mexeq_nq.htm
 
As filed with the Securities and Exchange Commission on June 18, 2105

 
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, 2015

Date of reporting period:  April 30, 2015

 
 
 
 
Item 1. Schedule of Investments.
 

The Mexico Equity and Income Fund, Inc.
            
Schedule of Investments
            
April 30, 2015 (Unaudited)
            
             
MEXICO - 100.00%
  
Shares
    
Value
  
             
COMMON STOCKS - 95.89%
            
Airports - 6.81%
            
Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.
     850,896     $ 4,249,488  
Grupo Aeroportuario del Pacifico, S.A.B. de C.V. - Series B
     408,500       2,908,386  
              7,157,874  
Auto Parts and Equipment - 3.53%
                
Rassini, S.A.B de C.V. (a)
     900,048       3,710,014  
                 
Beverages - 12.38%
                
Arca Continental, S.A.B. de C.V.
     999,387       6,139,501  
Coca-Cola Femsa, S.A.B. de C.V.
     187,500       1,499,926  
Fomento Economico Mexicano, S.A.B. de C.V.
     591,550       5,362,585  
              13,002,012  
Building Materials - 1.12%
                
Cemex, S.A.B. de C.V. - Series CPO (a)
     1,219,419       1,176,339  
                 
Cable and Satellite - 4.62%
                
Megacable Holdings, S.A.B. de C.V.
     1,166,359       4,854,127  
                 
Construction and Infrastructure - 6.96%
                
Impulsora del Desarrollo y el Empleo en America Latina, S.A.B. de C.V. (a)
     1,582,949       3,488,431  
Promotora y Operadora de Infraestructura, S.A.B. de C.V. (a)
     332,571       3,823,634  
              7,312,065  
Consumer Financing Services - 3.54%
                
Credito Real, S.A.B. de C.V.
     1,501,872       3,715,033  
                 
Energy - 1.64%
                
Infraestructura Energetica Nova, S.A.B. de C.V.
     296,439       1,725,073  
                 
Financial Groups - 10.10%
                
Banregio Grupo Financiero, S.A.B. de C.V.
     422,893       2,425,116  
Grupo Financiero Banorte, S.A.B. de C.V. - Series O
     1,111,948       6,340,321  
Grupo Financiero Inbursa, S.A.B. de C.V. - Series O
     773,728       1,847,325  
              10,612,762  
Food - 4.69%
                
Gruma, S.A.B. de C.V.
     151,811       1,830,499  
Grupo Bimbo, S.A.B. de C.V. (a)
     774,450       2,079,738  
Grupo Herdez, S.A.B. de C.V.
     374,216       1,018,350  
              4,928,587  
Holding Companies - 7.89%
                
Alfa, S.A.B. de C.V. - Series A
     2,181,440       4,429,139  
Grupo Carso, S.A.B. de C.V.
     937,824       3,865,728  
              8,294,867  
Hotels, Restaurants, and Recreation - 8.26%
                
Alsea, S.A.B. de C.V. - Series A (a)
     1,178,700       3,539,480  
Grupe, S.A.B. de C.V. (a)
     1,980,127       4,388,236  
Grupo Sports World, S.A.B. de C.V. (a)
     677,480       747,604  
              8,675,320  
Insurance Services - 1.81%
                
Qualitias Controladora, S.A.B. de C.V. (a)
     1,010,880       1,897,624  
                 
 
 
 
 
 
Mining - 3.99%
                
Grupo Mexico, S.A.B. de C.V. - Series B
     1,357,904       4,191,783  
                 
Real Estate Services - 1.43%
                
Corporacion Inmobiliaria Vesta, S.A.B. de C.V.
     803,134       1,502,932  
                 
Retail - 8.50%
                
Corporativo Fragua, S.A.B. de C.V.
     71,047       1,120,674  
El Puerto de Liverpool, S.A.B. de C.V.
     171,658       1,885,642  
Grupo Sanborns, S.A.B. de C.V.
     912,300       1,458,063  
Wal-mart De Mexico, S.A.B de C.V.
     1,890,361       4,465,303  
              8,929,682  
Telecommunication - 7.25%
                
America Movil, S.A.B. de C.V. - Series L
     7,252,500       7,615,551  
                 
Water - 1.37%
                
Grupo Rotoplas, S.A.B. de C.V. (a)
     791,062       1,443,732  
TOTAL COMMON STOCKS (Cost $95,220,245)
             100,745,377  
                 
CAPITAL DEVELOPMENT CERTIFICATES - 2.34%
                
Atlas Discovery Trust II (b)
     300,000       2,453,045  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES (Cost $2,190,759)
             2,453,045  
                 
ASSET BACKED SECURITIES - 0.29%
                
Nafin (Infonavit - Banamex)
                
3.460%, 10/21/2041
     11,034       300,973  
TOTAL ASSET BACKED SECURITIES (Cost $322,018)
             300,973  
                 
MORTGAGE BACKED SECURITIES - 1.31%
                
Nafin (Infonavit)
                
4.950%, 03/22/2039
     58,600       1,375,744  
TOTAL MORTGAGE BACKED SECURITIES (Cost $1,541,815)
             1,375,744  
   
Principal
          
SHORT-TERM INVESTMENTS - 0.17%
  
Amount
          
Mexican INAFIN
                
0.00% Coupon, 2.754% Effective Yield, 05/05/2015 (c)
     2,800,000 *     182,451  
TOTAL SHORT-TERM INVESTMENTS (Cost $183,263)
             182,451  
TOTAL MEXICO (Cost $94,458,100)
             105,057,590  
                 
UNITED STATES - 0.09%
  
Shares
          
INVESTMENT COMPANIES - 0.09%
                
First American Treasury Obligation - Class A
     99,193       99,193  
TOTAL INVESTMENT COMPANIES (Cost $99,193)
             99,193  
TOTAL UNITED STATES (Cost $99,193)
             99,193  
                 
Total Investments (Cost $99,557,293) - 100.09%
             105,156,783  
Liabilities in Excess of Other Assets - (0.09)%
             (93,904 )
TOTAL NET ASSETS - 100.00%
           $ 105,062,879  
                 
 
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 April 30, 2015 was $2,453,045, comprising 2.34% of net assets, while the remainder of the Fund's net assets 97.66% 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, 2015 was as follows:
                        
                               
Cost of investments**
   $ 99,557,293                          
Gross unrealized appreciation
     9,129,435                          
Gross unrealized depreciation
     (3,529,945 )                        
Net unrealized appreciation
   $ 5,599,490                          
                                 
**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 April 30, 2015:
                    
                         
   
Level 1*
    
Level 2*
    
Level 3
    
Total
  
Equity
                        
Airports
   $ 7,157,874     $ -     $ -     $ 7,157,874  
Auto Parts and Equipment
     3,710,014       -       -       3,710,014  
Beverages
     13,002,012       -       -       13,002,012  
Building Materials
     1,176,339       -       -       1,176,339  
Capital Development Certificates
     -       -       2,453,045       2,453,045  
Cable and Satellite
     4,854,127       -       -       4,854,127  
Construction and Infrastructure
     7,312,065       -       -       7,312,065  
Consumer Financing Services
     3,715,033       -       -       3,715,033  
Energy
     1,725,073       -       -       1,725,073  
Financial Groups
     10,612,762       -       -       10,612,762  
Food
     4,928,587       -       -       4,928,587  
Holding Companies
     8,294,867       -       -       8,294,867  
Hotels, Restaurants, and Recreation
     8,675,320       -       -       8,675,320  
Insurance Services
     1,897,624       -       -       1,897,624  
Mining
     4,191,783       -       -       4,191,783  
Real Estate Services
     1,502,932       -       -       1,502,932  
Retail
     8,929,682               -       8,929,682  
Telecommunications
     7,615,551       -       -       7,615,551  
Water
     1,443,732       -       -       1,443,732  
Total Equity
   $ 100,745,377     $ -     $ 2,453,045     $ 103,198,422  
                                 
Asset Backed Securities
   $ -     $ 300,973     $ -     $ 300,973  
                                 
Mortgage Backed Securities
   $ -     $ 1,375,744     $ -     $ 1,375,744  
                                 
Short-Term Investments
   $ 99,193     $ 182,451     $ -     $ 281,644  
Total Investments in Securities
   $ 100,844,570     $ 1,859,168     $ 2,453,045     $ 105,156,783  
                                 
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, 2015.
                          
                                 
*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)
                             (178,533 )
Balance as of April 30, 2015
                           $ 2,453,045  
                                 
 
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, 2015:
             
   
Fair Value April 30, 2015
  
Valuation
Methodologies
  
Unobservable
Input (1)
  
Impact to Valuation
from an Increase in
Input (2)
Capital Development Certificates
   $ 2,453,045  
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     June 1, 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     June 1, 2015                                    


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

Date     June 1, 2015                                    

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