mexeq_nq.htm
As filed with the Securities and Exchange Commission on December 26, 2012
 
 
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. Gerald Hellerman
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: October 31, 2012

Date of reporting period:  July 31, 2013
 
 
 
 
 
Item 1. Schedule of Investments.

The Mexico Equity and Income Fund
            
Schedule of Investments
            
October 31, 2012 (Unaudited)
            
             
MEXICO - 98.79%
  
Shares
    
Value
  
             
COMMON STOCKS - 93.21%
            
Airports - 1.67%
            
Grupo Aeroportuario del Centro Norte, S.A. de C.V.
     650,000     $ 1,548,801  
                 
Beverages - 5.89%
                
Arca Continental S.A.B. de C.V. 
     389,853       2,828,771  
Fomento Economico Mexicano,  S.A.B. de C.V. 
     293,350       2,641,808  
              5,470,579  
                 
Chemical Products - 7.78%
                
Mexichem, S.A.B. de C.V. 
     1,458,500       7,227,896  
                 
Construction and Infrastructure- 5.04%
                
Impulsora del Desarrollo y el Empleo  en America Latina, S.A.B. de  C.V. (a)
     978,455       1,667,125  
Promotora y Operadora de  Infraestructura, S.A.B. de C.V. (a)
     581,730       3,020,162  
              4,687,287  
Financial Groups - 8.76%
                
Banregio Grupo Financiero S.A.B. de  C.V. 
     682,381       2,699,506  
Grupo Financiero Banorte, S.A.B. de  C.V. - Class O 
     430,850       2,393,794  
Grupo Financiero Santander Mexico S.A.B. de C.V. 
     1,116,600       3,045,195  
              8,138,495  
                 
                 
Holding Companies - 10.97%
                
Alfa, S.A.B. de C.V. - Class A 
     2,541,330       4,687,117  
Grupo Carso, S.A.B. de C.V. 
     1,523,080       5,512,354  
              10,199,471  
Hotels, Restaurants & Recreation - 4.34%
                
Alsea, S.A.B. de C.V. - Class A (a)
     1,030,000       1,651,902  
Grupe, S.A.B. de C.V. (a)
     2,328,377       2,382,790  
              4,034,692  
                 
Insurance Services - 4.33%
                
Qualitias Controladora S.A.B. de  C.V. (a)
     2,700,315       4,021,395  
                 
Media - 3.80%
                
Grupo Televisa, S.A.B. de C.V. 
     378,000       1,718,234  
Grupo Televisa, S.A.B. de C.V. -  ADR 
     80,300       1,814,780  
              3,533,014  
                 
Mining - 5.97%
                
Grupo Mexico, S.A.B. de C.V. -  Series B 
     1,419,800       4,549,779  
Industrias Penoles, S.A.B. de C.V. 
     20,000       996,411  
              5,546,190  
                 
Retail - 13.78%
                
Controladora Comercial Mexicana  S.A. de C.V. 
     511,600       1,440,560  
Corporativo Fragua S.A.B. de C.V. 
     101,290       1,584,252  
El Puerto de Liverpool S.A.B. de  C.V. 
     605,697       5,428,329  
Grupo Comercial Chedraui S.A. de  C.V. 
     977,175       2,632,119  
Wal-Mart de Mexico, S.A.B. de C.V. -  Class V 
     583,338       1,722,749  
              12,808,009  
 
 
 
 
 
                 
Rubber and Plastic Manufacturing - 1.60%
                
Grupo Pochteca S.A.B. de C.V. (a)
     4,300,000       1,487,628  
              1,487,628  
Telecommunication Services - 19.28%
                
America Movil, S.A.B. de C.V. - Class  L 
     14,104,798       17,913,761  
TOTAL COMMON STOCKS  (Cost $79,500,619)
             86,617,218  
                 
REAL ESTATE INVESTMENT TRUSTS - 1.56%
                
Fibra Uno Administracion S.A. de  C.V. 
     549,147       1,446,890  
TOTAL REAL ESTATE  INVESTMENT TRUSTS  (Cost $1,011,586)
             1,446,890  
                 
                 
CAPITAL DEVELOPMENT CERTIFICATES- 2.24%
                
Atlas Discovery Trust II (b)
     300,000       2,082,077  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES  (Cost $2,317,515)
             2,082,077  
                 
MEXICAN GOVERNMENT NOTE/BONDS - 1.25%
                
Mexican Government International Bond
                
    4.750%, 03/08/2044 
     1,048,000       1,163,280  
TOTAL MEXICAN GOVERNMENT NOTE/BONDS (Cost $1,118,775)
             1,163,280  
                 
SHORT-TERM INVESTMENTS - 0.53%
                
Mexican INAFIN
                
0.000% Coupon, 4.38% Effective Yield, 11/05/2012 (c)
     6,463,756 *     493,411  
TOTAL SHORT-TERM  INVESTMENTS (Cost $496,423)
             493,411  
                 
UNITED STATES - 1.34%
  
Shares
    
Value
  
COMMON STOCKS - 1.03%
                
Retail - 1.03%
                
First Cash Financial Services, Inc. (a)
     21,500       960,190  
TOTAL COMMON STOCKS (Cost $871,019)
             960,190  
                 
INVESTMENT COMPANIES - 0.31%
                
First American Treasury Obligation - Class  A
     288,568       288,568  
TOTAL INVESTMENT COMPANIES (Cost $288,568)
             288,568  
TOTAL UNITED STATES (Cost $1,159,587)
             1,248,758  
Total Investments  (Cost $85,604,505) - 100.13%
             93,051,634  
Liabilities in Excess of Other Assets - (0.13)%
             (115,919 )
TOTAL NET ASSETS - 100.00%
           $ 92,935,715  
 
Percentages are stated as a percent of net assets.
          
               
ADR
American Depository Receipt
        
(a)
Non-income producing security.
        
(b)
The Advisor has determined these securities to be illiquid.  The total value of illiquid securities at October 31, 2012 was $2,082,077
 
comprising 2.24% of net assets, while the remainder of the Fund's net assets 97.89% 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, 2012 was as follows:
      
 
Cost of investments**
   $ 85,604,505  
Gross unrealized appreciation
     9,628,694  
Gross unrealized depreciation
     (2,181,565 )
Net unrealized appreciation
   $ 7,447,129  
 
**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 (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 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 level1 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, as of October 31, 2012, in valuing the Fund’s investments
  
carried at fair value:
                        
                         
   
Level 1*
    
Level 2*
    
Level 3
    
Total
  
Equity
                        
Airports
   $ 1,548,801     $ -     $ -     $ 1,548,801  
Beverages
     5,470,579       -       -       5,470,579  
Capital Development Certificates
     -       -       2,082,077       2,082,077  
Chemical Products
     7,227,896       -       -       7,227,896  
Construction and Infrastructure
     4,687,287       -       -       4,687,287  
Financial Groups
     8,138,495       -       -       8,138,495  
Holding Companies
     10,199,471       -       -       10,199,471  
Hotels, Restaurants, and Recreation
     1,651,902       2,382,790       -       4,034,692  
Insurance Services
     4,021,395       -       -       4,021,395  
Media
     3,533,014       -       -       3,533,014  
Mining
     5,546,190       -       -       5,546,190  
Retail
     13,768,199       -       -       13,768,199  
Rubber and Plastic Manufacturing
     1,487,628       -       -       1,487,628  
Telecommunication Services
     17,913,761       -       -       17,913,761  
Total Common Stock
     85,194,618       2,382,790       2,082,077       89,659,485  
                                 
Real Estate Investment Trusts
   $ 1,446,890     $ -     $ -     $ 1,446,890  
                                 
Mexican Government Bonds
   $ -     $ 1,163,280     $ -     $ 1,163,280  
                                 
                                 
Short-Term Investments
   $ 288,568     $ 493,411     $ -     $ 781,979  
Total Investments in Securities
   $ 86,930,076     $ 4,039,481     $ 2,082,077     $ 93,051,634  
 
           
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, 2012.
           
*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, 2012
   $ 1,914,447  
Acquisition/Purchase
     -  
Sales
     -  
Realized gain
     -  
Change in unrealized appreciation (depreciation)
     167,630  
Balance as of October 31, 2012
   $ 2,082,077  
 
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, 2012:
          
 
   
Fair Value
October 31, 2012
  
Valuation
Methodologies
  
Unobservable
Input(1)
  
Impact to Valuation
from an increase in
Input (2)
  
Capital Development Certificates
  
$2,082,077
  
Market
Comparables/
Sum of the Parts
Valuation
  
Sum of the Parts
Valuation
  
Increase
  
 
 
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 including.
                 
 
2
This column represents the directional change in the fair value of the Level 3 investments that would result from an increase 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 19, 2012                                                                                      




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 19, 2012                                                                                   
 

By (Signature and Title)*      /s/ Gerald Hellerman                                                                                                                                                
                                                        Gerald Hellerman, Chief Financial Officer

Date   December 17, 2012                                                                                      


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