mexeq_nq.htm
As filed with the Securities and Exchange Commission on June 24, 2013
 
 

 
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: July 31, 2013

Date of reporting period:  April 30, 2013
 
 
 
 
 
Item 1. Schedule of Investments.
 
Mexico Equity and Income Fund, Inc.
            
Schedule of Investments
            
April 30, 2013 (Unaudited)
            
             
MEXICO - 99.13%
  
Shares
    
Value
  
               
COMMON STOCKS - 83.05%
            
               
Airports - 2.27%
            
Grupo Aeroportuario del Centro Norte, S.A. de C.V.
     678,960     $ 2,607,965  
                   
Beverages - 7.64%
                
Arca Continental, S.A.B. de C.V.
     403,053       3,324,059  
Fomento Economico Mexicano, S.A.B. de C.V.
     481,173       5,472,207  
                8,796,266  
Building Materials - 3.69%
                
Cemex, S.A.B. de C.V. CPO (a)
     3,770,898       4,251,550  
                   
Cable & Satellite - 5.17%
                
Megacable Holdings, S.A.B. de C.V.
     1,834,246       5,947,330  
                   
Chemical Products - 3.61%
                
Alpek, S.A. de C.V.
     534,900       1,276,644  
Cydsa, S.A.B. de C.V.
     49,586       184,381  
Mexichem, S.A.B. de C.V.
     529,500       2,698,892  
                4,159,917  
Construction and Infrastructure - 7.05%
                
Empresas ICA Sociedad Controladora, S.A.B. de C.V. (a)
     1,254,400       3,468,059  
Impulsora del Desarrollo y el Empleo en America Latina, S.A.B. de C.V. (a)
     978,455       2,372,344  
Promotora y Operadora de Infraestructura, S.A.B. de C.V. (a)
     256,045       2,282,671  
                8,123,074  
Consumer Products - 0.74%
                
Kimberly-Clark de Mexico, S.A.B. de C.V.
     246,000       853,341  
                   
Energy - 0.62%
                
Infraestructura Energetica Nova, S.A.B. de C.V. (a)
     209,000       712,600  
Financial Groups - 7.03%
                
Banregio Grupo Financiero, S.A.B. de C.V.
     649,481       3,583,236  
Grupo Financiero Banorte, S.A.B. de C.V. - Class O
     598,850       4,515,677  
                8,098,913  
Food Manufacturing - 0.18%
                
Gruma, S.A.B. de C.V. (a)
     41,450       207,040  
                   
Holding Companies - 11.64%
                
Alfa, S.A.B. de C.V. - Class A
     1,859,984       4,319,737  
Grupo Carso, S.A.B. de C.V.
     813,490       4,643,518  
Grupo KUO, S.A.B. de C.V. - Series B
     1,781,234       4,440,506  
              13,403,761  
Hotels, Restaurants, and Recreation - 12.32%
                
Alsea, S.A.B. de C.V. - Class A (a)
     1,507,511       4,608,584  
Grupe, S.A.B. de C.V. (a)
     2,328,027       3,048,486  
Grupo Sanborns, S.A.B. de C.V. (a)
     1,209,273       2,818,447  
Grupo Sports World, S.A.B. de C.V. (a)
     2,263,079       3,714,549  
                14,190,066  
Insurance Services - 5.20%
                
Qualitias Controladora, S.A.B. de C.V.
     2,646,015       5,990,542  
                   
Mining - 5.06%
                
Grupo Mexico, S.A.B. de C.V. - Series B
     1,627,600       5,825,543  
                   
Real Estate Services - 3.48%
                
Corporacion Inmobiliaria Vesta, S.A.B. de C.V.
     1,736,823       4,002,233  
                   
Retail - 6.24%
                
Corporativo Fragua, S.A.B. de C.V.
     51,290       981,802  
El Puerto de Liverpool, S.A.B. de C.V.
     433,551       5,482,631  
Wal-Mart de Mexico, S.A.B. de C.V. - Class V
     224,800       715,373  
                7,179,806  
Steel - 1.11%
                
Grupo Simec, S.A.B. de C.V. (a)
     277,100       1,279,120  
TOTAL COMMON STOCKS (Cost $77,349,089)
             95,629,067  
                   
REAL ESTATE INVESTMENT TRUSTS - 9.25%
                
Fibra Uno Administracion, S.A. de C.V.
     2,769,847       10,652,994  
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $8,772,267)
             10,652,994  
                   
CORPORATE BONDS - 2.02%
                
America Movil, S.A.B. de C.V.
                
6.450%, 12/05/2022
     2,600       2,327,760  
TOTAL CORPORATE BONDS (Cost $2,096,836)
             2,327,760  
                   
CAPITAL DEVELOPMENT CERTIFICATES - 2.00%
                
Atlas Discovery Trust II (b)
     300,000       2,299,344  
TOTAL CAPITAL DEVELOPMENT CERTIFICATES (Cost $2,317,515)
             2,299,344  
 
 
 
 
 
                   
MORTGAGE BACKED SECURITIES - 1.96%
                
Nafin (Infonavit)
                
4.500%, 02/20/2040
     2,202,000       850,212  
3.300%, 02/20/2041
     3,295,200       1,402,537  
TOTAL MORTGAGE BACKED SECURITIES (Cost $2,041,010)
             2,252,749  
                   
SHORT-TERM INVESTMENTS - 0.85%
                
Mexican INAFIN
                
0.000% Coupon, 4.138% Effective Yield, 5/03/2013 (c)
     11,933,976 *     982,625  
TOTAL SHORT-TERM INVESTMENTS (Cost $977,177)
             982,625  
                   
TOTAL MEXICO (Cost $93,553,894)
               114,144,539  
                   
UNITED STATES - 0.36%
  
Shares
    
Value
  
                   
INVESTMENT COMPANIES - 0.36%
                
First American Treasury Obligation - Class A, 3.466%
     408,225       408,225  
TOTAL INVESTMENT COMPANIES (Cost $408,225)
             408,225  
                   
TOTAL UNITED STATES (Cost $408,225)
             408,225  
                   
Total Investments (Cost $93,962,119) - 99.49%
             114,552,764  
Other Assets in Excess of Liabilities - 0.51%
             589,964  
TOTAL NET ASSETS - 100.00%
           $ 115,142,728  
                   
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, 2013 was $2,299,344,
  
 
comprising 2.00% of net assets, while the remainder of the Fund's net assets 98.00% 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, 2013 was as follows:
                
                   
Cost of investments**
     $ 93,962,119          
Gross unrealized appreciation
       22,001,487          
Gross unrealized depreciation
       (1,410,842 )        
Net unrealized appreciation
     $ 20,590,645          
                   
**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 to value the Fund's investments carried at fair value as of April 30, 2013:
                

       
Level 1*
    
Level 2*
    
Level 3
    
Total
  
Equity
                            
Airports
       $ 2,607,965     $ -     $ -     $ 2,607,965  
Beverages
         8,796,266       -       -       8,796,266  
Building Materials
         4,251,550                       4,251,550  
Capital Development Certificates
       -       -       2,299,344       2,299,344  
Cable & Satellite
         5,947,330       -       -       5,947,330  
Chemical Products
         3,975,536       184,381       -       4,159,917  
Construction and Infrastructure
       8,123,074       -       -       8,123,074  
Consumer Products
         853,341       -       -       853,341  
Energy
         712,600       -       -       712,600  
Financial Groups
         8,098,913       -       -       8,098,913  
Food Manufacturing
         207,040       -       -       207,040  
Holding Companies
         13,403,761       -       -       13,403,761  
Hotels, Restaurants, and Recreation
     11,141,580       3,048,486       -       14,190,066  
Insurance Services
         5,990,542       -       -       5,990,542  
Mining
         5,825,543       -       -       5,825,543  
Real Estate Services
         4,002,233       -       -       4,002,233  
Retail
         7,179,806       -       -       7,179,806  
Steel
         1,279,120       -       -       1,279,120  
Total Equity
       $ 92,396,200     $ 3,232,867     $ 2,299,344     $ 97,928,411  
                                     
Real Estate Investment Trusts
       $ 10,652,994     $ -     $ -     $ 10,652,994  
                                     
Corporate Bonds
       $ -     $ 2,327,760     $ -     $ 2,327,760  
                                     
Mortgage Backed Securities
       $ -     $ 2,252,749     $ -     $ 2,252,749  
                                     
                                     
Short-Term Investments
       $ -     $ 1,390,850     $ -     $ 1,390,850  
Total Investments in Securities
     $ 103,049,194     $ 6,951,477     $ 2,299,344     $ 114,552,764  
                                     
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, 2013.
                          
                                     
*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)
                             384,897  
Balance as of April 30, 2013
                                 $ 2,299,344  
                                       
                                       
                                       
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, 2013:
                                
     
Fair Value April 30, 2013
          
Valuation Methodologies
    
Unobservable
Input (1)
    
Impact to Valuation from an increase in input (2)
  
 
Capital Development Certificates
    $  2,299,344            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 exit strategies and realization opportunities. Management has
determined that market participants would take these inputs into account when valuing the investments.
          
                                       
 
2
  
This column represents the directional change in the fair value of the Level 3 investments that would result from an increases to the corresponding unobservable input. An 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 20, 2013                                                                                   




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 20, 2013                                                                                   
 

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

Date    June 21, 2013                                                                                   


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