL ESTATE INVESTMENT TRUSTS - 4.95%
                
Fibra Uno Administracion, S.A. de C.V.
     901,718       3,133,790  
Mexico Real Estate Management S.A. de C.V.
     1,027,400       1,866,162  
PLA Administradora Industrial S de R.L. de C.V.
     500,000       1,158,823  
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $5,956,483)
             6,158,775  
     
Principal
          
     
Amount
          
SHORT-TERM INVESTMENTS - 0.17%
                
Mexican BANOBRA
                
0.00% Coupon, 3.098% Effective Yield, 11/03/2014 (c)
     2,900,000 *     215,317  
TOTAL SHORT-TERM INVESTMENTS (Cost $216,024)
             215,317  
                   
TOTAL MEXICO (Cost $101,603,946)
             122,572,162  
                   
UNITED STATES - 1.65%
  
Shares
    
Value
  
                   
COMMON STOCKS - 1.51%
                
Retail - 1.51%
                
First Cash Financial Services, Inc. (a)
     31,800       1,878,220  
TOTAL COMMON STOCKS (Cost $1,864,572)
             1,878,220  
                   
INVESTMENT COMPANIES - 0.14%
                
First American Treasury Obligation - Class A
     169,133       169,133  
TOTAL INVESTMENT COMPANIES (Cost $169,133)
             169,133  
                   
Total Investments (Cost $103,637,651) - 100.18%
             124,619,515  
Liabilities in Excess of Other Assets - (0.18)%
             (224,594 )
TOTAL NET ASSETS - 100.00%
           $ 124,394,921  
                   
Percentages are stated as a percent of net assets.
                
   
                   
(a)
Non-income producing security.
                
(b)
The Adviser has determined these securities to be illiquid. The total value of illiquid securities at October 31, 2014 was $2,561,511,
  
 
comprising 2.06% of net assets, while the remainder of the Fund's net assets 97.94% were liquid.
  
(c)
Effective yield based on the purchase price. The calculation assumes the security is held to maturity.
  
                   
* Principal amount in Mexican Pesos.
                
                   
The cost basis of investments for federal income tax purposes at October 31, 2014 was as follows:
          
                   
Cost of investments**
   $ 103,637,651          
Gross unrealized appreciation
     21,352,207          
Gross unrealized depreciation
     (370,343 )        
Net unrealized appreciation
   $ 20,981,864          
                   
 
 
 
 
 
 
 
**Because tax adjustments are calculated annually, the above table does not reflect tax adjustments.
For the previous fiscal year's federal income tax information, please refer to the Notes to Financial
Statements section of the Fund's most recent semi-annual or annual report.
    
       
Significant accounting policies are as follows:
    
       
Portfolio Valuation: Investments are stated at value. 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. If there are no such closing prices, the value shall be the most recent bid quotation
as of the valuation time. If there is no such bid quotation, the security shall be valued at the most recent asked quotation at the valuation time.
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 61st day prior to maturity if their term to maturity from the date of purchase when
acquired by the Fund was more than 60 days. Other assets and securities for which no quotations are readily available will be valued in good faith at fair
value using methods determined by the Board of Directors. These methods include, but are not limited to, the fundamental analytical data relating to
the investment; the nature and duration of restrictions in the market in which they are traded (including the time needed to dispose of the security,
methods of soliciting offers and mechanics of transfer); the evaluation of the forces which influence the market in which these securities may be
purchased or sold, including the economic outlook and the condition of the industry in which the issuer participates. The Fund has a Valuation
Committee comprised of independent directors which oversees the valuation of portfolio securities.
       
The Valuation Committee of the Fund shall meet to consider any fair valuations. This consideration includes reviewing various factors set forth
in the pricing procedures adopted by the Board of Directors and other factors as warranted. In considering a fair value determination, factors that
may be considered, among others include; the type and structure of the security; unusual events or circumstances relating to the security's issuer;
general market conditions; prior day's valuation; fundamental analytical data; size of the holding; cost of the security on the date of purchase;
 trading activity and prices of similar securities or financial instruments.
  
       
FAIR VALUE MEASUREMENTS
    
       
The Fund follows the FASB ASC Topic 820 hierarchy, under which various inputs are used in determining the value of the Fund’s investments.
The basis of the hierarchy is dependent upon various “inputs” used to determine the value of the Fund’s investments. These inputs are summarized
in the three broad levels listed below:
    
       
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either
directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for
similar instruments, interest rates, prepayment speeds, credit risks, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing
the company's own assumptions about the assumptions a market participant would use in valuing the asset or
liability , and would be based on the best information available.
    
       
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example,
the type of security, whether the security is new and not yet established in the marketplace, the liquidity of the markets, and other characteristics
particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market
the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest
for instruments categorized in level 3.
    
       
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the
fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant on
the lowest level input that is significant to the fair value measurement in its entirety.
       
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
       
The following is a summary of the inputs used to value the Fund's investments carried at fair value as of October 31, 2014:
 
 
 
 
 
 
 
                           
     
Level 1*
    
Level 2*
    
Level 3
    
Total
  
Equity
                          
Airports
     $ 3,287,489     $ -     $ -     $ 3,287,489  
Beverages
       5,891,518       -       -       5,891,518  
Building Materials
     7,686,645       -       -       7,686,645  
Capital Development Certificates
     -       -       2,561,511       2,561,511  
Cable & Satellite
     8,188,460       -       -       8,188,460  
Chemical Products
     2,475,933       -       -       2,475,933  
Construction and Infrastructure
     10,848,423       -       -       10,848,423  
Consumer Discretionary
     3,151,217       -       -       3,151,217  
Consumer Staples
     4,693,921       -       -       4,693,921  
Energy
       2,982,721       -       -       2,982,721  
Financial Groups
     13,666,524       -       -       13,666,524  
Food Manufacturing
     5,033,545       -       -       5,033,545  
Holding Companies
     8,102,650       -       -       8,102,650  
Hotels, Restaurants, and Recreation
     9,734,948       -       -       9,734,948  
Insurance Services
     3,930,774       -       -       3,930,774  
Mining
       2,751,904       -       -       2,751,904  
Real Estate Services
     3,324,154       -       -       3,324,154  
Retail
       4,778,593               -       4,778,593  
Specialty Pharmaceuticals
     1,612,387       -       -       1,612,387  
Telecommunication Services
     11,299,838       -       -       11,299,838  
Total Equity
     $ 113,441,644     $ -     $ 2,561,511     $ 116,003,155  
                                   
Real Estate Investment Trusts
   $ 6,158,775     $ -     $ -     $ 6,158,775  
                                   
Asset Backed Securities
   $ -     $ 380,881     $ -     $ 380,881  
                                   
Mortgage Backed Securities
   $ -     $ 1,692,254     $ -     $ 1,692,254  
                                   
Short-Term Investments
   $ 169,133     $ 215,317     $ -     $ 384,450  
Total Investments in Securities
   $ 119,769,552     $ 2,288,452     $ 2,561,511     $ 124,619,515  
                                   
Disclosures about Derivative Instruments and Hedging Activities
                                
                                   
The Fund did not invest in derivative securities or engage in hedging activities during the period ended October 31, 2014.
                  
                                   
*There were no transfers between levels 1 and 2 during the period. Transfers between levels are recognized at the end of the reporting period.
          
                                   
Level 3 Reconciliation Disclosure
                                
                                   
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
                  
                                   
Description
                            
Investments in Securities
  
Balance as of July 31, 2014
                           $ 2,631,578  
Acquisition/Purchase
                             -  
Sales
                               -  
Realized gain
                               -  
Change in unrealized appreciation (depreciation)
                             (70,067 )
Balance as of October 31, 2014
                           $ 2,561,511  
                                   
                                   
The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and
          
categorized within Level 3 as of October 31, 2014:
                                
 
Fair Value October 31, 2014
          
Valuation Methodologies
    
Unobservable Input (1)
    
Impact to Valuation from an Increase in Input (2)
  
Capital Development Certificates
 $                                                                                2,561,511
          
Market Comparables/ Sum of the Parts Valuation
    
Liquidity
Discount
    
Decrease
  
                                   
1 
In determining certain of these inputs, management evaluates a variety of factors including economic conditions, foreign exchange rates, industry and market developments, market valuations of comparable companies and company specific developments.
  
                                   
2 
This column represents the directional change in the fair value of the Level 3 investment that would result from increases to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.
  
 
 
 
 
 
 
 
Item 2. Controls and Procedures.
 
(a)  
The Registrant’s President and Chief Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) (17 CFR 270.30a-3(c)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rule 13a-15(b) or Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(d)).

(b)  
There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) (17 CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
 
 
Item 3. Exhibits.
 
Separate certifications for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)).  Filed herewith.
 
 
 
 
 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


(Registrant)  The Mexico Equity & Income Fund, Inc.                                                                                                                                                                                   

 
By (Signature and Title)    /s/ Maria Eugenia Pichardo                                                           
                                          Maria Eugenia Pichardo, President

Date December 15, 2014                                                                                                      

 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title)*      /s/ Maria Eugenia Pichardo                                                                                               
                                              Maria Eugenia Pichardo, President

Date      December 15, 2014                                                                                                   

 
By (Signature and Title)*      /s/ Laura Garcia                                                                                                                                                            
                                              Laura Garcia, Chief Financial Officer

Date     December 15, 2014                                                                                                 

* Print the name and title of each signing officer under his or her signature.