mexeq_nq.htm
 
As filed with the Securities and Exchange Commission on December 15, 2015



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)



Mr. Mario Alberto Gonzalez
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, 2016


Date of reporting period:  October 31, 2015
 
 
 
 
 
Item 1. Schedule of Investments.
 
The Mexico Equity and Income Fund, Inc.
            
Schedule of Investments
            
October 31, 2015 (Unaudited)
            
             
MEXICO - 101.16%
  
Shares
    
Value
  
               
COMMON STOCKS - 97.45%
            
Airports - 5.56%
            
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
     563,416     $ 2,897,954  
Grupo Aeroportuario del Pacifico, S.A.B. de C.V. - Series B
     321,649       2,896,979  
              5,794,933  
Auto Parts and Equipment - 6.07%
                
Nemak, S.A.B. de C.V. (a)
     2,486,043       3,595,610  
Rassini, S.A.B. de C.V.
     707,748       2,735,819  
              6,331,429  
Beverages - 10.18%
                
Arca Continental, S.A.B. de C.V.
     1,057,522       6,770,451  
Fomento Economico Mexicano, S.A.B. de C.V.
     389,680       3,849,428  
              10,619,879  
Cable and Satellite - 5.53%
                
Megacable Holdings, S.A.B. de C.V. - Series L
     1,512,603       5,764,591  
                   
Chemical Products - 3.70%
                
Alpek, S.A.B. de C.V.
     1,942,772       2,805,162  
Mexichem, S.A.B. de C.V.
     406,500       1,054,285  
              3,859,447  
Construction and Infrastructure - 5.18%
                
Promotora y Operadora de Infraestructura, S.A.B. de C.V. (a)
     300,454       3,767,271  
Promotora y Operadora de Infraestructura, S.A.B. de C.V. - Series L (a)
     149,400       1,629,690  
              5,396,961  
Consumer Products - 3.24%
                
Kimberly-Clark de Mexico, S.A.B. de C.V.
     1,400,000       3,378,416  
                   
Energy - 2.54%
                
Infraestructura Energetica Nova, S.A.B. de C.V.
     549,527       2,649,858  
                   
Financial Groups - 8.07%
                
Banregio Grupo Financiero, S.A.B. de C.V.
     689,919       3,721,965  
Grupo Financiero Banorte, S.A.B. de C.V. - Series O
     872,233       4,697,062  
              8,419,027  
Food - 7.20%
                
Gruma, S.A.B. de C.V.
     273,538       4,221,194  
Grupo Bimbo, S.A.B. de C.V. (a)
     1,050,949       2,982,115  
Grupo Lala, S.A.B. de C.V.
     120,333       307,502  
                7,510,811  
Holding Companies - 7.81%
                
Alfa, S.A.B. de C.V. - Series A
     2,393,528       4,986,215  
Grupo Carso, S.A.B. de C.V.
     707,603       3,154,650  
              8,140,865  
Home Builders - 0.14%
                
Consorcio ARA, S.A.B. de C.V.
     400,005       149,901  
 
 
 
 
 
Hotels, Restaurants, and Recreation - 6.47%
                
Alsea, S.A.B. de C.V. - Series A
     1,194,909       3,926,653  
Grupe, S.A.B. de C.V. (a)
     1,071,520       2,821,872  
              6,748,525  
Mining - 0.92%
                
Grupo Mexico, S.A.B. de C.V. - Series B
     395,766       964,149  
                   
Publishing and Broadcasting - 2.43%
                
Grupo Televisa, S.A.B. de C.V. - Series CPO
     435,200       2,532,242  
                   
Real Estate Services - 1.83%
                
Corporacion Inmobiliaria Vesta, S.A.B. de C.V.
     1,160,894       1,906,032  
                   
Retail - 6.36%
                
Corporativo Fragua, S.A.B. de C.V.
     67,235       956,598  
El Puerto de Liverpool, S.A.B. de C.V.
     205,998       2,860,785  
Wal-Mart de Mexico, S.A.B. de C.V.
     1,068,000       2,817,775  
              6,635,158  
Telecommunication - 14.22%
                
America Movil, S.A.B. de C.V. - Series L
     16,603,079       14,826,152  
TOTAL COMMON STOCKS (Cost $94,422,677)
             101,628,376  
                   
CAPITAL DEVELOPMENT CERTIFICATES - 2.39%
                
Atlas Discovery Trust II (b)
     300,000       2,497,461  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES (Cost $2,190,759)
             2,497,461  
     
Principal
          
SHORT-TERM INVESTMENTS - 1.32%
  
Amount
          
Mexican BANOBRA
     1,600,000 *     96,851  
0.00% Coupon, 2.775% Effective Yield, 11/03/2015 (c)
                
Mexican INAFIN
     3,600,000 *     217,930  
0.00% Coupon, 2.733% Effective Yield, 11/04/2015 (c)
                
Mexican INAFIN
     17,500,000 *     1,059,306  
0.00% Coupon, 2.734% Effective Yield, 11/05/2015 (c)
                
TOTAL SHORT-TERM INVESTMENTS (Cost $1,368,687)
             1,374,087  
TOTAL MEXICO (Cost $97,982,123)
             105,499,924  
                   
UNITED STATES - 0.20%
  
Shares
          
INVESTMENT COMPANIES - 0.20%
                
First American Treasury Obligation - Class A
     208,539       208,539  
TOTAL INVESTMENT COMPANIES (Cost $208,539)
             208,539  
TOTAL UNITED STATES (Cost $208,539)
             208,539  
                   
Total Investments (Cost $98,190,662) - 101.36%
             105,708,463  
Liabilities in Excess of Other Assets - (1.36)%
             (1,418,491 )
TOTAL NET ASSETS - 100.00%
           $ 104,289,972  
                   
Percentages are stated as a percent of net assets.
                
                   
(a) 
Non-income producing security.
                
(b) 
The Adviser has determined this security to be illiquid. The total value of illiquid securities at October 31, 2015 was $2,497,461,
  
 
comprising 2.39% of net assets, while the remainder of the Fund's net assets 97.61% 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, 2015 was as follows:
        
         
Cost of investments**
   $ 98,190,662    
Gross unrealized appreciation
     9,988,152    
Gross unrealized depreciation
     (2,470,351 )  
Net unrealized appreciation
   $ 7,517,801    
           
**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 security shall be valued at the mean between the most recent highest bid and lowest ask prices 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, 2015:
 
   
Level 1*
    
Level 2*
    
Level 3**
    
Total
  
Equity
                        
Airports
   $ 5,794,933     $ -     $ -     $ 5,794,933  
Auto Parts and Equipment
     6,331,429       -       -       6,331,429  
Beverages
     10,619,879       -       -       10,619,879  
Capital Development Certificates
     -       -       2,497,461       2,497,461  
Cable and Satellite
     5,764,591       -       -       5,764,591  
Chemical Products
     3,859,447       -       -       3,859,447  
Construction and Infrastructure
     5,396,961       -       -       5,396,961  
Consumer Products
     3,378,416       -       -       3,378,416  
Energy
     2,649,858       -       -       2,649,858  
Financial Groups
     8,419,027       -       -       8,419,027  
Food
     7,510,811       -       -       7,510,811  
Holding Companies
     8,140,865       -       -       8,140,865  
Home Builders
     149,901       -       -       149,901  
Hotels, Restaurants, and Recreation
     3,926,653       2,821,872       -       6,748,525  
Mining
     964,149       -       -       964,149  
Publishing and Broadcasting
     2,532,242       -       -       2,532,242  
Real Estate Services
     1,906,032       -       -       1,906,032  
Retail
     6,635,158               -       6,635,158  
Telecommunications
     14,826,152       -       -       14,826,152  
Total Equity
   $ 98,806,504     $ 2,821,872     $ 2,497,461     $ 104,125,837  
Short-Term Investments
   $ 208,539     $ 1,374,087     $ -     $ 1,582,626  
Total Investments in Securities
   $ 99,015,043     $ 4,195,959     $ 2,497,461     $ 105,708,463  
                                 
 
* Transfers between Levels are recognized at the end of the reporting period.
            
** The Fund measures Level 3 activity as of the beginning and end of each reporting period.
            
               
Transfers between Level 1 and Level 2 securities as of October 31, 2015 resulted from securities priced previously with an official close price (Level 1 securities) or on days where there is not an official
  
close price the securities are valued at the mean between the most recent bid and asked prices (Level 2 securities). Transfers as of October 31, 2015 are summarized in the table below:
    
 
Transfers into Level 1
   $ 1,037,760    
Transfers out of Level 1
     (2,821,872 )  
Net transfers in and/or out of Level 1
   $ (1,784,112 )  
           
           
Transfers into Level 2
   $ 2,821,872    
Transfers out of Level 2
     (1,037,760 )  
Net transfers in and/or out of Level 2
   $ 1,784,112    
           
 
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, 2015.
              
                 
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, 2015
   $ 2,565,943  
Acquisition/Purchase
     -  
Sales
     -  
Realized gain
     -  
Change in unrealized appreciation (depreciation)
     (68,482 )
Balance as of October 31, 2015
   $ 2,497,461  
 
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, 2015:
              
 
     
Fair Value October 31, 2015
  
Valuation
Methodologies
  
Unobservable
Input (1)
  
Impact to Valuation
from an Increase in
Input (2)
Capital Development
Certificates
     $ 2,497,461  
Market
Comparables/ Sum
of the Parts
Valuation
  
Liquidity Discount
  
Decrease
                     
       
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.
                       
       
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 9, 2015                                                                                        




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 9, 2015                                                                                       


By (Signature and Title)*  /s/ Mario Alberto Gonzalez                                    ­­
                                              Mario Alberto Gonzalez, Chief Financial Officer

Date     December 9, 2015                                                                                       

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