mexeq_nq.htm
As filed with the Securities and Exchange Commission on June 6, 2014



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. Marco Ramirez
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, 2014

Date of reporting period:  April 30, 2014
 
 
 
 
 
Item 1. Schedule of Investments.
 
The Mexico Equity and Income Fund, Inc.
            
Schedule of Investments
            
April 30, 2014 (Unaudited)
            
             
MEXICO - 100.42%
  
Shares
    
Value
  
             
COMMON STOCKS - 94.01%
            
             
Airports - 4.21%
            
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
     1,137,762     $ 4,180,483  
Grupo Aeroportuario del Pacifico, S.A.B. de C.V. - Class B
     100,300       603,207  
              4,783,690  
Beverages - 4.87%
                
Arca Continental, S.A.B. de C.V.
     597,704       3,808,420  
Fomento Economico Mexicano, S.A.B. de C.V.
     189,857       1,732,589  
              5,541,009  
Building Materials - 7.85%
                
Cemex, S.A.B. de C.V. CPO (a)
     6,985,678       8,933,167  
                 
Cable & Satellite - 5.91%
                
Megacable Holdings, S.A.B. de C.V.
     1,694,151       6,719,497  
                 
Chemical Products - 1.52%
                
Mexichem, S.A.B. de C.V.
     464,548       1,728,906  
                 
Construction and Infrastructure - 8.32%
                
Impulsora del Desarrollo y el Empleo en America Latina, S.A.B. de C.V. (a)
     1,985,844       4,590,161  
Promotora y Operadora de Infraestructura, S.A.B. de C.V. (a)
     348,735       4,874,333  
              9,464,494  
Consumer Products - 2.28%
                
Kimberly-Clark de Mexico, S.A.B. de C.V.
     998,303       2,595,195  
                 
Energy - 5.47%
                
Infraestructura Energetica Nova, S.A.B. de C.V.
     1,195,830       6,226,515  
                 
Financial Groups - 10.64%
                
Banregio Grupo Financiero S.A.B. de C.V.
     649,481       3,753,588  
Compartamos S.A.B. de C.V.
     1,027,482       1,800,072  
Grupo Financiero Banorte, S.A.B. de C.V. - Class O
     661,638       4,386,223  
Grupo Financiero Interacciones, S.A.B. de  C.V.
     357,508       2,158,534  
              12,098,417  
Food Manufacturing - 10.42%
                
Gruma, S.A.B. de C.V. (a)
     652,567       5,765,125  
Grupo Lala S.A.B. de C.V.
     2,626,547       6,083,153  
              11,848,278  
Holding Companies - 7.96%
                
Alfa, S.A.B. de C.V. - Class A
     1,818,014       4,787,265  
Grupo Carso, S.A.B. de C.V.
     840,539       4,272,484  
              9,059,749  
Hotels, Restaurants, and Recreation - 8.44%
                
Alsea, S.A.B. de C.V. - Class A
     947,500       3,272,823  
Grupe, S.A.B. de C.V. (a)
     2,082,127       4,535,791  
Grupo Sports World, S.A.B. de C.V. (a)
     1,170,012       1,793,999  
              9,602,613  
Insurance Services - 4.47%
                
Qualitias Controladora, S.A.B. de C.V.
     1,779,535       5,085,843  
                 
Mining - 2.34%
                
Grupo Mexico, S.A.B. de C.V. - Series B
     884,893       2,657,503  
                 
Real Estate Services - 2.25%
                
Corporacion Inmobiliaria Vesta, S.A.B. de C.V.
     1,264,940       2,560,288  
                 
Retail - 5.70%
                
Corporativo Fragua, S.A.B. de C.V.
     51,290       917,380  
El Puerto de Liverpool, S.A.B. de C.V.
     410,051       4,222,826  
Wal-Mart de Mexico, S.A.B. de C.V. - Class V
     528,937       1,337,428  
              6,477,634  
Telecommunication Services - 1.36%
                
America Movil, S.A.B de C.V. - Class L
     1,533,500       1,542,555  
TOTAL COMMON STOCKS (Cost $87,289,805)
             106,925,353  
 
 
 
 
 
CAPITAL DEVELOPMENT CERTIFICATES - 2.02%
                
Atlas Discovery Trust II (b)
     300,000       2,294,646  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES (Cost $2,190,759)
             2,294,646  
                 
ASSET BACKED SECURITIES - 0.37%
                
Nafin (Infonavit - Banamex)
                
3.460%, 10/21/2041
     11,034       419,586  
TOTAL ASSET BACKED SECURITIES (Cost $373,787)
             419,586  
                 
MORTGAGE BACKED SECURITIES - 1.60%
                
Nafin (Infonavit)
                
4.95%, 03/22/2039
     58,600       1,817,602  
TOTAL MORTGAGE BACKED SECURITIES (Cost $1,764,036)
             1,817,602  
                 
                 
SHORT-TERM INVESTMENTS - 2.42%
                
Mexican BANOBRA
     22,871,367 *     1,747,221  
0.00% Coupon, 3.495% Effective Yield, 05/07/2014 (c)
                
Mexican INAFIN
     13,216,809 *     1,010,021  
0.00% Coupon, 1.176% Effective Yield, 05/08/2014 (c)
                
TOTAL SHORT-TERM INVESTMENTS (Cost $2,745,950)
             2,757,242  
                 
TOTAL MEXICO (Cost $94,364,337)
             114,214,429  
                 
UNITED STATES - 0.17%
  
Shares
    
Value
  
                 
INVESTMENT COMPANIES - 0.17%
                
First American Treasury Obligation - Class A
     200,493       200,493  
TOTAL INVESTMENT COMPANIES (Cost $200,493)
             200,493  
                 
TOTAL UNITED STATES (Cost $200,493)
             200,493  
                 
Total Investments (Cost $94,564,830) - 100.59%
             114,414,922  
Liabilities in Excess of Other Assets - (0.59)%
             (673,061 )
TOTAL NET ASSETS - 100.00%
           $ 113,741,861  
                 

Percentages are stated as a percent of net assets.
                        
               
(a) 
Non-income producing security.
                        
(b) 
The Advisor has determined these securities to be illiquid. The total value of illiquid securities at April 30, 2014 was $2,294,646,
        
 
comprising 2.02% of net assets, while the remainder of the Fund's net assets 97.98% 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 April 30, 2014 was as follows:
                    
                           
Cost of investments**
   $ 94,564,830                    
Gross unrealized appreciation
     20,285,726                    
Gross unrealized depreciation
     (435,634 )                  
Net unrealized appreciation
   $ 19,850,092                    
                             
**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 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 to value the Fund's investments carried at fair value as of April 30, 2014:
              
                             
     
Level 1*
    
Level 2*
    
Level 3
    
Total
  
Equity
                            
Airports
     $ 4,783,690     $ -     $ -     $ 4,783,690  
Beverages
       5,541,009       -       -       5,541,009  
Building Materials
     8,933,167       -       -       8,933,167  
Capital Development Certificates
     -       -       2,294,646       2,294,646  
Cable & Satellite
   6,719,497       -       -       6,719,497  
Chemical Products
     1,728,906       -       -       1,728,906  
Construction and Infrastructure
     9,464,494       -       -       9,464,494  
Consumer Products
     2,595,195       -       -       2,595,195  
Energy
       6,226,515       -       -       6,226,515  
Financial Groups
   12,098,417       -       -       12,098,417  
Food Manufacturing
     11,848,278       -       -       11,848,278  
Holding Companies
     9,059,749       -       -       9,059,749  
Hotels, Restaurants, and Recreation
     9,602,613       -       -       9,602,613  
Insurance Services
     5,085,843       -       -       5,085,843  
Mining
       2,657,503       -       -       2,657,503  
Real Estate Services
     2,560,288       -       -       2,560,288  
Retail
       5,560,254       917,380       -       6,477,634  
Telecommunication Services
     1,542,555       -       -       1,542,555  
Total Equity
     $ 106,007,973     $ 917,380     $ 2,294,646     $ 109,219,999  
                                   
Asset Backed Securities
   $ -     $ 419,586     $ -     $ 419,586  
                                   
Mortgage Backed Securities
   $ -     $ 1,817,602     $ -     $ 1,817,602  
                                   
Short-Term Investments
   $ -     $ 2,957,735     $ -     $ 2,957,735  
Total Investments in Securities
   $ 106,007,973     $ 6,112,303     $ 2,294,646     $ 114,414,922  
                                   
Disclosures about Derivative Instruments and Hedging Activities
                                
                                   
The Fund did not invest in derivative securities or engage in hedging activities during the period ended April 30, 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, 2013
                           $ 2,171,017  
Acquisition/Purchase
                             -  
Sales
                               -  
Realized gain
                             -  
Change in unrealized appreciation (depreciation)
                             123,629  
Balance as of April 30, 2014
                           $ 2,294,646  
                                   
                                   
                                   
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 April 30, 2014:
                                
 
   
Fair Value April 30, 2014
  
Valuation
Methodologies
  
Unobservable
Input (1)
  
Impact to Valuation
from an Increase in
Input (2)
Capital
Development Certificates
   $ 2,294,646  
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     5/28/2014                                                                                      




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    5/28/2014                                                                                       


By (Signature and Title)* /s/ Marco Ramirez                                            
                                             Marco Ramirez, Chief Financial Officer

Date    5/28/2014                                                                                       


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